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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, 2010 | ||
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 (State or other jurisdiction of incorporation or organization) | 13-4075851 (I.R.S. Employer Identification No.) | |
200 Park Avenue, New York, N.Y. (Address of principal executive offices) | 10166-0188 (Zip Code) |
Large accelerated filerþ | Accelerated filero | |
Non-accelerated filero (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, | December 31, | |||||||
2010 | 2009 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at estimated fair value (amortized cost: $245,659 and $229,709, respectively; includes $3,283 and $3,171, respectively, relating to variable interest entities) | $ | 260,564 | $ | 227,642 | ||||
Equity securitiesavailable-for-sale, at estimated fair value (cost: $2,936 and $3,187, respectively) | 2,865 | 3,084 | ||||||
Trading securities, at estimated fair value (cost: $3,870 and $2,249, respectively; includes $231 and $0, respectively, relating to variable interest entities) | 3,987 | 2,384 | ||||||
Mortgage loans: | ||||||||
Held-for-investment, principally at amortized cost (net of valuation allowances of $666 and $721, respectively; includes $7,093 and $0, respectively, at estimated fair value, relating to variable interest entities) | 57,098 | 48,181 | ||||||
Held-for-sale, principally at estimated fair value | 2,840 | 2,728 | ||||||
Mortgage loans, net | 59,938 | 50,909 | ||||||
Policy loans | 10,230 | 10,061 | ||||||
Real estate and real estate joint venturesheld-for-investment (includes $18 and $18, respectively, relating to variable interest entities) | 6,981 | 6,852 | ||||||
Real estateheld-for-sale | 9 | 44 | ||||||
Other limited partnership interests (includes $197 and $236, respectively, relating to variable interest entities) | 5,948 | 5,508 | ||||||
Short-term investments | 11,590 | 8,374 | ||||||
Other invested assets (includes $102 and $137, respectively, relating to variable interest entities) | 16,571 | 12,709 | ||||||
Total investments | 378,683 | 327,567 | ||||||
Cash and cash equivalents (includes $62 and $68, respectively, relating to variable interest entities) | 14,557 | 10,112 | ||||||
Accrued investment income (includes $37 and $0, respectively, relating to variable interest entities) | 3,469 | 3,173 | ||||||
Premiums, reinsurance and other receivables | 18,654 | 16,752 | ||||||
Deferred policy acquisition costs and value of business acquired | 17,463 | 19,256 | ||||||
Current income tax recoverable | 178 | 316 | ||||||
Deferred income tax assets | — | 1,228 | ||||||
Goodwill | 4,966 | 5,047 | ||||||
Other assets (includes $7 and $16, respectively, relating to variable interest entities) | 6,913 | 6,822 | ||||||
Separate account assets | 172,372 | 149,041 | ||||||
Total assets | $ | 617,255 | $ | 539,314 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Future policy benefits | $ | 143,686 | $ | 135,879 | ||||
Policyholder account balances | 145,360 | 138,673 | ||||||
Other policyholder funds | 8,912 | 8,446 | ||||||
Policyholder dividends payable | 834 | 761 | ||||||
Policyholder dividend obligation | 2,014 | — | ||||||
Payables for collateral under securities loaned and other transactions | 31,891 | 24,196 | ||||||
Bank deposits | 9,362 | 10,211 | ||||||
Short-term debt | 2,057 | 912 | ||||||
Long-term debt (includes $7,130 and $64, respectively, at estimated fair value, relating to variable interest entities) | 24,512 | 13,220 | ||||||
Collateral financing arrangements | 5,297 | 5,297 | ||||||
Junior subordinated debt securities | 3,191 | 3,191 | ||||||
Deferred income tax liability | 3,543 | — | ||||||
Other liabilities (includes $100 and $26, respectively, relating to variable interest entities) | 17,455 | 15,989 | ||||||
Separate account liabilities | 172,372 | 149,041 | ||||||
Total liabilities | 570,486 | 505,816 | ||||||
Contingencies, Commitments and Guarantees (Note 8) | ||||||||
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; 910,103,484 and 822,359,818 shares issued at September 30, 2010 and December 31, 2009, respectively; 906,909,597 and 818,833,810 shares outstanding at September 30, 2010 and December 31, 2009, respectively | 9 | 8 | ||||||
Additional paid-in capital | 20,451 | 16,859 | ||||||
Retained earnings | 22,096 | 19,501 | ||||||
Treasury stock, at cost; 3,193,887 and 3,526,008 shares at September 30, 2010 and December 31, 2009, respectively | (172 | ) | (190 | ) | ||||
Accumulated other comprehensive income (loss) | 4,030 | (3,058 | ) | |||||
Total MetLife, Inc.’s stockholders’ equity | 46,415 | 33,121 | ||||||
Noncontrolling interests | 354 | 377 | ||||||
Total equity | 46,769 | 33,498 | ||||||
Total liabilities and stockholders’ equity | $ | 617,255 | $ | 539,314 | ||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 6,562 | $ | 6,601 | $ | 20,078 | $ | 19,299 | ||||||||
Universal life and investment-type product policy fees | 1,453 | 1,251 | 4,345 | 3,650 | ||||||||||||
Net investment income | 4,391 | 3,923 | 12,822 | 10,914 | ||||||||||||
Other revenues | 624 | 602 | 1,681 | 1,728 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (143 | ) | (650 | ) | (538 | ) | (1,769 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) | 24 | 245 | 181 | 479 | ||||||||||||
Other net investment gains (losses) | (223 | ) | (327 | ) | 33 | (1,500 | ) | |||||||||
Total net investment gains (losses) | (342 | ) | (732 | ) | (324 | ) | (2,790 | ) | ||||||||
Net derivatives gains (losses) | (244 | ) | (1,407 | ) | 1,278 | (4,084 | ) | |||||||||
Total revenues | 12,444 | 10,238 | 39,880 | 28,717 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 7,397 | 7,173 | 21,952 | 20,701 | ||||||||||||
Interest credited to policyholder account balances | 1,266 | 1,258 | 3,458 | 3,655 | ||||||||||||
Policyholder dividends | 392 | 439 | 1,157 | 1,297 | ||||||||||||
Other expenses | 2,996 | 2,543 | 9,358 | 7,576 | ||||||||||||
Total expenses | 12,051 | 11,413 | 35,925 | 33,229 | ||||||||||||
Income (loss) from continuing operations before provision for income tax | 393 | (1,175 | ) | 3,955 | (4,512 | ) | ||||||||||
Provision for income tax expense (benefit) | 71 | (551 | ) | 1,259 | (1,884 | ) | ||||||||||
Income (loss) from continuing operations, net of income tax | 322 | (624 | ) | 2,696 | (2,628 | ) | ||||||||||
Income (loss) from discontinued operations, net of income tax | (2 | ) | (1 | ) | 5 | 37 | ||||||||||
Net income (loss) | 320 | (625 | ) | 2,701 | (2,591 | ) | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests | 4 | (5 | ) | (7 | ) | (25 | ) | |||||||||
Net income (loss) attributable to MetLife, Inc. | 316 | (620 | ) | 2,708 | (2,566 | ) | ||||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 91 | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 286 | $ | (650 | ) | $ | 2,617 | $ | (2,657 | ) | ||||||
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders per common share: | ||||||||||||||||
Basic | $ | 0.33 | $ | (0.79 | ) | $ | 3.10 | $ | (3.30 | ) | ||||||
Diluted | $ | 0.32 | $ | (0.79 | ) | $ | 3.08 | $ | (3.30 | ) | ||||||
Net income (loss) available to MetLife, Inc.’s common shareholders per common share: | ||||||||||||||||
Basic | $ | 0.33 | $ | (0.79 | ) | $ | 3.11 | $ | (3.25 | ) | ||||||
Diluted | $ | 0.32 | $ | (0.79 | ) | $ | 3.09 | $ | (3.25 | ) | ||||||
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Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net | Foreign | Defined | Total | |||||||||||||||||||||||||||||||||||||||||||||
Additional | Treasury | Unrealized | Other-Than- | Currency | Benefit | MetLife, Inc.’s | ||||||||||||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock | Investment | Temporary | Translation | Plans | Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | Gains (Losses) | Impairments | Adjustments | Adjustment | Equity | Interests | Equity | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2009 | $ | 1 | $ | 8 | $ | 16,859 | $ | 19,501 | $ | (190 | ) | $ | (817 | ) | $ | (513 | ) | $ | (183 | ) | $ | (1,545 | ) | $ | 33,121 | $ | 377 | $ | 33,498 | |||||||||||||||||||
Cumulative effect of change in accounting principle, net of income tax (Note 1) | (12 | ) | 31 | 11 | 30 | 30 | ||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2010 | 1 | 8 | 16,859 | 19,489 | (190 | ) | (786 | ) | (502 | ) | (183 | ) | (1,545 | ) | 33,151 | 377 | 33,528 | |||||||||||||||||||||||||||||||
Cumulative effect of change in accounting principle, net of income tax (Note 1) | (10 | ) | 10 | — | — | |||||||||||||||||||||||||||||||||||||||||||
Common stock issuance — newly issued shares | 1 | 3,528 | 3,529 | 3,529 | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 64 | 18 | 82 | 82 | ||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock | (91 | ) | (91 | ) | (91 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests | (22 | ) | (22 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | 2,708 | 2,708 | (7 | ) | 2,701 | |||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | 409 | 409 | 409 | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | 6,268 | 357 | 6,625 | (1 | ) | 6,624 | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | (92 | ) | (92 | ) | 7 | (85 | ) | |||||||||||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax | 94 | 94 | 94 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 7,036 | 6 | 7,042 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) | 9,744 | (1 | ) | 9,743 | ||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2010 | $ | 1 | $ | 9 | $ | 20,451 | $ | 22,096 | $ | (172 | ) | $ | 5,901 | $ | (145 | ) | $ | (275 | ) | $ | (1,451 | ) | $ | 46,415 | $ | 354 | $ | 46,769 | ||||||||||||||||||||
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Interim Condensed Consolidated Statements of Stockholders’ Equity — (Continued)
For the Nine Months Ended September 30, 2009 (Unaudited)
(In millions)
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net | Foreign | Defined | Total | |||||||||||||||||||||||||||||||||||||||||||||
Additional | Treasury | Unrealized | Other-Than- | Currency | Benefit | MetLife, Inc.’s | ||||||||||||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock | Investment | Temporary | Translation | Plans | Stockholders’ | Noncontrolling | Total | |||||||||||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | Gains (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 change in accounting principle, net of income tax | 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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Nine Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
Net cash provided by operating activities | $ | 5,193 | $ | 2,718 | ||||
Cash flows from investing activities | ||||||||
Sales, maturities and repayments of: | ||||||||
Fixed maturity securities | 55,618 | 48,802 | ||||||
Equity securities | 1,002 | 1,900 | ||||||
Mortgage loans | 4,474 | 5,145 | ||||||
Real estate and real estate joint ventures | 135 | 23 | ||||||
Other limited partnership interests | 311 | 824 | ||||||
Purchases of: | ||||||||
Fixed maturity securities | (69,997 | ) | (63,363 | ) | ||||
Equity securities | (638 | ) | (1,543 | ) | ||||
Mortgage loans | (5,888 | ) | (4,204 | ) | ||||
Real estate and real estate joint ventures | (474 | ) | (466 | ) | ||||
Other limited partnership interests | (745 | ) | (570 | ) | ||||
Cash received in connection with freestanding derivatives | 1,717 | 3,062 | ||||||
Cash paid in connection with freestanding derivatives | (1,949 | ) | (4,672 | ) | ||||
Sales of businesses, net of cash disposed of $0 and $180, respectively | — | (50 | ) | |||||
Disposal of subsidiary | — | (19 | ) | |||||
Net change in policy loans | (169 | ) | (199 | ) | ||||
Net change in short-term investments | (3,152 | ) | 7,022 | |||||
Net change in other invested assets | 501 | 1,080 | ||||||
Other, net | (115 | ) | (129 | ) | ||||
Net cash used in investing activities | (19,369 | ) | (7,357 | ) | ||||
Cash flows from financing activities | ||||||||
Policyholder account balances: | ||||||||
Deposits | 53,709 | 62,229 | ||||||
Withdrawals | (50,126 | ) | (64,382 | ) | ||||
Net change in payables for collateral under securities loaned and other transactions | 7,695 | (6,696 | ) | |||||
Net change in bank deposits | (959 | ) | 1,368 | |||||
Net change in short-term debt | 1,145 | (528 | ) | |||||
Long-term debt issued | 4,590 | 2,625 | ||||||
Long-term debt repaid | (689 | ) | (244 | ) | ||||
Collateral financing arrangements issued | — | 105 | ||||||
Cash received in connection with collateral financing arrangements | — | 400 | ||||||
Cash paid in connection with collateral financing arrangements | — | (400 | ) | |||||
Junior subordinated debt securities issued | — | 500 | ||||||
Debt issuance costs | (14 | ) | (22 | ) | ||||
Common stock issued, net of issuance costs | 3,557 | — | ||||||
Common stock issued to settle stock forward contracts | — | 1,035 | ||||||
Dividends on preferred stock | (91 | ) | (91 | ) | ||||
Other, net | (188 | ) | (25 | ) | ||||
Net cash provided by (used in) financing activities | 18,629 | (4,126 | ) | |||||
Effect of change in foreign currency exchange rates on cash balances | (8 | ) | 88 | |||||
Change in cash and cash equivalents | 4,445 | (8,677 | ) | |||||
Cash and cash equivalents, beginning of period | 10,112 | 24,239 | ||||||
Cash and cash equivalents, end of period | $ | 14,557 | $ | 15,562 | ||||
Cash and cash equivalents, subsidiariesheld-for-sale, beginning of period | $ | — | $ | 32 | ||||
Cash and cash equivalents, subsidiariesheld-for-sale, end of period | $ | — | $ | — | ||||
Cash and cash equivalents, from continuing operations, beginning of period | $ | 10,112 | $ | 24,207 | ||||
Cash and cash equivalents, from continuing operations, end of period | $ | 14,557 | $ | 15,562 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Net cash paid during the period for: | ||||||||
Interest | $ | 997 | $ | 611 | ||||
Income tax | $ | 109 | $ | 298 | ||||
Non-cash transactions during the period: | ||||||||
Remarketing of debt securities: | ||||||||
Fixed maturity securities redeemed | $ | — | $ | 32 | ||||
Long-term debt issued | $ | — | $ | 1,035 | ||||
Junior subordinated debt securities redeemed | $ | — | $ | 1,067 | ||||
Real estate and real estate joint ventures acquired in satisfaction of debt | $ | 92 | $ | 211 | ||||
Purchase money mortgages on sales of real estate joint ventures | $ | — | $ | 74 | ||||
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1. | Business, Basis of Presentation and Summary of Significant Accounting Policies |
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2. | Pending Disposition |
3. | Investments |
September 30, 2010 | ||||||||||||||||||||||||
Cost or | Gross Unrealized | Estimated | ||||||||||||||||||||||
Amortized | Temporary | OTTI | Fair | % of | ||||||||||||||||||||
Cost | Gain | Loss | Loss | Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 75,648 | $ | 6,615 | $ | 1,243 | $ | — | $ | 81,020 | 31.1 | % | ||||||||||||
Residential mortgage-backed securities (“RMBS”) | 45,358 | 1,945 | 1,193 | 210 | 45,900 | 17.6 | ||||||||||||||||||
Foreign corporate securities (1) | 41,614 | 3,909 | 554 | (1 | ) | 44,970 | 17.2 | |||||||||||||||||
U.S. Treasury, agency and government guaranteed securities (2) | 31,325 | 3,062 | 27 | — | 34,360 | 13.2 | ||||||||||||||||||
Commercial mortgage-backed securities (“CMBS”) | 15,082 | 794 | 343 | — | 15,533 | 6.0 | ||||||||||||||||||
Foreign government securities | 12,632 | 2,232 | 20 | — | 14,844 | 5.7 | ||||||||||||||||||
Asset-backed securities (“ABS”) | 14,797 | 344 | 801 | 34 | 14,306 | 5.5 | ||||||||||||||||||
State and political subdivision securities | 9,186 | 596 | 168 | — | 9,614 | 3.7 | ||||||||||||||||||
Other fixed maturity securities | 17 | 1 | 1 | — | 17 | — | ||||||||||||||||||
Total fixed maturity securities (3),(4) | $ | 245,659 | $ | 19,498 | $ | 4,350 | $ | 243 | $ | 260,564 | 100.0 | % | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Common stock | $ | 1,508 | $ | 73 | $ | 10 | $ | — | $ | 1,571 | 54.8 | % | ||||||||||||
Non-redeemable preferred stock (3) | 1,428 | 85 | 219 | — | 1,294 | 45.2 | ||||||||||||||||||
Total equity securities (5) | $ | 2,936 | $ | 158 | $ | 229 | $ | — | $ | 2,865 | 100.0 | % | ||||||||||||
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December 31, 2009 | ||||||||||||||||||||||||
Cost or | Gross Unrealized | Estimated | ||||||||||||||||||||||
Amortized | Temporary | OTTI | Fair | % of | ||||||||||||||||||||
Cost | Gain | Loss | Loss | Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 72,075 | $ | 2,821 | $ | 2,699 | $ | 10 | $ | 72,187 | 31.7 | % | ||||||||||||
RMBS | 45,343 | 1,234 | 1,957 | 600 | 44,020 | 19.3 | ||||||||||||||||||
Foreign corporate securities | 37,254 | 2,011 | 1,226 | 9 | 38,030 | 16.7 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities (2) | 25,712 | 745 | 1,010 | — | 25,447 | 11.2 | ||||||||||||||||||
CMBS | 16,555 | 191 | 1,106 | 18 | 15,622 | 6.9 | ||||||||||||||||||
Foreign government securities | 11,010 | 1,076 | 139 | — | 11,947 | 5.2 | ||||||||||||||||||
ABS | 14,272 | 189 | 1,077 | 222 | 13,162 | 5.8 | ||||||||||||||||||
State and political subdivision securities | 7,468 | 151 | 411 | — | 7,208 | 3.2 | ||||||||||||||||||
Other fixed maturity securities | 20 | 1 | 2 | — | 19 | — | ||||||||||||||||||
Total fixed maturity securities (3),(4) | $ | 229,709 | $ | 8,419 | $ | 9,627 | $ | 859 | $ | 227,642 | 100.0 | % | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Common stock | $ | 1,537 | $ | 92 | $ | 8 | $ | — | $ | 1,621 | 52.6 | % | ||||||||||||
Non-redeemable preferred stock (3) | 1,650 | 80 | 267 | — | 1,463 | 47.4 | ||||||||||||||||||
Total equity securities (5) | $ | 3,187 | $ | 172 | $ | 275 | $ | — | $ | 3,084 | 100.0 | % | ||||||||||||
(1) | OTTI loss as presented above, represents the noncredit portion of OTTI loss that is included in accumulated other comprehensive income (loss). OTTI loss includes both the initial recognition of noncredit losses, and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities that were previously noncredit loss impaired. The noncredit loss component of OTTI loss for foreign corporate securities was in an unrealized gain position of $1 million at September 30, 2010 due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “Net Unrealized Investment Gains (Losses).” | |
(2) | The Company has classified within the U.S. Treasury, agency and government guaranteed securities caption 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 of $357 million and $407 million at estimated fair value with unrealized gains of $5 million and $2 million at September 30, 2010 and December 31, 2009, respectively. | |
(3) | Upon acquisition, the Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has an interest ratestep-up feature which, when combined with other qualitative factors, indicates that the security has more debt-like characteristics. The Company classifies perpetual securities with an interest ratestep-up feature which, when combined with other qualitative factors, indicates that the security has more equity-like characteristics, as equity securities within 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 |
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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: |
September 30, 2010 | December 31, 2009 | |||||||||||
Estimated | Estimated | |||||||||||
Classification | Fair | Fair | ||||||||||
Consolidated Balance Sheets | Sector Table | Primary Issuers | Value | Value | ||||||||
(In millions) | ||||||||||||
Equity securities | Non-redeemable preferred stock | Non-U.S. financial institutions | $ | 1,030 | $ | 988 | ||||||
Equity securities | Non-redeemable preferred stock | U.S. financial institutions | $ | 238 | $ | 349 | ||||||
Fixed maturity securities | Foreign corporate securities | Non-U.S. financial institutions | $ | 2,427 | $ | 2,626 | ||||||
Fixed maturity securities | U.S. corporate securities | U.S. financial institutions | $ | 95 | $ | 91 |
(4) | Redeemable preferred stock with stated maturity dates are included in the U.S. corporate securities sector within fixed maturity securities. These securities, commonly referred to as “capital securities,” are primarily issued by U.S. financial institutions and have cumulative interest deferral features. The Company held $2.4 billion and $2.5 billion at estimated fair value of such securities at September 30, 2010 and December 31, 2009, respectively. | |
(5) | Equity securities primarily consist of investments in common and preferred stocks, including certain perpetual hybrid securities and mutual fund interests. Privately-held equity securities were $1.2 billion and $1.0 billion at estimated fair value at September 30, 2010 and December 31, 2009, respectively. |
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September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Below investment grade or non-rated fixed maturity securities: | ||||||||
Estimated fair value | $ | 21,448 | $ | 20,201 | ||||
Net unrealized loss | $ | 539 | $ | 2,609 | ||||
Non-income producing fixed maturity securities: | ||||||||
Estimated fair value | $ | 302 | $ | 312 | ||||
Net unrealized loss | $ | — | $ | 31 | ||||
Fixed maturity securities credit enhanced by financial guarantor insurers — by sector — at estimated fair value: | ||||||||
State and political subdivision securities | $ | 2,284 | $ | 2,154 | ||||
U.S. corporate securities | 1,901 | 1,750 | ||||||
ABS | 822 | 803 | ||||||
Other | 51 | 43 | ||||||
Total fixed maturity securities credit enhanced by financial guarantor insurers | $ | 5,058 | $ | 4,750 | ||||
Ratings of the financial guarantor insurers providing the credit enhancement: | ||||||||
Portion rated Aa/AA | 20 | % | 18 | % | ||||
Portion rated A | 2 | % | 2 | % | ||||
Portion rated Baa/BBB | 36 | % | 36 | % | ||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Corporate fixed maturity securities — by industry type: | ||||||||||||||||
Foreign (1) | $ | 44,970 | 35.7 | % | $ | 38,030 | 34.5 | % | ||||||||
Industrial | 20,293 | 16.1 | 17,246 | 15.6 | ||||||||||||
Consumer | 20,113 | 16.0 | 16,924 | 15.4 | ||||||||||||
Utility | 17,044 | 13.5 | 14,785 | 13.4 | ||||||||||||
Finance | 13,452 | 10.7 | 13,756 | 12.5 | ||||||||||||
Communications | 6,730 | 5.3 | 6,580 | 6.0 | ||||||||||||
Other | 3,388 | 2.7 | 2,896 | 2.6 | ||||||||||||
Total | $ | 125,990 | 100.0 | % | $ | 110,217 | 100.0 | % | ||||||||
(1) | Includes U.S. dollar-denominated debt obligations of foreign obligors and other foreign fixed maturity security investments. |
September 30, 2010 | December 31, 2009 | |||||||||||||||
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 | $ | 937 | 0.2 | % | $ | 1,038 | 0.3 | % | ||||||||
Holdings in ten issuers with the largest exposures | $ | 7,269 | 1.9 | % | $ | 7,506 | 2.3 | % |
September 30, 2010 | December 31, 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By security type: | ||||||||||||||||
Collateralized mortgage obligations | $ | 23,131 | 50.4 | % | $ | 24,480 | 55.6 | % | ||||||||
Pass-through securities | 22,769 | 49.6 | 19,540 | 44.4 | ||||||||||||
Total RMBS | $ | 45,900 | 100.0 | % | $ | 44,020 | 100.0 | % | ||||||||
By risk profile: | ||||||||||||||||
Agency | $ | 35,139 | 76.6 | % | $ | 33,334 | 75.7 | % | ||||||||
Prime | 6,393 | 13.9 | 6,775 | 15.4 | ||||||||||||
Alternative residential mortgage loans | 4,368 | 9.5 | 3,911 | 8.9 | ||||||||||||
Total RMBS | $ | 45,900 | 100.0 | % | $ | 44,020 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 36,982 | 80.6 | % | $ | 35,626 | 80.9 | % | ||||||||
Portion rated NAIC 1 | $ | 40,394 | 88.0 | % | $ | 38,464 | 87.4 | % | ||||||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Vintage Year: | ||||||||||||||||
2004 & Prior | $ | 100 | 2.3 | % | $ | 109 | 2.8 | % | ||||||||
2005 | 1,569 | 35.9 | 1,395 | 35.7 | ||||||||||||
2006 | 1,033 | 23.6 | 825 | 21.1 | ||||||||||||
2007 | 930 | 21.3 | 814 | 20.8 | ||||||||||||
2008 | 6 | 0.1 | — | — | ||||||||||||
2009 | 697 | 16.0 | 768 | 19.6 | ||||||||||||
2010 | 33 | 0.8 | — | — | ||||||||||||
Total | $ | 4,368 | 100.0 | % | $ | 3,911 | 100.0 | % | ||||||||
September 30, 2010 | December 31, 2009 | |||||||||||||||
% of | % of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
(In millions) | ||||||||||||||||
Net unrealized loss | $ | 758 | $ | 1,248 | ||||||||||||
Rated Aa/AA or better | 17.2 | % | 26.3 | % | ||||||||||||
Rated NAIC 1 | 35.3 | % | 31.3 | % | ||||||||||||
By collateral type: | ||||||||||||||||
Fixed rate mortgage loans collateral | 90.8 | % | 89.3 | % | ||||||||||||
Hybrid adjustable rate mortgage loans collateral | 9.2 | 10.7 | ||||||||||||||
Total Alt-A RMBS | 100.0 | % | 100.0 | % | ||||||||||||
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September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Estimated | Estimated | Estimated | Estimated | Estimated | 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 | $ | 6,989 | $ | 7,266 | $ | 241 | $ | 242 | $ | 133 | $ | 130 | $ | 60 | $ | 56 | $ | 28 | $ | 24 | $ | 7,451 | $ | 7,718 | ||||||||||||||||||||||||
2004 | 1,944 | 2,101 | 113 | 109 | 52 | 44 | 79 | 72 | 78 | 56 | 2,266 | 2,382 | ||||||||||||||||||||||||||||||||||||
2005 | 2,517 | 2,731 | 30 | 25 | 58 | 47 | 58 | 39 | — | — | 2,663 | 2,842 | ||||||||||||||||||||||||||||||||||||
2006 | 1,508 | 1,599 | 20 | 19 | 22 | 22 | 56 | 47 | 89 | 71 | 1,695 | 1,758 | ||||||||||||||||||||||||||||||||||||
2007 | 683 | 586 | 126 | 102 | 62 | 40 | 121 | 93 | 11 | 8 | 1,003 | 829 | ||||||||||||||||||||||||||||||||||||
2008 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
2009 | 2 | 2 | — | — | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||||||||||||||||
2010 | 2 | 2 | — | — | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||||||||||||||||
Total | $ | 13,645 | $ | 14,287 | $ | 530 | $ | 497 | $ | 327 | $ | 283 | $ | 374 | $ | 307 | $ | 206 | $ | 159 | $ | 15,082 | $ | 15,533 | ||||||||||||||||||||||||
Ratings Distribution | 92.0 | % | 3.2 | % | 1.8 | % | 2.0 | % | 1.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Estimated | Estimated | Estimated | Estimated | Estimated | 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 | $ | 6,836 | $ | 6,918 | $ | 394 | $ | 365 | $ | 162 | $ | 140 | $ | 52 | $ | 41 | $ | 36 | $ | 18 | $ | 7,480 | $ | 7,482 | ||||||||||||||||||||||||
2004 | 2,240 | 2,255 | 200 | 166 | 114 | 71 | 133 | 87 | 88 | 58 | 2,775 | 2,637 | ||||||||||||||||||||||||||||||||||||
2005 | 2,956 | 2,853 | 144 | 108 | 85 | 65 | 39 | 24 | 57 | 51 | 3,281 | 3,101 | ||||||||||||||||||||||||||||||||||||
2006 | 1,087 | 1,009 | 162 | 139 | 380 | 323 | 187 | 129 | 123 | 48 | 1,939 | 1,648 | ||||||||||||||||||||||||||||||||||||
2007 | 432 | 314 | 13 | 12 | 361 | 257 | 234 | 153 | 35 | 13 | 1,075 | 749 | ||||||||||||||||||||||||||||||||||||
2008 | 5 | 5 | — | — | — | — | — | — | — | — | 5 | 5 | ||||||||||||||||||||||||||||||||||||
2009 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 13,556 | $ | 13,354 | $ | 913 | $ | 790 | $ | 1,102 | $ | 856 | $ | 645 | $ | 434 | $ | 339 | $ | 188 | $ | 16,555 | $ | 15,622 | ||||||||||||||||||||||||
Ratings Distribution | 85.4 | % | 5.1 | % | 5.5 | % | 2.8 | % | 1.2 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By collateral type: | ||||||||||||||||
Credit card loans | $ | 6,783 | 47.4 | % | $ | 7,057 | 53.6 | % | ||||||||
Student loans | 2,528 | 17.7 | 1,855 | 14.1 | ||||||||||||
RMBS backed bysub-prime mortgage loans | 1,082 | 7.6 | 1,044 | 7.9 | ||||||||||||
Automobile loans | 721 | 5.0 | 963 | 7.3 | ||||||||||||
Other loans | 3,192 | 22.3 | 2,243 | 17.1 | ||||||||||||
Total | $ | 14,306 | 100.0 | % | $ | 13,162 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 10,570 | 73.9 | % | $ | 9,354 | 71.1 | % | ||||||||
Portion rated NAIC 1 | $ | 12,883 | 90.1 | % | $ | 11,573 | 87.9 | % | ||||||||
RMBS backed bysub-prime mortgage loans — portion credit enhanced by financial guarantor insurers | 39.0 | % | 37.6 | % | ||||||||||||
Of the 39.0% and 37.6% credit enhanced, the financial guarantor insurers were rated as follows: | ||||||||||||||||
By financial guarantor insurers rated Aa/AA | 24.3 | % | 17.2 | % | ||||||||||||
By financial guarantor insurers rated A | 8.9 | % | 7.9 | % |
September 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Estimated | Estimated | Estimated | Estimated | Estimated | 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 | $ | 44 | $ | 42 | $ | 61 | $ | 52 | $ | 14 | $ | 12 | $ | 6 | $ | 6 | $ | 90 | $ | 56 | $ | 215 | $ | 168 | ||||||||||||||||||||||||
2004 | 87 | 71 | 298 | 231 | 29 | 23 | 3 | 2 | 44 | 28 | 461 | 355 | ||||||||||||||||||||||||||||||||||||
2005 | 57 | 46 | 102 | 89 | 23 | 15 | 94 | 87 | 243 | 153 | 519 | 390 | ||||||||||||||||||||||||||||||||||||
2006 | — | — | 51 | 31 | 12 | 8 | — | — | 106 | 73 | 169 | 112 | ||||||||||||||||||||||||||||||||||||
2007 | — | — | 78 | 41 | — | — | — | — | 29 | 16 | 107 | 57 | ||||||||||||||||||||||||||||||||||||
2008 to 2010 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 188 | $ | 159 | $ | 590 | $ | 444 | $ | 78 | $ | 58 | $ | 103 | $ | 95 | $ | 512 | $ | 326 | $ | 1,471 | $ | 1,082 | ||||||||||||||||||||||||
Ratings Distribution | 14.7 | % | 41.0 | % | 5.4 | % | 8.8 | % | 30.1 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
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December 31, 2009 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Estimated | Estimated | Estimated | Estimated | Estimated | 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 | $ | 57 | $ | 48 | $ | 73 | $ | 58 | $ | 11 | $ | 8 | $ | 7 | $ | 6 | $ | 98 | $ | 56 | $ | 246 | $ | 176 | ||||||||||||||||||||||||
2004 | 99 | 68 | 316 | 222 | 39 | 27 | 24 | 15 | 31 | 15 | 509 | 347 | ||||||||||||||||||||||||||||||||||||
2005 | 64 | 45 | 226 | 144 | 40 | 26 | 24 | 18 | 209 | 139 | 563 | 372 | ||||||||||||||||||||||||||||||||||||
2006 | 6 | 6 | 62 | 22 | — | — | 22 | 5 | 115 | 72 | 205 | 105 | ||||||||||||||||||||||||||||||||||||
2007 | — | — | 78 | 28 | — | — | — | — | 36 | 16 | 114 | 44 | ||||||||||||||||||||||||||||||||||||
2008 to 2009 | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Total | $ | 226 | $ | 167 | $ | 755 | $ | 474 | $ | 90 | $ | 61 | $ | 77 | $ | 44 | $ | 489 | $ | 298 | $ | 1,637 | $ | 1,044 | ||||||||||||||||||||||||
Ratings Distribution | 16.0 | % | 45.4 | % | 5.8 | % | 4.2 | % | 28.6 | % | 100.0 | % | ||||||||||||||||||||||||||||||||||||
September 30, 2010 | December 31, 2009 | |||||||
NAIC 1 | 73.9 | % | 69.1 | % | ||||
NAIC 2 | 4.1 | % | 4.2 | % | ||||
NAIC 3 | 11.6 | % | 12.2 | % | ||||
NAIC 4 | 6.3 | % | 6.2 | % | ||||
NAIC 5 | 3.5 | % | 8.3 | % | ||||
NAIC 6 | 0.6 | % | — | % |
September 30, 2010 | December 31, 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 8,883 | $ | 8,989 | $ | 6,845 | $ | 6,924 | ||||||||
