UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________
Form 10-Q
(Mark One)
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2018
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: 000-55029
 

Metropolitan Life Insurance Company
(Exact name of registrant as specified in its charter)
New York 13-5581829
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
200 Park Avenue, New York, N.Y. 10166-0188
(Address of principal executive offices) (Zip Code)
(212) 578-9500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ   No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨

Accelerated filer
¨

Non-accelerated filer (Do not check if a smaller reporting company)þSmaller reporting company
¨

  Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No þ
At November 8, 2017,May 10, 2018, 494,466,664 shares of the registrant’s common stock, $0.01 par value per share, were outstanding, all of which were owned directly by MetLife, Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.
 
 


Table of Contents
  Page
Part I — Financial Information
 
Item 1.Financial Statements (at September 30, 2017March 31, 2018 (Unaudited) and December 31, 20162017 and for the Three Months Ended March 31, 2018 and Nine Months Ended September 30, 2017 and 2016 (Unaudited)) 
 
Interim Condensed Consolidated Balance Sheets
34
 
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
45
 
Interim Condensed Consolidated Statements of Equity
56
 
Interim Condensed Consolidated Statements of Cash Flows
67
 
Notes to the Interim Condensed Consolidated Financial Statements:
 
 
Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies
78
 
Note 2 — Segment Information
1012
 
Note 3 — Insurance
1716
 
Note 4 — Closed Block
1918
 
Note 5 — Investments
2221
 
Note 6 — Derivatives
3635
 
Note 7 — Fair Value
5150
 
Note 8 — Equity
6964
 
Note 9 — Other Expenses
7266
 
Note 10 — Employee Benefit Plans
7266
 
Note 11 — Contingencies, Commitments and GuaranteesIncome Tax
7367
 
Note 12 — Contingencies, Commitments and Guarantees
67
Note 13 — Related Party Transactions
7974
Note 14 — Subsequent Event
76
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8477
Item 4.
Controls and Procedures
9788
   
Part II — Other Information
 
Item 1.
Legal Proceedings
9890
Item 1A.
Risk Factors
10090
Item 6. 
Exhibits
10190
   
Signatures
10291

Table of Contents


As used in this Form 10-Q, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q,10‑Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe”“believe,” “will be,” “will not,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MLIC.Metropolitan Life Insurance Company, its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in Metropolitan Life Insurance Company'sCompany’s filings with the U.S. Securities and Exchange Commission. These factors include: (1) adverse effects which may arise in connection with the material weakness in our internal control over financial reporting or our failure to promptly remediate it; (2) difficult conditions in the global capital markets; (2)(3) increased volatility and disruption of the global capital and credit markets, which may affect our ability to meet liquidity needs and access capital, including through credit facilities, generate market-related revenue and finance statutory reserve requirements; (3)(4) exposure to global financial and capital market risks; (4)(5) regulatory, legislative or tax changes relating to our insurance or other operations that may affect the cost of, or demand for, our products or services; (5)services, or increase the cost or administrative burdens of providing benefits to employees; (6) impact on us of comprehensive financial services regulation reform; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (6) impact on us of comprehensive financial services regulation reform, including potential regulation of MetLife, Inc. as a non-bank systemically important financial institution, or otherwise; (7) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, dispositions of businesses, entry into joint ventures, or legal entity reorganizations; (8) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (9) investment losses and changes to investment valuations; (10) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements or value of business acquired; (11) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (12) downgrades in our financial strength or credit ratings, or MetLife, Inc.’s credit ratings; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (15) differences between actual claims experience and underwriting and reserving assumptions; (16) ineffectiveness of MetLife’s risk management policies and procedures; (17) catastrophe losses; (18) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (18)(19) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, dispositions of businesses, entry into joint ventures, or legal entity reorganizations; (20) changes in accounting standards, practices and/or policies; (19)(21) difficulties in marketing and distributing products through our distribution channels; (22) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural catastrophes, including any related impact on MetLife’sthe value of our investment portfolio, our disaster recovery systems, cyber- or other information security systems and management continuity planning; (20)(23) any failure to protect the confidentiality of client information; (24) the effectiveness of our programs and (21)practices in avoiding giving our associates incentives to take excessive risks; (25) the impact of technological changes on our businesses; and (26) other risks and uncertainties described from time to time in Metropolitan Life Insurance Company'sCompany’s filings with the U.S. Securities and Exchange Commission.
Metropolitan Life Insurance Company does not undertake any obligation to publicly correct or update any forward-looking statement if Metropolitan Life Insurance Company later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures Metropolitan Life Insurance Company makes on related subjects in reports to the U.S. Securities and Exchange Commission.

2
Table of Contents


Note Regarding Reliance on Statements in Our Contracts
See “Item 6. Exhibits“Exhibits — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Quarterly Report on Form 10-Q.

23
Table of Contents

Part I — Financial Information
Item 1. Financial Statements
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Balance Sheets
September 30, 2017March 31, 2018 (Unaudited) and December 31, 20162017
(In millions, except share and per share data)
 September 30, 2017 December 31, 2016 March 31, 2018 December 31, 2017
Assets        
Investments:        
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $160,383 and $155,141, respectively) $172,284
 $163,120
Equity securities available-for-sale, at estimated fair value (cost: $1,712 and $1,785, respectively) 1,791
 1,839
Mortgage loans (net of valuation allowances of $272 and $267, respectively; includes $564 and $566, respectively, under the fair value option) 58,054
 56,560
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $154,301 and $157,809, respectively) $163,254
 $170,272
Equity securities, at estimated fair value 882
 1,658
Mortgage loans (net of valuation allowances of $281 and $271, respectively; includes $438 and $520, respectively, under the fair value option) 60,215
 58,459
Policy loans 5,985
 5,945
 6,009
 6,006
Real estate and real estate joint ventures (includes $1,102 and $1,124, respectively, relating to variable interest entities; includes $61 and $56, respectively, of real estate held-for-sale) 6,657
 6,386
Other limited partnership interests (includes $0 and $14, respectively, relating to variable interest entities) 3,893
 3,725
Real estate and real estate joint ventures (includes $1,331 and $1,077, respectively, relating to variable interest entities; includes $616 and $25, respectively, of real estate held-for-sale) 6,685
 6,656
Other limited partnership interests 4,066
 3,991
Short-term investments, principally at estimated fair value 4,682
 4,690
 3,391
 3,155
Other invested assets (includes $140 and $39, respectively, relating to variable interest entities) 15,335
 17,255
Other invested assets (includes $129 and $131, respectively, relating to variable interest entities) 14,946
 14,911
Total investments 268,681
 259,520
 259,448
 265,108
Cash and cash equivalents, principally at estimated fair value (includes $9 and $0, respectively, relating to variable interest entities) 4,323
 5,714
Cash and cash equivalents, principally at estimated fair value (includes $7 and $12, respectively, relating to variable interest entities) 4,735
 5,069
Accrued investment income 2,228
 2,019
 2,024
 2,042
Premiums, reinsurance and other receivables (includes $3 and $6, respectively, relating to variable interest entities) 22,148
 22,383
Premiums, reinsurance and other receivables (includes $2 and $3, respectively, relating to variable interest entities) 22,161
 22,098
Deferred policy acquisition costs and value of business acquired 4,492
 4,743
 4,473
 4,348
Other assets (includes $3 and $3, respectively, relating to variable interest entities) 4,514
 4,346
Current income tax recoverable 44
 64
Other assets (includes $2 and $2, respectively, relating to variable interest entities) 4,887
 4,741
Separate account assets 132,670
 133,836
 124,847
 130,825
Total assets $439,056
 $432,561
 $422,619
 $434,295
Liabilities and Equity        
Liabilities        
Future policy benefits $118,726
 $115,556
 $119,129
 $119,415
Policyholder account balances 94,175
 92,466
 92,951
 93,939
Other policy-related balances 6,607
 6,731
 7,146
 7,176
Policyholder dividends payable 551
 510
 525
 499
Policyholder dividend obligation 2,201
 1,931
 1,277
 2,121
Payables for collateral under securities loaned and other transactions 21,839
 20,815
 19,490
 19,871
Short-term debt 100
 100
 243
 243
Long-term debt (includes $6 and $12, respectively, at estimated fair value, relating to variable interest entities) 1,679
 1,589
Current income tax payable 236
 50
Long-term debt (includes $5 and $6, respectively, at estimated fair value, relating to variable interest entities) 1,650
 1,667
Deferred income tax liability 2,738
 2,503
 768
 1,369
Other liabilities 28,976
 29,497
Other liabilities (includes $2 and $3, respectively, relating to variable interest entities) 27,460
 27,409
Separate account liabilities 132,670
 133,836
 124,847
 130,825
Total liabilities 410,498
 405,584
 395,486
 404,534
Contingencies, Commitments and Guarantees (Note 11) 
 
Contingencies, Commitments and Guarantees (Note 12) 
 
Equity        
Metropolitan Life Insurance Company stockholder’s equity:        
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding 5
 5
 5
 5
Additional paid-in capital 14,149
 14,413
 14,151
 14,150
Retained earnings 9,184
 9,250
 8,787
 10,035
Accumulated other comprehensive income (loss) 5,041
 3,119
 3,985
 5,428
Total Metropolitan Life Insurance Company stockholder’s equity 28,379
 26,787
 26,928
 29,618
Noncontrolling interests 179
 190
 205
 143
Total equity 28,558
 26,977
 27,133
 29,761
Total liabilities and equity $439,056
 $432,561
 $422,619
 $434,295
See accompanying notes to the interim condensed consolidated financial statements.

34
Table of Contents


Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months Ended March 31, 2018 and Nine Months Ended September 30, 2017 and 2016 (Unaudited)
(In millions)
Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017 2016 2017 20162018 2017
Revenues          
Premiums$6,629
 $6,142
 $17,597
 $16,801
$4,949
 $5,181
Universal life and investment-type product policy fees556
 638
 1,706
 1,928
531
 588
Net investment income2,660
 2,870
 7,955
 8,349
2,701
 2,672
Other revenues371
 389
 1,148
 1,121
401
 398
Net investment gains (losses):       
Other-than-temporary impairments on fixed maturity securities(6) (4) (7) (66)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)1
 (5) 1
 (9)
Other net investment gains (losses)101
 51
 190
 190
Total net investment gains (losses)96
 42
 184
 115
Net investment gains (losses)(196) (43)
Net derivative gains (losses)(26) (205) (317) (562)60
 (151)
Total revenues10,286
 9,876
 28,273
 27,752
8,446
 8,645
Expenses          
Policyholder benefits and claims7,317
 6,897
 19,561
 19,019
5,514
 5,841
Interest credited to policyholder account balances567
 560
 1,660
 1,675
581
 542
Policyholder dividends267
 302
 827
 924
262
 281
Other expenses1,205
 1,364
 3,808
 4,450
1,354
 1,314
Total expenses9,356
 9,123
 25,856
 26,068
7,711
 7,978
Income (loss) before provision for income tax930
 753
 2,417
 1,684
735
 667
Provision for income tax expense (benefit)187
 123
 475
 232
63
 120
Net income (loss)743
 630
 1,942
 1,452
672
 547
Less: Net income (loss) attributable to noncontrolling interests5
 (7) 8
 (9)3
 1
Net income (loss) attributable to Metropolitan Life Insurance Company$738
 $637
 $1,934
 $1,461
$669
 $546
Comprehensive income (loss)$914
 $637
 $3,864
 $5,619
$(1,695) $1,061
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax5
 (7) 8
 (9)3
 1
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company$909
 $644
 $3,856
 $5,628
$(1,698) $1,060
See accompanying notes to the interim condensed consolidated financial statements.


45
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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Equity
For the NineThree Months Ended September 30,March 31, 2018 and 2017 and 2016 (Unaudited)
(In millions)
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2016 $5
 $14,413
 $9,250
 $3,119
 $26,787
 $190
 $26,977
Balance at December 31, 2017 $5
 $14,150
 $10,035
 $5,428
 $29,618
 $143
 $29,761
Cumulative effects of changes in accounting principles, net of income tax (Note 1)     (917) 924
 7
   7
Balance at January 1, 2018 5
 14,150
 9,118
 6,352
 29,625
 143
 29,768
Capital contributions from MetLife, Inc. 
 5
 
 
 5
 
 5
 
 1
 
 
 1
 
 1
Returns of capital 
 (20) 

 
 (20) 
 (20)
Dividends paid to MetLife, Inc. 
 

 (2,000) 
 (2,000) 

 (2,000) 
 

 (1,000) 
 (1,000) 

 (1,000)
Purchase of operating joint venture interest from an affiliate (Note 5) 
 (249) 

 
 (249) 
 (249)
Change in equity of noncontrolling interests 
 

 
 
 

 (19) (19) 
 

 
 
 —
 59
 59
Net income (loss) 
 
 1,934
 
 1,934
 8
 1,942
 
 
 669
 
 669
 3
 672
Other comprehensive income (loss), net of income tax 
 
 
 1,922
 1,922
 

 1,922
 
 
 
 (2,367) (2,367) 

 (2,367)
Balance at September 30, 2017 $5
 $14,149
 $9,184
 $5,041
 $28,379
 $179
 $28,558
Balance at March 31, 2018 $5
 $14,151
 $8,787
 $3,985
 $26,928
 $205
 $27,133
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2015 $5
 $14,444
 $13,738
 $2,685
 $30,872
 $372
 $31,244
Balance at December 31, 2016 $5
 $14,413
 $9,250
 $3,119
 $26,787
 $190
 $26,977
Prior period revisions (Note 1)     (217)   (217)   (217)
Balance at December 31, 2016 5
 14,413
 9,033
 3,119
 26,570
 190
 26,760
Capital contributions from MetLife, Inc. 
 4
 
 
 4
 
 4
 
 1
 
 
 1
 
 1
Returns of capital 
 (62) 

 
 (62) 
 (62) 
 (5) 

 
 (5) 
 (5)
Tax deficiencies related to stock-based compensation 
 (11) 

 
 (11) 
 (11)
Dividends paid to MetLife, Inc. 
 
 (3,600) 
 (3,600) 
 (3,600)
Purchase of operating joint venture interest
from an affiliate (Note 5)
 
 (249) 

 
 (249) 
 (249)
Change in equity of noncontrolling interests 
 

 
 
 

 (203) (203) 
 

 
 
 —
 4
 4
Net income (loss) 
 
 1,461
 
 1,461
 (9) 1,452
 
 
 546
 
 546
 1
 547
Other comprehensive income (loss), net of income tax 
 
 
 4,167
 4,167
 

 4,167
 
 
 
 514
 514
 

 514
Balance at September 30, 2016 $5
 $14,375
 $11,599
 $6,852
 $32,831
 $160
 $32,991
Balance at March 31, 2017 $5
 $14,160
 $9,579
 $3,633
 $27,377
 $195
 $27,572
See accompanying notes to the interim condensed consolidated financial statements.


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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Cash Flows
For the NineThree Months Ended September 30,March 31, 2018 and 2017 and 2016 (Unaudited)
(In millions)

Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017 20162018 2017
Net cash provided by (used in) operating activities$5,010
 $3,625
$510
 $800
Cash flows from investing activities      
Sales, maturities and repayments of:      
Fixed maturity securities37,260
 53,466
16,447
 12,770
Equity securities470
 798
63
 60
Mortgage loans5,696
 9,008
1,955
 1,505
Real estate and real estate joint ventures673
 353
125
 27
Other limited partnership interests412
 618
90
 193
Purchases of:      
Fixed maturity securities(40,819) (53,863)(12,322) (13,366)
Equity securities(387) (703)(62) (15)
Mortgage loans(7,020) (11,010)(3,342) (2,320)
Real estate and real estate joint ventures(671) (1,125)(164) (246)
Other limited partnership interests(536) (589)(154) (159)
Cash received in connection with freestanding derivatives1,439
 1,165
919
 699
Cash paid in connection with freestanding derivatives(2,259) (1,589)(1,316) (790)
Net change in policy loans(40) 86
(3) (7)
Net change in short-term investments78
 (128)(206) (2,079)
Net change in other invested assets(168) (316)(44) (78)
Net change in property, equipment and leasehold improvements(148) (154)(23) (71)
Net cash provided by (used in) investing activities(6,020) (3,983)1,963
 (3,877)
Cash flows from financing activities      
Policyholder account balances:      
Deposits53,149
 46,119
20,232
 16,403
Withdrawals(52,610) (44,175)(21,647) (15,807)
Net change in payables for collateral under securities loaned and other transactions1,443
 1,698
(381) 295
Long-term debt issued169
 11
14
 —
Long-term debt repaid(81) (55)(32) (13)
Financing element on certain derivative instruments and other derivative related transactions, net(210) (72)(51) (298)
Dividends paid to MetLife, Inc.(2,000) (3,600)(1,000) —
Returns of capital(5) (62)—
 (5)
Return of capital associated with the purchase of operating joint venture interest from an affiliate (Note 5)(249) —
Other, net(10) 19
58
 3
Net cash provided by (used in) financing activities(404) (117)(2,807) 578
Effect of change in foreign currency exchange rates on cash and cash equivalents balances23
 —
Change in cash and cash equivalents(1,391) (475)(334) (2,499)
Cash and cash equivalents, beginning of period5,714
 4,651
5,069
 5,714
Cash and cash equivalents, end of period$4,323
 $4,176
$4,735
 $3,215
Supplemental disclosures of cash flow information      
Net cash paid (received) for:      
Interest$64
 $71
$11
 $11
Income tax$1,137
 $596
$2
 $14
Non-cash transactions:      
Capital contributions from MetLife, Inc.$5
 $4
$1
 $1
Returns of capital$15
 $—
Fixed maturity securities received in connection with pension risk transfer transactions$—
 $985
Transfer of fixed maturity securities from affiliate$292
 $—
Transfer of fixed maturity securities to affiliates$—
 $3,435
Transfer of mortgage loans to affiliates$—
 $375
Deconsolidation of real estate joint venture:   
Reduction of real estate and real estate joint ventures$—
 $339
Reduction of noncontrolling interests$—
 $339
Purchase of operating joint venture interest from an affiliate (Note 5)$—
 $249
Transfer of fixed maturity securities from affiliates$—
 $292
See accompanying notes to the interim condensed consolidated financial statements.

67
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of insurance, annuities, employee benefits and asset management.management and is organized into two segments: U.S. and MetLife Holdings. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Metropolitan Life Insurance Company and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany accounts and transactions have been eliminated.
The Company uses the equity method of accounting for equity securities when it has significant influence or at least 20% interest and for real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. TheSubsequent to the adoption of guidance relating to the recognition and measurement of financial instruments on January 1, 2018, the Company usesaccounts for interests in unconsolidated entities that are not accounted for under the equity method, at estimated fair value. Such investments were previously accounted for under the cost method of accounting for investments in which it has virtually no influence over the investee’s operations.accounting. See “— Adoption of New Accounting Pronouncements.”
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 20172018 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.
Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.
Revisions
As discussed in Note 1 of the Notes to the Consolidated Financial Statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”), the Company made adjustments for group annuity reserves for which amounts previously reported have been immaterially restated. In addition, the Company has corrected other unrelated immaterial errors which were previously recorded in the periods the Company identified them.

8
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The impact of the revisions is shown in the tables below:
  Three Months 
 Ended 
 March 31,
  2017
Interim Condensed Consolidated Statements of Operations
 and Comprehensive Income (Loss)
 As
Previously
Reported		 Revisions As
Revised
  (In millions)
Expenses      
Policyholder benefits and claims $5,835
 $6
 $5,841
Total expenses $7,972
 $6
 $7,978
Income (loss) before provision for income tax $673
 $(6) $667
Provision for income tax expense (benefit) $122
 $(2) $120
Net income (loss) $551
 $(4) $547
Net income (loss) attributable to Metropolitan Life Insurance Company $550
 $(4) $546
Comprehensive income (loss) $1,065
 $(4) $1,061
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company $1,064
 $(4) $1,060
Interim Condensed Consolidated Statements of Equity As
Previously
Reported		 Revisions 
As
Revised
  (In millions)
Retained Earnings      
Balance at December 31, 2016 $9,250
 $(217) $9,033
Net income (loss) $550
 $(4) $546
Balance at March 31, 2017 $9,800
 $(221) $9,579
Total Metropolitan Life Insurance Company Stockholder’s Equity      
Balance at December 31, 2016 $26,787
 $(217) $26,570
Balance at March 31, 2017 $27,598
 $(221) $27,377
Total Equity      
Balance at December 31, 2016 $26,977
 $(217) $26,760
Balance at March 31, 2017 $27,793
 $(221) $27,572
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 20162017 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’sthe 2017 Annual Report, on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 20162017 Annual Report.
Adoption of New Accounting Pronouncements
Effective January 1, 2017, the Company early adopted guidance relating to business combinations. The new guidance clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard will result in fewer acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. The adoption did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2017, the Company retrospectively adopted guidance relating to consolidation. The new guidance does not change the characteristics of a primary beneficiary under current GAAP. It changes how a reporting entity evaluates whether it is the primary beneficiary of a VIE by changing how a reporting entity that is a single decisionmaker of a VIE handles indirect interests in the entity held through related parties that are under common control with the reporting entity. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

79
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Other
Effective January 3, 2017, the Chicago Mercantile Exchange (“CME”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives for which the CME serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $751 million, gross derivative liabilities by $603 million, accrued investment income by $55 million, accrued investment expense recorded within other liabilities by $10 million, collateral receivables recorded within premiums, reinsurance and other receivables of $226 million, and collateral payables recorded within payables for collateral under securities loaned and other transactions of $419 million.
Future Adoption of New Accounting Pronouncements
In August 2017,Effective January 1, 2018, the Financial Accounting Standards Board (“FASB”) issued newCompany early adopted guidance on hedging activities (Accounting Standards Update (“ASU”) 2017-12,Derivatives and Hedging (Topic 815): Targeted Improvementsrelating to Accounting for Hedging Activities).income taxes. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and shouldwas applied in the period of adoption. Current GAAP guidance requires that the effect of a change in tax laws or rates on deferred tax liabilities or assets to be applied on a modified retrospective basis through a cumulative-effect adjustmentincluded in income from continuing operations in the reporting period that includes the enactment date, even if the related income tax effects were originally charged or credited directly to retained earnings. Early adoptionaccumulated other comprehensive income (“AOCI”). The Company’s accounting policy for the release of stranded tax effects in AOCI is permitted.on an aggregate portfolio basis. The new guidance simplifiesallows a reclassification of AOCI to retained earnings for stranded tax effects resulting from the applicationTax Cuts and Jobs Act of hedge accounting2017 (“U.S. Tax Reform”). Due to U.S. Tax Reform and the change in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In Marchcorporate tax rates, at December 22, 2017, the FASB issued newCompany reported stranded tax effects in AOCI related to unrealized gains and losses on available-for-sale (“AFS”) securities, cumulative foreign translation adjustments and deferred costs on pension benefit plans. With the adoption of the guidance, on purchased callable debt securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.) The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied onthe Company released these stranded tax effects in AOCI resulting in a modified retrospective basis through a cumulative-effect adjustment directlydecrease to retained earnings. Early adoption is permitted. The ASU shortensearnings as of January 1, 2018 of $1.0 billion with a corresponding increase to AOCI.
Effective January 1, 2018 the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In March 2017, the FASB issued newretrospectively adopted guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost (ASU 2017-07,Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost).cost. The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance requires that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period.costs. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. TheIf a separate line item is not used, the line item used in the income statement to present the other components of net periodic benefit cost must be disclosed. In addition, the guidance should be applied retrospectively for the presentation ofallows only the service cost component into be eligible for capitalization when applicable. The adoption of the income statement and allowsguidance did not have a practical expedient formaterial impact on the estimation basis for applying the retrospective presentation requirements. The Company is currently evaluating the impact of this guidance on itsCompany’s consolidated financial statements.
In February 2017,Effective January 1, 2018, the FASB issued newCompany adopted, using a modified retrospective approach, guidance on derecognitionrelating to de-recognition of nonfinancial assets (ASU 2017-05,Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption was permitted for interim or annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption.assets. The new guidance clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” The ASUnew guidance also adds guidance for partial sales of nonfinancial assets. The Company is currently evaluatingadoption of the guidance did not have a material impact of this guidance on itsthe Company’s consolidated financial statements.

8
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates afterEffective January 1, 2017. The new2018, the Company retrospectively adopted guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In November 2016, the FASB issued new guidance onrelating to restricted cash (ASU 2016-18,Statement of Cash Flows (Topic 230): a consensus of the FASB Emerging Issues Task Force). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a retrospective basis. Early adoption is permitted.cash. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The Company is currently evaluatingadoption of the guidance did not have a material impact of this guidance on itsthe Company’s consolidated financial statements.
In October 2016,Effective January 1, 2018, the FASB issued newCompany adopted, using a modified retrospective approach, guidance onrelating to tax accounting for intra-entity transfers of assets (ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory). The newassets. Prior guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a modified retrospective basis. Early adoption is permitted in the first interim or annual reporting period. Current guidance prohibitsprohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Also,The adoption of the guidance eliminatesdid not have a material impact on the exception for an intra-entity transfer of an asset other than inventory. The Company is currently evaluating the impact of this guidance on itsCompany’s consolidated financial statements.
In August 2016,Effective January 1, 2018, the FASB issued newCompany retrospectively adopted guidance onrelating to cash flow statement presentation (ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments).presentation. The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Early adoption is permitted in any interim or annual period. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to recognition and measurement of financial instruments. The guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Effective January 1, 2018, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. Additionally, there will no longer be a requirement to assess equity securities for embedded derivatives requiring bifurcation. The adoption of this guidance resulted in a $101 million, net of income tax, increase to retained earnings largely offset by a decrease to AOCI that was primarily attributable to $925 million of equity securities previously classified and measured as equity securities AFS. The Company has included the required disclosures related to equity securities held at March 31, 2018 within Note 5.

10
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to revenue recognition. The new guidance supersedes nearly all existing revenue recognition guidance under U.S. GAAP. However, it does not impact the accounting for insurance and investment contracts within the scope of Accounting Standards Codification Topic 944,Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
For the three months ended March 31, 2018, the Company identified $199 million of revenue streams within the scope of the guidance that are all included within other revenues on the interim condensed consolidated statements of operations and comprehensive income (loss). Such amount primarily consisted of prepaid legal plans and administrative-only contracts within the U.S. segment of $129 million, and distribution and administrative services fees within the MetLife Holdings segment of $58 million.
Substantially all of the revenue from these services is recognized over time as the applicable services are provided or are made available to the customers and control is transferred continuously. The consideration received for these services is variable and constrained to the amount not probable of a significant revenue reversal.
Other
Effective January 16, 2018, the London Clearing House (“LCH”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives, for which the LCH serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $2 million, gross derivative liabilities by $182 million, accrued investment income by $4 million and collateral receivables recorded within premiums, reinsurance and other receivables by $176 million.
Future Adoption of New Accounting Pronouncements
In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance on hedging activities (Accounting Standards Update (“ASU”) 2017-12,Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. Early adoption is permitted. The new guidance simplifies the application of hedge accounting in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in their financial statements. The Company is currently evaluating the impact of thisthe new guidance on its consolidated financial statements.
In March 2017, the FASB issued new guidance on purchased callable debt securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04,Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for a description of the two-step test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company expects the adoption of this new guidance will reduce the complexity involved with the evaluation of goodwill for impairment. The impact of the new guidance will depend on the outcomes of future goodwill impairment tests.

11
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other than temporaryother-than-temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and is currently assessing the accounting and reporting system changes that will be required to comply with the new guidance. The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is continuing to evaluatecurrently evaluating the overall impact of the new guidance on its consolidated financial statements.

9
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach. Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. The Company’s implementation efforts are primarily focused on the review of its existing lease contracts, as well as identification of other contracts that may fall under the scope of the new guidance.guidance, and performing a gap analysis on the current state of lease-related activities compared with the future state of lease-related activities. The Company is currently evaluating the impact of thisthe new guidance on its consolidated financial statements.
In January 2016, the FASB issued new guidance (ASU 2016-01,Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities) on the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the instrument-specific credit risk provision. The new guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Additionally, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. The Company has assessed the population of financial instruments that are subject to the new guidance and has determined that the most significant impact will be the requirement to report changes in fair value in net income each reporting period for all equity securities currently classified as available-for-sale (“AFS”) and to a lesser extent, other limited partnership interests and real estate joint ventures that are currently accounted for under the cost method. The estimated impact, using values as of September 30, 2017, related to the change in accounting for equity securities AFS, was $50 million of net unrealized investment gains, net of income tax, which would be reclassified from accumulated other comprehensive income (“AOCI”) to retained earnings. The estimated financial statement impact related to cost method other limited partnership interests and real estate joint ventures was not material.
In May 2014, the FASB issued a comprehensive new revenue recognition standard (ASU 2014-09,Revenue from Contracts with Customers (Topic 606)), effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company will apply this guidance retrospectively with a cumulative-effect adjustment as of January 1, 2018. The new guidance will supersede nearly all existing revenue recognition guidance under U.S. GAAP. However, it will not impact the accounting for insurance and investment contracts within the scope of Accounting Standards Codification Topic 944,Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. Given the scope of the new revenue recognition guidance, the Company does not expect the adoption to have a material impact on its consolidated revenues or statements of operations, with the Company’s implementation efforts primarily focused on other revenues on the consolidated statements of operations. Other revenues on the consolidated statements of operations represents less than 5% of consolidated total revenues for the nine months ended September 30, 2017. Based on implementation efforts completed to date, the Company has identified revenue streams within the scope of the guidance and is evaluating the related contracts, primarily consisting of prepaid legal plans and administrative-only contracts in the U.S. segment, advisory fees in the MetLife Holdings segment, and fee-based investment management services in Corporate & Other. While the Company has not yet identified any material changes in the recognition and measurement of other revenue, the Company’s assessment is ongoing, including the consideration of the new disclosure requirements.
2. Segment Information
The Company is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other.

10
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) through a distribution of 96,776,670 shares of the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing 80.8% of those shares, to MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding.
U.S.
The U.S. segment offers a broad range of protection products and services aimed at serving the financial needs of customers throughout their lives. These products are sold to corporations and their respective employees, other institutions and their respective members, as well as individuals. The U.S. segment is organized into two businesses: Group Benefits and Retirement and Income Solutions.
The Group Benefits business offers insurance products and services which include life, dental, group short- and long-term disability, individual disability, accidental death and dismemberment, critical illness, vision and accident & health coverages, as well as prepaid legal plans. This business also sells administrative services-only arrangements to some employers.
The Retirement and Income Solutions business offers a broad range of annuity and investment products, including guaranteed interest contractsstable value and other stable valuepension risk transfer products, institutional income annuities, and separate account contracts for thetort settlements, capital market investment management of defined benefit and defined contribution plan assets. This business also includes structured settlements and certain products, to fundas well as postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives.insurance.
MetLife Holdings
The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company, in the United States. These products and businesses includesuch as variable, universal, term and whole life as well asinsurance, variable, fixed and index-linked annuities. The MetLife Holdings segment also includes the Company’s discontinuedannuities and long-term care business.insurance.

12
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

Corporate & Other
Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including enterprise-wide strategic initiative restructuring charges and various start-up businesses. Additionally, Corporate & Other includes run-off businesses (including the investment management business through which the Company offers fee-based investment management services to institutional clients, as wellsuch as the direct to consumer portion of the U.S. Direct business).business. Corporate & Other also includes the Company’s ancillary international operations, the business of the Company that MetLife, Inc. separated and included in Brighthouse Financial in the prior periods and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to affiliated reinsurance and intersegment loans, which bear interest rates commensurate with related borrowings.
Financial Measures and Segment Accounting Policies
OperatingAdjusted earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operatingadjusted earnings is also the Company’s GAAP measure of segment performance and is reported below. OperatingAdjusted earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of operatingadjusted earnings as the Company measures it for management purposes enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings allows analysis of the Company’s performance and facilitates comparisons to industry results.
OperatingAdjusted earnings is defined as operatingadjusted revenues less operatingadjusted expenses, both net of income tax.

11
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

The financial measures of operatingadjusted revenues and operatingadjusted expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. OperatingAdjusted revenues also excludes net investment gains (losses) and net derivative gains (losses).
The following additional adjustments are made to revenues, in the line items indicated, in calculating operatingadjusted revenues:
Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”); and
Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax operatingadjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, and (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnerships that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in fair value is recognized in net investment gains (losses) for GAAP.

13
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

The following additional adjustments are made to expenses, in the line items indicated, in calculating operatingadjusted expenses:
Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and other pass-through adjustments, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);
Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;
Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;
Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
Other expenses excludes costs related to noncontrolling interests and goodwill impairments.
The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.
Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for thethree months and nine months ended September 30, 2017March 31, 2018 and 2016.2017. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operatingadjusted earnings adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below.
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 and the Company’s business.

