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Washington, D.C. 20549
(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 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 |
Connecticut | 06-0566090 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1300 Hall Boulevard, Bloomfield, Connecticut (Address of principal executive offices) | 06002 (Zip Code) | |
(860) 656-3000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None |
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
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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. | Business |
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• | expanding the types of institutions that have access to the Federal Reserve Bank of New York’s discount window; | |
• | providing asset guarantees and emergency loans to particular distressed companies; | |
• | a temporary ban on short selling of shares of certain financial institutions (including, for a period, MetLife); | |
• | programs intended to reduce the volume of mortgage foreclosures by modifying the terms of mortgage loans for distressed borrowers; | |
• | temporarily guaranteeing money market funds; and | |
• | programs to support the mortgage-backed securities market and mortgage lending. |
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Item 1A. | Risk Factors |
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• | 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; |
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• | 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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• | As a large, interconnected bank holding company with assets of $50 billion or more, or possibly as an otherwise systemically important financial company, MetLife including possibly its subsidiaries, will be subject to enhanced prudential standards imposed on systemically significant financial companies. Enhanced standards will be applied to RBC, liquidity, leverage (unless another, similar, standard is appropriate), resolution plan and credit exposure reporting, concentration limits, and risk management. Off-balance sheet activities are required to be accounted for in meeting capital requirements. In addition, if it were determined that MetLife posed a substantial threat to U.S. financial stability, the applicable federal regulators would have the right to require it to take one or more other mitigating actions to reduce that risk, including limiting its ability to merge with or acquire another company, terminating activities, restricting its ability to offer financial products or requiring it to sell assets or off-balance sheet items to unaffiliated entities. Enhanced standards would also permit, but not require, regulators to establish requirements with respect to contingent capital, enhanced public disclosures and short-term debt limits. These standards are described as being more stringent than those otherwise imposed on bank holding companies; however, the Federal Reserve Board is permitted to apply them on aninstitution-by-institution basis, depending on its determination of the institution’s riskiness. In addition, under Dodd-Frank, all bank holding companies that have elected to be treated as financial holding companies, such as MetLife, Inc. will be required to be “well capitalized” and “well managed” as defined by the Federal Reserve Board, on a consolidated basis and not just at their depository institution(s), a higher standard than was applicable to financial holding companies before Dodd-Frank. These requirements could restrict the amount of capital available to MetLife’s subsidiaries, including us. | |
• | MetLife, as a bank holding company, will have to meet minimum leverage ratio and RBC requirements on a consolidated basis to be established by the Federal Reserve Board that are not less than those applicable to insured depository institutions under so-called prompt corrective action regulations as in effect on the date of the enactment of Dodd-Frank. As a subsidiary of a bank holding company, we, as well as MetLife, Inc., could be subject to other heightened standards, even if MetLife is not deemed to be a systemically significant company. | |
• | Under the provisions of Dodd-Frank relating to the resolution or liquidation of certain types of financial institutions, including bank holding companies, if MetLife, Inc. were to become insolvent or were in danger of defaulting on its obligations, it could be compelled to undergo liquidation with the FDIC as receiver. For this new regime to be applicable, a number of determinations would have to be made, including that a default by the affected company would have serious adverse effects on financial stability in the U.S. If the FDIC were to be appointed as the receiver for such a company, the liquidation of that company would occur under the provisions of the new liquidation authority, and not under the Bankruptcy Code. In such a liquidation, the holders of such company’s debt could in certain a respects be treated differently than under the Bankruptcy Code. In particular, unsecured creditors and shareholders are intended to bear the losses of the company being liquidated. The FDIC is authorized to establish rules for the priority of creditors’ claims and, under certain circumstances, to treat similarly situated creditors differently. These provisions could apply to some financial institutions whose outstanding debt securities we hold in our investment portfolios. Dodd-Frank also provides for the assessment of bank holding companies with assets of $50.0 billion or more, non-bank financial companies supervised by the Federal Reserve Bank, and other financial companies with assets of $50.0 billion or more to cover the costs of liquidating any financial company subject to the new liquidation |
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authority. Although it is not possible to assess the full impact of the liquidation authority at this time, it could affect the funding costs of large bank holding companies or financial companies that might be viewed as systemically significant, which could directly or indirectly affect the funding costs of respective subsidiaries. It could also lead to an increase in secured financings. |
• | Dodd-Frank also includes a new framework of regulation of theover-the-counter (“OTC”) derivatives markets which will require clearing of certain types of transactions currently traded OTC and could potentially impose additional costs, including new capital, reporting and margin requirements and additional regulation on the Company. Increased margin requirements on our part and a smaller universe of securities that will qualify as eligible collateral could reduce our liquidity and require an increase in our holdings of cash and government securities with lower yields causing a reduction in income. However, increased margin requirements and the expanded ability to transfer trades between our counterparties could reduce our exposure to our counterparties’ default. We use derivatives to mitigate a wide range of risks in connection with its businesses, including the impact of increased benefit exposures from our annuity products that offer guaranteed benefits. The derivative clearing requirements of Dodd-Frank could increase the cost of our risk mitigation and expose us to the risk of a default by a clearinghouse or one of its members. In addition, we are subject to the risk that hedging and other management procedures prove ineffective in reducing the risks to which insurance policies expose us or that unanticipated policyholder behavior or mortality, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed. Any such losses could be increased by any higher costs of writing derivatives (including customized derivatives) that might result from the enactment of Dodd-Frank. | |
• | Dodd-Frank restricts the ability of insured depository institutions and of companies, such as MetLife, Inc., that control an insured depository institution and their affiliates, to engage in proprietary trading and to sponsor or invest in funds (hedge funds and private equity funds) that rely on certain exemptions from the Investment Company Act. Dodd-Frank provides an exemption for investment activity by a regulated insurance company or its affiliates solely for the general account of such insurance company if such activity is in compliance with the insurance company investments laws of the state or jurisdiction in which such company is domiciled and the appropriate Federal regulators after consultation with relevant insurance commissioners have not jointly determined such laws to be insufficient to protect the safety and soundness of the institution or the financial stability of the U.S. Notwithstanding the foregoing, the appropriate Federal regulatory authorities are permitted under the legislation to impose, as part of rulemaking, additional capital requirements and other restrictions on any exempted activity. Dodd-Frank provides for a period of study (which has been completed) and rule making during which the effects of the statutory language may be clarified. Among other considerations, the study is to assess and include recommendations so as to appropriately accommodate the business of insurance within an insurance company subject to regulation in accordance with relevant insurance company investments laws. While these provisions of Dodd-Frank are supposed to accommodate the business of insurance, until the rulemaking is complete, it is unclear whether we may have to alter any of our future investment activities to comply. | |
• | Until various studies are completed and final regulations are promulgated pursuant to Dodd-Frank, the full impact of Dodd-Frank on the investments and investment activities and insurance and annuity products of MetLife, Inc. and its subsidiaries, including us, remains unclear. For example, besides directly limiting our future investment activities, Dodd-Frank could potentially negatively impact the market for, the returns from, or liquidity in, primary and secondary investments in private equity funds and hedge funds that are connected to (either through a fund sponsorship or investor relationship) an insured depository institution. The number of sponsors of such funds going forward may diminish, which may impact our available fund investment opportunities. Although Dodd-Frank provides for various transition periods for coming into compliance, fund sponsors that are subject to Dodd-Frank, and whose funds we have invested in, may have to spin off their funds business or reduce their ownership stakes in their funds, thereby potentially impacting our related investments in such funds. In addition, should such funds be required or choose to liquidate or sell their underlying assets, the market value and liquidity of such assets or the broader related asset classes could negatively be affected, including securities and real estate assets that MetLife, Inc. and its subsidiaries hold or may plan to sell. Secondary sales of fund interests at significant discounts by banking institutions and their |
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affiliates, which are not fund sponsors but nevertheless are subject to the divestment requirements of Dodd-Frank, could reduce the returns realized by investors such as MetLife, Inc. and its subsidiaries seeking to access liquidity by selling their fund interests. Reduced income to MetLife, Inc. from such investment activities could affect its ability to provide funding to us. In addition, our existing derivatives counterparties and the financial institutions subject to Dodd-Frank in which we have invested also could be negatively impacted by Dodd-Frank. See also “— New and Impending Compensation and Corporate Governance Regulations Could Hinder or Prevent MetLife and Its Affiliates From Attracting and Retaining Management and Other Employees with the Talent and Experience to Manage and Conduct Our Business Effectively.” |
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• | Loss of key personnel or higher than expected employee attrition rates could adversely affect the performance of the acquired business and our ability to integrate it successfully. | |
• | Customers of the acquired business may reduce, delay or defer decisions concerning their use of its products and services as a result of the acquisition or uncertainty related to the consummation of the acquisition, including, for example, potential unfamiliarity with the MetLife brand in regions where we did not have a market presence prior to the acquisition. | |
• | If the acquired business relies upon independent distributors to distribute its products, these distributors may not continue to generate the same volume of business after the acquisition. Independent distributors may reexamine the scope of their relationship with the acquired business or us as a result of the acquisition and decide to curtail or eliminate distribution of our products. |
