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Washington, D.C. 20549
(Mark One) | ||
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE TRANSITION PERIOD FROM TO |
Delaware | 13-4075851 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 Park Avenue, New York, NY (Address of principal executive offices) | 10166-0188 (Zip Code) |
Large accelerated filer þ | Accelerated filer o | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting companyo |
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E-1 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
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• | 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; | |
• | 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; | |
• | may apply standards of materiality in a way that is different from what may be viewed as material to investors; and | |
• | 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. |
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Item 1. | Financial Statements |
September 30, 2009 | December 31, 2008 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at estimated fair value (amortized cost: $225,274 and $209,508, respectively) | $ | 223,896 | $ | 188,251 | ||||
Equity securitiesavailable-for-sale, at estimated fair value (cost: $3,349 and $4,131, respectively) | 3,117 | 3,197 | ||||||
Trading securities, at estimated fair value (cost: $1,895 and $1,107, respectively) | 1,970 | 946 | ||||||
Mortgage and consumer loans: | ||||||||
Held-for-investment, at amortized cost (net of valuation allowances of $671 and $304, respectively) | 48,239 | 49,352 | ||||||
Held-for-sale, principally at estimated fair value | 2,442 | 2,012 | ||||||
Mortgage and consumer loans, net | 50,681 | 51,364 | ||||||
Policy loans | 10,001 | 9,802 | ||||||
Real estate and real estate joint venturesheld-for-investment | 6,982 | 7,535 | ||||||
Real estateheld-for-sale | 50 | 51 | ||||||
Other limited partnership interests | 5,255 | 6,039 | ||||||
Short-term investments | 6,861 | 13,878 | ||||||
Other invested assets | 13,916 | 17,248 | ||||||
Total investments | 322,729 | 298,311 | ||||||
Cash and cash equivalents | 15,562 | 24,207 | ||||||
Accrued investment income | 3,236 | 3,061 | ||||||
Premiums and other receivables | 16,903 | 16,973 | ||||||
Deferred policy acquisition costs and value of business acquired | 19,208 | 20,144 | ||||||
Current income tax recoverable | 412 | — | ||||||
Deferred income tax assets | 535 | 4,927 | ||||||
Goodwill | 5,033 | 5,008 | ||||||
Other assets | 7,140 | 7,262 | ||||||
Assets of subsidiariesheld-for-sale | — | 946 | ||||||
Separate account assets | 144,434 | 120,839 | ||||||
Total assets | $ | 535,192 | $ | 501,678 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 134,492 | $ | 130,555 | ||||
Policyholder account balances | 147,543 | 149,805 | ||||||
Other policyholder funds | 8,549 | 7,762 | ||||||
Policyholder dividends payable | 911 | 1,023 | ||||||
Short-term debt | 2,131 | 2,659 | ||||||
Long-term debt | 13,202 | 9,667 | ||||||
Collateral financing arrangements | 5,297 | 5,192 | ||||||
Junior subordinated debt securities | 3,191 | 3,758 | ||||||
Current income tax payable | — | 342 | ||||||
Payables for collateral under securities loaned and other transactions | 24,363 | 31,059 | ||||||
Other liabilities | 16,486 | 14,284 | ||||||
Liabilities of subsidiariesheld-for-sale | — | 748 | ||||||
Separate account liabilities | 144,434 | 120,839 | ||||||
Total liabilities | 500,599 | 477,693 | ||||||
Contingencies, Commitments and Guarantees (Note 12) | ||||||||
Stockholders’ Equity: | ||||||||
MetLife, Inc.’s stockholders’ equity: | ||||||||
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 84,000,000 shares issued and outstanding; $2,100 aggregate liquidation preference | 1 | 1 | ||||||
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 822,359,818 shares and 798,016,664 shares issued at September 30, 2009 and December 31, 2008, respectively; 818,753,139 shares and 793,629,070 shares outstanding at September 30, 2009 and December 31, 2008, respectively | 8 | 8 | ||||||
Additional paid-in capital | 16,865 | 15,811 | ||||||
Retained earnings | 19,822 | 22,403 | ||||||
Treasury stock, at cost; 3,606,679 shares and 4,387,594 shares at September 30, 2009 and December 31, 2008, respectively | (194 | ) | (236 | ) | ||||
Accumulated other comprehensive loss | (2,234 | ) | (14,253 | ) | ||||
Total MetLife, Inc.’s stockholders’ equity | 34,268 | 23,734 | ||||||
Noncontrolling interests | 325 | 251 | ||||||
Total equity | 34,593 | 23,985 | ||||||
Total liabilities and stockholders’ equity | $ | 535,192 | $ | 501,678 | ||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 6,601 | $ | 6,785 | $ | 19,299 | $ | 19,416 | ||||||||
Universal life and investment-type product policy fees | 1,251 | 1,352 | 3,650 | 4,145 | ||||||||||||
Net investment income | 3,923 | 4,047 | 10,914 | 12,661 | ||||||||||||
Other revenues | 602 | 421 | 1,728 | 1,141 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (650 | ) | (748 | ) | (1,769 | ) | (961 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 245 | — | 479 | — | ||||||||||||
Other net investment gains (losses), net | (1,734 | ) | 1,494 | (5,584 | ) | 620 | ||||||||||
Total net investment gains (losses) | (2,139 | ) | 746 | (6,874 | ) | (341 | ) | |||||||||
Total revenues | 10,238 | 13,351 | 28,717 | 37,022 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 7,173 | 7,264 | 20,701 | 20,426 | ||||||||||||
Interest credited to policyholder account balances | 1,258 | 1,129 | 3,655 | 3,558 | ||||||||||||
Policyholder dividends | 439 | 448 | 1,297 | 1,323 | ||||||||||||
Other expenses | 2,543 | 2,931 | 7,576 | 8,085 | ||||||||||||
Total expenses | 11,413 | 11,772 | 33,229 | 33,392 | ||||||||||||
Income (loss) from continuing operations before provision for income tax | (1,175 | ) | 1,579 | (4,512 | ) | 3,630 | ||||||||||
Provision for income tax expense (benefit) | (551 | ) | 529 | (1,884 | ) | 1,077 | ||||||||||
Income (loss) from continuing operations, net of income tax | (624 | ) | 1,050 | (2,628 | ) | 2,553 | ||||||||||
Income (loss) from discontinued operations, net of income tax | (1 | ) | (404 | ) | 37 | (251 | ) | |||||||||
Net income (loss) | (625 | ) | 646 | (2,591 | ) | 2,302 | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests | (5 | ) | 16 | (25 | ) | 78 | ||||||||||
Net income (loss) attributable to MetLife, Inc. | (620 | ) | 630 | (2,566 | ) | 2,224 | ||||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 94 | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (650 | ) | $ | 600 | $ | (2,657 | ) | $ | 2,130 | ||||||
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders per common share: | ||||||||||||||||
Basic | $ | (0.79 | ) | $ | 1.43 | $ | (3.30 | ) | $ | 3.45 | ||||||
Diluted | $ | (0.79 | ) | $ | 1.42 | $ | (3.30 | ) | $ | 3.39 | ||||||
Net income (loss) available to MetLife, Inc.’s common shareholders per common share: | ||||||||||||||||
Basic | $ | (0.79 | ) | $ | 0.84 | $ | (3.25 | ) | $ | 2.97 | ||||||
Diluted | $ | (0.79 | ) | $ | 0.83 | $ | (3.25 | ) | $ | 2.92 | ||||||
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Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | Foreign | Defined | Total | |||||||||||||||||||||||||||||||||||||||||||||
Additional | Treasury | Investment | Other-Than- | Currency | Benefit | MetLife, Inc.’s | ||||||||||||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock at | Gains | Temporary | Translation | Plans | Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | Cost | (Losses) | Impairments | Adjustments | Adjustment | Equity | Interests | Equity | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | $ | 1 | $ | 8 | $ | 15,811 | $ | 22,403 | $ | (236 | ) | $ | (12,564 | ) | $ | — | $ | (246 | ) | $ | (1,443 | ) | $ | 23,734 | $ | 251 | $ | 23,985 | ||||||||||||||||||||
Cumulative effect of changes in accounting principle, net of income tax (Note 1) | 76 | (76 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Common stock issuance — newly issued shares | 1,035 | 1,035 | 1,035 | |||||||||||||||||||||||||||||||||||||||||||||
Treasury stock transactions, net | 20 | 42 | 62 | 62 | ||||||||||||||||||||||||||||||||||||||||||||
Deferral of stock-based compensation | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (91 | ) | (91 | ) | (91 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests | 109 | 109 | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | (2,566 | ) | (2,566 | ) | (25 | ) | (2,591 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | 12,092 | (251 | ) | 11,841 | (10 | ) | 11,831 | |||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | 134 | 134 | 134 | |||||||||||||||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax | 120 | 120 | 120 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 12,095 | (10 | ) | 12,085 | ||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | 9,529 | (35 | ) | 9,494 | ||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2009 | $ | 1 | $ | 8 | $ | 16,865 | $ | 19,822 | $ | (194 | ) | $ | (472 | ) | $ | (327 | ) | $ | (112 | ) | $ | (1,323 | ) | $ | 34,268 | $ | 325 | $ | 34,593 | |||||||||||||||||||
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Interim Condensed Consolidated Statement of Stockholders’ Equity
For the Nine Months Ended September 30, 2008 (Unaudited) — (Continued)
(In millions)
Accumulated Other Comprehensive | ||||||||||||||||||||||||||||||||||||||||||||||||
Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | Foreign | Defined | Total | |||||||||||||||||||||||||||||||||||||||||||||
Additional | Treasury | Investment | Currency | Benefit | MetLife, Inc.’s | Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock | Gains | Translation | Plans | Stockholders’ | Discontinued | Continuing | Total | |||||||||||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | (Losses) | Adjustments | Adjustment | Equity | Operations | Operations | Equity | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | $ | 1 | $ | 8 | $ | 17,098 | $ | 19,884 | $ | (2,890 | ) | $ | 971 | $ | 347 | $ | (240 | ) | $ | 35,179 | $ | 1,534 | $ | 272 | $ | 36,985 | ||||||||||||||||||||||
Cumulative effect of changes in accounting principles, net of income tax | 27 | (10 | ) | 17 | 17 | |||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2008 | 1 | 8 | 17,098 | 19,911 | (2,890 | ) | 961 | 347 | (240 | ) | 35,196 | 1,534 | 272 | 37,002 | ||||||||||||||||||||||||||||||||||
Treasury stock transactions: | ||||||||||||||||||||||||||||||||||||||||||||||||
Acquired in connection with share repurchase agreements (Note 9) | 450 | (1,250 | ) | (800 | ) | (800 | ) | |||||||||||||||||||||||||||||||||||||||||
Issued to settle stock forward contracts | (29 | ) | 1,064 | 1,035 | 1,035 | |||||||||||||||||||||||||||||||||||||||||||
Acquired in connection with split-off of subsidiary | (1,318 | ) | (1,318 | ) | (1,318 | ) | ||||||||||||||||||||||||||||||||||||||||||
Other, net | (58 | ) | 115 | 57 | 57 | |||||||||||||||||||||||||||||||||||||||||||
Deferral of stock-based compensation | 141 | 141 | 141 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (94 | ) | (94 | ) | (94 | ) | ||||||||||||||||||||||||||||||||||||||||||
Dividends on subsidiary common stock | 34 | 34 | ||||||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests | (1,409 | ) | (41 | ) | (1,450 | ) | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | 2,224 | 2,224 | 94 | (16 | ) | 2,302 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | 135 | 135 | 135 | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | (8,448 | ) | (8,448 | ) | (150 | ) | (7 | ) | (8,605 | ) | ||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | (299 | ) | (299 | ) | (107 | ) | (406 | ) | ||||||||||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax | 4 | 4 | 4 | 8 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | (8,608 | ) | (253 | ) | (7 | ) | (8,868 | ) | ||||||||||||||||||||||||||||||||||||||||
Comprehensive loss | (6,384 | ) | (159 | ) | (23 | ) | (6,566 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2008 | $ | 1 | $ | 8 | $ | 17,602 | $ | 22,041 | $ | (4,279 | ) | $ | (7,352 | ) | $ | 48 | $ | (236 | ) | $ | 27,833 | $ | — | $ | 208 | $ | 28,041 | |||||||||||||||||||||
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�� | ||||||||
Nine Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Net cash provided by operating activities | $ | 2,718 | $ | 7,002 | ||||
Cash flows from investing activities | ||||||||
Sales, maturities and repayments of: | ||||||||
Fixed maturity securities | 48,802 | 74,011 | ||||||
Equity securities | 1,900 | 2,466 | ||||||
Mortgage and consumer loans | 5,145 | 4,570 | ||||||
Real estate and real estate joint ventures | 23 | 147 | ||||||
Other limited partnership interests | 824 | 580 | ||||||
Purchases of: | ||||||||
Fixed maturity securities | (63,363 | ) | (74,701 | ) | ||||
Equity securities | (1,543 | ) | (1,138 | ) | ||||
Mortgage and consumer loans | (4,204 | ) | (8,009 | ) | ||||
Real estate and real estate joint ventures | (466 | ) | (938 | ) | ||||
Other limited partnership interests | (570 | ) | (1,341 | ) | ||||
Net change in short-term investments | 7,022 | 36 | ||||||
Net change in other invested assets | (530 | ) | (689 | ) | ||||
Net change in policy loans | (199 | ) | (405 | ) | ||||
Purchases of businesses, net of cash received of $0 and $313, respectively | — | (465 | ) | |||||
Sales of businesses, net of cash disposed of $180 and $0, respectively | (50 | ) | (4 | ) | ||||
Disposal of subsidiary | (19 | ) | (281 | ) | ||||
Other, net | (129 | ) | (96 | ) | ||||
Net cash used in investing activities | (7,357 | ) | (6,257 | ) | ||||
Cash flows from financing activities | ||||||||
Policyholder account balances: | ||||||||
Deposits | 63,597 | 47,217 | ||||||
Withdrawals | (64,382 | ) | (38,896 | ) | ||||
Net change in short-term debt | (528 | ) | 439 | |||||
Long-term debt issued | 2,625 | 1,032 | ||||||
Long-term debt repaid | (244 | ) | (217 | ) | ||||
Collateral financing arrangements issued | 105 | 250 | ||||||
Cash received in connection with collateral financing arrangement | 400 | — | ||||||
Cash paid in connection with collateral financing arrangement | (400 | ) | (238 | ) | ||||
Junior subordinated debt securities issued | 500 | 750 | ||||||
Debt issuance costs | (22 | ) | (10 | ) | ||||
Net change in payables for collateral under securities loaned and other transactions | (6,696 | ) | (837 | ) | ||||
Stock options exercised | 6 | 43 | ||||||
Common stock issued to settle stock forward contracts | 1,035 | — | ||||||
Treasury stock acquired | — | (1,250 | ) | |||||
Treasury stock issued to settle stock forward contracts | — | 1,035 | ||||||
Dividends on preferred stock | (91 | ) | (94 | ) | ||||
Other, net | (31 | ) | (16 | ) | ||||
Net cash (used in) provided by financing activities | (4,126 | ) | 9,208 | |||||
Effect of change in foreign currency exchange rates on cash balances | 88 | (112 | ) | |||||
Change in cash and cash equivalents | (8,677 | ) | 9,841 | |||||
Cash and cash equivalents, beginning of period | 24,239 | 10,368 | ||||||
Cash and cash equivalents, end of period | $ | 15,562 | $ | 20,209 | ||||
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Interim Condensed Consolidated Statements of Cash Flows — (Continued)
Nine Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Cash and cash equivalents, subsidiariesheld-for-sale, beginning of period | $ | 32 | $ | 407 | ||||
Cash and cash equivalents, subsidiariesheld-for-sale, end of period | $ | — | $ | 28 | ||||
�� | ||||||||
Cash and cash equivalents, from continuing operations, beginning of period | $ | 24,207 | $ | 9,961 | ||||
Cash and cash equivalents, from continuing operations, end of period | $ | 15,562 | $ | 20,181 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Net cash paid during the period for: | ||||||||
Interest | $ | 611 | $ | 677 | ||||
Income tax | $ | 298 | $ | 430 | ||||
Non-cash transactions during the period: | ||||||||
Business acquisitions: | ||||||||
Assets acquired | $ | — | $ | 1,808 | ||||
Cash paid | — | (778 | ) | |||||
Liabilities assumed | $ | — | $ | 1,030 | ||||
Disposal of subsidiary: | ||||||||
Assets disposed | $ | — | $ | 22,135 | ||||
Less: liabilities disposed | — | (20,689 | ) | |||||
Net assets disposed | — | 1,446 | ||||||
Add: cash disposed | — | 270 | ||||||
Add: transaction costs, including cash paid of $19 and $11, respectively | 2 | 60 | ||||||
Less: treasury stock received in common stock exchange | — | (1,318 | ) | |||||
Loss on disposal of subsidiary | $ | 2 | $ | 458 | ||||
Remarketing of debt securities: | ||||||||
Fixed maturity securities redeemed | $ | 32 | $ | 32 | ||||
Long-term debt issued | $ | 1,035 | $ | 1,035 | ||||
Junior subordinated debt securities redeemed | $ | 1,067 | $ | 1,067 | ||||
Fixed maturity securities received in connection with insurance contract commutation | $ | — | $ | 115 | ||||
Real estate and real estate joint ventures acquired in satisfaction of debt | $ | 211 | $ | 1 | ||||
Purchase money mortgage on real estate joint venture sale | $ | 74 | $ | — | ||||
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1. | Business, Basis of Presentation, and Summary of Significant Accounting Policies |
(i) | the estimated fair value of investments in the absence of quoted market values; | |
(ii) | investment impairments; | |
(iii) | the recognition of income on certain investment entities; | |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the existence and estimated fair value of embedded derivatives requiring bifurcation; | |
(vi) | the estimated fair value of and accounting for derivatives; | |
(vii) | the capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”); | |
(viii) | the measurement of goodwill and related impairment, if any; | |
(ix) | the liability for future policyholder benefits; | |
(x) | accounting for income taxes and the valuation of deferred income tax assets; | |
(xi) | accounting for reinsurance transactions; | |
(xii) | accounting for employee benefit plans; and | |
(xiii) | the liability for litigation and regulatory matters. |
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• | The first update provides guidance on: (i) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities; and (ii) identifying transactions that are not orderly. Further, it requires disclosure in interim financial statements of the inputs and valuation techniques used to measure fair value. The adoption of this update did not have an impact on the Company’s consolidated financial statements. Additionally, the Company has provided all of the material required disclosures in its consolidated financial statements. | |
• | The second update requires interim financial instrument fair value disclosures similar to those included in annual financial statements. The Company has provided all of the material required disclosures in its consolidated financial statements. |
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• | All business combinations (whether full, partial or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
• | Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. | |
• | The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
• | Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition-date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. | |
• | Changes in deferred income tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
• | Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
• | Net income includes amounts attributable to noncontrolling interests. | |
• | When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
• | Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
• | When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
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• | The financial instrument transfer guidance eliminates the concept of a “qualifying special purpose entity,” eliminates the guaranteed mortgage securitization exception, changes the criteria for achieving sale accounting when transferring a financial asset and changes the initial recognition of retained beneficial interests. The guidance also requires additional disclosures about transfers of financial assets, including securitized transactions, as well as a company’s continuing involvement in transferred financial assets. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. | |
• | The consolidation guidance relating to special purpose entities changes the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model. Under the new qualitative model, the primary beneficiary must have both the ability to direct the activities of the VIE and the obligation to absorb either losses or gains that could be significant to the VIE. The guidance also changes when reassessment is needed, as well as requires enhanced disclosures, including the effects of a company’s involvement with VIEs on its financial statements. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. |
2. | Acquisitions and Dispositions |
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3. | Investments |
September 30, 2009 | ||||||||||||||||||||||||
Cost or | Gross Unrealized | Estimated | ||||||||||||||||||||||
Amortized | Temporary | OTTI | Fair | % of | ||||||||||||||||||||
Cost | Gain | Loss | Loss | Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
U.S. corporate securities | $ | 71,375 | $ | 3,416 | $ | 3,144 | $ | 5 | $ | 71,642 | 32.1 | % | ||||||||||||
Residential mortgage-backed securities | 45,267 | 1,389 | 2,849 | 410 | 43,397 | 19.4 | ||||||||||||||||||
Foreign corporate securities | 35,991 | 2,021 | 1,411 | 9 | 36,592 | 16.3 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities (1) | 24,281 | 1,468 | 282 | — | 25,467 | 11.4 | ||||||||||||||||||
Commercial mortgage-backed securities | 16,615 | 181 | 1,247 | 14 | 15,535 | 6.9 | ||||||||||||||||||
Asset-backed securities | 14,703 | 198 | 1,541 | 109 | 13,251 | 5.9 | ||||||||||||||||||
Foreign government securities | 10,473 | 1,107 | 133 | — | 11,447 | 5.1 | ||||||||||||||||||
State and political subdivision securities | 6,551 | 282 | 284 | — | 6,549 | 2.9 | ||||||||||||||||||
Other fixed maturity securities | 18 | — | 2 | — | 16 | — | ||||||||||||||||||
Total fixed maturity securities (2), (3) | $ | 225,274 | $ | 10,062 | $ | 10,893 | $ | 547 | $ | 223,896 | 100.0 | % | ||||||||||||
Common stock | $ | 1,576 | $ | 91 | $ | 31 | $ | — | $ | 1,636 | 52.5 | % | ||||||||||||
Non-redeemable preferred stock (2) | 1,773 | 75 | 367 | — | 1,481 | 47.5 | ||||||||||||||||||
Total equity securities (4) | $ | 3,349 | $ | 166 | $ | 398 | $ | — | $ | 3,117 | 100.0 | % | ||||||||||||
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December 31, 2008 | ||||||||||||||||||||
Cost or | Estimated | |||||||||||||||||||
Amortized | Gross Unrealized | Fair | % of | |||||||||||||||||
Cost | Gain | Loss | Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 72,211 | $ | 994 | $ | 9,902 | $ | 63,303 | 33.6 | % | ||||||||||
Residential mortgage-backed securities | 39,995 | 753 | 4,720 | 36,028 | 19.2 | |||||||||||||||
Foreign corporate securities | 34,798 | 565 | 5,684 | 29,679 | 15.8 | |||||||||||||||
U.S. Treasury, agency and government guaranteed securities (1) | 17,229 | 4,082 | 1 | 21,310 | 11.3 | |||||||||||||||
Commercial mortgage-backed securities | 16,079 | 18 | 3,453 | 12,644 | 6.7 | |||||||||||||||
Asset-backed securities | 14,246 | 16 | 3,739 | 10,523 | 5.6 | |||||||||||||||
Foreign government securities | 9,474 | 1,056 | 377 | 10,153 | 5.4 | |||||||||||||||
State and political subdivision securities | 5,419 | 80 | 942 | 4,557 | 2.4 | |||||||||||||||
Other fixed maturity securities | 57 | — | 3 | 54 | — | |||||||||||||||
Total fixed maturity securities (2), (3) | $ | 209,508 | $ | 7,564 | $ | 28,821 | $ | 188,251 | 100.0 | % | ||||||||||
Common stock | $ | 1,778 | $ | 40 | $ | 133 | $ | 1,685 | 52.7 | % | ||||||||||
Non-redeemable preferred stock (2) | 2,353 | 4 | 845 | 1,512 | 47.3 | |||||||||||||||
Total equity securities (4) | $ | 4,131 | $ | 44 | $ | 978 | $ | 3,197 | 100.0 | % | ||||||||||
(1) | The Company has classified within the U.S. Treasury, agency and government guaranteed securities caption above certain corporate fixed maturity securities issued by U.S. financial institutions that were guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) pursuant to the FDIC’s Temporary Liquidity Guarantee Program (“FDIC Program”) of $560 million and $2 million at estimated fair value with unrealized gains (losses) of $4 million and less than ($1) million at September 30, 2009 and December 31, 2008, respectively. | |
(2) | The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest ratestep-up feature, as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest ratestep-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued bynon-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as “perpetual hybrid securities.” The following table presents the perpetual hybrid securities held by the Company at: |
Classification | September 30, 2009 | December 31, 2008 | ||||||||||
Estimated | Estimated | |||||||||||
Fair | Fair | |||||||||||
Consolidated Balance Sheets | Sector Table | Primary Issuers | Value | Value | ||||||||
(In millions) | ||||||||||||
Equity securities | Non-redeemable preferred stock | Non-U.S. financial institutions | $ | 1,136 | $ | 1,224 | ||||||
Equity securities | Non-redeemable preferred stock | U.S. financial institutions | $ | 332 | $ | 288 | ||||||
Fixed maturity securities | Foreign corporate securities | Non-U.S. financial institutions | $ | 2,719 | $ | 2,110 | ||||||
Fixed maturity securities | U.S. corporate securities | U.S. financial institutions | $ | 59 | $ | 46 |
(3) | At September 30, 2009 and December 31, 2008, the Company held $2,457 million and $2,052 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates. These securities, commonly referred to as “capital securities”, are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are included in the U.S. corporate securities sector within fixed maturity securities. |
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(4) | Equity securities primarily consist of investments in common and preferred stocks, including certain perpetual hybrid securities, and mutual fund interests. Such securities include common stock of privately held companies with an estimated fair value of $1.1 billion at both September 30, 2009 and December 31, 2008. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Below investment grade or non-rated fixed maturity securities: | ||||||||
Estimated fair value | $ | 21,391 | $ | 12,365 | ||||
Net unrealized loss | $ | 4,085 | $ | 5,094 | ||||
Non-income producing fixed maturity securities: | ||||||||
Estimated fair value | $ | 274 | $ | 75 | ||||
Net unrealized loss | $ | 22 | $ | 19 | ||||
Fixed maturity securities credit enhanced by financial guarantor insurers — by sector — at estimated fair value: | ||||||||
State and political subdivision securities | $ | 2,177 | $ | 2,005 | ||||
U.S. corporate securities | 1,736 | 2,007 | ||||||
Asset-backed securities | 788 | 833 | ||||||
Other | 89 | 51 | ||||||
Total fixed maturity securities credit enhanced by financial guarantor insurers | $ | 4,790 | $ | 4,896 | ||||
Ratings of the financial guarantor insurers providing the credit enhancement: | ||||||||
Portion rated Aa/AA | 19 | % | 15 | % | ||||
Portion rated A | 38 | % | — | % | ||||
Portion rated Baa/BBB | — | % | 68 | % | ||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Corporate fixed maturity securities — by industry type: | ||||||||||||||||
Foreign (1) | $ | 36,592 | 33.8 | % | $ | 29,679 | 32.0 | % | ||||||||
Consumer | 16,588 | 15.3 | 13,122 | 14.1 | ||||||||||||
Industrial | 16,539 | 15.3 | 13,324 | 14.3 | ||||||||||||
Utility | 14,942 | 13.8 | 12,434 | 13.4 | ||||||||||||
Finance | 14,188 | 13.1 | 14,996 | 16.1 | ||||||||||||
Communications | 6,554 | 6.1 | 5,714 | 6.1 | ||||||||||||
Other | 2,831 | 2.6 | 3,713 | 4.0 | ||||||||||||
Total | $ | 108,234 | 100.0 | % | $ | 92,982 | 100.0 | % | ||||||||
(1) | Includes U.S. Dollar-denominated debt obligations of foreign obligors and other fixed maturity securities foreign investments. |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of Total | Fair | % of Total | |||||||||||||
Value | Investments | Value | Investments | |||||||||||||
(In millions) | ||||||||||||||||
Concentrations within corporate fixed maturity securities: | ||||||||||||||||
Largest exposure to a single issuer | $ | 1,250 | 0.4 | % | $ | 1,469 | 0.5 | % | ||||||||
Holdings in top ten issuers | $ | 8,009 | 2.5 | % | $ | 8,446 | 2.8 | % |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By security type: | ||||||||||||||||
Collateralized mortgage obligations | $ | 24,594 | 56.7 | % | $ | 26,025 | 72.2 | % | ||||||||
Pass-through securities | 18,803 | 43.3 | 10,003 | 27.8 | ||||||||||||
Total residential mortgage-backed securities | $ | 43,397 | 100.0 | % | $ | 36,028 | 100.0 | % | ||||||||
By risk profile: | ||||||||||||||||
Agency | $ | 32,851 | 75.7 | % | $ | 24,409 | 67.8 | % | ||||||||
Prime | 6,711 | 15.5 | 8,254 | 22.9 | ||||||||||||
Alternative residential mortgage loans | 3,835 | 8.8 | 3,365 | 9.3 | ||||||||||||
Total residential mortgage-backed securities | $ | 43,397 | 100.0 | % | $ | 36,028 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 35,341 | 81.4 | % | $ | 33,265 | 92.3 | % | ||||||||
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Alt-A Residential Mortgage—Backed Securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Estimated | Net | Hybrid | ||||||||||||||||||||||||||||||||||||||||||||||
2003 & | Fair | Unrealized | Rated Aa/AA or | Fixed | ARM | |||||||||||||||||||||||||||||||||||||||||||
Prior | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Value | Loss | Better | Rate% | % | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2009: | ||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 53 | $ | 49 | $ | 1,338 | $ | 812 | $ | 781 | $ | — | $ | 802 | $ | 3,835 | $ | 1,570 | ||||||||||||||||||||||||||||||
Percentage | 1.4% | 1.3% | 34.9% | 21.2% | 20.3% | —% | 20.9% | 100.0% | 26.9 | % | 89.2 | % | 10.8 | % | ||||||||||||||||||||||||||||||||||
December 31, 2008: | ||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 113 | $ | 137 | $ | 1,493 | $ | 857 | $ | 765 | $ | — | $ | — | $ | 3,365 | $ | 1,951 | ||||||||||||||||||||||||||||||
Percentage | 3.3% | 4.1% | 44.4% | 25.5% | 22.7% | —% | —% | 100.0% | 63.4 | % | 87.9 | % | 12.1 | % |
Commercial Mortgage—Backed Securities | ||||||||||||||||||||||||||||||||||||||||
Estimated | Net | |||||||||||||||||||||||||||||||||||||||
2003 & | Fair | Unrealized | ||||||||||||||||||||||||||||||||||||||
Prior | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Value | Loss | Rated Aaa | |||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
September 30, 2009: | ||||||||||||||||||||||||||||||||||||||||
Amount | $ | 7,485 | $ | 2,538 | $ | 3,104 | $ | 1,649 | $ | 759 | $ | — | $ | — | $ | 15,535 | $ | 1,080 | ||||||||||||||||||||||
Percentage | 48.2% | 16.3% | 20.0% | 10.6% | 4.9% | —% | —% | 100.0% | 88.9 | % | ||||||||||||||||||||||||||||||
December 31, 2008: | ||||||||||||||||||||||||||||||||||||||||
Amount | $ | 5,412 | $ | 2,457 | $ | 2,737 | $ | 1,437 | $ | 600 | $ | 1 | $ | — | $ | 12,644 | $ | 3,435 | ||||||||||||||||||||||
Percentage | 42.8% | 19.4% | 21.6% | 11.4% | 4.8% | —% | —% | 100.0% | 93.2 | % |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By collateral type: | ||||||||||||||||
Credit card loans | $ | 7,455 | 56.3 | % | $ | 5,190 | 49.3 | % | ||||||||
Student loans | 1,758 | 13.3 | 1,085 | 10.3 | ||||||||||||
Automobile loans | 1,035 | 7.8 | 1,051 | 10.0 | ||||||||||||
Residential mortgage-backed securities backed bysub-prime mortgage loans | 1,027 | 7.7 | 1,142 | 10.9 | ||||||||||||
Other loans | 1,976 | 14.9 | 2,055 | 19.5 | ||||||||||||
Total | $ | 13,251 | 100.0 | % | $ | 10,523 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 9,638 | 72.7 | % | $ | 7,934 | 75.4 | % | ||||||||
Residential mortgage-backed securities backed bysub-prime mortgage loans — portion that is credit enhanced by financial guarantor insurers | 37.6 | % | 37.2 | % | ||||||||||||
Of the 37.6% and 37.2% credit enhanced, the financial guarantor insurers are rated as follows: | ||||||||||||||||
By financial guarantor insurers rated Aa | 16.3 | % | 18.8 | % | ||||||||||||
By financial guarantor insurers rated A | 7.6 | % | — | % | ||||||||||||
By financial guarantor insurers rated Baa | — | % | 37.3 | % |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 6,135 | $ | 6,222 | $ | 5,556 | $ | 5,491 | ||||||||
Due after one year through five years | 36,746 | 37,421 | 33,604 | 30,884 | ||||||||||||
Due after five years through ten years | 40,256 | 41,258 | 41,481 | 36,895 | ||||||||||||
Due after ten years | 65,552 | 66,812 | 58,547 | 55,786 | ||||||||||||
Subtotal | 148,689 | 151,713 | 139,188 | 129,056 | ||||||||||||
Mortgage-backed and asset-backed securities | 76,585 | 72,183 | 70,320 | 59,195 | ||||||||||||
Total fixed maturity securities | $ | 225,274 | $ | 223,896 | $ | 209,508 | $ | 188,251 | ||||||||
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Fixed maturity securities that were temporarily impaired | $ | (831 | ) | $ | (21,246 | ) | ||
Fixed maturity securities with noncredit OTTI losses in other comprehensive loss | (547 | ) | — | |||||
Total fixed maturity securities | (1,378 | ) | (21,246 | ) | ||||
Equity securities | (232 | ) | (934 | ) | ||||
Derivatives | (46 | ) | (2 | ) | ||||
Other | 79 | 53 | ||||||
Subtotal | (1,577 | ) | (22,129 | ) | ||||
Amounts allocated from: | ||||||||
Insurance liability loss recognition | (239 | ) | 42 | |||||
DAC and VOBA on which noncredit OTTI losses have been recognized | 48 | — | ||||||
DAC and VOBA | 475 | 3,025 | ||||||
Subtotal | 284 | 3,067 | ||||||
Deferred income tax benefit (expense) on which noncredit OTTI losses have been recognized | 172 | — | ||||||
Deferred income tax benefit (expense) | 322 | 6,508 | ||||||
Net unrealized investment gains (losses) | (799 | ) | (12,554 | ) | ||||
Net unrealized investment gains (losses) attributable to noncontrolling interests | — | (10 | ) | |||||
Net unrealized investment gains (losses) attributable to MetLife, Inc. | $ | (799 | ) | $ | (12,564 | ) | ||
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Nine Months | ||||
Ended | ||||
September 30, 2009 | ||||
(In millions) | ||||
Balance, end of prior period | $ | (12,564 | ) | |
Cumulative effect of change in accounting principle, net of income tax | (76 | ) | ||
Fixed maturity securities on which noncredit OTTI losses have been recognized | (421 | ) | ||
Unrealized investment gains (losses) during the period | 21,099 | |||
Unrealized investment gains (losses) relating to: | ||||
Insurance liability gain (loss) recognition | (281 | ) | ||
DAC and VOBA on which noncredit OTTI losses have been recognized | 38 | |||
DAC and VOBA | (2,550 | ) | ||
Deferred income tax benefit (expense) on which noncredit OTTI losses have been recognized | 132 | |||
Deferred income tax benefit (expense) | (6,186 | ) | ||
Net unrealized investment gains (losses) | (809 | ) | ||
Net unrealized investment gains (losses) attributable to noncontrolling interests | 10 | |||
Balance, end of period | $ | (799 | ) | |
Change in net unrealized investment gains (losses) | $ | 11,755 | ||
Change in net unrealized investment gains (losses) attributable to noncontrolling interests | 10 | |||
Change in net unrealized investment gains (losses) attributable to MetLife, Inc.’s common shareholders | $ | 11,765 | ||
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September 30, 2009 | ||||||||||||||||||||||||
Equal to or Greater | ||||||||||||||||||||||||
Less than 12 Months | than 12 Months | Total | ||||||||||||||||||||||
Estimated | Gross | Estimated | Gross | Estimated | Gross | |||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
U.S. corporate securities | $ | 3,948 | $ | 398 | $ | 20,536 | $ | 2,751 | $ | 24,484 | $ | 3,149 | ||||||||||||
Residential mortgage-backed securities | 2,587 | 264 | 9,463 | 2,995 | 12,050 | 3,259 | ||||||||||||||||||
Foreign corporate securities | 2,323 | 194 | 8,400 | 1,226 | 10,723 | 1,420 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 7,265 | 282 | 2 | — | 7,267 | 282 | ||||||||||||||||||
Commercial mortgage-backed securities | 1,208 | 19 | 6,991 | 1,242 | 8,199 | 1,261 | ||||||||||||||||||
Asset-backed securities | 652 | 152 | 6,655 | 1,498 | 7,307 | 1,650 | ||||||||||||||||||
Foreign government securities | 1,366 | 45 | 539 | 88 | 1,905 | 133 | ||||||||||||||||||
State and political subdivision securities | 184 | 28 | 1,894 | 256 | 2,078 | 284 | ||||||||||||||||||
Other fixed maturity securities | 8 | 2 | — | — | 8 | 2 | ||||||||||||||||||
Total fixed maturity securities | $ | 19,541 | $ | 1,384 | $ | 54,480 | $ | 10,056 | $ | 74,021 | $ | 11,440 | ||||||||||||
Common stock | 195 | 30 | 10 | 1 | 205 | 31 | ||||||||||||||||||
Non-redeemable preferred stock | 173 | 65 | 924 | 302 | 1,097 | 367 | ||||||||||||||||||
Total equity securities | $ | 368 | $ | 95 | $ | 934 | $ | 303 | $ | 1,302 | $ | 398 | ||||||||||||
Total number of securities in an unrealized loss position | 1,453 | 3,821 | ||||||||||||||||||||||
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December 31, 2008 | ||||||||||||||||||||||||
Equal to or Greater | ||||||||||||||||||||||||
Less than 12 Months | than 12 Months | Total | ||||||||||||||||||||||
Estimated | Gross | Estimated | Gross | Estimated | Gross | |||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
U.S. corporate securities | $ | 30,076 | $ | 4,479 | $ | 18,011 | $ | 5,423 | $ | 48,087 | $ | 9,902 | ||||||||||||
Residential mortgage-backed securities | 10,032 | 2,711 | 4,572 | 2,009 | 14,604 | 4,720 | ||||||||||||||||||
Foreign corporate securities | 15,634 | 3,157 | 6,609 | 2,527 | 22,243 | 5,684 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 106 | 1 | — | — | 106 | 1 | ||||||||||||||||||
Commercial mortgage-backed securities | 9,259 | 1,665 | 3,093 | 1,788 | 12,352 | 3,453 | ||||||||||||||||||
Asset-backed securities | 6,412 | 1,325 | 3,777 | 2,414 | 10,189 | 3,739 | ||||||||||||||||||
Foreign government securities | 2,030 | 316 | 403 | 61 | 2,433 | 377 | ||||||||||||||||||
State and political subdivision securities | 2,035 | 405 | 948 | 537 | 2,983 | 942 | ||||||||||||||||||
Other fixed maturity securities | 20 | 3 | 2 | — | 22 | 3 | ||||||||||||||||||
Total fixed maturity securities | $ | 75,604 | $ | 14,062 | $ | 37,415 | $ | 14,759 | $ | 113,019 | $ | 28,821 | ||||||||||||
Equity securities | $ | 727 | $ | 306 | $ | 978 | $ | 672 | $ | 1,705 | $ | 978 | ||||||||||||
Total number of securities in an unrealized loss position | 9,066 | 3,539 | ||||||||||||||||||||||
September 30, 2009 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 13,065 | $ | 1,879 | $ | 389 | $ | 540 | 1,030 | 144 | ||||||||||||||
Six months or greater but less than nine months | 2,679 | 1,983 | 157 | 640 | 326 | 111 | ||||||||||||||||||
Nine months or greater but less than twelve months | 3,539 | 6,288 | 228 | 2,116 | 359 | 372 | ||||||||||||||||||
Twelve months or greater | 45,870 | 10,158 | 3,276 | 4,094 | 3,066 | 666 | ||||||||||||||||||
Total | $ | 65,153 | $ | 20,308 | $ | 4,050 | $ | 7,390 | ||||||||||||||||
Percentage of cost or amortized cost | 6 | % | 36 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 44 | $ | 46 | $ | 2 | $ | 13 | 127 | 31 | ||||||||||||||
Six months or greater but less than nine months | 32 | 113 | 6 | 45 | 8 | 7 | ||||||||||||||||||
Nine months or greater but less than twelve months | 229 | 132 | 29 | 43 | 23 | 16 | ||||||||||||||||||
Twelve months or greater | 393 | 711 | 48 | 212 | 69 | 25 | ||||||||||||||||||
Total | $ | 698 | $ | 1,002 | $ | 85 | $ | 313 | ||||||||||||||||
Percentage of cost | 12 | % | 31 | % | ||||||||||||||||||||
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December 31, 2008 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 32,658 | $ | 48,114 | $ | 2,358 | $ | 17,191 | 4,566 | 2,827 | ||||||||||||||
Six months or greater but less than nine months | 14,975 | 2,180 | 1,313 | 1,109 | 1,314 | 157 | ||||||||||||||||||
Nine months or greater but less than twelve months | 16,372 | 3,700 | 1,830 | 2,072 | 934 | 260 | ||||||||||||||||||
Twelve months or greater | 23,191 | 650 | 2,533 | 415 | 1,809 | 102 | ||||||||||||||||||
Total | $ | 87,196 | $ | 54,644 | $ | 8,034 | $ | 20,787 | ||||||||||||||||
Percentage of cost or amortized cost | 9 | % | 38 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 386 | $ | 1,190 | $ | 58 | $ | 519 | 351 | 551 | ||||||||||||||
Six months or greater but less than nine months | 33 | 413 | 6 | 190 | 8 | 32 | ||||||||||||||||||
Nine months or greater but less than twelve months | 3 | 487 | — | 194 | 5 | 15 | ||||||||||||||||||
Twelve months or greater | 171 | — | 11 | — | 20 | — | ||||||||||||||||||
Total | $ | 593 | $ | 2,090 | $ | 75 | $ | 903 | ||||||||||||||||
Percentage of cost | 13 | % | 43 | % | ||||||||||||||||||||
September 30, 2009 | December 31, 2008 | |||||||
Sector: | ||||||||
U.S. corporate securities | 27 | % | 33 | % | ||||
Residential mortgage-backed securities | 27 | 16 | ||||||
Asset-backed securities | 14 | 13 | ||||||
Foreign corporate securities | 12 | 19 | ||||||
Commercial mortgage-backed securities | 11 | 11 | ||||||
State and political subdivision securities | 2 | 3 | ||||||
Foreign government securities | 1 | 1 | ||||||
Other | 6 | 4 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Mortgage-backed | 38 | % | 27 | % | ||||
Finance | 25 | 24 | ||||||
Asset-backed | 14 | 13 | ||||||
Consumer | 5 | 11 | ||||||
Utility | 3 | 8 | ||||||
Communications | 2 | 5 | ||||||
Industrial | 2 | 4 | ||||||
Foreign government | 1 | 1 | ||||||
Other | 10 | 7 | ||||||
Total | 100 | % | 100 | % | ||||
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September 30, 2009 | December 31, 2008 | |||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||
Securities | Securities | Securities | Securities | |||||
(In millions, except number of securities) | ||||||||
Number of securities | 260 | 15 | 699 | 33 | ||||
Total gross unrealized loss | $5,341 | $248 | $14,485 | $699 | ||||
Percentage of gross unrealized loss | 47% | 62% | 50% | 71% |
September 30, 2009 | ||||||||||||||||||||||||||||||||
Non-Redeemable Preferred Stock | ||||||||||||||||||||||||||||||||
All Types of | ||||||||||||||||||||||||||||||||
All Equity | Non-Redeemable | Investment Grade | ||||||||||||||||||||||||||||||