12
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

MetLife’s economic capital model, coupled with considerations of local capital requirements, aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required economic capital shock factors to a specific confidence level and time horizon while applying an industry standard method for the inclusion of diversification benefits among risk types. MetLife’s management is responsible for the ongoing production and enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards.
Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, net income (loss) or operatingadjusted earnings.
Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios adjusted for allocated equity. Other costs are 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.
  Operating Results    
Three Months Ended September 30, 2017 U.S. 
MetLife
Holdings
 
Corporate
& Other
 Total Adjustments 
Total
Consolidated
  (In millions)
Revenues            
Premiums $5,820
 $806
 $3
 $6,629
 $—
 $6,629
Universal life and investment-type product policy fees 245
 286
 —
 531
 25
 556
Net investment income 1,554
 1,228
 (39) 2,743
 (83) 2,660
Other revenues 191
 36
 144
 371
 —
 371
Net investment gains (losses) —
 —
 —
 —
 96
 96
Net derivative gains (losses) —
 —
 —
 —
 (26) (26)
Total revenues 7,810
 2,356
 108
 10,274
 12
 10,286
Expenses            
Policyholder benefits and claims and policyholder dividends 6,006
 1,448
 —
 7,454
 130
 7,584
Interest credited to policyholder account balances 373
 195
 —
 568
 (1) 567
Capitalization of DAC (15) (2) —
 (17) —
 (17)
Amortization of DAC and VOBA 15
 (79) —
 (64) 21
 (43)
Interest expense on debt 3
 2
 21
 26
 —
 26
Other expenses 681
 291
 272
 1,244
 (5) 1,239
Total expenses 7,063
 1,855
 293
 9,211
 145
 9,356
Provision for income tax expense (benefit) 262
 161
 (190) 233
 (46) 187
Operating earnings $485
 $340
 $5
 830
    
Adjustments to:            
Total revenues       12
    
Total expenses       (145)    
Provision for income tax (expense) benefit       46
    
Net income (loss) $743
   $743

13
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

  Operating Results    
Three Months Ended September 30, 2016 U.S. 
MetLife
Holdings
 
Corporate
& Other
 Total Adjustments 
Total
Consolidated
  (In millions)
Revenues            
Premiums $5,036
 $1,091
 $15
 $6,142
 $—
 $6,142
Universal life and investment-type product policy fees 244
 310
 58
 612
 26
 638
Net investment income 1,554
 1,463
 (7) 3,010
 (140) 2,870
Other revenues 188
 46
 155
 389
 —
 389
Net investment gains (losses) —
 —
 —
 —
 42
 42
Net derivative gains (losses) —
 —
 —
 —
 (205) (205)
Total revenues 7,022
 2,910
 221
 10,153
 (277) 9,876
Expenses            
Policyholder benefits and claims and policyholder dividends 5,281
 1,814
 29
 7,124
 75
 7,199
Interest credited to policyholder account balances 322
 230
 9
 561
 (1) 560
Capitalization of DAC (17) (44) 2
 (59) —
 (59)
Amortization of DAC and VOBA 14
 217
 10
 241
 (29) 212
Interest expense on debt 2
 2
 24
 28
 —
 28
Other expenses 668
 341
 163
 1,172
 11
 1,183
Total expenses 6,270
 2,560
 237
 9,067
 56
 9,123
Provision for income tax expense (benefit) 269
 109
 (139) 239
 (116) 123
Operating earnings $483
 $241
 $123
 847
    
Adjustments to:            
Total revenues       (277)    
Total expenses       (56)    
Provision for income tax (expense) benefit       116
    
Net income (loss) $630
   $630




14
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

Three Months Ended March 31, 2018 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
  (In millions)
Revenues            
Premiums $4,177
 $773
 $(1) $4,949
 $—
 $4,949
Universal life and investment-type product policy fees 253
 255
 —
 508
 23
 531
Net investment income 1,593
 1,204
 (4) 2,793
 (92) 2,701
Other revenues 196
 66
 139
 401
 —
 401
Net investment gains (losses) —
 —
 —
 —
 (196) (196)
Net derivative gains (losses) —
 —
 —
 —
 60
 60
Total revenues 6,219
 2,298
 134
 8,651
 (205) 8,446
Expenses            
Policyholder benefits and claims and policyholder dividends 4,411
 1,374
 (11) 5,774
 2
 5,776
Interest credited to policyholder account balances 394
 188
 —
 582
 (1) 581
Capitalization of DAC (12) 2
 —
 (10) —
 (10)
Amortization of DAC and VOBA 17
 77
 —
 94
 (6) 88
Interest expense on debt 3
 2
 21
 26
 —
 26
Other expenses 719
 255
 278
 1,252
 (2) 1,250
Total expenses 5,532
 1,898
 288
 7,718
 (7) 7,711
Provision for income tax expense (benefit) 147
 77
 (119) 105
 (42) 63
Adjusted earnings $540
 $323
 $(35) 828
    
Adjustments to:            
Total revenues       (205)    
Total expenses       7
    
Provision for income tax (expense) benefit       42
    
Net income (loss) $672
   $672
 Operating Results    
Nine Months Ended September 30, 2017 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
Three Months Ended March 31, 2017 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
 (In millions) (In millions)
Revenues                        
Premiums $15,055
 $2,530
 $12
 $17,597
 $—
 $17,597
 $4,299
 $876
 $6
 $5,181
 $—
 $5,181
Universal life and investment-type product policy fees 757
 876
 —
 1,633
 73
 1,706
 263
 301
 —
 564
 24
 588
Net investment income 4,646
 3,711
 (103) 8,254
 (299) 7,955
 1,564
 1,256
 (30) 2,790
 (118) 2,672
Other revenues 581
 126
 441
 1,148
 —
 1,148
 197
 54
 147
 398
 —
 398
Net investment gains (losses) —
 —
 —
 —
 184
 184
 —
 —
 —
 —
 (43) (43)
Net derivative gains (losses) —
 —
 —
 —
 (317) (317) —
 —
 —
 —
 (151) (151)
Total revenues 21,039
 7,243
 350
 28,632
 (359) 28,273
 6,323
 2,487
 123
 8,933
 (288) 8,645
Expenses                        
Policyholder benefits and claims and policyholder dividends 15,743
 4,395
 3
 20,141
 247
 20,388
 4,581
 1,473
 2
 6,056
 66
 6,122
Interest credited to policyholder account balances 1,076
 587
 —
 1,663
 (3) 1,660
 348
 195
 —
 543
 (1) 542
Capitalization of DAC (42) (15) —
 (57) —
 (57) (12) (11) —
 (23) —
 (23)
Amortization of DAC and VOBA 44
 165
 —
 209
 (85) 124
 15
 132
 —
 147
 (10) 137
Interest expense on debt 8
 6
 65
 79
 —
 79
 3
 2
 21
 26
 —
 26
Other expenses 2,044
 895
 735
 3,674
 (12) 3,662
 685
 270
 221
 1,176
 (2) 1,174
Total expenses 18,873
 6,033
 803
 25,709
 147
 25,856
 5,620
 2,061
 244
 7,925
 53
 7,978
Provision for income tax expense (benefit) 756
 381
 (485) 652
 (177) 475
 245
 135
 (141) 239
 (119) 120
Operating earnings $1,410
 $829
 $32
 2,271
    
Adjusted earnings $458
 $291
 $20
 769
    
Adjustments to:                        
Total revenues       (359)           (288)    
Total expenses       (147)           (53)    
Provision for income tax (expense) benefit       177
           119
    
Net income (loss)Net income (loss) $1,942
   $1,942
Net income (loss) $547
   $547

15
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

  Operating Results    
Nine Months Ended September 30, 2016 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
  (In millions)
Revenues            
Premiums $13,451
 $3,303
 $47
 $16,801
 $—
 $16,801
Universal life and investment-type product policy fees 741
 928
 182
 1,851
 77
 1,928
Net investment income 4,518
 4,260
 (35) 8,743
 (394) 8,349
Other revenues 561
 98
 462
 1,121
 —
 1,121
Net investment gains (losses) —
 —
 —
 —
 115
 115
Net derivative gains (losses) —
 —
 —
 —
 (562) (562)
Total revenues 19,271
 8,589
 656
 28,516
 (764) 27,752
Expenses            
Policyholder benefits and claims and policyholder dividends 14,232
 5,475
 103
 19,810
 133
 19,943
Interest credited to policyholder account balances 964
 687
 26
 1,677
 (2) 1,675
Capitalization of DAC (43) (239) (3) (285) —
 (285)
Amortization of DAC and VOBA 43
 591
 51
 685
 (265) 420
Interest expense on debt 7
 5
 72
 84
 —
 84
Other expenses 2,057
 1,439
 612
 4,108
 123
 4,231
Total expenses 17,260
 7,958
 861
 26,079
 (11) 26,068
Provision for income tax expense (benefit) 720
 178
 (403) 495
 (263) 232
Operating earnings $1,291
 $453
 $198
 1,942
    
Adjustments to:            
Total revenues       (764)    
Total expenses       11
    
Provision for income tax (expense) benefit       263
    
Net income (loss) $1,452
   $1,452
The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
(In millions)(In millions)
U.S.$250,516
 $247,314
$240,152
 $245,750
MetLife Holdings164,588
 163,048
158,076
 163,397
Corporate & Other23,952
 22,199
24,391
 25,148
Total$439,056
 $432,561
$422,619
 $434,295

16
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

3. Insurance
Guarantees
As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 20162017 Annual Report, the Company issues variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 6.
The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.

16
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

Information regarding the Company’s guarantee exposure, which includes direct business, but excludes offsets from hedging or reinsurance, if any, was as follows at:
 September 30, 2017 December 31, 2016 March 31, 2018 December 31, 2017
 In the
Event of Death		 At
Annuitization		 In the
Event of Death		 At
Annuitization		 In the
Event of Death		 At
Annuitization		 In the
Event of Death		 At
Annuitization
 (Dollars in millions)  (Dollars in millions) 
Annuity Contracts (1):            
Annuity Contracts:            
Variable Annuity Guarantees:                        
Total account value (2) $55,962
  $25,123
  $54,629
  $24,310
 
Total account value (1), (2) $54,211
  $24,206
  $56,136
  $25,257
 
Separate account value(1) $45,046
  $24,179
  $43,359
  $23,330
  $43,714
  $23,302
  $45,431
  $24,336
 
Net amount at risk $1,082
(3) $383
(4) $1,386
(3) $328
(4) $1,224
(3) $307
(4) $990
(3) $353
(4)
Average attained age of contractholders 66 years
  65 years
  65 years
  64 years
  67 years
  65 years
  66 years
  65 years
 
Other Annuity Guarantees:                        
Total account value (2) N/A
  $140
  N/A
  $141
 
Total account value (1), (2) N/A
  $142
  N/A
  $141
 
Net amount at risk N/A
  $93
(5) N/A
  $92
(5) N/A
  $89
(5) N/A
  $92
(5)
Average attained age of contractholders N/A
  52 years
  N/A
  52 years
  N/A
  52 years
  N/A
  52 years
 
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Secondary
Guarantees		 Paid-Up
Guarantees		 Secondary
Guarantees		 Paid-Up
Guarantees		Secondary
Guarantees		 Paid-Up
Guarantees		 Secondary
Guarantees		 Paid-Up
Guarantees
(Dollars in millions)(Dollars in millions)
Universal and Variable Life Contracts (1):       
Total account value (2)$4,548
 $985
 $4,306
 $1,014
Universal and Variable Life Contracts:       
Total account value (1), (2)$4,708
 $967
 $4,679
 $977
Net amount at risk (6)$47,348
 $6,826
 $49,161
 $7,164
$46,156
 $6,603
 $46,704
 $6,713
Average attained age of policyholders54 years
 62 years
 53 years
 62 years
55 years
 63 years
 54 years
 62 years
__________________
(1)The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.
(2)Includes the contractholder’s investments in the general account and separate account, if applicable.
(3)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

17
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

(4)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved.
(5)Defined as either the excess of the upper tier, adjusted for a profit margin, less the lower tier, as of the balance sheet date or the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. These amounts represent the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date.
(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

17
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

Liabilities for Unpaid Claims and Claim Expenses
Rollforward of Claims and Claim Adjustment Expenses
Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:


Nine Months
Ended
September 30,
Three Months
Ended
March 31,


2017
2016
2018
2017 (1)


(In millions)
(In millions)
Balance at December 31 of prior period
$11,621
 $7,527
Balance, beginning of period
$12,090
 $11,621
Less: Reinsurance recoverables
539
 273

1,401
 1,251
Net Balance at December 31 of prior period
11,082
 7,254
Cumulative adjustment (1)
—
 3,397
Net balance, beginning of period
11,082
 10,651

10,689
 10,370
Incurred related to:
   
   
Current period
11,768
 12,392

4,469
 4,419
Prior periods (2)
205
 239

(161) (179)
Total incurred
11,973
 12,631

4,308
 4,240
Paid related to:
   
   
Current period
(8,952) (8,678)
(2,044) (2,295)
Prior periods
(3,115) (3,505)
(2,138) (1,996)
Total paid
(12,067) (12,183)
(4,182) (4,291)
Net balance, end of period
10,988
 11,099

10,815
 10,319
Add: Reinsurance recoverables
1,355
 1,489

1,414
 1,349
Balance, end of period (included in future policy benefits and other policy-related balances)
$12,343
 $12,588

$12,229
 $11,668
__________________
(1)ReflectsAs discussed in Note 4 of the accumulated adjustment, netNotes to the Consolidated Financial Statements included in the 2017 Annual Report, at December 31, 2016, the Net balance decreased and the Reinsurance recoverables increased from those amounts previously reported. Additionally, at March 31, 2017, the Net balance decreased by $133 million and the Reinsurance recoverables increased by $146 million from those amounts previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017. These adjustments to the Net balance and the Reinsurance recoverables, at both periods, are primarily to correct for improper classification of reinsurance upon implementation of the new short-duration contracts guidance which clarified the requirement to include claim information for long-duration contracts. The accumulated adjustment primarily reflects unpaid claim liabilities, net of reinsurance, for long-duration contracts as of the beginning of the period presented.recoverables.
(2)During both the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, as a result of changes in estimates of insured events in the respective prior periods, the claims and claim adjustment expenses associated with prior periods increaseddecreased due to unfavorablefavorable claims experience.

18
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Closed Block
On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company 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 approving Metropolitan Life Insurance Company’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company.
Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company’s net income continues to be sensitive to the actual performance of the closed block.
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.

1918
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Closed Block (continued)

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.
Information regarding the closed block liabilities and assets designated to the closed block was as follows at:
 September 30, 2017 December 31, 2016 March 31, 2018 December 31, 2017
 (In millions) (In millions)
Closed Block Liabilities        
Future policy benefits $40,489
 $40,834
 $40,285
 $40,463
Other policy-related balances 193
 257
 213
 222
Policyholder dividends payable 483
 443
 462
 437
Policyholder dividend obligation 2,201
 1,931
 1,277
 2,121
Current income tax payable —
 4
Other liabilities 277
 196
 285
 212
Total closed block liabilities 43,643
 43,665
 42,522
 43,455
Assets Designated to the Closed Block        
Investments:        
Fixed maturity securities available-for-sale, at estimated fair value 27,541
 27,220
 26,815
 27,904
Equity securities available-for-sale, at estimated fair value 71
 100
Equity securities, at estimated fair value 68
 70
Mortgage loans 5,904
 5,935
 6,040
 5,878
Policy loans 4,542
 4,553
 4,532
 4,548
Real estate and real estate joint ventures 628
 655
 595
 613
Other invested assets 1,053
 1,246
 607
 731
Total investments 39,739
 39,709
 38,657
 39,744
Cash and cash equivalents 60
 18
Accrued investment income 487
 467
 475
 477
Premiums, reinsurance and other receivables 68
 68
Premiums, reinsurance and other receivables; cash and cash equivalents 208
 14
Current income tax recoverable 30
 —
 40
 35
Deferred income tax assets 109
 177
 23
 36
Total assets designated to the closed block 40,493
 40,439
 39,403
 40,306
Excess of closed block liabilities over assets designated to the closed block 3,150
 3,226
 3,119
 3,149
Amounts included in accumulated other comprehensive income (loss) (“AOCI”):    
Amounts included in AOCI:    
Unrealized investment gains (losses), net of income tax 1,851
 1,517
 1,711
 1,863
Unrealized gains (losses) on derivatives, net of income tax 23
 95
 (57) (7)
Allocated to policyholder dividend obligation, net of income tax (1,431) (1,255) (1,009) (1,379)
Total amounts included in AOCI 443
 357
 645
 477
Maximum future earnings to be recognized from closed block assets and liabilities $3,593
 $3,583
 $3,764
 $3,626
See Note 1 for discussion of new accounting guidance related to U.S. Tax Reform.
Information regarding the closed block policyholder dividend obligation was as follows:
 Nine Months
Ended
September 30, 2017		 Year 
 Ended 
 December 31, 2016		 Three Months
Ended
March 31, 2018		 Year 
 Ended 
 December 31, 2017
 (In millions) (In millions)
Balance, beginning of period $1,931
 $1,783
 $2,121
 $1,931
Change in unrealized investment and derivative gains (losses) 270
 148
 (844) 190
Balance, end of period $2,201
 $1,931
 $1,277
 $2,121

2019
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Closed Block (continued)

Information regarding the closed block revenues and expenses was as follows:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,		 Three Months
Ended
March 31,
 2017 2016 2017 2016 2018 2017
 (In millions)(In millions)
Revenues            
Premiums $413
 $436
 $1,247
 $1,297
 $387
 $402
Net investment income 450
 486
 1,368
 1,435
 444
 466
Net investment gains (losses) —
 (3) (10) (19) (29) (8)
Net derivative gains (losses) (6) 4
 (24) (3) (3) (8)
Total revenues 857
 923
 2,581
 2,710
 799
 852
Expenses            
Policyholder benefits and claims 591
 619
 1,773
 1,861
 571
 568
Policyholder dividends 235
 232
 732
 723
 244
 250
Other expenses 30
 33
 94
 100
 29
 32
Total expenses 856
 884
 2,599
 2,684
 844
 850
Revenues, net of expenses before provision for income tax expense (benefit) 1
 39
 (18) 26
 (45) 2
Provision for income tax expense (benefit) —
 13
 (8) 8
 (10) —
Revenues, net of expenses and provision for income tax expense (benefit) $1
 $26
 $(10) $18
 $(35) $2
Metropolitan Life Insurance Company charges the closed block with federal income taxes, state and local premium taxes and other state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan of Reorganization. Metropolitan Life Insurance Company also charges the closed block for expenses of maintaining the policies included in the closed block.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments
Fixed Maturity and Equity Securities Available-for-Sale
Fixed Maturity and Equity Securities Available-for-Sale by Sector
The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities AFS are structured securities including residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”) (collectively, “Structured Securities”).
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Cost or
Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		 Cost or
Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		 Amortized
Cost		 Gross Unrealized Estimated
Fair
Value

Gains		 Temporary
Losses		 OTTI
Losses (1)		 
Gains		 Temporary
Losses		 OTTI
Losses (1)		 
Gains		 Temporary
Losses		 OTTI
Losses (1)		 
Gains		 Temporary
Losses		 OTTI
Losses (1)		 
(In millions)(In millions)
Fixed maturity securities:Fixed maturity securities:                  Fixed maturity securities:                  
U.S. corporate$52,903
 $4,851
 $277
 $—
 $57,477
 $52,665
 $4,079
 $586
 $—
 $56,158
$53,597
 $3,738
 $587
 $—
 $56,748
 $53,291
 $5,037
 $238
 $—
 $58,090
U.S. government and agency36,722
 3,630
 244
 —
 40,108
 32,834
 3,238
 457
 —
 35,615
32,453
 3,036
 430
 —
 35,059
 35,021
 3,755
 231
 —
 38,545
Foreign corporate24,311
 1,563
 507
 —
 25,367
 24,596
 957
 1,196
 —
 24,357
23,986
 1,393
 443
 —
 24,936
 24,367
 1,655
 426
 —
 25,596
RMBS23,470
 1,095
 184
 (39) 24,420
 22,786
 911
 290
 (10) 23,417
21,488
 918
 357
 (35) 22,084
 21,735
 1,039
 181
 (41) 22,634
ABS7,652
 68
 15
 —
 7,705
 7,567
 32
 95
 —
 7,504
7,562
 75
 10
 —
 7,627
 7,808
 73
 15
 —
 7,866
State and political subdivision6,284
 1,159
 8
 —
 7,435
 6,252
 928
 44
 —
 7,136
6,330
 1,094
 14
 —
 7,410
 6,310
 1,245
 3
 1
 7,551
CMBS5,239
 145
 27
 —
 5,357
 4,876
 118
 59
 —
 4,935
4,958
 60
 49
 —
 4,969
 5,390
 124
 26
 —
 5,488
Foreign government3,802
 639
 26
 —
 4,415
 3,565
 507
 74
 —
 3,998
3,927
 538
 44
 —
 4,421
 3,887
 641
 26
 —
 4,502
Total fixed maturity securities$160,383

$13,150

$1,288

$(39)
$172,284

$155,141

$10,770

$2,801

$(10)
$163,120
$154,301

$10,852

$1,934

$(35)
$163,254

$157,809

$13,569

$1,146

$(40)
$170,272
Equity securities:                   
Common stock$1,274
 $72
 $16
 $—
 $1,330
 $1,220
 $91
 $12
 $—
 $1,299
Non-redeemable preferred stock438
 29
 6
 —
 461
 565
 14
 39
 —
 540
Total equity securities$1,712

$101

$22

$—

$1,791

$1,785

$105

$51

$—

$1,839
__________________
(1)Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”
The Company held non-income producing fixed maturity securities with an estimated fair value of $1$23 million and less than $1$4 million, withand unrealized gains (losses) of less than ($1) million and less than $1($3) million at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2017:March 31, 2018:
 
Due in One
Year or Less
 
Due After
 One Year
Through
Five Years
 
Due After
Five Years
Through Ten
Years
 
Due After Ten
Years
 
Structured
Securities
 
Total Fixed
Maturity
Securities
 (In millions)
Amortized cost$6,872
 $35,227
 $30,763
 $51,160
 $36,361
 $160,383
Estimated fair value$6,894
 $36,381
 $32,449
 $59,078
 $37,482
 $172,284

22
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

 
Due in One
Year or Less
 
Due After
 One Year
Through
Five Years
 
Due After
Five Years
Through Ten
Years
 
Due After Ten
Years
 
Structured
Securities
 
Total Fixed
Maturity
Securities
 (In millions)
Amortized cost$7,390
 $31,521
 $29,596
 $51,786
 $34,008
 $154,301
Estimated fair value$7,371
 $32,234
 $30,643
 $58,326
 $34,680
 $163,254
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

21
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Less than 12 Months Equal to or Greater
than 12 Months		 Less than 12 Months Equal to or Greater
than 12 Months		Less than 12 Months Equal to or Greater
than 12 Months		 Less than 12 Months Equal to or Greater
than 12 Months
Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses
(Dollars in millions)(Dollars in millions)
Fixed maturity securities:                              
U.S. corporate$4,644
 $119
 $1,750
 $158
 $8,406
 $337
 $2,260
 $249
$12,484
 $349
 $2,450
 $238
 $3,727
 $57
 $2,523
 $181
U.S. government and agency15,499
 240
 149
 4
 6,032
 457
 —
 —
14,171
 163
 2,813
 267
 13,905
 76
 3,018
 155
Foreign corporate2,153
 74
 3,870
 433
 5,343
 336
 4,523
 860
4,315
 111
 3,010
 332
 1,677
 43
 3,912
 383
RMBS5,075
 77
 1,566
 68
 6,662
 187
 1,707
 93
8,007
 165
 2,945
 157
 3,673
 30
 3,332
 110
ABS1,156
 2
 463
 13
 1,482
 12
 1,714
 83
1,311
 6
 204
 4
 732
 3
 358
 12
State and political subdivision222
 6
 60
 2
 943
 43
 17
 1
280
 8
 117
 6
 106
 1
 120
 3
CMBS882
 8
 123
 19
 922
 15
 432
 44
2,043
 29
 212
 20
 844
 6
 193
 20
Foreign government216
 6
 249
 20
 581
 26
 309
 48
765
 21
 250
 23
 247
 6
 265
 20
Total fixed maturity securities$29,847
 $532
 $8,230
 $717
 $30,371
 $1,413
 $10,962
 $1,378
$43,376
 $852
 $12,001
 $1,047
 $24,911
 $222
 $13,721
 $884
Equity securities:
 
 
 
 
 
 
 
Common stock$98
 $16
 $3
 $—
 $58
 $12
 $10
 $—
Non-redeemable preferred stock—
 —
 82
 6
 139
 6
 120
 33
Total equity securities$98
 $16
 $85
 $6
 $197
 $18
 $130
 $33
Total number of securities in an
unrealized loss position
1,592
 
 886
 
 3,076
 
 940
 
3,337
 
 1,007
 
 1,295
 
 1,103
 
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities
As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 20162017 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired.
Current Period Evaluation
Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at September 30, 2017.March 31, 2018. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads, as well as a change in the Company’s intention to hold or sell a security that is in an unrealized loss position.spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.
Gross unrealized losses on fixed maturity securities increased $793 billion during the three months ended March 31, 2018 to $1.9 billion. The increase in gross unrealized losses for the three months ended March 31, 2018 was primarily attributable to widening credit spreads and increases in interest rates, partially offset by strengthening foreign currencies on non-functional currency denominated fixed maturity securities.
At March 31, 2018, $76 million of the total $1.9 billion of gross unrealized losses were from 19 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.


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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Gross unrealized losses on fixed maturity securities decreased $1.5 billion during the nine months ended September 30, 2017 to $1.2 billion. The decrease in gross unrealized losses for the nine months ended September 30, 2017 was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads, and to a lesser extent the impact of strengthening foreign currencies on non-functional currency denominated fixed maturity securities.
At September 30, 2017, $107 million of the total $1.2 billion of gross unrealized losses were from 30 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.
Gross unrealized losses on equity securities decreased $29 million during the nine months ended September 30, 2017 to $22 million.
Investment Grade Fixed Maturity Securities
Of the $107$76 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $70$35 million, or 65%46%, were related to gross unrealized losses on 13five investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.
Below Investment Grade Fixed Maturity Securities
Of the $107$76 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $37$41 million, or 35%54%, were related to gross unrealized losses on 1714 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily industrial and utility securities) and CMBS and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty including concerns over lower oil prices in the energy sector. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers.issuers and evaluates CMBS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security.
Equity Securities
Equity securities are summarized as follows at:
 March 31, 2018 December 31, 2017
 
Estimated
Fair
Value
 
% of
Total
 
Estimated
Fair
Value
 
% of
Total
 
 (Dollars in millions)
Equity securities:       
Common stock$473
 53.6% $1,251
 75.5%
Non-redeemable preferred stock409
 46.4
 407
 24.5
Total equity securities$882
 100.0% $1,658
 100.0%
In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company has reclassified its investment in common stock in regional banks of the Federal Home Loan Bank (“FHLB”) system from equity securities to other invested assets. These investments are carried at redemption value and are considered restricted investments until redeemed by the respective FHLB regional banks. The carrying value of these investments at December 31, 2017 was $733 million.


23
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
(Dollars in millions)(Dollars in millions)
Mortgage loans:              
Commercial$34,495
 59.4 % $34,008
 60.1 %$37,269
 61.9 % $35,440
 60.6 %
Agricultural12,700
 21.9
 12,358
 21.9
12,747
 21.2
 12,712
 21.8
Residential10,567
 18.2
 9,895
 17.5
10,042
 16.7
 10,058
 17.2
Subtotal (1)57,762
 99.5
 56,261
 99.5
60,058
 99.8
 58,210
 99.6
Valuation allowances(272) (0.5) (267) (0.5)(281) (0.5) (271) (0.5)
Subtotal mortgage loans, net57,490
 99.0
 55,994
 99.0
59,777
 99.3
 57,939
 99.1
Residential — FVO564
 1.0
 566
 1.0
438
 0.7
 520
 0.9
Total mortgage loans, net$58,054
 100.0 % $56,560
 100.0 %$60,215
 100.0 % $58,459
 100.0 %
__________________
(1)
Purchases of mortgage loans, primarily residential mortgage loans, were $409288 million and$1.9 billion762 million for thethree months ended March 31, 2018 and nine months endedSeptember 30, 2017, respectively, and$732 millionand $1.9 billionfor thethree monthsand nine months endedSeptember 30, 2016, respectively.
Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on residential mortgage loans — FVO is presented in Note 7. The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis.
Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment
Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at:
Evaluated Individually for Credit Losses 
Evaluated Collectively for
Credit Losses
 
Impaired
Loans
Evaluated Individually for Credit Losses 
Evaluated Collectively for
Credit Losses
 
Impaired
Loans
Impaired Loans with a
Valuation Allowance
 
Impaired Loans without a
Valuation Allowance
      
Impaired Loans with a
Valuation Allowance
 
Impaired Loans without a
Valuation Allowance
      
Unpaid
Principal
Balance
 
Recorded
Investment
 Valuation
Allowances		 
Unpaid
Principal
Balance
 Recorded
Investment		 Recorded
Investment		 Valuation
Allowances		 Carrying
Value
Unpaid
Principal
Balance
 
Recorded
Investment
 Valuation
Allowances		 
Unpaid
Principal
Balance
 Recorded
Investment		 Recorded
Investment		 Valuation
Allowances		 Carrying
Value
(In millions)(In millions)
September 30, 2017               
March 31, 2018               
Commercial$—
 $—
 $—
 $—
 $—
 $34,495
 $171
 $—
$—
 $—
 $—
 $—
 $—
 $37,269
 $184
 $—
Agricultural22
 21
 2
 28
 28
 12,651
 38
 47
22
 21
 2
 101
 100
 12,626
 38
 119
Residential—
 —
 —
 335
 304
 10,263
 61
 304
—
 —
 —
 376
 339
 9,703
 57
 339
Total$22

$21

$2

$363

$332

$57,409

$270

$351
$22

$21

$2

$477

$439

$59,598

$279

$458
December 31, 2016               
December 31, 2017               
Commercial$—
 $—
 $—
 $12
 $12
 $33,996
 $167
 $12
$—
 $—
 $—
 $—
 $—
 $35,440
 $173
 $—
Agricultural11
 9
 1
 27
 27
 12,322
 37
 35
22
 21
 2
 27
 27
 12,664
 38
 46
Residential—
 —
 —
 265
 241
 9,654
 62
 241
—
 —
 —
 358
 324
 9,734
 58
 324
Total$11

$9

$1

$304

$280

$55,972

$266

$288
$22

$21

$2

$385

$351

$57,838

$269

$370

24
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $31$84 million and $297$331 million, respectively, for the three months ended September 30, 2017;March 31, 2018; and $6$12 million, $28$25 million and $275$253 million, respectively, for the nine months ended September 30, 2017.
The average recorded investment for impaired commercial, agricultural and residential mortgage loans was$12 million, $48 millionand $202 million, respectively, for the three months ended September 30, 2016; and $34 million, $52 million and $174 million, respectively, for the nine months ended September 30, 2016.March 31, 2017.
Valuation Allowance Rollforward by Portfolio Segment
The changes in the valuation allowance, by portfolio segment, were as follows:

Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017
20162018
2017
Commercial
Agricultural
Residential
Total
Commercial
Agricultural
Residential
TotalCommercial
Agricultural
Residential
Total
Commercial
Agricultural
Residential
Total
(In millions)(In millions)
Balance, beginning of period$167

$38

$62

$267

$165

$37

$55

$257
$173

$40

$58

$271

$167

$38

$62

$267
Provision (release)4

4

10

18

—

2

11

13
11

—

—

11

3

—

5

8
Charge-offs, net of recoveries—

(2)
(11)
(13)
—

(2)
(12)
(14)—

—

(1)
(1)
—

—

(4)
(4)
Balance, end of period$171

$40

$61

$272

$165

$37

$54

$256
$184

$40

$57

$281

$170

$38

$63

$271
Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans was as follows at:
 Recorded Investment Estimated
Fair
Value		 % of
Total
 Debt Service Coverage Ratios   % of
Total		 
 > 1.20x 1.00x - 1.20x < 1.00x Total 
 (Dollars in millions)
March 31, 2018             
Loan-to-value ratios:             
Less than 65%$31,534
 $923
 $139
 $32,596
 87.5% $32,956
 87.7%
65% to 75%3,297
 95
 135
 3,527
 9.5
 3,516
 9.4
76% to 80%165
 210
 126
 501
 1.3
 480
 1.3
Greater than 80%401
 167
 77
 645
 1.7
 606
 1.6
Total$35,397

$1,395

$477

$37,269

100.0%
$37,558

100.0%
December 31, 2017             
Loan-to-value ratios:             
Less than 65%$29,346
 $1,359
 $198
 $30,903
 87.2% $31,563
 87.5%
65% to 75%3,245
 95
 114
 3,454
 9.7
 3,465
 9.6
76% to 80%149
 171
 57
 377
 1.1
 363
 1.0
Greater than 80%400
 159
 147
 706
 2.0
 665
 1.9
Total$33,140

$1,784

$516

$35,440

100.0%
$36,056

100.0%

2425
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans was as follows at:
 Recorded Investment Estimated
Fair
Value		 % of
Total
 Debt Service Coverage Ratios   % of
Total		 
 > 1.20x 1.00x - 1.20x < 1.00x Total 
 (Dollars in millions)
September 30, 2017             
Loan-to-value ratios:             
Less than 65%$29,702
 $1,430
 $242
 $31,374
 91.0% $32,058
 91.1%
65% to 75%2,441
 159
 168
 2,768
 8.0
 2,769
 7.9
76% to 80%149
 —
 57
 206
 0.6
 202
 0.6
Greater than 80%—
 —
 147
 147
 0.4
 143
 0.4
Total$32,292

$1,589

$614

$34,495

100%
$35,172

100%
December 31, 2016             
Loan-to-value ratios:             
Less than 65%$29,352
 $1,036
 $564
 $30,952
 91.0% $31,320
 91.2%
65% to 75%2,522
 —
 198
 2,720
 8.0
 2,694
 7.9
76% to 80%116
 —
 —
 116
 0.3
 115
 0.3
Greater than 80%118
 27
 75
 220
 0.7
 214
 0.6
Total$32,108

$1,063

$837

$34,008

100%
$34,343

100%
Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans was as follows at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
(Dollars in millions)(Dollars in millions)
Loan-to-value ratios:              
Less than 65%$12,162
 95.7% $11,829
 95.7%$12,118
 95.1% $12,082
 95.0%
65% to 75%520
 4.1
 424
 3.4
581
 4.5
 581
 4.6
76% to 80%9
 0.1
 17
 0.2
40
 0.3
 40
 0.3
Greater than 80%9
 0.1
 88
 0.7
8
 0.1
 9
 0.1
Total$12,700
 100.0% $12,358
 100.0%$12,747
 100.0% $12,712
 100.0%
The estimated fair value of agricultural mortgage loans was $12.7 billion and $12.8 billion and $12.5 billion at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.