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• | Integrating acquired operations with our existing operations may require us to coordinate geographically separated organizations, address possible differences in corporate culture and management philosophies, merge financial processes and risk and compliance procedures, combine separate information technology platforms and integrate operations that were previously closely tied to the former parent of the acquired business or other service providers. | |
• | In cases where we or an acquired business operates in certain markets through joint ventures, the acquisition may affect the continued success and prospects of the joint venture. Our ability to exercise management control or influence over these joint venture operations and our investment in them will depend on the continued cooperation between the joint venture participants and on the terms of the joint venture agreements, which allocate control among the joint venture participants. We may face financial or other exposure in the event that any of these joint venture partners fail to meet their obligations under the joint venture, encounter financial difficulty or elect to alter, modify or terminate the relationship. | |
• | We may incur significant costs in connection with any acquisition and the related integration. The costs and liabilities actually incurred in connection with an acquisition and subsequent integration process may exceed those anticipated. |
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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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Level 1 — | Unadjusted quoted prices in active markets for identical assets or liabilities. We define active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. | |
Level 2 — | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other significant inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3 — | Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of the estimated fair value requires significant management judgment or estimation. |
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Item 1B. | Unresolved Staff Comments |
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Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | (Removed and Reserved) |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Item 6. | Selected Financial Data |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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; and | |
(ix) | the liability for litigation and regulatory matters. |
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. | |
Level 2 | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other significant inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. |
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Level 3 | Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. |
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(i) | the length of time and the extent to which the estimated fair value has been below cost or amortized cost; | |
(ii) | the potential for impairments of securities when the issuer is experiencing significant financial difficulties; | |
(iii) | the potential for impairments in an entire industry sector orsub-sector; | |
(iv) | the potential for impairments in certain economically depressed geographic locations; | |
(v) | the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; | |
(vi) | with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before recovery of the decline in estimated fair value below cost or amortized cost; | |
(vii) | with respect to equity securities, whether the Company’s ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost; | |
(viii) | unfavorable changes in projected cash flows on mortgage-backed and asset-backed securities (“ABS”); and | |
(ix) | other subjective factors, including concentrations and information obtained from regulators and rating agencies. |
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(i) | future taxable income exclusive of reversing temporary differences and carryforwards; | |
(ii) | future reversals of existing taxable temporary differences; | |
(iii) | taxable income in prior carryback years; and | |
(iv) | tax planning strategies. |
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Years Ended December 31, | ||||||||||||||||
2010 | 2009 | Change | % Change | |||||||||||||
(In millions) | ||||||||||||||||
Revenues | ||||||||||||||||
Premiums | $ | 1,067 | $ | 1,312 | $ | (245 | ) | (18.7) | % | |||||||
Universal life and investment-type product policy fees | 1,639 | 1,380 | 259 | 18.8 | % | |||||||||||
Net investment income | 3,157 | 2,335 | 822 | 35.2 | % | |||||||||||
Other revenues | 503 | 598 | (95 | ) | (15.9) | % | ||||||||||
Net investment gains (losses) | 150 | (835 | ) | 985 | 118.0 | % | ||||||||||
Net derivative gains (losses) | 58 | (1,031 | ) | 1,089 | 105.6 | % | ||||||||||
Total revenues | 6,574 | 3,759 | 2,815 | 74.9 | % | |||||||||||
Expenses | ||||||||||||||||
Policyholder benefits and claims | 1,905 | 2,065 | (160 | ) | (7.7) | % | ||||||||||
Interest credited to policyholder account balances | 1,271 | 1,301 | (30 | ) | (2.3) | % | ||||||||||
Capitalization of DAC | (978 | ) | (851 | ) | (127 | ) | (14.9) | % | ||||||||
Amortization of DAC and VOBA | 839 | 294 | 545 | 185.4 | % | |||||||||||
Interest expense on debt | 472 | 71 | 401 | 564.8 | % | |||||||||||
Other expenses | 1,988 | 1,693 | 295 | 17.4 | % | |||||||||||
Total expenses | 5,497 | 4,573 | 924 | 20.2 | % | |||||||||||
Income (loss) before provision for income tax | 1,077 | (814 | ) | 1,891 | 232.3 | % | ||||||||||
Provision for income tax expense (benefit) | 320 | (368 | ) | 688 | 187.0 | % | ||||||||||
Net income (loss) | $ | 757 | $ | (446 | ) | $ | 1,203 | 269.7 | % | |||||||
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Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Net income (loss) | $ | 757 | $ | (446 | ) | |||
Less: Net investment gains (losses) | 150 | (835 | ) | |||||
Less: Net derivative gains (losses) | 58 | (1,031 | ) | |||||
Less: Adjustments to net income (loss) (1) | (122 | ) | 239 | |||||
Less: Provision for income tax (expense) benefit | (30 | ) | 571 | |||||
Operating earnings | $ | 701 | $ | 610 | ||||
(1) | See definitions of operating revenues and operating expenses for the components of such adjustments. |
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Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Total revenues | $ | 6,574 | $ | 3,759 | ||||
Less: Net investment gains (losses) | 150 | (835 | ) | |||||
Less: Net derivative gains (losses) | 58 | (1,031 | ) | |||||
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses) | (1 | ) | (20 | ) | ||||
Less: Other adjustments to revenues (1) | 423 | (31 | ) | |||||
Total operating revenues | $ | 5,944 | $ | 5,676 | ||||
Total expenses | $ | 5,497 | $ | 4,573 | ||||
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses) | 84 | (311 | ) | |||||
Less: Other adjustments to expenses (1) | 460 | 21 | ||||||
Total operating expenses | $ | 4,953 | $ | 4,863 | ||||
(1) | See definitions of operating revenues and operating expenses for the components of such adjustments. |
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
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• | implementing a 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 Committee of MetLife’s Board of Directors; with respect to credit risk, to the Investment Committee of MetLife’s Board of Directors; and, reporting on various aspects of risks, to financial and non-financial senior management committees. |
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• | MetLife’s Treasury Department is responsible for managing the exposure to investments in foreign subsidiaries. Limits to exposures are established and monitored by MetLife’s Treasury Department and managed by MetLife’s Investment Department. |
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• | MetLife’s 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 MetLife’s Board of Directors and are reported to MetLife’s 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, currency and equity variance swaps, interest rate and currency forwards, and interest rate option contracts. | |
• | 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 deferred annuities. Hedges include zero coupon interest rate swaps and swaptions. | |
• | Foreign Currency Risk — The Company uses currency swaps and forwards to hedge foreign currency risk. These hedges primarily swap foreign currency denominated bonds or equity exposures to 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. |
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• | 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. |
December 31, 2010 | ||||
(In millions) | ||||
Non-trading: | ||||
Interest rate risk | $ | 1,277 | ||
Foreign currency exchange rate risk | $ | 38 | ||
Equity market risk | $ | 78 |
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December 31, 2010 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Yield | ||||||||||
Amount | Value (3) | Curve | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 44,924 | $ | (995 | ) | |||||||
Equity securities | 405 | — | ||||||||||
Other securities | 2,247 | — | ||||||||||
Mortgage loans, net | 12,862 | (48 | ) | |||||||||
Policy loans | 1,260 | (8 | ) | |||||||||
Real estate joint ventures (1) | 102 | — | ||||||||||
Other limited partnership interests (1) | 116 | — | ||||||||||
Short-term investments | 88 | — | ||||||||||
Cash and cash equivalents | 1,928 | — | ||||||||||
Accrued investment income | 559 | — | ||||||||||
Premiums and other receivables | 6,164 | (103 | ) | |||||||||
Net embedded derivatives within asset host contracts (2) | 936 | (314 | ) | |||||||||
Mortgage loan commitments | $ | 270 | (2 | ) | (4 | ) | ||||||
Commitments to fund bank credit facilities and private corporate bond investments | $ | 315 | (12 | ) | — | |||||||
Total Assets | $ | (1,472 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 26,061 | $ | 188 | ||||||||
Long-term debt — affiliated | 930 | 39 | ||||||||||
Payables for collateral under securities loaned and other transactions | 8,103 | — | ||||||||||
Other | 294 | — | ||||||||||
Net embedded derivatives within liability host contracts (2) | 259 | 163 | ||||||||||
Total Liabilities | $ | 390 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 9,102 | $ | 406 | $ | (146 | ) | |||||
Interest rate floors | $ | 7,986 | 65 | (11 | ) | |||||||
Interest rate caps | $ | 7,158 | 28 | 7 | ||||||||
Interest rate futures | $ | 1,966 | (2 | ) | 4 | |||||||
Interest rate forwards | $ | 695 | (71 | ) | (44 | ) | ||||||
Foreign currency swaps | $ | 2,561 | 517 | (4 | ) | |||||||
Foreign currency forwards | $ | 151 | 3 | — | ||||||||
Credit default swaps | $ | 1,324 | (7 | ) | — | |||||||
Credit forwards | $ | — | — | — | ||||||||
Equity futures | $ | 93 | — | — | ||||||||
Equity options | $ | 733 | 77 | (1 | ) | |||||||
Variance swaps | $ | 1,081 | 12 | — | ||||||||
Total Derivative Instruments | $ | (195 | ) | |||||||||
Net Change | $ | (1,277 | ) | |||||||||
(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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December 31, 2010 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in the Foreign | ||||||||||
Amount | Value (1) | Exchange Rate | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 44,924 | $ | (80 | ) | |||||||
Equity securities | $ | 405 | $ | (3 | ) | |||||||
Total Assets | $ | (83 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 26,061 | $ | 181 | ||||||||
Total Liabilities | $ | 181 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 9,102 | $ | 406 | $ | 1 | ||||||
Interest rate floors | $ | 7,986 | 65 | — | ||||||||
Interest rate caps | $ | 7,158 | 28 | — | ||||||||
Interest rate futures | $ | 1,966 | (2 | ) | — | |||||||
Interest rate forwards | $ | 695 | (71 | ) | — | |||||||
Foreign currency swaps | $ | 2,561 | 517 | (150 | ) | |||||||
Foreign currency forwards | $ | 151 | 3 | 13 | ||||||||
Credit default swaps | $ | 1,324 | (7 | ) | — | |||||||
Credit forwards | $ | — | — | — | ||||||||
Equity futures | $ | 93 | — | — | ||||||||
Equity options | $ | 733 | 77 | — | ||||||||
Variance swaps | $ | 1,081 | 12 | — | ||||||||
Total Derivative Instruments | $ | (136 | ) | |||||||||
Net Change | $ | (38 | ) | |||||||||
(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 currency exchange risk. |
66
Table of Contents
December 31, 2010 | ||||||||||||
Assuming a | ||||||||||||
Estimated | 10% Increase | |||||||||||
Notional | Fair | in Equity | ||||||||||
Amount | Value (1) | Prices | ||||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Equity securities | $ | 44,924 | $ | 15 | ||||||||
Net embedded derivatives within asset host contracts (2) | 936 | (230 | ) | |||||||||
Total Assets | $ | (215 | ) | |||||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 26,061 | $ | — | ||||||||
Net embedded derivatives within liability host contracts (2) | 259 | 146 | ||||||||||
Total Liabilities | $ | 146 | ||||||||||
Derivative Instruments: | ||||||||||||
Interest rate swaps | $ | 9,102 | $ | 406 | $ | — | ||||||
Interest rate floors | $ | 7,986 | 65 | — | ||||||||
Interest rate caps | $ | 7,158 | 28 | — | ||||||||
Interest rate futures | $ | 1,966 | (2 | ) | — | |||||||