Due after one year through five years | 42,267 | 44,153 | 38,408 | 39,399 | ||||||||||||
Due after five years through ten years | 46,925 | 51,756 | 40,448 | 41,568 | ||||||||||||
Due after ten years | 72,347 | 79,927 | 67,838 | 66,947 | ||||||||||||
Subtotal | 170,422 | 184,825 | 153,539 | 154,838 | ||||||||||||
RMBS, CMBS and ABS | 75,237 | 75,739 | 76,170 | 72,804 | ||||||||||||
Total fixed maturity securities | $ | 245,659 | $ | 260,564 | $ | 229,709 | $ | 227,642 | ||||||||
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22
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September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Fixed maturity securities | $ | 15,148 | $ | (1,208 | ) | |||
Fixed maturity securities with noncredit OTTI losses in other comprehensive income (loss) | (243 | ) | (859 | ) | ||||
Total fixed maturity securities | 14,905 | (2,067 | ) | |||||
Equity securities | (71 | ) | (103 | ) | ||||
Derivatives | 482 | (144 | ) | |||||
Other | 48 | 71 | ||||||
Subtotal | 15,364 | (2,243 | ) | |||||
Amounts allocated from: | ||||||||
Insurance liability loss recognition | (2,910 | ) | (118 | ) | ||||
DAC and VOBA related to noncredit OTTI losses recognized in other comprehensive income (loss) | 18 | 71 | ||||||
DAC and VOBA | (1,768 | ) | 145 | |||||
Policyholder dividend obligation | (2,014 | ) | — | |||||
Subtotal | (6,674 | ) | 98 | |||||
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in other comprehensive income (loss) | 80 | 275 | ||||||
Deferred income tax benefit (expense) | (3,016 | ) | 539 | |||||
Net unrealized investment gains (losses) | 5,754 | (1,331 | ) | |||||
Net unrealized investment gains (losses) attributable to noncontrolling interests | 2 | 1 | ||||||
Net unrealized investment gains (losses) attributable to MetLife, Inc. | $ | 5,756 | $ | (1,330 | ) | |||
23
Table of Contents
Nine Months | ||||
Ended | ||||
September 30, 2010 | ||||
(In millions) | ||||
Balance, beginning of period | $ | (1,330 | ) | |
Cumulative effect of change in accounting principles, net of income tax | 52 | |||
Fixed maturity securities on which noncredit OTTI losses have been recognized | 600 | |||
Unrealized investment gains (losses) during the period | 16,927 | |||
Unrealized investment gains (losses) relating to: | ||||
Insurance liability gain (loss) recognition | (2,792 | ) | ||
DAC and VOBA related to noncredit OTTI losses recognized in other comprehensive income (loss) | (53 | ) | ||
DAC and VOBA | (1,913 | ) | ||
Policyholder dividend obligation | (2,014 | ) | ||
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in other comprehensive income (loss) | (190 | ) | ||
Deferred income tax benefit (expense) | (3,532 | ) | ||
Net unrealized investment gains (losses) | 5,755 | |||
Net unrealized investment gains (losses) attributable to noncontrolling interests | 1 | |||
Balance, end of period | $ | 5,756 | ||
Change in net unrealized investment gains (losses) | $ | 7,085 | ||
Change in net unrealized investment gains (losses) attributable to noncontrolling interests | 1 | |||
Change in net unrealized investment gains (losses) attributable to MetLife, Inc. | $ | 7,086 | ||
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Table of Contents
September 30, 2010 | ||||||||||||||||||||||||
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) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 2,718 | $ | 120 | $ | 9,855 | $ | 1,123 | $ | 12,573 | $ | 1,243 | ||||||||||||
RMBS | 1,939 | 54 | 7,440 | 1,349 | 9,379 | 1,403 | ||||||||||||||||||
Foreign corporate securities | 1,611 | 73 | 4,483 | 480 | 6,094 | 553 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 2,035 | 10 | 150 | 17 | 2,185 | 27 | ||||||||||||||||||
CMBS | 399 | 5 | 1,497 | 338 | 1,896 | 343 | ||||||||||||||||||
Foreign government securities | 181 | 3 | 220 | 17 | 401 | 20 | ||||||||||||||||||
ABS | 1,851 | 44 | 3,365 | 791 | 5,216 | 835 | ||||||||||||||||||
State and political subdivision securities | 288 | 5 | 1,083 | 163 | 1,371 | 168 | ||||||||||||||||||
Other fixed maturity securities | — | — | 5 | 1 | 5 | 1 | ||||||||||||||||||
Total fixed maturity securities | $ | 11,022 | $ | 314 | $ | 28,098 | $ | 4,279 | $ | 39,120 | $ | 4,593 | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Common stock | 46 | 9 | 8 | 1 | 54 | 10 | ||||||||||||||||||
Non-redeemable preferred stock | 27 | 9 | 877 | 210 | 904 | 219 | ||||||||||||||||||
Total equity securities | $ | 73 | $ | 18 | $ | 885 | $ | 211 | $ | 958 | $ | 229 | ||||||||||||
Total number of securities in an unrealized loss position | 2,101 | 1,937 | ||||||||||||||||||||||
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December 31, 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) | ||||||||||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 8,641 | $ | 395 | $ | 18,004 | $ | 2,314 | $ | 26,645 | $ | 2,709 | ||||||||||||
RMBS | 5,623 | 119 | 10,268 | 2,438 | 15,891 | 2,557 | ||||||||||||||||||
Foreign corporate securities | 3,786 | 139 | 7,282 | 1,096 | 11,068 | 1,235 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 15,051 | 990 | 51 | 20 | 15,102 | 1,010 | ||||||||||||||||||
CMBS | 2,052 | 29 | 5,435 | 1,095 | 7,487 | 1,124 | ||||||||||||||||||
Foreign government securities | 2,318 | 55 | 507 | 84 | 2,825 | 139 | ||||||||||||||||||
ABS | 1,259 | 143 | 5,875 | 1,156 | 7,134 | 1,299 | ||||||||||||||||||
State and political subdivision securities | 2,086 | 94 | 1,843 | 317 | 3,929 | 411 | ||||||||||||||||||
Other fixed maturity securities | 6 | 2 | — | — | 6 | 2 | ||||||||||||||||||
Total fixed maturity securities | $ | 40,822 | $ | 1,966 | $ | 49,265 | $ | 8,520 | $ | 90,087 | $ | 10,486 | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Common stock | 56 | 7 | 14 | 1 | 70 | 8 | ||||||||||||||||||
Non-redeemable preferred stock | 66 | 41 | 930 | 226 | 996 | 267 | ||||||||||||||||||
Total equity securities | $ | 122 | $ | 48 | $ | 944 | $ | 227 | $ | 1,066 | $ | 275 | ||||||||||||
Total number of securities in an unrealized loss position | 2,210 | 3,333 | ||||||||||||||||||||||
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September 30, 2010 | ||||||||||||||||||||||||
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 | $ | 9,447 | $ | 1,137 | $ | 134 | $ | 285 | 1,431 | 159 | ||||||||||||||
Six months or greater but less than nine months | 767 | 145 | 39 | 43 | 91 | 18 | ||||||||||||||||||
Nine months or greater but less than twelve months | 796 | 228 | 47 | 77 | 101 | 20 | ||||||||||||||||||
Twelve months or greater | 24,627 | 6,566 | 1,817 | 2,151 | 1,448 | 383 | ||||||||||||||||||
Total | $ | 35,637 | $ | 8,076 | $ | 2,037 | $ | 2,556 | ||||||||||||||||
Percentage of amortized cost | 6 | % | 32 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 56 | $ | 84 | $ | 7 | $ | 25 | 330 | 90 | ||||||||||||||
Six months or greater but less than nine months | 8 | 47 | 1 | 17 | 61 | 3 | ||||||||||||||||||
Nine months or greater but less than twelve months | 11 | 1 | 2 | — | 20 | — | ||||||||||||||||||
Twelve months or greater | 629 | 351 | 57 | 120 | 42 | 19 | ||||||||||||||||||
Total | $ | 704 | $ | 483 | $ | 67 | $ | 162 | ||||||||||||||||
Percentage of cost | 10 | % | 34 | % | ||||||||||||||||||||
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December 31, 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 | $ | 35,163 | $ | 2,658 | $ | 933 | $ | 713 | 1,725 | 186 | ||||||||||||||
Six months or greater but less than nine months | 4,908 | 674 | 508 | 194 | 124 | 49 | ||||||||||||||||||
Nine months or greater but less than twelve months | 1,723 | 1,659 | 167 | 517 | 106 | 79 | ||||||||||||||||||
Twelve months or greater | 41,721 | 12,067 | 3,207 | 4,247 | 2,369 | 724 | ||||||||||||||||||
Total | $ | 83,515 | $ | 17,058 | $ | 4,815 | $ | 5,671 | ||||||||||||||||
Percentage of amortized cost | 6 | % | 33 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 66 | $ | 63 | $ | 7 | $ | 14 | 199 | 8 | ||||||||||||||
Six months or greater but less than nine months | 6 | 1 | 1 | 1 | 15 | 2 | ||||||||||||||||||
Nine months or greater but less than twelve months | 13 | 94 | 2 | 39 | 8 | 6 | ||||||||||||||||||
Twelve months or greater | 610 | 488 | 73 | 138 | 50 | 24 | ||||||||||||||||||
Total | $ | 695 | $ | 646 | $ | 83 | $ | 192 | ||||||||||||||||
Percentage of cost | 12 | % | 30 | % | ||||||||||||||||||||
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September 30, 2010 | December 31, 2009 | |||||||
Sector: | ||||||||
RMBS | 29 | % | 24 | % | ||||
U.S. corporate securities | 26 | 25 | �� | |||||
ABS | 17 | 12 | ||||||
Foreign corporate securities | 11 | 11 | ||||||
CMBS | 7 | 10 | ||||||
State and political subdivision securities | 4 | 4 | ||||||
U.S. Treasury, agency and government guaranteed securities | 1 | 9 | ||||||
Other | 5 | 5 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Mortgage-backed | 36 | % | 34 | % | ||||
Finance | 24 | 22 | ||||||
Asset-backed | 17 | 12 | ||||||
Consumer | 5 | 4 | ||||||
State and political subdivision securities | 4 | 4 | ||||||
Utility | 3 | 4 | ||||||
Communications | 2 | 2 | ||||||
Industrial | 2 | 1 | ||||||
U.S. Treasury, agency and government guaranteed securities | 1 | 9 | ||||||
Other | 6 | 8 | ||||||
Total | 100 | % | 100 | % | ||||
September 30, 2010 | December 31, 2009 | |||||||||||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(In millions, except number of securities) | ||||||||||||||||
Number of securities | 97 | 7 | 223 | 9 | ||||||||||||
Total gross unrealized loss | $ | 1,715 | $ | 112 | $ | 4,465 | $ | 132 | ||||||||
Percentage of total gross unrealized loss | 37 | % | 49 | % | 43 | % | 48 | % |
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Table of Contents
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 | $ | 25 | $ | 20 | 80 | % | $ | 20 | 100 | % | $ | 20 | 100 | % | 10 | % | ||||||||||||||||
Six months or greater but less than twelve months | 17 | 17 | 100 | % | 17 | 100 | % | 17 | 100 | % | 94 | % | ||||||||||||||||||||
Twelve months or greater | 120 | 120 | 100 | % | 120 | 100 | % | 116 | 97 | % | 78 | % | ||||||||||||||||||||
All equity securities with a gross unrealized loss of 20% or more | $ | 162 | $ | 157 | 97 | % | $ | 157 | 100 | % | $ | 153 | 97 | % | 71 | % | ||||||||||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Total losses on fixed maturity securities: | ||||||||||||||||
Total OTTI losses recognized | $ | (143 | ) | $ | (650 | ) | $ | (538 | ) | $ | (1,769 | ) | ||||
Less: Noncredit portion of OTTI losses transferred to and recognized in other comprehensive income (loss) | 24 | 245 | 181 | 479 | ||||||||||||
Net OTTI losses on fixed maturity securities recognized in earnings | (119 | ) | (405 | ) | (357 | ) | (1,290 | ) | ||||||||
Fixed maturity securities — net gains (losses) on sales and disposals | 54 | (50 | ) | 99 | (152 | ) | ||||||||||
Total losses on fixed maturity securities | (65 | ) | (455 | ) | (258 | ) | (1,442 | ) | ||||||||
Other net investment gains (losses): | ||||||||||||||||
Equity securities | (1 | ) | (53 | ) | 100 | (430 | ) | |||||||||
Mortgage loans | 37 | (129 | ) | 20 | (400 | ) | ||||||||||
Real estate and real estate joint ventures | (1 | ) | (70 | ) | (50 | ) | (163 | ) | ||||||||
Other limited partnership interests | (4 | ) | (12 | ) | (15 | ) | (356 | ) | ||||||||
Other investment portfolio gains (losses) | (67 | ) | (26 | ) | 9 | (36 | ) | |||||||||
Subtotal — investment portfolio gains (losses) | (101 | ) | (745 | ) | (194 | ) | (2,827 | ) | ||||||||
Consolidated securitization entities: | ||||||||||||||||
Trading securities — fair value option | (26 | ) | — | (47 | ) | — | ||||||||||
Commercial mortgage loans — fair value option | 114 | — | 767 | — | ||||||||||||
Long-term debt — related to trading securities — fair value option | 37 | — | 48 | — | ||||||||||||
Long-term debt — related to commercial mortgage loans — fair value option | (109 | ) | — | (744 | ) | — | ||||||||||
Other gains (losses) (1) | (257 | ) | 13 | (154 | ) | 37 | ||||||||||
Subtotal consolidated securitization entities and other gains (losses) | (241 | ) | 13 | (130 | ) | 37 | ||||||||||
Total net investment gains (losses) | $ | (342 | ) | $ | (732 | ) | $ | (324 | ) | $ | (2,790 | ) | ||||
(1) | Other gains (losses) for the three months and nine months ended September 30, 2010 includes a loss of $217 million related to recording the Company’s investment in MSI MetLife at its estimated recoverable amount (see Note 2). |
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Table of Contents
Three Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Proceeds | $ | 10,747 | $ | 11,041 | $ | 102 | $ | 334 | $ | 10,849 | $ | 11,375 | ||||||||||||
Gross investment gains | 190 | 228 | 7 | 41 | 197 | 269 | ||||||||||||||||||
Gross investment losses | (136 | ) | (278 | ) | (7 | ) | (58 | ) | (143 | ) | (336 | ) | ||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||
Credit-related | (107 | ) | (223 | ) | — | — | (107 | ) | (223 | ) | ||||||||||||||
Other (1) | (12 | ) | (182 | ) | (1 | ) | (36 | ) | (13 | ) | (218 | ) | ||||||||||||
Total OTTI losses recognized in earnings | (119 | ) | (405 | ) | (1 | ) | (36 | ) | (120 | ) | (441 | ) | ||||||||||||
Net investment gains (losses) | $ | (65 | ) | $ | (455 | ) | $ | (1 | ) | $ | (53 | ) | $ | (66 | ) | $ | (508 | ) | ||||||
Nine Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Proceeds | $ | 32,625 | $ | 30,392 | $ | 547 | $ | 587 | $ | 33,172 | $ | 30,979 | ||||||||||||
Gross investment gains | 569 | 773 | 114 | 61 | 683 | 834 | ||||||||||||||||||
Gross investment losses | (470 | ) | (925 | ) | (11 | ) | (125 | ) | (481 | ) | (1,050 | ) | ||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||
Credit-related | (339 | ) | (966 | ) | — | — | (339 | ) | (966 | ) | ||||||||||||||
Other (1) | (18 | ) | (324 | ) | (3 | ) | (366 | ) | (21 | ) | (690 | ) | ||||||||||||
Total OTTI losses recognized in earnings | (357 | ) | (1,290 | ) | (3 | ) | (366 | ) | (360 | ) | (1,656 | ) | ||||||||||||
Net investment gains (losses) | $ | (258 | ) | $ | (1,442 | ) | $ | 100 | $ | (430 | ) | $ | (158 | ) | $ | (1,872 | ) | |||||||
(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 estimated fair value. |
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Table of Contents
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: | ||||||||||||||||
U.S. and foreign corporate securities — by industry: | ||||||||||||||||
Finance | $ | 54 | $ | 241 | $ | 82 | $ | 429 | ||||||||
Consumer | 8 | 42 | 31 | 206 | ||||||||||||
Communications | 9 | 29 | 12 | 232 | ||||||||||||
Utility | — | 8 | 3 | 84 | ||||||||||||
Industrial | — | 7 | — | 27 | ||||||||||||
Other industries | — | — | — | 26 | ||||||||||||
Total U.S. and foreign corporate securities | 71 | 327 | 128 | 1,004 | ||||||||||||
ABS | 26 | 17 | 89 | 111 | ||||||||||||
RMBS | 19 | 40 | 76 | 118 | ||||||||||||
CMBS | 3 | 20 | 64 | 56 | ||||||||||||
Foreign government securities | — | 1 | — | 1 | ||||||||||||
Total | $ | 119 | $ | 405 | $ | 357 | $ | 1,290 | ||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: | ||||||||||||||||
Common stock | $ | 1 | $ | 2 | $ | 3 | $ | 52 | ||||||||
Non-redeemable preferred stock | — | 34 | — | 314 | ||||||||||||
Total | $ | 1 | $ | 36 | $ | 3 | $ | 366 | ||||||||
Industry: | ||||||||||||||||
Financial services industry: | ||||||||||||||||
Perpetual hybrid securities | $ | — | $ | 34 | $ | — | $ | 294 | ||||||||
Common and remaining non-redeemable preferred stock | — | — | — | 30 | ||||||||||||
Total financial services industry | — | 34 | — | 324 | ||||||||||||
Other industries | 1 | 2 | 3 | 42 | ||||||||||||
Total | $ | 1 | $ | 36 | $ | 3 | $ | 366 | ||||||||
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Table of Contents
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period | $ | 491 | $ | 380 | $ | 581 | $ | — | ||||||||
Credit loss component of OTTI loss not reclassified to other comprehensive income (loss) in the cumulative effect transition adjustment | — | — | — | 230 | ||||||||||||
Additions: | ||||||||||||||||
Initial impairments — credit loss OTTI recognized on securities not previously impaired | 13 | 53 | 94 | 205 | ||||||||||||
Additional impairments — credit loss OTTI recognized on securities previously impaired | 34 | 50 | 104 | 55 | ||||||||||||
Reductions: | ||||||||||||||||
Due to sales (maturities, pay downs or prepayments) during the period of securities previously credit loss OTTI impaired | (97 | ) | (15 | ) | (231 | ) | (22 | ) | ||||||||
Due to securities de-recognized in connection with the adoption of new guidance related to the consolidation of VIEs | — | — | (100 | ) | — | |||||||||||
Due to increases in cash flows — accretion of previous credit loss OTTI | (2 | ) | — | (9 | ) | — | ||||||||||
Balance, end of period | $ | 439 | $ | 468 | $ | 439 | $ | 468 | ||||||||
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Table of Contents
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securities | $ | 3,081 | $ | 2,955 | $ | 9,187 | $ | 8,709 | ||||||||
Equity securities | 19 | 37 | 83 | 130 | ||||||||||||
Trading securities | 194 | 163 | 217 | 310 | ||||||||||||
Trading securities held by consolidated securitization entities | 4 | — | 12 | — | ||||||||||||
Mortgage loans | 713 | 677 | 2,082 | 2,055 | ||||||||||||
Commercial mortgage loans held by consolidated securitization entities | 102 | — | 312 | — | ||||||||||||
Policy loans | 157 | 163 | 494 | 481 | ||||||||||||
Real estate and real estate joint ventures | 141 | (25 | ) | 330 | (184 | ) | ||||||||||
Other limited partnership interests | 170 | 128 | 596 | (53 | ) | |||||||||||
Cash, cash equivalents and short-term investments | 26 | 27 | 64 | 109 | ||||||||||||
International joint ventures (1) | 19 | (16 | ) | (61 | ) | (86 | ) | |||||||||
Other | (7 | ) | 37 | 181 | 156 | |||||||||||
Total investment income | 4,619 | 4,146 | 13,497 | 11,627 | ||||||||||||
Less: Investment expenses | 228 | 223 | 675 | 713 | ||||||||||||
Net investment income | $ | 4,391 | $ | 3,923 | $ | 12,822 | $ | 10,914 | ||||||||
(1) | Amounts are presented net of changes in estimated fair value of derivatives related to economic hedges of the Company’s investment in these equity method international joint venture investments that do not qualify for hedge accounting of ($12) million and $65 million for the three months and nine months ended September 30, 2010, respectively, and $1 million and ($115) million for the three months and nine months ended September 30, 2009, respectively. |
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Table of Contents
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Securities on loan: | ||||||||
Cost or amortized cost | $ | 23,155 | $ | 21,012 | ||||
Estimated fair value | $ | 25,069 | $ | 20,949 | ||||
Aging of cash collateral liability: | ||||||||
Open (1) | $ | 3,118 | $ | 3,290 | ||||
Less than thirty days | 13,704 | 13,605 | ||||||
Thirty days or greater but less than sixty days | 4,476 | 3,534 | ||||||
Sixty days or greater but less than ninety days | 1,337 | 92 | ||||||
Ninety days or greater | 2,634 | 995 | ||||||
Total cash collateral liability | $ | 25,269 | $ | 21,516 | ||||
Security collateral on deposit from counterparties | $ | 373 | $ | 6 | ||||
Reinvestment portfolio — estimated fair value | $ | 24,738 | $ | 20,339 | ||||
(1) | Open — 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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Table of Contents
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Invested assets on deposit: | ||||||||
Regulatory agencies (1) | $ | 1,334 | $ | 1,383 | ||||
Invested assets held in trust: | ||||||||
Collateral financing arrangements (2) | 5,288 | 5,653 | ||||||
Reinsurance arrangements (3) | 3,360 | 2,719 | ||||||
Invested assets pledged as collateral: | ||||||||
Funding agreements and advances — FHLB of NY (4) | 22,402 | 20,612 | ||||||
Funding agreements — FHLB of Boston (4) | 415 | 419 | ||||||
Funding agreements — Farmer Mac (5) | 3,160 | 2,871 | ||||||
Federal Reserve Bank of New York (6) | 2,019 | 1,537 | ||||||
Collateral financing arrangements (7) | 130 | 80 | ||||||
Derivative transactions (8) | 1,266 | 1,671 | ||||||
Short sale agreements (9) | 572 | 496 | ||||||
Total invested assets on deposit, held in trust and pledged as collateral | $ | 39,946 | $ | 37,441 | ||||
(1) | The Company has investment assets on deposit with regulatory agencies consisting primarily of cash and cash equivalents, fixed maturity and equity securities and short-term investments. | |
(2) | The Company held in trust cash and securities, primarily fixed maturity and equity securities, to satisfy collateral requirements. | |
(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 funding agreements with, and advances from, the Federal Home Loan Bank of New York (“FHLB of NY”) and has pledged fixed maturity securities in support of its funding agreements with the Federal Home Loan Bank of Boston (“FHLB of Boston”). The nature of these Federal Home Loan Bank arrangements is described in Note 7 herein and Note 8 of the Notes to the Consolidated Financial Statements included in the 2009 Annual Report. | |
(5) | The Company has pledged certain agricultural real estate mortgage loans in connection with funding agreements issued to certain special purpose entities that have issued securities guaranteed by the Federal Agricultural Mortgage Corporation (“Farmer Mac”). The nature of these Farmer Mac arrangements is described in Note 8 of the Notes to the Consolidated Financial Statements included in the 2009 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 11 of the Notes to the Consolidated Financial Statements included in the 2009 Annual Report. | |
(7) | The Holding Company has pledged certain collateral in support of the collateral financing arrangements described in Note 12 of the Notes to the Consolidated Financial Statements included in the 2009 Annual Report. |
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Table of Contents
(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 portfolios as described in the following section. |
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Trading securities — at estimated fair value | $ | 3,756 | $ | 2,384 | ||||
Securities held by consolidated securitization entities — at estimated fair value | 231 | — | ||||||
Total trading securities — at estimated fair value | $ | 3,987 | $ | 2,384 | ||||
Short sale agreement liabilities — at estimated fair value (included in other liabilities) | $ | 38 | $ | 106 | ||||
Investments pledged to secure short sale agreement liabilities | $ | 572 | $ | 496 |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Trading securities: | ||||||||||||||||
Net investment income (1) | $ | 194 | $ | 163 | $ | 217 | $ | 310 | ||||||||
Changes in estimated fair value included in net investment income | $ | 153 | $ | 101 | $ | 127 | $ | 242 | ||||||||
Securities held by consolidated securitization entities: | ||||||||||||||||
Net investment income (2) | $ | 4 | $ | — | $ | 12 | $ | — | ||||||||
Changes in estimated fair value included in net investment gains (losses) (3) | $ | (26 | ) | $ | — | $ | (47 | ) | $ | — |
(1) | Includes interest and dividends earned on trading securities, in addition to the net realized gains (losses) and changes in estimated fair value subsequent to purchase, recognized on the trading securities and the related short sale agreement liabilities. | |
(2) | Includes interest and dividends earned on securities held by consolidated securitization entities. | |
(3) | Includes net realized gains (losses) and changes in estimated fair value subsequent to consolidation recognized on securities held by consolidated securitization entities — accounted for under the fair value option. |
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Mortgage loansheld-for-investment, net: | ||||||||||||||||
Commercial mortgage loans | $ | 35,517 | 59.3 | % | $ | 34,587 | 67.9 | % | ||||||||
Agricultural mortgage loans | 12,522 | 20.9 | 12,140 | 23.8 | ||||||||||||
Residential and consumer loans | 1,966 | 3.3 | 1,454 | 2.9 | ||||||||||||
Subtotal mortgage loansheld-for-investment, net | 50,005 | 83.5 | % | 48,181 | 94.6 | % | ||||||||||
Commercial mortgage loans held by consolidated securitization entities — fair value option | 7,093 | 11.8 | — | — | ||||||||||||
Total mortgage loansheld-for-investment, net | 57,098 | 95.3 | % | 48,181 | 94.6 | % | ||||||||||
Mortgage loansheld-for-sale: | ||||||||||||||||
Residential — fair value option | 2,141 | 3.5 | 2,470 | 4.9 | ||||||||||||
Agricultural and residential — lower of amortized cost or estimated fair value | 699 | 1.2 | 258 | 0.5 | ||||||||||||
Total mortgage loansheld-for-sale | 2,840 | 4.7 | 2,728 | 5.4 | ||||||||||||
Total mortgage loans, net | $ | 59,938 | 100.0 | % | $ | 50,909 | 100.0 | % | ||||||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Region: | ||||||||||||||||
Pacific | $ | 8,520 | 24.0 | % | $ | 8,684 | 25.1 | % | ||||||||
South Atlantic | 7,637 | 21.5 | 7,342 | 21.2 | ||||||||||||
Middle Atlantic | 6,302 | 17.7 | 5,948 | 17.2 | ||||||||||||
International | 3,546 | 10.0 | 3,564 | 10.3 | ||||||||||||
East North Central | 2,966 | 8.4 | 2,487 | 7.2 | ||||||||||||
West South Central | 2,925 | 8.2 | 2,870 | 8.3 | ||||||||||||
New England | 1,400 | 3.9 | 1,414 | 4.1 | ||||||||||||
Mountain | 892 | 2.5 | 944 | 2.7 | ||||||||||||
West North Central | 627 | 1.8 | 641 | 1.9 | ||||||||||||
East South Central | 452 | 1.3 | 443 | 1.3 | ||||||||||||
Other | 250 | 0.7 | 250 | 0.7 | ||||||||||||
Total | $ | 35,517 | 100.0 | % | $ | 34,587 | 100.0 | % | ||||||||
Property Type: | ||||||||||||||||
Office | $ | 15,728 | 44.2 | % | $ | 14,986 | 43.3 | % | ||||||||
Retail | 8,154 | 23.0 | 7,870 | 22.8 | ||||||||||||
Apartments | 3,695 | 10.4 | 3,696 | 10.7 | ||||||||||||
Hotel | 3,006 | 8.5 | 2,947 | 8.5 | ||||||||||||
Industrial | 2,862 | 8.1 | 2,759 | 8.0 | ||||||||||||
Other | 2,072 | 5.8 | 2,329 | 6.7 | ||||||||||||
Total | $ | 35,517 | 100.0 | % | $ | 34,587 | 100.0 | % | ||||||||
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At or For the | At or For the | |||||||||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Estimated fair value, beginning of period | $ | 660 | $ | 670 | $ | 878 | $ | 191 | ||||||||
Acquisition of MSRs | 124 | — | 124 | 117 | ||||||||||||
Origination of MSRs | 45 | 138 | 151 | 427 | ||||||||||||
Reductions due to loan payments | (31 | ) | (24 | ) | (74 | ) | (85 | ) | ||||||||
Reductions due to loan sales | — | — | (43 | ) | — | |||||||||||
Changes in estimated fair value due to: | ||||||||||||||||
Changes in valuation model inputs or assumptions | (91 | ) | (64 | ) | (329 | ) | 70 | |||||||||
Other changes in estimated fair value | — | — | — | — | ||||||||||||
Estimated fair value, end of period | $ | 707 | $ | 720 | $ | 707 | $ | 720 | ||||||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Total | Total | Total | Total | |||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(In millions) | ||||||||||||||||
Consolidated securitization entities (1) | $ | 7,408 | $ | 7,157 | $ | — | $ | — | ||||||||
MRSC collateral financing arrangement (2) | 3,291 | — | 3,230 | — | ||||||||||||
Other limited partnership interests | 203 | 56 | 367 | 72 | ||||||||||||
Other invested assets | 108 | 1 | 27 | 1 | ||||||||||||
Real estate joint ventures | 20 | 16 | 22 | 17 | ||||||||||||
Total | $ | 11,030 | $ | 7,230 | $ | 3,646 | $ | 90 | ||||||||
(1) | As discussed in Note 1, upon the adoption of new guidance effective January 1, 2010, the Company consolidated former QSPEs that are structured as CMBS and former QSPEs that are structured as collateralized debt obligations. At September 30, 2010, these entities held total assets of $7,408 million consisting of $231 million of securities classified by the Company as trading securities, $7,093 million of commercial mortgage loans, $37 million of accrued investment income and $47 million of cash. These entities had total liabilities of $7,157 million, consisting of $7,075 million of long-term debt and $82 million of other liabilities. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company or any of its subsidiaries or affiliates liable for any principal or interest shortfalls should any arise. The Company’s exposure is limited to that of its remaining investment in the former QSPEs of $202 million at estimated fair value at September 30, 2010. The long-term debt referred to above bears interest at primarily fixed rates ranging from 2.25% to 5.57%, payable primarily on a monthly basis and is expected to be repaid over the next 7 years. Interest expense related to these obligations, included in other expenses, was $103 million and $312 million for the three months and nine months ended September 30, 2010, respectively. | |
(2) | See Note 12 of the Notes to the Consolidated Financial Statements included in the 2009 Annual Report for a description of the MetLife Reinsurance Company of South Carolina (“MRSC”) collateral financing arrangement. These assets consist of the following, at estimated fair value at: |
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||
ABS | $ | 1,228 | $ | 963 | ||||
U.S. corporate securities | 937 | 1,049 | ||||||
RMBS | 576 | 672 | ||||||
CMBS | 378 | 348 | ||||||
Foreign corporate securities | 129 | 80 | ||||||
U.S. Treasury, agency and government guaranteed securities | — | 33 | ||||||
State and political subdivision securities | 30 | 21 | ||||||
Foreign government securities | 5 | 5 | ||||||
Cash and cash equivalents (including cash held in trust of $0 and less than $1 million, respectively) | 8 | 59 | ||||||
Total | $ | 3,291 | $ | 3,230 | ||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Carrying | Exposure | Carrying | Exposure | |||||||||||||
Amount | to Loss (1) | Amount | to Loss (1) | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||||||||||
RMBS (2) | $ | 45,900 | $ | 45,900 | $ | — | $ | — | ||||||||
CMBS (2) | 15,533 | 15,533 | — | — | ||||||||||||
ABS (2) | 14,306 | 14,306 | — | — | ||||||||||||
U.S. corporate securities | 2,487 | 2,487 | 1,216 | 1,216 | ||||||||||||
Foreign corporate securities | 2,250 | 2,250 | 1,254 | 1,254 | ||||||||||||
Other limited partnership interests | 3,947 | 5,859 | 2,543 | 2,887 | ||||||||||||
Other invested assets | 498 | 576 | 416 | 409 | ||||||||||||
Real estate joint ventures | 16 | 62 | 30 | 30 | ||||||||||||
Equity securitiesavailable-for-sale: | ||||||||||||||||
Non-redeemable preferred stock | — | — | 31 | 31 | ||||||||||||
Total | $ | 84,937 | $ | 86,973 | $ | 5,490 | $ | 5,827 | ||||||||
(1) | The maximum exposure to loss relating to the fixed maturity and equity securitiesavailable-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. 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 amounts guaranteed by third parties of $239 million and $232 million at September 30, 2010 and December 31, 2009, respectively. | |
