METLIFE INC - 10-K Annual Report

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

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 001-15787

METLIFE, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 13-4075851
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

ONE MADISON AVENUE
NEW YORK, NEW YORK 10010-3690
(212) 578-2211
(Address and telephone number of registrant's principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant as of June 28, 2002 was approximately $20
billion. As of March 7, 2003, 700,278,412 shares of the registrant's Common
Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

THE INFORMATION REQUIRED TO BE FURNISHED PURSUANT TO PART OF ITEM 10 AND
ITEMS 11, 12 AND 13 OF PART III OF THIS FORM 10-K IS SET FORTH IN, AND IS HEREBY
INCORPORATED BY REFERENCE HEREIN FROM, THE REGISTRANT'S DEFINITIVE PROXY
STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 22, 2003,
TO BE FILED BY THE REGISTRANT WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO REGULATION 14A NOT LATER THAN 120 DAYS AFTER THE YEAR ENDED DECEMBER
31, 2002.
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TABLE OF CONTENTS

This Annual Report on Form 10-K, including the Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains statements
which constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements relating to
trends in the operations and financial results and the business and the products
of the Registrant and its subsidiaries, as well as other statements including
words such as "anticipate," "believe," "plan," "estimate," "expect," "intend"
and other similar expressions. "MetLife" or the "Company" refers to MetLife,
Inc., a Delaware corporation (the "Holding Company"), and its subsidiaries,
including Metropolitan Life Insurance Company ("Metropolitan Life").
Forward-looking statements are made based upon management's current expectations
and beliefs concerning future developments and their potential effects on the
Company. Such forward-looking statements are not guarantees of future
performance.

Actual results may differ materially from those included in the
forward-looking statements as a result of risks and uncertainties including, but
not limited to, the following: (i) changes in general economic conditions,
including the performance of financial markets and interest rates; (ii)
heightened competition, including with respect to pricing, entry of new
competitors and the development of new products by new and existing competitors;
(iii) unanticipated changes in industry trends; (iv) MetLife, Inc.'s primary
reliance, as a holding company, on dividends from its subsidiaries to meet debt
payment obligations and the applicable regulatory restrictions on the ability of
the subsidiaries to pay such dividends; (v) deterioration in the experience of
the "closed block" established in connection with the reorganization of
Metropolitan Life; (vi) catastrophe losses; (vii) adverse litigation or
arbitration results; (viii) regulatory, accounting or tax changes that may
affect the cost of, or demand for, the Company's products or services; (ix)
downgrades in the Company's and its affiliates' claims paying ability, financial
strength or debt ratings; (x) changes in rating agency policies or practices;
(xi) discrepancies between actual claims experience and assumptions used in
setting prices for the Company's products and establishing the liabilities for
the Company's obligations for future policy benefits and claims; (xii)
discrepancies between actual experience and assumptions used in establishing
liabilities related to other contingencies or obligations; (xiii) the effects of
business disruption or economic contraction due to terrorism or other
hostilities; and (xiv) other risks and uncertainties described from time to time
in MetLife, Inc.'s filings with the U.S. Securities and Exchange Commission,
including its S-1 and S-3 registration statements. The Company specifically
disclaims any obligation to update or revise any forward-looking statement,
whether as a result of new information, future developments or otherwise.

2

As used in this Form 10-K, "MetLife" or the "Company" refers to MetLife,
Inc., a Delaware corporation formed in 1999 (the "Holding Company"), and its
subsidiaries, including Metropolitan Life Insurance Company ("Metropolitan
Life").

PART I

ITEM 1. BUSINESS

MetLife, Inc., through its affiliates and subsidiaries, is a leading
provider of insurance and other financial services to a broad spectrum of
individual and institutional customers. The Company offers life insurance,
annuities, automobile and property insurance and mutual funds to individuals and
group insurance, reinsurance, as well as retirement and savings products and
services to corporations and other institutions. The MetLife companies serve
approximately 12 million individuals in the U.S. and companies and institutions
with approximately 33 million employees and members, including 88 of the FORTUNE
100 largest companies. MetLife, Inc. also has international insurance operations
in 12 countries.

MetLife is one of the largest insurance and financial services companies in
the U.S. The Company's unparalleled franchises and brand names uniquely position
it to be the preeminent provider of protection and savings and investment
products in the U.S. In addition, MetLife's international operations are focused
on emerging markets where the demand for insurance and savings and investment
products is expected to grow rapidly in the future.

MetLife's well-recognized brand names, leading market positions,
competitive and innovative product offerings and financial strength and
expertise should help drive future growth and enhance shareholder value,
building on a long history of fairness, honesty and integrity.

Over the course of the next several years, MetLife will pursue the
following specific strategies to achieve its goals:

- Build on widely recognized brand names

- Capitalize on large customer base

- Expand multiple distribution channels

- Continue to introduce innovative and competitive products

- Focus international operations on emerging markets

- Maintain balanced focus on asset accumulation and protection products

- Reduce operating expenses

- Strengthen performance-oriented culture

- Further its commitment to a diverse workplace

- Optimize operating returns from the Company's investment portfolio

- Enhance capital efficiency

On April 7, 2000 (the "date of demutualization"), pursuant to an order by
the New York Superintendent of Insurance approving its plan of reorganization,
as amended (the "plan"), Metropolitan Life converted from a mutual life
insurance company to a stock life insurance company and became a wholly-owned
subsidiary of MetLife, Inc. On the date of demutualization, the Holding Company
conducted an initial public offering and concurrent private placements of shares
of its Common Stock at an offering price of $14.25 per share. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- The
Demutualization."

3

MetLife is organized into six major business segments: Individual,
Institutional, Reinsurance, Auto & Home, Asset Management and International.
Financial information, including revenues, income and loss, and total assets by
segment, is provided in Note 21 of Notes to Consolidated Financial Statements.

INDIVIDUAL

MetLife's Individual segment offers a wide variety of protection and asset
accumulation products aimed at serving the financial needs of its customers
throughout their entire life cycle. Products offered by Individual include
insurance products, such as traditional, universal and variable life insurance,
individual disability insurance and long-term care insurance, and annuities and
investment products, such as variable and fixed annuities and mutual funds.
Individual's principal distribution channels are MetLife Financial Services, New
England Financial, GenAmerica Financial and MetLife Investors Group. Individual
distributes its products through several additional distribution channels,
including Nathan & Lewis, MetLife Resources and Texas Life. In total, Individual
had approximately 11,000 active sales representatives at December 31, 2002.

MetLife's broadly recognized brand names and strong distribution channels
have allowed it to become the third largest provider of individual life
insurance and annuities in the U.S., with $9.8 billion of total statutory
individual life and annuity premiums and deposits through September 30, 2002,
the latest period for which OneSource, a database that aggregates U.S. insurance
company statutory financial statements, is available. According to a study done
by Tillinghast Towers Perrin, through December 31, 2002, MetLife was the fourth
largest issuer of individual variable life insurance in the U.S. based on
first-year premiums and deposits. In addition, according to a survey done by the
Variable Annuity Resource Data Service, as of December 31, 2002, MetLife was the
fifth largest variable annuity writer as measured by variable annuity assets
managed.

Reflecting overall trends in the insurance industry, sales of MetLife's
traditional life insurance products have declined in recent years, while
first-year premiums and deposits from variable and universal life insurance
products have grown at a compound annual rate of 5.0% from 1998 to 2002,
excluding the effect of acquiring GenAmerica Financial in 2000. This increase
includes the results of a customer retention exchange program. Excluding the
exchange program, the compound annual growth rate is 4.5%. Variable and
universal sales represented 76.3% of total life insurance sales for Individual
in 2002. Individual had $12.4 billion of revenues from continuing operations, or
37.4% of MetLife's total revenues in 2002.

MARKETING AND DISTRIBUTION

The Company targets the large middle-income market, as well as affluent
individuals, owners of small businesses and executives of small- to medium-sized
companies. The Company has also been successful in selling its products in
various multicultural markets. Individual products are distributed nationwide
through multiple channels, with the primary distribution systems being the
MetLife Financial Services career agency system, the New England Financial
general agency system, the GenAmerica Financial independent general agency
system and MetLife Investors Group's distribution through financial
intermediaries. While continuing to invest in its traditional distribution
channels, the Company also expanded into additional channels in order to
supplement its growth or penetrate specific target markets.

MetLife Financial Services career agency system. MetLife Financial
Services career agency system had 5,846 agents under contract in 150 agencies at
December 31, 2002. The career agency sales force focuses on the large
middle-income market, including multicultural markets. The Company supports its
efforts in multicultural markets through targeted advertising, specially trained
agents and sales literature written in various languages. Multicultural markets
represented approximately 36% of MetLife Financial Services' individual life
sales in 2002. The average face amount of a life insurance policy sold through
the career agency system in 2002 was approximately $221,000.

Agents in the career agency system are full-time MetLife employees who are
compensated primarily with commissions based on sales. As MetLife employees,
they also receive certain benefits. Agents in the career agency system may not
offer products of other insurers without MetLife's approval. At December 31,
2002, approximately 98% of the agents in the MetLife career agency system were
licensed to sell one or more of the following products: variable life insurance,
variable annuities and mutual funds.

4

From 1998 through 2002, the number of agents under contract in the MetLife
Financial Services career agency system declined from 6,607 to 5,846. This
decline was primarily the result of MetLife Financial Services' more stringent
standards for recruiting and retaining agents, the consolidation of sales
offices and modifications in compensation practices for its sales force. During
the same period, the career agency system increased productivity, with net sales
credits per agent, an industry measure for agent productivity, growing at a
compound annual rate of 5.0%.

New England Financial general agency system. New England Financial's
general agency system targets high net-worth individuals, owners of small
businesses and executives of small- to medium-sized companies. The average face
amount of a life insurance policy sold through the New England Financial general
agency system in 2002 was approximately $330,000.

At December 31, 2002, New England Financial's sales force included 84
general agencies providing support to 3,234 agents and a network of independent
brokers throughout the U.S. The compensation of agents who are independent
contractors and general agents who have exclusive contracts with New England
Financial is based on sales, although general agents are also provided with an
allowance for benefits and other expenses. At December 31, 2002, approximately
90% of New England Financial's agents were licensed to sell variable products
and mutual funds.

GenAmerica Financial independent general agency system. GenAmerica
Financial markets a portfolio of individual life insurance, annuity contracts,
securities, and related financial services to high net-worth individuals and
small- to medium-sized businesses through multiple distribution channels. These
distribution systems include independent general agents, financial advisors,
consultants, brokerage general agencies and other independent marketing
organizations. The average face amount of a life insurance policy sold through
the GenAmerica Financial independent general agency system in 2002 was
approximately $650,000.

The GenAmerica Financial distribution system sells universal life, variable
universal life, and traditional life insurance products through approximately
990 independent general agencies with which it has contractual arrangements.
This reflects a 17% increase in independent general agencies from 2001 to 2002.
There are 616 independent general agents who produced at least $12,500 in
first-year commissions in 2002. They market GenAmerica Financial products and
are independent contractors who are generally responsible for the expenses of
operating their agencies, including office and overhead expenses and the
recruiting, selection, contracting, training, and development of agents and
brokers in their agencies. Recruiting and wholesaling efforts are directed from
a nationwide network of regional offices. GenAmerica Financial is actively
developing and implementing programs designed to increase the scale and
productivity of its distribution systems.

MetLife Investors Group. MetLife Investors Group is a wholesale
distribution channel dedicated to the distribution of variable and fixed
annuities and insurance products through financial intermediaries, including
regional broker/dealers, New York Stock Exchange wirehouses, financial planners
and banks. For the year ended December 31, 2002, MetLife Investors Group had 344
selling agreements, 336 for regional broker/dealers and financial planners, 4
for wirehouses, and 4 for banks. Two major regional broker/dealer firms
accounted for 17% and 11%, respectively, of MetLife Investors Group's 2002
deposits. No other selling firm accounted for more than 10% of deposits. As of
December 31, 2002, MetLife Investors Group's sales force consisted of 69
regional vice presidents, or wholesalers.

MetLife Investors Group plans to continue growing existing distribution
relationships and acquiring new relationships by capitalizing on an experienced
management team, leveraging the MetLife brand and resources, and developing high
service, low-cost operations while also adding distribution of other MetLife
products.

Additional distribution channels. The Company distributes its individual
insurance and investment products through several additional distribution
channels, including Nathan & Lewis, MetLife Resources and Texas Life.

Nathan & Lewis. This channel operates through Nathan & Lewis
Securities, Inc., a Metropolitan Life subsidiary acquired in 1998. The
Company recently announced that in the third quarter of 2003, Nathan &
Lewis will be consolidated with another broker/dealer subsidiary of the
Company, Walnut Street Securities, Inc., and will operate under the Walnut
Street name. Nathan & Lewis is a broker/dealer that markets mutual funds
and other securities, as well as variable life insurance and variable
annuity products, through

5

769 independent registered representatives. With the acquisition of Nathan
& Lewis, the Company obtained the use of its client management account
information systems.

MetLife Resources. MetLife Resources, a division of MetLife, markets
retirement, annuity and other financial products on a national basis
through approximately 375 agents and independent brokers. MetLife Resources
targets the nonprofit, educational and healthcare markets.

Texas Life. Texas Life Insurance Company ("Texas Life"), a MetLife
subsidiary, markets whole life and universal life insurance products under
the Texas Life name through approximately 1,400 active independent
insurance brokers. These brokers are independent contractors who sell
insurance for Texas Life on a nonexclusive basis. A number of MetLife
career agents also market Texas Life products. Texas Life sells universal
life insurance policies with low cash values that are marketed through the
use of brochures, as well as payroll deduction life insurance products.

PRODUCTS

The Company offers a wide variety of individual insurance, annuities, and
investment products aimed at serving its customers' financial needs throughout
their entire life cycle.

INSURANCE PRODUCTS

The Company's individual insurance products include variable life products,
universal life products, traditional life products, including whole life and
term insurance, and other insurance products, including individual disability
and long-term care insurance.

The Company continually reviews and updates its products. It has introduced
new products and features designed to increase the competitiveness of its
portfolio and the flexibility of its products to meet the broad range of asset
accumulation, life-cycle protection and distribution needs of its customers.
Some of these updates have included new universal life policies, updated
variable universal life products, a new corporate-owned life insurance product,
an improved term insurance portfolio, and enhancements to one of MetLife's whole
life products. In addition, a broad array of new annuity products was launched
in 2002.

Variable life. Variable life products provide insurance coverage through a
contract that gives the policyholder flexibility in investment choices and,
depending on the product, in premium payments and coverage amounts, with certain
guarantees. Most importantly, with variable life products, premiums and account
balances can be directed by the policyholder into a variety of separate accounts
or directed to the Company's general account. In the separate accounts, the
policyholder bears the entire risk of the investment results. MetLife collects
specified fees for the management of these various investment accounts and any
net return is credited directly to the policyholder's account. In some
instances, third-party money management firms manage investment accounts that
support variable insurance products. With some products, by maintaining a
certain premium level, policyholders may have the advantage of various
guarantees that may protect the death benefit from adverse investment
experience.

Universal life. Universal life products provide insurance coverage on the
same basis as variable life, except that premiums, and the resulting accumulated
balances, are allocated only to the MetLife general account. Universal life
products may allow the insured to increase or decrease the amount of death
benefit coverage over the term of the contract and may allow the owner to adjust
the frequency and amount of premium payments. The Company credits premiums, net
of specified expenses, to an account maintained for the policyholder, as well as
interest, at rates it determines, subject to specified minimums. Specific
charges are made against the policyholder's account for the cost of insurance
protection and for expenses. With some products, by maintaining a certain
premium level, policyholders may have the advantage of various guarantees that
may protect the death benefit from adverse investment experience.

Whole life insurance. Whole life insurance products provide a guaranteed
benefit upon the death of the insured in return for the periodic payment of a
fixed premium over a predetermined period. Premium payments may be required for
the whole of the contract period, to a specified age or for a specified period,
and may be level

6

or change in accordance with a predetermined schedule. Whole life insurance
includes policies that provide a participation feature in the form of dividends.
Policyholders may receive dividends in cash or apply them to increase death
benefits, increase cash values available upon surrender or reduce the premiums
required to maintain the contract in-force. Because the use of dividends is
specified by the policyholder, this group of products provides significant
flexibility to individuals to tailor the product to suit their specific needs
and circumstances, while at the same time providing guaranteed benefits.

Term insurance. Term insurance provides a guaranteed benefit upon the
death of the insured for a specified time period in return for the periodic
payment of premiums. Specified coverage periods range from one year to 20 years,
but in no event are they longer than the period over which premiums are paid.
Death benefits may be level over the period or decreasing. Decreasing coverage
is used principally to provide for loan repayment in the event of death.
Premiums may be guaranteed at a level amount for the coverage period or may be
non-level and non-guaranteed. Term insurance products are sometimes referred to
as pure protection products, in that there are typically no savings or
investment elements. Term contracts expire without value at the end of the
coverage period when the insured party is still living.

Other individual insurance products. Individual disability products
provide a benefit in the event of the disability of the insured. In most
instances, this benefit is in the form of monthly income paid until the insured
reaches age 65. In addition to income replacement, the product may be used to
provide for the payment of business overhead expenses for disabled business
owners or mortgage payment protection.

MetLife's long-term care insurance provides reimbursement for certain costs
associated with nursing home care and other services that may be provided to
individuals unable to perform the activities of daily living.

In addition to these products, MetLife's Individual segment supports a
group of low face amount life insurance policies, known as industrial policies,
that its agents sold until 1964. New England Financial also sells a small amount
of employee benefit products and group pension products, which are included in
the financial results of the Individual segment.

ANNUITIES AND INVESTMENT PRODUCTS

The Company offers a variety of individual annuities and investment
products, including variable and fixed annuities and mutual funds.

Variable annuities. The Company offers variable annuities for both asset
accumulation and asset distribution needs. Variable annuities allow the
contractholder to make deposits into various investment accounts, as determined
by the contractholder. The investment accounts are separate accounts and risks
associated with such investments are borne entirely by the contractholders.
Contractholders may also choose to allocate all or a portion of their account to
the Company's general account and are credited with interest at rates the
Company determines, subject to certain minimums. In addition, contractholders
may also elect certain minimum death benefit and minimum living benefit
guarantees.

Fixed annuities. Fixed annuities are used for both asset accumulation and
asset distribution needs. Fixed annuities do not allow the same investment
flexibility provided by variable annuities, but provide guarantees related to
the preservation of principal and interest credited. Deposits made into these
contracts are allocated to the general account and are credited with interest at
rates the Company determines, subject to certain minimums. Credited interest
rates may be guaranteed not to change for certain limited periods of time,
normally one year.

Mutual funds and securities. MetLife offers both proprietary and
non-proprietary mutual funds. Proprietary funds include those offered by State
Street Research & Management Company, a subsidiary of Metropolitan Life. MetLife
also offers investment accounts for mutual funds and securities that allow
customers to buy, sell and retain holdings in one centralized location, as well
as brokerage accounts that offer the accessibility and liquidity of a money
market mutual fund. Of the mutual funds sold by the Company in 2002,
approximately $500 million of the deposited assets were managed by State Street
Research & Management Company and $2.1 billion by third parties.

7

INSTITUTIONAL

The Company's Institutional segment offers a broad range of group insurance
and retirement and savings products and services to corporations and other
institutions.

Group insurance products and services include group life insurance,
non-medical health insurance, such as short- and long-term disability, long-term
care and dental insurance and related administrative services, as well as other
benefits such as employer-sponsored auto and homeowners insurance provided
through the Auto & Home segment and prepaid legal services plans. The Company
offers these products either as an employer-paid benefit or as a voluntary
benefit in which the premiums are paid by the employee. Revenues applicable to
these group insurance products and services were $9.4 billion in 2002,
representing 72.6% of total Institutional revenues of $12.9 billion.

MetLife has built a leading position in the U.S. group insurance market
through long-standing relationships with many of the largest corporate employers
in the U.S. MetLife serves companies and institutions with approximately 33
million employees and members, including 88 of the FORTUNE 100 largest
companies.

MetLife's retirement and savings products and services include bundled
administrative services and investment services sold to sponsors of small and
mid-sized 401(k) and other defined contribution plans: guaranteed interest
products and other stable value products; institutional accumulation and income
annuities; and separate account contracts for the investment of defined benefit
and defined contribution plan assets. Revenues applicable to MetLife's
retirement and savings products were $3.5 billion in 2002, representing 27.4% of
total Institutional revenues.

The employee benefit market served by Institutional has changed
dramatically in recent years. As the U.S. employment market has become more
competitive, employers are seeking to enhance their ability to hire and retain
employees by providing attractive benefit plans. The market also reflects
employees' increasing concern about the future of government-funded retirement
and safety-net programs, an increasingly mobile workforce and the desire of
employers to share the market risk of retirement benefits with employees.
MetLife believes these trends are facilitating the introduction of "voluntary"
products, such as long-term care insurance, annuities and auto and homeowners
insurance, as well as leading more employers to adopt defined contribution
pension arrangements, such as 401(k) plans.

MARKETING AND DISTRIBUTION

Institutional markets its products and services through separate sales
forces, comprised of MetLife employees, for both its group insurance and
retirement and savings lines.

MetLife distributes its group insurance products and services through a
regional sales force that is segmented by the size of the target customer.
Marketing representatives sell either directly to corporate and other
institutional customers or through an intermediary, such as a broker or a
consultant. Voluntary products are sold through the same sales channels, as well
as by specialists for these products. As of December 31, 2002, the group
insurance sales channels had approximately 600 marketing representatives.

MetLife group insurance products and services are distributed through the
following channels:

- The National Accounts unit focuses exclusively on MetLife's largest
customers, generally those having more than 25,000 employees. This unit
assigns account executives and other administrative and technical
personnel to a discrete customer or group of customers in order to
provide them with individualized products and services;

- The regional sales force operates from 29 offices and generally
concentrates on sales to employers with fewer than 25,000 employees,
through selected national and regional brokers, as well as through
consultants; and

- The Small Business Center focuses on improving MetLife's position in the
smaller end of the market. Currently, 27 individual offices staffed with
sales and administrative employees are located throughout the U.S. These
centers provide comprehensive support services on a local basis to
brokers and other

8

intermediaries by providing an array of products and services designed
for smaller businesses, generally those with fewer than 1,000 employees.

MetLife's retirement and savings organization markets retirement, savings,
investment and payout products and services to sponsors and advisors of benefit
plans of all sizes. These products and services are offered to private and
public plans, collective bargaining units, nonprofit organizations, recipients
of structured settlements and the current and retired members of these and other
institutions.

MetLife distributes retirement and savings products and services through
dedicated sales teams and relationship managers located in 21 offices around the
country. In addition, the retirement and savings organization works with the
distribution channels in the Individual segment, group insurance and State
Street Research & Management Company to better reach and service customers,
brokers, consultants and other intermediaries.

The Company has entered into several joint ventures and other arrangements
with third parties to expand the marketing and distribution opportunities of
institutional products and services. The Company also seeks to sell its
institutional products and services through sponsoring organizations and
affinity groups. For example, the Company is a preferred provider of long-term
care products for the American Association of Retired Persons and the National
Long-Term Care Coalition, a group of some of the nation's largest employers. In
addition, the Company, together with John Hancock Financial Services, Inc., is a
provider for the Federal Long-Term Care Insurance program. The program,
available to most federal employees and their families, is the largest employer-
sponsored long-term care insurance program in the country based on enrollees.

GROUP INSURANCE PRODUCTS AND SERVICES

MetLife's group insurance products and services include:

Group life. Group life insurance products and services include group term
life, group universal life, group variable universal life, dependent life and
survivor benefits. These products and services can be standard products or
tailored to meet specific customer needs. This category also includes high face
amount life insurance products covering senior executives for
compensation-related or benefit-funding purposes.

Non-medical health. Non-medical health insurance consists of short- and
long-term disability, long-term care, dental and accidental death and
dismemberment. MetLife also sells excess risk and administrative services-only
arrangements to some employers.

Other products and services. Other products and services include
employer-sponsored auto and homeowners insurance provided through the Auto &
Home segment and prepaid legal plans.

RETIREMENT AND SAVINGS PRODUCTS AND SERVICES

MetLife's retirement and savings products and services include:

Guaranteed interest and stable value products. MetLife offers
guaranteed interest contracts ("GICs"), including separate account and synthetic
(trust) GICs, funding agreements and similar products.

Accumulation and income products. MetLife also sells fixed and variable
annuity products, generally in connection with defined contribution plans, the
termination of pension plans or the funding of structured settlements.

Defined contribution plan services. MetLife provides full service
defined contribution programs to small- and mid-size companies.

Other retirement and savings products and services. Other retirement
and savings products and services include separate account contracts for the
investment management of defined benefit and defined contribution plans on
behalf of corporations and other institutions.

9

REINSURANCE

MetLife's Reinsurance segment is comprised of the life reinsurance business
of Reinsurance Group of America, Incorporated ("RGA"), a publicly traded
company, and MetLife's ancillary life reinsurance business. MetLife acquired
approximately 49% of RGA's outstanding common shares through the acquisition of
GenAmerica Financial Corporation ("GenAmerica"), the parent corporation of
General American Life Insurance Company ("General American"), in January 2000.
Metropolitan Life owned 9% of the outstanding shares of RGA common stock prior
to the completion of the GenAmerica acquisition. During 2002, the Company
purchased an additional 327,600 shares of RGA's outstanding common stock at an
aggregate price of $9.5 million to offset potential future dilution of the
Company's holding of RGA's common stock arising from the issuance by RGA of
company-obligated mandatorily redeemable securities of a subsidiary trust in
December 2001. These purchases increased the Company's ownership percentage of
outstanding shares of RGA common stock from approximately 58% at December 31,
2001 to approximately 59% at December 31, 2002.

RGA's operations in North America are its largest and include operations of
its Canadian and U.S. subsidiaries, and three subsidiaries in Barbados. In
addition to its North American operations, RGA has subsidiary companies, branch
offices, or representative offices in Argentina, Australia, Hong Kong, India,
Japan, South Korea, Mexico, South Africa, Spain, Taiwan and the U.K.

In addition to its life reinsurance business, RGA provides reinsurance of
asset-intensive products and financial reinsurance. RGA and its predecessor, the
reinsurance division of General American, have been engaged in the business of
life reinsurance since 1973. As of December 31, 2002, RGA had approximately $8.9
billion in consolidated assets and worldwide life reinsurance in-force of
approximately $759 billion.

RGA'S PRODUCTS AND SERVICES

RGA has five main operational segments segregated primarily by geographic
region: U.S., Canada, Latin America, Asia/Pacific, and Europe and South Africa.
The U.S. operations, which represented 71% of RGA's 2002 net premiums, provide
traditional life, asset-intensive and financial reinsurance to domestic clients.
Asset-intensive products primarily include reinsurance of corporate-owned life
insurance and annuities. The Canadian operations, which represented 9% of RGA's
2002 net premiums, provide insurers with traditional reinsurance, as well as
assistance with capital management activity. The Asia/Pacific and the Europe and
South Africa operations, which represented 8% and 11%, respectively, of RGA's
2002 net premiums, provide primarily traditional life and critical illness
reinsurance. The Latin America operations, which represented 1% of RGA's 2002
net premiums, provide traditional reinsurance and reinsurance of privatized
pension products primarily in Argentina. In 2001, RGA ceased providing
reinsurance for the privatized pension program in Argentina and significantly
scaled back its operations in Latin America.

AUTO & HOME

Auto & Home, operating through Metropolitan Property and Casualty Insurance
Company, a wholly-owned subsidiary of Metropolitan Life, and its subsidiaries,
offers personal lines property and casualty insurance directly to employees
through employer-sponsored programs, as well as through a variety of retail
distribution channels, including the MetLife Financial Services career agency
system, independent agents, Auto & Home specialists and direct response
marketing. Auto & Home primarily sells auto insurance, which represented 74.7%
of Auto & Home's total net premiums earned in 2002, and homeowners insurance,
which represented 23.5% of Auto & Home's total net premiums earned in 2002. Auto
insurance includes both standard and non-standard policies. Non-standard
policies provide insurance for risks having higher loss experience or loss
potential than risks covered by standard insurance.

On September 30, 1999, the Auto & Home segment acquired the standard
personal lines property and casualty insurance operations of The St. Paul
Companies, which, at the time of the acquisition, had in-force premiums of
approximately $1.1 billion and approximately 3,000 independent agents and
brokers. The conversion of St. Paul's approximately one million policies to
MetLife Auto & Home policies was completed in September 2002.

10

PRODUCTS

Auto & Home's insurance products include:

- auto, including both standard and non-standard private passenger;

- homeowners, including renters, condominium and dwelling; and

- other personal lines, including umbrella (protection against losses in
excess of amounts covered by other liability insurance policies),
recreational vehicles and boat owners.

Auto coverages. Auto insurance policies include coverages for private
passenger automobiles, utility automobiles and vans, motorcycles, motor homes,
antique or classic automobiles and trailers. Auto & Home offers traditional
coverages such as liability, uninsured motorist, no fault or personal injury
protection and collision and comprehensive coverages. Auto & Home also offers
non-standard auto insurance, which accounted for $113 million in net premiums
earned in 2002. This represents 5.4% of total auto net premiums earned in 2002.

Homeowners coverages. Homeowners insurance provides protection for
homeowners, renters, condominium owners and residential landlords against losses
arising out of damage to dwellings and contents from a wide variety of perils,
as well as coverage for liability arising from ownership or occupancy.

Traditional insurance policies for dwellings represent the majority of Auto
& Home's homeowners policies providing protection for loss on a "replacement
cost" basis. These policies provide additional coverage for reasonable, normal
living expenses incurred by policyholders who have been displaced from their
homes.

MARKETING AND DISTRIBUTION

Personal lines auto and homeowners insurance products are directly marketed
to employees through employer-sponsored programs. Auto & Home products are also
marketed and sold by the MetLife Financial Services career agency sales force,
independent agents, Auto & Home specialists and through a direct response
channel.

EMPLOYER-SPONSORED PROGRAMS

Auto & Home is a leading provider of employer-sponsored auto and homeowners
products. Net premiums earned through Auto & Home's employer-sponsored
distribution channel have grown at a compound annual rate of 13.8%, from $496
million in 1998 to $832 million in 2002. At December 31, 2002, over 1,400
employers offered MetLife Auto & Home products to their employees.

Institutional marketing representatives market the employer-sponsored Auto
& Home products to employers through a variety of means, including broker
referrals and cross-selling to MetLife group customers. Once endorsed by the
employer, MetLife commences marketing efforts to employees. Employees who are
interested in the employer-sponsored auto and homeowners products can call a
toll-free number for a quote, purchase coverage and authorize payroll deduction
over the telephone. Auto & Home has also developed proprietary software that
permits an employee in most states to obtain a quote for employer-sponsored auto
insurance through Auto & Home's Internet website.

RETAIL DISTRIBUTION CHANNELS

MetLife markets and sells Auto & Home products through its career agency
sales force, independent agents and Auto & Home specialists. In recent years,
MetLife has increased its use of independent agents and Auto & Home specialists
to sell these products.

Independent agencies. At December 31, 2002, Auto & Home maintained
contracts with approximately 4,000 agencies and brokers.

11

Auto & Home specialists. Approximately 500 Auto & Home specialists sell
products for Auto & Home in 21 states. Auto & Home's strategy is to utilize Auto
& Home specialists, who are MetLife employees, in geographic markets that are
underserved by its career agents.

MetLife Financial Services career agency system. Approximately 1,700
agents in the MetLife Financial Services career agency system sell Auto & Home
insurance products. Sales of Auto & Home products by these agents have been
declining since the early 1990s, due principally to the reduction in the number
of agents in the MetLife Financial Services career agency sales force. See
"-- Individual -- Marketing and Distribution."

Other distribution channels. In 1998, the Company established a direct
response marketing channel which permits sales to be generated through sources
such as target mailings, career agent referrals and the Internet.

In 2002, Auto & Home's business was concentrated in the following states,
as measured by net premiums earned: New York ($391 million or 13.8% of total net
premiums earned), Massachusetts ($333 million or 11.8%), Illinois ($224 million
or 7.9%), Connecticut ($141 million or 5.0%), and Minnesota ($140 million or
5.0%).

CLAIMS

Auto & Home's claims department includes approximately 2,300 employees
located in Auto & Home's Warwick, Rhode Island home office, 14 field claim
offices, six in-house counsel offices and drive-in inspection and other sites
throughout the United States. These employees include claim adjusters,
appraisers, attorneys, managers, medical specialists, investigators, customer
service representatives, claim financial analysts and support staff. Claim
adjusters, representing the majority of employees, investigate, evaluate and
settle over 800,000 claims annually, principally by telephone.

ASSET MANAGEMENT

Asset Management, through SSRM Holdings, Inc. ("State Street Research"),
provides a broad variety of asset management products and services to MetLife,
third-party institutions and individuals. State Street Research conducts its
operations through two wholly-owned subsidiaries, State Street Research &
Management Company, a full-service investment management firm, and SSR Realty
Advisors, Inc., a full-service real estate investment advisor. State Street
Research offers investment management services in all major investment
disciplines through multiple channels of distribution in both the retail and
institutional marketplaces. At December 31, 2002, State Street Research had
assets under management of $44.6 billion which consisted of fixed income
investments, equities, real estate and money market investments, representing
58%, 29%, 11% and 2%, respectively, of State Street Research's total assets
under management.

State Street Research has been an investment manager for many of the
largest U.S. corporate pension plans for over 30 years. The majority of State
Street Research's institutional business is concentrated in qualified retirement
funds, including both defined benefit and defined contribution plans. State
Street Research also provides investment management services to foundations,
endowments and union programs. In addition, State Street Research serves as an
advisor for 22 mutual funds with assets totaling $7.7 billion at December 31,
2002, as well as seven portfolios with assets totaling $5.7 billion at December
31, 2002, underlying MetLife's variable life and variable annuity products.

State Street Research distributes its investment products to institutions
through its own institutional sales force and pension consultants. State Street
Research's mutual fund products are distributed primarily through retail
brokerage firms (77% of mutual fund sales) and by the MetLife career agency
sales force (12% of mutual fund sales). State Street Research offers its
products to the defined contribution market directly, as well as through
Institutional's defined contribution group.

INTERNATIONAL

International provides life insurance, accident and health insurance,
annuities and savings and retirement products to both individuals and groups,
and auto and homeowners coverage to individuals. The Company focuses on emerging
markets in the Asia/Pacific region, Latin America and selected European
countries as described more fully below. The Company operates in international
markets through subsidiaries and joint ventures.

12

LATIN AMERICA

The Company operates in the Latin America region in the following
countries: Mexico, Chile, Brazil, Argentina and Uruguay. During 2002, the
Company acquired Aseguradora Hidalgo S.A. ("Hidalgo"), Mexico's largest life
insurer, and is currently in the process of integrating Hidalgo and Seguros
Genesis, S.A., MetLife's wholly-owned Mexican subsidiary ("Genesis"). The
integration includes the selection of a new brand name (MetLife Mexico) and the
development of products and services for over five million customers. The
combined market share of Genesis and Hidalgo has created the leading life
insurance company in Mexico in both the individual and group businesses. The
operation in Chile was acquired in late 2001 and as of December 31, 2002, it is
the second largest annuity company in Chile, based on market share. The Chilean
operation also offers individual life insurance and group insurance products.
The operations in Mexico and Chile represent approximately 92% of the total
premiums and fees in this region for the year ended December 31, 2002.

ASIA/PACIFIC

The Company operates in the Asia/Pacific region in the following countries:
South Korea, Taiwan, Hong Kong, Indonesia and India. The operations in South
Korea and Taiwan represented approximately 96% of the total premiums and fees in
this region for the year ended December 31, 2002. The South Korean operation
offers individual life insurance, savings and retirement and non-medical health
products, as well as group life and retirement products. The Taiwanese operation
offers individual life, accident and health, and personal travel insurance
products, as well as group life and group accident and health insurance
products. The Company has received approval to operate a joint venture and
pursue licensing in China. During 2002, the Company closed its Philippine
operation.

EUROPE

During 2002, the Company operated in Spain, Portugal and Poland. In
December 2002, MetLife announced its exit from the Polish market. The Company's
withdrawal from this market was based on a thorough evaluation of the market,
which indicated diminished prospect for significant growth and profitability.
The operations in Spain and Portugal sell individual and group life insurance,
retirement and savings, as well as auto and homeowners products through their
own sales forces, direct channels and independent third parties.

FUTURE POLICY BENEFITS

MetLife establishes, and carries as liabilities, actuarially determined
amounts that are calculated to meet its policy obligations at such time as an
annuitant takes income, a policy matures or surrenders or an insured dies or
becomes disabled. MetLife computes the amounts for future policy benefits
reported in its consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP").

In establishing these liabilities, MetLife distinguishes between short
duration and long duration contracts. Short duration contracts arise from the
group life and group dental businesses. The liability for future policy benefits
for short duration contracts consists of gross unearned premiums as of the
valuation date and the discounted amount of the future payments on pending
claims as of the valuation date. Long duration contracts consist of traditional
life, term, non-participating whole life, individual disability, group long-term
disability and long-term care contracts. MetLife determines future policy
benefits for long duration contracts using assumptions based on current
experience, plus a margin for adverse deviation for these policies. Where they
exist, MetLife amortizes deferred policy acquisition costs in relation to the
associated gross margins or premium.

MetLife also distinguishes between investment contracts, limited pay
contracts and universal life-type contracts. The future policy benefits for
these products primarily consist of policyholders' account balances. The Company
also establishes liabilities for future policy benefits (associated with base
policies and riders, unearned mortality charges and future disability benefits),
for other policyholder funds (associated with unearned revenues and claims
payable) and for unearned revenue (the unamortized portion of front-end loads
charged). Investment contracts primarily consist of individual annuity and
certain group pension contracts that have limited or no

13

mortality risk. MetLife amortizes the deferred policy acquisition costs on these
contracts in relation to estimated gross profits. Limited pay contracts
primarily consist of single premium immediate individual and group pension
annuities. For limited pay contracts, the Company defers the excess of the gross
premium over the net premium and recognizes such excess into income in relation
to anticipated future benefit payments. Universal life-type contracts consist of
universal and variable life contracts. The Company amortizes deferred policy
acquisition costs for limited pay and universal life-type contracts using the
product's estimated gross profits. For universal life-type contracts with
front-end loads, MetLife defers the charge and amortizes the unearned revenue
using the product's estimated gross profits.

The liability for future policy benefits for participating traditional life
insurance is the net level reserve using the policy's guaranteed mortality rates
and the dividend fund interest rate or nonforfeiture interest rate, as
applicable. MetLife amortizes deferred policy acquisition costs in relation to
the product's estimated gross margins.

The Auto & Home segment establishes liabilities to account for the
estimated ultimate costs of losses and loss adjustment expenses for claims that
have been reported but not yet settled, and claims incurred but not reported. It
bases unpaid losses and loss adjustment expenses on:

- case estimates for losses reported on direct business, adjusted in the
aggregate for ultimate loss expectations;

- estimates of incurred but not reported losses based upon past experience;

- estimates of losses on insurance assumed primarily from involuntary
market mechanisms; and

- estimates of future expenses to be incurred in settlement of claims.

MetLife deducts estimated amounts of salvage and subrogation from unpaid
losses and loss adjustment expenses. Implicit in all these estimates are
underlying assumptions about rates of inflation because MetLife determines all
estimates using expected amounts to be paid. MetLife derives estimates for the
development of reported claims and for incurred but not reported claims
principally from actuarial analyses of historical patterns of claims and claims
development for each line of business. Similarly, MetLife derives estimates of
unpaid loss adjustment expenses principally from actuarial analyses of
historical development patterns of the relationship of loss adjustment expenses
to losses for each line of business. MetLife anticipates ultimate recoveries
from salvage and subrogation principally on the basis of historical recovery
patterns.

Pursuant to state insurance laws, MetLife's insurance subsidiaries
establish statutory reserves, carried as liabilities, to meet their obligations
on their respective policies. These statutory reserves are established in
amounts sufficient to meet policy and contract obligations, when taken together
with expected future premiums and interest at assumed rates. Statutory reserves
generally differ from liabilities for future policy benefits determined using
GAAP.

The New York Insurance Law and regulations require certain MetLife entities
to submit to the New York Superintendent of Insurance or other state insurance
departments, with each annual report, an opinion and memorandum of a "qualified
actuary" that the statutory reserves and related actuarial amounts recorded in
support of specified policies and contracts, and the assets supporting such
statutory reserves and related actuarial amounts, make adequate provision for
their statutory liabilities with respect to these obligations. See
"-- Regulation -- Insurance Regulation -- Policy and contract reserve
sufficiency analysis."

Due to the nature of the underlying risks and the high degree of
uncertainty associated with the determination of its liabilities, MetLife cannot
precisely determine the amounts that it will ultimately pay with respect to
these liabilities, and the ultimate amounts may vary from the estimated amounts,
particularly when payments may not occur until well into the future.
Furthermore, the Company has experienced, and will likely in the future
experience, catastrophe losses and possibly acts of terrorism that may have an
adverse impact on its business, results of operations and financial condition.
Catastrophes can be caused by various events, including, hurricanes, windstorms,
earthquakes, hail, tornadoes, explosions, severe winter weather (including snow,
freezing water, ice storms and blizzards) and fires. Due to their nature, the
Company cannot predict the incidence, timing and severity of catastrophes and
acts of terrorism, but the Company makes broad use of catastrophic and

14

non-catastrophic reinsurance to manage risk from these perils. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- September 11, 2001 Tragedies." However, MetLife believes its
liabilities for future benefits are adequate to cover the ultimate benefits.
MetLife periodically reviews its estimates of liabilities for future benefits
and compares them with its actual experience. It revises estimates, when
appropriate, if it determines that future expected experience differs from
assumptions used in the development of liabilities.

UNDERWRITING AND PRICING

INDIVIDUAL AND INSTITUTIONAL

The Company's individual and group insurance underwriting involves an
evaluation of applications for life, disability, dental, retirement and savings,
and long-term care insurance products and services by a professional staff of
underwriters and actuaries, who determine the type and the amount of risk that
the Company is willing to accept. The Company employs detailed underwriting
policies, guidelines and procedures designed to assist the underwriter to
properly assess and quantify risks before issuing a policy to qualified
applicants or groups.

Individual underwriting considers not only an applicant's medical history,
but also other factors such as financial profiles, foreign travel, avocations
and alcohol, drug and tobacco use. The Company's group underwriters generally
evaluate the risk characteristics of each prospective insured group, although
with certain voluntary products, employees may be underwritten on an individual
basis. Generally, the Company is not obligated to accept any risk or group of
risks from, or to issue a policy or group of policies to, any employer or
intermediary. Requests for coverage are reviewed on their merits and generally a
policy is not issued unless the particular risk or group has been examined and
approved for underwriting. Underwriting is generally done by the Company's
employees, although some policies are reviewed by intermediaries under strict
guidelines established by the Company.

In order to maintain high standards of underwriting quality and
consistency, the Company engages in a multilevel series of ongoing internal
underwriting audits, and is subject to external audits by its reinsurers, at
both its remote underwriting offices and its corporate underwriting office.

The Company has established senior level oversight of the underwriting
process that facilitates quality sales and serving the needs of its customers,
while supporting its financial strength and business objectives. The Company's
goal is to achieve the underwriting, mortality and morbidity levels reflected in
the assumptions in its product pricing. This is accomplished by determining and
establishing underwriting policies, guidelines, philosophies and strategies that
are competitive and suitable for the customer, the agent and the Company.

Individual and group product pricing reflects the Company's insurance
underwriting standards. Product pricing of insurance products is based on the
expected payout of benefits calculated through the use of assumptions for
mortality, morbidity, expenses, persistency and investment returns, as well as
certain macroeconomic factors, such as inflation. Product specifications are
designed to prevent greater than expected mortality, and the Company
periodically monitors mortality and morbidity assumptions. Investment-oriented
products are priced based on various factors, which may include investment
return, expenses, persistency, and optionality.

Unique to group insurance pricing is experience rating. MetLife employs
both prospective and retrospective experience rating. Prospective experience
rating involves the evaluation of past experience for the purpose of determining
future premium rates. Retrospective experience rating involves the evaluation of
past experience for the purpose of determining the actual cost of providing
insurance for the customer for the period of time in question.

MetLife continually reviews its underwriting and pricing guidelines so that
its policies remain competitive and supportive of its marketing strategies and
profitability goals. Decisions are based on established actuarial pricing and
risk selection principles to ensure that MetLife's underwriting and pricing
guidelines are appropriate.

15

REINSURANCE

Reinsurance is written on a facultative basis or an automatic treaty basis.
Facultative reinsurance is individually underwritten by the reinsurer for each
policy to be reinsured. Factors taken into account in underwriting facultative
reinsurance are medical history, impairments, employment, hobbies and financial
information. An automatic reinsurance treaty provides that risks will be ceded
on specified blocks of business where the underlying policies meet the ceding
company's underwriting criteria. In contrast to facultative reinsurance, the
reinsurer does not approve each individual risk. Automatic reinsurance treaties
generally provide that the reinsurer will be liable for a portion of the risk
associated with specified policies written by the ceding company. Factors
considered in underwriting automatic reinsurance are the product's underwriting,
pricing, distribution and optionality, as well as the ceding company's retention
and financial strength.

AUTO & HOME

Auto & Home's underwriting function has six principal aspects:

- evaluating potential worksite marketing employer accounts and independent
agencies;

- establishing guidelines for the binding of risks by agents with binding
authority;

- reviewing coverage bound by agents;

- on a case by case basis, underwriting potential insureds presented by
agents outside the scope of their binding authority;

- pursuing information necessary in certain cases to enable Auto & Home to
issue a policy within the Company's guidelines; and

- ensuring that renewal policies continue to be written at rates
commensurate with risk.

Subject to very few exceptions, agents in each of Auto & Home's
distribution channels, as well as in MetLife's Institutional segment, have
binding authority for risks which fall within Auto & Home's published
underwriting guidelines. Risks falling outside the underwriting guidelines may
be submitted for approval to the underwriting department; alternatively, agents
in such a situation may call the underwriting department to obtain authorization
to bind the risk themselves. In most states, Auto & Home generally has the right
within a specified period (usually the first 60 days) to cancel any policy.

Auto & Home establishes prices for its major lines of insurance based on
its proprietary database, rather than relying on rating bureaus. Auto & Home
determines prices in part from a number of variables specific to each risk. The
pricing of personal lines insurance products takes into account, among other
things, the expected frequency and severity of losses, the costs of providing
coverage (including the costs of acquiring policyholders and administering
policy benefits and other administrative and overhead costs), competitive
factors and profit considerations.

The major pricing variables for personal lines automobile insurance include
characteristics of the automobile itself, such as age, make and model,
characteristics of insureds, such as driving record and experience, and the
insured's personal financial management. Auto & Home's ability to set and change
rates is subject to regulatory oversight.

As a condition of MetLife's license to do business in each state, Auto &
Home, like all other automobile insurers, is required to write or share the cost
of private passenger automobile insurance for higher risk individuals who would
otherwise be unable to obtain such insurance. This "involuntary" market, also
called the "shared market," is governed by the applicable laws and regulations
of each state, and policies written in this market are generally written at
rates higher than standard rates.

REINSURANCE ACTIVITY

MetLife cedes premiums to other insurers under various agreements that
cover individual risks, group risks or defined blocks of business, on a
coinsurance, yearly renewable term, excess or catastrophe excess basis. These

16

reinsurance agreements spread the risk and minimize the effect of losses. The
amount of each risk retained by MetLife depends on its evaluation of the
specific risk, subject, in certain circumstances, to maximum limits based on the
characteristics of coverages. The Company also reinsures low mortality risk
reinsurance treaties with other reinsurance companies. It also reinsures when
capital requirements and the economic terms of the reinsurance make it
appropriate to do so.

Under the terms of the reinsurance agreements, the reinsurer agrees to
reimburse MetLife for the ceded amount in the event the claim is paid. However,
MetLife remains liable to its policyholders with respect to ceded insurance if
any reinsurer fails to meet the obligations assumed by it. Since it bears the
risk of nonpayment by one or more of its reinsurers, MetLife cedes reinsurance
to well-capitalized, highly rated reinsurers.

INDIVIDUAL

MetLife currently reinsures up to 90% of the mortality risk for all new
individual life insurance policies that it writes through its various insurance
companies. This practice was initiated for different products starting at
various points in time between 1992 and 2000. In addition, in 1998, MetLife
reinsured substantially all of the mortality risk on its universal life policies
issued since 1983.

In addition to reinsuring mortality risk, MetLife reinsures other risks and
specific coverages. The Company routinely reinsures certain classes of risks in
order to limit its exposure to particular travel, avocation and lifestyle
hazards. MetLife's retention limits per life vary by franchise and according to
the characteristics of the particular risks.

MetLife reinsures its business through a diversified group of reinsurers.
Placement of reinsurance is done primarily on an automatic basis and also on a
facultative basis for risks of specific characteristics.

AUTO & HOME

Auto & Home purchases reinsurance to control the Company's exposure to
large losses (primarily catastrophe losses) and to protect surplus. Auto & Home
cedes to reinsurers a portion of risks and pays premiums based upon the risk and
exposure of the policies subject to reinsurance.

To control the Company's exposure to large property and casualty losses,
Auto & Home utilizes property catastrophe, casualty, and property per risk
excess loss agreements.

REGULATION

INSURANCE REGULATION

Metropolitan Life is licensed to transact insurance business in, and is
subject to regulation and supervision by, all 50 states, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands and Canada. Each of MetLife's
other insurance subsidiaries is licensed and regulated in all U.S. and
international jurisdictions where it conducts insurance business. The extent of
such regulation varies, but most jurisdictions have laws and regulations
governing the financial aspects of insurers, including standards of solvency,
reserves, reinsurance and capital adequacy, and the business conduct of
insurers. In addition, statutes and regulations usually require the licensing of
insurers and their agents, the approval of policy forms and related materials
and, for certain lines of insurance, the approval of rates. Such statutes and
regulations also prescribe the permitted types and concentration of investments.

The New York Insurance Law limits the sales commissions and certain other
marketing expenses that may be incurred in connection with the sale of life
insurance policies and annuity contracts. MetLife's insurance subsidiaries are
each required to file reports, generally including detailed annual financial
statements, with insurance regulatory authorities in each of the jurisdictions
in which they do business, and their operations and accounts are subject to
periodic examination by such authorities. These subsidiaries must also file, and
in many jurisdictions and in some lines of insurance obtain regulatory approval
for, rules, rates and forms relating to the insurance written in the
jurisdictions in which they operate.

17

The National Association of Insurance Commissioners ("NAIC") has
established a program of accrediting state insurance departments. NAIC
accreditation permits accredited states to conduct periodic examinations of
insurers domiciled in such states. NAIC-accredited states will not accept
reports of examination of insurers from unaccredited states, except under
limited circumstances. As a direct result, insurers domiciled in unaccredited
states may be subject to financial examination by accredited states in which
they are licensed, in addition to any examinations conducted by their
domiciliary states. The New York Insurance Department (the "Department"),
Metropolitan Life's principal insurance regulator, has not received its
accreditation as a result of the New York legislature's failure to adopt certain
model NAIC laws. The Company does not believe that this will have a significant
impact upon its ability to conduct its insurance businesses.

State and federal insurance and securities regulatory authorities and other
state law enforcement agencies and attorneys general from time to time make
inquiries regarding compliance by MetLife's insurance subsidiaries with
insurance, securities and other laws and regulations regarding the conduct of
MetLife's insurance and securities businesses. MetLife cooperates with such
inquiries and takes corrective action when warranted.