25
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Credit Quality of Residential Mortgage Loans
The credit quality of residential mortgage loans was as follows at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
(Dollars in millions)(Dollars in millions)
Performance indicators:              
Performing$10,198
 96.5% $9,563
 96.6%$9,711
 96.7% $9,614
 95.6%
Nonperforming369
 3.5
 332
 3.4
331
 3.3
 444
 4.4
Total$10,567
 100.0% $9,895
 100.0%$10,042
 100.0% $10,058
 100.0%
The estimated fair value of residential mortgage loans was $11.2$10.8 billion and $10.3$10.6 billion at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.

26
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Past Due and Nonaccrual Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both September 30, 2017March 31, 2018 and December 31, 2016.2017. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and nonaccrual mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:
Past Due Greater than 90 Days Past Due and Still Accruing Interest NonaccrualPast Due Greater than 90 Days Past Due and Still Accruing Interest Nonaccrual
September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017 March 31, 2018 December 31, 2017
(In millions)(In millions)
Commercial$—
 $—
 $—
 $—
 $—
 $—
$—
 $—
 $—
 $—
 $—
 $—
Agricultural134
 127
 125
 104
 36
 23
219
 134
 114
 125
 106
 36
Residential369
 332
 —
 —
 369
 332
331
 444
 —
 —
 331
 444
Total$503
 $459
 $125
 $104
 $405
 $355
$550
 $578
 $114
 $125
 $437
 $480
Mortgage Loans Modified in a Troubled Debt Restructuring
During both thethree months and nine months endedSeptember 30, 2017 and 2016, the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring.
Cash Equivalents
The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $3.0$2.6 billion and $4.7$3.1 billion at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.

26
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity securities AFS and equity securities AFS and the effect on DAC, VOBA, deferred sales inducements (“DSI”), future policy benefits and the policyholder dividend obligation, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.
The components of net unrealized investment gains (losses), included in AOCI, were as follows:
 September 30, 2017 December 31, 2016
 (In millions)
Fixed maturity securities$11,787
 $7,912
Fixed maturity securities with noncredit OTTI losses included in AOCI39
 10
Total fixed maturity securities11,826
 7,922
Equity securities123
 72
Derivatives1,557
 2,244
Other62
 16
Subtotal13,568
 10,254
Amounts allocated from:   
Future policy benefits(18) (9)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI(1) (1)
DAC, VOBA and DSI(759) (569)
Policyholder dividend obligation(2,201) (1,931)
Subtotal(2,979) (2,510)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(13) (3)
Deferred income tax benefit (expense)(3,689) (2,690)
Net unrealized investment gains (losses)$6,887
 $5,051
The changes in net unrealized investment gains (losses) were as follows:
 Nine Months
Ended
September 30, 2017
 (In millions)
Balance, beginning of period$5,051
Fixed maturity securities on which noncredit OTTI losses have been recognized29
Unrealized investment gains (losses) during the period3,285
Unrealized investment gains (losses) relating to: 
Future policy benefits(9)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI—
DAC, VOBA and DSI(190)
Policyholder dividend obligation(270)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(10)
Deferred income tax benefit (expense)(999)
Balance, end of period$6,887
Change in net unrealized investment gains (losses)$1,836
Concentrations of Credit Risk
There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 2017 and December 31, 2016.
 March 31, 2018 December 31, 2017
 (In millions)
Fixed maturity securities$8,845
 $12,349
Fixed maturity securities with noncredit OTTI losses included in AOCI35
 40
Total fixed maturity securities8,880
 12,389
Equity securities—
 119
Derivatives706
 1,396
Other77
 1
Subtotal9,663
 13,905
Amounts allocated from:   
Future policy benefits(11) (19)
DAC, VOBA and DSI(579) (790)
Policyholder dividend obligation(1,277) (2,121)
Subtotal(1,867) (2,930)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(7) (14)
Deferred income tax benefit (expense)(1,629) (3,704)
Net unrealized investment gains (losses)$6,160
 $7,257

27
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

The changes in net unrealized investment gains (losses) were as follows:
 Three Months
Ended
March 31, 2018
 (In millions)
Balance, beginning of period$7,257
Cumulative effects of changes in accounting principles, net of income tax (Note 1)1,310
Fixed maturity securities on which noncredit OTTI losses have been recognized(5)
Unrealized investment gains (losses) during the period(4,118)
Unrealized investment gains (losses) relating to: 
Future policy benefits8
DAC, VOBA and DSI211
Policyholder dividend obligation844
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI7
Deferred income tax benefit (expense)646
Balance, end of period$6,160
Change in net unrealized investment gains (losses)$(1,097)
Concentrations of Credit Risk
There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both March 31, 2018 and December 31, 2017.
Securities Lending
Elements of the Company’s securities lending program are presented below at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
(In millions)(In millions)
Securities on loan: (1)      
Amortized cost$14,447
 $15,694
$12,702
 $13,887
Estimated fair value$15,551
 $16,496
$13,300
 $14,852
Cash collateral received from counterparties (2)$15,919
 $16,807
$13,542
 $15,170
Security collateral received from counterparties (3)$—
 $14
$27
 $11
Reinvestment portfolio — estimated fair value$16,012
 $16,821
$13,518
 $15,188
__________________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.
(3)
Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the interim condensed consolidated financial statements.

28
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Remaining Tenor of Securities
Lending Agreements
  
Remaining Tenor of Securities
Lending Agreements
  
Remaining Tenor of Securities
Lending Agreements
  
Remaining Tenor of Securities
Lending Agreements
  
Open (1) 1 Month or Less 1 to 6 Months Total Open (1) 1 Month or Less 1 to 6 Months TotalOpen (1) 1 Month or Less 
Over
1 to 6 Months
 Total Open (1) 1 Month or Less 
Over
1 to 6 Months
 Total
(In millions)(In millions)
Cash collateral liability by loaned security type:                              
U.S. government and agency$3,532
 $6,962
 $5,425
 $15,919
 $4,033
 $5,640
 $7,134
 $16,807
$2,457
 $5,163
 $5,922
 $13,542
 $2,927
 $5,279
 $6,964
 $15,170
__________________
(1)The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.
If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2017March 31, 2018 was $3.5$2.4 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. government and agency and ABS), short-term investments and cash equivalents with 68% invested in agency RMBS, U.S. government and agency securities, agency RMBS, ABS and U.S. corporate securities) and short-term investments with 64% invested in U.S. government and agency securities, agency RMBS, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.
Repurchase Agreements
Elements of the Company’s short-term repurchase agreements are presented below at:
 March 31, 2018 December 31, 2017
 (In millions)
Securities on loan: (1)   
Amortized cost$2,700
 $900
Estimated fair value$2,819
 $1,031
Cash collateral received from counterparties (2)$2,760
 $1,000
Reinvestment portfolio — estimated fair value$2,754
 $1,000
__________________
(1)Included within fixed maturity securities, cash equivalents and short-term investments.
(2)Included within payables for collateral under securities loaned and other transactions.

2829
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Repurchase Agreements
Elements of the short-term repurchase agreements are presented below at:
 September 30, 2017
 (In millions)
Securities on loan: (1) 
Amortized cost$1,879
Estimated fair value$2,000
Cash collateral received from counterparties (2)$1,960
Reinvestment portfolio — estimated fair value$1,972
__________________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.
The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:
September 30, 2017March 31, 2018 December 31, 2017
Remaining Tenor of Repurchase Agreements  Remaining Tenor of Repurchase Agreements   Remaining Tenor of Repurchase Agreements  
1 Month or Less Total1 Month or Less Total 1 Month or Less Total
(In millions)(In millions)
Cash collateral liability by loaned security type:      
U.S. government and agency$1,960
 $1,960
$2,760
 $2,760
 $1,000
 $1,000
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. government and agency securities, agency RMBS, ABS and ABS),U.S. corporate securities) and short-term investments and cash equivalents with 68%65% invested in agency RMBS, U.S. government and agency securities, agency RMBS, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company. There were no repurchase agreements outstanding at December 31, 2016.
Invested Assets on Deposit and Pledged as Collateral
Invested assets on deposit and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
(In millions)(In millions)
Invested assets on deposit (regulatory deposits)$49
 $47
$47
 $49
Invested assets pledged as collateral20,938
 20,750
21,097
 20,775
Total invested assets on deposit and pledged as collateral$20,987

$20,797
$21,144

$20,824
The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 20162017 Annual Report) and derivative transactions (see Note 6). Amounts in the table above include invested assets and cash and cash equivalents. See Note 6.
See “— Securities Lending” and “— Repurchase Agreements” for information regarding securities on loan and Note 4 for information regarding investments designated to the closed block.block and “— Equity Securities” for information on common stock holdings in regional banks of the FHLB system, which are considered restricted investments.

29
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Variable Interest Entities
The Company has invested in legal entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity.
Consolidated VIEs
Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.
The following table presents the total assets and total liabilities relating to investment-related VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at:
 September 30, 2017 December 31, 2016
 
Total
Assets
 
Total
Liabilities
 
Total
Assets
 
Total
Liabilities
 (In millions)
Real estate joint ventures (1)$1,102
 $—
 $1,124
 $—
Renewable energy partnership (2)114
 —
 —
 —
Other investments (3)41
 6
 62
 12
Total$1,257

$6

$1,186

$12
__________________
(1)The Company’s investment in these affiliated real estate joint ventures was $1.0 billion at both September 30, 2017 and December 31, 2016. Other affiliates’ investments in these affiliated real estate joint ventures totaled $83 million and $85 million at September 30, 2017 and December 31, 2016, respectively.
(2)Assets of the renewable energy partnership, primarily consisting of other invested assets, were consolidated in prior periods. As a result of the Separation and a reassessment in the third quarter of 2017, the renewable energy partnership was determined to be a consolidated VIE.
(3)Other investments is primarily comprised of other invested assets and other limited partnership interests. The Company consolidates entities that are structured as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise.

30
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

The following table presents the total assets and total liabilities relating to investment-related VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at:
 March 31, 2018 December 31, 2017
 
Total
Assets
 
Total
Liabilities
 
Total
Assets
 
Total
Liabilities
 (In millions)
Real estate joint ventures (1)$1,331
 $—
 $1,077
 $—
Renewable energy partnership (2)109
 1
 116
 3
Other investments31
 6
 32
 6
Total$1,471

$7

$1,225

$9
__________________
(1)The Company’s investment in these affiliated real estate joint ventures was $1.2 billion and $1.0 billion at March 31, 2018 and December 31, 2017, respectively. Other affiliates’ investments in these affiliated real estate joint ventures totaled $144 million and $85 million at March 31, 2018 and December 31, 2017, respectively.
(2)Assets of the renewable energy partnership primarily consisted of other invested assets.
Unconsolidated VIEs
The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
(In millions)(In millions)
Fixed maturity securities AFS:              
Structured Securities (2)$35,845
 $35,845
 $34,912
 $34,912
$33,350
 $33,350
 $34,284
 $34,284
U.S. and foreign corporate1,162
 1,162
 1,167
 1,167
990
 990
 1,166
 1,166
Other limited partnership interests3,490
 5,865
 3,383
 5,674
3,587
 5,922
 3,561
 5,765
Other invested assets2,159
 2,570
 2,089
 2,666
2,183
 2,440
 2,172
 2,506
Real estate joint ventures70
 84
 81
 95
41
 46
 38
 43
Total$42,726

$45,526

$41,632

$44,514
$40,151

$42,748

$41,221

$43,764
__________________
(1)The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $123$113 million and $150$117 million at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.
(2)For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset backedasset-backed securities issued by trusts that do not have substantial equity.
As described in Note 11,12, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during both the ninethree months ended September 30, 2017March 31, 2018 and 2016.2017.

31
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Net Investment Income
The components of net investment income were as follows:
Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,		 Three Months
Ended
March 31,
2017 2016 2017 2016 2018 2017
(In millions)(In millions)
Investment income:           
Fixed maturity securities$1,764
 $1,907
 $5,274
 $5,803
 $1,785
 $1,766
Equity securities20
 19
 68
 65
 11
 24
Mortgage loans697
 630
 1,989
 1,930
 671
 637
Policy loans77
 104
 230
 311
 72
 76
Real estate and real estate joint ventures104
 159
 327
 366
 111
 98
Other limited partnership interests163
 154
 506
 274
 147
 196
Cash, cash equivalents and short-term investments20
 10
 54
 31
 20
 16
Operating joint venture6
 2
 12
 7
 7
 1
Other49
 67
 154
 136
 79
 65
Subtotal2,900
 3,052
 8,614

8,923
 2,903

2,879
Less: Investment expenses240
 182
 659
 574
 202
 207
Net investment income$2,660
 $2,870
 $7,955

$8,349
 $2,701

$2,672
See “— Related Party Investment Transactions” for discussion of affiliated net investment income and investment expenses.


32
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,		 Three Months
Ended
March 31,
2017 2016 2017 2016 2018 2017
(In millions)(In millions)
Total gains (losses) on fixed maturity securities:           
Total OTTI losses recognized — by sector and industry:       
U.S. and foreign corporate securities — by industry:       
Industrial$—
 $—
 $—
 $(58)
Communications—
 —
 —
 (3)
Consumer(5) —
 (5) —
Total U.S. and foreign corporate securities(5) —
 (5) (61)
State and political subdivision—
 —
 (1) —
RMBS—
 (9) —
 (14)
OTTI losses on fixed maturity securities recognized in earnings(5) (9) (6) (75) $—
 $—
Fixed maturity securities — net gains (losses) on sales and disposals1
 61
 41
 268
 (45) 31
Total gains (losses) on fixed maturity securities(4) 52
 35

193
 (45)
31
Total gains (losses) on equity securities:    
 
 
 
Total OTTI losses recognized — by sector:    
 
OTTI losses recognized — by security type: 
 
Common stock(4) (5) (16) (71) —
 (7)
Non-redeemable preferred stock—
 —
 (1) —
 —
 (1)
OTTI losses on equity securities recognized in earnings(4) (5) (17)
(71)
Total OTTI losses on equity securities recognized in earnings —

(8)
Equity securities — net gains (losses) on sales and disposals—
 7
 1
 21
 —
 (3)
Change in estimated fair value of equity securities (1) (39) —
Total gains (losses) on equity securities(4) 2
 (16)
(50) (39)
(11)
Mortgage loans(16) (9) (44) (6) (21) (12)
Real estate and real estate joint ventures169
 20
 436
 28
 25
 (3)
Other limited partnership interests(30) (8) (44) (38) —
 (3)
Other21
 (14) (90) (44)
Other (2) (106) (38)
Subtotal136
 43
 277

83
 (186)
(36)
FVO consolidated securitization entities:       
Securities—
 1
 —
 2
Change in estimated fair value of other limited partnership interests and real estate joint ventures (6) —
Non-investment portfolio gains (losses)(40) (2) (93) 30
 (4) (7)
Subtotal(40) (1) (93)
32
 (10)
(7)
Total net investment gains (losses)$96
 $42
 $184

$115
 $(196)
$(43)
__________________
(1)
Changes in estimated fair value subsequent to purchase for equity securities still held as of the end of the period included in net investment gains (losses) were ($39) million for the three months ended March 31, 2018. See Note1.
(2)
Other gains (losses) for the three months ended March 31, 2018 includes a leveraged lease impairment of $105 million.
See “— Related Party Investment Transactions” for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates.
Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($30)10) millionand ($139) million for thethree months and nine months endedSeptember 30, 2017, respectively, and $1 millionand $2448) million for the three months endedMarch 31, 2018 and nine months ended September 30, 20162017, respectively.

33
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Sales or Disposals and Impairments of Fixed Maturity and Equity Securities AFS
Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities AFS and the components of fixed maturity and equity securities AFS net investment gains (losses) were as shown in the table below.
Three Months 
 Ended 
September 30,		Three Months 
 Ended 
 March 31,
2017 2016 2017 20162018 2017
Fixed Maturity Securities Equity SecuritiesFixed Maturity Securities
(In millions)(In millions)
Proceeds$5,888
 $15,343
 $317
 $28
$13,255
 $7,478
Gross investment gains$32
 $135
 $4
 $9
$51
 $130
Gross investment losses(31) (74) (4) (2)(96) (99)
OTTI losses(5) (9) (4) (5)—
 —
Net investment gains (losses)$(4) $52
 $(4) $2
$(45) $31

Nine Months
Ended
September 30,

2017
2016
2017
2016

Fixed Maturity Securities
Equity Securities

(In millions)
Proceeds$22,256

$41,425

$407

$85
Gross investment gains$225

$637

$9

$28
Gross investment losses(184)
(369)
(8)
(7)
OTTI losses(6)
(75)
(17)
(71)
Net investment gains (losses)$35

$193

$(16)
$(50)

Credit Loss Rollforward
The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in other comprehensive income (loss) (“OCI”):
 Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Balance, beginning of period$136
 $171
 $157
 $188
Addition:       
Additional impairments — credit loss OTTI on securities previously impaired—
 8
 —
 11
Reduction:       
Sales (maturities, pay downs or prepayments) of securities previously
impaired as credit loss OTTI
(4) (10) (25) (30)
Balance, end of period$132
 $169
 $132

$169
  Three Months
Ended
March 31,
  2018 2017
 (In millions)
Balance, beginning of period $110
 $157
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI (6) (16)
Balance, end of period $104

$141

34
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Related Party Investment Transactions
The Company transfers invested assets primarily consisting of fixed maturity securities and mortgage loans to and from affiliates. Invested assets transferred to and from affiliates were as follows:
Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,		 Three Months
Ended
March 31,
2017 2016 2017 2016 2018 2017
(In millions)(In millions)
Estimated fair value of invested assets transferred to affiliates$—
 $179
 $453
 $4,555
 $—
 $453
Amortized cost of invested assets transferred to affiliates$—
 $169
 $416
 $4,297
 $—
 $416
Net investment gains (losses) recognized on transfers$—
 $10
 $37
 $258
 $—
 $37
Estimated fair value of invested assets transferred from affiliates$—
 $51
 $293
 $150
 $—
 $293
In January 2017, the Company received transferred investments with an estimated fair value of $292 million, which are included in the table above, in addition to $275 million in cash related to the recapture of risks from minimum benefit guarantees on certain variable annuities previously reinsured by Brighthouse Life Insurance Company (“Brighthouse Insurance”). See Note 12 for additional information related
The unpaid principal balance of MetLife, Inc. affiliated loans held by the Company totals $1.8 billion. In March 2018, three senior notes previously issued by MetLife, Inc. to the transfer.
Below isCompany were redenominated to Japanese yen. A $500 million senior note was redenominated to a summarynew 53.3 billion Japanese yen senior note to the Company. The 53.3 billion Japanese yen senior note matures in June 2019 and bears interest at a rate per annum of certain1.45%, payable semi-annually. A $250 million senior note was redenominated to a new 26.5 billion Japanese yen senior note to the Company. The 26.5 billion Japanese yen senior note matures in October 2019 and bears interest at a rate per annum of 1.72%, payable semi-annually. A $250 million senior note was also redenominated to a new 26.5 billion Japanese yen senior note to the Company. The 26.5 billion Japanese yen senior note matures in September 2020 and bears interest at a rate per annum of 0.82%, payable semi-annually. Other previously issued notes of $358 million at 5.64% due on July 15, 2021 and $467 million at 5.86% due on December 16, 2021 also remain outstanding. The carrying value of these MetLife, Inc. affiliated loans which are more fully described in Note 8 of the Notes of the Consolidated Financial Statements included in the 2016 Annual Report.
totaled $1.8 billion at both March 31, 2018The Company had affiliated loans outstanding to MetLife, Inc., whichandDecember 31, 2017, and are included in other invested assets, totaling $1.8 billion at both September 30, 2017 and December 31, 2016.assets. Net investment income from these affiliated loans was $1911 million and $5819 million for the three monthsandnine months ended September 30, 2017, respectively, and$23 millionMarch 31, 2018 and $70 millionfor thethree monthsandnine months endedSeptember 30, 2016,2017, respectively.
As a structured settlements assignment company, the Company purchases annuities from Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) to fund the periodic structured settlement claim payment obligations it assumes. Each annuity purchased is contractually designated to the assumed claim obligation it funds. The aggregate annuity contract values recorded, for which the Company has also recorded unpaid claim obligations of equal amounts, were $1.3 billion at both September 30, 2017March 31, 2018 and December 31, 2016.2017. The related net investment income and corresponding policyholder benefits and claims recognized were $18 million and $51 million for the three monthsandnine months endedSeptember 30, 2017, respectively, and$17 millionand$4616 million for the three months endedMarch 31, 2018 andnine months endedSeptember 30, 2016, 2017, respectively.
The Company holds a surplus note from American Life Insurance Company, an affiliate, which is included in other invested assets, with a carrying value of $100 million at both September 30, 2017March 31, 2018 and December 31, 2016.2017. Net investment income from this surplus note was $1 million and $3 million for both the three months andninethree months ended September 30, 2017, and thethree monthsMarch 31, 2018 andnine months endedSeptember 30, 2016. 2017.
The Company held preferred stock of Metropolitan Property and Casualty Insurance Company, an affiliate, which was included in other invested assets, with a carrying value of $315 million at both September 30, 2017March 31, 2018 and December 31, 2016.2017. Net investment income from the affiliated preferred stock dividends was $2 million and $1 million and $4 million for both the three months endedMarch 31, 2018 andnine months endedSeptember 30, 2017,, and thethree monthsandnine months endedSeptember 30, 2016. respectively.
In March 2017, the Company purchased from Brighthouse Insurance an interest in an operating joint venture for $286 million, which was settled in cash in April 2017.
See Note 2 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for information regarding the separation of Brighthouse.
The Company provides investment administrative services to certain affiliates. The related investment administrative service charges to these affiliates were $1819 million and $5418 million for the three months endedMarch 31, 2018 andnine months endedSeptember 30, 2017,, respectively, and$42 million and$127 millionfor thethree monthsandnine months endedSeptember 30, 2016, respectively.
See “— Variable Interest Entities” for information on investments in affiliated real estate joint ventures.

35
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives
Accounting for Derivatives
Freestanding Derivatives
Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.
Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivativesderivative’s carrying value in other invested assets or other liabilities.
If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows:
Statement of Operations Presentation:Derivative:
Policyholder benefits and claims• 
Economic hedges of variable annuity guarantees included in
future policy benefits
Net investment income• 
Economic hedges of equity method investments in joint
ventures
• All derivatives held in relation to trading portfolios
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:
Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.
Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item.
In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

3635
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).
In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).
Embedded Derivatives
The Company sells variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;
the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and
a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.
See Note 7 for information about the fair value hierarchy for derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash markets.

3736
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Interest Rate Derivatives
The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, interest rate total return swaps, caps, floors, swaptions, futures and forwards.
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.
The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. government and agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.
Interest rate total return swaps are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Interbank Offered Rate (“LIBOR”), calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. Interest rate total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate total return swaps in nonqualifying hedging relationships.
The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, as well asand interest rate floors primarily to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively.level. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in nonqualifying hedging relationships.
In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures in nonqualifying hedging relationships.
Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.
The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and nonqualifying hedging relationships.
ToA synthetic guaranteed interest contract (“GIC”) is a lesser extent,contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the contractholder owns the underlying assets. The Company uses exchange-traded interestguarantees a rate futures in nonqualifyingof return on those assets for a premium. Synthetic GICs are not designated as hedging relationships.instruments.

37
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency exchange rate derivatives, including foreign currency swaps and foreign currency forwards, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.
In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in nonqualifying hedging relationships.

38
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium involuntary restructuring or governmental intervention.intervention for sovereign obligors. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

38
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts.contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Primary Risks Managed byCredit Derivatives
The following table presentsCompany enters into purchased credit default swaps to hedge against credit-related changes in the primary underlying risk exposure,value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount and estimated fairin exchange for the payment of cash amounts by the counterparty equal to the par value of the Company’s derivatives, excluding embedded derivatives, held at:
    September 30, 2017 December 31, 2016
  Primary Underlying Risk Exposure Gross
Notional
Amount		 Estimated Fair Value Gross
Notional
Amount		 Estimated Fair Value
  Assets Liabilities Assets Liabilities
    (In millions)
Derivatives Designated as Hedging Instruments:            
Fair value hedges:              
Interest rate swaps Interest rate $3,942
 $2,305
 $3
 $4,993
 $2,221
 $6
Foreign currency swaps Foreign currency exchange rate 636
 44
 4
 1,200
 29
 224
Subtotal   4,578
 2,349
 7
 6,193
 2,250
 230
Cash flow hedges:              
Interest rate swaps Interest rate 3,534
 307
 —
 1,793
 325
 26
Interest rate forwards Interest rate 3,413
 —
 203
 4,033
 —
 370
Foreign currency swaps Foreign currency exchange rate 22,027
 936
 1,043
 20,080
 1,435
 1,604
Subtotal   28,974
 1,243
 1,246
 25,906
 1,760
 2,000
Total qualifying hedges   33,552
 3,592
 1,253
 32,099
 4,010
 2,230
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swaps Interest rate 43,155
 1,773
 328
 32,662
 2,514
 879
Interest rate floors Interest rate 7,201
 127
 —
 9,001
 173
 2
Interest rate caps Interest rate 73,018
 54
 2
 78,358
 112
 3
Interest rate futures Interest rate 2,096
 2
 —
 2,342
 3
 —
Interest rate options Interest rate 7,525
 156
 35
 850
 144
 1
Interest rate forwards Interest rate —
 —
 —
 396
 —
 3
Interest rate total return swaps Interest rate 1,048
 3
 9
 1,549
 2
 127
Synthetic GICs Interest rate 11,254
 —
 —
 5,566
 —
 —
Foreign currency swaps Foreign currency exchange rate 7,068
 644
 135
 8,175
 1,247
 58
Foreign currency forwards Foreign currency exchange rate 1,429
 37
 6
 1,396
 52
 18
Credit default swaps — purchased Credit 878
 10
 7
 961
 12
 6
Credit default swaps — written Credit 8,031
 166
 1
 8,025
 119
 8
Equity futures Equity market 1,712
 —
 6
 1,851
 10
 —
Equity index options Equity market 6,773
 223
 496
 11,119
 260
 426
Equity variance swaps Equity market 5,579
 81
 228
 5,579
 69
 193
Equity total return swaps Equity market 1,063
 —
 35
 1,013
 1
 42
Total non-designated or nonqualifying derivatives 177,830
 3,276
 1,288
 168,843
 4,718
 1,766
Total   $211,382
 $6,868
 $2,541
 $200,942
 $8,728
 $3,996
Basedinvestment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. In each case, payout on gross notional amounts, a substantial portioncredit default swap is triggered only after the Credit Derivatives Determinations Committee of the Company’s derivatives was not designated or did not qualify as part ofInternational Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationship at both September 30, 2017 and December 31, 2016. relationships.
The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv)Company enters into written credit default swaps and interest rate swaps that are used to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and that doone or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not qualifydesignated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives,against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market factors can leadrisk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the recognitionCompany. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of fair valueexercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on the statement of operations without an offsetting gain or loss recognizedchanges in earnings for the item being hedged.equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

4038
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Freestanding derivatives and hedging gains (losses) (1)$(167) $(342) $(634) $947
Embedded derivatives gains (losses)141
 137
 317
 (1,509)
Total net derivative gains (losses)$(26) $(205) $(317) $(562)
__________________
(1)Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
The following table presents earned income on derivatives:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Qualifying hedges:       
Net investment income$73
 $70
 $220
 $199
Interest credited to policyholder account balances(20) —
 (40) 7
Nonqualifying hedges:       
Net investment income—
 —
 —
 (1)
Net derivative gains (losses)93
 152
 327
 428
Policyholder benefits and claims2
 1
 4
 3
Total$148
 $223
 $511
 $636

41
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 (In millions)
Three Months Ended September 30, 2017     
Interest rate derivatives$(60) $(2) $—
Foreign currency exchange rate derivatives(238) —
 —
Credit derivatives — purchased(6) —
 —
Credit derivatives — written24
 —
 —
Equity derivatives(124) (2) (52)
Total$(404) $(4) $(52)
Three Months Ended September 30, 2016     
Interest rate derivatives$(305) $—
 $—
Foreign currency exchange rate derivatives65
 —
 —
Credit derivatives — purchased(13) —
 —
Credit derivatives — written36
 —
 —
Equity derivatives(231) (2) (62)
Total$(448) $(2) $(62)
Nine Months Ended September 30, 2017     
Interest rate derivatives$(260) $(2) $—
Foreign currency exchange rate derivatives(639) —
 —
Credit derivatives — purchased(14) —
 —
Credit derivatives — written80
 —
 —
Equity derivatives(442) (4) (149)
Total$(1,275) $(6) $(149)
Nine Months Ended September 30, 2016     
Interest rate derivatives$867
 $—
 $—
Foreign currency exchange rate derivatives275
 —
 —
Credit derivatives — purchased(31) —
 —
Credit derivatives — written38
 —
 —
Equity derivatives(304) (12) (57)
Total$845
 $(12) $(57)
__________________
(1)Changes in estimated fair value related to economic hedges of equity method investments in joint ventures and derivatives held in relation to trading portfolios.
(2)Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

42
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)

 
 (In millions)
Three Months Ended September 30, 2017      
Interest rate swaps: Fixed maturity securities $1
 $—
 $1
  Policyholder liabilities (1) (13) 12
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities (8) 9
 1
  Foreign-denominated policyholder account balances (2) 15
 (16) (1)
Total $(5) $5
 $—
Three Months Ended September 30, 2016      
Interest rate swaps: Fixed maturity securities $5
 $(3) $2
  Policyholder liabilities (1) (47) 42
 (5)
Foreign currency swaps: Foreign-denominated fixed maturity securities 1
 (1) —
  Foreign-denominated policyholder account balances (2) (1) 1
 —
Total $(42) $39
 $(3)
Nine Months Ended September 30, 2017      
Interest rate swaps: Fixed maturity securities $2
 $(2) $—
  Policyholder liabilities (1) (15) 83
 68
Foreign currency swaps: Foreign-denominated fixed maturity securities (13) 14
 1
  Foreign-denominated policyholder account balances (2) 61
 (40) 21
Total $35
 $55
 $90
Nine Months Ended September 30, 2016      
Interest rate swaps: Fixed maturity securities $(3) $1
 $(2)
  Policyholder liabilities (1) 472
 (482) (10)
Foreign currency swaps: Foreign-denominated fixed maturity securities 5
 (4) 1
  Foreign-denominated policyholder account balances (2) (27) 24
 (3)
Total $447
 $(461) $(14)
__________________
(1)Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)Fixed rate or floating rate liabilities.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.

