NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION …

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED FINANCIAL STATEMENTS (GAAP Basis)

December 31, 2010 and 2009

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED BALANCE SHEET

ASSETS Fixed maturities, at fair value

Available-for-sale (includes securities pledged as collateral that can be sold or repledged of $452 in 2010 and $449 in 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity securities, at fair value

Available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage loans, net of allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred policy acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest in annuity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts recoverable from reinsurer

Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Separate account assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2010

2009

(In millions)

$ 64,374 $57,248

96

43

23 3 5,805 822 146 1,047 1,080

73,396 761

3,429 5,454

45 2 5,779 807 172 973 1,046

66,115 487

4,041 4,858

7,095 255

1,121 18,759

$110,270

6,684 243 966

16,089

$99,483

LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities Policyholders' account balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Obligations under structured settlement agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts payable to reinsurer

Affiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unaffiliated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Separate account liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stockholder's Equity Capital stock -- par value $10,000 (20,000 shares authorized, 2,500 issued and

outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities and stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 60,656 6,937 231 5,454

6,148 37

2,688 18,759 100,910

25 3,628 1,000 4,707 9,360 $110,270

The accompanying notes are an integral part of the consolidated financial statements

$56,268 5,292 237 4,858

5,906 35

2,978 16,089 91,663

25 3,628

111 4,056 7,820 $99,483

2

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF INCOME

Revenues

Year Ended December 31,

2010

2009

2008

(In millions)

Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fees-universal life and annuity policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net investment gains (losses)

Total other-than-temporary impairments on fixed maturity securities . . . . . . Total other-than-temporary impairments on fixed maturity securities

recognized in accumulated other comprehensive income . . . . . . . . . . . . .

$1,892 731

3,567

(172)

57

$1,797 635

3,265

(397)

241

$1,374 619

2,755

(331)

--

All other net investment gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

71

(75)

Total net investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Net revenue from reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47

(85) (406)

145

206

41

35

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,464 5,798 4,583

Expenses Interest credited to policyholders' account balances . . . . . . . . . . . . . . . . . . . . . Increase in liabilities for future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . Policyholder benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,217 1,467

674 1,247

2,068 1,480

502 954

2,141 1,225

349 900

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,605 5,004 4,615

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859

794

(32)

Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208

260

(63)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 651 $ 534 $ 31

The accompanying notes are an integral part of the consolidated financial statements 3

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY Years Ended December 31, 2010, 2009 and 2008 (In millions)

Capital Stock

Additional Paid In Capital

Accumulated Other Comprehensive Income (Loss)

Net Unrealized Investment Gains (Losses)

Net Unrealized Gains (Losses) on Other-Than Temporarily Impaired Fixed

Maturity Investments

Retained Earnings

Total Stockholder's

Equity

Balance at January 1, 2008 . . . . . . . . . . $25

Comprehensive income: Net income . . . . . . . . . . . . . . . . . . . .

Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes . . . .

Other comprehensive loss . . . . . . . . . .

Total comprehensive loss. . . . . . . . . . . . .

Capital Contribution . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . 25

Cumulative effect of change in accounting principle, net of related offsets and income tax . . . . . . . . .

Balance at January 1, 2009, as adjusted . . . . . . . . . . . . . . . . . . . . . . 25

Comprehensive income: Net income . . . . . . . . . . . . . . . . . . . .

Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes . . . . . . . . . . . . . . . .

Other comprehensive income . . . . . . . .

Total comprehensive income . . . . . . . . . .

Capital Contribution . . . . . . . . . . . . . .

Balance at December 31, 2009 . . . . . . . . 25

Comprehensive income: Net income . . . . . . . . . . . . . . . . . . . .

Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes . . . .

Other comprehensive income . . . . . . . .

Total comprehensive income . . . . . . . . . .

Balance at December 31, 2010 . . . . . . . . $25

$1,410

1,218 2,628 2,628

1,000 3,628

$3,628

$ 95 (2,232) (2,137)

(40) (2,177)

2,360 183 875

$ 1,058

$--

$3,443 $ 4,973

31

31

(2,232)

(2,232)

(2,201)

1,218

--

3,474

3,990

(8)

48

--

(8)

3,522

3,990

534

534

(64)

2,296

2,296

2,830

1,000

(72)

4,056

7,820

651

651

14

889

889

1,540

$(58)

$4,707 $ 9,360

The accompanying notes are an integral part of the consolidated financial statements 4

NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (a wholly owned subsidiary of New York Life Insurance Company)

CONSOLIDATED STATEMENT OF CASH FLOWS

Cash Flows from Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net capitalization of deferred policy acquisition costs . . . . . . . . . . . . . . . . . . . . . Universal life and annuity fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest credited to policyholders' account balances . . . . . . . . . . . . . . . . . . . . . . Net investment (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings of limited partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net revenue from intercompany reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . Net change in unearned revenue liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in: Other assets and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reinsurance recoverables (payables) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future policy benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . .

Cash Flows from Investing Activities: Proceeds from: Sale of available-for-sale fixed maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maturity of available-for-sale fixed maturities . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of mortgage loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sale of trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . Cost of: Available-for-sale fixed maturities acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity securities acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash collateral paid on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mortgage loans acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Policy loans (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash Flows from Financing Activities: Policyholders' account balances: Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net transfers to the separate accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Decrease) increase in loaned securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities sold under agreements to repurchase (net) . . . . . . . . . . . . . . . . . . . . . . . Net (paydowns) proceeds from debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in book and bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash collateral received on derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash contribution from parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . .

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2010

2009

2008

(In millions)

$ 651 $ 534 $ 31

(8) (83) (570) 2,217 (9) (22) 72 (1) 36

(225) (52) (6)

1,476

3,476

(26) (403) (529) 2,068

85 (25) 53 (35) 42

34 12 44 1,482

3,336

10 (324) (489) 2,141 406

65 104 (74)

36

23 38 10 1,233

3,210

24,722 1,573

40 996 746

22 26

(31,524) (11) --

(1,055) (997) (73) (18)

(5,553)

19,826 1,176 1,526

625 109

16 13

(31,912) (369) 13 (803) (633) -- (57)

(10,470)

16,084 1,217

51 491 129

17 497

(23,354) (241) (12) (936) (994) (10) (47)

(7,108)

7,756 (4,467)

(567) --

(353) (52) 17 14 --

2,348

3

274 487

$ 761

10,396 (4,415)

(29) (736) 499

65 (22) 79 877

6,714

--

(420) 907

$ 487

9,509 (4,973)

(307) (460)

34 -- 29 69 11

3,912

--

14 893

$ 907

The accompanying notes are an integral part of the consolidated financial statements

5

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