Holding Company regulation. The Holding Company and its insurance
subsidiaries are subject to regulation under the insurance holding company laws
of various jurisdictions. The insurance holding company laws and regulations
vary from jurisdiction to jurisdiction, but generally require a controlled
insurance company (insurers that are subsidiaries of insurance holding
companies) to register with state regulatory authorities and to file with those
authorities certain reports, including information concerning their capital
structure, ownership, financial condition, certain intercompany transactions and
general business operations.

State insurance statutes also typically place restrictions and limitations
on the amount of dividends or other distributions payable by insurance company
subsidiaries to their parent companies, as well as on transactions between an
insurer and its affiliates. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- The Holding Company." The New York Insurance Law and the
regulations thereunder also restrict the aggregate amount of investments
Metropolitan Life may make in non-life insurance subsidiaries, and provide for
detailed periodic reporting on subsidiaries.

Guaranty associations and similar arrangements. Most of the jurisdictions
in which MetLife's insurance subsidiaries are admitted to transact business
require life and property and casualty 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 premiums written by member insurers in the lines
of business in which the impaired, insolvent or failed insurer is engaged. Some
states permit member insurers to recover assessments paid through full or
partial premium tax offsets.

In the past five years, the aggregate assessments levied against MetLife's
insurance subsidiaries have not been material. While the amount and timing of
future assessments are not predictable, the Company has established liabilities
for guaranty fund assessments that it considers adequate for assessments with
respect to insurers that are currently subject to insolvency proceedings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Insolvency Assessments."

Statutory examination. As part of their regulatory oversight process,
state insurance departments conduct periodic detailed examinations of the books,
records, accounts, and business practices of insurers domiciled in their states.
These examinations are generally conducted in cooperation with the departments
of two or three other states, representing each of the NAIC zones, under
guidelines promulgated by the NAIC. On March 1, 2000, the Department completed
an examination of Metropolitan Life for each of the five years in the period
ended December 31, 1998 which included recommendations for certain changes in
recordkeeping processes, but did not result in a fine. For the three-year period
ended December 31, 2002, MetLife, Inc. has not received any material adverse
findings resulting from state insurance department examinations of its other
insurance subsidiaries.

Regulatory authorities in a small number of states have conducted
investigations or inquiries relating to Metropolitan Life's, New England Life
Insurance Company's ("New England Life") or General American's

18

sales of individual life insurance policies or annuities. Over the past several
years, these and a number of investigations by other regulatory authorities were
resolved by monetary payments and certain other relief. The Company may continue
to resolve investigations in a similar manner.

NAIC ratios. On the basis of statutory financial statements filed with
state insurance regulators, the NAIC calculates annually 13 financial ratios to
assist state regulators in monitoring the financial condition of insurers. A
"usual range" of results for each ratio is used as a benchmark. Departure from
the "usual range" on four or more of the ratios can lead to inquiries from
individual state insurance departments. In 2002, two of the 13 financial ratios
for Metropolitan Life fell outside the usual range, one of which is directly
related to the creation of the statutory Corporate Asset segment during 2002.
The Company created the statutory Corporate Asset segment in order to better
coordinate the GAAP management of its business with the requirements of
statutory reporting and investment income allocation. Had the ratio been
recalculated assuming the statutory Corporate Asset segment existed prior to
2002, the ratio would have been inside the usual range. In 2001, five of the 13
financial ratios for Metropolitan Life fell outside the usual range, three of
which were a direct result of certain transactions between the Holding Company,
Metropolitan Life and Metropolitan Insurance and Annuity Company. These
transactions were approved by the applicable individual state insurance
departments. The adoption of new statutory accounting principles in 2001
resulted in one of the ratios falling outside of the usual range. The Company
does not anticipate any inquiries as a result of these departures.

Policy and contract reserve sufficiency analysis. Under the New York
Insurance Law, Metropolitan Life is required to conduct annually an analysis of
the sufficiency of all life and health insurance and annuity statutory reserves.
Additionally, other life insurance affiliates are subject to similar
requirements in their states of domicile. In each case, a qualified actuary must
submit an opinion which states that the statutory reserves, when considered in
light of the assets held with respect to such reserves, make good and sufficient
provision for the associated contractual obligations and related expenses of the
insurer. If such an opinion cannot be provided, the insurer must set up
additional reserves by moving funds from surplus. Since the inception of this
requirement, Metropolitan Life and all other insurance subsidiaries required by
other jurisdictions to provide similar opinions have provided them without
qualifications.

Surplus and capital. The New York Insurance Law requires New York domestic
stock life insurers to maintain minimum capital. At December 31, 2002,
Metropolitan Life's capital was in excess of such required minimum. Since the
demutualization, Metropolitan Life has continued to offer participating
policies. Metropolitan Life is subject to statutory restrictions that limit to
10% the amount of statutory profits on participating policies written after the
demutualization (measured before dividends to policyholders) that can inure to
the benefit of stockholders. Since the demutualization, the impact of these
restrictions on net income has not been, and Metropolitan Life believes that in
the future it will not be, significant.

MetLife's U.S. insurance subsidiaries are subject to the supervision of the
regulators in each jurisdiction in which they are licensed to transact business.
Regulators have discretionary authority, in connection with the continued
licensing of these insurance subsidiaries, to limit or prohibit sales to
policyholders if, in their judgment, the regulators determine that such insurer
has not maintained the minimum surplus or capital or that the further
transaction of business will be hazardous to policyholders. See "-- Risk-based
capital."

Risk-based capital ("RBC"). The New York Insurance Law requires that New
York domestic life insurers report their RBC based on a formula calculated by
applying factors to various asset, premium and statutory reserve items; similar
rules apply to each of the Holding Company's U.S. insurance subsidiaries
domiciled in other jurisdictions. The formula takes into account the risk
characteristics of the insurer, including asset risk, insurance risk, interest
rate risk and business risk. The Department uses the formula as an early warning
regulatory tool to identify possible inadequately capitalized insurers for
purposes of initiating regulatory action, and not as a means to rank insurers
generally. The New York Insurance Law imposes broad confidentiality requirements
on those engaged in the insurance business (including insurers, agents, brokers
and others) and on the Department as to the use and publication of RBC data.

The New York Insurance Law gives the New York Superintendent of Insurance
explicit regulatory authority to require various actions by, or take various
actions against, insurers whose total adjusted capital does not exceed

19

certain RBC levels. At December 31, 2002, Metropolitan Life's total adjusted
capital was in excess of each of those RBC levels.

Each of the U.S. insurance subsidiaries of the Holding Company is also
subject to certain RBC requirements. At December 31, 2002, the total adjusted
capital of each of these insurance subsidiaries also was in excess of each of
those RBC levels. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- The
Company -- Support Agreements."

The NAIC adopted the Codification of Statutory Accounting Principles (the
"Codification") which is intended to standardize regulatory accounting and
reporting to state insurance departments and became effective January 1, 2001.
However, statutory accounting principles continue to be established by
individual state laws and permitted practices. The Department required adoption
of the Codification, with certain modifications, for the preparation of
statutory financial statements effective January 1, 2001. Effective December 31,
2002, the Department adopted a modification to its regulations to be consistent
with the Codification with respect to the admissibility of deferred income taxes
by New York insurers, subject to certain limitations. The adoption of the
Codification as modified by the Department, did not adversely affect
Metropolitan Life's statutory capital and surplus. Further modifications by
state insurance departments may impact the effect of the Codification on the
statutory capital and surplus of Metropolitan Life and the Holding Company's
other insurance subsidiaries.

Regulation of investments. Each of the Holding Company's insurance
subsidiaries is subject to state laws and regulations that require
diversification of its investment portfolios and limit the amount of investments
in certain asset categories, such as below investment grade fixed income
securities, equity real estate, other equity investments, and derivatives.
Failure to comply with these laws and regulations would cause investments
exceeding regulatory limitations to be treated as non-admitted assets for
purposes of measuring surplus, and, in some instances, would require divestiture
of such non-qualifying investments. The Company believes that the investments
made by each of its insurance subsidiaries complied with such regulations at
December 31, 2002.

Federal initiatives. Although the federal government generally does not
directly regulate the insurance business, federal initiatives often have an
impact on the business in a variety of ways. From time to time, federal measures
are proposed which may significantly affect the insurance business, including
limitations on antitrust immunity, the repeal of the federal estate tax, the
exclusion of federal income tax on corporate dividends, the creation of more
flexible tax advantaged or tax exempt savings accounts with higher contribution
limits, and the replacement of certain traditional retirement annuities with a
more general employer retirement savings account. It is possible that the repeal
of the tax on corporate dividends could adversely affect annuity sales by life
insurers, including the Company, by decreasing demand for products which offer
tax-deferred growth of assets. In addition, the demand for annuities could
decrease if the new, tax-favored savings accounts are adopted, as they may be
subject to more favorable tax treatment than annuities. The Company cannot
predict whether these initiatives will be adopted as proposed, or what impact,
if any, such proposals may have on the Company's business, results of operation
or financial condition.

Members of Congress are scheduled to hold hearings in 2003 on possible
federal legislation that would allow a state-chartered and regulated insurer,
such as MetLife's U.S. insurance subsidiaries, to choose instead to be regulated
exclusively by a federal insurance regulator. The Company does not believe that
these discussions will lead to any new law in this area during the 108th
Congress.

Legislative Developments. On May 26, 2001, President Bush signed into law
the Economic Growth and Taxpayer Relief Reconciliation Act, which includes the
repeal of the federal estate tax over a ten-year period. The Company believes
that the repeal of the federal estate tax has resulted in reduced sales and
could continue to impact sales of some of the Company's estate planning
products, including survivorship/second to die life insurance policies; however,
the Company does not expect the repeal to have a material adverse impact on its
overall business.

For a discussion of the Gramm-Leach-Bliley Act of 1999, permitting
affiliations between banks and insurers, see "-- Competition."

20

Management cannot predict what other proposals may be made, what
legislation may be introduced or enacted or the impact of any such legislation
on the Company's business, results of operations and financial condition.

BROKER/DEALER AND SECURITIES REGULATION

Some of MetLife, Inc.'s subsidiaries and certain policies and contracts
offered by them, are subject to various levels of regulation under the federal
securities laws administered by the Securities and Exchange Commission. Some of
MetLife, Inc.'s subsidiaries are investment advisers registered under the
Investment Advisers Act of 1940, as amended. In addition, some separate accounts
and a variety of mutual funds are registered under the Investment Company Act of
1940, as amended. Some annuity contracts and insurance policies issued by the
Company are funded by separate accounts, the interests in which are registered
under the Securities Act of 1933, as amended. Some of MetLife, Inc.'s
subsidiaries are registered as broker/dealers under the Securities Exchange Act
of 1934, as amended, and are members of the National Association of Securities
Dealers, Inc. These broker/dealers may also be registered under various state
securities laws.

Some of MetLife, Inc.'s subsidiaries also have certain pooled investment
vehicles that are exempt from registration under the Securities Act and the
Investment Company Act, but may be subject to certain other provisions of such
acts.

Federal and state securities regulatory authorities from time to time make
inquiries regarding compliance by MetLife, Inc. and its subsidiaries with
securities and other laws and regulations regarding the conduct of their
securities businesses. MetLife cooperates with such inquiries and takes
corrective action when warranted.

These laws and regulations are primarily intended to protect investors in
the securities markets and generally grant supervisory agencies broad
administrative powers, including the power to limit or restrict the conduct of
business for failure to comply with such laws and regulations. The Company may
also be subject to similar laws and regulations in the states and foreign
countries in which it provides investment advisory services, offers the products
described above or conducts other securities-related activities.

ENVIRONMENTAL CONSIDERATIONS

As an owner and operator of real property, the Company is subject to
extensive federal, state and local environmental laws and regulations. Inherent
in such ownership and operation is also the risk that there may be potential
environmental liabilities and costs in connection with any required remediation
of such properties. In addition, the Company holds equity interests in companies
that could potentially be subject to environmental liabilities. The Company
routinely has environmental assessments performed with respect to real estate
being acquired for investment and real property to be acquired through
foreclosure. The Company cannot provide assurance that unexpected environmental
liabilities will not arise. However, based on information currently available to
management, management believes that any costs associated with compliance with
environmental laws and regulations or any remediation of such properties will
not have a material adverse effect on the Company's business, results of
operations or financial condition.

ERISA CONSIDERATIONS

The Company provides products and services to certain employee benefit
plans that are subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended (the
"Code"). As such, its activities are subject to the restrictions imposed by
ERISA and the Code, including the requirement under ERISA that fiduciaries must
perform their duties solely in the interests of ERISA plan participants and
beneficiaries and the requirement under ERISA and the Code that fiduciaries may
not cause a covered plan to engage in prohibited transactions with persons who
have certain relationships with respect to such plans. The applicable provisions
of ERISA and the Code are subject to enforcement by the Department of Labor, the
Internal Revenue Service and the Pension Benefit Guaranty Corporation.

In John Hancock Mutual Life Insurance Company v. Harris Trust and Savings
Bank (1993), the U.S. Supreme Court held that certain assets in excess of
amounts necessary to satisfy guaranteed obligations

21

under a participating group annuity general account contract are "plan assets."
Therefore, these assets are subject to certain fiduciary obligations under
ERISA, which requires fiduciaries to perform their duties solely in the interest
of ERISA plan participants and beneficiaries. On January 5, 2000, the Secretary
of Labor issued final regulations indicating, in cases where an insurer has
issued a policy backed by the insurer's general account to or for an employee
benefit plan, the extent to which assets of the insurer constitute plan assets
for purposes of ERISA and the Code. The regulations apply only with respect to a
policy issued by an insurer on or before December 31, 1998 ("Transition
Policy"). No person will generally be liable under ERISA or the Code for conduct
occurring prior to July 5, 2001, where the basis of a claim is that insurance
company general account assets constitute plan assets. Insurers issuing new
policies -- other than guaranteed benefit policies -- after December 31, 1998
will generally be subject to fiduciary obligations under ERISA.

The regulations indicate the requirements that must be met so that assets
supporting a Transition Policy will not be considered plan assets for purposes
of ERISA and the Code. These requirements include detailed disclosures to be
made to the employee benefits plan and the requirement that the insurer must
permit the policyholder to terminate the policy on 90 days' notice and receive
without penalty, at the policyholder's option, either (i) the unallocated
accumulated fund balance (which may be subject to market value adjustment) or
(ii) a book value payment of such amount in annual installments with interest.
The Company has taken and continues to take steps designed to ensure compliance
with these regulations, as appropriate.

FINANCIAL HOLDING COMPANY REGULATION

Regulatory agencies. In connection with its acquisition of a
federally-chartered commercial bank, the Holding Company became a bank holding
company and financial holding company on February 28, 2001. As such, the Holding
Company is subject to regulation under the Bank Holding Company Act of 1956, as
amended (the "BHC Act"), and to inspection, examination, and supervision by the
Board of Governors of the Federal Reserve System (the "FRB"). In addition, the
Holding Company's banking subsidiary is subject to regulation and examination
primarily by the Office of the Comptroller of the Currency ("OCC") and
secondarily by the FRB and the Federal Deposit Insurance Corporation ("FDIC").

Financial Holding Company Activities. As a financial holding company,
MetLife, Inc.'s activities and investments are restricted by the BHC Act, as
amended by the Gramm-Leach-Bliley Act of 1999 (the "GLB Act"), to those that are
"financial" in nature or "incidental" or "complementary" to such financial
activities. Activities that are financial in nature include securities
underwriting, dealing and market making, sponsoring mutual funds and investment
companies, insurance underwriting and agency, merchant banking and activities
that the FRB has determined to be closely related to banking. In addition, under
the insurance company investment portfolio provision of the GLB Act, financial
holding companies are authorized to make investments in other financial and
non-financial companies, through their insurance subsidiaries, that are in the
ordinary course of business and in accordance with state insurance law, provided
the financial holding company does not routinely manage or operate such
companies except as may be necessary to obtain a reasonable return on
investment.

Other Restrictions and Limitations on Bank Holding Companies and Financial
Holding Companies -- Capital. MetLife, Inc. and its insured depository
institution subsidiary are subject to risk-based and leverage capital guidelines
issued by the federal banking regulatory agencies for banks and financial
holding companies. The federal banking regulatory agencies are required by law
to take specific prompt corrective actions with respect to institutions that do
not meet minimum capital standards. At December 31, 2002, MetLife, Inc. and its
insured depository institution subsidiary were in compliance with the
aforementioned guidelines.

Other Restrictions and Limitations on Bank Holding Companies and Financial
Holding Companies -- Consumer Protection Laws. Numerous other federal and state
laws also affect the Holding Company and its subsidiary bank's earnings and
activities, including federal and state consumer protection laws. The GLB Act
included consumer privacy provisions that, among other things, require
disclosure of a financial institution's privacy policy to customers. In
addition, these provisions permit states to adopt more extensive privacy
protections through legislation or regulation.

Other Restrictions and Limitations on Bank Holding Companies and Financial
Holding Companies -- Change of Control. Because MetLife, Inc. is a "financial
holding company" and "bank holding company"

22

under the federal banking laws, no person may acquire control of MetLife, Inc.
without the prior approval of the FRB. A change of control is conclusively
presumed upon acquisitions of 25% or more of any class of voting securities and
rebuttably presumed upon acquisitions of 10% or more of any class of voting
securities. Further, as a result of MetLife, Inc.'s ownership of MetLife Bank,
N.A., a national bank, approval from the OCC would be required in connection
with a change of control (generally presumed upon the acquisition of 10% or more
of any class of voting securities) of MetLife, Inc.

COMPETITION

The Company believes that competition with its business segments is based
on a number of factors, including service, product features, price, commission
structure, financial strength, claims-paying ratings, debt ratings and name
recognition. It competes with a large number of other insurers, as well as
non-insurance financial services companies, such as banks, broker/dealers and
asset managers, for individual consumers, employer and other group customers and
agents and other distributors of insurance and investment products. Some of
these companies offer a broader array of products, have more competitive pricing
or, with respect to other insurers, have higher claims paying ability ratings.
Some may also have greater financial resources with which to compete. National
banks, which may sell annuity products of life insurers in some circumstances,
also have pre-existing customer bases for financial services products.

In 1999, the GLB Act was adopted, implementing fundamental changes in the
regulation of the financial services industry in the U.S. With the passage of
this Act, among other things, bank holding companies may acquire insurers, and
insurance holding companies may acquire banks. The ability of banks to affiliate
with insurers may materially adversely affect all of the Company's product lines
by substantially increasing the number, size and financial strength of potential
competitors.

The Company must attract and retain productive sales representatives to
sell its insurance, annuities and investment products. Strong competition exists
among insurers for sales representatives with demonstrated ability. The Company
competes with other insurers for sales representatives primarily on the basis of
its financial position, support services and compensation and product features.
See "-- Individual -- Marketing and Distribution." MetLife continues to
undertake several initiatives to grow the MetLife Financial Services career
agency force. The Company cannot provide assurance that these initiatives will
succeed in attracting and retaining new agents. Sales of individual insurance,
annuities and investment products and the Company's results of operations and
financial position could be materially adversely affected if it is unsuccessful
in attracting and retaining agents.

Many of the Company's insurance products, particularly those offered by its
Institutional segment, are underwritten annually, and, accordingly, there is a
risk that group purchasers may be able to obtain more favorable terms from
competitors rather than renewing coverage with the Company. The effect of
competition may, as a result, adversely affect the persistency of these and
other products, as well as the Company's ability to sell products in the future.

The investment management and securities brokerage businesses have
relatively few barriers to entry and continually attract new entrants. Many of
the Company's competitors in these businesses offer a broader array of
investment products and services and are better known than it as sellers of
annuities and other investment products.

Congress periodically considers reforms to the nation's health care system.
While the Company offers non-medical health insurance products (such as group
dental insurance, long-term care and disability insurance), it generally does
not offer medical indemnity products or managed care products, and, accordingly,
it does not expect to be directly affected by such proposals to any significant
degree. However, the uncertain environment resulting from health care reform
could cause group health insurance providers to enter some of the markets in
which the Company does business, thereby increasing competition.

23

COMPANY RATINGS

FINANCIAL STRENGTH RATINGS

Financial strength ratings are a factor in establishing the competitive
position of insurers. The Company's financial strength ratings as of the date of
this filing are listed in the table below:

The foregoing ratings reflect each rating agency's opinion of Metropolitan
Life and the Company's other insurance subsidiaries' financial strength,
operating performance and ability to meet policyholder obligations, and are not
evaluations directed toward the protection of MetLife, Inc.'s securityholders.

A ratings downgrade (or the potential for such a downgrade) of Metropolitan
Life or any of the Company's other insurance subsidiaries could, among other
things, increase the number of policies surrendered and withdrawals by
policyholders of cash values from their policies, adversely affect relationships
with broker/dealers, banks, agents, wholesalers and other distributors of the
Company's products and services, negatively impact new sales, and adversely
affect its ability to compete and thereby have a material adverse effect on its
business, results of operations and financial condition.

CREDIT RATINGS

Credit ratings are also a factor in establishing the competitive position
of insurers and are important to the Company's ability to raise capital through
the issuance of debt and may impact the cost of such financing. The Company's
credit ratings as of the date of this filing are listed in the table below:

27

EMPLOYEES

At December 31, 2002, the Company employed approximately 48,500 employees.
The Company believes that its relations with its employees are satisfactory.

EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is information regarding the executive officers of MetLife,
Inc. and Metropolitan Life:

ROBERT H. BENMOSCHE, age 58, has been a Director of MetLife, Inc.
since August 1999 and Chairman of the Board, President and Chief Executive
Officer of MetLife, Inc. since September 1999. He has been a Director of
Metropolitan Life since 1997 and Chairman of the Board, President and Chief
Executive Officer of Metropolitan Life since July 1998, was President and
Chief Operating Officer from November 1997 to June 1998, and was Executive
Vice President from September 1995 to October 1997. Previously, he was
Executive Vice President of PaineWebber Group Incorporated, a full service
securities and commodities firm, from 1989 to 1995.

GERALD CLARK, age 59, has been a Director of MetLife, Inc. since
August 1999 and Vice Chairman of the Board and Chief Investment Officer of
MetLife, Inc. since September 1999. He has been a Director of Metropolitan
Life since 1997 and Vice Chairman of the Board and Chief Investment Officer
of Metropolitan Life since July 1998, was Senior Executive Vice President
and Chief Investment Officer from December 1995 to July 1998, and was
Executive Vice President and Chief Investment Officer from September 1992
to December 1995.

STEWART G. NAGLER, age 60, has been a Director and Vice Chairman of
the Board and Chief Financial Officer of MetLife, Inc. since September
1999. He has been a Director of Metropolitan Life since 1997 and Vice
Chairman of the Board and Chief Financial Officer of Metropolitan Life
since July 1998, and was its Senior Executive Vice President and Chief
Financial Officer from April 1993 to July 1998. Mr. Nagler also serves as a
Director and Chairman of the Board of RGA.

GARY A. BELLER, age 64, has been Senior Executive Vice President and
General Counsel of MetLife, Inc. since September 1999 and of Metropolitan
Life since February 1998. He was Executive Vice President and General
Counsel of Metropolitan Life from August 1996 to January 1998, and
Executive Vice President and Chief Legal Officer from November 1994 to July
1996.

DANIEL J. CAVANAGH, age 63, has been Executive Vice President of
Operations and Technology of MetLife, Inc. since March 1999. He was Senior
Vice President in charge of information systems from 1983 to 1991, Vice
President from 1975 to 1983, Assistant Vice President from 1973 to 1975, a
manager in electronic development from 1972 to 1975, and joined the Company
as an insurance trainee in the industrial insurance department in 1957. He
was appointed president of Metropolitan Property and Casualty Insurance
Company in 1991, its Chief Executive Officer from 1993 to March 1999 and
has been a director since 1986.

C. ROBERT HENRIKSON, age 55, has been President of the U.S. Insurance
and Financial Services businesses of MetLife, Inc. since July 2002. He
served as President of Institutional Business of MetLife, Inc. since
September 1999 and President of Institutional Business of Metropolitan Life
since May 1999. He was Senior Executive Vice President, Institutional
Business, of Metropolitan Life from December 1997 to May 1999, Executive
Vice President, Institutional Business, from January 1996 to December 1997,
and Senior Vice President, Pensions, from January 1991 to January 1995. He
is a director of a number of subsidiaries of Metropolitan Property and
Casualty Insurance Company.

CATHERINE A. REIN, age 60, has been Senior Executive Vice President of
MetLife, Inc. since September 1999 and President and Chief Executive
Officer of Metropolitan Property and Casualty Insurance Company since March
1999. She has been Senior Executive Vice President of Metropolitan Life
since February 1998 and was Executive Vice President from October 1989 to
February 1998.

WILLIAM J. TOPPETA, age 54, has been President of International of
MetLife, Inc. since June 2001. He was President of Client Services and
Chief Administrative Officer of MetLife, Inc. from September 1999 to June
2001 and President of Client Services and Chief Administrative Officer of
Metropolitan Life from May 1999 to June 2001. He was Senior Executive Vice
President, Head of Client Services, of Metropolitan Life from March 1999 to
May 1999, Senior Executive Vice President, Individual, from February 1998
to March 1999, Executive Vice President, Individual Business, from July
1996 to February 1998, Senior Vice President from October 1995

28

to July 1996 and its President and Chief Executive Officer, Canadian
Operations, from July 1993 to October 1995.

LISA M. WEBER, age 40, has been Senior Executive Vice President and
Chief Administrative Officer of MetLife, Inc. and Metropolitan Life since
June 2001. She was Executive Vice President of MetLife, Inc. and
Metropolitan Life from December 1999 to June 2001 and head of Human
Resources of Metropolitan Life since March 1998. She was Senior Vice
President of MetLife, Inc. from September 1999 to November 1999 and Senior
Vice President of Metropolitan Life from March 1998 to November 1999.
Previously, she was Senior Vice President of Human Resources of PaineWebber
Group Incorporated, where she was employed for ten years.

TRADEMARKS

MetLife has a worldwide trademark portfolio that it considers important in
the marketing of its products and services, including, among others, the
trademark "MetLife" and the license to use the Peanuts(R) characters. MetLife
has the exclusive right to use the Peanuts(R) characters in the area of
financial services and health care benefit services in the U.S. and some foreign
countries under an advertising and premium agreement with United Feature
Syndicate. The agreement with United Feature Syndicate expires on December 31,
2012. The Company believes that its rights in its trademarks are well protected.

AVAILABLE INFORMATION

MetLife makes available, free of charge, on its website (www.metlife.com)
through the Investor Relations page, its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to all those
reports as soon as reasonably practicable after MetLife files (or furnishes)
such reports to the U.S. Securities and Exchange Commission.

ITEM 2. PROPERTIES

One Madison Avenue in New York, New York currently serves as the Company's
headquarters, and it, along with the adjacent MetLife Tower, contains
approximately 1.4 million rentable square feet of space. The Company has leased
One Madison Avenue and the MetLife Tower to Credit Suisse First Boston (USA),
Inc. ("CSFB"), under a long-term lease. MetLife has subleased for its own use a
portion of One Madison Avenue and the Tower pursuant to a sublease from CSFB.
CSFB is occupying portions of One Madison Avenue and the Tower and expects to
complete its occupancy in stages through late 2003. MetLife continues to vacate
portions of One Madison Avenue and the Tower and occupies approximately 365,000
rentable square feet as of December 2002 (which is the square footage subleased
to MetLife on a long-term basis under the sublease from CSFB). At December 31,
2002, the Company occupied approximately 404,000 rentable square feet in Long
Island City, New York under a long-term lease arrangement. Over 950 employees
are resident in that facility (most of whom formerly resided in One Madison
Avenue). An addition to that facility is currently under construction and is
slated for completion in late 2003. That expansion will contain approximately
282,000 rentable square feet on 13 floors and is expected to house an additional
900 employees.

In December 2002, the Company entered into a sale-leaseback of the
headquarters building of New England Life Insurance Company (formerly New
England Mutual Life Insurance Company) located on Boylston Street in Boston
containing approximately 560,000 rentable square feet. Under the terms of the
sale-leaseback arrangement, the Company will occupy 465,000 rentable square feet
for one year and then 210,000 square feet for the next four years. The
sale-leaseback provides the Company with rights of termination after year three,
as well as the right to renew after year five.

The Company continues to own 16 other buildings in the U.S. that it uses in
the operation of its business. These buildings contain approximately 3.1 million
rentable square feet and are located in the following states: Florida, Illinois,
Massachusetts, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania,
Rhode Island and Texas. The Company's computer center in Rensselaer, New York is
not owned in fee but rather is occupied pursuant to a long-term ground lease.
The Company leases space in approximately 715 other locations throughout the
U.S., and these leased facilities consist of approximately 7.2 million rentable
square feet. Approximately 51% of these leases are occupied as sales offices for
the Individual segment, and the Company uses the balance for its other business
activities. It also owns four buildings outside the U.S., comprising more than
386,000 rentable square feet. The Company leases approximately 100,000 rentable
square feet in various locations outside the

29

U.S. Management believes that its properties are suitable and adequate for the
Company's current and anticipated business operations.

The Company arranges for property and casualty coverage on its properties,
taking into consideration its risk exposures and the cost and availability of
commercial coverages, including deductible loss levels. In connection with its
renewal of those coverages, the Company has arranged $650 million of annual
terrorist coverage on its real estate portfolio, effective March 1, 2003.

ITEM 3. LEGAL PROCEEDINGS

Sales Practices Claims

Over the past several years, Metropolitan Life, New England Mutual Life
Insurance Company ("New England Mutual") and General American Life Insurance
Company ("General American") have faced numerous claims, including class action
lawsuits, alleging improper marketing and sales of individual life insurance
policies or annuities. These lawsuits are generally referred to as "sales
practices claims."

In December 1999, a federal court approved a settlement resolving sales
practices claims on behalf of a class of owners of permanent life insurance
policies and annuity contracts or certificates issued pursuant to individual
sales in the United States by Metropolitan Life, Metropolitan Insurance and
Annuity Company or Metropolitan Tower Life Insurance Company between January 1,
1982 and December 31, 1997. The class includes owners of approximately six
million in-force or terminated insurance policies and approximately one million
in-force or terminated annuity contracts or certificates.

Similar sales practices class actions against New England Mutual, with
which Metropolitan Life merged in 1996, and General American, which was acquired
in 2000, have been settled. In October 2000, a federal court approved a
settlement resolving sales practices claims on behalf of a class of owners of
permanent life insurance policies issued by New England Mutual between January
1, 1983 through August 31, 1996. The class includes owners of approximately
600,000 in-force or terminated policies. A federal court has approved a
settlement resolving sales practices claims on behalf of a class of owners of
permanent life insurance policies issued by General American between January 1,
1982 through December 31, 1996. An appellate court has affirmed the order
approving the settlement. The class includes owners of approximately 250,000
in-force or terminated policies. Implementation of the General American class
action settlement is proceeding.

Certain class members have opted out of the class action settlements noted
above and have brought or continued non-class action sales practices lawsuits.
In addition, other sales practices lawsuits have been brought. As of December
31, 2002, there are approximately 420 sales practices lawsuits pending against
Metropolitan Life, approximately 60 sales practices lawsuits pending against New
England Mutual and approximately 35 sales practices lawsuits pending against
General American. Metropolitan Life, New England Mutual and General American
continue to defend themselves vigorously against these lawsuits. Some individual
sales practices claims have been resolved through settlement, won by dispositive
motions, or, in a few instances, have gone to trial. Most of the current cases
seek substantial damages, including in some cases punitive and treble damages
and attorneys' fees. Additional litigation relating to the Company's marketing
and sales of individual life insurance may be commenced in the future.

The Metropolitan Life class action settlement did not resolve two putative
class actions involving sales practices claims filed against Metropolitan Life
in Canada, and these actions remain pending. In March 2002, a purported class
action complaint was filed in a federal court in Kansas by S-G Metals
Industries, Inc. against New England Mutual. The complaint seeks certification
of a class on behalf of corporations and banks that purchased participating life
insurance policies, as well as persons who purchased participating policies for
use in pension plans or through work site marketing. These policyholders were
not part of the New England Mutual class action settlement noted above. The
action was transferred to a federal court in Massachusetts. New England Mutual
moved to dismiss the case and in November 2002, the federal district court
dismissed the case. S-G Metals has filed a notice of appeal. New England Mutual
intends to continue to defend itself vigorously against the case.

The Company believes adequate provision has been made in its consolidated
financial statements for all probable and reasonably estimable losses for sales
practices claims against Metropolitan Life, New England Mutual and General
American.

30

Regulatory authorities in a small number of states have had investigations
or inquiries relating to Metropolitan Life's, New England Mutual's or General
American's sales of individual life insurance policies or annuities. Over the
past several years, these and a number of investigations by other regulatory
authorities were resolved for monetary payments and certain other relief. The
Company may continue to resolve investigations in a similar manner.

Asbestos-Related Claims

Metropolitan Life is a defendant in thousands of lawsuits seeking
compensatory and punitive damages for personal injuries allegedly caused by
exposure to asbestos or asbestos-containing products. Metropolitan Life has
never engaged in the business of manufacturing, producing, distributing or
selling asbestos or asbestos-containing products nor has Metropolitan Life
issued liability or workers' compensation insurance to companies in the business
of manufacturing, producing, distributing or selling asbestos or
asbestos-containing products. Rather, these lawsuits have principally been based
upon allegations relating to certain research, publication and other activities
of one or more of Metropolitan Life's employees during the period from the
1920's through approximately the 1950's and alleging that Metropolitan Life
learned or should have learned of certain health risks posed by asbestos and,
among other things, improperly publicized or failed to disclose those health
risks. Metropolitan Life believes that it should not have legal liability in
such cases.

Legal theories asserted against Metropolitan Life have included negligence,
intentional tort claims and conspiracy claims concerning the health risks
associated with asbestos. Although Metropolitan Life believes it has meritorious
defenses to these claims, and has not suffered any adverse monetary judgments in
respect of these claims, due to the risks and expenses of litigation, almost all
past cases have been resolved by settlements. Metropolitan Life's defenses
(beyond denial of certain factual allegations) to plaintiffs' claims include
that: (i) Metropolitan Life owed no duty to the plaintiffs -- it had no special
relationship with the plaintiffs and did not manufacture, produce, distribute or
sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs
cannot demonstrate justifiable detrimental reliance; and (iii) plaintiffs cannot
demonstrate proximate causation. In defending asbestos cases, Metropolitan Life
selects various strategies depending upon the jurisdictions in which such cases
are brought and other factors which, in Metropolitan Life's judgment, best
protect Metropolitan Life's interests. Strategies include seeking to settle or
compromise claims, motions challenging the legal or factual basis for such
claims or defending on the merits at trial. In early 2002 and in early 2003, two
trial courts granted motions dismissing claims against Metropolitan Life on some
or all of the above grounds. Other courts have denied motions brought by
Metropolitan Life to dismiss cases without the necessity of trial. There can be
no assurance that Metropolitan Life will receive favorable decisions on motions
in the future. Metropolitan Life intends to continue to exercise its best
judgment regarding settlement or defense of such cases, including when trials of
these cases are appropriate.

The following table sets forth the total number of asbestos personal injury
claims pending against Metropolitan Life as of the dates indicated, the number
of new claims during the years ended on those dates and the total settlement
payments made to resolve asbestos personal injury claims during those years:

- ---------------

(1) Settlement payments represent payments made by Metropolitan Life during the
year in connection with settlements made in that year and in prior years.
Amounts do not include Metropolitan Life's attorneys' fees and expenses and
do not reflect amounts received from insurance carriers.

31

During the fourth quarter of 2002, Metropolitan Life analyzed its claims
experience and reviewed external publications and numerous variables to identify
trends and assessed their impact on its recorded asbestos liability. Certain
publications suggest a trend towards more asbestos-related claims and a greater
awareness of asbestos litigation generally by potential plaintiffs and
plaintiffs' lawyers. Plaintiffs' lawyers continue to advertise heavily with
respect to asbestos litigation. Bankruptcies and reorganizations of other
defendants in asbestos litigation may increase the pressures on remaining
defendants, including Metropolitan Life. Through the first nine months of 2002,
the number of new claims received by Metropolitan Life was lower than those
received during the comparable 2001 period. However, the number of new claims
received by Metropolitan Life during the fourth quarter of 2002 was
significantly higher than those received in the prior year quarter, resulting in
more new claims being received by Metropolitan Life in 2002 than in 2001.
Factors considered also included expected trends in filing cases, the dates of
initial exposure of plaintiffs to asbestos, the likely percentage of total
asbestos claims which included Metropolitan Life as a defendant and experience
in claims settlement negotiations.

Metropolitan Life also considered views derived from actuarial calculations
it made in the fourth quarter of 2002. These calculations were made using, among
other things, current information regarding Metropolitan Life's claims and
settlement experience, information available in public reports, as well as a
study regarding the possible future incidence of mesothelioma. Based on all of
the above information, including greater than expected claims experience over
the last three years, Metropolitan Life expects to receive more claims in the
future than it had previously expected. Previously, Metropolitan Life's
liability reflected that the increase in asbestos-related claims was a result of
an acceleration in the reporting of such claims; the liability now reflects that
such an increase is also the result of an increase in the total number of
asbestos-related claims expected to be received by Metropolitan Life.
Accordingly, Metropolitan Life increased its recorded liability for
asbestos-related claims by $402 million from approximately $820 million to
$1,225 million at December 31, 2002. This total recorded asbestos-related
liability (after the self-insured retention) is within the coverage of the
excess insurance policies discussed below.

During 1998, Metropolitan Life paid $878 million in premiums for excess
insurance policies for asbestos-related claims. The excess insurance policies
for asbestos-related claims provide for recovery of losses up to $1,500 million,
which is in excess of a $400 million self-insured retention. The
asbestos-related policies are also subject to annual and per-claim sublimits.
Amounts are recoverable under the policies annually with respect to claims paid
during the prior calendar year. Although amounts paid by Metropolitan Life in
any given year that may be recoverable in the next calendar year under the
policies will be reflected as a reduction in the Company's operating cash flows
for the year in which they are paid, management believes that the payments will
not have a material adverse effect on the Company's liquidity.

Each asbestos-related policy contains an experience fund and a reference
fund that provides for payments to Metropolitan Life at the commutation date if
the reference fund is greater than zero at commutation or pro rata reductions
from time to time in the loss reimbursements to Metropolitan Life if the
cumulative return on the reference fund is less than the return specified in the
experience fund. The return in the reference fund is tied to performance of the
Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. A
claim will be made under the excess insurance policies in 2003 for the amounts
paid with respect to asbestos litigation in excess of the retention. Based on
performance of the reference fund, at December 31, 2002, the loss reimbursements
to Metropolitan Life in 2003 and the recoverable with respect to later periods
will be $42 million less than the amount of the recorded losses. Such foregone
loss reimbursements may be recovered upon commutation depending upon future
performance of the reference fund. The foregone loss reimbursements are
estimated to be $9 million with respect to 2002 claims and $42 million in the
aggregate.

The $402 million increase in the recorded liability for asbestos claims
less the foregone loss reimbursement adjustment of $42 million ($27 million, net
of income tax) resulted in an increase in the recoverable of $360 million. At
December 31, 2002, a portion ($136 million) of the $360 million recoverable was
recognized in income while the remainder ($224 million) was recorded as a
deferred gain which is expected to be recognized in income in the future over
the estimated settlement period of the excess insurance policies. The $402
million increase in the recorded liability, less the portion of the recoverable
recognized in income, resulted in a net expense of $266 million ($169 million,
net of income tax). The $360 million recoverable may change depending on the
future performance of the Standard & Poor's 500 Index and the Lehman Brothers
Aggregate Bond Index.

32

As a result of the excess insurance policies, $1,237 million is recorded as
a recoverable at December 31, 2002 ($224 million of which is recorded as a
deferred gain as mentioned above); the amount includes recoveries expected to be
obtained in 2003 for amounts paid in 2002. If at some point in the future, the
Company believes the liability for probable and estimable losses for
asbestos-related claims should be increased, an expense would be recorded and
the insurance recoverable would be adjusted subject to the terms, conditions and
limits of the excess insurance policies. Portions of the change in the insurance
recoverable would be recorded as a deferred gain and amortized into income over
the estimated remaining settlement period of the insurance policies.

The Company believes adequate provision has been made in its consolidated
financial statements for all probable and reasonably estimable losses for
asbestos-related claims. The ability of Metropolitan Life to estimate its
ultimate asbestos exposure is subject to considerable uncertainty due to
numerous factors. The availability of data is limited and it is difficult to
predict with any certainty numerous variables that can affect liability
estimates, including the number of future claims, the cost to resolve claims,
the disease mix and severity of disease, the jurisdiction of claims filed, tort
reform efforts and the impact of any possible future adverse verdicts and their
amounts.

Recent bankruptcies of other companies involved in asbestos litigation, as
well as advertising by plaintiffs' asbestos lawyers, may be resulting in an
increase in the number of claims and the cost of resolving claims, as well as
the number of trials and possible adverse verdicts Metropolitan Life may
experience. Plaintiffs are seeking additional funds from defendants, including
Metropolitan Life, in light of such recent bankruptcies by certain other
defendants. It is likely that bills will be introduced in 2003 in the United
States Congress to reform asbestos litigation. While the Company strongly
supports reform efforts, there can be no assurance that legislative reforms will
be enacted. Metropolitan Life will continue to study its claims experience,
review external literature regarding asbestos claims experience in the United
States and consider numerous variables that can affect its asbestos liability
exposure, including bankruptcies of other companies involved in asbestos
litigation and legislative and judicial developments, to identify trends and to
assess their impact on the recorded asbestos liability.

The number of asbestos cases that may be brought or the aggregate amount of
any liability that Metropolitan Life may ultimately incur is uncertain.
Accordingly, it is reasonably possible that the Company's total exposure to
asbestos claims may be greater than the liability recorded by the Company in its
consolidated financial statements and that future charges to income may be
necessary. While the potential future charges could be material in particular
quarterly or annual periods in which they are recorded, based on information
currently known by management, it does not believe any such charges are likely
to have a material adverse effect on the Company's consolidated financial
position.

Property and Casualty Actions

Purported class action suits involving claims by policyholders for the
alleged diminished value of automobiles after accident-related repairs have been
filed in Rhode Island, Texas, Georgia and Tennessee against Metropolitan
Property and Casualty Insurance Company. Rhode Island and Texas trial courts
denied plaintiffs' motions for class certification and a hearing on plaintiffs'
motion in Tennessee for class certification is to be scheduled. A settlement has
been reached in the Georgia class action; the Company determined to settle the
case in light of a Georgia Supreme Court decision involving another insurer. The
settlement is being implemented. A purported class action has been filed against
Metropolitan Property and Casualty Insurance Company's subsidiary, Metropolitan
Casualty Insurance Company, in Florida. The complaint alleges breach of contract
and unfair trade practices with respect to allowing the use of parts not made by
the original manufacturer to repair damaged automobiles. Discovery is ongoing
and a motion for class certification is pending. Total loss valuation methods
are the subject of national class actions involving other insurance companies. A
Pennsylvania state court purported class action lawsuit filed in 2001 alleges
that Metropolitan Property and Casualty Insurance Company improperly took
depreciation on partial homeowner losses where the insured replaced the covered
item. The court has dismissed the action. An appeal has been filed. Metropolitan
Property and Casualty Insurance Company and Metropolitan Casualty Insurance
Company are vigorously defending themselves against these lawsuits.

33

Demutualization Actions

Several lawsuits were brought in 2000 challenging the fairness of
Metropolitan Life's plan of reorganization and the adequacy and accuracy of
Metropolitan Life's disclosure to policyholders regarding the plan. These
actions name as defendants some or all of Metropolitan Life, the Holding
Company, the individual directors, the Superintendent and the underwriters for
MetLife, Inc.'s initial public offering, Goldman Sachs & Company and Credit
Suisse First Boston. Five purported class actions pending in the New York state
court in New York County were consolidated within the commercial part. In
addition, there remained a separate purported class action in New York state
court in New York County. On February 21, 2003, the defendants' motions to
dismiss both the consolidated action and separate action were granted; leave to
replead as a proceeding under Article 78 of New York's Civil Practice Law and
Rules has been granted in the separate action. Another purported class action in
New York state court in Kings County has been voluntarily held in abeyance by
plaintiffs. The plaintiffs in the state court class actions seek injunctive,
declaratory and compensatory relief, as well as an accounting and, in some
instances, punitive damages. Some of the plaintiffs in the above described
actions also have brought a proceeding under Article 78 of New York's Civil
Practice Law and Rules challenging the Opinion and Decision of the
Superintendent who approved the plan. In this proceeding, petitioners seek to
vacate the Superintendent's Opinion and Decision and enjoin him from granting
final approval of the plan. This case also is being held in abeyance by
plaintiffs. Another purported class action was filed in New York state court in
New York County on behalf of a purported class of beneficiaries of Metropolitan
Life annuities purchased to fund structured settlements claiming that the class
members should have received common stock or cash in connection with the
demutualization. Metropolitan Life's motion to dismiss this case was granted in
a decision filed on October 31, 2002. Plaintiff has withdrawn her notice of
appeal. Three purported class actions were filed in the United States District
Court for the Eastern District of New York claiming violation of the Securities
Act of 1933. The plaintiffs in these actions, which have been consolidated,
claim that the Policyholder Information Booklets relating to the plan failed to
disclose certain material facts and seek rescission and compensatory damages.
Metropolitan Life's motion to dismiss these three cases was denied in 2001. On
February 4, 2003, plaintiffs filed a consolidated amended complaint adding a
fraud claim under the Securities Exchange Act of 1934. A purported class action
also was filed in the United States District Court for the Southern District of
New York seeking damages from Metropolitan Life and the Holding Company for
alleged violations of various provisions of the Constitution of the United
States in connection with the plan of reorganization. In 2001, pursuant to a
motion to dismiss filed by Metropolitan Life, this case was dismissed by the
District Court. In January 2003, the United States Court of Appeals for the
Second Circuit affirmed the dismissal. Metropolitan Life, the Holding Company
and the individual defendants believe they have meritorious defenses to the
plaintiffs' claims and are contesting vigorously all of the plaintiffs' claims
in these actions.

In 2001, a lawsuit was filed in the Superior Court of Justice, Ontario,
Canada on behalf of a proposed class of certain former Canadian policyholders
against the Holding Company, Metropolitan Life, and Metropolitan Life Insurance
Company of Canada. Plaintiffs' allegations concern the way that their policies
were treated in connection with the demutualization of Metropolitan Life; they
seek damages, declarations, and other non-pecuniary relief. The defendants
believe they have meritorious defenses to the plaintiffs' claims and will
contest vigorously all of plaintiffs' claims in this matter.

In July 2002, a lawsuit was filed in the United States District Court for
the Eastern District of Texas on behalf of a proposed class comprised of the
settlement class in the Metropolitan Life sales practices class action
settlement approved in December 1999 by the United States District Court for the
Western District of Pennsylvania. The Holding Company, Metropolitan Life, the
trustee of the policyholder trust, and certain present and former individual
directors and officers of Metropolitan Life are named as defendants. Plaintiffs'
allegations concern the treatment of the cost of the settlement in connection
with the demutualization of Metropolitan Life and the adequacy and accuracy of
the disclosure, particularly with respect to those costs. Plaintiffs seek
compensatory, treble and punitive damages, as well as attorneys' fees and costs.
The defendants' motion to transfer the lawsuit to the Western District of
Pennsylvania was granted on February 14, 2003. The defendants' motion to dismiss
is pending. Plaintiffs have filed a motion for class certification which the
Texas court has adjourned. The defendants believe they have meritorious defenses
to the plaintiffs' claims and will contest them vigorously.

34

Race-Conscious Underwriting Claims

Insurance Departments in a number of states initiated inquiries in 2000
about possible race-conscious underwriting of life insurance. These inquiries
generally have been directed to all life insurers licensed in their respective
states, including Metropolitan Life and certain of its affiliates. The New York
Insurance Department has concluded its examination of Metropolitan Life
concerning possible past race-conscious underwriting practices. Metropolitan
Life has cooperated fully with that inquiry. Four purported class action
lawsuits filed against Metropolitan Life in 2000 and 2001 alleging racial
discrimination in the marketing, sale, and administration of life insurance
policies have been consolidated in the United States District Court for the
Southern District of New York. The plaintiffs seek unspecified monetary damages,
punitive damages, reformation, imposition of a constructive trust, a declaration
that the alleged practices are discriminatory and illegal, injunctive relief
requiring Metropolitan Life to discontinue the alleged discriminatory practices
and adjust policy values, and other relief. Metropolitan Life has entered into
settlement agreements to resolve the regulatory examination and the actions
pending in the United States District Court for the Southern District of New
York. The class action settlement, which has received preliminary approval from
the court, must receive final approval before it can be implemented. A fairness
hearing was held on February 7, 2003. The regulatory settlement agreement is
conditioned upon final approval of the class action settlement. Metropolitan
Life recorded a charge in the fourth quarter of 2001 in connection with the
anticipated resolution of these matters and believes that charge is adequate to
cover the costs associated with these settlements.

Sixteen lawsuits involving approximately 125 plaintiffs have been filed in
federal and state court in Alabama, Mississippi and Tennessee alleging federal
and/or state law claims of racial discrimination in connection with the sale,
formation, administration or servicing of life insurance policies. Metropolitan
Life is contesting vigorously plaintiffs' claims in these actions.

Other

In 2001, a putative class action was filed against Metropolitan Life in the
United States District Court for the Southern District of New York alleging
gender discrimination and retaliation in the MetLife Financial Services unit of
the Individual segment. The plaintiffs seek unspecified compensatory damages,
punitive damages, a declaration that the alleged practices are discriminatory
and illegal, injunctive relief requiring Metropolitan Life to discontinue the
alleged discriminatory practices, an order restoring class members to their
rightful positions (or appropriate compensation in lieu thereof), and other
relief. Metropolitan Life is vigorously defending itself against these
allegations.

A lawsuit has been filed against Metropolitan Life in Ontario, Canada by
Clarica Life Insurance Company regarding the sale of the majority of
Metropolitan Life's Canadian operation to Clarica in 1998. Clarica alleges that
Metropolitan Life breached certain representations and warranties contained in
the sale agreement, that Metropolitan Life made misrepresentations upon which
Clarica relied during the negotiations and that Metropolitan Life was negligent
in the performance of certain of its obligations and duties under the sale
agreement. Metropolitan Life is vigorously defending itself against this
lawsuit.

A putative class action lawsuit is pending in the United States District
Court for the District of Columbia, in which plaintiffs allege that they were
denied certain ad hoc pension increases awarded to retirees under the
Metropolitan Life retirement plan. The ad hoc pension increases were awarded
only to retirees (i.e., individuals who were entitled to an immediate retirement
benefit upon their termination of employment) and not available to individuals
like these plaintiffs whose employment, or whose spouses' employment, had
terminated before they became eligible for an immediate retirement benefit. The
district court denied the parties' cross-motions for summary judgment to allow
for discovery. Discovery has not yet commenced pending the court's ruling as to
the timing of a class certification motion. The plaintiffs seek to represent a
class consisting of former Metropolitan Life employees, or their surviving
spouses, who are receiving deferred vested annuity payments under the retirement
plan and who were allegedly eligible to receive the ad hoc pension increases
awarded in 1977, 1980, 1989, 1992, 1996 and 2001, as well as increases awarded
in earlier years. Metropolitan Life is vigorously defending itself against these
allegations.