Securities | Preferred Stock | All Industries | Financial Services Industry | |||||||||||||||||||||||||||||
Gross | Gross | % of All | Gross | % of All | Gross | % A | ||||||||||||||||||||||||||
Unrealized | Unrealized | Equity | Unrealized | Non-Redeemable | Unrealized | % of All | Rated or | |||||||||||||||||||||||||
Loss | Loss | Securities | Loss | Preferred Stock | Loss | Industries | Better | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Less than six months | $ | 13 | $ | 9 | 69 | % | $ | 1 | 11 | % | $ | 1 | 100 | % | 100 | % | ||||||||||||||||
More than six months and less than twelve months | 88 | 88 | 100 | % | 57 | 65 | % | 51 | 89 | % | 88 | % | ||||||||||||||||||||
Twelve months or greater | 212 | 212 | 100 | % | 212 | 100 | % | 212 | 100 | % | 61 | % | ||||||||||||||||||||
All equity securities with gross unrealized loss of 20% or more | $ | 313 | $ | 309 | 99 | % | $ | 270 | 87 | % | $ | 264 | 98 | % | 66 | % | ||||||||||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Total losses on fixed maturity securities: | ||||||||||||||||
Total OTTI losses recognized | $ | (650 | ) | $ | (748 | ) | $ | (1,769 | ) | $ | (961 | ) | ||||
Less: Noncredit portion of OTTI losses transferred to and recognized in other comprehensive loss | 245 | — | 479 | — | ||||||||||||
Net OTTI losses on fixed maturity securities recognized in earnings | (405 | ) | (748 | ) | (1,290 | ) | (961 | ) | ||||||||
Fixed maturity securities — net gains (losses) on sales and disposals | (50 | ) | (170 | ) | (152 | ) | (466 | ) | ||||||||
Total losses on fixed maturity securities | (455 | ) | (918 | ) | (1,442 | ) | (1,427 | ) | ||||||||
Other net investment gains (losses): | ||||||||||||||||
Equity securities | (53 | ) | (181 | ) | (430 | ) | (191 | ) | ||||||||
Mortgage and consumer loans | (129 | ) | 26 | (400 | ) | (36 | ) | |||||||||
Real estate and real estate joint ventures | (70 | ) | 1 | (163 | ) | 3 | ||||||||||
Other limited partnership interests | (12 | ) | (16 | ) | (356 | ) | (31 | ) | ||||||||
Freestanding derivatives | (821 | ) | 1,451 | (5,508 | ) | 1,093 | ||||||||||
Embedded derivatives | (586 | ) | 31 | 1,424 | (29 | ) | ||||||||||
Other | (13 | ) | 352 | 1 | 277 | |||||||||||
Total net investment gains (losses) | $ | (2,139 | ) | $ | 746 | $ | (6,874 | ) | $ | (341 | ) | |||||
Fixed Maturity Securities | Equity Securities | |||||||||||||||||||||||||||||||
Three Months | Nine Months | Three Months | Nine Months | |||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Proceeds | $ | 11,041 | $ | 15,441 | $ | 30,392 | $ | 42,250 | $ | 334 | $ | 1,396 | $ | 587 | $ | 2,026 | ||||||||||||||||
Gross investment gains | 228 | 279 | 773 | 569 | 41 | 265 | 61 | 412 | ||||||||||||||||||||||||
Gross investment losses | (278 | ) | (449 | ) | (925 | ) | (1,035 | ) | (58 | ) | (167 | ) | (125 | ) | (207 | ) | ||||||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||||||||||
Credit-related | (223 | ) | (593 | ) | (966 | ) | (803 | ) | — | — | — | — | ||||||||||||||||||||
Other (1) | (182 | ) | (155 | ) | (324 | ) | (158 | ) | (36 | ) | (279 | ) | (366 | ) | (396 | ) | ||||||||||||||||
Total OTTI losses recognized in earnings | (405 | ) | (748 | ) | (1,290 | ) | (961 | ) | (36 | ) | (279 | ) | (366 | ) | (396 | ) | ||||||||||||||||
Net investment gains (losses) | $ | (455 | ) | $ | (918 | ) | $ | (1,442 | ) | $ | (1,427 | ) | $ | (53 | ) | $ | (181 | ) | $ | (430 | ) | $ | (191 | ) | ||||||||
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(1) | Other OTTI losses recognized in earnings include impairments on equity securities, impairments on perpetual hybrid securities classified within fixed maturity securities where the primary reason for the impairment was the severity and/or the duration of an unrealized loss position, and fixed maturity securities where there is an intent to sell or it is more likely than not that the Company will be required to sell the security before recovery of the decline in fair value. |
• | Three Months Ended September 30, 2009 compared to the Three Months Ended September 30, 2008 —In the third quarter of 2008, the stress experienced in the global financial markets, caused several financial institutions to enter bankruptcy, enter FDIC receivership or receive significant government capital infusions. The Company incurred fixed maturity and equity securities impairments of $562 million ($482 million on fixed maturity security holdings and $80 million on equity security holdings) related to security holdings on three such financial institutions in the third quarter of 2008. In addition, the Company incurred fixed maturity security impairments of $155 million in the third quarter of 2008 on securities the Company either lacked the intent to hold, or due to extensive credit spread widening, the Company was uncertain of its intent to hold these securities for a period of time sufficient to allow for recovery of the market value decline. Accordingly, impairments on the Company’s financial services industry holdings, and total impairments across all sectors, were higher in the third quarter of 2008 than the third quarter of 2009 as presented in the tables below. | |
• | Nine Months Ended September 30, 2009 compared to the Nine Months Ended September 30, 2008 — Conversely, impairments for the nine months ended September 2009 were higher than for the nine months ended September 2008, due to increased fixed maturity security impairments across several industry sectors as presented in the tables below, and not as a result of a concentration in the financial services industry sector. Impairments across these several industry sectors increased due to financial restructurings, bankruptcy filings, ratings downgrades, or difficult operating environments of the issuers. |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
U.S. and foreign corporate securities: | ||||||||||||||||
Finance | $ | 241 | $ | 491 | $ | 429 | $ | 605 | ||||||||
Communications | 29 | 32 | 232 | 49 | ||||||||||||
Consumer | 42 | 12 | 206 | 60 | ||||||||||||
Utility | 8 | 1 | 84 | 2 | ||||||||||||
Industrial | 7 | — | 27 | — | ||||||||||||
Other | — | 177 | 26 | 182 | ||||||||||||
Total U.S. and foreign corporate securities | 327 | 713 | 1,004 | 898 | ||||||||||||
Residential mortgage-backed securities | 40 | — | 118 | — | ||||||||||||
Asset-backed securities | 17 | 35 | 111 | 63 | ||||||||||||
Commercial mortgage-backed securities | 20 | — | 56 | — | ||||||||||||
Foreign government securities | 1 | — | 1 | — | ||||||||||||
Total | $ | 405 | $ | 748 | $ | 1,290 | $ | 961 | ||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: | ||||||||||||||||
Non-redeemable preferred stock | $ | 34 | $ | 270 | $ | 314 | $ | 308 | ||||||||
Common stock (1) | 2 | 9 | 52 | 88 | ||||||||||||
Total | $ | 36 | $ | 279 | $ | 366 | $ | 396 | ||||||||
Industry: | ||||||||||||||||
Financial services industry: | ||||||||||||||||
Perpetual hybrid securities (2) | $ | 34 | $ | 84 | $ | 294 | $ | 86 | ||||||||
Common and remaining non-redeemable preferred stock | — | 191 | 30 | 245 | ||||||||||||
Total financial services industry | 34 | 275 | 324 | 331 | ||||||||||||
Other | 2 | 4 | 42 | 65 | ||||||||||||
Total | $ | 36 | $ | 279 | $ | 366 | $ | 396 | ||||||||
(1) | With respect to common stock holdings, the Company considered the duration and severity of the securities in an unrealized loss position of 20% or more; and the duration of the securities in an unrealized loss position of 20% or less in an extended unrealized loss position (i.e., 12 months or greater) in determining the other-than-temporary impairment charge for such securities. |
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(2) | Impairment due to a deterioration in the credit rating of the issuer to below investment grade and due to a severe and extended unrealized loss position. |
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2009 | September 30, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 380 | $ | — | ||||
Credit loss component of OTTI loss not reclassified to other comprehensive loss in the cumulative effect transition adjustment | — | 230 | ||||||
Additions: | ||||||||
Initial impairments — credit loss OTTI recognized on securities not previously impaired | 53 | 205 | ||||||
Additional impairments — credit loss OTTI recognized on securities previously impaired | 50 | 55 | ||||||
Reductions: | ||||||||
Due to sales (or maturities, pay downs or prepayments) during the period of securities previously credit loss OTTI impaired | (15 | ) | (22 | ) | ||||
Balance, end of period | $ | 468 | $ | 468 | ||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securities | $ | 2,955 | $ | 3,446 | $ | 8,709 | $ | 10,424 | ||||||||
Equity securities | 37 | 47 | 130 | 197 | ||||||||||||
Trading securities (1) | 163 | (95 | ) | 310 | (137 | ) | ||||||||||
Mortgage and consumer loans | 677 | 712 | 2,055 | 2,109 | ||||||||||||
Policy loans | 163 | 148 | 481 | 447 | ||||||||||||
Real estate and real estate joint ventures (2) | (25 | ) | 141 | (184 | ) | 519 | ||||||||||
Other limited partnership interests (3) | 128 | (62 | ) | (53 | ) | 141 | ||||||||||
Cash, cash equivalents and short-term investments | 27 | 101 | 109 | 313 | ||||||||||||
International joint ventures (4) | (16 | ) | 21 | (86 | ) | 16 | ||||||||||
Other | 37 | 83 | 156 | 230 | ||||||||||||
Total investment income | 4,146 | 4,542 | 11,627 | 14,259 | ||||||||||||
Less: Investment expenses | 223 | 495 | 713 | 1,598 | ||||||||||||
Net investment income | $ | 3,923 | $ | 4,047 | $ | 10,914 | $ | 12,661 | ||||||||
(1) | Net investment income from trading securities includes interest and dividends earned on trading securities in addition to the net realized gains (losses) and subsequent changes in estimated fair value recognized on trading securities and the short sale agreement liabilities. During the three months and nine months ended September 30, 2008, unfavorable changes in estimated fair value of trading securities, due to volatility in the equity and credit markets, were in excess of interest and dividends earned and net realized gains (losses) on securities sold. The changes in estimated fair value included in net investment income on trading securities are presented in the trading securities section below. | |
(2) | Net investment income from wholly-owned real estate was more than offset by losses incurred on real estate joint ventures. Net investment income from real estate joint ventures within the real estate and real estate joint ventures caption represents distributions for investments accounted for under the cost method and equity in earnings for investments accounted for under the equity method. Overall, for the three months and nine months ended September 30, 2009, the net amount recognized were losses of $25 million and $184 million, respectively, resulting primarily from declining property valuations on certain investment funds that carry their real estate at estimated fair value and operating losses incurred on properties that were developed for sale by development joint ventures. The commercial real estate properties underlying these investment funds have experienced declines in estimated fair value driven by capital market factors and deteriorating market conditions, which has led to declining property valuations, while the development joint ventures have experienced fewer property sales due to declining real estate market fundamentals and decreased availability of lending to finance these types of transactions. | |
(3) | Net investment income from other limited partnership interests, including hedge funds, represents distributions from other limited partnership interests accounted for under the cost method and equity in earnings from other limited partnership interests accounted for under the equity method. Overall for the nine months ended September 30, 2009, the net amount recognized was a loss of $53 million, resulting principally from losses on equity method investments. Such earnings and losses recognized for other limited partnership interests are impacted by volatility in the equity and credit markets. |
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(4) | Amounts are presented net of changes in estimated fair value of derivatives related to economic hedges of these equity method investments that do not qualify for hedge accounting of $1 million and ($115) million for the three months and nine months ended September 30, 2009, respectively, and $33 million and $41 million for the three months and nine months ended September 30, 2008, respectively. The increase in losses on the international joint ventures was driven by these derivatives, which moved from gains in the prior year to losses in the current year. The losses were primarily attributable to losses on equity derivatives (used to hedge embedded derivative risk) due to improving equity markets in the current period, as well as losses on foreign currency derivatives due to the U.S. Dollar weakening against several major foreign currencies. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Securities on loan: | ||||||||
Cost or amortized cost | $ | 19,790 | $ | 20,791 | ||||
Estimated fair value | $ | 20,556 | $ | 22,885 | ||||
Aging of cash collateral liability: | ||||||||
Open (1) | $ | 2,473 | $ | 5,118 | ||||
Less than thirty days | 9,091 | 14,711 | ||||||
Greater than thirty days to sixty days | 5,222 | 3,471 | ||||||
Greater than sixty days to ninety days | 1,659 | — | ||||||
Greater than ninety days | 2,606 | — | ||||||
Total cash collateral liability | $ | 21,051 | $ | 23,300 | ||||
Security collateral on deposit from counterparties | $ | 40 | $ | 279 | ||||
Reinvestment portfolio — estimated fair value | $ | 20,150 | $ | 19,509 | ||||
(1) | Open terms — meaning that the related loaned security could be returned to the Company on the next business day requiring the Company to immediately return the cash collateral. |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Assets on deposit: | ||||||||
Regulatory agencies (1) | $ | 1,397 | $ | 1,282 | ||||
Assets held in trust: | ||||||||
Collateral financing arrangements (2) | 5,887 | 4,754 | ||||||
Reinsurance arrangements (3) | 1,537 | 1,714 | ||||||
Assets pledged as collateral: | ||||||||
Debt and funding agreements — FHLB of NY (4) | 20,213 | 20,880 | ||||||
Debt and funding agreements — FHLB of Boston (4) | 424 | 1,284 | ||||||
Funding agreements — Farmer MAC (5) | 2,872 | 2,875 | ||||||
Federal Reserve Bank of New York (6) | 2,456 | 1,577 | ||||||
Collateral financing arrangements — Holding Company (7) | 76 | 316 | ||||||
Derivative transactions (8) | 1,563 | 1,744 | ||||||
Short sale agreements (9) | 473 | 346 | ||||||
Other | — | 180 | ||||||
Total assets on deposit, held in trust and pledged as collateral | $ | 36,898 | $ | 36,952 | ||||
(1) | The Company had investment assets on deposit with regulatory agencies consisting primarily of fixed maturity and equity securities. | |
(2) | The Company held in trust cash and securities, primarily fixed maturity and equity securities, to satisfy collateral requirements. The Company has also pledged certain fixed maturity securities in support of the collateral financing arrangements described in Note 10. | |
(3) | The Company has pledged certain investments, primarily fixed maturity securities, in connection with certain reinsurance transactions. | |
(4) | The Company has pledged fixed maturity securities and mortgage loans in support of its debt and funding agreements with the Federal Home Loan Bank of New York (“FHLB of NY”) and has pledged fixed maturity securities to the Federal Home Loan Bank of Boston (“FHLB of Boston”). The nature of these Federal Home Loan Bank arrangements is described in Note 7 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. | |
(5) | The Company has pledged certain agricultural real estate mortgage loans in connection with funding agreements with the Federal Agricultural Mortgage Corporation (“Farmer MAC”). The nature of the Farmer MAC arrangements is described in Note 7 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. |
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(6) | The Company has pledged qualifying mortgage loans and fixed maturity securities in connection with collateralized borrowings from the Federal Reserve Bank of New York’s Term Auction Facility. The nature of the Federal Reserve Bank of New York arrangements is described in Note 9. | |
(7) | The Holding Company has pledged certain collateral in support of the collateral financing arrangements described in Note 10. | |
(8) | Certain of the Company’s invested assets are pledged as collateral for various derivative transactions as described in Note 4. | |
(9) | Certain of the Company’s trading securities and cash and cash equivalents are pledged to secure liabilities associated with short sale agreements in the trading securities portfolio as described in the following section. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Trading securities — at estimated fair value | $ | 1,970 | $ | 946 | ||||
Short sale agreement liabilities (included in other liabilities) | $ | 143 | $ | 57 | ||||
Investments pledged to secure short sale agreement liabilities | $ | 473 | $ | 346 |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Net investment income (1) | $ | 163 | $ | (95 | ) | $ | 310 | $ | (137 | ) | ||||||
Changes in estimated fair value included in net investment income | $ | 101 | $ | (105 | ) | $ | 242 | $ | (149 | ) |
(1) | Includes interest and dividends earned on trading securities, in addition to the net realized gains (losses) and subsequent changes in estimated fair value, recognized on the trading securities and the related short sale agreement liabilities. |
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Carrying Value | ||||
(In millions) | ||||
Fair value, beginning of period | $ | 191 | ||
Acquisition of mortgage servicing rights | 117 | |||
Origination of mortgage servicing rights | 427 | |||
Reduction due to loan payments | (85 | ) | ||
Changes in estimated fair value due to: | ||||
Changes in valuation model inputs or assumptions | 70 | |||
Fair value, end of period | $ | 720 | ||
September 30, 2009 | December 31, 2008 | |||||||||||||||
Total | Total | Total | Total | |||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(In millions) | ||||||||||||||||
MRSC collateral financing arrangement (1) | $ | 3,159 | $ | — | $ | 2,361 | $ | — | ||||||||
Real estate joint ventures (2) | 21 | 15 | 26 | 15 | ||||||||||||
Other limited partnership interests (3) | 359 | 87 | 20 | 3 | ||||||||||||
Other invested assets (4) | 29 | 2 | 10 | 3 | ||||||||||||
Total | $ | 3,568 | $ | 104 | $ | 2,417 | $ | 21 | ||||||||
(1) | See Note 10 for a description of the MetLife Reinsurance Company of South Carolina (“MRSC”) collateral financing arrangement. At September 30, 2009 and December 31, 2008, these assets are presented at estimated fair value and consist of the following: |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||
U.S. corporate securities | $ | 1,069 | $ | 948 | ||||
Asset-backed securities | 857 | 409 | ||||||
Residential mortgage-backed securities | 658 | 561 | ||||||
Commercial mortgage-backed securities | 345 | 98 | ||||||
U.S. Treasury, agency and government guaranteed securities | 100 | — | ||||||
Foreign corporate securities | 100 | 95 | ||||||
State and political subdivision securities | 21 | 21 | ||||||
Foreign government securities | 5 | 5 | ||||||
Cash and cash equivalents (including cash held in trust of less than $1 million and $60 million, respectively) | 4 | 224 | ||||||
Total | $ | 3,159 | $ | 2,361 | ||||
(2) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. At September 30, 2009 and December 31, 2008, the assets consisted of $16 million and $20 million, respectively, of real estate and real estate joint venturesheld-for-investment, $4 million and $5 million, respectively, of cash and cash equivalents and $1 million and $1 million, respectively, of other assets. At both September 30, 2009 and December 31, 2008, liabilities consisted of $15 million of other liabilities. | |
(3) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. At September 30, 2009, the assets consisted of $228 million of other limited partnership interests, $104 million of other invested assets, $12 million of cash and cash equivalents, and $15 million of other assets. At December 31, 2008, the assets of $20 million were included within other limited partnership interests. At September 30, 2009, liabilities of $75 million and $12 million were included within long-term debt and other liabilities, respectively, and at December 31, 2008, liabilities of $3 million were included within other liabilities. | |
(4) | Other invested assets include tax-credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. At September 30, 2009 and December 31, 2008, the assets of $29 million and $10 million, respectively, were included within other invested assets. At September 30, 2009 and December 31, 2008, the liabilities consisted of $1 million and $2 million, respectively, of long-term debt and $1 million and $1 million, respectively, of other liabilities. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Carrying | Exposure | Carrying | Exposure | |||||||||||||
Amount (1) | to Loss (2) | Amount (1) | to Loss (2) | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||||||||||
Foreign corporate securities | $ | 1,212 | $ | 1,212 | $ | 1,080 | $ | 1,080 | ||||||||
U.S. corporate securities | 1,090 | 1,090 | 992 | 992 | ||||||||||||
Real estate joint ventures | 31 | 31 | 32 | 32 | ||||||||||||
Other limited partnership interests | 2,350 | 2,667 | 3,496 | 4,004 | ||||||||||||
Other invested assets | 388 | 225 | 318 | 108 | ||||||||||||
Total | $ | 5,071 | $ | 5,225 | $ | 5,918 | $ | 6,216 | ||||||||
(1) | See Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for further discussion of the Company’s accounting policies with respect to the basis for determining carrying value of these investments. | |
(2) | The maximum exposure to loss relating to the fixed maturity securitiesavailable-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the real estate joint ventures and other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company’s return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by tax credits guaranteed by third parties of $237 million and $278 million at September 30, 2009 and December 31, 2008, respectively. |
4. | Derivative Financial Instruments |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||
Current Market | Current Market | |||||||||||||||||||||||||
Primary Underlying | Notional | or Fair Value (1) | Notional | or Fair Value (1) | ||||||||||||||||||||||
Risk Exposure | Instrument Type | Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Interest rate | Interest rate swaps | $ | 36,558 | $ | 2,306 | $ | 1,227 | $ | 34,060 | $ | 4,617 | $ | 1,468 | |||||||||||||
Interest rate floors | 23,691 | 638 | 58 | 48,517 | 1,748 | — | ||||||||||||||||||||
Interest rate caps | 28,409 | 249 | — | 24,643 | 11 | — | ||||||||||||||||||||
Interest rate futures | 7,943 | 10 | 4 | 13,851 | 44 | 117 | ||||||||||||||||||||
Interest rate options | 300 | 3 | — | 2,365 | 939 | 35 | ||||||||||||||||||||
Interest rate forwards | 13,331 | 203 | 62 | 16,616 | 49 | 70 | ||||||||||||||||||||
Synthetic GICs | 4,340 | — | — | 4,260 | — | — | ||||||||||||||||||||
Foreign currency | Foreign currency swaps | 16,971 | 1,681 | 1,506 | 19,438 | 1,953 | 1,866 | |||||||||||||||||||
Foreign currency forwards | 6,566 | 137 | 74 | 5,167 | 153 | 129 | ||||||||||||||||||||
Currency options | 649 | 19 | — | 932 | 73 | — | ||||||||||||||||||||
Non-derivative hedging instruments (2) | — | — | — | 351 | — | 323 | ||||||||||||||||||||
Credit | Swap spreadlocks | — | — | — | 2,338 | — | 99 | |||||||||||||||||||
Credit default swaps | 6,994 | 119 | 161 | 5,219 | 152 | 69 | ||||||||||||||||||||
Other | 90 | 4 | — | — | — | — | ||||||||||||||||||||
Equity market | Equity futures | 7,725 | 23 | 18 | 6,057 | 1 | 88 | |||||||||||||||||||
Equity options | 25,769 | 1,910 | 933 | 5,153 | 2,150 | — | ||||||||||||||||||||
Variance swaps | 13,570 | 254 | 25 | 9,222 | 416 | — | ||||||||||||||||||||
Other | 250 | — | 60 | 250 | — | 101 | ||||||||||||||||||||
Total | $ | 193,156 | $ | 7,556 | $ | 4,128 | $ | 198,439 | $ | 12,306 | $ | 4,365 | ||||||||||||||
(1) | The estimated fair value of all derivatives in an asset position is reported within other invested assets in the consolidated balance sheets and the estimated fair value of all derivatives in a liability position is reported within other liabilities in the consolidated balance sheets. | |
(2) | The estimated fair value of non-derivative hedging instruments represents the amortized cost of the instruments, as adjusted for foreign currency transaction gains or losses. Non-derivative hedging instruments are reported within policyholder account balances in the consolidated balance sheets. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Derivatives Designated as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fair Value Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | $ | 5,007 | $ | 948 | $ | 137 | $ | 6,093 | $ | 467 | $ | 550 | ||||||||||||
Interest rate swaps | 4,791 | 767 | 97 | 4,141 | 1,338 | 153 | ||||||||||||||||||
Subtotal | 9,798 | 1,715 | 234 | 10,234 | 1,805 | 703 | ||||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | 3,953 | 163 | 344 | 3,782 | 463 | 381 | ||||||||||||||||||
Interest rate swaps | — | — | — | 286 | — | 6 | ||||||||||||||||||
Interest rate forwards | 2,753 | 138 | — | — | — | — | ||||||||||||||||||
Other | 90 | 4 | — | — | — | — | ||||||||||||||||||
Subtotal | 6,796 | 305 | 344 | 4,068 | 463 | 387 | ||||||||||||||||||
Foreign Operations Hedges: | ||||||||||||||||||||||||
Foreign currency forwards | 1,906 | 18 | 42 | 1,670 | 32 | 50 | ||||||||||||||||||
Foreign currency swaps | 102 | — | 14 | 164 | 1 | — | ||||||||||||||||||
Non-derivative hedging instruments | — | — | — | 351 | — | 323 | ||||||||||||||||||
Subtotal | 2,008 | 18 | 56 | 2,185 | 33 | 373 | ||||||||||||||||||
Total Qualifying Hedges | $ | 18,602 | $ | 2,038 | $ | 634 | $ | 16,487 | $ | 2,301 | $ | 1,463 | ||||||||||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Derivatives Not Designated or Not | Notional | Fair Value | Notional | Fair Value | ||||||||||||||||||||
Qualifying as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 31,767 | $ | 1,539 | $ | 1,130 | $ | 29,633 | $ | 3,279 | $ | 1,309 | ||||||||||||
Interest rate floors | 23,691 | 638 | 58 | 48,517 | 1,748 | — | ||||||||||||||||||
Interest rate caps | 28,409 | 249 | — | 24,643 | 11 | — | ||||||||||||||||||
Interest rate futures | 7,943 | 10 | 4 | 13,851 | 44 | 117 | ||||||||||||||||||
Interest rate options | 300 | 3 | — | 2,365 | 939 | 35 | ||||||||||||||||||
Interest rate forwards | 10,578 | 65 | 62 | 16,616 | 49 | 70 | ||||||||||||||||||
Synthetic GICs | 4,340 | — | — | 4,260 | — | — | ||||||||||||||||||
Foreign currency swaps | 7,909 | 570 | 1,011 | 9,399 | 1,022 | 935 | ||||||||||||||||||
Foreign currency forwards | 4,660 | 119 | 32 | 3,497 | 121 | 79 | ||||||||||||||||||
Currency options | 649 | 19 | — | 932 | 73 | — | ||||||||||||||||||
Swap spreadlocks | — | — | — | 2,338 | — | 99 | ||||||||||||||||||
Credit default swaps | 6,994 | 119 | 161 | 5,219 | 152 | 69 | ||||||||||||||||||
Equity futures | 7,725 | 23 | 18 | 6,057 | 1 | 88 | ||||||||||||||||||
Equity options | 25,769 | 1,910 | 933 | 5,153 | 2,150 | — | ||||||||||||||||||
Variance swaps | 13,570 | 254 | 25 | 9,222 | 416 | — | ||||||||||||||||||
Other | 250 | — | 60 | 250 | — | 101 | ||||||||||||||||||
Total non-designated or non-qualifying derivatives | $ | 174,554 | $ | 5,518 | $ | 3,494 | $ | 181,952 | $ | 10,005 | $ | 2,902 | ||||||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Qualifying hedges: | ||||||||||||||||
Net investment income | $ | 11 | $ | 6 | $ | 38 | $ | 8 | ||||||||
Interest credited to policyholder account balances | 58 | 26 | 155 | 89 | ||||||||||||
Other expenses | (1 | ) | (2 | ) | (2 | ) | (3 | ) | ||||||||
Non-qualifying hedges: | ||||||||||||||||
Net investment income (loss) | (1 | ) | 3 | (2 | ) | 2 | ||||||||||
Net investment gains (losses) | (1 | ) | 5 | 62 | (14 | ) | ||||||||||
Other revenues | 25 | — | 47 | — | ||||||||||||
Total | $ | 91 | $ | 38 | $ | 298 | $ | 82 | ||||||||
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Ineffectiveness | ||||||||||||||
Net Investment Gains | Net Investment Gains | Recognized in | ||||||||||||
Derivatives in Fair Value | Hedged Items in Fair Value | (Losses) Recognized | (Losses) Recognized | Net Investment | ||||||||||
Hedging Relationships | Hedging Relationships | for Derivatives | for Hedged Items | Gains (Losses) | ||||||||||
(In millions) | ||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||
Interest rate swaps: | Fixed maturity securities | $ | (13 | ) | $ | 12 | $ | (1 | ) | |||||
Policyholder account balances (1) | 144 | (142 | ) | 2 | ||||||||||
Foreign currency swaps: | Foreign-denominated fixed maturity securities | (3 | ) | 2 | (1 | ) | ||||||||
Foreign-denominated policyholder account balances (2) | 190 | (181 | ) | 9 | ||||||||||
Total | $ | 318 | $ | (309 | ) | $ | 9 | |||||||
For the Three Months Ended September 30, 2008 | $ | (401 | ) | $ | 411 | $ | 10 | |||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||
Interest rate swaps: | Fixed maturity securities | $ | 34 | $ | (29 | ) | $ | 5 | ||||||
Policyholder account balances (1) | (668 | ) | 659 | (9 | ) | |||||||||
Foreign currency swaps: | Foreign-denominated fixed maturity securities | (16 | ) | 13 | (3 | ) | ||||||||
Foreign-denominated policyholder account balances (2) | 510 | (489 | ) | 21 | ||||||||||
Total | $ | (140 | ) | $ | 154 | $ | 14 | |||||||
For the Nine Months Ended September 30, 2008 | $ | (379 | ) | $ | 384 | $ | 5 | |||||||
(1) | Fixed rate liabilities | |
(2) | Fixed rate or floating rate liabilities |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Other comprehensive income (loss), beginning of period | $ | 13 | $ | (318 | ) | $ | 82 | $ | (270 | ) | ||||||
Gains (losses) deferred in other comprehensive loss on the effective portion of cash flow hedges | 12 | 123 | (93 | ) | 77 | |||||||||||
Amounts reclassified to net investment gains (losses) | 70 | 126 | 103 | 119 | ||||||||||||
Amounts reclassified to net investment income | 4 | 2 | 10 | 7 | ||||||||||||
Amounts reclassified to other expenses | — | — | (1 | ) | (1 | ) | ||||||||||
Amortization of transition adjustment | — | — | (2 | ) | 1 | |||||||||||
Other comprehensive income (loss), end of period | $ | 99 | $ | (67 | ) | $ | 99 | $ | (67 | ) | ||||||
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Amount of Gains | Amount and Location | |||||||||||||||||||||||
(Losses) Deferred | of Gains (Losses) | Amount and Location | ||||||||||||||||||||||
in Accumulated | Reclassified from | of Gains (Losses) | ||||||||||||||||||||||
Derivatives in Cash Flow | Other Comprehensive | Accumulated Other | Recognized in Income | |||||||||||||||||||||
Hedging Relationships | Loss on Derivatives | Comprehensive Loss into Income | on Derivatives | |||||||||||||||||||||
(Ineffective Portion and | ||||||||||||||||||||||||
Amount Excluded from | ||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | Effectiveness Testing) | ||||||||||||||||||||||
Net Investment | Net Investment | Other | Net Investment | Net Investment | ||||||||||||||||||||
Gains Losses | Income | Expenses | Gains (Losses) | Income | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||
Interest rate swaps | $ | 1 | $ | — | $ | (2 | ) | $ | — | $ | — | $ | — | |||||||||||
Foreign currency swaps | (121 | ) | (107 | ) | (2 | ) | — | — | — | |||||||||||||||
Interest rate forwards | 128 | 37 | — | — | — | — | ||||||||||||||||||
Other | 4 | — | — | — | — | — | ||||||||||||||||||
Total | $ | 12 | $ | (70 | ) | $ | (4 | ) | $ | — | $ | — | $ | — | ||||||||||
For the Three Months Ended September 30, 2008: | ||||||||||||||||||||||||
Interest rate swaps | $ | 3 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Foreign currency swaps | 120 | (126 | ) | (2 | ) | — | — | — | ||||||||||||||||
Total | $ | 123 | $ | (126 | ) | $ | (2 | ) | $ | — | $ | — | $ | — | ||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||||||
Interest rate swaps | $ | 2 | $ | — | $ | (4 | ) | $ | — | $ | — | $ | — | |||||||||||
Foreign currency swaps | (300 | ) | (140 | ) | (4 | ) | 1 | — | — | |||||||||||||||
Interest rate forwards | 201 | 37 | — | — | — | — | ||||||||||||||||||
Other | 4 | — | — | — | — | — | ||||||||||||||||||
Total | $ | (93 | ) | $ | (103 | ) | $ | (8 | ) | $ | 1 | $ | — | $ | — | |||||||||
For the Nine Months Ended September 30, 2008: | ||||||||||||||||||||||||
Interest rate swaps | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Foreign currency swaps | 76 | (119 | ) | (8 | ) | 1 | — | — | ||||||||||||||||
Total | $ | 77 | $ | (119 | ) | $ | (8 | ) | $ | 1 | $ | — | $ | — | ||||||||||
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Amount of Gains (Losses) | ||||
Deferred in Accumulated | ||||
Derivatives and Non-Derivative Hedging Instruments in Net Investment Hedging | Other Comprehensive Loss | |||
Relationships (1), (2) | (Effective Portion) | |||
(In millions) | ||||
For the Three Months Ended September 30, 2009: | ||||
Foreign currency forwards | $ | (43 | ) | |
Foreign currency swaps | (9 | ) | ||
Non-derivative hedging instruments | (17 | ) | ||
Total | $ | (69 | ) | |
For the Three Months Ended September 30, 2008: | ||||
Foreign currency forwards | $ | 157 | ||
Foreign currency swaps | 18 | |||
Non-derivative hedging instruments | 18 | |||
Total | $ | 193 | ||
For the Nine Months Ended September 30, 2009: | ||||
Foreign currency forwards | $ | (192 | ) | |
Foreign currency swaps | (19 | ) | ||
Non-derivative hedging instruments | (37 | ) | ||
Total | $ | (248 | ) | |
For the Nine Months Ended September 30, 2008: | ||||
Foreign currency forwards | $ | 119 | ||
Foreign currency swaps | 28 | |||
Non-derivative hedging instruments | 29 | |||
Total | $ | 176 | ||
(1) | There were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from accumulated other comprehensive loss into income during the periods presented. | |
(2) | There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations. |
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Net | Net | Policyholder | ||||||||||||||
Investment | Investment | Benefits | Other | |||||||||||||
Gains (Losses) | Income (1) | and Claims (2) | Revenues (3) | |||||||||||||
(In millions) | ||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||
Interest rate swaps | $ | 250 | $ | (1 | ) | $ | — | $ | 88 | |||||||
Interest rate floors | 87 | — | — | — | ||||||||||||
Interest rate caps | (73 | ) | — | — | — | |||||||||||
Interest rate futures | 108 | (2 | ) | — | — | |||||||||||
Equity futures | (284 | ) | (20 | ) | (194 | ) | — | |||||||||
Foreign currency swaps | (237 | ) | — | — | — | |||||||||||
Foreign currency forwards | 16 | 18 | — | — | ||||||||||||
Currency options | — | — | — | — | ||||||||||||
Equity options | (605 | ) | 7 | — | — | |||||||||||
Interest rate options | — | — | — | (1 | ) | |||||||||||
Interest rate forwards | 12 | — | — | (35 | ) | |||||||||||
Variance swaps | (46 | ) | (1 | ) | — | — | ||||||||||
Swap spreadlocks | — | — | — | — | ||||||||||||
Credit default swaps | (100 | ) | (3 | ) | — | — | ||||||||||
Synthetic GICs | — | — | — | — | ||||||||||||
Other | 41 | — | — | — | ||||||||||||
Total | $ | (831 | ) | $ | (2 | ) | $ | (194 | ) | $ | 52 | |||||
For the Three Months Ended September 30, 2008 | $ | 1,453 | $ | 42 | $ | 62 | $ | — | ||||||||
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Net | Net | Policyholder | ||||||||||||||
Investment | Investment | Benefits | Other | |||||||||||||
Gains (Losses) | Income (1) | and Claims (2) | Revenues (3) | |||||||||||||
(In millions) | ||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||
Interest rate swaps | $ | (1,222 | ) | $ | (4 | ) | $ | — | $ | (58 | ) | |||||
Interest rate floors | (766 | ) | — | — | — | |||||||||||
Interest rate caps | — | — | — | — | ||||||||||||
Interest rate futures | (376 | ) | (2 | ) | — | — | ||||||||||
Equity futures | (633 | ) | (31 | ) | (291 | ) | — | |||||||||
Foreign currency swaps | (399 | ) | — | — | — | |||||||||||
Foreign currency forwards | (68 | ) | (13 | ) | — | — | ||||||||||
Currency options | (32 | ) | — | — | — | |||||||||||
Equity options | (1,337 | ) | (55 | ) | — | — | ||||||||||
Interest rate options | (353 | ) | — | — | 1 | |||||||||||
Interest rate forwards | 6 | — | — | 7 | ||||||||||||
Variance swaps | (175 | ) | (10 | ) | — | — | ||||||||||
Swap spreadlocks | (38 | ) | — | — | — | |||||||||||
Credit default swaps | (219 | ) | (10 | ) | — | — | ||||||||||
Synthetic GICs | — | — | — | — | ||||||||||||
Other | 49 | — | — | — | ||||||||||||
Total | $ | (5,563 | ) | $ | (125 | ) | $ | (291 | ) | $ | (50 | ) | ||||
For the Nine Months Ended September 30, 2008 | $ | 1,170 | $ | 81 | $ | 121 | $ | — | ||||||||
(1) | Changes in estimated fair value related to economic hedges of equity method investments in joint ventures, and changes in estimated fair value related to derivatives held in relation to trading portfolios. | |
(2) | Changes in estimated fair value related to economic hedges of liabilities embedded in certain variable annuity products offered by the Company. | |
(3) | Changes in estimated fair value related to derivatives held in connection with the Company’s mortgage banking activities. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||
Maximum | Maximum | |||||||||||||||||
Estimated | Amount | Estimated | Amount of | |||||||||||||||
Fair | of Future | Weighted | Fair Value | Future | Weighted | |||||||||||||
Value of Credit | Payments under | Average | of Credit | Payments under | Average | |||||||||||||
Rating Agency Designation of Referenced | Default | Credit Default | Years to | Default | Credit Default | Years to | ||||||||||||
Credit Obligations (1) | Swaps | Swaps (2) | Maturity (3) | Swaps | Swaps (2) | Maturity (3) | ||||||||||||
(In millions) | ||||||||||||||||||
Aaa/Aa/A | ||||||||||||||||||
Single name credit default swaps (corporate) | $ | 4 | $ | 135 | 4.3 | $ | 1 | $ | 143 | 5.0 | ||||||||
Credit default swaps referencing indices | 33 | 2,456 | 3.5 | (33) | 1,372 | 4.1 | ||||||||||||
Subtotal | 37 | 2,591 | 3.6 | (32) | 1,515 | 4.2 | ||||||||||||
Baa | ||||||||||||||||||
Single name credit default swaps (corporate) | 1 | 45 | 4.4 | 2 | 110 | 2.6 | ||||||||||||
Credit default swaps referencing indices | — | — | — | (5) | 215 | 4.1 | ||||||||||||
Subtotal | 1 | 45 | 4.4 | (3) | 325 | 3.6 | ||||||||||||
Ba | ||||||||||||||||||
Single name credit default swaps (corporate) | — | 3 | 5.3 | — | 25 | 1.6 | ||||||||||||
Credit default swaps referencing indices | — | — | — | — | — | — | ||||||||||||
Subtotal | — | 3 | 5.3 | — | 25 | 1.6 | ||||||||||||
B | ||||||||||||||||||
Single name credit default swaps (corporate) | — | — | — | — | — | — | ||||||||||||
Credit default swaps referencing indices | — | — | — | (2) | 10 | 5.0 | ||||||||||||
Subtotal | — | — | — | (2) | 10 | 5.0 | ||||||||||||
Caa and lower | ||||||||||||||||||
Single name credit default swaps (corporate) | — | — | — | — | — | — | ||||||||||||
Credit default swaps referencing indices | — | — | — | — | — | — | ||||||||||||
Subtotal | — | — | — | — | — | — | ||||||||||||
In or near default | ||||||||||||||||||
Single name credit default swaps (corporate) | — | — | — | — | — | — | ||||||||||||
Credit default swaps referencing indices | — | — | — | — | — | — | ||||||||||||
Subtotal | — | — | — | — | — | — | ||||||||||||
Total | $ | 38 | $ | 2,639 | 3.6 | $ | (37) | $ | 1,875 | 4.0 | ||||||||
(1) | The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, and Fitch. If no rating is available from a rating agency, then the MetLife rating is used. | |
(2) | Assumes the value of the referenced credit obligations is zero. | |
(3) | The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. |
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Estimated | Estimated | |||||||||||||||
Fair Value (1) of | Fair Value of | |||||||||||||||
Derivatives in Net | Collateral | |||||||||||||||
Liability Position | Provided | Fair Value of Incremental Collateral | ||||||||||||||
September 30, 2009 | September 30, 2009 | Provided Upon: | ||||||||||||||
Downgrade in the | ||||||||||||||||
One Notch | Company’s Credit Rating | |||||||||||||||
Downgrade | to a Level that Triggers | |||||||||||||||
in the | Full Overnight | |||||||||||||||
Company’s | Collateralization or | |||||||||||||||
Fixed Maturity | Credit | Termination | ||||||||||||||
Securities (2) | Rating | of the Derivative Position | ||||||||||||||
(In millions) | ||||||||||||||||
Derivatives subject to credit-contingent provisions | $ | 956 | $ | 815 | $ | 70 | $ | 188 | ||||||||
Derivatives not subject to credit-contingent provisions | 61 | 57 | — | — | ||||||||||||
Total | $ | 1,017 | $ | 872 | $ | 70 | $ | 188 | ||||||||
(1) | After taking into consideration the existence of netting agreements. | |
(2) | Included in fixed maturity securities in the consolidated balance sheet. The counterparties are permitted by contract to sell or repledge this collateral. At September 30, 2009, the Company did not provide any cash collateral. |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Net embedded derivatives within asset host contracts: | ||||||||
Ceded guaranteed minimum benefit riders | $ | 114 | $ | 205 | ||||
Call options in equity securities | (30 | ) | (173 | ) | ||||
Net embedded derivatives within asset host contracts | $ | 84 | $ | 32 | ||||
Net embedded derivatives within liability host contracts: | ||||||||
Direct guaranteed minimum benefit riders | $ | 1,828 | $ | 3,134 | ||||
Other | 8 | (83 | ) | |||||
Net embedded derivatives within liability host contracts | $ | 1,836 | $ | 3,051 | ||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Net investment gains (losses) (1) | $ | (586 | ) | $ | 31 | $ | 1,424 | $ | (29 | ) | ||||||
Policyholder benefits and claims | $ | (7 | ) | $ | — | $ | (75 | ) | $ | — |
(1) | Effective January 1, 2008, the valuation of the Company’s guaranteed minimum benefit riders includes an adjustment for the Company’s own credit. Included in net investment gains (losses) for the three months and nine months ended September 30, 2009 were gains (losses) of ($895) million and ($1,605) million, respectively, in connection with this adjustment, and for the three months and nine months ended September 30, 2008, in connection with this adjustment, were gains (losses) of $677 million and $952 million, respectively. |