43
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). There were no amounts reclassified from AOCI into net derivative gains (losses) for the three months ended September 30, 2017. The amount reclassified from AOCI into net derivative gains (losses) was $20 million for the nine months ended September 30, 2017. These amounts were $7 million and $10 million for the three months and nine months ended September 30, 2016.
At both September 30, 2017 and December 31, 2016, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed five years.
At September 30, 2017 and December 31, 2016, the balance in AOCI associated with cash flow hedges was $1.6 billion and $2.2 billion, respectively.
The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships		 Amount of Gains
(Losses) Deferred in
AOCI on Derivatives		 Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)		 Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
  (Effective Portion) (Effective Portion) (Ineffective Portion)
    Net Derivative
Gains (Losses)		 Net Investment
Income		 Net Derivative
Gains (Losses)
  (In millions)
Three Months Ended September 30, 2017        
Interest rate swaps $15
 $8
 $4
 $(2)
Interest rate forwards 2
 (1) 1
 —
Foreign currency swaps (37) 282
 (1) —
Credit forwards —
 —
 

 —
Total $(20) $289
 $4
 $(2)
Three Months Ended September 30, 2016        
Interest rate swaps $21
 $27
 $4
 $—
Interest rate forwards (6) 1
 —
 —
Foreign currency swaps 24
 69
 —
 (4)
Credit forwards —
 —
 —
 —
Total $39
 $97
 $4
 $(4)
Nine Months Ended September 30, 2017        
Interest rate swaps $90
 $22
 $12
 $5
Interest rate forwards 138
 (5) 2
 (1)
Foreign currency swaps (2) 882
 (1) 1
Credit forwards —
 1
 —
 —
Total $226
 $900
 $13
 $5
Nine Months Ended September 30, 2016        
Interest rate swaps $330
 $44
 $10
 $—
Interest rate forwards 34
 —
 2
 —
Foreign currency swaps 339
 169
 (1) (3)
Credit forwards —
 3
 —
 —
Total $703
 $216
 $11
 $(3)
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

44
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

At September 30, 2017,the Company expected to reclassify ($3) millionof deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months.
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

38
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
    March 31, 2018 December 31, 2017
  Primary Underlying Risk Exposure Gross
Notional
Amount		 Estimated Fair Value Gross
Notional
Amount		 Estimated Fair Value
  Assets Liabilities Assets Liabilities
    (In millions)
Derivatives Designated as Hedging Instruments:            
Fair value hedges:              
Interest rate swaps Interest rate $2,517
 $2,111
 $2
 $3,826
 $2,289
 $3
Foreign currency swaps Foreign currency exchange rate 1,112
 62
 35
 1,082
 47
 17
Subtotal   3,629
 2,173
 37
 4,908
 2,336
 20
Cash flow hedges:              
Interest rate swaps Interest rate 3,245
 158
 10
 3,337
 234
 —
Interest rate forwards Interest rate 3,143
 —
 217
 3,333
 —
 127
Foreign currency swaps Foreign currency exchange rate 23,916
 701
 1,206
 22,287
 795
 1,078
Subtotal   30,304
 859
 1,433
 28,957
 1,029
 1,205
Total qualifying hedges   33,933
 3,032
 1,470
 33,865
 3,365
 1,225
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swaps Interest rate 36,747
 1,456
 87
 43,028
 1,722
 336
Interest rate floors Interest rate 7,201
 66
 —
 7,201
 91
 —
Interest rate caps Interest rate 46,021
 221
 2
 53,079
 78
 2
Interest rate futures Interest rate 1,025
 1
 —
 2,257
 1
 2
Interest rate options Interest rate 11,125
 125
 —
 7,525
 142
 11
Interest rate total return swaps Interest rate 1,048
 14
 25
 1,048
 8
 2
Synthetic GICs Interest rate 9,631
 —
 —
 11,318
 —
 —
Foreign currency swaps Foreign currency exchange rate 6,573
 410
 204
 6,739
 547
 164
Foreign currency forwards Foreign currency exchange rate 1,025
 18
 4
 961
 16
 7
Credit default swaps — purchased Credit 848
 5
 7
 980
 7
 8
Credit default swaps — written Credit 7,891
 140
 2
 7,874
 181
 —
Equity futures Equity market 937
 —
 —
 1,282
 5
 1
Equity index options Equity market 14,359
 406
 414
 14,408
 384
 476
Equity variance swaps Equity market 3,530
 44
 165
 3,530
 45
 169
Equity total return swaps Equity market 971
 31
 —
 1,077
 —
 39
Total non-designated or nonqualifying derivatives 148,932
 2,937
 910
 162,307
 3,227
 1,217
Total   $182,865
 $5,969
 $2,380
 $196,172
 $6,592
 $2,442
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2018 and December 31, 2017. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

40
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
  Three Months
Ended
March 31,
  2018 2017
 (In millions)
Freestanding derivatives and hedging gains (losses) (1) $(273) $(526)
Embedded derivatives gains (losses) 333
 375
Total net derivative gains (losses) $60
 $(151)
__________________
(1)Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
The following table presents earned income on derivatives:
 Three Months
Ended
March 31,
 2018 2017
 (In millions)
Qualifying hedges:   
Net investment income$77
 $75
Interest credited to policyholder account balances(23) (6)
Nonqualifying hedges:   
Net derivative gains (losses)82
 127
Policyholder benefits and claims2
 1
Total$138
 $197

41
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 (In millions)
Three Months Ended March 31, 2018     
Interest rate derivatives$(256) $4
 $—
Foreign currency exchange rate derivatives(214) —
 —
Credit derivatives — purchased(1) —
 —
Credit derivatives — written(28) —
 —
Equity derivatives10
 1
 1
Total$(489) $5
 $1
Three Months Ended March 31, 2017     
Interest rate derivatives$(266) $2
 $—
Foreign currency exchange rate derivatives(125) —
 —
Credit derivatives — purchased(6) —
 —
Credit derivatives — written27
 —
 —
Equity derivatives(221) (1) (60)
Total$(591) $1
 $(60)
__________________
(1)Changes in estimated fair value related to economic hedges of equity method investments in joint ventures.
(2)Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

42
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)

 
 (In millions)
Three Months Ended March 31, 2018      
Interest rate swaps: Fixed maturity securities $3
 $(2) $1
  Policyholder liabilities (1) (213) 212
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities and mortgage loans (25) 25
 —
  Foreign-denominated policyholder account balances (2) 18
 (18) —
Total $(217) $217
 $—
Three Months Ended March 31, 2017      
Interest rate swaps: Fixed maturity securities $1
 $(1) $—
  Policyholder liabilities (1) (52) 51
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities (3) 3
 —
  Foreign-denominated policyholder account balances (2) 1
 2
 3
Total $(53) $55
 $2
__________________
(1)Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)Fixed rate or floating rate liabilities.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.
In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). These amounts were less than $1 million and $20 million for the three months ended March 31, 2018 and 2017, respectively.
At March 31, 2018 and December 31, 2017, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed four years and five years, respectively.
At March 31, 2018 and December 31, 2017, the balance in AOCI associated with cash flow hedges was $706 million and $1.4 billion, respectively.

43
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and comprehensive income (loss) and the interim condensed consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships		 Amount of Gains
(Losses) Deferred in
AOCI on Derivatives		 Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)		 Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
  (Effective Portion) (Effective Portion) (Ineffective Portion)
    Net Derivative
Gains (Losses)		 Net Investment
Income		 Net Derivative
Gains (Losses)
  (In millions)
Three Months Ended March 31, 2018        
Interest rate swaps $(173) $16
 $3
 $(2)
Interest rate forwards (104) 4
 1
 —
Foreign currency swaps (229) 160
 —
 (1)
Total $(506) $180
 $4
 $(3)
Three Months Ended March 31, 2017        
Interest rate swaps $4
 $8
 $4
 $1
Interest rate forwards 44
 (4) 1
 —
Foreign currency swaps 18
 203
 —
 1
Total $66
 $207
 $5
 $2
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At March 31, 2018,the Company expected to reclassify $60 millionof deferred net gains (losses) on derivatives in AOCI, included in the table above, to earnings within the next 12 months.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $8.0$7.9 billion at both September 30, 2017March 31, 2018 and December 31, 2016.2017. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At September 30, 2017March 31, 2018 and December 31, 2016,2017, the Company would have received $165$138 million and $111$181 million, respectively, to terminate all of these contracts.

44
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
 September 30, 2017 December 31, 2016 March 31, 2018 December 31, 2017
Rating Agency Designation of Referenced
Credit Obligations (1)
 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)
 (Dollars in millions) (Dollars in millions)
Aaa/Aa/A                        
Single name credit default swaps (3) $3
 $229
 2.2
 $1
 $229
 2.7
 $2
 $159
 2.6
 $3
 $159
 2.8
Credit default swaps referencing indices 42
 2,193
 3.0
 32
 2,093
 3.5
 39
 2,192
 2.5
 42
 2,193
 2.7
Subtotal 45
 2,422
 2.9
 33
 2,322
 3.4
 41
 2,351
 2.5
 45
 2,352
 2.7
Baa                        
Single name credit default swaps (3) 5
 493
 1.6
 3
 563
 2.2
 4
 463
 1.8
 4
 416
 1.5
Credit default swaps referencing indices 96
 4,761
 5.4
 61
 4,730
 5.1
 78
 4,817
 5.4
 111
 4,761
 5.2
Subtotal 101
 5,254
 5.0
 64
 5,293
 4.8
 82
 5,280
 5.1
 115
 5,177
 4.9
Ba                        
Single name credit default swaps (3) —
 105
 3.6
 (2) 115
 4.2
 —
 20
 1.2
 1
 105
 3.4
Credit default swaps referencing indices —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Subtotal —
 105
 3.6
 (2) 115
 4.2
 —
 20
 1.2
 1
 105
 3.4
B                        
Single name credit default swaps (3) 2
 30
 2.6
 —
 70
 1.8
 2
 20
 3.2
 2
 20
 3.5
Credit default swaps referencing indices 17
 220
 5.2
 16
 225
 5.0
 13
 220
 5.2
 18
 220
 5.0
Subtotal 19
 250
 4.9
 16
 295
 4.2
 15
 240
 5.1
 20
 240
 4.9
Total $165
 $8,031
 4.4
 $111
 $8,025
 4.4
 $138
 $7,891
 4.3
 $181
 $7,874
 4.2
__________________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), Standard & Poor’s Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(3)Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.

45
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amount of potential future recoveries available to offset the $8.0$7.9 billion fromof future payments under credit default provisions at both March 31, 2018 and December 31, 2017 set forth in the table above was $30$16 million and $27 million at both September 30, 2017March 31, 2018 and December 31, 2016.2017, respectively.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

45
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.
The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.
See Note 7 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
  March 31, 2018 December 31, 2017
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1) Assets Liabilities Assets Liabilities
  (In millions)
Gross estimated fair value of derivatives:        
OTC-bilateral (1) $5,908
 $2,325
 $6,478
 $2,203
OTC-cleared (1), (6) 111
 26
 168
 216
Exchange-traded 1
 —
 6
 3
Total gross estimated fair value of derivatives (1) 6,020
 2,351
 6,652
 2,422
Amounts offset on the interim condensed consolidated balance sheets —
 —
 —
 —
Estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1), (6) 6,020
 2,351
 6,652
 2,422
Gross amounts not offset on the interim condensed consolidated balance sheets:        
Gross estimated fair value of derivatives: (2)        
OTC-bilateral (1,811) (1,811) (1,891) (1,891)
OTC-cleared (16) (16) (31) (31)
Exchange-traded —
 —
 —
 —
Cash collateral: (3), (4)        
OTC-bilateral (3,038) —
 (3,448) —
OTC-cleared (93) —
 (131) (179)
Exchange-traded —
 —
 —
 —
Securities collateral: (5)        
OTC-bilateral (890) (514) (954) (312)
OTC-cleared —
 (10) —
 (6)
Exchange-traded —
 —
 —
 (3)
Net amount after application of master netting agreements and collateral $172
 $—
 $197
 $—
__________________
(1)
At March 31, 2018 and December 31, 2017, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $51 million and $60 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($29) millionand ($20) million, respectively.

46
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
  September 30, 2017 December 31, 2016
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1) Assets Liabilities Assets Liabilities
  (In millions)
Gross estimated fair value of derivatives:        
OTC-bilateral (1) $6,773
 $2,284
 $7,926
 $3,349
OTC-cleared (1), (6) 152
 218
 905
 611
Exchange-traded 2
 6
 13
 —
Total gross estimated fair value of derivatives (1) 6,927
 2,508
 8,844
 3,960
Amounts offset on the consolidated balance sheets —
 —
 —
 —
Estimated fair value of derivatives presented on the consolidated balance
 sheets (1), (6)
 6,927
 2,508
 8,844
 3,960
Gross amounts not offset on the consolidated balance sheets:        
Gross estimated fair value of derivatives: (2)        
OTC-bilateral (1,914) (1,914) (2,737) (2,737)
OTC-cleared (32) (32) (391) (391)
Exchange-traded —
 —
 —
 —
Cash collateral: (3), (4)        
OTC-bilateral (3,702) —
 (3,418) —
OTC-cleared (115) (181) (497) (217)
Exchange-traded —
 —
 —
 —
Securities collateral: (5)        
OTC-bilateral (1,092) (371) (1,560) (609)
OTC-cleared —
 (5) —
 —
Exchange-traded —
 (5) —
 —
Net amount after application of master netting agreements and collateral $72
 $—
 $241
 $6
__________________
(1)
At September 30, 2017 and December 31, 2016, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $59 million and $116 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($33) millionand ($36) million, respectively.
(2)Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.
(4)The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2017March 31, 2018 and December 31, 2016,2017, the Company received excess cash collateral of $143$57 million and $77$122 million, respectively, and provided excess cash collateral of $4 million$0 and $9 million, respectively, which is not included in the table above due to the foregoing limitation.

47
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

(5)Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2017,March 31, 2018, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2017March 31, 2018 and December 31, 2016,2017, the Company received excess securities collateral with an estimated fair value of $81$1 million and $21$30 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2017March 31, 2018 and December 31, 2016,2017, the Company provided excess securities collateral with an estimated fair value of $179$206 million and $75$152 million, respectively, for its OTC-bilateral derivatives, and $307$215 million and $531$299 million, respectively, for its OTC-cleared derivatives, and $66$48 million and $116$50 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)Effective January 3, 2017,16, 2018, the CMELCH amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the CMELCH amendments.
The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that party reaches a minimum transfer amount. A small number of these arrangements also include financial strength or credit rating contingent provisions that include a threshold above which collateral must be posted. Such agreements provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in credit ratings of Metropolitan Life Insurance Company and/or the credit ratings of the counterparty. In addition, substantiallySubstantially all of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

4847
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that arewere in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that Metropolitan Life Insurance Company would be required to provide if there was a one-notch downgrade in its financial strength or credit rating, as applicable, at the reporting date or if its financial strength or credit rating, as applicable, sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
 September 30, 2017 December 31, 2016 March 31, 2018 December 31, 2017
 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total
 (In millions) (In millions)
Estimated Fair Value of Derivatives in a Net
Liability Position (1)
 $371
 $—
 $371
 $612
 $—
 $612
 $514
 $—
 $514
 $313
 $—
 $313
Estimated Fair Value of Collateral Provided:                        
Fixed maturity securities $465
 $—
 $465
 $684
 $—
 $684
 $700
 $—
 $700
 $399
 $—
 $399
Cash $—
 $—
 $��
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
Estimated Fair Value of Incremental Collateral
Provided Upon:
            
One-notch downgrade in financial strength or
credit rating, as applicable
 $—
 $—
 $—
 $—
 $—
 $—
Downgrade in financial strength or credit rating, as
applicable, to a level that triggers full overnight
collateralization or termination of the derivative
position
 $—
 $—
 $—
 $—
 $—
 $—
__________________
(1)After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance; fixed annuities with equity indexed returns; and certain debt and equity securities.
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
  Balance Sheet Location March 31, 2018 December 31, 2017
    (In millions)
Embedded derivatives within asset host contracts:      
Options embedded in debt or equity securities (1) Investments $—
 $(113)
Embedded derivatives within asset host contracts $—
 $(113)
Embedded derivatives within liability host contracts:      
Direct guaranteed minimum benefits Policyholder account balances $(135) $(94)
Assumed guaranteed minimum benefits Policyholder account balances 2
 3
Funds withheld on ceded reinsurance Other liabilities 656
 898
Fixed annuities with equity indexed returns Policyholder account balances 68
 69
Embedded derivatives within liability host contracts $591
 $876
__________________
(1)In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company is no longer required to bifurcate and account separately for derivatives embedded in equity securities. Beginning January 1, 2018, the entire change in fair value of equity securities is recognized as a component of net investment gains and losses.

4948
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
  Balance Sheet Location September 30, 2017 December 31, 2016
    (In millions)
Embedded derivatives within asset host contracts:      
Ceded guaranteed minimum benefits Premiums, reinsurance and other receivables $—
 $460
Options embedded in debt or equity securities Investments (119) (78)
Embedded derivatives within asset host contracts $(119) $382
Embedded derivatives within liability host contracts:      
Direct guaranteed minimum benefits Policyholder account balances $(31) $169
Assumed guaranteed minimum benefits Policyholder account balances 3
 390
Funds withheld on ceded reinsurance Other liabilities 906
 777
Fixed annuities with equity indexed returns Policyholder account balances 53
 17
Embedded derivatives within liability host contracts $931
 $1,353
The following table presents changes in estimated fair value related to embedded derivatives:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Net derivative gains (losses) (1), (2)$141
 $137
 $317
 $(1,509)
 Three Months 
 Ended 
 March 31,
 2018 2017
 (In millions)
Net derivative gains (losses) (1), (2)$333
 $375
__________________
(1)The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($17)21) million and ($39)12) million for the three months ended March 31, 2018 and nine months ended September 30, 2017, respectively, and ($47) million and $173 million for the three months and nine months ended September 30, 2016, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes a nonperformance risk adjustment. For the three months and nine months ended September 30, 2017, the Company did not have any ceded guaranteed minimum benefits. The amounts included in net derivative gains (losses) in connection with this adjustment were $9 million and ($64) million for the three months and nine months ended September 30, 2016, respectively.
(2)
See Note 1213 for discussion of affiliated net derivative gains (losses).

5049
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value
ConsiderableWhen developing estimated fair values, considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:
September 30, 2017March 31, 2018
Fair Value Hierarchy  Fair Value Hierarchy  
Level 1 Level 2 Level 3 Total 
Estimated
Fair Value		Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
(In millions)(In millions)
Assets              
Fixed maturity securities:              
U.S. corporate$—
 $52,694
 $4,783
 $57,477
$—
 $53,534
 $3,214
 $56,748
U.S. government and agency20,192
 19,916
 —
 40,108
15,790
 19,269
 —
 35,059
Foreign corporate—
 21,403
 3,964
 25,367
—
 20,855
 4,081
 24,936
RMBS412
 20,637
 3,371
 24,420
—
 19,011
 3,073
 22,084
ABS—
 7,286
 419
 7,705
—
 6,921
 706
 7,627
State and political subdivision—
 7,434
 1
 7,435
—
 7,410
 —
 7,410
CMBS—
��5,329
 28
 5,357
—
 4,896
 73
 4,969
Foreign government—
 4,401
 14
 4,415
—
 4,408
 13
 4,421
Total fixed maturity securities20,604
 139,100
 12,580
 172,284
15,790
 136,304
 11,160
 163,254
Equity securities483
 943
 365
 1,791
359
 164
 359
 882
Other limited partnership interests—
 —
 189
 189
Short-term investments2,467
 1,813
 402
 4,682
1,932
 909
 550
 3,391
Residential mortgage loans — FVO—
 —
 564
 564
—
 —
 438
 438
Derivative assets: (1)              
Interest rate2
 4,722
 3
 4,727
1
 4,137
 14
 4,152
Foreign currency exchange rate—
 1,661
 —
 1,661
—
 1,191
 —
 1,191
Credit—
 137
 39
 176
—
 110
 35
 145
Equity market—
 199
 105
 304
—
 412
 69
 481
Total derivative assets2
 6,719
 147
 6,868
1
 5,850
 118
 5,969
Embedded derivatives within asset host contracts (3)—
 —
 —
 —
—
 —
 —
 —
Separate account assets (3)23,832
 107,799
 1,039
 132,670
21,963
 101,657
 1,227
 124,847
Total assets$47,388
 $256,374
 $15,097
 $318,859
$40,045
 $244,884
 $14,041
 $298,970
Liabilities              
Derivative liabilities: (1)              
Interest rate$—
 $368
 $212
 $580
$—
 $101
 $242
 $343
Foreign currency exchange rate—
 1,184
 4
 1,188
—
 1,445
 4
 1,449
Credit—
 8
 —
 8
—
 9
 —
 9
Equity market6
 531
 228
 765
—
 414
 165
 579
Total derivative liabilities6
 2,091
 444
 2,541
—
 1,969
 411
 2,380
Embedded derivatives within liability host contracts (2)—
 —
 931
 931
—
 —
 591
 591
Long-term debt—
 —
 —
 —
Separate account liabilities (3)1
 6
 2
 9
—
 12
 5
 17
Total liabilities$7
 $2,097
 $1,377
 $3,481
$—
 $1,981
 $1,007
 $2,988

5150
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

December 31, 2016December 31, 2017
Fair Value Hierarchy  Fair Value Hierarchy  
Level 1 Level 2 Level 3 Total 
Estimated
Fair Value		Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
(In millions)(In millions)
Assets              
Fixed maturity securities:              
U.S. corporate$—
 $51,303
 $4,855
 $56,158
$—
 $54,629
 $3,461
 $58,090
U.S. government and agency17,597
 18,018
 —
 35,615
18,802
 19,743
 —
 38,545
Foreign corporate—
 20,373
 3,984
 24,357
—
 21,471
 4,125
 25,596
RMBS—
 19,719
 3,698
 23,417
—
 19,372
 3,262
 22,634
ABS—
 6,745
 759
 7,504
—
 7,079
 787
 7,866
State and political subdivision—
 7,126
 10
 7,136
—
 7,551
 —
 7,551
CMBS—
 4,851
 84
 4,935
—
 5,461
 27
 5,488
Foreign government—
 3,977
 21
 3,998
—
 4,471
 31
 4,502
Total fixed maturity securities17,597
 132,112
 13,411
 163,120
18,802
 139,777
 11,693
 170,272
Equity securities408
 1,011
 420
 1,839
399
 893
 366
 1,658
Short-term investments2,945
 1,720
 25
 4,690
2,056
 1,092
 7
 3,155
Residential mortgage loans — FVO—
 —
 566
 566
—
 —
 520
 520
Derivative assets: (1)              
Interest rate3
 5,489
 2
 5,494
1
 4,556
 8
 4,565
Foreign currency exchange rate—
 2,763
 —
 2,763
—
 1,405
 —
 1,405
Credit—
 101
 30
 131
—
 149
 39
 188
Equity market10
 226
 104
 340
5
 363
 66
 434
Total derivative assets13
 8,579
 136
 8,728
6
 6,473
 113
 6,592
Embedded derivatives within asset host contracts (2)—
 —
 460
 460
—
 —
 —
 —
Separate account assets (3)27,633
 105,055
 1,148
 133,836
23,571
 106,294
 960
 130,825
Total assets$48,596
 $248,477
 $16,166
 $313,239
$44,834
 $254,529
 $13,659
 $313,022
Liabilities              
Derivative liabilities: (1)              
Interest rate$—
 $917
 $500
 $1,417
$2
 $351
 $130
 $483
Foreign currency exchange rate—
 1,902
 2
 1,904
—
 1,261
 5
 1,266
Credit—
 14
 —
 14
—
 8
 —
 8
Equity market—
 468
 193
 661
1
 515
 169
 685
Total derivative liabilities—
 3,301
 695
 3,996
3
 2,135
 304
 2,442
Embedded derivatives within liability host contracts (3)—
 —
 1,353
 1,353
—
 —
 876
 876
Long-term debt—
 —
 74
 74
Separate account liabilities (3)—
 16
 7
 23
—
 7
 2
 9
Total liabilities$—
 $3,317
 $2,129
 $5,446
$3
 $2,142
 $1,182
 $3,327
__________________
(1)Derivative assets are presented within other invested assets on the interim condensed consolidated balance sheets and derivative liabilities are presented within other liabilities on the interim condensed consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the interim condensed consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets. At September 30, 2017March 31, 2018 and December 31, 2016,2017, debt and equity securities also included embedded derivatives of ($119) million$0 and ($78)113) million, respectively.

5251
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

(3)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.
The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy.
Investments
Valuation Controls and ProceduresFreestanding Derivatives
On behalf ofFreestanding derivatives are carried on the Company and MetLife, Inc.’s Chief Investment Officer and Chief Financial Officer, a pricing and valuation committee that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a quarterly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. This committee also provides oversight of the selection of independent third-party pricing providers and the controls and procedures to evaluate third-party pricing. Periodically, the Chief Accounting Officer reports to the Audit Committee of the Board of Directors of each of MetLife, Inc. and Metropolitan Life Insurance Company regarding compliance withCompany’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value accounting standards.
value. The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained ondoes not offset the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and less than 1% ofamounts recognized for derivatives executed with the total estimated fair value of Level 3 fixed maturity securities at September 30, 2017.same counterparty under the same master netting agreement.
The Company also applies a formal process to challenge any prices received from independent pricing servicesAccruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not considered representative of estimated fair value. scheduled to settle within one year are included with the derivative’s carrying value in other invested assets or other liabilities.
If prices received from independent pricing services area derivative is not considered reflective of market activitydesignated as an accounting hedge or representative of estimated fair value, independent non-binding broker quotations are obtained, or an internally developed valuation is prepared. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and nonperformance risks, compared with pricing received from the independent pricing services, didits use in managing risk does not produce material differencesqualify for hedge accounting, changes in the estimated fair values for the majority of the portfolio; accordingly, overrides were not material. This is, in part, because internal estimates of liquidity and nonperformance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used.
Securities, Short-term Investments and Long-term Debt
When available, the estimated fair value of thesethe derivative are reported in net derivative gains (losses) except as follows:
Statement of Operations Presentation:Derivative:
Policyholder benefits and claims• 
Economic hedges of variable annuity guarantees included in
future policy benefits
Net investment income• 
Economic hedges of equity method investments in joint
ventures
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial instruments is basedstatement presentation of changes in estimated fair value of the hedging derivatives are as follows:
Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.
Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on quoted pricesthe derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in active marketscash flows of the hedged item); ineffectiveness in net derivative gains (losses).
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are readily and regularly obtainable. Generally, these areseparately reported on the most liquidstatement of operations within interest income or interest expense to match the location of the Company’s securities holdingshedged item.
In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and valuationsets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of these securities does not involve management’s judgment.the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

5335
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value6. Derivatives (continued)

When quoted priceshedge accounting is discontinued because it is determined that the derivative is not highly effective in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observableoffsetting changes in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).
In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).
Embedded Derivatives
The Company sells variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;
the terms of the embedded derivative are not observableclearly and closely related to the economic characteristics of the host contract; and
a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.
See Note 7 for information about the fair value hierarchy for derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash markets.

36
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Interest Rate Derivatives
The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, interest rate total return swaps, caps, floors, swaptions, futures and forwards.
Interest rate swaps are used by the Company primarily to reduce market or cannot be derived principallyrisks from or corroborated by, observable market data. These unobservable inputs can be basedchanges in large part on management’s judgment or estimationinterest rates and cannot be supportedto alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to market activity. Even though these inputsan agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.
The Company uses structured interest rate swaps to synthetically create investments that are unobservable, management believes theyeither more expensive to acquire or otherwise unavailable in the cash markets. These transactions are consistent with whata combination of a derivative and a cash instrument such as a U.S. government and agency, or other market participants would use when pricing such securitiesfixed maturity security. Structured interest rate swaps are included in interest rate swaps and are considered appropriate givennot designated as hedging instruments.
Interest rate total return swaps are swaps whereby the circumstances.Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Interbank Offered Rate (“LIBOR”), calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. Interest rate total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate total return swaps in nonqualifying hedging relationships.
The Company purchases interest rate caps primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, and interest rate floors primarily to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in nonqualifying hedging relationships.
In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures in nonqualifying hedging relationships.
Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.
The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and nonqualifying hedging relationships.
A synthetic guaranteed interest contract (“GIC”) is a contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the contractholder owns the underlying assets. The Company guarantees a rate of return on those assets for a premium. Synthetic GICs are not designated as hedging instruments.

37
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency exchange rate derivatives, including foreign currency swaps and foreign currency forwards, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.
In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in nonqualifying hedging relationships.
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

38
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
    March 31, 2018 December 31, 2017
  Primary Underlying Risk Exposure Gross
Notional
Amount		 Estimated Fair Value Gross
Notional
Amount		 Estimated Fair Value
  Assets Liabilities Assets Liabilities
    (In millions)
Derivatives Designated as Hedging Instruments:            
Fair value hedges:              
Interest rate swaps Interest rate $2,517
 $2,111
 $2
 $3,826
 $2,289
 $3
Foreign currency swaps Foreign currency exchange rate 1,112
 62
 35
 1,082
 47
 17
Subtotal   3,629
 2,173
 37
 4,908
 2,336
 20
Cash flow hedges:              
Interest rate swaps Interest rate 3,245
 158
 10
 3,337
 234
 —
Interest rate forwards Interest rate 3,143
 —
 217
 3,333
 —
 127
Foreign currency swaps Foreign currency exchange rate 23,916
 701
 1,206
 22,287
 795
 1,078
Subtotal   30,304
 859
 1,433
 28,957
 1,029
 1,205
Total qualifying hedges   33,933
 3,032
 1,470
 33,865
 3,365
 1,225
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swaps Interest rate 36,747
 1,456
 87
 43,028
 1,722
 336
Interest rate floors Interest rate 7,201
 66
 —
 7,201
 91
 —
Interest rate caps Interest rate 46,021
 221
 2
 53,079
 78
 2
Interest rate futures Interest rate 1,025
 1
 —
 2,257
 1
 2
Interest rate options Interest rate 11,125
 125
 —
 7,525
 142
 11
Interest rate total return swaps Interest rate 1,048
 14
 25
 1,048
 8
 2
Synthetic GICs Interest rate 9,631
 —
 —
 11,318
 —
 —
Foreign currency swaps Foreign currency exchange rate 6,573
 410
 204
 6,739
 547
 164
Foreign currency forwards Foreign currency exchange rate 1,025
 18
 4
 961
 16
 7
Credit default swaps — purchased Credit 848
 5
 7
 980
 7
 8
Credit default swaps — written Credit 7,891
 140
 2
 7,874
 181
 —
Equity futures Equity market 937
 —
 —
 1,282
 5
 1
Equity index options Equity market 14,359
 406
 414
 14,408
 384
 476
Equity variance swaps Equity market 3,530
 44
 165
 3,530
 45
 169
Equity total return swaps Equity market 971
 31
 —
 1,077
 —
 39
Total non-designated or nonqualifying derivatives 148,932
 2,937
 910
 162,307
 3,227
 1,217
Total   $182,865
 $5,969
 $2,380
 $196,172
 $6,592
 $2,442
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2018 and December 31, 2017. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

40
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
  Three Months
Ended
March 31,
  2018 2017
 (In millions)
Freestanding derivatives and hedging gains (losses) (1) $(273) $(526)
Embedded derivatives gains (losses) 333
 375
Total net derivative gains (losses) $60
 $(151)
__________________
(1)Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
The following table presents earned income on derivatives:
 Three Months
Ended
March 31,
 2018 2017
 (In millions)
Qualifying hedges:   
Net investment income$77
 $75
Interest credited to policyholder account balances(23) (6)
Nonqualifying hedges:   
Net derivative gains (losses)82
 127
Policyholder benefits and claims2
 1
Total$138
 $197

41
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 (In millions)
Three Months Ended March 31, 2018     
Interest rate derivatives$(256) $4
 $—
Foreign currency exchange rate derivatives(214) —
 —
Credit derivatives — purchased(1) —
 —
Credit derivatives — written(28) —
 —
Equity derivatives10
 1
 1
Total$(489) $5
 $1
Three Months Ended March 31, 2017     
Interest rate derivatives$(266) $2
 $—
Foreign currency exchange rate derivatives(125) —
 —
Credit derivatives — purchased(6) —
 —
Credit derivatives — written27
 —
 —
Equity derivatives(221) (1) (60)
Total$(591) $1
 $(60)
__________________
(1)Changes in estimated fair value related to economic hedges of equity method investments in joint ventures.
(2)Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

42
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)

 
 (In millions)
Three Months Ended March 31, 2018      
Interest rate swaps: Fixed maturity securities $3
 $(2) $1
  Policyholder liabilities (1) (213) 212
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities and mortgage loans (25) 25
 —
  Foreign-denominated policyholder account balances (2) 18
 (18) —
Total $(217) $217
 $—
Three Months Ended March 31, 2017      
Interest rate swaps: Fixed maturity securities $1
 $(1) $—
  Policyholder liabilities (1) (52) 51
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities (3) 3
 —
  Foreign-denominated policyholder account balances (2) 1
 2
 3
Total $(53) $55
 $2
__________________
(1)Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)Fixed rate or floating rate liabilities.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.
In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). These amounts were less than $1 million and $20 million for the three months ended March 31, 2018 and 2017, respectively.
At March 31, 2018 and December 31, 2017, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed four years and five years, respectively.
At March 31, 2018 and December 31, 2017, the balance in AOCI associated with cash flow hedges was $706 million and $1.4 billion, respectively.

43
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and comprehensive income (loss) and the interim condensed consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships		 Amount of Gains
(Losses) Deferred in
AOCI on Derivatives		 Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)		 Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
  (Effective Portion) (Effective Portion) (Ineffective Portion)
    Net Derivative
Gains (Losses)		 Net Investment
Income		 Net Derivative
Gains (Losses)
  (In millions)
Three Months Ended March 31, 2018        
Interest rate swaps $(173) $16
 $3
 $(2)
Interest rate forwards (104) 4
 1
 —
Foreign currency swaps (229) 160
 —
 (1)
Total $(506) $180
 $4
 $(3)
Three Months Ended March 31, 2017        
Interest rate swaps $4
 $8
 $4
 $1
Interest rate forwards 44
 (4) 1
 —
Foreign currency swaps 18
 203
 —
 1
Total $66
 $207
 $5
 $2
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At March 31, 2018,the Company expected to reclassify $60 millionof deferred net gains (losses) on derivatives in AOCI, included in the table above, to earnings within the next 12 months.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $7.9 billion at both March 31, 2018 and December 31, 2017. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At March 31, 2018 and December 31, 2017, the Company would have received $138 million and $181 million, respectively, to terminate all of these contracts.