35

A reinsurer of universal life policy liabilities of Metropolitan Life and
certain affiliates is seeking rescission and has commenced an arbitration
proceeding claiming that, during underwriting, material misrepresentations or
omissions were made. The reinsurer also has sent a notice purporting to increase
reinsurance premium rates. Metropolitan Life and these affiliates intend to
vigorously defend themselves against the claims of the reinsurer, including the
purported rate increase.

Various litigation, claims and assessments against the Company, in addition
to those discussed above 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, employer, investor, investment advisor 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.

Summary

It is not feasible to predict or determine the ultimate outcome of all
pending investigations and legal proceedings or provide reasonable ranges of
potential losses, except as noted above in connection with specific matters. In
some of the matters referred to above, 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 adverse effect upon the Company's consolidated 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 adverse effect on the
Company's consolidated net income or cash flows in particular quarterly or
annual periods.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of 2002.

36

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MetLife, Inc.'s common stock, par value $0.01 per share (the "Common
Stock"), began trading on the New York Stock Exchange ("NYSE") under the symbol
"MET" on April 5, 2000.

The following table presents high and low closing prices for the Common
Stock on the NYSE for the periods indicated, and the dividends declared per
share:

As of February 28, 2003, there were 34,339 shareholders of record of Common
Stock.

On October 22, 2002, the Holding Company's Board of Directors approved an
annual dividend for 2002 of $0.21 per share. The dividend was paid on December
13, 2002 to shareholders of record on November 8, 2002. On October 23, 2001, the
Holding Company's Board of Directors approved an annual dividend for 2001 of
$0.20 per share. The dividend was paid on December 14, 2001 to shareholders of
record on November 6, 2001. Future dividend decisions will be based on and
affected by a number of factors, including the operating results and financial
requirements of the Holding Company and the impact of regulatory restrictions.
See "Business -- Regulation" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

37

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial information
for the Company. The selected consolidated financial information for the years
ended December 31, 2002, 2001, and 2000 and at December 31, 2002 and 2001 has
been derived from the Company's audited consolidated financial statements
included elsewhere herein. The selected consolidated financial information for
the years ended December 31, 1999 and 1998 and at December 31, 2000, 1999 and
1998 has been derived from the Company's audited consolidated financial
statements not included elsewhere herein. The following consolidated statements
of income and consolidated balance sheet data have been prepared in conformity
with GAAP. The following information should be read in conjunction with and is
qualified in its entirety by the information contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the consolidated financial statements appearing elsewhere herein. Some
previously reported amounts have been reclassified to conform with the
presentation at and for the year ended December 31, 2002.

- ---------------

(1) In accordance with Statement of Financial Accounting Standards ("SFAS") No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, income
related to real estate sold or classified as held-for-sale for transactions
initiated on or after January 1, 2002 is presented as discontinued
operations. The following table presents the components of income from
discontinued operations:

(2) Investment gains and losses are presented net of related policyholder
amounts. The amounts netted against investment gains and losses are the
following:

Investment gains and losses have been reduced by (i) additions to future
policy benefits resulting from the need to establish additional liabilities
due to the recognition of investment gains, (ii) amortization of

40

deferred policy acquisition costs, to the extent that such amortization
results from investment gains and losses, (iii) adjustments to
participating contractholder accounts when amounts equal to such investment
gains and losses are applied to the contractholder's accounts, and (iv)
adjustments to the policyholder dividend obligation resulting from
investment gains and losses. This presentation may not be comparable to
presentations made by other insurers.

(3) Includes the following combined financial statement data of Conning
Corporation ("Conning"), which was sold in 2001, the Company's controlling
interest in Nvest Companies, L.P. and its affiliates ("Nvest"), which were
sold in 2000, MetLife Capital Holdings, Inc., which was sold in 1998, and
the Company's Canadian operations and U.K. insurance operations,
substantially all of which were sold in 1998:

As a result of these sales, investment gains of $25 million, $663 million,
and $520 million were recorded for the years ended December 31, 2001, 2000,
and 1998, respectively.

In July 1998, Metropolitan Life sold a substantial portion of its Canadian
operations to Clarica Life Insurance Company ("Clarica Life"). As part of
that sale, a large block of policies in effect with Metropolitan Life in
Canada were transferred to Clarica Life, and the holders of the transferred
Canadian policies became policyholders of Clarica Life. Those transferred
policyholders were no longer policyholders of Metropolitan Life and,
therefore, were not entitled to compensation under the plan of
reorganization. However, as a result of a commitment made in connection
with obtaining Canadian regulatory approval of that sale and in connection
with the demutualization, in 2000, Metropolitan Life's Canadian branch made
cash payments to those who were, or were deemed to be, holders of these
transferred Canadian policies. The payments were determined in a manner
that is consistent with the treatment of, and fair and equitable to,
eligible policyholders of Metropolitan Life.

(4) Included in total revenues and total expenses for the year ended December
31, 2002 are $421 million and $358 million, respectively, related to
Aseguradora Hidalgo S.A., which was acquired in June 2002. Included in
total revenues and total expenses for the year ended December 31, 2000 are
$3,739 million and $3,561 million, respectively, related to GenAmerica,
which was acquired in January 2000.

(5) Policyholder benefits and claims exclude ($150) million, ($159) million,
$41 million, ($21) million, and $368 million for the years ended December
31, 2002, 2001, 2000, 1999, and 1998, respectively, of future policy
benefit loss recognition, adjustments to participating contractholder
accounts and changes in the policyholder dividend obligation that have been
netted against net investment gains and losses as such amounts are directly
related to such gains and losses. This presentation may not be comparable
to presentations made by other insurers.

(6) Other expenses exclude $5 million, $25 million, ($95) million, ($46)
million, and $240 million for the years ended December 31, 2002, 2001,
2000, 1999 and 1998, respectively, of amortization of deferred policy
acquisition costs that have been netted against net investment gains and
losses as such amounts are directly related to such gains and losses. This
presentation may not be comparable to presentations made by other insurers.

(7) Provision for income taxes includes ($145) million, $125 million, and $18
million for surplus tax (credited) accrued by Metropolitan Life for the
years ended December 31, 2000, 1999, and 1998, respectively. Prior to its
demutualization, Metropolitan Life was subject to surplus tax imposed on
mutual life insurance companies under Section 809 of the Internal Revenue
Code.

(8) Policyholder liabilities include future policy benefits and other
policyholder funds. Life and health policyholder liabilities also include
policyholder account balances, policyholder dividends payable and the
policyholder dividend obligation.

41

(9) For additional information regarding these items, see Notes 1 and 17 of
Notes to Consolidated Financial Statements.

(10) Return on equity is defined as net income divided by average total equity,
excluding accumulated other comprehensive income (loss).

(11) Includes MetLife's general account and separate account assets managed on
behalf of third parties. Includes $21 billion of assets under management
managed by Conning at December 31, 2000, which was sold in 2001. Includes
$133 billion and $135 billion of assets under management managed by Nvest
at December 31, 1999 and 1998, respectively, which was sold in 2000.

(12) Based on earnings subsequent to the date of demutualization. For additional
information regarding net income per share data, see Note 19 of Notes to
Consolidated Financial Statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

For purposes of this discussion, the terms "Company" or "MetLife" refer, at
all times prior to the date of demutualization (as hereinafter defined), to
Metropolitan Life Insurance Company ("Metropolitan Life"), a mutual life
insurance company organized under the laws of the State of New York, and its
subsidiaries, and at all times on and after the date of demutualization, to
MetLife, Inc. (the "Holding Company"), a Delaware corporation, and its
subsidiaries, including Metropolitan Life. Following this summary is a
discussion addressing the consolidated results of operations and financial
condition of the Company for the periods indicated. This discussion should be
read in conjunction with the Company's consolidated financial statements
included elsewhere herein.

BUSINESS REALIGNMENT INITIATIVES

During the fourth quarter of 2001, the Company implemented several business
realignment initiatives, which resulted from a strategic review of operations
and an ongoing commitment to reduce expenses. The following tables represent the
original expenses recorded in the fourth quarter of 2001 and the remaining
liability as of December 31, 2002:

The business realignment initiatives resulted in savings of approximately
$95 million, net of income tax, during 2002, comprised of approximately $33
million, $57 million and $5 million in the Institutional, Individual and Auto &
Home segments, respectively.

Institutional. The charges to this segment in the fourth quarter of 2001
include costs associated with exiting a business, including the write-off of
goodwill, severance and severance-related costs, and facilities' consolidation
costs. These expenses are the result of the discontinuance of certain 401(k)
recordkeeping services and externally-managed guaranteed index separate
accounts. These actions resulted in charges to policyholder benefits and claims
and other expenses of $215 million and $184 million, respectively. During the
fourth quarter
42

of 2002, approximately $30 million of the charges recorded in 2001 were released
into income primarily as a result of the accelerated implementation of the
Company's exit from the large market 401(k) business. The business realignment
initiatives will ultimately result in the elimination of approximately 930
positions. As of December 31, 2002, there were approximately 340 terminations to
be completed. The Company continues to carry a liability as of December 31, 2002
since the exit plan could not be completed within one year due to circumstances
outside the Company's control and since certain of its contractual obligations
extended beyond one year.

Individual. The charges to this segment in the fourth quarter of 2001
include facilities' consolidation costs, severance and severance-related costs,
which predominately stem from the elimination of approximately 560 non-sales
positions and 190 operations and technology positions supporting this segment.
As of December 31, 2002, there were approximately 25 terminations to be
completed. These costs were recorded in other expenses. The remaining liability
as of December 31, 2002 is due to certain contractual obligations that extended
beyond one year.

Auto & Home. The charges to this segment in the fourth quarter of 2001
include severance and severance-related costs associated with the elimination of
approximately 200 positions. All terminations were completed as of December 31,
2002. The costs were recorded in other expenses.

SEPTEMBER 11, 2001 TRAGEDIES

On September 11, 2001 terrorist attacks occurred in New York, Washington,
D.C. and Pennsylvania (the "tragedies") triggering a significant loss of life
and property which had an adverse impact on certain of the Company's businesses.
The Company has direct exposure to these events with claims arising from its
Individual, Institutional, Reinsurance and Auto & Home insurance coverages, and
it believes the majority of such claims have been reported or otherwise analyzed
by the Company.

The Company's original estimate of the total insurance losses related to
the tragedies, which was recorded in the third quarter of 2001, was $208
million, net of income taxes of $117 million. Net income for the year ended
December 31, 2002 includes a $17 million, net of income taxes of $9 million,
benefit from the reduction of the liability associated with the tragedies. The
revision to the liability is the result of an analysis completed during the
fourth quarter of 2002, which focused on the emerging incidence experienced over
the past 12 months associated with certain disability products. As of December
31, 2002, the Company's remaining liability for unpaid and future claims
associated with the tragedies was $47 million, principally related to disability
coverages. This estimate has been and will continue to be subject to revision in
subsequent periods, as claims are received from insureds and the claims to
reinsurers are identified and processed. Any revision to the estimate of gross
losses and reinsurance recoveries in subsequent periods will affect net income
in such periods. Reinsurance recoveries are dependent on the continued
creditworthiness of the reinsurers, which may be adversely affected by their
other reinsured losses in connection with the tragedies.

The Company's general account investment portfolios include investments,
primarily comprised of fixed maturities, in industries that were affected by the
tragedies, including airline, other travel, lodging and insurance. Exposures to
these industries also exist through mortgage loans and investments in real
estate. The carrying value of the Company's investment portfolio exposed to
industries affected by the tragedies was approximately $3.7 billion at December
31, 2002.

The long-term effects of the tragedies on the Company's businesses cannot
be assessed at this time. The tragedies have had significant adverse effects on
the general economic, market and political conditions, increasing many of the
Company's business risks. This may have a negative effect on MetLife's
businesses and results of operations over time. In particular, the declines in
share prices experienced after the reopening of the U.S. equity markets
following the tragedies have contributed, and may continue to contribute, to a
decline in separate account assets, which in turn may have an adverse effect on
fees earned in the Company's businesses. In addition, the Company has received
and expects to continue to receive disability claims from individuals resulting
from the tragedies.

43

THE DEMUTUALIZATION

On April 7, 2000 (the "date of demutualization"), pursuant to an order by
the New York Superintendent of Insurance (the "Superintendent") approving its
plan of reorganization, as amended (the "plan"), Metropolitan Life converted
from a mutual life insurance company to a stock life insurance company and
became a wholly-owned subsidiary of the Holding Company. In conjunction
therewith, each policyholder's membership interest was extinguished and each
eligible policyholder received, in exchange for that interest, trust interests
representing shares of Common Stock held in the MetLife Policyholder Trust, cash
or an adjustment to their policy values in the form of policy credits, as
provided in the plan. In addition, Metropolitan Life's Canadian branch made cash
payments to holders of certain policies transferred to Clarica Life Insurance
Company in connection with the sale of a substantial portion of Metropolitan
Life's Canadian operations in 1998, as a result of a commitment made in
connection with obtaining Canadian regulatory approval of that sale. The
payments, which were recorded in the second quarter of 2000, were determined in
a manner that was consistent with the treatment of, and fair and equitable to,
eligible policyholders of Metropolitan Life.

On the date of demutualization, the Holding Company conducted an initial
public offering of 202,000,000 shares of its Common Stock and concurrent private
placements of an aggregate of 60,000,000 shares of its Common Stock at an
offering price of $14.25 per share. The shares of Common Stock issued in the
offerings are in addition to 494,466,664 shares of Common Stock of the Holding
Company distributed to the Metropolitan Life Policyholder Trust for the benefit
of policyholders of Metropolitan Life in connection with the demutualization. On
April 10, 2000, the Holding Company issued 30,300,000 additional shares of its
Common Stock as a result of the exercise of over-allotment options granted to
underwriters in the initial public offering.

Concurrently with these offerings, MetLife, Inc. and MetLife Capital Trust
I, a Delaware statutory business trust wholly-owned by MetLife, Inc. (the
"Trust"), issued 20,125,000 8.00% equity security units ("units") for an
aggregate offering price of $1,006 million. Each unit originally consisted of
(i) a contract to purchase, for $50, shares of Common Stock on May 15, 2003, and
(ii) a capital security of the Trust, with a stated liquidation amount of $50.
In accordance with the terms of the units, the Trust was dissolved on February
5, 2003 and $1,006 million aggregate principal amount of 8% debentures of the
Holding Company (the "MetLife debentures"), the sole asset of the Trust, were
distributed to the unit holders. As required by the terms of the units, the
MetLife debentures were remarketed on behalf of the debenture holders on
February 12, 2003 and the interest rate on the MetLife debentures was reset as
of February 15, 2003 to 3.911% per annum for a yield to maturity of 2.876%.

On the date of demutualization, Metropolitan Life established a closed
block for the benefit of holders of certain individual life insurance policies
of Metropolitan Life.

ACQUISITIONS AND DISPOSITIONS

In June 2002, the Company acquired Aseguradora Hidalgo S.A. ("Hidalgo"), an
insurance company based in Mexico with approximately $2.5 billion in assets as
of the date of acquisition. The purchase price is subject to adjustment under
certain provisions of the purchase agreement. The Company does not expect that
any purchase price adjustment will have an impact on its consolidated statements
of income. The Company is in the process of integrating Hidalgo and Seguros
Genesis, S.A., ("Genesis"), MetLife's wholly-owned Mexican subsidiary
headquartered in Mexico City, to operate as a combined entity under the name
MetLife Mexico.

In November 2001, the Company acquired Compania de Seguros de Vida
Santander S.A. and Compania de Reaseguros de Vida Soince Re S.A., wholly-owned
subsidiaries of Santander Central Hispano in Chile. These acquisitions marked
MetLife's entrance into the Chilean insurance market.

In July 2001, the Company completed its sale of Conning Corporation
("Conning"), an affiliate acquired in the acquisition of GenAmerica Financial
Corporation ("GenAmerica") in 2000. Conning specialized in asset management for
insurance company investment portfolios and investment research.

In May 2001, the Company acquired Seguradora America Do Sul S.A., a life
and pension company in Brazil. Seasul has been integrated into MetLife's
wholly-owned Brazilian subsidiary, Metropolitan Life Seguros e Previdencia
Privada S.A.
44

In February 2001, the Holding Company consummated the purchase of Grand
Bank, N.A., which was renamed MetLife Bank, N.A. ("MetLife Bank"). MetLife Bank
provides banking services to individuals and small businesses in the Princeton,
New Jersey area. On February 12, 2001, the Federal Reserve Board approved the
Holding Company's application for bank holding company status and to become a
financial holding company upon its acquisition of Grand Bank, N.A.

During the second half of 2000, Reinsurance Group of America, Incorporated
("RGA") acquired the interest in RGA Financial Group, LLC it did not already
own.

In October 2000, the Company completed the sale of its 48% ownership
interest in its affiliates, Nvest, L.P. and Nvest Companies L.P.

In July 2000, the Company acquired the workplace benefits division of
Business Men's Assurance Company ("BMA"), a Kansas City, Missouri-based insurer.

In April 2000, Metropolitan Life acquired the outstanding shares of Conning
common stock not already owned by Metropolitan Life.

In January 2000, Metropolitan Life completed its acquisition of GenAmerica,
a holding company which included General American Life Insurance Company
("General American"), approximately 49% of the outstanding shares of RGA common
stock, and 61% of the outstanding shares of Conning common stock, which was
subsequently sold in 2001. Metropolitan Life owned 9% of the outstanding shares
of RGA common stock prior to the completion of the GenAmerica acquisition.
During 2002, the Company purchased an additional 327,600 shares of RGA's
outstanding common stock at an aggregate price of $9.5 million to offset
potential future dilution of the Company's holding of RGA's common stock arising
from the issuance by RGA of company-obligated mandatorily redeemable securities
of a subsidiary trust in December 2001. These purchases increased the Company's
ownership percentage of outstanding shares of RGA common stock from
approximately 58% at December 31, 2001 to approximately 59% at December 31,
2002.

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to adopt accounting policies and make estimates and assumptions that
affect amounts reported in the consolidated financial statements. The critical
accounting policies, estimates and related judgments underlying the Company's
consolidated financial statements are summarized below. In applying these
accounting policies, management makes subjective and complex judgments that
frequently require estimates about matters that are inherently uncertain. Many
of these policies, estimates and related judgments are common in the insurance
and financial services industries; others are specific to the Company's
businesses and operations.

INVESTMENTS

The Company's principal investments are in fixed maturities, mortgage loans
and real estate, all of which are exposed to three primary sources of investment
risk: credit, interest rate and market valuation. The financial statement risks
are those associated with the recognition of impairments and income, as well as
the determination of fair values. The assessment of whether impairments have
occurred is based on management's case-by-case evaluation of the underlying
reasons for the decline in fair value. Management considers a wide range of
factors about the security issuer and uses its best judgment in evaluating the
cause of the decline in the estimated fair value of the security and in
assessing the prospects for near-term recovery. Inherent in management's
evaluation of the security are assumptions and estimates about the operations of
the issuer and its future earnings potential. Considerations used by the Company
in the impairment evaluation process include, but are not limited to: (i) the
length of time and the extent to which the market value has been below amortized
cost; (ii) the potential for impairments of securities when the issuer is
experiencing significant financial difficulties; (iii) the potential for
impairments in an entire industry sector or sub-sector; (iv) the potential for
impairments in certain economically depressed geographic locations; (v) the
potential for impairments of securities where the issuer, series of issuers or
industry has suffered a catastrophic type of loss or has exhausted natural
resources; and (vi) other subjective

45

factors, including concentrations and information obtained from regulators and
rating agencies. In addition, the earnings on certain investments are dependent
upon market conditions, which could result in prepayments and changes in amounts
to be earned due to changing interest rates or equity markets. The determination
of fair values in the absence of quoted market values is based on valuation
methodologies, securities the Company deems to be comparable and assumptions
deemed appropriate given the circumstances. The use of different methodologies
and assumptions may have a material effect on the estimated fair value amounts.

DERIVATIVES

The Company enters into freestanding derivative transactions primarily to
manage the risk associated with variability in cash flows related to the
Company's financial assets and liabilities or to changing fair values. The
Company also purchases investment securities and issues certain insurance and
reinsurance policies with embedded derivatives. The associated financial
statement risk is the volatility in net income which can result from (i) changes
in fair value of derivatives not qualifying as accounting hedges, and (ii)
ineffectiveness of designated hedges in an environment of changing interest
rates or fair values. In addition, accounting for derivatives is complex, as
evidenced by significant authoritative interpretations of the primary accounting
standards which continue to evolve, as well as the significant judgments and
estimates involved in determining fair value in the absence of quoted market
values. These estimates are based on valuation methodologies and assumptions
deemed appropriate in the circumstances. Such assumptions include estimated
market volatility and interest rates used in the determination of fair value
where quoted market values are not available. The use of different assumptions
may have a material effect on the estimated fair value amounts.

DEFERRED POLICY ACQUISITION COSTS

The Company incurs significant costs in connection with acquiring new
insurance business. These costs, which vary with and are primarily related to
the production of new business, are deferred. The recovery of such costs is
dependent upon the future profitability of the related business. The amount of
future profit is dependent principally on investment returns, mortality,
morbidity, 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 are most likely
to impact the rate of amortization of such costs. The aforementioned factors
enter into management's estimates of gross margins and profits, which generally
are used to amortize such costs. Revisions to estimates result in changes to the
amounts expensed in the reporting period in which the revisions are made and
could result in the impairment of the asset and a charge to income if estimated
future gross margins and profits are less than amounts deferred. In addition,
the Company utilizes the reversion to the mean assumption, a standard industry
practice, in its determination of the amortization of deferred policy
acquisition costs. This practice assumes that the expectation for long-term
appreciation in equity markets is not changed by minor short-term market
fluctuations, but that it does change when large interim deviations have
occurred.

FUTURE POLICY BENEFITS

The Company establishes liabilities for amounts payable under insurance
policies, including traditional life insurance, annuities and disability
insurance. Generally, amounts are payable over an extended period of time and
the profitability of the products is dependent on the pricing of the products.
Principal assumptions used in pricing policies and in the establishment of
liabilities for future policy benefits are mortality, morbidity, expenses,
persistency, investment returns and inflation.

The Company also establishes liabilities for unpaid claims and claims
expenses for property and casualty insurance. Pricing of this insurance takes
into account the expected frequency and severity of losses, the costs of
providing coverage, competitive factors, characteristics of the insured and the
property covered, and profit considerations. Liabilities for property and
casualty insurance are dependent on estimates of amounts payable for claims
reported but not settled and claims incurred but not reported. These estimates
are influenced by historical experience and actuarial assumptions of current
developments, anticipated trends and risk management strategies.

Differences between the actual experience and assumptions used in pricing
these policies and in the establishment of liabilities result in variances in
profit and could result in losses.

46

REINSURANCE

The Company enters into reinsurance transactions as both a provider and a
purchaser of reinsurance. 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 policy benefits and evaluates the
financial strength of counterparties to its reinsurance agreements using
criteria similar to that evaluated in the security impairment process discussed
above. Additionally, for each of its reinsurance contracts, the Company must
determine if the contract provides indemnification against loss or liability
relating to insurance risk, in accordance with applicable accounting standards.
The Company must review all contractual features, particularly those that may
limit the amount of insurance risk to which the Company is subject or features
that delay the timely reimbursement of claims. If the Company determines that a
contract does not expose it to a reasonable possibility of a significant loss
from insurance risk, the Company records the contract using the deposit method
of accounting.

LITIGATION

The Company is a party to a number of legal actions. Given the inherent
unpredictability of litigation, it is difficult to estimate the impact of
litigation on the Company's consolidated financial position. Liabilities are
established when it is probable that a loss has been incurred and the amount of
the loss can be reasonably estimated. Liabilities related to certain lawsuits,
including the Company's asbestos-related liability, are especially difficult to
estimate due to the limitation of available data and uncertainty regarding
numerous variables used to determine amounts recorded. The data and variables
that impact the assumption used to estimate the Company's asbestos-related
liability include the number of future claims, the cost to resolve claims, the
disease mix and severity of disease, the jurisdiction of claims filed, tort
reform efforts and the impact of any possible future adverse verdicts and their
amounts. It is possible that an adverse outcome in certain of the Company's
litigation, including asbestos-related cases, or the use of different
assumptions in the determination of amounts recorded could have a material
effect upon the Company's consolidated net income or cash flows in particular
quarterly or annual periods.

EMPLOYEE BENEFIT PLANS

The Company sponsors pension and other retirement plans in various forms
covering employees who meet specified eligibility requirements. The reported
expense and liability associated with these plans requires an extensive use of
assumptions which include the discount rate, expected return on plan assets and
rate of future compensation increases as determined by the Company. Management
determines these assumptions based upon currently available market and industry
data, historical performance of the plan and its assets, and consultation with
an independent consulting actuarial firm to aid it in selecting appropriate
assumptions and valuing its related liabilities. The actuarial assumptions used
by the Company may differ materially from actual results due to changing market
and economic conditions, higher or lower withdrawal rates or longer or shorter
life spans of the participants. These differences may have a significant effect
on the Company's consolidated financial statements and liquidity.

The actuarial assumptions used in the calculation of the Company's
aggregate projected benefit obligation may vary and include an expectation of
long-term market appreciation in equity markets which is not changed by minor
short-term market fluctuations, but does change when large interim deviations
occur. For the largest of the plans sponsored by the Company (the Metropolitan
Life Retirement Plan for United States Employees, with a projected benefit
obligation of $4.3 billion or 98.6% of all qualified plans at December 31,
2002), the discount rate, expected rate of return on plan assets, and the range
of rates of future compensation increases used in that plan's valuation at
December 31, 2002 were 6.75%, 9% and 4% to 8%, respectively. The expected rate
of return on plan assets for use in that plan's valuation in 2003 is currently
anticipated to be 8.5%.

47

RESULTS OF OPERATIONS

The following table presents consolidated financial information for the
years indicated:

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- THE COMPANY

Premiums increased by $1,874 million, or 11%, to $19,086 million for the
year ended December 31, 2002 from $17,212 million for the comparable 2001
period. This variance is primarily attributable to increases in the
Institutional, International and Reinsurance segments. A $966 million increase
in Institutional is largely due to sales growth in its group life, dental,
disability and long-term care businesses, a sale of a significant retirement and
savings contract in the second quarter of 2002, as well as new sales throughout
2002 in this segment's structured settlements and traditional annuity products.
The June 2002 acquisition of Hidalgo, the 2001 acquisitions in Chile and Brazil
and the sale of an annuity contract in the first quarter of 2002 to a Canadian
trust company are the primary drivers of a $665 million increase in
International. A portion of the increase in International is also attributable
to business growth in South Korea, Mexico (excluding Hidalgo), Spain and Taiwan.
In addition, an increase in Canada due to the restructuring of a pension
contract from an investment-type product to a long-term annuity contributed to
this variance. New premiums from facultative and automatic treaties, and renewal
premiums on existing blocks of business contributed to a $243 million increase
in the Reinsurance segment.

Universal life and investment-type product policy fees increased by $250
million, or 13%, to $2,139 million for the year ended December 31, 2002 from
$1,889 million for the comparable 2001 period. This variance is

48

primarily attributable to the Individual, International and Institutional
segments. A $120 million favorable variance in Individual is due to an increase
in policy fees from insurance products, primarily due to higher revenue from
insurance fees, which increase as the average separate account asset base
supporting the underlying minimum death benefits declines. The average separate
account asset base has declined in 2002 in response to poor equity market
performance. These increases are partially offset by lower policy fees from
annuity and investment-type products generally resulting from poor equity market
performance despite growth in annuity deposits. Management would expect policy
fees from annuity and investment-type products to continue to be adversely
impacted while revenues from insurance fees on variable life products would be
expected to rise if average separate account asset levels continue to decline. A
$106 million increase in International is largely due to the acquisition of
Hidalgo and the acquisitions in Chile, partially offset by a decrease in Spain
due to the cessation of product lines offered through a joint venture with Banco
Santander Central Hispano, S.A., ("Banco Santander") in 2001. A $23 million
increase in Institutional is principally due to a fee related to the
renegotiation of a portion of a bank-owned life insurance contract, as well as
growth in existing business in the group universal life product.

Net investment income increased by $74 million, or 1%, to $11,329 million
for the year ended December 31, 2002 from $11,255 million for the comparable
2001 period. This variance is primarily attributable to increases of (i) $61
million, or 1%, in income from fixed maturities, (ii) $54 million, or 12%, in
income from real estate and real estate joint ventures held-for-investment, net
of investment expenses and depreciation, (iii) $35 million, or 2%, in income on
mortgage loans on real estate, (iv) $7 million, or 1%, in interest income on
policy loans, and (v) lower investment expenses of $9 million, or 4%. These
variances are partially offset by decreases of (i) $47 million, or 17%, in
income on cash, cash equivalents and short-term investments, (ii) $31 million,
or 12%, in income on other invested assets, and (iii) $14 million, or 14%, in
income from equity securities and other limited partnership interests.

The increase in income from fixed maturities to $8,092 million in 2002 from
$8,031 million in 2001 is largely due to a higher asset base, primarily
resulting from increased cash flows from sales of insurance and the acquisitions
in Mexico and Chile. In addition, securities lending income was higher due to
increased activity and a more favorable cost of funds. The increases in income
from fixed maturities are partially offset by decreases resulting from lower
reinvestment rates and a decline in bond prepayment fees. The increase in income
from real estate and real estate joint ventures held-for-investment to $513
million in 2002 from $459 million in 2001 is primarily due to the transfer of
the Company's One Madison Avenue, New York property from a company use property
to an investment property in 2002. The increase in income on mortgage loans on
real estate to $1,883 million in 2002 from $1,848 million in 2001 is due
primarily to a higher asset base from new loan production, partially offset by
lower mortgage rates. The increase in interest income from policy loans to $543
million in 2002 from $536 million in 2001 is largely due to increased loans
outstanding. The decrease in income from cash, cash equivalents and short-term
investments to $232 million in 2002 from $279 million in 2001 is due to
declining interest rates coupled with a decrease in the asset base. The decrease
in net investment income from other invested assets to $218 million in 2002 from
$249 million in 2001 is largely due to lower derivative income, partially offset
by an increase in reinsurance contracts' funds withheld at interest. The decline
in income from equity securities and other limited partnership interests to $83
million in 2002 from $97 million in 2001 primarily resulted from lower dividend
income from equity securities, partially offset by higher limited corporate
partnership distributions.

The increase in net investment income is attributable to increases in the
International, Individual and Reinsurance segments, partially offset by
decreases in Corporate & Other, and the Institutional and Auto & Home segments.
A $194 million increase in International is due to a higher asset base resulting
from the acquisitions in Mexico and Chile. Individual increased by $71 million
primarily due to higher income from securities lending and limited corporate
partnership distributions, partially offset by lower bond prepayment fee income.
The Reinsurance segment increased $31 million largely resulting from an increase
in reinsurance contracts' funds withheld at interest. The decrease in Corporate
& Other of $149 million is due to a lower asset base, resulting from funding
International's acquisitions in Mexico and Chile, as well as the Company's
common stock repurchases, partially offset by higher income from securities
lending. Institutional decreased $38 million

49

predominantly as a result of decreased limited partnership, equity-linked note
and bond prepayment fee income. Auto & Home decreased $23 million primarily due
to lower reinvestment rates.

Other revenues decreased by $130 million, or 9%, to $1,377 million for the
year ended December 31, 2002 from $1,507 million for the comparable 2001 period.
This variance is primarily attributable to decreases in the Individual,
Institutional and Asset Management segments, partially offset by an increase in
Corporate & Other. Individual decreased by $77 million resulting from lower
commission and fee income associated with decreased volume in the broker/dealer
and other subsidiaries as a result of the depressed equity markets. A $40
million decrease in Institutional is primarily due to a $73 million reduction in
administrative fees as a result of the Company's exit from the large market
401(k) business in late 2001, as well as lower fees earned on investments in
separate accounts resulting generally from poor equity market performance. This
reduction is partially offset by a $33 million increase in group insurance due
to growth in the administrative service businesses and a settlement received in
2002 related to the Company's former medical business. A $32 million decrease in
Asset Management is primarily due to the sale of Conning in July 2001. These
variances were partially offset by an increase of $16 million in Corporate &
Other principally due to the sale of a company-occupied building and income
earned on corporate-owned life insurance ("COLI") purchased during 2002,
partially offset by an increase in the elimination of intersegment activity.

The Company's investment gains and losses are net of related policyholder
amounts. The amounts netted against investment gains and losses are (i)
amortization of deferred policy acquisition costs, to the extent that such
amortization results from investment gains and losses, (ii) adjustments to
participating contractholder accounts when amounts equal to such investment
gains and losses are applied to the contractholder's accounts, and (iii)
adjustments to the policyholder dividend obligation resulting from investment
gains and losses.

Net investment losses increased by $181 million, or 30%, to $784 million
for the year ended December 31, 2002 from $603 million for the comparable 2001
period. This increase reflects total investment losses, before offsets, of $929
million (including gross gains of $2,028 million, gross losses of $1,469
million, and writedowns of $1,488 million), an increase of $192 million, or 26%,
from $737 million in 2001. Offsets include the amortization of deferred policy
acquisition costs of ($5) million and ($25) million in 2002 and 2001,
respectively, and changes in the policyholder dividend obligation of $157
million and $159 million in 2002 and 2001, respectively, and adjustments to
participating contracts of ($7) million in 2002. Refer to "--Investments"
beginning on page 81 for a discussion of the Company's investment portfolio.

The Company believes its policy of netting related policyholder amounts
against investment gains and losses provides important information in evaluating
its performance. Investment gains and losses are often excluded by investors
when evaluating the overall financial performance of insurers. The Company
believes its presentation enables readers to easily exclude investment gains and
losses and the related effects on the consolidated statements of income when
evaluating its performance. The Company's presentation of investment gains and
losses, net of policyholder amounts, may be different from the presentation used
by other insurance companies and, therefore, amounts in its consolidated
statements of income may not be comparable to amounts reported by other
insurers.

Policyholder benefits and claims increased by $1,069 million, or 6%, to
$19,523 million for the year ended December 31, 2002 from $18,454 million for
the comparable 2001 period. This variance is attributable to increases in the
International, Institutional and Reinsurance segments, partially offset by a
decrease in the Auto & Home segment. A $699 million increase in International is
primarily due to the acquisition of Hidalgo, the acquisitions in Chile and
Brazil, the aforementioned sale of an annuity contract, the restructuring of a
Canadian pension contract and business growth in South Korea, Mexico (excluding
Hidalgo), Taiwan and Spain. An increase in Institutional of $415 million is
commensurate with the growth in premiums as discussed above, largely offset by
the establishment of a liability in 2001 related to the September 11, 2001
tragedies and the 2001 fourth quarter business realignment initiatives. An
increase in Reinsurance of $70 million is commensurate with the growth in
premiums discussed above. These increases were partially offset by a decrease of
$102 million in the Auto & Home segment. The variance in Auto & Home is largely
due to improved claim frequency resulting from milder winter weather, lower
catastrophe levels and fewer personal umbrella claims, partially offset by an

50

increase in current year bodily injury and no-fault severities and costs
associated with the processing of the New York assigned risk business.

Interest credited to policyholder account balances decreased by $134
million, or 4%, to $2,950 million for the year ended December 31, 2002 from
$3,084 million for the comparable 2001 period. This variance is attributable to
decreases in the Individual and Institutional segments, partially offset by
increases in the International and Reinsurance segments. A $105 million decrease
in Individual is primarily due to the establishment in 2001 of a policyholder
liability with respect to certain group annuity contracts at New England
Financial. Excluding this policyholder liability, interest credited expense
increased slightly in response to an increase in policyholder account balances,
which is primarily attributable to sales growth despite declines in interest
crediting rates. An $81 million decrease in Institutional is primarily due to a
decline in average crediting rates resulting from the current interest rate
environment. These variances are partially offset by a net increase of $28
million in International. This increase is principally due to the acquisition of
Hidalgo, partially offset by a reduction in the number of investment-type
policies in-force in Argentina. In addition, a $24 million increase in
Reinsurance is primarily due to several new deferred annuity reinsurance
agreements executed during 2002.

Policyholder dividends decreased by $144 million, or 7%, to $1,942 million
for the year ended December 31, 2002 from $2,086 million for the comparable 2001
period. This variance is attributable to a decrease in the Institutional segment
resulting from unfavorable mortality experience of several large group clients.
Institutional policyholder dividends vary from period to period based on
participating contract experience, which is recorded in policyholder benefits
and claims.

Other expenses increased by $39 million, or 1%, to $7,061 million for the
year ended December 31, 2002 from $7,022 million for the comparable 2001 period.
Excluding the capitalization and amortization of deferred policy acquisition
costs, which are discussed below, other expenses increased by $114 million, or
2%, to $7,762 million in 2002 from $7,648 million in 2001. Excluding the
capitalization and amortization of deferred policy acquisition costs and the
change in accounting as prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, ("SFAS 142"),
which eliminates the amortization of goodwill and certain other intangibles,
other expenses increased by $161 million. This variance is primarily
attributable to increases in the Reinsurance and International segments, as well
as in Corporate & Other, partially offset by decreases in the Institutional,
Individual and Asset Management segments. A $209 million increase in Reinsurance
is primarily attributable to increases in allowances paid, primarily driven by
high-allowance business in the U.K. along with strong growth in the U.S. and
Asia/Pacific regions. An increase of $166 million in International expenses is
primarily due to the acquisition of Hidalgo, the acquisitions in Chile and
Brazil, as well as business growth in South Korea, Mexico (excluding Hidalgo),
and Hong Kong. An increase in Corporate & Other of $112 million is primarily due
to increases in legal and interest expenses. The 2002 period includes a $266
million charge to increase the Company's asbestos-related liability and expenses
to cover costs associated with the resolution of federal government
investigations of General American's former Medicare business. These increases
are partially offset by a $250 million charge recorded in the fourth quarter of
2001 to cover costs associated with the resolution of class action lawsuits and
a regulatory inquiry pending against Metropolitan Life involving alleged
race-conscious insurance underwriting practices prior to 1973. The increase in
interest expenses is primarily due to increases in long-term debt resulting from
the issuance of $1.25 billion and $1 billion of senior debt in November 2001 and
December 2002, respectively, partially offset by a decrease in commercial paper
in 2002. In addition, a decrease in the elimination of intersegment activity
contributed to the variance. A decrease of $181 million in Institutional is due
to higher expenses resulting from the business realignment initiatives accrual
in the fourth quarter 2001 (primarily the Company's exit from the large market
401(k) business), $30 million of which was released into income in the fourth
quarter of 2002. This decrease is partially offset by an increase in 2002
operational expenses for dental and disability and group insurance's non-
deferrable expenses commensurate with the aforementioned premium growth, as well
as higher pension and post-retirement benefit expenses. A decrease of $105
million in Individual is due to continued expense management initiatives,
including reduced compensation-related expenses, a decline in business
realignment expenses that were incurred in 2001 and reductions in volume-related
commission expenses in the broker/dealer and other subsidiaries. These declines
are partially offset by higher pension and post-retirement benefit expenses and
an

51

increase in expenses stemming from sales growth in new annuity and
investment-type products. In addition, a decrease of $39 million in Asset
Management is primarily due to the sale of Conning in July 2001. Primarily as a
result of changes in expected rate of return and discount rate assumptions
effective for 2003, the Company currently anticipates its pension expense will
increase by approximately $115 million, net of income tax, for the year ending
December 31, 2003 from the comparable 2002 period.

Deferred policy acquisition costs are principally amortized in proportion
to gross margins and profits, including investment gains or losses. The
amortization is allocated to investment gains and losses to provide consolidated
statement of income information regarding the impact of investment gains and
losses on the amount of the amortization, and other expenses to provide amounts
related to gross margins and profits originating from transactions other than
investment gains and losses.

Capitalization of deferred policy acquisition costs increased by $301
million, or 15%, to $2,340 million for the year ended December 31, 2002 from
$2,039 million for the comparable 2001 period. This variance is primarily due to
increases in the Reinsurance, Individual, International and Institutional
segments. A $125 million increase in Reinsurance is commensurate with the
increase in allowances paid. A $111 million increase in Individual is due to
higher sales of annuity and investment-type products, resulting in higher
commissions and other deferrable expenses. A $51 million increase in
International is primarily due to the 2002 acquisition of Hidalgo and overall
business growth in South Korea, partially offset by a decrease in Argentina due
to the reduction in business caused by the overall economic environment. A $22
million increase in Institutional is primarily due to growth in sales
commissions and fees for disability products sold by Institutional. Total
amortization of deferred policy acquisitions costs increased by $206 million, or
14%, to $1,644 million in 2002 from $1,438 million in 2001. Amortization of
$1,639 million and $1,413 million are allocated to other expenses in 2002 and
2001, respectively, while the remainder of the amortization in each period is
allocated to investment gains and losses. The increase in amortization allocated
to other expenses is attributable to increases in the Individual, International
and Reinsurance segments. An increase of $111 million in Individual is due to
the impact of the depressed equity markets and changes in the estimates of
future gross profits. In 2002, estimates of future dividend scales, future
maintenance expenses, future rider margins, and future reinsurance recoveries
were revised. In 2001, estimates of future fixed account interest spreads,
future gross margins and profits related to separate accounts and future
mortality margins were revised. An increase in International of $64 million is
primarily due to loss recognition in Argentina as a result of the economic
environment, primarily the devaluation of its currency. The remaining increase
was due to new business in South Korea, Taiwan, and the June 2002 acquisition of
Hidalgo. An increase in Reinsurance of $55 million is due to growth in the
business, commensurate with the growth in premiums described above.

Income tax expense for the year ended December 31, 2002 was $516 million,
or 31% of income from continuing operations before provision for income taxes,
compared with $227 million, or 37%, for the comparable 2001 period. The 2002
effective tax rate differs from the federal corporate tax rate of 35% primarily
due to the impact of non-taxable investment income. The 2001 effective tax rate
differs from the federal corporate tax rate of 35%, due to an increase in prior
year income taxes on capital gains.

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets ("SFAS 144"), income related to the Company's real estate
which was identified as held-for-sale on or after January 1, 2002 is presented
as discontinued operations for the years ended December 31, 2002, 2001 and 2000.
The income from discontinued operations is comprised of net investment income
and net investment gains related to 47 properties that the Company began
marketing for sale on or after January 1, 2002. For the year ended December 31,
2002, the Company recognized $582 million of net investment gains from
discontinued operations due primarily to the sale of 36 properties.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- THE COMPANY

Premiums grew by $895 million, or 5%, to $17,212 million for the year ended
December 31, 2001 from $16,317 for the comparable 2000 period. This variance is
attributable to increases in the Institutional, Reinsurance, International and
Auto & Home segments, partially offset by a decrease in the Individual segment.
An improvement of $388 million in the Institutional segment is predominantly the
result of sales growth and

52

continued favorable policyholder retention in this segment's dental, disability
and long-term care businesses. In addition, significant premiums received from
several existing group life customers in 2001 and the BMA acquisition in 2000
resulted in higher premiums. The 2000 balance includes $124 million in
additional insurance coverages purchased by existing customers with funds
received in the demutualization and significant premiums received from existing
retirement and savings customers. New premiums from facultative and automatic
treaties and renewal premiums on existing blocks of business all contributed to
the $312 million premium growth in the Reinsurance segment. A $186 million rise
in the International segment is due to growth in Mexico, South Korea, Spain and
Taiwan, as well as acquisitions in Brazil and Chile. These variances were
partially offset by a decline in Argentinean individual life premiums,
reflecting the impact of economic and political events in that country. Higher
average premium resulting from rate increases is the primary driver of a $119
million rise in the Auto & Home segment. A $110 million decline in the
Individual segment is attributable to lower sales of traditional life insurance
policies, which reflects a continued shift in customer preference from those
policies to variable life products.

Universal life and investment-type product policy fees increased by $69
million, or 4%, to $1,889 million for the year ended December 31, 2001 from
$1,820 million for the comparable 2000 period. This variance is due to increases
in the Institutional and Individual segments, partially offset by a decline in
the International segment. Growth in sales and deposits of group universal life
and COLI products resulted in a $45 million increase in the Institutional
segment. A $39 million rise in the Individual segment is predominantly the
result of higher fees from variable life products reflecting a shift in customer
preferences from traditional life products. A decrease of $15 million in the
International segment is primarily due to reduced fees in Spain resulting from
fewer assets under management. This is a result of a planned cessation of
product lines offered through a joint venture with Banco Santander.

Net investment income increased by $231 million, or 2%, to $11,255 million
for the year ended December 31, 2001 from $11,024 million for the comparable
2000 period. This change is due to higher income from (i) mortgage loans on real
estate of $155 million, or 9%, (ii) fixed maturities of $116 million, or 1%,
(iii) other invested assets of $87 million, or 54%, and (iv) interest income on
policy loans of $21 million, or 4%. These positive variances are partially
offset by lower income from (i) equity securities and other limited partnership
interests of $86 million, or 47%, (ii) real estate and real estate joint
ventures held-for-investment, net of investment expenses and depreciation, of
$49 million, or 10%, (iii) cash, cash equivalents and short-term investments of
$9 million, or 3%, and (iv) higher investment expenses of $4 million, or 2%.

The increase in income from mortgage loans on real estate to $1,848 million
in 2001 from $1,693 million in 2000 is predominantly the result of higher
mortgage production volume and increases in mortgage prepayment fees and
contingent interest. The improvement in income from fixed maturities to $8,031
million in 2001 from $7,915 million in 2000 is primarily due to bond prepayments
and increased securities lending activity, offset by lower yields on
reinvestments. Income from other invested assets increased to $249 million in
2001 from $162 million in 2000 primarily due to the reclassification of $19
million from other comprehensive income related to cash flow hedges, $24 million
from derivatives not designated as accounting hedges and the recognition in 2000
of a $20 million loss on an equity method investment. The increase in interest
income from policy loans to $536 million in 2001 from $515 million in 2000 is
largely due to increased loans outstanding. The reduction of income from equity
securities and other limited partnership interests to $97 million in 2001 from
$183 million in 2000 is primarily due to fewer sales of underlying assets held
in corporate partnerships and increased partnership write-downs. The decrease in
income from real estate and real estate joint ventures held-for-investment to
$459 million in 2001 from $508 million in 2000 is primarily due to a decline in
hotel occupancy rates and reduced real estate joint venture sales.

The increase in net investment income is largely attributable to positive
variances in the Institutional and Individual segments, partially offset by a
decline in Corporate & Other. Net investment income for the Institutional and
Individual segments grew by $254 million and $80 million, respectively. These
increases are predominately due to a higher volume of securities lending
activity, increases in bond and mortgage prepayments and higher contingent
interest on mortgages. The decrease in Corporate & Other is principally the
result of sales in 2000 of underlying assets held in corporate limited
partnerships. The remainder of the variance is attributable to smaller
fluctuations in the other segments.
53

Other revenues decreased by $722 million, or 32%, to $1,507 million for the
year ended December 31, 2001 from $2,229 million for the comparable 2000 period.
This variance is mainly attributable to reductions in the Asset Management,
Individual and Auto & Home segments, partially offset by an increase in the
Reinsurance segment. The sales of Nvest and Conning in October 2000 and July
2001, respectively, are the primarily drivers of a $562 million decline in the
Asset Management segment. A decrease of $155 million in the Individual segment
is primarily due to reduced commission and fee income associated with lower
sales in the broker/dealer and other subsidiaries which was a result of the
equity market downturn. Such commission and fee income can fluctuate consistent
with movements in the equity market. Auto & Home's other revenues are lower by
$18 million primarily due to a revision of an estimate made in 2000 of amounts
recoverable from reinsurers related to the disposition of this segment's
reinsurance business in 1990. Other revenues in the Reinsurance segment improved
by $13 million due to an increase in fees earned on financial reinsurance,
primarily as a result of the acquisition of the remaining interest in RGA
Financial Group, LLC during the second half of 2000.

The Company's investment gains and losses are net of related policyholder
amounts. The amounts netted against investment gains and losses are (i)
amortization of deferred policy acquisition costs, to the extent that such
amortization results from investment gains and losses, (ii) additions to
participating contractholder accounts when amounts equal to such investment
gains and losses are credited to the contractholder's accounts, and (iii)
adjustments to the policyholder dividend obligation resulting from investment
gains and losses.

Net investment losses grew by $213 million, or 55%, to $603 million for the
year ended December 31, 2001 from $390 million for the comparable 2000 period.
This increase reflects total investment losses, before offsets, of $737 million,
an increase of $293 million, or 66%, from $444 million in 2000. Offsets include
the amortization of deferred policy acquisition costs of ($25) million and $95
million in 2001 and 2000, respectively; changes in policyholder dividend
obligation of $159 million and $85 million in 2001 and 2000, respectively; and
additions to participating contracts of ($126) million in 2000. Excluding the
net gain on the sale of a subsidiary, net investment losses decreased from the
prior year. The Company recognized deteriorating credits through the proactive
sale of certain assets.

The Company believes its policy of netting related policyholder amounts
against investment gains and losses provides important information in evaluating
its operating performance. Investment gains and losses are often excluded by
investors when evaluating the overall financial performance of insurers. The
Company believes its presentation enables readers of its consolidated statements
of income to easily exclude investment gains and losses and the related effects
on the consolidated statements of income when evaluating its operating
performance. The Company's presentation of investment gains and losses, net of
related policyholder amounts, may be different from the presentation used by
other insurance companies and, therefore, amounts in its consolidated statements
of income may not be comparable to amounts reported by other insurers.

Policyholder benefits and claims rose by $1,561 million, or 9%, to $18,454
million for the year ended December 31, 2001 from $16,893 million for the
comparable 2000 period. The variance in policyholder benefits and claims is
mainly attributable to increases in the Institutional, Reinsurance, Individual,
International and Auto & Home segments. Claims related to the September 11, 2001
tragedies and fourth quarter business realignment initiatives account for $291
million and $215 million, respectively, of a $746 million increase in the
Institutional segment. The remainder of the fluctuation is attributable to
growth in the group life, dental, disability and long-term care insurance
businesses, commensurate with the variance in premiums, partially offset by a
decrease in policyholder benefits and claims related to the retirement and
savings business. Policyholder benefits and claims for the Reinsurance segment
rose by $388 million due to unfavorable mortality experience in the first and
fourth quarters of 2001, as well as adverse results on the reinsurance of
Argentine pension business, reflecting the impact of economic and political
events in that country. In addition, reinsurance claims arising from the
September 11, 2001 tragedies of approximately $16 million, net of amounts
recoverable from reinsurers, contributed to the variance. A $179 million rise in
the Individual segment is primarily the result of an increase in the liabilities
for future policy benefits commensurate with the aging of the in-force block of
business. In addition, an increase of $74 million in the policyholder dividend
obligation and $24 million in liabilities and claims associated with the
September 11, 2001 tragedies contributed to the variance. International
policyholder benefits and claims increased by $127 million as a result of growth
in Mexico, South Korea and Taiwan, as well as acquisitions in Brazil and Chile.
These fluctuations are partially offset by a decline in Argentina, reflecting
the
54

impact of economic and political events in that country. A $116 million increase
in the Auto & Home segment is predominantly the result of increased average
claim costs, growth in the auto business and increased non-catastrophe
weather-related losses.