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5. | Deferred Policy Acquisition Costs and Value of Business Acquired |
DAC | VOBA | Total | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 16,653 | $ | 3,491 | $ | 20,144 | ||||||
Capitalizations | 2,265 | — | 2,265 | |||||||||
Subtotal | 18,918 | 3,491 | 22,409 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | (544 | ) | (72 | ) | (616 | ) | ||||||
Other expenses | 1,264 | 190 | 1,454 | |||||||||
Total amortization | 720 | 118 | 838 | |||||||||
Less: Unrealized investment gains (losses) | 2,042 | 470 | 2,512 | |||||||||
Less: Other | (111 | ) | (38 | ) | (149 | ) | ||||||
Balance, end of period | $ | 16,267 | $ | 2,941 | $ | 19,208 | ||||||
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DAC | VOBA | Total | ||||||||||||||||||||||
September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional: | ||||||||||||||||||||||||
Group life | $ | 65 | $ | 74 | $ | — | $ | 9 | $ | 65 | $ | 83 | ||||||||||||
Retirement & savings | 33 | 31 | 1 | 1 | 34 | 32 | ||||||||||||||||||
Non-medical health & other | 931 | 898 | — | — | 931 | 898 | ||||||||||||||||||
Subtotal | 1,029 | 1,003 | 1 | 10 | 1,030 | 1,013 | ||||||||||||||||||
Individual: | ||||||||||||||||||||||||
Traditional life | 4,937 | 5,813 | 110 | 154 | 5,047 | 5,967 | ||||||||||||||||||
Variable & universal life | 3,393 | 3,682 | 930 | 968 | 4,323 | 4,650 | ||||||||||||||||||
Annuities | 4,395 | 3,971 | 1,466 | 1,917 | 5,861 | 5,888 | ||||||||||||||||||
Other | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | 12,725 | 13,466 | 2,506 | 3,039 | 15,231 | 16,505 | ||||||||||||||||||
International: | ||||||||||||||||||||||||
Latin America region | 495 | 432 | 342 | 341 | 837 | 773 | ||||||||||||||||||
European region | 399 | 303 | 19 | 22 | 418 | 325 | ||||||||||||||||||
Asia Pacific region | 1,432 | 1,263 | 71 | 75 | 1,503 | 1,338 | ||||||||||||||||||
Subtotal | 2,326 | 1,998 | 432 | 438 | 2,758 | 2,436 | ||||||||||||||||||
Auto & Home | 184 | 183 | — | — | 184 | 183 | ||||||||||||||||||
Corporate & Other | 3 | 3 | 2 | 4 | 5 | 7 | ||||||||||||||||||
Total | $ | 16,267 | $ | 16,653 | $ | 2,941 | $ | 3,491 | $ | 19,208 | $ | 20,144 | ||||||||||||
6. | Goodwill |
September 30, 2009 | ||||
(In millions) | ||||
Balance, beginning of period | $ | 5,008 | ||
Other, net (1) | 25 | |||
Balance, end of period | $ | 5,033 | ||
(1) | Consisting principally of foreign currency translation adjustments. |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Institutional: | ||||||||
Group life | $ | 15 | $ | 15 | ||||
Retirement & savings | 887 | 887 | ||||||
Non-medical health & other | 149 | 149 | ||||||
Subtotal | 1,051 | 1,051 | ||||||
Individual: | ||||||||
Traditional life | 73 | 73 | ||||||
Variable & universal life | 1,172 | 1,174 | ||||||
Annuities | 1,692 | 1,692 | ||||||
Other | 18 | 18 | ||||||
Subtotal | 2,955 | 2,957 | ||||||
International: | ||||||||
Latin America region | 200 | 184 | ||||||
European region | 40 | 37 | ||||||
Asia Pacific region | 160 | 152 | ||||||
Subtotal | 400 | 373 | ||||||
Auto & Home | 157 | 157 | ||||||
Corporate & Other (1) | 470 | 470 | ||||||
Total | $ | 5,033 | $ | 5,008 | ||||
(1) | The allocation of the goodwill to the reporting units was performed at the time of the respective acquisition. The $470 million of goodwill within Corporate & Other relates to goodwill acquired as a part of the Travelers acquisition of $405 million, as well as acquisitions by MetLife Bank, National Association (“MetLife Bank”) which resides within Corporate & Other. For purposes of goodwill impairment testing, the $405 million of Corporate & Other goodwill has been attributed to the Individual and Institutional segment reporting units. The Individual segment was attributed $210 million (traditional life — $23 million, variable & universal life — $11 million and annuities — $176 million), and the Institutional segment was attributed $195 million (group life — $2 million, retirement & savings — $186 million, and non-medical health & other — $7 million) at both September 30, 2009 and December 31, 2008. |
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7. | Insurance |
Future Policy Benefits | Policyholder Account Balances | Other Policyholder Funds | ||||||||||||||||||||||
September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional: | ||||||||||||||||||||||||
Group life | $ | 3,379 | $ | 3,346 | $ | 14,565 | $ | 14,044 | $ | 2,816 | $ | 2,532 | ||||||||||||
Retirement & savings | 40,814 | 40,320 | 51,054 | 60,787 | 42 | 58 | ||||||||||||||||||
Non-medical health & other | 12,367 | 11,619 | 501 | 501 | 600 | 609 | ||||||||||||||||||
Individual: | ||||||||||||||||||||||||
Traditional life | 53,604 | 52,968 | 1 | 1 | 1,546 | 1,423 | ||||||||||||||||||
Variable & universal life | 1,327 | 1,129 | 15,472 | 15,062 | 1,472 | 1,452 | ||||||||||||||||||
Annuities | 3,938 | 3,655 | 47,450 | 44,282 | 98 | 88 | ||||||||||||||||||
Other | — | 2 | 2,898 | 2,524 | 1 | 1 | ||||||||||||||||||
International | 10,682 | 9,241 | 7,177 | 5,654 | 1,559 | 1,227 | ||||||||||||||||||
Auto & Home | 3,015 | 3,083 | — | — | 43 | 43 | ||||||||||||||||||
Corporate & Other | 5,366 | 5,192 | 8,425 | 6,950 | 372 | 329 | ||||||||||||||||||
Total | $ | 134,492 | $ | 130,555 | $ | 147,543 | $ | 149,805 | $ | 8,549 | $ | 7,762 | ||||||||||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||
In the | At | In the | At | |||||||||||||
Event of Death | Annuitization | Event of Death | Annuitization | |||||||||||||
(In millions) | ||||||||||||||||
Annuity Contracts (1) | ||||||||||||||||
Return of Net Deposits | ||||||||||||||||
Separate account value | $ | 23,158 | N/A | $ | 15,882 | N/A | ||||||||||
Net amount at risk (2) | $ | 1,924 | (3) | N/A | $ | 4,384 | (3) | N/A | ||||||||
Average attained age of contractholders | 62 years | N/A | 62 years | N/A | ||||||||||||
Anniversary Contract Value or Minimum Return | ||||||||||||||||
Separate account value | $ | 75,526 | $ | 37,007 | $ | 62,345 | $ | 24,328 | ||||||||
Net amount at risk (2) | $ | 10,513 | (3) | $ | 7,855 | (4) | $ | 18,637 | (3) | $ | 11,312 | (4) | ||||
Average attained age of contractholders | 61 years | 61 years | 60 years | 61 years | ||||||||||||
Two Tier Annuities | ||||||||||||||||
General account value | N/A | $ | 282 | N/A | $ | 283 | ||||||||||
Net amount at risk (2) | N/A | $ | 50 | (5) | N/A | $ | 50 | (5) | ||||||||
Average attained age of contractholders | N/A | 61 years | N/A | 60 years |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Secondary | Paid-Up | Secondary | Paid-Up | |||||||||||||
Guarantees | Guarantees | Guarantees | Guarantees | |||||||||||||
(In millions) | ||||||||||||||||
Universal and Variable Life Contracts (1) | ||||||||||||||||
Account value (general and separate account) | $ | 9,230 | $ | 4,140 | $ | 7,825 | $ | 4,135 | ||||||||
Net amount at risk (2) | $ | 153,225 | (3) | $ | 29,362 | (3) | $ | 145,927 | (3) | $ | 31,274 | (3) | ||||
Average attained age of policyholders | 52 years | 57 years | 50 years | 56 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) | The net amount at risk is based on the direct amount at risk (excluding reinsurance). | |
(3) | The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. | |
(4) | The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. |
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(5) | The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. |
Universal and Variable | ||||||||||||||||||||
Annuity Contracts | Life Contracts | |||||||||||||||||||
Guaranteed | Guaranteed | |||||||||||||||||||
Death | Annuitization | Secondary | Paid-Up | |||||||||||||||||
Benefits | Benefits | Guarantees | Guarantees | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Direct: | ||||||||||||||||||||
Balance, beginning of period | $ | 251 | $ | 403 | $ | 271 | $ | 140 | $ | 1,065 | ||||||||||
Incurred guaranteed benefits | 74 | 97 | 185 | 16 | 372 | |||||||||||||||
Paid guaranteed benefits | (167 | ) | — | — | — | (167 | ) | |||||||||||||
Balance, end of period | $ | 158 | $ | 500 | $ | 456 | $ | 156 | $ | 1,270 | ||||||||||
Ceded: | ||||||||||||||||||||
Balance, beginning of period | $ | 8 | $ | — | $ | 80 | $ | 90 | $ | 178 | ||||||||||
Incurred guaranteed benefits | 21 | — | 85 | 19 | 125 | |||||||||||||||
Paid guaranteed benefits | (23 | ) | — | — | — | (23 | ) | |||||||||||||
Balance, end of period | $ | 6 | $ | — | $ | 165 | $ | 109 | $ | 280 | ||||||||||
Net: | ||||||||||||||||||||
Balance, beginning of period | $ | 243 | $ | 403 | $ | 191 | $ | 50 | $ | 887 | ||||||||||
Incurred guaranteed benefits | 53 | 97 | 100 | (3 | ) | 247 | ||||||||||||||
Paid guaranteed benefits | (144 | ) | — | — | — | (144 | ) | |||||||||||||
Balance, end of period | $ | 152 | $ | 500 | $ | 291 | $ | 47 | $ | 990 | ||||||||||
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Mutual Fund Groupings: | ||||||||
Equity | $ | 46,106 | $ | 39,842 | ||||
Balanced | 28,026 | 14,548 | ||||||
Bond | 7,117 | 5,671 | ||||||
Money Market | 2,043 | 2,456 | ||||||
Specialty | 1,958 | 488 | ||||||
Total | $ | 85,250 | $ | 63,005 | ||||
8. | Closed Block |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Closed Block Liabilities | ||||||||
Future policy benefits | $ | 43,458 | $ | 43,520 | ||||
Other policyholder funds | 299 | 315 | ||||||
Policyholder dividends payable | 772 | 711 | ||||||
Payables for collateral under securities loaned and other transactions | 2,327 | 2,852 | ||||||
Other liabilities | 1,024 | 254 | ||||||
Total closed block liabilities | 47,880 | 47,652 | ||||||
Assets Designated to the Closed Block | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at estimated fair value (amortized cost: $28,053 and $27,947, respectively) | 28,515 | 26,205 | ||||||
Equity securitiesavailable-for-sale, at estimated fair value (cost: $263 and $280, respectively) | 278 | 210 | ||||||
Mortgage loans | 6,593 | 7,243 | ||||||
Policy loans | 4,507 | 4,426 | ||||||
Real estate and real estate joint venturesheld-for-investment | 323 | 381 | ||||||
Short-term investments | 2 | 52 | ||||||
Other invested assets | 1,553 | 952 | ||||||
Total investments | 41,771 | 39,469 | ||||||
Cash and cash equivalents | 650 | 262 | ||||||
Accrued investment income | 487 | 484 | ||||||
Premiums and other receivables | 81 | 98 | ||||||
Current income tax recoverable | 55 | — | ||||||
Deferred income tax assets | 629 | 1,632 | ||||||
Total assets designated to the closed block | 43,673 | 41,945 | ||||||
Excess of closed block liabilities over assets designated to the closed block | 4,207 | 5,707 | ||||||
Amounts included in accumulated other comprehensive income (loss): | ||||||||
Unrealized investment gains (losses), net of income tax of $152 and ($633), respectively | 282 | (1,174 | ) | |||||
Unrealized gains (losses) on derivative instruments, net of income tax of $8 and ($8), respectively | 15 | (15 | ) | |||||
Total amounts included in accumulated other comprehensive income (loss) | 297 | (1,189 | ) | |||||
Maximum future earnings to be recognized from closed block assets and liabilities | $ | 4,504 | $ | 4,518 | ||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 649 | $ | 667 | $ | 1,953 | $ | 2,004 | ||||||||
Net investment income and other revenues | 547 | 573 | 1,633 | 1,714 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (12 | ) | (87 | ) | (69 | ) | (90 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 6 | — | 14 | — | ||||||||||||
Other net investment gains (losses), net | 58 | 110 | 166 | 40 | ||||||||||||
Total net investment gains (losses) | 52 | 23 | 111 | (50 | ) | |||||||||||
Total revenues | 1,248 | 1,263 | 3,697 | 3,668 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 800 | 812 | 2,412 | 2,459 | ||||||||||||
Policyholder dividends | 375 | 384 | 1,114 | 1,134 | ||||||||||||
Other expenses | 50 | 54 | 154 | 164 | ||||||||||||
Total expenses | 1,225 | 1,250 | 3,680 | 3,757 | ||||||||||||
Revenues, net of expenses before income tax | 23 | 13 | 17 | (89 | ) | |||||||||||
Provision (benefit) for income tax | 6 | 2 | 3 | (38 | ) | |||||||||||
Revenues, net of expenses and income tax | $ | 17 | $ | 11 | $ | 14 | $ | (51 | ) | |||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period | $ | 4,521 | $ | 4,491 | $ | 4,518 | $ | 4,429 | ||||||||
Change during period | (17 | ) | (11 | ) | (14 | ) | 51 | |||||||||
Balance, end of period | $ | 4,504 | $ | 4,480 | $ | 4,504 | $ | 4,480 | ||||||||
9. | Long-term and Short-term Debt |
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Letter of | ||||||||||||||||||
Credit | Unused | |||||||||||||||||
Borrower(s) | Expiration | Capacity | Issuances | Drawdowns | Commitments | |||||||||||||
(In millions) | ||||||||||||||||||
MetLife, Inc. and MetLife Funding, Inc. | June 2012 (1) | $ | 2,850 | $ | 537 | $ | — | $ | 2,313 | |||||||||
MetLife Bank, N.A | August 2010 | 300 | — | — | 300 | |||||||||||||
Total | $ | 3,150 | $ | 537 | $ | — | $ | 2,613 | ||||||||||
(1) | Proceeds are available to be used for general corporate purposes, to support the borrowers’ commercial paper programs and for the issuance of letters of credit. All borrowings under the credit agreement must be repaid by June 2012, except that letters of credit outstanding upon termination may remain outstanding until June 2013. |
Letter of | ||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Issuances | Drawdowns | Commitments | (Years) | ||||||||||||||||
(In millions) | ||||||||||||||||||||||
MetLife, Inc. | August 2010 | $ | 300 | $ | 300 | $ | — | $ | — | — | ||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. | June 2016 (1) | 500 | 490 | — | 10 | 6 | ||||||||||||||||
Exeter Reassurance Company Ltd. | December 2027 (2) | 650 | 410 | — | 240 | 18 | ||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | 3,500 | — | 2,797 | 703 | 27 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 (2) | 2,896 | 1,452 | — | 1,444 | 28 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | September 2038 (2) | 3,500 | 1,448 | — | 2,052 | 28 | ||||||||||||||||
Total | $ | 11,346 | $ | 4,100 | $ | 2,797 | $ | 4,449 | ||||||||||||||
(1) | Letters of credit and replacements or renewals thereof issued under this facility of $280 million, $10 million and $200 million are set to expire no later than December 2015, March 2016 and June 2016, respectively. | |
(2) | The Holding Company is a guarantor under this agreement. |
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10. | Collateral Financing Arrangements |
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11. | Junior Subordinated Debt Securities |
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12. | Contingencies, Commitments and Guarantees |
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13. | Employee Benefit Plans |
Other | ||||||||||||||||||||||||||||||||
Pension Benefits | Postretirement Benefits | |||||||||||||||||||||||||||||||
Three Months | Nine Months | Three Months | Nine Months | |||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Service cost | $ | 44 | $ | 41 | $ | 130 | $ | 123 | $ | 6 | $ | 6 | $ | 17 | $ | 16 | ||||||||||||||||
Interest cost | 98 | 94 | 296 | 285 | 31 | 25 | 94 | 77 | ||||||||||||||||||||||||
Expected return on plan assets | (111 | ) | (130 | ) | (331 | ) | (393 | ) | (18 | ) | (22 | ) | (55 | ) | (66 | ) | ||||||||||||||||
Amortization of prior service cost (credit) | 3 | 3 | 7 | 11 | (9 | ) | (9 | ) | (27 | ) | (27 | ) | ||||||||||||||||||||
Amortization of net actuarial (gains) losses | 57 | 7 | 170 | 18 | 10 | — | 31 | — | ||||||||||||||||||||||||
Net periodic benefit cost | $ | 91 | $ | 15 | $ | 272 | $ | 44 | $ | 20 | $ | — | $ | 60 | $ | — | ||||||||||||||||
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Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||||||||
Three Months | Nine Months | Three Months | Nine Months | |||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Amortization of prior service cost (credit) | $ | 3 | $ | 3 | $ | 7 | $ | 11 | $ | (9 | ) | $ | (9 | ) | $ | (27 | ) | $ | (27 | ) | ||||||||||||
Amortization of net actuarial (gains) losses | 57 | 7 | 170 | 18 | 10 | — | 31 | — | ||||||||||||||||||||||||
Subtotal | 60 | 10 | 177 | 29 | 1 | (9 | ) | 4 | (27 | ) | ||||||||||||||||||||||
Deferred income tax expense (benefit) | (20 | ) | (4 | ) | (60 | ) | (11 | ) | — | 3 | (1 | ) | 9 | |||||||||||||||||||
Components of net periodic benefit cost amortized from accumulated other comprehensive loss, net of income tax (1) | $ | 40 | $ | 6 | $ | 117 | $ | 18 | $ | 1 | $ | (6 | ) | $ | 3 | $ | (18 | ) | ||||||||||||||
(1) | At September 30, 2008, other comprehensive income (loss) also includes $4 million of amounts, which were reversed upon the disposition of Reinsurance Group of America, Incorporated (“RGA”). Such amounts were included in other comprehensive income (loss). |
14. | Equity |
Dividend | ||||||||||||||||||||
Series A | Series A | Series B | Series B | |||||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | Per Share | Aggregate | ||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
August 17, 2009 | August 31, 2009 | September 15, 2009 | $ | 0.2555555 | $ | 6 | $ | 0.4062500 | $ | 24 | ||||||||||
May 15, 2009 | May 31, 2009 | June 15, 2009 | $ | 0.2555555 | 7 | $ | 0.4062500 | 24 | ||||||||||||
March 5, 2009 | February 28, 2009 | March 16, 2009 | $ | 0.2500000 | 6 | $ | 0.4062500 | 24 | ||||||||||||
$ | 19 | $ | 72 | |||||||||||||||||
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15. | Other Expenses |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Compensation | $ | 957 | $ | 925 | $ | 2,950 | $ | 2,669 | ||||||||
Commissions | 815 | 852 | 2,538 | 2,545 | ||||||||||||
Interest and debt issue costs | 284 | 265 | 799 | 822 | ||||||||||||
Amortization of DAC and VOBA | 202 | 698 | 838 | 1,780 | ||||||||||||
Capitalization of DAC | (722 | ) | (773 | ) | (2,265 | ) | (2,309 | ) | ||||||||
Rent, net of sublease income | 112 | 107 | 328 | 323 | ||||||||||||
Insurance tax | 144 | 143 | 412 | 394 | ||||||||||||
Other (1) | 751 | 714 | 1,976 | 1,861 | ||||||||||||
Total other expenses | $ | 2,543 | $ | 2,931 | $ | 7,576 | $ | 8,085 | ||||||||
(1) | Includes restructuring charges as discussed below. |
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Three Months | Nine Months | |||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||
September 30, 2009 | September 30, 2009 | |||||||||||||||||||||||
Contract | Contract | |||||||||||||||||||||||
Termination | Termination | |||||||||||||||||||||||
Severance | Costs | Total | Severance | Costs | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Balance, beginning of period | $ | 36 | $ | — | $ | 36 | $ | 86 | $ | — | $ | 86 | ||||||||||||
Additional charges | 34 | 11 | 45 | 72 | 11 | 83 | ||||||||||||||||||
Change in estimates | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Cash payments | (22 | ) | — | (22 | ) | (109 | ) | — | (109 | ) | ||||||||||||||
Balance, end of period | $ | 48 | $ | 11 | $ | 59 | $ | 48 | $ | 11 | $ | 59 | ||||||||||||
Restructuring charges incurred in current period | $ | 34 | $ | 11 | $ | 45 | $ | 71 | $ | 11 | $ | 82 | ||||||||||||
Total restructuring charges incurred since inception of program | $ | 172 | $ | 11 | $ | 183 | $ | 172 | $ | 11 | $ | 183 | ||||||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Severance charges | 73 | 73 | ||||||
Balance, end of period | $ | 73 | $ | 73 | ||||
Total restructuring charges incurred since inception of program | $ | 73 | $ | 73 | ||||
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16. | Earnings Per Common Share |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions, except share and per common share data) | ||||||||||||||||
Weighted Average Shares: | ||||||||||||||||
Weighted average common stock outstanding for basic earnings per common share | 821,764,490 | 718,114,168 | 817,302,327 | 716,704,688 | ||||||||||||
Incremental common shares from assumed: | ||||||||||||||||
Stock purchase contracts underlying common equity units (1) | — | 241,875 | — | 2,724,737 | ||||||||||||
Exercise or issuance of stock-based awards (2) | — | 8,578,009 | — | 9,208,513 | ||||||||||||
Weighted average common stock outstanding for diluted earnings per common share | 821,764,490 | 726,934,052 | 817,302,327 | 728,637,938 | ||||||||||||
Income (Loss) from Continuing Operations: | ||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | (624 | ) | $ | 1,050 | $ | (2,628 | ) | $ | 2,553 | ||||||
Less: Income (loss) attributable to noncontrolling interests, net of income tax | (5 | ) | (7 | ) | (25 | ) | (16 | ) | ||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 94 | ||||||||||||
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders | $ | (649 | ) | $ | 1,027 | $ | (2,694 | ) | $ | 2,475 | ||||||
Basic | $ | (0.79 | ) | $ | 1.43 | $ | (3.30 | ) | $ | 3.45 | ||||||
Diluted | $ | (0.79 | ) | $ | 1.42 | $ | (3.30 | ) | $ | 3.39 | ||||||
Income from Discontinued Operations: | ||||||||||||||||
Income from discontinued operations, net of income tax | $ | (1 | ) | $ | (404 | ) | $ | 37 | $ | (251 | ) | |||||
Less: Income from discontinued operations, net of income tax, attributable to noncontrolling interests | — | 23 | — | 94 | ||||||||||||
Income from discontinued operations, net of income tax, available to MetLife, Inc.’s common shareholders | $ | (1 | ) | $ | (427 | ) | $ | 37 | $ | (345 | ) | |||||
Basic | $ | — | $ | (0.59 | ) | $ | 0.05 | $ | (0.48 | ) | ||||||
Diluted | $ | — | $ | (0.59 | ) | $ | 0.05 | $ | (0.47 | ) | ||||||
Net Income: | ||||||||||||||||
Net income (loss) | $ | (625 | ) | $ | 646 | $ | (2,591 | ) | $ | 2,302 | ||||||
Less: Net income (loss) attributable to noncontrolling interests | (5 | ) | 16 | (25 | ) | 78 | ||||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 94 | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (650 | ) | $ | 600 | $ | (2,657 | ) | $ | 2,130 | ||||||
Basic | $ | (0.79 | ) | $ | 0.84 | $ | (3.25 | ) | $ | 2.97 | ||||||
Diluted | $ | (0.79 | ) | $ | 0.83 | $ | (3.25 | ) | $ | 2.92 | ||||||
(1) | See Note 13 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for a description of the common equity units. The stock purchase contracts underlying the common equity units as described therein were settled upon the initial stock purchase in August 2008 and the subsequent stock purchase in February 2009. During the period ended September 30, 2008, the average closing price of the Company’s common stock exceeded the threshold appreciation price on the stock purchase contracts underlying the common equity units, and, accordingly, increased the weighted average shares outstanding presented above. |
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During the period ended September 30, 2009, the average closing price of the Company’s common stock never exceeded the threshold appreciation price on the stock purchase contracts underlying the common equity units prior to the settlement in February 2009. | ||
(2) | For the three months and nine months ended September 30, 2009, 5,540,339 shares and 3,575,086 shares, respectively, related to the exercise or issuance of stock-based awards have been excluded from the calculation of diluted earnings per common share as these shares are anti-dilutive. |
17. | Business Segment Information |
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Auto | Corporate | |||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 3,826 | $ | 1,175 | $ | 868 | $ | 727 | $ | 5 | $ | 6,601 | ||||||||||||
Universal life and investment-type product policy fees | 189 | 840 | 222 | — | — | 1,251 | ||||||||||||||||||
Net investment income | 1,653 | 1,735 | 357 | 45 | 133 | 3,923 | ||||||||||||||||||
Other revenues | 142 | 176 | 4 | 8 | 272 | 602 | ||||||||||||||||||
Net investment gains (losses): | ||||||||||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (289 | ) | (223 | ) | (30 | ) | (28 | ) | (80 | ) | (650 | ) | ||||||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 105 | 96 | 22 | — | 22 | 245 | ||||||||||||||||||
Other net investment gains (losses), net | (212 | ) | (632 | ) | (566 | ) | (2 | ) | (322 | ) | (1,734 | ) | ||||||||||||
Total net investment gains (losses) | (396 | ) | (759 | ) | (574 | ) | (30 | ) | (380 | ) | (2,139 | ) | ||||||||||||
Total revenues | 5,414 | 3,167 | 877 | 750 | 30 | 10,238 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 4,276 | 1,688 | 727 | 482 | — | 7,173 | ||||||||||||||||||
Interest credited to policyholder account balances | 441 | 619 | 198 | — | — | 1,258 | ||||||||||||||||||
Policyholder dividends | — | 436 | 2 | 1 | — | 439 | ||||||||||||||||||
Other expenses | 622 | 701 | 406 | 184 | 630 | 2,543 | ||||||||||||||||||
Total expenses | 5,339 | 3,444 | 1,333 | 667 | 630 | 11,413 | ||||||||||||||||||
Income (loss) from continuing operations before provision for income tax | 75 | (277 | ) | (456 | ) | 83 | (600 | ) | (1,175 | ) | ||||||||||||||
Provision for income tax expense (benefit) | 19 | (103 | ) | (173 | ) | 16 | (310 | ) | (551 | ) | ||||||||||||||
Income (loss) from continuing operations, net of income tax | 56 | (174 | ) | (283 | ) | 67 | (290 | ) | (624 | ) | ||||||||||||||
Income (loss) from discontinued operations, net of income tax | 1 | — | — | — | (2 | ) | (1 | ) | ||||||||||||||||
Net income (loss) | 57 | (174 | ) | (283 | ) | 67 | (292 | ) | (625 | ) | ||||||||||||||
Less: Net loss attributable to noncontrolling interests | — | — | (5 | ) | — | — | (5 | ) | ||||||||||||||||
Net income (loss) attributable to MetLife, Inc. | 57 | (174 | ) | (278 | ) | 67 | (292 | ) | (620 | ) | ||||||||||||||
Less: Preferred stock dividends | — | — | — | — | 30 | 30 | ||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 57 | $ | (174 | ) | $ | (278 | ) | $ | 67 | $ | (322 | ) | $ | (650 | ) | ||||||||
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Auto | Corporate | |||||||||||||||||||||||
For the Three Months Ended September 30, 2008: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 4,065 | $ | 1,074 | $ | 893 | $ | 745 | $ | 8 | $ | 6,785 | ||||||||||||
Universal life and investment-type product policy fees | 215 | 873 | 264 | — | — | 1,352 | ||||||||||||||||||
Net investment income | 1,866 | 1,635 | 334 | 48 | 164 | 4,047 | ||||||||||||||||||
Other revenues | 223 | 147 | — | 9 | 42 | 421 | ||||||||||||||||||
Net investment gains (losses): | ||||||||||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (255 | ) | (200 | ) | (18 | ) | (2 | ) | (273 | ) | (748 | ) | ||||||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | — | — | — | — | — | — | ||||||||||||||||||
Other net investment gains (losses), net | 458 | 563 | 295 | (65 | ) | 243 | 1,494 | |||||||||||||||||
Total net investment gains (losses) | 203 | 363 | 277 | (67 | ) | (30 | ) | 746 | ||||||||||||||||
Total revenues | 6,572 | 4,092 | 1,768 | 735 | 184 | 13,351 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 4,462 | 1,370 | 949 | 471 | 12 | 7,264 | ||||||||||||||||||
Interest credited to policyholder account balances | 631 | 492 | 6 | — | — | 1,129 | ||||||||||||||||||
Policyholder dividends | — | 445 | 2 | 1 | — | 448 | ||||||||||||||||||
Other expenses | 612 | 1,182 | 418 | 196 | 523 | 2,931 | ||||||||||||||||||
Total expenses | 5,705 | 3,489 | 1,375 | 668 | 535 | 11,772 | ||||||||||||||||||
Income (loss) from continuing operations before provision for income tax | 867 | 603 | 393 | 67 | (351 | ) | 1,579 | |||||||||||||||||
Provision for income tax expense (benefit) | 295 | 207 | 145 | 10 | (128 | ) | 529 | |||||||||||||||||
Income (loss) from continuing operations, net of income tax | 572 | 396 | 248 | 57 | (223 | ) | 1,050 | |||||||||||||||||
Income (loss) from discontinued operations, net of income tax | 2 | 4 | — | — | (410 | ) | (404 | ) | ||||||||||||||||
Net income (loss) | 574 | 400 | 248 | 57 | (633 | ) | 646 | |||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | (6 | ) | — | 22 | 16 | |||||||||||||||||
Net income (loss) attributable to MetLife, Inc. | 574 | 400 | 254 | 57 | (655 | ) | 630 | |||||||||||||||||
Less: Preferred stock dividends | — | — | — | — | 30 | 30 | ||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 574 | $ | 400 | $ | 254 | $ | 57 | $ | (685 | ) | $ | 600 | |||||||||||
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Auto | Corporate | |||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 11,270 | $ | 3,477 | $ | 2,366 | $ | 2,175 | $ | 11 | $ | 19,299 | ||||||||||||
Universal life and investment-type product policy fees | 623 | 2,369 | 658 | — | — | 3,650 | ||||||||||||||||||
Net investment income | 4,700 | 4,955 | 808 | 134 | 317 | 10,914 | ||||||||||||||||||
Other revenues | 479 | 397 | 8 | 22 | 822 | 1,728 | ||||||||||||||||||
Net investment gains (losses): | ||||||||||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (889 | ) | (465 | ) | (51 | ) | (29 | ) | (335 | ) | (1,769 | ) | ||||||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 218 | 135 | 22 | — | 104 | 479 | ||||||||||||||||||
Other net investment gains (losses), net | (2,840 | ) | (1,854 | ) | (592 | ) | 22 | (320 | ) | (5,584 | ) | |||||||||||||
Total net investment gains (losses) | (3,511 | ) | (2,184 | ) | (621 | ) | (7 | ) | (551 | ) | (6,874 | ) | ||||||||||||
Total revenues | 13,561 | 9,014 | 3,219 | 2,324 | 599 | 28,717 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 12,556 | 4,834 | 1,855 | 1,453 | 3 | 20,701 | ||||||||||||||||||
Interest credited to policyholder account balances | 1,412 | 1,808 | 435 | — | — | 3,655 | ||||||||||||||||||
Policyholder dividends | — | 1,291 | 5 | 1 | — | 1,297 | ||||||||||||||||||
Other expenses | 1,850 | 2,213 | 1,103 | 569 | 1,841 | 7,576 | ||||||||||||||||||
Total expenses | 15,818 | 10,146 | 3,398 | 2,023 | 1,844 | 33,229 | ||||||||||||||||||
Income (loss) from continuing operations before provision for income tax | (2,257 | ) | (1,132 | ) | (179 | ) | 301 | (1,245 | ) | (4,512 | ) | |||||||||||||
Provision for income tax expense (benefit) | (805 | ) | (405 | ) | (117 | ) | 67 | (624 | ) | (1,884 | ) | |||||||||||||
Income (loss) from continuing operations, net of income tax | (1,452 | ) | (727 | ) | (62 | ) | 234 | (621 | ) | (2,628 | ) | |||||||||||||
Income (loss) from discontinued operations, net of income tax | 3 | 24 | — | — | 10 | 37 | ||||||||||||||||||
Net income (loss) | (1,449 | ) | (703 | ) | (62 | ) | 234 | (611 | ) | (2,591 | ) | |||||||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | (19 | ) | — | (6 | ) | (25 | ) | |||||||||||||||
Net income (loss) attributable to MetLife, Inc. | (1,449 | ) | (703 | ) | (43 | ) | 234 | (605 | ) | (2,566 | ) | |||||||||||||
Less: Preferred stock dividends | — | — | — | — | 91 | 91 | ||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (1,449 | ) | $ | (703 | ) | $ | (43 | ) | $ | 234 | $ | (696 | ) | $ | (2,657 | ) | |||||||
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Auto | Corporate | |||||||||||||||||||||||
For the Nine Months Ended September 30, 2008: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Premiums | $ | 11,237 | $ | 3,204 | $ | 2,717 | $ | 2,232 | $ | 26 | $ | 19,416 | ||||||||||||
Universal life and investment-type product policy fees | 647 | 2,651 | 847 | — | — | 4,145 | ||||||||||||||||||
Net investment income | 5,865 | 5,022 | 960 | 149 | 665 | 12,661 | ||||||||||||||||||
Other revenues | 584 | 450 | 13 | 30 | 64 | 1,141 | ||||||||||||||||||
Net investment gains (losses): | ||||||||||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (378 | ) | (236 | ) | (19 | ) | (3 | ) | (325 | ) | (961 | ) | ||||||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | — | — | — | — | — | — | ||||||||||||||||||
Other net investment gains (losses), net | (52 | ) | 234 | 295 | (88 | ) | 231 | 620 | ||||||||||||||||
Total net investment gains (losses) | (430 | ) | (2 | ) | 276 | (91 | ) | (94 | ) | (341 | ) | |||||||||||||
Total revenues | 17,903 | 11,325 | 4,813 | 2,320 | 661 | 37,022 | ||||||||||||||||||
Expenses | ||||||||||||||||||||||||
Policyholder benefits and claims | 12,389 | 4,121 | 2,392 | 1,488 | 36 | 20,426 | ||||||||||||||||||
Interest credited to policyholder account balances | 1,928 | 1,488 | 142 | — | — | 3,558 | ||||||||||||||||||
Policyholder dividends | — | 1,313 | 6 | 4 | — | 1,323 | ||||||||||||||||||
Other expenses | 1,776 | 3,097 | 1,329 | 604 | 1,279 | 8,085 | ||||||||||||||||||
Total expenses | 16,093 | 10,019 | 3,869 | 2,096 | 1,315 | 33,392 | ||||||||||||||||||
Income (loss) from continuing operations before provision for income tax | 1,810 | 1,306 | 944 | 224 | (654 | ) | 3,630 | |||||||||||||||||
Provision for income tax expense (benefit) | 605 | 435 | 348 | 33 | (344 | ) | 1,077 | |||||||||||||||||
Income (loss) from continuing operations, net of income tax | 1,205 | 871 | 596 | 191 | (310 | ) | 2,553 | |||||||||||||||||
Income (loss) from discontinued operations, net of income tax | 3 | 4 | — | — | (258 | ) | (251 | ) | ||||||||||||||||
Net income (loss) | 1,208 | 875 | 596 | 191 | (568 | ) | 2,302 | |||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interests | 1 | — | (17 | ) | — | 94 | 78 | |||||||||||||||||
Net income (loss) attributable to MetLife, Inc. | 1,207 | 875 | 613 | 191 | (662 | ) | 2,224 | |||||||||||||||||
Less: Preferred stock dividends | — | — | — | — | 94 | 94 | ||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 1,207 | $ | 875 | $ | 613 | $ | 191 | $ | (756 | ) | $ | 2,130 | |||||||||||
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Institutional | $ | 195,098 | $ | 195,191 | ||||
Individual | 243,463 | 214,476 | ||||||
International | 31,864 | 25,891 | ||||||
Auto & Home | 5,487 | 5,232 | ||||||
Corporate & Other | 59,280 | 60,888 | ||||||
Total | $ | 535,192 | $ | 501,678 | ||||
18. | Discontinued Operations |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues: | ||||||||||||||||
Investment income | $ | 3 | $ | 7 | $ | 6 | $ | 9 | ||||||||
Investment expense | (1 | ) | (1 | ) | (1 | ) | (3 | ) | ||||||||
Total revenues | 2 | 6 | 5 | 6 | ||||||||||||
Provision for income tax | 1 | 3 | 2 | 5 | ||||||||||||
Income from discontinued operations, net of income tax | $ | 1 | $ | 3 | $ | 3 | $ | 1 | ||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Net investment income: | ||||||||||||||||
Institutional | $ | 2 | $ | 5 | $ | 5 | $ | 7 | ||||||||
Individual | — | 1 | — | (1 | ) | |||||||||||
Corporate & Other | — | — | — | — | ||||||||||||
Total net investment income | $ | 2 | $ | 6 | $ | 5 | $ | 6 | ||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues: | ||||||||||||||||
Premiums | $ | — | $ | 4 | $ | 3 | $ | 12 | ||||||||
Universal life and investment-type product policy fees | — | 16 | 15 | 61 | ||||||||||||
Net investment income | — | 10 | 6 | 29 | ||||||||||||
Net investment gains (losses) | — | (1 | ) | 1 | (1 | ) | ||||||||||
Total revenues | — | 29 | 25 | 101 | ||||||||||||
Expenses: | ||||||||||||||||
Policyholder benefits and claims | — | 12 | 10 | 48 | ||||||||||||
Interest credited to policyholder account balances | — | 4 | 3 | 14 | ||||||||||||
Policyholder dividends | — | 1 | 1 | 2 | ||||||||||||
Other expenses | — | 6 | 5 | 21 | ||||||||||||
Total expenses | — | 23 | 19 | 85 | ||||||||||||
Income before provision for income tax | — | 6 | 6 | 16 | ||||||||||||
Provision for income tax | — | 2 | 2 | 7 | ||||||||||||
Income from operations of discontinued operations, net of income tax | — | 4 | 4 | 9 | ||||||||||||
Gain on disposal, net of income tax | — | — | 32 | — | ||||||||||||
Income from discontinued operations, net of income tax | $ | — | $ | 4 | $ | 36 | $ | 9 | ||||||||
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December 31, 2008 | ||||
(In millions) | ||||
Fixed maturity securities | $ | 514 | ||
Equity securities | 1 | |||
Mortgage and consumer loans | 41 | |||
Policy loans | 35 | |||
Real estate and real estate joint ventures held-for-investment | 2 | |||
Total investments | 593 | |||
Cash and cash equivalents | 32 | |||
Accrued investment income | 7 | |||
Premiums and other receivables | 19 | |||
DAC and VOBA | 232 | |||
Deferred income tax asset | 61 | |||
Other assets | 2 | |||
Total assetsheld-for-sale | $ | 946 | ||
Future policy benefits | $ | 180 | ||
Policyholder account balances | 356 | |||
Other policyholder funds | 181 | |||
Policyholder dividends payable | 4 | |||
Current income tax payable | 1 | |||
Other liabilities | 26 | |||
Total liabilitiesheld-for-sale | $ | 748 | ||
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Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2008 | September 30, 2008 | |||||||
(In millions) | ||||||||
Revenues: | ||||||||
Premiums | $ | 878 | $ | 3,535 | ||||
Net investment income | 143 | 597 | ||||||
Other revenues | 16 | 69 | ||||||
Net investment gains (losses) | (87 | ) | (249 | ) | ||||
Total revenues | 950 | 3,952 | ||||||
Expenses: | ||||||||
Policyholder benefits and claims | 732 | 2,989 | ||||||
Interest credited to policyholder account balances | (29 | ) | 108 | |||||
Other expenses | 213 | 699 | ||||||
Total expenses | 916 | 3,796 | ||||||
Income before provision for income tax | 34 | 156 | ||||||
Provision for income tax | 10 | 53 | ||||||
Income from discontinued operations, net of income tax, available to MetLife, Inc.’s common shareholders | 24 | 103 | ||||||
Income from discontinued operations, net of income tax, attributable to noncontrolling interests | 23 | 94 | ||||||
Loss on disposal, net of income tax | (458 | ) | (458 | ) | ||||
Loss from discontinued operations, net of income tax | $ | (411 | ) | $ | (261 | ) | ||
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19. | Fair Value |
Estimated | ||||||||||||
Notional | Carrying | Fair | ||||||||||
September 30, 2009 | Amount | Value | Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 223,896 | $ | 223,896 | ||||||||
Equity securities | $ | 3,117 | $ | 3,117 | ||||||||
Trading securities | $ | 1,970 | $ | 1,970 | ||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | $ | 48,239 | $ | 46,175 | ||||||||
Held-for-sale | 2,442 | 2,442 | ||||||||||
Mortgage and consumer loans, net | $ | 50,681 | $ | 48,617 | ||||||||
Policy loans | $ | 10,001 | $ | 11,516 | ||||||||
Real estate joint ventures (1) | $ | 114 | $ | 123 | ||||||||
Other limited partnership interests(1) | $ | 1,605 | $ | 1,598 | ||||||||
Short-term investments | $ | 6,861 | $ | 6,861 | ||||||||
Other invested assets: (1) | ||||||||||||
Derivative assets (2) | $ | 129,651 | $ | 7,556 | $ | 7,556 | ||||||
Mortgage servicing rights | $ | 720 | $ | 720 | ||||||||
Other | $ | 1,221 | $ | 1,274 | ||||||||
Cash and cash equivalents | $ | 15,562 | $ | 15,562 | ||||||||
Accrued investment income | $ | 3,236 | $ | 3,236 | ||||||||
Premiums and other receivables (1) | $ | 2,684 | $ | 2,967 | ||||||||
Other assets (1) | $ | 800 | $ | 791 | ||||||||
Separate account assets | $ | 144,434 | $ | 144,434 | ||||||||
Net embedded derivatives within asset host contracts (3) | $ | 114 | $ | 114 | ||||||||
Liabilities: | ||||||||||||
Policyholder account balances (1) | $ | 106,360 | $ | 105,919 | ||||||||
Short-term debt | $ | 2,131 | $ | 2,131 | ||||||||
Long-term debt (1) | $ | 13,166 | $ | 13,785 | ||||||||
Collateral financing arrangements | $ | 5,297 | $ | 2,688 | ||||||||
Junior subordinated debt securities | $ | 3,191 | $ | 3,081 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 24,363 | $ | 24,363 | ||||||||
Other liabilities: (1) | ||||||||||||
Derivative liabilities (2) | $ | 63,505 | $ | 4,128 | $ | 4,128 | ||||||
Trading liabilities | $ | 143 | $ | 143 | ||||||||
Other | $ | 2,918 | $ | 2,918 | ||||||||
Separate account liabilities (1) | $ | 31,281 | $ | 31,281 | ||||||||
Net embedded derivatives within liability host contracts (3) | $ | 1,836 | $ | 1,836 | ||||||||
Commitments:(4) | ||||||||||||
Mortgage loan commitments | $ | 3,468 | $ | — | $ | (162 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 932 | $ | — | $ | (54 | ) |
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Estimated | ||||||||||||
Notional | Carrying | Fair | ||||||||||
December 31, 2008 | Amount | Value | Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 188,251 | $ | 188,251 | ||||||||
Equity securities | $ | 3,197 | $ | 3,197 | ||||||||
Trading securities | $ | 946 | $ | 946 | ||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | $ | 49,352 | $ | 48,133 | ||||||||
Held-for-sale | 2,012 | 2,010 | ||||||||||
Mortgage and consumer loans, net | $ | 51,364 | $ | 50,143 | ||||||||
Policy loans | $ | 9,802 | $ | 11,952 | ||||||||
Real estate joint ventures (1) | $ | 163 | $ | 176 | ||||||||
Other limited partnership interests (1) | $ | 1,900 | $ | 2,269 | ||||||||
Short-term investments | $ | 13,878 | $ | 13,878 | ||||||||
Other invested assets: (1) | ||||||||||||
Derivative assets (2) | $ | 133,565 | $ | 12,306 | $ | 12,306 | ||||||
Mortgage servicing rights | $ | 191 | $ | 191 | ||||||||
Other | $ | 801 | $ | 900 | ||||||||
Cash and cash equivalents | $ | 24,207 | $ | 24,207 | ||||||||
Accrued investment income | $ | 3,061 | $ | 3,061 | ||||||||
Premiums and other receivables (1) | $ | 2,995 | $ | 3,473 | ||||||||
Other assets (1) | $ | 800 | $ | 629 | ||||||||
Assets of subsidiariesheld-for-sale (1) | $ | 630 | $ | 649 | ||||||||
Separate account assets | $ | 120,839 | $ | 120,839 | ||||||||
Net embedded derivatives within asset host contracts (3) | $ | 205 | $ | 205 | ||||||||
Liabilities: | ||||||||||||
Policyholder account balances (1) | $ | 110,174 | $ | 102,902 | ||||||||
Short-term debt | $ | 2,659 | $ | 2,659 | ||||||||
Long-term debt (1) | $ | 9,619 | $ | 8,155 | ||||||||
Collateral financing arrangements | $ | 5,192 | $ | 1,880 | ||||||||
Junior subordinated debt securities | $ | 3,758 | $ | 2,606 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 31,059 | $ | 31,059 | ||||||||
Other liabilities: (1) | ||||||||||||
Derivative liabilities (2) | $ | 64,523 | $ | 4,042 | $ | 4,042 | ||||||
Trading liabilities | $ | 57 | $ | 57 | ||||||||
Other | $ | 638 | $ | 638 | ||||||||
Liabilities of subsidiariesheld-for-sale (1) | $ | 50 | $ | 49 | ||||||||
Separate account liabilities (1) | $ | 28,862 | $ | 28,862 | ||||||||
Net embedded derivatives within liability host contracts (3) | $ | 3,051 | $ | 3,051 | ||||||||
Commitments:(4) | ||||||||||||
Mortgage loan commitments | $ | 2,690 | $ | — | $ | (129 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 971 | $ | — | $ | (105 | ) |