44
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
  March 31, 2018 December 31, 2017
Rating Agency Designation of Referenced
Credit Obligations (1)
 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)
  (Dollars in millions)
Aaa/Aa/A            
Single name credit default swaps (3) $2
 $159
 2.6
 $3
 $159
 2.8
Credit default swaps referencing indices 39
 2,192
 2.5
 42
 2,193
 2.7
Subtotal 41
 2,351
 2.5
 45
 2,352
 2.7
Baa            
Single name credit default swaps (3) 4
 463
 1.8
 4
 416
 1.5
Credit default swaps referencing indices 78
 4,817
 5.4
 111
 4,761
 5.2
Subtotal 82
 5,280
 5.1
 115
 5,177
 4.9
Ba            
Single name credit default swaps (3) —
 20
 1.2
 1
 105
 3.4
Credit default swaps referencing indices —
 —
 —
 —
 —
 —
Subtotal —
 20
 1.2
 1
 105
 3.4
B            
Single name credit default swaps (3) 2
 20
 3.2
 2
 20
 3.5
Credit default swaps referencing indices 13
 220
 5.2
 18
 220
 5.0
Subtotal 15
 240
 5.1
 20
 240
 4.9
Total $138
 $7,891
 4.3
 $181
 $7,874
 4.2
__________________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”),Standard & Poor’s Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(3)Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.
The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amount of potential future recoveries available to offset the $7.9 billion of future payments under credit default provisions at both March 31, 2018 and December 31, 2017 set forth in the table above was $16 million and $27 million at March 31, 2018 and December 31, 2017, respectively.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

45
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.
The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.
See Note 7 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair valuevalues of long-term debt is determined on a basis consistent with the methodologies described herein for securities.
The valuationCompany’s net derivative assets and net derivative liabilities after the application of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.master netting agreements and collateral were as follows at:
  March 31, 2018 December 31, 2017
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1) Assets Liabilities Assets Liabilities
  (In millions)
Gross estimated fair value of derivatives:        
OTC-bilateral (1) $5,908
 $2,325
 $6,478
 $2,203
OTC-cleared (1), (6) 111
 26
 168
 216
Exchange-traded 1
 —
 6
 3
Total gross estimated fair value of derivatives (1) 6,020
 2,351
 6,652
 2,422
Amounts offset on the interim condensed consolidated balance sheets —
 —
 —
 —
Estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1), (6) 6,020
 2,351
 6,652
 2,422
Gross amounts not offset on the interim condensed consolidated balance sheets:        
Gross estimated fair value of derivatives: (2)        
OTC-bilateral (1,811) (1,811) (1,891) (1,891)
OTC-cleared (16) (16) (31) (31)
Exchange-traded —
 —
 —
 —
Cash collateral: (3), (4)        
OTC-bilateral (3,038) —
 (3,448) —
OTC-cleared (93) —
 (131) (179)
Exchange-traded —
 —
 —
 —
Securities collateral: (5)        
OTC-bilateral (890) (514) (954) (312)
OTC-cleared —
 (10) —
 (6)
Exchange-traded —
 —
 —
 (3)
Net amount after application of master netting agreements and collateral $172
 $—
 $197
 $—
__________________
Instrument(1)
Level 2
Observable InputsAt March 31, 2018 and December 31, 2017, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $51 million and $60 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($29) millionand ($20) million, respectively.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Level 3
Unobservable Inputs
Fixed Maturity Securities(2)Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
U.S. corporate(3)Cash collateral received by the Company for OTC-bilateral and Foreign corporateOTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.
(4)Valuation Approaches: PrincipallyThe receivable for the marketreturn of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and income approaches.OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At March 31, 2018 and December 31, 2017, the Company received excess cash collateral of $57 million and $122 million, respectively, and provided excess cash collateral of $0 and $9 million, respectively, which is not included in the table above due to the foregoing limitation.
Valuation Approaches: Principally the market approach.
(5)Key Inputs:Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at March 31, 2018, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At March 31, 2018 and December 31, 2017, the Company received excess securities collateral with an estimated fair value of $1 million and $30 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2018 and December 31, 2017, the Company provided excess securities collateral with an estimated fair value of $206 million and $152 million, respectively, for its OTC-bilateral derivatives, and $215 million and $299 million, respectively, for its OTC-cleared derivatives, and $48 million and $50 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
Key Inputs:
(6)•quoted pricesEffective January 16, 2018, the LCH amended its rulebook, resulting in markets that are not active•illiquidity premium
•benchmark yields; spreads off benchmark yields; new issuances; issuer rating•delta spreadthe characterization of variation margin transfers as settlement payments, as opposed to adjustments to reflect specific credit-related issues
•trades of identical or comparable securities; duration•credit spreads
•Privately-placed securities are valued usingcollateral. See Note 1 for further information on the additional key inputs:•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•market yield curve; call provisions
•
observable prices and spreads for similar public or private securities that
incorporate the credit quality and industry sector of the issuer
•

independent non-binding broker quotations
•delta spread adjustments to reflect specific credit-related issues
U.S. government and agency, State and political subdivision and Foreign government securities
Valuation Approaches: Principally the market approach.Valuation Approaches: Principally the market approach.
Key Inputs:Key Inputs:
•quoted prices in markets that are not active•independent non-binding broker quotations
•benchmark U.S. Treasury yield or other yields•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•the spread off the U.S. Treasury yield curve for the identical security
•issuer ratings and issuer spreads; broker-dealer quotes•credit spreads
•comparable securities that are actively traded
Structured Securities
Valuation Approaches: Principally the market and income approaches.Valuation Approaches: Principally the market and income approaches.
Key Inputs:Key Inputs:
•quoted prices in markets that are not active•credit spreads
•spreads for actively traded securities; spreads off benchmark yields•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•expected prepayment speeds and volumes
•current and forecasted loss severity; ratings; geographic region•independent non-binding broker quotations
•weighted average coupon and weighted average maturity
•average delinquency rates; debt-service coverage ratios
•issuance-specific information, including, but not limited to:
•collateral type; structure of the security; vintage of the loans
•payment terms of the underlying assets
•payment priority within the tranche; deal performanceLCH amendments.
The Company’s collateral arrangements for its OTC-bilateral derivatives require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that party reaches a minimum transfer amount. Substantially all of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
  March 31, 2018 December 31, 2017
  
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total
  (In millions)
Estimated Fair Value of Derivatives in a Net
Liability Position (1)
 $514
 $—
 $514
 $313
 $—
 $313
Estimated Fair Value of Collateral Provided:            
Fixed maturity securities $700
 $—
 $700
 $399
 $—
 $399
Cash $—
 $—
 $—
 $—
 $—
 $—
__________________
(1)After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance; fixed annuities with equity indexed returns; and certain debt and equity securities.
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
  Balance Sheet Location March 31, 2018 December 31, 2017
    (In millions)
Embedded derivatives within asset host contracts:      
Options embedded in debt or equity securities (1) Investments $—
 $(113)
Embedded derivatives within asset host contracts $—
 $(113)
Embedded derivatives within liability host contracts:      
Direct guaranteed minimum benefits Policyholder account balances $(135) $(94)
Assumed guaranteed minimum benefits Policyholder account balances 2
 3
Funds withheld on ceded reinsurance Other liabilities 656
 898
Fixed annuities with equity indexed returns Policyholder account balances 68
 69
Embedded derivatives within liability host contracts $591
 $876
__________________
(1)In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company is no longer required to bifurcate and account separately for derivatives embedded in equity securities. Beginning January 1, 2018, the entire change in fair value of equity securities is recognized as a component of net investment gains and losses.

48
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents changes in estimated fair value related to embedded derivatives:
 Three Months 
 Ended 
 March 31,
 2018 2017
 (In millions)
Net derivative gains (losses) (1), (2)$333
 $375
__________________
(1)The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($21) million and ($12) million for the three months ended March 31, 2018 and 2017, respectively.
(2)
See Note 13 for discussion of affiliated net derivative gains (losses).

49
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value
When developing estimated fair values, considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:
 March 31, 2018
 Fair Value Hierarchy  
 Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
 (In millions)
Assets       
Fixed maturity securities:       
U.S. corporate$—
 $53,534
 $3,214
 $56,748
U.S. government and agency15,790
 19,269
 —
 35,059
Foreign corporate—
 20,855
 4,081
 24,936
RMBS—
 19,011
 3,073
 22,084
ABS—
 6,921
 706
 7,627
State and political subdivision—
 7,410
 —
 7,410
CMBS—
 4,896
 73
 4,969
Foreign government—
 4,408
 13
 4,421
Total fixed maturity securities15,790
 136,304
 11,160
 163,254
Equity securities359
 164
 359
 882
Other limited partnership interests—
 —
 189
 189
Short-term investments1,932
 909
 550
 3,391
Residential mortgage loans — FVO—
 —
 438
 438
Derivative assets: (1)       
Interest rate1
 4,137
 14
 4,152
Foreign currency exchange rate—
 1,191
 —
 1,191
Credit—
 110
 35
 145
Equity market—
 412
 69
 481
Total derivative assets1
 5,850
 118
 5,969
Embedded derivatives within asset host contracts (3)—
 —
 —
 —
Separate account assets (3)21,963
 101,657
 1,227
 124,847
Total assets$40,045
 $244,884
 $14,041
 $298,970
Liabilities       
Derivative liabilities: (1)       
Interest rate$—
 $101
 $242
 $343
Foreign currency exchange rate—
 1,445
 4
 1,449
Credit—
 9
 —
 9
Equity market—
 414
 165
 579
Total derivative liabilities—
 1,969
 411
 2,380
Embedded derivatives within liability host contracts (2)—
 —
 591
 591
Separate account liabilities (3)—
 12
 5
 17
Total liabilities$—
 $1,981
 $1,007
 $2,988

50
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Equity Securities
Valuation Approaches: Principally the market approach.Valuation Approaches: Principally the market and income approaches.
Key Input:Key Inputs:
•quoted prices in markets that are not considered active•credit ratings; issuance structures
•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•independent non-binding broker quotations
Short-term investments
•
Short-term investments are of a similar nature and class to the fixed maturity
and equity securities described above; accordingly, the valuation
approaches and observable inputs used in their valuation are also
similar to those described above.
•
Short-term investments are of a similar nature and class to the fixed
maturity and equity securities described above; accordingly,
the valuation approaches and unobservable inputs used in their
valuation are also similar to those described above.
Residential mortgage loans — FVO
• N/A
Valuation Approaches: Principally the market approach.

Valuation Techniques and Key Inputs: These investments are based primarily on matrix pricing or other similar techniques that utilize inputs from mortgage servicers that are unobservable or cannot be derived principally from, or corroborated by, observable market data.

Separate Account Assets and Separate Account Liabilities (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
Key Input:•N/A
•quoted prices or reported Net Asset value (“NAV”) provided by the fund managers
Other limited partnership interests
•

N/A
Valued giving consideration to the underlying holdings
of the partnerships and by applying a premium or discount, if appropriate.
Key Inputs:
•liquidity; bid/ask spreads; performance record of the fund manager
•
other relevant variables that may impact the exit value of the particular
partnership interest
 December 31, 2017
 Fair Value Hierarchy  
 Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
 (In millions)
Assets       
Fixed maturity securities:       
U.S. corporate$—
 $54,629
 $3,461
 $58,090
U.S. government and agency18,802
 19,743
 —
 38,545
Foreign corporate—
 21,471
 4,125
 25,596
RMBS—
 19,372
 3,262
 22,634
ABS—
 7,079
 787
 7,866
State and political subdivision—
 7,551
 —
 7,551
CMBS—
 5,461
 27
 5,488
Foreign government—
 4,471
 31
 4,502
Total fixed maturity securities18,802
 139,777
 11,693
 170,272
Equity securities399
 893
 366
 1,658
Short-term investments2,056
 1,092
 7
 3,155
Residential mortgage loans — FVO—
 —
 520
 520
Derivative assets: (1)       
Interest rate1
 4,556
 8
 4,565
Foreign currency exchange rate—
 1,405
 —
 1,405
Credit—
 149
 39
 188
Equity market5
 363
 66
 434
Total derivative assets6
 6,473
 113
 6,592
Embedded derivatives within asset host contracts (2)—
 —
 —
 —
Separate account assets (3)23,571
 106,294
 960
 130,825
Total assets$44,834
 $254,529
 $13,659
 $313,022
Liabilities       
Derivative liabilities: (1)       
Interest rate$2
 $351
 $130
 $483
Foreign currency exchange rate—
 1,261
 5
 1,266
Credit—
 8
 —
 8
Equity market1
 515
 169
 685
Total derivative liabilities3
 2,135
 304
 2,442
Embedded derivatives within liability host contracts (3)—
 —
 876
 876
Separate account liabilities (3)—
 7
 2
 9
Total liabilities$3
 $2,142
 $1,182
 $3,327
__________________
(1)Estimated fair value equals carrying value, basedDerivative assets are presented within other invested assets on the valueinterim condensed consolidated balance sheets and derivative liabilities are presented within other liabilities on the interim condensed consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the interim condensed consolidated balance sheets, but are presented net for purposes of the underlying assets, including: mutual fund interests, fixed maturity securities,rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets. At March 31, 2018 and December 31, 2017, debt and equity securities also included embedded derivatives hedge funds, other limited partnership interests, short-term investmentsof $0 and cash and cash equivalents. Fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents are similar in nature to the instruments described under “— Securities, Short-term Investments and Long-term Debt” and “— Derivatives — Freestanding Derivatives.”($113) million, respectively.
Derivatives
The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments.”
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

(3)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.
Most
The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for OTC-bilateraleach category of assets or liabilities that are classified within Level 2 and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair valuesLevel 3 of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.hierarchy.
Investments
Freestanding Derivatives
Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.
Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivative’s carrying value in other invested assets or other liabilities.
If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows:
Statement of Operations Presentation:Derivative:
Policyholder benefits and claims• 
Economic hedges of variable annuity guarantees included in
future policy benefits
Net investment income• 
Economic hedges of equity method investments in joint
ventures
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:
Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.
Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item.
In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

35
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).
In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).
Embedded Derivatives
The Company sells variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;
the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and
a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.
See Note 7 for information about the fair value hierarchy for derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash markets.

36
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Interest Rate Derivatives
The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, interest rate total return swaps, caps, floors, swaptions, futures and forwards.
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.
The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. government and agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.
Interest rate total return swaps are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Interbank Offered Rate (“LIBOR”), calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. Interest rate total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate total return swaps in nonqualifying hedging relationships.
The Company purchases interest rate caps primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, and interest rate floors primarily to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in nonqualifying hedging relationships.
In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures in nonqualifying hedging relationships.
Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.
The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and nonqualifying hedging relationships.
A synthetic guaranteed interest contract (“GIC”) is a contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the contractholder owns the underlying assets. The Company guarantees a rate of return on those assets for a premium. Synthetic GICs are not designated as hedging instruments.

37
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency exchange rate derivatives, including foreign currency swaps and foreign currency forwards, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.
In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in nonqualifying hedging relationships.
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

38
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
    March 31, 2018 December 31, 2017
  Primary Underlying Risk Exposure Gross
Notional
Amount		 Estimated Fair Value Gross
Notional
Amount		 Estimated Fair Value
  Assets Liabilities Assets Liabilities
    (In millions)
Derivatives Designated as Hedging Instruments:            
Fair value hedges:              
Interest rate swaps Interest rate $2,517
 $2,111
 $2
 $3,826
 $2,289
 $3
Foreign currency swaps Foreign currency exchange rate 1,112
 62
 35
 1,082
 47
 17
Subtotal   3,629
 2,173
 37
 4,908
 2,336
 20
Cash flow hedges:              
Interest rate swaps Interest rate 3,245
 158
 10
 3,337
 234
 —
Interest rate forwards Interest rate 3,143
 —
 217
 3,333
 —
 127
Foreign currency swaps Foreign currency exchange rate 23,916
 701
 1,206
 22,287
 795
 1,078
Subtotal   30,304
 859
 1,433
 28,957
 1,029
 1,205
Total qualifying hedges   33,933
 3,032
 1,470
 33,865
 3,365
 1,225
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swaps Interest rate 36,747
 1,456
 87
 43,028
 1,722
 336
Interest rate floors Interest rate 7,201
 66
 —
 7,201
 91
 —
Interest rate caps Interest rate 46,021
 221
 2
 53,079
 78
 2
Interest rate futures Interest rate 1,025
 1
 —
 2,257
 1
 2
Interest rate options Interest rate 11,125
 125
 —
 7,525
 142
 11
Interest rate total return swaps Interest rate 1,048
 14
 25
 1,048
 8
 2
Synthetic GICs Interest rate 9,631
 —
 —
 11,318
 —
 —
Foreign currency swaps Foreign currency exchange rate 6,573
 410
 204
 6,739
 547
 164
Foreign currency forwards Foreign currency exchange rate 1,025
 18
 4
 961
 16
 7
Credit default swaps — purchased Credit 848
 5
 7
 980
 7
 8
Credit default swaps — written Credit 7,891
 140
 2
 7,874
 181
 —
Equity futures Equity market 937
 —
 —
 1,282
 5
 1
Equity index options Equity market 14,359
 406
 414
 14,408
 384
 476
Equity variance swaps Equity market 3,530
 44
 165
 3,530
 45
 169
Equity total return swaps Equity market 971
 31
 —
 1,077
 —
 39
Total non-designated or nonqualifying derivatives 148,932
 2,937
 910
 162,307
 3,227
 1,217
Total   $182,865
 $5,969
 $2,380
 $196,172
 $6,592
 $2,442
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2018 and December 31, 2017. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

40
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
  Three Months
Ended
March 31,
  2018 2017
 (In millions)
Freestanding derivatives and hedging gains (losses) (1) $(273) $(526)
Embedded derivatives gains (losses) 333
 375
Total net derivative gains (losses) $60
 $(151)
__________________
(1)Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
The following table presents earned income on derivatives:
 Three Months
Ended
March 31,
 2018 2017
 (In millions)
Qualifying hedges:   
Net investment income$77
 $75
Interest credited to policyholder account balances(23) (6)
Nonqualifying hedges:   
Net derivative gains (losses)82
 127
Policyholder benefits and claims2
 1
Total$138
 $197

41
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 (In millions)
Three Months Ended March 31, 2018     
Interest rate derivatives$(256) $4
 $—
Foreign currency exchange rate derivatives(214) —
 —
Credit derivatives — purchased(1) —
 —
Credit derivatives — written(28) —
 —
Equity derivatives10
 1
 1
Total$(489) $5
 $1
Three Months Ended March 31, 2017     
Interest rate derivatives$(266) $2
 $—
Foreign currency exchange rate derivatives(125) —
 —
Credit derivatives — purchased(6) —
 —
Credit derivatives — written27
 —
 —
Equity derivatives(221) (1) (60)
Total$(591) $1
 $(60)
__________________
(1)Changes in estimated fair value related to economic hedges of equity method investments in joint ventures.
(2)Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

42
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)

 
 (In millions)
Three Months Ended March 31, 2018      
Interest rate swaps: Fixed maturity securities $3
 $(2) $1
  Policyholder liabilities (1) (213) 212
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities and mortgage loans (25) 25
 —
  Foreign-denominated policyholder account balances (2) 18
 (18) —
Total $(217) $217
 $—
Three Months Ended March 31, 2017      
Interest rate swaps: Fixed maturity securities $1
 $(1) $—
  Policyholder liabilities (1) (52) 51
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities (3) 3
 —
  Foreign-denominated policyholder account balances (2) 1
 2
 3
Total $(53) $55
 $2
__________________
(1)Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)Fixed rate or floating rate liabilities.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.
In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). These amounts were less than $1 million and $20 million for the three months ended March 31, 2018 and 2017, respectively.
At March 31, 2018 and December 31, 2017, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed four years and five years, respectively.
At March 31, 2018 and December 31, 2017, the balance in AOCI associated with cash flow hedges was $706 million and $1.4 billion, respectively.

43
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the effects of derivatives in cash flow hedging relationships on the interim condensed consolidated statements of operations and comprehensive income (loss) and the interim condensed consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships		 Amount of Gains
(Losses) Deferred in
AOCI on Derivatives		 Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)		 Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
  (Effective Portion) (Effective Portion) (Ineffective Portion)
    Net Derivative
Gains (Losses)		 Net Investment
Income		 Net Derivative
Gains (Losses)
  (In millions)
Three Months Ended March 31, 2018        
Interest rate swaps $(173) $16
 $3
 $(2)
Interest rate forwards (104) 4
 1
 —
Foreign currency swaps (229) 160
 —
 (1)
Total $(506) $180
 $4
 $(3)
Three Months Ended March 31, 2017        
Interest rate swaps $4
 $8
 $4
 $1
Interest rate forwards 44
 (4) 1
 —
Foreign currency swaps 18
 203
 —
 1
Total $66
 $207
 $5
 $2
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At March 31, 2018,the Company expected to reclassify $60 millionof deferred net gains (losses) on derivatives in AOCI, included in the table above, to earnings within the next 12 months.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $7.9 billion at both March 31, 2018 and December 31, 2017. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At March 31, 2018 and December 31, 2017, the Company would have received $138 million and $181 million, respectively, to terminate all of these contracts.

44
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
  March 31, 2018 December 31, 2017
Rating Agency Designation of Referenced
Credit Obligations (1)
 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)
  (Dollars in millions)
Aaa/Aa/A            
Single name credit default swaps (3) $2
 $159
 2.6
 $3
 $159
 2.8
Credit default swaps referencing indices 39
 2,192
 2.5
 42
 2,193
 2.7
Subtotal 41
 2,351
 2.5
 45
 2,352
 2.7
Baa            
Single name credit default swaps (3) 4
 463
 1.8
 4
 416
 1.5
Credit default swaps referencing indices 78
 4,817
 5.4
 111
 4,761
 5.2
Subtotal 82
 5,280
 5.1
 115
 5,177
 4.9
Ba            
Single name credit default swaps (3) —
 20
 1.2
 1
 105
 3.4
Credit default swaps referencing indices —
 —
 —
 —
 —
 —
Subtotal —
 20
 1.2
 1
 105
 3.4
B            
Single name credit default swaps (3) 2
 20
 3.2
 2
 20
 3.5
Credit default swaps referencing indices 13
 220
 5.2
 18
 220
 5.0
Subtotal 15
 240
 5.1
 20
 240
 4.9
Total $138
 $7,891
 4.3
 $181
 $7,874
 4.2
__________________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”),Standard & Poor’s Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(3)Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.
The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amount of potential future recoveries available to offset the $7.9 billion of future payments under credit default provisions at both March 31, 2018 and December 31, 2017 set forth in the table above was $16 million and $27 million at March 31, 2018 and December 31, 2017, respectively.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

45
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.
The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.
See Note 7 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
  March 31, 2018 December 31, 2017
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1) Assets Liabilities Assets Liabilities
  (In millions)
Gross estimated fair value of derivatives:        
OTC-bilateral (1) $5,908
 $2,325
 $6,478
 $2,203
OTC-cleared (1), (6) 111
 26
 168
 216
Exchange-traded 1
 —
 6
 3
Total gross estimated fair value of derivatives (1) 6,020
 2,351
 6,652
 2,422
Amounts offset on the interim condensed consolidated balance sheets —
 —
 —
 —
Estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1), (6) 6,020
 2,351
 6,652
 2,422
Gross amounts not offset on the interim condensed consolidated balance sheets:        
Gross estimated fair value of derivatives: (2)        
OTC-bilateral (1,811) (1,811) (1,891) (1,891)
OTC-cleared (16) (16) (31) (31)
Exchange-traded —
 —
 —
 —
Cash collateral: (3), (4)        
OTC-bilateral (3,038) —
 (3,448) —
OTC-cleared (93) —
 (131) (179)
Exchange-traded —
 —
 —
 —
Securities collateral: (5)        
OTC-bilateral (890) (514) (954) (312)
OTC-cleared —
 (10) —
 (6)
Exchange-traded —
 —
 —
 (3)
Net amount after application of master netting agreements and collateral $172
 $—
 $197
 $—
__________________
(1)
At March 31, 2018 and December 31, 2017, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $51 million and $60 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($29) millionand ($20) million, respectively.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

(2)Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.
(4)The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At March 31, 2018 and December 31, 2017, the Company received excess cash collateral of $57 million and $122 million, respectively, and provided excess cash collateral of $0 and $9 million, respectively, which is not included in the table above due to the foregoing limitation.
(5)Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at March 31, 2018, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At March 31, 2018 and December 31, 2017, the Company received excess securities collateral with an estimated fair value of $1 million and $30 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2018 and December 31, 2017, the Company provided excess securities collateral with an estimated fair value of $206 million and $152 million, respectively, for its OTC-bilateral derivatives, and $215 million and $299 million, respectively, for its OTC-cleared derivatives, and $48 million and $50 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)Effective January 16, 2018, the LCH amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the LCH amendments.
The Company’s collateral arrangements for its OTC-bilateral derivatives require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that party reaches a minimum transfer amount. Substantially all of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

47
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
  March 31, 2018 December 31, 2017
  
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total
  (In millions)
Estimated Fair Value of Derivatives in a Net
Liability Position (1)
 $514
 $—
 $514
 $313
 $—
 $313
Estimated Fair Value of Collateral Provided:            
Fixed maturity securities $700
 $—
 $700
 $399
 $—
 $399
Cash $—
 $—
 $—
 $—
 $—
 $—
__________________
(1)After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance; fixed annuities with equity indexed returns; and certain debt and equity securities.
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
  Balance Sheet Location March 31, 2018 December 31, 2017
    (In millions)
Embedded derivatives within asset host contracts:      
Options embedded in debt or equity securities (1) Investments $—
 $(113)
Embedded derivatives within asset host contracts $—
 $(113)
Embedded derivatives within liability host contracts:      
Direct guaranteed minimum benefits Policyholder account balances $(135) $(94)
Assumed guaranteed minimum benefits Policyholder account balances 2
 3
Funds withheld on ceded reinsurance Other liabilities 656
 898
Fixed annuities with equity indexed returns Policyholder account balances 68
 69
Embedded derivatives within liability host contracts $591
 $876
__________________
(1)In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company is no longer required to bifurcate and account separately for derivatives embedded in equity securities. Beginning January 1, 2018, the entire change in fair value of equity securities is recognized as a component of net investment gains and losses.

48
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents changes in estimated fair value related to embedded derivatives:
 Three Months 
 Ended 
 March 31,
 2018 2017
 (In millions)
Net derivative gains (losses) (1), (2)$333
 $375
__________________
(1)The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($21) million and ($12) million for the three months ended March 31, 2018 and 2017, respectively.
(2)
See Note 13 for discussion of affiliated net derivative gains (losses).

49
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value
When developing estimated fair values, considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:
 March 31, 2018
 Fair Value Hierarchy  
 Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
 (In millions)
Assets       
Fixed maturity securities:       
U.S. corporate$—
 $53,534
 $3,214
 $56,748
U.S. government and agency15,790
 19,269
 —
 35,059
Foreign corporate—
 20,855
 4,081
 24,936
RMBS—
 19,011
 3,073
 22,084
ABS—
 6,921
 706
 7,627
State and political subdivision—
 7,410
 —
 7,410
CMBS—
 4,896
 73
 4,969
Foreign government—
 4,408
 13
 4,421
Total fixed maturity securities15,790
 136,304
 11,160
 163,254
Equity securities359
 164
 359
 882
Other limited partnership interests—
 —
 189
 189
Short-term investments1,932
 909
 550
 3,391
Residential mortgage loans — FVO—
 —
 438
 438
Derivative assets: (1)       
Interest rate1
 4,137
 14
 4,152
Foreign currency exchange rate—
 1,191
 —
 1,191
Credit—
 110
 35
 145
Equity market—
 412
 69
 481
Total derivative assets1
 5,850
 118
 5,969
Embedded derivatives within asset host contracts (3)—
 —
 —
 —
Separate account assets (3)21,963
 101,657
 1,227
 124,847
Total assets$40,045
 $244,884
 $14,041
 $298,970
Liabilities       
Derivative liabilities: (1)       
Interest rate$—
 $101
 $242
 $343
Foreign currency exchange rate—
 1,445
 4
 1,449
Credit—
 9
 —
 9
Equity market—
 414
 165
 579
Total derivative liabilities—
 1,969
 411
 2,380
Embedded derivatives within liability host contracts (2)—
 —
 591
 591
Separate account liabilities (3)—
 12
 5
 17
Total liabilities$—
 $1,981
 $1,007
 $2,988

50
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

 December 31, 2017
 Fair Value Hierarchy  
 Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
 (In millions)
Assets       
Fixed maturity securities:       
U.S. corporate$—
 $54,629
 $3,461
 $58,090
U.S. government and agency18,802
 19,743
 —
 38,545
Foreign corporate—
 21,471
 4,125
 25,596
RMBS—
 19,372
 3,262
 22,634
ABS—
 7,079
 787
 7,866
State and political subdivision—
 7,551
 —
 7,551
CMBS—
 5,461
 27
 5,488
Foreign government—
 4,471
 31
 4,502
Total fixed maturity securities18,802
 139,777
 11,693
 170,272
Equity securities399
 893
 366
 1,658
Short-term investments2,056
 1,092
 7
 3,155
Residential mortgage loans — FVO—
 —
 520
 520
Derivative assets: (1)       
Interest rate1
 4,556
 8
 4,565
Foreign currency exchange rate—
 1,405
 —
 1,405
Credit—
 149
 39
 188
Equity market5
 363
 66
 434
Total derivative assets6
 6,473
 113
 6,592
Embedded derivatives within asset host contracts (2)—
 —
 —
 —
Separate account assets (3)23,571
 106,294
 960
 130,825
Total assets$44,834
 $254,529
 $13,659
 $313,022
Liabilities       
Derivative liabilities: (1)       
Interest rate$2
 $351
 $130
 $483
Foreign currency exchange rate—
 1,261
 5
 1,266
Credit—
 8
 —
 8
Equity market1
 515
 169
 685
Total derivative liabilities3
 2,135
 304
 2,442
Embedded derivatives within liability host contracts (3)—
 —
 876
 876
Separate account liabilities (3)—
 7
 2
 9
Total liabilities$3
 $2,142
 $1,182
 $3,327
__________________
(1)Derivative assets are presented within other invested assets on the interim condensed consolidated balance sheets and derivative liabilities are presented within other liabilities on the interim condensed consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the interim condensed consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets. At March 31, 2018 and December 31, 2017, debt and equity securities also included embedded derivatives of $0 and ($113) million, respectively.

51
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

(3)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.
The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy.
Investments
Valuation Controls and Procedures
On behalf of the Company and MetLife, Inc.’s Chief Investment Officer and Chief Financial Officer, a pricing and valuation committee that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a quarterly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. This committee also provides oversight of the selection of independent third-party pricing providers and the controls and procedures to evaluate third-party pricing. Periodically, the Chief Accounting Officer reports to the Audit Committee of the Board of Directors of each of MetLife, Inc. and Metropolitan Life Insurance Company regarding compliance with fair value accounting standards.
The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and less than 1% of the total estimated fair value of Level 3 fixed maturity securities at March 31, 2018.
The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained, or an internally developed valuation is prepared. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and nonperformance risks, compared with pricing received from the independent pricing services, did not produce material differences in the estimated fair values for the majority of the portfolio; accordingly, overrides were not material. This is, in part, because internal estimates of liquidity and nonperformance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used.
Securities and Short-term Investments
When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment.