Interest credited to policyholder account balances grew by $149 million, or
5%, to $3,084 million for the year ended December 31, 2001 from $2,935 million
for the comparable 2000 period, primarily due to an increase of $218 million in
the Individual segment, partially offset by a $77 million reduction in the
Institutional segment. The establishment of a policyholder liability of $118
million with respect to certain group annuity contracts at New England Financial
is the primary driver of the fluctuation in Individual. In addition, higher
average policyholder account balances and slightly increased crediting rates
contributed to the variance. The decrease in the Institutional segment is
primarily due to an overall decline in crediting rates in 2001 as a result of
the low interest rate environment, partially offset by an increase in average
customer account balances stemming from asset growth. The remaining variance is
due to minor fluctuations in the Reinsurance and International segments.

Policyholder dividends increased by $167 million, or 9%, to $2,086 million
for the year ended December 31, 2001 from $1,919 million for the comparable 2000
period, primarily due to increases of $135 million and $25 million in the
Institutional and Individual segments, respectively. The rise in the
Institutional segment is primarily attributed to favorable experience on a large
group life contract in 2001. Policyholder dividends vary from period to period
based on participating contract experience, which is recorded in policyholder
benefits and claims. The change in the Individual segment reflects growth in the
assets supporting policies associated with this segment's aging block of
traditional life insurance business. The remaining variance is due to minor
fluctuations in the International and Reinsurance segments.

Payments of $327 million were made during the second quarter of 2000, as
part of Metropolitan Life's demutualization, to holders of certain policies
transferred to Clarica Life Insurance Company in connection with the sale of a
substantial portion of the Canadian operations in 1998.

Demutualization costs of $230 million were incurred during the year ended
December 31, 2000. These costs are related to Metropolitan Life's
demutualization on April 7, 2000.

Other expenses decreased by $379 million, or 5%, to $7,022 million for the
year ended December 31, 2001 from $7,401 million for the comparable 2000 period.
Excluding the capitalization and amortization of deferred policy acquisition
costs, which are discussed below, other expenses declined by $138 million, or
2%, to $7,648 million in 2001 from $7,786 million in 2000. This variance is
attributable to reductions in the Asset Management, Individual and Auto & Home
segments, partially offset by increases in the other segments. A decrease of
$532 million in the Asset Management segment is predominantly the result of the
sales of Nvest and Conning in October 2000 and July 2001, respectively. The
Individual segment's expenses declined by $121 million due to continued expense
management, primarily due to reduced employee costs and lower discretionary
spending. In addition, there were reductions in volume-related commission
expenses in the broker/dealer and other subsidiaries. These items are partially
offset by an increase of $97 million related to fourth quarter 2001 business
realignment initiatives. A $34 million decrease in Auto & Home is attributable
to a reduction in integration costs associated with the acquisition of the
standard personal lines property and casualty insurance operations of The St.
Paul Companies in September 1999 ("St. Paul acquisition"). An increase of $287
million in Institutional expenses is primarily driven by expenses associated
with fourth quarter business realignment initiatives of $184 million and a rise
in non-deferrable variable expenses associated with premium growth in the group
insurance businesses. Non-deferrable variable expenses include premium tax,
commissions and administrative expenses for dental, disability and long-term
care businesses. Other expenses in Corporate & Other grew by $198 million
primarily due to a $250 million race-conscious underwriting loss provision which
was recorded in the fourth quarter of 2001, additional expenses associated with
MetLife, Inc. shareholder services costs and start-up costs relating to
MetLife's banking initiatives, as well as a decrease in the elimination of
intersegment activity. These increases are partially offset by a decline in
interest expense due to reduced average levels in borrowing and a lower interest
rate environment in 2001. An increase of $43 million in the International
segment is predominantly the result of growth in Mexico and South Korea, and
acquisitions in Brazil and Chile, partially offset by a decrease in Spain's
other expenses due to a planned cessation of product lines offered through a
joint venture with Banco Santander. The acquisition of the remaining interest in
RGA Financial Group,

55

LLC during the second half of 2000 contributed to the $20 million increase in
other expenses in the Reinsurance segment.

Deferred policy acquisition costs are principally amortized in proportion
to gross margins or profits, including investment gains or losses. The
amortization is allocated to investment gains and losses to provide consolidated
statement of income information regarding the impact of investment gains and
losses on the amount of the amortization, and other expenses to provide amounts
related to gross margins or profits originating from transactions other than
investment gains and losses.

Capitalization of deferred policy acquisition costs increased to $2,039
million for the year ended December 31, 2001 from $1,863 million for the
comparable 2000 period. This variance is attributable to increases in the
Individual, Reinsurance, Institutional and International segments. The growth in
the Individual segment is primarily due to higher sales of variable and
universal life insurance policies and annuity and investment-type products,
resulting in additional commissions and other deferrable expenses. The increases
in the Reinsurance, Institutional and International segments are commensurate
with growth in those businesses. Total amortization of deferred policy
acquisition costs increased to $1,438 million in 2001 from $1,383 million in
2000. Amortization of $1,413 million and $1,478 million are allocated to other
expenses in 2001 and 2000, respectively, while the remainder of the amortization
in each year is allocated to investment gains and losses. The decrease in
amortization of deferred policy acquisition costs allocated to other expenses is
attributable to a decline in the Individual segment, partially offset by
increases in the Reinsurance and International segments. The decline in the
Individual segment is due to changes in the estimates of future gross margins
and profits. Contributing to this variance are modifications made in the third
quarter of 2001 relating to the manner in which estimates of future market
performance are developed. These estimates are used in determining unamortized
deferred policy acquisition costs balances and the amount of related
amortization. The modification will reflect an expected impact of past market
performance on future market performance, as well as improving the ability to
estimate deferred policy acquisition costs balances and related amortization.
The increase in the Reinsurance segment is primarily due to fluctuations in
allowances paid to ceding companies as a result of a change in product mix. The
increase in the International segment is due to a write-off of deferred policy
acquisition costs as a result of the economic and political events in Argentina.

Income tax expense for the year ended December 31, 2001 was $227 million,
or 37%, of income from continuing operations before provision for income taxes,
compared with $421 million, or 33%, for the comparable 2000 period. The 2001
effective tax rate differs from the federal corporate tax rate of 35% due to an
increase in prior year income taxes on capital gains. The 2000 effective tax
rate differs from the federal corporate tax rate of 35% primarily due to the
payments made in the second quarter of 2000 to former Canadian policyholders in
connection with the demutualization, the impact of surplus tax and a reduction
in prior year income taxes on capital gains recorded in the third quarter of
2000. This reduction is associated with the previous sale of a business. Prior
to its demutualization, the Company was subject to surplus tax imposed on mutual
life insurance companies under Section 809 of the Internal Revenue Code. The
surplus tax results from the disallowance of a portion of a mutual life
insurance company's policyholder dividends as a deduction from taxable income.

In accordance with SFAS No. 144, income related to the Company's real
estate which was identified as held-for-sale on or after January 1, 2002 is
presented as discontinued operations for the years ended December 31, 2002, 2001
and 2000. The income from discontinued operations is comprised of net investment
income related to 47 properties that the Company began marketing for sale on or
after January 1, 2002.

56

INDIVIDUAL

The following table presents consolidated financial information for the
Individual segment for the years indicated:

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- INDIVIDUAL

Premiums decreased by $56 million, or 1%, to $4,507 million for the year
ended December 31, 2002 from $4,563 million for the comparable 2001 period.
Premiums from insurance products decreased by $94 million, primarily resulting
from a third quarter 2002 amendment of a reinsurance agreement to increase the
amount of insurance ceded from 50% to 100%. This amendment was effective January
1, 2002. The Company also believes the decline is the result of a continued
shift in policyholders' preference from traditional policies to annuity and
investment-type products. These decreases are partially offset by policyholders
expanding their traditional life insurance coverage through the purchase of
additional insurance with dividend proceeds in 2002. Premiums from annuity
products increased by $38 million as a result of higher sales of fixed annuities
and supplementary contracts with life contingencies.

Universal life and investment-type product policy fees increased by $120
million, or 10%, to $1,380 million for the year ended December 31, 2002 from
$1,260 million for the comparable 2001 period. Policy fees from insurance
products increased by $145 million primarily due to higher revenue from
insurance fees, which increase as the average separate account asset base
supporting the underlying minimum death benefit declines. The average separate
account asset base has declined in response to poor equity market performance.
Additionally, this variance reflects the acceleration of the recognition of
unearned fees associated with future reinsurance recoveries. Policy fees from
annuity and investment-type products decreased by $25 million primarily due to
declines in the average separate account asset base resulting generally from
poor equity market performance, partially offset by an increase in fees
resulting from growth in annuity deposits. Policy fees from annuity and
investment-type products are typically calculated as a percentage of average
separate account assets.

57

Such assets can fluctuate depending on equity market performance. If average
separate account asset levels continue to decline, management expects that
policy fees from annuity and investment-type products will continue to be
adversely impacted, while revenues from insurance fees on variable life products
would be expected to rise.

Other revenues decreased by $77 million, or 16%, to $418 million for the
year ended December 31, 2002 from $495 million for the comparable 2001 period,
largely due to lower commission and fee income associated with a volume decline
in the broker/dealer and other subsidiaries which is principally due to the
depressed equity markets.

Policyholder benefits and claims decreased by $13 million, or less than 1%,
to $5,220 million for the year ended December 31, 2002 from $5,233 million for
the comparable 2001 period. Policyholder benefits and claims for insurance
products decreased by $119 million, primarily due to the impact of the
aforementioned reinsurance transaction and the establishment of liabilities for
the September 11, 2001 tragedies in the previous year. Policyholder benefits and
claims for annuity and investment-type products increased by $106 million
primarily due to an increase in fixed and immediate annuity liabilities,
resulting from business growth and an increase in the liability associated with
guaranteed minimum death benefits on variable annuities.

Interest credited to policyholder account balances decreased by $105
million, or 6%, to $1,793 million for the year ended December 31, 2002 compared
with $1,898 for the comparable 2001 period. This decrease was primarily due to
the establishment of a $118 million policyholder liability with respect to
certain group annuity contracts at New England Financial in 2001. Excluding this
policyholder liability, interest credited increased slightly due to an increase
in policyholder account balances which is primarily attributable to sales growth
partially offset by declines in interest crediting rates.

Policyholder dividends increased by $3 million, or less than 1%, to $1,770
million for the year ended December 31, 2002 from $1,767 million for the
comparable 2001 period due to the increase in the invested assets supporting the
policies associated with this segment's large block of traditional life
insurance business. This increase is partially offset by the approval by the
Company's Board of Directors in the fourth quarter of 2002 of a reduction in the
dividend scale to reflect the impact of the current low interest rate
environment on the asset portfolios supporting these policies.

Other expenses decreased by $118 million, or 4%, to $2,629 million for the
year ended December 31, 2002 million from $2,747 for the comparable 2001 period.
Excluding the capitalization and amortization of deferred policy acquisition
costs, which are discussed below, other expenses decreased by $118 million, or
4%, to $2,922 million in 2002 from $3,040 million in 2001. Other expenses
related to insurance products decreased by $129 million, which is attributable
to continued expense management, reductions in volume-related commission
expenses in the broker/dealer and other subsidiaries and a reduction of $62
million related to business realignment expenses incurred in 2001. These
decreases are partially offset by increased pension and post-retirement benefit
expenses over the comparable period. Other expenses related to annuity and
investment-type products increased by $11 million. This increase is commensurate
with the rise in sales of new annuity and investment-type products as well as
increased pension and post-retirement benefit expenses. This increase is
partially offset by the reduction of $37 million of business realignment
expenses incurred in 2001.

Deferred policy acquisition costs are principally amortized in proportion
to gross margins or gross profits, including investment gains or losses. The
amortization is allocated to investment gains and losses to provide consolidated
statement of income information regarding the impact of investment gains and
losses on the amount of the amortization, and other expenses to provide amounts
related to gross margins or profits originating from transactions other than
investment gains and losses.

Capitalization of deferred policy acquisition costs increased by $111
million, or 12%, to $1,037 million for the year ended December 31, 2002 from
$926 million for the comparable 2001 period due to higher sales of annuity and
investment-type products, resulting in higher commissions and other deferrable
expenses. Total amortization of deferred policy acquisition costs increased by
$100 million, or 15%, to $754 million in 2002 from $654 million in 2001.
Amortization of deferred policy acquisition costs of $744 million and $633
million is allocated to other expenses in 2002 and 2001, respectively, while the
remainder of the amortization in each year

58

is allocated to investment gains and losses. Increases in amortization of
deferred policy acquisition costs allocated to other expenses of $84 million and
$27 million related to insurance products and annuity and investment-type
products, respectively, are due to the impact of the depressed equity markets
and changes in the estimates of future gross profits. In 2002, estimates of
future dividend scales, future maintenance expenses, future rider margins, and
future reinsurance recoveries were revised. In 2001, estimates of future fixed
account interest spreads, future gross margins and profits related to separate
accounts and future mortality margins were revised.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- INDIVIDUAL

Premiums decreased by $110 million, or 2%, to $4,563 million for the year
ended December 31, 2001 from $4,673 million for the comparable 2000 period.
Premiums from insurance products declined by $108 million. This decrease is
primarily due to declines in traditional life insurance policies, which reflects
a maturing of that business and a continued shift in customer preference from
those policies to variable life products. Premiums from annuity products
declined by $2 million, due to lower sales of supplementary contracts with life
contingencies and single premium immediate annuity business.

Universal life and investment-type product policy fees increased by $39
million, or 3%, to $1,260 million for the year ended December 31, 2001 from
$1,221 million for the comparable 2000 period. Policy fees from insurance
products rose by $149 million. This growth is primarily due to increases in
variable life products reflecting a continued shift in customer preferences from
traditional life products. Policy fees from annuity and investment-type products
decreased by $110 million, primarily resulting from a lower average separate
account asset base. Policy fees from annuity and investment-type products are
typically calculated as a percentage of average assets. Such assets can
fluctuate depending on equity market performance. Thus, the amount of fees can
increase or decrease consistent with movements in average separate account
balances.

Other revenues decreased by $155 million, or 24%, to $495 million for the
year ended December 31, 2001 from $650 million for the comparable 2000 period,
primarily due to reduced commission and fee income associated with lower sales
in the broker/dealer and other subsidiaries, which was a result of the equity
market downturn. Such commission and fee income can fluctuate consistent with
movements in the equity market.

Policyholder benefits and claims increased by $179 million, or 4%, to
$5,233 million for the year ended December 31, 2001 from $5,054 million for the
comparable 2000 period. Policyholder benefits and claims for insurance products
rose by $192 million primarily due to increases in the liabilities for future
policy benefits commensurate with the aging of the in-force block of business.
In addition, increases of $74 million and $24 million in the policyholder
dividend obligation and liabilities and claims associated with the September 11,
2001 tragedies, respectively, contributed to the variance. Partially offsetting
these variances is a reduction in policyholder benefits and claims for annuity
and investment-type products due to a decrease in liabilities for supplemental
contracts with life contingencies.

Interest credited to policyholder account balances rose by $218 million, or
13%, to $1,898 million for the year ended December 31, 2001 from $1,680 million
for the comparable 2000 period. Interest on insurance products increased by $165
million, primarily due to the establishment of a policyholder liability of $118
million with respect to certain group annuity contracts at New England
Financial. The remainder of the variance is predominantly a result of higher
average policyholder account balances. Interest on annuity and investment-type
products grew by $53 million due to slightly higher crediting rates and higher
policyholder account balances stemming from increased sales, including products
with a dollar cost averaging-type feature.

Policyholder dividends increased by $25 million, or 1%, to $1,767 million
for the year ended December 31, 2001 from $1,742 million for the comparable 2000
period. This is largely attributable to the growth in the assets supporting
policies associated with this segment's aging block of traditional life
insurance business.

Other expenses decreased by $265 million, or 9%, to $2,747 for the year
ended December 31, 2001 from $3,012 million for the comparable 2000 period.
Excluding the capitalization and amortization of deferred policy acquisition
costs that are discussed below, other expenses are lower by $121 million, or 4%,
to $3,040 million in 2001 from $3,161 million in 2000. Other expenses related to
insurance products decreased by $158 million due to continued expense
management, primarily due to reduced employee costs and lower discretionary
spending. In

59

addition, there were reductions in volume-related commission expenses in the
broker/dealer and other subsidiaries. These decreases are partially offset by an
increase of $62 million related to fourth quarter 2001 business realignment
initiatives. The annuity and investment-type products experienced an increase in
other expenses of $37 million primarily due to expenses associated with the
business realignment initiatives.

Deferred policy acquisition costs are principally amortized in proportion
to gross margins and profits, including investment gains or losses. The
amortization is allocated to investment gains and losses to provide consolidated
statement of income information regarding the impact of investment gains and
losses on the amount of the amortization, and to other expenses to provide
amounts related to gross margins and profits originating from transactions other
than investment gains and losses.

Capitalization of deferred policy acquisition costs increased by $54
million, or 6%, to $926 million for the year ended December 31, 2001 from $872
million for the comparable 2000 period. This increase is primarily due to higher
sales of variable and universal life insurance policies and annuity and
investment-type products, resulting in higher commissions and other deferrable
expenses. Total amortization of deferred policy acquisition costs increased by
$26 million, or 4%, to $654 million in 2001 from $628 million in 2000.
Amortization of deferred policy acquisition costs of $633 million and $723
million is allocated to other expenses in 2001 and 2000, respectively, while the
remainder of the amortization in each year is allocated to investment gains and
losses. Amortization of deferred policy acquisition costs allocated to other
expenses related to insurance products declined by $48 million due to changes in
the estimate of future gross margins and profits. Amortization of deferred
policy acquisition costs allocated to other expenses related to annuity and
investment products declined by $42 million due to changes in the estimate of
future gross profits. Contributing to this variance are modifications made in
the third quarter of 2001 relating to the manner in which estimates of future
market performance are developed. These estimates are used in determining
unamortized deferred policy acquisition costs balances and the amount of related
amortization. The modification reflects an expected impact of past market
performance on future market performance, and improves the ability to estimate
deferred policy acquisition costs balances and related amortization.

60

INSTITUTIONAL

The following table presents consolidated financial information for the
Institutional segment for the years indicated:

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- INSTITUTIONAL

Premiums increased by $966 million, or 13%, to $8,254 million for the year
ended December 31, 2002 from $7,288 million for the comparable 2001 period.
Group insurance premiums increased by $505 million as a result of growth in this
segment's group life, dental, disability and long-term care businesses.
Retirement and savings premiums increased by $461 million primarily due to the
sale of a significant contract in the second quarter of 2002, as well as new
sales throughout 2002 from structured settlements and traditional annuity
products. Retirement and savings premium levels are significantly influenced by
large transactions and, as a result, can fluctuate from period to period.

Universal life and investment-type product policy fees increased by $23
million, or 4%, to $615 million for the year ended December 31, 2002 from $592
million for the comparable 2001 period. This increase is primarily attributable
to a fee resulting from the renegotiation of a portion of a bank-owned life
insurance contract, as well as growth in existing business in the group
universal life product line.

Other revenues decreased by $40 million, or 6%, to $609 million for the
year ended December 31, 2002 from $649 million for the comparable 2001 period.
Retirement and savings other revenues decreased $73 million primarily due to a
reduction in administrative fees as a result of the Company's exit from the
large market 401(k) business in late 2001, and lower fees earned on investments
in separate accounts resulting generally from poor equity market performance.
This decrease is partially offset by a $33 million increase in group insurance
due to growth in the administrative service businesses and a settlement received
in 2002 related to the Company's former medical business.

Policyholder benefits and claims increased by $415 million, or 5%, to
$9,339 million for the year ended December 31, 2002 from $8,924 million for the
comparable 2001 period. This variance is attributable to increases

61

of $238 million and $177 million in group insurance and retirement and savings,
respectively. Excluding $291 million of 2001 claims related to the September 11,
2001 tragedies, group insurance policyholder benefits and claims increased by
$529 million commensurate with the aforementioned premium growth in this
segment's group life, dental, disability, and long-term care businesses.
Excluding $215 million of 2001 policyholder benefits related to the fourth
quarter 2001 business realignment initiatives, retirement and savings
policyholder benefits increased $392 million, commensurate with the
aforementioned premium growth.

Interest credited to policyholders decreased by $81 million, or 8%, to $932
million for the year ended December 31, 2002 from $1,013 million for the
comparable 2001 period. Decreases of $42 million and $39 million in retirement
and savings and group insurance, respectively, are primarily attributable to
declines in the average crediting rates in 2002 as a result of the current low
interest rate environment.

Policyholder dividends decreased by $144 million, or 56%, to $115 million
for the year ended December 31, 2002 from $259 million for the comparable 2001
period. This decline is largely attributable to unfavorable mortality experience
of several large group clients. Policyholder dividends vary from period to
period based on participating contract experience, which are generally recorded
in policyholder benefits and claims.

Other expenses decreased by $215 million, or 12%, to $1,531 million for the
year ended December 31, 2002 from $1,746 million in the comparable 2001 period.
Retirement and savings decreased by $293 million, primarily attributable to $184
million of accrued expenses related to business realignment initiatives recorded
in the fourth quarter of 2001 (predominantly related to the Company's exit from
the large market 401(k) business), $30 million of which was released into income
in the fourth quarter of 2002. In addition, ongoing expenses for the defined
contribution product have steadily decreased throughout 2002. The net reduction
in retirement and savings is partially offset by an increase in pension and
post-retirement costs. Group insurance other expenses increased by $78 million.
This increase is mainly attributable to growth in operational expenses for the
dental and disability products, as well as group insurance's non-deferrable
expenses, including a certain portion of premium taxes and commissions. These
variances are commensurate with the aforementioned premium growth. In addition,
an increase in pension and post-retirement costs contributed to the variance.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- INSTITUTIONAL

Premiums increased by $388 million, or 6%, to $7,288 million for the year
ended December 31, 2001 from $6,900 million for the comparable 2000 period.
Group insurance premiums grew by $680 million, due, in most part, to sales
growth and continued favorable policyholder retention in this segment's dental,
disability and long-term care businesses. In addition, premiums received from
several existing group life customers in 2001 and the BMA acquisition
contributed $173 million and $29 million, respectively, to this variance. The
2000 balance includes $124 million in additional insurance coverages purchased
by existing customers with funds received in the demutualization. Retirement and
savings premiums decreased by $292 million, primarily as a result of $270
million in premiums received in 2000 from existing customers.

Universal life and investment-type product policy fees increased by $45
million, or 8%, to $592 million for the year ended December 31, 2001 from $547
million for the comparable 2000 period. The rise in fees reflects growth in
sales and deposits in group universal life and COLI products. Higher fees in
group universal life products represent an increase in insured lives for an
existing customer, coupled with a change in a customer preference for group life
over optional term products. The increase in corporate-owned life insurance
represents a $27 million fee received in 2001 from an existing customer.

Other revenues decreased by $1 million to $649 million for the year ended
December 31, 2001 from $650 million for the comparable 2000 period. Group
insurance other revenues decreased by $19 million. This decline is primarily
attributable to the renegotiation of an existing contract with a significant
long-term care customer, as well as $20 million in final settlements in 2000 on
several cases relating to the term life and former medical business. This
variance is partially offset by a rise in other revenues stemming from sales
growth in this segment's dental and disability administrative businesses.
Retirement and savings' other revenues increased by $18 million, due to $12
million in earnings on seed money and an increase in administrative services
fees for the defined contribution group businesses.

62

Policyholder benefits and claims increased by $746 million, or 9%, to
$8,924 million for the year ended December 31, 2001 from $8,178 million for the
comparable 2000 period. Group insurance policyholder benefits and claims grew by
$778 million, primarily due to growth in this segment's group life, dental,
disability and long-term care insurance businesses, commensurate with the
premium variance discussed above. In addition, $291 million in claims related to
the September 11, 2001 tragedies contributed to this variance. Retirement and
savings policyholder benefits and claims declined by $32 million. A decrease
commensurate with the $292 million premium variance discussed above is almost
entirely offset by a $215 million increase in policyholder benefits associated
with fourth quarter 2001 business realignment initiatives.

Interest credited to policyholder account balances decreased by $77
million, or 7%, to $1,013 million for the year ended December 31, 2001 from
$1,090 million for the comparable 2000 period. Retirement and savings decreased
by $53 million, or 9%, to $549 million in 2001 from $602 million in 2000, due to
a overall decline in crediting rates in 2001 as a result of the low interest
rate environment. A $24 million drop in group life is largely attributable to an
overall decline in crediting rates in 2001 as a result of the low interest rate
environment. The variance in group life was partially dampened by an increase in
average customer account balances stemming from asset growth, resulting in $12
million in additional interest credited.

Policyholder dividends increased by $135 million, or 109%, to $259 million
for the year ended December 31, 2001 from $124 million for the comparable 2000
period. The rise in dividends is primarily attributed to favorable experience on
a large group life contract in 2001. Policyholder dividends vary from period to
period based on insurance contract experience, which are generally recorded in
policyholder benefits and claims.

Other expenses increased by $232 million, or 15%, to $1,746 million for the
year ended December 31, 2001 from $1,514 million for the comparable 2000 period.
Other expenses related to retirement and savings rose by $121 million, which is
largely attributable to $184 million in expenses associated with fourth quarter
2001 business realignment initiatives. This variance is partially offset by a
decrease in expenses, due in most part, to expense management initiatives. Group
insurance expenses grew by $111 million due primarily to a rise in non-
deferrable variable expenses associated with premium growth. Non-deferrable
variable expenses include premium tax, commissions and administrative expenses
for dental, disability and long-term care businesses.

63

REINSURANCE

The following table presents consolidated financial information for the
Reinsurance segment for the years indicated:

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- REINSURANCE

Premiums increased by $243 million, or 14%, to $2,005 million for the year
ended December 31, 2002 from $1,762 million for the comparable 2001 period. New
premiums from facultative and automatic treaties and renewal premiums on
existing blocks of business, particularly in the U.S. and U.K. reinsurance
operations, all contributed to the premium growth. Premium levels are
significantly influenced by large transactions and reporting practices of ceding
companies and, as a result, can fluctuate from period to period.

Other revenues remained essentially unchanged at $43 million for the year
ended December 31, 2002 versus $42 million for the comparable 2001 period.

Policyholder benefits and claims increased by $70 million, or 5%, to $1,554
million for the year ended December 31, 2002 from $1,484 million for the
comparable 2001 period. Policyholder benefits and claims were 78% of premiums
for the year ended December 31, 2002 compared to 84% in the comparable 2001
period. The decrease in policyholder benefits and claims as a percentage of
premiums is primarily attributable to higher than expected mortality in the U.S.
reinsurance operations during the first and fourth quarters of 2001, favorable
claims experience in 2002 and the 2001 impact of claims associated with the
September 11, 2001 tragedies. In addition, increases in the liabilities for
future policyholder benefits and adverse results on the reinsurance of Argentine
pension business during 2001 contributed to the decrease. The level of claims
may fluctuate from period to period, but exhibits less volatility over the long
term.

Interest credited to policyholder account balances increased by $24
million, or 20%, to $146 million for the year ended December 31, 2002 from $122
million for the comparable 2001 period. Contributing to this growth were several
new deferred annuity reinsurance agreements executed during 2002. The crediting
rate on certain blocks of annuities is based on the performance of the
underlying assets.

Policyholder dividends were essentially unchanged at $22 million for the
year ended December 31, 2002, versus $24 million for the 2001 comparable period.

64

Other expenses increased by $108 million, or 25%, to $547 million for the
year ended December 31, 2002 from $439 million for the comparable 2001 period.
The increase in other expenses is primarily attributable to an increase in
reinsurance business in the U.K., which is characterized by higher initial
reinsurance allowances than those historically experienced in the segment. These
expenses fluctuate depending on the mix of the underlying insurance products
being reinsured as allowances paid and the related capitalization and
amortization can vary significantly based on the type of business and the
reinsurance treaty.

Minority interest reflects third-party ownership interests in RGA.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- REINSURANCE

Premiums increased by $312 million, or 22%, to $1,762 million for the year
ended December 31, 2001 from $1,450 million for the comparable 2000 period. New
premiums from facultative and automatic treaties and renewal premiums on
existing blocks of business all contributed to the premium growth. Premium
levels are significantly influenced by large transactions and reporting
practices of ceding companies and, as a result, can fluctuate from period to
period.

Other revenues increased by $13 million, or 45%, to $42 million for the
year ended December 31, 2001 from $29 million for the comparable 2000 period.
The increase is due to an increase in fees earned on financial reinsurance,
primarily as a result of the acquisition of RGA Financial Group, LLC during the
second half of 2000.

Policyholder benefits and claims increased by $388 million, or 35%, to
$1,484 million for the year ended December 31, 2001 from $1,096 million for the
comparable 2000 period. Claims experience for the year ended December 31, 2001
includes claims arising from the September 11, 2001 tragedies of approximately
$16 million, net of amounts recoverable from reinsurers. As a percentage of
premiums, policyholder benefits and claims increased to 84% for the year ended
December 31, 2001 from 76% for the comparable 2000 period. This increase is
attributed primarily to higher than expected mortality in the U.S. reinsurance
operations during the first and fourth quarters of 2001, in addition to the
claims arising from the terrorist attacks. Additionally, increases for benefits
and adverse results on the reinsurance of Argentine pension business contributed
to the increase. Mortality is expected to vary from period to period, but
generally remains fairly constant over the long term.

Interest credited to policyholder account balances increased by $13
million, or 12%, to $122 million for the year ended December 31, 2001 from $109
million for the comparable 2000 period. Interest credited to policyholder
account balances relates to amounts credited on deposit-type contracts and
certain cash-value contracts. The increase is primarily related to an increase
in the underlying account balances due to a new block of single premium deferred
annuities reinsured in 2001. Additionally, the crediting rate on certain blocks
of annuities is based on the performance of the underlying assets. Therefore,
any fluctuations in interest credited related to these blocks are generally
offset by a corresponding change in net investment income.

Policyholder dividends were essentially unchanged at $24 million for the
year ended December 31, 2001 as compared to $21 million for the year ended
December 31, 2000.

Other expenses decreased by $7 million, or 2%, to $439 million for the year
ended December 31, 2001 from $446 million for the comparable 2000 period. Other
expenses, which include underwriting, acquisition and insurance expenses, were
20% of segment revenues in 2001 compared with 24% in 2000. This percentage
fluctuates depending on the mix of the underlying insurance products being
reinsured.

Minority interest reflects third-party ownership interests in RGA.

65

AUTO & HOME

The following table presents consolidated financial information for the
Auto & Home segment for the years indicated:

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- AUTO & HOME

Premiums increased by $73 million, or 3%, to $2,828 million for the year
ended December 31, 2002 from $2,755 million for the comparable 2001 period. Auto
and property premiums increased by $66 million and $1 million, respectively,
primarily due to increases in average premium earned per policy resulting from
rate increases. The impact on premiums from rate increases was partially offset
by an expected reduction in retention and a reduction in new business sales.
Premiums from other personal lines increased by $6 million.

Other revenues increased by $4 million, or 18%, to $26 million for the year
ended December 31, 2002 from $22 million for the comparable 2001 period. This
increase was primarily due to income earned on a COLI policy purchased in the
second quarter of 2002, as well as higher fees on installment payments. These
increases were partially offset by an adjustment to a deferred gain related to
the disposition of this segment's reinsurance business in 1990.

Policyholder benefits and claims decreased by $102 million, or 5%, to
$2,019 million for the year ended December 31, 2002 from $2,121 million for the
comparable 2001 period. Property policyholder benefits and claims decreased by
$120 million due to improved claim frequency, underwriting and agency management
actions, and a $41 million reduction in catastrophe losses. Property
catastrophes represented 7.4% of the property loss ratio in 2002 compared to
13.5% in 2001. Other policyholder benefits and claims decreased by $10 million
due to fewer personal umbrella claims. Fluctuations in these policyholder
benefits and claims may not be commensurate with the change in premiums for a
given period due to low premium volume and high liability limits. Auto
policyholder benefits and claims increased by $28 million largely due to an
increase in current year bodily injury and no-fault severities. Costs associated
with the processing of the New York assigned risk business also contributed to
this increase. These increases were partially offset by improved claim frequency
resulting from milder winter weather, underwriting and agency management
actions, as well as lower catastrophe losses.

Other expenses decreased by $7 million, or 1%, to $793 million for the year
ended December 31, 2002 from $800 million for the comparable 2001 period. This
decrease is primarily due to reduced employee head-count and reduced expenses
associated with the consolidation of The St. Paul companies acquired in 1999.
These declines are partially offset by an increase in expenses related to the
outsourced New York assigned risk business.

66

The effective income tax rates for the year ended December 31, 2002 and
2001 differ from the federal corporate tax rate of 35% due to the impact of
non-taxable investment income.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- AUTO & HOME

Premiums increased by $119 million, or 5%, to $2,755 million for the year
ended December 31, 2001 from $2,636 million for the comparable 2000 period. Auto
premiums increased by $99 million. Property premiums increased by $17 million.
Both increases were largely due to rate increases. Due to increased rate
activity, the retention ratio for the existing business declined from 90% to
89%. Premiums from other personal lines increased by $3 million.

Other revenues decreased by $18 million, or 45%, to $22 million for the
year ended December 31, 2001 from $40 million for the comparable 2000 period.
This decrease is primarily due to a revision of an estimate made in 2000 of
amounts recoverable from reinsurers related to the disposition of this segment's
reinsurance business in 1990.

Policyholder benefits and claims increased by $116 million, or 6%, to
$2,121 million for the year ended December 31, 2001 from $2,005 million for the
comparable 2000 period. Auto policyholder benefits and claims increased by $62
million due to increased average claim costs, growth in the business and adverse
weather in the first quarter of 2001. Despite this increase, the auto loss ratio
decreased to 75.9% in 2001 from 76.6% in 2000 as a result of higher premiums per
policy. Property policyholder benefits and claims increased by $41 million due
to increased non-catastrophe weather-related losses in 2001. Correspondingly,
the property loss ratio increased to 80.7% in 2001 from 76.4% in 2000.
Catastrophes represented 13.5% of the loss ratio in 2001 compared to 17.3% in
2000. Other policyholder benefits and claims grew by $13 million, primarily due
to an increase in high liability personal umbrella claims. Fluctuations in these
policyholder benefits and claims may not be commensurate with the change in
premiums for a given period due to low premium volume and high liability limits.

Other expenses decreased by $27 million, or 3%, to $800 million for the
year ended December 31, 2001 from $827 million for the comparable 2000 period.
This decrease is due to a reduction in integration costs associated with the St.
Paul acquisition.

The effective income tax rates for the years ended December 31, 2001 and
2000 differ from the federal corporate tax rate of 35% due to the impact of
non-taxable investment income.

ASSET MANAGEMENT

The following table presents consolidated financial information for the
Asset Management segment for the years indicated:

67

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- ASSET MANAGEMENT

Other revenues, which primarily consist of management and advisory fees
from third parties, decreased by $32 million, or 16%, to $166 million for the
year ended December 31, 2002 from $198 million for the comparable 2001 period.
The most significant factor contributing to this decline is a $31 million
decrease resulting from the sale of Conning, which occurred in July 2001.
Excluding the impact of this transaction, other revenues remained essentially
unchanged at $166 million for the year ended December 31, 2002 as compared to
$167 million for the year ended December 31, 2001. Despite lower average assets
under management, revenues remained constant due to performance and incentive
fees earned on certain real estate and hedge fund products. The lower assets
under management are primarily due to institutional client withdrawals, and the
downturn in the equity market. In addition, fourth quarter 2002 product closings
and business exits also contributed to this decline.

Other expenses decreased by $41 million, or 16%, to $211 million for the
year ended December 31, 2002 from $252 million for the comparable 2001 period.
Excluding the impact of the sale of Conning, other expenses decreased by $6
million, or 3%, to $211 million in 2002 from $217 million in 2001. This decrease
is due to reductions in marketing-related expenses and expenses related to fund
reimbursements. In addition, a decrease in amortization of deferred sales
commissions resulted from a reduction in sales. These decreases were partially
offset by a $5 million increase in employee compensation attributable to
severance-related expenses resulting from third and fourth quarter 2002 staff
reductions.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- ASSET MANAGEMENT

Other revenues, which are primarily comprised of management and advisory
fees from third parties, decreased by $562 million, or 74%, to $198 million in
2001 from $760 million in 2000. The most significant factors contributing to
this decline were a $522 million decrease resulting from the sale of Nvest,
which occurred in October 2000, and a $48 million decrease resulting from the
sale of Conning, which occurred in July 2001. Excluding the impact of these
transactions, other revenues increased by $8 million, or 5%, to $167 million in
2001 from $159 million in 2000. This is attributable to an increase in real
estate assets under management that command a higher fee. Assets under
management in the remaining Asset Management organization decreased from $56
billion as of December 31, 2000 to $51 billion at December 31, 2001. The decline
occurred as a result of the equity market downturn and MetLife institutional
customer withdrawals. Third party assets under management registered only a
slight decrease of $352 million as a result of the equity market downturn,
substantially offset by strong mutual fund sales and the purchase of a real
estate portfolio in the second quarter of 2001 comprised of new assets of $1.7
billion. Management and advisory fees are typically calculated based on a
percentage of assets under management, and are not necessarily proportionate to
average assets managed due to changes in account mix.

Other expenses decreased by $497 million, or 66%, to $252 million in 2001
from $749 million in 2000. The sale of Nvest reduced other expenses by $457
million and the sale of Conning reduced other expenses by $55 million. Excluding
the impact of these transactions, other expenses increased by $15 million, or
7%, to $217 million in 2001 from $202 million in 2000. This variance is
attributable to an increase in total compensation and benefits and an increase
in discretionary spending. Compensation and benefits expense totaled $111
million in 2001 and is comprised of approximately 63% base compensation and 37%
variable compensation. Base compensation increased by $9 million, or 15%, to $70
million in 2001 from $61 million in 2000, primarily due to higher staffing
levels. Variable compensation decreased by $1 million, or 2%, to $41 million in
2001 from $42 million in 2000 due to lower profitability. Variable incentive
payments are based upon profitability, investment portfolio performance, new
business sales and growth in revenues and profits. The variable compensation
plans reward the employees for growth in their businesses, but also require them
to share in the impact of any declines. Increased sales commissions arising from
higher mutual fund sales in 2001 were largely offset by downward revisions in
other variable compensation due to a decline in profits. Other general and
administrative expenses increased $7 million, or 7%, to $106 million in 2001
from $99 million in 2000, primarily due to increases in occupancy costs and
increased mutual fund reimbursement subsidies.

68

Minority interest, principally reflecting third-party ownership interest in
Nvest, decreased by $35 million, or 100%, due to the sale of Nvest.

INTERNATIONAL

The following table presents consolidated financial information for the
International segment for the years indicated:

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- INTERNATIONAL

Premiums increased by $665 million, or 79%, to $1,511 million for the year
ended December 31, 2002 from $846 million for the comparable 2001 period. The
June 2002 acquisition of Hidalgo and the 2001 acquisitions in Chile and Brazil
increased premiums by $228 million, $102 million and $8 million, respectively.
In addition, a portion of the increase in premiums is attributable to a $108
million increase due to the sale of an annuity contract in the first quarter of
2002 to a Canadian trust company. South Korea's premiums increased by $91
million primarily due to a larger professional sales force and improved agent
productivity. Mexico's premiums (excluding Hidalgo), increased by $66 million,
primarily due to increases in its group life, major medical and individual life
businesses. Excluding the aforementioned sale of an annuity contract, Canada's
premiums increased by $26 million due to the restructuring of a pension contract
from an investment-type product to a long-term annuity. Spain's and Taiwan's
premiums increased by $25 million and $13 million, respectively, due primarily
to continued growth in the direct auto business and in the individual life
insurance business. Hong Kong's premiums increased $5 million primarily due to
continued growth in the group life and traditional life businesses. These
increases are partially offset by a decrease in Argentina's premiums of $9
million due to the reduction in business caused by the Argentine economic
environment. The remainder of the variance is attributable to minor fluctuations
in other countries.

Universal life and investment type-product policy fees increased by $106
million, or 279%, to $144 million for the year ended December 31, 2002 from $38
million for the comparable 2001 period. The acquisition of Hidalgo and the
acquisitions in Chile resulted in increases of $102 million and $5 million,
respectively. These increases were partially offset by a $9 million decrease in
Spain due to a reduction in fees caused by a decline in
69

assets under management, as a result of the cessation of product lines offered
through a joint venture with Banco Santander in 2001. The remainder of the
variance is attributable to minor fluctuations in several countries.

Other revenues decreased by $2 million, or 13%, to $14 million for the year
ended December 31, 2002 from $16 million for the comparable 2001 period.
Canada's other revenues in 2001 included $1 million due primarily to the
settlement of two legal cases in 2001. The remainder of the variance is
attributable to minor fluctuations in several countries. The acquisition of
Hidalgo and the acquisitions in Chile and Brazil had no material impact on this
variance.

Policyholder benefits and claims increased by $699 million, or 101%, to
$1,388 million for the year ended December 31, 2002 from $689 million for the
comparable 2001 period. The acquisition of Hidalgo and the acquisitions in Chile
increased policyholder benefits and claims by $224 million and $169 million,
respectively. In addition, $108 million of this increase in policyholder
benefits and claims is attributable to the aforementioned sale of an annuity
contract in Canada. South Korea's, Mexico's (excluding Hidalgo), Taiwan's and
Spain's policyholder benefits and claims increased by $69 million, $67 million,
$18 million and $15 million, respectively, commensurate with the overall premium
increases discussed above. Excluding the aforementioned sale of an annuity
contract, Canada's policyholder benefits and claims increased by $32 million
primarily due to the restructuring of a pension contract from an investment-type
product to a long-term annuity. The remainder of the variance is attributable to
minor fluctuations in several countries.

Interest credited to policyholder account balances increased by $28
million, or 55%, to $79 million for the year ended December 31, 2002 from $51
million for the comparable 2001 period. The acquisition of Hidalgo contributed
$51 million. This increase was partially offset by a decrease of $17 million in
Argentina. This decrease is primarily due to modifications to policy contracts
as authorized by the Argentinean government and a reduction of investment-type
policies in-force. In addition, Spain's interest credited decreased by $7
million primarily due to a decrease in the assets under management for life
products with guarantees associated with the sale of a block of policies to
Banco Santander in May 2001. The remainder of the variance is attributable to
minor fluctuations in several countries.

Policyholder dividends remained essentially unchanged at $35 million for
the year ended December 31, 2002 versus $36 million for the comparable 2001
period. The acquisition of Hidalgo and the acquisitions in Chile and Brazil had
no material impact on this variance.

Other expenses increased by $178 million, or 54%, to $507 million for the
year ended December 31, 2002 from $329 million for the comparable 2001 period.
The acquisition of Hidalgo and the acquisitions in Chile and Brazil contributed
$82 million, $21 million and $5 million, respectively. South Korea's, Mexico's
(excluding Hidalgo), and Hong Kong's other expenses increased by $29 million,
$19 million and $7 million, respectively. These increases are primarily due to
increased non-deferrable commissions from higher sales as discussed above,
particularly in South Korea where fixed sales compensation is paid to new sales
management as part of the professional agency expansion. Argentina's other
expenses increased by $9 million due to additional loss recognition in
connection with ongoing economic circumstances in the country. Poland's other
expenses increased by $5 million primarily due to costs incurred in the fourth
quarter of 2002 associated with the closing of this operation. The remainder of
the variance is attributable to minor fluctuations in several countries.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- INTERNATIONAL

Premiums increased by $186 million, or 28%, to $846 million for the year
ended December 31, 2001 from $660 million for the comparable 2000 period.
Mexico's premiums grew by $89 million due to additional sales in group life,
major medical and individual life products. Protection-type product sales
fostered by the continued expansion of the professional sales force in South
Korea accounted for an additional $41 million in premiums. Spain's premiums rose
by $18 million primarily due to continued growth in the direct auto business.
Higher individual life sales resulted in an additional $17 million in Taiwanese
premiums. The 2001 acquisitions in Brazil and Chile increased premiums by $12
million and $7 million, respectively, in those countries. Hong Kong's premiums
grew by $5 million primarily due to continued growth in the direct marketing,
group life, and traditional life businesses. These variances were partially
offset by a $3 million decline in Argentinean individual

70

life premiums, reflecting the impact of economic and political events in that
country. The remainder of the variance is attributable to minor fluctuations in
several countries.

Universal life and investment-type product policy fees decreased by $15
million, or 28%, to $38 million for the year ended December 31, 2001 from $53
million for the comparable 2000 period. This decline is primarily attributable
to a $19 million reduction in fees in Spain caused by a reduction in assets
under management, as a result of a planned cessation of product lines offered
through a joint venture with Banco Santander. The remainder of the variance is
attributable to minor fluctuations in several countries.

Other revenues increased by $7 million, or 78%, to $16 million for the year
ended December 31, 2001 from $9 million for the comparable 2000 period.
Argentina's other revenues grew by $5 million primarily due to foreign currency
transaction gains in the private pension business, which was introduced in the
third quarter of 2001. The required accounting for foreign currency translation
fluctuations in Indonesia, a highly inflationary economy, resulted in a $3
million increase in other revenues. These variances were partially offset by a
$3 million decrease in Taiwan due to higher group reinsurance commissions
received in 2000. The remainder of the increase is attributable to minor
variances in several countries.

Policyholder benefits and claims increased by $127 million, or 23%, to $689
million for the year ended December 31, 2001 from $562 million for the
comparable 2000 period. Mexico's, South Korea's and Taiwan's policyholder
benefits and claims grew by $74 million, $24 million and $15 million,
respectively, commensurate with the overall premium variance discussed above.
The 2001 acquisitions in Brazil and Chile contributed $9 million and $7 million,
respectively, to this variance. These variances are partially offset by a $7
million decline in Argentina's policyholder benefits and claims as a result of
the impact of economic and political events in that country. The remainder of
the variance is attributable to minor fluctuations in several countries.

Interest credited to policyholder account balances decreased by $5 million,
or 9%, to $51 million for the year ended December 31, 2001 from $56 million for
the comparable 2000 period. An overall decline in crediting rates on
interest-sensitive products in 2001 as a result of the low interest rate
environment is primarily responsible for a $6 million reduction in South Korea.
Spain's interest credited dropped by $6 million due to a reduction in assets
under management, as a result of a planned cessation of product lines offered
through a joint venture with Banco Santander. These variances were partially
offset by a $2 million increase in both Mexico and Argentina, due to an increase
in average customer account balances.

Policyholder dividends increased by $4 million, or 13%, to $36 million for
the year ended December 31, 2001 from $32 million for the comparable 2000
period. The growth in Mexico's group life sales mentioned above resulted in an
increase in policyholder dividends of $2 million. Taiwan's individual life sales
contributed an additional $2 million in policyholder dividends. The remainder of
the variance is attributable to minor fluctuations in several countries.

Payments of $327 million related to Metropolitan Life's demutualization
were made during the second quarter of 2000 to holders of certain policies
transferred to Clarica Life Insurance Company in connection with the sale of a
substantial portion of the Company's Canadian operations in 1998.

Other expenses increased by $37 million, or 13%, to $329 million for the
year ended December 31, 2001 from $292 million in the comparable 2000 period.
Argentina's other expenses rose by $15 million due to a write-off of deferred
policy acquisition costs, resulting from a revision in the calculation of
estimated gross margins and profits caused by the anticipated impact of economic
and political events in that country. Mexico and South Korea's other expenses
grew by $13 million and $10 million, respectively, primarily due to the growth
in business in these countries. The 2001 acquisitions in Brazil and Chile
contributed $7 million and $3 million, respectively, to this variance. These
variances were partially offset by an $11 million decrease in Spain's other
expenses due to a reduction in payroll, commissions, and administrative expenses
as a result of a planned cessation of product lines offered through a joint
venture with Banco Santander. The remainder of the variance is attributable to
minor fluctuations in several countries.

71

CORPORATE & OTHER

YEAR ENDED DECEMBER 31, 2002 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2001 -- CORPORATE & OTHER

Other revenues increased by $16 million, or 19%, to $101 million for the
year ended December 31, 2002 from $85 million for the comparable 2001 period,
primarily due to the sale of a company-occupied building, and income earned on
COLI purchased during 2002, partially offset by an increase in the elimination
of intersegment activity.

Other expenses increased by $111 million, or 17%, to $768 million for the
year ended December 31, 2002 from $657 million for the comparable 2001 period,
primarily due to increases in legal and interest expenses. The 2002 period
includes a $266 million charge to increase the Company's asbestos-related
liability and expenses to cover costs associated with the resolution of federal
government investigations of General American's former Medicare business. These
increases are partially offset by a $250 million charge recorded in the fourth
quarter of 2001 to cover costs associated with the resolution of class action
lawsuits and a regulatory inquiry pending against Metropolitan Life, involving
alleged race-conscious insurance underwriting practices prior to 1973. The
increase in interest expenses is primarily due to increases in long-term debt
resulting from the issuance of $1.25 billion and $1 billion of senior debt in
November 2001 and December 2002, respectively, partially offset by a decrease in
commercial paper in 2002. In addition, a decrease in the elimination of
intersegment activity contributed to the variance.

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2000 -- CORPORATE & OTHER

Other revenues decreased by $6 million, or 7%, to $85 million for the year
ended December 31, 2001 from $91 million for the comparable 2000 period,
primarily due the sales of certain subsidiaries in 2000, partially offset by the
recognition of a refund earned on a reinsurance treaty in 2001 and a decrease in
the elimination of intersegment activity.

Demutualization costs of $230 million were incurred during the year ended
December 31, 2000. These costs are related to Metropolitan Life's
demutualization on April 7, 2000.

Other expenses increased by $198 million, or 43%, to $657 million for the
year ended December 31, 2001 from $459 million for the comparable 2000 period.
This variance is primarily due to higher legal expenses, expenses associated
with MetLife, Inc. shareholder services cost and start-up costs relating to
MetLife's banking initiatives, as well as a decrease in the elimination of
intersegment activity. Legal expenses of $250 million were recorded in the
fourth quarter of 2001 to cover costs associated with the anticipated resolution
of class action lawsuits and a regulatory inquiry pending against Metropolitan
Life, involving alleged race-conscious insurance underwriting practices prior to
1973. These increases are partially offset by a reduction in interest expenses
due to reduced average levels in borrowing and a lower rate environment in 2001.

LIQUIDITY AND CAPITAL RESOURCES

THE HOLDING COMPANY

Capital

Restrictions and Limitations on Bank Holding Companies and Financial
Holding Companies -- Capital. MetLife, Inc. and its insured depository
institution subsidiary are subject to risk-based and leverage capital guidelines
issued by the federal banking regulatory agencies for banks and financial
holding companies. The federal banking regulatory agencies are required by law
to take specific prompt corrective actions with respect to institutions that do
not meet minimum capital standards. At December 31, 2002, MetLife and its
insured depository institution subsidiary were in compliance with the
aforementioned guidelines.

Liquidity

Liquidity refers to a company's ability to generate adequate amounts of
cash to meet its needs. Liquidity is managed to preserve stable, reliable and
cost-effective sources of cash to meet all current and future financial
obligations. Liquidity is provided by a variety of sources, including a
portfolio of liquid assets, a diversified mix
72

of short- and long-term funding sources from the wholesale financial markets and
the ability to borrow through committed credit facilities. The Holding Company
is an active participant in the global financial markets through which it
obtains a significant amount of funding. These markets, which serve as
cost-effective sources of funds, are critical components of the Holding
Company's liquidity management. Decisions to access these markets are based upon
relative costs, prospective views of balance sheet growth, and a targeted
liquidity profile. A disruption in the financial markets could limit access to
liquidity for the Holding Company.

The Holding Company's ability to maintain regular access to competitively
priced wholesale funds is fostered by its current debt ratings from the major
credit rating agencies. Management views its capital ratios, credit quality,
stable and diverse earnings streams, diversity of liquidity sources and its
liquidity monitoring procedures as critical to retaining high credit ratings.