Interest rate forwards | $ | 695 | (71 | ) | — | |||||||
Foreign currency swaps | $ | 2,561 | 517 | — | ||||||||
Foreign currency forwards | $ | 151 | 3 | — | ||||||||
Credit default swaps | $ | 1,324 | (7 | ) | — | |||||||
Credit forwards | $ | — | — | — | ||||||||
Equity futures | $ | 93 | — | 4 | ||||||||
Equity options | $ | 733 | 77 | (13 | ) | |||||||
Variance swaps | $ | 1,081 | 12 | — | ||||||||
Total Derivative Instruments | $ | (9 | ) | |||||||||
Net Change | $ | (78 | ) | |||||||||
(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 market risk. | |
(2) | Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract. |
67
Item 8. | Financial Statements and Supplementary Data |
Page | ||||
F-1 | ||||
Financial Statements at December 31, 2010 and 2009 and for the Years Ended December 31, 2010, 2009, and 2008: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
Financial Statement Schedules at December 31, 2010 and 2009 and for the Years Ended December 31, 2010, 2009, and 2008: | ||||
F-134 | ||||
F-135 | ||||
F-139 | ||||
F-141 |
68
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F-1
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Balance Sheets
December 31, 2010 and 2009
(In millions, except share and per share data)
2010 | 2009 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at estimated fair value (amortized cost: $44,132 and $42,435, respectively) | $ | 44,924 | $ | 41,275 | ||||
Equity securitiesavailable-for-sale, at estimated fair value (cost: $427 and $494, respectively) | 405 | 459 | ||||||
Other securities, at estimated fair value | 2,247 | 938 | ||||||
Mortgage loans (net of valuation allowances of $87 and $77, respectively; includes $6,840 and $0, respectively, at estimated fair value relating to variable interest entities) | 12,730 | 4,748 | ||||||
Policy loans | 1,190 | 1,189 | ||||||
Real estate and real estate joint ventures | 501 | 445 | ||||||
Other limited partnership interests | 1,538 | 1,236 | ||||||
Short-term investments, principally at estimated fair value | 1,235 | 1,775 | ||||||
Other invested assets, principally at estimated fair value | 1,716 | 1,498 | ||||||
Total investments | 66,486 | 53,563 | ||||||
Cash and cash equivalents, principally at estimated fair value | 1,928 | 2,574 | ||||||
Accrued investment income (includes $31 and $0, respectively, relating to variable interest entities) | 559 | 516 | ||||||
Premiums, reinsurance and other receivables | 17,008 | 13,444 | ||||||
Deferred policy acquisition costs and value of business acquired | 5,099 | 5,244 | ||||||
Current income tax recoverable | 38 | — | ||||||
Deferred income tax assets | 356 | 1,147 | ||||||
Goodwill | 953 | 953 | ||||||
Other assets | 839 | 799 | ||||||
Separate account assets | 61,619 | 49,449 | ||||||
Total assets | $ | 154,885 | $ | 127,689 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Future policy benefits | $ | 23,198 | $ | 21,621 | ||||
Policyholder account balances | 39,291 | 37,442 | ||||||
Other policy-related balances | 2,652 | 2,297 | ||||||
Payables for collateral under securities loaned and other transactions | 8,103 | 7,169 | ||||||
Long-term debt (includes $6,773 and $0, respectively, at estimated fair value relating to variable interest entities) | 7,568 | 950 | ||||||
Current income tax payable | — | 23 | ||||||
Other liabilities (includes $31 and $0, respectively, relating to variable interest entities) | 4,503 | 2,177 | ||||||
Separate account liabilities | 61,619 | 49,449 | ||||||
Total liabilities | 146,934 | 121,128 | ||||||
Contingencies, Commitments and Guarantees (Note 11) | ||||||||
Stockholders’ Equity | ||||||||
Common stock, par value $2.50 per share; 40,000,000 shares authorized; 34,595,317 shares issued and outstanding at December 31, 2010 and 2009 | 86 | 86 | ||||||
Additional paid-in capital | 6,719 | 6,719 | ||||||
Retained earnings | 934 | 541 | ||||||
Accumulated other comprehensive income (loss) | 212 | (785 | ) | |||||
Total stockholders’ equity | 7,951 | 6,561 | ||||||
Total liabilities and stockholders’ equity | $ | 154,885 | $ | 127,689 | ||||
F-2
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Operations
For the Years Ended December 31, 2010, 2009 and 2008
(In millions)
2010 | 2009 | 2008 | ||||||||||
Revenues | ||||||||||||
Premiums | $ | 1,067 | $ | 1,312 | $ | 634 | ||||||
Universal life and investment-type product policy fees | 1,639 | 1,380 | 1,378 | |||||||||
Net investment income | 3,157 | 2,335 | 2,494 | |||||||||
Other revenues | 503 | 598 | 230 | |||||||||
Net investment gains (losses): | ||||||||||||
Other-than-temporary impairments on fixed maturity securities | (103 | ) | (552 | ) | (401 | ) | ||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) | 53 | 165 | — | |||||||||
Other net investment gains (losses) | 200 | (448 | ) | (44 | ) | |||||||
Total net investment gains (losses) | 150 | (835 | ) | (445 | ) | |||||||
Net derivative gains (losses) | 58 | (1,031 | ) | 994 | ||||||||
Total revenues | 6,574 | 3,759 | 5,285 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 1,905 | 2,065 | 1,446 | |||||||||
Interest credited to policyholder account balances | 1,271 | 1,301 | 1,130 | |||||||||
Other expenses | 2,321 | 1,207 | 1,933 | |||||||||
Total expenses | 5,497 | 4,573 | 4,509 | |||||||||
Income (loss) before provision for income tax | 1,077 | (814 | ) | 776 | ||||||||
Provision for income tax expense (benefit) | 320 | (368 | ) | 203 | ||||||||
Net income (loss) | $ | 757 | $ | (446 | ) | $ | 573 | |||||
F-3
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Stockholders’ Equity
For the Years Ended December 31, 2010, 2009 and 2008
(In millions)
Accumulated Other | ||||||||||||||||||||||||||||
Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
Net | Foreign | |||||||||||||||||||||||||||
Additional | Unrealized | Other-Than- | Currency | |||||||||||||||||||||||||
Common | Paid-in | Retained | Investment | Temporary | Translation | Total | ||||||||||||||||||||||
Stock | Capital | Earnings | Gains (Losses) | Impairments | Adjustments | Equity | ||||||||||||||||||||||
Balance at December 31, 2007 | $ | 86 | $ | 6,719 | $ | 892 | $ | (361 | ) | $ | — | $ | 12 | $ | 7,348 | |||||||||||||
Dividend paid to MetLife | (500 | ) | (500 | ) | ||||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||
Net income | 573 | 573 | ||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | 21 | 21 | ||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | (2,342 | ) | (2,342 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | (166 | ) | (166 | ) | ||||||||||||||||||||||||
Other comprehensive income (loss) | (2,487 | ) | ||||||||||||||||||||||||||
Comprehensive income (loss) | (1,914 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2008 | 86 | 6,719 | 965 | (2,682 | ) | — | (154 | ) | 4,934 | |||||||||||||||||||
Cumulative effect of change in accounting principle, net of income tax (Note 1) | 22 | (22 | ) | — | ||||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||
Net loss | (446 | ) | (446 | ) | ||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | (14 | ) | (14 | ) | ||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | 2,103 | (61 | ) | 2,042 | ||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | 45 | 45 | ||||||||||||||||||||||||||
Other comprehensive income (loss) | 2,073 | |||||||||||||||||||||||||||
Comprehensive income (loss) | 1,627 | |||||||||||||||||||||||||||
Balance at December 31, 2009 | 86 | 6,719 | 541 | (593 | ) | (83 | ) | (109 | ) | 6,561 | ||||||||||||||||||
Cumulative effect of change in accounting principle, net of income tax (Note 1) | — | — | (34 | ) | 23 | 11 | — | — | ||||||||||||||||||||
Balance at January 1, 2010 | 86 | 6,719 | 507 | (570 | ) | (72 | ) | (109 | ) | 6,561 | ||||||||||||||||||
Dividend paid to MetLife | (330 | ) | (330 | ) | ||||||||||||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||||||||||
Net income | 757 | 757 | ||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | (70 | ) | (70 | ) | ||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | 1,028 | 21 | 1,049 | |||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | (16 | ) | (16 | ) | ||||||||||||||||||||||||
Other comprehensive income (loss) | 963 | |||||||||||||||||||||||||||
Comprehensive income (loss) | 1,720 | |||||||||||||||||||||||||||
Balance at December 31, 2010 | $ | 86 | $ | 6,719 | $ | 934 | $ | 388 | $ | (51 | ) | $ | (125 | ) | $ | 7,951 | ||||||||||||
F-4
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2010, 2009 and 2008
(In millions)
2010 | 2009 | 2008 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income (loss) | $ | 757 | $ | (446 | ) | $ | 573 | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization expenses | 41 | 29 | 29 | |||||||||
Amortization of premiums and accretion of discounts associated with investments, net | (259 | ) | (198 | ) | (18 | ) | ||||||
(Gains) losses on investments and derivatives and from sales of businesses, net | (300 | ) | 1,866 | (546 | ) | |||||||
Undistributed equity earnings of real estate joint ventures and other limited partnership interests | (130 | ) | 98 | 97 | ||||||||
Interest credited to policyholder account balances | 1,271 | 1,301 | 1,130 | |||||||||
Universal life and investment-type product policy fees | (1,639 | ) | (1,380 | ) | (1,378 | ) | ||||||
Change in other securities | (1,199 | ) | (597 | ) | (218 | ) | ||||||
Change in accrued investment income | 31 | (29 | ) | 150 | ||||||||
Change in premiums, reinsurance and other receivables | (3,284 | ) | (2,307 | ) | (2,561 | ) | ||||||
Change in deferred policy acquisition costs, net | (138 | ) | (559 | ) | 330 | |||||||
Change in income tax recoverable (payable) | 208 | (303 | ) | 262 | ||||||||
Change in other assets | 1,041 | 449 | 598 | |||||||||
Change in insurance-related liabilities and policy-related balances | 1,952 | 1,648 | 997 | |||||||||
Change in other liabilities | 2,072 | (166 | ) | 1,176 | ||||||||
Other, net | 94 | 32 | 38 | |||||||||
Net cash provided by (used in) operating activities | 518 | (562 | ) | 659 | ||||||||
Cash flows from investing activities | ||||||||||||
Sales, maturities and repayments of: | ||||||||||||
Fixed maturity securities | 17,748 | 13,076 | 20,183 | |||||||||
Equity securities | 131 | 141 | 126 | |||||||||
Mortgage loans | 964 | 444 | 522 | |||||||||
Real estate and real estate joint ventures | 18 | 4 | 15 | |||||||||
Other limited partnership interests | 123 | 142 | 203 | |||||||||
Purchases of: | ||||||||||||
Fixed maturity securities | (19,342 | ) | (16,192 | ) | (14,027 | ) | ||||||
Equity securities | (39 | ) | (74 | ) | (65 | ) | ||||||
Mortgage loans | (1,468 | ) | (783 | ) | (621 | ) | ||||||
Real estate and real estate joint ventures | (117 | ) | (31 | ) | (102 | ) | ||||||
Other limited partnership interests | (363 | ) | (203 | ) | (458 | ) | ||||||
Cash received in connection with freestanding derivatives | 97 | 239 | 142 | |||||||||
Cash paid in connection with freestanding derivatives | (155 | ) | (449 | ) | (228 | ) | ||||||
Net change in policy loans | (1 | ) | 3 | (279 | ) | |||||||
Net change in short-term investments | 554 | 1,445 | (1,887 | ) | ||||||||
Net change in other invested assets | (194 | ) | 16 | 531 | ||||||||
Other, net | — | (2 | ) | — | ||||||||
Net cash (used in) provided by investing activities | (2,044 | ) | (2,224 | ) | 4,055 | |||||||
Cash flows from financing activities | ||||||||||||
Policyholder account balances: | ||||||||||||
Deposits | 24,910 | 20,783 | 7,146 | |||||||||
Withdrawals | (23,700 | ) | (20,067 | ) | (5,307 | ) | ||||||
Net change in payables for collateral under securities loaned and other transactions | 934 | (702 | ) | (2,600 | ) | |||||||
Net change in short-term debt | — | (300 | ) | 300 | ||||||||
Long-term debt issued — affiliated | — | — | 750 | |||||||||
Long-term debt repaid — affiliated | (878 | ) | — | (435 | ) | |||||||
Debt issuance costs | — | — | (8 | ) | ||||||||
Financing element on certain derivative instruments | (44 | ) | (53 | ) | (46 | ) | ||||||
Dividends on common stock | (330 | ) | — | (500 | ) | |||||||
Net cash provided by (used in) financing activities | 892 | (339 | ) | (700 | ) | |||||||
Effect of change in foreign currency exchange rates on cash and cash equivalents balances | (12 | ) | 43 | (132 | ) | |||||||
Change in cash and cash equivalents | (646 | ) | (3,082 | ) | 3,882 | |||||||
Cash and cash equivalents, beginning of year | 2,574 | 5,656 | 1,774 | |||||||||
Cash and cash equivalents, end of year | $ | 1,928 | $ | 2,574 | $ | 5,656 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Net cash paid (received) during the year for: | ||||||||||||
Interest | $ | 479 | $ | 73 | $ | 64 | ||||||
Income tax | $ | 122 | $ | (63 | ) | $ | (48 | ) | ||||
Non-cash transactions during the year: | ||||||||||||
Real estate and real estate joint ventures acquired in satisfaction of debt | $ | 28 | $ | — | $ | — | ||||||
Long-term debt issued in exchange for certain other invested assets | $ | 45 | $ | — | $ | — | ||||||
F-5
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements
1. | Business, Basis of Presentation and Summary of Significant Accounting Policies |