52
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances.
Other Limited Partnership Interests
The estimated fair values of other limited partnership interests are generally based on the Company’s share of the net asset value (“NAV”) of the other limited partnership interests as provided on the financial statements of the investee. In certain circumstances, management may adjust the NAV when it has sufficient evidence to support applying such adjustments.
The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.
Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Fixed maturity securities
U.S. corporate and Foreign corporate securities
Valuation Approaches: Principally the market and income approaches.Valuation Approaches: Principally the market approach.
Key Inputs:Key Inputs:
•quoted prices in markets that are not active•illiquidity premium
•benchmark yields; spreads off benchmark yields; new issuances; issuer rating•delta spread adjustments to reflect specific credit-related issues
•trades of identical or comparable securities; duration•credit spreads
•Privately-placed securities are valued using the additional key inputs:•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•market yield curve; call provisions
•
observable prices and spreads for similar public or private securities that
incorporate the credit quality and industry sector of the issuer
•

independent non-binding broker quotations
•delta spread adjustments to reflect specific credit-related issues
U.S. government and agency, State and political subdivision and Foreign government securities
Valuation Approaches: Principally the market approach.Valuation Approaches: Principally the market approach.
Key Inputs:Key Inputs:
•quoted prices in markets that are not active•independent non-binding broker quotations
•benchmark U.S. Treasury yield or other yields•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•the spread off the U.S. Treasury yield curve for the identical security
•issuer ratings and issuer spreads; broker-dealer quotes•credit spreads
•comparable securities that are actively traded
Structured Securities
Valuation Approaches: Principally the market and income approaches.Valuation Approaches: Principally the market and income approaches.
Key Inputs:Key Inputs:
•quoted prices in markets that are not active•credit spreads
•spreads for actively traded securities; spreads off benchmark yields•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•expected prepayment speeds and volumes
•current and forecasted loss severity; ratings; geographic region•independent non-binding broker quotations
•weighted average coupon and weighted average maturity
•average delinquency rates; debt-service coverage ratios
•issuance-specific information, including, but not limited to:
•collateral type; structure of the security; vintage of the loans
•payment terms of the underlying assets
•payment priority within the tranche; deal performance

53
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Equity securities
Valuation Approaches: Principally the market approach.Valuation Approaches: Principally the market and income approaches.
Key Input:Key Inputs:
•quoted prices in markets that are not considered active•credit ratings; issuance structures
•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
•independent non-binding broker quotations
Short-term investments and Other limited partnership interests
•
Short-term investments are of a similar nature and class to the fixed maturity
and equity securities described above; accordingly, the valuation
approaches and observable inputs used in their valuation are also
similar to those described above.
•
Short-term investments are of a similar nature and class to the fixed
maturity and equity securities described above; accordingly,
the valuation approaches and unobservable inputs used in their
valuation are also similar to those described above.
•Valuation approaches for other limited partnership interests are discussed below.
Residential mortgage loans — FVO
• N/AValuation Approaches: Principally the market approach.
Valuation Techniques and Key Inputs: These investments are based primarily on matrix pricing or other similar techniques that utilize inputs from mortgage servicers that are unobservable or cannot be derived principally from, or corroborated by, observable market data.
Separate account assets and Separate account liabilities (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
Key Input:•N/A
•quoted prices or reported NAV provided by the fund managers
Other limited partnership interests
•

N/A
Valued giving consideration to the underlying holdings
of the partnerships and adjusting, if appropriate.
Key Inputs:
•liquidity; bid/ask spreads; performance record of the fund manager
•
other relevant variables that may impact the exit value of the particular
partnership interest
__________________
(1)Estimated fair value equals carrying value, based on the value of the underlying assets, including: mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. Fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents are similar in nature to the instruments described under “— Securities and Short-term Investments,” “—Other Limited Partnership Interests” and “— Derivatives — Freestanding Derivatives.”
Derivatives
The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments.”
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Freestanding Derivatives
Level 2 Valuation Approaches and Key Inputs:
This level includes all types of derivatives utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivatives with unobservable inputs as described in Level 3.
Level 3 Valuation Approaches and Key Inputs:
These valuation methodologies generally use the same inputs as described in the corresponding sections for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.
Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. Key inputs are as follows:
Instrument Interest Rate 
Foreign Currency
Exchange Rate
 Credit Equity Market
Inputs common to Level 2 and Level 3 by instrument type•swap yield curves•swap yield curves•swap yield curves•swap yield curves
•basis curves•basis curves•credit curves•spot equity index levels
•interest rate volatility (1)•currency spot rates•recovery rates•dividend yield curves
   •cross currency basis curves  •equity volatility (1)
Level 3•swap yield curves (2)•swap yield curves (2)•swap yield curves (2)•dividend yield curves (2)
 •basis curves (2)•basis curves (2)•credit curves (2)•equity volatility (1), (2)
 •repurchase rates•cross currency basis curves (2)
•

credit spreads•
correlation between model
inputs (1)
   •currency correlation•repurchase rates  
     •
independent non-binding
broker quotations
  
__________________
(1)Option-based only.
(2)Extrapolation beyond the observable limits of the curve(s).

5655
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Embedded Derivatives
Embedded derivatives principally include certain direct, assumed and ceded variable annuity guarantees, certain affiliated ceded reinsurance agreements related to such variable annuity guarantees, equity or bond indexed crediting rates within certain funding agreements and those related to funds withheld on ceded reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.
The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The Company’s actuarial department calculates the fair value of these embedded derivatives, which are estimated as the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates.
Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.
The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries as compared to MetLife, Inc.
Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income.
The Company ceded the risk associated with certain of the GMIBs, GMABs and GMWBs previously described. In addition to ceding risks associated with guarantees that are accounted for as embedded derivatives, the Company also ceded directly written GMIBs that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance agreement contains an embedded derivative. These embedded derivatives are included within premiums, reinsurance and other receivables on the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.
The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as described in “— Investments — Securities and Short-term Investments and Long-term Debt.Investments.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities on the consolidated balance sheets with changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

5756
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including a nonperformance risk adjustment. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within policyholder account balances with changes in estimated fair value recorded in net derivative gains (losses). Changes in equity and bond indices, interest rates and the Company’s credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.
Embedded Derivatives Within Asset and Liability Host Contracts
Level 3 Valuation Approaches and Key Inputs:
Direct and assumed guaranteed minimum benefits
These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curves, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curves and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin.
Reinsurance ceded on certain guaranteed minimum benefits
These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in “— Direct and assumed guaranteed minimum benefits” and also include counterparty credit spreads.
Embedded derivatives within funds withheld related to certain ceded reinsurance
These embedded derivatives are principally valued using the income approach. The valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curves and the fair value of assets within the reference portfolio. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include the fair value of certain assets within the reference portfolio which are not observable in the market and cannot be derived principally from, or corroborated by, observable market data.
Transfers between Levels
Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into or out of any level are assumed to occur at the beginning of the period.
Transfers between Levels 1 and 2:
ForThere were no transfers between Levels 1 and 2 for assets and liabilities measured at estimated fair value and still held at September 30, 2017March 31, 2018 and December 31, 2016, there were no transfers between Levels 1 and 2.2017.
Transfers into or out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

5857
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
 September 30, 2017 December 31, 2016 Impact of
Increase in Input
on Estimated
Fair Value (2)		 March 31, 2018 December 31, 2017 Impact of
Increase in Input
on Estimated
Fair Value (2)
Valuation
Techniques		 
Significant
Unobservable Inputs
 Range 
Weighted
Average (1)
 Range 
Weighted
Average (1)
 Valuation
Techniques		 
Significant
Unobservable Inputs
 Range 
Weighted
Average (1)
 Range 
Weighted
Average (1)
 
Fixed maturity securities (3)Fixed maturity securities (3) Fixed maturity securities (3) 
U.S. corporate and foreign corporate•Matrix pricing •Offered quotes (4) 21-140 108 18-138 106 Increase•Matrix pricing •Offered quotes (4) 89-139 108 83-142 111 Increase
•Market pricing
•Quoted prices (4)
25-498
121
25-700
117
Increase•Market pricing
•Quoted prices (4)
25-846
127
10-443
123
Increase
RMBS•Market pricing •Quoted prices (4) 5-173 94 19-137 91 Increase (5)•Market pricing •Quoted prices (4) —-107 94 —-126 94 Increase (5)
ABS•Market pricing •Quoted prices (4) 28-104 100 20-106 99 Increase (5)•Market pricing •Quoted prices (4) 20-104 100 27-104 100 Increase (5)
•Consensus pricing •Offered quotes (4) 99-100 99 98-100 100 Increase (5)•Consensus pricing •Offered quotes (4) 
 
 
 100-101 100 Increase (5)
Derivatives  
Interest rate•Present value techniques •Swap yield (6) 200-300 200-300 Increase (7)•Present value techniques •Swap yield (6) 277-313 200-300 Increase (7)
 •Repurchase rates (8) —-8 (44)-18 Decrease (7) •Repurchase rates (8) (4)-6 (5)-5 Decrease (7)
Foreign currency exchange rate•Present value techniques •Swap yield (6) (24)-(1) 50-236 Increase (7)•Present value techniques •Swap yield (6) (19)-2 (14)-(3) Increase (7)
Credit•Present value techniques •Credit spreads (9) 97-100 97-98 Decrease (7)•Present value techniques •Credit spreads (9) 97-100 —-— Decrease (7)
•Consensus pricing •Offered quotes (10) •Consensus pricing •Offered quotes (10) 
Equity market•
Present value
   techniques or
   option pricing
   models
 •Volatility (11) 9%-30% 14%-32% Increase (7)•
Present value
   techniques or
   option pricing
   models
 •Volatility (11) 20%-31% 11%-31% Increase (7)
 •Correlation (12) 10%-30% 40%-40%  •Correlation (12) 10%-30% 10%-30% 
Embedded derivativesEmbedded derivatives Embedded derivatives 
Direct, assumed and ceded
guaranteed minimum
benefits		•Option pricing
techniques		 •Mortality rates: •Option pricing
techniques		 •Mortality rates: 
 Ages 0 - 40 0%-0.09% 0%-0.09% Decrease (13) Ages 0 - 40 0%-0.09% 0%-0.09% Decrease (13)
 Ages 41 - 60 0.04%-0.65% 0.04%-0.65% Decrease (13) Ages 41 - 60 0.04%-0.65% 0.04%-0.65% Decrease (13)
 Ages 61 - 115 0.26%-100% 0.26%-100% Decrease (13) Ages 61 - 115 0.26%-100% 0.26%-100% Decrease (13)
 •Lapse rates:  •Lapse rates: 
 Durations 1 - 10 0.25%-100% 0.25%-100% Decrease (14) Durations 1 - 10 0.25%-100% 0.25%-100% Decrease (14)
 Durations 11 - 20 3%-100% 3%-100% Decrease (14) Durations 11 - 20 3%-100% 3%-100% Decrease (14)
 Durations 21 - 116 3%-100% 3%-100% Decrease (14) Durations 21 - 116 3%-100% 3%-100% Decrease (14)
 •Utilization rates 0%-25% 0%-25% Increase (15) •Utilization rates 0%-25% 0%-25% Increase (15)
 •Withdrawal rates 0.25%-10% 0.25%-10% (16) •Withdrawal rates 0.25%-10% 0.25%-10% (16)
 •Long-term equity
volatilities		 17.40%-25% 17.40%-25% Increase (17) •Long-term equity
volatilities		 17.40%-25% 17.40%-25% Increase (17)
 •Nonperformance risk
spread		 0.03%-0.46% 0.04%-0.57% Decrease (18) •Nonperformance risk
spread		 0.03%-0.50% 0.02%-0.44% Decrease (18)
__________________
(1)The weighted average for fixed maturity securities is determined based on the estimated fair value of the securities.
(2)The impact of a decrease in input would have the opposite impact on estimated fair value. For embedded derivatives, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions.
(3)Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations.
(4)Range and weighted average are presented in accordance with the market convention for fixed maturity securities of dollars per hundred dollars of par.

5958
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

(5)Changes in the assumptions used for the probability of default are accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.
(6)Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curves are utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
(7)Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.
(8)Ranges represent different repurchase rates utilized as components within the valuation methodology and are presented in basis points.
(9)Represents the risk quoted in basis points of a credit default event on the underlying instrument. Credit derivatives with significant unobservable inputs are primarily comprised of written credit default swaps.
(10)At both September 30, 2017March 31, 2018 and December 31, 2016,2017, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.
(11)Ranges represent the underlying equity volatility quoted in percentage points. Since this valuation methodology uses a range of inputs across multiple volatility surfaces to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
(12)Ranges represent the different correlation factors utilized as components within the valuation methodology. Presenting a range of correlation factors is more representative of the unobservable input used in the valuation. Increases (decreases) in correlation in isolation will increase (decrease) the significance of the change in valuations.
(13)Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(14)Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(15)The utilization rate assumption estimates the percentage of contractholders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(16)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(17)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(18)Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

6059
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3, including those within separate account assets, and embedded derivatives within funds withheld related to certain ceded reinsurance, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The residential mortgage loans — FVO and long-term debt are valued using independent non-binding broker quotations and internal models including matrix pricing and discounted cash flow methodologies using current interest rates. Other limited partnership interests valuations are generally based on the Company’s share of the NAV as provided on the financial statements of the investees. In certain circumstances, management may adjust the NAV when it has sufficient evidence to support applying such adjustments. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table.
The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 Fixed Maturity Securities   Fixed Maturity Securities  
 Corporate (1) 
U.S.
Government
and Agency
 
Structured
Securities
 State and
Political
Subdivision  		 Foreign
Government		 
Equity
Securities
 Corporate (1) 
Structured
Securities
 Foreign
Government		 
Equity
Securities
 (In millions) (In millions)
Three Months Ended September 30, 2017            
Three Months Ended March 31, 2018        
Balance, beginning of period $8,458
 $—
 $4,133
 $—
 $14
 $416
 $7,586
 $4,076
 $31
 $366
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 (4) —
 21
 —
 —
 —
 6
 23
 —
 (8)
Total realized/unrealized gains (losses)
included in AOCI		 121
 —
 17
 —
 —
 (3) (36) 6
 —
 —
Purchases (4) 420
 —
 220
 —
 —
 4
 385
 445
 —
 1
Sales (4) (255) —
 (303) —
 —
 (52) (425) (247) —
 —
Issuances (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 117
 —
 —
 1
 —
 —
 45
 45
 1
 —
Transfers out of Level 3 (5) (110) —
 (270) —
 —
 —
 (266) (496) (19) —
Balance, end of period $8,747
 $—
 $3,818
 $1
 $14
 $365
 $7,295
 $3,852
 $13
 $359
Three Months Ended September 30, 2016            
Three Months Ended March 31, 2017        
Balance, beginning of period $8,904
 $175
 $4,415
 $28
 $65
 $456
 $8,839
 $4,541
 $21
 $420
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 9
 —
 25
 —
 —
 4
 —
 31
 —
 (10)
Total realized/unrealized gains (losses)
included in AOCI		 66
 —
 23
 3
 —
 (12) 103
 29
 —
 19
Purchases (4) 431
 98
 702
 —
 17
 4
 603
 872
 4
 1
Sales (4) (407) —
 (294) —
 (1) (11) (334) (343) —
 —
Issuances (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 331
 —
 36
 7
 —
 1
 52
 23
 —
 —
Transfers out of Level 3 (5) (139) (2) (159) —
 (10) (5) (1,215) (186) (7) —
Balance, end of period $9,195
 $271
 $4,748
 $38
 $71
 $437
 $8,048
 $4,967
 $18
 $430
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
 $(3) $—
 $21
 $—
 $—
 $(2)
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
 $1
 $—
 $26
 $—
 $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at March 31, 2018 (6)
 $(1) $21
 $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at March 31, 2017 (6)
 $1
 $23
 $—
 $(10)

6160
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  
Short-term
Investments
 
Residential
Mortgage
Loans - FVO
 
Net
Derivatives (7)
 
Net Embedded
Derivatives (8)
 
Separate
Accounts (9)
 
Long-term
Debt
  (In millions)
Three Months Ended September 30, 2017            
Balance, beginning of period $821
 $615
 $(277) $(1,008) $975
 $(19)
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 —
 32
 (5) 131
 6
 —
Total realized/unrealized gains (losses)
included in AOCI		 —
 —
 1
 —
 —
 —
Purchases (4) —
 10
 —
 —
 136
 —
Sales (4) (247) (72) —
 —
 (35) —
Issuances (4) —
 —
 —
 —
 1
 —
Settlements (4) —
 (21) (16) (54) (1) 19
Transfers into Level 3 (5) 2
 —
 —
 —
 56
 —
Transfers out of Level 3 (5) (174) —
 —
 —
 (101) —
Balance, end of period $402
 $564
 $(297) $(931) $1,037
 $—
Three Months Ended September 30, 2016            
Balance, beginning of period $—
 $449
 $102
 $(1,508) $1,485
 $(44)
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 —
 10
 (44) 119
 (25) —
Total realized/unrealized gains (losses)
included in AOCI		 —
 —
 (8) —
 —
 —
Purchases (4) 187
 42
 —
 —
 4
 —
Sales (4) (1) (5) —
 —
 (25) —
Issuances (4) —
 —
 (1) —
 30
 —
Settlements (4) —
 (15) (10) (57) (45) 2
Transfers into Level 3 (5) —
 —
 —
 —
 8
 —
Transfers out of Level 3 (5) —
 —
 —
 —
 (178) —
Balance, end of period $186
 $481
 $39
 $(1,446) $1,254
 $(42)
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
 $—
 $32
 $(9) $59
 $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
 $—
 $10
 $(33) $119
 $—
 $—

62
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  Fixed Maturity Securities  
  Corporate (1) 
U.S.
Government
and Agency
 
Structured
Securities
 State and
Political
Subdivision  		 Foreign
Government		 
Equity
Securities
  (In millions)
Nine Months Ended September 30, 2017            
Balance, beginning of period $8,839
 $—
 $4,541
 $10
��$21
 $420
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 5
 —
 76
 —
 —
 (14)
Total realized/unrealized gains (losses)
included in AOCI		 394
 —
 94
 —
 —
 27
Purchases (4) 1,853
 —
 465
 —
 —
 10
Sales (4) (1,229) —
 (1,038) —
 (1) (74)
Issuances (4) —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 58
 —
 10
 1
 —
 —
Transfers out of Level 3 (5) (1,173) —
 (330) (10) (6) (4)
Balance, end of period $8,747
 $—
 $3,818
 $1
 $14
 $365
Nine Months Ended September 30, 2016            
Balance, beginning of period $8,282
 $—
 $4,416
 $33
 $275
 $328
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 1
 —
 73
 1
 —
 (21)
Total realized/unrealized gains (losses)
included in AOCI		 633
 13
 (19) 2
 (1) 38
Purchases (4) 1,155
 98
 1,726
 —
 18
 20
Sales (4) (717) —
 (966) —
 (1) (15)
Issuances (4) —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 589
 160
 4
 7
 —
 282
Transfers out of Level 3 (5) (748) —
 (486) (5) (220) (195)
Balance, end of period $9,195
 $271
 $4,748
 $38
 $71
 $437
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
 $(1) $—
 $66
 $—
 $—
 $(12)
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
 $3
 $—
 $76
 $1
 $—
 $(26)


63
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Short-term
Investments
 
Residential
Mortgage
Loans - FVO
 
Net
Derivatives (7)
 
Net Embedded
Derivatives (8)
 
Separate
Accounts (9)
 
Long-term
Debt
Other Limited Partnership Interests 
Short-term
Investments
 
Residential
Mortgage
Loans - FVO
 
Net
Derivatives (7)
 
Net Embedded
Derivatives (8)
 
Separate
Accounts (9)
(In millions)
(In millions)

Nine Months Ended September 30, 2017           
Three Months Ended March 31, 2018           
Balance, beginning of period$25
 $566
 $(559) $(893) $1,141
 $(74)$—
 $7
 $520
 $(191) $(876) $958
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		—
 38
 7
 343
 (22) —
(6) —
 2
 (47) 333
 2
Total realized/unrealized gains (losses)
included in AOCI		—
 —
 136
 —
 —
 —
2
 —
 —
 (104) —
 —
Purchases (4)400
 184
 —
 —
 269
 —
—
 550
 —
 —
 —
 407
Sales (4)—
 (155) —
 —
 (78) —
(19) (2) (64) —
 —
 (123)
Issuances (4)—
 —
 —
 —
 1
 —
—
 —
 —
 —
 —
 1
Settlements (4)—
 (69) 119
 (381) (62) 34
—
 —
 (20) 49
 (48) (1)
Transfers into Level 3 (5)2
 —
 —
 —
 21
 —
212
 —
 —
 —
 —
 53
Transfers out of Level 3 (5)(25) —
 —
 —
 (233) 40
—
 (5) —
 —
 —
 (75)
Balance, end of period$402
 $564
 $(297) $(931) $1,037
 $—
$189
 $550
 $438
 $(293) $(591) $1,222
Nine Months Ended September 30, 2016           
Three Months Ended March 31, 2017           
Balance, beginning of period$200
 $314
 $(23) $186
 $1,520
 $(36)—
 $25
 $566
 $(559) $(893) $1,141
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		—
 22
 63
 (1,476) 7
 —
—
 —
 (3) (2) 391
 (24)
Total realized/unrealized gains (losses)
included in AOCI		—
 —
 27
 —
 —
 —
—
 —
 —
 44
 —
 —
Purchases (4)187
 187
 6
 —
 107
 —
—
 773
 135
 —
 —
 136
Sales (4)(199) (12) —
 —
 (64) —
—
 (2) (33) —
 —
 (42)
Issuances (4)—
 —
 (1) —
 28
 (11)—
 —
 —
 —
 —
 39
Settlements (4)—
 (30) (33) (156) (57) 5
—
 —
 (26) 93
 (388) (33)
Transfers into Level 3 (5)—
 —
 —
 —
 9
 —
—
 —
 —
 —
 —
 69
Transfers out of Level 3 (5)(2) —
 —
 —
 (296) —
—
 (21) —
 —
 —
 (102)
Balance, end of period$186
 $481
 $39
 $(1,446) $1,254
 $(42)$—
 $775
 $639
 $(424) $(890) $1,184
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
$—
 $38
 $(19) $343
 $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
$—
 $22
 $66
 $(1,470) $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at March 31, 2018 (6)
$(6) $—
 $(8) $(5) $335
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at March 31, 2017 (6)
$—
 $—
 $(3) $(10) $391
 $—
__________________
(1)Comprised of U.S. and foreign corporate securities.
(2)Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses), while changes in estimated fair value of residential mortgage loans — FVO are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivativesderivative gains (losses).
(3)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(4)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(5)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(6)Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(7)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.

6461
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

(7)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(8)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(9)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). Separate account assets and liabilities are presented net for the purposes of the rollforward.
Fair Value Option
The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis. The following table presents information for residential mortgage loans, which are accounted for under the FVO, and were initially measured at fair value.
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
(In millions)(In millions)
Unpaid principal balance$711
 $794
$544
 $650
Difference between estimated fair value and unpaid principal balance(147) (228)(106) (130)
Carrying value at estimated fair value$564
 $566
$438
 $520
Loans in nonaccrual status$213
 $214
$159
 $198
Loans more than 90 days past due$106
 $137
$78
 $94
Loans in nonaccrual status or more than 90 days past due, or both - difference between aggregate estimated fair value and unpaid principal balance$(121) $(150)$(82) $(102)
The following table presents information for long-term debt, which is accounted for under the FVO, and was initially measured at fair value.
  September 30, 2017 December 31, 2016
  (In millions)
Contractual principal balance $—
 $71
Difference between estimated fair value and contractual
principal balance
 —
 3
Carrying value at estimated fair value (1) $—
 $74
__________________
(1)Changes in estimated fair value are recognized in net investment gains (losses). Interest expense is recognized in other expenses.
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the consolidated balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.

6562
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
September 30, 2017March 31, 2018
  Fair Value Hierarchy    Fair Value Hierarchy  
Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value		Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value
(In millions)(In millions)
Assets                  
Mortgage loans$57,490
 $—
 $—
 $59,149
 $59,149
$59,777
 $—
 $—
 $61,006
 $61,006
Policy loans$5,985
 $—
 $259
 $6,769
 $7,028
$6,009
 $—
 $264
 $6,670
 $6,934
Real estate joint ventures$2
 $—
 $—
 $11
 $11
Other limited partnership interests$234
 $—
 $—
 $239
 $239
Other invested assets$2,260
 $—
 $2,051
 $159
 $2,210
$2,993
 $—
 $2,740
 $143
 $2,883
Premiums, reinsurance and other
receivables
$15,036
 $—
 $643
 $14,895
 $15,538
$14,698
 $—
 $347
 $14,784
 $15,131
Liabilities                  
Policyholder account balances$75,498
 $—
 $—
 $76,953
 $76,953
$74,591
 $—
 $—
 $75,107
 $75,107
Long-term debt$1,673
 $—
 $2,037
 $—
 $2,037
$1,645
 $—
 $1,941
 $—
 $1,941
Other liabilities$15,520
 $—
 $2,070
 $13,553
 $15,623
$14,461
 $—
 $1,124
 $12,385
 $13,509
Separate account liabilities$63,481
 $—
 $63,481
 $—
 $63,481
$58,434
 $—
 $58,434
 $—
 $58,434
 December 31, 2016
   Fair Value Hierarchy  
 Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value
 (In millions)
Assets         
Mortgage loans$55,994
 $—
 $—
 $57,171
 $57,171
Policy loans$5,945
 $—
 $258
 $6,695
 $6,953
Real estate joint ventures$4
 $—
 $—
 $26
 $26
Other limited partnership interests$336
 $—
 $—
 $362
 $362
Other invested assets$2,263
 $—
 $2,151
 $151
 $2,302
Premiums, reinsurance and other
receivables
$14,888
 $—
 $368
 $15,421
 $15,789
Liabilities         
Policyholder account balances$72,944
 $—
 $—
 $74,052
 $74,052
Long-term debt$1,503
 $—
 $1,755
 $—
 $1,755
Other liabilities$14,731
 $—
 $894
 $13,920
 $14,814
Separate account liabilities$65,545
 $—
 $65,545
 $—
 $65,545
The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:
Mortgage Loans
The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans.
 December 31, 2017
   Fair Value Hierarchy  
 Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value
 (In millions)
Assets         
Mortgage loans$57,939
 $—
 $—
 $59,465
 $59,465
Policy loans$6,006
 $—
 $261
 $6,797
 $7,058
Other limited partnership interests$214
 $—
 $—
 $212
 $212
Other invested assets$2,260
 $—
 $2,028
 $154
 $2,182
Premiums, reinsurance and other
receivables
$15,024
 $—
 $679
 $14,859
 $15,538
Liabilities         
Policyholder account balances$75,323
 $—
 $—
 $76,452
 $76,452
Long-term debt$1,661
 $—
 $2,021
 $—
 $2,021
Other liabilities$13,954
 $—
 $547
 $13,490
 $14,037
Separate account liabilities$61,757
 $—
 $61,757
 $—
 $61,757

66
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Policy Loans
Policy loans with fixed interest rates are classified within Level 3. The estimated fair values for these loans are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk, as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. Policy loans with variable interest rates are classified within Level 2 and the estimated fair value approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates.
Real Estate Joint Ventures and Other Limited Partnership Interests
The estimated fair values of these cost method investments are generally based on the Company’s share of the NAV as provided on the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments.
Other Invested Assets
These other invested assets are principally comprised of loans to affiliates. The estimated fair value of loans to affiliates is determined by discounting the expected future cash flows using market interest rates currently available for instruments with similar terms and remaining maturities.
Premiums, Reinsurance and Other Receivables
Premiums, reinsurance and other receivables are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivatives and amounts receivable for securities sold but not yet settled.
Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been classified as Level 3. The valuation is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty.
The amounts on deposit for derivative settlements, classified within Level 2, essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value.
Policyholder Account Balances
These policyholder account balances include investment contracts which primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts (“TCA”). The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability.
Long-term Debt
The estimated fair value of long-term debt is principally determined using market standard valuation methodologies.
Valuations of instruments are based primarily on quoted prices in markets that are not active or using matrix pricing that use standard market observable inputs such as quoted prices in markets that are not active and observable yields and spreads in the market. Instruments valued using discounted cash flow methodologies use standard market observable inputs including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues.

67
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Other Liabilities
Other liabilities consist primarily of amounts due for securities purchased but not yet settled, funds withheld amounts payable, which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements, and amounts payable under certain assumed reinsurance agreements, which are recorded using the deposit method of accounting. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For such payables, the estimated fair value is determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty.
Separate Account Liabilities
Separate account liabilities represent those balances due to policyholders under contracts that are classified as investment contracts.
Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding.
Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section “— Recurring Fair Value Measurements,” the value of those assets approximates the estimated fair value of the related separate account liabilities. The valuation techniques and inputs for separate account liabilities are similar to those described for separate account assets.

6863
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Equity
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI attributable to Metropolitan Life Insurance Company, was as follows:
Three Months 
 Ended 
 September 30, 2017		Three Months
Ended
March 31, 2018
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
(In millions)(In millions)
Balance, beginning of period$5,549
 $1,216
 $(82) $(1,813) $4,870
$6,351
 $906
 $(47) $(1,782) $5,428
OCI before reclassifications560
 (20) 29
 2
 571
(2,380) (506) 22
 —
 (2,864)
Deferred income tax benefit (expense)(214) 7
 (7) (1) (215)515
 103
 (6) —
 612
AOCI before reclassifications, net of income tax5,895
 1,203
 (60) (1,812) 5,226
4,486
 503
 (31) (1,782) 3,176
Amounts reclassified from AOCI(30) (293) —
 40
 (283)10
 (184) —
 31
 (143)
Deferred income tax benefit (expense)10
 102
 —
 (14) 98
(2) 37
 —
 (7) 28
Amounts reclassified from AOCI, net of income tax(20) (191) —
 26
 (185)8
 (147) —
 24
 (115)
Cumulative effects of changes in accounting principles(119) —
 —
 —
 (119)
Deferred income tax benefit (expense), cumulative effects of changes in accounting principles1,222
 207
 (7) (379) 1,043
Cumulative effects of changes in accounting principles, net of income tax (2)1,103
 207
 (7) (379) 924
Balance, end of period$5,875
 $1,012
 $(60) $(1,786) $5,041
$5,597
 $563
 $(38) $(2,137) $3,985
 Three Months 
 Ended 
 September 30, 2016
 
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
 (In millions)
Balance, beginning of period$7,051
 $1,785
 $(53) $(1,938) $6,845
OCI before reclassifications343
 39
 (16) (258) 108
Deferred income tax benefit (expense)(117) (14) 5
 90
 (36)
AOCI before reclassifications, net of income tax7,277
 1,810
 (64) (2,106) 6,917
Amounts reclassified from AOCI(44) (101) —
 46
 (99)
Deferred income tax benefit (expense)15
 36
 —
 (17) 34
Amounts reclassified from AOCI, net of income tax(29) (65) —
 29
 (65)
Balance, end of period$7,248
 $1,745
 $(64) $(2,077) $6,852



69
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8. Equity (continued)

 Nine Months
Ended
September 30, 2017
 
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
 (In millions)
Balance, beginning of period$3,592
 $1,459
 $(67) $(1,865) $3,119
OCI before reclassifications3,434
 226
 9
 5
 3,674
Deferred income tax benefit (expense)(1,215) (79) (2) (2) (1,298)
AOCI before reclassifications, net of income tax5,811
 1,606
 (60) (1,862) 5,495
Amounts reclassified from AOCI98
 (913) —
 118
 (697)
Deferred income tax benefit (expense)(34) 319
 —
 (42) 243
Amounts reclassified from AOCI, net of income tax64
 (594) —
 76
 (454)
Balance, end of period$5,875
 $1,012
 $(60) $(1,786) $5,041
Nine Months
Ended
September 30, 2016		Three Months
Ended
March 31, 2017
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
(In millions)(In millions)
Balance, beginning of period$3,337
 $1,436
 $(74) $(2,014) $2,685
$3,592
 $1,459
 $(67) $(1,865) $3,119
OCI before reclassifications6,132
 703
 6
 (241) 6,600
787
 66
 (33) —
 820
Deferred income tax benefit (expense)(2,148) (247) 4
 84
 (2,307)(264) (23) 8
 —
 (279)
AOCI before reclassifications, net of income tax7,321
 1,892
 (64) (2,171) 6,978
4,115
 1,502
 (92) (1,865) 3,660
Amounts reclassified from AOCI(113) (227) —
 145
 (195)126
 (212) —
 41
 (45)
Deferred income tax benefit (expense)40
 80
 —
 (51) 69
(42) 74
 —
 (14) 18
Amounts reclassified from AOCI, net of income tax(73) (147) —
 94
 (126)84
 (138) —
 27
 (27)
Balance, end of period$7,248
 $1,745
 $(64) $(2,077) $6,852
$4,199
 $1,364
 $(92) $(1,838) $3,633
__________________
(1)
See Note 5 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.
(2)See Note 1 for further information on adoption of new accounting pronouncements.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8. Equity (continued)

Information regarding amounts reclassified out of each component of AOCI was as follows:
AOCI Components Amounts Reclassified from AOCI Consolidated Statements of
Operations and
Comprehensive Income (Loss)
Locations		 Amounts Reclassified from AOCI Consolidated Statements of
Operations and
Comprehensive Income (Loss)
Locations
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,		  Three Months
Ended
March 31,		 
 2017 2016 2017 2016  2018 2017 
 (In millions)  (In millions) 
Net unrealized investment gains (losses):              
Net unrealized investment gains (losses) $(5) $52
 $30
 $144
 Net investment gains (losses) $(47) $28
 Net investment gains (losses)
Net unrealized investment gains (losses) (3) —
 (5) 11
 Net investment income 3
 3
 Net investment income
Net unrealized investment gains (losses) 38
 (8) (123) (42) Net derivative gains (losses) 34
 (157) Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax 30
 44
 (98) 113
  (10) (126) 
Income tax (expense) benefit (10) (15) 34
 (40)  2
 42
 
Net unrealized investment gains (losses), net of income tax 20
 29
 (64) 73
  (8) (84) 
Unrealized gains (losses) on derivatives - cash flow hedges:              
Interest rate swaps 8
 27
 22
 44
 Net derivative gains (losses) 16
 8
 Net derivative gains (losses)
Interest rate swaps 4
 4
 12
 10
 Net investment income 3
 4
 Net investment income
Interest rate forwards (1) 1
 (5) —
 Net derivative gains (losses) 4
 (4) Net derivative gains (losses)
Interest rate forwards 1
 —
 2
 2
 Net investment income 1
 1
 Net investment income
Foreign currency swaps 282
 69
 882
 169
 Net derivative gains (losses) 160
 203
 Net derivative gains (losses)
Foreign currency swaps (1) —
 (1) (1) Net investment income
Credit forwards —
 ���
 1
 3
 Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax 293
 101
 913
 227
  184
 212
 
Income tax (expense) benefit (102) (36) (319) (80)  (37) (74) 
Gains (losses) on cash flow hedges, net of income tax 191
 65
 594
 147
  147
 138
 
Defined benefit plans adjustment: (1)              
Amortization of net actuarial gains (losses) (45) (48) (134) (150)  (36) (45) 
Amortization of prior service (costs) credit 5
 2
 16
 5
  5
 4
 
Amortization of defined benefit plan items, before income tax (40) (46) (118) (145)  (31) (41) 
Income tax (expense) benefit 14
 17
 42
 51
  7
 14
 
Amortization of defined benefit plan items, net of income tax (26) (29) (76) (94)  (24) (27) 
Total reclassifications, net of income tax $185
 $65
 $454
 $126
  $115
 $27
 
__________________
(1)
These AOCI components are included in the computation of net periodic benefit costs. See Note 10.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Other Expenses
Information on other expenses was as follows:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Compensation$530
 $488
 $1,541
 $1,598
Pension, postretirement and postemployment benefit costs51
 41
 138
 199
Commissions132
 168
 398
 527
Volume-related costs69
 40
 164
 162
Affiliated expenses on ceded and assumed reinsurance149
 152
 521
 774
Capitalization of DAC(17) (59) (57) (285)
Amortization of DAC and VOBA(43) 212
 124
 420
Interest expense on debt26
 28
 79
 84
Premium taxes, licenses and fees62
 89
 210
 272
Professional services266
 235
 755
 662
Rent and related expenses, net of sublease income72
 38
 122
 108
Other(92) (68) (187) (71)
Total other expenses$1,205
 $1,364
 $3,808
 $4,450
 Three Months 
 Ended 
 March 31,
 2018 2017
 (In millions)
General and administrative expenses$691
 $590
Pension, postretirement and postemployment benefit costs17
 46
Premium taxes, other taxes, and licenses & fees95
 95
Commissions and other variable expenses447
 443
Capitalization of DAC(10) (23)
Amortization of DAC and VOBA88
 137
Interest expense on debt26
 26
Total other expenses$1,354
 $1,314
Certain prior year amounts have been reclassified to conform to the current year presentation, which has been revised to align the expense categories with the Company’s businesses. The reclassifications did not result in a change to total other expenses.
Affiliated Expenses
Commissions and other variable expenses, capitalization of DAC and amortization of DAC and VOBA include the impact of affiliated reinsurance transactions. See Note 1213 for a discussion of affiliated expenses included in the table above.
10. Employee Benefit Plans
Pension and Other Postretirement Benefit Plans
The Company sponsors and administers various qualified and nonqualified defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. Participating affiliates are allocated an equitable share of net expense related to the plans, proportionate to other expenses being allocated to these affiliates.
The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. Participating affiliates are allocated a proportionate share of net expense and contributions related to the postemployment and other postretirement plans.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Employee Benefit Plans (continued)