Liquidity is monitored through the use of internal liquidity risk metrics,
including the composition and level of the liquid asset portfolio, timing
differences in short-term cash flow obligations, access to the financial markets
for capital and term-debt transactions, and exposure to contingent draws on the
Holding Company's liquidity.

Liquidity Sources

Dividends. The primary source of the Holding Company's liquidity is
dividends it receives from Metropolitan Life. Under the New York Insurance Law,
Metropolitan Life is permitted without prior insurance regulatory clearance to
pay a stockholder dividend to the Holding Company as long as the aggregate
amount of all such dividends in any calendar year does not exceed the lesser of
(i) 10% of its statutory surplus as of the immediately preceding calendar year,
and (ii) its statutory net gain from operations for the immediately preceding
calendar year (excluding realized capital gains). Metropolitan Life will be
permitted to pay a stockholder dividend to the Holding Company in excess of the
lesser of such two amounts only if it files notice of its intention to declare
such a dividend and the amount thereof with the Superintendent and the
Superintendent does not disapprove the distribution. Under the New York
Insurance Law, the Superintendent has broad discretion in determining whether
the financial condition of a stock life insurance company would support the
payment of such dividends to its stockholders. The New York Insurance Department
(the "Department") has established informal guidelines for such determinations.
The guidelines, among other things, focus on the insurer's overall financial
condition and profitability under statutory accounting practices. Management of
the Holding Company cannot provide assurance that Metropolitan Life will have
statutory earnings to support payment of dividends to the Holding Company in an
amount sufficient to fund its cash requirements and pay cash dividends or that
the Superintendent will not disapprove any dividends that Metropolitan Life must
submit for the Superintendent's consideration. In addition, the Holding Company
also receives dividends from its other subsidiaries. The Holding Company's other
insurance subsidiaries are also subject to restrictions on the payment of
dividends to their respective parent companies.

The dividend limitation is based on statutory financial results. Statutory
accounting practices, as prescribed by the Department, differ in certain
respects from accounting principles used in financial statements prepared in
conformity with GAAP. The significant differences relate to deferred policy
acquisition costs, certain deferred income taxes, required investment reserves,
reserve calculation assumptions, goodwill and surplus notes.

Liquid Assets. An integral part of the Holding Company's liquidity
management is the amount of liquid assets that it holds. Liquid assets include
cash, cash equivalents, short-term investments and marketable fixed maturities.
At December 31, 2002 and 2001, the Holding Company had $1,343 million and $2,981
million in liquid assets, respectively.

Global Funding Sources. Liquidity is also provided by a variety of both
short- and long-term instruments, including repurchase agreements, commercial
paper, medium-and long-term debt, capital securities and stockholders' equity.
The diversity of the Holding Company's funding sources enhances funding
flexibility and limits dependence on any one source of funds, and generally
lowers the cost of funds.

At December 31, 2002, the Holding Company had $249 million in short-term
debt outstanding. At December 31, 2001, the Holding Company had no short-term
debt outstanding. At December 31, 2002 and 2001, the Holding Company had $3.3
billion and $2.3 billion in long-term debt outstanding, respectively.

73

The Holding Company filed a $4.0 billion shelf registration statement,
effective June 1, 2001, with the U.S. Securities and Exchange Commission ("SEC")
which permits the registration and issuance of debt and equity securities as
described more fully therein. The Holding Company has issued senior debt in the
amount of $2.25 billion under this registration statement. In December 2002, the
Holding Company issued $400 million 5.375% senior notes due 2012 and $600
million 6.50% senior notes due 2032 and in November 2001, the Holding Company
issued $500 million 5.25% senior notes due 2006 and $750 million 6.125% senior
notes due 2011. In addition, in February 2003, the Holding Company remarketed
under the shelf registration statement $1,006 million aggregate principal amount
of debentures previously issued in connection with the issuance of equity
security units as part of MetLife, Inc.'s initial public offering in April 2000.

Other sources of the Holding Company's liquidity include programs for
short- and long-term borrowing, as needed, arranged through Metropolitan Life.

Credit Facilities. The Holding Company maintains approximately $1.25
billion in a committed and unsecured credit facility that it shares with
Metropolitan Life and MetLife Funding, Inc. ("MetLife Funding") expiring in
2005. If these facilities were drawn upon, they would bear interest at varying
rates stated in the agreements. This facility is primarily used as back-up lines
of credit for its commercial paper program. At December 31, 2002, the Holding
Company, Metropolitan Life or MetLife Funding had not drawn against this credit
facility.

Liquidity Uses

The primary uses of liquidity of the Holding Company include cash dividends
on common stock, service on debt, contributions to subsidiaries, payment of
general operating expenses and the repurchase of the Holding Company's common
stock.

Dividends. In the fourth quarter of 2002, the Holding Company declared an
annual dividend for 2002 of $0.21 per share. The 2002 dividend represented an
increase of $0.01 per share from the 2001 annual dividend of $0.20 per share.
Dividends, if any, in any year will be determined by the Holding Company's Board
of Directors after taking into consideration factors such as the Holding
Company's current earnings, expected medium- and long-term earnings, financial
condition, regulatory capital position, and applicable governmental regulations
and policies.

Capital Contributions to Subsidiaries. In 2002, the Holding Company
contributed $500 million to Metropolitan Life and in 2001, contributed $770
million to Metropolitan Insurance and Annuity Company ("MIAC").

Share Repurchase. On February 19, 2002, the Holding Company's Board of
Directors authorized a $1 billion common stock repurchase program. This program
began after the completion of the March 28, 2001 and June 27, 2000 repurchase
programs, each of which authorized the repurchase of $1 billion of common stock.
Under these authorizations, the Holding Company may purchase common stock from
the MetLife Policyholder Trust, in the open market and in privately negotiated
transactions. The Holding Company acquired 15,244,492 and 45,242,966 shares of
common stock for $471 million and $1,322 million during the years ended December
31, 2002 and 2001, respectively. At December 31, 2002 the Holding Company had
approximately $806 million remaining on its existing share repurchase
authorization. The Company does not anticipate any share repurchases in the
first six months of 2003 and any repurchases in the remainder of 2003 will be
dependent upon several factors, including the Company's capital position, its
financial strength and credit ratings, general market conditions and the price
of the Company's stock.

Support Agreements. In 2002, the Holding Company entered into a net worth
maintenance agreement with three of its insurance subsidiaries, MetLife
Investors Insurance Company, First MetLife Investors Insurance Company and
MetLife Investors Insurance Company of California. Under the agreements, the
Holding Company agreed, without limitation as to the amount, to cause each of
these subsidiaries to have a minimum capital and surplus of $10 million (or,
with respect to MetLife Investors Insurance Company of California, $5 million),
total adjusted capital at a level not less than 150% of the company action level
RBC, as defined by state insurance statutes, and liquidity necessary to enable
it to meet its current obligations on a timely basis. The capital and surplus of
each of these subsidiaries at December 31, 2002 was in excess of the referenced
amounts.

74

The Holding Company has agreed to make capital contributions, in any event
not to exceed $120 million, to MIAC in the aggregate amount of the excess of (i)
the debt service payments required to be made, and the capital expenditure
payments required to be made or reserved for, in connection with the affiliated
borrowings arranged in December 2001 to fund the purchase by MIAC of certain
real estate properties from Metropolitan Life during the two year period
following the date of the borrowings, over (ii) the cash flows generated by
these properties.

Based on management's analysis of its expected cash inflows from the
dividends it receives from subsidiaries, including Metropolitan Life, that are
permitted to be paid without prior insurance regulatory approval and its
portfolio of liquid assets and other anticipated cash flows, management believes
there will be sufficient liquidity to enable the Holding Company to make
payments on debt, make dividend payments on its common stock, pay all operating
expenses and meet other obligations.

THE COMPANY

Capital

Risk-Based Capital ("RBC"). Section 1322 of the New York Insurance Law
requires that New York domestic life insurers report their RBC based on a
formula calculated by applying factors to various asset, premium and statutory
reserve items, and similar rules apply to each of the Company's domestic
insurance subsidiaries. The formula takes into account the risk characteristics
of the insurer, including asset risk, insurance risk, interest rate risk and
business risk. Section 1322 gives the Superintendent explicit regulatory
authority to require various actions by, or take various actions against,
insurers whose total adjusted capital does not exceed certain RBC levels. At
December 31, 2002, Metropolitan Life's and each of the Holding Company's
domestic insurance subsidiaries' total adjusted capital was in excess of each of
the RBC levels required by each state of domicile.

The National Association of Insurance Commissioners ("NAIC") adopted the
Codification of Statutory Accounting Principles (the "Codification"), which is
intended to standardize regulatory accounting and reporting to state insurance
departments and became effective January 1, 2001. However, statutory accounting
principles continue to be established by individual state laws and permitted
practices. The Department required adoption of the Codification with certain
modifications for the preparation of statutory financial statements of insurance
companies domiciled in New York effective January 1, 2001. Effective December
31, 2002, the Department adopted a modification to its regulations to be
consistent with Codification with respect to the admissibility of deferred
income taxes by New York insurers, subject to certain limitations. The adoption
of the Codification as modified by the Department, did not adversely affect
Metropolitan Life's statutory capital and surplus. Further modifications by
state insurance departments may impact the effect of the Codification on the
statutory capital and surplus of Metropolitan Life and the Holding Company's
other insurance subsidiaries.

Liquidity Sources

Cash Flow from Operations. The Company's principal cash inflows from its
insurance activities come from insurance premiums, annuity considerations and
deposit funds. A primary liquidity concern with respect to these cash inflows is
the risk of early contractholder and policyholder withdrawal. The Company seeks
to include provisions limiting withdrawal rights on many of its products,
including general account institutional pension products (generally group
annuities, including guaranteed interest contracts and certain deposit fund
liabilities) sold to employee benefit plan sponsors.

The Company's principal cash inflows from its investment activities result
from repayments of principal, proceeds from maturities and sales of invested
assets and investment income. The primary liquidity concerns with respect to
these cash inflows are the risk of default by debtors and market volatilities.
The Company closely monitors and manages these risks through its credit risk
management process.

Liquid Assets. An integral part of the Company's liquidity management is
the amount of liquid assets it holds. Liquid assets include cash, cash
equivalents, short-term investments, marketable fixed maturities and equity
securities. At December 31, 2002 and 2001, the Company had $127 billion and $108
billion in liquid assets, respectively.

75

Global Funding Sources. Liquidity is also provided by a variety of both
short- and long-term instruments, including repurchase agreements, commercial
paper, medium- and long-term debt, capital securities and stockholders' equity.
The diversity of the Company's funding sources enhances funding flexibility and
limits dependence on any one source of funds, and generally lowers the cost of
funds.

At December 31, 2002 and 2001, the Company had $1,161 million and $355
million in short-term debt outstanding, respectively, and $4,425 million and
$3,628 million in long-term debt outstanding, respectively. See "-- The Holding
Company -- Global Funding Sources."

MetLife Funding serves as a centralized finance unit for Metropolitan Life.
Pursuant to a support agreement, Metropolitan Life has agreed to cause MetLife
Funding to have a tangible net worth of at least one dollar. At December 31,
2002 and 2001, MetLife Funding had a tangible net worth of $10.7 million and
$10.6 million, respectively. MetLife Funding raises funds from various funding
sources and uses the proceeds to extend loans, through MetLife Credit Corp., a
subsidiary of Metropolitan Life, to the Holding Company, Metropolitan Life and
other affiliates. MetLife Funding manages its funding sources to enhance the
financial flexibility and liquidity of Metropolitan Life and other affiliated
companies. At December 31, 2002 and 2001, MetLife Funding had total outstanding
liabilities, including accrued interest payable, of $400 million and $133
million, respectively, consisting primarily of commercial paper.

Credit Facilities. The Company maintains committed and unsecured credit
facilities aggregating $2.43 billion ($1.14 billion expiring in 2003 and $1.29
billion expiring in 2005). If these facilities were drawn upon, they would bear
interest at varying rates stated in the agreements. The facilities can be used
for general corporate purposes and also as back-up lines of credit for the
Company's commercial paper program. At December 31, 2002, the Company had drawn
approximately $28 million under the facilities expiring in 2005 at interest
rates ranging from 4.39% to 5.57%.

Liquidity Uses

Insurance Liabilities. The Company's principal cash outflows primarily
relate to the liabilities associated with its various life insurance, property
and casualty, annuity and group pension products, operating expenses and income
taxes, as well as principal and interest on its outstanding debt obligations.
Liabilities arising from its insurance activities primarily relate to benefit
payments under the aforementioned products, as well as payments for policy
surrenders, withdrawals and loans.

Investment and Other. Additional cash outflows include those related to
obligations of securities lending activities, investments in real estate,
limited partnership and joint ventures, as well as legal liabilities.

The following table summarizes the Company's major contractual obligations
(other than those arising from its ordinary product and investment purchase
activities):

- ---------------

(1) Amounts differ from the balances presented on the Consolidated Balance
Sheets, which are shown net of related discounts.

On July 11, 2002, an affiliate of the Company elected not to make future
payments required by the terms of a non-recourse loan obligation. The book value
of this loan was $16 million at December 31, 2002. The Company's exposure under
the terms of the applicable loan agreement is limited solely to its investment
in certain securities

76

held by an affiliate. During the first quarter of 2003 the Company made all
previously required and current payments under the terms of the loan.

Letters of Credit. At December 31, 2002 and December 31, 2001, the Company
had outstanding approximately $625 million and $473 million in letters of credit
from various banks, all of which expire within one year. Since commitments
associated with letters of credit and financing arrangements may expire unused,
these amounts do not necessarily reflect the actual future cash funding
requirements.

Support Agreements. In addition to its support agreement with MetLife
Funding described above, Metropolitan Life entered into a net worth maintenance
agreement with New England Life Insurance Company ("New England Life") at the
time Metropolitan Life acquired New England Life. Under the agreement,
Metropolitan Life agreed, without limitation as to the amount, to cause New
England Life to have a minimum capital and surplus of $10 million, total
adjusted capital at a level not less than the company action level RBC, as
defined by state insurance statutes, and liquidity necessary to enable it to
meet its current obligations on a timely basis. The agreement may be terminated
under certain circumstances. The capital and surplus of New England Life at
December 31, 2002 and 2001 was in excess of the referenced amounts. See
"-- Liquidity Sources -- Global Funding Sources."

In connection with the Company's acquisition of GenAmerica, Metropolitan
Life entered into a net worth maintenance agreement with General American Life
Insurance Company ("General American"). Under the agreement, Metropolitan Life
agreed without limitation as to amount to cause General American to have a
minimum capital and surplus of $10 million, total adjusted capital at a level
not less than 180% of the company action level RBC, as defined by state
insurance statutes, and liquidity necessary to enable it to meet its current
obligations on a timely basis. The agreement was subsequently amended to provide
that, for the five year period from 2003 through 2007, total adjusted capital
must be maintained at a level not less than 200% of the company action level
RBC, as defined by state insurance statutes. The capital and surplus of General
American at December 31, 2002 and 2001 was in excess of the referenced amounts.

Metropolitan Life has entered into a net worth maintenance agreement with
Security Equity Life Insurance Company ("Security Equity"), an insurance
subsidiary acquired in the GenAmerica transaction. Under the agreement,
Metropolitan Life agreed without limitation as to amount to cause Security
Equity to have a minimum capital and surplus of $10 million, total adjusted
capital at a level not less than 150% of the company action level RBC, as
defined by state insurance statutes, and sufficient liquidity to meet its
current obligations. The agreement may be terminated under certain
circumstances. The capital and surplus of Security Equity at December 31, 2002
and 2001 was in excess of the referenced amounts.

Metropolitan Life has also entered into arrangements for the benefit of
some of its other subsidiaries and affiliates to assist such subsidiaries and
affiliates in meeting various jurisdictions' regulatory requirements regarding
capital and surplus and security deposits. In addition, Metropolitan Life has
entered into a support arrangement with respect to a subsidiary under which
Metropolitan Life may become responsible, in the event that the subsidiary
becomes the subject of insolvency proceedings, for the payment of certain
reinsurance recoverables due from the subsidiary to one or more of its cedents
in accordance with the terms and conditions of the applicable reinsurance
agreements.

General American has agreed to guarantee the obligations of its subsidiary,
Paragon Life Insurance Company, and certain obligations of its former
subsidiaries, Security Equity, MetLife Investors Insurance Company ("MetLife
Investors"), First MetLife Investors Insurance Company and MetLife Investors
Insurance Company of California. In addition, General American has entered into
a contingent reinsurance agreement with MetLife Investors. Under this agreement,
in the event that MetLife Investors' statutory capital and surplus is less than
$10 million or total adjusted capital falls below 150% of the company action
level RBC, as defined by state insurance statutes, General American would assume
as assumption reinsurance, subject to regulatory approvals and required
consents, all of MetLife Investors' life insurance policies and annuity contract
liabilities. The capital and surplus of MetLife Investors' at December 31, 2002
and 2001 was in excess of the referenced amounts.

Management does not anticipate that these arrangements will place any
significant demands upon the Company's liquidity resources.

77

Litigation. Various litigation claims and assessments against the Company
have arisen in the course of the Company's business, including, but not limited
to, in connection with its activities as an insurer, employer, investor,
investment advisor 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 feasible to predict or determine the ultimate outcome of all
pending investigations and legal proceedings or provide reasonable ranges of
potential losses except with respect to certain matters. 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 adverse effect upon the
Company's consolidated 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
adverse effect on the Company's operating results or cash flows in particular
quarterly or annual periods.

Based on management's analysis of its expected cash inflows from operating
activities, the dividends it receives from subsidiaries, including Metropolitan
Life, that are permitted to be paid without prior insurance regulatory approval
and its portfolio of liquid assets and other anticipated cash flows, management
believes there will be sufficient liquidity to enable the Company to make
payments on debt, make dividend payments on its common stock, pay all operating
expenses and meet other obligations. The nature of the Company's diverse product
portfolio and customer base lessen the likelihood that normal operations will
result in any significant strain on liquidity in 2003.

Consolidated cash flows. Net cash provided by operating activities was
$4,997 million and $4,512 million for the years ended December 31, 2002 and
2001, respectively. The $485 million increase in operating cash flow in 2002
over the comparable 2001 period is primarily attributable to sales growth in the
group life, dental, disability and long-term care businesses, the sale of a
significant retirement and savings contract in the second quarter of 2002, as
well as additional sales of structured settlements and traditional annuity
products. In addition, a large annuity contract sold in the first quarter of
2002 to a Canadian trust company and increased sales in South Korea due to
larger professional sales force and improved agent productivity. These increases
were partially offset by a contribution by the Company to its defined benefit
pension plans in December 2002.

Net cash provided by operating activities was $4,512 million and $3,277
million for the years ended December 31, 2001 and 2000, respectively. The $1,235
million increase in operating cash flow in 2001 over the 2000 comparable period
is primarily attributable to sales growth in the dental, disability, long-term
care and group life products, partially offset by decreases in the sales of
retirement and savings products. An increase in operating cash flows resulted
from additional sales of group life, major medical and individual life products
in Mexico. Protection-type product sales fostered by the continued expansion of
the professional sales force accounted for additional premiums from South Korea.

Net cash used in investing activities was $16,996 million and $3,165
million for the years ended December 31, 2002 and 2001, respectively. The
$13,831 million increase in net cash used in investing activities in 2002 over
the 2001 comparable period is partly attributable to an increase in investments
held as cash collateral received in connection with the securities lending
program. In addition, the Company invested income generated from operations,
cash raised through the issuance of a guaranteed investment contract and cash
generated by a company-sponsored real estate sales program in various financial
instruments, including fixed maturities and mortgage loans on real estate. At
December 31, 2001, the Company held cash equivalents that were subsequently
invested in bonds and U.S. treasury notes in the first quarter of 2002.
Additionally, certain contractholders transferred investments from the separate
account to the general account. Net cash used in investing activities also
increased due to the acquisition of Hidalgo.

Net cash used in investing activities was $3,165 million and $1,232 million
for the years ended December 31, 2001 and 2000, respectively. Net cash used in
investing activities increased $1,933 million in 2001, over the comparable
period in 2000, due in large part to the purchase of equity securities as part
of the
78

Company's investment in the equity markets following the September 11, 2001
tragedies. The remaining change in investing activities was due to the
investment of income generated from the operations of the Company in various
financial instruments.

Net cash provided by financing activities was $6,849 million and $2,692
million for the years ended December 31, 2002 and 2001, respectively. The $4,157
million increase in financing activities in 2002 from 2001 was due to a $2,401
million increase in policyholder account balances primarily from sales of
annuity products, the issuance of $1,536 million in short-term debt. In
addition, the Company spent $850 million less in the stock repurchase program in
2002 as compared to 2001. These cash flows are partially offset by a $592
million decrease in long-term debt issued.

Net cash provided by financing was $2,692 million for the year ended
December 31, 2001. Net cash used in financing was $1,400 million for the year
ended December 31, 2000. Net cash provided by financing activities increased
$4,092 million in 2001 from 2000, partially attributable to a $3,514 million
increase in policyholder account balances primarily from sales of annuity
products, $2,550 million of cash payments to policyholders in 2000 related to
the Company's demutualization, the paydown of $2,365 million of short-term debt
in 2000 and the issuance of $1,393 million in long-term debt in 2001. Partially
offsetting these activities were the issuance of $4,009 million in common stock
in connection with the Company's initial public offering in 2000, $708 million
in higher costs associated with the stock repurchase program in 2001 and $772
million in lower proceeds from the issuance of company-obligated mandatorily
redeemable securities in 2001.

INSOLVENCY ASSESSMENTS

Most of the jurisdictions in which the Company is admitted to transact
business require life insurers doing business within the jurisdiction to
participate in guaranty associations, which are organized to pay contractual
benefits owed pursuant to insurance policies issued by impaired, insolvent or
failed life insurers. These associations levy assessments, up to prescribed
limits, on all member insurers in a particular state on the basis of the
proportionate share of the premiums written by member insurers in the lines of
business in which the impaired, insolvent or failed insurer engaged. Some states
permit member insurers to recover assessments paid through full or partial
premium tax offsets. Assessments levied against the Company from January 1, 2000
through December 31, 2002 aggregated $2 million. The Company maintained a
liability of $62 million at December 31, 2002 for future assessments in respect
of currently impaired, insolvent or failed insurers.

In the past five years, none of the aggregate assessments levied against
MetLife's insurance subsidiaries has been material. The Company has established
liabilities for guaranty fund assessments that it considers adequate for
assessments with respect to insurers that are currently subject to insolvency
proceedings.

EFFECTS OF INFLATION

The Company does not believe that inflation has had a material effect on
its consolidated results of operations, except insofar as inflation may affect
interest rates.

ACCOUNTING STANDARDS

During 2002, the Company adopted or applied the following accounting
standards: (i) SFAS No. 141, Business Combinations ("SFAS 141"), (ii) SFAS No.
142 and (iii) SFAS No. 144. In accordance with SFAS 141, the elimination of $5
million of negative goodwill was reported in net income in the first quarter of
2002 as a cumulative effect of a change in accounting. On January 1, 2002, the
Company adopted SFAS 142. The Company did not amortize goodwill during 2002.
Amortization of goodwill was $47 million and $50 million for the years ended
December 31, 2001 and 2000, respectively. Amortization of other intangible
assets was not material for the years December 31, 2002, 2001 and 2000. The
Company has completed the required impairment tests of goodwill and
indefinite-lived intangible assets. As a result of these tests, the Company
recorded a $5 million charge to earnings relating to the impairment of certain
goodwill assets in the third quarter of 2002 as a cumulative effect of a change
in accounting. There was no impairment of identified intangible assets or
significant reclassifications between goodwill and other intangible assets at
January 1, 2002. Adoption of SFAS 144 did not have a material impact on the
Company's consolidated financial statements other than the presentation as
79

discontinued operations of net investment income and net investment gains
related to operations of real estate on which the Company initiated disposition
activities subsequent to January 1, 2002 and the classification of such real
estate as held-for-sale on the consolidated balance sheets.

The Financial Accounting Standards Board ("FASB") is deliberating on a
proposed statement that would further amend SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). The proposed
statement will address certain SFAS 133 Implementation Issues. The proposed
statement is not expected to have a significant impact on the Company's
consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an Interpretation of APB No. 51 ("FIN 46"). FIN
46 requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The Company is in the process of assessing the
impact of FIN 46 on its consolidated financial statements. Certain disclosure
provisions of FIN 46 were required for December 31, 2002 financial statements.
Such provisions, which were adopted by the Company, required the disclosure of
the total assets and the maximum exposure to loss relating to the Company's
interests in variable interest entities.

In 2003, the FASB staff is expected to provide transition guidance with
respect to the issue of whether embedded derivatives within modified coinsurance
agreements need to be accounted for separately. The Company enters into modified
coinsurance and certain coinsurance agreements under which assets equal to the
net statutory reserves are withheld from the Company and legally owned by the
ceding company. The withheld funds are reflected on the Company's balance sheet
as funds withheld at interest and totaled $2.1 billion as of December 31, 2002.
The Company also cedes business under certain modified coinsurance agreements.
As of December 31, 2002, the Company has not separately accounted for any
potential embedded derivatives associated with these contracts, which it
believes is consistent with GAAP, as well as industry practice. The Company
cannot estimate the impact, if any, associated with the adoption of any new FASB
guidance expected to be issued in 2003.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure ("SFAS 148"), which provides guidance
on how to transition from the intrinsic value method of accounting for
stock-based employee compensation under Accounting Principles Board ("APB")
Opinion No. 25 Accounting for Stock-Issued to Employees ("APB 25") to the fair
value method of accounting from SFAS No. 123 Accounting for Stock-Based
Compensation ("SFAS 123"), if a company so elects. Effective January 1, 2003,
the Company adopted the fair value method of recording stock options under SFAS
123. In accordance with alternatives available under the transitional guidance
of SFAS 148, the Company has elected to apply the fair value method of
accounting for stock options prospectively to awards granted subsequent to
January 1, 2003. As permitted, options granted prior to January 1, 2003, will
continue to be accounted for under APB 25, and the pro forma impact of
accounting for these options at fair value will continue to be disclosed in the
consolidated financial statements until the last of those options vest in 2005.
Had the Company expensed stock options beginning January 1, 2002, the income
statement impact would have been approximately $23 million pretax, and $15
million, or $0.02 per diluted share, after tax, in 2002. As the cost of
anticipated future option awards is phased in over a three-year period, the
annual impact in the third year (2005) will rise to approximately $0.07 per
diluted share, assuming options are granted in future years at a similar level
and under similar market conditions to 2002. The actual impact per diluted share
may vary in the event the fair value or the number of options granted increases
or decreases from the current estimate, or if the current accounting guidance
changes.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees Including Indirect
Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires entities to
establish liabilities for certain types of guarantees, and expands financial
statement disclosures for others. Disclosure requirements under FIN 45 are
effective for financial statements of annual periods ending

80

after December 15, 2002 and are applicable to all guarantees issued by the
guarantor subject to the provisions of FIN 45. The initial recognition and
initial measurement provisions of FIN 45 are applicable on a prospective basis
to guarantees issued or modified after December 31, 2002. The Company does not
expect the initial adoption of FIN 45 to have a significant impact on the
Company's consolidated financial statements. The adoption of FIN 45 requires the
Company to include disclosures in its consolidated financial statements related
to guarantees.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities ("SFAS 146"), which must be adopted for exit
and disposal activities initiated after December 31, 2002. SFAS 146 will require
that a liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is
incurred rather than at the date of an entity's commitment to an exit plan as
required by Emerging Issues Task Force ("EITF") 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). In the fourth quarter of
2001, the Company recorded a charge of $330 million, net of income taxes of $169
million, associated with business realignment initiatives using the EITF 94-3
accounting guidance.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
("SFAS 145"). In addition to amending or rescinding other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions, SFAS 145 generally
precludes companies from recording gains and losses from the extinguishment of
debt as an extraordinary item. SFAS 145 also requires sale-leaseback treatment
for certain modifications of a capital lease that result in the lease being
classified as an operating lease. SFAS 145 is effective for fiscal years
beginning after May 15, 2002, and the initial application of this standard did
not have a significant impact on the Company's consolidated financial
statements.

INVESTMENTS

The Company had total cash and invested assets at December 31, 2002 of
$190.7 billion. In addition, the Company had $59.7 billion held in its separate
accounts, for which the Company generally does not bear investment risk.

The Company's primary investment objective is to maximize net investment
income consistent with acceptable risk parameters. The Company is exposed to
three primary sources of investment risk:

- credit risk, relating to the uncertainty associated with the continued
ability of a given obligor to make timely payments of principal and
interest;

- interest rate risk, relating to the market price and cash flow
variability associated with changes in market interest rates; and

- market valuation risk.

The Company manages risk through in-house fundamental analysis of the
underlying obligors, issuers, transaction structures and real estate properties.
The Company also manages credit risk and market valuation risk through industry
and issuer diversification and asset allocation. For real estate and
agricultural assets, the Company manages credit risk and valuation risk through
geographic, property type, and product type diversification and asset
allocation. The Company manages interest rate risk as part of its asset and
liability management strategies, product design, such as the use of market value
adjustment features and surrender charges, and proactive monitoring and
management of certain non-guaranteed elements of its products, such as the
resetting of credited interest and dividend rates for policies that permit such
adjustments.

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The following table summarizes the Company's cash and invested assets at:

82

INVESTMENT RESULTS

The annualized yields on general account cash and invested assets,
excluding net investment gains and losses, were 7.20%, 7.56% and 7.54% for the
years ended December 31, 2002, 2001 and 2000, respectively.

The following table illustrates the annualized yields on average assets for
each of the components of the Company's investment portfolio for the years ended
December 31, 2002, 2001 and 2000:

- ---------------

(1) Yields are based on quarterly average asset carrying values, excluding
recognized and unrealized gains and losses, and for yield calculation
purposes, average assets exclude collateral associated with the Company's
securities lending program.

(2) Included in fixed maturities are equity-linked notes of $834 million, $1,004
million and $1,232 million at December 31, 2002, 2001 and 2000,
respectively, which include an equity-like component as part of the notes'
return. Investment income for fixed maturities includes prepayment fees and
income from the securities lending program. Fixed maturity investment income
has been reduced by rebates paid under the securities lending program.

(3) Investment income from mortgage loans on real estate includes prepayment
fees.

(4) Real estate and real estate joint venture income is shown net of
depreciation of $227 million, $220 million and $224 million for the years
ended December 31, 2002, 2001 and 2000, respectively. Real estate and real
estate joint venture income includes amounts classified as discontinued
operations of $124 million, $125 million and $121 million for the years
ended December 31, 2002, 2001 and 2000, respectively. These amounts are net
of depreciation of $48 million, $79 million and $80 million for the years
ended December 31, 2002, 2001 and 2000, respectively. Net investment gains
include $582 million of gains classified as discontinued operations for the
year ended December 31, 2002.

(5) Adjustments to investment gains and losses include amortization of deferred
policy acquisition costs, charges and credits to participating contracts,
and adjustments to the policyholder dividend obligation resulting from
investment gains and losses.

FIXED MATURITIES

Fixed maturities consist principally of publicly traded and privately
placed debt securities, and represented 73.7% and 68.0% of total cash and
invested assets at December 31, 2002 and 2001, respectively. Based on estimated
fair value, public fixed maturities represented $121,191 million, or 86.2%, and
$96,579 million, or 83.7%, of total fixed maturities at December 31, 2002 and
2001, respectively. Based on estimated fair value, private fixed maturities
represented $19,362 million, or 13.8%, and $18,819 million, or 16.3%, of total
fixed maturities at December 31, 2002 and 2001, respectively. The Company
invests in privately placed fixed maturities to (i) obtain higher yields than
can ordinarily be obtained with comparable public market securities, (ii)
provide the Company with protective covenants, call protection features and,
where applicable, a higher level of collateral, and (iii) increase
diversification. However, the Company may not freely trade its privately placed
fixed maturities because of restrictions imposed by federal and state securities
laws and illiquid markets.

In cases where quoted market prices are not available, fair values are
estimated using present value or valuation techniques. The fair value estimates
are made at a specific point in time, based on available market information and
judgments about the financial instruments, including estimates of the timing and
amounts of expected future cash flows and the credit standing of the issuer or
counter-party. Factors considered in estimating fair value include: coupon rate,
maturity, estimated duration, call provisions, sinking fund requirements, credit
rating, industry sector of the issuer and quoted market prices of comparable
securities.

84

The Securities Valuation Office of the NAIC evaluates the fixed maturity
investments of insurers for regulatory reporting purposes and assigns securities
to one of six investment categories called "NAIC designations." The NAIC ratings
are similar to the rating agency designations of the Nationally Recognized
Statistical Rating Organizations for marketable bonds. NAIC ratings 1 and 2
include bonds generally considered investment grade (rated "Baa3" or higher by
Moody's Investors Services ("Moody's"), or rated "BBB-" or higher by Standard &
Poor's ("S&P")) by such rating organizations. NAIC ratings 3 through 6 include
bonds generally considered below investment grade (rated "Ba1" or lower by
Moody's, or rated "BB+" or lower by S&P).

The following table presents the Company's total fixed maturities by
Nationally Recognized Statistical Rating Organizations designation and the
equivalent ratings of the NAIC, as well as the percentage, based on estimated
fair value, that each designation comprises at:

- ---------------

(1) Amounts presented are based on rating agency designations. Comparisons
between NAIC ratings and rating agency designations are published by the
NAIC.

Based on estimated fair values, investment grade fixed maturities comprised
91.5% and 90.8% of total fixed maturities in the general account at December 31,
2002 and 2001, respectively.

The following table shows the amortized cost and estimated fair value of
fixed maturities, by contractual maturity dates (excluding scheduled sinking
funds) at:

Actual maturities may differ as a result of prepayments by the issuer.

85

The Company diversifies its fixed maturities by security sector. The
following tables set forth the amortized cost, gross unrealized gain or loss and
estimated fair value of the Company's fixed maturities by sector, as well as the
percentage of the total fixed maturities holdings that each security sector is
comprised at:

Problem, Potential Problem and Restructured Fixed Maturities. The Company
monitors fixed maturities to identify investments that management considers to
be problems or potential problems. The Company also monitors investments that
have been restructured.

The Company defines problem securities in the fixed maturities category as
securities with principal or interest payments in default, securities to be
restructured pursuant to commenced negotiations, or securities issued by a
debtor that has entered into bankruptcy.

The Company defines potential problem securities in the fixed maturity
category as securities of an issuer deemed to be experiencing significant
operating problems or difficult industry conditions. The Company uses various
criteria, including the following, to identify potential problem securities:

- debt service coverage or cash flow falling below certain thresholds which
vary according to the issuer's industry and other relevant factors;

86

- significant declines in revenues or margins;

- violation of financial covenants;

- public securities trading at a substantial discount as a result of
specific credit concerns; and

- other subjective factors.

The Company defines restructured securities in the fixed maturities
category as securities to which the Company has granted a concession that it
would not have otherwise considered but for the financial difficulties of the
obligor. The Company enters into a restructuring when it believes it will
realize a greater economic value under the new terms rather than through
liquidation or disposition. The terms of the restructuring may involve some or
all of the following characteristics: a reduction in the interest rate, an
extension of the maturity date, an exchange of debt for equity or a partial
forgiveness of principal or interest.

The following table presents the estimated fair value of the Company's
total fixed maturities classified as performing, potential problem, problem and
restructured at:

Fixed Maturity Impairment. The Company classifies all of its fixed
maturities as available-for-sale and marks them to market through other
comprehensive income. All securities with gross unrealized losses at the
consolidated balance sheet date are subjected to the Company's process for
identifying other-than-temporary impairments. The Company writes down to fair
value securities that it deems to be other-than-temporarily impaired in the
period the securities are deemed to be so impaired. The assessment of whether
such impairment has occurred is based on management's case-by-case evaluation of
the underlying reasons for the decline in fair value. Management considers a
wide range of factors, as described below, about the security issuer and uses
its best judgment in evaluating the cause of the decline in the estimated fair
value of the security and in assessing the prospects for near-term recovery.
Inherent in management's evaluation of the security are assumptions and
estimates about the operations of the issuer and its future earnings potential.

Considerations used by the Company in the impairment evaluation process
include, but are not limited to, the following:

- The length of time and the extent to which the market value has been
below amortized cost;

- The potential for impairments of securities when the issuer is
experiencing significant financial difficulties, including a review of
all securities of the issuer, including its known subsidiaries and
affiliates, regardless of the form of the Company's ownership;

- The potential for impairments in an entire industry sector or sub-sector;

- The potential for impairments in certain economically depressed
geographic locations;

- The potential for impairments of securities where the issuer, series of
issuers or industry has suffered a catastrophic type of loss or has
exhausted natural resources; and

- Other subjective factors, including concentrations and information
obtained from regulators and rating agencies.

87

The Company records writedowns as investment losses and adjusts the cost
basis of the fixed maturities accordingly. The Company does not change the
revised cost basis for subsequent recoveries in value. Writedowns of fixed
maturities were $1,264 million and $273 million for the years ended December 31,
2002 and 2001, respectively. The Company's three largest writedowns totaled $352
million for the year ended December 31, 2002. The circumstances that gave rise
to these impairments were financial restructurings or bankruptcy filings. During
the year ended December 31, 2002, the Company sold fixed maturity securities
with a fair value of $14,597 million at a loss of $894 million.

The gross unrealized loss related to the Company's fixed maturities at
December 31, 2002 was $1,690 million. These fixed maturities mature as follows:
17% due in one year or less; 19% due in greater than one year to five years; 18%
due in greater than five years to ten years; and 46% due in greater than ten
years (calculated as a percentage of amortized cost). Additionally, such
securities are concentrated by security type in U.S. corporates (57%),
asset-backed (12%) and foreign corporates (12%); and are concentrated by
industry in utilities (20%), finance (18%), transportation (12%) and
communications (10%) (calculated as a percentage of gross unrealized loss).
Non-investment grade securities represent 23% of the $23,402 million of the fair
value and 48% of the $1,690 million gross unrealized loss on fixed maturities.

The following table presents the amortized cost, gross unrealized losses
and number of securities for fixed maturities where the estimated fair value had
declined and remained below amortized cost by less than 20%, or 20% or more for:

The Company's review of its fixed maturities for impairments includes an
analysis of the total gross unrealized losses by three categories of securities:
(i) securities where the estimated fair value had declined and remained below
amortized cost by less than 20%; (ii) securities where the estimated fair value
had declined and remained below amortized cost by 20% or more for less than six
months; and (iii) securities where the estimated value had declined and remained
below amortized cost by 20% or more for six months or greater. The first two
categories have generally been adversely impacted by the downturn in the
financial markets, overall economic conditions and continuing effects of the
September 11, 2001 tragedies. While all of these securities are monitored for
potential impairment, the Company's experience indicates that the first two
categories do not present as great a risk of impairment, and often, fair values
recover over time as the factors that caused the declines improve.

88

The following table presents the total gross unrealized losses for fixed
maturities where the estimated fair value had declined and remained below
amortized cost by:

The category of fixed maturity securities where the estimated fair value
has declined and remained below amortized cost by less than 20% is comprised of
1,222 securities with an amortized cost of $22,838 million and a gross
unrealized loss of $925 million. These fixed maturities mature as follows: 19%
due in one year or less; 19% due in greater than one year to five years; 17% due
in greater than five years to ten years; and 45% due in greater than ten years
(calculated as a percentage of amortized cost). Additionally, such securities
are concentrated by security type in U.S. corporates (51%) and foreign
corporates (17%); and are concentrated by industry in finance (28%), utilities
(14%) and communications (11%) (calculated as a percentage of gross unrealized
loss). Non-investment grade securities represent 21% of the $21,913 million fair
value and 33% of the $925 million gross unrealized loss.

The category of fixed maturity securities where the estimated fair value
has declined and remained below amortized cost by 20% or more for less than six
months is comprised of 160 securities with an amortized cost of $1,622 million
and a gross unrealized loss of $531 million. These fixed maturities mature as
follows: 4% due in one year or less; 16% due in greater than one year to five
years; 23% due in greater than five years to ten years; and 57% due in greater
than ten years (calculated as a percentage of amortized cost). Additionally,
such securities are concentrated by security type in U.S. corporates (66%) and
asset-backed (21%); and are concentrated by industry in utilities (34%),
transportation (20%) and asset-backed (20%) (calculated as a percentage of gross
unrealized loss). Non-investment grade securities represent 53% of the $1,091
million fair value and 59% of the $531 million gross unrealized loss.

The category of fixed maturity securities where the estimated fair value
has declined and remained below amortized cost by 20% or more for six months or
greater is comprised of 57 securities with an amortized cost of $632 million and
a gross unrealized loss of $234 million. These fixed maturities mature as
follows: 13% due in greater than one year to five years; 27% due in greater than
five years to ten years; and 60% due in greater than ten years (calculated as a
percentage of amortized cost). Additionally, such securities are concentrated by
security type in U.S. corporates (58%), foreign governments (17%) and
asset-backed (16%); and are concentrated by industry in communications (26%),
foreign government (17%), asset-backed (16%), utilities (15%) and transportation
(13%) (calculated as a percentage of gross unrealized loss). Non-investment
grade securities represent 74% of the $398 million fair value and 78% of the
$234 million gross unrealized loss.

The Company held 19 fixed maturity securities each with a gross unrealized
loss at December 31, 2002 greater than $10 million. Seven of these securities
represent 54% of the gross unrealized loss on fixed maturities where the
estimated fair value had declined and remained below amortized cost by 20% or
more for six months or greater. The estimated fair value and gross unrealized
loss at December 31, 2002 for these securities were $202 million and $125
million, respectively. These securities were concentrated in the U.S. corporate
sector. The Company analyzed, on a case-by-case basis, each of the seven fixed
maturity securities as of December 31, 2002 to determine if the securities were
other-than-temporarily impaired. The Company believes that the estimated fair
value of these securities, which were concentrated in the utility and
transportation industries, were artificially depressed as a result of unusually
strong negative market reaction in this sector and generally poor economic and
market conditions. The Company believes that the analysis of each such security
indicated that the financial strength, liquidity, leverage, future outlook
and/or recent management actions support the view that the security was not
other-than-temporarily impaired as of December 31, 2002.

89

Corporate Fixed Maturities. The table below shows the major industry types
that comprise the corporate bond holdings at:

- ---------------

(1) Includes publicly traded, U.S. dollar-denominated debt obligations of
foreign obligors, known as Yankee bonds, and other foreign investments.

The Company diversifies its corporate bond holdings by industry and issuer.
The portfolio has no exposure to any single issuer in excess of 1% of its total
invested assets. At December 31, 2002, the Company's combined holdings in the
ten issuers to which it had the greatest exposure totaled $2,973 million, which
was less than 2% of the Company's total invested assets at such date. The
exposure to the largest single issuer of corporate bonds the Company held at
December 31, 2002 was $385 million.

At December 31, 2002 and 2001, investments of $14,778 million and $13,734
million, respectively, or 76.9% and 80.9%, respectively, of the Yankee/Foreign
sector, represented exposure to traditional Yankee bonds. The balance of this
exposure was primarily U.S. dollar-denominated and concentrated by security type
in industrial and financial institutions. The Company diversifies the
Yankee/Foreign portfolio by country and issuer.

The Company does not have material exposure to foreign currency risk in its
invested assets. In the Company's international insurance operations, both its
assets and liabilities are generally denominated in local currencies. Foreign
currency denominated securities supporting U.S. dollar liabilities are generally
swapped back into U.S. dollars.

The Company's exposure to future deterioration in the economic and
political environment in Brazil and Argentina, with respect to its Brazilian and
Argentine related investments (including local insurance operations), is limited
to the net carrying value of those assets, which totaled approximately $357
million and $150 million, respectively, as of December 31, 2002. The net
carrying value of the Company's Brazilian and Argentine related investments is
net of writedowns for other-than-temporary impairments.

Mortgage-Backed Securities. The following table shows the types of
mortgage-backed securities the Company held at:

At December 31, 2002 and 2001, pass-through and collateralized mortgage
obligations totaled $28,026 million and $20,816 million, respectively, or 80.4%
and 79.5%, respectively, of total mortgage-backed securities,

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and a majority of this amount represented agency-issued pass-through and
collateralized mortgage obligations guaranteed or otherwise supported by the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or the Government National Mortgage Association. At December 31,
2002 and 2001, approximately $3,598 million and $2,866 million, respectively, or
52.5% and 53.4%, respectively, of the commercial mortgage-backed securities, and
$27,590 million and $20,249 million, respectively, or 98.4% and 97.3%,
respectively, of the pass-through securities and collateralized mortgage
obligations, were rated Aaa/AAA by Moody's or S&P.

The principal risks inherent in holding mortgage-backed securities are
prepayment, extension and collateral risks, which will affect the timing of when
cash will be received. The Company's active monitoring of its mortgage-backed
securities mitigates exposure to losses from cash flow risk associated with
interest rate fluctuations.

Asset-Backed Securities. Asset-backed securities, which include home
equity loans, credit card receivables, collateralized debt obligations and
automobile receivables, are purchased both to diversify the overall risks of the
Company's fixed maturity assets and to provide attractive returns. The Company's
asset-backed securities are diversified both by type of asset and by issuer.
Home equity loans constitute the largest exposure in the Company's asset-backed
securities investments. Except for asset-backed securities backed by home equity
loans, the asset-backed security investments generally have little sensitivity
to changes in interest rates. Approximately $4,912 million and $3,341 million,
or 51.7% and 41.4%, of total asset-backed securities were rated Aaa/AAA by
Moody's or S&P at December 31, 2002 and 2001, respectively.

The principal risks in holding asset-backed securities are structural,
credit and capital market risks. Structural risks include the security's
priority in the issuer's capital structure, the adequacy of and ability to
realize proceeds from the collateral and the potential for prepayments. Credit
risks include consumer or corporate credits such as credit card holders,
equipment lessees, and corporate obligors. Capital market risks include the
general level of interest rates and the liquidity for these securities in the
marketplace.

Structured investment transactions. The Company participates in structured
investment transactions as part of its risk management strategy, including
asset/liability management, and to enhance the Company's total return on its
investment portfolio. These investments are predominantly made through
bankruptcy-remote special purpose entities ("SPEs"), which generally acquire
financial assets, including corporate equities, debt securities and purchased
options. These investments are referred to as "beneficial interests."

The Company's exposure to losses related to these SPEs is limited to its
carrying value since the Company has not guaranteed the performance, liquidity
or obligations of the SPEs. As prescribed by GAAP, the Company does not
consolidate such SPEs since unrelated third parties hold controlling interests
through ownership of the SPEs' equity, representing at least three percent of
the total assets of the SPE throughout the life of the SPE, and such equity
class has the substantive risks and rewards of the residual interests in the
SPE.

The Company sponsors financial asset securitizations of high yield debt
securities, investment grade bonds and structured finance securities and is also
the collateral manager and a beneficial interest holder in such transactions. As
the collateral manager, the Company earns a management fee on the outstanding
securitized asset balance. When the Company transfers assets to an SPE and
surrenders control over the transferred assets, the transaction is accounted for
as a sale. Gains or losses on securitizations are determined with reference to
the cost or amortized cost of the financial assets transferred, which is
allocated to the assets sold and the beneficial interests retained based on
relative fair values at the date of transfer. The Company has sponsored five
securitizations with a total of approximately $1,323 million in financial assets
as of December 31, 2002. Two of these transactions included the transfer of
assets totaling approximately $289 million in 2001, resulting in the recognition
of an insignificant amount of investment gains. The Company's beneficial
interests in these SPEs as of December 31, 2002 and 2001 and the related
investment income for the years ended December 31, 2002, 2001 and 2000 were
insignificant.

The Company also invests in structured investment transactions, which are
managed and controlled by unrelated third parties. In instances where the
Company exercises significant influence over the operating and financial
policies of an SPE, the beneficial interests are accounted for in accordance
with the equity method of

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accounting. Where the Company does not exercise significant influence, the
structure of the beneficial interests (i.e., debt or equity securities)
determines the method of accounting for the investment. Such beneficial
interests generally are structured notes, which are classified as fixed
maturities, and the related income is recognized using the retrospective
interest method. Beneficial interests other than structured notes are also
classified as fixed maturities, and the related income is recognized using the
level yield method.

The carrying value of all such structured investments, including SPEs, was
approximately $870 million and $1.6 billion at December 31, 2002 and 2001,
respectively. The related investment income recognized on SPEs was $1 million,
$44 million and $62 million for the years ended December 31, 2002, 2001 and
2000, respectively.

MORTGAGE LOANS ON REAL ESTATE

The Company's mortgage loans on real estate are collateralized by
commercial, agricultural and residential properties. Mortgage loans on real
estate comprised 13.2% and 13.9% of the Company's total cash and invested assets
at December 31, 2002 and 2001, respectively. The carrying value of mortgage
loans on real estate is stated at original cost net of repayments, amortization
of premiums, accretion of discounts and valuation allowances. The following
table shows the carrying value of the Company's mortgage loans on real estate by
type at:

Commercial Mortgage Loans. The Company diversifies its commercial mortgage
loans by both geographic region and property type, and manages these investments
through a network of regional offices overseen by its investment department. The
following table presents the distribution across geographic regions and property
types for commercial mortgage loans at:

The following table presents the scheduled maturities for the Company's
commercial mortgage loans at:

Problem, Potential Problem and Restructured Mortgage Loans. The Company
monitors its mortgage loan investments on a continual basis. Through this
monitoring process, the Company reviews loans that are restructured, delinquent
or under foreclosure and identifies those that management considers to be
potentially delinquent. These loan classifications are generally consistent with
those used in industry practice.

The Company defines restructured mortgage loans, consistent with industry
practice, as loans in which the Company, for economic or legal reasons related
to the debtor's financial difficulties, grants a concession to the debtor that
it would not otherwise consider. This definition provides for loans to exit the
restructured category under certain conditions. The Company defines delinquent
mortgage loans, consistent with industry practice, as loans in which two or more
interest or principal payments are past due. The Company defines mortgage loans
under foreclosure, consistent with industry practice, as loans in which
foreclosure proceedings have formally commenced. The Company defines potentially
delinquent loans as loans that, in management's opinion, have a high probability
of becoming delinquent.

The Company reviews all mortgage loans at least annually. These reviews may
include an analysis of the property financial statements and rent roll, lease
rollover analysis, property inspections, market analysis and tenant
creditworthiness. The Company also reviews loan-to-value ratios and debt
coverage ratios for restructured loans, delinquent loans, loans under
foreclosure, potentially delinquent loans, loans with an existing valuation
allowance, loans maturing within two years and loans with a loan-to-value ratio
greater than 90% as determined in the prior year.

The principal risks in holding commercial mortgage loans are property
specific, supply and demand, financial and capital market risks. Property
specific risks include the geographic location of the property, the physical
condition of the property, the diversity of tenants and the rollover of their
leases and the ability of the property manager to attract tenants and manage
expenses. Supply and demand risks include changes in the supply
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and/or demand for rental space which cause changes in vacancy rates and/or
rental rates. Financial risks include the overall level of debt on the property
and the amount of principal repaid during the loan term. Capital market risks
include the general level of interest rates, the liquidity for these securities
in the marketplace and the capital available for loan refinancing.