• | Reclassification from other net investment gains (losses) of ($1,031) million and $994 million to net derivative gains (losses) in the consolidated statements of operations for the years ended December 31, 2009 and 2008, respectively; and | |
• | Reclassification from net change in other invested assets of $239 million and $142 million to cash received in connection with freestanding derivatives and ($449) million and ($228) million to cash paid in connection with freestanding derivatives, all within cash flows from investing activities, in the consolidated statements of cash flows for the years ended December 31, 2009 and 2008, respectively. |
F-6
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. | |
Level 2 | Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other significant inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. |
F-7
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-8
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
(i) | The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows expected to be received. The discount rate is generally the effective interest rate of the fixed maturity security prior to impairment. | |
(ii) | When determining the collectability and the period over which value is expected to recover, the Company applies the same considerations utilized in its overall impairment evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s best estimates of likely scenario-based outcomes after giving consideration to a variety of variables that include, but are not limited to: general payment terms of the security; the likelihood that the issuer can service the scheduled interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies. |
F-9
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
(iii) | Additional considerations are made when assessing the unique features that apply to certain structured securities such as residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and ABS. These additional factors for structured securities include, but are not limited to: the quality of underlying collateral; expected prepayment speeds; current and forecasted loss severity; consideration of the payment terms of the underlying assets backing a particular security; and the payment priority within the tranche structure of the security. | |
(iv) | When determining the amount of the credit loss for United States (“U.S.”) and foreign corporate securities, foreign government securities and state and political subdivision securities, management considers the estimated fair value as the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process which incorporates available information and management’s best estimate of scenarios-based outcomes regarding the specific security and issuer; possible corporate restructurings or asset sales by the issuer; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; fundamentals of the industry and geographic area in which the security issuer operates, and the overall macroeconomic conditions. |
F-10
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-11
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-12
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-13
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-14
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-15
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-16
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-17
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-18
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-19
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-20
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
• | Guaranteed minimum death benefit (“GMDB”) liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with the historical experience of the appropriate underlying equity index, such as the Standard & Poor’s (“S&P”) 500 Index. The benefit assumptions used in calculating the liabilities are based on the average benefits payable over a range of scenarios. | |
• | Guaranteed minimum income benefits (“GMIB”) liabilities are determined by estimating the expected value of the income benefits in excess of the projected account balance at any future date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used for estimating the GMIB liabilities are consistent with those used for estimating the GMDB liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates an assumption for the percentage of the potential annuitizations that may be elected by the contractholder. Certain GMIBs have settlement features that result in a portion of that guarantee being accounted for as an embedded derivative and are recorded in policyholder account balances as described below. |
F-21
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
• | Guaranteed minimum withdrawal benefits (“GMWB”) guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder’s cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. | |
• | Guaranteed minimum accumulation benefits (“GMAB”) and settlement features in certain GMIB described above provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. |
F-22
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-23
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
(i) | future taxable income exclusive of reversing temporary differences and carryforwards; | |
(ii) | future reversals of existing taxable temporary differences; | |
(iii) | taxable income in prior carryback years; and | |
(iv) | tax planning strategies. |
F-24
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-25
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-26
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-27
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
• | Effective January 1, 2009, the Company adopted prospectively an update on accounting for transfers of financial assets and repurchase financing transactions. This update provides guidance for evaluating whether |
F-28
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. |
• | Effective December 31, 2008, the Company adopted guidance on the recognition of interest income and impairment on purchased beneficial interests and beneficial interests that continue to be held by a transferor in securitized financial assets. This new guidance more closely aligns the determination of whether an OTTI has occurred for a beneficial interest in a securitized financial asset with the original guidance for fixed maturity securities classified asavailable-for-sale orheld-to-maturity. | |
• | Effective January 1, 2008, the Company adopted guidance relating to application of the shortcut method of accounting for derivative instruments and hedging activities. This guidance permits interest rate swaps to have a non-zero fair value at inception when applying the shortcut method of assessing hedge effectiveness as long as the difference between the transaction price (zero) and the fair value (exit price), as defined by current accounting guidance on fair value measurements, is solely attributable to a bid-ask spread. In addition, entities are not precluded from applying the shortcut method of assessing hedge effectiveness in a hedging relationship of interest rate risk involving an interest bearing asset or liability in situations where the hedged item is not recognized for accounting purposes until settlement date as long as the period between trade date and settlement date of the hedged item is consistent with generally established conventions in the marketplace. | |
• | Effective January 1, 2008, the Company adopted guidance that permits a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement that have been offset. This guidance also includes certain terminology modifications. Upon adoption of this guidance, the Company did not change its accounting policy of not offsetting fair value amounts recognized for derivative instruments under master netting arrangements. |
• | All business combinations (whether full, partial or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
• | Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. | |
• | The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
• | Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. | |
• | Changes in deferred income tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
• | Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
• | Net income (loss) includes amounts attributable to noncontrolling interests. |
F-29
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
• | When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
• | Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
• | When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
F-30
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
• | Effective September 30, 2008, the Company adopted guidance relating to the fair value measurements of financial assets when the market for those assets is not active. It provides guidance on how a company’s internal cash flow and discount rate assumptions should be considered in the measurement of fair value when relevant market data does not exist, how observable market information in an inactive market affects fair value measurement and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. | |
• | Effective January 1, 2009, the Company implemented fair value measurements guidance for certain nonfinancial assets and liabilities that are recorded at fair value on a non-recurring basis. This guidance applies to such items as: (i) nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination; (ii) reporting units measured at estimated fair value in the first step of a goodwill impairment test; and (iii) indefinite-lived intangible assets measured at estimated fair value for impairment assessment. | |
• | Effective January 1, 2009, the Company adopted prospectively guidance on issuer’s accounting for liabilities measured at fair value with a third-party credit enhancement. This guidance states that an issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. In addition, it requires disclosures about the existence of any third-party credit enhancement related to liabilities that are measured at fair value. | |
• | Effective April 1, 2009, the Company adopted guidance on: (i) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities; and (ii) identifying transactions that are not orderly. The Company has provided all of the material disclosures in its consolidated financial statements. | |
• | Effective December 31, 2009, the Company adopted guidance on: (i) measuring the fair value of investments in certain entities that calculate NAV per share; (ii) how investments within its scope would be classified in the fair value hierarchy; and (iii) enhanced disclosure requirements, for both interim and annual periods, about the nature and risks of investments measured at fair value on a recurring or non-recurring basis. | |
• | Effective December 31, 2009, the Company adopted guidance on measuring liabilities at fair value. This guidance provides clarification for measuring fair value in circumstances in which a quoted price in an active market for the identical liability is not available. In such circumstances a company is required to measure fair value using either a valuation technique that uses: (i) the quoted price of the identical liability when traded as an asset; or (ii) quoted prices for similar liabilities or similar liabilities when traded as assets; or (iii) another valuation technique that is consistent with the principles of fair value measurement such as an income approach (e.g., present value technique) or a market approach (e.g., “entry” value technique). |
F-31
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-32
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
2. | Investments |
December 31, 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 | $ | 14,860 | $ | 816 | $ | 302 | $ | — | $ | 15,374 | 34.2 | % | ||||||||||||
Foreign corporate securities | 8,095 | 502 | 127 | — | 8,470 | 18.8 | ||||||||||||||||||
U.S. Treasury and agency securities | 7,665 | 143 | 132 | — | 7,676 | 17.1 | ||||||||||||||||||
RMBS | 6,803 | 203 | 218 | 79 | 6,709 | 14.9 | ||||||||||||||||||
CMBS | 2,203 | 113 | 39 | — | 2,277 | 5.1 | ||||||||||||||||||
ABS | 1,927 | 44 | 95 | 7 | 1,869 | 4.2 | ||||||||||||||||||
State and political subdivision securities | 1,755 | 22 | 131 | — | 1,646 | 3.7 | ||||||||||||||||||
Foreign government securities | 824 | 81 | 2 | — | 903 | 2.0 | ||||||||||||||||||
Total fixed maturity securities (1), (2) | $ | 44,132 | $ | 1,924 | $ | 1,046 | $ | 86 | $ | 44,924 | 100.0 | % | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Non-redeemable preferred stock (1) | $ | 306 | $ | 9 | $ | 47 | $ | — | $ | 268 | 66.2 | % | ||||||||||||
Common stock | 121 | 17 | 1 | — | 137 | 33.8 | ||||||||||||||||||
Total equity securities (3) | $ | 427 | $ | 26 | $ | 48 | $ | — | $ | 405 | 100.0 | % | ||||||||||||
F-33
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
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 | $ | 15,598 | $ | 441 | $ | 639 | $ | 2 | $ | 15,398 | 37.3 | % | ||||||||||||
Foreign corporate securities | 7,292 | 307 | 255 | 6 | 7,338 | 17.8 | ||||||||||||||||||
U.S. Treasury and agency securities | 6,503 | 35 | 281 | — | 6,257 | 15.2 | ||||||||||||||||||