(2) | As discussed in Note 1, the Company adopted new guidance effective January 1, 2010 which eliminated the concept of a QSPE. As a result, the Company concluded it held variable interests in RMBS, CMBS and ABS. For these interests, the Company’s involvement is limited to that of a passive investor. |
4. | Derivative Financial Instruments |
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September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||
Estimated Fair | Estimated Fair | |||||||||||||||||||||||||
Primary Underlying | Notional | Value (1) | Notional | Value (1) | ||||||||||||||||||||||
Risk Exposure | Instrument Type | Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
Interest rate | Interest rate swaps | $ | 46,625 | $ | 4,487 | $ | 1,234 | $ | 38,152 | $ | 1,570 | $ | 1,255 | |||||||||||||
Interest rate floors | 23,941 | 1,036 | 116 | 23,691 | 461 | 37 | ||||||||||||||||||||
Interest rate caps | 34,112 | 95 | 1 | 28,409 | 283 | — | ||||||||||||||||||||
Interest rate futures | 8,026 | 22 | 2 | 7,563 | 8 | 10 | ||||||||||||||||||||
Interest rate options | 2,342 | 100 | 26 | 4,050 | 117 | 57 | ||||||||||||||||||||
Interest rate forwards | 12,666 | 92 | 37 | 9,921 | 66 | 27 | ||||||||||||||||||||
Synthetic GICs | 4,367 | — | — | 4,352 | — | — | ||||||||||||||||||||
Foreign currency | Foreign currency swaps | 17,834 | 1,673 | 1,228 | 16,879 | 1,514 | 1,392 | |||||||||||||||||||
Foreign currency forwards | 7,320 | 81 | 155 | 6,485 | 83 | 57 | ||||||||||||||||||||
Currency options | 364 | 29 | 2 | 822 | 18 | — | ||||||||||||||||||||
Non-derivative hedging instruments (2) | 169 | — | 180 | — | — | — | ||||||||||||||||||||
Credit | Credit default swaps | 10,254 | 148 | 108 | 6,723 | 74 | 130 | |||||||||||||||||||
Credit forwards | 155 | 15 | — | 220 | 2 | 6 | ||||||||||||||||||||
Equity market | Equity futures | 7,830 | 37 | 13 | 7,405 | 44 | 21 | |||||||||||||||||||
Equity options | 32,575 | 2,375 | 654 | 27,175 | 1,712 | 1,018 | ||||||||||||||||||||
Variance swaps | 17,496 | 365 | 61 | 13,654 | 181 | 58 | ||||||||||||||||||||
Total rate of return swaps | 1,349 | — | 40 | 376 | — | 47 | ||||||||||||||||||||
Total | $ | 227,425 | $ | 10,555 | $ | 3,857 | $ | 195,877 | $ | 6,133 | $ | 4,115 | ||||||||||||||
(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, 2010 | December 31, 2009 | |||||||||||||||||||||||
Notional | Estimated Fair Value | Notional | Estimated Fair Value | |||||||||||||||||||||
Derivatives Designated as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fair Value Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | $ | 4,602 | $ | 920 | $ | 126 | $ | 4,807 | $ | 854 | $ | 132 | ||||||||||||
Interest rate swaps | 5,107 | 1,274 | 120 | 4,824 | 500 | 75 | ||||||||||||||||||
Subtotal | 9,709 | 2,194 | 246 | 9,631 | 1,354 | 207 | ||||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | 5,511 | 237 | 310 | 4,108 | 127 | 347 | ||||||||||||||||||
Interest rate swaps | 4,155 | 451 | 39 | 1,740 | — | 48 | ||||||||||||||||||
Interest rate forwards | 1,065 | 21 | 8 | — | — | — | ||||||||||||||||||
Credit forwards | 155 | 15 | — | 220 | 2 | 6 | ||||||||||||||||||
Subtotal | 10,886 | 724 | 357 | 6,068 | 129 | 401 | ||||||||||||||||||
Foreign Operations Hedges: | ||||||||||||||||||||||||
Foreign currency forwards | 2,266 | 1 | 69 | 1,880 | 27 | 13 | ||||||||||||||||||
Non-derivative hedging instruments | 169 | — | 180 | — | — | — | ||||||||||||||||||
Subtotal | 2,435 | 1 | 249 | 1,880 | 27 | 13 | ||||||||||||||||||
Total Qualifying Hedges | $ | 23,030 | $ | 2,919 | $ | 852 | $ | 17,579 | $ | 1,510 | $ | 621 | ||||||||||||
September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
Derivatives Not Designated or Not | Notional | Estimated Fair Value | Notional | Estimated Fair Value | ||||||||||||||||||||
Qualifying as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 37,363 | $ | 2,762 | $ | 1,075 | $ | 31,588 | $ | 1,070 | $ | 1,132 | ||||||||||||
Interest rate floors | 23,941 | 1,036 | 116 | 23,691 | 461 | 37 | ||||||||||||||||||
Interest rate caps | 34,112 | 95 | 1 | 28,409 | 283 | — | ||||||||||||||||||
Interest rate futures | 8,026 | 22 | 2 | 7,563 | 8 | 10 | ||||||||||||||||||
Interest rate options | 2,342 | 100 | 26 | 4,050 | 117 | 57 | ||||||||||||||||||
Interest rate forwards | 11,601 | 71 | 29 | 9,921 | 66 | 27 | ||||||||||||||||||
Synthetic GICs | 4,367 | — | — | 4,352 | — | — | ||||||||||||||||||
Foreign currency swaps | 7,721 | 516 | 792 | 7,964 | 533 | 913 | ||||||||||||||||||
Foreign currency forwards | 5,054 | 80 | 86 | 4,605 | 56 | 44 | ||||||||||||||||||
Currency options | 364 | 29 | 2 | 822 | 18 | — | ||||||||||||||||||
Credit default swaps | 10,254 | 148 | 108 | 6,723 | 74 | 130 | ||||||||||||||||||
Equity futures | 7,830 | 37 | 13 | 7,405 | 44 | 21 | ||||||||||||||||||
Equity options | 32,575 | 2,375 | 654 | 27,175 | 1,712 | 1,018 | ||||||||||||||||||
Variance swaps | 17,496 | 365 | 61 | 13,654 | 181 | 58 | ||||||||||||||||||
Total rate of return swaps | 1,349 | — | 40 | 376 | — | 47 | ||||||||||||||||||
Total non-designated or non-qualifying derivatives | $ | 204,395 | $ | 7,636 | $ | 3,005 | $ | 178,298 | $ | 4,623 | $ | 3,494 | ||||||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Derivatives and hedging gains (losses) (1) | $ | (327 | ) | $ | (821 | ) | $ | 2,872 | $ | (5,508 | ) | |||||
Embedded derivatives | 83 | (586 | ) | (1,594 | ) | 1,424 | ||||||||||
Total net derivatives gains (losses) | $ | (244 | ) | $ | (1,407 | ) | $ | 1,278 | $ | (4,084 | ) | |||||
(1) | Includes foreign currency transaction gains (losses) on hedged items in cash flow and non-qualifying hedge relationships, which are not presented elsewhere in this note. |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Qualifying hedges: | ||||||||||||||||
Net investment income | $ | 17 | $ | 11 | $ | 58 | $ | 38 | ||||||||
Interest credited to policyholder account balances | 64 | 58 | 177 | 155 | ||||||||||||
Other expenses | (1 | ) | (1 | ) | (5 | ) | (2 | ) | ||||||||
Non-qualifying hedges: | ||||||||||||||||
Net investment income | (1 | ) | (1 | ) | (3 | ) | (2 | ) | ||||||||
Net derivatives gains (losses) | (30 | ) | (1 | ) | 143 | 62 | ||||||||||
Other revenues | 25 | 25 | 81 | 47 | ||||||||||||
Total | $ | 74 | $ | 91 | $ | 451 | $ | 298 | ||||||||
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Net Derivatives | ||||||||||||||
Gains | ||||||||||||||
Net Derivatives | (Losses) | Ineffectiveness | ||||||||||||
Gains (Losses) | Recognized | Recognized in | ||||||||||||
Derivatives in Fair Value | Hedged Items in Fair Value | Recognized | for Hedged | Net Derivatives | ||||||||||
Hedging Relationships | Hedging Relationships | for Derivatives | Items | Gains (Losses) | ||||||||||
(In millions) | ||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||
Interest rate swaps: | Fixed maturity securities | $ | (13 | ) | $ | 13 | $ | — | ||||||
Policyholder account balances (1) | 212 | (221 | ) | (9 | ) | |||||||||
Foreign currency swaps: | Foreign-denominated fixed maturity securities | (5 | ) | 5 | — | |||||||||
Foreign-denominated policyholder account balances (2) | 415 | (395 | ) | 20 | ||||||||||
Total | $ | 609 | $ | (598 | ) | $ | 11 | |||||||
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 Nine Months Ended September 30, 2010: | ||||||||||||||
Interest rate swaps: | Fixed maturity securities | $ | (38 | ) | $ | 38 | $ | — | ||||||
Policyholder account balances (1) | 678 | (675 | ) | 3 | ||||||||||
Foreign currency swaps: | Foreign-denominated fixed maturity securities | 11 | (12 | ) | (1 | ) | ||||||||
Foreign-denominated policyholder account balances (2) | 47 | (51 | ) | (4 | ) | |||||||||
Total | $ | 698 | $ | (700 | ) | $ | (2 | ) | ||||||
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 | |||||||
(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, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Other comprehensive income (loss), balance at beginning of period | $ | 593 | $ | 13 | $ | (76 | ) | $ | 82 | |||||||
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges | (40 | ) | 12 | 577 | (93 | ) | ||||||||||
Amounts reclassified to net derivatives gains (losses) | (1 | ) | 70 | 50 | 103 | |||||||||||
Amounts reclassified to net investment income | 1 | 4 | 3 | 10 | ||||||||||||
Amounts reclassified to other expenses | — | — | (1 | ) | (1 | ) | ||||||||||
Amortization of transition adjustment | — | — | — | (2 | ) | |||||||||||
Other comprehensive income (loss), balance at end of period | $ | 553 | $ | 99 | $ | 553 | $ | 99 | ||||||||
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Amount of Gains | Amount and Location | |||||||||||||||||||||||
(Losses) Deferred | of Gains (Losses) | Amount and Location | ||||||||||||||||||||||
in Accumulated Other | Reclassified from | of Gains (Losses) | ||||||||||||||||||||||
Derivatives in Cash Flow | Comprehensive Income | Accumulated Other Comprehensive | Recognized in Income (Loss) | |||||||||||||||||||||
Hedging Relationships | (Loss) on Derivatives | Income (Loss) into Income (Loss) | on Derivatives | |||||||||||||||||||||
(Ineffective Portion and | ||||||||||||||||||||||||
Amount Excluded from | ||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | Effectiveness Testing) | ||||||||||||||||||||||
Net Derivatives | Net Investment | Other | Net Derivatives | Net Investment | ||||||||||||||||||||
Gains (Losses) | Income | Expenses | Gains (Losses) | Income | ||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||||||||||
Interest rate swaps | $ | 181 | $ | — | $ | — | $ | — | $ | 1 | $ | — | ||||||||||||
Foreign currency swaps | (247 | ) | 1 | (2 | ) | — | (3 | ) | — | |||||||||||||||
Interest rate forwards | 15 | — | 1 | — | — | — | ||||||||||||||||||
Credit forwards | 11 | — | — | — | — | — | ||||||||||||||||||
Total | $ | (40 | ) | $ | 1 | $ | (1 | ) | $ | — | $ | (2 | ) | $ | — | |||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||
Interest rate swaps | $ | 1 | $ | — | $ | (2 | ) | $ | — | $ | — | $ | — | |||||||||||
Foreign currency swaps | (121 | ) | (107 | ) | (2 | ) | — | — | — | |||||||||||||||
Interest rate forwards | 128 | 37 | — | — | — | — | ||||||||||||||||||
Credit forwards | 4 | — | — | — | — | — | ||||||||||||||||||
Total | $ | 12 | $ | (70 | ) | $ | (4 | ) | $ | — | $ | — | $ | — | ||||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||||||||||
Interest rate swaps | $ | 457 | $ | — | $ | — | $ | — | $ | 3 | $ | — | ||||||||||||
Foreign currency swaps | 92 | (61 | ) | (5 | ) | 1 | — | — | ||||||||||||||||
Interest rate forwards | — | 11 | 2 | — | — | — | ||||||||||||||||||
Credit forwards | 28 | — | — | — | — | — | ||||||||||||||||||
Total | $ | 577 | $ | (50 | ) | $ | (3 | ) | $ | 1 | $ | 3 | $ | — | ||||||||||
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 | — | — | — | — | ||||||||||||||||||
Credit forwards | 4 | — | — | — | — | — | ||||||||||||||||||
Total | $ | (93 | ) | $ | (103 | ) | $ | (8 | ) | $ | 1 | $ | — | $ | — | |||||||||
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Amount and Location | ||||||||
of Gains (Losses) | ||||||||
Reclassified From Accumulated Other | ||||||||
Amount of Gains (Losses) | Comprehensive Income | |||||||
Deferred in Accumulated | (Loss) into Income (Loss) | |||||||
Derivatives and Non-Derivative Hedging Instruments in Net | Other Comprehensive Income (Loss) | (Effective Portion) | ||||||
Investment Hedging Relationships (1),(2) | (Effective Portion) | Net Investment Gains (Losses) | ||||||
(In millions) | ||||||||
For the Three Months Ended September 30, 2010: | ||||||||
Foreign currency forwards | $ | (162 | ) | $ | — | |||
Foreign currency swaps | — | — | ||||||
Non-derivative hedging instruments | (10 | ) | — | |||||
Total | $ | (172 | ) | $ | — | |||
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 Nine Months Ended September 30, 2010: | ||||||||
Foreign currency forwards | $ | (135 | ) | $ | — | |||
Foreign currency swaps | — | — | ||||||
Non-derivative hedging instruments | (10 | ) | — | |||||
Total | $ | (145 | ) | $ | — | |||
For the Nine Months Ended September 30, 2009: | ||||||||
Foreign currency forwards | $ | (192 | ) | $ | — | |||
Foreign currency swaps | (19 | ) | — | |||||
Non-derivative hedging instruments | (37 | ) | — | |||||
Total | $ | (248 | ) | $ | — | |||
(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 income (loss) into earnings 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 | ||||||||||||||||||
Derivatives | Investment | Benefits | Other | Other | ||||||||||||||||
Gains (Losses) | Income (1) | and Claims (2) | Revenues (3) | Expenses (4) | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||||||
Interest rate swaps | $ | 518 | $ | 2 | $ | — | $ | 138 | $ | — | ||||||||||
Interest rate floors | 227 | — | — | — | — | |||||||||||||||
Interest rate caps | (50 | ) | — | — | — | — | ||||||||||||||
Interest rate futures | 74 | (2 | ) | — | (1 | ) | — | |||||||||||||
Equity futures | 23 | (15 | ) | (195 | ) | — | — | |||||||||||||
Foreign currency swaps | (272 | ) | — | — | — | — | ||||||||||||||
Foreign currency forwards | (56 | ) | 2 | — | — | — | ||||||||||||||
Currency options | (12 | ) | — | — | — | — | ||||||||||||||
Equity options | (553 | ) | (23 | ) | — | — | — | |||||||||||||
Interest rate options | 9 | — | — | (3 | ) | — | ||||||||||||||
Interest rate forwards | 1 | — | — | (8 | ) | — | ||||||||||||||
Variance swaps | (166 | ) | (3 | ) | — | — | — | |||||||||||||
Credit default swaps | 10 | (2 | ) | — | — | — | ||||||||||||||
Total rate of return swaps | 29 | — | — | — | — | |||||||||||||||
Total | $ | (218 | ) | $ | (41 | ) | $ | (195 | ) | $ | 126 | $ | — | |||||||
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 | ) | — | — | — | |||||||||||||
Total rate of return swaps | 41 | — | — | — | — | |||||||||||||||
Total | $ | (831 | ) | $ | (2 | ) | $ | (194 | ) | $ | 52 | $ | — | |||||||
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Net | Net | Policyholder | ||||||||||||||||||
Derivatives | Investment | Benefits | Other | Other | ||||||||||||||||
Gains (Losses) | Income (1) | and Claims (2) | Revenues (3) | Expenses (4) | ||||||||||||||||
(In millions) | ||||||||||||||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||||||
Interest rate swaps | $ | 1,561 | $ | 5 | $ | 39 | $ | 394 | $ | — | ||||||||||
Interest rate floors | 501 | — | — | — | — | |||||||||||||||
Interest rate caps | (261 | ) | — | — | — | — | ||||||||||||||
Interest rate futures | 141 | (8 | ) | — | (4 | ) | — | |||||||||||||
Equity futures | (146 | ) | (5 | ) | (124 | ) | — | — | ||||||||||||
Foreign currency swaps | 74 | — | — | — | — | |||||||||||||||
Foreign currency forwards | 269 | 40 | — | — | — | |||||||||||||||
Currency options | 5 | (1 | ) | — | — | (4 | ) | |||||||||||||
Equity options | 431 | 14 | — | — | — | |||||||||||||||
Interest rate options | 59 | — | — | (4 | ) | — | ||||||||||||||
Interest rate forwards | 9 | — | — | (94 | ) | — | ||||||||||||||
Variance swaps | 164 | 5 | — | — | — | |||||||||||||||
Credit default swaps | 25 | 1 | — | — | — | |||||||||||||||
Total rate of return swaps | 10 | — | — | — | — | |||||||||||||||
Total | $ | 2,842 | $ | 51 | $ | (85 | ) | $ | 292 | $ | (4 | ) | ||||||||
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 | ) | — | — | — | |||||||||||||
Total rate of return swaps | 49 | — | — | — | — | |||||||||||||||
Total | $ | (5,563 | ) | $ | (125 | ) | $ | (291 | ) | $ | (50 | ) | $ | — | ||||||
(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. |
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(2) | Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits. | |
(3) | Changes in estimated fair value related to derivatives held in connection with the Company’s mortgage banking activities. | |
(4) | Changes in estimated fair value related to economic hedges of foreign currency exposure associated with the Company’s international subsidiaries. |
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September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||
Maximum | Maximum | |||||||||||||||||||||||
Estimated | Amount | Estimated | Amount of | |||||||||||||||||||||
Fair Value | of Future | Weighted | Fair Value | Future | Weighted | |||||||||||||||||||
of Credit | Payments under | Average | of Credit | Payments under | Average | |||||||||||||||||||
Rating Agency Designation of Referenced | Default | Credit Default | Years to | Default | Credit Default | Years to | ||||||||||||||||||
Credit Obligations (1) | Swaps | Swaps (2) | Maturity (3) | Swaps | Swaps (2) | Maturity (3) | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Aaa/Aa/A | ||||||||||||||||||||||||
Single name credit default swaps (corporate) | $ | 4 | $ | 445 | 4.0 | $ | 5 | $ | 175 | 4.3 | ||||||||||||||
Credit default swaps referencing indices | 33 | 2,728 | 4.0 | 46 | 2,676 | 3.4 | ||||||||||||||||||
Subtotal | 37 | 3,173 | 4.0 | 51 | 2,851 | 3.5 | ||||||||||||||||||
Baa | ||||||||||||||||||||||||
Single name credit default swaps (corporate) | (2 | ) | 650 | 4.6 | 2 | 195 | 4.8 | |||||||||||||||||
Credit default swaps referencing indices | (3 | ) | 911 | 5.3 | — | 10 | 5.0 | |||||||||||||||||
Subtotal | (5 | ) | 1,561 | 5.0 | 2 | 205 | 4.8 | |||||||||||||||||
Ba | ||||||||||||||||||||||||
Single name credit default swaps (corporate) | — | 25 | 4.5 | — | 25 | 5.0 | ||||||||||||||||||
Credit default swaps referencing indices | — | — | — | — | — | — | ||||||||||||||||||
Subtotal | — | 25 | 4.5 | — | 25 | 5.0 | ||||||||||||||||||
B | ||||||||||||||||||||||||
Single name credit default swaps (corporate) | — | — | — | — | — | — | ||||||||||||||||||
Credit default swaps referencing indices | — | 30 | 4.8 | — | 20 | 5.0 | ||||||||||||||||||
Subtotal | — | 30 | 4.8 | — | 20 | 5.0 | ||||||||||||||||||
Total | $ | 32 | $ | 4,789 | 4.3 | $ | 53 | $ | 3,101 | 3.6 | ||||||||||||||
(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 an internally developed 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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Fair Value of Incremental Collateral | ||||||||||||||||
Provided Upon: | ||||||||||||||||
Downgrade in the | ||||||||||||||||
Estimated | One Notch | Company’s Credit Rating | ||||||||||||||
Fair Value of | Downgrade | to a Level that Triggers | ||||||||||||||
Estimated | Collateral | in the | Full Overnight | |||||||||||||
Fair Value (1) of | Provided | Company’s | Collateralization or | |||||||||||||
Derivatives in Net | Fixed Maturity | Credit | Termination | |||||||||||||
Liability Position | Securities (2) | Rating | of the Derivative Position | |||||||||||||
(In millions) | ||||||||||||||||
At September 30, 2010: | ||||||||||||||||
Derivatives subject to credit-contingent provisions | $ | 751 | $ | 608 | $ | 82 | $ | 182 | ||||||||
Derivatives not subject to credit-contingent provisions | 40 | 35 | — | — | ||||||||||||
Total | $ | 791 | $ | 643 | $ | 82 | $ | 182 | ||||||||
At December 31, 2009: | ||||||||||||||||
Derivatives subject to credit-contingent provisions | $ | 1,163 | $ | 1,017 | $ | 90 | $ | 218 | ||||||||
Derivatives not subject to credit-contingent provisions | 48 | 42 | — | — | ||||||||||||
Total | $ | 1,211 | $ | 1,059 | $ | 90 | $ | 218 | ||||||||
(1) | After taking into consideration the existence of netting agreements. | |
(2) | Included in fixed maturity securities in the consolidated balance sheets. The counterparties are permitted by contract to sell or repledge this collateral. At both September 30, 2010 and December 31, 2009, the Company did not provide any cash collateral. |
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September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Net embedded derivatives within asset host contracts: | ||||||||
Ceded guaranteed minimum benefits | $ | 125 | $ | 76 | ||||
Options embedded in debt or equity securities | (42 | ) | (37 | ) | ||||
Net embedded derivatives within asset host contracts | $ | 83 | $ | 39 | ||||
Net embedded derivatives within liability host contracts: | ||||||||
Direct guaranteed minimum benefits | $ | 3,397 | $ | 1,500 | ||||
Other | 54 | 5 | ||||||
Net embedded derivatives within liability host contracts | $ | 3,451 | $ | 1,505 | ||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Net derivatives gains (losses) (1) | $ | 83 | $ | (586 | ) | $ | (1,594 | ) | $ | 1,424 | ||||||
Policyholder benefits and claims | $ | — | $ | (7 | ) | $ | 46 | $ | (75 | ) |
(1) | The valuation of guaranteed minimum benefits includes an adjustment for nonperformance risk. Included in net derivatives gains (losses), in connection with this adjustment, were gains (losses) of ($291) million and $399 million for the three months and nine months ended September 30, 2010, respectively, and gains (losses) of ($895) million and ($1,605) million for the three months and nine months ended September 30, 2009, respectively. Net derivatives gains (losses) for the nine months ended September 30, 2010 included a loss of $955 million relating to a refinement for estimating nonperformance risk in fair value measurements implemented at June 30, 2010. See Note 5. |
5. | Fair Value |
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September 30, 2010 | ||||||||||||||||
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 | $ | — | $ | 74,165 | $ | 6,855 | $ | 81,020 | ||||||||
RMBS | — | 43,606 | 2,294 | 45,900 | ||||||||||||
Foreign corporate securities | — | 40,143 | 4,827 | 44,970 | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | 17,207 | 17,094 | 59 | 34,360 | ||||||||||||
CMBS | — | 15,252 | 281 | 15,533 | ||||||||||||
Foreign government securities | 278 | 14,252 | 314 | 14,844 | ||||||||||||
ABS | — | 10,652 | 3,654 | 14,306 | ||||||||||||
State and political subdivision securities | — | 9,562 | 52 | 9,614 | ||||||||||||
Other fixed maturity securities | — | 12 | 5 | 17 | ||||||||||||
Total fixed maturity securities | 17,485 | 224,738 | 18,341 | 260,564 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stock | 321 | 1,080 | 170 | 1,571 | ||||||||||||
Non-redeemable preferred stock | — | 385 | 909 | 1,294 | ||||||||||||
Total equity securities | 321 | 1,465 | 1,079 | 2,865 | ||||||||||||
Trading securities: | ||||||||||||||||
Trading securities | 3,005 | 658 | 93 | 3,756 | ||||||||||||
Trading securities held by consolidated securitization entities | — | 231 | — | 231 | ||||||||||||
Total trading securities | 3,005 | 889 | 93 | 3,987 | ||||||||||||
Short-term investments (1) | 4,601 | 6,469 | 210 | 11,280 | ||||||||||||
Mortgage loans: | ||||||||||||||||
Mortgage loans held by consolidated securitization entities | — | 7,093 | — | 7,093 | ||||||||||||
Mortgage loansheld-for-sale (2) | — | 2,114 | 27 | 2,141 | ||||||||||||
Total mortgage loans | — | 9,207 | 27 | 9,234 | ||||||||||||
MSRs (3) | — | — | 707 | 707 | ||||||||||||
Derivative assets: (4) | ||||||||||||||||
Interest rate contracts | 25 | 5,691 | 116 | 5,832 | ||||||||||||
Foreign currency contracts | — | 1,722 | 61 | 1,783 | ||||||||||||
Credit contracts | — | 109 | 54 | 163 | ||||||||||||
Equity market contracts | 37 | 2,204 | 536 | 2,777 | ||||||||||||
Total derivative assets | 62 | 9,726 | 767 | 10,555 | ||||||||||||
Net embedded derivatives within asset host contracts (5) | — | — | 125 | 125 | ||||||||||||
Separate account assets (6) | 24,927 | 145,697 | 1,748 | 172,372 | ||||||||||||
Total assets | $ | 50,401 | $ | 398,191 | $ | 23,097 | $ | 471,689 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities: (4) | ||||||||||||||||
Interest rate contracts | $ | 30 | $ | 1,375 | $ | 11 | $ | 1,416 | ||||||||
Foreign currency contracts | — | 1,384 | 1 | 1,385 | ||||||||||||
Credit contracts | — | 100 | 8 | 108 | ||||||||||||
Equity market contracts | 13 | 693 | 62 | 768 | ||||||||||||
Total derivative liabilities | 43 | 3,552 | 82 | 3,677 | ||||||||||||
Net embedded derivatives within liability host contracts (5) | — | (8 | ) | 3,459 | 3,451 | |||||||||||
Long-term debt of consolidated securitization entities | — | 6,891 | 184 | 7,075 | ||||||||||||
Trading liabilities (7) | 16 | 20 | 2 | 38 | ||||||||||||
Total liabilities | $ | 59 | $ | 10,455 | $ | 3,727 | $ | 14,241 | ||||||||
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December 31, 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 | $ | — | $ | 65,493 | $ | 6,694 | $ | 72,187 | ||||||||
RMBS | — | 42,180 | 1,840 | 44,020 | ||||||||||||
Foreign corporate securities | — | 32,738 | 5,292 | 38,030 | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | 10,951 | 14,459 | 37 | 25,447 | ||||||||||||
CMBS | — | 15,483 | 139 | 15,622 | ||||||||||||
Foreign government securities | 306 | 11,240 | 401 | 11,947 | ||||||||||||
ABS | — | 10,450 | 2,712 | 13,162 | ||||||||||||
State and political subdivision securities | — | 7,139 | 69 | 7,208 | ||||||||||||
Other fixed maturity securities | — | 13 | 6 | 19 | ||||||||||||
Total fixed maturity securities | 11,257 | 199,195 | 17,190 | 227,642 | ||||||||||||
Equity securities: | ||||||||||||||||
Common stock | 490 | 995 | 136 | 1,621 | ||||||||||||
Non-redeemable preferred stock | — | 359 | 1,104 | 1,463 | ||||||||||||
Total equity securities | 490 | 1,354 | 1,240 | 3,084 | ||||||||||||
Trading securities | 1,886 | 415 | 83 | 2,384 | ||||||||||||
Short-term investments (1) | 5,650 | 2,500 | 23 | 8,173 | ||||||||||||
Mortgage loansheld-for-sale (2) | — | 2,445 | 25 | 2,470 | ||||||||||||
MSRs (3) | — | — | 878 | 878 | ||||||||||||
Derivative assets (4) | 103 | 5,600 | 430 | 6,133 | ||||||||||||
Net embedded derivatives within asset host contracts (5) | — | — | 76 | 76 | ||||||||||||
Separate account assets (6) | 17,601 | 129,545 | 1,895 | 149,041 | ||||||||||||
Total assets | $ | 36,987 | $ | 341,054 | $ | 21,840 | $ | 399,881 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities (4) | $ | 51 | $ | 3,990 | $ | 74 | $ | 4,115 | ||||||||
Net embedded derivatives within liability host contracts (5) | — | (26 | ) | 1,531 | 1,505 | |||||||||||
Trading liabilities (7) | 106 | — | — | 106 | ||||||||||||
Total liabilities | $ | 157 | $ | 3,964 | $ | 1,605 | $ | 5,726 | ||||||||
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(1) | Short-term investments as presented in the tables above differ from the amounts presented in the consolidated balance sheets because certain short-term investments are not measured at estimated fair value (e.g., time deposits, etc.), and therefore are excluded from the tables presented above. | |
(2) | Mortgage loansheld-for-sale as presented in the tables above differ from the amount presented in the consolidated balance sheets as these tables only include residential mortgage loansheld-for-sale measured at estimated fair value on a recurring basis. | |
(3) | MSRs are presented within other invested assets in the consolidated balance sheets. | |
(4) | Derivative assets are presented within other invested assets in the consolidated balance sheets and derivative liabilities are presented within other liabilities in the consolidated balance sheets. 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 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables which follow. At September 30, 2010 and December 31, 2009, certain non-derivative hedging instruments of $180 million and $0, respectively, which are carried at amortized cost, are included with the liabilities total in Note 4 but excluded from derivative liabilities in the tables above as they are not derivative instruments. | |
(5) | Net embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables in the consolidated balance sheets. Net embedded derivatives within liability host contracts are presented primarily within policyholder account balances in the consolidated balance sheets. At September 30, 2010, fixed maturity securities and equity securities also included embedded derivatives of ($53) million and $11 million, respectively. At December 31, 2009, fixed maturity securities and equity securities included embedded derivatives of $0 and ($37) million, respectively. | |
(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 in the consolidated balance sheets. |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||||||
Balance, | Other | Sales, | ||||||||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | Transfer Into | Transfer Out | Balance, | |||||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | Level 3 (4) | of Level 3 (4) | End of Period | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 7,173 | $ | (14 | ) | $ | 196 | $ | 67 | $ | 119 | $ | (686 | ) | $ | 6,855 | ||||||||||||
RMBS | 1,852 | (11 | ) | 68 | 379 | 161 | (155 | ) | 2,294 | |||||||||||||||||||
Foreign corporate securities | 4,600 | (18 | ) | 302 | 131 | 52 | (240 | ) | 4,827 | |||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 37 | — | 1 | — | 21 | — | 59 | |||||||||||||||||||||
CMBS | 270 | (1 | ) | 13 | (7 | ) | 9 | (3 | ) | 281 | ||||||||||||||||||
Foreign government securities | 280 | 3 | 25 | 6 | — | — | 314 | |||||||||||||||||||||
ABS | 3,498 | (9 | ) | 105 | 156 | 5 | (101 | ) | 3,654 | |||||||||||||||||||
State and political subdivision securities | 101 | — | (3 | ) | 9 | — | (55 | ) | 52 | |||||||||||||||||||
Other fixed maturity securities | 5 | — | — | — | — | — | 5 | |||||||||||||||||||||
Total fixed maturity securities | $ | 17,816 | $ | (50 | ) | $ | 707 | $ | 741 | $ | 367 | $ | (1,240 | ) | $ | 18,341 | ||||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Common stock | $ | 161 | $ | (1 | ) | $ | 14 | $ | (6 | ) | $ | 2 | $ | — | $ | 170 | ||||||||||||
Non-redeemable preferred stock | 845 | 1 | 56 | 7 | — | — | 909 | |||||||||||||||||||||
Total equity securities | $ | 1,006 | $ | — | $ | 70 | $ | 1 | $ | 2 | $ | — | $ | 1,079 | ||||||||||||||
Trading securities | $ | 36 | $ | 9 | $ | — | $ | 13 | $ | 35 | $ | — | $ | 93 | ||||||||||||||
Short-term investments | $ | 52 | $ | 2 | $ | — | $ | 156 | $ | — | $ | — | $ | 210 | ||||||||||||||
Mortgage loansheld-for-sale | $ | 26 | $ | (1 | ) | $ | — | $ | — | $ | 4 | $ | (2 | ) | $ | 27 | ||||||||||||
MSRs (5), (6) | $ | 660 | $ | (91 | ) | $ | — | $ | 138 | $ | — | $ | — | $ | 707 | |||||||||||||
Net derivatives: (7) | ||||||||||||||||||||||||||||
Interest rate contracts | $ | 61 | $ | 16 | $ | 16 | $ | 12 | $ | — | $ | — | $ | 105 | ||||||||||||||
Foreign currency contracts | 28 | 45 | — | (5 | ) | — | (8 | ) | 60 | |||||||||||||||||||
Credit contracts | 31 | 12 | 10 | (7 | ) | — | — | 46 | ||||||||||||||||||||
Equity market contracts | 633 | (171 | ) | 4 | 8 | — | — | 474 | ||||||||||||||||||||
Total net derivatives | $ | 753 | $ | (98 | ) | $ | 30 | $ | 8 | $ | — | $ | (8 | ) | $ | 685 | ||||||||||||
Separate account assets (8) | $ | 1,693 | $ | 59 | $ | — | $ | 62 | $ | 9 | $ | (75 | ) | $ | 1,748 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