The Company has a $525 million non-recourse mortgage loan on a high profile
office complex that has been affected by the September 11, 2001 tragedies,
causing the obligor to impair its investment in the property. The Company
continues to be in discussions with the borrower concerning the borrower's
ownership interest in the property. A change in circumstances could result in a
borrower default, MetLife classifying the loan as impaired or the transfer of
ownership of the property to the Company. The Company did not classify this loan
as a problem or potential problem as of December 31, 2002 since the obligor is
performing as agreed and the estimated collateral value provides sufficient
coverage for the loan. Based on the Company's current estimate that the
property's market value exceeds the loan balance, the Company would not record a
loss in accordance with SFAS No. 114, Accounting by Creditors for Impairments of
a Loan ("SFAS 114") in the event the loan was classified as impaired.

The Company establishes valuation allowances for loans that it deems
impaired, as determined through its mortgage review process. The Company defines
impaired loans consistent with SFAS 114 as loans which it probably will not
collect all amounts due according to applicable contractual terms of the
agreement. The Company bases valuation allowances upon the present value of
expected future cash flows discounted at the loan's original effective interest
rate or the value of the loan's collateral. The Company records valuation
allowances as investment losses. The Company records subsequent adjustments to
allowances as investment gains or losses.

The following table presents the amortized cost and valuation allowance for
commercial mortgage loans distributed by loan classification at:

- ---------------

(1) Amortized cost is equal to carrying value before valuation allowances.

The following table presents the changes in valuation allowances for
commercial mortgage loans for the:

Agricultural Mortgage Loans. The Company diversifies its agricultural
mortgage loans by both geographic region and product type. The Company manages
these investments through a network of regional offices and field professionals
overseen by its investment department.

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Approximately 63.5% of the $5,146 million of agricultural mortgage loans
outstanding at December 31, 2002 were subject to rate resets prior to maturity.
A substantial portion of these loans generally is successfully renegotiated and
remains outstanding to maturity. The process and policies for monitoring the
agricultural mortgage loans and classifying them by performance status are
generally the same as those for the commercial loans.

The following table presents the amortized cost and valuation allowances
for agricultural mortgage loans distributed by loan classification at:

- ---------------

(1) Amortized cost is equal to carrying value before valuation allowances.

The following table presents the changes in valuation allowances for
agricultural mortgage loans for the:

The principal risks in holding agricultural mortgage loans are property
specific, supply and demand, and financial and capital market risks. Property
specific risks include the geographic location of the property, soil types,
weather conditions and the other factors that may impact the borrower's
guaranty. Supply and demand risks include the supply and demand for the
commodities produced on the specific property and the related price for those
commodities. Financial risks include the overall level of debt on the property
and the amount of principal repaid during the loan term. Capital market risks
include the general level of interest rates, the liquidity for these securities
in the marketplace and the capital available for loan refinancing.

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REAL ESTATE AND REAL ESTATE JOINT VENTURES

The Company's real estate and real estate joint venture investments consist
of commercial and agricultural properties located primarily throughout the U.S.
The Company manages these investments through a network of regional offices
overseen by its investment department. At December 31, 2002 and 2001, the
carrying value of the Company's real estate, real estate joint ventures and real
estate held-for-sale was $4,725 million and $5,730 million, respectively, or
2.5% and 3.4% of total cash and invested assets, respectively. The carrying
value of real estate is stated at depreciated cost net of impairments and
valuation allowances. The carrying value of real estate joint ventures is stated
at the Company's equity in the real estate joint ventures net of impairments and
valuation allowances. The following table presents the carrying value of the
Company's real estate, real estate joint ventures, real estate held-for-sale and
real estate acquired upon foreclosure at:

Office properties, representing 58% and 63% of the Company's equity real
estate portfolio at December 31, 2002 and 2001, respectively, are well
diversified geographically, principally within the United States. The average
occupancy level of office properties was 92% and 91% at December 31, 2002 and
2001, respectively.

Ongoing management of these investments includes quarterly valuations, as
well as an annual market update and review of each property's budget, financial
returns, lease rollover status and the Company's exit strategy.

The Company adjusts the carrying value of real estate and real estate joint
ventures held-for-investment for impairments whenever events or changes in
circumstances indicate that the carrying value of the property may not be
recoverable. The Company writes down impaired real estate to estimated fair
value, when the carrying value of the real estate exceeds the sum of the
undiscounted cash flow expected to result from the use and eventual disposition
of the real estate. The Company records writedowns as investment losses and
reduces the cost basis of the properties accordingly. The Company does not
change the revised cost basis for subsequent recoveries in value.

The current real estate equity portfolio is mainly comprised of a core
portfolio of multi-tenanted office buildings with high tenant credit quality,
net leased properties and apartments. The objective is to maximize earnings by
building upon and strengthening the core portfolio through selective
acquisitions and dispositions. In light of this objective, the Company took
advantage of a significant demand for Class A, institutional grade properties
and, as a result, sold certain real estate holdings in its portfolio during
2002. This sales program, which was substantially completed during 2002, does
not represent any fundamental change in the Company's investment strategy.

Once the Company identifies a property that is expected to be sold within
one year and commences a firm plan for marketing the property, in accordance
with SFAS 144, the Company classifies the property as held-for-sale and reports
the related net investment income and any resulting investments gains and losses
as discontinued operations. Further, the Company establishes and periodically
revises, if necessary, a valuation allowance to adjust the carrying value of the
property to its expected sales value, less associated selling costs, if it is
lower than the property's carrying value. The Company records valuation
allowances as investment losses and subsequent

96

adjustments as investment gains or losses. If circumstances arise that were
previously considered unlikely and, as a result, the property is expected to be
on the market longer than anticipated, a held-for-sale property is reclassified
to held-for-investment and measured as such.

The Company's carrying value of real estate and real estate joint ventures
held-for-sale, including real estate acquired upon foreclosure of commercial and
agricultural mortgage loans, in the amounts of $229 million and $1,676 million
at December 31, 2002 and 2001, respectively, are net of impairments of $82
million and $177 million, respectively, and net of valuation allowances of $16
million and $35 million, respectively.

The Company records real estate acquired upon foreclosure of commercial and
agricultural mortgage loans at the lower of estimated fair value or the carrying
value of the mortgage loan at the date of foreclosure.

EQUITY SECURITIES AND OTHER LIMITED PARTNERSHIP INTERESTS

The Company's carrying value of equity securities, which primarily consist
of investments in common stocks, was $1,348 million and $3,063 million at
December 31, 2002 and 2001, respectively. Substantially all of the common stock
is publicly traded on major securities exchanges. The carrying value of the
other limited partnership interests (which primarily represent ownership
interests in pooled investment funds that make private equity investments in
companies in the U.S. and overseas) was $2,395 million and $1,637 million at
December 31, 2002 and 2001, respectively. The Company classifies its investments
in common stocks as available-for-sale and marks them to market, except for
non-marketable private equities, which are generally carried at cost. The
Company uses the equity method of accounting for investments in limited
partnership interests in which it has more than a minor interest, has influence
over the partnership's operating and financial policies and does not have a
controlling interest. The Company uses the cost method for minor interest
investments and when it has virtually no influence over the partnership's
operating and financial policies. The Company's investments in equity securities
excluding partnerships represented 0.7% and 1.8% of cash and invested assets at
December 31, 2002 and 2001, respectively.

Equity securities include, at December 31, 2002 and 2001, $443 million and
$329 million, respectively, of private equity securities. The Company may not
freely trade its private equity securities because of restrictions imposed by
federal and state securities laws and illiquid markets.

During the year ended December 31, 2001, two exchangeable subordinated debt
securities matured, resulting in a gross gain of $44 million on the equity
exchanged in satisfaction of the note. In February 2002, the remaining
exchangeable debt security issued to the Company matured. The debt security was
satisfied for cash, and no equity was exchanged.

The Company makes commitments to fund partnership investments in the normal
course of business. The amounts of these unfunded commitments were $1,667
million and $1,898 million at December 31, 2002 and 2001, respectively.

The following tables set forth the cost, gross unrealized gain or loss and
estimated fair value of the Company's equity securities, as well as the
percentage of the total equity securities at:

Problem and Potential Problem Equity Securities and Other Limited
Partnership Interests. The Company monitors its equity securities and other
limited partnership interests on a continual basis. Through this monitoring
process, the Company identifies investments that management considers to be
problems or potential problems.

Problem equity securities and other limited partnership interests are
defined as securities (i) in which significant declines in revenues and/or
margins threaten the ability of the issuer to continue operating, or (ii) where
the issuer has entered into bankruptcy.

Potential problem equity securities and other limited partnership interests
are defined as securities issued by a company that is experiencing significant
operating problems or difficult industry conditions. Criteria generally
indicative of these problems or conditions are (i) cash flows falling below
varying thresholds established for the industry and other relevant factors, (ii)
significant declines in revenues and/or margins, (iii) public securities trading
at a substantial discount compared to original cost as a result of specific
credit concerns, and (iv) other information that becomes available.

Equity Security Impairment. The Company classifies all of its equity
securities as available-for-sale and marks them to market through other
comprehensive income. All securities with gross unrealized losses at the
consolidated balance sheet date are subjected to the Company's process for
identifying other-than-temporary impairments. The Company writes down to fair
value securities that it deems to be other-than-temporarily impaired in the
period the securities are deemed to be so impaired. The assessment of whether
such impairment has occurred is based on management's case-by-case evaluation of
the underlying reasons for the decline in fair value. Management considers a
wide range of factors, as described below, about the security issuer and uses
its best judgment in evaluating the cause of the decline in the estimated fair
value of the security and in assessing the prospects for near-term recovery.
Inherent in management's evaluation of the security are assumptions and
estimates about the operations of the issuer and its future earnings potential.

Considerations used by the Company in the impairment evaluation process
include, but are not limited to, the following:

- The length of time and the extent to which the market value has been
below cost;

- The potential for impairments of securities when the issuer is
experiencing significant financial difficulties, including a review of
all securities of the issuer, including its known subsidiaries and
affiliates, regardless of the form of the Company's ownership;

- The potential for impairments in an entire industry sector or sub-sector;

- The potential for impairments in certain economically depressed
geographic locations;

- The potential for impairments of securities where the issuer, series of
issuers or industry has suffered a catastrophic type of loss or has
exhausted natural resources; and

- Other subjective factors, including concentrations and information
obtained from regulators and rating agencies.

Equity securities or other limited partnership interests which are deemed
to be other-than-temporarily impaired are written down to fair value. The
Company records writedowns as investment losses and adjusts the cost basis of
the equity securities accordingly. The Company does not change the revised cost
basis for

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subsequent recoveries in value. Writedowns of equity securities and other
limited partnership interests were $191 million and $142 million for the years
ended December 31, 2002 and 2001, respectively. During the years ended December
31, 2002 and 2001, the Company sold equity securities with an estimated fair
value of $915 million and $1,311 million at a loss of $85 million and $41
million, respectively.

The gross unrealized loss related to the Company's equity securities at
December 31, 2002 was $83 million. Such securities are concentrated by security
type in common stock (61%) and mutual funds (35%); and are concentrated by
industry in financial (59%) and domestic broad market mutual funds (34%)
(calculated as a percentage of gross unrealized loss).

The following table presents the costs, gross unrealized losses and number
of securities for equity securities where the estimated fair value had declined
and remained below cost by less than 20%, or 20% or more for:

The Company's review of its equity security exposure includes the analysis
of the total gross unrealized losses by three categories of securities: (i)
securities where the estimated fair value had declined and remained below cost
by less than 20%; (ii) securities where the estimated fair value had declined
and remained below cost by 20% or more for less than six months; and (iii)
securities where the estimated fair value had declined and remained below cost
by 20% or more for six months or greater. The first two categories have
generally been adversely impacted by the downturn in the financial markets,
overall economic conditions and continuing effects of the September 11, 2001
tragedies. While all of these securities are monitored for potential impairment,
the Company's experience indicates that the first two categories do not present
as great a risk of impairment, and often, fair values recover over time as the
factors that caused the declines improve.

The following table presents the total gross unrealized losses for equity
securities at December 31, 2002 where the estimated fair value had declined and
remained below cost by:

The category of equity securities where the estimated fair value has
declined and remained below cost by less than 20% is comprised of 61 equity
securities with a cost of $365 million and a gross unrealized loss of $25
million. These securities are concentrated by security type in mutual funds
(78%); and concentrated by industry in domestic broad market mutual funds (78%)
(calculated as a percentage of gross unrealized loss). The significant factors
considered at December 31, 2002 in the review of equity securities for
other-than-temporary

99

impairment were the unusual and severely depressed market conditions, the
instability of the global economy and the lagging effects of the September 11,
2001 tragedies.

The category of equity securities where the estimated fair value has
declined and remained below cost by 20% or more for less than six months is
comprised of 23 equity securities with a cost of $292 million and a gross
unrealized loss of $58 million. These securities are concentrated by security
type in common stock (80%) and mutual funds (15%); and concentrated by industry
in financial (80%) and domestic broad market mutual funds (15%) (calculated as a
percentage of gross unrealized loss). The significant factors considered at
December 31, 2002 in the review of equity securities for other-than-temporary
impairment were the unusual and severely depressed market conditions, the
instability of the global economy and the lagging effects of the September 11,
2001 tragedies.

The Company held two equity securities with a gross unrealized loss at
December 31, 2002 greater than $5 million. Neither of these securities
represented gross unrealized losses where the estimated fair value had declined
and remained below cost by 20% or more for six months or greater.

OTHER INVESTED ASSETS

The Company's other invested assets consist principally of leveraged leases
and funds withheld at interest of $3.1 billion and $2.7 billion at December 31,
2002 and 2001, respectively. The leveraged leases are recorded net of
non-recourse debt. The Company participates in lease transactions, which are
diversified by geographic area. The Company regularly reviews residual values
and writes down residuals to expected values as needed. Funds withheld represent
amounts contractually withheld by ceding companies in accordance with
reinsurance agreements. For agreements written on a modified coinsurance basis
and certain agreements written on a coinsurance basis, assets supporting the
reinsured policies equal to the net statutory reserves are withheld and continue
to be legally owned by the ceding company. Interest accrues to these funds
withheld at rates defined by the treaty terms and may be contractually specified
or directly related to the investment portfolio. The Company's other invested
assets represented 1.9% of cash and invested assets at both December 31, 2002
and 2001.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company uses derivative instruments to manage risk through one of four
principal risk management strategies: the hedging of liabilities, invested
assets, portfolios of assets or liabilities and anticipated transactions.
Additionally, Metropolitan Life enters into income generation and replication
derivative transactions as permitted by its derivatives use plan that was
approved by the Department. The Company's derivative strategy employs a variety
of instruments, including financial futures, financial forwards, interest rate,
credit default and foreign currency swaps, foreign currency forwards, written
covered calls and options, including caps and floors.

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The table below provides a summary of the notional amount and fair value of
derivative financial instruments held at:

SECURITIES LENDING

The Company participates in a securities lending program whereby blocks of
securities, which are included in investments, are loaned to third parties,
primarily major brokerage firms. The Company requires a minimum of 102% of the
fair value of the loaned securities to be separately maintained as collateral
for the loans. Securities with a cost or amortized cost of $14,873 million and
$11,416 million and an estimated fair value of $17,625 million and $12,066
million were on loan under the program at December 31, 2002 and 2001,
respectively. The Company was liable for cash collateral under its control of
$17,862 million and $12,661 million at December 31, 2002 and 2001, respectively.
Security collateral on deposit from customers may not be sold or repledged and
is not reflected in the consolidated financial statements.

SEPARATE ACCOUNT ASSETS

The Company manages each separate account's assets in accordance with the
prescribed investment policy that applies to that specific separate account. The
Company establishes separate accounts on a single client and multi-client
commingled basis in conformity with insurance laws. Generally, separate accounts
are not chargeable with liabilities that arise from any other business of the
Company. Separate account assets are subject to the Company's general account
claims only to the extent that the value of such assets exceeds the separate
account liabilities, as defined by the account's contract. If the Company uses a
separate account to support a contract providing guaranteed benefits, the
Company must comply with the asset maintenance requirements stipulated under
Regulation 128 of the Department. The Company monitors these requirements at
least monthly and, in addition, performs cash flow analyses, similar to that
conducted for the general account, on an annual basis. The Company reports
separately as assets and liabilities investments held in separate accounts and
liabilities of the separate accounts. The Company reports substantially all
separate account assets at their fair market value. Investment income and gains
or losses on the investments of separate accounts accrue directly to
contractholders, and, accordingly, the Company does not reflect them in its
consolidated statements of income and cash flows. The Company reflects in its
revenues fees charged to the separate accounts by the Company, including
mortality charges, risk charges, policy administration fees, investment
management fees and surrender charges.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company must effectively manage, measure and monitor the market risk
associated with its invested assets and interest rate sensitive insurance
contracts. It has developed an integrated process for managing risk, which it
conducts through its Corporate Risk Management Department, several
asset/liability committees and

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additional specialists at the business segment level. The Company has
established and implemented comprehensive policies and procedures at both the
corporate and business segment level to minimize the effects of potential market
volatility.

MARKET RISK EXPOSURES

The Company has exposure to market risk through its insurance operations
and investment activities. For purposes of this disclosure, "market risk" is
defined as the risk of loss resulting from changes in interest rates, equity
prices and foreign currency exchange rates.

Interest rates. The Company's exposure to interest rate changes results
from its significant holdings of fixed maturities, as well as its interest rate
sensitive liabilities. The fixed maturities include U.S. and foreign government
bonds, securities issued by government agencies, corporate bonds and
mortgage-backed securities, all of which are mainly exposed to changes in
medium- and long-term treasury rates. The interest rate sensitive liabilities
for purposes of this disclosure include guaranteed interest contracts and fixed
annuities, which have the same interest rate exposure (medium- and long-term
treasury rates) as the fixed maturities. The Company employs product design,
pricing and asset/liability management strategies to reduce the adverse effects
of interest rate volatility. Product design and pricing strategies include the
use of surrender charges or restrictions on withdrawals in some products.
Asset/liability management strategies include the use of derivatives, the
purchase of securities structured to protect against prepayments, prepayment
restrictions and related fees on mortgage loans and consistent monitoring of the
pricing of the Company's products in order to better match the duration of the
assets and the liabilities they support.

Equity prices. The Company's investments in equity securities expose it to
changes in equity prices. It manages this risk on an integrated basis with other
risks through its asset/liability management strategies. The Company also
manages equity price risk through industry and issuer diversification and asset
allocation techniques.

Foreign currency exchange rates. The Company's exposure to fluctuations in
foreign currency exchange rates against the U.S. dollar results from its
holdings in non-U.S. dollar denominated fixed maturity securities and equity
securities and through its investments in foreign subsidiaries. The principal
currencies which create foreign currency exchange rate risk in the Company's
investment portfolios are Canadian dollars, Euros, Mexican pesos, Chilean pesos
and British pounds. The Company mitigates the majority of its fixed maturities'
foreign currency exchange rate risk through the utilization of foreign currency
swaps and forward contracts. Through its investments in foreign subsidiaries,
the Company is primarily exposed to the Euro, Mexican peso and South Korean won.
The Company has denominated substantially all assets and liabilities of its
foreign subsidiaries in their respective local currencies, thereby minimizing
its risk to foreign currency exchange rate fluctuations.

RISK MANAGEMENT

Corporate risk management. MetLife has established several financial and
non-financial senior management committees as part of its risk management
process. These committees manage capital and risk positions, approve
asset/liability management strategies and establish appropriate corporate
business standards.

MetLife also has a separate Corporate Risk Management Department, which is
responsible for risk throughout MetLife and reports directly to Metropolitan
Life's Chief Actuary. The Corporate Risk Management Department's primary
responsibilities consist of:

- implementing a board of directors-approved corporate risk framework,
which outlines the Company's approach for managing risk on an
enterprise-wide basis;

- developing policies and procedures for managing, measuring and monitoring
those risks identified in the corporate risk framework;

- establishing appropriate corporate risk tolerance levels;

- deploying capital on an economic capital basis; and

- reporting on a periodic basis to the Audit Committee of the Holding
Company's board of directors and various financial and non-financial
senior management committees.

102

Asset/liability management. At MetLife, asset/liability management is the
responsibility of the General Account Portfolio Management Department ("GAPM"),
the operating business segments and various GAPM boards. The GAPM boards are
comprised of senior officers from the investment department, senior managers
from each business segment and the Chief Actuary. The GAPM boards' duties
include setting broad asset/ liability management policy and strategy, reviewing
and approving target portfolios, establishing investment guidelines and limits,
and providing oversight of the portfolio management process.

The portfolio managers and asset sector specialists, who have
responsibility on a day-to-day basis for risk management of their respective
investing activities, implement the goals and objectives established by the GAPM
boards. The goals of the investment process are to optimize after-tax,
risk-adjusted investment income and after-tax, risk-adjusted total return while
ensuring that the assets and liabilities are managed on a cash flow and duration
basis. The risk management objectives established by the GAPM boards stress
quality, diversification, asset/liability matching, liquidity and investment
return.

Each of MetLife's business segments has an asset/liability officer who
works with portfolio managers in the investment department to monitor
investment, product pricing, hedge strategy and liability management issues.
MetLife establishes target asset portfolios for each major insurance product,
which represent the investment strategies used to profitably fund its
liabilities within acceptable levels of risk. These strategies include
objectives for effective duration, yield curve sensitivity, convexity,
liquidity, asset sector concentration and credit quality.

To manage interest rate risk, the Company performs periodic projections of
asset and liability cash flows to evaluate the potential sensitivity of its
securities investments and liabilities to interest rate movements. These
projections involve evaluating the potential gain or loss on most of the
Company's in-force business under various increasing and decreasing interest
rate environments. The Company has developed models of its in-force business
that reflect specific product characteristics and include assumptions based on
current and anticipated experience regarding lapse, mortality and interest
crediting rates. In addition, these models include asset cash flow projections
reflecting interest payments, sinking fund payments, principal payments, bond
calls, mortgage prepayments and defaults. New York Insurance Department
regulations require that MetLife perform some of these analyses annually as part
of the annual proof of the sufficiency of its regulatory reserves to meet
adverse interest rate scenarios.

Hedging activities. MetLife's risk management strategies incorporate the
use of various interest rate derivatives that are used to adjust the overall
duration and cash flow profile of its invested asset portfolios to better match
the duration and cash flow profile of its liabilities to reduce interest rate
risk. Such instruments include financial futures, financial forwards, interest
rate and credit default swaps, floors, options, written covered calls and caps.
MetLife also uses foreign currency swaps and foreign currency forwards to hedge
its foreign currency denominated fixed income investments.

Economic Capital. Beginning in 2003, the Company has changed its
methodology of allocating capital from Risk Based Capital to Economic Capital.
In 2002 and in prior years, the Company's business segments' allocated equity
was primarily based on Risk Based Equity, an internally developed formula based
on applying a multiple to the NAIC Statutory Risk Based Capital and includes
certain GAAP accounting adjustments. Economic Capital is an internally developed
risk capital model, the purpose of which is to measure the risk in the business
and to provide a basis upon which capital is deployed. The Economic Capital
model accounts for the unique and specific nature of the risks inherent in
MetLife's businesses. This is in contrast to the standardized regulatory Risk
Based Capital formula which is not as refined in its risk calculations with
respect to the nuances of different companies' businesses.

This change in methodology will be applied prospectively and will impact
the level of net investment income and net income of each of the Company's
business segments. A portion of net investment income is credited to the
segments based on the level of allocated equity. This methodology change of
allocating equity will not impact the Company's consolidated net investment
income or net income.

103

RISK MEASUREMENT; SENSITIVITY ANALYSIS

The Company measures market risk related to its holdings of invested assets
and other financial instruments, including certain market risk sensitive
insurance contracts ("other financial instruments"), based on changes in
interest rates, equity prices and currency exchange rates, utilizing a
sensitivity analysis. This analysis estimates the potential changes in fair
value, cash flows and earnings based on a hypothetical 10% change (increase or
decrease) in interest rates, equity prices and currency exchange rates. The
Company believes that a 10% change (increase or decrease) in these market rates
and prices is reasonably possible in the near-term. In performing this analysis,
the Company used market rates at December 31, 2002 to re-price its invested
assets and other financial instruments. The sensitivity analysis separately
calculated each of MetLife's market risk exposures (interest rate, equity price
and foreign currency exchange rate) related to its non-trading invested assets
and other financial instruments. The Company does not maintain a trading
portfolio.

The sensitivity analysis performed included the market risk sensitive
holdings described above. The Company modeled the impact of changes in market
rates and prices on the fair values of its invested assets, earnings and cash
flows as follows:

Fair values. The Company bases its potential change in fair values on an
immediate change (increase or decrease) in:

- the net present values of its interest rate sensitive exposures resulting
from a 10% change (increase or decrease) in interest rates;

- the U.S. dollar equivalent balances of the Company's currency exposures
due to a 10% change (increase or decrease) in currency exchange rates;
and

- the market value of its equity positions due to a 10% change (increase or
decrease) in equity prices.

Earnings and cash flows. MetLife calculates the potential change in
earnings and cash flows on the change in its earnings and cash flows over a
one-year period based on an immediate 10% change (increase or decrease) in
market rates and equity prices. The following factors were incorporated into the
earnings and cash flows sensitivity analyses:

- the reinvestment of fixed maturity securities;

- the reinvestment of payments and prepayments of principal related to
mortgage-backed securities;

- the re-estimation of prepayment rates on mortgage-backed securities for
each 10% change (increase or decrease) in the interest rates; and

- the expected turnover (sales) of fixed maturities and equity securities,
including the reinvestment of the resulting proceeds.

The sensitivity analysis is an estimate and should not be viewed as
predictive of the Company's future financial performance. The Company cannot
assure that its actual losses in any particular year will not exceed the amounts
indicated in the table below. Limitations related to this sensitivity analysis
include:

- the market risk information is limited by the assumptions and parameters
established in creating the related sensitivity analysis, including the
impact of prepayment rates on mortgages;

- the analysis excludes other significant real estate holdings and
liabilities pursuant to insurance contracts; and

- the model assumes that the composition of assets and liabilities remains
unchanged throughout the year.

Accordingly, the Company uses such models as tools and not substitutes for
the experience and judgment of its corporate risk and asset/liability management
personnel.

Based on its analysis of the impact of a 10% change (increase or decrease)
in market rates and prices, MetLife has determined that such a change could have
a material adverse effect on the fair value of its interest

104

rate sensitive invested assets. The equity and foreign currency portfolios do
not expose the Company to material market risk.

The table below illustrates the potential loss in fair value of the
Company's interest rate sensitive financial instruments at December 31, 2002 and
2001. In addition, the potential loss with respect to the fair value of currency
exchange rates and the Company's equity price sensitive positions at December
31, 2002 and 2001 is set forth in the table below.

The potential loss in fair value for each market risk exposure of the
Company's portfolio, all of which is non-trading, for the periods indicated was:

The change in potential loss in fair value related to market risk exposure
between December 31, 2002 and 2001 was primarily attributable to a shift in the
yield curve.

105

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

106

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
MetLife, Inc.:

We have audited the accompanying consolidated balance sheets of MetLife,
Inc. and subsidiaries (the "Company") as of December 31, 2002 and 2001, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2002. Our audits
also included the financial statement schedules listed in the Index to
Consolidated Financial Statements and Schedules. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of MetLife, Inc. and
subsidiaries as of December 31, 2002 and 2001, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP

New York, New York
February 19, 2003

F-1

METLIFE, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001

(DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

See accompanying notes to consolidated financial statements.
F-2

METLIFE, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

See accompanying notes to consolidated financial statements.

F-3

METLIFE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN MILLIONS)

See accompanying notes to consolidated financial statements
F-4

METLIFE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

(DOLLARS IN MILLIONS)

F-5

METLIFE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

(DOLLARS IN MILLIONS)

See accompanying notes to consolidated financial statements.
F-6

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF ACCOUNTING POLICIES

BUSINESS

MetLife, Inc. (the "Holding Company") and its subsidiaries (together with
the Holding Company, "MetLife" or the "Company") is a leading provider of
insurance and other financial services to a broad section of individual and
institutional customers. The Company offers life insurance, annuities,
automobile and property insurance and mutual funds to individuals and group
insurance, reinsurance, as well as retirement and savings products and services
to corporations and other institutions.

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
the Holding Company and its subsidiaries, partnerships and joint ventures in
which the Company has a majority voting interest. Closed block assets,
liabilities, revenues and expenses are combined on a line by line basis with the
assets, liabilities, revenues and expenses outside the closed block based on the
nature of the particular item. See Note 7. Intercompany accounts and
transactions have been eliminated.

The Company uses the equity method of accounting for investments in real
estate joint ventures and other limited partnership interests in which it has
more than a minor interest, has influence over the partnership's operating and
financial policies and does not have a controlling interest. The Company uses
the cost method for minor interest investments and when it has virtually no
influence over the partnership's operating and financial policies.

Minority interest related to consolidated entities included in other
liabilities was $491 million and $442 million at December 31, 2002 and 2001,
respectively.

Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 2002 presentation.

SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to adopt accounting policies and make estimates and assumptions that
affect amounts reported in the consolidated financial statements. The critical
accounting policies, estimates and related judgments underlying the Company's
consolidated financial statements are summarized below. In applying these
policies, management makes subjective and complex judgments that frequently
require estimates about matters that are inherently uncertain. Many of these
policies, estimates and related judgments are common in the insurance and
financial services industries; others are specific to the Company's businesses
and operations.

Investments

The Company's principal investments are in fixed maturities, mortgage loans
and real estate, all of which are exposed to three primary sources of investment
risk: credit, interest rate and market valuation. The financial statement risks
are those associated with the recognition of impairments and income, as well as
the determination of fair values. The assessment of whether impairments have
occurred is based on management's case-by-case evaluation of the underlying
reasons for the decline in fair value. Management considers a wide range of
factors about the security issuer and uses its best judgment in evaluating the
cause of the decline in the estimated fair value of the security and in
assessing the prospects for near-term recovery. Inherent in management's
evaluation of the security are assumptions and estimates about the operations of
the issuer and its future earnings potential. Considerations used by the Company
in the impairment evaluation process include, but are not limited to: (i) the
length of time and the extent to which the market value has been below amortized
cost; (ii) the potential for

F-7

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

impairments of securities when the issuer is experiencing significant financial
difficulties; (iii) the potential for impairments in an entire industry sector
or sub-sector; (iv) the potential for impairments in certain economically
depressed geographic locations; (v) the potential for impairments of securities
where the issuer, series of issuers or industry has suffered a catastrophic type
of loss or has exhausted natural resources; and (vi) other subjective factors,
including concentrations and information obtained from regulators and rating
agencies. In addition, the earnings on certain investments are dependent upon
market conditions, which could result in prepayments and changes in amounts to
be earned due to changing interest rates or equity markets. The determination of
fair values in the absence of quoted market values is based on valuation
methodologies, securities the Company deems to be comparable and assumptions
deemed appropriate given the circumstances. The use of different methodologies
and assumptions may have a material effect on the estimated fair value amounts.

Derivatives

The Company enters into freestanding derivative transactions primarily to
manage the risk associated with variability in cash flows related to the
Company's financial assets and liabilities or to changing fair values. The
Company also purchases investment securities and issues certain insurance and
reinsurance policies with embedded derivatives. The associated financial
statement risk is the volatility in net income, which can result from (i)
changes in fair value of derivatives not qualifying as accounting hedges, and
(ii) ineffectiveness of designated hedges in an environment of changing interest
rates or fair values. In addition, accounting for derivatives is complex, as
evidenced by significant authoritative interpretations of the primary accounting
standards which continue to evolve, as well as the significant judgments and
estimates involved in determining fair value in the absence of quoted market
values. These estimates are based on valuation methodologies and assumptions
deemed appropriate in the circumstances. Such assumptions include estimated
market volatility and interest rates used in the determination of fair value
where quoted market values are not available. The use of different assumptions
may have a material effect on the estimated fair value amounts.

Deferred Policy Acquisition Costs

The Company incurs significant costs in connection with acquiring new
insurance business. These costs, which vary with, and are primarily related to,
the production of new business, are deferred. The recovery of such costs is
dependent upon the future profitability of the related business. The amount of
future profit is dependent principally on investment returns, mortality,
morbidity, 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 are most likely
to impact the rate of amortization of such costs. The aforementioned factors
enter into management's estimates of gross margins and profits, which generally
are used to amortize such costs. Revisions to estimates result in changes to the
amounts expensed in the reporting period in which the revisions are made and
could result in the impairment of the asset and a charge to income if estimated
future gross margins and profits are less than amounts deferred. In addition,
the Company utilizes the reversion to the mean assumption, a standard industry
practice, in its determination of the amortization of deferred policy
acquisition costs. This practice assumes that the expectation for long-term
appreciation in equity markets is not changed by minor short-term market
fluctuations, but that it does change when large interim deviations have
occurred.

Future Policy Benefits

The Company establishes liabilities for amounts payable under insurance
policies, including traditional life insurance, annuities and disability
insurance. Generally, amounts are payable over an extended period of time and
the profitability of the products is dependent on the pricing of the products.
Principal assumptions used in pricing policies and in the establishment of
liabilities for future policy benefits are mortality, morbidity, expenses,
persistency, investment returns and inflation.

F-8

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company also establishes liabilities for unpaid claims and claims
expenses for property and casualty insurance. Pricing of this insurance takes
into account the expected frequency and severity of losses, the costs of
providing coverage, competitive factors, characteristics of the insured and the
property covered, and profit considerations. Liabilities for property and
casualty insurance are dependent on estimates of amounts payable for claims
reported but not settled and claims incurred but not reported. These estimates
are influenced by historical experience and actuarial assumptions of current
developments, anticipated trends and risk management strategies.

Differences between the actual experience and assumptions used in pricing
these policies and in the establishment of liabilities result in variances in
profit and could result in losses.

Reinsurance

The Company enters into reinsurance transactions as both a provider and a
purchaser of reinsurance. 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 policy benefits and evaluates the
financial strength of counterparties to its reinsurance agreements using
criteria similar to that evaluated in the security impairment process discussed
above. Additionally, for each of its reinsurance contracts, the Company must
determine if the contract provides indemnification against loss or liability
relating to insurance risk, in accordance with applicable accounting standards.
The Company must review all contractual features, particularly those that may
limit the amount of insurance risk to which the Company is subject or features
that delay the timely reimbursement of claims. If the Company determines that a
contract does not expose it to a reasonable possibility of a significant loss
from insurance risk, the Company records the contract using the deposit method
of accounting.

Litigation

The Company is a party to a number of legal actions. Given the inherent
unpredictability of litigation, it is difficult to estimate the impact of
litigation on the Company's consolidated financial position. Liabilities are
established when it is probable that a loss has been incurred and the amount of
the loss can be reasonably estimated. Liabilities related to certain lawsuits,
including the Company's asbestos-related liability, are especially difficult to
estimate due to the limitation of available data and uncertainty regarding
numerous variables used to determine amounts recorded. The data and variables
that impact the assumption used to estimate the Company's asbestos-related
liability include the number of future claims, the cost to resolve claims, the
disease mix and severity of disease, the jurisdiction of claims filed, tort
reform efforts and the impact of any possible future adverse verdicts and their
amounts. It is possible that an adverse outcome in certain of the Company's
litigation, including asbestos-related cases, or the use of different
assumptions in the determination of amounts recorded could have a material
effect upon the Company's consolidated net income or cash flows in particular
quarterly or annual periods.

Employee Benefit Plans

The Company sponsors pension and other retirement plans in various forms
covering employees who meet specified eligibility requirements. The reported
expense and liability associated with these plans requires an extensive use of
assumptions which include the discount rate, expected return on plan assets and
rate of future compensation increases as determined by the Company. Management
determines these assumptions based upon currently available market and industry
data, historical performance of the plan and its assets, and consultation with
an independent consulting actuarial firm to aid it in selecting appropriate
assumptions and valuing its related liabilities. The actuarial assumptions used
by the Company may differ materially from actual results due to changing market
and economic conditions, higher or lower withdrawal rates or longer or shorter
life spans of the participants. These differences may have a significant effect
on the Company's consolidated financial statements and liquidity.

F-9

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The actuarial assumptions used in the calculation of the Company's
aggregate projected benefit obligation may vary and include an expectation of
long-term market appreciation in equity markets which is not changed by minor
short-term market fluctuations, but does change when large interim deviations
occur. For the largest of the plans sponsored by the Company (the Metropolitan
Life Retirement Plan for United States Employees, with a projected benefit
obligation of $4.3 billion or 98.6% of all qualified plans at December 31,
2002), the discount rate, expected rate of return on plan assets, and the range
of rates of future compensation increases used in that plan's valuation at
December 31, 2002 were 6.75%, 9% and 4% to 8%, respectively. Note 6 describes in
more detail the assumptions used and status of the many plans sponsored by the
Company and its affiliates.

SIGNIFICANT ACCOUNTING POLICIES

Investments

The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of other comprehensive income or loss, net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other-than-temporary. These
adjustments are recorded as investment losses. Investment gains and losses on
sales of securities are determined on a specific identification basis. All
security transactions are recorded on a trade date basis.

Mortgage loans on real estate are stated at amortized cost, net of
valuation allowances. Valuation allowances are established for the excess
carrying value of the mortgage loan over its estimated fair value when it is
probable that, based upon current information and events, the Company will be
unable to collect all amounts due under the contractual terms of the loan
agreement. Valuation allowances are included in net investment gains and losses
and are based upon the present value of expected future cash flows discounted at
the loan's original effective interest rate or the collateral value if the loan
is collateral dependent. Interest income earned on impaired loans is accrued on
the principal amount of the loan based on the loan's contractual interest rate.
However, interest ceases to be accrued for loans on which interest is generally
more than 60 days past due and/or where the collection of interest is not
considered probable. Cash receipts on impaired loans are recorded as a reduction
of the recorded asset.

Real estate held-for-investment, including related improvements, is stated
at cost less accumulated depreciation. Depreciation is provided on a
straight-line basis over the estimated useful life of the asset (typically 20 to
40 years). Real estate held-for-sale is stated at the lower of depreciated cost
or fair value less expected disposition costs. Real estate is not depreciated
while it is classified as held-for-sale. Cost of real estate held-for-
investment is adjusted for impairment whenever events or changes in
circumstances indicate the carrying amount of the asset may not be recoverable.
Impaired real estate is written down to estimated fair value with the impairment
loss being included in net investment gains and losses. Impairment losses are
based upon the estimated fair value of real estate, which is generally computed
using the present value of expected future cash flows from the real estate
discounted at a rate commensurate with the underlying risks. Real estate
acquired upon foreclosure of commercial and agricultural mortgage loans is
recorded at the lower of estimated fair value or the carrying value of the
mortgage loan at the date of foreclosure.

Policy loans are stated at unpaid principal balances.

Short-term investments are stated at amortized cost, which approximates
fair value.

Other invested assets consist principally of leveraged leases and funds
withheld at interest. The leveraged leases are recorded net of non-recourse
debt. The Company participates in lease transactions which are diversified

F-10

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

by geographic area. The Company regularly reviews residual values and writes
down residuals to expected values as needed. Funds withheld represent amounts
contractually withheld by ceding companies in accordance with reinsurance
agreements. For agreements written on a modified coinsurance basis and certain
agreements written on a coinsurance basis, assets supporting the reinsured
policies and equal to the net statutory reserves are withheld and continue to be
legally owned by the ceding companies. The Company recognizes interest on funds
withheld in accordance with the treaty terms as investment income is earned on
the assets supporting the reinsured policies.

Structured Investment Transactions and Variable Interest Entities

The Company participates in structured investment transactions, primarily
asset securitizations and structured notes. These transactions enhance the
Company's total return of the investment portfolio principally by generating
management fee income on asset securitizations and by providing equity-based
returns on debt securities through structured notes and similar type
instruments.

The Company sponsors financial asset securitizations of high yield debt
securities, investment grade bonds and structured finance securities and also is
the collateral manager and a beneficial interest holder in such transactions. As
the collateral manager, the Company earns management fees on the outstanding
securitized asset balance, which are recorded in income as earned. When the
Company transfers assets to a bankruptcy-remote special purpose entity ("SPE")
and surrenders control over the transferred assets, the transaction is accounted
for as a sale. Gains or losses on securitizations are determined with reference
to the carrying amount of the financial assets transferred, which is allocated
to the assets sold and the beneficial interests retained based on relative fair
values at the date of transfer. Beneficial interests in securitizations are
carried at fair value in fixed maturities. Income on the beneficial interests is
recognized using the prospective method in accordance with Emerging Issues Task
Force ("EITF") Issue No. 99-20, Recognition of Interest Income and Impairment on
Certain Investments ("EITF 99-20"). The SPEs used to securitize assets are not
consolidated by the Company because unrelated third parties hold controlling
interests through ownership of equity in the SPEs, representing at least three
percent of the value of the total assets of the SPE throughout the life of the
SPE, and such equity class has the substantive risks and rewards of the residual
interest of the SPE.

The Company purchases or receives beneficial interests in SPEs, which
generally acquire financial assets, including corporate equities, debt
securities and purchased options. The Company has not guaranteed the
performance, liquidity or obligations of the SPEs and the Company's exposure to
loss is limited to its carrying value of the beneficial interests in the SPEs.
The Company uses the beneficial interests as part of its risk management
strategy, including asset-liability management. These SPEs are not consolidated
by the Company because unrelated third parties hold controlling interests
through ownership of equity in the SPEs, representing at least three percent of
the value of the total assets of the SPE throughout the life of the SPE, and
such equity class has the substantive risks and rewards of the residual interest
of the SPE. The beneficial interests in SPEs where the Company exercises
significant influence over the operating and financial policies of the SPE are
accounted for in accordance with the equity method of accounting. Impairments of
these beneficial interests are included in net investment gains and losses. The
beneficial interests in SPEs where the Company does not exercise significant
influence are accounted for based on the substance of the beneficial interest's
rights and obligations. Beneficial interests are accounted for and are included
in fixed maturities. These beneficial interests are generally structured notes,
as defined by EITF Issue No. 96-12, Recognition of Interest Income and Balance
Sheet Classification of Structured Notes, and their income is recognized using
the retrospective interest method or the level yield method, as appropriate.

Effective in 2003, Financial Accounting Standards Board ("FASB")
Interpretation No. 46, Consolidation of Variable Interest Entities, an
Interpretation of APB No. 51 ("FIN 46") will establish new accounting guidance
relating to the consolidation of variable interest entities ("VIEs"). Certain of
the asset-backed securitizations and structured investment transactions
discussed above meet the definition of a VIE under FIN 46. In addition, certain

F-11

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investments in real estate joint ventures and other limited partnership
interests also meet the VIE definition. The Company will be required to
consolidate any VIE for which it is determined that the Company is the primary
beneficiary. The Company is still in the process of evaluating its investments
with regard to the implementation of FIN 46.

The following table presents the total assets and the maximum exposure to
loss relating to the VIEs that the Company believes it is reasonably possible it
will need to consolidate or disclose information about in accordance with the
provisions of FIN 46 at:

- ---------------
(1) The maximum exposure to loss is based on the carrying value of retained
interests.

(2) The maximum exposure to loss is based on the carrying value of beneficial
interests.

(3) The maximum exposure to loss is based on the carrying value plus unfunded
commitments reduced by amounts guaranteed by other partners.

Derivative Instruments

The Company uses derivative instruments to manage risk through one of four
principal risk management strategies: (i) the hedging of liabilities, (ii)
invested assets, (iii) portfolios of assets or liabilities and (iv) firm
commitments and forecasted transactions. Additionally, the Company enters into
income generation and replication derivative transactions as permitted by its
derivatives use plan that was approved by the New York Insurance Department (the
"Department"). The Company's derivative hedging strategy employs a variety of
instruments, including financial futures, financial forwards, interest rate,
credit default and foreign currency swaps, foreign currency forwards, and
options, including caps and floors.

On the date the Company enters into a derivative contract, management
designates the derivative as a hedge of the identified exposure (fair value,
cash flow or foreign currency). If a derivative does not qualify as a hedge,
according to Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended ("SFAS
133"), the derivative is recorded at fair value and changes in its fair value
are generally reported in net investment gains or losses.

The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions. In this documentation, the
Company specifically identifies the asset, liability, firm commitment, or
forecasted transaction that has been designated as a hedged item and states how
the hedging instrument is expected to hedge the risks related to the hedged
item. The Company formally measures effectiveness of its hedging relationships
both at the hedge inception and on an ongoing basis in accordance with its risk
management policy. The Company generally determines hedge effectiveness based on
total changes in fair value of a derivative instrument. The Company discontinues
hedge accounting prospectively when: (i) it is determined that the derivative is
no longer effective in offsetting changes in the fair value or cash flows of a
hedged item, (ii) the derivative expires or is sold, terminated, or exercised,
(iii) the derivative is de-designated as a hedge instrument, (iv) it is probable
that the

F-12

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

forecasted transaction will not occur, (v) a hedged firm commitment no longer
meets the definition of a firm commitment, or (vi) management determines that
designation of the derivative as a hedge instrument is no longer appropriate.

The Company designates and accounts for the following as cash flow hedges,
when they have met the effectiveness requirements of SFAS 133: (i) various types
of interest rate swaps to convert floating rate investments to fixed rate
investments, (ii) receive U.S. dollar fixed on foreign currency swaps to hedge
the foreign currency cash flow exposure of foreign currency denominated
investments, (iii) foreign currency forwards to hedge the exposure of future
payments or receipts in foreign currencies, and (iv) other instruments to hedge
the cash flows of various other forecasted transactions. For all qualifying and
highly effective cash flow hedges, the effective portion of changes in fair
value of the derivative instrument is reported in other comprehensive income or
loss. The ineffective portion of changes in fair value of the derivative
instrument is reported in net investment gains or losses. Hedged forecasted
transactions, other than the receipt or payment of variable interest payments,
are not expected to occur more than 12 months after hedge inception.

The Company designates and accounts for the following as fair value hedges
when they have met the effectiveness requirements of SFAS 133: (i) various types
of interest rate swaps to convert fixed rate investments to floating rate
investments, (ii) receive U.S. dollar floating on foreign currency swaps to
hedge the foreign currency fair value exposure of foreign currency denominated
investments, and (iii) other instruments to hedge various other fair value
exposures of investments. For all qualifying and highly effective fair value
hedges, the changes in fair value of the derivative instrument are reported as
net investment gains or losses. In addition, changes in fair value attributable
to the hedged portion of the underlying instrument are reported in net
investment gains and losses.

When hedge accounting is discontinued because it is determined that the
derivative no longer qualifies as an effective fair value hedge, the derivative
continues to be carried on the consolidated balance sheet at its fair value, but
the hedged asset or liability will no longer be adjusted for changes in fair
value. When hedge accounting is discontinued because the hedged item no longer
meets the definition of a firm commitment, the derivative continues to be
carried on the consolidated balance sheet at its fair value, and any asset or
liability that was recorded pursuant to recognition of the firm commitment is
removed from the consolidated balance sheet and recognized as a net investment
gain or loss in the current period. When hedge accounting is discontinued
because it is probable that a forecasted transaction will not occur, the
derivative continues to be carried on the consolidated balance sheet at its fair
value, and gains and losses that were accumulated in other comprehensive income
or loss are recognized immediately in net investment gains or losses. When the
hedged forecasted transaction is no longer probable, but is reasonably possible,
the accumulated gain or loss remains in other comprehensive income or loss and
is recognized when the transaction affects net income or loss; however,
prospective hedge accounting for the transaction is terminated. In all other
situations in which hedge accounting is discontinued, the derivative is carried
at its fair value on the consolidated balance sheet, with changes in its fair
value generally recognized in the current period as net investment gains or
losses.

The Company may enter into contracts that are not themselves derivative
instruments but contain embedded derivatives. For each contract, the Company
assesses whether the economic characteristics of the embedded derivative are
clearly and closely related to those of the host contract and determines whether
a separate instrument with the same terms as the embedded instrument would meet
the definition of a derivative instrument.

If it is determined that the embedded derivative possesses economic
characteristics that are not clearly and closely related to the economic
characteristics of the host contract, and that a separate instrument with the
same terms would qualify as a derivative instrument, the embedded derivative is
separated from the host contract and accounted for as a stand-alone derivative.
Such embedded derivatives are recorded on the consolidated balance sheet at fair
value and changes in their fair value are recorded currently in net investment
gains or losses. If the Company is unable to properly identify and measure an
embedded derivative for separation from its host contract,

F-13

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the entire contract is carried on the consolidated balance sheet at fair value,
with changes in fair value recognized in the current period as net investment
gains or losses.

The Company also uses derivatives to synthetically create investments that
are either more expensive to acquire or otherwise unavailable in the cash
markets. These securities, called replication synthetic asset transactions
("RSATs"), are a combination of a derivative and a cash security to
synthetically create a third replicated security. These derivatives are not
designated as hedges. As of December 31, 2002 and 2001, 19 and 15, respectively,
of such RSATs, with notional amounts totaling $285 million and $205 million,
respectively, have been created through the combination of a credit default swap
and a U.S. Treasury security. The Company records the premiums received on the
credit default swaps in investment income over the life of the contract and
changes in fair value are recorded in net investment gains and losses.

The Company enters into written covered calls and net written covered
collars to generate additional investment income on the underlying assets it
holds. These derivatives are not designated as hedges. The Company records the
premiums received as net investment income over the life of the contract and
changes in fair value of such options and collars as net investment gains and
losses.

Cash and Cash Equivalents

The Company considers all investments purchased with an original maturity
of three months or less to be cash equivalents.

Property, Equipment, Leasehold Improvements and Computer Software

Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or sum-of-
the-years-digits method over the estimated useful lives of the assets. The
estimated life for company occupied real estate property is 40 years. Estimated
lives range from five to ten years for leasehold improvements and three to five
years for all other property and equipment. Accumulated depreciation and
amortization of property, equipment and leasehold improvements was $428 million
and $552 million at December 31, 2002 and 2001, respectively. Related
depreciation and amortization expense was $85 million, $99 million and $90
million for the years ended December 31, 2002, 2001 and 2000, respectively.

Computer software, which is included in other assets, is stated at cost,
less accumulated amortization. Purchased software costs, as well as internal and
external costs incurred to develop internal-use computer software during the
application development stage, are capitalized. Such costs are amortized
generally over a three-year period using the straight-line method. Accumulated
amortization of capitalized software was $317 million and $169 million at
December 31, 2002 and 2001, respectively. Related amortization expense was $155
million, $110 million and $45 million for the years ended December 31, 2002,
2001 and 2000, respectively.

Deferred Policy Acquisition Costs

The costs of acquiring new insurance business that vary with, and are
primarily related to, the production of new business are deferred. Such costs,
which consist principally of commissions, agency and policy issue expenses, are
amortized with interest over the expected life of the contract for participating
traditional life, universal life and investment-type products. Generally,
deferred policy acquisition costs are amortized in proportion to the present
value of estimated gross margins or profits from investment, mortality, expense
margins and surrender charges. Interest rates are based on rates in effect at
the inception or acquisition of the contracts.

Actual gross margins or profits can vary from management's estimates
resulting in increases or decreases in the rate of amortization. Management
utilizes the reversion to the mean assumption, a standard industry practice, in
its determination of the amortization of deferred policy acquisition costs. This
practice assumes that the expectation for long-term appreciation is not changed
by minor short-term market fluctuations, but that it does
F-14

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

change when large interim deviations have occurred. Management periodically
updates these estimates and evaluates the recoverability of deferred policy
acquisition costs. When appropriate, management revises its assumptions of the
estimated gross margins or profits of these contracts, and the cumulative
amortization is re-estimated and adjusted by a cumulative charge or credit to
current operations.