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(1) | Carrying values presented herein differ from those presented on the consolidated balance sheet because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions omitted from the table above are not considered financial instruments. | |
(2) | Derivative assets are presented within other invested assets and derivative liabilities are presented within other liabilities. At September 30, 2009 and December 31, 2008, certain non-derivative hedging instruments of $0 and $323 million, respectively, which are carried at amortized cost, are included with the liabilities total in Note 4 but are excluded from derivative liabilities here as they are not derivative instruments. | |
(3) | Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented primarily within policyholder account balances. At September 30, 2009 and December 31, 2008, equity securities also included embedded derivatives of ($30) million and ($173) million, respectively. | |
(4) | Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. |
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September 30, 2009 | ||||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant | Total | ||||||||||||||
Identical Assets | Significant Other | Unobservable | Estimated | |||||||||||||
and Liabilities | Observable Inputs | Inputs | Fair | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | |||||||||||||
(In millions) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | — | $ | 64,712 | $ | 6,930 | $ | 71,642 | ||||||||
Residential mortgage-backed securities | — | 41,187 | 2,210 | 43,397 | ||||||||||||
Foreign corporate securities | — | 31,236 | 5,356 | 36,592 | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | 10,134 | 15,295 | 38 | 25,467 | ||||||||||||
Commercial mortgage-backed securities | — | 15,228 | 307 | 15,535 | ||||||||||||
Asset-backed securities | — | 10,789 | 2,462 | 13,251 | ||||||||||||
Foreign government securities | 315 | 10,592 | 540 | 11,447 | ||||||||||||
State and political subdivision securities | — | 6,397 | 152 | 6,549 | ||||||||||||
Other fixed maturity securities | — | 9 | 7 | 16 | ||||||||||||
Total fixed maturity securities | 10,449 | 195,445 | 18,002 | 223,896 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stock | 489 | 1,025 | 122 | 1,636 | ||||||||||||
Non-redeemable preferred stock | — | 302 | 1,179 | 1,481 | ||||||||||||
Total equity securities | 489 | 1,327 | 1,301 | 3,117 | ||||||||||||
Trading securities | 1,551 | 360 | 59 | 1,970 | ||||||||||||
Short-term investments (1) | 5,066 | 1,467 | 29 | 6,562 | ||||||||||||
Mortgage and consumer loans (2) | — | 2,384 | 20 | 2,404 | ||||||||||||
Derivative assets (3) | 49 | 5,122 | 2,385 | 7,556 | ||||||||||||
Net embedded derivatives within asset host contracts (4) | — | — | 114 | 114 | ||||||||||||
Mortgage servicing rights (5) | — | — | 720 | 720 | ||||||||||||
Separate account assets (6) | 110,064 | 32,449 | 1,921 | 144,434 | ||||||||||||
Total assets | $ | 127,668 | $ | 238,554 | $ | 24,551 | $ | 390,773 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities (3) | $ | 81 | $ | 3,052 | $ | 995 | $ | 4,128 | ||||||||
Net embedded derivatives within liability host contracts (4) | — | (37 | ) | 1,873 | 1,836 | |||||||||||
Trading liabilities (7) | 129 | — | 14 | 143 | ||||||||||||
Total liabilities | $ | 210 | $ | 3,015 | $ | 2,882 | $ | 6,107 | ||||||||
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December 31, 2008 | ||||||||||||||||
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant | Total | ||||||||||||||
Identical Assets | Significant Other | Unobservable | Estimated | |||||||||||||
and Liabilities | Observable Inputs | Inputs | Fair | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Value | |||||||||||||
(In millions) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | — | $ | 55,805 | $ | 7,498 | $ | 63,303 | ||||||||
Residential mortgage-backed securities | — | 35,433 | 595 | 36,028 | ||||||||||||
Foreign corporate securities | — | 23,735 | 5,944 | 29,679 | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | 10,132 | 11,090 | 88 | 21,310 | ||||||||||||
Commercial mortgage-backed securities | — | 12,384 | 260 | 12,644 | ||||||||||||
Asset-backed securities | — | 8,071 | 2,452 | 10,523 | ||||||||||||
Foreign government securities | 282 | 9,463 | 408 | 10,153 | ||||||||||||
State and political subdivision securities | — | 4,434 | 123 | 4,557 | ||||||||||||
Other fixed maturity securities | — | 14 | 40 | 54 | ||||||||||||
Total fixed maturity securities | 10,414 | 160,429 | 17,408 | 188,251 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stock | 413 | 1,167 | 105 | 1,685 | ||||||||||||
Non-redeemable preferred stock | — | 238 | 1,274 | 1,512 | ||||||||||||
Total equity securities | 413 | 1,405 | 1,379 | 3,197 | ||||||||||||
Trading securities | 587 | 184 | 175 | 946 | ||||||||||||
Short-term investments (1) | 10,549 | 2,913 | 100 | 13,562 | ||||||||||||
Mortgage and consumer loans (2) | — | 1,798 | 177 | 1,975 | ||||||||||||
Derivative assets (3) | 55 | 9,483 | 2,768 | 12,306 | ||||||||||||
Net embedded derivatives within asset host contracts (4) | — | — | 205 | 205 | ||||||||||||
Mortgage servicing rights (5) | — | — | 191 | 191 | ||||||||||||
Separate account assets (6) | 85,886 | 33,195 | 1,758 | 120,839 | ||||||||||||
Total assets | $ | 107,904 | $ | 209,407 | $ | 24,161 | $ | 341,472 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities (3) | $ | 273 | $ | 3,548 | $ | 221 | $ | 4,042 | ||||||||
Net embedded derivatives within liability host contracts (4) | — | (83 | ) | 3,134 | 3,051 | |||||||||||
Trading liabilities (7) | 57 | — | — | 57 | ||||||||||||
Total liabilities | $ | 330 | $ | 3,465 | $ | 3,355 | $ | 7,150 | ||||||||
(1) | Short-term investments as presented in the tables above differ from the amounts presented in the consolidated balance sheet because certain short-term investments are not measured at estimated fair value (e.g. time deposits, money market funds, etc.). |
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(2) | Mortgage and consumer loans as presented in the tables above differ from the amount presented in the consolidated balance sheet as these tables only include residential mortgage loansheld-for-sale measured at estimated fair value on a recurring basis. | |
(3) | Derivative assets are presented within other invested assets and derivative liabilities are presented within other liabilities. The amounts are presented gross in the tables above to reflect the presentation in the consolidated balance sheets, but are presented net for purposes of the rollforward in the following tables. At September 30, 2009 and December 31, 2008, certain non-derivative hedging instruments of $0 and $323 million, respectively, which are carried at amortized cost, are included with the liabilities total in Note 4 but are excluded from derivative liabilities here as they are not derivative instruments. | |
(4) | Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented primarily within policyholder account balances. At September 30, 2009 and December 31, 2008, equity securities also included embedded derivatives of ($30) million and ($173) million, respectively. | |
(5) | MSRs are presented within other invested assets. | |
(6) | Separate account assets are measured at estimated fair value. 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. | |
(7) | Trading liabilities are presented within other liabilities. |
Level 1 | This category includes certain U.S. Treasury, agency and government guaranteed fixed maturity securities, certain foreign government fixed maturity securities; exchange-traded common stock; and certain short-term money market securities. As it relates to derivatives, this level includes exchange-traded equity and interest rate futures, as well as interest rate forwards to sell certain residential mortgage-backed securities. Separate account assets classified within this level principally include mutual funds. Also included are assets held within separate accounts which are similar in nature to those classified in this level for the general account. | |
Level 2 | This category includes fixed maturity and equity securities priced principally by independent pricing services using observable inputs. Fixed maturity securities classified as Level 2 include most U.S. Treasury, agency and government guaranteed securities, as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, state and political subdivision securities, foreign government securities and asset-backed securities. Equity securities classified as Level 2 securities consist principally of common stock and non-redeemable preferred stock where market quotes are available but are not considered actively traded. Short-term investments and trading securities included within Level 2 are of a similar nature to these fixed maturity and equity securities. Mortgage and consumer loans included in Level 2 include residential mortgage loans held-for-sale for which there is readily available observable pricing for similar loans or securities backed by similar loans and the unobservable adjustments to such prices are insignificant. As it relates to derivatives, this level includes all types of derivative instruments utilized by the Company with the exception of exchange-traded futures and interest rate forwards to sell certain residential mortgage-backed securities included within Level 1 and those derivative instruments with unobservable inputs as described in Level 3. Separate account assets classified within this level are generally similar to those classified within this level for the general account. Hedge funds owned by separate accounts are also included within this level. Embedded derivatives classified within this level include embedded equity derivatives contained in certain GICs. |
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Level 3 | This category includes fixed maturity securities priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level primarily consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities — including below investment grade private placements; residential mortgage-backed securities and asset-backed securities — including all of those supported by sub-prime mortgage loans. Equity securities classified as Level 3 securities consist principally of non-redeemable preferred stock and common stock of companies that are privately held or of companies for which there has been very limited trading activity or where less price transparency exists around the inputs to the valuation. Short-term investments and trading securities included within Level 3 are of a similar nature to these fixed maturity and equity securities. Mortgage and consumer loans included in Level 3 include residential mortgage loans held-for-sale for which pricing for similar loans or securities backed by similar loans is not observable and the estimated fair value is determined using unobservable broker quotes. As it relates to derivatives this category includes: swap spreadlocks with maturities which extend beyond observable periods; interest rate forwards including interest rate lock commitments with certain unobservable inputs, including pull-through rates; equity variance swaps with unobservable volatility inputs or that are priced via independent broker quotations; foreign currency swaps which are cancelable and priced through independent broker quotations; interest rate swaps with maturities which extend beyond the observable portion of the yield curve; credit default swaps based upon baskets of credits having unobservable credit correlations, as well as credit default swaps with maturities which extend beyond the observable portion of the credit curves and credit default swaps priced through independent broker quotes; foreign currency forwards priced via independent broker quotations or with liquidity adjustments; interest rate caps and floors referencing unobservable yield curves and/or which include liquidity and volatility adjustments; implied volatility swaps with unobservable volatility inputs; and equity options with unobservable volatility inputs. Separate account assets classified within this level are generally similar to those classified within this level for the general account; however, they also include mortgage loans, and other limited partnership interests. Embedded derivatives classified within this level primarily include embedded derivatives associated with certain variable annuity riders. This category also includes MSRs which are carried at estimated fair value and have multiple significant unobservable inputs including discount rates, estimates of loan prepayments and servicing costs. |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||
Balance, | Other | Sales, | Transfer In | Balance, | ||||||||||||||||||||
Beginning | Comprehensive | Issuances and | and/or Out | End of | ||||||||||||||||||||
of Period | Earnings (2, 3) | Income (Loss) | Settlements (4) | of Level 3 (5) | Period | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 6,663 | $ | (21 | ) | $ | 400 | $ | (113 | ) | $ | 1 | $ | 6,930 | ||||||||||
Residential mortgage-backed securities | 1,494 | (14 | ) | 59 | 782 | (111 | ) | 2,210 | ||||||||||||||||
Foreign corporate securities | 4,729 | (114 | ) | 766 | (10 | ) | (15 | ) | 5,356 | |||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 37 | — | 1 | — | — | 38 | ||||||||||||||||||
Commercial mortgage-backed securities | 251 | (31 | ) | 29 | (1 | ) | 59 | 307 | ||||||||||||||||
Asset-backed securities | 2,160 | (14 | ) | 352 | (29 | ) | (7 | ) | 2,462 | |||||||||||||||
Foreign government securities | 346 | 2 | 45 | 27 | 120 | 540 | ||||||||||||||||||
State and political subdivision securities | 104 | — | 5 | 29 | 14 | 152 | ||||||||||||||||||
Other fixed maturity securities | 8 | — | (1 | ) | — | — | 7 | |||||||||||||||||
Total fixed maturity securities | $ | 15,792 | $ | (192 | ) | $ | 1,656 | $ | 685 | $ | 61 | $ | 18,002 | |||||||||||
Equity securities: | ||||||||||||||||||||||||
Common stock | $ | 118 | $ | (1 | ) | $ | (1 | ) | $ | 6 | $ | — | $ | 122 | ||||||||||
Non-redeemable preferred stock | 1,067 | (70 | ) | 267 | (85 | ) | — | 1,179 | ||||||||||||||||
Total equity securities | $ | 1,185 | $ | (71 | ) | $ | 266 | $ | (79 | ) | $ | — | $ | 1,301 | ||||||||||
Trading securities | $ | 72 | $ | 7 | $ | — | $ | (20 | ) | $ | — | $ | 59 | |||||||||||
Short-term investments | $ | 5 | $ | (1 | ) | $ | — | $ | 25 | $ | — | $ | 29 | |||||||||||
Mortgage and consumer loans | $ | 136 | $ | (1 | ) | $ | — | $ | — | $ | (115 | ) | $ | 20 | ||||||||||
Net derivatives (6) | $ | 1,766 | $ | (539 | ) | $ | 51 | $ | 121 | $ | (9 | ) | $ | 1,390 | ||||||||||
Mortgage servicing rights (7), (8) | $ | 670 | $ | (64 | ) | $ | — | $ | 114 | $ | — | $ | 720 | |||||||||||
Separate account assets (9) | $ | 1,554 | $ | 58 | $ | — | $ | 231 | $ | 78 | $ | 1,921 | ||||||||||||
Net embedded derivatives (10) | $ | (1,108 | ) | $ | (550 | ) | $ | (60 | ) | $ | (41 | ) | $ | — | $ | (1,759 | ) | |||||||
Trading liabilities | $ | (59 | ) | $ | — | $ | — | $ | 45 | $ | — | $ | (14 | ) | ||||||||||
For the Three Months Ended September 30, 2008: | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 7,472 | $ | (473 | ) | $ | (330 | ) | $ | 520 | $ | 492 | $ | 7,681 | ||||||||||
Residential mortgage-backed securities | 1,158 | 2 | (75 | ) | (479 | ) | (96 | ) | 510 | |||||||||||||||
Foreign corporate securities | 8,023 | 83 | (825 | ) | 1 | 508 | 7,790 | |||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 82 | 1 | 2 | (1 | ) | (18 | ) | 66 | ||||||||||||||||
Commercial mortgage-backed securities | 450 | 1 | (66 | ) | — | (29 | ) | 356 | ||||||||||||||||
Asset-backed securities | 3,627 | (35 | ) | (321 | ) | (103 | ) | (81 | ) | 3,087 | ||||||||||||||
Foreign government securities | 594 | 10 | (56 | ) | (68 | ) | 40 | 520 | ||||||||||||||||
State and political subdivision securities | 122 | — | 4 | 23 | (25 | ) | 124 | |||||||||||||||||
Other fixed maturity securities | 269 | — | (2 | ) | (224 | ) | — | 43 | ||||||||||||||||
Total fixed maturity securities | $ | 21,797 | $ | (411 | ) | $ | (1,669 | ) | $ | (331 | ) | $ | 791 | $ | 20,177 | |||||||||
Equity securities: | ||||||||||||||||||||||||
Common stock | $ | 186 | $ | (2 | ) | $ | (5 | ) | $ | (23 | ) | $ | (7 | ) | $ | 149 | ||||||||
Non-redeemable preferred stock | 1,871 | (220 | ) | 17 | (153 | ) | 53 | 1,568 | ||||||||||||||||
Total equity securities | $ | 2,057 | $ | (222 | ) | $ | 12 | $ | (176 | ) | $ | 46 | $ | 1,717 | ||||||||||
Trading securities | $ | 312 | $ | (12 | ) | $ | (2 | ) | $ | (62 | ) | $ | — | $ | 236 | |||||||||
Short-term investments | $ | 134 | $ | — | $ | — | $ | (12 | ) | $ | 16 | $ | 138 | |||||||||||
Mortgage and consumer loans | $ | — | $ | — | $ | — | $ | 10 | $ | 5 | $ | 15 | ||||||||||||
Net derivatives (6) | $ | 853 | $ | 348 | $ | — | $ | 67 | $ | — | $ | 1,268 | ||||||||||||
Mortgage servicing rights (7), (8) | $ | — | $ | 1 | $ | — | $ | 302 | $ | — | $ | 303 | ||||||||||||
Separate account assets (9) | $ | 1,694 | $ | (88 | ) | $ | — | $ | (57 | ) | $ | 462 | $ | 2,011 | ||||||||||
Net embedded derivatives (10) | $ | (444 | ) | $ | 13 | $ | — | $ | (18 | ) | $ | — | $ | (449 | ) |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||||||
Gains (Losses) included in: | ||||||||||||||||||||||||||||||||
Other | Purchases, | |||||||||||||||||||||||||||||||
Balance, | Comprehensive | Sales, | Transfer In | Balance, | ||||||||||||||||||||||||||||
Balance, | Impact of | Beginning | Earnings | Income | Issuances and | and/or Out | End of | |||||||||||||||||||||||||
December 31, 2007 | Adoption (1) | of Period | (2, 3) | (Loss) | Settlements (4) | of Level 3 (5) | Period | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
U.S. corporate securities | $ | 7,498 | $ | (465 | ) | $ | 710 | $ | (563 | ) | $ | (250 | ) | $ | 6,930 | |||||||||||||||||
Residential mortgage-backed securities | 595 | 9 | 71 | 1,576 | (41 | ) | 2,210 | |||||||||||||||||||||||||
Foreign corporate securities | 5,944 | (303 | ) | 1,475 | (312 | ) | (1,448 | ) | 5,356 | |||||||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 88 | — | — | (29 | ) | (21 | ) | 38 | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 260 | (36 | ) | 49 | (16 | ) | 50 | 307 | ||||||||||||||||||||||||
Asset-backed securities | 2,452 | (50 | ) | 268 | (257 | ) | 49 | 2,462 | ||||||||||||||||||||||||
Foreign government securities | 408 | (45 | ) | 68 | 6 | 103 | 540 | |||||||||||||||||||||||||
State and political subdivision securities | 123 | — | 10 | 42 | (23 | ) | 152 | |||||||||||||||||||||||||
Other fixed maturity securities | 40 | 1 | — | (34 | ) | — | 7 | |||||||||||||||||||||||||
Total fixed maturity securities | $ | 17,408 | $ | (889 | ) | $ | 2,651 | $ | 413 | $ | (1,581 | ) | $ | 18,002 | ||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
Common stock | $ | 105 | $ | (1 | ) | $ | 5 | $ | 13 | $ | — | $ | 122 | |||||||||||||||||||
Non-redeemable preferred stock | 1,274 | (328 | ) | 400 | (167 | ) | — | 1,179 | ||||||||||||||||||||||||
Total equity securities | $ | 1,379 | $ | (329 | ) | $ | 405 | $ | (154 | ) | $ | — | $ | 1,301 | ||||||||||||||||||
Trading securities | $ | 175 | $ | 14 | $ | — | $ | (130 | ) | $ | — | $ | 59 | |||||||||||||||||||
Short-term investments | $ | 100 | $ | (3 | ) | $ | — | $ | (63 | ) | $ | (5 | ) | $ | 29 | |||||||||||||||||
Mortgage and consumer loans | $ | 177 | $ | (3 | ) | $ | — | $ | 1 | $ | (155 | ) | $ | 20 | ||||||||||||||||||
Net derivatives (6) | $ | 2,547 | $ | (1,498 | ) | $ | (12 | ) | $ | 341 | $ | 12 | $ | 1,390 | ||||||||||||||||||
Mortgage servicing rights (7), (8) | $ | 191 | $ | 70 | $ | — | $ | 459 | $ | — | $ | 720 | ||||||||||||||||||||
Separate account assets (9) | $ | 1,758 | $ | (212 | ) | $ | — | $ | 286 | $ | 89 | $ | 1,921 | |||||||||||||||||||
Net embedded derivatives (10) | $ | (2,929 | ) | $ | 1,294 | $ | (35 | ) | $ | (89 | ) | $ | — | $ | (1,759 | ) | ||||||||||||||||
Trading liabilities | $ | — | $ | — | $ | — | $ | (14 | ) | $ | — | $ | (14 | ) | ||||||||||||||||||
For the Nine Months Ended September 30, 2008: | ||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
U.S. corporate securities | $ | 8,368 | $ | — | $ | 8,368 | $ | (534 | ) | $ | (578 | ) | $ | 79 | $ | 346 | $ | 7,681 | ||||||||||||||
Residential mortgage-backed securities | 1,423 | — | 1,423 | 5 | (156 | ) | (223 | ) | (539 | ) | 510 | |||||||||||||||||||||
Foreign corporate securities | 7,228 | (8 | ) | 7,220 | 124 | (1,186 | ) | (157 | ) | 1,789 | 7,790 | |||||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 80 | — | 80 | — | (3 | ) | 1 | (12 | ) | 66 | ||||||||||||||||||||||
Commercial mortgage-backed securities | 539 | — | 539 | (2 | ) | (125 | ) | (8 | ) | (48 | ) | 356 | ||||||||||||||||||||
Asset-backed securities | 4,490 | — | 4,490 | (87 | ) | (677 | ) | (615 | ) | (24 | ) | 3,087 | ||||||||||||||||||||
Foreign government securities | 785 | — | 785 | 23 | (58 | ) | (242 | ) | 12 | 520 | ||||||||||||||||||||||
State and political subdivision securities | 124 | — | 124 | — | — | 38 | (38 | ) | 124 | |||||||||||||||||||||||
Other fixed maturity securities | 289 | — | 289 | 1 | (4 | ) | (243 | ) | — | 43 | ||||||||||||||||||||||
Total fixed maturity securities | $ | 23,326 | $ | (8 | ) | $ | 23,318 | $ | (470 | ) | $ | (2,787 | ) | $ | (1,370 | ) | $ | 1,486 | $ | 20,177 | ||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
Common stock | $ | 183 | $ | — | $ | 183 | $ | 3 | $ | (8 | ) | $ | (11 | ) | $ | (18 | ) | $ | 149 | |||||||||||||
Non-redeemable preferred stock | 2,188 | — | 2,188 | (268 | ) | (186 | ) | (211 | ) | 45 | 1,568 | |||||||||||||||||||||
Total equity securities | $ | 2,371 | $ | — | $ | 2,371 | $ | (265 | ) | $ | (194 | ) | $ | (222 | ) | $ | 27 | $ | 1,717 | |||||||||||||
Trading securities | $ | 183 | $ | 8 | $ | 191 | $ | (15 | ) | $ | — | $ | 65 | $ | (5 | ) | $ | 236 | ||||||||||||||
Short-term investments | $ | 179 | $ | — | $ | 179 | $ | — | $ | — | $ | (41 | ) | $ | — | $ | 138 | |||||||||||||||
Mortgage and consumer loans | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 10 | $ | 5 | $ | 15 | ||||||||||||||||
Net derivatives (6) | $ | 789 | $ | (1 | ) | $ | 788 | $ | 405 | $ | — | $ | 74 | $ | 1 | $ | 1,268 | |||||||||||||||
Mortgage servicing rights (7), (8) | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | 302 | $ | — | $ | 303 | ||||||||||||||||
Separate account assets (9) | $ | 1,464 | $ | — | $ | 1,464 | $ | (60 | ) | $ | — | $ | 295 | $ | 312 | $ | 2,011 | |||||||||||||||
Net embedded derivatives (10) | $ | (278 | ) | $ | 24 | $ | (254 | ) | $ | (125 | ) | $ | — | $ | (70 | ) | $ | — | $ | (449 | ) |
(1) | Impact of adoption of fair value measurement guidance represents the amount recognized in earnings as a change in estimate associated with Level 3 financial instruments held at January 1, 2008. The net impact of adoption on Level 3 assets and liabilities presented in the table above was a $23 million increase to net assets. Such amount was also impacted by an increase to DAC of $17 million. The impact of this adoption on RGA — |
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not reflected in the table above as a result of the reflection of RGA in discontinued operations — was a net increase of $2 million (i.e., a decrease in Level 3 net embedded derivative liabilities of $17 million offset by a DAC decrease of $15 million) for a total impact of $42 million on Level 3 assets and liabilities. This impact of $42 million along with a $12 million reduction in the estimated fair value of Level 2 freestanding derivatives, resulted in a total net impact of adoption of $30 million. | ||
(2) | Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains (losses). Impairments charged to earnings are included within net investment gains (losses) which are reported within the earnings caption of total gains (losses). Lapses associated with embedded derivatives are included with the earnings caption of total gains (losses). | |
(3) | Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. | |
(4) | The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. For embedded derivatives, attributed fees are included within this caption along with settlements, if any. | |
(5) | Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers in and/or out of Level 3 occurred at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward. | |
(6) | Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. | |
(7) | The additions and reductions (due to loan payments) affecting MSRs were $138 million and ($24) million, respectively, for the three months ended September 30, 2009 and $544 million and ($85) million, respectively, for the nine months ended September 30, 2009. The additions and reductions (due to loan payments) affecting MSRs were $305 million and ($3) million, respectively, for both the three months and nine months ended September 30, 2008. | |
(8) | The changes in estimated fair value due to changes in valuation model inputs or assumptions, and other changes in estimated fair value affecting MSRs were ($64) million and $0, respectively, for the three months ended September 30, 2009, and $70 million and $0, respectively, for the nine months ended September 30, 2009. The changes in estimated fair value due to changes in valuation model inputs or assumptions, and other changes in estimated fair value affecting MSRs were $1 million and $0, respectively, for both the three months and nine months ended September 30, 2008. | |
(9) | Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. | |
(10) | Embedded derivative assets and liabilities are presented net for purposes of the rollforward. | |
(11) | Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging activities, could differ materially. |
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Total Gains and Losses | ||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||
Net | Net | Policyholder | ||||||||||||||||||
Investment | Investment | Other | Benefits and | |||||||||||||||||
Income | Gains (Losses) | Revenues | Claims | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 3 | $ | (24 | ) | $ | — | $ | — | $ | (21 | ) | ||||||||
Residential mortgage-backed securities | 12 | (26 | ) | — | — | (14 | ) | |||||||||||||
Foreign corporate securities | (1 | ) | (113 | ) | — | — | (114 | ) | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | — | (31 | ) | — | — | (31 | ) | |||||||||||||
Asset-backed securities | 1 | (15 | ) | — | — | (14 | ) | |||||||||||||
Foreign government securities | 3 | (1 | ) | — | — | 2 | ||||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | — | — | — | — | — | |||||||||||||||
Total fixed maturity securities | $ | 18 | $ | (210 | ) | $ | — | $ | — | $ | (192 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||
Non-redeemable preferred stock | (2 | ) | (68 | ) | — | — | (70 | ) | ||||||||||||
Total equity securities | $ | (2 | ) | $ | (69 | ) | $ | — | $ | — | $ | (71 | ) | |||||||
Trading securities | $ | 7 | $ | — | $ | — | $ | — | $ | 7 | ||||||||||
Short-term investments | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||
Mortgage and consumer loans | $ | — | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) | ||||||||
Net derivatives | $ | 4 | $ | (576 | ) | $ | 33 | $ | — | $ | (539 | ) | ||||||||
Mortgage servicing rights | $ | — | $ | — | $ | (64 | ) | $ | — | $ | (64 | ) | ||||||||
Net embedded derivatives | $ | — | $ | (543 | ) | $ | — | $ | (7 | ) | $ | (550 | ) | |||||||
For the Three Months Ended September 30, 2008: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 4 | $ | (477 | ) | $ | — | $ | — | $ | (473 | ) | ||||||||
Residential mortgage-backed securities | 2 | — | — | — | 2 | |||||||||||||||
Foreign corporate securities | 74 | 9 | — | — | 83 | |||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | 1 | — | — | 1 | |||||||||||||||
Commercial mortgage-backed securities | 1 | — | — | — | 1 | |||||||||||||||
Asset-backed securities | (2 | ) | (33 | ) | — | — | (35 | ) | ||||||||||||
Foreign government securities | 8 | 2 | — | — | 10 | |||||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | — | — | — | — | — | |||||||||||||||
Total fixed maturity securities | $ | 87 | $ | (498 | ) | $ | — | $ | — | $ | (411 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | (2 | ) | $ | — | $ | — | $ | (2 | ) | ||||||||
Non-redeemable preferred stock | — | (220 | ) | — | — | (220 | ) | |||||||||||||
Total equity securities | $ | — | $ | (222 | ) | $ | — | $ | — | $ | (222 | ) | ||||||||
Trading securities | $ | (12 | ) | $ | — | $ | — | $ | — | $ | (12 | ) | ||||||||
Short-term investments | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Net derivatives | $ | 6 | $ | 342 | $ | — | $ | — | $ | 348 | ||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | ||||||||||
Net embedded derivatives | $ | — | $ | 13 | $ | — | $ | — | $ | 13 |
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Total Gains and Losses | ||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||
Net | Net | Policyholder | ||||||||||||||||||
Investment | Investment | Other | Benefits and | |||||||||||||||||
Income | Gains (Losses) | Revenues | Claims | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 11 | $ | (476 | ) | $ | — | $ | — | $ | (465 | ) | ||||||||
Residential mortgage-backed securities | 14 | (5 | ) | — | — | 9 | ||||||||||||||
Foreign corporate securities | (4 | ) | (299 | ) | — | — | (303 | ) | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | 1 | (37 | ) | — | — | (36 | ) | |||||||||||||
Asset-backed securities | 2 | (52 | ) | — | — | (50 | ) | |||||||||||||
Foreign government securities | 8 | (53 | ) | — | — | (45 | ) | |||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | 1 | — | — | — | 1 | |||||||||||||||
Total fixed maturity securities | $ | 33 | $ | (922 | ) | $ | — | $ | — | $ | (889 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||
Non-redeemable preferred stock | (2 | ) | (326 | ) | — | — | (328 | ) | ||||||||||||
Total equity securities | $ | (2 | ) | $ | (327 | ) | $ | — | $ | — | $ | (329 | ) | |||||||
Trading securities | $ | 14 | $ | — | $ | — | $ | — | $ | 14 | ||||||||||
Short-term investments | $ | — | $ | (3 | ) | $ | — | $ | — | $ | (3 | ) | ||||||||
Mortgage and consumer loans | $ | — | $ | — | $ | (3 | ) | $ | — | $ | (3 | ) | ||||||||
Net derivatives | $ | (66 | ) | $ | (1,444 | ) | $ | 12 | $ | — | $ | (1,498 | ) | |||||||
Mortgage servicing rights | $ | — | $ | — | $ | 70 | $ | — | $ | 70 | ||||||||||
Net embedded derivatives | $ | — | $ | 1,369 | $ | — | $ | (75 | ) | $ | 1,294 | |||||||||
For the Nine Months Ended September 30, 2008: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 10 | $ | (544 | ) | $ | — | $ | — | $ | (534 | ) | ||||||||
Residential mortgage-backed securities | 4 | 1 | — | — | 5 | |||||||||||||||
Foreign corporate securities | 157 | (33 | ) | — | — | 124 | ||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | 2 | (4 | ) | — | — | (2 | ) | |||||||||||||
Asset-backed securities | 4 | (91 | ) | — | — | (87 | ) | |||||||||||||
Foreign government securities | 24 | (1 | ) | — | — | 23 | ||||||||||||||
State and political subdivision securities | (1 | ) | 1 | — | — | — | ||||||||||||||
Other fixed maturity securities | 1 | — | — | — | 1 | |||||||||||||||
Total fixed maturity securities | $ | 201 | $ | (671 | ) | $ | — | $ | — | $ | (470 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | 3 | $ | — | $ | — | $ | 3 | ||||||||||
Non-redeemable preferred stock | — | (268 | ) | — | — | (268 | ) | |||||||||||||
Total equity securities | $ | — | $ | (265 | ) | $ | — | $ | — | $ | (265 | ) | ||||||||
Trading securities | $ | (15 | ) | $ | — | $ | — | $ | — | $ | (15 | ) | ||||||||
Short-term investments | $ | 1 | $ | (1 | ) | $ | — | $ | — | $ | — | |||||||||
Net derivatives | $ | 15 | $ | 390 | $ | — | $ | — | $ | 405 | ||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | ||||||||||
Net embedded derivatives | $ | — | $ | (125 | ) | $ | — | $ | — | $ | (125 | ) |
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Changes in Unrealized Gains (Losses) | ||||||||||||||||||||
Relating to Assets Held at September 30, 2009 and 2008 | ||||||||||||||||||||
Net | Net | Policyholder | ||||||||||||||||||
Investment | Investment | Other | Benefits and | |||||||||||||||||
Income | Gains (Losses) | Revenues | Claims | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 5 | $ | (13 | ) | $ | — | $ | — | $ | (8 | ) | ||||||||
Residential mortgage-backed securities | 12 | — | — | — | 12 | |||||||||||||||
Foreign corporate securities | (1 | ) | (45 | ) | — | — | (46 | ) | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | — | (31 | ) | — | — | (31 | ) | |||||||||||||
Asset-backed securities | 1 | (6 | ) | — | — | (5 | ) | |||||||||||||
Foreign government securities | 3 | — | — | — | 3 | |||||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | — | — | — | — | — | |||||||||||||||
Total fixed maturity securities | $ | 20 | $ | (95 | ) | $ | — | $ | — | $ | (75 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Non-redeemable preferred stock | (2 | ) | (27 | ) | — | — | (29 | ) | ||||||||||||
Total equity securities | $ | (2 | ) | $ | (27 | ) | $ | — | $ | — | $ | (29 | ) | |||||||
Trading securities | $ | 6 | $ | — | $ | — | $ | — | $ | 6 | ||||||||||
Short-term investments | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Mortgage and consumer loans | $ | — | $ | — | $ | (1 | ) | $ | — | $ | (1 | ) | ||||||||
Net derivatives | $ | 4 | $ | (574 | ) | $ | 49 | $ | — | $ | (521 | ) | ||||||||
Mortgage servicing rights | $ | — | $ | — | $ | (10 | ) | $ | — | $ | (10 | ) | ||||||||
Net embedded derivatives | $ | — | $ | (545 | ) | $ | — | $ | (7 | ) | $ | (552 | ) | |||||||
For the Three Months Ended September 30, 2008: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 4 | $ | (317 | ) | $ | — | $ | — | $ | (313 | ) | ||||||||
Residential mortgage-backed securities | 1 | — | — | — | 1 | |||||||||||||||
Foreign corporate securities | 70 | (4 | ) | — | — | 66 | ||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | 1 | — | — | — | 1 | |||||||||||||||
Asset-backed securities | 1 | (31 | ) | — | — | (30 | ) | |||||||||||||
Foreign government securities | 8 | — | — | — | 8 | |||||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | — | — | — | — | — | |||||||||||||||
Total fixed maturity securities | $ | 85 | $ | (352 | ) | $ | — | $ | — | $ | (267 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Non-redeemable preferred stock | — | (218 | ) | — | — | (218 | ) | |||||||||||||
Total equity securities | $ | — | $ | (218 | ) | $ | — | $ | — | $ | (218 | ) | ||||||||
Trading securities | $ | (12 | ) | $ | — | $ | — | $ | — | $ | (12 | ) | ||||||||
Short-term investments | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Net derivatives | $ | 6 | $ | 317 | $ | — | $ | — | $ | 323 | ||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | ||||||||||
Net embedded derivatives | $ | — | $ | 8 | $ | — | $ | — | $ | 8 |
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Changes in Unrealized Gains (Losses) | ||||||||||||||||||||
Relating to Assets Held at September 30, 2009 and 2008 | ||||||||||||||||||||
Net | Net | Policyholder | ||||||||||||||||||
Investment | Investment | Other | Benefits and | |||||||||||||||||
Income | Gains (Losses) | Revenues | Claims | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 13 | $ | (457 | ) | $ | — | $ | — | $ | (444 | ) | ||||||||
Residential mortgage-backed securities | 14 | 1 | — | — | 15 | |||||||||||||||
Foreign corporate securities | (4 | ) | (246 | ) | — | — | (250 | ) | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | 1 | (51 | ) | — | — | (50 | ) | |||||||||||||
Asset-backed securities | 2 | (103 | ) | — | — | (101 | ) | |||||||||||||
Foreign government securities | 8 | — | — | — | 8 | |||||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | 1 | — | — | — | 1 | |||||||||||||||
Total fixed maturity securities | $ | 35 | $ | (856 | ) | $ | — | $ | — | $ | (821 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||
Non-redeemable preferred stock | (2 | ) | (172 | ) | — | — | (174 | ) | ||||||||||||
Total equity securities | $ | (2 | ) | $ | (173 | ) | $ | — | $ | — | $ | (175 | ) | |||||||
Trading securities | $ | 16 | $ | — | $ | — | $ | — | $ | 16 | ||||||||||
Short-term investments | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Mortgage and consumer loans | $ | — | $ | — | $ | (3 | ) | $ | — | $ | (3 | ) | ||||||||
Net derivatives | $ | (66 | ) | $ | (1,405 | ) | $ | 49 | $ | — | $ | (1,422 | ) | |||||||
Mortgage servicing rights | $ | — | $ | — | $ | 50 | $ | — | $ | 50 | ||||||||||
Net embedded derivatives | $ | — | $ | 1,354 | $ | — | $ | (75 | ) | $ | 1,279 | |||||||||
For the Nine Months Ended September 30, 2008: | ||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||
U.S. corporate securities | $ | 7 | $ | (341 | ) | $ | — | $ | — | $ | (334 | ) | ||||||||
Residential mortgage-backed securities | 4 | — | — | — | 4 | |||||||||||||||
Foreign corporate securities | 154 | (29 | ) | — | — | 125 | ||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | |||||||||||||||
Commercial mortgage-backed securities | 3 | (5 | ) | — | — | (2 | ) | |||||||||||||
Asset-backed securities | 3 | (67 | ) | — | — | (64 | ) | |||||||||||||
Foreign government securities | 19 | — | — | — | 19 | |||||||||||||||
State and political subdivision securities | — | — | — | — | — | |||||||||||||||
Other fixed maturity securities | 1 | — | — | — | 1 | |||||||||||||||
Total fixed maturity securities | $ | 191 | $ | (442 | ) | $ | — | $ | — | $ | (251 | ) | ||||||||
Equity securities: | ||||||||||||||||||||
Common stock | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Non-redeemable preferred stock | — | (248 | ) | — | — | (248 | ) | |||||||||||||
Total equity securities | $ | — | $ | (248 | ) | $ | — | $ | — | $ | (248 | ) | ||||||||
Trading securities | $ | (12 | ) | $ | — | $ | — | $ | — | $ | (12 | ) | ||||||||
Short-term investments | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Net derivatives | $ | 15 | $ | 345 | $ | — | $ | — | $ | 360 | ||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | ||||||||||
Net embedded derivatives | $ | — | $ | (138 | ) | $ | — | $ | — | $ | (138 | ) |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Unpaid principal balance | $ | 2,322 | $ | 1,920 | ||||
Excess estimated fair value over unpaid principal balance | 82 | 55 | ||||||
Carrying value at estimated fair value | $ | 2,404 | $ | 1,975 | ||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Instrument-specific credit risk based on changes in credit spreads for non-agency loans and adjustments in individual loan quality | $ | (1 | ) | $ | — | $ | (2 | ) | $ | — | ||||||
Other changes in fair value | $ | 149 | $ | 13 | $ | 457 | $ | 13 |
Three Months | Three Months | |||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||||||||||
Carrying | Estimated Fair | Carrying | Estimated Fair | |||||||||||||||||||||
Value Prior to | Value After | Value Prior to | Value After | |||||||||||||||||||||
Impairment | Impairment | Gains (Losses) | Impairment | Impairment | Gains (Losses) | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Mortgage and consumer loans (1): | ||||||||||||||||||||||||
Held-for-investment | $ | 88 | $ | 63 | $ | (25 | ) | $ | 46 | $ | 40 | $ | (6 | ) | ||||||||||
Held-for-sale | 35 | 33 | (2 | ) | 94 | 85 | (9 | ) | ||||||||||||||||
Mortgage and consumer loans, net | $ | 123 | $ | 96 | $ | (27 | ) | $ | 140 | $ | 125 | $ | (15 | ) | ||||||||||
Other limited partnership interests (2) | $ | 49 | $ | 36 | $ | (13 | ) | $ | 47 | $ | 30 | $ | (17 | ) | ||||||||||
Real estate joint ventures (2) | $ | 49 | $ | 27 | $ | (22 | ) | $ | — | $ | — | $ | — |
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Nine Months | Nine Months | |||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||||||||||
Estimated | Estimated | |||||||||||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||||||||||
Value Prior to | Value After | Value Prior to | Value After | |||||||||||||||||||||
Impairment | Impairment | Gains (Losses) | Impairment | Impairment | Gains (Losses) | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Mortgage and consumer loans (1): | ||||||||||||||||||||||||
Held-for-investment | $ | 176 | $ | 123 | $ | (53 | ) | $ | 125 | $ | 95 | $ | (30 | ) | ||||||||||
Held-for-sale | 41 | 38 | (3 | ) | 112 | 85 | (27 | ) | ||||||||||||||||
Mortgage and consumer loans, net | $ | 217 | $ | 161 | $ | (56 | ) | $ | 237 | $ | 180 | $ | (57 | ) | ||||||||||
Other limited partnership interests (2) | $ | 881 | $ | 527 | $ | (354 | ) | $ | 71 | $ | 38 | $ | (33 | ) | ||||||||||
Real estate joint ventures (2) | $ | 186 | $ | 96 | $ | (90 | ) | $ | — | $ | — | $ | — |
(1) | Mortgage and Consumer Loans —The impaired mortgage and consumer loans presented above were written down to their estimated fair values at the date the impairments were recognized. Estimated fair values for impaired mortgage and consumer loans are based on observable market prices or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, on the value of the underlying collateral, or the present value of the expected future cash flows. Impairments to estimated fair value representnon-recurring fair value measurements that have been categorized as Level 3 due to the lack of price transparency inherent in the limited markets for such mortgage and consumer loans. | |
(2) | Other Limited Partnership Interests and Real Estate Joint Ventures —The impaired investments presented above were accounted for using the cost basis. Impairments on these cost basis investments were recognized at estimated fair value determined from information provided in the financial statements of the underlying entities in the period in which the impairment was incurred. These impairments to estimated fair value representnon-recurring fair value measurements that have been classified as Level 3 due to the limited activity and price transparency inherent in the market for such investments. |
20. | Subsequent Events |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (650 | ) | $ | 600 | $ | (2,657 | ) | $ | 2,130 | ||||||
Less: Net investment gains (losses), net of income tax | (1,420 | ) | 483 | (4,573 | ) | (217 | ) | |||||||||
Less: Adjustments related to net investment gains (losses), net of income tax | 66 | (61 | ) | 331 | 134 | |||||||||||
Less: Adjustments related to acquisition costs, net of income tax | (12 | ) | — | (21 | ) | — | ||||||||||