RMBS | 6,183 | 153 | 402 | 82 | 5,852 | 14.2 | ||||||||||||||||||
CMBS | 2,808 | 43 | 216 | 18 | 2,617 | 6.3 | ||||||||||||||||||
ABS | 2,152 | 33 | 163 | 33 | 1,989 | 4.8 | ||||||||||||||||||
State and political subdivision securities | 1,291 | 12 | 124 | — | 1,179 | 2.8 | ||||||||||||||||||
Foreign government securities | 608 | 46 | 9 | — | 645 | 1.6 | ||||||||||||||||||
Total fixed maturity securities (1), (2) | $ | 42,435 | $ | 1,070 | $ | 2,089 | $ | 141 | $ | 41,275 | 100.0 | % | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Non-redeemable preferred stock (1) | $ | 351 | $ | 10 | $ | 55 | $ | — | $ | 306 | 66.7 | % | ||||||||||||
Common stock | 143 | 11 | 1 | — | 153 | 33.3 | ||||||||||||||||||
Total equity securities (3) | $ | 494 | $ | 21 | $ | 56 | $ | — | $ | 459 | 100.0 | % | ||||||||||||
(1) | 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 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: |
December 31, | ||||||||||||
2010 | 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 | $ | 202 | $ | 237 | ||||||
Equity securities | Non-redeemable preferred stock | U.S. financial institutions | $ | 35 | $ | 43 | ||||||
Fixed maturity securities | Foreign corporate securities | Non-U.S. financial institutions | $ | 450 | $ | 580 | ||||||
Fixed maturity securities | U.S. corporate securities | U.S. financial institutions | $ | 10 | $ | 17 |
(2) | The Company’s holdings in redeemable preferred stock with stated maturity dates, commonly referred to as “capital securities”, were primarily issued by U.S. financial institutions and have cumulative interest deferral features. The Company held $645 million and $513 million at estimated fair value of such securities at December 31, 2010 and 2009, respectively, which are included in the U.S. and foreign corporate securities sectors within fixed maturity securities. |
F-34
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
(3) | 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 $100 million and $82 million at estimated fair value at December 31, 2010 and 2009, respectively. |
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Below investment grade or non-rated fixed maturity securities: | ||||||||
Estimated fair value | $ | 4,027 | $ | 3,866 | ||||
Net unrealized gain (loss) | $ | (125 | ) | $ | (467 | ) | ||
Non-income producing fixed maturity securities: | ||||||||
Estimated fair value | $ | 36 | $ | 67 | ||||
Net unrealized gain (loss) | $ | 2 | $ | 2 |
F-35
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Corporate fixed maturity securities — by sector: | ||||||||||||||||
Foreign corporate fixed maturity securities (1) | $ | 8,470 | 35.5 | % | $ | 7,338 | 32.3 | % | ||||||||
U.S. corporate fixed maturity securities — by industry: | ||||||||||||||||
Consumer | 3,893 | 16.3 | 3,507 | 15.4 | ||||||||||||
Utility | 3,379 | 14.2 | 3,328 | 14.6 | ||||||||||||
Industrial | 3,282 | 13.7 | 3,047 | 13.4 | ||||||||||||
Finance | 2,569 | 10.8 | 3,145 | 13.8 | ||||||||||||
Communications | 1,444 | 6.1 | 1,669 | 7.4 | ||||||||||||
Other | 807 | 3.4 | 702 | 3.1 | ||||||||||||
Total | $ | 23,844 | 100.0 | % | $ | 22,736 | 100.0 | % | ||||||||
(1) | Includes U.S. dollar-denominated debt obligations of foreign obligors and other foreign fixed maturity securities. |
December 31, | ||||||||||||||||
2010 | 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 | $ | 252 | 0.4 | % | $ | 204 | 0.4 | % | ||||||||
Holdings in ten issuers with the largest exposures | $ | 1,683 | 2.5 | % | $ | 1,695 | 3.2 | % |
F-36
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By security type: | ||||||||||||||||
Pass-through securities | $ | 3,466 | 51.7 | % | $ | 2,206 | 37.7 | % | ||||||||
Collateralized mortgage obligations | 3,243 | 48.3 | 3,646 | 62.3 | ||||||||||||
Total RMBS | $ | 6,709 | 100.0 | % | $ | 5,852 | 100.0 | % | ||||||||
By risk profile: | ||||||||||||||||
Agency | $ | 5,080 | 75.7 | % | $ | 4,095 | 70.0 | % | ||||||||
Prime | 1,023 | 15.3 | 1,118 | 19.1 | ||||||||||||
Alternative residential mortgage loans | 606 | 9.0 | 639 | 10.9 | ||||||||||||
Total RMBS | $ | 6,709 | 100.0 | % | $ | 5,852 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 5,254 | 78.3 | % | $ | 4,347 | 74.3 | % | ||||||||
Portion rated NAIC 1 | $ | 5,618 | 83.7 | % | $ | 4,835 | 82.6 | % | ||||||||
F-37
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Vintage Year: | ||||||||||||||||
2004 & Prior | $ | 9 | 1.5 | % | $ | 15 | 2.3 | % | ||||||||
2005 | 302 | 49.8 | 336 | 52.6 | ||||||||||||
2006 | 88 | 14.6 | 83 | 13.0 | ||||||||||||
2007 | 207 | 34.1 | 205 | 32.1 | ||||||||||||
2008 to 2010 | — | — | — | — | ||||||||||||
Total | $ | 606 | 100.0 | % | $ | 639 | 100.0 | % | ||||||||
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
% of | % of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
(In millions) | ||||||||||||||||
Net unrealized gain (loss) | $ | (141 | ) | $ | (235 | ) | ||||||||||
Rated Aa/AA or better | 1.5 | % | 2.3 | % | ||||||||||||
Rated NAIC 1 | 14.9 | % | 16.6 | % | ||||||||||||
Distribution of holdings — at estimated fair value — by collateral type: | ||||||||||||||||
Fixed rate mortgage loans collateral | 96.1 | % | 95.6 | % | ||||||||||||
Hybrid adjustable rate mortgage loans collateral | 3.9 | 4.4 | ||||||||||||||
Total Alt-A RMBS | 100.0 | % | 100.0 | % | ||||||||||||
F-38
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Vintage Year: | ||||||||||||||||
2003 & Prior | $ | 947 | 41.6 | % | $ | 1,202 | 45.9 | % | ||||||||
2004 | 442 | 19.4 | 512 | 19.6 | ||||||||||||
2005 | 431 | 18.9 | 472 | 18.0 | ||||||||||||
2006 | 442 | 19.4 | 407 | 15.6 | ||||||||||||
2007 | 15 | 0.7 | 24 | 0.9 | ||||||||||||
2008 to 2010 | — | — | — | — | ||||||||||||
Total | $ | 2,277 | 100.0 | % | $ | 2,617 | 100.0 | % | ||||||||
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
% of | % of | |||||||||||||||
Amount | Total | Amount | Total | |||||||||||||
(In millions) | ||||||||||||||||
Net unrealized gain (loss) | $ | 74 | $ | (191 | ) | |||||||||||
Rated Aaa/AAA | 88 | % | 83 | % | ||||||||||||
Rated NAIC 1 | 95 | % | 93 | % |
F-39
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Fair | % of | Fair | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By collateral type: | ||||||||||||||||
Credit card loans | $ | 753 | 40.3 | % | $ | 920 | 46.3 | % | ||||||||
RMBS backed bysub-prime mortgage loans | 247 | 13.2 | 247 | 12.4 | ||||||||||||
Student loans | 174 | 9.3 | 158 | 7.9 | ||||||||||||
Automobile loans | 98 | 5.3 | 205 | 10.3 | ||||||||||||
Other loans | 597 | 31.9 | 459 | 23.1 | ||||||||||||
Total | $ | 1,869 | 100.0 | % | $ | 1,989 | 100.0 | % | ||||||||
Portion rated Aaa/AAA | $ | 1,251 | 66.9 | % | $ | 1,292 | 65.0 | % | ||||||||
Portion rated NAIC 1 | $ | 1,699 | 90.9 | % | $ | 1,767 | 88.8 | % | ||||||||
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Estimated | Estimated | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 1,874 | $ | 1,889 | $ | 1,023 | $ | 1,029 | ||||||||
Due after one year through five years | 9,340 | 9,672 | 9,048 | 9,202 | ||||||||||||
Due after five years through ten years | 7,829 | 8,333 | 7,882 | 7,980 | ||||||||||||
Due after ten years | 14,156 | 14,175 | 13,339 | 12,606 | ||||||||||||
Subtotal | 33,199 | 34,069 | 31,292 | 30,817 | ||||||||||||
RMBS, CMBS and ABS | 10,933 | 10,855 | 11,143 | 10,458 | ||||||||||||
Total fixed maturity securities | $ | 44,132 | $ | 44,924 | $ | 42,435 | $ | 41,275 | ||||||||
F-40
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | 878 | $ | (1,019 | ) | $ | (4,755 | ) | ||||
Fixed maturity securities with noncredit OTTI losses in accumulated other comprehensive income (loss) | (86 | ) | (141 | ) | — | |||||||
Total fixed maturity securities | 792 | (1,160 | ) | (4,755 | ) | |||||||
Equity securities | (21 | ) | (35 | ) | (199 | ) | ||||||
Derivatives | (109 | ) | (4 | ) | 12 | |||||||
Short-term investments | (2 | ) | (10 | ) | (100 | ) | ||||||
Other | (3 | ) | (3 | ) | (3 | ) | ||||||
Subtotal | 657 | (1,212 | ) | (5,045 | ) | |||||||
Amounts allocated from: | ||||||||||||
Insurance liability loss recognition | (33 | ) | — | — | ||||||||
DAC and VOBA related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) | 5 | 12 | — | |||||||||
DAC and VOBA | (126 | ) | 151 | 916 | ||||||||
Subtotal | (154 | ) | 163 | 916 | ||||||||
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) | 30 | 46 | — | |||||||||
Deferred income tax benefit (expense) | (196 | ) | 327 | 1,447 | ||||||||
Net unrealized investment gains (losses) | $ | 337 | $ | (676 | ) | $ | (2,682 | ) | ||||
F-41
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | (676 | ) | $ | (2,682 | ) | $ | (361 | ) | |||
Cumulative effect of change in accounting principles, net of income tax | 34 | (22 | ) | — | ||||||||
Fixed maturity securities on which noncredit OTTI losses have been recognized | 39 | (105 | ) | — | ||||||||
Unrealized investment gains (losses) during the year | 1,778 | 3,974 | (4,396 | ) | ||||||||
Unrealized investment gains (losses) relating to: | ||||||||||||
Insurance liability gain (loss) recognition | (33 | ) | — | — | ||||||||
DAC and VOBA related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) | (7 | ) | 10 | — | ||||||||
DAC and VOBA | (277 | ) | (765 | ) | 823 | |||||||
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) | (11 | ) | 34 | — | ||||||||
Deferred income tax benefit (expense) | (510 | ) | (1,120 | ) | 1,252 | |||||||
Balance, end of period | $ | 337 | $ | (676 | ) | $ | (2,682 | ) | ||||
Change in net unrealized investment gains (losses) | $ | 1,013 | $ | 2,006 | $ | (2,321 | ) | |||||
F-42
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, 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 | $ | 1,956 | $ | 56 | $ | 1,800 | $ | 246 | $ | 3,756 | $ | 302 | ||||||||||||
Foreign corporate securities | 727 | 24 | 816 | 103 | 1,543 | 127 | ||||||||||||||||||
U.S. Treasury and agency securities | 2,857 | 113 | 85 | 19 | 2,942 | 132 | ||||||||||||||||||
RMBS | 2,228 | 59 | 1,368 | 238 | 3,596 | 297 | ||||||||||||||||||
CMBS | 68 | 1 | 237 | 38 | 305 | 39 | ||||||||||||||||||
ABS | 245 | 5 | 590 | 97 | 835 | 102 | ||||||||||||||||||
State and political subdivision securities | 716 | 36 | 352 | 95 | 1,068 | 131 | ||||||||||||||||||
Foreign government securities | 49 | 1 | 9 | 1 | 58 | 2 | ||||||||||||||||||
Total fixed maturity securities | $ | 8,846 | $ | 295 | $ | 5,257 | $ | 837 | $ | 14,103 | $ | 1,132 | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Non-redeemable preferred stock | $ | 26 | $ | 5 | $ | 187 | $ | 42 | $ | 213 | $ | 47 | ||||||||||||
Common stock | 9 | 1 | — | — | 9 | 1 | ||||||||||||||||||
Total equity securities | $ | 35 | $ | 6 | $ | 187 | $ | 42 | $ | 222 | $ | 48 | ||||||||||||
Total number of securities in an unrealized loss position | 759 | 637 | ||||||||||||||||||||||
F-43
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
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 | $ | 2,164 | $ | 87 | $ | 4,314 | $ | 554 | $ | 6,478 | $ | 641 | ||||||||||||
Foreign corporate securities | 759 | 27 | 1,488 | 234 | 2,247 | 261 | ||||||||||||||||||
U.S. Treasury and agency securities | 5,265 | 271 | 26 | 10 | 5,291 | 281 | ||||||||||||||||||
RMBS | 703 | 12 | 1,910 | 472 | 2,613 | 484 | ||||||||||||||||||
CMBS | 334 | 3 | 1,054 | 231 | 1,388 | 234 | ||||||||||||||||||
ABS | 125 | 11 | 821 | 185 | 946 | 196 | ||||||||||||||||||
State and political subdivision securities | 413 | 16 | 433 | 108 | 846 | 124 | ||||||||||||||||||
Foreign government securities | 132 | 4 | 25 | 5 | 157 | 9 | ||||||||||||||||||
Total fixed maturity securities | $ | 9,895 | $ | 431 | $ | 10,071 | $ | 1,799 | $ | 19,966 | $ | 2,230 | ||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Non-redeemable preferred stock | $ | 21 | $ | 9 | $ | 198 | $ | 46 | $ | 219 | $ | 55 | ||||||||||||
Common stock | 3 | 1 | 3 | — | 6 | 1 | ||||||||||||||||||
Total equity securities | $ | 24 | $ | 10 | $ | 201 | $ | 46 | $ | 225 | $ | 56 | ||||||||||||
Total number of securities in an unrealized loss position | 708 | 1,236 | ||||||||||||||||||||||
F-44
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, 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 | $ | 8,882 | $ | 439 | $ | 268 | $ | 109 | 686 | 43 | ||||||||||||||
Six months or greater but less than nine months | 152 | 40 | 6 | 13 | 30 | 10 | ||||||||||||||||||
Nine months or greater but less than twelve months | 48 | 25 | 2 | 11 | 11 | 3 | ||||||||||||||||||
Twelve months or greater | 4,768 | 881 | 450 | 273 | 475 | 101 | ||||||||||||||||||
Total | $ | 13,850 | $ | 1,385 | $ | 726 | $ | 406 | ||||||||||||||||
Percentage of amortized cost | 5 | % | 29 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 31 | $ | 30 | $ | 4 | $ | 7 | 8 | 12 | ||||||||||||||
Six months or greater but less than nine months | — | 3 | — | 1 | — | 1 | ||||||||||||||||||
Nine months or greater but less than twelve months | 5 | 7 | — | 2 | 1 | 1 | ||||||||||||||||||
Twelve months or greater | 150 | 44 | 18 | 16 | 12 | 5 | ||||||||||||||||||
Total | $ | 186 | $ | 84 | $ | 22 | $ | 26 | ||||||||||||||||
Percentage of cost | 12 | % | 31 | % | ||||||||||||||||||||
F-45
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