(Gains) Losses included in: | Purchases, | |||||||||||||||||||||||||||
Balance, | Other | Sales, | ||||||||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | Transfer Into | Transfer Out | Balance, | |||||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | Level 3 (4) | of Level 3 (4) | End of Period | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives (9) | $ | 3,296 | $ | (134 | ) | $ | 98 | $ | 74 | $ | — | $ | — | $ | 3,334 | |||||||||||||
Long-term debt of consolidated securitization entities (10) | $ | 221 | $ | (37 | ) | $ | — | $ | — | $ | — | $ | — | $ | 184 | |||||||||||||
Trading liabilities | $ | — | $ | — | $ | — | $ | 2 | $ | — | $ | — | $ | 2 |
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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 | |||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | and/or Out | Balance, | ||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | of Level 3 (4) | End of Period | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 6,663 | $ | (21 | ) | $ | 400 | $ | (113 | ) | $ | 1 | $ | 6,930 | ||||||||||
RMBS | 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 | ||||||||||||||||||
CMBS | 251 | (31 | ) | 29 | (1 | ) | 59 | 307 | ||||||||||||||||
Foreign government securities | 346 | 2 | 45 | 27 | 120 | 540 | ||||||||||||||||||
ABS | 2,160 | (14 | ) | 352 | (29 | ) | (7 | ) | 2,462 | |||||||||||||||
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 loansheld-for-sale | $ | 136 | $ | (1 | ) | $ | — | $ | — | $ | (115 | ) | $ | 20 | ||||||||||
MSRs (5), (6) | $ | 670 | $ | (64 | ) | $ | — | $ | 114 | $ | — | $ | 720 | |||||||||||
Net derivatives (7) | $ | 1,766 | $ | (539 | ) | $ | 51 | $ | 121 | $ | (9 | ) | $ | 1,390 | ||||||||||
Separate account assets (8) | $ | 1,554 | $ | 58 | $ | — | $ | 231 | $ | 78 | $ | 1,921 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
(Gains) Losses included in: | Purchases, | |||||||||||||||||||||||||||
Balance, | Other | Sales, | Transfer In | |||||||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | and/or Out | Balance, | ||||||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | of Level 3 (4) | End of Period | |||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives (9) | $ | 1,108 | $ | 550 | $ | 60 | $ | 41 | $ | — | $ | 1,759 | ||||||||||||||||
Trading liabilities | $ | 59 | $ | — | $ | — | $ | (45 | ) | $ | — | $ | 14 |
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Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||||||
Balance, | Other | Sales, | ||||||||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | Transfer Into | Transfer Out | Balance, | |||||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | Level 3 (4) | of Level 3 (4) | End of Period | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 6,694 | $ | 6 | $ | 461 | $ | (648 | ) | $ | 616 | $ | (274 | ) | $ | 6,855 | ||||||||||||
RMBS | 1,840 | 15 | 121 | 195 | 253 | (130 | ) | 2,294 | ||||||||||||||||||||
Foreign corporate securities | 5,292 | (32 | ) | 375 | (620 | ) | 363 | (551 | ) | 4,827 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 37 | — | 3 | (3 | ) | 22 | — | 59 | ||||||||||||||||||||
CMBS | 139 | (2 | ) | 72 | (24 | ) | 128 | (32 | ) | 281 | ||||||||||||||||||
Foreign government securities | 401 | (3 | ) | 53 | 19 | — | (156 | ) | 314 | |||||||||||||||||||
ABS | 2,712 | (40 | ) | 302 | 827 | 93 | (240 | ) | 3,654 | |||||||||||||||||||
State and political subdivision securities | 69 | — | 4 | 9 | — | (30 | ) | 52 | ||||||||||||||||||||
Other fixed maturity securities | 6 | — | 1 | (2 | ) | — | — | 5 | ||||||||||||||||||||
Total fixed maturity securities | $ | 17,190 | $ | (56 | ) | $ | 1,392 | $ | (247 | ) | $ | 1,475 | $ | (1,413 | ) | $ | 18,341 | |||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Common stock | $ | 136 | $ | 1 | $ | 4 | $ | 35 | $ | 2 | $ | (8 | ) | $ | 170 | |||||||||||||
Non-redeemable preferred stock | 1,104 | 48 | 24 | (259 | ) | — | (8 | ) | 909 | |||||||||||||||||||
Total equity securities | $ | 1,240 | $ | 49 | $ | 28 | $ | (224 | ) | $ | 2 | $ | (16 | ) | $ | 1,079 | ||||||||||||
Trading securities | $ | 83 | $ | 3 | $ | — | $ | (12 | ) | $ | 37 | $ | (18 | ) | $ | 93 | ||||||||||||
Short-term investments | $ | 23 | $ | 2 | $ | — | $ | 185 | $ | — | $ | — | $ | 210 | ||||||||||||||
Mortgage loansheld-for-sale | $ | 25 | $ | (1 | ) | $ | — | $ | — | $ | 10 | $ | (7 | ) | $ | 27 | ||||||||||||
MSRs (5), (6) | $ | 878 | $ | (329 | ) | $ | — | $ | 158 | $ | — | $ | — | $ | 707 | |||||||||||||
Net derivatives: (7) | ||||||||||||||||||||||||||||
Interest rate contracts | $ | 7 | $ | 97 | $ | 13 | $ | (12 | ) | $ | — | $ | — | $ | 105 | |||||||||||||
Foreign currency contracts | 108 | 28 | — | (54 | ) | — | (22 | ) | 60 | |||||||||||||||||||
Credit contracts | 42 | (10 | ) | 27 | (13 | ) | — | — | 46 | |||||||||||||||||||
Equity market contracts | 199 | 249 | 9 | 17 | — | — | 474 | |||||||||||||||||||||
Total net derivatives | $ | 356 | $ | 364 | $ | 49 | $ | (62 | ) | $ | — | $ | (22 | ) | $ | 685 | ||||||||||||
Separate account assets (8) | $ | 1,895 | $ | 94 | $ | — | $ | (48 | ) | $ | 31 | $ | (224 | ) | $ | 1,748 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
(Gains) Losses included in: | Purchases, | |||||||||||||||||||||||||||
Balance, | Other | Sales, | ||||||||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | Transfer Into | Transfer Out | Balance, | |||||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | Level 3 (4) | of Level 3 (4) | End of Period | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives (9) | $ | 1,455 | $ | 1,496 | $ | 163 | $ | 220 | $ | — | $ | — | $ | 3,334 | ||||||||||||||
Long-term debt of consolidated securitization entities (10) | $ | — | $ | (48 | ) | $ | — | $ | 232 | $ | — | $ | — | $ | 184 | |||||||||||||
Trading liabilities | $ | — | $ | — | $ | — | $ | 2 | $ | — | $ | — | $ | 2 |
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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 | |||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | and/or Out | Balance, | ||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | of Level 3 (4) | End of Period | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||
U.S. corporate securities | $ | 7,498 | $ | (465 | ) | $ | 710 | $ | (563 | ) | $ | (250 | ) | $ | 6,930 | |||||||||
RMBS | 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 | ||||||||||||||||
CMBS | 260 | (36 | ) | 49 | (16 | ) | 50 | 307 | ||||||||||||||||
Foreign government securities | 408 | (45 | ) | 68 | 6 | 103 | 540 | |||||||||||||||||
ABS | 2,452 | (50 | ) | 268 | (257 | ) | 49 | 2,462 | ||||||||||||||||
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 loansheld-for-sale | $ | 177 | $ | (3 | ) | $ | — | $ | 1 | $ | (155 | ) | $ | 20 | ||||||||||
MSRs (5), (6) | $ | 191 | $ | 70 | $ | — | $ | 459 | $ | — | $ | 720 | ||||||||||||
Net derivatives (7) | $ | 2,547 | $ | (1,498 | ) | $ | (12 | ) | $ | 341 | $ | 12 | $ | 1,390 | ||||||||||
Separate account assets (8) | $ | 1,758 | $ | (212 | ) | $ | — | $ | 286 | $ | 89 | $ | 1,921 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||
(Gains) Losses included in: | Purchases, | |||||||||||||||||||||||
Balance, | Other | Sales, | Transfer In | |||||||||||||||||||||
Beginning of | Comprehensive | Issuances and | and/or Out | Balance, | ||||||||||||||||||||
Period | Earnings (1), (2) | Income (Loss) | Settlements (3) | of Level 3 (4) | End of Period | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Net embedded derivatives (9) | $ | 2,929 | $ | (1,294 | ) | $ | 35 | $ | 89 | $ | — | $ | 1,759 | |||||||||||
Trading liabilities | $ | — | $ | — | $ | — | $ | 14 | $ | — | $ | 14 |
(1) | 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 on securities and certain mortgage loans are included within net investment gains (losses) which are reported within the earnings caption of total gains (losses); while changes in estimated fair value of certain mortgage loans and MSRs are recorded in other |
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revenues. Lapses associated with embedded derivatives are included with the earnings caption of total gains (losses). | ||
(2) | Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. | |
(3) | 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. | |
(4) | 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. | |
(5) | The additions and reductions (due to loan payments and sales) affecting MSRs were $169 million and ($31) million, respectively, for the three months ended September 30, 2010 and $275 million and ($117) million, respectively, for the nine months ended September 30, 2010. 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. | |
(6) | 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 ($91) million and $0, respectively, for the three months ended September 30, 2010, and ($329) million and $0, respectively, for the nine months ended September 30, 2010. 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. | |
(7) | Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. | |
(8) | Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. | |
(9) | Embedded derivative assets and liabilities are presented net for purposes of the rollforward. | |
(10) | The long-term debt at January 1, 2010 of the consolidated securitization entities is reported within the purchases, sales, issuances and settlements activity column of the rollforward. |
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Total Gains and Losses | ||||||||||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 6 | $ | (20 | ) | $ | — | $ | — | $ | — | $ | — | $ | (14 | ) | ||||||||||||
RMBS | (5 | ) | (6 | ) | — | — | — | — | (11 | ) | ||||||||||||||||||
Foreign corporate securities | 7 | (25 | ) | — | — | — | — | (18 | ) | |||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | 1 | (2 | ) | — | — | — | — | (1 | ) | |||||||||||||||||||
Foreign government securities | 2 | 1 | — | — | — | — | 3 | |||||||||||||||||||||
ABS | 8 | (17 | ) | — | — | — | — | (9 | ) | |||||||||||||||||||
State and political subdivision securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Other fixed maturity securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Total fixed maturity securities | $ | 19 | $ | (69 | ) | $ | — | $ | — | $ | — | $ | — | $ | (50 | ) | ||||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Common stock | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | ||||||||||||
Non-redeemable preferred stock | — | 1 | — | — | — | — | 1 | |||||||||||||||||||||
Total equity securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Trading securities | $ | 9 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 9 | ||||||||||||||
Short-term investments | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | ||||||||||||||
Mortgage loansheld-for-sale | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | (91 | ) | $ | — | $ | — | $ | (91 | ) | ||||||||||||
Net derivatives: | ||||||||||||||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | 2 | $ | 14 | $ | — | $ | — | $ | 16 | ||||||||||||||
Foreign currency contracts | — | — | 46 | — | — | (1 | ) | 45 | ||||||||||||||||||||
Credit contracts | — | — | 12 | — | — | — | 12 | |||||||||||||||||||||
Equity market contracts | (2 | ) | — | (169 | ) | — | — | — | (171 | ) | ||||||||||||||||||
Total net derivatives | $ | (2 | ) | $ | — | $ | (109 | ) | $ | 14 | $ | — | $ | (1 | ) | $ | (98 | ) | ||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | 134 | $ | — | $ | — | $ | — | $ | 134 | ||||||||||||||
Long-term debt of consolidated securitization entities | $ | — | $ | 37 | $ | — | $ | — | $ | — | $ | — | $ | 37 |
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Total Gains and Losses | ||||||||||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 3 | $ | (24 | ) | $ | — | $ | — | $ | — | $ | — | $ | (21 | ) | ||||||||||||
RMBS | 12 | (26 | ) | — | — | — | — | (14 | ) | |||||||||||||||||||
Foreign corporate securities | (1 | ) | (113 | ) | — | — | — | — | (114 | ) | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | — | (31 | ) | — | — | — | — | (31 | ) | |||||||||||||||||||
Foreign government securities | 3 | (1 | ) | — | — | — | — | 2 | ||||||||||||||||||||
ABS | 1 | (15 | ) | — | — | — | — | (14 | ) | |||||||||||||||||||
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 loansheld-for-sale | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | (64 | ) | $ | — | $ | — | $ | (64 | ) | ||||||||||||
Net derivatives | $ | 4 | $ | — | $ | (576 | ) | $ | 33 | $ | — | $ | — | $ | (539 | ) | ||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | (543 | ) | $ | — | $ | (7 | ) | $ | — | $ | (550 | ) |
83
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Total Gains and Losses | ||||||||||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 21 | $ | (15 | ) | $ | — | $ | — | $ | — | $ | — | $ | 6 | |||||||||||||
RMBS | 21 | (6 | ) | — | — | — | — | 15 | ||||||||||||||||||||
Foreign corporate securities | 10 | (42 | ) | — | — | — | — | (32 | ) | |||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | 1 | (3 | ) | — | — | — | — | (2 | ) | |||||||||||||||||||
Foreign government securities | 2 | (5 | ) | — | — | — | — | (3 | ) | |||||||||||||||||||
ABS | 27 | (67 | ) | — | — | — | — | (40 | ) | |||||||||||||||||||
State and political subdivision securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Other fixed maturity securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Total fixed maturity securities | $ | 82 | $ | (138 | ) | $ | — | $ | — | $ | — | $ | — | $ | (56 | ) | ||||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Common stock | $ | — | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 1 | ||||||||||||||
Non-redeemable preferred stock | — | 48 | — | — | — | — | 48 | |||||||||||||||||||||
Total equity securities | $ | — | $ | 49 | $ | — | $ | — | $ | — | $ | — | $ | 49 | ||||||||||||||
Trading securities | $ | 3 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 3 | ||||||||||||||
Short-term investments | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | ||||||||||||||
Mortgage loansheld-for-sale | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | (329 | ) | $ | — | $ | — | $ | (329 | ) | ||||||||||||
Net derivatives: | ||||||||||||||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | 36 | $ | 61 | $ | — | $ | — | $ | 97 | ||||||||||||||
Foreign currency contracts | — | — | 32 | — | — | (4 | ) | 28 | ||||||||||||||||||||
Credit contracts | — | — | (10 | ) | — | — | — | (10 | ) | |||||||||||||||||||
Equity market contracts | 6 | — | 243 | — | — | — | 249 | |||||||||||||||||||||
Total net derivatives | $ | 6 | $ | — | $ | 301 | $ | 61 | $ | — | $ | (4 | ) | $ | 364 | |||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | (1,542 | ) | $ | — | $ | 46 | $ | — | $ | (1,496 | ) | ||||||||||||
Long-term debt of consolidated securitization entities | $ | — | $ | 48 | $ | — | $ | — | $ | — | $ | — | $ | 48 |
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Total Gains and Losses | ||||||||||||||||||||||||||||
Classification of Realized/Unrealized Gains | ||||||||||||||||||||||||||||
(Losses) included in Earnings | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 11 | $ | (476 | ) | $ | — | $ | — | $ | — | $ | — | $ | (465 | ) | ||||||||||||
RMBS | 14 | (5 | ) | — | — | — | — | 9 | ||||||||||||||||||||
Foreign corporate securities | (4 | ) | (299 | ) | — | — | — | — | (303 | ) | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | 1 | (37 | ) | — | — | — | — | (36 | ) | |||||||||||||||||||
Foreign government securities | 8 | (53 | ) | — | — | — | — | (45 | ) | |||||||||||||||||||
ABS | 2 | (52 | ) | — | — | — | — | (50 | ) | |||||||||||||||||||
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 loansheld-for-sale | $ | — | $ | — | $ | — | $ | (3 | ) | $ | — | $ | — | $ | (3 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | 70 | $ | — | $ | — | $ | 70 | ||||||||||||||
Net derivatives | $ | (66 | ) | $ | — | $ | (1,444 | ) | $ | 12 | $ | — | $ | — | $ | (1,498 | ) | |||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | 1,369 | $ | — | $ | (75 | ) | $ | — | $ | 1,294 |
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Changes in Unrealized Gains (Losses) | ||||||||||||||||||||||||||||
Relating to Assets and Liabilities Held at September 30, 2010 | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 4 | $ | (30 | ) | $ | — | $ | — | $ | — | $ | — | $ | (26 | ) | ||||||||||||
RMBS | (5 | ) | — | — | — | — | — | (5 | ) | |||||||||||||||||||
Foreign corporate securities | 5 | (29 | ) | — | — | — | — | (24 | ) | |||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | 1 | (3 | ) | — | — | — | — | (2 | ) | |||||||||||||||||||
Foreign government securities | 2 | — | — | — | — | — | 2 | |||||||||||||||||||||
ABS | 8 | (9 | ) | — | — | — | — | (1 | ) | |||||||||||||||||||
State and political subdivision securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Other fixed maturity securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Total fixed maturity securities | $ | 15 | $ | (71 | ) | $ | — | $ | — | $ | — | $ | — | $ | (56 | ) | ||||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Common stock | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | ||||||||||||
Non-redeemable preferred stock | — | — | — | — | — | — | — | |||||||||||||||||||||
Total equity securities | $ | — | $ | (1 | ) | $ | — | $ | — | $ | — | $ | — | $ | (1 | ) | ||||||||||||
Trading securities | $ | 9 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 9 | ||||||||||||||
Short-term investments | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | ||||||||||||||
Mortgage loansheld-for-sale | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | (74 | ) | $ | — | $ | — | $ | (74 | ) | ||||||||||||
Net derivatives: | ||||||||||||||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | 1 | $ | 63 | $ | — | $ | — | $ | 64 | ||||||||||||||
Foreign currency contracts | — | — | 37 | — | — | — | 37 | |||||||||||||||||||||
Credit contracts | — | — | 12 | — | — | — | 12 | |||||||||||||||||||||
Equity market contracts | (2 | ) | — | (169 | ) | — | — | — | (171 | ) | ||||||||||||||||||
Total net derivatives | $ | (2 | ) | $ | — | $ | (119 | ) | $ | 63 | $ | — | $ | — | $ | (58 | ) | |||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | 126 | $ | — | $ | — | $ | — | $ | 126 | ||||||||||||||
Long-term debt of consolidated securitization entities | $ | — | $ | 37 | $ | — | $ | — | $ | — | $ | — | $ | 37 |
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Changes in Unrealized Gains (Losses) | ||||||||||||||||||||||||||||
Relating to Assets and Liabilities Held at September 30, 2009 | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 5 | $ | (13 | ) | $ | — | $ | — | $ | — | $ | — | $ | (8 | ) | ||||||||||||
RMBS | 12 | — | — | — | — | — | 12 | |||||||||||||||||||||
Foreign corporate securities | (1 | ) | (45 | ) | — | — | — | — | (46 | ) | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | — | (31 | ) | — | — | — | — | (31 | ) | |||||||||||||||||||
Foreign government securities | 3 | — | — | — | — | — | 3 | |||||||||||||||||||||
ABS | 1 | (6 | ) | — | — | — | — | (5 | ) | |||||||||||||||||||
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 loansheld-for-sale | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | (10 | ) | $ | — | $ | — | $ | (10 | ) | ||||||||||||
Net derivatives | $ | 4 | $ | — | $ | (574 | ) | $ | 49 | $ | — | $ | — | $ | (521 | ) | ||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | (545 | ) | $ | — | $ | (7 | ) | $ | — | $ | (552 | ) |
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Changes in Unrealized Gains (Losses) | ||||||||||||||||||||||||||||
Relating to Assets and Liabilities Held at September 30, 2010 | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 11 | $ | (44 | ) | $ | — | $ | — | $ | — | $ | — | $ | (33 | ) | ||||||||||||
RMBS | 21 | — | — | — | — | — | 21 | |||||||||||||||||||||
Foreign corporate securities | 9 | (45 | ) | — | — | — | — | (36 | ) | |||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | 1 | (3 | ) | — | — | — | — | (2 | ) | |||||||||||||||||||
Foreign government securities | 6 | — | — | — | — | — | 6 | |||||||||||||||||||||
ABS | 26 | (54 | ) | — | — | — | — | (28 | ) | |||||||||||||||||||
State and political subdivision securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Other fixed maturity securities | — | — | — | — | — | — | — | |||||||||||||||||||||
Total fixed maturity securities | $ | 74 | $ | (146 | ) | $ | — | $ | — | $ | — | $ | — | $ | (72 | ) | ||||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Common stock | $ | — | $ | (2 | ) | $ | — | $ | — | $ | — | $ | — | $ | (2 | ) | ||||||||||||
Non-redeemable preferred stock | — | — | — | — | — | — | — | |||||||||||||||||||||
Total equity securities | $ | — | $ | (2 | ) | $ | — | $ | — | $ | — | $ | — | $ | (2 | ) | ||||||||||||
Trading securities | $ | 3 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 3 | ||||||||||||||
Short-term investments | $ | 2 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2 | ||||||||||||||
Mortgage loansheld-for-sale | $ | — | $ | — | $ | — | $ | (1 | ) | $ | — | $ | — | $ | (1 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | (294 | ) | $ | — | $ | — | $ | (294 | ) | ||||||||||||
Net derivatives: | ||||||||||||||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | 36 | $ | 66 | $ | — | $ | — | $ | 102 | ||||||||||||||
Foreign currency contracts | — | — | 31 | — | — | — | 31 | |||||||||||||||||||||
Credit contracts | — | — | (9 | ) | — | — | — | (9 | ) | |||||||||||||||||||
Equity market contracts | 5 | — | 250 | — | — | — | 255 | |||||||||||||||||||||
Total net derivatives | $ | 5 | $ | — | $ | 308 | $ | 66 | $ | — | $ | — | $ | 379 | ||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | (1,556 | ) | $ | — | $ | 46 | $ | — | $ | (1,510 | ) | ||||||||||||
Long-term debt of consolidated securitization entities | $ | — | $ | 48 | $ | — | $ | — | $ | — | $ | — | $ | 48 |
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Changes in Unrealized Gains (Losses) | ||||||||||||||||||||||||||||
Relating to Assets and Liabilities Held at September 30, 2009 | ||||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Net | Investment | Derivatives | Policyholder | |||||||||||||||||||||||||
Investment | Gains | Gains | Other | Benefits and | Other | |||||||||||||||||||||||
Income | (Losses) | (Losses) | Revenues | Claims | Expenses | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 13 | $ | (457 | ) | $ | — | $ | — | $ | — | $ | — | $ | (444 | ) | ||||||||||||
RMBS | 14 | 1 | — | — | — | — | 15 | |||||||||||||||||||||
Foreign corporate securities | (4 | ) | (246 | ) | — | — | — | — | (250 | ) | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | — | — | — | — | — | — | — | |||||||||||||||||||||
CMBS | 1 | (51 | ) | — | — | — | — | (50 | ) | |||||||||||||||||||
Foreign government securities | 8 | — | — | — | — | — | 8 | |||||||||||||||||||||
ABS | 2 | (103 | ) | — | — | — | — | (101 | ) | |||||||||||||||||||
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 loansheld-for-sale | $ | — | $ | — | $ | — | $ | (3 | ) | $ | — | $ | — | $ | (3 | ) | ||||||||||||
MSRs | $ | — | $ | — | $ | — | $ | 50 | $ | — | $ | — | $ | 50 | ||||||||||||||
Net derivatives | $ | (66 | ) | $ | — | $ | (1,405 | ) | $ | 49 | $ | — | $ | — | $ | (1,422 | ) | |||||||||||
Liabilities: | ||||||||||||||||||||||||||||
Net embedded derivatives | $ | — | $ | — | $ | 1,354 | $ | — | $ | (75 | ) | $ | — | $ | 1,279 |
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Table of Contents
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Unpaid principal balance | $ | 2,051 | $ | 2,418 | ||||
Excess of estimated fair value over unpaid principal balance | 90 | 52 | ||||||
Carrying value at estimated fair value | $ | 2,141 | $ | 2,470 | ||||
Loans in non-accrual status | $ | 2 | $ | 4 | ||||
Loans more than 90 days past due | $ | 3 | $ | 2 | ||||
Loans in non-accrual status or more than 90 days past due, or both — difference between aggregate estimated fair value and unpaid principal balance | $ | (1 | ) | $ | (2 | ) |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Instrument-specific credit risk based on changes in credit spreads for non-agency loans and adjustments in individual loan quality | $ | (1 | ) | $ | (1 | ) | $ | (1 | ) | $ | (2 | ) | ||||
Other changes in estimated fair value | 139 | 149 | 400 | 457 | ||||||||||||
Total gains (losses) recognized in other revenues | $ | 138 | $ | 148 | $ | 399 | $ | 455 | ||||||||
September 30, 2010 | ||||
(In millions) | ||||
Unpaid principal balance | $ | 6,881 | ||
Excess of estimated fair value over unpaid principal balance | 212 | |||
Carrying value at estimated fair value | $ | 7,093 | ||
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September 30, 2010 | ||||
(In millions) | ||||
Contractual principal balance | $ | 6,852 | ||
Excess of estimated fair value over contractual principal balance | 223 | |||
Carrying value at estimated fair value | $ | 7,075 | ||
Three Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Estimated | Net | Estimated | Net | |||||||||||||||||||||
Carrying | Fair | Investment | Carrying | Fair | Investment | |||||||||||||||||||
Value Prior to | Value After | Gains | Value Prior to | Value After | Gains | |||||||||||||||||||
Measurement | Measurement | (Losses) | Measurement | Measurement | (Losses) | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Mortgage loans: (1) | ||||||||||||||||||||||||
Held-for-investment | $ | 93 | $ | 93 | $ | — | $ | 88 | $ | 63 | $ | (25 | ) | |||||||||||
Held-for-sale | 27 | 28 | 1 | 35 | 33 | (2 | ) | |||||||||||||||||
Mortgage loans, net | $ | 120 | $ | 121 | $ | 1 | $ | 123 | $ | 96 | $ | (27 | ) | |||||||||||
Other limited partnership interests (2) | $ | 3 | $ | 1 | $ | (2 | ) | $ | 49 | $ | 36 | $ | (13 | ) | ||||||||||
Real estate joint ventures (3) | $ | — | $ | — | $ | — | $ | 49 | $ | 27 | $ | (22 | ) |
Nine Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Estimated | Net | Estimated | Net | |||||||||||||||||||||
Carrying | Fair | Investment | Carrying | Fair | Investment | |||||||||||||||||||
Value Prior to | Value After | Gains | Value Prior to | Value After | Gains | |||||||||||||||||||
Measurement | Measurement | (Losses) | Measurement | Measurement | (Losses) | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Mortgage loans: (1) | ||||||||||||||||||||||||
Held-for-investment | $ | 90 | $ | 93 | $ | 3 | $ | 176 | $ | 123 | $ | (53 | ) | |||||||||||
Held-for-sale | 28 | 28 | — | 41 | 38 | (3 | ) | |||||||||||||||||
Mortgage loans, net | $ | 118 | $ | 121 | $ | 3 | $ | 217 | $ | 161 | $ | (56 | ) | |||||||||||
Other limited partnership interests (2) | $ | 28 | $ | 18 | $ | (10 | ) | $ | 881 | $ | 527 | $ | (354 | ) | ||||||||||
Real estate joint ventures (3) | $ | 33 | $ | 8 | $ | (25 | ) | $ | 186 | $ | 96 | $ | (90 | ) |
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(1) | Mortgage loans —The impaired mortgage loans presented above were written down to their estimated fair values at the date the impairments were recognized and are reported as losses above. Subsequent improvements in estimated fair value on previously impaired loans recorded through a reduction in the previously established valuation allowance are reported as gains above. Estimated fair values for impaired mortgage loans are based on observable market prices or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, on the estimated fair value of the underlying collateral, or the present value of the expected future cash flows. Impairments to estimated fair value and decreases in previous impairments from subsequent improvements in estimated fair value represent non-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 loans. | |
(2) | Other limited partnership interests —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 represent non-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. This category includes several private equity and debt funds that typically invest primarily in a diversified pool of investments across certain investment strategies including domestic and international leveraged buyout funds; power, energy, timber and infrastructure development funds; venture capital funds; below investment grade debt and mezzanine debt funds. The estimated fair values of these investments have been determined using the NAV of the Company’s ownership interest in the partners’ capital. Distributions from these investments will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next 2 to 10 years. Unfunded commitments for these investments were $25 million at September 30, 2010. | |
(3) | 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 represent non-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. This category includes several real estate funds that typically invest primarily in commercial real estate. The estimated fair values of these investments have been determined using the NAV of the Company’s ownership interest in the partners’ capital. Distributions from these investments will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next 2 to 10 years. Unfunded commitments for these investments were $7 million at September 30, 2010. |
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Estimated | ||||||||||||
Notional | Carrying | Fair | ||||||||||
September 30, 2010 | Amount | Value | Value | |||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Mortgage loans: (1) | ||||||||||||
Held-for-investment | $ | 50,005 | $ | 51,331 | ||||||||
Held-for-sale | 699 | 699 | ||||||||||
Mortgage loans, net | $ | 50,704 | $ | 52,030 | ||||||||
Policy loans | $ | 10,230 | $ | 12,173 | ||||||||
Real estate joint ventures (2) | $ | 110 | $ | 132 | ||||||||
Other limited partnership interests (2) | $ | 1,575 | $ | 1,754 | ||||||||
Short-term investments (3) | $ | 310 | $ | 310 | ||||||||
Other invested assets (2) | $ | 912 | $ | 912 | ||||||||
Cash and cash equivalents | $ | 14,557 | $ | 14,557 | ||||||||
Accrued investment income | $ | 3,469 | $ | 3,469 | ||||||||
Premiums, reinsurance and other receivables (2) | $ | 3,272 | $ | 3,744 | ||||||||
Other assets (2) | $ | 425 | $ | 394 | ||||||||
Liabilities | ||||||||||||
Policyholder account balances (2) | $ | 100,287 | $ | 106,415 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 31,891 | $ | 31,891 | ||||||||
Bank deposits | $ | 9,362 | $ | 9,415 | ||||||||
Short-term debt | $ | 2,057 | $ | 2,057 | ||||||||
Long-term debt (2) | $ | 17,404 | $ | 19,037 | ||||||||
Collateral financing arrangements | $ | 5,297 | $ | 2,484 | ||||||||
Junior subordinated debt securities | $ | 3,191 | $ | 3,415 | ||||||||
Other liabilities (2) | $ | 3,829 | $ | 3,829 | ||||||||