Less: Discontinued operations, net of income tax | (2 | ) | (430 | ) | 34 | (349 | ) | |||||||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 718 | $ | 608 | $ | 1,572 | $ | 2,562 | ||||||||
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• | Lower fee income from separate account businesses, including variable annuity and life products in Individual Business. | |
• | A potential reduction in payroll linked revenue from Institutional group insurance customers. | |
• | A decline in demand for certain International and Institutional retirement & savings products. | |
• | A decrease in Auto & Home premiums resulting from a depressed housing market and auto industry. |
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(i) | the estimated fair value of investments in the absence of quoted market values; |
(ii) | investment impairments; | |
(iii) | the recognition of income on certain investment entities; |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the existence and estimated fair value of embedded derivatives requiring bifurcation; | |
(vi) | the estimated fair value of and accounting for derivatives; | |
(vii) | the capitalization and amortization of DAC and the establishment and amortization of VOBA; |
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(viii) | the measurement of goodwill and related impairment, if any; | |
(ix) | the liability for future policyholder benefits; | |
(x) | accounting for income taxes and the valuation of deferred income tax assets; | |
(xi) | accounting for reinsurance transactions; | |
(xii) | accounting for employee benefit plans; and | |
(xiii) | the liability for litigation and regulatory matters. |
(i) | the length of time and the extent to which the estimated fair value has been below cost or amortized cost; | |
(ii) | the potential for impairments of securities when the issuer is experiencing significant financial difficulties; | |
(iii) | the potential for impairments in an entire industry sector orsub-sector; | |
(iv) | the potential for impairments in certain economically depressed geographic locations; | |
(v) | the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; |
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(vi) | with respect to equity securities, whether the Company’s ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost; | |
(vii) | with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before recovery of the decline in fair value below amortized cost; | |
(viii) | unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and | |
(ix) | other subjective factors, including concentrations and information obtained from regulators and rating agencies. |
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Three Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
(In millions) | ||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (650 | ) | $ | 600 | |||
Less: Net investment gains (losses), net of income tax | (1,420 | ) | 483 | |||||
Less: Adjustments related to net investment gains (losses), net of income tax | 66 | (61 | ) | |||||
Less: Adjustments related to acquisition costs, net of income tax | (12 | ) | — | |||||
Less: Discontinued operations, net of income tax | (2 | ) | (430 | ) | ||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 718 | $ | 608 | ||||
Auto | Corporate | |||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 57 | $ | (174 | ) | $ | (278 | ) | $ | 67 | $ | (322 | ) | $ | (650 | ) | ||||||||
Less: Net investment gains (losses), net of income tax | (228 | ) | (521 | ) | (413 | ) | (19 | ) | (239 | ) | (1,420 | ) | ||||||||||||
Less: Adjustments related to net investment gains (losses), net of income tax | (26 | ) | 110 | (18 | ) | — | — | 66 | ||||||||||||||||
Less: Adjustments related to acquisition costs, net of income tax | — | — | — | — | (12 | ) | (12 | ) | ||||||||||||||||
Less: Discontinued operations, net of income tax | — | — | — | — | (2 | ) | (2 | ) | ||||||||||||||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 311 | $ | 237 | $ | 153 | $ | 86 | $ | (69 | ) | $ | 718 | |||||||||||
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Auto | Corporate | |||||||||||||||||||||||
For the Three Months Ended September 30, 2008: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 574 | $ | 400 | $ | 254 | $ | 57 | $ | (685 | ) | $ | 600 | |||||||||||
Less: Net investment gains (losses), net of income tax | 141 | 227 | 189 | (44 | ) | (30 | ) | 483 | ||||||||||||||||
Less: Adjustments related to net investment gains (losses), net of income tax | 37 | (45 | ) | (53 | ) | — | — | (61 | ) | |||||||||||||||
Less: Adjustments related to acquisition costs, net of income tax | — | — | — | — | — | — | ||||||||||||||||||
Less: Discontinued operations, net of income tax | — | 3 | — | — | (433 | ) | (430 | ) | ||||||||||||||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 396 | $ | 215 | $ | 118 | $ | 101 | $ | (222 | ) | $ | 608 | |||||||||||
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Nine Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
(In millions) | ||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (2,657 | ) | $ | 2,130 | |||
Less: Net investment gains (losses), net of income tax | (4,573 | ) | (217 | ) | ||||
Less: Adjustments related to net investment gains (losses), net of income tax | 331 | 134 | ||||||
Less: Adjustments related to acquisition costs, net of income tax | (21 | ) | — | |||||
Less: Discontinued operations, net of income tax | 34 | (349 | ) | |||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 1,572 | $ | 2,562 | ||||
Auto | Corporate | |||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (1,449 | ) | $ | (703 | ) | $ | (43 | ) | $ | 234 | $ | (696 | ) | $ | (2,657 | ) | |||||||
Less: Net investment gains (losses), net of income tax | (2,224 | ) | (1,521 | ) | (479 | ) | (4 | ) | (345 | ) | (4,573 | ) | ||||||||||||
Less: Adjustments related to net investment gains (losses), net of income tax | (42 | ) | 379 | (6 | ) | — | — | 331 | ||||||||||||||||
Less: Adjustments related to acquisition costs, net of income tax | — | — | — | — | (21 | ) | (21 | ) | ||||||||||||||||
Less: Discontinued operations, net of income tax | — | 24 | — | — | 10 | 34 | ||||||||||||||||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 817 | $ | 415 | $ | 442 | $ | 238 | $ | (340 | ) | $ | 1,572 | |||||||||||
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Auto | Corporate | |||||||||||||||||||||||
For the Nine Months Ended September 30, 2008: | Institutional | Individual | International | & Home | & Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 1,207 | $ | 875 | $ | 613 | $ | 191 | $ | (756 | ) | $ | 2,130 | |||||||||||
Less: Net investment gains (losses), net of income tax | (262 | ) | (3 | ) | 171 | (60 | ) | (63 | ) | (217 | ) | |||||||||||||
Less: Adjustments related to net investment gains (losses), net of income tax | 67 | 26 | 41 | — | — | 134 | ||||||||||||||||||
Less: Adjustments related to acquisition costs, net of income tax | — | — | — | — | — | — | ||||||||||||||||||
Less: Discontinued operations, net of income tax | — | 3 | — | — | (352 | ) | (349 | ) | ||||||||||||||||
Operating earnings available to MetLife, Inc.’s common shareholders | $ | 1,402 | $ | 849 | $ | 401 | $ | 251 | $ | (341 | ) | $ | 2,562 | |||||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 3,826 | $ | 4,065 | $ | 11,270 | $ | 11,237 | ||||||||
Universal life and investment-type product policy fees | 189 | 215 | 623 | 647 | ||||||||||||
Net investment income | 1,653 | 1,866 | 4,700 | 5,865 | ||||||||||||
Other revenues | 142 | 223 | 479 | 584 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (289 | ) | (255 | ) | (889 | ) | (378 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 105 | — | 218 | — | ||||||||||||
Other net investment gains (losses), net | (212 | ) | 458 | (2,840 | ) | (52 | ) | |||||||||
Total net investment gains (losses) | (396 | ) | 203 | (3,511 | ) | (430 | ) | |||||||||
Total revenues | 5,414 | 6,572 | 13,561 | 17,903 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 4,276 | 4,462 | 12,556 | 12,389 | ||||||||||||
Interest credited to policyholder account balances | 441 | 631 | 1,412 | 1,928 | ||||||||||||
Other expenses | 622 | 612 | 1,850 | 1,776 | ||||||||||||
Total expenses | 5,339 | 5,705 | 15,818 | 16,093 | ||||||||||||
Income (loss) from continuing operations before provision for income tax | 75 | 867 | (2,257 | ) | 1,810 | |||||||||||
Provision for income tax expense (benefit) | 19 | 295 | (805 | ) | 605 | |||||||||||
Income (loss) from continuing operations, net of income tax | 56 | 572 | (1,452 | ) | 1,205 | |||||||||||
Income from discontinued operations, net of income tax | 1 | 2 | 3 | 3 | ||||||||||||
Net income (loss) | 57 | 574 | (1,449 | ) | 1,208 | |||||||||||
Less: Net income attributable to noncontrolling interests | — | — | — | 1 | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 57 | $ | 574 | $ | (1,449 | ) | $ | 1,207 | |||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 1,175 | $ | 1,074 | $ | 3,477 | $ | 3,204 | ||||||||
Universal life and investment-type product policy fees | 840 | 873 | 2,369 | 2,651 | ||||||||||||
Net investment income | 1,735 | 1,635 | 4,955 | 5,022 | ||||||||||||
Other revenues | 176 | 147 | 397 | 450 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (223 | ) | (200 | ) | (465 | ) | (236 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 96 | — | 135 | — | ||||||||||||
Other net investment gains (losses), net | (632 | ) | 563 | (1,854 | ) | 234 | ||||||||||
Total net investment gains (losses) | (759 | ) | 363 | (2,184 | ) | (2 | ) | |||||||||
Total revenues | 3,167 | 4,092 | 9,014 | 11,325 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 1,688 | 1,370 | 4,834 | 4,121 | ||||||||||||
Interest credited to policyholder account balances | 619 | 492 | 1,808 | 1,488 | ||||||||||||
Policyholder dividends | 436 | 445 | 1,291 | 1,313 | ||||||||||||
Other expenses | 701 | 1,182 | 2,213 | 3,097 | ||||||||||||
Total expenses | 3,444 | 3,489 | 10,146 | 10,019 | ||||||||||||
Income (loss) from continuing operations before provision for income tax | (277 | ) | 603 | (1,132 | ) | 1,306 | ||||||||||
Provision for income tax expense (benefit) | (103 | ) | 207 | (405 | ) | 435 | ||||||||||
Income (loss) from continuing operations, net of income tax | (174 | ) | 396 | (727 | ) | 871 | ||||||||||
Income from discontinued operations, net of income tax | — | 4 | 24 | 4 | ||||||||||||
Net income (loss) | (174 | ) | 400 | (703 | ) | 875 | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | — | — | — | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (174 | ) | $ | 400 | $ | (703 | ) | $ | 875 | ||||||
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• | Lower DAC amortization of $352 million, net of income tax, primarily due to separate account balance increases from market improvement, which increase expected future gross profits, as well as current period net derivative losses. | |
• | Favorable underwriting results in life products of $23 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs less claims incurred and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from period to period. | |
• | A decrease in policyholder dividends of $6 million, net of income tax, primarily due to updates of actuarial assumptions used in the calculation of the terminal dividend liability for certain life products. |
• | Higher annuity benefits of $152 million, net of income tax, primarily due to current period hedge losses and higher guaranteed annuity benefit costs, partially offset by lower amortization of sales inducements. | |
• | Higher expenses of $39 million, net of income tax, include higher non-deferrable volume related expenses, including those expenses associated with information technology and direct departmental spending, as well as higher pension and post-retirement benefit expenses. This increase is partially offset by a reduction in certain expenses, which management attributes to the Company’s enterprise-wide cost reduction and revenue enhancement initiative. | |
• | Lower universal life and investment-type product policy fees combined with other revenues of $15 million, net of income tax, primarily resulting from lower average separate account balances due to recent unfavorable equity market performance. |
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• | Lower net investment income on blocks of business not driven by interest margins of $15 million, net of income tax. | |
• | An increase in interest credited to policyholder account balances of $2 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business. | |
• | A decrease in interest margins of $1 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed $11 million of the decrease to other investment-type products, and a $10 million increase to the deferred annuity business, both net of income tax. Interest margin is the difference between interest earned and interest credited to policyholder account balances related to the general account on these businesses. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non- policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move in a manner similar to market interest rate movements, subject to any minimum guarantees and, therefore, generally does not, but may introduce volatility in expense. |
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• | Higher annuity benefits of $317 million, net of income tax, primarily due to current period hedge losses and higher guaranteed annuity benefit costs, partially offset by lower amortization of sales inducements. | |
• | Lower universal life and investment-type product policy fees combined with other revenues of $240 million, net of income tax, primarily resulting from lower average separate account balances due to lower equity market levels compared to the first nine months of 2008. | |
• | A decrease in interest margins of $147 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed $86 million of this decrease to the deferred annuity business and $61 million of the decrease to other investment-type products, both net of income tax. Interest margin is the difference between interest earned and interest credited to policyholder account balances related to the general account on these businesses. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non-policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move in a manner similar to market interest rate movements, subject to any minimum guarantees and, therefore, generally does not, but may introduce volatility in expense. | |
• | Lower net investment income on blocks of business not driven by interest margins of $94 million, net of income tax. | |
• | Higher expenses of $50 million, net of income tax, include higher pension and post-retirement benefits and commission expenses offset by higher DAC capitalization primarily from increases in annuity deposits and a |
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reduction in certain expenses, which management attributes to the Company’s enterprise-wide cost reduction and revenue enhancement initiative. In addition, non-deferrable volume related expense, which include those expenses associated with information technology and direct departmental spending have also increased. |
• | An increase in interest credited to policyholder account balances of $11 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business. |
• | Lower DAC amortization of $626 million, net of income tax, primarily due to current period net investment losses and separate account balance increases from market improvement, which increase expected future gross profits. | |
• | Favorable underwriting results in life products of $53 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs less claims incurred and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from period to period. | |
• | A decrease in policyholder dividends of $14 million, net of income tax, primarily due to updates of actuarial assumptions used in the calculation of the terminal dividend liability for certain life products. |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 868 | $ | 893 | $ | 2,366 | $ | 2,717 | ||||||||
Universal life and investment-type product policy fees | 222 | 264 | 658 | 847 | ||||||||||||
Net investment income | 357 | 334 | 808 | 960 | ||||||||||||
Other revenues | 4 | — | 8 | 13 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (30 | ) | (18 | ) | (51 | ) | (19 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 22 | — | 22 | — | ||||||||||||
Other net investment gains (losses), net | (566 | ) | 295 | (592 | ) | 295 | ||||||||||
Total net investment gains (losses) | (574 | ) | 277 | (621 | ) | 276 | ||||||||||
Total revenues | 877 | 1,768 | 3,219 | 4,813 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 727 | 949 | 1,855 | 2,392 | ||||||||||||
Interest credited to policyholder account balances | 198 | 6 | 435 | 142 | ||||||||||||
Policyholder dividends | 2 | 2 | 5 | 6 | ||||||||||||
Other expenses | 406 | 418 | 1,103 | 1,329 | ||||||||||||
Total expenses | 1,333 | 1,375 | 3,398 | 3,869 | ||||||||||||
Income (loss) from continuing operations before provision for income tax | (456 | ) | 393 | (179 | ) | 944 | ||||||||||
Provision for income tax expense (benefit) | (173 | ) | 145 | (117 | ) | 348 | ||||||||||
Income (loss) from continuing operations, net of income tax | (283 | ) | 248 | (62 | ) | 596 | ||||||||||
Income (loss) from discontinued operations, net of income tax | — | — | — | — | ||||||||||||
Net income (loss) | (283 | ) | 248 | (62 | ) | 596 | ||||||||||
Less: Net loss attributable to noncontrolling interests | (5 | ) | (6 | ) | (19 | ) | (17 | ) | ||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (278 | ) | $ | 254 | $ | (43 | ) | $ | 613 | ||||||
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• | Mexico by $30 million, net of income tax, primarily due to a decrease in certain policyholder liabilities caused by a decrease in the unrealized investment results on the invested assets supporting those liabilities relative to the prior period, growth in its individual and institutional businesses and higher premium rates in its institutional business, as well as a lower effective tax rate. These increases were partially offset by the impact of management’s update of assumptions used to determine estimated gross profits in both the current and prior years, an increase in claims experience, as well as an increase in interest credited to policyholder account balances resulting from business growth. | |
• | The home office by $13 million, net of income tax, primarily due to a reduction of tax liabilities resulting from an election to not repatriate earnings from our Australian operation in the future, as well as lower headcount and lower spending on growth and infrastructure initiatives. | |
• | Argentina by $7 million, net of income tax, primarily due to higher yields resulting from portfolio repositioning, as well as higher income from the trading portfolio which experienced losses in the prior year period. |
• | Japan by $23 million, net of income tax, due to a decrease of $21 million, net of income tax, from hedging activities associated with the guaranteed annuity business as well as a decrease of $6 million from the Company’s investment in Japan primarily due to the utilization of the fair value option for certain fixed annuities, partially offset by lower DAC amortization relative to the prior year related to market performance and a decrease in the costs of guaranteed annuity benefits. These decreases were partially offset by higher fees of $4 million, net of income tax, from the assumed reinsurance business. | |
• | South Korea by $3 million, net of income tax, primarily due to higher expenses due to investments in distribution capability and business growth as well as higher claims experience partially offset by an increase in surrender charges and business growth, as well as lower taxes resulting from a reduction in the statutory tax rate. |
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• | Mexico by $56 million primarily due to growth in its individual and institutional businesses, an increase in fees due to management’s update of assumptions used to determine estimated gross profits in both the current and prior years and higher premium rates in its institutional business. | |
• | Hong Kong and India by $17 million and $10 million, respectively, due to a shift from variable to traditional business. | |
• | South Korea by $9 million primarily due to an increase in surrender charges, as well as business growth. | |
• | Australia and Brazil by $9 million and $7 million, respectively, primarily due to business growth. | |
• | Japan by $5 million due to an increase in assumed reinsurance premium. |
• | Argentina by $15 million primarily due to the nationalization of the pension business in the fourth quarter of 2008, which eliminated the revenue from this business. | |
• | Chile by $13 million primarily due to lower annuity sales resulting from a contraction of the annuity market in Chile. |
• | Hong Kong, Ireland and Brazil by $107 million, $83 million and $12 million, respectively, primarily due to favorable results on the trading securities portfolio. | |
• | Argentina by $7 million due to higher yields resulting from portfolio repositioning, as well as higher income from the trading portfolio. | |
• | South Korea by $4 million primarily due to increases in invested assets. |
• | Chile by $99 million due to the impact of lower inflation rates on indexed securities, the valuations and returns of which are linked to inflation rates. | |
• | Japan by $38 million due to a decrease of $32 million from hedging activities associated with the guaranteed annuity business, as well as a decrease of $6 million from the Company’s investment in Japan from the utilization of the fair value option for certain fixed annuities, partially offset by lower DAC amortization relative to the prior year related to market performance and a decrease in the costs of guaranteed annuity benefits. | |
• | Australia by $2 million due to a decrease in invested assets as a result of dividends remitted to parent. |
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• | Hong Kong and Ireland by $117 million and $87 million, respectively, primarily due to favorable results on the trading securities portfolio which supports unit-linked policyholder liabilities. | |
• | Brazil by $16 million due to higher interest credited resulting from better performance on the trading securities portfolio which supports unit-linked pension liabilities, as well as growth from entry into the dental insurance business in fourth quarter of 2008. | |
• | South Korea by $7 million primarily due to claims experience. | |
• | Taiwan and Australia by $5 million and $4 million, respectively, primarily due to business growth. |
• | Chile by $116 million primarily due to a decrease in inflation indexed policyholder liabilities commensurate with the decrease in net investment income from inflation-indexed assets, as well as a decrease in the annuity business mentioned above, partially offset by higher interest credited. | |
• | Mexico by $15 million, primarily due to a decrease in certain policyholder liabilities of $41 million caused by a decrease in the unrealized investment results on the invested assets supporting those liabilities relative to the prior period, partially offset by increase in claims experience, as well as an increase in interest credited to policyholder account balances resulting from business growth. |
• | Mexico by $32 million primarily due to an increase in DAC amortization relative to the prior year due to management’s update of assumptions used to determine estimated gross profits in both the current and prior years. | |
• | South Korea by $10 million due to investments in distribution capability and business growth. | |
• | Brazil by $4 million primarily due to growth. | |
• | India by $4 million primarily due to increased staffing, rent and DAC amortization due to business growth. | |
• | Australia by $2 million due to currency transaction losses as well as growth. |
• | Argentina by $15 million due to lower administrative expenses resulting from the nationalization of the pension business. | |
• | The home office of $3 million primarily due to lower headcount and lower spending on growth and infrastructure initiatives. |
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• | Argentina by $82 million, net of income tax, due to a reassessment by the Company of its approach to managing existing and potential future claims related to certain social security pension annuity contractholders, as a result of which liabilities of $95 million related to pesification were released, as well as lower administrative expenses resulting from the nationalization of the pension business, higher investment yields resulting from portfolio repositioning, higher income from the trading portfolio which experienced losses in prior year period, as well as the adverse impact of currency transaction losses in the prior year. Our operations in Argentina also benefited more significantly in the current year from the utilization of deferred tax assets against which valuation allowances had previously been established. These increases were partially offset by a reduction in fees due to the nationalization of the pension business in December 2008, the reduction in the prior year of the liability for pension servicing obligations resulting from a refinement of assumptions and methodology as well as the availability of government statistics regarding the number of participants transferring to the government-sponsored plan created by the pension reform program, which was in effect from January 1, 2008 until December 2008 when the business was nationalized. | |
• | South Korea by $19 million, net of income tax, due to an increase in surrender charges, lower taxes resulting from a reduction in the statutory tax rate and a one-time tax benefit related to the reduction in the statutory tax rate as well as business growth, partially offset by an increase in claims and higher expenses due to investments in distribution capability and business growth. | |
• | Chile by $9 million, net of income tax, primarily due to the net impact of lower inflation rates on indexed securities and on policyholder liabilities. While the impact of inflation is neutral to net income, a portion of the inflation impact is accounted for in net investment gains (losses). | |
• | Hong Kong by $2 million, net of income tax, primarily due to business growth. |
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• | Japan by $44 million, net of income tax, due to a decrease of $101 million, net of income tax, from hedging activities associated with Japan’s guaranteed annuity benefits, partially offset by an increase in premiums of $7 million, net of income tax, from assumed reinsurance. In addition, the Company’s earnings from its investment in Japan increased by $50 million, net of income tax, due to the impact of a refinement in assumptions for DAC amortization on guaranteed annuity business, lower DAC amortization relative to the prior year related to market performance, a decrease in the costs of guaranteed annuity benefits, and the impact of a reduction in a liability for guarantee fund assessments, offset by the unfavorable impact from the utilization of the fair value option for certain fixed annuities. | |
• | Ireland by $22 million, net of income tax, primarily due to foreign currency transaction gains and a tax benefit in the prior period, as well as higher initiative spending. | |
• | The home office by $16 million, net of income tax, primarily due to a valuation allowance of $40 million established against net deferred tax assets resulting from an election to not repatriate earnings from our Mexico operation, as well as higher economic capital charges and lower interest income due to a decrease in cash equivalents, partially offset by a reduction of tax liabilities resulting from an election to not repatriate earnings from our Australian operation in the future, as well as lower headcount and lower spending on growth and infrastructure initiatives. | |
• | Mexico by $14 million, net of income tax, primarily due to an increase in certain policyholder liabilities caused by an increase in the unrealized investment results on the invested assets supporting those liabilities relative to the prior year, the impact of management’s update of assumptions used to determine estimated gross profits in both the current and prior years, higher claims experience, a reduction in fees charged on the pension business, the impact of portfolio repositioning and a decrease in short-term yields as well as the prior year impact from the reinstatement of premiums. These items were partially offset by a decrease in policyholder liabilities resulting from a policy cancellation, a revision to certain dollar-denominated policyholder liabilities, growth in its individual and institutional businesses and higher premium rates in its institutional business, as well as a lower effective tax rate, and a one-time tax benefit related to a change in assumption regarding the repatriation of earnings. |
• | Mexico by $101 million due to growth in its individual and institutional businesses, an increase in fees due to management’s update of assumptions used to determine estimated gross profits in both the current and prior years, and higher premium rates in its institutional business partially offset by the reinstatement of premiums in the prior period and a reduction in fees charged on the pension business. | |
• | Hong Kong by $35 million due to a shift to traditional business, as well as an increase in surrender charges on non-traditional business. |
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• | South Korea by $27 million primarily due to an increase in surrender charges, as well as business growth. | |
• | Australia and Poland by $23 million and $5 million, respectively, primarily due to business growth. | |
• | India by $22 million due to business growth and a shift to traditional products. | |
• | Brazil by $17 million due to its entry into the dental business in the fourth quarter of 2008, as well as growth in existing lines. | |
• | United Kingdom by $8 million due to premium growth and the impact of stronger foreign currencies from business written outside of the United Kingdom, partially offset by a decrease in business written in the United Kingdom. | |
• | Japan by $10 million due to an increase in assumed reinsurance premium. |
• | Chile by $94 million primarily due to lower annuity sales resulting from a contraction of the annuity market in Chile. | |
• | Argentina by $44 million primarily due to the nationalization of the pension business in the fourth quarter of 2008, which eliminated the revenue from this business |
• | Hong Kong, Ireland, and Brazil by $213 million, $88 million, and $20 million, respectively, primarily due to favorable results on the trading securities portfolio which supports unit-linked pension liabilities. | |
• | Mexico by $25 million primarily due to an increase in invested assets, partially offset by the impact of lower inflation rates on indexed securities, the impact of portfolio repositioning and a decrease in short-term yields. | |
• | South Korea and Taiwan by $12 million and $7 million, respectively, primarily due to increases in invested assets. | |
• | Argentina by $11 million due to higher yields resulting from portfolio repositioning, higher income from the trading portfolio as well as the adverse impact of currency transaction losses in the prior year. |
• | Chile by $221 million due to the impact of lower inflation rates on indexed securities, the valuations and returns of which are linked to inflation rates. | |
• | Japan by $106 million primarily due to a decrease of $156 million from hedging activities associated with Japan’s guaranteed annuity benefits, partially offset by an increase of $50 million, net of income tax, in the Company’s earnings from its investment in Japan resulting from the impact of a refinement in assumptions for DAC amortization on guaranteed annuity business, lower DAC amortization relative to the prior year related to market performance, a decrease in the costs of guaranteed annuity benefits, and the impact of a reduction in the liability for guarantee fund assessments, offset by the unfavorable impact from the utilization of the fair value option for certain fixed annuities. | |
• | The home office by $7 million primarily due to an increase in the amount charged for economic capital and lower interest income due to a decrease in cash equivalents. | |
• | Australia by $2 million due to a decrease in invested assets as a result of dividends remitted to parent. |
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• | Hong Kong by $239 million primarily due to favorable results on the trading securities portfolio which supports unit-linked policyholder liabilities compared to the prior period, as discussed above, as well as a shift to traditional business. | |
• | Mexico by $143 million, primarily due to an increase in certain policyholder liabilities of $57 million caused by an increase in the unrealized investment results on the invested assets supporting those liabilities relative to the prior period. The remainder of the increase was due to an increase in claims experience, as well as in interest credited to policyholder account balances resulting from business growth, partially offset by a decrease in policyholder liabilities resulting from a policy cancellation, as well as a revision in the calculation of certain dollar-denominated policyholder liabilities. | |
• | Ireland by $91 million due to favorable results on the trading securities portfolio which supports unit-linked policyholder liabilities. | |
• | Brazil by $28 million due to higher interest credited resulting from better performance on the trading securities portfolio which supports unit-linked pension liabilities, as well as growth from entry into the dental insurance business in fourth quarter of 2008. | |
• | South Korea by $19 million primarily due to an increase in claims and surrenders. | |
• | India by $15 million due to business growth. | |
• | Australia by $14 million primarily due to business growth, as well as higher claims experience and an increase in liabilities related to reinsurance. | |
• | Taiwan by $10 million primarily due to business growth. |
• | Chile by $335 million primarily due to a decrease in inflation indexed policyholder liabilities commensurate with the decrease in net investment income from inflation-indexed assets, as well as a decrease in the annuity business mentioned above, partially offset by higher interest credited. |
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• | Mexico by $43 million primarily due to an increase in DAC amortization relative to the prior year, due to management’s update of assumptions used to determine estimated gross profits in both the current and prior years, as well as higher expenses from initiative spending and business growth. | |
• | Ireland by $21 million due to foreign currency transaction gains in the prior period, higher spending on regional initiatives, and business growth. | |
• | India by $15 million primarily due to increased staffing, rent and DAC amortization due to business growth. | |
• | South Korea by $13 million due to investments in distribution capability and business growth. | |
• | Brazil by $10 million primarily due to business growth and entry into the dental insurance business. | |
• | Australia by $9 million primarily due to currency transaction losses as well as growth. | |
• | Chile by $9 million due to an adjustment in DAC amortization related to the decrease in inflation partially offset by reductions administrative expenses. | |
• | Hong Kong by $7 million due to business growth. | |
• | The United Kingdom by $6 million due to higher commission cost related to the increase in premiums, as well as foreign currency transaction gains recognized in the prior period. |
• | Argentina by $97 million, due to a reassessment by the Company of its approach to managing existing and potential future claims related to certain social security pension annuity contractholders. As a result of this reassessment, contingent liabilities of $95 million related to pesification were released. In addition, the nationalization of the pension business in December 2008 resulted in lower administrative expenses. These decreases were partially offset by a reduction in the prior period of the liability for pension servicing obligations resulting from a refinement of assumptions and methodology, as well as the availability of government statistics regarding the number of participants transferring to the government-sponsored plan created by the pension reform program which was in effect from January 1, 2008 until December 2008 when the business was nationalized. | |
• | The home office of $25 million primarily due to lower headcount and lower spending on growth and infrastructure initiatives. |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 727 | $ | 745 | $ | 2,175 | $ | 2,232 | ||||||||
Net investment income | 45 | 48 | 134 | 149 | ||||||||||||
Other revenues | 8 | 9 | 22 | 30 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (28 | ) | (2 | ) | (29 | ) | (3 | ) | ||||||||
Other net investment gains (losses), net | (2 | ) | (65 | ) | 22 | (88 | ) | |||||||||
Total net investment gains (losses) | (30 | ) | (67 | ) | (7 | ) | (91 | ) | ||||||||
Total revenues | 750 | 735 | 2,324 | 2,320 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 482 | 471 | 1,453 | 1,488 | ||||||||||||
Policyholder dividends | 1 | 1 | 1 | 4 | ||||||||||||
Other expenses | 184 | 196 | 569 | 604 | ||||||||||||
Total expenses | 667 | 668 | 2,023 | 2,096 | ||||||||||||
Income before provision for income tax | 83 | 67 | 301 | 224 | ||||||||||||
Provision for income tax | 16 | 10 | 67 | 33 | ||||||||||||
Income from continuing operations, net of income tax | 67 | 57 | 234 | 191 | ||||||||||||
Income from discontinued operations, net of income tax | — | — | — | — | ||||||||||||
Net income | 67 | 57 | 234 | 191 | ||||||||||||
Less: Net income attributable to noncontrolling interests | — | — | — | — | ||||||||||||
Net income available to MetLife, Inc.’s common shareholders | $ | 67 | $ | 57 | $ | 234 | $ | 191 | ||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 5 | $ | 8 | $ | 11 | $ | 26 | ||||||||
Net investment income | 133 | 164 | 317 | 665 | ||||||||||||
Other revenues | 272 | 42 | 822 | 64 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (80 | ) | (273 | ) | (335 | ) | (325 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive loss | 22 | — | 104 | — | ||||||||||||
Other net investment gains (losses), net | (322 | ) | 243 | (320 | ) | 231 | ||||||||||
Total net investment gains (losses) | (380 | ) | (30 | ) | (551 | ) | (94 | ) | ||||||||
Total revenues | 30 | 184 | 599 | 661 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | — | 12 | 3 | 36 | ||||||||||||
Other expenses | 630 | 523 | 1,841 | 1,279 | ||||||||||||
Total expenses | 630 | 535 | 1,844 | 1,315 | ||||||||||||
Loss from continuing operations before income tax | (600 | ) | (351 | ) | (1,245 | ) | (654 | ) | ||||||||
Income tax benefit | (310 | ) | (128 | ) | (624 | ) | (344 | ) | ||||||||
Loss from continuing operations, net of income tax | (290 | ) | (223 | ) | (621 | ) | (310 | ) | ||||||||
Income (loss) from discontinued operations, net of income tax | (2 | ) | (410 | ) | 10 | (258 | ) | |||||||||
Net loss | (292 | ) | (633 | ) | (611 | ) | (568 | ) | ||||||||
Less: Net income (loss) attributable to noncontrolling interests | — | 22 | (6 | ) | 94 | |||||||||||
Net loss attributable to MetLife, Inc. | (292 | ) | (655 | ) | (605 | ) | (662 | ) | ||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 94 | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | (322 | ) | $ | (685 | ) | $ | (696 | ) | $ | (756 | ) | ||||
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• | MetLife, Inc. and MetLife Funding, Inc. (“MetLife Funding”) each have commercial paper programs supported by our $2.85 billion general corporate credit facility. Access to the commercial paper markets has improved throughout the nine months ended September 30, 2009. | |
• | The Federal Reserve Bank of New York’s Commercial Paper Funding Facility (“CPFF”) is intended to improve liquidity in short-term funding markets by increasing the availability of term commercial paper funding to issuers and by providing greater assurance to both issuers and investors that firms will be able to rollover their maturing commercial paper. The CPFF program has been extended to February 1, 2010. MetLife Short Term Funding LLC, the issuer of commercial paper under a program supported by funding agreements issued by MLIC and MetLife Insurance Company of Connecticut (“MICC”), was accepted in October 2008 for the CPFF and may issue a maximum amount of $3.8 billion under the CPFF. At September 30, 2009, MetLife Short Term Funding LLC had no drawdown under its CPFF capacity, |
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compared to $1,650 million at December 31, 2008. MetLife Funding was accepted in November 2008 for the CPFF and may issue a maximum amount of $1 billion under the CPFF. No drawdown by MetLife Funding has taken place under this facility at September 30, 2009. |
• | MetLife Bank is a depository institution that is approved to use the Federal Reserve Bank of New York Discount Window borrowing privileges and participate in the Federal Reserve Bank of New York Term Auction Facility. To utilize these facilities, MetLife Bank has pledged qualifying loans and investment securities to the Federal Reserve Bank of New York as collateral. At September 30, 2009 and December 31, 2008, MetLife Bank’s liability for advances from the Federal Reserve Bank of New York under these facilities was $1.2 billion and $950 million, respectively, which is included in short-term debt. The Company did not participate in these programs during the nine months ended September 30, 2008. See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements. | |
• | As a member of the FHLB of New York, MetLife Bank has entered into repurchase agreements with FHLB of New York on both short- and long-term bases, with a total liability for repurchase agreements with the FHLB of New York of $2.4 billion and $1.8 billion at September 30, 2009 and December 31, 2008, respectively. See Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements. | |