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 | $ | 8,310 | $ | 790 | $ | 173 | $ | 199 | 609 | 74 | ||||||||||||||
Six months or greater but less than nine months | 1,084 | 132 | 114 | 37 | 33 | 24 | ||||||||||||||||||
Nine months or greater but less than twelve months | 694 | 362 | 74 | 102 | 30 | 29 | ||||||||||||||||||
Twelve months or greater | 8,478 | 2,346 | 737 | 794 | 867 | 260 | ||||||||||||||||||
Total | $ | 18,566 | $ | 3,630 | $ | 1,098 | $ | 1,132 | ||||||||||||||||
Percentage of amortized cost | 6 | % | 31 | % | ||||||||||||||||||||
Equity Securities: | ||||||||||||||||||||||||
Less than six months | $ | 3 | $ | 9 | $ | — | $ | 3 | 7 | 3 | ||||||||||||||
Six months or greater but less than nine months | — | — | — | — | — | — | ||||||||||||||||||
Nine months or greater but less than twelve months | 10 | 20 | 1 | 8 | 2 | 3 | ||||||||||||||||||
Twelve months or greater | 161 | 78 | 21 | 23 | 17 | 6 | ||||||||||||||||||
Total | $ | 174 | $ | 107 | $ | 22 | $ | 34 | ||||||||||||||||
Percentage of cost | 13 | % | 32 | % | ||||||||||||||||||||
F-46
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||
2010 | 2009 | |||||||
Sector: | ||||||||
U.S. corporate securities | 26 | % | 28 | % | ||||
RMBS | 25 | 21 | ||||||
U.S. Treasury and agency securities | 11 | 12 | ||||||
State and political subdivision securities | 11 | 5 | ||||||
Foreign corporate securities | 11 | 11 | ||||||
ABS | 9 | 9 | ||||||
CMBS | 3 | 10 | ||||||
Other | 4 | 4 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Mortgage-backed | 28 | % | 31 | % | ||||
Finance | 19 | 22 | ||||||
U.S. Treasury and agency securities | 11 | 12 | ||||||
State and political subdivision securities | 11 | 5 | ||||||
Asset-backed | 9 | 9 | ||||||
Consumer | 5 | 6 | ||||||
Utility | 3 | 4 | ||||||
Communications | 2 | 3 | ||||||
Industrial | 1 | 2 | ||||||
Transportation | 1 | 1 | ||||||
Other | 10 | 5 | ||||||
Total | 100 | % | 100 | % | ||||
F-47
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Fixed Maturity | Equity | Fixed Maturity | Equity | |||||||||||||
Securities | Securities | Securities | Securities | |||||||||||||
(In millions, except number of securities) | ||||||||||||||||
Number of securities | 15 | — | 33 | — | ||||||||||||
Total gross unrealized loss | $ | 210 | $ | — | $ | 510 | $ | — | ||||||||
Percentage of total gross unrealized loss | 19 | % | — | % | 23 | % | — | % |
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 | $ | 7 | $ | 6 | 86 | % | $ | 2 | 33 | % | $ | 2 | 100 | % | 100 | % | ||||||||||||||||
Six months or greater but less than twelve months | 3 | 3 | 100 | % | 3 | 100 | % | 3 | 100 | % | 67 | % | ||||||||||||||||||||
Twelve months or greater | 16 | 16 | 100 | % | 16 | 100 | % | 16 | 100 | % | 56 | % | ||||||||||||||||||||
All equity securities with a gross unrealized loss of 20% or more | $ | 26 | $ | 25 | 96 | % | $ | 21 | 84 | % | $ | 21 | 100 | % | 62 | % | ||||||||||||||||
F-48
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-49
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Total gains (losses) on fixed maturity securities: | ||||||||||||
Total OTTI losses recognized | $ | (103 | ) | $ | (552 | ) | $ | (401 | ) | |||
Less: Noncredit portion of OTTI losses transferred to and recognized in other comprehensive income (loss) | 53 | 165 | — | |||||||||
Net OTTI losses on fixed maturity securities recognized in earnings | (50 | ) | (387 | ) | (401 | ) | ||||||
Fixed maturity securities — net gains (losses) on sales and disposals | 123 | (115 | ) | (255 | ) | |||||||
Total gains (losses) on fixed maturity securities | 73 | (502 | ) | (656 | ) | |||||||
Other net investment gains (losses): | ||||||||||||
Equity securities | 28 | (119 | ) | (60 | ) | |||||||
Mortgage loans | (18 | ) | (32 | ) | (44 | ) | ||||||
Real estate and real estate joint ventures | (21 | ) | (61 | ) | (1 | ) | ||||||
Other limited partnership interests | (13 | ) | (72 | ) | (9 | ) | ||||||
Other investment portfolio gains (losses) | 10 | 4 | 14 | |||||||||
Subtotal — investment portfolio gains (losses) | 59 | (782 | ) | (756 | ) | |||||||
FVO consolidated securitization entities: | ||||||||||||
Commercial mortgage loans | 758 | — | — | |||||||||
Long-term debt — related to commercial mortgage loans | (734 | ) | — | — | ||||||||
Other gains (losses) | 67 | (53 | ) | 311 | ||||||||
Subtotal FVO consolidated securitization entities and other gains (losses) | 91 | (53 | ) | 311 | ||||||||
Total net investment gains (losses) | $ | 150 | $ | (835 | ) | $ | (445 | ) | ||||
F-50
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | Years Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Proceeds | $ | 12,434 | $ | 8,766 | $ | 11,450 | $ | 109 | $ | 113 | $ | 76 | $ | 12,543 | $ | 8,879 | $ | 11,526 | ||||||||||||||||||
Gross investment gains | $ | 244 | $ | 180 | $ | 126 | $ | 31 | $ | 6 | $ | 15 | $ | 275 | $ | 186 | $ | 141 | ||||||||||||||||||
Gross investment losses | (121 | ) | (295 | ) | (381 | ) | (1 | ) | (28 | ) | (25 | ) | (122 | ) | (323 | ) | (406 | ) | ||||||||||||||||||
Total OTTI losses recognized in earnings: | ||||||||||||||||||||||||||||||||||||
Credit-related | (47 | ) | (348 | ) | (366 | ) | — | — | — | (47 | ) | (348 | ) | (366 | ) | |||||||||||||||||||||
Other (1) | (3 | ) | (39 | ) | (35 | ) | (2 | ) | (97 | ) | (50 | ) | (5 | ) | (136 | ) | (85 | ) | ||||||||||||||||||
Total OTTI losses recognized in earnings | (50 | ) | (387 | ) | (401 | ) | (2 | ) | (97 | ) | (50 | ) | (52 | ) | (484 | ) | (451 | ) | ||||||||||||||||||
Net investment gains (losses) | $ | 73 | $ | (502 | ) | $ | (656 | ) | $ | 28 | $ | (119 | ) | $ | (60 | ) | $ | 101 | $ | (621 | ) | $ | (716 | ) | ||||||||||||
(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. |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Sector: | ||||||||||||
U.S. and foreign corporate securities — by industry: | ||||||||||||
Consumer | $ | 10 | $ | 53 | $ | 35 | ||||||
Finance | 7 | 84 | 225 | |||||||||
Communications | 4 | 88 | 21 | |||||||||
Utility | 2 | 6 | — | |||||||||
Industrial | — | 18 | — | |||||||||
Other industries | — | — | 40 | |||||||||
Total U.S. and foreign corporate securities | 23 | 249 | 321 | |||||||||
RMBS | 17 | 24 | — | |||||||||
CMBS | 8 | 69 | 65 | |||||||||
ABS | 2 | 45 | 15 | |||||||||
Total | $ | 50 | $ | 387 | $ | 401 | ||||||
F-51
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Sector: | ||||||||||||
Common stock | $ | 2 | $ | 5 | $ | 12 | ||||||
Non-redeemable preferred stock | — | 92 | 38 | |||||||||
Total | $ | 2 | $ | 97 | $ | 50 | ||||||
Industry: | ||||||||||||
Financial services industry: | ||||||||||||
Perpetual hybrid securities | $ | — | $ | 72 | $ | 9 | ||||||
Common and remaining non-redeemable preferred stock | — | 3 | 34 | |||||||||
Total financial services industry | — | 75 | 43 | |||||||||
Other industries | 2 | 22 | 7 | |||||||||
Total | $ | 2 | $ | 97 | $ | 50 | ||||||
Years Ended December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Balance, at January 1, | $ | 213 | $ | — | ||||
Credit loss component of OTTI loss not reclassified to other comprehensive income (loss) in the cumulative effect transition adjustment | — | 92 | ||||||
Additions: | ||||||||
Initial impairments — credit loss OTTI recognized on securities not previously impaired | 11 | 97 | ||||||
Additional impairments — credit loss OTTI recognized on securities previously impaired | 10 | 43 | ||||||
Reductions: | ||||||||
Due to sales (maturities, pay downs or prepayments) during the period of securities previously credit loss OTTI impaired | (67 | ) | (18 | ) | ||||
Due to securities de-recognized in connection with the adoption of new guidance related to the consolidation of VIEs | (100 | ) | — | |||||
Due to securities impaired to net present value of expected future cash flows | (1 | ) | — | |||||
Due to increases in cash flows — accretion of previous credit loss OTTI | (3 | ) | (1 | ) | ||||
Balance, at December 31, | $ | 63 | $ | 213 | ||||
F-52
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Investment income: | ||||||||||||
Fixed maturity securities | $ | 2,120 | $ | 2,094 | $ | 2,455 | ||||||
Equity securities | 16 | 27 | 44 | |||||||||
Other securities — FVO general account securities | — | — | 2 | |||||||||
Mortgage loans | 301 | 239 | 255 | |||||||||
Policy loans | 67 | 80 | 64 | |||||||||
Real estate and real estate joint ventures | (24 | ) | (120 | ) | 11 | |||||||
Other limited partnership interests | 190 | 17 | (69 | ) | ||||||||
Cash, cash equivalents and short-term investments | 9 | 16 | 67 | |||||||||
International joint ventures | (6 | ) | (4 | ) | (4 | ) | ||||||
Other | 3 | (2 | ) | (3 | ) | |||||||
Subtotal | 2,676 | 2,347 | 2,822 | |||||||||
Less: Investment expenses | 97 | 109 | 307 | |||||||||
Subtotal, net | 2,579 | 2,238 | 2,515 | |||||||||
Other securities — FVO contractholder-directed unit-linked investments | 167 | 97 | (21 | ) | ||||||||
FVO consolidated securitization entities — Commercial mortgage loans | 411 | — | — | |||||||||
Subtotal | 578 | 97 | (21 | ) | ||||||||
Net investment income | $ | 3,157 | $ | 2,335 | $ | 2,494 | ||||||
F-53
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Securities on loan: | ||||||||
Amortized cost | $ | 6,992 | $ | 6,173 | ||||
Estimated fair value | $ | 7,054 | $ | 6,051 | ||||
Aging of cash collateral liability: | ||||||||
Open (1) | $ | 1,292 | $ | 1,325 | ||||
Less than thirty days | 3,297 | 3,342 | ||||||
Thirty days or greater but less than sixty days | 1,221 | 1,323 | ||||||
Sixty days or greater but less than ninety days | 326 | — | ||||||
Ninety days or greater | 1,002 | 234 | ||||||
Total cash collateral liability | $ | 7,138 | $ | 6,224 | ||||
Reinvestment portfolio — estimated fair value | $ | 6,916 | $ | 5,686 | ||||
(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. |
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Invested assets on deposit: | ||||||||
Regulatory agencies (1) | $ | 55 | $ | 21 | ||||
Invested assets pledged as collateral: | ||||||||
Funding agreements — FHLB of Boston (2) | 211 | 419 | ||||||
Funding agreements — Farmer Mac (3) | 231 | — | ||||||
Derivative transactions (4) | 83 | 18 | ||||||
Total invested assets on deposit and pledged as collateral | $ | 580 | $ | 458 | ||||
(1) | The Company has investment assets on deposit with regulatory agencies consisting primarily of fixed maturity securities. |
F-54
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
(2) | The Company 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. | |
(3) | The Company has pledged certain agricultural mortgage loans in connection with funding agreements issued to certain special purpose entities (“SPEs”) that have issued securities guaranteed by the Federal Agricultural Mortgage Corporation (“Farmer Mac”). The nature of these Farmer Mac arrangements is described in Note 7. | |
(4) | Certain of the Company’s invested assets are pledged as collateral for various derivative transactions as described in Note 3. |
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
FVO general account securities | $ | 7 | $ | 7 | ||||
FVO contractholder-directed unit-linked investments | 2,240 | 931 | ||||||
Total other securities — at estimated fair value | $ | 2,247 | $ | 938 | ||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
FVO general account securities: | ||||||||||||
Net investment income | $ | — | $ | — | $ | 2 | ||||||
Changes in estimated fair value included in net investment income | $ | — | $ | 1 | $ | (2 | ) | |||||
FVO contractholder-directed unit-linked investments: | ||||||||||||
Net investment income | $ | 167 | $ | 97 | $ | (21 | ) | |||||
Changes in estimated fair value included in net investment income | $ | 121 | $ | 89 | $ | (19 | ) |
F-55
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Mortgage loans: | ||||||||||||||||
Commercial mortgage loans | $ | 4,635 | 36.4 | % | $ | 3,620 | 76.2 | % | ||||||||
Agricultural mortgage loans | 1,342 | 10.6 | 1,204 | 25.4 | ||||||||||||
Residential mortgage loans | — | — | 1 | — | ||||||||||||
Subtotal | 5,977 | 47.0 | % | 4,825 | 101.6 | % | ||||||||||
Valuation allowances | (87 | ) | (0.7 | ) | (77 | ) | (1.6 | ) | ||||||||
Subtotal mortgage loans, net | 5,890 | 46.3 | 4,748 | 100.0 | ||||||||||||
Commercial mortgage loans held by consolidated securitization entities — FVO | 6,840 | 53.7 | — | — | ||||||||||||
Total mortgage loans, net | $ | 12,730 | 100.0 | % | $ | 4,748 | 100.0 | % | ||||||||
F-56
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
Commercial | Agricultural | Residential | Total | |||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||||||||||
Evaluated individually for credit losses | $ | 23 | $ | 23 | $ | — | $ | — | $ | — | $ | — | $ | 23 | $ | 23 | ||||||||||||||||
Evaluated collectively for credit losses | 4,612 | 3,597 | 1,342 | 1,204 | — | 1 | 5,954 | 4,802 | ||||||||||||||||||||||||
Total mortgage loans | 4,635 | 3,620 | 1,342 | 1,204 | — | 1 | 5,977 | 4,825 | ||||||||||||||||||||||||
Valuation allowances: | ||||||||||||||||||||||||||||||||
Specific credit losses | 23 | 23 | — | — | — | — | 23 | 23 | ||||||||||||||||||||||||
Non-specifically identified credit losses | 61 | 51 | 3 | 3 | — | — | 64 | 54 | ||||||||||||||||||||||||