Deferred policy acquisition costs for non-participating traditional life,
non-medical health and annuity policies with life contingencies are amortized in
proportion to anticipated premiums. Assumptions as to anticipated premiums are
made at the date of policy issuance or acquisition and are consistently applied
during the lives of the contracts. Deviations from estimated experience are
included in operations when they occur. For these contracts, the amortization
period is typically the estimated life of the policy.

Policy acquisition costs related to internally replaced contracts are
expensed at the date of replacement.

Deferred policy acquisition costs for property and casualty insurance
contracts, which are primarily comprised of commissions and certain underwriting
expenses, are deferred and amortized on a pro rata basis over the applicable
contract term or reinsurance treaty.

Value of business acquired ("VOBA"), included as part of deferred policy
acquisition costs, represents the present value of future profits generated from
existing insurance contracts in force at the date of acquisition and is
amortized over the expected policy or contract duration in relation to the
present value of estimated gross profits from such policies and contracts.

Information regarding VOBA and deferred policy acquisition costs for the
year ended December 31, 2002 is as follows:

F-15

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information regarding VOBA and deferred policy acquisition costs for the
year ended December 31, 2001 is as follows:

Information regarding VOBA and deferred policy acquisition costs for the
year ended December 31, 2000 is as follows:

The estimated future amortization expense allocated to other expenses for
VOBA is $147 million in 2003, $141 million in 2004, $137 million in 2005, $135
million in 2006 and $128 million in 2007.

Amortization of VOBA and deferred policy acquisition costs is allocated to
(i) investment gains and losses to provide consolidated statement of income
information regarding the impact of such gains and losses on the amount of the
amortization, (ii) unrealized investment gains and losses to provide information
regarding the amount that would have been amortized if such gains and losses had
been recognized, and (iii) other expenses to provide amounts related to the
gross margins or profits originating from transactions other than investment
gains and losses.

F-16

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investment gains and losses related to certain products have a direct
impact on the amortization of VOBA and deferred policy acquisition costs.
Presenting investment gains and losses net of related amortization of VOBA and
deferred policy acquisition costs provides information useful in evaluating the
operating performance of the Company. This presentation may not be comparable to
presentations made by other insurers.

Goodwill

The excess of cost over the fair value of net assets acquired ("goodwill")
is included in other assets. On January 1, 2002, the Company adopted the
provisions of SFAS No. 142, Goodwill and Other Intangible Assets, ("SFAS 142").
In accordance with SFAS 142, goodwill is not amortized but is tested for
impairment at least annually to determine if a write down of the cost of the
asset is required. Impairments are recognized in operating results when the
carrying amount of goodwill exceeds its implied fair value. Prior to the
adoption of SFAS 142, goodwill was amortized on a straight-line basis over a
period ranging from ten to 30 years and impairments were recognized in operating
results when permanent diminution in value was deemed to have occurred.

Changes in goodwill were as follows:

Accumulated amortization from goodwill was as follows at:

Future Policy Benefits and Policyholder Account Balances

Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (i) net level premium reserves
for death and endowment policy benefits (calculated based upon the nonforfeiture
interest rate, ranging from 3% to 11%, and mortality rates guaranteed in
calculating the cash surrender values described in such contracts), (ii) the
liability for terminal dividends, and (iii) premium deficiency reserves, which
are established when the liabilities for future policy benefits plus the present
value of expected future gross premiums are insufficient to provide for expected
future policy benefits and expenses after deferred policy acquisition costs are
written off.

Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and the
present value of expected future payments after annuitization. Interest rates
used in establishing such liabilities range from 2% to 11%. Future policy
benefit liabilities for non-medical health insurance are calculated using the
net level premium method and assumptions as to future morbidity, withdrawals and
interest, which provide a margin for adverse deviation. Interest rates used in

F-17

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

establishing such liabilities range from 3% to 11%. Future policy benefit
liabilities for disabled lives are estimated using the present value of benefits
method and experience assumptions as to claim terminations, expenses and
interest. Interest rates used in establishing such liabilities range from 3% to
11%.

Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest, ranging from 1%
to 13%, less expenses, mortality charges, and withdrawals.

The liability for unpaid claims and claim expenses for property and
casualty insurance represents the amount estimated for claims that have been
reported but not settled and claims incurred but not reported. Liabilities for
unpaid claims are estimated based upon the Company's historical experience and
other actuarial assumptions that consider the effects of current developments,
anticipated trends and risk management programs, reduced for anticipated salvage
and subrogation. Revisions of these estimates are included in operations in the
year such refinements are made.

Recognition of Insurance Revenue and Related Benefits

Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives of
the policies. When premiums are due over a significantly shorter period than the
period over which benefits are provided, any excess profit is deferred and
recognized into operations in a constant relationship to insurance in-force or,
for annuities, the amount of expected future policy benefit payments.

Premiums related to non-medical health contracts are recognized on a pro
rata basis over the applicable contract term.

Deposits related to universal life and investment-type products are
credited to policyholder account balances. Revenues from such contracts consist
of amounts assessed against policyholder account balances for mortality, policy
administration and surrender charges and are recognized in the period in which
services are provided. Amounts that are charged to operations include interest
credited and benefit claims incurred in excess of related policyholder account
balances.

Premiums related to property and casualty contracts are recognized as
revenue on a pro rata basis over the applicable contract term. Unearned premiums
are included in other liabilities.

Other Revenues

Other revenues include asset management and advisory fees, broker/dealer
commissions and fees, and administrative service fees. Such fees and commissions
are recognized in the period in which services are performed. Other revenues
also include changes in account value relating to corporate-owned life insurance
("COLI"). Under certain COLI contracts, if the Company reports certain unlikely
adverse results in its consolidated financial statements, withdrawals would not
be immediately available and would be subject to market value adjustment, which
could result in a reduction of the account value.

Policyholder Dividends

Policyholder dividends are approved annually by the insurance subsidiaries'
boards 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 the insurance subsidiaries.

F-18

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Participating Business

Participating business represented approximately 16% and 18% of the
Company's life insurance in-force, and 55% and 78% of the number of life
insurance policies in-force, at December 31, 2002 and 2001, respectively.
Participating policies represented approximately 43% and 45%, 43% and 45%, and
47% and 50% of gross and net life insurance premiums for the years ended
December 31, 2002, 2001 and 2000, respectively. The percentages indicated are
calculated excluding the business of the Reinsurance segment.

Income Taxes

The Holding Company and its includable life insurance and non-life
insurance subsidiaries file a consolidated U.S. federal income tax return in
accordance with the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"). Non-includable subsidiaries file either separate tax returns or
separate consolidated tax returns. Under the Code, the amount of federal income
tax expense incurred by mutual life insurance companies includes an equity tax
calculated based upon a prescribed formula that incorporates a differential
earnings rate between stock and mutual life insurance companies. Metropolitan
Life has not been subject to the equity tax since the date of demutualization.
The future tax consequences of temporary differences between financial reporting
and tax bases of assets and liabilities are measured at the balance sheet dates
and are recorded as deferred income tax assets and liabilities.

Reinsurance

The Company has reinsured certain of its life insurance and property and
casualty insurance contracts with other insurance companies under various
agreements. Amounts due from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Policy and contract liabilities are reported
gross of reinsurance credits. Deferred policy acquisition costs are reduced by
amounts recovered under reinsurance contracts. Amounts received from reinsurers
for policy administration are reported in other revenues.

The Company assumes and retrocedes financial reinsurance contracts, which
represent low mortality risk reinsurance treaties. These contracts are reported
as deposits and are included in other assets. The amount of revenue reported on
these contracts represents fees and the cost of insurance under the terms of the
reinsurance agreement.

Separate Accounts

Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent the value of such assets exceeds the separate account liabilities.
Investments (stated at estimated fair value) and liabilities of the separate
accounts are reported separately as assets and liabilities. Deposits to separate
accounts, investment income and recognized and unrealized gains and losses on
the investments of the separate accounts accrue directly to contractholders and,
accordingly, are not reflected in the Company's consolidated statements of
income and cash flows. Mortality, policy administration and surrender charges to
all separate accounts are included in revenues.

Stock Based Compensation

The Company accounts for the stock-based compensation plans using the
accounting method prescribed by Accounting Principles Board Opinion ("APB") No.
25, Accounting for Stock Issued to Employees ("APB 25") and has included in Note
17 the pro forma disclosures required by SFAS No. 123, Accounting for
Stock-Based Compensation ("SFAS 123").

F-19

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Foreign Currency Translation

Balance sheet accounts of foreign operations are translated at the exchange
rates in effect at each year-end and income and expense accounts are translated
at the average rates of exchange prevailing during the year. The local
currencies of foreign operations are the functional currencies unless the local
economy is highly inflationary. Translation adjustments are charged or credited
directly to other comprehensive income or loss. Gains and losses from foreign
currency transactions are reported in earnings.

Discontinued Operations

The results of operations of a component of the Company that either has
been disposed of or is classified as held-for-sale on or after January 1, 2002
are reported in discontinued operations if the operations and cash flows of the
component have been or will be eliminated from the ongoing operations of the
Company as a result of the disposal transaction and the Company will not have
any significant continuing involvement in the operations of the component after
the disposal transaction.

Earnings Per Share

Earnings per share amounts, on a basic and diluted basis, have been
calculated based upon the weighted average common shares outstanding or deemed
to be outstanding only for the period after the date of demutualization.

Basic earnings per share is computed based on the weighted average number
of shares outstanding during the period. Diluted earnings per share includes the
dilutive effect of the assumed conversion of forward purchase contracts and
exercise of stock options, using the treasury stock method. Under the treasury
stock method, exercise of the stock options and the forward purchase contracts
is assumed with the proceeds used to purchase common stock at the average market
price for the period. The difference between the number of shares assumed issued
and number of shares assumed purchased represents the dilutive shares.

DEMUTUALIZATION AND INITIAL PUBLIC OFFERING

On April 7, 2000 (the "date of demutualization"), Metropolitan Life
Insurance Company ("Metropolitan Life") converted from a mutual life insurance
company to a stock life insurance company and became a wholly-owned subsidiary
of MetLife, Inc. The conversion was pursuant to an order by the New York
Superintendent of Insurance (the "Superintendent") approving Metropolitan Life's
plan of reorganization, as amended (the "plan").

On the date of demutualization, policyholders' membership interests in
Metropolitan Life were extinguished and eligible policyholders received, in
exchange for their interests, trust interests representing 494,466,664 shares of
common stock of MetLife, Inc. to be held in a trust, cash payments aggregating
$2,550 million and adjustments to their policy values in the form of policy
credits aggregating $408 million, as provided in the plan. In addition,
Metropolitan Life's Canadian branch made cash payments of $327 million in the
second quarter of 2000 to holders of certain policies transferred to Clarica
Life Insurance Company in connection with the sale of a substantial portion of
Metropolitan Life's Canadian operations in 1998, as a result of a commitment
made in connection with obtaining Canadian regulatory approval of that sale.

APPLICATION OF ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FIN 46 which requires certain variable
interest entities to be consolidated by the primary beneficiary of the entity if
the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to
F-20

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The Company is in the process of
assessing the impact of FIN 46 on its consolidated financial statements. Certain
disclosure provisions of FIN 46 were required for December 31, 2002 financial
statements. See "-- Structured Investment Transactions and Variable Interest
Entities."

As of December 31, 2002, the FASB is deliberating on a proposed statement
that would further amend SFAS 133. The proposed statement will address certain
SFAS 133 Implementation Issues. The proposed statement is not expected to have a
significant impact on the Company's consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure ("SFAS 148"), which provides guidance
on how to transition from the intrinsic value method of accounting for
stock-based employee compensation under APB 25 to the fair value method of
accounting from SFAS 123, if a company so elects. Effective January 1, 2003, the
Company adopted the fair value method of recording stock options under SFAS 123.
In accordance with alternatives available under the transitional guidance of
SFAS 148, the Company has elected to apply the fair value method of accounting
for stock options prospectively to awards granted subsequent to January 1, 2003.
As permitted, options granted prior to January 1, 2003, will continue to be
accounted for under APB 25, and the pro forma impact of accounting for these
options at fair value will continue to be disclosed in the consolidated
financial statements until the last of those options vest in 2005.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees Including Indirect
Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires entities to
establish liabilities for certain types of guarantees, and expands financial
statement disclosures for others. Disclosure requirements under FIN 45 are
effective for financial statements of annual periods ending after December 15,
2002 and are applicable to all guarantees issued by the guarantor subject to the
provisions of FIN 45. The initial recognition and initial measurement provisions
of FIN 45 are applicable on a prospective basis to guarantees issued or modified
after December 31, 2002. The Company does not expect the initial adoption of FIN
45 to have a significant impact on the Company's consolidated financial
statements. The adoption of FIN 45 requires the Company to include disclosures
in its consolidated financial statements related to guarantees. See Note 11.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities ("SFAS 146"), which must be adopted for exit
and disposal activities initiated after December 31, 2002. SFAS 146 will require
that a liability for a cost associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is
incurred rather than at the date of an entity's commitment to an exit plan as
required by EITF 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring) ("EITF 94-3"). As discussed in Note 13, in the fourth
quarter of 2001, the Company recorded a charge of $330 million, net of income
taxes of $169 million, associated with business realignment initiatives using
the EITF 94-3 accounting guidance.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
("SFAS 145"). In addition to amending or rescinding other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions, SFAS 145 generally
precludes companies from recording gains and losses from the extinguishment of
debt as an extraordinary item. SFAS 145 also requires sale-leaseback treatment
for certain modifications of a capital lease that result in the lease being
classified as an operating lease. SFAS 145 is effective for fiscal years
beginning after May 15, 2002, and the initial application of this standard did
not have a significant impact on the Company's consolidated financial
statements.

Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 provides
a single model for accounting for long-lived assets to be

F-21

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

disposed of by superseding SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"), and
the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions ("APB 30"). Under SFAS 144, discontinued operations are measured at
the lower of carrying value or fair value less costs to sell, rather than on a
net realizable value basis. Future operating losses relating to discontinued
operations also are no longer recognized before they occur. SFAS 144 (i)
broadens the definition of a discontinued operation to include a component of an
entity (rather than a segment of a business); (ii) requires long-lived assets to
be disposed of other than by sale to be considered held and used until disposed;
and (iii) retains the basic provisions of (a) APB 30 regarding the presentation
of discontinued operations in the statements of income, (b) SFAS 121 relating to
recognition and measurement of impaired long-lived assets (other than goodwill),
and (c) SFAS 121 relating to the measurement of long-lived assets classified as
held-for-sale. Adoption of SFAS 144 did not have a material impact on the
Company's consolidated financial statements other than the presentation as
discontinued operations of net investment income and net investment gains
related to operations of real estate on which the Company initiated disposition
activities subsequent to January 1, 2002 and the classification of such real
estate as held-for-sale on the consolidated balance sheets. See Note 22.

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets ("SFAS 142"). SFAS 142 eliminates the systematic
amortization and establishes criteria for measuring the impairment of goodwill
and certain other intangible assets by reporting unit. The Company did not
amortize goodwill during 2002. Amortization of goodwill was $47 million and $50
million for the years ended December 31, 2001 and 2000, respectively.
Amortization of other intangible assets was not material for the years ended
December 31, 2002, 2001 and 2000. The Company has completed the required
impairment tests of goodwill and indefinite-lived intangible assets. As a result
of these tests, the Company recorded a $5 million charge to earnings relating to
the impairment of certain goodwill assets in the third quarter of 2002 as a
cumulative effect of a change in accounting. There was no impairment of
identified intangible assets or significant reclassifications between goodwill
and other intangible assets at January 1, 2002.

Effective July 1, 2001, the Company adopted SFAS No. 141, Business
Combinations ("SFAS 141"). SFAS 141 requires the purchase method of accounting
for all business combinations and separate recognition of intangible assets
apart from goodwill if such intangible assets meet certain criteria. In
accordance with SFAS 141, the elimination of $5 million of negative goodwill was
reported in net income in the first quarter of 2002 as a cumulative effect of a
change in accounting.

In July 2001, the U.S. Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin ("SAB") No. 102, Selected Loan Loss Allowance and
Documentation Issues ("SAB 102"). SAB 102 summarizes certain of the SEC's views
on the development, documentation and application of a systematic methodology
for determining allowances for loan and lease losses. The application of SAB 102
by the Company did not have a material impact on the Company's consolidated
financial statements.

Effective April 1, 2001, the Company adopted certain additional accounting
and reporting requirements of SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities -- a
Replacement of FASB Statement No. 125, relating to the derecognition of
transferred assets and extinguished liabilities and the reporting of servicing
assets and liabilities. The initial adoption of these requirements did not have
a material impact on the Company's consolidated financial statements.

Effective April 1, 2001, the Company adopted EITF 99-20, Recognition of
Interest Income and Impairment on Certain Investments. This pronouncement
requires investors in certain asset-backed securities to record changes in their
estimated yield on a prospective basis and to apply specific evaluation methods
to these securities for an other-than-temporary decline in value. The initial
adoption of EITF 99-20 did not have a material impact on the Company's
consolidated financial statements.

F-22

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective January 1, 2001, the Company adopted SFAS 133 which established
new accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. The cumulative effect of the adoption of SFAS 133, as of January 1,
2001, resulted in a $33 million increase in other comprehensive income, net of
income taxes of $18 million, and had no material impact on net income. The
increase to other comprehensive income is attributable to net gains on cash
flow-type hedges at transition. Also at transition, the amortized cost of fixed
maturities decreased and other invested assets increased by $22 million,
representing the fair value of certain interest rate swaps that were accounted
for prior to SFAS 133 using fair value-type settlement accounting. During the
year ended December 31, 2001, $18 million of the pre-tax gain reported in
accumulated other comprehensive income at transition was reclassified into net
investment income. The FASB continues to issue additional guidance relating to
the accounting for derivatives under SFAS 133, which may result in further
adjustments to the Company's treatment of derivatives in subsequent accounting
periods.

Effective October 1, 2000, the Company adopted SAB No. 101, Revenue
Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of
the Securities and Exchange Commission's views in applying GAAP to revenue
recognition in financial statements. The requirements of SAB 101 did not have a
material effect on the Company's consolidated financial statements.

Effective January 1, 2000, the Company adopted Statement of Position
("SOP") No. 98-7, Accounting for Insurance and Reinsurance Contracts That Do Not
Transfer Insurance Risk ("SOP 98-7"). SOP 98-7 provides guidance on the method
of accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. SOP 98-7 classifies
insurance and reinsurance contracts for which the deposit method is appropriate
into those that (i) transfer only significant timing risk, (ii) transfer only
significant underwriting risk, (iii) transfer neither significant timing nor
underwriting risk and (iv) have an indeterminate risk. Adoption of SOP 98-7 did
not have a material effect on the Company's consolidated financial statements.

2. SEPTEMBER 11, 2001 TRAGEDIES

On September 11, 2001 terrorist attacks occurred in New York, Washington,
D.C. and Pennsylvania (the "tragedies") triggering a significant loss of life
and property which had an adverse impact on certain of the Company's businesses.
The Company has direct exposure to these events with claims arising from its
Individual, Institutional, Reinsurance and Auto & Home insurance coverages, and
it believes the majority of such claims have been reported or otherwise analyzed
by the Company.

The Company's original estimate of the total insurance losses related to
the tragedies, which was recorded in the third quarter of 2001, was $208
million, net of income taxes of $117 million. Net income for the year ended
December 31, 2002 includes a $17 million, net of income taxes of $9 million,
benefit from the reduction of the liability associated with the tragedies. The
revision to the liability is the result of an analysis completed during the
fourth quarter of 2002, which focused on the emerging incidence experienced over
the past 12 months associated with certain disability products. As of December
31, 2002, the Company's remaining liability for unpaid and future claims
associated with the tragedies was $47 million, principally related to disability
coverages. This estimate has been and will continue to be subject to revision in
subsequent periods, as claims are received from insureds and the claims to
reinsurers are identified and processed. Any revision to the estimate of gross
losses and reinsurance recoveries in subsequent periods will affect net income
in such periods. Reinsurance recoveries are dependent on the continued
creditworthiness of the reinsurers, which may be adversely affected by their
other reinsured losses in connection with the tragedies.

The Company's general account investment portfolios include investments,
primarily comprised of fixed maturities, in industries that were affected by the
tragedies, including airline, other travel, lodging and insurance. Exposures to
these industries also exist through mortgage loans and investments in real
estate. The carrying value of the Company's investment portfolio exposed to
industries affected by the tragedies was approximately $3.7 billion at December
31, 2002.
F-23

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The long-term effects of the tragedies on the Company's businesses cannot
be assessed at this time. The tragedies have had significant adverse effects on
the general economic, market and political conditions, increasing many of the
Company's business risks. This may have a negative effect on MetLife's
businesses and results of operations over time. In particular, the declines in
share prices experienced after the reopening of the U.S. equity markets
following the tragedies have contributed, and may continue to contribute, to a
decline in separate account assets, which in turn may have an adverse effect on
fees earned in the Company's businesses. In addition, the Company has received
and expects to continue to receive disability claims from individuals resulting
from the tragedies.

3. INVESTMENTS

FIXED MATURITIES AND EQUITY SECURITIES

Fixed maturities and equity securities at December 31, 2002 were as
follows:

F-24

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Fixed maturities and equity securities at December 31, 2001 were as
follows:

The Company held foreign currency derivatives with notional amounts of
$2,371 million and $1,925 million to hedge the exchange rate risk associated
with foreign bonds at December 31, 2002 and 2001, respectively.

The Company held fixed maturities at estimated fair values that were below
investment grade or not rated by an independent rating agency that totaled
$11,286 million and $9,790 million at December 31, 2002 and 2001, respectively.
Non-income producing fixed maturities were $416 million and $237 million at
December 31, 2002 and 2001, respectively.

The cost or amortized cost and estimated fair value of bonds at December
31, 2002, by contractual maturity date (excluding scheduled sinking funds), are
shown below:

Actual maturities may differ as a result of prepayments by the issuer.

F-25

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.

Sales of fixed maturities and equity securities classified as
available-for-sale were as follows:

Gross investment losses above exclude writedowns recorded during 2002, 2001
and 2000 for other than temporarily impaired available-for-sale fixed maturities
and equity securities of $1,375 million, $278 million and $324 million,
respectively.

Excluding investments in U.S. Treasury securities and obligations of U.S.
government corporations and agencies, the Company is not exposed to any
significant concentration of credit risk in its fixed maturities portfolio.

SECURITIES LENDING PROGRAM

The Company participates in securities lending programs whereby blocks of
securities, which are included in investments, are loaned to third parties,
primarily major brokerage firms. The Company requires a minimum of 102% of the
fair value of the loaned securities to be separately maintained as collateral
for the loans. Securities with a cost or amortized cost of $14,873 million and
$11,416 million and an estimated fair value of $17,625 million and $12,066
million were on loan under the program at December 31, 2002 and 2001,
respectively. The Company was liable for cash collateral under its control of
$17,862 million and $12,661 million at December 31, 2002 and 2001, respectively.
Security collateral on deposit from customers may not be sold or repledged and
is not reflected in the consolidated financial statements.

STRUCTURED INVESTMENT TRANSACTIONS

The Company securitizes high yield debt securities, investment grade bonds
and structured finance securities. The Company has sponsored five
securitizations with a total of approximately $1,323 million in financial assets
as of December 31, 2002. Two of these transactions included the transfer of
assets totaling approximately $289 million in 2001, resulting in the recognition
of an insignificant amount of investment gains. The Company's beneficial
interests in these SPEs as of December 31, 2002 and 2001 and the related
investment income for the years ended December 31, 2002, 2001 and 2000 were
insignificant.

The Company also invests in structured notes and similar type instruments,
which generally provide equity-based returns on debt securities. The carrying
value of such investments was approximately $870 million and $1.6 billion at
December 31, 2002 and 2001, respectively. The related income recognized was $1
million, $44 million and $62 million for the years ended December 31, 2002, 2001
and 2000, respectively.

ASSETS ON DEPOSIT AND HELD IN TRUST

The Company had investment assets on deposit with regulatory agencies with
a fair market value of $936 million and $845 million at December 31, 2002 and
2001, respectively. Company securities held in trust to satisfy collateral
requirements had an amortized cost of $1,949 million and $1,918 million at
December 31, 2002 and 2001, respectively.

F-26

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

MORTGAGE LOANS ON REAL ESTATE

Mortgage loans on real estate were categorized as follows:

Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 2002, approximately 18%,
8% and 8% of the properties were located in California, New York and Florida,
respectively. Generally, the Company (as the lender) requires that a minimum of
one-fourth of the purchase price of the underlying real estate be paid by the
borrower.

Certain of the Company's real estate joint ventures have mortgage loans
with the Company. The carrying values of such mortgages were $620 million and
$644 million at December 31, 2002 and 2001, respectively.

Changes in mortgage loan valuation allowances were as follows:

A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:

The average investment in impaired mortgage loans on real estate was $1,088
million, $947 million and $912 million for the years ended December 31, 2002,
2001 and 2000, respectively. Interest income on impaired mortgage loans was $91
million, $103 million and $80 million for the years ended December 31, 2002,
2001 and 2000, respectively.

F-27

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The investment in restructured mortgage loans on real estate was $414
million and $685 million at December 31, 2002 and 2001, respectively. Interest
income of $44 million, $76 million and $77 million was recognized on
restructured loans for the years ended December 31, 2002, 2001 and 2000,
respectively. Gross interest income that would have been recorded in accordance
with the original terms of such loans amounted to $41 million, $60 million and
$74 million for the years ended December 31, 2002, 2001 and 2000, respectively.

Mortgage loans on real estate with scheduled payments of 60 days (90 days
for agriculture mortgages) or more past due or in foreclosure had an amortized
cost of $40 million and $53 million at December 31, 2002 and 2001, respectively.

REAL ESTATE AND REAL ESTATE JOINT VENTURES

Real estate and real estate joint ventures consisted of the following:

Accumulated depreciation on real estate was $1,951 million and $2,504
million at December 31, 2002 and 2001, respectively. Related depreciation
expense was $227 million, $220 million and $224 million for the years ended
December 31, 2002, 2001 and 2000, respectively. These amounts include $48
million, $79 million and $80 million of depreciation expense related to
discontinued operations for the years ended December 31, 2002, 2001 and 2000,
respectively.

Real estate and real estate joint ventures were categorized as follows:

The Company's real estate holdings are primarily located throughout the
United States. At December 31, 2002, approximately 37%, 21% and 13% of the
Company's real estate holdings were located in New York, California and Texas,
respectively.

F-28

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in real estate and real estate joint ventures held-for-sale
valuation allowance were as follows:

Investment income related to impaired real estate and real estate joint
ventures held-for-investment was $40 million, $22 million and $11 million for
the years ended December 31, 2002, 2001 and 2000, respectively. Investment
income related to impaired real estate and real estate joint ventures
held-for-sale was $11 million, $31 million and $52 million for the years ended
December 31, 2002, 2001 and 2000, respectively. The carrying value of non-income
producing real estate and real estate joint ventures was $63 million and $14
million at December 31, 2002 and 2001, respectively.

The Company owned real estate acquired in satisfaction of debt of $10
million and $49 million at December 31, 2002 and 2001, respectively.

LEVERAGED LEASES

Leveraged leases, included in other invested assets, consisted of the
following:

The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from two to 15 years, but in
certain circumstances are as long as 30 years. These receivables are generally
collateralized by the related property. The Company's deferred tax provision
related to leveraged leases was $981 million and $1,077 million at December 31,
2002 and 2001, respectively.

F-29

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET INVESTMENT INCOME

The components of net investment income were as follows:

- ---------------

(1) Excludes amounts related to real estate held-for-sale presented as
discontinued operations in accordance with SFAS 144.

NET INVESTMENT LOSSES

Net investment losses, including changes in valuation allowances, were as
follows:

- ---------------

(1) The amount presented for the year ended December 31, 2002 excludes amounts
related to sales of real estate held-for-sale presented as discontinued
operations in accordance with SFAS 144.

F-30

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Investment gains and losses are net of related policyholder amounts. The
amounts netted against investment gains and losses are (i) amortization of
deferred policy acquisition costs to the extent that such amortization results
from investment gains and losses, (ii) adjustments to participating
contractholder accounts when amounts equal to such investment gains and losses
are applied to the contractholder's accounts, and (iii) adjustments to the
policyholder dividend obligation resulting from investment gains and losses.
This presentation may not be comparable to presentations made by other insurers.

NET UNREALIZED INVESTMENT GAINS

The components of net unrealized investment gains, included in accumulated
other comprehensive income, were as follows:

The changes in net unrealized investment gains were as follows:

F-31

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. DERIVATIVE INSTRUMENTS

The table below provides a summary of notional amount and fair value of
derivative financial instruments held at December 31, 2002 and 2001:

The following is a reconciliation of the notional amounts by derivative
type and strategy at December 31, 2002 and 2001:

F-32

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 2002:

The following table presents the notional amounts and fair values of
derivatives by type of hedge designation at December 31, 2002 and 2001:

For the years ended December 31, 2002, 2001 and 2000, the Company
recognized net investment income of $23 million, $32 million and $13 million,
respectively, from the periodic settlement of interest rate and foreign currency
swaps.

During the year ended December 31, 2002, the Company recognized $30 million
in net investment losses related to qualifying fair value hedges. Accordingly,
$34 million of unrealized gains on fair value hedged investments were recognized
in net investment gains and losses. There were no derivatives designated as fair
value hedges during the year ended December 31, 2001. There were no discontinued
hedges during the year ended December 31, 2002.

For the years ended December 31, 2002 and 2001, the amounts accumulated in
other comprehensive income relating to cash flow hedges were losses of $24
million and gains of $71 million, respectively. During the year ended December
31, 2002, the Company recognized other comprehensive losses of $142 million
relating to the effective portion of cash flow hedges. During the year ended
December 31, 2002, $10 million of other comprehensive income and $57 million of
other comprehensive losses were reclassified into net investment income and net
investment losses, respectively. During the year ended December 31, 2001, $19
million of other comprehensive income was reclassified into net investment
income due to the SFAS 133 transition adjustment.

F-33

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Approximately $6 million and $12 million of the losses reported in accumulated
other comprehensive income at December 31, 2002 are expected to be reclassified
during the year ending December 31, 2003 into net investment income and net
investment gains and losses, respectively, as the underlying investments mature
or expire according to their original terms.

For the years ended December 31, 2002 and 2001, the Company recognized net
investment income of $32 million and $24 million, respectively, and net
investment losses of $172 million and net investment gains of $100 million,
respectively, from derivatives not qualifying as accounting hedges. The use of
these non-speculative derivatives is permitted by the Department.

5. FAIR VALUE INFORMATION

The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein may
not necessarily be indicative of amounts that could be realized in a current
market exchange. The use of different assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts.

Amounts related to the Company's financial instruments were as follows:

F-34

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:

FIXED MATURITIES AND EQUITY SECURITIES

The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities for which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.

MORTGAGE LOANS ON REAL ESTATE, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO
FUND PARTNERSHIP INVESTMENTS

Fair values for mortgage loans on real estate are estimated by discounting
expected future cash flows, using current interest rates for similar loans with
similar credit risk. For mortgage loan commitments, the estimated fair value is
the net premium or discount of the commitments. Commitments to fund partnership
investments have no stated interest rate and are assumed to have a fair value of
zero.

POLICY LOANS

The carrying values for policy loans approximate fair value.

CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The carrying values for cash and cash equivalents and short-term
investments approximated fair values due to the short-term maturities of these
instruments.

F-35

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

POLICYHOLDER ACCOUNT BALANCES

The fair value of policyholder account balances are estimated by
discounting expected future cash flows, based upon interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the agreements being valued.

SHORT-TERM AND LONG-TERM DEBT, PAYABLES UNDER SECURITIES LOANED TRANSACTIONS
AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS

The fair values of short-term and long-term debt, payables under securities
loaned transactions and Company-obligated mandatorily redeemable securities of
subsidiary trusts are determined by discounting expected future cash flows,
using risk rates currently available for debt with similar terms and remaining
maturities.

DERIVATIVE INSTRUMENTS

The fair value of derivative instruments, including financial futures,
financial forwards, interest rate, credit default and foreign currency swaps,
foreign currency forwards, caps, floors, options and written covered calls are
based upon quotations obtained from dealers or other reliable sources. See Note
4 for derivative fair value disclosures.

6. EMPLOYEE BENEFIT PLANS

PENSION BENEFIT AND OTHER BENEFIT PLANS

The Company is both the sponsor and administrator of defined benefit
pension plans covering eligible employees and sales representatives of the
Company. Retirement benefits are based upon years of credited service and final
average earnings history.

The Company also provides certain postemployment benefits and certain
postretirement health care and life insurance benefits for retired employees
through insurance contracts. Substantially all of the Company's employees may,
in accordance with the plans applicable to the postretirement benefits, become
eligible for these benefits if they attain retirement age, with sufficient
service, while working for the Company.

F-36

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:

F-37

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The assumptions used in determining the aggregate projected benefit
obligation and aggregate contract value for the pension and other benefits were
as follows:

For the largest of the plans sponsored by the Company (the Metropolitan
Life Retirement Plan for United States Employees, with a projected benefit
obligation of $4.3 billion or 98.6% of all qualified plans at December 31,
2002), the discount rate, expected rate of return on plan assets, and the range
of rates of future compensation increases used in that plan's valuation at
December 31, 2002 were 6.75%, 9% and 4% to 8%, respectively. The discount rate
is based on the yield of a hypothetical portfolio of high-quality debt
instruments available on the valuation date, which would provide the necessary
future cash flows to pay the aggregate projected benefit obligation when due.
The expected rate of return on plan assets is based on anticipated performance
of the various asset sectors, which the plan invests in, inflation expectations
and long-term historical returns of the plan assets as well as other factors.
The expected rate of return on plan assets for use in that plan's valuation in
2003 is currently anticipated to be 8.5%. The discount rate of 4% and 9.5% and
the expected rate of return on plan assets of 4% and 10% are attributable to the
Company's international subsidiaries in Taiwan and Mexico, respectively. The
rate of compensation increase of 2% in 2002 and 2001 is attributable to the
Company's subsidiary in Taiwan. These rates are indicative of the economic
environments in those countries.

The assumed health care cost trend rates used in measuring the accumulated
nonpension postretirement benefit obligation were as follows:

Assumed health care cost trend rates may have a significant effect on the
amounts reported for health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:

The components of net periodic benefit cost were as follows:

F-38

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SAVINGS AND INVESTMENT PLANS

The Company sponsors savings and investment plans for substantially all
employees under which the Company matches a portion of employee contributions.
The Company contributed $49 million, $55 million and $65 million for the years
ended December 31, 2002, 2001 and 2000, respectively.

7. CLOSED BLOCK

On the date of demutualization, Metropolitan Life established a closed
block for the benefit of holders of certain individual life insurance policies
of Metropolitan Life. Assets have been allocated to the closed block in an
amount that has been determined to produce cash flows which, together with
anticipated revenues from the policies included in the closed block, are
reasonably expected to be sufficient to support obligations and liabilities
relating to these policies, including, but not limited to, provisions for the
payment of claims and certain expenses and taxes, and to provide for the
continuation of policyholder dividend scales in effect for 1999, if the
experience underlying such dividend scales continues, and for appropriate
adjustments in such scales if the experience changes. At least annually, the
Company compares actual and projected experience against the experience assumed
in the then-current dividend scales. Dividend scales are adjusted periodically
to give effect to changes in experience.

The closed block assets, the cash flows generated by the closed block
assets and the anticipated revenues from the policies in the closed block will
benefit only the holders of the policies in the closed block. To the extent
that, over time, cash flows from the assets allocated to the closed block and
claims and other experience related to the closed block are, in the aggregate,
more or less favorable than what was assumed when the closed block was
established, total dividends paid to closed block policyholders in the future
may be greater than or less than the total dividends that would have been paid
to these policyholders if the policyholder dividend scales in effect for 1999
had been continued. Any cash flows in excess of amounts assumed will be
available for distribution over time to closed block policyholders and will not
be available to stockholders. If the closed block has insufficient funds to make
guaranteed policy benefit payments, such payments will be made from assets
outside of the closed block. The closed block will continue in effect as long as
any policy in the closed block remains in-force. The expected life of the closed
block is over 100 years.

The Company uses the same accounting principles to account for the
participating policies included in the closed block as it used prior to the date
of demutualization. However, the Company establishes a policyholder dividend
obligation for earnings that will be paid to policyholders as additional
dividends as described below. The excess of closed block liabilities over closed
block assets at the effective date of the demutualization (adjusted to eliminate
the impact of related amounts in accumulated other comprehensive income)
represents the estimated maximum future earnings from the closed block expected
to result from operations attributed to the closed block after income taxes.
Earnings of the closed block are recognized in income over the period the
policies and contracts in the closed block remain in-force. Management believes
that over time the actual cumulative earnings of the closed block will
approximately equal the expected cumulative earnings due to the effect of
dividend changes. If, over the period the closed block remains in existence, the
actual cumulative earnings of the closed block is greater than the expected
cumulative earnings of the closed block, the Company will pay the excess of the
actual cumulative earnings of the closed block over the expected cumulative
earnings to closed block policyholders as additional policyholder dividends
unless offset by future unfavorable experience of the closed block and,
accordingly, will recognize only the expected cumulative earnings in income with
the excess recorded as a policyholder dividend obligation. If over such period,
the actual cumulative earnings of the closed block is less than the expected
cumulative earnings of the closed block, the Company will recognize only the
actual earnings in income. However, the Company may change policyholder dividend
scales in the future, which would be intended to increase future actual earnings
until the actual cumulative earnings equal the expected cumulative earnings.
Amounts reported for the period after demutualization are as of April 1, 2000
and for the period beginning on April 1, 2000 (the effect of transaction from
April 1, 2000 through April 6, 2000 is not considered material).

F-39

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Closed block liabilities and assets designated to the closed block are as
follows:

F-40

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information regarding the policyholder dividend obligation is as follows:

Closed block revenues and expenses were as follows:

F-41

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The change in maximum future earnings of the closed block was as follows:

During the year ended December 31, 2002, the allocation of assets to the
closed block was revised to appropriately classify assets in accordance with the
plan of demutualization. The reallocation of assets had no impact on
consolidated assets or liabilities.

Metropolitan Life charges the closed block with federal income taxes, state
and local premium taxes, and other additive state or local taxes, as well as
investment management expenses relating to the closed block as provided in the
plan of demutualization. Metropolitan Life also charges the closed block for
expenses of maintaining the policies included in the closed block.

Many of the derivative instrument strategies used by the Company are also
used for the closed block. The table below provides a summary of the notional
amount and fair value of derivatives by hedge accounting classification at:

The amounts accumulated in other comprehensive loss relating to cash flow
hedges were gains of $21 million for both the years ended December 31, 2002 and
2001. During the year ended December 31, 2002, the Company recognized other
comprehensive gains of $4 million relating to the effective portion of cash flow
hedges. Reclassifications are recognized over the life of the hedged item.
During the year ended December 31, 2002, $4 million of other comprehensive loss
was reclassified into net investment income. Approximately $3 million of the
gains reported in accumulated other comprehensive loss is expected to be
reclassified into net investment income during the year ending December 31,
2003, as the underlying investments mature or expire according to their original
terms.

For the years ended December 31, 2002 and 2001, the Company recognized net
investment losses of $11 million and net investment gains of $5 million,
respectively, from derivatives not qualifying as accounting hedges. The use of
these non-speculative derivatives is permitted by the Department.

The cumulative effect of the adoption of SFAS 133, as of January 1, 2001,
resulted in $11 million of other comprehensive income, net of income taxes of $6
million.

F-42

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. SEPARATE ACCOUNTS

Separate accounts include two categories of account types: non-guaranteed
separate accounts totaling $44,925 million and $48,912 million at December 31,
2002 and 2001, respectively, for which the policyholder assumes the investment
risk, and guaranteed separate accounts totaling $14,768 million and $13,802
million at December 31, 2002 and 2001, respectively, for which the Company
contractually guarantees either a minimum return or account value to the
policyholder.

Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in the
Company's revenues as universal life and investment-type product policy fees and
totaled $544 million, $564 million and $667 million for the years ended December
31, 2002, 2001 and 2000, respectively. Guaranteed separate accounts consisted
primarily of Met Managed Guaranteed Interest Contracts and participating close
out contracts. The average interest rates credited on these contracts were 4.8%
and 7.0% at December 31, 2002 and 2001, respectively. The assets that support
these liabilities were comprised of $12,536 million and $11,888 million in fixed
maturities at December 31, 2002 and 2001, respectively. The portfolios are
segregated from other investments and are managed to minimize liquidity and
interest rate risk. In order to minimize the risk of early withdrawals to invest
in instruments yielding a higher return, these investment products carry a
graded surrender charge as well as a market value adjustment.

9. DEBT

Debt consisted of the following:

The Company maintains committed and unsecured credit facilities aggregating
$2,434 million ($1,140 million expiring in 2003 and $1,294 million expiring in
2005). If these facilities were drawn upon, they would bear interest at rates
stated in the agreements. The facilities can be used for general corporate
purposes and also provide support for the Company's commercial paper program. At
December 31, 2002, the Company had drawn approximately $28 million under the
facilities expiring in 2005 at interest rates ranging from 4.39% to 5.57%. At
December 31, 2002, the Company had approximately $625 million in letters of
credit from various banks.

Payments of interest and principal on the surplus notes, subordinated to
all other indebtedness, may be made only with the prior approval of the
insurance department of the state of domicile. Subject to the prior approval of
the Superintendent, the $300 million 7.45% surplus notes due 2023 may be
redeemed, in whole or in part, at the

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METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

election of Metropolitan Life at any time on or after November 1, 2003 and, if
redeemed prior to November 2013, would include a premium.

The investment-related exchangeable debt instrument is payable in cash or
by delivery of an underlying security owned by the Company. The amount of the
debt payable at maturity is greater than the principal of the debt if the market
value of the underlying security appreciates above certain levels at the date of
debt repayment as compared to the market value of the underlying security at the
date of debt issuance. At December 31, 2001, the underlying security pledged as
collateral had a market value of $240 million.

The aggregate maturities of long-term debt for the Company are $448 million
in 2003, $12 million in 2004, $395 million in 2005, $601 million in 2006, $4
million in 2007 and $2,965 million thereafter.

Short-term debt of the Company consisted of commercial paper with a
weighted average interest rate of 1.5% and a weighted average maturity of 74
days at December 31, 2002. Short-term debt of the Company consisted of
commercial paper with a weighted average interest rate of 2.1% and a weighted
average maturity of 87 days at December 31, 2001. The Company also has other
collateralized borrowings with a weighted average coupon rate of 5.83% and a
weighted average maturity of 34 days at December 31, 2002. Such securities had a
weighted average coupon rate of 7.25% and a weighted average maturity of 30 days
at December 31, 2001.

Interest expense related to the Company's indebtedness included in other
expenses was $288 million, $252 million and $377 million for the years ended
December 31, 2002, 2001 and 2000, respectively.

10. COMPANY-OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS

METLIFE CAPITAL TRUST I. In April 2000, MetLife Capital Trust I, a
Delaware statutory business trust wholly-owned by the Holding Company, issued
20,125,000 8.00% equity security units ("units"). Each unit consists of (i) a
purchase contract under which the holder agrees to purchase, for $50.00, shares
of common stock of the Holding Company on May 15, 2003 (59,771,250 shares at
December 31, 2002 and 2001 based on the average market price at December 31,
2002 and 2001) and (ii) a capital security, with a stated liquidation amount of
$50.00 and mandatorily redeemable on May 15, 2005. The number of shares to be
purchased at such date will be determined based on the average trading price of
the Holding Company's common stock. The proceeds from the sale of the units were
used to acquire $1,006 million 8.00% debentures of the Holding Company ("MetLife
debentures"). The capital securities represent undivided beneficial ownership
interests in MetLife Capital Trust I's assets, which consist solely of the
MetLife debentures. These securities are pledged to collateralize the
obligations of the unit holder under the related purchase contracts. Holders of
the capital securities are entitled to receive cumulative cash distributions
accruing from April 2000 and payable quarterly in arrears commencing August 15,
2000 at an annual rate of 8.00%. The Holding Company irrevocably guarantee, on a
senior and unsecured basis, the payment in full of distributions on the capital
securities and the stated liquidation amount of the capital securities, in each
case to the extent of available trust funds. Holders of the capital securities
generally have no voting rights. Capital securities outstanding were $988
million and $980 million, net of unamortized discounts of $18 million and $26
million, at December 31, 2002 and 2001, respectively.

The MetLife debentures bear interest at an annual rate of 8.00% of the
principal amount, payable quarterly in arrears commencing August 15, 2000 and
mature on May 15, 2005. These debentures are unsecured. The Holding Company's
right to participate in the distribution of assets of any subsidiary upon the
subsidiary's liquidation, reorganization or otherwise, is subject to the prior
claims of creditors of the subsidiary, except to the extent the Holding Company
may be recognized as a creditor of that subsidiary. Accordingly, the Holding
Company's obligations under the debentures are effectively subordinated to all
existing and future liabilities of its subsidiaries. Interest expense on the
capital securities is included in other expenses and was $81 million, $81
million and $59 million for the years ended December 31, 2002, 2001 and 2000,
respectively.

In February 2003, the Company dissolved MetLife Capital Trust I,
distributed the MetLife debentures to the holders of the capital securities in
exchange for the capital securities and the interest rate on the MetLife
debentures was reset in connection with the remarketing of the debentures. See
Note 23.

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METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GENAMERICA CAPITAL I. In June 1997, GenAmerica Corporation ("GenAmerica")
issued $125 million of 8.525% capital securities through a wholly-owned
subsidiary trust, GenAmerica Capital I. GenAmerica has fully and unconditionally
guaranteed, on a subordinated basis, the obligation of the trust under the
capital securities and is obligated to mandatorily redeem the securities on June
30, 2027. GenAmerica may prepay the securities any time after June 30, 2007.
Capital securities outstanding were $119 million and $118 million, net of
unamortized discounts of $6 million and $7 million, at December 31, 2002 and
2001, respectively. Interest expense on these instruments is included in other
expenses and was $11 million for each of the years ended December 31, 2002, 2001
and 2000.

RGA CAPITAL TRUST I. In December 2001, a subsidiary of the Company, RGA,
through its wholly-owned trust RGA Capital Trust I (the "Trust") issued
4,500,000 Preferred Income Equity Redeemable Securities ("PIERS") Units. Each
PIERS unit consists of (i) a preferred security issued by the Trust, having a
stated liquidation amount of $50 per unit, representing an undivided beneficial
ownership interest in the assets of the Trust, which consist solely of junior
subordinated debentures issued by RGA which have a principal amount at maturity
of $50 and a stated maturity of March 18, 2051, and (ii) a warrant to purchase,
at any time prior to December 15, 2050, 1.2508 shares of RGA stock at an
exercise price of $50. The fair market value of the warrant on the issuance date
was $14.87 and is detachable from the preferred security. RGA fully and
unconditionally guarantees, on a subordinated basis, the obligations of the
Trust under the preferred securities. The preferred securities and subordinated
debentures were issued at a discount (original issue discount) to the face or
liquidation value of $14.87 per security. The securities will accrete to their
$50 face/liquidation value over the life of the security on a level yield basis.
The weighted average effective interest rate on the preferred securities and the
subordinated debentures is 8.25% per annum. Capital securities outstanding were
$158 million, net of unamortized discount of $67 million, at both December 31,
2002 and 2001.

11. COMMITMENTS, CONTINGENCIES AND GUARANTEES

LITIGATION

Sales Practices Claims

Over the past several years, Metropolitan Life, New England Mutual Life
Insurance Company ("New England Mutual") and General American Life Insurance
Company ("General American") have faced numerous claims, including class action
lawsuits, alleging improper marketing and sales of individual life insurance
policies or annuities. These lawsuits are generally referred to as "sales
practices claims."

In December 1999, a federal court approved a settlement resolving sales
practices claims on behalf of a class of owners of permanent life insurance
policies and annuity contracts or certificates issued pursuant to individual
sales in the United States by Metropolitan Life, Metropolitan Insurance and
Annuity Company or Metropolitan Tower Life Insurance Company between January 1,
1982 and December 31, 1997. The class includes owners of approximately six
million in-force or terminated insurance policies and approximately one million
in-force or terminated annuity contracts or certificates.

Similar sales practices class actions against New England Mutual, with
which Metropolitan Life merged in 1996, and General American, which was acquired
in 2000, have been settled. In October 2000, a federal court approved a
settlement resolving sales practices claims on behalf of a class of owners of
permanent life insurance policies issued by New England Mutual between January
1, 1983 through August 31, 1996. The class includes owners of approximately
600,000 in-force or terminated policies. A federal court has approved a
settlement resolving sales practices claims on behalf of a class of owners of
permanent life insurance policies issued by General American between January 1,
1982 through December 31, 1996. An appellate court has affirmed the order
approving the settlement. The class includes owners of approximately 250,000
in-force or terminated policies. Implementation of the General American class
action settlement is proceeding.

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METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Certain class members have opted out of the class action settlements noted
above and have brought or continued non-class action sales practices lawsuits.
In addition, other sales practices lawsuits have been brought. As of December
31, 2002, there are approximately 420 sales practices lawsuits pending against
Metropolitan Life, approximately 60 sales practices lawsuits pending against New
England Mutual and approximately 35 sales practices lawsuits pending against
General American. Metropolitan Life, New England Mutual and General American
continue to defend themselves vigorously against these lawsuits. Some individual
sales practices claims have been resolved through settlement, won by dispositive
motions, or, in a few instances, have gone to trial. Most of the current cases
seek substantial damages, including in some cases punitive and treble damages
and attorneys' fees. Additional litigation relating to the Company's marketing
and sales of individual life insurance may be commenced in the future.

The Metropolitan Life class action settlement did not resolve two putative
class actions involving sales practices claims filed against Metropolitan Life
in Canada, and these actions remain pending. In March 2002, a purported class
action complaint was filed in a federal court in Kansas by S-G Metals
Industries, Inc. against New England Mutual. The complaint seeks certification
of a class on behalf of corporations and banks that purchased participating life
insurance policies, as well as persons who purchased participating policies for
use in pension plans or through work site marketing. These policyholders were
not part of the New England Mutual class action settlement noted above. The
action was transferred to a federal court in Massachusetts. New England Mutual
moved to dismiss the case and in November 2002, the federal district court
dismissed the case. S-G Metals has filed a notice of appeal. New England Mutual
intends to continue to defend itself vigorously against the case.

The Company believes adequate provision has been made in its consolidated
financial statements for all probable and reasonably estimable losses for sales
practices claims against Metropolitan Life, New England Mutual and General
American.

Regulatory authorities in a small number of states have had investigations
or inquiries relating to Metropolitan Life's, New England Mutual's or General
American's sales of individual life insurance policies or annuities. Over the
past several years, these and a number of investigations by other regulatory
authorities were resolved for monetary payments and certain other relief. The
Company may continue to resolve investigations in a similar manner.

Asbestos-Related Claims

Metropolitan Life is a defendant in thousands of lawsuits seeking
compensatory and punitive damages for personal injuries allegedly caused by
exposure to asbestos or asbestos-containing products. Metropolitan Life has
never engaged in the business of manufacturing, producing, distributing or
selling asbestos or asbestos-containing products nor has Metropolitan Life
issued liability or workers' compensation insurance to companies in the business
of manufacturing, producing, distributing or selling asbestos or
asbestos-containing products. Rather, these lawsuits have principally been based
upon allegations relating to certain research, publication and other activities
of one or more of Metropolitan Life's employees during the period from the
1920's through approximately the 1950's and alleging that Metropolitan Life
learned or should have learned of certain health risks posed by asbestos and,
among other things, improperly publicized or failed to disclose those health
risks. Metropolitan Life believes that it should not have legal liability in
such cases.