• | MetLife, Inc. and MetLife Bank elected to continue to participate in the debt guarantee component of the FDIC Program. On March 26, 2009, MetLife, Inc. issued $397 million of floating-rate senior notes due June 2012 under the FDIC Program, representing all MetLife, Inc.’s capacity under the FDIC Program. MetLife Bank may issue up to $178 million of guaranteed debt under the FDIC Program. Unless extended, the FDIC Program will not apply to debt issued after October 31, 2009. | |
• | In addition, the Company had obligations under funding agreements with the FHLB of NY of $14.3 billion and $15.2 billion at September 30, 2009 and December 31, 2008, respectively, for MLIC and with the FHLB of Boston of $326 million and $526 million at September 30, 2009 and December 31, 2008, respectively, for MICC. The FHLB of Boston had also advanced $300 million to MICC at December 31, 2008, which was included in short-term debt. There were no such advances at September 30, 2009. See Note 7 of the Notes to the Interim Condensed Consolidated Financial Statements. |
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More Than | ||||||||||||||||||||||||
More Than | Three Years | |||||||||||||||||||||||
One Year and | and Less | |||||||||||||||||||||||
Less Than | Less Than | Than Five | More Than | |||||||||||||||||||||
Contractual Obligations | Total | One Year | Three Years | Years | Five Years | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Future policy benefits | (1 | ) | $ | 306,645 | $ | 7,055 | $ | 10,687 | $ | 11,452 | $ | 277,451 | ||||||||||||
Policyholder account balances | (2 | ) | 205,581 | 30,713 | 30,504 | 26,333 | 118,031 | |||||||||||||||||
Other policyholder liabilities | (3 | ) | 6,337 | 6,337 | — | — | — | |||||||||||||||||
Short-term debt | (4 | ) | 2,131 | 2,131 | — | — | — | |||||||||||||||||
Long-term debt | (4 | ) | 21,268 | 1,322 | 3,769 | 2,597 | 13,580 | |||||||||||||||||
Collateral financing arrangements | (4 | ) | 6,797 | 71 | 141 | 141 | 6,444 | |||||||||||||||||
Junior subordinated debt securities | (4 | ) | 10,514 | 258 | 517 | 517 | 9,222 | |||||||||||||||||
Payables for collateral under securities loaned and other transactions | (5 | ) | 24,363 | 24,363 | — | — | — | |||||||||||||||||
Commitments to lend funds | (6 | ) | 8,536 | 8,498 | 17 | 2 | 19 | |||||||||||||||||
Operating leases | (7 | ) | 2,020 | 283 | 433 | 293 | 1,011 | |||||||||||||||||
Other | (8 | ) | 12,433 | 12,027 | 6 | 6 | 394 | |||||||||||||||||
Total | $ | 606,625 | $ | 93,058 | $ | 46,074 | $ | 41,341 | $ | 426,152 | ||||||||||||||
(1) | Future policyholder benefits include liabilities related to traditional whole life policies, term life policies, closeout and other group annuity contracts, structured settlements, master terminal funding agreements, single premium immediate annuities, long-term disability policies, individual disability income policies, LTC policies and property and casualty contracts. Included within future policyholder benefits are contracts where the Company is currently making payments and will continue to do so until the occurrence of a specific event such as death, as well as those where the timing of a portion of the payments has been determined by the contract. Also included are contracts where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death or illness, or where the occurrence of the payment triggering event, such as a surrender of a policy or contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience, as well as its expectation of future payment patterns. | |
Liabilities related to accounting conventions, or which are not contractually due, such as shadow liabilities, excess interest reserves and property and casualty loss adjustment expenses, of $625 million have been excluded from amounts presented in the table above. | ||
Amounts presented in the table above, excluding those related to property and casualty contracts, represent the estimated cash payments for benefits under such contracts including assumptions related to the receipt of future premiums and assumptions related to mortality, morbidity, policy lapse, renewal, retirement, inflation, disability incidence, disability terminations, policy loans and other contingent events as appropriate to the respective product type. Payments for case reserve liabilities and incurred but not reported liabilities associated with property and casualty contracts of $1.4 billion have been included using an estimate of the ultimate amount to be settled under the policies based upon historical payment patterns. The ultimate amount to be paid under property and casualty contracts is not determined until the Company reaches a settlement with the claimant, which may vary significantly from the liability or contractual obligation presented above especially as it relates to incurred but not reported liabilities. All estimated cash payments presented in the table above are undiscounted as to interest, net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. The more than five years category displays estimated payments due for periods extending for more than 100 years from the present date. | ||
The sum of the estimated cash flows shown for all years in the table of $306.6 billion exceeds the liability amount of $134.5 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions, most significantly mortality, between the date the liabilities were initially established and the current date. | ||
For the majority of the Company’s insurance operations, estimated contractual obligations for future policy benefits and policyholder account balance liabilities as presented in the table above are derived from the annual |
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asset adequacy analysis used to develop actuarial opinions of statutory reserve adequacy for state regulatory purposes. These cash flows are materially representative of the cash flows under generally accepted accounting principles. | ||
Actual cash payments to policyholders may differ significantly from the liabilities as presented in the consolidated balance sheet and the estimated cash payments as presented in the table above due to differences between actual experience and the assumptions used in the establishment of these liabilities and the estimation of these cash payments. | ||
(2) | Policyholder account balances include liabilities related to conventional guaranteed interest contracts, guaranteed interest contracts associated with formal offering programs, funding agreements, individual and group annuities, total control accounts, bank deposits, individual and group universal life, variable universal life and company-owned life insurance. | |
Included within policyholder account balances are contracts where the amount and timing of the payment is essentially fixed and determinable. These amounts relate to policies where the Company is currently making payments and will continue to do so, as well as those where the timing of the payments has been determined by the contract. Other contracts involve payment obligations where the timing of future payments is uncertain and where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death, or where the occurrence of the payment triggering event, such as a surrender of or partial withdrawal on a policy or deposit contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience, as well as its expectation of future payment patterns. | ||
Excess interest reserves representing purchase accounting adjustments of $597 million have been excluded from amounts presented in the table above as they represent an accounting convention and not a contractual obligation. | ||
Amounts presented in the table above represent the estimated cash payments to be made to policyholders undiscounted as to interest and including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate to the respective product type. Such estimated cash payments are also presented net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. For obligations denominated in foreign currencies, cash payments have been estimated using current spot rates. | ||
The sum of the estimated cash flows shown for all years in the table of $205.6 billion exceeds the liability amount of $147.5 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions between the date the liabilities were initially established and the current date. See the comments under footnote 1 regarding the source and uncertainties associated with the estimation of the contractual obligations related to future policyholder benefits and policyholder account balances. See also “— Overview.” | ||
(3) | Other policyholder liabilities are comprised of other policyholder funds, policyholder dividends payable and the policyholder dividend obligation. Amounts included in the table above related to these liabilities are as follows: | |
a. Other policyholder funds includes liabilities for incurred but not reported claims and claims payable on group term life, long-term disability, LTC and dental; policyholder dividends left on deposit and policyholder dividends due and unpaid related primarily to traditional life and group life and health; and premiums received in advance. Liabilities related to unearned revenue of $2.1 billion have been excluded from the cash payments presented in the table above because they reflect an accounting convention and not a contractual obligation. With the exception of policyholder dividends left on deposit, and those items excluded as noted in the preceding sentence, the contractual obligation presented in the table above related to other policyholder funds is equal to the liability reflected in the consolidated balance sheet. Such amounts are reported in the less than one year category due to the short-term nature of the liabilities. Contractual obligations on policyholder dividends left on deposit are projected based on assumptions of policyholder withdrawal activity. |
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b. Policyholder dividends payable consists of liabilities related to dividends payable in the following calendar year on participating policies. As such, the contractual obligation related to policyholder dividends payable is presented in the table above in the less than one year category at the amount of the liability presented in the consolidated balance sheet. | ||
c. The nature of the policyholder dividend obligation is described in Note 9 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. Because the exact timing and amount of the ultimate policyholder dividend obligation is subject to significant uncertainty and the amount of the policyholder dividend obligation is based upon a long-term projection of the performance of the closed block, management has reflected the obligation at the amount of the liability, if any, presented in the consolidated balance sheet in the more than five years category. This was done to reflect the long-duration of the liability and the uncertainty of the ultimate cash payment. | ||
(4) | Amounts presented in the table above for short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities differ from the balances presented on the consolidated balance sheet as the amounts presented in the table above do not include premiums or discounts upon issuance or purchase accounting fair value adjustments. The amounts presented above also include interest on such obligations as described below. | |
Short-term debt consists of borrowings with original maturities of less than one year carrying fixed interest rates. The contractual obligation for short-term debt presented in the table above represents the amounts due upon maturity plus the related interest for the period from October 1, 2009 through maturity. | ||
Long-term debt bears interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at September 30, 2009 and, as such, does not consider the impact of future rate movements. Long-term debt also includes payments under capital lease obligations of $3 million, $4 million, $0 and $29 million, in the less than one year, one to three years, three to five years and more than five years categories, respectively. | ||
Collateral financing arrangements bear interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at September 30, 2009 and, as such, does not consider the impact of future rate movements. Pursuant to these collateral financing arrangements, the Holding Company may be required to deliver cash or pledge collateral to the respective unaffiliated financial institutions. See “— The Holding Company — Global Funding Sources.” | ||
Junior subordinated debt securities bear interest at fixed interest rates through their respective redemption dates. Interest was computed using the stated rates on the obligations through the scheduled redemption dates as it is the Company’s expectation that the debt will be redeemed at that time. Inclusion of interest payments on junior subordinated debt through the final maturity dates would increase the contractual obligation by $4.1 billion. | ||
(5) | The Company has accepted cash collateral in connection with securities lending and derivative transactions. As the securities lending transactions expire within the next year or the timing of the return of the collateral is uncertain, the return of the collateral has been included in the less than one year category in the table above. The Company also holds non-cash collateral, which is not reflected as a liability in the consolidated balance sheet, of $623 million at September 30, 2009. | |
(6) | The Company commits to lend funds under mortgage loans, partnerships, bank credit facilities, bridge loans and private corporate bond investments. In the table above, the timing of the funding of mortgage loans and private corporate bond investments is based on the expiration date of the commitment. As it relates to commitments to lend funds to partnerships and under bank credit facilities, the Company anticipates that these amounts could be invested any time over the next five years; however, as the timing of the fulfillment of the obligation cannot be predicted, such obligations are presented in the less than one year category in the table above. Commitments to fund bridge loans are short-term obligations and, as a result, are presented in the less than one year category in the table above. See “— Off-Balance Sheet Arrangements.” | |
(7) | As a lessee, the Company has various operating leases, primarily for office space. Contractual provisions exist that could increase or accelerate those leases obligations presented, including various leases with early buyouts |
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and/or escalation clauses. However, the impact of any such transactions would not be material to the Company’s financial position or results of operations. See “— Off-Balance Sheet Arrangements.” | ||
(8) | Other includes those other liability balances which represent contractual obligations, as well as other miscellaneous contractual obligations of $16 million not included elsewhere in the table above. Other liabilities presented in the table above are principally comprised of amounts due under reinsurance arrangements, payables related to securities purchased but not yet settled, securities sold short, accrued interest on debt obligations, estimated fair value of derivative obligations, deferred compensation arrangements, guaranty liabilities, the estimated fair value of forward stock purchase contracts, as well as general accruals and accounts payable due under contractual obligations. If the timing of any of the other liabilities is sufficiently uncertain, the amounts are included within the less than one year category. | |
The other liabilities presented in the table above differs from the amount presented in the consolidated balance sheet by $4.1 billion due primarily to the exclusion of items such as legal liabilities, pension and postretirement benefit obligations, taxes due other than income tax, unrecognized tax benefits and related accrued interest, accrued severance and employee incentive compensation and other liabilities such as deferred gains and losses. Such items have been excluded from the table above as they represent accounting conventions or are not liabilities due under contractual obligations. | ||
The net funded status of the Company’s pension and other postretirement liabilities included within other liabilities has been excluded from the amounts presented in the table above. Rather, the amounts presented represent the discretionary contributions of $53 million, based on the current year’s expected gross benefit payments to participants, to be made by the Company to the postretirement benefit plans during 2009. Virtually all contributions to the pension and postretirement benefit plans are made by the insurance subsidiaries of the Holding Company with little impact on the Holding Company’s cash flows. | ||
Excluded from the table above are unrecognized tax benefits and accrued interest of $768 million and $191 million, respectively, for which the Company cannot reliably determine the timing of payment. Current income tax payable is also excluded from the table. | ||
See also “— Off-Balance Sheet Arrangements.” |
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2009 | ||||
Permitted w/o | ||||
Company | Approval (1) | |||
(In millions) | ||||
Metropolitan Life Insurance Company | $ | 552 | ||
MetLife Insurance Company of Connecticut | $ | 714 | ||
Metropolitan Tower Life Insurance Company | $ | 88 | ||
Metropolitan Property and Casualty Insurance Company | $ | 9 |
(1) | Reflects dividend amounts that may be paid during 2009 without prior regulatory approval. However, if paid before a specified date during 2009, some or all of such dividends may require regulatory approval. None of these available amounts have been paid as of September 30, 2009. |
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• | In December 2007, the Holding Company, in connection with the collateral financing arrangement associated with MetLife Reinsurance Company of Charleston’s (“MRC”) reinsurance of the closed block liabilities, entered into an agreement with an unaffiliated financial institution that referenced the $2.5 billion surplus note issued by MRC. Under the agreement, the Holding Company is entitled to the interest paid by MRC on the surplus note of3-month LIBOR plus 0.55% in exchange for the payment of3-month LIBOR plus 1.12%, payable quarterly on such amount as adjusted, as described below. |
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• | In May 2007, the Holding Company, in connection with the collateral financing arrangement associated with MetLife Reinsurance Company of South Carolina’s (“MRSC”) reinsurance of universal life secondary guarantees, entered into an agreement with an unaffiliated financial institution under which the Holding Company is entitled to the return on the investment portfolio held by a trust established in connection with this collateral financing arrangement in exchange for the payment of a stated rate of return to the unaffiliated financial institution of3-month LIBOR plus 0.70%, payable quarterly. The collateral financing agreement may be extended by agreement of the Holding Company and the unaffiliated financial institution on each anniversary of the closing. The Holding Company may also be required to make payments to the unaffiliated financial institution, for deposit into the trust, related to any decline in the estimated fair value of the assets held by the trust, as well as amounts outstanding upon maturity or early termination of the collateral financing arrangement. |
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Dividend | ||||||||||||||||||||
Series A | Series A | Series B | Series B | |||||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | Per Share | Aggregate | ||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
August 17, 2009 | August 31, 2009 | September 15, 2009 | $ | 0.2555555 | $ | 6 | $ | 0.4062500 | $ | 24 | ||||||||||
May 15, 2009 | May 31, 2009 | June 15, 2009 | $ | 0.2555555 | 7 | $ | 0.4062500 | 24 | ||||||||||||
March 5, 2009 | February 28, 2009 | March 16, 2009 | $ | 0.2500000 | 6 | $ | 0.4062500 | 24 | ||||||||||||
$ | 19 | $ | 72 | |||||||||||||||||
Subsidiaries | Interest Rate | Maturity Date | September 30, 2009 | December 31, 2008 | ||||||||
(In millions) | ||||||||||||
Metropolitan Life Insurance Company | 3-month LIBOR + 1.15% | December 31, 2009 | $ | 700 | $ | 700 | ||||||
Metropolitan Life Insurance Company | 7.13% | December 15, 2032 | 400 | 400 | ||||||||
Metropolitan Life Insurance Company | 7.13% | January 15, 2033 | 100 | 100 | ||||||||
Total | $ | 1,200 | $ | 1,200 | ||||||||
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September 30, 2009 | ||||
(In millions) | ||||
Balance, beginning of period | $ | 5,008 | ||
Other, net (1) | 25 | |||
Balance, end of period | $ | 5,033 | ||
(1) | Consisting principally of foreign currency translation adjustments. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Institutional: | ||||||||
Group life | $ | 15 | $ | 15 | ||||
Retirement & savings | 887 | 887 | ||||||
Non-medical health & other | 149 | 149 | ||||||
Subtotal | 1,051 | 1,051 | ||||||
Individual: | ||||||||
Traditional life | 73 | 73 | ||||||
Variable & universal life | 1,172 | 1,174 | ||||||
Annuities | 1,692 | 1,692 | ||||||
Other | 18 | 18 | ||||||
Subtotal | 2,955 | 2,957 | ||||||
International: | ||||||||
Latin America region | 200 | 184 | ||||||
European region | 40 | 37 | ||||||
Asia Pacific region | 160 | 152 | ||||||
Subtotal | 400 | 373 | ||||||
Auto & Home | 157 | 157 | ||||||
Corporate & Other (1) | 470 | 470 | ||||||
Total | $ | 5,033 | $ | 5,008 | ||||
(1) | The allocation of the goodwill to the reporting units was performed at the time of the respective acquisition. The $470 million of goodwill within Corporate & Other relates to goodwill acquired as a part of the Travelers acquisition of $405 million, as well as acquisitions by MetLife Bank which resides within Corporate & Other. For purposes of goodwill impairment testing, the $405 million of Corporate & Other goodwill has been attributed to the Individual and Institutional segment reporting units. The Individual segment was attributed $210 million (traditional life — $23 million, variable & universal life — $11 million and annuities — |
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$176 million), and the Institutional segment was attributed $195 million (group life — $2 million, retirement & savings — $186 million, and non-medical health & other — $7 million) at both September 30, 2009 and December 31, 2008. |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Investment return | $ | 57 | $ | 1 | $ | 107 | $ | (31 | ) | |||||||
Separate account balances | 46 | (171 | ) | (60 | ) | (287 | ) | |||||||||
Net investment gain (loss) related | 175 | (1 | ) | 616 | 258 | |||||||||||
Expense | 2 | 7 | (6 | ) | 11 | |||||||||||
In-force/Persistency | 22 | (33 | ) | 30 | (52 | ) | ||||||||||
Policyholder dividends and other | 45 | (14 | ) | 113 | (40 | ) | ||||||||||
Total | $ | 347 | $ | (211 | ) | $ | 800 | $ | (141 | ) | ||||||
• | Actual gross profits decreased as a result of increased losses from the portfolio associated with the hedging of guaranteed insurance obligations on variable annuities, resulting in a decrease of DAC and VOBA amortization of $57 million. | |
• | The increase in equity markets during the quarter increased separate account balances resulting in an increase in expected future gross profits on variable universal life contracts and variable deferred annuity contracts resulting in a decrease of $46 million in DAC and VOBA amortization | |
• | Changes in net investment gains (losses) resulted in the following changes in DAC and VOBA amortization: |
- | Actual gross profits increased as a result of a decrease in liabilities associated with guarantee obligations on variable annuities resulting in an increase of DAC and VOBA amortization of $128 million, excluding the impact from the Company’s own credit and risk margins, which are described below. This increase in actual gross profits was partially offset by freestanding derivative losses associated with the hedging of such guarantee obligations which resulted in a decrease in DAC and VOBA amortization of $79 million. | |
- | A change in valuation of guarantee liabilities, resulting from the adoption of fair value measurements guidance during 2008, also impacted the computation of actual gross profits and the related amortization of DAC and VOBA. The inclusion of these valuation changes increases the volatility of the related DAC and VOBA amortization, and the net income of the Company. Higher risk margins increased the guarantee liability valuations, decreased actual gross profits and decreased amortization by $21 million. In addition, the narrowing of own credit spreads increased the valuation of guarantee liabilities, decreased actual gross profits and decreased amortization by $197 million. | |
- | The remainder of the impact of net investment gains (losses), which decreased DAC amortization by $6 million, was primarily attributable to current period investment activities. |
• | Included in policyholder dividends and other is a decrease of amortization of $13 million due to lower actual gross margins from the closed block in the current period. The remainder of the decrease is due to various |
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immaterial items. Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements provides additional information on the closed block business. |
• | Actual gross profits decreased as a result of increased losses from the portfolio associated with the hedging of guaranteed insurance obligations on variable annuities, resulting in a decrease of DAC and VOBA amortization of $107 million. | |
• | The decrease in amortization due to the increase in equity markets during the second and third quarter did not fully offset the increase in amortization from the decrease in the equity markets during the first quarter of 2009. As a result, the impact of the separate account performance resulted in a decrease in expected future gross profits on variable universal life contracts and variable deferred annuity contracts resulting in an increase of $60 million in DAC and VOBA amortization. | |
• | Changes in net investment gains (losses) resulted in the following changes in DAC and VOBA amortization: |
- | Actual gross profits increased as a result of a decrease in liabilities associated with guarantee obligations on variable annuities resulting in an increase of DAC and VOBA amortization of $758 million, excluding the impact from the Company’s own credit and risk margins, which are described below. This increase in actual gross profits was partially offset by freestanding derivative losses associated with the hedging of such guarantee obligations which resulted in a decrease in DAC and VOBA amortization of $477 million. | |
- | A change in valuation of guarantee liabilities, resulting from the adoption of fair value measurements guidance during 2008, also impacted the computation of actual gross profits and the related amortization of DAC and VOBA. The inclusion of these valuation changes increases the volatility of the related DAC and VOBA amortization, and the net income of the Company. Lower risk margins decreased the guarantee liability valuations, increased actual gross profits and increased amortization by $11 million. However, the narrowing of MetLife’s own credit spread increased the valuation of guarantee liabilities, decreased actual gross profits and decreased amortization by $499 million. | |
- | The remainder of the impact of net investment gains (losses), which decreased DAC amortization by $409 million, was primarily attributable to current period investment activities. |
• | Included in policyholder dividends and other is a decrease of amortization of $41 million due to lower actual gross margins from the closed block in the current period. The remainder of the decrease is due to various immaterial items. Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements provides additional information on the closed block business. |
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• | credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest; | |
• | interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates; | |
• | liquidity risk, relating to the diminished ability to sell certain investments in times of strained market conditions; and | |
• | market valuation risk. |
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At or For the Three | At or For the Nine | |||||||||||||||
Months Ended | Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Fixed Maturity Securities | ||||||||||||||||
Yield (1) | 5.89 | % | 6.38 | % | 5.83 | % | 6.46 | % | ||||||||
Investment income (2) | $ | 3,090 | $ | 3,107 | $ | 8,926 | $ | 9,430 | ||||||||
Investment gains (losses) | $ | (455 | ) | $ | (918 | ) | $ | (1,442 | ) | $ | (1,427 | ) | ||||
Ending carrying value (2) | $ | 225,866 | $ | 212,912 | $ | 225,866 | $ | 212,912 | ||||||||
Mortgage and Consumer Loans | ||||||||||||||||
Yield (1) | 5.33 | % | 5.99 | % | 5.34 | % | 6.09 | % | ||||||||
Investment income (3) | $ | 675 | $ | 687 | $ | 2,049 | $ | 2,037 | ||||||||
Investment gains (losses) | $ | (129 | ) | $ | 26 | $ | (400 | ) | $ | (36 | ) | |||||
Ending carrying value | $ | 50,681 | $ | 50,606 | $ | 50,681 | $ | 50,606 | ||||||||
Real Estate and Real Estate Joint Ventures (4) | ||||||||||||||||
Yield (1) | (6.09 | )% | 2.84 | % | (8.05 | )% | 4.86 | % | ||||||||
Investment income | $ | (109 | ) | $ | 53 | $ | (443 | ) | $ | 261 | ||||||
Investment gains (losses) | $ | (70 | ) | $ | 2 | $ | (163 | ) | $ | 4 | ||||||
Ending carrying value | $ | 7,032 | $ | 7,555 | $ | 7,032 | $ | 7,555 | ||||||||
Policy Loans | ||||||||||||||||
Yield (1) | 6.56 | % | 6.09 | % | 6.49 | % | 6.19 | % | ||||||||
Investment income | $ | 163 | $ | 148 | $ | 481 | $ | 447 | ||||||||
Ending carrying value | $ | 10,001 | $ | 9,742 | $ | 10,001 | $ | 9,742 | ||||||||
Equity Securities (7) | ||||||||||||||||
Yield (1) | 4.50 | % | 4.00 | % | 4.83 | % | 5.01 | % | ||||||||
Investment income | $ | 37 | $ | 45 | $ | 128 | $ | 190 | ||||||||
Investment gains (losses) | $ | (53 | ) | $ | (181 | ) | $ | (430 | ) | $ | (191 | ) | ||||
Ending carrying value | $ | 3,117 | $ | 3,474 | $ | 3,117 | $ | 3,474 | ||||||||
Other Limited Partnership Interests (7) | ||||||||||||||||
Yield (1) | 9.75 | % | (3.91 | )% | (1.32 | )% | 3.08 | % | ||||||||
Investment income | $ | 127 | $ | (62 | ) | $ | (54 | ) | $ | 141 | ||||||
Investment gains (losses) | $ | (12 | ) | $ | (16 | ) | $ | (356 | ) | $ | (31 | ) | ||||
Ending carrying value | $ | 5,255 | $ | 6,353 | $ | 5,255 | $ | 6,353 | ||||||||
Cash and Short-Term Investments | ||||||||||||||||
Yield (1) | 0.45 | % | 1.89 | % | 0.46 | % | 2.49 | % | ||||||||
Investment income | $ | 20 | $ | 78 | $ | 80 | $ | 259 | ||||||||
Investment gains (losses) | $ | 5 | $ | — | $ | 5 | $ | 1 | ||||||||
Ending carrying value | $ | 22,423 | $ | 22,751 | $ | 22,423 | $ | 22,751 | ||||||||
Other Invested Assets (5),(6),(7),(8),(9) | ||||||||||||||||
Investment income | $ | 54 | $ | 65 | $ | 244 | $ | 159 | ||||||||
Investment gains (losses) | $ | (1,457 | ) | $ | 1,863 | $ | (4,257 | ) | $ | 1,392 | ||||||
Ending carrying value | $ | 13,916 | $ | 9,755 | $ | 13,916 | $ | 9,755 | ||||||||
Total Investments | ||||||||||||||||
Gross investment income yield (1) | 5.14 | % | 5.63 | % | 4.80 | % | 5.97 | % | ||||||||
Investment fees and expenses yield | (0.13 | ) | (0.15 | ) | (0.14 | ) | (0.16 | ) | ||||||||
Net Investment Income Yield | 5.01 | % | 5.48 | % | 4.66 | % | 5.81 | % | ||||||||
Gross investment income | $ | 4,057 | $ | 4,121 | $ | 11,411 | $ | 12,924 | ||||||||
Investment fees and expenses | (101 | ) | (108 | ) | (322 | ) | (345 | ) | ||||||||
Net Investment Income (10) | $ | 3,956 | $ | 4,013 | $ | 11,089 | $ | 12,579 | ||||||||
Ending carrying value | $ | 338,291 | $ | 323,148 | $ | 338,291 | $ | 323,148 | ||||||||
Gross investment gains | $ | 299 | $ | 1,109 | $ | 1,133 | $ | 1,797 | ||||||||
Gross investment losses | (491 | ) | (464 | ) | (1,572 | ) | (1,345 | ) | ||||||||
Writedowns | (661 | ) | (1,048 | ) | (2,548 | ) | (1,496 | ) | ||||||||
Subtotal | $ | (853 | ) | $ | (403 | ) | $ | (2,987 | ) | $ | (1,044 | ) | ||||
Derivatives not qualifying for hedge accounting (9) | (1,318 | ) | 1,179 | (4,056 | ) | 756 | ||||||||||
Investment Gains (Losses) (10) | $ | (2,171 | ) | $ | 776 | $ | (7,043 | ) | $ | (288 | ) | |||||
Investment gains (losses) tax benefit (provision) | 751 | (293 | ) | 2,470 | 71 | |||||||||||
Investment Gains (Losses), Net of Income Tax | $ | (1,420 | ) | $ | 483 | $ | (4,573 | ) | $ | (217 | ) | |||||
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(1) | Yields are based on average of quarterly average asset carrying values, excluding recognized and unrealized investment gains (losses), and for yield calculation purposes, average of quarterly ending assets exclude collateral received from counterparties associated with the Company’s securities lending program. | |
(2) | Fixed maturity securities include $1,970 million and $787 million at estimated fair value related to trading securities at September 30, 2009 and 2008, respectively. Fixed maturity securities include $163 million and $310 million of investment income related to trading securities for the three months and nine months ended September 30, 2009, respectively, and ($95) million and ($137) million of investment loss for the three months and nine months ended September 30, 2008, respectively. | |
(3) | Investment income from mortgage and consumer loans includes prepayment fees. | |
(4) | Included in investment income (loss) from real estate and real estate joint ventures is $2 million, $6 million, $5 million and $6 million from discontinued operations for the three months and nine months ended September 30, 2009 and 2008, respectively. | |
(5) | Included in investment income from other invested assets are scheduled periodic settlement payments on derivative instruments that do not qualify for hedge accounting under derivatives and hedging guidance of ($4) million and $59 million for the three months and nine months ended September 30, 2009, respectively, and ($3) million and ($47) million for the three months and nine months ended September 30, 2008, respectively. These amounts are excluded from investment gains (losses). Additionally, excluded from investment gains (losses) is $1 million and ($1) million for the three months and nine months ended September 30, 2009, respectively, and $10 million and $35 million for the three months and nine months ended September 30, 2008, respectively, related to settlement payments on derivative instruments used to hedge interest rate and currency risk on policyholder account balances that do not qualify for hedge accounting. Such amounts are included within interest credited to policyholder account balances. | |
(6) | Other invested assets are principally comprised of free-standing derivatives with positive estimated fair values and leveraged leases. Freestanding derivatives with negative estimated fair values are included within other liabilities. As yield is not considered a meaningful measure of performance for other invested assets it has been excluded from the table above. | |
(7) | Certain prior periods have been reclassified to conform to the current period presentation. | |
(8) | Derivatives not qualifying for hedge accounting is comprised of amounts for freestanding derivatives of ($732) million and $1,148 million; and embedded derivatives of ($586) million and $31 million for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, respectively, it is comprised of amounts for freestanding derivatives of ($5,480) million and $785 million; and embedded derivatives of $1,424 million and ($29) million. | |
(9) | Included in investment gains (losses) from other invested assets are the net results of the hedged embedded derivatives related to certain variable annuities with guarantees of consolidated entities and operating joint ventures reported under the equity method of accounting of ($35) million and $37 million for the three months ended September 30, 2009 and 2008, respectively. For the nine months ended September 30, 2009 and 2008, respectively, such results were ($111) million and $41 million. These amounts are excluded from investment income. |
(10) | Net investment income and net investment gains (losses) as presented in this table, are presented consistent with the method of presentation in the Company’s Quarterly Financial Supplement. The net investment income and net investment gains (losses) presented in this table vary from the amounts presented in the Interim Condensed Consolidated Statements of Income due to certain reclassifications made between net investment income and net investment gains (losses) as described in notes 4, 5 and 9 to this table. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||
Cost or | Estimated | Cost or | Estimated | |||||||||||||||||||||||
NAIC | Amortized | Fair | % of | Amortized | Fair | % of | ||||||||||||||||||||
Rating | Rating Agency Designation (1) | Cost | Value | Total | Cost | Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
1 | Aaa/Aa/A | $ | 151,633 | $ | 153,893 | 68.7 | % | $ | 146,796 | $ | 137,125 | 72.9 | % | |||||||||||||
2 | Baa | 48,165 | 48,612 | 21.7 | 45,253 | 38,761 | 20.6 | |||||||||||||||||||
3 | Ba | 10,791 | 9,860 | 4.4 | 10,258 | 7,796 | 4.1 | |||||||||||||||||||
4 | B | 6,858 | 5,927 | 2.7 | 5,915 | 3,779 | 2.0 | |||||||||||||||||||
5 | Caa and lower | 7,531 | 5,330 | 2.4 | 1,192 | 715 | 0.4 | |||||||||||||||||||
6 | In or near default | 296 | 274 | 0.1 | 94 | 75 | — | |||||||||||||||||||
Total fixed maturity securities | $ | 225,274 | $ | 223,896 | 100.0 | % | $ | 209,508 | $ | 188,251 | 100.0 | % | ||||||||||||||
(1) | Amounts presented are based on rating agency designations. Comparisons between NAIC ratings and rating agency designations are published by the NAIC. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. |
Fixed Maturity Securities — by Sector & Credit Quality Rating at September 30, 2009 | ||||||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | 6 | Total | ||||||||||||||||||||||
NAIC Rating: | Caa and | In or Near | Estimated | |||||||||||||||||||||||||
Rating Agency Designation (1) : | Aaa/Aa/A | Baa | Ba | B | Lower | Default | Fair Value | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 32,008 | $ | 29,734 | $ | 6,013 | $ | 2,879 | $ | 765 | $ | 243 | $ | 71,642 | ||||||||||||||
Residential mortgage-backed securities | 36,666 | 929 | 927 | 759 | 4,111 | 5 | 43,397 | |||||||||||||||||||||
Foreign corporate securities | 17,852 | 15,111 | 1,583 | 1,761 | 259 | 26 | 36,592 | |||||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 25,467 | — | — | — | — | — | 25,467 | |||||||||||||||||||||
Commercial mortgage-backed securities | 15,143 | 253 | 110 | 17 | 12 | — | 15,535 | |||||||||||||||||||||
Asset-backed securities | 11,657 | 1,076 | 243 | 129 | 146 | — | 13,251 | |||||||||||||||||||||
Foreign government securities | 9,416 | 699 | 958 | 374 | — | — | 11,447 | |||||||||||||||||||||
State and political subdivisions securities | 5,668 | 810 | 26 | 8 | 37 | — | 6,549 | |||||||||||||||||||||
Other fixed maturity securities | 16 | — | — | — | — | — | 16 | |||||||||||||||||||||
Total fixed maturity securities | $ | 153,893 | $ | 48,612 | $ | 9,860 | $ | 5,927 | $ | 5,330 | $ | 274 | $ | 223,896 | ||||||||||||||
Percentage of total | 68.7 | % | 21.7 | % | 4.4 | % | 2.7 | % | 2.4 | % | 0.1 | % | 100.0 | % |
(1) | Amounts presented are based on rating agency designations. Comparisons between NAIC ratings and rating agency designations are published by the NAIC. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. |
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Fixed Maturity Securities — by Sector & Credit Quality Rating at December 31, 2008 | ||||||||||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | 6 | Total | ||||||||||||||||||||||
NAIC Rating: | Caa and | In or Near | Estimated | |||||||||||||||||||||||||
Rating Agency Designation (1) : | Aaa/Aa/A | Baa | Ba | B | Lower | Default | Fair Value | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 31,403 | $ | 24,438 | $ | 4,891 | $ | 2,112 | $ | 399 | $ | 60 | $ | 63,303 | ||||||||||||||
Residential mortgage-backed securities | 34,512 | 638 | 695 | 103 | 80 | — | 36,028 | |||||||||||||||||||||
Foreign corporate securities | 15,936 | 11,039 | 1,357 | 1,184 | 148 | 15 | 29,679 | |||||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 21,310 | — | — | — | — | — | 21,310 | |||||||||||||||||||||
Commercial mortgage-backed securities | 12,486 | 81 | 59 | 7 | 11 | — | 12,644 | |||||||||||||||||||||
Asset-backed securities | 9,393 | 1,037 | 35 | 16 | 42 | — | 10,523 | |||||||||||||||||||||
Foreign government securities | 8,030 | 1,049 | 713 | 357 | 4 | — | 10,153 | |||||||||||||||||||||
State and political subdivisions securities | 4,002 | 479 | 46 | — | 30 | — | 4,557 | |||||||||||||||||||||
Other fixed maturity securities | 53 | — | — | — | 1 | — | 54 | |||||||||||||||||||||
Total fixed maturity securities | $ | 137,125 | $ | 38,761 | $ | 7,796 | $ | 3,779 | $ | 715 | $ | 75 | $ | 188,251 | ||||||||||||||
Percentage of total | 72.9 | % | 20.6 | % | 4.1 | % | 2.0 | % | 0.4 | % | — | % | 100.0 | % |
(1) | Amounts presented are based on rating agency designations. Comparisons between NAIC ratings and rating agency designations are published by the NAIC. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Below investment grade or non-rated fixed maturity securities: | ||||||||
Estimated fair value | $ | 21,391 | $ | 12,365 | ||||
Net unrealized loss | $ | 4,085 | $ | 5,094 | ||||
Non-income producing fixed maturity securities: | ||||||||
Estimated fair value | $ | 274 | $ | 75 | ||||
Net unrealized loss | $ | 22 | $ | 19 | ||||
Fixed maturity securities credit enhanced by financial guarantor insurers — by sector — at estimated fair value: | ||||||||
State and political subdivision securities | $ | 2,177 | $ | 2,005 | ||||
U.S. corporate securities | 1,736 | 2,007 | ||||||
Asset-backed securities | 788 | 833 | ||||||