Separate account liabilities (2) | $ | 40,538 | $ | 40,538 | ||||||||
Commitments(4) | ||||||||||||
Mortgage loan commitments | $ | 3,225 | $ | — | $ | (2 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 2,053 | $ | — | $ | 73 |
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Estimated | ||||||||||||
Notional | Carrying | Fair | ||||||||||
December 31, 2009 | Amount | Value | Value | |||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Mortgage loans: (1) | ||||||||||||
Held-for-investment | $ | 48,181 | $ | 46,315 | ||||||||
Held-for-sale | 258 | 258 | ||||||||||
Mortgage loans, net | $ | 48,439 | $ | 46,573 | ||||||||
Policy loans | $ | 10,061 | $ | 11,294 | ||||||||
Real estate joint ventures (2) | $ | 115 | $ | 127 | ||||||||
Other limited partnership interests (2) | $ | 1,571 | $ | 1,581 | ||||||||
Short-term investments (3) | $ | 201 | $ | 201 | ||||||||
Other invested assets (2) | $ | 1,241 | $ | 1,284 | ||||||||
Cash and cash equivalents | $ | 10,112 | $ | 10,112 | ||||||||
Accrued investment income | $ | 3,173 | $ | 3,173 | ||||||||
Premiums, reinsurance and other receivables (2) | $ | 3,375 | $ | 3,532 | ||||||||
Other assets (2) | $ | 425 | $ | 440 | ||||||||
Liabilities | ||||||||||||
Policyholder account balances (2) | $ | 97,131 | $ | 96,735 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 24,196 | $ | 24,196 | ||||||||
Bank deposits | $ | 10,211 | $ | 10,300 | ||||||||
Short-term debt | $ | 912 | $ | 912 | ||||||||
Long-term debt (2) | $ | 13,185 | $ | 13,831 | ||||||||
Collateral financing arrangements | $ | 5,297 | $ | 2,877 | ||||||||
Junior subordinated debt securities | $ | 3,191 | $ | 3,167 | ||||||||
Other liabilities (2) | $ | 1,788 | $ | 1,788 | ||||||||
Separate account liabilities (2) | $ | 32,171 | $ | 32,171 | ||||||||
Commitments(4) | ||||||||||||
Mortgage loan commitments | $ | 2,220 | $ | — | $ | (48 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,261 | $ | — | $ | (52 | ) |
(1) | Mortgage loansheld-for-investment as presented in the tables above differ from the amount presented in the consolidated balance sheets because these tables do not include commercial mortgage loans held by consolidated securitization entities. Mortgage loansheld-for-sale as presented in the tables above differ from the amount presented in the consolidated balance sheets because these tables do not include residential mortgage loansheld-for-sale accounted for under the fair value option. | |
(2) | Carrying values presented herein differ from those presented in the consolidated balance sheets because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions excluded from the table above are not considered financial instruments. | |
(3) | Short-term investments as presented in the tables above differ from the amounts presented in the consolidated balance sheets because these tables do not include short-term investments that meet the definition of a security, which are measured at estimated fair value on a recurring basis. | |
(4) | Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. |
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6. | Closed Block |
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September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Closed Block Liabilities | ||||||||
Future policy benefits | $ | 43,409 | $ | 43,576 | ||||
Other policyholder funds | 305 | 307 | ||||||
Policyholder dividends payable | 699 | 615 | ||||||
Policyholder dividend obligation | 2,014 | — | ||||||
Other liabilities | 651 | 576 | ||||||
Total closed block liabilities | 47,078 | 45,074 | ||||||
Assets Designated to the Closed Block | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at estimated fair value (amortized cost: | ||||||||
$27,318 and $27,129, respectively) | 30,217 | 27,375 | ||||||
Equity securitiesavailable-for-sale, at estimated fair value (cost: $110 and $204, respectively) | 107 | 218 | ||||||
Mortgage loans | 6,064 | 6,200 | ||||||
Policy loans | 4,609 | 4,538 | ||||||
Real estate and real estate joint venturesheld-for-investment | 331 | 321 | ||||||
Short-term investments | — | 1 | ||||||
Other invested assets | 588 | 463 | ||||||
Total investments | 41,916 | 39,116 | ||||||
Cash and cash equivalents | 207 | 241 | ||||||
Accrued investment income | 538 | 489 | ||||||
Premiums, reinsurance and other receivables | 75 | 78 | ||||||
Current income tax recoverable | 100 | 112 | ||||||
Deferred income tax assets | 307 | 612 | ||||||
Total assets designated to the closed block | 43,143 | 40,648 | ||||||
Excess of closed block liabilities over assets designated to the closed block | 3,935 | 4,426 | ||||||
Amounts included in accumulated other comprehensive income (loss): | ||||||||
Unrealized investment gains (losses), net of income tax of $1,015 and $89, respectively | 1,884 | 166 | ||||||
Unrealized gains (losses) on derivative instruments, net of income tax of $5 and ($3), respectively | 9 | (5 | ) | |||||
Allocated to policyholder dividend obligation, net of income tax of ($705) and $0, respectively | (1,309 | ) | — | |||||
Total amounts included in accumulated other comprehensive income (loss) | 584 | 161 | ||||||
Maximum future earnings to be recognized from closed block assets and liabilities | $ | 4,519 | $ | 4,587 | ||||
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Nine Months | Year | |||||||
Ended | Ended | |||||||
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Change in unrealized investment and derivative gains (losses) | 2,014 | — | ||||||
Balance, end of period | $ | 2,014 | $ | — | ||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 593 | $ | 649 | $ | 1,776 | $ | 1,953 | ||||||||
Net investment income | 571 | 547 | 1,714 | 1,633 | ||||||||||||
Net investment gains (losses): | ||||||||||||||||
Other-than-temporary impairments on fixed maturity securities | (5 | ) | (12 | ) | (23 | ) | (69 | ) | ||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) | — | 6 | — | 14 | ||||||||||||
Other net investment gains (losses) | 3 | 105 | 42 | 298 | ||||||||||||
Total net investment gains (losses) | (2 | ) | 99 | 19 | 243 | |||||||||||
Net derivatives gains (losses) | (36 | ) | (47 | ) | (22 | ) | (132 | ) | ||||||||
Total revenues | 1,126 | 1,248 | 3,487 | 3,697 | ||||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 758 | 800 | 2,262 | 2,412 | ||||||||||||
Policyholder dividends | 329 | 375 | 974 | 1,114 | ||||||||||||
Other expenses | 50 | 50 | 151 | 154 | ||||||||||||
Total expenses | 1,137 | 1,225 | 3,387 | 3,680 | ||||||||||||
Revenues, net of expenses before provision for income tax expense (benefit) | (11 | ) | 23 | 100 | 17 | |||||||||||
Provision for income tax expense (benefit) | (5 | ) | 6 | 32 | 3 | |||||||||||
Revenues, net of expenses and provision for income tax expense (benefit) | $ | (6 | ) | $ | 17 | $ | 68 | $ | 14 | |||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Balance, end of period | $ | 4,519 | $ | 4,504 | $ | 4,519 | $ | 4,504 | ||||||||
Balance, beginning of period | 4,513 | 4,521 | 4,587 | 4,518 | ||||||||||||
Change during period | $ | 6 | $ | (17 | ) | $ | (68 | ) | $ | (14 | ) | |||||
7. | Long-term and Short-term Debt |
• | $1,000 million senior notes due February 6, 2014, which bear interest at a fixed rate of 2.375%, payable semiannually; | |
• | $1,000 million senior notes due February 8, 2021, which bear interest at a fixed rate of 4.75%, payable semiannually; | |
• | $750 million senior notes due February 6, 2041, which bear interest at a fixed rate of 5.875%, payable semiannually; and | |
• | $250 million floating rate senior notes due August 6, 2013, which bear interest at a rate equal to three-month LIBOR, reset quarterly, plus 1.25%, payable quarterly. |
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8. | Contingencies, Commitments and Guarantees |
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106
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107
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9. | Employee Benefit Plans |
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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, | |||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Service cost | $ | 45 | $ | 44 | $ | 133 | $ | 130 | $ | 4 | $ | 6 | $ | 13 | $ | 17 | ||||||||||||||||
Interest cost | 99 | 98 | 298 | 296 | 28 | 31 | 84 | 94 | ||||||||||||||||||||||||
Settlement and curtailment cost | 1 | — | 8 | — | — | — | — | — | ||||||||||||||||||||||||
Expected return on plan assets | (113 | ) | (111 | ) | (337 | ) | (331 | ) | (19 | ) | (18 | ) | (59 | ) | (55 | ) | ||||||||||||||||
Amortization of net actuarial (gains) losses | 49 | 57 | 147 | 170 | 9 | 10 | 28 | 31 | ||||||||||||||||||||||||
Amortization of prior service cost (credit) | 2 | 3 | 5 | 7 | (21 | ) | (9 | ) | (62 | ) | (27 | ) | ||||||||||||||||||||
Net periodic benefit cost | $ | 83 | $ | 91 | $ | 254 | $ | 272 | $ | 1 | $ | 20 | $ | 4 | $ | 60 | ||||||||||||||||
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, | |||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Amortization of net actuarial (gains) losses | $ | 49 | $ | 57 | $ | 147 | $ | 170 | $ | 9 | $ | 10 | $ | 28 | $ | 31 | ||||||||||||||||
Amortization of prior service cost (credit) | 2 | 3 | 5 | 7 | (21 | ) | (9 | ) | (62 | ) | (27 | ) | ||||||||||||||||||||
Subtotal | 51 | 60 | 152 | 177 | (12 | ) | 1 | (34 | ) | 4 | ||||||||||||||||||||||
Deferred income tax expense (benefit) | (17 | ) | (20 | ) | (53 | ) | (60 | ) | 3 | — | 29 | (1 | ) | |||||||||||||||||||
Components of net periodic benefit cost amortized from accumulated other comprehensive income (loss), net of income tax | $ | 34 | $ | 40 | $ | 99 | $ | 117 | $ | (9 | ) | $ | 1 | $ | (5 | ) | $ | 3 | ||||||||||||||
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10. | Equity |
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11. | Other Expenses |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Compensation | $ | 920 | $ | 942 | $ | 2,812 | $ | 2,872 | ||||||||
Commissions | 878 | 815 | 2,538 | 2,538 | ||||||||||||
Interest and debt issue costs | 397 | 284 | 1,155 | 799 | ||||||||||||
Interest credited to bank deposits | 33 | 37 | 108 | 120 | ||||||||||||
Capitalization of DAC | (778 | ) | (722 | ) | (2,289 | ) | (2,265 | ) | ||||||||
Amortization of DAC and VOBA | 579 | 202 | 2,201 | 838 | ||||||||||||
Rent, net of sublease income | 96 | 112 | 291 | 328 | ||||||||||||
Insurance tax | 138 | 144 | 394 | 412 | ||||||||||||
Other | 733 | 729 | 2,148 | 1,934 | ||||||||||||
Total other expenses | $ | 2,996 | $ | 2,543 | $ | 9,358 | $ | 7,576 | ||||||||
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period | $ | 20 | $ | 36 | $ | 36 | $ | 86 | ||||||||
Severance charges | 2 | 34 | 15 | 72 | ||||||||||||
Change in severance charge estimates | (3 | ) | — | (1 | ) | (1 | ) | |||||||||
Cash payments | (12 | ) | (22 | ) | (43 | ) | (109 | ) | ||||||||
Balance, end of period | $ | 7 | $ | 48 | $ | 7 | $ | 48 | ||||||||
Restructuring charges incurred in current period | $ | (1 | ) | $ | 34 | $ | 14 | $ | 71 | |||||||
Total restructuring charges incurred since inception of program | $ | 191 | $ | 172 | $ | 191 | $ | 172 | ||||||||
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12. | Earnings Per Common Share |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions, except share and per common share data) | ||||||||||||||||
Weighted Average Shares: | ||||||||||||||||
Weighted average common stock outstanding for basic earnings per common share | 875,782,191 | 821,764,490 | 840,375,518 | 817,302,327 | ||||||||||||
Incremental common shares from assumed: | ||||||||||||||||
Exercise or issuance of stock-based awards (1) | 7,317,973 | — | 6,950,540 | — | ||||||||||||
Weighted average common stock outstanding for diluted earnings per common share | 883,100,164 | 821,764,490 | 847,326,058 | 817,302,327 | ||||||||||||
Income (Loss) from Continuing Operations: | ||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 322 | $ | (624 | ) | $ | 2,696 | $ | (2,628 | ) | ||||||
Less: Income (loss) from continuing operations, net of income tax, attributable to noncontrolling interests | 4 | (5 | ) | (7 | ) | (25 | ) | |||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 91 | ||||||||||||
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders | $ | 288 | $ | (649 | ) | $ | 2,612 | $ | (2,694 | ) | ||||||
Basic | $ | 0.33 | $ | (0.79 | ) | $ | 3.10 | $ | (3.30 | ) | ||||||
Diluted | $ | 0.32 | $ | (0.79 | ) | $ | 3.08 | $ | (3.30 | ) | ||||||
Income (Loss) from Discontinued Operations: | ||||||||||||||||
Income (loss) from discontinued operations, net of income tax | $ | (2 | ) | $ | (1 | ) | $ | 5 | $ | 37 | ||||||
Less: Income (loss) from discontinued operations, net of income tax, attributable to noncontrolling interests | — | — | — | — | ||||||||||||
Income (loss) from discontinued operations, net of income tax, available to MetLife, Inc.’s common shareholders | $ | (2 | ) | $ | (1 | ) | $ | 5 | $ | 37 | ||||||
Basic | $ | — | $ | — | $ | 0.01 | $ | 0.05 | ||||||||
Diluted | $ | — | $ | — | $ | 0.01 | $ | 0.05 | ||||||||
Net Income (Loss): | ||||||||||||||||
Net income (loss) | $ | 320 | $ | (625 | ) | $ | 2,701 | $ | (2,591 | ) | ||||||
Less: Net income (loss) attributable to noncontrolling interests | 4 | (5 | ) | (7 | ) | (25 | ) | |||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 91 | ||||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 286 | $ | (650 | ) | $ | 2,617 | $ | (2,657 | ) | ||||||
Basic | $ | 0.33 | $ | (0.79 | ) | $ | 3.11 | $ | (3.25 | ) | ||||||
Diluted | $ | 0.32 | $ | (0.79 | ) | $ | 3.09 | $ | (3.25 | ) | ||||||
(1) | For the three months and nine months ended September 30, 2009, 5,540,339 shares and 3,575,086 shares, respectively, related to the assumed exercise or issuance of stock-based awards have been excluded from the calculation of diluted earnings per common share as these assumed shares are anti-dilutive. |
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13. | Business Segment Information |
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Operating Earnings | ||||||||||||||||||||||||||||||||||||||||
U.S. Business | ||||||||||||||||||||||||||||||||||||||||
Corporate | Auto | Banking, | ||||||||||||||||||||||||||||||||||||||
Insurance | Retirement | Benefit | & | Corporate | Total | |||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2010 | Products | Products | Funding | Home | Total | International | & Other | Total | Adjustments | Consolidated | ||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums | $ | 4,234 | $ | 128 | $ | 501 | $ | 740 | $ | 5,603 | $ | 956 | $ | 3 | $ | 6,562 | $ | — | $ | 6,562 | ||||||||||||||||||||
Universal life and investment-type product policy fees | 539 | 554 | 58 | — | 1,151 | 302 | — | 1,453 | — | 1,453 | ||||||||||||||||||||||||||||||
Net investment income | 1,515 | 777 | 1,295 | 51 | 3,638 | 474 | 225 | 4,337 | 54 | 4,391 | ||||||||||||||||||||||||||||||
Other revenues | 185 | 56 | 59 | 8 | 308 | 7 | 309 | 624 | — | 624 | ||||||||||||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | — | — | — | (342 | ) | (342 | ) | ||||||||||||||||||||||||||||
Net derivatives gains (losses) | — | — | — | — | — | — | — | — | (244 | ) | (244 | ) | ||||||||||||||||||||||||||||
Total revenues | 6,473 | 1,515 | 1,913 | 799 | 10,700 | 1,739 | 537 | 12,976 | (532 | ) | 12,444 | |||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 4,685 | 456 | 1,120 | 506 | 6,767 | 852 | (4 | ) | 7,615 | 174 | 7,789 | |||||||||||||||||||||||||||||
Interest credited to policyholder account balances | 243 | 393 | 381 | — | 1,017 | 244 | — | 1,261 | 5 | 1,266 | ||||||||||||||||||||||||||||||
Interest credited to bank deposits | — | — | — | — | — | — | 33 | 33 | — | 33 | ||||||||||||||||||||||||||||||
Capitalization of DAC | (204 | ) | (270 | ) | (6 | ) | (118 | ) | (598 | ) | (180 | ) | — | (778 | ) | — | (778 | ) | ||||||||||||||||||||||
Amortization of DAC and VOBA | 221 | 98 | 4 | 110 | 433 | 110 | (1 | ) | 542 | 37 | 579 | |||||||||||||||||||||||||||||
Interest expense | — | 1 | 2 | — | 3 | (1 | ) | 292 | 294 | 103 | 397 | |||||||||||||||||||||||||||||
Other expenses | 998 | 607 | 121 | 200 | 1,926 | 519 | 278 | 2,723 | 42 | 2,765 | ||||||||||||||||||||||||||||||
Total expenses | 5,943 | 1,285 | 1,622 | 698 | 9,548 | 1,544 | 598 | 11,690 | 361 | 12,051 | ||||||||||||||||||||||||||||||
Provision for income tax expense (benefit) | 185 | 81 | 102 | 20 | 388 | 4 | (14 | ) | 378 | (307 | ) | 71 | ||||||||||||||||||||||||||||
Operating earnings | $ | 345 | $ | 149 | $ | 189 | $ | 81 | $ | 764 | $ | 191 | $ | (47 | ) | 908 | ||||||||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||||||||||||||
Total revenues | (532 | ) | ||||||||||||||||||||||||||||||||||||||
Total expenses | (361 | ) | ||||||||||||||||||||||||||||||||||||||
Provision for income tax (expense) benefit | 307 | |||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 322 | $ | 322 | ||||||||||||||||||||||||||||||||||||
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Operating Earnings | ||||||||||||||||||||||||||||||||||||||||
U.S. Business | ||||||||||||||||||||||||||||||||||||||||
Corporate | Auto | Banking, | ||||||||||||||||||||||||||||||||||||||
Insurance | Retirement | Benefit | & | Corporate | Total | |||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2009 | Products | Products | Funding | Home | Total | International | & Other | Total | Adjustments | Consolidated | ||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums | $ | 4,222 | $ | 140 | $ | 639 | $ | 727 | $ | 5,728 | $ | 868 | $ | 5 | $ | 6,601 | $ | — | $ | 6,601 | ||||||||||||||||||||
Universal life and investment-type product policy fees | 533 | 466 | 34 | — | 1,033 | 222 | — | 1,255 | (4 | ) | 1,251 | |||||||||||||||||||||||||||||
Net investment income | 1,437 | 749 | 1,210 | 45 | 3,441 | 395 | 120 | 3,956 | (33 | ) | 3,923 | |||||||||||||||||||||||||||||
Other revenues | 221 | 61 | 34 | 8 | 324 | 4 | 274 | 602 | — | 602 | ||||||||||||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | — | — | — | (732 | ) | (732 | ) | ||||||||||||||||||||||||||||
Net derivatives gains (losses) | — | — | — | — | — | — | — | — | (1,407 | ) | (1,407 | ) | ||||||||||||||||||||||||||||
Total revenues | 6,413 | 1,416 | 1,917 | 780 | 10,526 | 1,489 | 399 | 12,414 | (2,176 | ) | 10,238 | |||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 4,745 | 424 | 1,192 | 483 | 6,844 | 705 | — | 7,549 | 63 | 7,612 | ||||||||||||||||||||||||||||||
Interest credited to policyholder account balances | 240 | 431 | 390 | — | 1,061 | 198 | — | 1,259 | (1 | ) | 1,258 | |||||||||||||||||||||||||||||
Interest credited to bank deposits | — | — | — | — | — | — | 37 | 37 | — | 37 | ||||||||||||||||||||||||||||||
Capitalization of DAC | (218 | ) | (223 | ) | (5 | ) | (112 | ) | (558 | ) | (164 | ) | — | (722 | ) | �� | — | (722 | ) | |||||||||||||||||||||
Amortization of DAC and VOBA | 145 | 42 | 3 | 107 | 297 | 79 | — | 376 | (174 | ) | 202 | |||||||||||||||||||||||||||||
Interest expense | — | — | 1 | — | 1 | 3 | 270 | 274 | — | 274 | ||||||||||||||||||||||||||||||
Other expenses | 1,048 | 580 | 128 | 189 | 1,945 | 481 | 297 | 2,723 | 29 | 2,752 | ||||||||||||||||||||||||||||||
Total expenses | 5,960 | 1,254 | 1,709 | 667 | 9,590 | 1,302 | 604 | 11,496 | (83 | ) | 11,413 | |||||||||||||||||||||||||||||
Provision for income tax expense (benefit) | 151 | 57 | 68 | 27 | 303 | 34 | (167 | ) | 170 | (721 | ) | (551 | ) | |||||||||||||||||||||||||||
Operating earnings | $ | 302 | $ | 105 | $ | 140 | $ | 86 | $ | 633 | $ | 153 | $ | (38 | ) | 748 | ||||||||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||||||||||||||
Total revenues | (2,176 | ) | ||||||||||||||||||||||||||||||||||||||
Total expenses | 83 | |||||||||||||||||||||||||||||||||||||||
Provision for income tax (expense) benefit | 721 | |||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | (624 | ) | $ | (624 | ) | ||||||||||||||||||||||||||||||||||
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Operating Earnings | ||||||||||||||||||||||||||||||||||||||||
U.S. Business | ||||||||||||||||||||||||||||||||||||||||
Corporate | Auto | Banking, | ||||||||||||||||||||||||||||||||||||||
Insurance | Retirement | Benefit | & | Corporate | Total | |||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2010 | Products | Products | Funding | Home | Total | International | & Other | Total | Adjustments | Consolidated | ||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums | $ | 12,874 | $ | 402 | $ | 1,875 | $ | 2,177 | $ | 17,328 | $ | 2,744 | $ | 6 | $ | 20,078 | $ | — | $ | 20,078 | ||||||||||||||||||||
Universal life and investment-type product policy fees | 1,634 | 1,628 | 169 | — | 3,431 | 908 | — | 4,339 | 6 | 4,345 | ||||||||||||||||||||||||||||||
Net investment income | 4,514 | 2,313 | 3,878 | 156 | 10,861 | 1,221 | 691 | 12,773 | 49 | 12,822 | ||||||||||||||||||||||||||||||
Other revenues | 562 | 158 | 182 | 14 | 916 | 12 | 753 | 1,681 | — | 1,681 | ||||||||||||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | — | — | — | (324 | ) | (324 | ) | ||||||||||||||||||||||||||||
Net derivatives gains (losses) | — | — | — | — | — | — | — | — | 1,278 | 1,278 | ||||||||||||||||||||||||||||||
Total revenues | 19,584 | 4,501 | 6,104 | 2,347 | 32,536 | 4,885 | 1,450 | 38,871 | 1,009 | 39,880 | ||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 14,253 | 859 | 3,625 | 1,506 | 20,243 | 2,529 | (11 | ) | 22,761 | 348 | 23,109 | |||||||||||||||||||||||||||||
Interest credited to policyholder account balances | 714 | 1,204 | 1,100 | — | 3,018 | 437 | — | 3,455 | 3 | 3,458 | ||||||||||||||||||||||||||||||
Interest credited to bank deposits | — | — | — | — | — | — | 108 | 108 | — | 108 | ||||||||||||||||||||||||||||||
Capitalization of DAC | (627 | ) | (766 | ) | (17 | ) | (339 | ) | (1,749 | ) | (540 | ) | — | (2,289 | ) | — | (2,289 | ) | ||||||||||||||||||||||
Amortization of DAC and VOBA | 666 | 603 | 12 | 328 | 1,609 | 330 | (1 | ) | 1,938 | 263 | 2,201 | |||||||||||||||||||||||||||||
Interest expense | — | 1 | 6 | — | 7 | 2 | 815 | 824 | 312 | 1,136 | ||||||||||||||||||||||||||||||
Other expenses | 3,021 | 1,760 | 370 | 572 | 5,723 | 1,534 | 825 | 8,082 | 120 | 8,202 | ||||||||||||||||||||||||||||||
Total expenses | 18,027 | 3,661 | 5,096 | 2,067 | 28,851 | 4,292 | 1,736 | 34,879 | 1,046 | 35,925 | ||||||||||||||||||||||||||||||
Provision for income tax expense (benefit) | 545 | 294 | 353 | 54 | 1,246 | 106 | (185 | ) | 1,167 | 92 | 1,259 | |||||||||||||||||||||||||||||
Operating earnings | $ | 1,012 | $ | 546 | $ | 655 | $ | 226 | $ | 2,439 | $ | 487 | $ | (101 | ) | 2,825 | ||||||||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||||||||||||||
Total revenues | 1,009 | |||||||||||||||||||||||||||||||||||||||
Total expenses | (1,046 | ) | ||||||||||||||||||||||||||||||||||||||
Provision for income tax (expense) benefit | (92 | ) | ||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 2,696 | $ | 2,696 | ||||||||||||||||||||||||||||||||||||
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Operating Earnings | ||||||||||||||||||||||||||||||||||||||||
U.S. Business | ||||||||||||||||||||||||||||||||||||||||
Corporate | Auto | Banking, | ||||||||||||||||||||||||||||||||||||||
Insurance | Retirement | Benefit | & | Corporate | Total | |||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2009 | Products | Products | Funding | Home | Total | International | & Other | Total | Adjustments | Consolidated | ||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||||||||||||||
Premiums | $ | 12,658 | $ | 431 | $ | 1,658 | $ | 2,175 | $ | 16,922 | $ | 2,366 | $ | 11 | $ | 19,299 | $ | — | $ | 19,299 | ||||||||||||||||||||
Universal life and investment-type product policy fees | 1,659 | 1,219 | 135 | — | 3,013 | 658 | — | 3,671 | (21 | ) | 3,650 | |||||||||||||||||||||||||||||
Net investment income | 4,131 | 2,096 | 3,500 | 134 | 9,861 | 922 | 306 | 11,089 | (175 | ) | 10,914 | |||||||||||||||||||||||||||||
Other revenues | 579 | 125 | 172 | 22 | 898 | 8 | 822 | 1,728 | — | 1,728 | ||||||||||||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | — | — | — | (2,790 | ) | (2,790 | ) | ||||||||||||||||||||||||||||
Net derivatives gains (losses) | — | — | — | — | — | — | — | — | (4,084 | ) | (4,084 | ) | ||||||||||||||||||||||||||||
Total revenues | 19,027 | 3,871 | 5,465 | 2,331 | 30,694 | 3,954 | 1,139 | 35,787 | (7,070 | ) | 28,717 | |||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 14,193 | 1,102 | 3,311 | 1,454 | 20,060 | 1,853 | 3 | 21,916 | 82 | 21,998 | ||||||||||||||||||||||||||||||
Interest credited to policyholder account balances | 704 | 1,261 | 1,258 | — | 3,223 | 435 | — | 3,658 | (3 | ) | 3,655 | |||||||||||||||||||||||||||||
Interest credited to bank deposits | — | — | — | — | — | — | 120 | 120 | — | 120 | ||||||||||||||||||||||||||||||
Capitalization of DAC | (637 | ) | (837 | ) | (13 | ) | (329 | ) | (1,816 | ) | (449 | ) | — | (2,265 | ) | — | (2,265 | ) | ||||||||||||||||||||||
Amortization of DAC and VOBA | 516 | 324 | 12 | 328 | 1,180 | 272 | 2 | 1,454 | (616 | ) | 838 | |||||||||||||||||||||||||||||
Interest expense | 3 | 1 | 3 | — | 7 | 6 | 762 | 775 | — | 775 | ||||||||||||||||||||||||||||||
Other expenses | 3,132 | 1,820 | 355 | 570 | 5,877 | 1,253 | 915 | 8,045 | 63 | 8,108 | ||||||||||||||||||||||||||||||
Total expenses | 17,911 | 3,671 | 4,926 | 2,023 | 28,531 | 3,370 | 1,802 | 33,703 | (474 | ) | 33,229 | |||||||||||||||||||||||||||||
Provision for income tax expense (benefit) | 374 | 70 | 179 | 70 | 693 | 142 | (414 | ) | 421 | (2,305 | ) | (1,884 | ) | |||||||||||||||||||||||||||
Operating earnings | $ | 742 | $ | 130 | $ | 360 | $ | 238 | $ | 1,470 | $ | 442 | $ | (249 | ) | 1,663 | ||||||||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||||||||||||||
Total revenues | (7,070 | ) | ||||||||||||||||||||||||||||||||||||||
Total expenses | 474 | |||||||||||||||||||||||||||||||||||||||
Provision for income tax (expense) benefit | 2,305 | |||||||||||||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | (2,628 | ) | $ | (2,628 | ) | ||||||||||||||||||||||||||||||||||
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
U.S. Business: | ||||||||
Insurance Products | $ | 142,852 | $ | 132,717 | ||||
Retirement Products | 162,956 | 148,756 | ||||||
Corporate Benefit Funding | 179,666 | 159,270 | ||||||
Auto & Home | 5,819 | 5,517 | ||||||
Total | 491,293 | 446,260 | ||||||
International | 41,321 | 33,923 | ||||||
Banking, Corporate & Other | 84,641 | 59,131 | ||||||
Total | $ | 617,255 | $ | 539,314 | ||||
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14. | Discontinued Operations |
Nine Months | ||||
Ended | ||||
September 30, | ||||
2009 | ||||
(In millions) | ||||
Total revenues | $ | 25 | ||
Total expenses | 19 | |||
Income before provision for income tax | 6 | |||
Provision for income tax | 2 | |||
Income from operations of discontinued operations, net of income tax | 4 | |||
Gain on disposal, net of income tax | 32 | |||
Income from discontinued operations, net of income tax | $ | 36 | ||
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15. | Subsequent Events |
(In millions) | ||||||||
Cash | $ | 7,203 | ||||||
MetLife, Inc.’s common stock (78,239,712 shares at $40.90 per share) | 3,200 | |||||||
MetLife, Inc.’s Series B contingent convertible junior participating non-cumulative perpetual preferred stock (1) | 2,805 | |||||||
MetLife, Inc.’s equity units ($3.0 billion aggregate stated amount) (2) | 3,189 | |||||||
Total fair value of consideration transferred | $ | 16,397 | ||||||
(1) | Consists of 6,857,000 shares convertible into approximately 68,570,000 shares (valued at $40.90 per share at the time of the Acquisition) of the Holding Company’s common stock (subject to anti-dilution adjustments) upon a favorable vote of the Holding Company’s common stockholders. | |
(2) | The equity units, which are mandatorily convertible securities, will initially consist of (i) purchase contracts obligating the holder to purchase a variable number of shares of MetLife, Inc.’s common stock on each of three specified future settlement dates (expected to be approximately two, three and four years after closing of the Acquisition), for a fixed amount per purchase contract, (an aggregate of $1.0 billion on each settlement date) and (ii) an interest in each of three series of senior debt securities (Series A, B and C) of MetLife, Inc. At future dates, the Series A, B and C debt securities will be subject to remarketing and sold to investors. Holders of the equity units who elect to include their debt securities in a remarketing can use the proceeds thereof to meet their obligations under the purchase contracts. |
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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, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 322 | $ | (624 | ) | $ | 2,696 | $ | (2,628 | ) | ||||||
Less: Net investment gains (losses) | (342 | ) | (732 | ) | (324 | ) | (2,790 | ) | ||||||||
Less: Net derivatives gains (losses) | (244 | ) | (1,407 | ) | 1,278 | (4,084 | ) | |||||||||
Less: Adjustments to continuing operations(1) | (307 | ) | 46 | (991 | ) | 278 | ||||||||||
Less: Provision for income tax (expense) benefit | 307 | 721 | (92 | ) | 2,305 | |||||||||||
Operating earnings | 908 | 748 | 2,825 | 1,663 | ||||||||||||
Less: Preferred stock dividends | 30 | 30 | 91 | 91 | ||||||||||||
Operating earnings available to common shareholders | $ | 878 | $ | 718 | $ | 2,734 | $ | 1,572 | ||||||||
(1) | See definitions of operating revenues and operating expenses for the components of such adjustments. |
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• | Continued growth in premiums, fees & other revenues for the full year of 2010 of approximately 3% over 2009 primarily from the following businesses: |
• | Higher fees earned on separate accounts, as the recovery in the equity market continues, relative to the prior year, thereby increasing the value of those separate accounts; | |
• | Increased growth in our International segment, due to improved results from ongoing investments and enhancements in the various distribution and service operations throughout the regions; and | |
• | Offsetting these growth areas, MetLife Bank’s premiums, fees & other revenues are lower than the 2009 levels, in line with current market expectations. |
• | Higher returns on the investment portfolio, as returns on alternative investment classes improve and we reinvest cash and U.S. Treasuries into higher yielding asset classes. | |
• | Improvement in net investment gains (losses) from the large losses encountered in 2009 on our investment portfolio. We continue to see a significant improvement in net investment gains (losses) on our investment portfolio as the financial markets stabilize across asset classes. | |