Total valuation allowances | 84 | 74 | 3 | 3 | — | — | 87 | 77 | ||||||||||||||||||||||||
Mortgage loans, net of valuation allowance | $ | 4,551 | $ | 3,546 | $ | 1,339 | $ | 1,201 | $ | — | $ | 1 | $ | 5,890 | $ | 4,748 | ||||||||||||||||
Mortgage Loan Valuation Allowances | ||||||||||||
Commercial | Agricultural | Total | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, 2008 | $ | 7 | $ | 1 | $ | 8 | ||||||
Provision (release) | 74 | 1 | 75 | |||||||||
Charge-offs, net of recoveries | (37 | ) | — | (37 | ) | |||||||
Balance at December 31, 2008 | 44 | 2 | 46 | |||||||||
Provision (release) | 35 | 1 | 36 | |||||||||
Charge-offs, net of recoveries | (5 | ) | — | (5 | ) | |||||||
Balance at December 31, 2009 | 74 | 3 | 77 | |||||||||
Provision (release) | 16 | — | 16 | |||||||||
Charge-offs, net of recoveries | (6 | ) | — | (6 | ) | |||||||
Balance at December 31, 2010 | $ | 84 | $ | 3 | $ | 87 | ||||||
F-57
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, 2010 | ||||||||||||||||||||||||||||
Recorded Investment | ||||||||||||||||||||||||||||
Debt Service Coverage Ratios | Estimated | |||||||||||||||||||||||||||
> 1.20x | 1.00x - 1.20x | < 1.00x | Total | % of Total | Fair Value | % of Total | ||||||||||||||||||||||
(In millions) | (In millions) | |||||||||||||||||||||||||||
Loan-to-value ratios: | ||||||||||||||||||||||||||||
Less than 65% | $ | 2,051 | $ | 11 | $ | 34 | $ | 2,096 | 45.2 | % | $ | 2,196 | 47.1 | % | ||||||||||||||
65% to 75% | 824 | 99 | 148 | 1,071 | 23.1 | 1,099 | 23.6 | |||||||||||||||||||||
76% to 80% | 301 | 29 | 7 | 337 | 7.3 | 347 | 7.4 | |||||||||||||||||||||
Greater than 80% | 828 | 163 | 140 | 1,131 | 24.4 | 1,018 | 21.9 | |||||||||||||||||||||
Total | $ | 4,004 | $ | 302 | $ | 329 | $ | 4,635 | 100.0 | % | $ | 4,660 | 100.0 | % | ||||||||||||||
December 31, 2010 | ||||||||
Agricultural Mortgage Loans | ||||||||
Recorded Investment | % of Total | |||||||
(In millions) | ||||||||
Loan-to-value ratios: | ||||||||
Less than 65% | $ | 1,289 | 96.0 | % | ||||
65% to 75% | 53 | 4.0 | ||||||
Total | $ | 1,342 | 100.0 | % | ||||
F-58
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Impaired Mortgage Loans | ||||||||||||||||||||||||||||||||
Loans without | ||||||||||||||||||||||||||||||||
Loans with a Valuation Allowance | a Valuation Allowance | All Impaired Loans | ||||||||||||||||||||||||||||||
Unpaid | Unpaid | Unpaid | ||||||||||||||||||||||||||||||
Principal | Recorded | Valuation | Carrying | Principal | Recorded | Principal | Carrying | |||||||||||||||||||||||||
Balance | Investment | Allowances | Value | Balance | Investment | Balance | Value | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
At December 31, 2010: | ||||||||||||||||||||||||||||||||
Commercial mortgage loans | $ | 23 | $ | 23 | $ | 23 | $ | — | $ | — | $ | — | $ | 23 | $ | — | ||||||||||||||||
Agricultural mortgage loans | — | — | — | — | 7 | 7 | 7 | 7 | ||||||||||||||||||||||||
Total | $ | 23 | $ | 23 | $ | 23 | $ | — | $ | 7 | $ | 7 | $ | 30 | $ | 7 | ||||||||||||||||
Total mortgage loans at December 31, 2009 | $ | 24 | $ | 24 | $ | 24 | $ | — | $ | 12 | $ | 12 | $ | 36 | $ | 12 | ||||||||||||||||
Impaired Mortgage Loans | ||||||||||||
Average Investment | Interest Income Recognized | |||||||||||
Cash Basis | Accrual Basis | |||||||||||
(In millions) | ||||||||||||
For the Year Ended December 31, 2010: | ||||||||||||
Commercial mortgage loans | $ | 45 | $ | 2 | $ | — | ||||||
Agricultural mortgage loans | 13 | — | — | |||||||||
Total | $ | 58 | $ | 2 | $ | — | ||||||
For the Year Ended December 31, 2009 | $ | 32 | $ | 2 | $ | — | ||||||
For the Year Ended December 31, 2008 | $ | 42 | $ | 1 | $ | 1 | ||||||
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Traditional | $ | 105 | 21.0 | % | $ | 82 | 18.4 | % | ||||||||
Real estate joint ventures and funds | 368 | 73.4 | 363 | 81.6 | ||||||||||||
Real estate and real estate joint ventures | 473 | 94.4 | 445 | 100.0 | ||||||||||||
Foreclosed | 28 | 5.6 | — | — | ||||||||||||
Total real estate and real estate joint ventures | $ | 501 | 100.0 | % | $ | 445 | 100.0 | % | ||||||||
F-59
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Office | $ | 253 | 50.4 | % | $ | 127 | 28.6 | % | ||||||||
Real estate private equity funds | 122 | 24.4 | 96 | 21.6 | ||||||||||||
Apartments | 32 | 6.4 | 72 | 16.2 | ||||||||||||
Industrial | 16 | 3.2 | 25 | 5.6 | ||||||||||||
Land | 14 | 2.8 | 43 | 9.6 | ||||||||||||
Retail | 9 | 1.8 | 16 | 3.6 | ||||||||||||
Agriculture | — | — | 11 | 2.5 | ||||||||||||
Other | 55 | 11.0 | 55 | 12.3 | ||||||||||||
Total real estate and real estate joint ventures | $ | 501 | 100.0 | % | $ | 445 | 100.0 | % | ||||||||
F-60
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-61
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Freestanding derivatives with positive fair values | $ | 1,520 | 88.6 | % | $ | 1,470 | 98.1 | % | ||||||||
Tax credit partnerships | 92 | 5.3 | 2 | 0.1 | ||||||||||||
Leveraged leases, net of non-recourse debt | 56 | 3.3 | — | — | ||||||||||||
Joint venture investments | 46 | 2.7 | 26 | 1.8 | ||||||||||||
Other | 2 | 0.1 | — | — | ||||||||||||
Total | $ | 1,716 | 100.0 | % | $ | 1,498 | 100.0 | % | ||||||||
December 31, 2010 | ||||
(In millions) | ||||
Rental receivables, net | $ | 92 | ||
Estimated residual values | 14 | |||
Subtotal | 106 | |||
Unearned income | (50 | ) | ||
Investment in leveraged leases | $ | 56 | ||
F-62
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-63
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Carrying | Exposure | Carrying | Exposure | |||||||||||||
Amount | to Loss(1) | Amount | to Loss(1) | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securitiesavailable-for-sale: | ||||||||||||||||
RMBS (2) | $ | 6,709 | $ | 6,709 | $ | — | $ | — | ||||||||
CMBS (2) | 2,277 | 2,277 | — | — | ||||||||||||
ABS (2) | 1,869 | 1,869 | — | — | ||||||||||||
Foreign corporate securities | 348 | 348 | 304 | 304 | ||||||||||||
U.S. corporate securities | 336 | 336 | 247 | 247 | ||||||||||||
Other limited partnership interests | 1,192 | 1,992 | 838 | 1,273 | ||||||||||||
Real estate joint ventures | 10 | 35 | 32 | 39 | ||||||||||||
Total | $ | 12,741 | $ | 13,566 | $ | 1,421 | $ | 1,863 | ||||||||
(1) | The maximum exposure to loss relating to the fixed maturity securitiesavailable-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the 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. | |
(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. |
F-64
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Estimated fair value of invested assets transferred to affiliates | $ | 582 | $ | 717 | $ | 27 | ||||||
Amortized cost of invested assets transferred to affiliates | $ | 533 | $ | 769 | $ | 23 | ||||||
Net investment gains (losses) recognized on invested assets transferred to affiliates | $ | 49 | $ | (52 | ) | $ | 4 | |||||
Estimated fair value of assets transferred from affiliates | $ | 46 | $ | 143 | $ | 230 |
3. | Derivative Financial Instruments |
F-65
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||||||||||||
2010 | 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 | $ | 9,102 | $ | 658 | $ | 252 | $ | 5,261 | $ | 534 | $ | 179 | |||||||||||||
Interest rate floors | 7,986 | 127 | 62 | 7,986 | 78 | 34 | ||||||||||||||||||||
Interest rate caps | 7,158 | 29 | 1 | 4,003 | 15 | — | ||||||||||||||||||||
Interest rate futures | 1,966 | 5 | 7 | 835 | 2 | 1 | ||||||||||||||||||||
Interest rate forwards | 695 | — | 71 | — | — | — | ||||||||||||||||||||
Foreign currency | Foreign currency swaps | 2,561 | 585 | 68 | 2,678 | 689 | 93 | |||||||||||||||||||
Foreign currency forwards | 151 | 4 | 1 | 79 | 3 | — | ||||||||||||||||||||
Credit | Credit default swaps | 1,324 | 15 | 22 | 966 | 12 | 31 | |||||||||||||||||||
Credit forwards | — | — | — | 90 | — | 3 | ||||||||||||||||||||
Equity market | Equity futures | 93 | — | — | 81 | 1 | — | |||||||||||||||||||
Equity options | 733 | 77 | — | 775 | 112 | — | ||||||||||||||||||||
Variance swaps | 1,081 | 20 | 8 | 1,081 | 24 | 6 | ||||||||||||||||||||
Total | $ | 32,850 | $ | 1,520 | $ | 492 | $ | 23,835 | $ | 1,470 | $ | 347 | ||||||||||||||
(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. |
F-66
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Remaining Life | ||||||||||||||||||||
After One Year | After Five Years | |||||||||||||||||||
One Year or | Through Five | Through Ten | After Ten | |||||||||||||||||
Less | Years | Years | Years | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Interest rate swaps | $ | 1,007 | $ | 2,340 | $ | 2,450 | $ | 3,305 | $ | 9,102 | ||||||||||
Interest rate floors | — | 4,468 | 3,518 | — | 7,986 | |||||||||||||||
Interest rate caps | 1,750 | 4,830 | 578 | — | 7,158 | |||||||||||||||
Interest rate futures | 1,966 | — | — | — | 1,966 | |||||||||||||||
Interest rate forwards | 75 | 585 | 35 | — | 695 | |||||||||||||||
Foreign currency swaps | 925 | 1,039 | 328 | 269 | 2,561 | |||||||||||||||
Foreign currency forwards | 151 | — | — | — | 151 | |||||||||||||||
Credit default swaps | — | 1,324 | — | — | 1,324 | |||||||||||||||
Credit forwards | — | — | — | — | — | |||||||||||||||
Equity futures | 93 | — | — | — | 93 | |||||||||||||||
Equity options | 127 | 606 | — | — | 733 | |||||||||||||||
Variance swaps | — | 519 | 562 | — | 1,081 | |||||||||||||||
Total | $ | 6,094 | $ | 15,711 | $ | 7,471 | $ | 3,574 | $ | 32,850 | ||||||||||
F-67
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-68
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-69
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Estimated | Estimated | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Derivatives Designated as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fair Value Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | $ | 787 | $ | 334 | $ | 18 | $ | 850 | $ | 370 | $ | 15 | ||||||||||||
Interest rate swaps | 193 | 11 | 15 | 220 | 11 | 2 | ||||||||||||||||||
Subtotal | 980 | 345 | 33 | 1,070 | 381 | 17 | ||||||||||||||||||
Cash Flow Hedges: | ||||||||||||||||||||||||
Foreign currency swaps | 295 | 15 | 11 | 166 | 15 | 7 | ||||||||||||||||||
Interest rate swaps | 575 | 1 | 45 | — | — | — | ||||||||||||||||||
Interest rate forwards | 695 | — | 71 | — | — | — | ||||||||||||||||||
Credit forwards | — | — | — | 90 | — | 3 | ||||||||||||||||||
Subtotal | 1,565 | 16 | 127 | 256 | 15 | 10 | ||||||||||||||||||
Total Qualifying Hedges | $ | 2,545 | $ | 361 | $ | 160 | $ | 1,326 | $ | 396 | $ | 27 | ||||||||||||
December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Estimated | Estimated | |||||||||||||||||||||||
Derivatives Not Designated or Not | Notional | Fair Value | Notional | Fair Value | ||||||||||||||||||||
Qualifying as Hedging Instruments | Amount | Assets | Liabilities | Amount | Assets | Liabilities | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 8,334 | $ | 646 | $ | 192 | $ | 5,041 | $ | 523 | $ | 177 | ||||||||||||
Interest rate floors | 7,986 | 127 | 62 | 7,986 | 78 | 34 | ||||||||||||||||||
Interest rate caps | 7,158 | 29 | 1 | 4,003 | 15 | — | ||||||||||||||||||
Interest rate futures | 1,966 | 5 | 7 | 835 | 2 | 1 | ||||||||||||||||||
Foreign currency swaps | 1,479 | 236 | 39 | 1,662 | 304 | 71 | ||||||||||||||||||
Foreign currency forwards | 151 | 4 | 1 | 79 | 3 | — | ||||||||||||||||||
Credit default swaps | 1,324 | 15 | 22 | 966 | 12 | 31 | ||||||||||||||||||
Equity futures | 93 | — | — | 81 | 1 | — | ||||||||||||||||||
Equity options | 733 | 77 | — | 775 | 112 | — | ||||||||||||||||||
Variance swaps | 1,081 | 20 | 8 | 1,081 | 24 | 6 | ||||||||||||||||||
Total non-designated or non-qualifying derivatives | $ | 30,305 | $ | 1,159 | $ | 332 | $ | 22,509 | $ | 1,074 | $ | 320 | ||||||||||||
F-70
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Derivatives and hedging gains (losses) (1) | $ | (74 | ) | $ | (717 | ) | $ | 558 | ||||
Embedded derivatives | 132 | (314 | ) | 436 | ||||||||
Total net derivative gains (losses) | $ | 58 | $ | (1,031 | ) | $ | 994 | |||||
(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. |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Qualifying hedges: | ||||||||||||
Net investment income | $ | 2 | $ | (1 | ) | $ | (2 | ) | ||||
Interest credited to policyholder account balances | 37 | 40 | 6 | |||||||||
Non-qualifying hedges: | ||||||||||||
Net derivative gains (losses) | 6 | (8 | ) | 43 | ||||||||
Total | $ | 45 | $ | 31 | $ | 47 | ||||||
F-71
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Net Derivative | Ineffectiveness | |||||||||||||
Gains (Losses) | Net Derivative Gains | Recognized in | ||||||||||||
Derivatives in Fair Value | Recognized | (Losses) Recognized | Net Derivative | |||||||||||
Hedging Relationships | Hedged Items in Fair Value Hedging Relationships | for Derivatives | for Hedged Items | Gains (Losses) | ||||||||||
(In millions) | ||||||||||||||
For the Year Ended December 31, 2010: | ||||||||||||||
Interest rate swaps: | Fixed maturity securities | $ | (1 | ) | $ | 1 | $ | — | ||||||
Policyholder account balances (1) | (13 | ) | 8 | (5 | ) | |||||||||
Foreign currency swaps: | Foreign-denominated policyholder account balances (2) | (38 | ) | 14 | (24 | ) | ||||||||
Total | $ | (52 | ) | $ | 23 | $ | (29 | ) | ||||||