Other | 89 | 51 | ||||||
Total fixed maturity securities credit enhanced by financial guarantor insurers | $ | 4,790 | $ | 4,896 | ||||
Ratings of the financial guarantor insurers providing the credit enhancement: | ||||||||
Portion rated Aa/AA | 19 | % | 15 | % | ||||
Portion rated A | 38 | % | — | % | ||||
Portion rated Baa/BBB | — | % | 68 | % | ||||
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September 30, 2009 | ||||||||||||||||||||||||
Cost or | Gross Unrealized | Estimated | ||||||||||||||||||||||
Amortized | Temporary | OTTI | Fair | % of | ||||||||||||||||||||
Cost | Gain | Loss | Loss | Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
U.S. corporate securities | $ | 71,375 | $ | 3,416 | $ | 3,144 | $ | 5 | $ | 71,642 | 32.1 | % | ||||||||||||
Residential mortgage-backed securities | 45,267 | 1,389 | 2,849 | 410 | 43,397 | 19.4 | ||||||||||||||||||
Foreign corporate securities | 35,991 | 2,021 | 1,411 | 9 | 36,592 | 16.3 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities (1) | 24,281 | 1,468 | 282 | — | 25,467 | 11.4 | ||||||||||||||||||
Commercial mortgage-backed securities | 16,615 | 181 | 1,247 | 14 | 15,535 | 6.9 | ||||||||||||||||||
Asset-backed securities | 14,703 | 198 | 1,541 | 109 | 13,251 | 5.9 | ||||||||||||||||||
Foreign government securities | 10,473 | 1,107 | 133 | — | 11,447 | 5.1 | ||||||||||||||||||
State and political subdivision securities | 6,551 | 282 | 284 | — | 6,549 | 2.9 | ||||||||||||||||||
Other fixed maturity securities | 18 | — | 2 | — | 16 | — | ||||||||||||||||||
Total fixed maturity securities (2), (3) | $ | 225,274 | $ | 10,062 | $ | 10,893 | $ | 547 | $ | 223,896 | 100.0 | % | ||||||||||||
Common stock | $ | 1,576 | $ | 91 | $ | 31 | $ | — | $ | 1,636 | 52.5 | % | ||||||||||||
Non-redeemable preferred stock (2) | 1,773 | 75 | 367 | — | 1,481 | 47.5 | ||||||||||||||||||
Total equity securities (4) | $ | 3,349 | $ | 166 | $ | 398 | $ | — | $ | 3,117 | 100.0 | % | ||||||||||||
December 31, 2008 | ||||||||||||||||||||
Cost or | Estimated | |||||||||||||||||||
Amortized | Gross Unrealized | Fair | % of | |||||||||||||||||
Cost | Gain | Loss | Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 72,211 | $ | 994 | $ | 9,902 | $ | 63,303 | 33.6 | % | ||||||||||
Residential mortgage-backed securities | 39,995 | 753 | 4,720 | 36,028 | 19.2 | |||||||||||||||
Foreign corporate securities | 34,798 | 565 | 5,684 | 29,679 | 15.8 | |||||||||||||||
U.S. Treasury, agency and government guaranteed securities (1) | 17,229 | 4,082 | 1 | 21,310 | 11.3 | |||||||||||||||
Commercial mortgage-backed securities | 16,079 | 18 | 3,453 | 12,644 | 6.7 | |||||||||||||||
Asset-backed securities | 14,246 | 16 | 3,739 | 10,523 | 5.6 | |||||||||||||||
Foreign government securities | 9,474 | 1,056 | 377 | 10,153 | 5.4 | |||||||||||||||
State and political subdivision securities | 5,419 | 80 | 942 | 4,557 | 2.4 | |||||||||||||||
Other fixed maturity securities | 57 | — | 3 | 54 | — | |||||||||||||||
Total fixed maturity securities (2), (3) | $ | 209,508 | $ | 7,564 | $ | 28,821 | $ | 188,251 | 100.0 | % | ||||||||||
Common stock | $ | 1,778 | $ | 40 | $ | 133 | $ | 1,685 | 52.7 | % | ||||||||||
Non-redeemable preferred stock (2) | 2,353 | 4 | 845 | 1,512 | 47.3 | |||||||||||||||
Total equity securities (4) | $ | 4,131 | $ | 44 | $ | 978 | $ | 3,197 | 100.0 | % | ||||||||||
(1) | The Company has classified within the U.S. Treasury, agency and government guaranteed securities caption above certain corporate fixed maturity securities issued by U.S. financial institutions that were guaranteed by the FDIC pursuant to the FDIC’s Temporary Liquidity Guarantee Program of $560 million and $2 million at |
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estimated fair value with unrealized gains (losses) of $4 million and less than ($1) million at September 30, 2009 and December 31, 2008, respectively. | ||
(2) | The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest ratestep-up feature, as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest ratestep-up are classified as non-redeemable preferred stock. Many of such securities have been issued bynon-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as “perpetual hybrid securities.” The following table presents the perpetual hybrid securities held by the Company at: |
Classification | September 30, 2009 | December 31, 2008 | ||||||||||
Estimated | Estimated | |||||||||||
Fair | Fair | |||||||||||
Consolidated Balance Sheets | Sector Table | Primary Issuers | Value | Value | ||||||||
(In millions) | ||||||||||||
Equity securities | Non-redeemable preferred stock | Non-U.S. financial institutions | $ | 1,136 | $ | 1,224 | ||||||
Equity securities | Non-redeemable preferred stock | U.S. financial institutions | $ | 332 | $ | 288 | ||||||
Fixed maturity securities | Foreign corporate securities | Non-U.S. financial institutions | $ | 2,719 | $ | 2,110 | ||||||
Fixed maturity securities | U.S. corporate securities | U.S. financial institutions | $ | 59 | $ | 46 |
(3) | At September 30, 2009 and December 31, 2008, the Company held $2,457 million and $2,052 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates. These securities, commonly referred to as “capital securities”, are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are included in the U.S. corporate securities sector within fixed maturity securities. | |
(4) | Equity securities primarily consist of investments in common and preferred stocks, including certain perpetual hybrid securities, and mutual fund interests. Such securities include common stock of privately held companies with an estimated fair value of $1.1 billion at both September 30, 2009 and December 31, 2008. |
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September 30, 2009 | ||||||||||||||||
Equity | ||||||||||||||||
Fixed Maturity Securities | Securities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets (Level 1) | $ | 10,449 | 4.7 | % | $ | 489 | 15.7 | % | ||||||||
Independent pricing source | 168,967 | 75.5 | 350 | 11.2 | ||||||||||||
Internal matrix pricing or discounted cash flow techniques | 26,478 | 11.8 | 977 | 31.4 | ||||||||||||
Significant other observable inputs (Level 2) | 195,445 | 87.3 | 1,327 | 42.6 | ||||||||||||
Independent pricing source | 6,366 | 2.8 | 871 | 27.9 | ||||||||||||
Internal matrix pricing or discounted cash flow techniques | 9,890 | 4.4 | 256 | 8.2 | ||||||||||||
Independent broker quotations | 1,746 | 0.8 | 174 | 5.6 | ||||||||||||
Significant unobservable inputs (Level 3) | 18,002 | 8.0 | 1,301 | 41.7 | ||||||||||||
Total estimated fair value | $ | 223,896 | 100.0 | % | $ | 3,117 | 100.0 | % | ||||||||
September 30, 2009 | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Quoted Prices | Significant | |||||||||||||||
in Active | Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | Total | |||||||||||||
Identical Assets | Inputs | Inputs | Estimated | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | — | $ | 64,712 | $ | 6,930 | $ | 71,642 | ||||||||
Residential mortgage-backed securities | — | 41,187 | 2,210 | 43,397 | ||||||||||||
Foreign corporate securities | — | 31,236 | 5,356 | 36,592 | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | 10,134 | 15,295 | 38 | 25,467 | ||||||||||||
Commercial mortgage-backed securities | — | 15,228 | 307 | 15,535 | ||||||||||||
Asset-backed securities | — | 10,789 | 2,462 | 13,251 | ||||||||||||
Foreign government securities | 315 | 10,592 | 540 | 11,447 | ||||||||||||
State and political subdivision securities | — | 6,397 | 152 | 6,549 | ||||||||||||
Other fixed maturity securities | — | 9 | 7 | 16 | ||||||||||||
Total fixed maturity securities | $ | 10,449 | $ | 195,445 | $ | 18,002 | $ | 223,896 | ||||||||
Equity securities: | ||||||||||||||||
Common stock | $ | 489 | $ | 1,025 | $ | 122 | $ | 1,636 | ||||||||
Non-redeemable preferred stock | — | 302 | 1,179 | 1,481 | ||||||||||||
Total equity securities | $ | 489 | $ | 1,327 | $ | 1,301 | $ | 3,117 | ||||||||
• | The majority of the Level 3 fixed maturity and equity securities (88%, as presented above) are concentrated in four sectors: U.S. and foreign corporate securities, asset-backed securities and residential mortgage-backed securities. | |
• | Level 3 fixed maturity securities are priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. Level 3 fixed maturity securities consists |
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of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including newly issued agency-backed residential mortgage-backed securities yet to be priced by independent sources, below investment grade private placements and less liquid investment grade corporate securities (included in U.S. and foreign corporate securities) and less liquid asset-backed securities including securities supported bysub-prime mortgage loans (included in asset-backed securities). |
• | During the three months ended September 30, 2009, Level 3 fixed maturity securities increased by $2.2 billion or 14%, due primarily to favorable estimated fair value changes recognized in other comprehensive income (loss), and purchases in excess of sales and settlements which were partially offset by realized and unrealized losses included in earnings. The transfers out of Level 3 are described in the discussion after the rollforward table below. The favorable estimated fair value changes in fixed maturity securities were concentrated in U.S. and foreign corporate securities and asset-backed securities (including residential mortgage-backed securities backed bysub-prime mortgage loans) due to current market conditions including narrowing of credit spreads. Net purchases in excess of sales and settlements of fixed maturity securities were concentrated in residential mortgage-backed securities. The realized and unrealized losses included in earnings were primarily due to OTTI credit losses, primarily on perpetual hybrid securities included in foreign corporate securities. | |
• | During the nine months ended September 30, 2009, Level 3 fixed maturity securities increased by $594 million or 3%, due primarily to favorable estimated fair value changes recognized in other comprehensive income (loss) and to a lesser extent purchases in excess of sales and settlements, partially offset by transfers out and realized and unrealized losses included in earnings. The transfers out of Level 3 are described in the discussion after the rollforward table below. The favorable estimated fair value changes in fixed maturity securities were concentrated in U.S. and foreign corporate securities and asset-backed securities (including residential mortgage-backed securities backed bysub-prime mortgage loans) due to current market conditions including narrowing of credit spreads, offset slightly by the effect of rising interest rates on such securities. Net purchases in excess of sales and settlements of fixed maturity securities were concentrated in residential mortgage-backed securities. The realized and unrealized losses included in earnings were primarily due to OTTI credit losses, primarily on perpetual hybrid securities included in foreign corporate securities. |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, 2009 | September 30, 2009 | |||||||||||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period | $ | 15,792 | $ | 1,185 | $ | 17,408 | $ | 1,379 | ||||||||
Total realized/unrealized gains (losses) included in: | ||||||||||||||||
Earnings | (192 | ) | (71 | ) | (889 | ) | (329 | ) | ||||||||
Other comprehensive loss | 1,656 | 266 | 2,651 | 405 | ||||||||||||
Purchases, sales, issuances and settlements | 685 | (79 | ) | 413 | (154 | ) | ||||||||||
Transfer in and/or out of Level 3 | 61 | — | (1,581 | ) | — | |||||||||||
Balance, end of period | $ | 18,002 | $ | 1,301 | $ | 18,002 | $ | 1,301 | ||||||||
• | Total gains and losses (in earnings and other comprehensive loss) are calculated assuming transfers in or out of Level 3 occurred at the beginning of the period. Items transferred in and out for the same period are excluded from the rollforward. |
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• | Total gains and losses for fixed maturity securities included in earnings of ($26) million and ($334) million, respectively, and other comprehensive income (loss) of $55 million and $19 million, respectively, were incurred for transfers subsequent to their transfer to Level 3, for the three months and nine months ended September 30, 2009, respectively. | |
• | Net transfers inand/or out of Level 3 for fixed maturity securities were $61 million and ($1,581) million for the three months and nine months ended September 30, 2009, respectively, and were comprised of transfers in of $607 million and $3,341 million, respectively, and transfers out of ($546) million and ($4,922) million, respectively. There were no net transfers in or out of Level 3 for equity securities for the three months and nine months ended September 30, 2009. |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Fixed maturity securities that were temporarily impaired | $ | (831 | ) | $ | (21,246 | ) | ||
Fixed maturity securities with noncredit OTTI losses in other comprehensive loss | (547 | ) | — | |||||
Total fixed maturity securities | (1,378 | ) | (21,246 | ) | ||||
Equity securities | (232 | ) | (934 | ) | ||||
Derivatives | (46 | ) | (2 | ) | ||||
Other | 79 | 53 | ||||||
Subtotal | (1,577 | ) | (22,129 | ) | ||||
Amounts allocated from: | ||||||||
Insurance liability loss recognition | (239 | ) | 42 | |||||
DAC and VOBA on which noncredit OTTI losses have been recognized | 48 | — | ||||||
DAC and VOBA | 475 | 3,025 | ||||||
Subtotal | 284 | 3,067 | ||||||
Deferred income tax benefit (expense) on which noncredit OTTI losses have been recognized | 172 | — | ||||||
Deferred income tax benefit (expense) | 322 | 6,508 | ||||||
Net unrealized investment gains (losses) | (799 | ) | (12,554 | ) | ||||
Net unrealized investment gains (losses) attributable to noncontrolling interests | — | (10 | ) | |||||
Net unrealized investment gains (losses) attributable to MetLife, Inc. | $ | (799 | ) | $ | (12,564 | ) | ||
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Nine Months | ||||
Ended | ||||
September 30, 2009 | ||||
(In millions) | ||||
Balance, end of prior period | $ | (12,564 | ) | |
Cumulative effect of change in accounting principle, net of income tax | (76 | ) | ||
Fixed maturity securities on which noncredit OTTI losses have been recognized | (421 | ) | ||
Unrealized investment gains (losses) during the period | 21,099 | |||
Unrealized investment gains (losses) relating to: | ||||
Insurance liability gain (loss) recognition | (281 | ) | ||
DAC and VOBA on which noncredit OTTI losses have been recognized | 38 | |||
DAC and VOBA | (2,550 | ) | ||
Deferred income tax benefit (expense) on which noncredit OTTI losses have been recognized | 132 | |||
Deferred income tax benefit (expense) | (6,186 | ) | ||
Net unrealized investment gains (losses) | (809 | ) | ||
Net unrealized investment gains (losses) attributable to noncontrolling interests | 10 | |||
Balance, end of period | $ | (799 | ) | |
Change in net unrealized investment gains (losses) | $ | 11,755 | ||
Change in net unrealized investment gains (losses) attributable to noncontrolling interests | 10 | |||
Change in net unrealized investment gains (losses) attributable to MetLife, Inc.’s common shareholders | $ | 11,765 | ||
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September 30, 2009 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 13,065 | $ | 1,879 | $ | 389 | $ | 540 | 1,030 | 144 | ||||||||||||||
Six months or greater but less than nine months | 2,679 | 1,983 | 157 | 640 | 326 | 111 | ||||||||||||||||||
Nine months or greater but less than twelve months | 3,539 | 6,288 | 228 | 2,116 | 359 | 372 | ||||||||||||||||||
Twelve months or greater | 45,870 | 10,158 | 3,276 | 4,094 | 3,066 | 666 | ||||||||||||||||||
Total | $ | 65,153 | $ | 20,308 | $ | 4,050 | $ | 7,390 | ||||||||||||||||
Percentage of cost or amortized cost | 6 | % | 36 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 44 | $ | 46 | $ | 2 | $ | 13 | 127 | 31 | ||||||||||||||
Six months or greater but less than nine months | 32 | 113 | 6 | 45 | 8 | 7 | ||||||||||||||||||
Nine months or greater but less than twelve months | 229 | 132 | 29 | 43 | 23 | 16 | ||||||||||||||||||
Twelve months or greater | 393 | 711 | 48 | 212 | 69 | 25 | ||||||||||||||||||
Total | $ | 698 | $ | 1,002 | $ | 85 | $ | 313 | ||||||||||||||||
Percentage of cost | 12 | % | 31 | % | ||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 32,658 | $ | 48,114 | $ | 2,358 | $ | 17,191 | 4,566 | 2,827 | ||||||||||||||
Six months or greater but less than nine months | 14,975 | 2,180 | 1,313 | 1,109 | 1,314 | 157 | ||||||||||||||||||
Nine months or greater but less than twelve months | 16,372 | 3,700 | 1,830 | 2,072 | 934 | 260 | ||||||||||||||||||
Twelve months or greater | 23,191 | 650 | 2,533 | 415 | 1,809 | 102 | ||||||||||||||||||
Total | $ | 87,196 | $ | 54,644 | $ | 8,034 | $ | 20,787 | ||||||||||||||||
Percentage of cost or amortized cost | 9 | % | 38 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 386 | $ | 1,190 | $ | 58 | $ | 519 | 351 | 551 | ||||||||||||||
Six months or greater but less than nine months | 33 | 413 | 6 | 190 | 8 | 32 | ||||||||||||||||||
Nine months or greater but less than twelve months | 3 | 487 | — | 194 | 5 | 15 | ||||||||||||||||||
Twelve months or greater | 171 | — | 11 | — | 20 | — | ||||||||||||||||||
Total | $ | 593 | $ | 2,090 | $ | 75 | $ | 903 | ||||||||||||||||
Percentage of cost | 13 | % | 43 | % | ||||||||||||||||||||
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September 30, 2009 | December 31, 2008 | |||||||
Sector: | ||||||||
U.S. corporate securities | 27 | % | 33 | % | ||||
Residential mortgage-backed securities | 27 | 16 | ||||||
Asset-backed securities | 14 | 13 | ||||||
Foreign corporate securities | 12 | 19 | ||||||
Commercial mortgage-backed securities | 11 | 11 | ||||||
State and political subdivision securities | 2 | 3 | ||||||
Foreign government securities | 1 | 1 | ||||||
Other | 6 | 4 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Mortgage-backed | 38 | % | 27 | % | ||||
Finance | 25 | 24 | ||||||
Asset-backed | 14 | 13 | ||||||
Consumer | 5 | 11 | ||||||
Utility | 3 | 8 | ||||||
Communications | 2 | 5 | ||||||
Industrial | 2 | 4 | ||||||
Foreign government | 1 | 1 | ||||||
Other | 10 | 7 | ||||||
Total | 100 | % | 100 | % | ||||
September 30, 2009 | December 31, 2008 | |||||||||||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(In millions, except number of securities) | ||||||||||||||||
Number of securities | 260 | 15 | 699 | 33 | ||||||||||||
Total gross unrealized loss | $ | 5,341 | $ | 248 | $ | 14,485 | $ | 699 | ||||||||
Percentage of gross unrealized loss | 47% | 62% | 50% | 71% |
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September 30, 2009 | ||||||||||||||||||||||||||||||||
Non-Redeemable Preferred Stock | ||||||||||||||||||||||||||||||||
All Types of | ||||||||||||||||||||||||||||||||
All Equity | Non-Redeemable | Investment Grade | ||||||||||||||||||||||||||||||
Securities | Preferred Stock | All Industries | Financial Services Industry | |||||||||||||||||||||||||||||
Gross | Gross | % of All | Gross | % of All | Gross | |||||||||||||||||||||||||||
Unrealized | Unrealized | Equity | Unrealized | Non-Redeemable | Unrealized | % of All | % A Rated or | |||||||||||||||||||||||||
Loss | Loss | Securities | Loss | Preferred Stock | Loss | Industries | Better | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Less than six months | $ | 13 | $ | 9 | 69 | % | $ | 1 | 11 | % | $ | 1 | 100 | % | 100 | % | ||||||||||||||||
More than six months and less than twelve months | 88 | 88 | 100 | % | 57 | 65 | % | 51 | 89 | % | 88 | % | ||||||||||||||||||||
Twelve months or greater | 212 | 212 | 100 | % | 212 | 100 | % | 212 | 100 | % | 61 | % | ||||||||||||||||||||
All equity securities with gross unrealized loss of 20% or more | $ | 313 | $ | 309 | 99 | % | $ | 270 | 87 | % | $ | 264 | 98 | % | 66 | % | ||||||||||||||||
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Fixed Maturity Securities | Equity Securities | |||||||||||||||||||||||||||||||
Three Months | Nine Months | Three Months | Nine Months | |||||||||||||||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Proceeds | $ | 11,041 | $ | 15,441 | $ | 30,392 | $ | 42,250 | $ | 334 | $ | 1,396 | $ | 587 | $ | 2,026 | ||||||||||||||||
Gross investment gains | 228 | 279 | 773 | 569 | 41 | 265 | 61 | 412 | ||||||||||||||||||||||||
Gross investment losses | (278 | ) | (449 | ) | (925 | ) | (1,035 | ) | (58 | ) | (167 | ) | (125 | ) | (207 | ) | ||||||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||||||||||
Credit-related | (223 | ) | (593 | ) | (966 | ) | (803 | ) | — | — | — | — | ||||||||||||||||||||
Other(1) | (182 | ) | (155 | ) | (324 | ) | (158 | ) | (36 | ) | (279 | ) | (366 | ) | (396 | ) | ||||||||||||||||
Total OTTI losses recognized in earnings | (405 | ) | (748 | ) | (1,290 | ) | (961 | ) | (36 | ) | (279 | ) | (366 | ) | (396 | ) | ||||||||||||||||
Net investment gains (losses) | $ | (455 | ) | $ | (918 | ) | $ | (1,442 | ) | $ | (1,427 | ) | $ | (53 | ) | $ | (181 | ) | $ | (430 | ) | $ | (191 | ) | ||||||||
(1) | Other OTTI losses recognized in earnings include impairments on equity securities, impairments on perpetual hybrid securities classified within fixed maturity securities where the primary reason for the impairment was the severity and/or the duration of an unrealized loss position, and fixed maturity securities where there is an intent to sell or it is more likely than not that the Company will be required to sell the security before recovery of the decline in fair value. |
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• | Three Months Ended September 30, 2009 compared to the Three Months Ended September 30, 2008 —In the third quarter of 2008, the stress experienced in the global financial markets, caused several financial institutions to enter bankruptcy, enter FDIC receivership or receive significant government capital infusions. The Company incurred fixed maturity securities impairments of $482 million related to security holdings on three such financial institutions in the third quarter of 2008. In addition, the Company incurred fixed maturity security impairments of $155 million in the third quarter of 2008 on securities the Company either lacked the intent to hold, or due to extensive credit spread widening, the Company was uncertain of its intent |
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to hold these securities for a period of time sufficient to allow for recovery of the market value decline. Accordingly, fixed maturity security impairments on the Company’s financial services industry holdings, and total impairments across all sectors, were higher in the third quarter of 2008 than the third quarter of 2009, as presented in the table below. |
• | Nine Months Ended September 30, 2009 compared to the Nine Months Ended September 30, 2008 — Conversely, fixed maturity security impairments for the nine months ended September 2009 were higher than for the nine months ended September 2008, due to increased impairments across several industry sectors as presented in the table below, and not as a result of a concentration in the financial services industry sector. Impairments across these several industry sectors increased due to financial restructurings, bankruptcy filings, ratings downgrades, or difficult operating environments of the issuers. |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
U.S. and foreign corporate securities: | ||||||||||||||||
Finance | $ | 241 | $ | 491 | $ | 429 | $ | 605 | ||||||||
Communications | 29 | 32 | 232 | 49 | ||||||||||||
Consumer | 42 | 12 | 206 | 60 | ||||||||||||
Utility | 8 | 1 | 84 | 2 | ||||||||||||
Industrial | 7 | — | 27 | — | ||||||||||||
Other | — | 177 | 26 | 182 | ||||||||||||
Total U.S. and foreign corporate securities | 327 | 713 | 1,004 | 898 | ||||||||||||
Residential mortgage-backed securities | 40 | — | 118 | — | ||||||||||||
Asset-backed securities | 17 | 35 | 111 | 63 | ||||||||||||
Commercial mortgage-backed securities | 20 | — | 56 | — | ||||||||||||
Foreign government securities | 1 | — | 1 | — | ||||||||||||
Total | $ | 405 | $ | 748 | $ | 1,290 | $ | 961 | ||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: | ||||||||||||||||
Non-redeemable preferred stock | $ | 34 | $ | 270 | $ | 314 | $ | 308 | ||||||||
Common stock (1) | 2 | 9 | 52 | 88 | ||||||||||||
Total | $ | 36 | $ | 279 | $ | 366 | $ | 396 | ||||||||
Industry: | ||||||||||||||||
Financial services industry: | ||||||||||||||||
Perpetual hybrid securities (2) | $ | 34 | $ | 84 | $ | 294 | $ | 86 | ||||||||
Common and remaining non-redeemable preferred stock | — | 191 | 30 | 245 | ||||||||||||
Total financial services industry | 34 | 275 | 324 | 331 | ||||||||||||
Other | 2 | 4 | 42 | 65 | ||||||||||||
Total | $ | 36 | $ | 279 | $ | 366 | $ | 396 | ||||||||
(1) | With respect to common stock holdings, the Company considered the duration and severity of the securities in an unrealized loss position of 20% or more; and the duration of the securities in an unrealized loss position of 20% or less in an extended unrealized loss position (i.e.,12 months or greater) in determining theother-than-temporary impairment charge for such securities. | |
(2) | Impairment due to a deterioration in the credit rating of the issuer to below investment grade and due to a severe and extended unrealized loss position. |
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Three Months | �� | Nine Months | ||||||
Ended | Ended | |||||||
September 30, 2009 | September 30, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 380 | $ | — | ||||
Credit loss component of OTTI loss not reclassified to other comprehensive loss in the cumulative effect transition adjustment | — | 230 | ||||||
Additions: | ||||||||
Initial impairments — credit loss OTTI recognized on securities not previously impaired | 53 | 205 | ||||||
Additional impairments — credit loss OTTI recognized on securities previously impaired | 50 | 55 | ||||||
Reductions: | ||||||||
Due to sales (or maturities, pay downs or prepayments) during the period of securities previously credit loss OTTI impaired | (15 | ) | (22 | ) | ||||
Balance, end of period | $ | 468 | $ | 468 | ||||
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Corporate fixed maturity securities — by industry type: | ||||||||||||||||
Foreign (1) | $ | 36,592 | 33.8 | % | $ | 29,679 | 32.0 | % | ||||||||
Consumer | 16,588 | 15.3 | 13,122 | 14.1 | ||||||||||||
Industrial | 16,539 | 15.3 | 13,324 | 14.3 | ||||||||||||
Utility | 14,942 | 13.8 | 12,434 | 13.4 | ||||||||||||
Finance | 14,188 | 13.1 | 14,996 | 16.1 | ||||||||||||
Communications | 6,554 | 6.1 | 5,714 | 6.1 | ||||||||||||
Other | 2,831 | 2.6 | 3,713 | 4.0 | ||||||||||||
Total | $ | 108,234 | 100.0 | % | $ | 92,982 | 100.0 | % | ||||||||
(1) | Includes U.S. Dollar-denominated debt obligations of foreign obligors and other fixed maturity securities foreign investments. |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of Total | Fair | % of Total | |||||||||||||
Value | Investments | Value | Investments | |||||||||||||
(In millions) | ||||||||||||||||
Concentrations within corporate fixed maturity securities: | ||||||||||||||||
Largest holdings in a single issuer | $ | 1,250 | 0.4 | % | $ | 1,469 | 0.5 | % | ||||||||
Holdings in top ten issuers | $ | 8,009 | 2.5 | % | $ | 8,446 | 2.8 | % |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Residential mortgage-backed securities | $ | 43,397 | 60.1 | % | $ | 36,028 | 60.8 | % | ||||||||
Commercial mortgage-backed securities | 15,535 | 21.5 | 12,644 | 21.4 | ||||||||||||
Asset-backed securities | 13,251 | 18.4 | 10,523 | 17.8 | ||||||||||||
Total structured securities | $ | 72,183 | 100.0 | % | $ | 59,195 | 100.0 | % | ||||||||
Portion rated Aaa /AAA | ||||||||||||||||
Residential mortgage-backed securities | $ | 35,341 | 81.4 | % | $ | 33,265 | 92.3 | % | ||||||||
Commercial mortgage-backed securities | $ | 13,818 | 88.9 | % | $ | 11,778 | 93.2 | % | ||||||||
Asset-backed securities | $ | 9,638 | 72.7 | % | $ | 7,934 | 75.4 | % |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By security type: | ||||||||||||||||
Collateralized mortgage obligations | $ | 24,594 | 56.7 | % | $ | 26,025 | 72.2 | % | ||||||||
Pass-through securities | 18,803 | 43.3 | 10,003 | 27.8 | ||||||||||||
Total residential mortgage-backed securities | $ | 43,397 | 100.0 | % | $ | 36,028 | 100.0 | % | ||||||||
By risk profile: | ||||||||||||||||
Agency | $ | 32,851 | 75.7 | % | $ | 24,409 | 67.8 | % | ||||||||
Prime | 6,711 | 15.5 | 8,254 | 22.9 | ||||||||||||
Alternative residential mortgage loans | 3,835 | 8.8 | 3,365 | 9.3 | ||||||||||||
Total residential mortgage-backed securities | $ | 43,397 | 100.0 | % | $ | 36,028 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 35,341 | 81.4 | % | $ | 33,265 | 92.3 | % | ||||||||
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Alt-A ResidentialMortgage-Backed Securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Estimated | Net | Rated | Hybrid | |||||||||||||||||||||||||||||||||||||||||||||
2003 & | Fair | Unrealized | Aa/AA or | Fixed | ARM | |||||||||||||||||||||||||||||||||||||||||||
Prior | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Value | Loss | Better | Rate% | % | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2009: | ||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 53 | $ | 49 | $ | 1,338 | $ | 812 | $ | 781 | $ | — | $ | 802 | $ | 3,835 | $ | 1,570 | ||||||||||||||||||||||||||||||
Percentage | 1.4% | 1.3% | 34.9% | 21.2% | 20.3% | —% | 20.9% | 100.0% | 26.9 | % | 89.2 | % | 10.8 | % | ||||||||||||||||||||||||||||||||||
December 31, 2008: | ||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 113 | $ | 137 | $ | 1,493 | $ | 857 | $ | 765 | $ | — | $ | — | $ | 3,365 | $ | 1,951 | ||||||||||||||||||||||||||||||
Percentage | 3.3% | 4.1% | 44.4% | 25.5% | 22.7% | —% | —% | 100.0% | 63.4 | % | 87.9 | % | 12.1 | % |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By collateral type: | ||||||||||||||||
Credit card loans | $ | 7,455 | 56.3 | % | $ | 5,190 | 49.3 | % | ||||||||
Student loans | 1,758 | 13.3 | 1,085 | 10.3 | ||||||||||||
Automobile loans | 1,035 | 7.8 | 1,051 | 10.0 | ||||||||||||
Residential mortgage-backed securities backed bysub-prime mortgage loans | 1,027 | 7.7 | 1,142 | 10.9 | ||||||||||||
Other loans | 1,976 | 14.9 | 2,055 | 19.5 | ||||||||||||
Total | $ | 13,251 | 100.0 | % | $ | 10,523 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 9,638 | 72.7 | % | $ | 7,934 | 75.4 | % | ||||||||
Residential mortgage-backed securities backed bysub-prime mortgage loans — portion that is credit enhanced by financial guarantor insurers | 37.6 | % | 37.2 | % | ||||||||||||
Of the 37.6% and 37.2% credit enhanced, the financial guarantor insurers are rated as follows: | ||||||||||||||||
By financial guarantor insurers rated Aa | 16.3 | % | 18.8 | % | ||||||||||||
By financial guarantor insurers rated A | 7.6 | % | — | % | ||||||||||||
By financial guarantor insurers rated Baa | — | % | 37.3 | % |
September 30, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Below Investment Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | |||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 60 | $ | 45 | $ | 78 | $ | 60 | $ | 22 | $ | 11 | $ | 17 | $ | 10 | $ | 84 | $ | 50 | $ | 261 | $ | 176 | ||||||||||||||||||||||||
2004 | 99 | 57 | 326 | 225 | 42 | 25 | 26 | 14 | 31 | 13 | 524 | 334 | ||||||||||||||||||||||||||||||||||||
2005 | 69 | 47 | 225 | 127 | 39 | 27 | 29 | 22 | 230 | 145 | 592 | 368 | ||||||||||||||||||||||||||||||||||||
2006 | 48 | 41 | 62 | 22 | — | — | 22 | 5 | 92 | 44 | 224 | 112 | ||||||||||||||||||||||||||||||||||||
2007 | — | — | 79 | 22 | — | — | — | — | 39 | 15 | 118 | 37 | ||||||||||||||||||||||||||||||||||||
2008 | — | — | — | — | — | — | — | — | �� | — | — | — | — | |||||||||||||||||||||||||||||||||||
2009 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 276 | $ | 190 | $ | 770 | $ | 456 | $ | 103 | $ | 63 | $ | 94 | $ | 51 | $ | 476 | $ | 267 | $ | 1,719 | $ | 1,027 | ||||||||||||||||||||||||
Ratings Distribution | 18.6 | % | 44.4 | % | 6.1 | % | 5.0 | % | 25.9 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
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December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Below Investment Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | |||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 96 | $ | 77 | $ | 92 | $ | 72 | $ | 26 | $ | 16 | $ | 83 | $ | 53 | $ | 8 | $ | 4 | $ | 305 | $ | 222 | ||||||||||||||||||||||||
2004 | 129 | 70 | 372 | 204 | 5 | 3 | 37 | 28 | 2 | 1 | 545 | 306 | ||||||||||||||||||||||||||||||||||||
2005 | 357 | 227 | 186 | 114 | 20 | 11 | 79 | 46 | 4 | 4 | 646 | 402 | ||||||||||||||||||||||||||||||||||||
2006 | 146 | 106 | 69 | 30 | 15 | 10 | 26 | 7 | 2 | 2 | 258 | 155 | ||||||||||||||||||||||||||||||||||||
2007 | — | — | 78 | 33 | 35 | 21 | 2 | 2 | 3 | 1 | 118 | 57 | ||||||||||||||||||||||||||||||||||||
2008 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 728 | $ | 480 | $ | 797 | $ | 453 | $ | 101 | $ | 61 | $ | 227 | $ | 136 | $ | 19 | $ | 12 | $ | 1,872 | $ | 1,142 | ||||||||||||||||||||||||
Ratings Distribution | 42.0 | % | 39.7 | % | 5.3 | % | 11.9 | % | 1.1 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
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September 30, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Below Investment Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | |||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 6,814 | $ | 6,893 | $ | 409 | $ | 377 | $ | 187 | $ | 156 | $ | 55 | $ | 40 | $ | 36 | $ | 19 | $ | 7,501 | $ | 7,485 | ||||||||||||||||||||||||
2004 | 2,184 | 2,192 | 216 | 168 | 124 | 67 | 112 | 63 | 89 | 48 | 2,725 | 2,538 | ||||||||||||||||||||||||||||||||||||
2005 | 3,045 | 2,908 | 189 | 129 | 38 | 26 | 9 | 4 | 77 | 37 | 3,358 | 3,104 | ||||||||||||||||||||||||||||||||||||
2006 | 1,423 | 1,297 | 77 | 64 | 267 | 209 | 97 | 59 | 78 | 20 | 1,942 | 1,649 | ||||||||||||||||||||||||||||||||||||
2007 | 701 | 528 | 33 | 29 | 195 | 100 | 125 | 87 | 35 | 15 | 1,089 | 759 | ||||||||||||||||||||||||||||||||||||
2008 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
2009 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 14,167 | $ | 13,818 | $ | 924 | $ | 767 | $ | 811 | $ | 558 | $ | 398 | $ | 253 | $ | 315 | $ | 139 | $ | 16,615 | $ | 15,535 | ||||||||||||||||||||||||
Ratings Distribution | 88.9 | % | 4.9 | % | 3.6 | % | 1.6 | % | 1.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Below Investment Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | Cost or | Estimated | |||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 5,428 | $ | 4,975 | $ | 424 | $ | 272 | $ | 213 | $ | 124 | $ | 51 | $ | 24 | $ | 42 | $ | 17 | $ | 6,158 | $ | 5,412 | ||||||||||||||||||||||||
2004 | 2,630 | 2,255 | 205 | 100 | 114 | 41 | 47 | 11 | 102 | 50 | 3,098 | 2,457 | ||||||||||||||||||||||||||||||||||||
2005 | 3,403 | 2,664 | 187 | 49 | 40 | 13 | 5 | 1 | 18 | 10 | 3,653 | 2,737 | ||||||||||||||||||||||||||||||||||||
2006 | 1,825 | 1,348 | 110 | 39 | 25 | 14 | 94 | 36 | — | — | 2,054 | 1,437 | ||||||||||||||||||||||||||||||||||||
2007 | 999 | 535 | 43 | 28 | 63 | 28 | 10 | 9 | — | — | 1,115 | 600 | ||||||||||||||||||||||||||||||||||||
2008 | 1 | 1 | — | — | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||||||||||||||
2009 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 14,286 | $ | 11,778 | $ | 969 | $ | 488 | $ | 455 | $ | 220 | $ | 207 | $ | 81 | $ | 162 | $ | 77 | $ | 16,079 | $ | 12,644 | ||||||||||||||||||||||||
Ratings Distribution | 93.2 | % | 3.9 | % | 1.7 | % | 0.6 | % | 0.6 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Securities on loan: | ||||||||
Cost or amortized cost | $ | 19,790 | $ | 20,791 | ||||
Estimated fair value | $ | 20,556 | $ | 22,885 | ||||
Aging of cash collateral liability: | ||||||||
Open (1) | $ | 2,473 | $ | 5,118 | ||||
Less than thirty days | 9,091 | 14,711 | ||||||
Greater than thirty days to sixty days | 5,222 | 3,471 | ||||||
Greater than sixty days to ninety days | 1,659 | — | ||||||
Greater than ninety days | 2,606 | — | ||||||
Total cash collateral liability | $ | 21,051 | $ | 23,300 | ||||
Security collateral on deposit from counterparties | $ | 40 | $ | 279 | ||||
Reinvestment portfolio — estimated fair value | $ | 20,150 | $ | 19,509 | ||||
(1) | Open terms — meaning that the related loaned security could be returned to the Company on the next business day requiring the Company to immediately return the cash collateral. |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Assets on deposit: | ||||||||
Regulatory agencies (1) | $ | 1,397 | $ | 1,282 | ||||
Assets held in trust: | ||||||||
Collateral financing arrangements (2) | 5,887 | 4,754 | ||||||
Reinsurance arrangements (3) | 1,537 | 1,714 | ||||||
Assets pledged as collateral: | ||||||||
Debt and funding agreements — FHLB of NY (4) | 20,213 | 20,880 | ||||||
Debt and funding agreements — FHLB of Boston (4) | 424 | 1,284 | ||||||
Funding agreements — Farmer MAC (5) | 2,872 | 2,875 | ||||||
Federal Reserve Bank of New York (6) | 2,456 | 1,577 | ||||||
Collateral financing arrangements — Holding Company (7) | 76 | 316 | ||||||
Derivative transactions (8) | 1,563 | 1,744 | ||||||
Short sale agreements (9) | 473 | 346 | ||||||
Other | — | 180 | ||||||
Total assets on deposit, held in trust and pledged as collateral | $ | 36,898 | $ | 36,952 | ||||
(1) | The Company had investment assets on deposit with regulatory agencies consisting primarily of fixed maturity and equity securities. | |
(2) | The Company held in trust cash and securities, primarily fixed maturity and equity securities, to satisfy collateral requirements. The Company has also pledged certain fixed maturity securities in support of the collateral financing arrangements described in Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements. | |
(3) | The Company has pledged certain investments, primarily fixed maturity securities, in connection with certain reinsurance transactions. | |
(4) | The Company has pledged fixed maturity securities and mortgage loans in support of its debt and funding agreements with the FHLB of NY and has pledged fixed maturity securities to the FHLB of Boston. The nature of these Federal Home Loan Bank arrangements is described in Note 7 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. | |
(5) | The Company has pledged certain agricultural real estate mortgage loans in connection with funding agreements with the Federal Agricultural Mortgage Corporation (“Farmer MAC”). The nature of the Farmer MAC arrangements is described in Note 7 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. | |
(6) | The Company has pledged qualifying mortgage loans and fixed maturity securities in connection with collateralized borrowings from the Federal Reserve Bank of New York’s Term Auction Facility. The nature of the Federal Reserve Bank of New York arrangements is described in Note 9 of the Notes to the Interim Condensed Consolidated Financial Statements. | |
(7) | The Holding Company has pledged certain collateral in support of the collateral financing arrangements described in Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements. | |
(8) | Certain of the Company’s invested assets are pledged as collateral for various derivative transactions as described in Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements. | |
(9) | Certain of the Company’s trading securities and cash and cash equivalents are pledged to secure liabilities associated with short sale agreements in the trading securities portfolio as described in the following section. |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Trading securities — at estimated fair value | $ | 1,970 | $ | 946 | ||||
Short sale agreement liabilities (included in other liabilities) | $ | 143 | $ | 57 | ||||
Investments pledged to secure short sale agreement liabilities | $ | 473 | $ | 346 |
Nine Months | ||||||||||||||||
Three Months Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Net investment income (1) | $ | 163 | $ | (95 | ) | $ | 310 | $ | (137 | ) | ||||||
Changes in estimated fair value included in net investment income | $ | 101 | $ | (105 | ) | $ | 242 | $ | (149 | ) |
(1) | Includes interest and dividends earned on trading securities, in addition to the net realized gains (losses) and subsequent changes in estimated fair value, recognized on the trading securities and the related short sale agreement liabilities. |
September 30, 2009 | ||||||||||||||||
Trading Securities | Trading Liabilities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | 1,551 | 79 | % | $ | 129 | 90 | % | ||||||||
Significant other observable inputs (Level 2) | 360 | 18 | — | — | ||||||||||||
Significant unobservable inputs (Level 3) | 59 | 3 | 14 | 10 | ||||||||||||
Total estimated fair value | $ | 1,970 | 100 | % | $ | 143 | 100 | % | ||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2009 | September 30, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 72 | $ | 175 | ||||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | 7 | 14 | ||||||
Purchases, sales, issuances and settlements | (20 | ) | (130 | ) | ||||
Transfer in and/or out of Level 3 | — | — | ||||||
Balance, end of period | $ | 59 | $ | 59 | ||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Commercial mortgage loans | $ | 34,810 | $ | 68.7 | % | $ | 35,965 | 70.1 | % | |||||||
Agricultural mortgage loans | 12,059 | 23.8 | 12,234 | 23.8 | ||||||||||||
Consumer loans | 1,370 | 2.7 | 1,153 | 2.2 | ||||||||||||
Loansheld-for-investment | 48,239 | 95.2 | 49,352 | 96.1 | ||||||||||||
Mortgage loansheld-for-sale: | ||||||||||||||||
Residential — fair value option — Level 2 | 2,384 | 4.7 | 1,798 | 3.5 | ||||||||||||
Residential — fair value option — Level 3 | 20 | — | 177 | 0.3 | ||||||||||||
Total residential — fair value option | 2,404 | 4.7 | 1,975 | 3.8 | ||||||||||||
Commercial and residential — lower of amortized cost or estimated fair value | 38 | 0.1 | 37 | 0.1 | ||||||||||||
Total mortgage loansheld-for-sale | 2,442 | 4.8 | 2,012 | 3.9 | ||||||||||||
Total mortgage and consumer loans, net | $ | 50,681 | 100.0 | % | $ | 51,364 | 100.0 | % | ||||||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Region | ||||||||||||||||