• | More difficult to predict is the impact of potential changes in fair value of freestanding derivatives as even relatively small movements in market variables, including interest rates, equity levels and volatility, can have a large impact on the fair value of derivatives and net derivatives gains (losses). Additionally, changes in value of embedded derivatives within certain insurance liabilities may have a material impact on net derivatives gains (losses) related to the inclusion of an adjustment for nonperformance risk. | |
• | Reduced volatility in guarantee-related liabilities. Certain annuity and life benefit guarantees are tied to market performance, which when markets are depressed, may require us to establish additional liabilities, even though these guarantees are significantly hedged. In line with the assumptions discussed above, we continue to see a reduction in the volatility of these items in 2010 compared to 2009. | |
• | Focus on disciplined underwriting. We continue to see no significant changes to the underlying trends that drive underwriting results and anticipate solid results in 2010. We did begin to see the negative impact of the economy on the non-medical health business in 2009. While this trend has continued for some of our businesses in 2010 it has moderated and we expect it to continue as the economy improves. | |
• | Focus on expense management. We continue to see focus on expense control throughout the Company, as well the continuing impact of specific initiatives such as Operational Excellence (our enterprise-wide cost reduction and revenue enhancement initiative), contribute to increased profitability. |
• | Given the closing time frame and the acquisition and integration expenses incurred in relation to the Acquisition, the Company does not anticipate that the impact on MetLife’s 2010 earnings will be material. The valuation on the Company’s balance sheet, of the assets and liabilities acquired, will be included in our Annual Report onForm 10-K for the year ended December 31, 2010. | |
• | ALICO is one of the largest and most diversified international life insurance companies in the world, providing consumers and businesses with products and services for life insurance, accident and health insurance, retirement and wealth management solutions. The Acquisition includes all of the Alico Business, including the business’ distribution system composed of agents, brokers and financial institutions; 12,500 employees across more than 50 countries; and 20 million customers worldwide. The Acquisition also includes the Alico Business’ Global Benefits Network serving U.S. and foreign multinationals. |
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• | With the acquisition of the Alico Business, MetLife is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 60 countries. MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. This transaction delivers on our global growth strategies, adding significant scale and reach to MetLife’s international footprint, furthering our diversification in geographic mix and product offerings, as well as increasing our distribution strength. In 2011, our International segment is expected to contribute 40% to MetLife’s operating earnings. |
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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 and the application of the consolidation rules to certain investments; | |
(iv) | the estimated fair value of and accounting for freestanding derivatives and the existence and estimated fair value of embedded derivatives requiring bifurcation; | |
(v) | the capitalization and amortization of DAC and the establishment and amortization of VOBA; | |
(vi) | the measurement of goodwill and related impairment, if any; | |
(vii) | the liability for future policyholder benefits and the accounting for reinsurance contracts; | |
(viii) | accounting for income taxes and the valuation of deferred tax assets; | |
(ix) | accounting for employee benefit plans; and | |
(x) | the liability for litigation and regulatory matters. |
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 6,562 | $ | 6,601 | $ | (39 | ) | (0.6 | )% | |||||||
Universal life and investment-type product policy fees | 1,453 | 1,251 | 202 | 16.1 | % | |||||||||||
Net investment income | 4,391 | 3,923 | 468 | 11.9 | % | |||||||||||
Other revenues | 624 | 602 | 22 | 3.7 | % | |||||||||||
Net investment gains (losses) | (342 | ) | (732 | ) | 390 | 53.3 | % | |||||||||
Net derivatives gains (losses) | (244 | ) | (1,407 | ) | 1,163 | 82.7 | % | |||||||||
Total revenues | 12,444 | 10,238 | 2,206 | 21.5 | % | |||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 7,789 | 7,612 | 177 | 2.3 | % | |||||||||||
Interest credited to policyholder account balances | 1,266 | 1,258 | 8 | 0.6 | % | |||||||||||
Interest credited to bank deposits | 33 | 37 | (4 | ) | (10.8 | )% | ||||||||||
Capitalization of DAC | (778 | ) | (722 | ) | (56 | ) | (7.8 | )% | ||||||||
Amortization of DAC and VOBA | 579 | 202 | 377 | 186.6 | % | |||||||||||
Interest expense | 397 | 274 | 123 | 44.9 | % | |||||||||||
Other expenses | 2,765 | 2,752 | 13 | 0.5 | % | |||||||||||
Total expenses | 12,051 | 11,413 | 638 | 5.6 | % | |||||||||||
Income (loss) from continuing operations before provision for income tax | 393 | (1,175 | ) | 1,568 | 133.4 | % | ||||||||||
Provision for income tax expense (benefit) | 71 | (551 | ) | 622 | 112.9 | % | ||||||||||
Income (loss) from continuing operations, net of income tax | 322 | (624 | ) | 946 | 151.6 | % | ||||||||||
Income (loss) from discontinued operations, net of income tax | (2 | ) | (1 | ) | (1 | ) | (100.0 | )% | ||||||||
Net income (loss) | 320 | (625 | ) | 945 | 151.2 | % | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests | 4 | (5 | ) | 9 | 180.0 | % | ||||||||||
Net income (loss) attributable to MetLife, Inc. | 316 | (620 | ) | 936 | 151.0 | % | ||||||||||
Less: Preferred stock dividends | 30 | 30 | — | — | % | |||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 286 | $ | (650 | ) | $ | 936 | 144.0 | % | |||||||
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Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 401 | $ | 177 | $ | 109 | $ | 76 | $ | (133 | ) | $ | (308 | ) | $ | 322 | ||||||||||||
Less: Net investment gains (losses) | 69 | 9 | 50 | (3 | ) | (239 | ) | (228 | ) | (342 | ) | |||||||||||||||||
Less: Net derivatives gains (losses) | 86 | 109 | (186 | ) | (4 | ) | (109 | ) | (140 | ) | (244 | ) | ||||||||||||||||
Less: Adjustments to continuing operations (1) | (69 | ) | (75 | ) | 11 | — | (145 | ) | (29 | ) | (307 | ) | ||||||||||||||||
Less: Provision for income tax (expense) benefit | (30 | ) | (15 | ) | 45 | 2 | 169 | 136 | 307 | |||||||||||||||||||
Operating earnings | $ | 345 | $ | 149 | $ | 189 | $ | 81 | $ | 191 | (47 | ) | 908 | |||||||||||||||
Less: Preferred stock dividends | 30 | 30 | ||||||||||||||||||||||||||
Operating earnings available to common shareholders | $ | (77 | ) | $ | 878 | |||||||||||||||||||||||
Corporate | Banking | |||||||||||||||||||||||||||
Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 171 | $ | (82 | ) | $ | (119 | ) | $ | 67 | $ | (283 | ) | $ | (378 | ) | $ | (624 | ) | |||||||||
Less: Net investment gains (losses) | (137 | ) | (71 | ) | (305 | ) | (29 | ) | (18 | ) | (172 | ) | (732 | ) | ||||||||||||||
Less: Net derivatives gains (losses) | (2 | ) | (391 | ) | (112 | ) | (1 | ) | (556 | ) | (345 | ) | (1,407 | ) | ||||||||||||||
Less: Adjustments to continuing operations (1) | (64 | ) | 172 | 17 | — | (69 | ) | (10 | ) | 46 | ||||||||||||||||||
Less: Provision for income tax (expense) benefit | 72 | 103 | 141 | 11 | 207 | 187 | 721 | |||||||||||||||||||||
Operating earnings | $ | 302 | $ | 105 | $ | 140 | $ | 86 | $ | 153 | (38 | ) | 748 | |||||||||||||||
Less: Preferred stock dividends | 30 | 30 | ||||||||||||||||||||||||||
Operating earnings available to common shareholders | $ | (68 | ) | $ | 718 | |||||||||||||||||||||||
(1) | See definition of operating revenues and operating expenses for the components of such adjustments. |
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Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Total revenues | $ | 6,592 | $ | 1,567 | $ | 1,824 | $ | 792 | $ | 1,380 | $ | 289 | $ | 12,444 | ||||||||||||||
Less: Net investment gains (losses) | 69 | 9 | 50 | (3 | ) | (239 | ) | (228 | ) | (342 | ) | |||||||||||||||||
Less: Net derivatives gains (losses) | 86 | 109 | (186 | ) | (4 | ) | (109 | ) | (140 | ) | (244 | ) | ||||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | — | — | — | — | — | — | — | |||||||||||||||||||||
Less: Other adjustments to revenues (1) | (36 | ) | (66 | ) | 47 | — | (11 | ) | 120 | 54 | ||||||||||||||||||
Total operating revenues | $ | 6,473 | $ | 1,515 | $ | 1,913 | $ | 799 | $ | 1,739 | $ | 537 | $ | 12,976 | ||||||||||||||
Total expenses | $ | 5,976 | $ | 1,294 | $ | 1,658 | $ | 698 | $ | 1,678 | $ | 747 | $ | 12,051 | ||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | 28 | 9 | — | — | — | — | 37 | |||||||||||||||||||||
Less: Other adjustments to expenses (1) | 5 | — | 36 | — | 134 | 149 | 324 | |||||||||||||||||||||
Total operating expenses | $ | 5,943 | $ | 1,285 | $ | 1,622 | $ | 698 | $ | 1,544 | $ | 598 | $ | 11,690 | ||||||||||||||
Corporate | Banking | |||||||||||||||||||||||||||
Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Total revenues | $ | 6,256 | $ | 905 | $ | 1,556 | $ | 750 | $ | 877 | $ | (106 | ) | $ | 10,238 | |||||||||||||
Less: Net investment gains (losses) | (137 | ) | (71 | ) | (305 | ) | (29 | ) | (18 | ) | (172 | ) | (732 | ) | ||||||||||||||
Less: Net derivatives gains (losses) | (2 | ) | (391 | ) | (112 | ) | (1 | ) | (556 | ) | (345 | ) | (1,407 | ) | ||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | (4 | ) | — | — | — | — | — | (4 | ) | |||||||||||||||||||
Less: Other adjustments to revenues (1) | (14 | ) | (49 | ) | 56 | — | (38 | ) | 12 | (33 | ) | |||||||||||||||||
Total operating revenues | $ | 6,413 | $ | 1,416 | $ | 1,917 | $ | 780 | $ | 1,489 | $ | 399 | $ | 12,414 | ||||||||||||||
Total expenses | $ | 6,006 | $ | 1,033 | $ | 1,748 | $ | 667 | $ | 1,333 | $ | 626 | $ | 11,413 | ||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | 47 | (221 | ) | — | — | — | — | (174 | ) | |||||||||||||||||||
Less: Other adjustments to expenses (1) | (1 | ) | — | 39 | — | 31 | 22 | 91 | ||||||||||||||||||||
Total operating expenses | $ | 5,960 | $ | 1,254 | $ | 1,709 | $ | 667 | $ | 1,302 | $ | 604 | $ | 11,496 | ||||||||||||||
(1) | See definition of operating revenues and operating expenses for the components of such adjustments. |
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Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 4,234 | $ | 4,222 | $ | 12 | 0.3 | % | ||||||||
Universal life and investment-type product policy fees | 539 | 533 | 6 | 1.1 | % | |||||||||||
Net investment income | 1,515 | 1,437 | 78 | 5.4 | % | |||||||||||
Other revenues | 185 | 221 | (36 | ) | (16.3 | )% | ||||||||||
Total operating revenues | 6,473 | 6,413 | 60 | 0.9 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 4,685 | 4,745 | (60 | ) | (1.3 | )% | ||||||||||
Interest credited to policyholder account balances | 243 | 240 | 3 | 1.3 | % | |||||||||||
Capitalization of DAC | (204 | ) | (218 | ) | 14 | 6.4 | % | |||||||||
Amortization of DAC and VOBA | 221 | 145 | 76 | 52.4 | % | |||||||||||
Other expenses | 998 | 1,048 | (50 | ) | (4.8 | )% | ||||||||||
Total operating expenses | 5,943 | 5,960 | (17 | ) | (0.3 | )% | ||||||||||
Provision for income tax expense (benefit) | 185 | 151 | 34 | 22.5 | % | |||||||||||
Operating earnings | $ | 345 | $ | 302 | $ | 43 | 14.2 | % | ||||||||
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 128 | $ | 140 | $ | (12 | ) | (8.6 | )% | |||||||
Universal life and investment-type product policy fees | 554 | 466 | 88 | 18.9 | % | |||||||||||
Net investment income | 777 | 749 | 28 | 3.7 | % | |||||||||||
Other revenues | 56 | 61 | (5 | ) | (8.2 | )% | ||||||||||
Total operating revenues | 1,515 | 1,416 | 99 | 7.0 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 456 | 424 | 32 | 7.5 | % | |||||||||||
Interest credited to policyholder account balances | 393 | 431 | (38 | ) | (8.8 | )% | ||||||||||
Capitalization of DAC | (270 | ) | (223 | ) | (47 | ) | (21.1 | )% | ||||||||
Amortization of DAC and VOBA | 98 | 42 | 56 | 133.3 | % | |||||||||||
Interest expense | 1 | — | 1 | |||||||||||||
Other expenses | 607 | 580 | 27 | 4.7 | % | |||||||||||
Total operating expenses | 1,285 | 1,254 | 31 | 2.5 | % | |||||||||||
Provision for income tax expense (benefit) | 81 | 57 | 24 | 42.1 | % | |||||||||||
Operating earnings | $ | 149 | $ | 105 | $ | 44 | 41.9 | % | ||||||||
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 501 | $ | 639 | $ | (138 | ) | (21.6 | )% | |||||||
Universal life and investment-type product policy fees | 58 | 34 | 24 | 70.6 | % | |||||||||||
Net investment income | 1,295 | 1,210 | 85 | 7.0 | % | |||||||||||
Other revenues | 59 | 34 | 25 | 73.5 | % | |||||||||||
Total operating revenues | 1,913 | 1,917 | (4 | ) | (0.2 | )% | ||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 1,120 | 1,192 | (72 | ) | (6.0 | )% | ||||||||||
Interest credited to policyholder account balances | 381 | 390 | (9 | ) | (2.3 | )% | ||||||||||
Capitalization of DAC | (6 | ) | (5 | ) | (1 | ) | (20.0 | )% | ||||||||
Amortization of DAC and VOBA | 4 | 3 | 1 | 33.3 | % | |||||||||||
Interest expense | 2 | 1 | 1 | 100.0 | % | |||||||||||
Other expenses | 121 | 128 | (7 | ) | (5.5 | )% | ||||||||||
Total operating expenses | 1,622 | 1,709 | (87 | ) | (5.1 | )% | ||||||||||
Provision for income tax expense (benefit) | 102 | 68 | 34 | 50.0 | % | |||||||||||
Operating earnings | $ | 189 | $ | 140 | $ | 49 | 35.0 | % | ||||||||
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 740 | $ | 727 | $ | 13 | 1.8 | % | ||||||||
Net investment income | 51 | 45 | 6 | 13.3 | % | |||||||||||
Other revenues | 8 | 8 | — | — | % | |||||||||||
Total operating revenues | 799 | 780 | 19 | 2.4 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 506 | 483 | 23 | 4.8 | % | |||||||||||
Capitalization of DAC | (118 | ) | (112 | ) | (6 | ) | (5.4 | )% | ||||||||
Amortization of DAC and VOBA | 110 | 107 | 3 | 2.8 | % | |||||||||||
Other expenses | 200 | 189 | 11 | 5.8 | % | |||||||||||
Total operating expenses | 698 | 667 | 31 | 4.6 | % | |||||||||||
Provision for income tax expense (benefit) | 20 | 27 | (7 | ) | (25.9 | )% | ||||||||||
Operating earnings | $ | 81 | $ | 86 | $ | (5 | ) | (5.8 | )% | |||||||
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 956 | $ | 868 | $ | 88 | 10.1 | % | ||||||||
Universal life and investment-type product policy fees | 302 | 222 | 80 | 36.0 | % | |||||||||||
Net investment income | 474 | 395 | 79 | 20.0 | % | |||||||||||
Other revenues | 7 | 4 | 3 | 75.0 | % | |||||||||||
Total operating revenues | 1,739 | 1,489 | 250 | 16.8 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 852 | 705 | 147 | 20.9 | % | |||||||||||
Interest credited to policyholder account balances | 244 | 198 | 46 | 23.2 | % | |||||||||||
Capitalization of DAC | (180 | ) | (164 | ) | (16 | ) | (9.8 | )% | ||||||||
Amortization of DAC and VOBA | 110 | 79 | 31 | 39.2 | % | |||||||||||
Interest expense | (1 | ) | 3 | (4 | ) | (133.3 | )% | |||||||||
Other expenses | 519 | 481 | 38 | 7.9 | % | |||||||||||
Total operating expenses | 1,544 | 1,302 | 242 | 18.6 | % | |||||||||||
Provision for income tax expense (benefit) | 4 | 34 | (30 | ) | (88.2 | )% | ||||||||||
Operating earnings | $ | 191 | $ | 153 | $ | 38 | 24.8 | % | ||||||||
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Three Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 3 | $ | 5 | $ | (2 | ) | (40.0 | )% | |||||||
Net investment income | 225 | 120 | 105 | 87.5 | % | |||||||||||
Other revenues | 309 | 274 | 35 | 12.8 | % | |||||||||||
Total operating revenues | 537 | 399 | 138 | 34.6 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | (4 | ) | — | (4 | ) | |||||||||||
Interest credited to bank deposits | 33 | 37 | (4 | ) | (10.8 | )% | ||||||||||
Amortization of DAC and VOBA | (1 | ) | — | (1 | ) | |||||||||||
Interest expense | 292 | 270 | 22 | 8.1 | % | |||||||||||
Other expenses | 278 | 297 | (19 | ) | (6.4 | )% | ||||||||||
Total operating expenses | 598 | 604 | (6 | ) | (1.0 | )% | ||||||||||
Provision for income tax expense (benefit) | (14 | ) | (167 | ) | 153 | 91.6 | % | |||||||||
Operating earnings | (47 | ) | (38 | ) | (9 | ) | (23.7 | )% | ||||||||
Preferred stock dividends | 30 | 30 | — | — | % | |||||||||||
Operating earnings available to common shareholders | $ | (77 | ) | $ | (68 | ) | $ | (9 | ) | (13.2 | )% | |||||
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 20,078 | $ | 19,299 | $ | 779 | 4.0 | % | ||||||||
Universal life and investment-type product policy fees | 4,345 | 3,650 | 695 | 19.0 | % | |||||||||||
Net investment income | 12,822 | 10,914 | 1,908 | 17.5 | % | |||||||||||
Other revenues | 1,681 | 1,728 | (47 | ) | (2.7 | )% | ||||||||||
Net investment gains (losses) | (324 | ) | (2,790 | ) | 2,466 | 88.4 | % | |||||||||
Net derivatives gains (losses) | 1,278 | (4,084 | ) | 5,362 | 131.3 | % | ||||||||||
Total revenues | 39,880 | 28,717 | 11,163 | 38.9 | % | |||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 23,109 | 21,998 | 1,111 | 5.1 | % | |||||||||||
Interest credited to policyholder account balances | 3,458 | 3,655 | (197 | ) | (5.4 | )% | ||||||||||
Interest credited to bank deposits | 108 | 120 | (12 | ) | (10.0 | )% | ||||||||||
Capitalization of DAC | (2,289 | ) | (2,265 | ) | (24 | ) | (1.1 | )% | ||||||||
Amortization of DAC and VOBA | 2,201 | 838 | 1,363 | 162.6 | % | |||||||||||
Interest expense | 1,136 | 775 | 361 | 46.6 | % | |||||||||||
Other expenses | 8,202 | 8,108 | 94 | 1.2 | % | |||||||||||
Total expenses | 35,925 | 33,229 | 2,696 | 8.1 | % | |||||||||||
Income (loss) from continuing operations before provision for income tax | 3,955 | (4,512 | ) | 8,467 | 187.7 | % | ||||||||||
Provision for income tax expense (benefit) | 1,259 | (1,884 | ) | 3,143 | 166.8 | % | ||||||||||
Income (loss) from continuing operations, net of income tax | 2,696 | (2,628 | ) | 5,324 | 202.6 | % | ||||||||||
Income (loss) from discontinued operations, net of income tax | 5 | 37 | (32 | ) | (86.5 | )% | ||||||||||
Net income (loss) | 2,701 | (2,591 | ) | 5,292 | 204.2 | % | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests | (7 | ) | (25 | ) | 18 | 72.0 | % | |||||||||
Net income (loss) attributable to MetLife, Inc. | 2,708 | (2,566 | ) | 5,274 | 205.5 | % | ||||||||||
Less: Preferred stock dividends | 91 | 91 | — | — | % | |||||||||||
Net income (loss) available to MetLife, Inc.’s common shareholders | $ | 2,617 | $ | (2,657 | ) | $ | 5,274 | 198.5 | % | |||||||
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Corporate | Banking | |||||||||||||||||||||||||||
Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | 1,405 | $ | 690 | $ | 763 | $ | 219 | $ | 50 | $ | (431 | ) | $ | 2,696 | |||||||||||||
Less: Net investment gains (losses) | 78 | 46 | 161 | (3 | ) | (268 | ) | (338 | ) | (324 | ) | |||||||||||||||||
Less: Net derivatives gains (losses) | 711 | 560 | (56 | ) | (7 | ) | 157 | (87 | ) | 1,278 | ||||||||||||||||||
Less: Adjustments to continuing operations (1) | (183 | ) | (382 | ) | 69 | — | (413 | ) | (82 | ) | (991 | ) | ||||||||||||||||
Less: Provision for income tax (expense) benefit | (213 | ) | (80 | ) | (66 | ) | 3 | 87 | 177 | (92 | ) | |||||||||||||||||
Operating earnings | $ | 1,012 | $ | 546 | $ | 655 | $ | 226 | $ | 487 | (101 | ) | 2,825 | |||||||||||||||
Less: Preferred stock dividends | 91 | 91 | ||||||||||||||||||||||||||
Operating earnings available to common shareholders | $ | (192 | ) | $ | 2,734 | |||||||||||||||||||||||
Corporate | Banking | |||||||||||||||||||||||||||
Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Income (loss) from continuing operations, net of income tax | $ | (657 | ) | $ | (491 | ) | $ | (925 | ) | $ | 234 | $ | (62 | ) | $ | (727 | ) | $ | (2,628 | ) | ||||||||
Less: Net investment gains (losses) | (520 | ) | (403 | ) | (1,473 | ) | (46 | ) | (78 | ) | (270 | ) | (2,790 | ) | ||||||||||||||
Less: Net derivatives gains (losses) | (1,533 | ) | (1,029 | ) | (574 | ) | 39 | (543 | ) | (444 | ) | (4,084 | ) | |||||||||||||||
Less: Adjustments to continuing operations (1) | (98 | ) | 476 | 71 | — | (142 | ) | (29 | ) | 278 | ||||||||||||||||||
Less: Provision for income tax (expense) benefit | 752 | 335 | 691 | 3 | 259 | 265 | 2,305 | |||||||||||||||||||||
Operating earnings | $ | 742 | $ | 130 | $ | 360 | $ | 238 | $ | 442 | (249 | ) | 1,663 | |||||||||||||||
Less: Preferred stock dividends | 91 | 91 | ||||||||||||||||||||||||||
Operating earnings available to common shareholders | $ | (340 | ) | $ | 1,572 | |||||||||||||||||||||||
(1) | See definition of operating revenues and operating expenses for the components of such adjustments. |
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Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Total revenues | $ | 20,273 | $ | 4,910 | $ | 6,351 | $ | 2,337 | $ | 4,639 | $ | 1,370 | $ | 39,880 | ||||||||||||||
Less: Net investment gains (losses) | 78 | 46 | 161 | (3 | ) | (268 | ) | (338 | ) | (324 | ) | |||||||||||||||||
Less: Net derivatives gains (losses) | 711 | 560 | (56 | ) | (7 | ) | 157 | (87 | ) | 1,278 | ||||||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | 6 | — | — | — | — | — | 6 | |||||||||||||||||||||
Less: Other adjustments to revenues (1) | (106 | ) | (197 | ) | 142 | — | (135 | ) | 345 | 49 | ||||||||||||||||||
Total operating revenues | $ | 19,584 | $ | 4,501 | $ | 6,104 | $ | 2,347 | $ | 4,885 | $ | 1,450 | $ | 38,871 | ||||||||||||||
Total expenses | $ | 18,110 | $ | 3,846 | $ | 5,169 | $ | 2,067 | $ | 4,570 | $ | 2,163 | $ | 35,925 | ||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | 78 | 185 | — | — | — | — | 263 | |||||||||||||||||||||
Less: Other adjustments to expenses (1) | 5 | — | 73 | — | 278 | 427 | 783 | |||||||||||||||||||||
Total operating expenses | $ | 18,027 | $ | 3,661 | $ | 5,096 | $ | 2,067 | $ | 4,292 | $ | 1,736 | $ | 34,879 | ||||||||||||||
Corporate | Banking | |||||||||||||||||||||||||||
Insurance | Retirement | Benefit | Auto & | Corporate | ||||||||||||||||||||||||
Products | Products | Funding | Home | International | & Other | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Total revenues | $ | 16,896 | $ | 2,285 | $ | 3,555 | $ | 2,324 | $ | 3,219 | $ | 438 | $ | 28,717 | ||||||||||||||
Less: Net investment gains (losses) | (520 | ) | (403 | ) | (1,473 | ) | (46 | ) | (78 | ) | (270 | ) | (2,790 | ) | ||||||||||||||
Less: Net derivatives gains (losses) | (1,533 | ) | (1,029 | ) | (574 | ) | 39 | (543 | ) | (444 | ) | (4,084 | ) | |||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | (21 | ) | — | — | — | — | — | (21 | ) | |||||||||||||||||||
Less: Other adjustments to revenues (1) | (57 | ) | (154 | ) | 137 | — | (114 | ) | 13 | (175 | ) | |||||||||||||||||
Total operating revenues | $ | 19,027 | $ | 3,871 | $ | 5,465 | $ | 2,331 | $ | 3,954 | $ | 1,139 | $ | 35,787 | ||||||||||||||
Total expenses | $ | 17,931 | $ | 3,041 | $ | 4,992 | $ | 2,023 | $ | 3,398 | $ | 1,844 | $ | 33,229 | ||||||||||||||
Less: Adjustments related to net investment gains (losses) and net derivatives gains (losses) | 25 | (630 | ) | — | — | — | — | (605 | ) | |||||||||||||||||||
Less: Other adjustments to expenses (1) | (5 | ) | — | 66 | — | 28 | 42 | 131 | ||||||||||||||||||||
Total operating expenses | $ | 17,911 | $ | 3,671 | $ | 4,926 | $ | 2,023 | $ | 3,370 | $ | 1,802 | $ | 33,703 | ||||||||||||||
(1) | See definition of operating revenues and operating expenses for the components of such adjustments. |
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 12,874 | $ | 12,658 | $ | 216 | 1.7 | % | ||||||||
Universal life and investment-type product policy fees | 1,634 | 1,659 | (25 | ) | (1.5 | )% | ||||||||||
Net investment income | 4,514 | 4,131 | 383 | 9.3 | % | |||||||||||
Other revenues | 562 | 579 | (17 | ) | (2.9 | )% | ||||||||||
Total operating revenues | 19,584 | 19,027 | 557 | 2.9 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 14,253 | 14,193 | 60 | 0.4 | % | |||||||||||
Interest credited to policyholder account balances | 714 | 704 | 10 | 1.4 | % | |||||||||||
Capitalization of DAC | (627 | ) | (637 | ) | 10 | 1.6 | % | |||||||||
Amortization of DAC and VOBA | 666 | 516 | 150 | 29.1 | % | |||||||||||
Interest expense | — | 3 | (3 | ) | (100.0 | )% | ||||||||||
Other expenses | 3,021 | 3,132 | (111 | ) | (3.5 | )% | ||||||||||
Total operating expenses | 18,027 | 17,911 | 116 | 0.6 | % | |||||||||||
Provision for income tax expense (benefit) | 545 | 374 | 171 | 45.7 | % | |||||||||||
Operating earnings | $ | 1,012 | $ | 742 | $ | 270 | 36.4 | % | ||||||||
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 402 | $ | 431 | $ | (29 | ) | (6.7 | )% | |||||||
Universal life and investment-type product policy fees | 1,628 | 1,219 | 409 | 33.6 | % | |||||||||||
Net investment income | 2,313 | 2,096 | 217 | 10.4 | % | |||||||||||
Other revenues | 158 | 125 | 33 | 26.4 | % | |||||||||||
Total operating revenues | 4,501 | 3,871 | 630 | 16.3 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 859 | 1,102 | (243 | ) | (22.1 | )% | ||||||||||
Interest credited to policyholder account balances | 1,204 | 1,261 | (57 | ) | (4.5 | )% | ||||||||||
Capitalization of DAC | (766 | ) | (837 | ) | 71 | 8.5 | % | |||||||||
Amortization of DAC and VOBA | 603 | 324 | 279 | 86.1 | % | |||||||||||
Interest expense | 1 | 1 | — | — | % | |||||||||||
Other expenses | 1,760 | 1,820 | (60 | ) | (3.3 | )% | ||||||||||
Total operating expenses | 3,661 | 3,671 | (10 | ) | (0.3 | )% | ||||||||||
Provision for income tax expense (benefit) | 294 | 70 | 224 | 320.0 | % | |||||||||||
Operating earnings | $ | 546 | $ | 130 | $ | 416 | 320.0 | % | ||||||||
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 1,875 | $ | 1,658 | $ | 217 | 13.1 | % | ||||||||
Universal life and investment-type product policy fees | 169 | 135 | 34 | 25.2 | % | |||||||||||
Net investment income | 3,878 | 3,500 | 378 | 10.8 | % | |||||||||||
Other revenues | 182 | 172 | 10 | 5.8 | % | |||||||||||
Total operating revenues | 6,104 | 5,465 | 639 | 11.7 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 3,625 | 3,311 | 314 | 9.5 | % | |||||||||||
Interest credited to policyholder account balances | 1,100 | 1,258 | (158 | ) | (12.6 | )% | ||||||||||
Capitalization of DAC | (17 | ) | (13 | ) | (4 | ) | (30.8 | )% | ||||||||
Amortization of DAC and VOBA | 12 | 12 | — | — | % | |||||||||||
Interest expense | 6 | 3 | 3 | 100.0 | % | |||||||||||
Other expenses | 370 | 355 | 15 | 4.2 | % | |||||||||||
Total operating expenses | 5,096 | 4,926 | 170 | 3.5 | % | |||||||||||
Provision for income tax expense (benefit) | 353 | 179 | 174 | 97.2 | % | |||||||||||
Operating earnings | $ | 655 | $ | 360 | $ | 295 | 81.9 | % | ||||||||
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 2,177 | $ | 2,175 | $ | 2 | 0.1 | % | ||||||||
Net investment income | 156 | 134 | 22 | 16.4 | % | |||||||||||
Other revenues | 14 | 22 | (8 | ) | (36.4 | )% | ||||||||||
Total operating revenues | 2,347 | 2,331 | 16 | 0.7 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 1,506 | 1,454 | 52 | 3.6 | % | |||||||||||
Capitalization of DAC | (339 | ) | (329 | ) | (10 | ) | (3.0 | )% | ||||||||
Amortization of DAC and VOBA | 328 | 328 | — | — | % | |||||||||||
Other expenses | 572 | 570 | 2 | 0.4 | % | |||||||||||
Total operating expenses | 2,067 | 2,023 | 44 | 2.2 | % | |||||||||||
Provision for income tax expense (benefit) | 54 | 70 | (16 | ) | (22.9 | )% | ||||||||||
Operating earnings | $ | 226 | $ | 238 | $ | (12 | ) | (5.0 | )% | |||||||
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 2,744 | $ | 2,366 | $ | 378 | 16.0 | % | ||||||||
Universal life and investment-type product policy fees | 908 | 658 | 250 | 38.0 | % | |||||||||||
Net investment income | 1,221 | 922 | 299 | 32.4 | % | |||||||||||
Other revenues | 12 | 8 | 4 | 50.0 | % | |||||||||||
Total operating revenues | 4,885 | 3,954 | 931 | 23.5 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | 2,529 | 1,853 | 676 | 36.5 | % | |||||||||||
Interest credited to policyholder account balances | 437 | 435 | 2 | 0.5 | % | |||||||||||
Capitalization of DAC | (540 | ) | (449 | ) | (91 | ) | (20.3 | )% | ||||||||
Amortization of DAC and VOBA | 330 | 272 | 58 | 21.3 | % | |||||||||||
Interest expense | 2 | 6 | (4 | ) | (66.7 | )% | ||||||||||
Other expenses | 1,534 | 1,253 | 281 | 22.4 | % | |||||||||||
Total operating expenses | 4,292 | 3,370 | 922 | 27.4 | % | |||||||||||
Provision for income tax expense (benefit) | 106 | 142 | (36 | ) | (25.4 | )% | ||||||||||
Operating earnings | $ | 487 | $ | 442 | $ | 45 | 10.2 | % | ||||||||
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Nine Months | ||||||||||||||||
Ended | ||||||||||||||||
September 30, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
OPERATING REVENUES | ||||||||||||||||
Premiums | $ | 6 | $ | 11 | $ | (5 | ) | (45.5 | )% | |||||||
Net investment income | 691 | 306 | 385 | 125.8 | % | |||||||||||
Other revenues | 753 | 822 | (69 | ) | (8.4 | )% | ||||||||||
Total operating revenues | 1,450 | 1,139 | 311 | 27.3 | % | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Policyholder benefits and claims and policyholder dividends | (11 | ) | 3 | (14 | ) | (466.7 | )% | |||||||||
Interest credited to bank deposits | 108 | 120 | (12 | ) | (10.0 | )% | ||||||||||
Amortization of DAC and VOBA | (1 | ) | 2 | (3 | ) | (150.0 | )% | |||||||||
Interest expense | 815 | 762 | 53 | 7.0 | % | |||||||||||
Other expenses | 825 | 915 | (90 | ) | (9.8 | )% | ||||||||||
Total operating expenses | 1,736 | 1,802 | (66 | ) | (3.7 | )% | ||||||||||
Provision for income tax expense (benefit) | (185 | ) | (414 | ) | 229 | 55.3 | % | |||||||||
Operating earnings | (101 | ) | (249 | ) | 148 | 59.4 | % | |||||||||
Preferred stock dividends | 91 | 91 | — | — | % | |||||||||||
Operating earnings available to common shareholders | $ | (192 | ) | $ | (340 | ) | $ | 148 | 43.5 | % | ||||||
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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, relating to the variability in the estimated fair value of investments associated with changes in market factors such as credit spreads. |
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At or For the | At or For the | |||||||||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Fixed Maturity Securities: | ||||||||||||||||
Yield (1) | 5.79 | % | 5.89 | % | 5.62 | % | 5.83 | % | ||||||||