Legal theories asserted against Metropolitan Life have included negligence,
intentional tort claims and conspiracy claims concerning the health risks
associated with asbestos. Although Metropolitan Life believes it has meritorious
defenses to these claims, and has not suffered any adverse monetary judgments in
respect of these claims, due to the risks and expenses of litigation, almost all
past cases have been resolved by settlements. Metropolitan Life's defenses
(beyond denial of certain factual allegations) to plaintiffs' claims include
that: (i) Metropolitan Life owed no duty to the plaintiffs -- it had no special
relationship with the plaintiffs and did not manufacture, produce, distribute or
sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs
cannot demonstrate justifiable detrimental reliance; and (iii) plaintiffs cannot
demonstrate proximate causation. In
F-46

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

defending asbestos cases, Metropolitan Life selects various strategies depending
upon the jurisdictions in which such cases are brought and other factors which,
in Metropolitan Life's judgment, best protect Metropolitan Life's interests.
Strategies include seeking to settle or compromise claims, motions challenging
the legal or factual basis for such claims or defending on the merits at trial.
In early 2002 and in early 2003, two trial courts granted motions dismissing
claims against Metropolitan Life on some or all of the above grounds. Other
courts have denied motions brought by Metropolitan Life to dismiss cases without
the necessity of trial. There can be no assurance that Metropolitan Life will
receive favorable decisions on motions in the future. Metropolitan Life intends
to continue to exercise its best judgment regarding settlement or defense of
such cases, including when trials of these cases are appropriate.

The following table sets forth the total number of asbestos personal injury
claims pending against Metropolitan Life as of the dates indicated, the number
of new claims during the years ended on those dates and the total settlement
payments made to resolve asbestos personal injury claims during those years:

- ---------------

(1) Settlement payments represent payments made by Metropolitan Life during the
year in connection with settlements made in that year and in prior years.
Amounts do not include Metropolitan Life's attorneys' fees and expenses and
do not reflect amounts received from insurance carriers.

During the fourth quarter of 2002, Metropolitan Life analyzed its claims
experience and reviewed external publications and numerous variables to identify
trends and assessed their impact on its recorded asbestos liability. Certain
publications suggest a trend towards more asbestos-related claims and a greater
awareness of asbestos litigation generally by potential plaintiffs and
plaintiffs' lawyers. Plaintiffs' lawyers continue to advertise heavily with
respect to asbestos litigation. Bankruptcies and reorganizations of other
defendants in asbestos litigation may increase the pressures on remaining
defendants, including Metropolitan Life. Through the first nine months of 2002,
the number of new claims received by Metropolitan Life was lower than those
received during the comparable 2001 period. However, the number of new claims
received by Metropolitan Life during the fourth quarter of 2002 was
significantly higher than those received in the prior year quarter, resulting in
more new claims being received by Metropolitan Life in 2002 than in 2001.
Factors considered also included expected trends in filing cases, the dates of
initial exposure of plaintiffs to asbestos, the likely percentage of total
asbestos claims which included Metropolitan Life as a defendant and experience
in claims settlement negotiations.

Metropolitan Life also considered views derived from actuarial calculations
it made in the fourth quarter of 2002. These calculations were made using, among
other things, current information regarding Metropolitan Life's claims and
settlement experience, information available in public reports, as well as a
study regarding the possible future incidence of mesothelioma. Based on all of
the above information, including greater than expected claims experience over
the last three years, Metropolitan Life expects to receive more claims in the
future than it had previously expected. Previously, Metropolitan Life's
liability reflected that the increase in asbestos-related claims was a result of
an acceleration in the reporting of such claims; the liability now reflects that
such an increase is also the result of an increase in the total number of
asbestos-related claims expected to be received by Metropolitan Life.
Accordingly, Metropolitan Life increased its recorded liability for
asbestos-related claims by $402 million from approximately $820 million to
$1,225 million at December 31, 2002. This total recorded asbestos-related
liability (after the self-insured retention) is within the coverage of the
excess insurance policies discussed below.

F-47

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1998, Metropolitan Life paid $878 million in premiums for excess
insurance policies for asbestos-related claims. The excess insurance policies
for asbestos-related claims provide for recovery of losses up to $1,500 million,
which is in excess of a $400 million self-insured retention. The
asbestos-related policies are also subject to annual and per-claim sublimits.
Amounts are recoverable under the policies annually with respect to claims paid
during the prior calendar year. Although amounts paid by Metropolitan Life in
any given year that may be recoverable in the next calendar year under the
policies will be reflected as a reduction in the Company's operating cash flows
for the year in which they are paid, management believes that the payments will
not have a material adverse effect on the Company's liquidity.

Each asbestos-related policy contains an experience fund and a reference
fund that provides for payments to Metropolitan Life at the commutation date if
the reference fund is greater than zero at commutation or pro rata reductions
from time to time in the loss reimbursements to Metropolitan Life if the
cumulative return on the reference fund is less than the return specified in the
experience fund. The return in the reference fund is tied to performance of the
Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. A
claim will be made under the excess insurance policies in 2003 for the amounts
paid with respect to asbestos litigation in excess of the retention. Based on
performance of the reference fund, at December 31, 2002, the loss reimbursements
to Metropolitan Life in 2003 and the recoverable with respect to later periods
will be $42 million less than the amount of the recorded losses. Such foregone
loss reimbursements may be recovered upon commutation depending upon future
performance of the reference fund. The foregone loss reimbursements are
estimated to be $9 million with respect to 2002 claims and $42 million in the
aggregate.

The $402 million increase in the recorded liability for asbestos claims
less the foregone loss reimbursement adjustment of $42 million ($27 million, net
of income tax) resulted in an increase in the recoverable of $360 million. At
December 31, 2002, a portion ($136 million) of the $360 million recoverable was
recognized in income while the remainder ($224 million) was recorded as a
deferred gain which is expected to be recognized in income in the future over
the estimated settlement period of the excess insurance policies. The $402
million increase in the recorded liability, less the portion of the recoverable
recognized in income, resulted in a net expense of $266 million ($169 million,
net of income tax). The $360 million recoverable may change depending on the
future performance of the Standard & Poor's 500 Index and the Lehman Brothers
Aggregate Bond Index.

As a result of the excess insurance policies, $1,237 million is recorded as
a recoverable at December 31, 2002 ($224 million of which is recorded as a
deferred gain as mentioned above); the amount includes recoveries expected to be
obtained in 2003 for amounts paid in 2002. If at some point in the future, the
Company believes the liability for probable and estimable losses for
asbestos-related claims should be increased, an expense would be recorded and
the insurance recoverable would be adjusted subject to the terms, conditions and
limits of the excess insurance policies. Portions of the change in the insurance
recoverable would be recorded as a deferred gain and amortized into income over
the estimated remaining settlement period of the insurance policies.

The Company believes adequate provision has been made in its consolidated
financial statements for all probable and reasonably estimable losses for
asbestos-related claims. The ability of Metropolitan Life to estimate its
ultimate asbestos exposure is subject to considerable uncertainty due to
numerous factors. The availability of data is limited and it is difficult to
predict with any certainty numerous variables that can affect liability
estimates, including the number of future claims, the cost to resolve claims,
the disease mix and severity of disease, the jurisdiction of claims filed, tort
reform efforts and the impact of any possible future adverse verdicts and their
amounts.

Recent bankruptcies of other companies involved in asbestos litigation, as
well as advertising by plaintiffs' asbestos lawyers, may be resulting in an
increase in the number of claims and the cost of resolving claims, as well as
the number of trials and possible adverse verdicts Metropolitan Life may
experience. Plaintiffs are seeking additional funds from defendants, including
Metropolitan Life, in light of such recent bankruptcies by certain other
defendants. It is likely that bills will be introduced in 2003 in the United
States Congress to reform asbestos litigation. While the Company strongly
supports reform efforts, there can be no assurance that legislative reforms
F-48

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

will be enacted. Metropolitan Life will continue to study its claims experience,
review external literature regarding asbestos claims experience in the United
States and consider numerous variables that can affect its asbestos liability
exposure, including bankruptcies of other companies involved in asbestos
litigation and legislative and judicial developments, to identify trends and to
assess their impact on the recorded asbestos liability.

The number of asbestos cases that may be brought or the aggregate amount of
any liability that Metropolitan Life may ultimately incur is uncertain.
Accordingly, it is reasonably possible that the Company's total exposure to
asbestos claims may be greater than the liability recorded by the Company in its
consolidated financial statements and that future charges to income may be
necessary. While the potential future charges could be material in particular
quarterly or annual periods in which they are recorded, based on information
currently known by management, it does not believe any such charges are likely
to have a material adverse effect on the Company's consolidated financial
position.

Property and Casualty Actions

Purported class action suits involving claims by policyholders for the
alleged diminished value of automobiles after accident-related repairs have been
filed in Rhode Island, Texas, Georgia and Tennessee against Metropolitan
Property and Casualty Insurance Company. Rhode Island and Texas trial courts
denied plaintiffs' motions for class certification and a hearing on plaintiffs'
motion in Tennessee for class certification is to be scheduled. A settlement has
been reached in the Georgia class action; the Company determined to settle the
case in light of a Georgia Supreme Court decision involving another insurer. The
settlement is being implemented. A purported class action has been filed against
Metropolitan Property and Casualty Insurance Company's subsidiary, Metropolitan
Casualty Insurance Company, in Florida. The complaint alleges breach of contract
and unfair trade practices with respect to allowing the use of parts not made by
the original manufacturer to repair damaged automobiles. Discovery is ongoing
and a motion for class certification is pending. Total loss valuation methods
are the subject of national class actions involving other insurance companies. A
Pennsylvania state court purported class action lawsuit filed in 2001 alleges
that Metropolitan Property and Casualty Insurance Company improperly took
depreciation on partial homeowner losses where the insured replaced the covered
item. The court has dismissed the action. An appeal has been filed. Metropolitan
Property and Casualty Insurance Company and Metropolitan Casualty Insurance
Company are vigorously defending themselves against these lawsuits.

Demutualization Actions

Several lawsuits were brought in 2000 challenging the fairness of
Metropolitan Life's plan of reorganization and the adequacy and accuracy of
Metropolitan Life's disclosure to policyholders regarding the plan. These
actions name as defendants some or all of Metropolitan Life, the Holding
Company, the individual directors, the Superintendent and the underwriters for
MetLife, Inc.'s initial public offering, Goldman, Sachs & Company and Credit
Suisse First Boston. Five purported class actions pending in the New York state
court in New York County were consolidated within the commercial part. In
addition, there remained a separate purported class action in New York state
court in New York County. Another purported class action in New York state court
in Kings County has been voluntarily held in abeyance by plaintiffs. The
plaintiffs in the state court class actions seek injunctive, declaratory and
compensatory relief, as well as an accounting and, in some instances, punitive
damages. Some of the plaintiffs in the above described actions also have brought
a proceeding under Article 78 of New York's Civil Practice Law and Rules
challenging the Opinion and Decision of the Superintendent who approved the
plan. In this proceeding, petitioners seek to vacate the Superintendent's
Opinion and Decision and enjoin him from granting final approval of the plan.
This case also is being held in abeyance by plaintiffs. Another purported class
action was filed in New York state court in New York County on behalf of a
purported class of beneficiaries of Metropolitan Life annuities purchased to
fund structured settlements claiming that the class members should have received
common stock or cash in connection with the demutualization. Metropolitan Life's
motion to dismiss this case was granted in a decision filed on October 31, 2002.
Plaintiff has withdrawn
F-49

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

her notice of appeal. Three purported class actions were filed in the United
States District Court for the Eastern District of New York claiming violation of
the Securities Act of 1933. The plaintiffs in these actions, which have been
consolidated, claim that the Policyholder Information Booklets relating to the
plan failed to disclose certain material facts and seek rescission and
compensatory damages. Metropolitan Life's motion to dismiss these three cases
was denied in 2001. On February 4, 2003, plaintiffs filed a consolidated amended
complaint adding a fraud claim under the Securities Exchange Act of 1934. A
purported class action also was filed in the United States District Court for
the Southern District of New York seeking damages from Metropolitan Life and the
Holding Company for alleged violations of various provisions of the Constitution
of the United States in connection with the plan of reorganization. In 2001,
pursuant to a motion to dismiss filed by Metropolitan Life, this case was
dismissed by the District Court. In January 2003, the United States Court of
Appeals for the Second Circuit affirmed the dismissal. Metropolitan Life, the
Holding Company and the individual defendants believe they have meritorious
defenses to the plaintiffs' claims and are contesting vigorously all of the
plaintiffs' claims in these actions.

In 2001, a lawsuit was filed in the Superior Court of Justice, Ontario,
Canada on behalf of a proposed class of certain former Canadian policyholders
against the Holding Company, Metropolitan Life, and Metropolitan Life Insurance
Company of Canada. Plaintiffs' allegations concern the way that their policies
were treated in connection with the demutualization of Metropolitan Life; they
seek damages, declarations, and other non-pecuniary relief. The defendants
believe they have meritorious defenses to the plaintiffs' claims and will
contest vigorously all of plaintiffs' claims in this matter.

In July 2002, a lawsuit was filed in the United States District Court for
the Eastern District of Texas on behalf of a proposed class comprised of the
settlement class in the Metropolitan Life sales practices class action
settlement approved in December 1999 by the United States District Court for the
Western District of Pennsylvania. The Holding Company, Metropolitan Life, the
trustee of the policyholder trust, and certain present and former individual
directors and officers of Metropolitan Life are named as defendants. Plaintiffs'
allegations concern the treatment of the cost of the settlement in connection
with the demutualization of Metropolitan Life and the adequacy and accuracy of
the disclosure, particularly with respect to those costs. Plaintiffs seek
compensatory, treble and punitive damages, as well as attorneys' fees and costs.
The defendants' motion to transfer the lawsuit to the Western District of
Pennsylvania was granted on February 14, 2003. The defendants' motion to dismiss
is pending. Plaintiffs have filed a motion for class certification which the
Texas court has adjourned. The defendants believe they have meritorious defenses
to the plaintiffs' claims and will contest them vigorously.

Race-Conscious Underwriting Claims

Insurance Departments in a number of states initiated inquiries in 2000
about possible race-conscious underwriting of life insurance. These inquiries
generally have been directed to all life insurers licensed in their respective
states, including Metropolitan Life and certain of its affiliates. The New York
Insurance Department has concluded its examination of Metropolitan Life
concerning possible past race-conscious underwriting practices. Metropolitan
Life has cooperated fully with that inquiry. Four purported class action
lawsuits filed against Metropolitan Life in 2000 and 2001 alleging racial
discrimination in the marketing, sale, and administration of life insurance
policies have been consolidated in the United States District Court for the
Southern District of New York. The plaintiffs seek unspecified monetary damages,
punitive damages, reformation, imposition of a constructive trust, a declaration
that the alleged practices are discriminatory and illegal, injunctive relief
requiring Metropolitan Life to discontinue the alleged discriminatory practices
and adjust policy values, and other relief. Metropolitan Life has entered into
settlement agreements to resolve the regulatory examination and the actions
pending in the United States District Court for the Southern District of New
York. The class action settlement, which has received preliminary approval from
the court, must receive final approval before it can be implemented. A fairness
hearing was held on February 7, 2003. The regulatory settlement

F-50

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreement is conditioned upon final approval of the class action settlement.
Metropolitan Life recorded a charge in the fourth quarter of 2001 in connection
with the anticipated resolution of these matters and believes that charge is
adequate to cover the costs associated with these settlements.

Sixteen lawsuits involving approximately 125 plaintiffs have been filed in
federal and state court in Alabama, Mississippi and Tennessee alleging federal
and/or state law claims of racial discrimination in connection with the sale,
formation, administration or servicing of life insurance policies. Metropolitan
Life is contesting vigorously plaintiffs' claims in these actions.

Other

In 2001, a putative class action was filed against Metropolitan Life in the
United States District Court for the Southern District of New York alleging
gender discrimination and retaliation in the MetLife Financial Services unit of
the Individual segment. The plaintiffs seek unspecified compensatory damages,
punitive damages, a declaration that the alleged practices are discriminatory
and illegal, injunctive relief requiring Metropolitan Life to discontinue the
alleged discriminatory practices, an order restoring class members to their
rightful positions (or appropriate compensation in lieu thereof), and other
relief. Metropolitan Life is vigorously defending itself against these
allegations.

A lawsuit has been filed against Metropolitan Life in Ontario, Canada by
Clarica Life Insurance Company regarding the sale of the majority of
Metropolitan Life's Canadian operation to Clarica in 1998. Clarica alleges that
Metropolitan Life breached certain representations and warranties contained in
the sale agreement, that Metropolitan Life made misrepresentations upon which
Clarica relied during the negotiations and that Metropolitan Life was negligent
in the performance of certain of its obligations and duties under the sale
agreement. Metropolitan Life is vigorously defending itself against this
lawsuit.

A putative class action lawsuit is pending in the United States District
Court for the District of Columbia, in which plaintiffs allege that they were
denied certain ad hoc pension increases awarded to retirees under the
Metropolitan Life retirement plan. The ad hoc pension increases were awarded
only to retirees (i.e., individuals who were entitled to an immediate retirement
benefit upon their termination of employment) and not available to individuals
like these plaintiffs whose employment, or whose spouses' employment, had
terminated before they became eligible for an immediate retirement benefit. The
district court denied the parties' cross-motions for summary judgment to allow
for discovery. Discovery has not yet commenced pending the court's ruling as to
the timing of a class certification motion. The plaintiffs seek to represent a
class consisting of former Metropolitan Life employees, or their surviving
spouses, who are receiving deferred vested annuity payments under the retirement
plan and who were allegedly eligible to receive the ad hoc pension increases
awarded in 1977, 1980, 1989, 1992, 1996 and 2001, as well as increases awarded
in earlier years. Metropolitan Life is vigorously defending itself against these
allegations.

A reinsurer of universal life policy liabilities of Metropolitan Life and
certain affiliates is seeking rescission and has commenced an arbitration
proceeding claiming that, during underwriting, material misrepresentations or
omissions were made. The reinsurer also has sent a notice purporting to increase
reinsurance premium rates. Metropolitan Life and these affiliates intend to
vigorously defend themselves against the claims of the reinsurer, including the
purported rate increase.

Various litigation, claims and assessments against the Company, in addition
to those discussed above 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, employer, investor, investment advisor 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.

F-51

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Summary

It is not feasible to predict or determine the ultimate outcome of all
pending investigations and legal proceedings or provide reasonable ranges of
potential losses, except as noted above in connection with specific matters. In
some of the matters referred to above, 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 adverse effect upon the Company's consolidated 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 adverse effect on the
Company's consolidated net income or cash flows in particular quarterly or
annual periods.

LEASES

In accordance with industry practice, certain of the Company's income from
lease agreements with retail tenants is contingent upon the level of the
tenants' sales revenues. Additionally, the Company, as lessee, has entered into
various lease and sublease agreements for office space, data processing and
other equipment. Future minimum rental and sublease income, and minimum gross
rental payments relating to these lease agreements were as follows:

COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS

The Company makes commitments to fund partnership investments in the normal
course of business. The amounts of these unfunded commitments were $1,667
million and $1,898 million at December 31, 2002 and 2001, respectively. The
Company anticipates that these amounts will be invested in the partnerships over
the next three to five years.

GUARANTEES

In the course of its business, the Company has provided certain
indemnities, guarantees and commitments to third parties pursuant to which it
may be required to make payments now or in the future.

In the context of acquisition and disposition 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. 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 $1 million to $800 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 due under these guarantees in the
future.

F-52

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, the Holding Company and its subsidiaries indemnify their
respective directors and officers as provided in their charters and by-laws.
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 due under these indemnities in the
future.

The Company has not recorded any liability for these indemnities,
guarantees and commitments in the accompanying consolidated balance sheets for
the years ended December 31, 2002 or 2001.

12. ACQUISITIONS AND DISPOSITIONS

DISPOSITIONS

In July 2001, the Company completed its sale of Conning Corporation
("Conning"), an affiliate acquired in the acquisition of GenAmerica Financial
Corporation ("GenAmerica"). Conning specialized in asset management for
insurance company investment portfolios and investment research. The Company
received $108 million in the transaction and reported a gain of approximately
$25 million in the third quarter of 2001.

In October 2000, the Company completed the sale of its 48% ownership
interest in its affiliates, Nvest, L.P. and Nvest Companies L.P. This
transaction resulted in an investment gain of $663 million.

ACQUISITIONS

In June 2002, the Company acquired Aseguradora Hidalgo S.A. ("Hidalgo"), an
insurance company based in Mexico with approximately $2.5 billion in assets as
of the date of acquisition. The purchase price is subject to adjustment under
certain provisions of the purchase agreement. The Company does not expect that
any purchase price adjustment will have an impact on its consolidated statements
of income. The Company is in the process of integrating Hidalgo and Seguros
Genesis, S.A., MetLife's wholly-owned Mexican subsidiary headquartered in Mexico
City, to operate as a combined entity under the name MetLife Mexico.

In November 2001, the Company acquired Compania de Seguros de Vida
Santander S.A. and Compania de Reaseguros de Vida Soince Re S.A., wholly-owned
subsidiaries of Santander Hispano in Chile. These acquisitions marked MetLife's
entrance into the Chilean insurance market.

In January 2000, Metropolitan Life completed its acquisition of GenAmerica,
a holding company which included General American Life Insurance Company,
approximately 49% of the outstanding shares of RGA common stock, and 61% of the
outstanding shares of Conning common stock which was subsequently sold in 2001.
Metropolitan Life owned 9% of the outstanding shares of RGA common stock prior
to the completion of the GenAmerica acquisition. During 2002, the Company
purchased an additional 327,600 shares of RGA's outstanding common stock at an
aggregate price of $9.5 million to offset potential future dilution of the
Company's holding of RGA's common stock arising from the issuance by RGA of
company-obligated mandatorily redeemable securities of a subsidiary trust in
December 2001. These purchases increased the Company's ownership percentage of
outstanding shares of RGA common stock from approximately 58% at December 31,
2001 to approximately 59% at December 31, 2002.

In April 2000, Metropolitan Life acquired the outstanding shares of Conning
common stock not already owned by Metropolitan Life for $73 million.

13. BUSINESS REALIGNMENT INITIATIVES

During the fourth quarter of 2001, the Company implemented several business
realignment initiatives, which resulted from a strategic review of operations
and an ongoing commitment to reduce expenses. The following

F-53

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tables represent the original expenses recorded in the fourth quarter of 2001
and the remaining liability as of December 31, 2002:

Reconciliations of the income tax provision at the U.S. statutory rate to
the provision for income taxes as reported for continuing operations were as
follows:

F-55

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes represent 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:

Domestic net operating loss carryforwards amount to $656 million at
December 31, 2002 and will expire beginning in 2019. Foreign net operating loss
carryforwards amount to $300 million at December 31, 2002 and were generated in
various foreign countries with expiration periods of five years to infinity.

The Company has recorded a valuation allowance related to tax benefits of
certain foreign net operating loss carryforwards. The valuation allowance
reflects management's assessment, based on available information, that it is
more likely than not that the deferred income tax asset for certain foreign net
operating loss carryforwards will not be realized. The tax benefit will be
recognized when management believes that it is more likely than not that these
deferred income tax assets are realizable.

The Internal Revenue Service has audited the Company for the years through
and including 1996. The Company is being audited for the years 1997, 1998 and
1999. The Company believes that any adjustments that might be required for open
years will not have a material effect on the Company's consolidated financial
statements.

15. REINSURANCE

The Company's life insurance operations participate in reinsurance
activities in order to limit losses, minimize exposure to large risks, and to
provide additional capacity for future growth. The Company currently reinsures
up to 90% of the mortality risk for all new individual life insurance policies
that it writes through its various franchises. This practice was initiated by
different franchises for different products starting at various points in time
between 1992 and 2000. Risks in excess of $25 million on single life policies
and $30 million on

F-56

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

survivorship policies are 100% coinsured. In addition, in 1998, the Company
reinsured substantially all of the mortality risk on its universal life policies
issued since 1983. RGA retains a maximum of $4 million of coverage per
individual life with respect to its assumed reinsurance business. The company
reinsures its business through a diversified group of reinsurers. Placement of
reinsurance is done primarily on an automatic basis and also on a facultative
basis for risks of specific characteristics. The Company is contingently liable
with respect to ceded reinsurance should any reinsurer be unable to meet its
obligations under these agreements.

In addition to reinsuring mortality risk, the Company reinsures other risks
and specific coverages. The Company routinely reinsures certain classes of risks
in order to limit its exposure to particular travel, avocation and lifestyle
hazards. The Company has exposure to catastrophes, which are an inherent risk of
the property and casualty business and could contribute to significant
fluctuations in the Company's results of operations. The Company uses excess of
loss and quota share reinsurance arrangements to limit its maximum loss, provide
greater diversification of risk and minimize exposure to larger risks.

The Company has also protected itself through the purchase of combination
risk coverage. This reinsurance coverage pools risks from several lines of
business and includes individual and group life claims in excess of $2 million
per policy, as well as excess property and casualty losses, among others.

See Note 11 for information regarding certain excess of loss reinsurance
agreements providing coverage for risks associated primarily with sales
practices claims.

The amounts in the consolidated statements of income are presented net of
reinsurance ceded. The effects of reinsurance were as follows:

Reinsurance recoverables, included in premiums and other receivables, were
$3,574 million and $3,393 million at December 31, 2002 and 2001, respectively,
including $1,348 million and $1,356 million, respectively, relating to
reinsurance of long-term guaranteed interest contracts and structured settlement
lump sum contracts accounted for as a financing transaction. Reinsurance and
ceded commissions payables, included in other liabilities, were $50 million and
$112 million at December 31, 2002 and 2001, respectively.

F-57

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following provides an analysis of the activity in the liability for
benefits relating to property and casualty and group accident and non-medical
health policies and contracts:

16. OTHER EXPENSES

Other expenses were comprised of the following:

17. STOCKHOLDERS' EQUITY

PREFERRED STOCK

On September 29, 1999, the Holding Company adopted a stockholder rights
plan (the "rights plan") under which each outstanding share of common stock
issued between April 4, 2000 and the distribution date (as defined in the rights
plan) will be coupled with a stockholder right. Each right will entitle the
holder to purchase one one-

F-58

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

hundredth of a share of Series A Junior Participating Preferred Stock. Each one
one-hundredth of a share of Series A Junior Participating Preferred Stock will
have economic and voting terms equivalent to one share of common stock. Until it
is exercised, the right itself will not entitle the holder thereof to any rights
as a stockholder, including the right to receive dividends or to vote at
stockholder meetings.

Stockholder rights are not exercisable until the distribution date, and
will expire at the close of business on April 4, 2010, unless earlier redeemed
or exchanged by the Holding Company. The rights plan is designed to protect
stockholders in the event of unsolicited offers to acquire the Holding Company
and other coercive takeover tactics.

COMMON STOCK

On the date of demutualization, the Holding Company conducted an initial
public offering of 202,000,000 shares of its common stock and concurrent private
placements of an aggregate of 60,000,000 shares of its common stock at an
initial public offering price of $14.25 per share. The shares of common stock
issued in the offerings were in addition to 494,466,664 shares of common stock
of the Holding Company distributed to the MetLife Policyholder Trust for the
benefit of policyholders of Metropolitan Life in connection with the
demutualization. On April 10, 2000, the Holding Company issued 30,300,000
additional shares of common stock as a result of the exercise of over-allotment
options granted to underwriters in the initial public offering.

On February 19, 2002, the Holding Company's Board of Directors authorized a
$1 billion common stock repurchase program. This program began after the
completion of the March 28, 2001 and June 27, 2000 repurchase programs, each of
which authorized the repurchase of $1 billion of common stock. Under these
authorizations, the Holding Company may purchase common stock from the MetLife
Policyholder Trust, in the open market and in privately negotiated transactions.

On August 7, 2001, the Company purchased 10 million shares of its common
stock as part of the sale of 25 million shares of MetLife common stock by
Santusa Holdings, S.L., an affiliate of Banco Santander Central Hispano, S.A.
The sale by Santusa Holdings, S.L. was made pursuant to a shelf registration
statement, effective June 29, 2001.

The Company acquired 15,244,492, 45,242,966 and 26,108,315 shares of common
stock for $471 million, $1,322 million and $613 million during the years ended
December 31, 2002, 2001 and 2000, respectively. At December 31, 2002, the
Company had approximately $806 million remaining on its existing share
repurchase authorization.

DIVIDEND RESTRICTIONS

Under the New York Insurance Law, Metropolitan Life is permitted without
prior insurance regulatory clearance to pay a stockholder dividend to the
Holding Company as long as the aggregate amount of all such dividends in any
calendar year does not exceed the lesser of (i) 10% of its surplus to
policyholders as of the immediately preceding calendar year and (ii) its
statutory net gain from operations for the immediately preceding calendar year
(excluding realized capital gains). Metropolitan Life will be permitted to pay a
stockholder dividend to the Holding Company in excess of the lesser of such two
amounts only if it files notice of its intention to declare such a dividend and
the amount thereof with the Superintendent and the Superintendent does not
disapprove the distribution. Under the New York Insurance Law, the
Superintendent has broad discretion in determining whether the financial
condition of a stock life insurance company would support the payment of such
dividends to its stockholders. The Department has established informal
guidelines for such determinations. The guidelines, among other things, focus on
the insurer's overall financial condition and profitability under statutory
accounting practices. For the year ended December 31, 2002, Metropolitan Life
paid to MetLife, Inc. $535 million in dividends for which prior insurance
regulatory clearance was not required and $369 million in special dividends, as
approved by the Superintendent. For the year ended December 31, 2001,
Metropolitan Life

F-59

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

paid to MetLife, Inc. $721 million in dividends for which prior insurance
regulatory clearance was not required and $3,033 million in special dividends,
as approved by the Superintendent. For the year ended December 31, 2000,
Metropolitan Life paid to MetLife, Inc. $763 million in dividends for which
prior insurance regulatory clearance was not required. At December 31, 2002,
Metropolitan Life could pay the Holding Company a dividend of $662 million
without prior approval of the Superintendent.

MIAC paid to MetLife, Inc. $25 million and $31 million in dividends for
which prior insurance regulatory clearance was not required for the years ended
December 31, 2002 and 2001, respectively. MIAC is subject to similar
restrictions based on the regulations of its state of domicile, and at December
31, 2002, could pay the Holding Company dividends of $104 million without prior
approval.

STOCK COMPENSATION PLANS

Under the MetLife, Inc. 2000 Stock Incentive Plan (the "Stock Incentive
Plan"), awards granted may be in the form of non-qualified or incentive stock
options qualifying under Section 422A of the Internal Revenue Code. Under the
MetLife, Inc. 2000 Directors Stock Plan, (the "Directors Stock Plan") awards
granted may be in the form of stock awards or non-qualified stock options or a
combination of the foregoing to outside Directors of the Company. The aggregate
number of shares of stock that may be awarded under the Stock Incentive Plan is
subject to a maximum limit of 37,823,333 shares for the duration of the plan.
The Directors Stock Plan has a maximum limit of 500,000 share awards.

All options granted have an exercise price equal to the fair market value
price of the Company's common stock on the date of grant, and an option's
maximum term is ten years. Certain options under the Stock Incentive Plan become
exercisable over a three-year period commencing with date of grant, while other
options become exercisable three years after the date of grant. Options issued
under the Directors Stock Plan are exercisable at any time after April 7, 2002.

The Company applies APB 25 and related interpretations in accounting for
its stock-based compensation plans. Accordingly, in the measurement of
compensation expense, the Company utilizes the excess of market price over
exercise price on the first date that both the number of shares and award price
are known. For the years ended December 31, 2002 and 2001, compensation expense
for non-employees related to the Company's Stock Incentive Plan and Directors
Stock Plan was $2 million and $1 million, respectively.

F-60

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Had compensation cost for the Company's Stock Incentive Plan and Directors
Stock Plan been determined based on fair value at the grant date for awards
under those plans consistent with the method of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
below:

- ---------------

(1) The pro forma earnings disclosures are not necessarily representative of the
effects on net income and earnings per share in future years.

(2) Includes the Company's ownership share of compensation costs related to
RGA's incentive stock plan determined in accordance with SFAS 123.

The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes options-pricing model with the following weighted
average assumptions used for grants for the:

F-61

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the status of options included in the Company's Stock
Incentive Plan and Directors Stock Plan is presented below:

The following table summarizes information about stock options outstanding
at December 31, 2002:

STATUTORY EQUITY AND INCOME

Applicable insurance department regulations require that the insurance
subsidiaries prepare statutory financial statements in accordance with statutory
accounting practices prescribed or permitted by the insurance department of the
state of domicile. Statutory accounting practices primarily differ from GAAP by
charging policy acquisition costs to expense as incurred, establishing future
policy benefit liabilities using different actuarial assumptions, reporting
surplus notes as surplus instead of debt and valuing securities on a different
basis. As of December 31, 2001, New York Statutory Accounting Practices did not
provide for deferred income taxes. The Department has adopted a modification to
its regulations, effective December 31, 2002, with respect to the admissibility
of deferred taxes by New York insurers, subject to certain limitations.
Statutory net income of Metropolitan Life, as filed with the Department, was
$1,478 million, $2,782 million and $1,027 million for the years ended 2002, 2001
and 2000, respectively; statutory capital and surplus, as filed, was $6,986
million and $5,358 million at December 31, 2002 and 2001, respectively.

The National Association of Insurance Commissioners ("NAIC") adopted the
Codification of Statutory Accounting Principles (the "Codification"), which is
intended to standardize regulatory accounting and reporting
F-62

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to state insurance departments, and became effective January 1, 2001. However,
statutory accounting principles continue to be established by individual state
laws and permitted practices. The Department required adoption of the
Codification, with certain modifications, for the preparation of statutory
financial statements effective January 1, 2001. Further modifications by state
insurance departments may impact the effect of the Codification on the statutory
capital and surplus of Metropolitan Life and the Holding Company's other
insurance subsidiaries.

18. OTHER COMPREHENSIVE INCOME

The following table sets forth the reclassification adjustments required
for the years ended December 31, 2002, 2001 and 2000 to avoid double-counting in
other comprehensive income (loss) items that are included as part of net income
for the current year that have been reported as a part of other comprehensive
income (loss) in the current or prior year:

19. EARNINGS PER SHARE AND EARNINGS AFTER DATE OF DEMUTUALIZATION

Net income after the date of demutualization is based on the results of
operations after March 31, 2000, adjusted for the payments to the former
Canadian policyholders and costs of demutualization recorded in April 2000 which
are applicable to the period prior to April 7, 2000.

F-63

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following presents a reconciliation of the weighted average shares used
in calculating basic earnings per share to those used in calculating diluted
earnings per share:

- ---------------

(1) For the period April 7, 2000 through December 31, 2000.

F-64

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The unaudited quarterly results of operations for the years ended December
31, 2002 and 2001 are summarized in the table below:

Due to changes in the number of average shares outstanding, quarterly
earnings per share of common stock do not add to the totals for the years.

Unaudited net income for the first quarter of 2002 includes a charge of $48
million related to Metropolitan Life's wholly-owned subsidiary, General
American, in connection with its former Medicare business and the resolution of
a federal government investigation. Unaudited net income for the second quarter
of 2002 includes a benefit of $30 million related to a reduction of the
Company's previously established liability for its sales practice class action
settlement recorded in 1999. Unaudited net income for the fourth quarter of 2002
includes a charge of $169 million related to the Company's asbestos-related
litigation, a $20 million benefit related to the reduction of a previously
established liability for the Company's 2001 business realignment initiatives
and a $17 million

F-65

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

benefit related to the reduction of a previously established liability for
disability insurance-related losses from the September 11, 2001 tragedies.

Unaudited net income for the third quarter of 2001 includes charges for
insurance-related losses of $208 million related to the September 11, 2001
tragedies. Unaudited net income for the fourth quarter of 2001 includes charges
of $159 million related to a class action lawsuit and a related regulatory
inquiry pending against Metropolitan Life, $330 million related to business
realignment initiatives and $74 million related to the establishment of a
policyholder liability for certain group annuity policies.

21. BUSINESS SEGMENT INFORMATION

The Company provides insurance and financial services to customers in the
United States, Canada, Central America, South America, Europe, South Africa,
Asia and Australia. The Company's business is divided into six major segments:
Individual, Institutional, Reinsurance, Auto & Home, Asset Management and
International. These segments are managed separately because they either provide
different products and services, require different strategies or have different
technology requirements.

Individual offers a wide variety of individual insurance and investment
products, including life insurance, annuities and mutual funds. Institutional
offers a broad range of group insurance and retirement and savings products and
services, including group life insurance, non-medical health insurance such as
short and long-term disability, long-term care, and dental insurance, and other
insurance products and services. Reinsurance provides primarily reinsurance of
life and annuity policies in North America and various international markets.
Additionally, reinsurance of critical illness policies is provided in select
international markets. Auto & Home provides insurance coverages, including
private passenger automobile, homeowners and personal excess liability
insurance. Asset Management provides a broad variety of asset management
products and services to individuals and institutions. International provides
life insurance, accident and health insurance, annuities and retirement and
savings products to both individuals and groups, and auto and homeowners
coverage to individuals.

Set forth in the tables below is certain financial information with respect
to the Company's operating segments as of or for the years ended December 31,
2002, 2001 and 2000. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies, except for
the method of capital allocation and the accounting for gains and losses from
inter-company sales which are eliminated in consolidation. The Company allocates
capital to each segment based upon an internal capital allocation system that
allows the Company to more effectively manage its capital. The Company evaluates
the performance of each operating segment based upon income or loss from
operations before provision for income taxes and non-recurring items (e.g. items
of unusual or infrequent nature). The Company allocates certain non-recurring
items (primarily consisting of expenses associated with the resolution of
proceedings alleging race-conscious underwriting practices, sales practices
claims and claims for personal injuries caused by exposure to asbestos or
asbestos-containing products and demutualization costs) to Corporate & Other.

F-66

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F-67

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The International segment's assets at December 31, 2002 and results of
operations for the year ended December 31, 2002 include the assets and results
of operations of Hidalgo, a Mexican life insurer that was acquired in June 2002.

For the year ended December 31, 2001 the Institutional, Individual,
Reinsurance and Auto & Home segments include $287 million, $24 million, $9
million and $5 million, respectively, of pre-tax losses associated with the
September 11, 2001 tragedies. See Note 2.

The Institutional, Individual and Auto & Home segments include $399
million, $97 million and $3 million, respectively, in pre-tax charges associated
with business realignment initiatives for the year ended December 31, 2001. See
Note 13.

For the year ended December 31, 2001, the Individual segment includes $118
million of pre-tax expenses associated with the establishment of a policyholder
liability for certain group annuity policies.

For the year ended December 31, 2001, pre-tax gross investment gains and
(losses) of $1,027 million, $142 million and ($1,172) million (comprised of a
$354 million gain and an intercompany elimination of ($1,526) million),
resulting from the sale of certain real estate properties from Metropolitan Life
to Metropolitan Insurance and Annuity Company, a subsidiary of MetLife, Inc.,
are included in the Individual segment, Institutional segment and Corporate &
Other, respectively.

The Individual segment included an equity ownership interest in Nvest under
the equity method of accounting. Nvest was included within the Asset Management
segment due to the types of products and strategies employed by the entity. The
Individual segment's equity in earnings of Nvest, which is included in net
investment income, was $30 million for the year ended December 31, 2000. The
Individual segment includes $538 million (after allocating $118 million to
participating contracts) of the pre-tax gross investment gain on the sale of
Nvest in 2000.

F-68

METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As part of the GenAmerica acquisition in 2000, the Company acquired
Conning, the results of which are included in the Asset Management segment due
to the types of products and strategies employed by the entity from its
acquisition date to July 2001, the date of its disposition. The Company sold
Conning, receiving $108 million in the transaction and reported a gain of
approximately $25 million, in the third quarter of 2001.

The Corporate & Other segment consists of various start-up entities,
including Grand Bank, N.A., and run-off entities, as well as the elimination of
all intersegment amounts. The principal component of the intersegment amounts
relates to intersegment loans, which bear interest rates commensurate with
related borrowings. In addition, the elimination of the Individual segment's
ownership interest in Nvest is included for the year ended December 31, 2000.

Net investment income and net investment gains and losses are based upon
the actual results of each segment's specifically identifiable asset portfolio
adjusted for allocated capital. Other costs and operating costs were allocated
to each of the segments based upon: (i) a review of the nature of such costs,
(ii) time studies analyzing the amount of employee compensation costs incurred
by each segment, and (iii) cost estimates included in the Company's product
pricing.

Revenues derived from any customer did not exceed 10% of consolidated
revenues. Revenues from U.S. operations were $31,026 million, $30,109 million
and $30,006 million for the years ended December 31, 2002, 2001 and 2000,
respectively, which represented 94%, 96% and 97%, respectively, of consolidated
revenues.

22. DISCONTINUED OPERATIONS

The Company actively manages its real estate portfolio with the objective
to maximize earnings through selective acquisitions and dispositions.
Accordingly, the Company sold certain real estate holdings out of its portfolio
during 2002. In accordance with SFAS No. 144, income related to real estate
classified as held-for-sale on or after January 1, 2002 is presented as
discontinued operations.

The following table presents the components of income from discontinued
operations:

The carrying value of real estate related to discontinued operations was
$223 million and $1,580 million at December 31, 2002 and 2001, respectively. See
Note 21 for discontinued operations by business segment.

23. SUBSEQUENT EVENTS

In connection with MetLife, Inc.'s initial public offering in April 2000,
the Holding Company and MetLife Capital Trust I (the "Trust") issued equity
security units (the "units"). Each unit originally consisted of (i) a

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METLIFE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contract to purchase, for $50, shares of the Holding Company's common stock on
May 15, 2003, and (ii) a capital security of the Trust, with a stated
liquidation amount of $50.

In accordance with the terms of the units, the Trust was dissolved on
February 5, 2003 and $1,006 million aggregate principal amount 8% debentures of
the Holding Company ("MetLife debentures"), the sole asset of the Trust, were
distributed to the unitholders in exchange for the capital securities. As
required by the terms of the units, the MetLife debentures were remarketed on
behalf of the debenture holders on February 12, 2003 and the interest rate on
the MetLife debentures was reset as of February 15, 2003 to 3.911% per annum for
a yield to maturity of 2.876%.

F-70

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by this Item pertaining to Directors is
incorporated herein by reference to the sections entitled "Proposal
One -- Election of Directors" and "Stock Ownership of Directors and Executive
Officers -- Section 16(a) Beneficial Ownership Reporting Compliance" in the
registrant's definitive proxy statement for the Annual Meeting of Shareholders
to be held on April 22, 2003, to be filed by the registrant with the Securities
and Exchange Commission pursuant to Regulation 14A within 120 days after the
year ended December 31, 2002.

The information called for by this Item pertaining to Executive Officers
appears in "Part I -- Item 1. Business -- Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

The information called for by this Item is incorporated herein by reference
to the section entitled "Executive Compensation" in the registrant's definitive
proxy statement for the Annual Meeting of Shareholders to be held on April 22,
2003, to be filed by the registrant with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after the year ended December 31,
2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information called for by this Item, other than the equity compensation
plan information set forth below, is incorporated herein by reference to the
sections entitled "Stock Ownership of Directors and Executive Officers" and
"Ownership of MetLife Common Stock" in the registrant's definitive proxy
statement for the Annual Meeting of Shareholders to be held on April 22, 2003,
to be filed by the registrant with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after the year ended December 31,
2002.

EQUITY COMPENSATION PLANS

The following table provides information, as of December 31, 2002,
regarding the securities authorized for issuance under the Company's equity
compensation plans.

- ---------------

(1) The MetLife, Inc. 2000 Stock Incentive Plan and the MetLife, Inc. 2000
Directors Stock Plan were each approved by Metropolitan Life, the sole
shareholder of the Holding Company at the time of approval. The
policyholders of Metropolitan Life entitled to vote on its plan of
reorganization (the "plan of reorganiza-

108

tion") approved that plan of reorganization, which included both the
MetLife, Inc. 2000 Stock Incentive Plan and the MetLife, Inc. 2000 Directors
Stock Plan. The policyholders entitled to so vote received a summary
description of each plan, including the applicable limits on the number of
shares available for issuance under each plan.

(2) Under the plan of reorganization, the Holding Company is authorized to issue
a maximum of 38,323,333 shares of common stock under certain compensation
plans. Of the 38,323,333 shares:

- 37,823,333 shares, representing five percent of the total number of shares
of Holding Company common stock outstanding immediately after the effective
date of the plan of reorganization, may be utilized (i) for issuances
pursuant to options granted under the MetLife, Inc. 2000 Stock Incentive
Plan and the MetLife, Inc. 2000 Directors Stock Plan, (ii) for issuances
under the MetLife Long Term Performance Compensation Plan, (iii) for
investment tracking valuation under the Metropolitan Life Auxiliary Savings
and Investment Plan (a non-qualified savings and investment plan under
which distributions are made in cash) and (iv) for investment tracking
valuation and issuance under the MetLife Deferred Compensation Plan for
Officers (a non-qualified deferred compensation plan). As of December 31,
2002, a total of 2,729 shares had been utilized with respect to the plans
described in (ii), (iii) and (iv) above; and

- 500,000 shares are available for issuance as share awards under the
MetLife, Inc. 2000 Directors Stock Plan. As of December 31, 2002, a total
of 30,903 shares had been utilized with respect to share awards under this
plan.

Under the plan of reorganization, (i) the total number of shares of Holding
Company common stock available for issuance under each of the above
authorizations will be appropriately adjusted in the event of a common stock
dividend or split, recapitalization, merger, spin-off or similar change and
(ii) shares subject to options that are canceled, terminated or otherwise
settled without the issuance of Holding Company common stock are again
available for issuance under the plans.

(3) Under the MetLife, Inc. 2000 Stock Incentive Plan, options covering no more
than 60% of the total shares available for issuance under the plan could
have been awarded prior to April 8, 2002 and options covering no more than
80% of the total shares available under the plan may be awarded prior to
April 8, 2003.

(4) Under the MetLife, Inc. 2000 Directors Stock Plan, the number of shares
issuable pursuant to options may not exceed 378,233.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this Item is incorporated herein by reference
to the section entitled "Corporate Governance -- Certain Relationships and
Related Transactions" in the registrant's definitive proxy statement for the
Annual Meeting of Shareholders to be held on April 22, 2003, to be filed by the
registrant with the Securities and Exchange Commission pursuant to Regulation
14A within 120 days after the year ended December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Based on their
evaluation as of a date within 90 days of the filing date of this Annual Report
on Form 10-K (the "Evaluation Date"), the Holding Company's principal executive
officer and principal financial officer have concluded that the Holding
Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended) were effective
for the purposes set forth in the definition thereof in Rule 13a-14(c).

Change in Internal Controls. There were no significant changes in the
Holding Company's internal controls or in other factors that could significantly
affect internal controls subsequent to the Evaluation Date, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

109

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements

The financial statements are listed in the Index to Consolidated
Financial Statements and Schedules on page 106.

2. Financial Statement Schedules

The financial statement schedules are listed in the Index to
Consolidated Financial Statements and Schedules on page 106.

3. Exhibits

The exhibits are listed in the Exhibit Index which begins on page
E-1.

(b) Reports on Form 8-K

The following Reports on Form 8-K were filed during the fourth quarter
of 2002:

1. Form 8-K filed October 22, 2002 (dated October 22, 2002) attaching
press release regarding the declaration of the annual dividend on
common stock.

2. Form 8-K filed November 6, 2002 (dated November 5, 2002) attaching
press release regarding third quarter 2002 results.

3. Form 8-K filed December 3, 2002 (dated December 3, 2002) regarding
correction of certain amounts in Quarterly Report on Form 10-Q for
the quarter ended September 30, 2002.

4. Form 8-K filed December 11, 2002 (dated December 11, 2002) attaching
press release regarding operating earnings guidance for 2003-2005
and disclosing presentation slides to be used in presentations to
investors.

5. Form 8-K filed December 17, 2002 (dated December 3, 2002) reporting
the issuance of $400,000,000 in Senior Notes due December 15, 2012
and $600,000,000 in Senior Notes due December 15, 2032 in an
underwritten public offering.

110

METLIFE, INC.

SCHEDULE I

CONSOLIDATED SUMMARY OF INVESTMENTS -- OTHER THAN
INVESTMENTS IN AFFILIATES
DECEMBER 31, 2002
(DOLLARS IN MILLIONS)

- ---------------

(1) Cost for fixed maturities and mortgage loans on real estate represents
original cost reduced by repayments, net valuation allowances and writedowns
from other-than-temporary declines in value and adjusted for amortization of
premiums or accretion of discount; for equity securities, cost represents
original cost reduced by writedowns from other-than-temporary declines in
value; for real estate, cost represents original cost reduced by writedowns
and adjusted for valuation allowances and depreciation; cost for real estate
joint ventures and limited partnership interests represents original cost
reduced for other-than-temporary impairments or original cost adjusted for
equity in earnings and distributions.

111

METLIFE, INC.

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF METLIFE, INC. (REGISTRANT)
(DOLLARS IN MILLIONS)

- ---------------

(1) MetLife, Inc. was incorporated August 10, 1999 as a wholly-owned subsidiary
of Metropolitan Life. On April 7, 2000, Metropolitan Life converted from a
mutual life insurance company to a stock life insurance company and became a
wholly-owned subsidiary of MetLife, Inc. MetLife, Inc. commenced operations
as a holding company on April 7, 2000.

112

METLIFE, INC.

SCHEDULE II -- (CONTINUED)

CONDENSED FINANCIAL INFORMATION OF METLIFE, INC. (REGISTRANT)
(DOLLARS IN MILLIONS)

113

METLIFE, INC.

SCHEDULE III

CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
AT AND FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN MILLIONS)

- ---------------

(1) Amounts are included in Future Policy Benefits and Other Policyholder Funds.

114

METLIFE, INC.

SCHEDULE III -- (CONTINUED)

CONSOLIDATED SUPPLEMENTARY INSURANCE INFORMATION
AT AND FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
(DOLLARS IN MILLIONS)

(1) Includes demutualization costs of $230 million and payments to Canadian
policyholders of $327 million in 2000.

115

METLIFE, INC.

SCHEDULE IV

CONSOLIDATED REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(DOLLARS IN MILLIONS)

116

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of New
York, State of New York on the 19th day of March, 2003.

METLIFE, INC.

By: /s/ ROBERT H. BENMOSCHE
------------------------------------
Name: Robert H. Benmosche
Title: Chairman of the Board,
President and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

117

118

SECTION 302 CERTIFICATION

I, Robert H. Benmosche, Chief Executive Officer of MetLife, Inc., certify
that:

1. I have reviewed this annual report on Form 10-K of MetLife, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 19, 2003
/s/ ROBERT H. BENMOSCHE
--------------------------------------
Robert H. Benmosche
Chairman, President and Chief
Executive Officer

119

SECTION 302 CERTIFICATION

I, Stewart G. Nagler, Chief Financial Officer of MetLife, Inc., certify
that:

1. I have reviewed this annual report on Form 10-K of MetLife, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 19, 2003
/s/ STEWART G. NAGLER
--------------------------------------
Stewart G. Nagler
Vice Chairman and Chief
Financial Officer

120

EXHIBIT INDEX

E-1

E-2

E-3

E-4

- ---------------

* Indicates management contracts or compensatory plans or arrangements.

E-5