Pacific | $ | 8,806 | 25.3 | % | $ | 8,837 | 24.6 | % | ||||||||
South Atlantic | 7,454 | 21.4 | 8,101 | 22.5 | ||||||||||||
Middle Atlantic | 5,639 | 16.2 | 5,931 | 16.5 | ||||||||||||
International | 3,590 | 10.3 | 3,414 | 9.5 | ||||||||||||
West South Central | 2,906 | 8.3 | 3,070 | 8.5 | ||||||||||||
East North Central | 2,545 | 7.3 | 2,591 | 7.2 | ||||||||||||
New England | 1,451 | 4.2 | 1,529 | 4.3 | ||||||||||||
Mountain | 1,039 | 3.0 | 1,052 | 2.9 | ||||||||||||
West North Central | 667 | 2.0 | 716 | 2.0 | ||||||||||||
East South Central | 460 | 1.3 | 468 | 1.3 | ||||||||||||
Other | 253 | 0.7 | 256 | 0.7 | ||||||||||||
Total | $ | 34,810 | 100.0 | % | $ | 35,965 | 100.0 | % | ||||||||
Property Type | ||||||||||||||||
Office | $ | 14,988 | 43.1 | % | $ | 15,307 | 42.6 | % | ||||||||
Retail | 8,081 | 23.2 | 8,038 | 22.3 | ||||||||||||
Apartments | 3,725 | 10.7 | 4,113 | 11.4 | ||||||||||||
Hotel | 2,967 | 8.5 | 3,078 | 8.6 | ||||||||||||
Industrial | 2,804 | 8.1 | 2,901 | 8.1 | ||||||||||||
Other | 2,245 | 6.4 | 2,528 | 7.0 | ||||||||||||
Total | $ | 34,810 | 100.0 | % | $ | 35,965 | 100.0 | % | ||||||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Performing | $ | 35,325 | 99.9 | % | $ | 518 | 1.5 | % | $ | 36,192 | 100.0 | % | $ | 232 | 0.6 | % | ||||||||||||||||
Restructured | — | — | — | — | % | — | — | — | — | % | ||||||||||||||||||||||
Potentially delinquent | 24 | 0.1 | 24 | 100.0 | % | 2 | — | — | — | % | ||||||||||||||||||||||
Delinquent or under foreclosure | 3 | — | — | — | % | 3 | — | — | — | % | ||||||||||||||||||||||
Total | $ | 35,352 | 100.0 | % | $ | 542 | 1.5 | % | $ | 36,197 | 100.0 | % | $ | 232 | 0.6 | % | ||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Performing | $ | 11,907 | 97.8 | % | $ | 33 | 0.3 | % | $ | 12,054 | 98.0 | % | $ | 16 | 0.1 | % | ||||||||||||||||
Restructured | 27 | 0.2 | 5 | 18.5 | % | 1 | — | — | — | % | ||||||||||||||||||||||
Potentially delinquent | 105 | 0.9 | 39 | 37.1 | % | 133 | 1.1 | 18 | 13.5 | % | ||||||||||||||||||||||
Delinquent or under foreclosure | 133 | 1.1 | 36 | 27.1 | % | 107 | 0.9 | 27 | 25.2 | % | ||||||||||||||||||||||
Total | $ | 12,172 | 100.0 | % | $ | 113 | 0.9 | % | $ | 12,295 | 100.0 | % | $ | 61 | 0.5 | % | ||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Performing | $ | 1,319 | 95.2 | % | $ | 15 | 1.1 | % | $ | 1,116 | 95.8 | % | $ | 11 | 1.0 | % | ||||||||||||||||
Restructured | — | — | — | — | % | — | — | — | — | % | ||||||||||||||||||||||
Potentially delinquent | 29 | 2.1 | — | — | % | 17 | 1.5 | — | — | % | ||||||||||||||||||||||
Delinquent or under foreclosure | 38 | 2.7 | 1 | 2.6 | % | 31 | 2.7 | — | — | % | ||||||||||||||||||||||
Total | $ | 1,386 | 100.0 | % | $ | 16 | 1.2 | % | $ | 1,164 | 100.0 | % | $ | 11 | 0.9 | % | ||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, 2009 | ||||||||||||||||
Commercial | Agricultural | Consumer | Total | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period | $ | 232 | $ | 61 | $ | 11 | $ | 304 | ||||||||
Additions | 330 | 77 | 9 | 416 | ||||||||||||
Deductions | (20 | ) | (25 | ) | (4 | ) | (49 | ) | ||||||||
Balance, end of period | $ | 542 | $ | 113 | $ | 16 | $ | 671 | ||||||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Type | Value | Total | Value | Total | ||||||||||||
(In millions) | ||||||||||||||||
Real estate | $ | 4,011 | 57.0 | % | $ | 4,011 | 52.9 | % | ||||||||
Real estate joint ventures | 2,846 | 40.5 | 3,522 | 46.4 | ||||||||||||
Foreclosed real estate | 125 | 1.8 | 2 | — | ||||||||||||
Real estateheld-for-investment | 6,982 | 99.3 | 7,535 | 99.3 | ||||||||||||
Real estateheld-for-sale | 50 | 0.7 | 51 | 0.7 | ||||||||||||
Total real estate holdings | $ | 7,032 | 100.0 | % | $ | 7,586 | 100.0 | % | ||||||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Type | Value | Total | Value | Total | ||||||||||||
(In millions) | ||||||||||||||||
Freestanding derivatives with positive fair values | $ | 7,556 | 54.3 | % | $ | 12,306 | 71.3 | % | ||||||||
Leveraged leases, net of non-recourse debt | 2,308 | 16.6 | 2,146 | 12.4 | ||||||||||||
Joint venture investments | 925 | 6.6 | 751 | 4.4 | ||||||||||||
Mortgage servicing rights | 720 | 5.2 | 191 | 1.1 | ||||||||||||
Tax credit partnerships | 678 | 4.9 | 503 | 2.9 | ||||||||||||
Funds withheld | 495 | 3.6 | 62 | 0.4 | ||||||||||||
Funding agreements | 406 | 2.9 | 394 | 2.3 | ||||||||||||
Other | 828 | 5.9 | 895 | 5.2 | ||||||||||||
Total | $ | 13,916 | 100.0 | % | $ | 17,248 | 100.0 | % | ||||||||
Carrying Value | ||||
(In millions) | ||||
Fair value, beginning of period | $ | 191 | ||
Acquisition of mortgage servicing rights | 117 | |||
Origination of mortgage servicing rights | 427 | |||
Reduction due to loan payments | (85 | ) | ||
Changes in estimated fair value due to: | ||||
Changes in valuation model inputs or assumptions | 70 | |||
Fair value, end of period | $ | 720 | ||
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||
Current Market | Current Market | |||||||||||||||||||||||||
Primary Underlying | Notional | or Fair Value (1) | Notional | or Fair Value (1) | ||||||||||||||||||||||
Risk Exposure | Instrument Type | Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Interest rate | Interest rate swaps | $ | 36,558 | $ | 2,306 | $ | 1,227 | $ | 34,060 | $ | 4,617 | $ | 1,468 | |||||||||||||
Interest rate floors | 23,691 | 638 | 58 | 48,517 | 1,748 | — | ||||||||||||||||||||
Interest rate caps | 28,409 | 249 | — | 24,643 | 11 | — | ||||||||||||||||||||
Interest rate futures | 7,943 | 10 | 4 | 13,851 | 44 | 117 | ||||||||||||||||||||
Interest rate options | 300 | 3 | — | 2,365 | 939 | 35 | ||||||||||||||||||||
Interest rate forwards | 13,331 | 203 | 62 | 16,616 | 49 | 70 | ||||||||||||||||||||
Synthetic GICs | 4,340 | — | — | 4,260 | — | — | ||||||||||||||||||||
Foreign currency | Foreign currency swaps | 16,971 | 1,681 | 1,506 | 19,438 | 1,953 | 1,866 | |||||||||||||||||||
Foreign currency forwards | 6,566 | 137 | 74 | 5,167 | 153 | 129 | ||||||||||||||||||||
Currency options | 649 | 19 | — | 932 | 73 | — | ||||||||||||||||||||
Non-derivative hedging instruments (2) | — | — | — | 351 | — | 323 | ||||||||||||||||||||
Credit | Swap spreadlocks | — | — | — | 2,338 | — | 99 | |||||||||||||||||||
Credit default swaps | 6,994 | 119 | 161 | 5,219 | 152 | 69 | ||||||||||||||||||||
Other | 90 | 4 | — | — | — | — | ||||||||||||||||||||
Equity market | Equity futures | 7,725 | 23 | 18 | 6,057 | 1 | 88 | |||||||||||||||||||
Equity options | 25,769 | 1,910 | 933 | 5,153 | 2,150 | — | ||||||||||||||||||||
Variance swaps | 13,570 | 254 | 25 | 9,222 | 416 | — | ||||||||||||||||||||
Other | 250 | — | 60 | 250 | — | 101 | ||||||||||||||||||||
Total | $ | 193,156 | $ | 7,556 | $ | 4,128 | $ | 198,439 | $ | 12,306 | $ | 4,365 | ||||||||||||||
(1) | The estimated fair value of all derivatives in an asset position are reported within other invested assets in the consolidated balance sheets and the estimated fair value of all derivatives in a liability position are reported within other liabilities in the consolidated balance sheets. | |
(2) | The estimated fair value of non-derivative hedging instruments represents the amortized cost of the instruments, as adjusted for foreign currency transaction gains or losses. Non-derivative hedging instruments are reported within policyholder account balances in the consolidated balance sheets. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Derivatives Designated as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fair Value Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | $ | 5,007 | $ | 948 | $ | 137 | $ | 6,093 | $ | 467 | $ | 550 | ||||||||||||
Interest rate swaps | 4,791 | 767 | 97 | 4,141 | 1,338 | 153 | ||||||||||||||||||
Subtotal | 9,798 | 1,715 | 234 | 10,234 | 1,805 | 703 | ||||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | 3,953 | 163 | 344 | 3,782 | 463 | 381 | ||||||||||||||||||
Interest rate swaps | — | — | — | 286 | — | 6 | ||||||||||||||||||
Interest rate forwards | 2,753 | 138 | — | — | — | — | ||||||||||||||||||
Other | 90 | 4 | — | — | — | — | ||||||||||||||||||
Subtotal | 6,796 | 305 | 344 | 4,068 | 463 | 387 | ||||||||||||||||||
Foreign Operations Hedges: | ||||||||||||||||||||||||
Foreign currency forwards | 1,906 | 18 | 42 | 1,670 | 32 | 50 | ||||||||||||||||||
Foreign currency swaps | 102 | — | 14 | 164 | 1 | — | ||||||||||||||||||
Non-derivative hedging instruments | — | — | — | 351 | — | 323 | ||||||||||||||||||
Subtotal | 2,008 | 18 | 56 | 2,185 | 33 | 373 | ||||||||||||||||||
Total Qualifying Hedges | $ | 18,602 | $ | 2,038 | $ | 634 | $ | 16,487 | $ | 2,301 | $ | 1,463 | ||||||||||||
September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Derivatives Not Designated or Not Qualifying | Notional | Fair Value | Notional | Fair Value | ||||||||||||||||||||
as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 31,767 | $ | 1,539 | $ | 1,130 | $ | 29,633 | $ | 3,279 | $ | 1,309 | ||||||||||||
Interest rate floors | 23,691 | 638 | 58 | 48,517 | 1,748 | — | ||||||||||||||||||
Interest rate caps | 28,409 | 249 | — | 24,643 | 11 | — | ||||||||||||||||||
Interest rate futures | 7,943 | 10 | 4 | 13,851 | 44 | 117 | ||||||||||||||||||
Interest rate options | 300 | 3 | — | 2,365 | 939 | 35 | ||||||||||||||||||
Interest rate forwards | 10,578 | 65 | 62 | 16,616 | 49 | 70 | ||||||||||||||||||
Synthetic GICs | 4,340 | — | — | 4,260 | — | — | ||||||||||||||||||
Foreign currency swaps | 7,909 | 570 | 1,011 | 9,399 | 1,022 | 935 | ||||||||||||||||||
Foreign currency forwards | 4,660 | 119 | 32 | 3,497 | 121 | 79 | ||||||||||||||||||
Currency options | 649 | 19 | — | 932 | 73 | — | ||||||||||||||||||
Swap spreadlocks | — | — | — | 2,338 | — | 99 | ||||||||||||||||||
Credit default swaps | 6,994 | 119 | 161 | 5,219 | 152 | 69 | ||||||||||||||||||
Equity futures | 7,725 | 23 | 18 | 6,057 | 1 | 88 | ||||||||||||||||||
Equity options | 25,769 | 1,910 | 933 | 5,153 | 2,150 | — | ||||||||||||||||||
Variance swaps | 13,570 | 254 | 25 | 9,222 | 416 | — | ||||||||||||||||||
Other | 250 | — | 60 | 250 | — | 101 | ||||||||||||||||||
Total non-designated or non-qualifying derivatives | $ | 174,554 | $ | 5,518 | $ | 3,494 | $ | 181,952 | $ | 10,005 | $ | 2,902 | ||||||||||||
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Policyholder | ||||||||||||||||||||
Net Investment | Net Investment | Benefits | Other | Other | ||||||||||||||||
Gains (Losses) | Income (1) | and Claims (2) | Revenues (3) | Expenses | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||
Non-qualifying Hedges | ||||||||||||||||||||
Interest rate swaps | $ | 250 | $ | (1 | ) | $ | — | $ | 88 | $ | — | |||||||||
Interest rate floors | 87 | — | — | — | — | |||||||||||||||
Interest rate caps | (73 | ) | — | — | — | — | ||||||||||||||
Interest rate futures | 108 | (2 | ) | — | — | — | ||||||||||||||
Equity futures | (284 | ) | (20 | ) | (194 | ) | — | — | ||||||||||||
Foreign currency swaps | (237 | ) | — | — | — | — | ||||||||||||||
Foreign currency forwards | 16 | 18 | — | — | — | |||||||||||||||
Currency options | — | — | — | — | — | |||||||||||||||
Equity options | (605 | ) | 7 | — | — | — | ||||||||||||||
Interest rate options | — | — | — | (1 | ) | — | ||||||||||||||
Interest rate forwards | 12 | — | — | (35 | ) | — | ||||||||||||||
Variance swaps | (46 | ) | (1 | ) | — | — | — | |||||||||||||
Swap spreadlocks | — | — | — | — | — | |||||||||||||||
Credit default swaps | (100 | ) | (3 | ) | — | — | — | |||||||||||||
Other | 41 | — | — | — | — | |||||||||||||||
Subtotal | (831 | ) | (2 | ) | (194 | ) | 52 | — | ||||||||||||
Fair Value Hedges (4) | ||||||||||||||||||||
Interest rate swaps | 1 | — | — | — | — | |||||||||||||||
Foreign currency swaps | 8 | — | — | — | — | |||||||||||||||
Subtotal | 9 | — | — | — | — | |||||||||||||||
Cash Flow Hedges | ||||||||||||||||||||
Interest rate swaps | — | (2 | ) | — | — | — | ||||||||||||||
Foreign currency swaps | (107 | ) | (2 | ) | — | — | — | |||||||||||||
Interest rate forwards | 37 | — | — | — | — | |||||||||||||||
Subtotal | (70 | ) | (4 | ) | — | — | — | |||||||||||||
Total | $ | (892 | ) | $ | (6 | ) | $ | (194 | ) | $ | 52 | $ | — | |||||||
For the Three Months Ended September 30, 2008: | ||||||||||||||||||||
Non-qualifying Hedges | $ | 1,453 | $ | 42 | $ | 62 | $ | — | $ | — | ||||||||||
Fair Value Hedges | 10 | — | — | — | — | |||||||||||||||
Cash Flow Hedges | (126 | ) | (2 | ) | — | — | — | |||||||||||||
Total | $ | 1,337 | $ | 40 | $ | 62 | $ | — | $ | — | ||||||||||
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Policyholder | ||||||||||||||||||||
Net Investment | Net Investment | Benefits | Other | Other | ||||||||||||||||
Gains (Losses) | Income (1) | and Claims (2) | Revenues (3) | Expenses | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||
Non-qualifying Hedges | ||||||||||||||||||||
Interest rate swaps | $ | (1,222 | ) | $ | (4 | ) | $ | — | $ | (58 | ) | $ | — | |||||||
Interest rate floors | (766 | ) | — | — | — | — | ||||||||||||||
Interest rate caps | — | — | — | — | — | |||||||||||||||
Interest rate futures | (376 | ) | (2 | ) | — | — | — | |||||||||||||
Equity futures | (633 | ) | (31 | ) | (291 | ) | — | — | ||||||||||||
Foreign currency swaps | (399 | ) | — | — | — | — | ||||||||||||||
Foreign currency forwards | (68 | ) | (13 | ) | — | — | — | |||||||||||||
Currency options | (32 | ) | — | — | — | — | ||||||||||||||
Equity options | (1,337 | ) | (55 | ) | — | — | — | |||||||||||||
Interest rate options | (353 | ) | — | — | 1 | — | ||||||||||||||
Interest rate forwards | 6 | — | — | 7 | — | |||||||||||||||
Variance swaps | (175 | ) | (10 | ) | — | — | — | |||||||||||||
Swap spreadlocks | (38 | ) | — | — | — | — | ||||||||||||||
Credit default swaps | (219 | ) | (10 | ) | — | — | — | |||||||||||||
Other | 49 | — | — | — | — | |||||||||||||||
Subtotal | (5,563 | ) | (125 | ) | (291 | ) | (50 | ) | — | |||||||||||
Fair Value Hedges (4) | ||||||||||||||||||||
Interest rate swaps | (4 | ) | — | — | — | — | ||||||||||||||
Foreign currency swaps | 18 | — | — | — | — | |||||||||||||||
Subtotal | 14 | — | — | — | — | |||||||||||||||
Cash Flow Hedges | ||||||||||||||||||||
Interest rate swaps | — | (4 | ) | — | — | — | ||||||||||||||
Foreign currency swaps | (140 | ) | (4 | ) | — | — | 1 | |||||||||||||
Interest rate forwards | 37 | — | — | — | — | |||||||||||||||
Subtotal | (103 | ) | (8 | ) | — | — | 1 | |||||||||||||
Total | $ | (5,652 | ) | $ | (133 | ) | $ | (291 | ) | $ | (50 | ) | $ | 1 | ||||||
For the Nine Months Ended September 30, 2008: | ||||||||||||||||||||
Non-qualifying Hedges | $ | 1,170 | $ | 81 | $ | 121 | $ | — | $ | — | ||||||||||
Fair Value Hedges | 5 | — | — | — | — | |||||||||||||||
Cash Flow Hedges | (119 | ) | (8 | ) | — | — | 1 | |||||||||||||
Total | $ | 1,056 | $ | 73 | $ | 121 | $ | — | $ | 1 | ||||||||||
(1) | Changes in estimated fair value related to economic hedges of equity method investments in joint ventures, and changes in estimated fair value related to derivatives held in relation to trading portfolios. | |
(2) | Changes in estimated fair value related to economic hedges of liabilities embedded in certain variable annuity products offered by the Company. | |
(3) | Changes in estimated fair value related to derivatives held in connection with the Company’s mortgage banking activities. | |
(4) | Net of the gains or losses recognized on the hedged item. |
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September 30, 2009 | ||||||||||||||||
Derivative | Derivative | |||||||||||||||
Assets | Liabilities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | 49 | 1 | % | $ | 81 | 2 | % | ||||||||
Significant other observable inputs (Level 2) | 5,122 | 68 | 3,052 | 74 | ||||||||||||
Significant unobservable inputs (Level 3) | 2,385 | 31 | 995 | 24 | ||||||||||||
Total estimated fair value | $ | 7,556 | 100 | % | $ | 4,128 | 100 | % | ||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2009 | September 30, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 1,766 | $ | 2,547 | ||||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | (539 | ) | (1,498 | ) | ||||
Other comprehensive income (loss) | 51 | (12 | ) | |||||
Purchases, sales, issuances and settlements | 121 | 341 | ||||||
Transfer in and/or out of Level 3 | (9 | ) | 12 | |||||
Balance, end of period | $ | 1,390 | $ | 1,390 | ||||
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September 30, 2009 | ||||||||||||||||
Net Embedded Derivatives Within | ||||||||||||||||
Asset Host | Liability Host | |||||||||||||||
Contracts | Contracts | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | — | — | % | $ | — | — | % | ||||||||
Significant other observable inputs (Level 2) | — | — | (37 | ) | (2 | ) | ||||||||||
Significant unobservable inputs (Level 3) | 114 | 100 | 1,873 | 102 | ||||||||||||
Total estimated fair value | $ | 114 | 100 | % | $ | 1,836 | 100 | % | ||||||||
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Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2009 | September 30, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | (1,108 | ) | $ | (2,929 | ) | ||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | (550 | ) | 1,294 | |||||
Other comprehensive loss | (60 | ) | (35 | ) | ||||
Purchases, sales, issuances and settlements | (41 | ) | (89 | ) | ||||
Transfer in and/or out of Level 3 | — | — | ||||||
Balance, end of period | $ | (1,759 | ) | $ | (1,759 | ) | ||
September 30, 2009 | December 31, 2008 | |||||||||||||||
Total Assets | Total Liabilities | Total Assets | Total Liabilities | |||||||||||||
(In millions) | ||||||||||||||||
MRSC collateral financing arrangement (1) | $ | 3,159 | $ | — | $ | 2,361 | $ | — | ||||||||
Real estate joint ventures (2) | 21 | 15 | 26 | 15 | ||||||||||||
Other limited partnership interests (3) | 359 | 87 | 20 | 3 | ||||||||||||
Other invested assets (4) | 29 | 2 | 10 | 3 | ||||||||||||
Total | $ | 3,568 | $ | 104 | $ | 2,417 | $ | 21 | ||||||||
(1) | See “— Liquidity and Capital Resources — The Holding Company — Liquidity and Capital Sources — Collateral Financing Arrangements” for a description of the MRSC collateral financing arrangement. At September 30, 2009 and December 31, 2008, these assets are presented at estimated fair value and consist of the following: |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||
U.S. corporate securities | $ | 1,069 | $ | 948 | ||||
Asset-backed securities | 857 | 409 | ||||||
Residential mortgage-backed securities | 658 | 561 | ||||||
Commercial mortgage-backed securities | 345 | 98 | ||||||
U.S. Treasury, agency and government guaranteed securities | 100 | — | ||||||
Foreign corporate securities | 100 | 95 | ||||||
State and political subdivision securities | 21 | 21 | ||||||
Foreign government securities | 5 | 5 | ||||||
Cash and cash equivalents (including cash held in trust of less than $1 million and $60 million, respectively) | 4 | 224 | ||||||
Total | $ | 3,159 | $ | 2,361 | ||||
(2) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. At September 30, 2009 and December 31, 2008, the assets consisted of $16 million and $20 million, respectively, of real estate and real estate joint venturesheld-for-investment, $4 million and $5 million, respectively, of cash and cash equivalents and $1 million and $1 million, respectively, of other assets. At both September 30, 2009 and December 31, 2008, liabilities consisted of $15 million of other liabilities. | |
(3) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. At September 30, 2009, the assets consisted of $228 million of other limited partnership interests, $104 million of other invested assets, $12 million of cash and cash equivalents, and $15 million of other assets. At December 31, 2008, the assets of $20 million were included within other limited partnership interests. At September 30, 2009, liabilities of $75 million and $12 million were included in long-term debt and other liabilities, respectively, and at December 31, 2008, liabilities of $3 million were included within other liabilities. | |
(4) | Other invested assets include tax-credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. Upon consolidation, the assets and liabilities are reflected at the VIE’s carrying amounts. At September 30, 2009 and December 31, 2008, the assets of $29 million and $10 million, respectively, were included within other invested assets. At September 30, 2009 and December 31, 2008, the liabilities consisted of $1 million and $2 million, respectively, of long-term debt and $1 million and $1 million, respectively, of other liabilities. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Carrying | Exposure | Carrying | Exposure | |||||||||||||
Amount (1) | to Loss (2) | Amount (1) | to Loss (2) | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||||||||||
Foreign corporate securities | $ | 1,212 | $ | 1,212 | $ | 1,080 | $ | 1,080 | ||||||||
U.S. corporate securities | 1,090 | 1,090 | 992 | 992 | ||||||||||||
Real estate joint ventures | 31 | 31 | 32 | 32 | ||||||||||||
Other limited partnership interests | 2,350 | 2,667 | 3,496 | 4,004 | ||||||||||||
Other invested assets | 388 | 225 | 318 | 108 | ||||||||||||
Total | $ | 5,071 | $ | 5,225 | $ | 5,918 | $ | 6,216 | ||||||||
(1) | See Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for further discussion of the Company’s accounting policies with respect to the basis for determining carrying value of these investments. | |
(2) | The maximum exposure to loss relating to the fixed maturity securitiesavailable-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the real estate joint ventures and other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company’s return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by tax credits guaranteed by third parties of $237 million and $278 million at September 30, 2009 and December 31, 2008, respectively. |
• | such separate accounts are legally recognized; | |
• | assets supporting the contract liabilities are legally insulated from the Company’s general account liabilities; | |
• | investments are directed by the contractholder; and | |
• | all investment performance, net of contract fees and assessments, is passed through to the contractholder. |
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September 30, 2009 | ||||||||
(In millions) | ||||||||
Quoted prices in active markets for identical assets (Level 1) | $ | 110,064 | 76.2 | % | ||||
Significant other observable inputs (Level 2) | 32,449 | 22.5 | ||||||
Significant unobservable inputs (Level 3) | 1,921 | 1.3 | ||||||
Total estimated fair value | $ | 144,434 | 100.0 | % | ||||
Future Policy Benefits | Policyholder Account Balances | Other Policyholder Funds | ||||||||||||||||||||||
September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | September 30, 2009 | December 31, 2008 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional: | ||||||||||||||||||||||||
Group life | $ | 3,379 | $ | 3,346 | $ | 14,565 | $ | 14,044 | $ | 2,816 | $ | 2,532 | ||||||||||||
Retirement & savings | 40,814 | 40,320 | 51,054 | 60,787 | 42 | 58 | ||||||||||||||||||
Non-medical health & other | 12,367 | 11,619 | 501 | 501 | 600 | 609 | ||||||||||||||||||
Individual: | ||||||||||||||||||||||||
Traditional life | 53,604 | 52,968 | 1 | 1 | 1,546 | 1,423 | ||||||||||||||||||
Variable & universal life | 1,327 | 1,129 | 15,472 | 15,062 | 1,472 | 1,452 | ||||||||||||||||||
Annuities | 3,938 | 3,655 | 47,450 | 44,282 | 98 | 88 | ||||||||||||||||||
Other | — | 2 | 2,898 | 2,524 | 1 | 1 | �� | |||||||||||||||||
International | 10,682 | 9,241 | 7,177 | 5,654 | 1,559 | 1,227 | ||||||||||||||||||
Auto & Home | 3,015 | 3,083 | — | — | 43 | 43 | ||||||||||||||||||
Corporate & Other | 5,366 | 5,192 | 8,425 | 6,950 | 372 | 329 | ||||||||||||||||||
Total | $ | 134,492 | $ | 130,555 | $ | 147,543 | $ | 149,805 | $ | 8,549 | $ | 7,762 | ||||||||||||
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Individual: | ||||||||
Guaranteed minimum accumulation benefit | $ | 83 | $ | 169 | ||||
Guaranteed minimum withdrawal benefit | 301 | 750 | ||||||
Guaranteed minimum income benefit | 327 | 1,043 | ||||||
International: | ||||||||
Guaranteed minimum accumulation benefit | 200 | 271 | ||||||
Guaranteed minimum withdrawal benefit | 917 | 901 | ||||||
Total | $ | 1,828 | $ | 3,134 | ||||
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||
Primary Underlying | Notional | Fair Value | Notional | Fair Value | ||||||||||||||||||||||
Risk Exposure | Derivative Type | Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Interest rate | Interest rate swaps | $ | 8,453 | $ | 311 | $ | 171 | $ | 5,572 | $ | 632 | $ | 7 | |||||||||||||
Interest rate futures | 5,504 | 10 | 4 | 9,264 | 36 | 56 | ||||||||||||||||||||
Foreign currency | Foreign currency forwards | 2,002 | 83 | — | 1,017 | 49 | 4 | |||||||||||||||||||
Currency options | 349 | 19 | — | 582 | 68 | — | ||||||||||||||||||||
Equity market | Equity futures | 6,408 | 19 | 17 | 4,660 | 1 | 65 | |||||||||||||||||||
Equity options | 25,389 | 1,789 | 933 | 4,842 | 1,997 | — | ||||||||||||||||||||
Variance Swaps | 13,184 | 244 | 25 | 8,835 | 396 | — | ||||||||||||||||||||
Total | $ | 61,289 | $ | 2,475 | $ | 1,150 | $ | 34,772 | $ | 3,179 | $ | 132 | ||||||||||||||
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Individual: | ||||||||
Guaranteed minimum death benefit | $ | 127 | $ | 204 | ||||
Guaranteed minimum income benefit | 500 | 403 | ||||||
International: | ||||||||
Guaranteed minimum death benefit | 24 | 39 | ||||||
Total | $ | 651 | $ | 646 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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• | implementing a Board of Directors approved corporate risk framework, which outlines the Company’s approach for managing risk on an enterprise-wide basis; | |
• | developing policies and procedures for managing, measuring, monitoring and controlling those risks identified in the corporate risk framework; | |
• | establishing appropriate corporate risk tolerance levels; | |
• | deploying capital on an economic capital basis; and | |
• | reporting on a periodic basis to the Finance and Risk Policy Committee of the Company’s Board of Directors, and with respect to credit risk to the Investment Committee of the Company’s Board of Directors and various financial and non-financial senior management committees. |
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• | The Company’s Treasury Department is responsible for managing the exposure to investments in foreign subsidiaries. Limits to exposures are established and monitored by the Treasury Department and managed by the Investment Department. | |
• | The Investment Department is responsible for managing the exposure to foreign currency investments. Exposure limits to unhedged foreign currency investments are incorporated into the standing authorizations granted to management by the Board of Directors and are reported to the Board of Directors on a periodic basis. | |
• | The lines of business are responsible for establishing limits and managing any foreign exchange rate exposure caused by the sale or issuance of insurance products. |
• | Risks Related to Living Benefit Riders — The Company uses a wide range of derivative contracts to hedge the risk associated with variable annuity living benefit riders. These hedges include equity and interest rate futures, interest rate swaps, currency futures/forwards, equity indexed options and interest rate option contracts and equity variance swaps. | |
• | Minimum Interest Rate Guarantees — For certain Company liability contracts, the Company provides the contractholder a guaranteed minimum interest rate. These contracts include certain fixed annuities and other insurance liabilities. The Company purchases interest rate floors to reduce risk associated with these liability guarantees. | |
• | Reinvestment Risk in Long Duration Liability Contracts — Derivatives are used to hedge interest rate risk related to certain long duration liability contracts, such as long-term care. Hedges include zero coupon interest rate swaps and swaptions. | |
• | Foreign Currency Risk — The Company uses currency swaps and forwards to hedge foreign currency risk. These hedges primarily swap foreign currency denominated bonds or equity exposures to US dollars. |
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• | General ALM Hedging Strategies — In the ordinary course of managing the Company’s asset/liability risks, the Company uses interest rate futures, interest rate swaps, interest rate caps, interest rate floors and inflation swaps. These hedges are designed to reduce interest rate risk or inflation risk related to the existing assets or liabilities or related to expected future cash flows. |
• | the net present values of its interest rate sensitive exposures resulting from a 10% change (increase or decrease) in interest rates; | |
• | the U.S. Dollar equivalent estimated fair values of the Company’s foreign currency exposures due to a 10% change (increase or decrease) in foreign currency exchange rates; and | |
• | the estimated fair value of its equity positions due to a 10% change (increase or decrease) in equity market prices. |
• | the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis, including the impact of prepayment rates on mortgages; | |
• | the derivatives that qualify as hedges, the impact on reported earnings may be materially different from the change in market values; | |
• | the analysis excludes other significant real estate holdings and liabilities pursuant to insurance contracts; and | |
• | the model assumes that the composition of assets and liabilities remains unchanged throughout the period. |
September 30, 2009 | ||||
(In millions) | ||||
Non-trading: | ||||
Interest rate risk | $ | 2,833 | ||
Foreign currency exchange rate risk | $ | 783 | ||
Equity price risk | $ | 245 | ||
Trading: | ||||
Interest rate risk | $ | 3 | ||
Foreign currency exchange rate risk | $ | 72 |
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September 30, 2009 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Yield | ||||||||||
Amount | Value (3) | Curve | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 223,896 | $ | (4,139 | ) | |||||||
Equity securities | 3,117 | — | ||||||||||
Trading securities | 1,970 | (8 | ) | |||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | 46,175 | (184 | ) | |||||||||
Held-for-sale | 2,442 | (15 | ) | |||||||||
Mortgage and consumer loans, net | 48,617 | (199 | ) | |||||||||
Policy loans | 11,516 | (182 | ) | |||||||||
Real estate joint ventures (1) | 123 | — | ||||||||||
Other limited partnership interests (1) | 1,598 | — | ||||||||||
Short-term investments | 6,861 | (1 | ) | |||||||||
Other invested assets: | ||||||||||||
Mortgage servicing rights | 720 | 73 | ||||||||||
Other | 1,274 | (8 | ) | |||||||||
Cash and cash equivalents | 15,562 | — | ||||||||||
Accrued investment income | 3,236 | — | ||||||||||
Premiums and other receivables | 2,967 | (179 | ) | |||||||||
Other assets | 791 | (11 | ) | |||||||||
Net embedded derivatives within asset host contracts (2) | 114 | (20 | ) | |||||||||
Mortgage loan commitments | $ | 3,468 | (162 | ) | (13 | ) | ||||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 932 | (54 | ) | — | |||||||
Total Assets | $ | (4,687 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 105,919 | $ | 1,465 | ||||||||
Short-term debt | 2,131 | — | ||||||||||
Long-term debt | 13,785 | 308 | ||||||||||
Collateral financing arrangements | 2,688 | (9 | ) | |||||||||
Junior subordinated debt securities | 3,081 | 127 | ||||||||||
Payables for collateral under securities loaned and other transactions | 24,363 | — | ||||||||||
Other liabilities: | ||||||||||||
Trading liabilities | 143 | 5 | ||||||||||
Other | 2,918 | — | ||||||||||
Net embedded derivatives within liability host contracts (2) | 1,836 | 874 | ||||||||||
Total Liabilities | $ | 2,770 | ||||||||||
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September 30, 2009 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Yield | ||||||||||
Amount | Value (3) | Curve | ||||||||||
(In millions) | ||||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 36,558 | $ | 1,079 | $ | (692 | ) | |||||
Interest rate floors | $ | 23,691 | 580 | (74 | ) | |||||||
Interest rate caps | $ | 28,409 | 249 | 72 | ||||||||
Interest rate futures | $ | 7,943 | 6 | (36 | ) | |||||||
Interest rate options | $ | 300 | 3 | 2 | ||||||||
Interest rate forwards | $ | 13,331 | 141 | (75 | ) | |||||||
Synthetic GICs | $ | 4,340 | — | — | ||||||||
Foreign currency swaps | $ | 16,971 | 175 | (35 | ) | |||||||
Foreign currency forwards | $ | 6,566 | 63 | 1 | ||||||||
Currency options | $ | 649 | 19 | — | ||||||||
Credit default swaps | $ | 6,994 | (42 | ) | 1 | |||||||
Equity futures | $ | 7,725 | 5 | — | ||||||||
Equity options | $ | 25,769 | 977 | (54 | ) | |||||||
Variance swaps | $ | 13,570 | 229 | (12 | ) | |||||||
Other Credit | $ | 90 | 4 | — | ||||||||
Other Equity | $ | 250 | (60 | ) | (17 | ) | ||||||
Total Derivative Instruments | $ | (919 | ) | |||||||||
Net Change | $ | (2,836 | ) | |||||||||
(1) | Represents only those investments accounted for using the cost method. | |
(2) | Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract. | |
(3) | Separate account assets and liabilities which are interest rate sensitive are not included herein as any interest rate risk is borne by the holder of the separate account. |
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September 30, 2009 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Foreign | ||||||||||
Amount | Value (1) | Exchange Rate | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 223,896 | $ | (1,956 | ) | |||||||
Trading securities | 1,970 | (72 | ) | |||||||||
Equity securities | 3,117 | (6 | ) | |||||||||
Mortgage and consumer loans: | ||||||||||||
Held-for-investment | 46,175 | (340 | ) | |||||||||
Held-for-sale | 2,442 | — | ||||||||||
Mortgage and consumer loans, net | 48,617 | (340 | ) | |||||||||
Policy loans | 11,516 | (38 | ) | |||||||||
Short-term investments | 6,861 | (73 | ) | |||||||||
Other invested assets: | ||||||||||||
Mortgage servicing rights | 720 | — | ||||||||||
Other | 1,274 | (40 | ) | |||||||||
Accrued investment income | 3,236 | (9 | ) | |||||||||
Cash and cash equivalents | 15,562 | (82 | ) | |||||||||
Total Assets | $ | (2,616 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 105,919 | $ | 1,222 | ||||||||
Long-term debt | 13,785 | 96 | ||||||||||
Net embedded derivatives within liability host contracts (2) | 1,836 | 111 | ||||||||||
Total Liabilities | $ | 1,429 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 36,558 | $ | 1,079 | $ | 2 | ||||||
Interest rate floors | $ | 23,691 | 580 | — | ||||||||
Interest rate caps | $ | 28,409 | 249 | — | ||||||||
Interest rate futures | $ | 7,943 | 6 | (2 | ) | |||||||
Interest rate options | $ | 300 | 3 | — | ||||||||
Interest rate forwards | $ | 13,331 | 141 | — | ||||||||
Synthetic GICs | $ | 4,340 | — | — | ||||||||
Foreign currency swaps | $ | 16,971 | 175 | 179 | ||||||||
Foreign currency forwards | $ | 6,566 | 63 | 218 | ||||||||
Currency options | $ | 649 | 19 | — | ||||||||
Credit default swaps | $ | 6,994 | (42 | ) | — | |||||||
Equity futures | $ | 7,725 | 5 | (2 | ) | |||||||
Equity options | $ | 25,769 | 977 | (61 | ) | |||||||
Variance swaps | $ | 13,570 | 229 | (2 | ) | |||||||
Other Credit | $ | 90 | 4 | — | ||||||||
Other Equity | $ | 250 | (60 | ) | — | |||||||
Total Derivative Instruments | $ | 332 | ||||||||||
Net Change | $ | (855 | ) | |||||||||
(1) | Estimated fair value presented in the table above represents the estimated fair value of all financial instruments within this financial statement caption not necessarily those solely subject to foreign exchange risk. | |
(2) | Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract. |
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September 30, 2009 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in Equity | ||||||||||
Amount | Value (1) | Prices | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Equity securities | $ | 3,117 | $ | 323 | ||||||||
Other invested assets: | ||||||||||||
Net embedded derivatives within asset host contracts (2) | 114 | (12 | ) | |||||||||
Total Assets | $ | 311 | ||||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 105,919 | $ | — | ||||||||
Other liabilities: | ||||||||||||
Net embedded derivatives within liability host contracts (2) | 1,836 | 378 | ||||||||||
Total Liabilities | $ | 378 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 36,558 | $ | 1,079 | $ | — | ||||||
Interest rate floors | $ | 23,691 | 580 | — | ||||||||
Interest rate caps | $ | 28,409 | 249 | — | ||||||||
Interest rate futures | $ | 7,943 | 6 | — | ||||||||
Interest rate options | $ | 300 | 3 | — | ||||||||
Interest rate forwards | $ | 13,331 | 141 | — | ||||||||
Synthetic GICs | $ | 4,340 | — | — | ||||||||
Foreign currency swaps | $ | 16,971 | 175 | — | ||||||||
Foreign currency forwards | $ | 6,566 | 63 | — | ||||||||
Currency options | $ | 649 | 19 | — | ||||||||
Credit default swaps | $ | 6,994 | (42 | ) | — | |||||||
Equity futures | $ | 7,725 | 5 | (286 | ) | |||||||
Equity options | $ | 25,769 | 977 | (682 | ) | |||||||
Variance swaps | $ | 13,570 | 229 | 10 | ||||||||
Other Credit | $ | 90 | 4 | — | ||||||||
Other Equity | $ | 250 | (60 | ) | 24 | |||||||
Total Derivative Instruments | $ | (934 | ) | |||||||||
Net Change | $ | (245 | ) | |||||||||
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(1) | Estimated fair value presented in the table above represents the estimated fair value of all financial instruments within this financial statement caption not necessarily those solely subject to equity price risk. | |
(2) | Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract. |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
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Item 1A. | Risk Factors |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(c) Total Number | (d) Maximum Number | |||||||||||||||
of Shares | (or Approximate | |||||||||||||||
Purchased as Part | Dollar Value) of | |||||||||||||||
(a) Total Number | of Publicly | Shares that May Yet | ||||||||||||||
of Shares | (b) Average Price | Announced Plans | Be Purchased Under the | |||||||||||||
Period | Purchased (1) | Paid per Share | or Programs | Plans or Programs (2) | ||||||||||||
July 1 — July 31, 2009 | — | $ | — | — | $ | 1,260,735,127 | ||||||||||
August 1 — August 31, 2009 | — | $ | — | — | $ | 1,260,735,127 | ||||||||||
September 1 — September 30, 2009 | 15,000 | $ | 37.35 | — | $ | 1,260,735,127 | ||||||||||
Total | 15,000 | $ | 37.35 | — | $ | 1,260,735,127 | ||||||||||
(1) | During the period September 1 through September 30, 2009, separate account affiliates of the Company purchased 15,000 shares of common stock on the open market in nondiscretionary transactions to rebalance index funds. Except as disclosed above, there were no shares of common stock which were repurchased by the Company. | |
(2) | At September 30, 2009, the Company had $1,261 million remaining under its common stock repurchase program authorizations. In April 2008, the Company’s Board of Directors authorized a $1 billion common stock repurchase program, which will begin after the completion of the January 2008 $1 billion common stock repurchase program, of which $261 million remained outstanding at September 30, 2009. Under these authorizations, the Company may purchase its common stock from the MetLife Policyholder Trust, in the open market (including pursuant to the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act) and in privately negotiated transactions. The Company does not intend to make any purchases under the common stock repurchase programs in 2009. |
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Item 6. | Exhibits |
Exhibit | ||||
No. | Description | |||
4 | .1 | Eighth Supplemental Indenture, dated July 8, 2009, to the Subordinated Indenture between the Company and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to J.P. Morgan Trust Company, National Association), as trustee (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 8, 2009). | ||
4 | .2 | Form of security certificate representing 10.750%Fixed-to-Floating Rate Junior Subordinated Debentures due 2069 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 8, 2009). | ||
10 | .1 | Separation Agreement, Waiver and General Release between Lisa M. Weber and MetLife Group, Inc. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated September 3, 2009). | ||
31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | .1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32 | .2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101 | .INS | XBRL Instance Document. | ||
101 | .SCH | XBRL Taxonomy Extension Schema Document. | ||
101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101 | .LAB | XBRL Taxonomy Extension Label Linkbase Document. | ||
101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
101 | .DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
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Table of Contents
By | /s/ Peter M. Carlson |
Title: | Executive Vice President, Finance |
256
Table of Contents
Exhibit | ||||
No. | Description | |||
4 | .1 | Eighth Supplemental Indenture, dated July 8, 2009, to the Subordinated Indenture between the Company and The Bank of New York Mellon Trust Company, N.A. (as successor in interest to J.P. Morgan Trust Company, National Association), as trustee (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 8, 2009). | ||
4 | .2 | Form of security certificate representing 10.750%Fixed-to-Floating Rate Junior Subordinated Debentures due 2069 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 8, 2009). | ||
10 | .1 | Separation Agreement, Waiver and General Release between Lisa M. Weber and MetLife Group, Inc. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated September 3, 2009). | ||
31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | .1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
32 | .2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101 | .INS | XBRL Instance Document. | ||
101 | .SCH | XBRL Taxonomy Extension Schema Document. | ||
101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101 | .LAB | XBRL Taxonomy Extension Label Linkbase Document. | ||
101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
101 | .DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
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