The components of net periodic benefit costs, reported in other expenses, were as follows:
Three Months 
 Ended 
 September 30,		Three Months
Ended
March 31,
2017 20162018 2017
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
(In millions)(In millions)
Service costs$40
 $—
 $49
 $3
$40
 $1
 $40
 $1
Interest costs98
 16
 100
 20
93
 11
 99
 13
Divestitures and curtailment costs (1)3
 2
 (1) (1)
Expected return on plan assets(121) (16) (139) (20)(131) (18) (121) (14)
Amortization of net actuarial (gains) losses45
 —
 45
 3
44
 (8) 45
 —
Amortization of prior service costs (credit)—
 (5) —
 (2)—
 (5) —
 (4)
Allocated to affiliates(9) —
 (15) (3)(17) 5
 (9) —
Net periodic benefit costs (credit)$56
 $(3) $39
 $—
$29
 $(14) $54
 $(4)
 Nine Months
Ended
September 30,
 2017 2016
 
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
 (In millions)
Service costs$120
 $3
 $155
 $7
Interest costs295
 50
 314
 62
Divestitures and curtailment costs (1)3
 2
 (1) 26
Expected return on plan assets(362) (48) (389) (56)
Amortization of net actuarial (gains) losses134
 —
 143
 7
Amortization of prior service costs (credit)(1) (15) —
 (5)
Allocated to affiliates(26) (1) (50) (7)
Net periodic benefit costs (credit)$163
 $(9) $172
 $34
__________________
(1)During the three months and nine months ended September 30, 2016, the Company recognized curtailment charges on certain postretirement benefit plans in connection with the sale to MassMutual of MetLife, Inc.’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc.
11. Contingencies, Commitments and Guarantees

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Income Tax
On December 22, 2017, President Trump signed into law U.S. Tax Reform. U.S. Tax Reform includes numerous changes in tax law, including a permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, which took effect for taxable years beginning on or after January 1, 2018. U.S. Tax Reform moves the United States from a worldwide tax system to a participation exemption system by providing corporations a 100% dividends received deduction for dividends distributed by a controlled foreign corporation. To transition to that new system, U.S. Tax Reform imposed a one-time deemed repatriation tax on unremitted earnings and profits at a rate of 8.0% for illiquid assets and 15.5% for cash and cash equivalents.
In accordance with Staff Accounting Bulletin 118 issued by the U.S. Securities and Exchange Commission (“SEC”) in December 2017, the Company recorded provisional amounts for certain items for which the income tax accounting is not complete. For these items, the Company recorded a reasonable estimate of the tax effects of U.S. Tax Reform. The estimates will be reported as provisional amounts during a measurement period, which will not exceed one year from the date of enactment of U.S. Tax Reform. The Company may reflect adjustments to its provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.
See Note 15 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for further information. As of March 31, 2018, no updates were made to the provisional amounts.
12. Contingencies, Commitments and Guarantees (continued)

Contingencies
Litigation
The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will view the relevant evidence and applicable law.
The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at September 30, 2017.March 31, 2018. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.
Matters as to Which an Estimate Can Be Made
For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of September 30, 2017,March 31, 2018, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $350$575 million.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

Matters as to Which an Estimate Cannot Be Made
For other matters disclosed below, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

Asbestos-Related Claims
Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life Insurance Company has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life Insurance Company issued liability or workers’ compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life Insurance Company’s employees during the period from the 1920’s through approximately the 1950’s and allege that Metropolitan Life Insurance Company 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 Insurance Company believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life Insurance Company. Metropolitan Life Insurance Company employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances.
Claims asserted against Metropolitan Life Insurance Company have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life Insurance Company’s defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life Insurance Company 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 did not rely on any actions of Metropolitan Life Insurance Company; (iii) Metropolitan Life Insurance Company’s conduct was not the cause of the plaintiffs’ injuries; (iv) plaintiffs’ exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against Metropolitan Life Insurance Company, while other trial courts have denied Metropolitan Life Insurance Company’s motions. There can be no assurance that Metropolitan Life Insurance Company will receive favorable decisions on motions in the future. While most cases brought to date have settled, Metropolitan Life Insurance Company intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials.
As reported in the 20162017 Annual Report, Metropolitan Life Insurance Company received approximately 4,1463,514 asbestos-related claims in 2016.2017. During the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, Metropolitan Life Insurance Company received approximately 2,742823 and 3,2671,104 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 20162017 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014.2017. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

The ability of Metropolitan Life Insurance Company to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the 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 in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life Insurance Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.
The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life Insurance Company’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against Metropolitan Life Insurance Company, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against Metropolitan Life Insurance Company, but which Metropolitan Life Insurance Company believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life Insurance Company’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.
Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2017.March 31, 2018.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission (“SEC”);SEC; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”). The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida
In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain environmental testing at the Chemform Site. The EPA may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reached a settlement in principal on the EPA’s claim for past costs. The Company estimates that the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.
Sales Practices Regulatory Matters
Regulatory authorities in a number of states and FINRA, and occasionally the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by Metropolitan Life Insurance Company. These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for these sales practices-related investigations or inquiries.
Unclaimed Property Litigation
Total Asset Recovery Services, LLC. v. MetLife, Inc., et al. (Supreme Court of the State of New York, County of New York, filed November 17, 2017)
Alleging that MetLife, Inc., Metropolitan Life Insurance Company, and several other insurance companies violated the New York False Claims Act (the “Act”) by filing false unclaimed property reports from 1986 to 2017 with New York to avoid having to escheat the proceeds of more than 25,000 life insurance policies, including policies for which the defendants escheated funds as part of their demutualizations in the late 1990s, Total Asset Recovery Services (“The Relator”) has brought an action under the qui tam provision of the Act on behalf of itself and New York. The Relator originally filed this action under seal in 2010, and the complaint was unsealed on December 19, 2017. The Relator seeks treble damages and other relief. The Company intends to defend this action vigorously.
Total Control Accounts Litigation
Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as total control accountsTotal Control Accounts (“TCA”), as a settlement option for death benefits.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)
Plaintiff filed this class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

Inquiries into Pension Benefits
The Company informed its primary state regulator, the New York Department of Financial Services (“NYDFS”), about its practices in connection with the payment of certain pension benefits to annuitants and related matters. The NYDFS is examining the issue. The Division of Enforcement of the SEC is also investigating this matter and several additional regulators, including, but not limited to, the Massachusetts Securities Division, have made inquiries into these practices, including as to related disclosures. It is possible that other jurisdictions may pursue similar investigations or inquiries. As previously disclosed in the 2017 Annual Report, the Company, in connection with a review of practices and procedures used to estimate reserves related to certain Retirement Income Solutions (“RIS”) group annuitants who have been unresponsive or missing over time, identified a material weakness in its internal control over financial reporting related to certain RIS group annuity reserves. In conjunction with the material weakness, the Company increased reserves by $510 million pre-tax to reinstate reserves previously released, and to reflect accrued interest and other related liabilities. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report.
The Company is exposed to lawsuits and regulatory investigations, and could be exposed to additional legal actions relating to these matters. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or awarded by courts or regulatory authorities under applicable escheat, tax, securities, ERISA, or other laws or regulations. The Company could incur significant costs in connection with these actions. The Company’s increase in reserves does not reflect, and the Company has not recorded an accrual for, any such potential amounts. An estimate of the possible loss or range of loss cannot be made at this time.
Other Litigation
Sun Life Assurance Company of Canada Indemnity Claim
In 2006, Sun Life Assurance Company of Canada (“Sun Life”), as successor to the purchaser of Metropolitan Life Insurance Company’s Canadian operations, filed a lawsuit in Toronto, seeking a declaration that Metropolitan Life Insurance Company remains liable for “market conduct claims” related to certain individual life insurance policies sold by Metropolitan Life Insurance Company that were subsequently transferred to Sun Life. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted Metropolitan Life Insurance Company’s motion for summary judgment. Both parties agreed to consider the indemnity claim through arbitration. In September 2010, Sun Life notified Metropolitan Life Insurance Company that a purported class action lawsuit was filed against Sun Life in Toronto alleging sales practices claims regarding the policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. On August 30, 2011, Sun Life notified Metropolitan Life Insurance Company that another purported class action lawsuit was filed against Sun Life in Vancouver, BC alleging sales practices claims regarding certain of the same policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. Sun Life contends that Metropolitan Life Insurance Company is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. These sales practices cases against Sun Life are ongoing, and the Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation.
Voshall v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Los Angeles, April 8, 2015)
Plaintiff filed this putative class action lawsuit on behalf of himself and all persons covered under a long-term group disability income insurance policy issued by Metropolitan Life Insurance Company to public entities in California between April 8, 2011 and April 8, 2015. Plaintiff alleges that Metropolitan Life Insurance Company improperly reduced benefits by including cost of living adjustments and employee paid contributions in the employer retirement benefits and other income that reduces the benefit payable under such policies. Plaintiff asserts causes of action for declaratory relief, violation of the California Business & Professions Code, breach of contract and breach of the implied covenant of good faith and fair dealing. The Company intends to defend this action vigorously.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

Martin v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Contra Costa, filed December 17, 2015)
Plaintiffs filed this putative class action lawsuit on behalf of themselves and all California persons who have been charged compound interest by Metropolitan Life Insurance Company in life insurance policy and/or premium loan balances within the last four years. Plaintiffs allege that Metropolitan Life Insurance Company has engaged in a pattern and practice of charging compound interest on life insurance policy and premium loans without the borrower authorizing such compounding, and that this constitutes an unlawful business practice under California law. Plaintiff asserts causes of action for declaratory relief, violation of California’s Unfair Competition Law and Usury Law, and unjust enrichment. Plaintiff seeks declaratory and injunctive relief, restitution of interest, and damages in an unspecified amount. On April 12, 2016, the court granted Metropolitan Life Insurance Company’s motion to dismiss. Plaintiffs have appealed this ruling.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notesruling to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

United States Court of Appeals for the Ninth Circuit. The Company intends to defend this action vigorously.
Lau v. Metropolitan Life Insurance Company (S.D.N.Y. filed, December 3, 2015)
This putative class action lawsuit was filed by a single defined contribution plan participant on behalf of all ERISA plans whose assets were invested in Metropolitan Life Insurance Company’s “Group Annuity Contract Stable Value Funds” within the past six years. The suit alleges breaches of fiduciary duty under ERISA and challenges the “spread” with respect to the stable value fund group annuity products sold to retirement plans. The allegations focus on the methodology Metropolitan Life Insurance Company uses to establish and reset the crediting rate, the terms under which plan participants are permitted to transfer funds from a stable value option to another investment option, the procedures followed if an employer terminates a contract, and the level of disclosure provided. Plaintiff seeks declaratory and injunctive relief, as well as damages in an unspecified amount. The Company intends to defend this action vigorously.parties settled on January 2, 2018 and the court has dismissed the action.
Newman v. Metropolitan Life Insurance Company (N.D. Ill., filed March 23, 2016)
Plaintiff filed this putative class action alleging causes of action for breach of contract, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, based on Metropolitan Life Insurance Company’s class-wide increase in premiums charged for long-term care insurance policies. Plaintiff alleges a class consisting of herself and all persons over age 65 who selected a Reduced Pay at Age 65 payment feature and whose premium rates were increased after age 65. Plaintiff asserts that premiums could not be increased for these class members and/or that marketing material was misleading as to Metropolitan Life Insurance Company’s right to increase premiums. Plaintiff seeks unspecified compensatory, statutory and punitive damages, as well as recessionary and injunctive relief. On April 12, 2017, the court granted Metropolitan Life Insurance Company’s motion, dismissing the action with prejudice. On April 21, 2017, plaintiffPlaintiff appealed this ruling.ruling to the United States Court of Appeals for the Seventh Circuit (the “Seventh Circuit”) and on February 6, 2018, the Seventh Circuit reversed and remanded for further proceedings, ruling that Plaintiff is entitled to relief on her contract claim. Following Metropolitan Life Insurance Company’s petition for rehearing, the Seventh Circuit issued an amended opinion on March 22, 2018, holding that plaintiff’s claim survived Metropolitan Life Insurance Company’s motion to dismiss but finding that the policy is ambiguous as to Metropolitan Life Insurance Company’s right to raise plaintiff’s premiums. The Seventh Circuit held that on remand to the district court, the parties may introduce evidence to try to resolve this ambiguity.
Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)
Plaintiffs filed this putative class action against MetLife, Inc. and Metropolitan Life Insurance Company in the U.S. District Court for the Central District of California, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy forwith a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, Plaintiffsplaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York. TheOn November 9, 2017, plaintiffs dismissed MetLife, Inc. without prejudice from the action. Metropolitan Life Insurance Company intends to defend this action vigorously.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)
Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. On March 22, 2018, the Court conditionally certified the case as a collective action, requiring that notice be mailed to LTD claims specialists who worked for the Company from February 8, 2014 to the present. The Company intends to defend this action vigorously.
Sales Practices Claims
Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds, other products or the misuse of client assets. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys’ fees. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.
Summary
Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.6 billion and $3.3 billion and $3.9 billion at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $4.0$3.8 billion and $4.2$3.9 billion at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Contingencies, Commitments and Guarantees (continued)

Guarantees
In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $127$493 million, with a cumulative maximum of $367$898 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.
In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
The Company’s recorded liabilities were $4 million at September 30, 2017both March 31, 2018 and $5 million at December 31, 2016, respectively,2017 for indemnities, guarantees and commitments.
12.13. Related Party Transactions

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Related Party Transactions (continued)

Service Agreements
The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include personnel, policy administrative functions and distribution services. For certain agreements, charges are based on various performance measures or activity-based costing. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual cost incurred by the Company and/or affiliate. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $575$516 million and $1.7 billion$589 million for the three months ended March 31, 2018 and nine months ended September 30, 2017, respectively, and $631 million and $1.7 billion for the three months and nine months ended September 30, 2016, respectively. RevenuesTotal revenues received from affiliates related to these agreements recorded in universal life and investment-type product policy fees, were $31$58 million and $93$60 million for the three months ended March 31, 2018 and nine months ended September 30, 2017, respectively, and $37 million and $104 million for the three months and nine months ended September 30, 2016, respectively. Revenues received from affiliates related to these agreements, recorded in other revenues, were $27 million and $82 million for the three months and nine months ended September 30, 2017, respectively, and $37 million and $110 million for the three months and nine months ended September 30, 2016, respectively.
The Company also entered into agreements with affiliates to provide additional services necessary to conduct the affiliates’ activities. Typical services provided under these agreements include management, policy administrative functions, investment advice and distribution services. Expenses incurred by the Company related to these agreements, included in other expenses, were $378$298 million and $1.1 billion$336 million for the three months ended March 31, 2018, andnine months endedSeptember 30, 2017, respectively, and $304 million and $1.1 billion for the three months and nine months ended September 30, 2016, respectively, and were reimbursed to the Company by these affiliates.
The Company had net payables to affiliates, related to the items discussed above, of $142$30 million and $165$205 million at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively.
See Notes 5 and 10 for additional information on related party transactions.
Related Party Reinsurance Transactions
The Company has reinsurance agreements with certain of MetLife, Inc.’s subsidiaries, including MetLife Reinsurance Company of Charleston (“MRC”), MetLife Reinsurance Company of Vermont, Metropolitan Tower Life Insurance Company and General American Life Insurance Company, all of which are related parties. Additionally, the Company has reinsurance agreements with Brighthouse Insurance, Brighthouse Life Insurance Company of NY (“Brighthouse NY”) and New England Life Insurance Company, (“NELICO”), former subsidiaries of MetLife, Inc. that were part of the Separation. See Note 2.separation of Brighthouse and are related parties.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12.13. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on the interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:
Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017 2016 2017 20162018 2017
(In millions)(In millions)
Premiums          
Reinsurance assumed$5
 $188
 $118
 $569
$3
 $86
Reinsurance ceded(32) (9) (101) (30)(32) (36)
Net premiums$(27) $179
 $17
 $539
$(29) $50
Universal life and investment-type product policy fees          
Reinsurance assumed$(2) $14
 $16
 $45
$1
 $13
Reinsurance ceded(6) (40) (16) (109)(5) (5)
Net universal life and investment-type product policy fees$(8) $(26) $—
 $(64)$(4) $8
Other revenues          
Reinsurance assumed$4
 $9
 $30
 $(5)$3
 $23
Reinsurance ceded139
 143
 421
 429
133
 142
Net other revenues$143
 $152
 $451
 $424
$136
 $165
Policyholder benefits and claims          
Reinsurance assumed$4
 $197
 $63
 $532
$4
 $60
Reinsurance ceded(26) (34) (90) (72)(28) (33)
Net policyholder benefits and claims$(22) $163
 $(27) $460
$(24) $27
Interest credited to policyholder account balances          
Reinsurance assumed$12
 $8
 $36
 $24
$11
 $13
Reinsurance ceded(3) (22) (9) (66)(3) (3)
Net interest credited to policyholder account balances$9
 $(14) $27
 $(42)$8
 $10
Other expenses          
Reinsurance assumed$(4) $9
 $33
 $456
$8
 $1
Reinsurance ceded139
 145
 459
 417
132
 153
Net other expenses$135
 $154
 $492
 $873
$140
 $154

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12.13. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on the interim condensed consolidated balance sheets was as follows at:
September 30, 2017 December 31, 2016March 31, 2018 December 31, 2017
Assumed Ceded Assumed CededAssumed Ceded Assumed Ceded
(In millions)(In millions)
Assets              
Premiums, reinsurance and other receivables$50
 $12,730
 $229
 $13,334
$46
 $12,691
 $47
 $12,762
Deferred policy acquisition costs and value of business acquired—
 (182) 38
 (198)—
 (182) —
 (180)
Total assets$50
 $12,548
 $267
 $13,136
$46
 $12,509
 $47
 $12,582
Liabilities              
Future policy benefits$384
 $(4) $663
 $(4)$377
 $(2) $380
 $(4)
Policyholder account balances168
 —
 563
 —
161
 —
 166
 —
Other policy-related balances104
 16
 212
 18
101
 14
 104
 15
Other liabilities1,865
 12,969
 1,853
 13,065
1,850
 12,651
 1,858
 12,970
Total liabilities$2,521
 $12,981
 $3,291
 $13,079
$2,489
 $12,663
 $2,508
 $12,981
The Company ceded two blocks of business to an affiliate on a 75% coinsurance with funds withheld basis. Certain contractual features of these agreements qualify as embedded derivatives, which are separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivatives related to the funds withheld associated with these reinsurance agreements are included within other liabilities and were $15$10 million and $10$16 million at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively. Net derivative gains (losses) associated with these embedded derivatives were less than ($1)$6 million and ($6) million for the three months and nine months ended September 30, 2017, respectively, and less than ($1) million and ($17)2) million for the threemonths and nine months ended September 30, 2016,March 31, 2018 and 2017, respectively.
The Company ceded risks to an affiliate related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were $0 and $460 million at September 30, 2017 and December 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than ($1) million and ($110) million for the threemonths and nine months ended September 30, 2017, respectively, and ($33) million and $275 million for the threemonths and nine months ended September 30, 2016, respectively.
Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and was $891$647 million and $767$882 million at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively. Net derivative gains (losses) associated with the embedded derivative were less than ($1)$235 million and ($124)27) million for the threemonths and nine months ended September 30,March 31, 2018 and 2017, respectively, and ($3) million and ($512) million for the threemonths and nine months ended September 30, 2016, respectively.
The Company assumes risks from affiliates related to guaranteed minimum benefit guarantees written directly by the affiliates. These assumed reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $2 million and $3 million and $390 million at September 30, 2017March 31, 2018 and December 31, 2016,2017, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than $1 million and $263$262 million for the threemonths and nine months ended September 30, 2017, respectively, $6 million and ($136) million for the threemonths andnine months ended September 30, 2016,March 31, 2018and 2017, respectively.
14. Subsequent Event
In January 2017, Brighthouse NY and NELICO recaptured risks relatedthe second quarter of 2018, the remaining $825 million of affiliated senior notes previously issued by MetLife, Inc. to certain variable annuities, including guaranteed minimum benefits, reinsured by the Company. This recapture resulted in a decrease in cash and cash equivalents of $34 million, a decrease in premiums, reinsurance and other receivables of $77 million, a decrease in future policy benefits of $79 million, a decrease in policyholder account balances of $387 million and an increase in other liabilities of $76 million. For the nine months ended September 30, 2017, the Company recognized(see Note 5) were redenominated to a gainnew 38.5 billion Japanese yen senior note which matures in July 2021 and bears interest at a rate per annum of $178 million, net2.97%, payable semi-annually and a new 51.0 billion Japanese yen senior note which matures in December 2021 and bears interest at a rate per annum of income tax, as a result of this transaction.3.14%, payable semi-annually.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Related Party Transactions (continued)

In January 2017, the Company recaptured risks related to guaranteed minimum benefit guarantees on certain variable annuities reinsured by Brighthouse Insurance. This recapture resulted in an increase in investments and cash and cash equivalents of $428 million and a decrease in premiums, reinsurance and other receivables of $565 million. The Company recognized a loss of $89 million, net of income tax, for thenine months endedSeptember 30, 2017, as a result of this transaction.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
 Page
Forward-Looking Statements and Other Financial Information
8578
Business
8578
Summary of Critical Accounting Estimates
8880
Results of Operations
8981
Adoption of New Accounting Pronouncements
9686
Future Adoption of New Accounting Pronouncements
9686
Non-GAAP and Other Financial Disclosures
9687
Subsequent Event
88

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Forward-Looking Statements and Other Financial Information
For purposes of this discussion, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”). Management’s narrative analysis of the Company’s results of operations is presented pursuant to General Instruction H(2)(a) of Form 10-Q. This narrative analysis should be read in conjunction with Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 20162017 (the “2016“2017 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, and the Company’s interim condensed consolidated financial statements included elsewhere herein.
This narrative analysis may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe”“believe,” “will be,” “will not,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results. Any or all forward-looking statements may turn out to be wrong. Actual results could differ materially from those expressed or implied in the forward-looking statements. See “Note Regarding Forward-Looking Statements.”
This narrative analysis includes references to our performance measure, operatingadjusted earnings, that is not based on accounting principles generally accepted in the United States of America (“GAAP”). This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operatingadjusted earnings is also our GAAP measure of segment performance. OperatingAdjusted earnings allows analysis of our performance and facilitates comparisons to industry results. Forward-looking guidance provided on a non-GAAP basis cannot be reconciled to the most directly comparable GAAP measures on a forward-looking basis because net income may fluctuate significantly if net investment gains and losses and net derivative gains and losses move outside of estimated ranges. See “— Non-GAAP and Other Financial Disclosures” for a definition and discussion of this and other financial measures, and “— Results of Operations” for reconciliations of historical non-GAAP financial measures to the most directly comparable GAAP measures.
Business
Overview
MLIC is a provider of insurance, annuities, employee benefits and asset management to both individuals and groups.management. MLIC is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.
Group Annuity Reserves and Other Revisions
As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Group Annuity Reserves and Other Revisions” included in the 2017 Annual Report, a material weakness was identified in internal control over financial reporting relating to the review of practices and procedures used to estimate the Company’s reserves related to certain Retirement and Income Solutions (“RIS”) group annuitants who have been unresponsive or missing over time. An update of the remediation plan to remove the material weakness is further described in “Controls and Procedures.” Also, see Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements for prior period revisions related to the Company’s consolidated results, as well as “Risk Factors” disclosed in the 2017 Annual Report for further information.
U.S. Tax Reform
On December 22, 2017, President Trump signed into law H.R.1, commonly referred to as the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). U.S. Tax Reform includes numerous changes in tax law, including a permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, which took effect for taxable years beginning on or after January 1, 2018, a participation exemption system which generally eliminates U.S. federal income tax on dividends received from foreign subsidiaries, and a number of other revenue raisers.

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Other Key Information

Given the complexities of U.S. Tax Reform, amounts recorded may change, possibly materially, due to, among other things, changes in interpretations and assumptions made by the Company, additional guidance that may be issued and actions that the Company may take. See Notes 1 and 11 of the Notes to the Interim Condensed Consolidated Financial Statements for a further discussion of U.S. Tax Reform and the impact to the Company in the first quarter of 2018. 
Separation of Brighthouse
On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) through a distribution of 96,776,670 shares of the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing 80.8% of those shares, to the MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding. Certain MetLife affiliates hold MetLife, Inc. common stock and, as a result, participated in the distribution.

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U.S. Retail Advisor Force Divestiture
In July 2016, MetLife, Inc. completed the sale to Massachusetts Mutual Life Insurance Company (“MassMutual”) of MetLife’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc. (the “U.S. Retail Advisor Force Divestiture”). MassMutual assumed all of the liabilities related to such assets that arise or occur at or after the closing of the sale. As part of the transactions, MetLife, Inc. and MassMutual entered into a product development agreement under which the part of MetLife’s former U.S. retail business now in Brighthouse will be the exclusive developer of certain annuity products to be issued by MassMutual. In the MassMutual purchase agreement, MetLife, Inc. agreed to indemnify MassMutual for certain claims, liabilities and breaches of representations and warranties up to limits described in the purchase agreement.
Extraordinary Dividends
In December 2016, MLIC distributed to MetLife, Inc., as a non-cash extraordinary dividend, all of the issued and outstanding shares of common stock of each of New England Life Insurance Company (“NELICO”) and General American Life Insurance Company (“GALIC”). See “— Results of Operations” and Note 3 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for further information.
Non-Bank SIFI
On December 18, 2014, the Financial Stability Oversight Council (“FSOC”) designated MetLife, Inc. as a non-bank systemically important financial institution (“non-bank SIFI”) subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of New York (collectively with the Federal Reserve Board, the “Federal Reserve”) and the Federal Deposit Insurance Corporation (the “FDIC”), as well as to enhanced supervision and prudential standards. On March 30, 2016, the U.S. District Court for the District of Columbia (the “D.C. District Court”) ordered that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded. On April 8, 2016, the FSOC appealed the D.C. District Court’s order to the United States Court of Appeals for the District of Columbia (“D.C. Circuit”), and oral argument was heard on October 24, 2016. In a Presidential Memorandum for the Secretary of the Treasury dated April 21, 2017, President Trump directed the Secretary of the Treasury to review the FSOC SIFI designation process for transparency, due process and other factors, and, pending the completion of the review and submission of the Secretary’s recommendations, to refrain from voting for any non-emergency designations. The Secretary’s review and report were due by October 18, 2017. As of November 8, 2017, the Secretary’s report has not yet been issued. On August 2, 2017, the D.C. Circuit ordered that the appeal be held in abeyance pending the issuance of that report by the Secretary of the Treasury. The D.C. Circuit also ordered the parties to file additional procedural motions to govern future proceedings by November 17, 2017, or within 30 days of the issuance of the Treasury Secretary’s report, whichever occurs first. If the FSOC prevails on appeal or designates MetLife, Inc. as systemically important as part of its ongoing review of non-bank financial companies, MetLife, Inc. could once again be subject to regulation as a non-bank SIFI. See “Business — Regulation — Potential Regulation of MetLife, Inc. as a Non-Bank SIFI” included in the 2016 Annual Report.
Regulatory Developments
The following discussion on regulatory developments should be read in conjunction with “Business — Regulation” in the 2017 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments.”
The U.S. insurance industry is regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, we are subject to regulation under the insurance holding company laws of the states of domicile of our U.S. insurance companies.New York. Furthermore, some of our operations, products and services are subject to consumer protection laws, securities regulation, environmental and unclaimed property laws and regulations, and to the Employee Retirement Income Security Act of 1974 (“ERISA”). If MetLife, Inc. were re-designatedSee “— Insurance Regulation” below, as a non-bank SIFI, it could also be subject to regulation by the Federal Reserve and the FDIC and,well as a subsidiary of MetLife, Inc., we could be affected by such regulation. We may also be affected by any additional capital requirements to which MetLife, Inc. may become subject as a global systemically important insurer. See “Business — Regulation,” “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” included in the 20162017 Annual Report,Report.
Insurance Regulation
Surplus and Capital; Risk-Based Capital
The National Association of Insurance Commissioners (“NAIC”) adopted for 2018 a Risk-Based Capital (“RBC”) revision for collateral pledged to support Federal Home Loan Bank advances, which we expect to have a modest positive impact on our RBC ratio, and a RBC charge for operational risk, which we expect to have an immaterial impact on our RBC ratio. The NAIC is also studying RBC revisions for bonds, real estate, and longevity risk, but it is premature to project the impact of any potential regulatory changes resulting from such studies.
New York Insurance Regulation 210
Insurance Regulation 210 went into effect in New York on March 19, 2018. Insurance Regulation 210 establishes standards for the determination and any readjustment of non-guaranteed elements (“NGEs”) that may vary at the insurer's discretion for life insurance policies and annuity contracts delivered or issued for delivery in New York State. Examples of NGEs include cost of insurance for universal life insurance policies, as amended or supplementedwell as interest crediting rates for annuities and universal life insurance policies. The regulation requires insurers to notify policyholders at least 60 days in our subsequently filed Quarterly Reports on Form 10-Q underadvance of any change in NGEs that is adverse to policyholders and, with respect to life insurance, to notify the caption “Management’s Discussion and AnalysisNew York Department of Financial ConditionServices (“NYDFS”) at least 120 days prior to any such changes. Additionally, the regulation requires insurers to file annually with NYDFS to inform the NYDFS of any changes adverse to policyholders made in the prior year. The regulation generally prohibits insurers from increasing profit margins for in-force policies or adjusting NGEs in order to recoup past losses.
ERISA and ResultsFiduciary Considerations
The Department of Operations — Business — Regulatory Developments”Labor (“DOL”) issued regulations, which became for the most part applicable on June 9, 2017, that substantially expanded the definition of “investment advice” and similarly named sectionsrequire that an impartial or “best interests” standard be met in providing such advice, thereby broadening the circumstances under which we or our representatives, in providing investment advice with respect to ERISA plans, plan participants or Individual Retirement Accounts (“IRAs”), could be deemed a fiduciary under ERISA or the caption “Risk Factors.”Internal Revenue Code of 1986, as amended. Several financial services industry groups have initiated litigation challenging the regulations on both procedural and substantive grounds. In particular, on March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) vacated the regulations (including related prohibited transaction exemptions), holding that the regulations were unreasonable, that the DOL lacked statutory authority to promulgate them, and that the DOL overreached its authority by doing so. This decision, which could take effect as early as May 2018, if it is not further litigated, may alter whether and how some or all of the rules are applied to our business or the way in which predecessor prohibited transaction exemptions may be interpreted in the future.

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) effectedOn November 24, 2017, the most far-reaching overhaulNAIC issued an exposure draft of financial regulationan expanded Suitability in Annuity Transactions Model Regulation, intended to result in the United States in decades. However, President Trump and the majority party have expressed goals to amend Dodd-Frank. On June 8, 2017, the U.S. Houseadoption of Representatives passed the Financial CHOICE Act of 2017, which proposes to amend or repeal various sections of Dodd-Frank. This proposed legislation is now being considered by the U.S. Senate. On February 3, 2017, President Trump issued an Executive Order that calls for a comprehensive review of laws, treaties, regulations, policies and guidance regulating the U.S. financial system, and requires the Secretary of the Treasury to consult with the heads of the member agencies of FSOC to identify any laws, regulations or requirements that inhibit federal regulation of the financial system in“best interest” standard on a manner consistent with the core principles identified in the Executive Order.nationwide basis. The Secretary’s report on asset management and insurance was issued on October 26, 2017 and recommended activities-based evaluations of systemic risk in the insurance industry rather than an entity-based approach. The report also supported primary regulation of the U.S. insurance industry by the states rather than the federal government. See “Business — Regulation — Insurance Regulation” and “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated and Changes in Regulation and In Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” in the 2016 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q, for a discussion of Dodd-Frank and other U.S. regulation.
Insurance Regulation
Insurance Regulatory Examinations and Other Activities
The International Association of Insurance Supervisors has encouraged U.S. insurance supervisors, such as the New York State Department of Financial Services (“NYDFS”), to establish Supervisory Colleges for U.S.-based insurance groups with international operations, including MetLife, to facilitate cooperation and coordination among the insurance groups’ supervisors and to enhance the member regulators’ understanding of an insurance group’s risk profile. In October 2017, a Supervisory College meeting was chaired by the NYDFS and attended by MetLife’s key U.S. and international regulators. MetLife has not received any reports or recommendations from the Supervisory College meeting, and we do not expect any outcome of the meeting to have a material adverse effect on our business.
ERISA Considerations
We provide products and services to certain employee benefit plans that are subject to ERISA or the Internal Revenue Code of 1986, as amended (the “Code”). The applicable provisions of ERISA and the Code are subject to enforcement by the Department of Labor (“DOL”), among others. DOL regulations which became effective on June 9, 2017 broadened circumstances under which we may be deemed fiduciaries under ERISA in providing investment advice, increasing our potential exposure to fiduciary liabilities. Regulations that apply more onerous disclosure requirements and increase fiduciary requirements also become effective on January 1, 2018. On February 3, 2017, President Trump asked the DOL to update its analysis of the impact of the new regulations and possibly propose new regulations. On July 6, 2017, the DOL published a new Request for Information regarding a possible delay in the applicability date of January 1, 2018 along with possible additional changesamendments to the rule. Following this, on August 31, 2017,regulation originally proposed are expected to be modified following the DOL proposed to delay the applicability date to July 1, 2019. The public comment period for that proposal ended on September 15, 2017. The rule is also being challenged indecision by the Fifth Circuit Courtdescribed above. In addition, on December 27, 2017, the NYDFS proposed revisions to Insurance Regulation 187, which not only incorporate the “best interest” standard, but also would expand the scope of Appeals (and elsewhere), wherethe regulations to include sales of life insurance policies, as well as annuities, to consumers. The NYDFS’s proposed revisions to Insurance Regulation 187 were open for public comment until February 25, 2018, and on April 27, 2018, the NYDFS exposed an updated draft of the regulation for a decision is expected by30-day comment period. Separately, on April 18, 2018, the endU.S. Securities and Exchange Commission proposed and opened for public comment, Regulation Best Interest, which would require broker-dealers to act in the best interest of 2017.“retail” customers, including participants in ERISA-covered plans and IRAs, when making a recommendation of any securities transaction or investment strategy involving securities. See “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” included in the 20162017 Annual Report.
Potential Regulation of MetLife, Inc. as a Non-Bank SIFI
See “— Overview — Other Key Information — Non-Bank SIFI” above for recent developments concerning FSOC’s appeal of the D.C. District Court’s order that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded.
Regulation of Over-the-Counter Derivatives and Qualified Financial Contracts
Federal banking regulators have recently adopted new rules that will apply to certain qualified financial contracts, including many derivatives contracts, securities lending agreements and repurchase agreements, with certain banking institutions and certain of their affiliates. These new rules, which will begin to go into effect in 2019, will generally require the banking institutions and their applicable affiliates to include contractual provisions in their qualified financial contracts that limit or delay certain rights of their counterparties including counterparties’ default rights (such as the right to terminate the contracts or foreclose on collateral) and restrictions on assignments and transfers of credit enhancements (such as guarantees) arising in connection with the banking institution or an applicable affiliate becoming subject to a bankruptcy, insolvency, resolution or similar proceeding. To the extent that any of the derivatives, securities lending agreements or repurchase agreements that we enter into are subject to these new rules, it could limit our recovery in the event of a default and increase our counterparty risk.