Investment income (2), (3) | $ | 3,257 | $ | 3,090 | $ | 9,350 | $ | 8,926 | ||||||||
Investment gains (losses) (3) | $ | (65 | ) | $ | (455 | ) | $ | (258 | ) | $ | (1,442 | ) | ||||
Ending carrying value (2), (3) | $ | 264,320 | $ | 225,866 | $ | 264,320 | $ | 225,866 | ||||||||
Mortgage Loans: | ||||||||||||||||
Yield (1) | 5.54 | % | 5.33 | % | 5.49 | % | 5.34 | % | ||||||||
Investment income (3), (4) | $ | 712 | $ | 675 | $ | 2,079 | $ | 2,049 | ||||||||
Investment gains (losses) (3) | $ | 37 | $ | (129 | ) | $ | 20 | $ | (400 | ) | ||||||
Ending carrying value (3) | $ | 52,845 | $ | 50,681 | $ | 52,845 | $ | 50,681 | ||||||||
Real Estate and Real Estate Joint Ventures: | ||||||||||||||||
Yield (1) | 2.80 | % | (6.09 | )% | 1.28 | % | (8.05 | )% | ||||||||
Investment income | $ | 48 | $ | (109 | ) | $ | 66 | $ | (443 | ) | ||||||
Investment gains (losses) | $ | (1 | ) | $ | (70 | ) | $ | (40 | ) | $ | (163 | ) | ||||
Ending carrying value | $ | 6,990 | $ | 7,032 | $ | 6,990 | $ | 7,032 | ||||||||
Policy Loans: | ||||||||||||||||
Yield (1) | 6.18 | % | 6.56 | % | 6.49 | % | 6.49 | % | ||||||||
Investment income | $ | 157 | $ | 163 | $ | 494 | $ | 481 | ||||||||
Ending carrying value | $ | 10,230 | $ | 10,001 | $ | 10,230 | $ | 10,001 | ||||||||
Equity Securities: | ||||||||||||||||
Yield (1) | 2.74 | % | 4.50 | % | 3.84 | % | 4.83 | % | ||||||||
Investment income | $ | 19 | $ | 37 | $ | 83 | $ | 128 | ||||||||
Investment gains (losses) | $ | (1 | ) | $ | (53 | ) | $ | 100 | $ | (430 | ) | |||||
Ending carrying value | $ | 2,865 | $ | 3,117 | $ | 2,865 | $ | 3,117 | ||||||||
Other Limited Partnership Interests: | ||||||||||||||||
Yield (1) | 11.48 | % | 9.75 | % | 13.75 | % | (1.32 | )% | ||||||||
Investment income | $ | 170 | $ | 127 | $ | 596 | $ | (54 | ) | |||||||
Investment gains (losses) | $ | (4 | ) | $ | (12 | ) | $ | (15 | ) | $ | (356 | ) | ||||
Ending carrying value | $ | 5,948 | $ | 5,255 | $ | 5,948 | $ | 5,255 | ||||||||
Cash and Short-Term Investments: | ||||||||||||||||
Yield (1) | 0.41 | % | 0.45 | % | 0.39 | % | 0.46 | % | ||||||||
Investment income | $ | 20 | $ | 20 | $ | 48 | $ | 80 | ||||||||
Investment gains (losses) | $ | — | $ | 5 | $ | 1 | $ | 5 | ||||||||
Ending carrying value (3) | $ | 26,100 | $ | 22,423 | $ | 26,100 | $ | 22,423 | ||||||||
Other Invested Assets: (5) | ||||||||||||||||
Investment income | $ | 75 | $ | 54 | $ | 395 | $ | 244 | ||||||||
Investment gains (losses) | $ | (67 | ) | $ | (31 | ) | $ | 8 | $ | (41 | ) | |||||
Ending carrying value | $ | 16,571 | $ | 13,916 | $ | 16,571 | $ | 13,916 | ||||||||
Total Investments: | ||||||||||||||||
Gross investment income yield (1) | 5.31 | % | 5.14 | % | 5.35 | % | 4.80 | % | ||||||||
Investment fees and expenses yield | (0.14 | ) | (0.13 | ) | (0.14 | ) | (0.14 | ) | ||||||||
Investment Income Yield (3) | 5.17 | % | 5.01 | % | 5.21 | % | 4.66 | % | ||||||||
Gross investment income | $ | 4,458 | $ | 4,057 | $ | 13,111 | $ | 11,411 | ||||||||
Investment fees and expenses | (121 | ) | (101 | ) | (338 | ) | (322 | ) | ||||||||
Investment Income (3), (6) | $ | 4,337 | $ | 3,956 | $ | 12,773 | $ | 11,089 | ||||||||
Ending Carrying Value (3) | $ | 385,869 | $ | 338,291 | $ | 385,869 | $ | 338,291 | ||||||||
Gross investment gains (3) | $ | 212 | $ | 327 | $ | 899 | $ | 945 | ||||||||
Gross investment losses (3) | (215 | ) | (411 | ) | (664 | ) | (1,224 | ) | ||||||||
Writedowns | (98 | ) | (661 | ) | (419 | ) | (2,548 | ) | ||||||||
Investment Portfolio Gains (Losses) (3), (6) | $ | (101 | ) | $ | (745 | ) | $ | (184 | ) | $ | (2,827 | ) | ||||
Investment portfolio gains (losses) income tax (expense) benefit | 29 | 264 | 48 | 978 | ||||||||||||
Investment Portfolio Gains (Losses), Net of Income Tax | $ | (72 | ) | $ | (481 | ) | $ | (136 | ) | $ | (1,849 | ) | ||||
Derivatives Net Gains (Losses) (6) | $ | (311 | ) | $ | (1,437 | ) | $ | 1,001 | $ | (4,251 | ) | |||||
Derivatives net gains (losses) income tax (expense) benefit | $ | 121 | $ | 491 | $ | (408 | ) | $ | 1,505 | |||||||
Derivatives Net Gains (Losses), Net of Income Tax | $ | (190 | ) | $ | (946 | ) | $ | 593 | $ | (2,746 | ) | |||||
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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 and exclude the effects of consolidating under GAAP certain VIEs that are treated as consolidated securitization entities (“CSEs”). | |
(2) | Fixed maturity securities include $3,756 million and $1,970 million at estimated fair value of trading securities at September 30, 2010 and 2009, respectively. Fixed maturity securities include $194 million and $217 million of investment income related to trading securities for the three months and nine months ended September 30, 2010, respectively, and $163 million and $310 million of investment income related to trading securities for the three months and nine months ended September 30, 2009, respectively. | |
(3) | Ending carrying values, investment income (loss), and investment gains (losses) as presented herein, exclude the effects of consolidating under GAAP certain VIEs that are treated as CSEs. The adjustment to investment income and investment gains (losses) in the aggregate are as shown in footnote (6) to this yield table. The adjustments to ending carrying value, investment income and investment gains (losses) by invested asset class are presented below. Both the invested assets and long-term debt of the CSEs are accounted for under the fair value option. The adjustment to investment gains (losses) presented below and in footnote (6) to this yield table includes the effects of remeasuring both the invested assets and long-term debt in accordance with the fair value option. |
At or For the Three Months Ended | At or For the Nine Months Ended | |||||||||||||||||||||||
September 30, 2010 | September 30, 2010 | |||||||||||||||||||||||
Impact of | Impact of | |||||||||||||||||||||||
Consolidated | Consolidated | |||||||||||||||||||||||
As Reported in the | Securitization | Total — | As Reported in the | Securitization | Total — | |||||||||||||||||||
Yield Table | Entities | With CSEs | Yield Table | Entities | With CSEs | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Trading Securities: | ||||||||||||||||||||||||
Ending carrying value | $ | 3,756 | $ | 231 | $ | 3,987 | $ | 3,756 | $ | 231 | $ | 3,987 | ||||||||||||
Investment income | $ | 194 | $ | 4 | $ | 198 | $ | 217 | $ | 12 | $ | 229 | ||||||||||||
Investment gains (losses) | $ | — | $ | 11 | $ | 11 | $ | — | $ | 1 | $ | 1 | ||||||||||||
Mortgage Loans: | ||||||||||||||||||||||||
Ending carrying value | $ | 52,845 | $ | 7,093 | $ | 59,938 | $ | 52,845 | $ | 7,093 | $ | 59,938 | ||||||||||||
Investment income | $ | 712 | $ | 102 | $ | 814 | $ | 2,079 | $ | 312 | $ | 2,391 | ||||||||||||
Investment gains (losses) | $ | 37 | $ | 5 | $ | 42 | $ | 20 | $ | 23 | $ | 43 | ||||||||||||
Cash and Short-Term Investments: | ||||||||||||||||||||||||
Ending carrying value | $ | 26,100 | $ | 47 | $ | 26,147 | $ | 26,100 | $ | 47 | $ | 26,147 | ||||||||||||
Total Investments: | ||||||||||||||||||||||||
Ending carrying value | $ | 385,869 | $ | 7,371 | $ | 393,240 | $ | 385,869 | $ | 7,371 | $ | 393,240 |
(4) | Investment income from mortgage loans includes prepayment fees. | |
(5) | Other invested assets are principally comprised of freestanding derivatives with positive estimated fair values and leveraged leases. Freestanding derivatives with negative estimated fair values are included within other liabilities. However, the accruals of settlement payments in other liabilities are included in net investment income as shown in Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements. |
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(6) | Investment income, investment portfolio gains (losses) and derivatives net gains (losses) presented in this yield table vary from the most directly comparable measures presented in the GAAP interim condensed consolidated statements of operations due to certain reclassifications affecting net investment income (“NII”), net investment gains (losses) (“NIGL”) and PABs and to exclude the effects of consolidating under GAAP certain VIEs that are treated as CSEs. Such reclassifications are presented in the tables below. |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Investment income — in the above yield table | $ | 4,337 | $ | 3,956 | $ | 12,773 | $ | 11,089 | ||||||||
Real estate discontinued operations — deduct from NII | 13 | (2 | ) | 11 | (5 | ) | ||||||||||
Scheduled periodic settlement payments on derivatives not qualifying for hedge accounting — deduct from NII, add to Net derivatives gains (losses) | (62 | ) | 4 | (172 | ) | (59 | ) | |||||||||
Equity method operating joint ventures — add to NII, deduct from Net derivatives gains (losses) | — | (35 | ) | (102 | ) | (111 | ) | |||||||||
Incremental net investment income from consolidated securitization entities — add to NII | 103 | — | 312 | — | ||||||||||||
Net investment income — GAAP consolidated statements of operations | $ | 4,391 | $ | 3,923 | $ | 12,822 | $ | 10,914 | ||||||||
Investment portfolio gains (losses) — in the above yield table | $ | (101 | ) | $ | (745 | ) | $ | (184 | ) | $ | (2,827 | ) | ||||
Real estate discontinued operations — deduct from NIGL | — | — | (10 | ) | — | |||||||||||
Investment gains (losses) related to consolidated securitization entities — add to NIGL | 16 | — | 24 | — | ||||||||||||
Other gains (losses) — add to NIGL | (257 | ) | 13 | (154 | ) | 37 | ||||||||||
Net investment gains (losses) — GAAP consolidated statements of operations | $ | (342 | ) | $ | (732 | ) | $ | (324 | ) | $ | (2,790 | ) | ||||
Derivatives net gains (losses) — in the above yield table | $ | (311 | ) | $ | (1,437 | ) | $ | 1,001 | $ | (4,251 | ) | |||||
Scheduled periodic settlement payments on derivatives not qualifying for hedge accounting — add to Net derivatives gains (losses), deduct from NII | 62 | (4 | ) | 172 | 59 | |||||||||||
Scheduled periodic settlement payments on derivatives not qualifying for hedge accounting — add to Net derivatives gains (losses), deduct from interest credited to PABs | 5 | (1 | ) | 3 | (3 | ) | ||||||||||
Equity method operating joint ventures — add to NII, deduct from Net derivatives gains (losses) | — | 35 | 102 | 111 | ||||||||||||
Net derivatives gains (losses) — GAAP consolidated statements of operations | $ | (244 | ) | $ | (1,407 | ) | $ | 1,278 | $ | (4,084 | ) | |||||
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September 30, 2010 | ||||||||||||||||
Equity | ||||||||||||||||
Fixed Maturity Securities | Securities | |||||||||||||||
(In millions) | ||||||||||||||||
Level 1: | ||||||||||||||||
Quoted prices in active markets for identical assets | $ | 17,485 | 6.7 | % | $ | 321 | 11.2 | % | ||||||||
Level 2: | ||||||||||||||||
Independent pricing source | 193,116 | 74.1 | 397 | 13.8 | ||||||||||||
Internal matrix pricing or discounted cash flow techniques | 31,622 | 12.1 | 1,068 | 37.3 | ||||||||||||
Significant other observable inputs | 224,738 | 86.2 | 1,465 | 51.1 | ||||||||||||
Level 3: | ||||||||||||||||
Independent pricing source | 8,333 | 3.2 | 933 | 32.6 | ||||||||||||
Internal matrix pricing or discounted cash flow techniques | 7,432 | 2.9 | 131 | 4.6 | ||||||||||||
Independent broker quotations | 2,576 | 1.0 | 15 | 0.5 | ||||||||||||
Significant unobservable inputs | 18,341 | 7.1 | 1,079 | 37.7 | ||||||||||||
Total estimated fair value | $ | 260,564 | 100.0 | % | $ | 2,865 | 100.0 | % | ||||||||
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September 30, 2010 | ||||||||||||||||
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 | $ | — | $ | 74,165 | $ | 6,855 | $ | 81,020 | ||||||||
Residential mortgage-backed securities (“RMBS”) | — | 43,606 | 2,294 | 45,900 | ||||||||||||
Foreign corporate securities | — | 40,143 | 4,827 | 44,970 | ||||||||||||
U.S. Treasury, agency and government guaranteed securities | 17,207 | 17,094 | 59 | 34,360 | ||||||||||||
Commercial mortgage-backed securities (“CMBS”) | — | 15,252 | 281 | 15,533 | ||||||||||||
Foreign government securities | 278 | 14,252 | 314 | 14,844 | ||||||||||||
Asset-backed securities (“ABS”) | — | 10,652 | 3,654 | 14,306 | ||||||||||||
State and political subdivision securities | — | 9,562 | 52 | 9,614 | ||||||||||||
Other fixed maturity securities | — | 12 | 5 | 17 | ||||||||||||
Total fixed maturity securities | $ | 17,485 | $ | 224,738 | $ | 18,341 | $ | 260,564 | ||||||||
Equity Securities: | ||||||||||||||||
Common stock | $ | 321 | $ | 1,080 | $ | 170 | $ | 1,571 | ||||||||
Non-redeemable preferred stock | — | 385 | 909 | 1,294 | ||||||||||||
Total equity securities | $ | 321 | $ | 1,465 | $ | 1,079 | $ | 2,865 | ||||||||
• | The majority of the Level 3 fixed maturity and equity securities (91%, as presented above) were concentrated in four sectors: U.S. and foreign corporate securities, ABS and RMBS. | |
• | 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 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 alternative residential mortgage loan RMBS and less liquid prime RMBS, below investment grade private placements and less liquid investment grade corporate securities (included in U.S. and foreign corporate securities) and less liquid ABS including securities supported bysub-prime mortgage loans (included in ABS). | |
• | During the three months ended September 30, 2010, Level 3 fixed maturity securities increased by $525 million, or 3%. The increase was driven by net purchases in excess of sales and increases in estimated fair value recognized in other comprehensive income (loss), net of transfers out of Level 3. The net transfers out of Level 3 are described in the discussion following the rollforward table below. Net purchases in excess of sales of fixed maturity securities were concentrated in RMBS and ABS. The increase in estimated fair value in fixed maturity securities was concentrated in U.S. and foreign corporate securities, and ABS (including RMBS backed bysub-prime mortgage loans) due to improving or stabilizing market conditions including an improvement in liquidity coupled with the effect of decreased interest rates on such securities. | |
• | During the nine months ended September 30, 2010, Level 3 fixed maturity securities increased by $1,151 million, or 7%. This increase was driven by increases in estimated fair value recognized in other comprehensive income (loss) which were partially offset by net sales in excess of purchases. The |
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increase in estimated fair value in fixed maturity securities was concentrated in U.S. and foreign corporate securities and ABS (including RMBS backed bysub-prime mortgage loans) due to improving or stabilizing market conditions including an improvement in liquidity coupled with the effect of decreased interest rates on such securities. |
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, 2010 | September 30, 2010 | |||||||||||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period | $ | 17,816 | $ | 1,006 | $ | 17,190 | $ | 1,240 | ||||||||
Total realized/unrealized gains (losses) included in: | ||||||||||||||||
Earnings | (50 | ) | — | (56 | ) | 49 | ||||||||||
Other comprehensive income (loss) | 707 | 70 | 1,392 | 28 | ||||||||||||
Purchases, sales, issuances and settlements | 741 | 1 | (247 | ) | (224 | ) | ||||||||||
Transfers into and/or out of Level 3 | (873 | ) | 2 | 62 | (14 | ) | ||||||||||
Balance, end of period | $ | 18,341 | $ | 1,079 | $ | 18,341 | $ | 1,079 | ||||||||
• | Total gains and losses in earnings and other comprehensive income (loss) are calculated assuming transfers into or out of Level 3 occurred at the beginning of the period. Items transferred into and out of Level 3 for the same period are excluded from the rollforward. | |
• | Total gains and losses for fixed maturity securities included in earnings of ($3) million and ($59) million, and other comprehensive income (loss) of $13 million and $99 million, were incurred for transfers subsequent to their transfer into Level 3, for the three months and nine months ended September 30, 2010, respectively. | |
• | Net transfers intoand/or out of Level 3 for fixed maturity securities were ($873) million and $62 million, and were comprised of transfers into Level 3 of $367 million and $1,475 million, and transfers out of Level 3 ($1,240) million and ($1,413) million for the three months and nine months ended September 30, 2010, respectively. |
• | During the three months and nine months ended September 30, 2010, fixed maturity securities transfers into Level 3 of $367 million and $1,475 million, respectively, resulted primarily from current market conditions characterized by a lack of trading activity, decreased liquidity and credit ratings downgrades (e.g., from investment grade to below investment grade). These current market conditions have resulted in decreased transparency of valuations and an increased use of broker quotations and unobservable inputs to determine estimated fair value, principally for certain RMBS and private placements included in U.S. and foreign corporate securities. |
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• | During the three months and nine months ended September 30, 2010, fixed maturity securities transfers out of Level 3 of ($1,240) million and ($1,413) million, respectively, resulted primarily from increased transparency of both new issuances that subsequent to issuance and establishment of trading activity, became priced by pricing services and existing issuances that, over time, the Company was able to corroborate pricing received from independent pricing services with observable inputs, or there were increases in market activity and upgraded credit ratings primarily for certain U.S. and foreign corporate securities, ABS and RMBS. |
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September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||
Estimated | Estimated | |||||||||||||||||||||||||||
NAIC | Amortized | Fair | % of | Amortized | Fair | % of | ||||||||||||||||||||||
Rating | Rating Agency Designation | Cost | Value | Total | Cost | Value | Total | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
1 | Aaa/Aa/A | $ | 162,359 | $ | 173,111 | 66.5 | % | $ | 151,391 | $ | 151,136 | 66.4 | % | |||||||||||||||
2 | Baa | 61,313 | 66,005 | 25.3 | 55,508 | 56,305 | 24.7 | |||||||||||||||||||||
3 | Ba | 13,271 | 13,289 | 5.1 | 13,184 | 12,003 | 5.3 | |||||||||||||||||||||
4 | B | 7,492 | 7,022 | 2.7 | 7,474 | 6,461 | 2.9 | |||||||||||||||||||||
5 | Caa and lower | 922 | 835 | 0.3 | 1,809 | 1,425 | 0.6 | |||||||||||||||||||||
6 | In or near default | 302 | 302 | 0.1 | 343 | 312 | 0.1 | |||||||||||||||||||||
Total fixed maturity securities | $ | 245,659 | $ | 260,564 | 100.0 | % | $ | 229,709 | $ | 227,642 | 100.0 | % | ||||||||||||||||
Fixed Maturity Securities — by Sector & Credit Quality Rating at September 30, 2010 | ||||||||||||||||||||||||||||
NAIC Rating: | 1 | 2 | 3 | 4 | 5 | 6 | Total | |||||||||||||||||||||
Caa and | In or Near | Estimated | ||||||||||||||||||||||||||
Rating Agency Designation: | Aaa/Aa/A | Baa | Ba | B | Lower | Default | Fair Value | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 34,826 | $ | 34,769 | $ | 7,520 | $ | 3,451 | $ | 413 | $ | 41 | $ | 81,020 | ||||||||||||||
RMBS | 40,394 | 1,843 | 1,930 | 1,365 | 153 | 215 | 45,900 | |||||||||||||||||||||
Foreign corporate securities | 19,653 | 21,224 | 2,450 | 1,480 | 151 | 12 | 44,970 | |||||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 34,360 | �� | — | — | — | — | 34,360 | |||||||||||||||||||||
CMBS | 15,066 | 307 | 82 | 40 | 38 | — | 15,533 | |||||||||||||||||||||
Foreign government securities | 7,072 | 6,226 | 990 | 556 | — | — | 14,844 | |||||||||||||||||||||
ABS | 12,883 | 907 | 286 | 116 | 80 | 34 | 14,306 | |||||||||||||||||||||
State and political subdivision securities | 8,857 | 717 | 31 | 9 | — | — | 9,614 | |||||||||||||||||||||
Other fixed maturity securities | — | 12 | — | 5 | — | — | 17 | |||||||||||||||||||||
Total fixed maturity securities | $ | 173,111 | $ | 66,005 | $ | 13,289 | $ | 7,022 | $ | 835 | $ | 302 | $ | 260,564 | ||||||||||||||
Percentage of total | 66.5 | % | 25.3 | % | 5.1 | % | 2.7 | % | 0.3 | % | 0.1 | % | 100.0 | % |
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Fixed Maturity Securities — by Sector & Credit Quality Rating at December 31, 2009 | ||||||||||||||||||||||||||||
NAIC Rating: | 1 | 2 | 3 | 4 | 5 | 6 | Total | |||||||||||||||||||||
Caa and | In or Near | Estimated | ||||||||||||||||||||||||||
Rating Agency Designation: | Aaa/Aa/A | Baa | Ba | B | Lower | Default | Fair Value | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 31,848 | $ | 30,266 | $ | 6,319 | $ | 2,965 | $ | 616 | $ | 173 | $ | 72,187 | ||||||||||||||
RMBS | 38,464 | 1,563 | 2,260 | 1,391 | 339 | 3 | 44,020 | |||||||||||||||||||||
Foreign corporate securities | 16,678 | 17,393 | 2,067 | 1,530 | 281 | 81 | 38,030 | |||||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities | 25,447 | — | — | — | — | — | 25,447 | |||||||||||||||||||||
CMBS | 15,000 | 434 | 152 | 22 | 14 | — | 15,622 | |||||||||||||||||||||
Foreign government securities | 5,786 | 4,841 | 890 | 415 | — | 15 | 11,947 | |||||||||||||||||||||
ABS | 11,573 | 1,033 | 275 | 124 | 117 | 40 | 13,162 | |||||||||||||||||||||
State and political subdivision securities | 6,337 | 765 | 40 | 8 | 58 | — | 7,208 | |||||||||||||||||||||
Other fixed maturity securities | 3 | 10 | — | 6 | — | — | 19 | |||||||||||||||||||||
Total fixed maturity securities | $ | 151,136 | $ | 56,305 | $ | 12,003 | $ | 6,461 | $ | 1,425 | $ | 312 | $ | 227,642 | ||||||||||||||
Percentage of total | 66.4 | % | 24.7 | % | 5.3 | % | 2.9 | % | 0.6 | % | 0.1 | % | 100.0 | % |
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
RMBS | $ | 45,900 | 60.6 | % | $ | 44,020 | 60.5 | % | ||||||||
CMBS | 15,533 | 20.5 | 15,622 | 21.4 | ||||||||||||
ABS | 14,306 | 18.9 | 13,162 | 18.1 | ||||||||||||
Total structured securities | $ | 75,739 | 100.0 | % | $ | 72,804 | 100.0 | % | ||||||||
Ratings profile: | ||||||||||||||||
RMBS rated Aaa/AAA | $ | 36,982 | 80.6 | % | $ | 35,626 | 80.9 | % | ||||||||
RMBS rated NAIC 1 | $ | 40,394 | 88.0 | % | $ | 38,464 | 87.4 | % | ||||||||
CMBS rated Aaa/AAA | $ | 14,287 | 92.0 | % | $ | 13,354 | 85.5 | % | ||||||||
ABS rated Aaa/AAA | $ | 10,570 | 73.9 | % | $ | 9,354 | 71.1 | % | ||||||||
ABS rated NAIC 1 | $ | 12,883 | 90.1 | % | $ | 11,573 | 87.9 | % |
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(In millions, except number of securities) | ||||||||||||||||
Number of securities | 97 | 7 | 223 | 9 | ||||||||||||
Total gross unrealized loss | $ | 1,715 | $ | 112 | $ | 4,465 | $ | 132 | ||||||||
Percentage of total gross unrealized loss | 37 | % | 49 | % | 43 | % | 48 | % |
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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 | $ | 25 | $ | 20 | 80 | % | $ | 20 | 100 | % | $ | 20 | 100 | % | 10 | % | ||||||||||||||||
Six months or greater but less than twelve months | 17 | 17 | 100 | % | 17 | 100 | % | 17 | 100 | % | 94 | % | ||||||||||||||||||||
Twelve months or greater | 120 | 120 | 100 | % | 120 | 100 | % | 116 | 97 | % | 78 | % | ||||||||||||||||||||
All equity securities with a gross unrealized loss of 20% or more | $ | 162 | $ | 157 | 97 | % | $ | 157 | 100 | % | $ | 153 | 97 | % | 71 | % | ||||||||||||||||
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Three Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Proceeds | $ | 10,747 | $ | 11,041 | $ | 102 | $ | 334 | $ | 10,849 | $ | 11,375 | ||||||||||||
Gross investment gains | 190 | 228 | 7 | 41 | 197 | 269 | ||||||||||||||||||
Gross investment losses | (136 | ) | (278 | ) | (7 | ) | (58 | ) | (143 | ) | (336 | ) | ||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||
Credit-related | (107 | ) | (223 | ) | — | — | (107 | ) | (223 | ) | ||||||||||||||
Other (1) | (12 | ) | (182 | ) | (1 | ) | (36 | ) | (13 | ) | (218 | ) | ||||||||||||
Total OTTI losses recognized in earnings | (119 | ) | (405 | ) | (1 | ) | (36 | ) | (120 | ) | (441 | ) | ||||||||||||
Net investment gains (losses) | $ | (65 | ) | $ | (455 | ) | $ | (1 | ) | $ | (53 | ) | $ | (66 | ) | $ | (508 | ) | ||||||
Nine Months Ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Proceeds | $ | 32,625 | $ | 30,392 | $ | 547 | $ | 587 | $ | 33,172 | $ | 30,979 | ||||||||||||
Gross investment gains | 569 | 773 | 114 | 61 | 683 | 834 | ||||||||||||||||||
Gross investment losses | (470 | ) | (925 | ) | (11 | ) | (125 | ) | (481 | ) | (1,050 | ) | ||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||
Credit-related | (339 | ) | (966 | ) | — | — | (339 | ) | (966 | ) | ||||||||||||||
Other (1) | (18 | ) | (324 | ) | (3 | ) | (366 | ) | (21 | ) | (690 | ) | ||||||||||||
Total OTTI losses recognized in earnings | (357 | ) | (1,290 | ) | (3 | ) | (366 | ) | (360 | ) | (1,656 | ) | ||||||||||||
Net investment gains (losses) | $ | (258 | ) | $ | (1,442 | ) | $ | 100 | $ | (430 | ) | $ | (158 | ) | $ | (1,872 | ) | |||||||
(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 estimated fair value. |
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Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
U.S. and foreign corporate securities — by industry: | ||||||||||||||||
Finance | $ | 54 | $ | 241 | $ | 82 | $ | 429 | ||||||||
Consumer | 8 | 42 | 31 | 206 | ||||||||||||
Communications | 9 | 29 | 12 | 232 | ||||||||||||
Utility | — | 8 | 3 | 84 | ||||||||||||
Other industries | — | — | — | 26 | ||||||||||||
Industrial | — | 7 | — | 27 | ||||||||||||
Total U.S. and foreign corporate securities | 71 | 327 | 128 | 1,004 | ||||||||||||
ABS | 26 | 17 | 89 | 111 | ||||||||||||
RMBS | 19 | 40 | 76 | 118 | ||||||||||||
CMBS | 3 | 20 | 64 | 56 | ||||||||||||
Foreign government securities | — | 1 | — | 1 | ||||||||||||
Total | $ | 119 | $ | 405 | $ | 357 | $ | 1,290 | ||||||||
Three Months | Nine Months | |||||||||||||||
Ended | Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: | ||||||||||||||||
Common stock | $ | 1 | $ | 2 | $ | 3 | $ | 52 | ||||||||
Non-redeemable preferred stock | — | 34 | — | 314 | ||||||||||||
Total | $ | 1 | $ | 36 | $ | 3 | $ | 366 | ||||||||
Industry: | ||||||||||||||||
Financial services industry: | ||||||||||||||||
Perpetual hybrid securities | $ | — | $ | 34 | $ | — | $ | 294 | ||||||||
Common and remaining non-redeemable preferred stock | — | — | — | 30 | ||||||||||||
Total financial services industry | — | 34 | — | 324 | ||||||||||||
Other industries | 1 | 2 | 3 | 42 | ||||||||||||
Total | $ | 1 | $ | 36 | $ | 3 | $ | 366 | ||||||||
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September 30, 2010 | ||||||||||||||||
Trading Securities | Trading Liabilities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | 3,005 | 76 | % | $ | 16 | 42 | % | ||||||||
Significant other observable inputs (Level 2) (1) | 889 | 22 | 20 | 53 | ||||||||||||
Significant unobservable inputs (Level 3) | 93 | 2 | 2 | 5 | ||||||||||||
Total estimated fair value | $ | 3,987 | 100 | % | $ | 38 | 100 | % | ||||||||
(1) | All trading securities held by consolidated securitization entities are classified as Level 2. |
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2010 | September 30, 2010 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 36 | $ | 83 | ||||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | 9 | 3 | ||||||
Purchases, sales, issuances and settlements | 13 | (12 | ) | |||||
Transfer in and/or out of Level 3 | 35 | 19 | ||||||
Balance, end of period | $ | 93 | $ | 93 | ||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost | Total | Allowance | Cost | Cost | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Commercial: | ||||||||||||||||||||||||||||||||
Performing | $ | 35,863 | 99.4 | % | $ | 550 | 1.5 | % | $ | 35,066 | 99.7 | % | $ | 548 | 1.6 | % | ||||||||||||||||
Restructured | 87 | 0.2 | — | — | % | — | — | — | — | % | ||||||||||||||||||||||
Potentially delinquent | 133 | 0.4 | 23 | 17.3 | % | 102 | 0.3 | 41 | 40.2 | % | ||||||||||||||||||||||
Delinquent or under foreclosure | 8 | — | — | — | % | 8 | — | — | — | % | ||||||||||||||||||||||
Total | $ | 36,091 | 100.0 | % | $ | 573 | 1.6 | % | $ | 35,176 | 100.0 | % | $ | 589 | 1.7 | % | ||||||||||||||||
Agricultural (1): | ||||||||||||||||||||||||||||||||
Performing | $ | 12,354 | 98.0 | % | $ | 35 | 0.3 | % | $ | 11,950 | 97.5 | % | $ | 33 | 0.3 | % | ||||||||||||||||
Restructured | 63 | 0.5 | 14 | 22.2 | % | 36 | 0.3 | 10 | 27.8 | % | ||||||||||||||||||||||
Potentially delinquent | 36 | 0.3 | 11 | 30.6 | % | 128 | 1.0 | 34 | 26.6 | % | ||||||||||||||||||||||
Delinquent or under foreclosure | 145 | 1.2 | 16 | 11.0 | % | 141 | 1.2 | 38 | 27.0 | % | ||||||||||||||||||||||
Total | $ | 12,598 | 100.0 | % | $ | 76 | 0.6 | % | $ | 12,255 | 100.0 | % | $ | 115 | 0.9 | % | ||||||||||||||||
Residential and Consumer (2): | ||||||||||||||||||||||||||||||||
Performing | $ | 1,903 | 96.0 | % | $ | 16 | 0.8 | % | $ | 1,389 | 94.4 | % | $ | 16 | 1.2 | % | ||||||||||||||||
Restructured | 2 | — | — | — | % | 1 | 0.1 | — | — | % | ||||||||||||||||||||||
Potentially delinquent | 17 | 0.9 | — | — | % | 10 | 0.7 | — | — | % | ||||||||||||||||||||||
Delinquent or under foreclosure | 61 | 3.1 | 1 | 1.6 | % | 71 | 4.8 | 1 | 1.4 | % | ||||||||||||||||||||||
Total | $ | 1,983 | 100.0 | % | $ | 17 | 0.9 | % | $ | 1,471 | 100.0 | % | $ | 17 | 1.2 | % | ||||||||||||||||
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(1) | The Company diversifies its agricultural mortgage loansheld-for-investment by both geographic region and product type. Of the $12.6 billion of agricultural mortgage loans outstanding at September 30, 2010, 53% were subject to rate resets prior to maturity. A substantial portion of these loans has been successfully renegotiated and remains outstanding to maturity. | |
(2) | Residential and consumer loans consist of primarily residential mortgage loans, home equity lines of credit, and automobile loansheld-for-investment. |
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Residential | ||||||||||||||||
and | ||||||||||||||||
Commercial | Agricultural | Consumer | Total | |||||||||||||
(In millions) | ||||||||||||||||
For the Three Months Ended September 30, 2010: | ||||||||||||||||
Balance, beginning of period | $ | 621 | $ | 96 | $ | 17 | $ | 734 | ||||||||
Provision/(release) | (27 | ) | 1 | 3 | (23 | ) | ||||||||||
Charge-offs, net of recoveries | (21 | ) | (21 | ) | (3 | ) | (45 | ) | ||||||||
Balance, at end of period | $ | 573 | $ | 76 | $ | 17 | $ | 666 | ||||||||
For the Three Months Ended September 30, 2009: | ||||||||||||||||
Balance, beginning of period | $ | 432 | $ | 96 | $ | 15 | $ | 543 | ||||||||
Provision/(release) | 112 | 27 | 2 | 141 | ||||||||||||
Charge-offs, net of recoveries | (2 | ) | (10 | ) | (1 | ) | (13 | ) | ||||||||
Balance, at end of period | $ | 542 | $ | 113 | $ | 16 | $ | 671 | ||||||||
For the Nine Months Ended September 30, 2010: | ||||||||||||||||
Balance, beginning of period | $ | 589 | $ | 115 | $ | 17 | $ | 721 | ||||||||
Provision/(release) | 6 | — | 5 | 11 | ||||||||||||
Charge-offs, net of recoveries | (22 | ) | (39 | ) | (5 | ) | (66 | ) | ||||||||
Balance, at end of period | $ | 573 | $ | 76 | $ | 17 | $ | 666 | ||||||||
For the Nine Months Ended September 30, 2009: | ||||||||||||||||
Balance, beginning of period | $ | 232 | $ | 61 | $ | 11 | $ | 304 | ||||||||
Provision/(release) | 330 | 77 | 9 | 416 | ||||||||||||
Charge-offs, net of recoveries | (20 | ) | (25 | ) | (4 | ) | (49 | ) | ||||||||
Balance, at end of period | $ | 542 | $ | 113 | $ | 16 | $ | 671 | ||||||||
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Specific credit losses | $ | 71 | $ | 123 | ||||
Non-specifically identified credit losses | 595 | 598 | ||||||
Total valuation allowances | $ | 666 | $ | 721 | ||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Wholly-owned real estate | $ | 5,636 | 80.7 | % | $ | 5,435 | 78.8 | % | ||||||||
Accumulated depreciation | (1,509 | ) | (21.6 | ) | (1,408 | ) | (20.4 | ) | ||||||||
Net wholly-owned real estate | 4,127 | 59.1 | 4,027 | 58.4 | ||||||||||||
Real estate joint ventures and funds | 2,711 | 38.8 | 2,698 | 39.1 | ||||||||||||
Subtotal — wholly-owned real estate and real estate joint ventures | 6,838 | 97.9 | % | 6,725 | 97.5 | % | ||||||||||
Foreclosed real estate | 143 | 2.0 | 127 | 1.9 | ||||||||||||
Real estateheld-for-investment | 6,981 | 99.9 | % | 6,852 | 99.4 | % | ||||||||||
Real estateheld-for-sale | 9 | 0.1 | 44 | 0.6 | ||||||||||||
Total real estate holdings | $ | 6,990 | 100.0 | % | $ | 6,896 | 100.0 | % | ||||||||
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September 30, 2010 | December 31, 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Freestanding derivatives with positive fair values | $ | 10,555 | 63.7 | % | $ | 6,133 | 48.2 | % | ||||||||
Leveraged leases, net of non-recourse debt | 2,277 | 13.7 | 2,227 | 17.5 | ||||||||||||
Tax credit partnerships | 832 | 5.0 | 719 | 5.7 | ||||||||||||
Mortgage servicing rights (“MSRs”) | 707 | 4.3 | 878 | 6.9 | ||||||||||||
Joint venture investments | 670 | 4.0 | 977 | 7.7 | ||||||||||||
Funds withheld at interest | 540 | 3.3 | 505 | 4.0 | ||||||||||||
Funding agreements | — | — | 409 | 3.2 | ||||||||||||
Other | 990 | 6.0 | 861 | 6.8 | ||||||||||||
Total | $ | 16,571 | 100.0 | % | $ | 12,709 | 100.0 | % | ||||||||
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• | A comprehensive description of the nature of the Company’s derivative instruments, including the strategies for which derivatives are used in managing various risks. | |
• | Information about the notional amount, estimated fair value, and primary underlying risk exposure of the Company’s derivative financial instruments, excluding embedded derivatives held at September 30, 2010 and December 31, 2009. |
• | The notional amount and estimated fair value of derivatives and non-derivative instruments designated as hedging instruments by type of hedge designation at September 30, 2010 and December 31, 2009. | |
• | The notional amount and estimated fair value of derivatives that are not designated or do not qualify as hedging instruments by derivative type at September 30, 2010 and December 31, 2009. | |
• | The statement of operations effects of derivatives in cash flow, fair value, or non-qualifying hedge relationships for the three months and nine months ended September 30, 2010 and 2009. |
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September 30, 2010 | ||||||||||||||||
Derivative | Derivative | |||||||||||||||
Assets | Liabilities | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | 62 | 1 | % | $ | 43 | 1 | % | ||||||||
Significant other observable inputs (Level 2) | 9,726 | 92 | 3,552 | 97 | ||||||||||||
Significant unobservable inputs (Level 3) | 767 | 7 | 82 | 2 | ||||||||||||
Total estimated fair value | $ | 10,555 | 100 | % | $ | 3,677 | 100 | % | ||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2010 | September 30, 2010 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | 753 | $ | 356 | ||||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | (98 | ) | 364 | |||||
Other comprehensive income (loss) | 30 | 49 | ||||||
Purchases, sales, issuances and settlements | 8 | (62 | ) | |||||
Transfer in and/or out of Level 3 | (8 | ) | (22 | ) | ||||
Balance, end of period | $ | 685 | $ | 685 | ||||
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September 30, 2010 | ||||||||||||||||
Net Embedded Derivatives Within | ||||||||||||||||
Asset Host | ||||||||||||||||
Contracts | Liability Host Contracts | |||||||||||||||
(In millions) | ||||||||||||||||
Quoted prices in active markets for identical assets and liabilities (Level 1) | $ | — | — | % | $ | — | — | % | ||||||||
Significant other observable inputs (Level 2) | — | — | (8 | ) | — | |||||||||||
Significant unobservable inputs (Level 3) | 125 | 100 | 3,459 | 100 | ||||||||||||
Total estimated fair value | $ | 125 | 100 | % | $ | 3,451 | 100 | % | ||||||||
Three Months | Nine Months | |||||||
Ended | Ended | |||||||
September 30, 2010 | September 30, 2010 | |||||||
(In millions) | ||||||||
Balance, beginning of period | $ | (3,296 | ) | $ | (1,455 | ) | ||
Total realized/unrealized gains (losses) included in: | ||||||||
Earnings | 134 | (1,496 | ) | |||||
Other comprehensive income (loss) | (98 | ) | (163 | ) | ||||
Purchases, sales, issuances and settlements | (74 | ) | (220 | ) | ||||
Transfer in and/or out of Level 3 | — | — | ||||||
Balance, end of period | $ | (3,334 | ) | $ | (3,334 | ) | ||
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(In millions) | ||||
Cash | $ | 7,203 | ||
MetLife, Inc.’s common stock (78,239,712 shares at $40.90 per share) | 3,200 | |||
MetLife, Inc.’s Series B contingent convertible junior participating non-cumulative perpetual preferred stock (1) | 2,805 | |||
MetLife, Inc.’s equity units ($3.0 billion aggregate stated amount) (2) | 3,189 | |||
Total fair value of consideration transferred | $ | 16,397 | ||
(1) | Consists of 6,857,000 shares convertible into approximately 68,570,000 shares (valued at $40.90 per share at the time of the Acquisition) of the Holding Company’s common stock (subject to anti-dilution adjustments) upon a favorable vote of the Holding Company’s common stockholders. | |
(2) | The equity units, which are mandatorily convertible securities, will initially consist of (i) purchase contracts obligating the holder to purchase a variable number of shares of MetLife, Inc.’s common stock on each of three specified future settlement dates (expected to be approximately two, three and four years after closing of the Acquisition), for a fixed amount per purchase contract, (an aggregate of $1.0 billion on each settlement date) and (ii) an interest in each of three series of senior debt securities (Series A, B and C) of MetLife, Inc. At future dates, the Series A, B and C debt securities will be subject to remarketing and sold to investors. Holders of the equity units who elect to include their debt securities in a remarketing can use the proceeds thereof to meet their obligations under the purchase contracts. |
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• | $1,000 million senior notes due February 6, 2014, which bear interest at a fixed rate of 2.375%, payable semiannually; | |
• | $1,000 million senior notes due February 8, 2021, which bear interest at a fixed rate of 4.75%, payable semiannually; | |
• | $750 million senior notes due February 6, 2041, which bear interest at a fixed rate of 5.875%, payable semiannually; and | |
• | $250 million floating rate senior notes due August 6, 2013, which bear interest at a rate equal to three-month LIBOR, reset quarterly, plus 1.25%, payable quarterly. |
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Nine Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Sources: | ||||||||
Net cash provided by operating activities | $ | 5,193 | $ | 2,718 | ||||
Net cash provided by changes in policyholder account balances | 3,583 | — | ||||||
Net cash provided by changes in payables for collateral under securities loaned and other transactions | 7,695 | — | ||||||
Net cash provided by changes in bank deposits | — | 1,368 | ||||||
Net cash provided by short-term debt issuances | 1,145 | — | ||||||
Long-term debt issued, net of issuance costs | 4,576 | 2,603 | ||||||
Collateral financing arrangements issued | — | 105 | ||||||
Junior subordinated debt securities issued | — | 500 | ||||||
Common stock issued, net of issuance costs | 3,557 | — | ||||||
Common stock issued to settle stock forward contracts | — | 1,035 | ||||||
Cash provided by the effect of change in foreign currency exchange rates | — | 88 | ||||||
Total sources | 25,749 | 8,417 | ||||||
Uses: | ||||||||
Net cash used in investing activities | 19,369 | 7,357 | ||||||
Net cash used for changes in policyholder account balances | — | 2,153 | ||||||
Net cash used for changes in payables for collateral under securities loaned and other transactions | — | 6,696 | ||||||
Net cash used for changes in bank deposits | 959 | — | ||||||
Net cash used for short-term debt repayments | — | 528 | ||||||
Long-term debt repaid | 689 | 244 | ||||||
Dividends on preferred stock | 91 | 91 | ||||||
Net cash used in other, net | 188 | 25 | ||||||
Cash used in the effect of change in foreign currency exchange rates | 8 | — | ||||||
Total uses | 21,304 | 17,094 | ||||||
Net increase (decrease) in cash and cash equivalents | $ | 4,445 | $ | (8,677 | ) | |||
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• | The Holding Company and MetLife Funding, Inc. (“MetLife Funding”) each have commercial paper programs supported by $4.0 billion in general corporate credit facilities (see “— Credit and Committed Facilities”). MetLife Funding, a subsidiary of MLIC, serves as a centralized finance unit for the Company. Pursuant to a support agreement, MLIC has agreed to cause MetLife Funding to have a tangible net worth of at least one dollar. At both September 30, 2010 and December 31, 2009, MetLife Funding had a tangible net worth of $12 million. MetLife Funding raises cash from various funding sources and uses the proceeds to extend loans, through MetLife Credit Corp., another subsidiary of MLIC, to the Holding Company, MLIC and other affiliates in order to enhance the financial flexibility and liquidity of these companies. At September 30, 2010 and December 31, 2009, MetLife Funding had total outstanding liabilities for its commercial paper program, including accrued interest payable, of $304 million and $319 million, respectively. | |
• | 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 both September 30, 2010 and December 31, 2009, MetLife Bank had no liability for advances from the Federal Reserve Bank of New York under these facilities. | |
• | As a member of the FHLB of NY, MetLife Bank has received advances from the FHLB of NY on both short- and long-term bases, with a total liability of $5.0 billion and $2.4 billion at September 30, 2010 and December 31, 2009, respectively. | |
• | In addition, the Company had obligations under funding agreements with the FHLB of NY of $13.3 billion and $13.7 billion at September 30, 2010 and December 31, 2009, respectively, for MLIC, and with the FHLB of Boston of $100 million and $326 million at September 30, 2010 and December 31, 2009, respectively, for MetLife Insurance Company of Connecticut (“MICC”). See Note 8 of the Notes to the Consolidated Financial Statements included in the 2009 Annual Report. In September 2010, each of MetLife Investors Insurance Company and General American Life Insurance Company, subsidiaries of MetLife, became a member of the Federal Home Loan Bank of Des Moines (“FHLB of Des Moines”), and purchased $10 million of FHLB of Des Moines common stock as of September 30, 2010. Membership in the FHLB of Des Moines provides an additional source of contingent liquidity for the Company. There were no funding agreements with the FHLB of Des Moines at September 30, 2010. |
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• | The Holding Company and MetLife Bank elected to participate in the debt guarantee component of the FDIC’s Temporary Liquidity Guarantee Program (the “FDIC Program”). On March 26, 2009, the Holding Company issued $397 million of floating-rate senior notes due June 2012 under the FDIC Program, representing all of the Holding Company’s capacity under the FDIC Program. MetLife Bank let its capacity to issue up to $178 million of guaranteed debt under the FDIC Program expire unused when the program ended on October 31, 2009. |
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Short-term debt | $ | 2,057 | $ | 912 | ||||
Long-term debt (1),(2) | $ | 17,382 | $ | 13,156 | ||||
Collateral financing arrangements | $ | 5,297 | $ | 5,297 | ||||
Junior subordinated debt securities | $ | 3,191 | $ | 3,191 |
(1) | Excludes $7,130 million and $64 million at September 30, 2010 and December 31, 2009, respectively, of long-term debt relating to VIEs. | |
(2) | See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements and “— Liquidity and Capital Resources — Overview — Acquisition of the Alico Business — Senior Notes” for a description of the senior notes issued in anticipation of the Acquisition. |
Letter of | ||||||||||||||||||
Credit | Unused | |||||||||||||||||
Borrowers | Expiration | Capacity | Issuances | Drawdowns | Commitments | |||||||||||||
(In millions) | ||||||||||||||||||
MetLife, Inc. and MetLife Funding | June 2012 (1),(2) | $ | 2,850 | $ | 65 | $ | — | $ | 2,785 |
(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. | |
(2) | In October 2010, the Holding Company and MetLife Funding entered into a three-year, $3.0 billion senior unsecured credit facility and a364-day, $1.0 billion senior unsecured credit facility, both with various financial institutions. These facilities replaced the $2.85 billion credit facility amended and restated in December 2008 and the $1.5 billion committed facility entered into in December 2009. Proceeds are available to be used for general corporate purposes, including to support their commercial paper programs, for the issuance of letters of credit and to support variable annuity policy and reinsurance reserve requirements. The Holding Company and MetLife Funding incurred costs of $11 million related to the credit facilities, which have been capitalized and included in other assets. These costs will be amortized over the term of the facilities. |
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Letter of | ||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Issuances | Drawdowns | Commitments | (Years) | ||||||||||||||||
(In millions) | ||||||||||||||||||||||
MetLife, Inc. | August 2011 | $ | 300 | $ | 300 | $ | — | $ | — | — | ||||||||||||
MetLife, Inc. | December 2010 (1) | 1,500 | 777 | — | 723 | — | ||||||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. | June 2016 (2) | 500 | 490 | — | 10 | 5 | ||||||||||||||||
Exeter Reassurance Company Ltd. | December 2027 (3) | 650 | 490 | — | 160 | 17 | ||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | 3,500 | — | 2,797 | 703 | 26 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 (3) | 2,896 | 1,573 | — | 1,323 | 27 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | September 2038 (3) | 3,500 | 2,132 | — | 1,368 | 27 | ||||||||||||||||
Total | $ | 12,846 | $ | 5,762 | $ | 2,797 | $ | 4,287 | ||||||||||||||
(1) | See footnote (2) to the unsecured credit facilities table above. | |
(2) | 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. | |
(3) | The Holding Company is a guarantor under this agreement. |
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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 16, 2010 | August 31, 2010 | September 15, 2010 | $ | 0.2555555 | $ | 6 | $ | 0.4062500 | $ | 24 | ||||||||||
May 17, 2010 | May 31, 2010 | June 15, 2010 | $ | 0.2555555 | 7 | $ | 0.4062500 | 24 | ||||||||||||
March 5, 2010 | February 28, 2010 | March 15, 2010 | $ | 0.2500000 | 6 | $ | 0.4062500 | 24 | ||||||||||||
$ | 19 | $ | 72 | |||||||||||||||||
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One Year or | Three Years or | |||||||||||||||||||
More to | More to | |||||||||||||||||||
Less Than | Less Than | Less Than | Five Years | |||||||||||||||||
Contractual Obligations | Total | One Year | Three Years | Five Years | or More | |||||||||||||||
(In millions) | ||||||||||||||||||||
Long-term debt | $ | 26,864 | $ | 1,594 | $ | 4,659 | $ | 5,862 | $ | 14,749 | ||||||||||
Obligation under purchase acquisition agreement | $ | 15,500 | $ | 15,500 | $ | — | $ | — | $ | — |
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2010 | ||||
Permitted w/o | ||||
Company | Approval (1) | |||
(In millions) | ||||
Metropolitan Life Insurance Company | $ | 1,262 | ||
MetLife Insurance Company of Connecticut | $ | 659 | ||
Metropolitan Tower Life Insurance Company | $ | 93 | ||
Metropolitan Property and Casualty Insurance Company | $ | — |
(1) | Reflects dividend amounts that may be paid during 2010 without prior regulatory approval. However, because dividend tests may be based on dividends previously paid over rolling12-month periods, if paid before a specified date during 2010, some or all of such dividends may require regulatory approval. None of these available amounts have been paid as of September 30, 2010. During the nine months ended September 30, 2010, the Holding Company received dividends of $54 million from other subsidiaries, all of which represented returns of capital. |
September 30, 2010 | December 31, 2009 | |||||||
(In millions) | ||||||||
Long-term debt — unaffiliated | $ | 13,419 | $ | 10,458 | ||||
Long-term debt — affiliated | $ | 500 | $ | 500 | ||||
Collateral financing arrangements | $ | 2,797 | $ | 2,797 | ||||
Junior subordinated debt securities | $ | 1,748 | $ | 1,748 |
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Subsidiaries | Interest Rate | Maturity Date | September 30, 2010 | December 31, 2009 | ||||||||
(In millions) | ||||||||||||
Metropolitan Life Insurance Company | 6-month LIBOR + 1.80% | December 31, 2011 | $ | 775 | $ | 775 | ||||||
Metropolitan Life Insurance Company | 6-month LIBOR + 1.80% | December 31, 2011 | 300 | 300 | ||||||||
Metropolitan Life Insurance Company | 7.13% | December 15, 2032 | 400 | 400 | ||||||||
Metropolitan Life Insurance Company | 7.13% | January 15, 2033 | 100 | 100 | ||||||||
MetLife Chile Seguros De Vida S.A. | 6-month LIBOR + 2.73% | April 28, 2015 | 45 | — | ||||||||
Total | $ | 1,620 | $ | 1,575 | ||||||||
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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 Guarantee Benefits — The Company uses a wide range of derivative contracts to hedge the risk associated with variable annuity living guarantee benefits. 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. |
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• | Foreign Currency Risk — The Company uses currency swaps and forwards to hedge foreign currency risk. These hedges primarily swap foreign currency denominated bonds, investments in foreign subsidiaries or equity exposures to U.S. dollars. | |
• | 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; | |
• | for 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. |
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September 30, 2010 | ||||
(In millions) | ||||
Non-trading: | ||||
Interest rate risk | $ | 3,694 | ||
Foreign currency exchange rate risk | $ | 1,035 | ||
Equity price risk | $ | 121 | ||
Trading: | ||||
Interest rate risk | $ | 4 | ||
Foreign currency exchange rate risk | $ | 190 |
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September 30, 2010 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Yield | ||||||||||
Amount | Value (3) | Curve | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 260,564 | $ | (4,181 | ) | |||||||
Equity securities | 2,865 | — | ||||||||||
Trading securities | 3,987 | (5 | ) | |||||||||
Mortgage loans: | ||||||||||||
Held-for-investment | 58,424 | (225 | ) | |||||||||
Held-for-sale | 2,840 | (5 | ) | |||||||||
Mortgage loans, net | 61,264 | (230 | ) | |||||||||
Policy loans | 12,173 | (152 | ) | |||||||||
Real estate joint ventures (1) | 132 | — | ||||||||||
Other limited partnership interests (1) | 1,754 | — | ||||||||||
Short-term investments | 11,590 | (1 | ) | |||||||||
Other invested assets: | ||||||||||||
Mortgage servicing rights | 707 | 78 | ||||||||||
Other | 912 | — | ||||||||||
Cash and cash equivalents | 14,557 | — | ||||||||||
Accrued investment income | 3,469 | — | ||||||||||
Premiums, reinsurance and other receivables | 3,744 | (354 | ) | |||||||||
Other assets | 394 | (10 | ) | |||||||||
Net embedded derivatives within asset host contracts (2) | 125 | (17 | ) | |||||||||
Mortgage loan commitments | $ | 3,225 | (2 | ) | (3 | ) | ||||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 2,053 | 73 | — | ||||||||
Total Assets | $ | (4,875 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 106,415 | $ | 631 | ||||||||
Payables for collateral under securities loaned and other transactions | 31,891 | — | ||||||||||
Bank deposits | 9,415 | 2 | ||||||||||
Short-term debt | 2,057 | — | ||||||||||
Long-term debt | 19,037 | 336 | ||||||||||
Collateral financing arrangements | 2,484 | (9 | ) | |||||||||
Junior subordinated debt securities | 3,415 | 134 | ||||||||||
Other liabilities: | ||||||||||||
Trading liabilities | 38 | 1 | ||||||||||
Other | 3,829 | — | ||||||||||
Net embedded derivatives within liability host contracts (2) | 3,451 | 1,408 | ||||||||||
Total Liabilities | $ | 2,503 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 46,625 | $ | 3,253 | $ | (1,054 | ) | |||||
Interest rate floors | $ | 23,941 | 920 | (104 | ) | |||||||
Interest rate caps | $ | 34,112 | 94 | 28 | ||||||||
Interest rate futures | $ | 8,026 | 20 | (20 | ) | |||||||
Interest rate options | $ | 2,342 | 74 | (16 | ) | |||||||
Interest rate forwards | $ | 12,666 | 55 | (50 | ) | |||||||
Synthetic GICs | $ | 4,367 | — | — | ||||||||
Foreign currency swaps | $ | 17,834 | 445 | (9 | ) | |||||||
Foreign currency forwards | $ | 7,320 | (74 | ) | 1 | |||||||
Currency options | $ | 364 | 27 | — | ||||||||
Non-derivative hedging instruments | $ | 169 | (180 | ) | — | |||||||
Credit default swaps | $ | 10,254 | 40 | — | ||||||||
Credit forwards | $ | 155 | 15 | — | ||||||||
Equity futures | $ | 7,830 | 24 | — | ||||||||
Equity options | $ | 32,575 | 1,721 | (84 | ) | |||||||
Variance swaps | $ | 17,496 | 304 | (11 | ) | |||||||
Total rate of return swaps | $ | 1,349 | (40 | ) | (7 | ) | ||||||
Total Derivative Instruments | $ | (1,326 | ) | |||||||||
Net Change | $ | (3,698 | ) | |||||||||
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(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, 2010 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Foreign | ||||||||||
Amount | Value (1) | Exchange Rate | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 260,564 | $ | (2,518 | ) | |||||||
Equity securities | 2,865 | (4 | ) | |||||||||
Trading securities | 3,987 | (190 | ) | |||||||||
Mortgage loans: | ||||||||||||
Held-for-investment | 58,424 | (339 | ) | |||||||||
Held-for-sale | 2,840 | — | ||||||||||
Mortgage loans, net | 61,264 | (339 | ) | |||||||||
Policy loans | 12,173 | (43 | ) | |||||||||
Short-term investments | 11,590 | (54 | ) | |||||||||
Other invested assets: | ||||||||||||
Mortgage servicing rights | 707 | — | ||||||||||
Other | 912 | (57 | ) | |||||||||
Cash and cash equivalents | 14,557 | (132 | ) | |||||||||
Accrued investment income | 3,469 | (8 | ) | |||||||||
Premiums, reinsurance and other receivables | 3,744 | (4 | ) | |||||||||
Total Assets | $ | (3,349 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 106,415 | $ | 1,232 | ||||||||
Bank deposits | 9,415 | — | ||||||||||
Long-term debt | 19,037 | 36 | ||||||||||
Net embedded derivatives within liability host contracts (2) | 3,451 | 389 | ||||||||||
Total Liabilities | $ | 1,657 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 46,625 | $ | 3,253 | $ | (17 | ) | |||||
Interest rate floors | $ | 23,941 | 920 | — | ||||||||
Interest rate caps | $ | 34,112 | 94 | — | ||||||||
Interest rate futures | $ | 8,026 | 20 | (6 | ) | |||||||
Interest rate options | $ | 2,342 | 74 | — | ||||||||
Interest rate forwards | $ | 12,666 | 55 | — | ||||||||
Synthetic GICs | $ | 4,367 | — | — | ||||||||
Foreign currency swaps | $ | 17,834 | 445 | 308 | ||||||||
Foreign currency forwards | $ | 7,320 | (74 | ) | 280 | |||||||
Currency options | $ | 364 | 27 | 4 | ||||||||
Non-derivative hedging instruments | $ | 169 | (180 | ) | — | |||||||
Credit default swaps | $ | 10,254 | 40 | — | ||||||||
Credit forwards | $ | 155 | 15 | — | ||||||||
Equity futures | $ | 7,830 | 24 | — | ||||||||
Equity options | $ | 32,575 | 1,721 | (100 | ) | |||||||
Variance swaps | $ | 17,496 | 304 | (2 | ) | |||||||
Total rate of return swaps | $ | 1,349 | (40 | ) | — | |||||||
Total Derivative Instruments | $ | 467 | ||||||||||
Net Change | $ | (1,225 | ) | |||||||||
(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, 2010 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in Equity | ||||||||||
Amount | Value (1) | Prices | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Equity securities | $ | 2,865 | $ | 294 | ||||||||
Other invested assets: | ||||||||||||
Net embedded derivatives within asset host contracts (2) | 125 | (13 | ) | |||||||||
Total Assets | $ | 281 | ||||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 106,415 | $ | — | ||||||||
Bank deposits | 9,415 | — | ||||||||||
Other liabilities: | ||||||||||||
Net embedded derivatives within liability host contracts (2) | 3,451 | 471 | ||||||||||
Total Liabilities | $ | 471 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 46,625 | $ | 3,253 | $ | — | ||||||
Interest rate floors | $ | 23,941 | 920 | — | ||||||||
Interest rate caps | $ | 34,112 | 94 | — | ||||||||
Interest rate futures | $ | 8,026 | 20 | — | ||||||||
Interest rate options | $ | 2,342 | 74 | — | ||||||||
Interest rate forwards | $ | 12,666 | 55 | — | ||||||||
Synthetic GICs | $ | 4,367 | — | — | ||||||||
Foreign currency swaps | $ | 17,834 | 445 | — | ||||||||
Foreign currency forwards | $ | 7,320 | (74 | ) | — | |||||||
Currency options | $ | 364 | 27 | — | ||||||||
Non-derivative hedging instruments | $ | 169 | (180 | ) | — | |||||||
Credit default swaps | $ | 10,254 | 40 | — | ||||||||
Credit forwards | $ | 155 | 15 | — | ||||||||
Equity futures | $ | 7,830 | 24 | (220 | ) | |||||||
Equity options | $ | 32,575 | 1,721 | (563 | ) | |||||||
Variance swaps | $ | 17,496 | 304 | — | ||||||||
Total rate of return swaps | $ | 1,349 | (40 | ) | (90 | ) | ||||||
Total Derivative Instruments | $ | (873 | ) | |||||||||
Net Change | $ | (121 | ) | |||||||||
(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. |
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Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
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Item 1A. | Risk Factors |
• | licensing companies and agents to transact business; | |
• | calculating the value of assets to determine compliance with statutory requirements; | |
• | mandating certain insurance benefits; | |
• | regulating certain premium rates; | |
• | reviewing and approving policy forms; | |
• | regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements; | |
• | regulating advertising; | |
• | protecting privacy; | |
• | establishing statutory capital and reserve requirements and solvency standards; | |
• | fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts; | |
• | approving changes in control of insurance companies; | |
• | restricting the payment of dividends and other transactions between affiliates; and | |
• | regulating the types, amounts and valuation of investments. |
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• | chartering to carry on business as a bank; | |
• | the permissibility of certain activities; | |
• | maintaining minimum capital ratios; | |
• | capital management in relation to the bank’s assets; | |
• | dividend payments; |
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• | safety and soundness standards; | |
• | loan loss and other related liabilities; | |
• | liquidity; | |
• | financial reporting and disclosure standards; | |
• | counterparty credit concentration; | |
• | restrictions on related party and affiliate transactions; | |
• | lending limits (and, in addition, Dodd-Frank includes the credit exposures arising from securities lending by MetLife Bank within lending limits otherwise applicable to loans); | |
• | payment of interest; | |
• | unfair or deceptive acts or practices; | |
• | privacy; and | |
• | bank holding company and bank change of control. |
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• | reducing new sales of insurance products, annuities and other investment products; | |
• | adversely affecting our relationships with our sales force and independent sales intermediaries; | |
• | materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders; | |
• | requiring us to reduce prices for many of our products and services to remain competitive; and | |
• | adversely affecting our ability to obtain reinsurance at reasonable prices or at all. |
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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, 2010 | — | $ | — | — | $ | 1,260,735,127 | ||||||||||
August 1 — August 31, 2010 | 23,849 | $ | 41.70 | — | $ | 1,260,735,127 | ||||||||||
September 1 — September 30, 2010 | 12,345 | $ | 39.39 | — | $ | 1,260,735,127 |
(1) | During the period August 1 through August 31, 2010 and September 1 through September 30, 2010, separate account affiliates of the Company purchased 23,849 shares and 12,345 shares, respectively, 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, 2010, 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, 2010. 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 2010. |
Item 6. | Exhibits |
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Exhibit | ||||
No. | Description | |||
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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By | /s/ Peter M. Carlson |
Title: | Executive Vice President, Finance |
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Exhibit | ||||
No. | Description | |||
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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