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Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements. The most critical estimates include those used in determining:
(i)liabilities for future policy benefits and the accounting for reinsurance;
(ii)capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”);
(iii)estimated fair values of investments in the absence of quoted market values;
(iv)investment impairments;
(v)estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;
(vi)measurement of employee benefit plan liabilities;
(vii)
measurement of income taxes and the valuation of deferred tax assets; and
(viii)
liabilities for litigation and regulatory matters.
In applying our accountingthese policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.
The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in the 20162017 Annual Report.

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Results of Operations
Consolidated Results
Business Overview. Overall sales for the ninethree months ended September 30, 2017 increased overMarch 31, 2018 decreased compared to the prior period levels reflecting higherlower sales from our U.S. segment in both our Retirementof stable value, pension risk transfer, structured settlement and Income Solutions (“RIS”) and Group Benefits businesses. The increase in RIS was primarily drivenspecialized benefit products, partially offset by an increase in funding agreement issuances, as well as higher sales of pension risk transfers and stable value products, partially offset by lower sales of structured settlements. Strong performance fromall within our core and voluntary products resultedRIS business. Sales in a 22% increase in sales from our Group Benefits business. In connection withbusiness also declined slightly, as lower sales in our core insurance products were mostly offset by continued growth in our voluntary products. Revenues in our MetLife Holdings segment decreased as a result of the Separation and the U.S. Retail Advisor Force Divestiture, we have discontinueddiscontinuance of the marketing of life and annuity products in our MetLife Holdings segment, which has led to lower sales.early 2017.
Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017 20162018 2017
(In millions)(In millions)
Revenues      
Premiums$17,597
 $16,801
$4,949
 $5,181
Universal life and investment-type product policy fees1,706
 1,928
531
 588
Net investment income7,955
 8,349
2,701
 2,672
Other revenues1,148
 1,121
401
 398
Net investment gains (losses)184
 115
(196) (43)
Net derivative gains (losses)(317) (562)60
 (151)
Total revenues28,273
 27,752
8,446
 8,645
Expenses      
Policyholder benefits and claims and policyholder dividends20,388
 19,943
5,776
 6,122
Interest credited to policyholder account balances1,660
 1,675
581
 542
Capitalization of DAC(57) (285)(10) (23)
Amortization of DAC and VOBA124
 420
88
 137
Interest expense on debt79
 84
26
 26
Other expenses3,662
 4,231
1,250
 1,174
Total expenses25,856
 26,068
7,711
 7,978
Income (loss) before provision for income tax2,417
 1,684
735
 667
Provision for income tax expense (benefit)475
 232
63
 120
Net income (loss)1,942
 1,452
672
 547
Less: Net income (loss) attributable to noncontrolling interests8
 (9)3
 1
Net income (loss) attributable to Metropolitan Life Insurance Company$1,934
 $1,461
$669
 $546
NineThree Months Ended September 30, 2017March 31, 2018 Compared with the NineThree Months Ended September 30, 2016March 31, 2017
During the ninethree months ended September 30, 2017,March 31, 2018, net income (loss) before provision for income tax increased $733$125 million ($490 million, net of income tax) from the prior period primarily driven by favorable changes in operating earnings and net derivative gains (losses). As previously discussed, MLIC distributed to MetLife, Inc., as a non-cash extraordinary dividend, all and adjusted earnings, including the favorable impact of the issued and outstanding shares of common stock of each of NELICO and GALIC in December 2016. This transaction resulted in a $40 million decreaseU.S. Tax Reform, partially offset by an unfavorable change in net income for the nine months ended September 30, 2017 as compared to the prior period.

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investment gains (losses).
Management of Investment Portfolio and Hedging Market Risks with Derivatives. We manage our investment portfolio using disciplined asset/liability management principles, focusing on cash flow and duration to support our current and future liabilities. Our intent is to match the timing and amount of liability cash outflows with invested assets that have cash inflows of comparable timing and amount, while optimizing risk-adjusted net investment income and risk-adjusted total return. Our investment portfolio is heavily weighted toward fixed income investments, with over 80% of our portfolio invested in fixed maturity securities and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities.

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We purchase investments to support our insurance liabilities and not to generate net investment gains and losses. However, net investment gains and losses are incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign currency exchange rates, credit spreads and equity markets; counterparty specific factors such as financial performance, credit rating and collateral valuation; and internal factors such as portfolio rebalancing. Changes in these factors from period to period can significantly impact the levels of both impairments and realized gains and losses on investments sold.
We also use derivatives as an integral part of our management of the investment portfolio and insurance liabilities to hedge certain risks, including changes in interest rates, foreign currency exchange rates, credit spreads and equity market levels.
We use freestanding interest rate, equity, credit and currency derivatives to hedge certain invested assets and insurance liabilities. A small portion of these hedges are designated and qualify as accounting hedges, which reduce volatility in earnings. For those hedges not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings. During the first quarter of 2017, we began restructuringrestructured certain derivative hedges to partially stabilizedecrease volatility from nonqualified interest rate derivatives and to help meet prospective dividendliquidity objectives under varying interest rate scenarios. The restructuring of the hedge program is substantially complete in meeting our initial objectives. As part of this restructuring, we replaced certain nonqualified derivatives with derivatives that qualify for hedge accounting treatment. In addition, we also entered into replication transactions using interest rate swaps, which are accounted for at amortized cost under statutory guidelines and are nonqualified derivatives under GAAP. We actively evaluate market risk hedging needs and strategies to ensure our capitalliquidity objectives are met under a range of market conditions.
Certain direct or assumed variable annuity products with guaranteed minimum benefits contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). We use reinsurance and derivatives to hedge the market and other risks inherent in these variable annuity guarantees. Ceded reinsurance of direct variable annuity products with guaranteed minimum benefits generally contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). Ongoing refinement of the strategy may be required to adapt to changing NAIC rules, which may become effective as early as January 1, 2019. The restructured hedge strategy is classified as a macro hedge program, included in the non-VA program derivatives section of the table below, to protect our overall statutory capital from significant adverse economic conditions. The valuation of these embedded derivatives includes a nonperformance risk adjustment, which is unhedged, and can be a significant driver of net derivative gains (losses) and volatility in earnings, but does not have an economic impact on us.

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Net Derivative Gains (Losses). Direct, assumed and ceded variable annuity embedded derivatives, as well as the associated freestanding derivatives, are referred to as “VA program derivatives” in the following table. All other embedded derivatives and all freestanding derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table. The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:
Nine Months 
 Ended
September 30,		Three Months 
 Ended
March 31,
2017 20162018 2017
(In millions)(In millions)
Non-VA program derivatives      
Interest rate$68
 $992
$(142) $(113)
Foreign currency exchange rate(354) (50)(83) (170)
Credit107
 45
(16) 33
Equity26
 9
13
 9
Non-VA embedded derivatives(190) (664)244
 (56)
Total non-VA program derivatives(343) 332
16
 (297)
VA program derivatives      
Embedded derivatives-direct and assumed guarantees:      
Market risks511
 (85)150
 207
Nonperformance risk adjustment(39) 173
(21) (12)
Other risks145
 (1,209)(40) 233
Total617
 (1,121)89
 428
Embedded derivatives - ceded reinsurance:      
Market and other risks(110) 340
—
 3
Nonperformance risk adjustment—
 (64)—
 —
Total(110) 276
—
 3
Freestanding derivatives hedging direct and assumed embedded derivatives(481) (49)(45) (285)
Total VA program derivatives26
 (894)44
 146
Net derivative gains (losses)$(317) $(562)$60
 $(151)
The unfavorablefavorable change in net derivative gains (losses) on non-VA program derivatives was $675$313 million ($439247 million, net of income tax). This was primarily due to mid- and long-term interest rates decreasing less in the current period versus the prior period, unfavorably impacting receive-fixed interest rate swaps, swaptions and floors, primarily hedging long duration liability portfolios. Additionally, the U.S. dollar weakened in relation to other key currencies more in the current period relative to the prior period, unfavorably impacting foreign currency swaps that primarily hedge foreign currency-denominated bonds. These unfavorable changes were partially offset by a change in the value of the underlying assets favorably impacting non-VA embedded derivatives related to funds withheld on a certain reinsurance agreement. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.
The favorableunfavorable change in net derivative gains (losses) on VA program derivatives was $920$102 million ($59881 million, net of income tax). This was due to a favorablean unfavorable change of $1.1 billion$93 million ($69473 million, net of income tax) in market and other risks on direct and assumed variable annuity embedded derivatives, net of the impact of market and other risks on the ceded reinsurance embedded derivatives and net of freestanding derivatives hedging those risks, partially offset byas well as an unfavorable change of $148$9 million ($967 million, net of income tax) related to the change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives, net of the impact of the nonperformance risk adjustment on the ceded variable annuity embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.

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The foregoing favorableunfavorable change of $1.1 billion$93 million ($69473 million, net of income tax) was primarily driven by changes in market factors and other risks.

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The primary changes in market factors are summarized as follows:
Long-term interest ratesKey equity index levels decreased less in the current period thanand increased in the prior period, contributing to an unfavorablea favorable change in our freestanding derivatives and a favorablean unfavorable change in our embedded derivatives. For example, the S&P 500 Index decreased 1% in the current period and increased 6% in the prior period.
Long-term interest rates increased more in the current period versus the prior period, contributing to a favorable change in our embedded derivatives. Our freestanding interest rate derivatives were favorably impacted by the restructuring of the VA hedging strategy. For example, the 30-year U.S. swap rate decreased 6increased 28 basis points in the current period and decreased 84increased 5 basis points in the prior period.
Key weighted average equity index levels increased more in the current period than in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives.
The primary changes in other risks are summarized as follows:
Updates to actuarial policyholder behavior assumptions within the valuation model;
Impacts due to variable annuity reinsurance recaptures, which became effective in the first quarter of 2017;
An increaseA change in the risk margin adjustment measuring policyholder behavior risks, which was affected by market and interest rate changes;changes, as well as updates to actuarial policyholder behavior assumptions; and
A combination of other factors, which include fees being deducted from accounts and changes in the benefit base, premiums, lapses, withdrawals and deaths.mortality rates.
We calculate the nonperformance risk adjustment as the change in the embedded derivative discounted at the risk-adjusted rate (which includes our own credit spread to the extent that the embedded derivative is in-the-money) less the change in the embedded derivative discounted at the risk-free rate. The unfavorable change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives of $212 million ($138 million, net of income tax) was primarily due to an unfavorable change of $190 million, before income tax, as a result of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and an unfavorable change of $22 million, before income tax, related to changes in our own credit spread. The favorable change in the nonperformance risk adjustment on the ceded variable annuity embedded derivatives of $64 million ($42 million, net of income tax) was due to a favorable change of $53 million, before income tax, as a result of the impact of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and a favorable change of $11 million, before income tax, related to changes in our own credit spread.
When equity index levels decrease in isolation, the direct and assumed variable annuity guarantees become more valuable to policyholders, which results in an increase in the undiscounted embedded derivative liability. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.
When the risk-free interest rate decreases in isolation, discounting the embedded derivative liability produces a higher valuation of the liability than if the risk-free interest rate had remained constant. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free interest rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.
When our own credit spread increases in isolation, discounting the embedded derivative liability produces a lower valuation of the liability than if our own credit spread had remained constant. As a result, a gain is created from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees when the reinsurer’s credit spread increases in isolation. For each of these primary market drivers, the opposite effect occurs when they move in the opposite direction.
Generally, a higher portion of the ceded reinsurance for guaranteed minimum income benefits (“GMIBs”) is accounted for as an embedded derivative as compared to the direct guarantees since the settlement provisions of the reinsurance agreements generally meet the accounting criteria of “net settlement.” This mismatch in accounting can lead to significant volatility in earnings, even though the risks inherent in these direct guarantees are fully covered by the ceded reinsurance.

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Net Investment Gains (Losses). The favorableunfavorable change in net investment gains (losses) of $69$153 million ($45121 million, net of income tax) primarily reflects higher losses on sales of fixed maturity securities, and a leveraged lease impairment, as well as mark-to-market losses on our equity securities which are measured at fair value through net income. These unfavorable changes were partially offset by higher gains on sales of real estate joint ventures and lower impairments of fixed maturity and equity securities. These favorable changes were partially offset by lower gains on sales of fixed maturity and equity securities, lower foreign currency transaction gains, increased provisions for loan losses on mortgage loans and higher impairments on leveraged leases.ventures.
Actuarial Assumption Review. Results for the current period include a $74 million ($48 million, net of income tax) gain associated with our annual review of actuarial assumptions related to reserves and DAC, of which an $18 million ($12 million, net of income tax) gain was recognized in net derivative gains (losses). Of the $74 million gain, a $141 million ($92 million, net of income tax) gain was associated with DAC, offset by a $67 million ($44 million, net of income tax) loss related to reserves. The $18 million gain recognized in net derivative gains (losses) associated with this annual review of actuarial assumptions was included within the other risks in embedded derivatives - direct and assumed guarantees caption in the table above.
As a result of our annual review of actuarial assumptions, changes were made to policyholder behavior, mortality and operational assumptions. The significant impacts of the assumption review were on the individual life and variable annuity blocks of business and are summarized as follows:
Changes in the mortality assumptions resulted in a net charge of $23 million ($15 million, net of income tax).
Changes in policyholder behavior assumptions resulted in reserve increases, net of reinsurance, which were partially offset by favorable DAC, resulting in a net charge of $45 million ($29 million net of income tax).
Operational updates, most notably related to updates to maintenance expense assumptions and the closed block projections, resulted in a net gain of $142 million ($92 million, net of income tax).
Results for the prior period include a $722 million ($469 million, net of income tax) loss associated with the annual review of actuarial assumptions related to reserves and DAC, of which a $798 million ($519 million, net of income tax) loss was recognized in net derivative gains (losses). Of the $722 million charge, a $787 million ($512 million, net of income tax) loss was related to reserves while a $65 million ($43 million, net of income tax) gain was associated with DAC.
Taxes. Income tax expense for the ninethree months ended September 30, 2017March 31, 2018 was $475$63 million, or 20%9% of income (loss) before provision for income tax, compared with income tax expense of $232$120 million, or 14%18% of income (loss) before provision for income tax, for the ninethree months ended September 30, 2016. OurMarch 31, 2017. The Company’s effective tax rates differ from the U.S. statutory rate of 35%21% typically due to non-taxable investment income and tax credits for low income housing. Current andThe changes from U.S. Tax Reform resulted in an increase in earnings of $88 million for the first quarter of 2018 compared to the prior period results include tax benefits of $25 million and $36 million, respectively, for tax audit settlements.period.
OperatingAdjusted Earnings. As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use operatingadjusted earnings, which does not equate to net income (loss), as determined in accordance with GAAP, to analyze our performance, evaluate segment performance and allocate resources. We believe that the presentation of operatingadjusted earnings, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. OperatingAdjusted earnings allows analysis of our performance and facilitates comparisons to industry results. OperatingAdjusted earnings should not be viewed as a substitute for net income (loss). OperatingAdjusted earnings increased $329$59 million, net of income tax, to $2.3 billion,$828 million, net of income tax, for the ninethree months ended September 30, 2017March 31, 2018 from $1.9 billion,$769 million, net of income tax, for the ninethree months ended September 30, 2016.March 31, 2017.

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Reconciliation of net income (loss) to operatingadjusted earnings
Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017
20162018
2017
(In millions)(In millions)
Net income (loss)$1,942
 $1,452
$672
 $547
Less: Net investment gains (losses)184
 115
(196) (43)
Less: Net derivative gains (losses)(317) (562)60
 (151)
Less: Other adjustments to net income (1)(373) (306)(62) (147)
Less: Provision for income tax (expense) benefit177
 263
42
 119
Operating earnings$2,271
 $1,942
Adjusted earnings$828
 $769
__________________
(1)
See definitions of operatingadjusted revenues and operatingadjusted expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.adjustments and Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for additional details on these adjustments by financial statement line item.
Reconciliation of revenues to operatingadjusted revenues and expenses to operatingadjusted expenses
Nine Months
Ended
September 30,		Three Months
Ended
March 31,
2017 20162018 2017
(In millions)(In millions)
Total revenues$28,273
 $27,752
$8,446
 $8,645
Less: Net investment gains (losses)184
 115
(196) (43)
Less: Net derivative gains (losses)(317) (562)60
 (151)
Less: Other adjustments to revenues (1)(226) (317)(69) (94)
Total operating revenues$28,632
 $28,516
Total adjusted revenues$8,651
 $8,933
Total expenses$25,856
 $26,068
$7,711
 $7,978
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)(66) (281)(7) 2
Less: Other adjustments to expenses (1)213
 270
—
 51
Total operating expenses$25,709
 $26,079
Total adjusted expenses$7,718
 $7,925
__________________
(1)
See definitions of operatingadjusted revenues and operatingadjusted expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.adjustments and Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for additional details on these adjustments by financial statement line item.

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Consolidated Results — OperatingAdjusted Earnings
NineThree Months Ended September 30, 2017March 31, 2018 Compared with the NineThree Months Ended September 30, 2016March 31, 2017
Unless otherwise stated, all amounts discussed below are net of income tax.
As previously mentioned, MLIC transferred the issued and outstanding shares of NELICO’s and GALIC’s common stock to MetLife, Inc. in the form of a non-cash extraordinary dividend in December 2016. This transaction, which is excludedU.S. Tax Reform. The changes from the discussion below,U.S. Tax Reform resulted in an $87increase in adjusted earnings of $134 million decrease in operating earnings asfor the first quarter of 2018 compared to the prior period.

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Business Growth. An increase in net investment income was due toresulted from asset growth in our U.S. segment, consistent with the growth in average invested assets from increased net flows in our RIS business.business from funding agreements. This increase was partially offset by negative net flows, primarily as a result of a reduced asset base in our MetLife Holdings segment, due to the recapture of two assumed single-premium deferred annuity reinsurance agreements with Brighthouse.segment. Consistent with the growth in average invested assets from increased premiumspositive net flows in the U.S.U.S segment, interest credited on long-duration contracts increased. In our MetLife Holdings segment, negative net flows in our deferred annuities business and a decrease in universal life sales resulted in lower asset-based fee income, decreasing operatingadjusted earnings. Higher interest credited on insurance liabilities and DAC amortization in our MetLife Holdings segment also decreased operatingadjusted earnings. In our U.S. segment, anhigher volume-related, direct and premium tax expenses were mostly offset by lower pension and post-retirement expenses. This net increase in premiums, fees and other revenues,expenses, coupled with a decline in direct and allocated expenses, was partially offset by higher volume-related expenses. Thethe increase due to the current period abatementreinstatement of the annual health insurer fee under the Patient Protection and Affordable Care Act, waswere mostly offset by a corresponding decreaseincrease in premiums, fees and other revenues. The combined impact of the items discussed above decreased operatingadjusted earnings by $67$40 million.
Market Factors. Market factors, including interest rate levels, variability in equity market returns, and foreign currency exchange rate fluctuations, continued to impact our results; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields were negatively affected by lower prepayment fees,returns on private equities, driven by a decrease in certain partnership distributions, and lower income on derivatives and lower returns on real estate joint ventures. In addition, earnings on our securities lending program decreased, which primarily resulted from lower margins due to a flatter yield curve. These declines werederivatives. This decrease in net investment income was partially offset by higher income on other limited partnership interests, driven by improvements in equity market performance, andlower investment expenses, increased yields on fixed maturity securities. In our MetLife Holdings segment,securities and mortgage loans, as well as higher equity returns drove an increase inreal estate joint venture income. Higher average separate account balances, resulting in higher asset-based fees in our deferred annuities business. Certain of our funding agreements and guaranteed interest contract liabilities have interest credited rates that are contractually tied to current market rates, specifically the 3-month London Interbank Offered Rate (“LIBOR”) and, as a result, a higher average interest credited rate drove an increase in interest credited expense. In addition,expenses in our U.S. segment; however, this was partially offset by an increase in adjusted earnings due to a decrease in the crediting rate on certain long-duration insurance contractscontracts. In our MetLife Holdings segment, lower equity returns drove a decrease in average separate account balances within our deferred annuity business which resulted in lower asset-based fee income. Adjusted earnings also increased which decreased operating earnings.due to lower DAC amortization. The changes in market factors discussed above resulted in a $22$17 million decrease in operatingadjusted earnings.
Underwriting Actuarial Assumption Review and Other Insurance Adjustments. Favorable underwriting increased operatingadjusted earnings by $87$33 million due to favorable mortalitymorbidity and mortality. A $25 million increase in adjusted earnings was driven by favorable morbidity experience in our individual disability and critical illness businesses in our U.S. segment, as well as in our long-term care business in our MetLife Holdings and U.S. segments and favorable morbidity in our U.S. segment. Mortality results improved by $58$8 million primarily as a result of lower life claim severityfavorable claims experience in our MetLife Holdings segment and favorable claims experiencedue to lower life claim severity. Mortality results in our U.S. segment mainly driven by a prior period developmentwere essentially unchanged as less favorable claim experience in our term life business, and favorable current period mortality in our pension risk transfer, structured settlement and post-retirement benefit businesses. These positive results were partiallydriven by the impact of a more severe flu season, was offset by less favorable mortalitylower incidence in our accidental death and dismemberment and universal life businesses, driven by higher incidence and severity, as well as less favorable mortality in our specialized life insurance and income annuities businesses. A $29 million increase in operating earnings was driven by favorable morbidity experience in our U.S. segment, partially offset by unfavorable morbidity experience due to higher claim severity and volume in our long-term care business in our MetLife Holdings segment. The favorable morbidity experience in our U.S. segment was the result of favorable prior period development, current period utilization and the impact of pricing actions in our dental business, as well as favorable claims experience in our group disability and accident & health businesses. The impact in both periods of our annual actuarial assumption review resulted in a $170 million increase in operating earnings, primarily driven by favorable DAC unlockings in the current period compared to unfavorable DAC unlockings in the prior period, primarily in the life business in our MetLife Holdings segment.business. Refinements to DAC and certain insurance-related liabilities, which were recorded in both periods, resulted in ana slight increase in operating earnings of $73 million.adjusted earnings. This includes currentfavorable prior period refinements in the MetLife Holdings segment of (i) favorablea reserve adjustmentsadjustment resulting from modeling improvements in the reserving process of $32 million and $28 million, in our life business reserving process; and long-term care businesses, respectively; (ii) a $10 million unfavorable DAC adjustment related to certain participating whole life business assumed from Brighthouse; and (iii) a net unfavorable impact from an affiliated life reinsurance recapture. This also includes an unfavorable prior period refinement resulting from modeling improvements in the reserving process for our universal life business in the MetLife Holdings segment, which increased operating earnings by $25 million in the current period.Brighthouse.
Expenses and Taxes. An $88Adjusted earnings decreased $28 million increase in expenses was primarily due toas a result of an increase in costs associated with corporate initiativeslitigation reserves and projects, higher employee-relatedcorporate-related expenses, andpartially offset by expenses incurred in the currentprior period related to the guaranty fund assessment for Penn Treaty Network America Insurance Company partially offsetand lower Separation-related expenses.
Other. Adjusted earnings decreased by lower costs$19 million as a result of the U.S. Retail Advisor Force Divestiture. Costs associated with corporate initiatives and projects include leasehold impairments, Separation-related costs and costs related to our unit cost initiative. Our effective tax rates differ from the U.S. statutory rate of 35% due to non-taxable investment income and tax credits for investments in low income housing. Current and prior period results include tax benefits of $25 million and $36 million, respectively, for tax audit settlements.

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Other. In connection with the Separation,continued annuities reinsurance activity with Brighthouse increased operating earnings by $254 million.Brighthouse. This favorableunfavorable impact was primarily due to the recapture in 2016 of certain single-premium deferred annuity reinsurance agreements and the elimination of interest credited payments on the related reinsurance payable, as well as lower DAC amortization. This increase was partially offset by the net unfavorable impact in the currentprior period from the recapture and novation of as well as refinements to, assumed and ceded agreements covering certain variable annuity business.
Adoption of New Accounting Pronouncements
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.
Future Adoption of New Accounting Pronouncements
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

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Non-GAAP and Other Financial Disclosures
In this report, the Company presents certain measures of its performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.
The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:Comparable GAAP financial measures:
(i)operatingadjusted revenues(i)revenues
(ii)operatingadjusted expenses(ii)expenses
(iii)operatingadjusted earnings(iii)net income (loss)
Reconciliations of these non-GAAP measures to the most directly comparable historical GAAP measures are included in the results of operations, see “— Results of Operations.” Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures isare not accessible on a forward-looking basis because we believe it is not possible without unreasonable efforts to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income. These “adjusted” non-GAAP financial measures were formerly referred to as “operating” non-GAAP financial measures.
Our definitions of the various non-GAAP and other financial measures discussed in this report may differ from those used by other companies:
OperatingAdjusted earnings
This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operatingadjusted earnings is also our GAAP measure of segment performance. OperatingAdjusted earnings allows analysis of our performance and facilitates comparisons to industry results.
OperatingAdjusted earnings is defined as operatingadjusted revenues less operatingadjusted expenses, both net of income tax.

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OperatingAdjusted revenues and operatingadjusted expenses
These financial measures focus on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. OperatingAdjusted revenues also excludes net investment gains (losses) and net derivative gains (losses).
The following additional adjustments are made to revenues, in the line items indicated, in calculating operatingadjusted revenues:
Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”); and
Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax operatingadjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, and (iii) excludes certain amounts related to securitization entities that are variable interest entities (“VIEs”) consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnerships that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in fair value is recognized in net investment gains (losses) for GAAP.

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The following additional adjustments are made to expenses, in the line items indicated, in calculating operatingadjusted expenses:
Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and other pass-through adjustments, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);
Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;
Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;
Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
Other expenses excludes costs related to noncontrolling interests and goodwill impairments.
The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.
The following additional information is relevant to an understanding of our performance results:
We sometimes refer to sales activity for various products. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.
Subsequent Event
See Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements.
Item 4. Controls and Procedures
Management, withBased on the participation of theCompany’s internal review, Metropolitan Life Insurance Company’s Chief Executive Officer (“CEO”) and former Chief Financial Officer (“CFO”) identified a material weakness in the design and operation of its internal control over financial reporting. Management concluded that the Company has not maintained effective controls over the administrative and accounting practices relating to certain RIS group annuity reserves and the timely communication and escalation of issues regarding those reserves throughout the Company. Management identified an error in the reserve balance in connection with this material weakness. For more information on this reserve adjustment, see Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report. This material weakness remains unremediated as of March 31, 2018.
Evaluation of Disclosure Controls and Procedures
Management, including the CEO and current CFO, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rulepursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of the endMarch 31, 2018. Solely because of the period covered by this report. Based on that evaluation,material weakness in internal control over financial reporting reported in the Chief Executive Officer2017 Annual Report, our CEO and Chief Financial Officer havecurrent CFO concluded that theseas of March 31, 2018, our disclosure controls and procedures arewere not effective.

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Remediation Status of Reported Material Weakness
Management is executing its plan to remediate the material weakness noted above and has developed Steering Committees, project teams and working groups to lead the remediation efforts. To date, management has performed the following:
Implemented immediate changes to improve its administrative and accounting procedures and search practices to identify, contact, and record responses from “unresponsive and missing” plan annuitants and to otherwise locate missing annuitants;
Instituted additional procedures to help address the timely communication and escalation of issues throughout the Company; and
Engaged third party advisors who have commenced procedures associated with the comprehensive examination and analysis of the facts and circumstances giving rise to the material weakness, under the supervision of MetLife, Inc.’s Chief Risk Officer.
Management believes the remediation steps outlined above will further strengthen our internal control over financial reporting. Management will test the ongoing operating effectiveness of all new controls subsequent to implementation and consider the material weakness remediated after the applicable controls operate effectively for a sufficient period of time. The Company will continue to evaluate, update and improve its internal control over financial reporting as management executes on its remediation plan.
Changes in Internal Control Over Financial Reporting
There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f)Rules 13a-15(d) and 15d-15(d) that occurred during the quarter ended September 30, 2017March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II — Other Information
Item 1. Legal Proceedings
The following should be read in conjunction with (i) Part I, Item 3, of the 2016 Annual Report; (ii) Part II, Item 1, of Metropolitan Life Insurance Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017; and (iii)See Note 1112 of the Notes to the Interim Condensed Consolidated Financial Statements in Part I of this report.Statements.
Asbestos-Related Claims
Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages.
As reported in the 2016 Annual Report, Metropolitan Life Insurance Company received approximately 4,146 asbestos-related claims in 2016. During the nine months ended September 30, 2017 and 2016, Metropolitan Life Insurance Company received approximately 2,742 and 3,267 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.
Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2017.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the SEC; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.
In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida
In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain environmental testing at the Chemform Site. The EPA may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reached a settlement in principal on the EPA’s claim for past costs. The Company estimates that the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.
Total Control Accounts Litigation
Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as TCA, as a settlement option for death benefits.

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Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)
Plaintiff filed this class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.
Other Litigation
Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)
Plaintiffs filed this putative class action against MetLife, Inc. and Metropolitan Life Insurance Company in the U.S. District Court for the Central District of California, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy for a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, Plaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York. The Company intends to defend this action vigorously.
Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)
Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. The Company intends to defend this action vigorously.
Summary
Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

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Item 1A. Risk Factors
The following should be read in conjunction with, and supplements and amends, theCertain factors that may affect the Company’s business or operations are described under “Risk Factors” in Part I, Item 1A, of the 20162017 Annual Report, as amended or supplemented by the information under “Risk Factors” in Part II, Item 1A, of Metropolitan Life Insurance Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (the “Second Quarter 2017 Report”). Other than as described in this Item 1A, thereReport. There have been no material changes to our risk factors from the risk factors previously disclosed in the 20162017 Annual Report as amended or supplemented by such information in the Second Quarter 2017 Report.
Risks Related to Our Business
The following updates and replaces the similar risk factor entitled “Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results” included in the 2016 Annual Report.
Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results
Our earnings significantly depend upon the extent to which our actual claims experience is consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Such amounts are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. We cannot determine precisely the amounts which we will ultimately pay to settle our liabilities, and such amounts may vary from the estimated amounts, particularly when those payments may not occur until well in the future. We evaluate our liabilities periodically based on accounting requirements, which change from time to time, the assumptions used to establish the liabilities, as well as our actual experience. Reserve estimates in some instances are affected by our operating practices and procedures that are used, among other things, to support our assumptions with respect to the Company’s obligations to its policyholders and contractholders. To the extent that these practices and procedures do not accurately produce the data to support our assumptions our reserves may require adjustment. If the liabilities originally established for future benefit payments prove inadequate, we must increase them and/or reduce associated DAC and/or VOBA. Such adjustments could affect earnings negatively and have a material adverse effect on our business, results of operations and financial condition. See “Business — Policyholder Liabilities” included in the 2016 Annual Report. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated Results — Nine Months Ended September 30, 2017 Compared with the Nine Months Ended September 30, 2016 — Actuarial Assumption Review,” as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Deferred Policy Acquisition Costs and Value of Business Acquired” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Derivatives” included in the 2016 Annual Report for further information regarding the manner in which policyholder behavior and other events may differ from our assumptions and, thereby affect our financial results.

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Item 6. Exhibits
(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Metropolitan Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Metropolitan Life Insurance Company, its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and Metropolitan Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)
    Incorporated by Reference  
Exhibit No. Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
             
31.1 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
31.2 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
32.1 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
32.2 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
101.INS XBRL Instance Document.         X
101.SCH XBRL Taxonomy Extension Schema Document.         X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.         X
101.LAB XBRL Taxonomy Extension Label Linkbase Document.         X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.         X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.         X


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


METROPOLITAN LIFE INSURANCE COMPANY
    
By:  /s/ William O’Donnell
  Name:     William O’Donnell
  Title: Executive Vice President and Chief
   Accounting Officer (Authorized Signatory
   and Principal Accounting Officer)
Date: November 8, 2017May 10, 2018

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