For the Year Ended December 31, 2009: | ||||||||||||||
Interest rate swaps: | Fixed maturity securities | $ | 6 | $ | (6 | ) | $ | — | ||||||
Policyholder account balances (1) | (8 | ) | 4 | (4 | ) | |||||||||
Foreign currency swaps: | Foreign-denominated policyholder account balances (2) | 111 | (117 | ) | (6 | ) | ||||||||
Total | $ | 109 | $ | (119 | ) | $ | (10 | ) | ||||||
For the Year Ended December 31, 2008 | $ | (87 | ) | $ | 86 | $ | (1 | ) | ||||||
(1) | Fixed rate liabilities | |
(2) | Fixed rate or floating rate liabilities |
F-72
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Accumulated other comprehensive income (loss), balance at January 1, | $ | (1 | ) | $ | 20 | $ | (13 | ) | ||||
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges | (107 | ) | (44 | ) | 9 | |||||||
Amounts reclassified to net derivative gains (losses) | (1 | ) | 23 | 24 | ||||||||
Accumulated other comprehensive income (loss), balance at December 31, | $ | (109 | ) | $ | (1 | ) | $ | 20 | ||||
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 Derivative | Net Derivative | |||||||||||
Gains (Losses) | Gains (Losses) | |||||||||||
(In millions) | ||||||||||||
For the Year Ended December 31, 2010: | ||||||||||||
Interest rate swaps | $ | (44 | ) | $ | — | $ | — | |||||
Foreign currency swaps | (6 | ) | (3 | ) | — | |||||||
Interest rate forwards | (71 | ) | 4 | (1 | ) | |||||||
Credit forwards | 14 | — | — | |||||||||
Total | $ | (107 | ) | $ | 1 | $ | (1 | ) | ||||
For the Year Ended December 31, 2009: | ||||||||||||
Foreign currency swaps | $ | (58 | ) | $ | (36 | ) | $ | — | ||||
Interest rate forwards | 17 | 13 | — | |||||||||
Credit forwards | (3 | ) | — | — | ||||||||
Total | $ | (44 | ) | $ | (23 | ) | $ | — | ||||
For the Year Ended December 31, 2008: | ||||||||||||
Foreign currency swaps | $ | 9 | $ | (24 | ) | $ | — | |||||
F-73
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-74
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Net | Net | |||||||
Derivative | Investment | |||||||
Gains (Losses) | Income(1) | |||||||
(In millions) | ||||||||
For the Year Ended December 31, 2010: | ||||||||
Interest rate swaps | $ | 51 | $ | — | ||||
Interest rate floors | 20 | — | ||||||
Interest rate caps | (9 | ) | — | |||||
Interest rate futures | (22 | ) | — | |||||
Equity futures | (12 | ) | — | |||||
Foreign currency swaps | (31 | ) | — | |||||
Foreign currency forwards | 2 | — | ||||||
Equity options | (30 | ) | (7 | ) | ||||
Interest rate options | (3 | ) | — | |||||
Interest rate forwards | 1 | — | ||||||
Variance swaps | (6 | ) | — | |||||
Credit default swaps | — | — | ||||||
Total | $ | (39 | ) | $ | (7 | ) | ||
For the Year Ended December 31, 2009: | ||||||||
Interest rate swaps | $ | (149 | ) | $ | — | |||
Interest rate floors | (265 | ) | — | |||||
Interest rate caps | 4 | — | ||||||
Interest rate futures | (37 | ) | — | |||||
Equity futures | (71 | ) | — | |||||
Foreign currency swaps | (3 | ) | — | |||||
Foreign currency forwards | (4 | ) | — | |||||
Equity options | (121 | ) | (1 | ) | ||||
Variance swaps | (40 | ) | — | |||||
Credit default swaps | (50 | ) | — | |||||
Total | $ | (736 | ) | $ | (1 | ) | ||
For the Year Ended December 31, 2008 | $ | 514 | $ | — | ||||
(1) | Changes in estimated fair value related to economic hedges of equity method investments in joint ventures. |
F-75
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Maximum | Maximum | |||||||||||||||||||||||
Estimated | Amount | Estimated | Amount | |||||||||||||||||||||
Fair Value | of Future | Weighted | Fair Value | of 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) | $ | 1 | $ | 45 | 3.6 | $ | 1 | $ | 25 | 4.0 | ||||||||||||||
Credit default swaps referencing indices | 11 | 679 | 3.7 | 7 | 437 | 3.5 | ||||||||||||||||||
Subtotal | 12 | 724 | 3.7 | 8 | 462 | 3.5 | ||||||||||||||||||
Baa | ||||||||||||||||||||||||
Single name credit default swaps (corporate) | — | 5 | 3.0 | — | 5 | 4.0 | ||||||||||||||||||
Credit default swaps referencing indices | 1 | 183 | 5.0 | — | 10 | 5.0 | ||||||||||||||||||
Subtotal | 1 | 188 | 5.0 | — | 15 | 4.7 | ||||||||||||||||||
Total | $ | 13 | $ | 912 | 4.0 | $ | 8 | $ | 477 | 3.5 | ||||||||||||||
(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. |
F-76
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Estimated Fair Value | Fair Value of Incremental | |||||||||||||||
of Collateral Provided: | Collateral Provided Upon: | |||||||||||||||
Downgrade in the | ||||||||||||||||
One Notch | Company’s Credit Rating | |||||||||||||||
Downgrade | to a Level that Triggers | |||||||||||||||
Estimated | in the | Full Overnight | ||||||||||||||
Fair Value (1) of | Company’s | Collateralization or | ||||||||||||||
Derivatives in Net | Fixed Maturity | Credit | Termination | |||||||||||||
Liability Position | Securities(2) | Rating | of the Derivative Position | |||||||||||||
(In millions) | ||||||||||||||||
December 31, 2010 | $ | 96 | $ | 58 | $ | 11 | $ | 62 | ||||||||
December 31, 2009 | $ | 42 | $ | — | $ | 8 | $ | 42 |
(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 December 31, 2010 and 2009, the Company did not provide any cash collateral. |
F-77
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Net embedded derivatives within asset host contracts: | ||||||||
Ceded guaranteed minimum benefits | $ | 936 | $ | 724 | ||||
Options embedded in debt or equity securities | (2 | ) | (5 | ) | ||||
Net embedded derivatives within asset host contracts | $ | 934 | $ | 719 | ||||
Net embedded derivatives within liability host contracts: | ||||||||
Direct guaranteed minimum benefits | $ | 254 | $ | 290 | ||||
Other | 5 | (11 | ) | |||||
Net embedded derivatives within liability host contracts | $ | 259 | $ | 279 | ||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Net derivative gains (losses) (1), (2) | $ | 132 | $ | (314 | ) | $ | 436 |
(1) | The valuation of direct guaranteed minimum benefits includes an adjustment for nonperformance risk. Included in net derivative gains (losses), in connection with this adjustment, were gains (losses) of ($153) million, ($567) million and $738 million, for the years ended December 31, 2010, 2009 and 2008, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes an adjustment for nonperformance risk. Included in net derivatives gains (losses), in connection with this adjustment, were gains (losses) of $210 million, $816 million and ($1,145) million, for the years ended December 31, 2010, 2009 and 2008, respectively. The net derivative gains (losses) for the year ended December 31, 2010 included a gain of $191 million relating to a refinement for estimating nonperformance risk in fair value measurements implemented at June 30, 2010. See Note 4. | |
(2) | See Note 8 for discussion of affiliated net derivative gains (losses) included in the table above. |
4. | Fair Value |
F-78
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, 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 | $ | — | $ | 13,864 | $ | 1,510 | $ | 15,374 | ||||||||
Foreign corporate securities | — | 7,590 | 880 | 8,470 | ||||||||||||
U.S. Treasury and agency securities | 4,616 | 3,026 | 34 | 7,676 | ||||||||||||
RMBS | — | 6,674 | 35 | 6,709 | ||||||||||||
CMBS | — | 2,147 | 130 | 2,277 | ||||||||||||
ABS | — | 1,301 | 568 | 1,869 | ||||||||||||
State and political subdivision securities | — | 1,614 | 32 | 1,646 | ||||||||||||
Foreign government securities | — | 889 | 14 | 903 | ||||||||||||
Total fixed maturity securities | 4,616 | 37,105 | 3,203 | 44,924 | ||||||||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | — | 54 | 214 | 268 | ||||||||||||
Common stock | 43 | 72 | 22 | 137 | ||||||||||||
Total equity securities | 43 | 126 | 236 | 405 | ||||||||||||
Other securities: | ||||||||||||||||
FVO general account securities | — | 7 | — | 7 | ||||||||||||
FVO contractholder-directed unit-linked investments | 2,240 | — | — | 2,240 | ||||||||||||
Total other securities | 2,240 | 7 | — | 2,247 | ||||||||||||
Short-term investments (1) | 390 | 584 | 173 | 1,147 | ||||||||||||
Mortgage loans held by consolidated securitization entities | — | 6,840 | — | 6,840 | ||||||||||||
Derivative assets: (2) | ||||||||||||||||
Interest rate contracts | 5 | 804 | 10 | 819 | ||||||||||||
Foreign currency contracts | — | 589 | — | 589 | ||||||||||||
Credit contracts | — | 3 | 12 | 15 | ||||||||||||
Equity market contracts | — | 77 | 20 | 97 | ||||||||||||
Total derivative assets | 5 | 1,473 | 42 | 1,520 | ||||||||||||
Net embedded derivatives within asset host contracts (3) | — | — | 936 | 936 | ||||||||||||
Separate account assets (4) | 76 | 61,410 | 133 | 61,619 | ||||||||||||
Total assets | $ | 7,370 | $ | 107,545 | $ | 4,723 | $ | 119,638 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities: (2) | ||||||||||||||||
Interest rate contracts | $ | 7 | $ | 315 | $ | 71 | $ | 393 | ||||||||
Foreign currency contracts | — | 69 | — | 69 | ||||||||||||
Credit contracts | — | 21 | 1 | 22 | ||||||||||||
Equity market contracts | — | — | 8 | 8 | ||||||||||||
Total derivative liabilities | 7 | 405 | 80 | 492 | ||||||||||||
Net embedded derivatives within liability host contracts (3) | — | — | 259 | 259 | ||||||||||||
Long-term debt of consolidated securitization entities | — | 6,773 | — | 6,773 | ||||||||||||
Total liabilities | $ | 7 | $ | 7,178 | $ | 339 | $ | 7,524 | ||||||||
F-79
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
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 | $ | — | $ | 13,793 | $ | 1,605 | $ | 15,398 | ||||||||
Foreign corporate securities | — | 6,344 | 994 | 7,338 | ||||||||||||
U.S. Treasury and agency securities | 3,972 | 2,252 | 33 | 6,257 | ||||||||||||
RMBS | — | 5,827 | 25 | 5,852 | ||||||||||||
CMBS | — | 2,572 | 45 | 2,617 | ||||||||||||
ABS | — | 1,452 | 537 | 1,989 | ||||||||||||
State and political subdivision securities | — | 1,147 | 32 | 1,179 | ||||||||||||
Foreign government securities | — | 629 | 16 | 645 | ||||||||||||
Total fixed maturity securities | 3,972 | 34,016 | 3,287 | 41,275 | ||||||||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | — | 48 | 258 | 306 | ||||||||||||
Common stock | 72 | 70 | 11 | 153 | ||||||||||||
Total equity securities | 72 | 118 | 269 | 459 | ||||||||||||
Other securities | 931 | 7 | — | 938 | ||||||||||||
Short-term investments (1) | 1,057 | 703 | 8 | 1,768 | ||||||||||||
Derivative assets (2) | 3 | 1,410 | 57 | 1,470 | ||||||||||||
Net embedded derivatives within asset host contracts (3) | — | — | 724 | 724 | ||||||||||||
Separate account assets (4) | 69 | 49,227 | 153 | 49,449 | ||||||||||||
Total assets | $ | 6,104 | $ | 85,481 | $ | 4,498 | $ | 96,083 | ||||||||
Liabilities | ||||||||||||||||
Derivative liabilities (2) | $ | 1 | $ | 336 | $ | 10 | $ | 347 | ||||||||
Net embedded derivatives within liability host contracts (3) | — | — | 279 | 279 | ||||||||||||
Total liabilities | $ | 1 | $ | 336 | $ | 289 | $ | 626 | ||||||||
(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) | 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 |
F-80
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables which follow. | ||
(3) | 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 in the consolidated balance sheets within policyholder account balances and other liabilities. At December 31, 2010, fixed maturity securities and equity securities also included embedded derivatives of $3 million and ($5) million, respectively. At December 31, 2009, fixed maturity securities and equity securities included embedded derivatives of $0 and ($5) million, respectively. | |
(4) | 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. |
F-81
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-82
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-83
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-84
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-85
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-86
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-87
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-88
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-89
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||||||
Other | Sales, | |||||||||||||||||||||||||||
Balance, | Comprehensive | Issuances and | Transfer Into | Transfer Out | Balance, | |||||||||||||||||||||||
January 1, | Earnings (1), (2) | Income (Loss) | Settlements (3) | Level 3 (4) | of Level 3 (4) | December 31, | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Year Ended December 31, 2010: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 1,605 | $ | 2 | $ | 79 | $ | (173 | ) | $ | 147 | $ | (150 | ) | $ | 1,510 | ||||||||||||
Foreign corporate securities | 994 | (4 | ) | 90 | (199 | ) | 114 | (115 | ) | 880 | ||||||||||||||||||
U.S. Treasury and agency securities | 33 | — | 2 | (1 | ) | — | — | 34 | ||||||||||||||||||||
RMBS | 25 | — | 3 | (10 | ) | 17 | — | 35 | ||||||||||||||||||||
CMBS | 45 | — | 21 | 1 | 85 | (22 | ) | 130 | ||||||||||||||||||||
ABS | 537 | (7 | ) | 78 | 15 | 4 | (59 | ) | 568 | |||||||||||||||||||
State and political subdivision securities | 32 | — | 4 | (1 | ) | — | (3 | ) | 32 | |||||||||||||||||||
Foreign government securities | 16 | — | — | 4 | 3 | (9 | ) | 14 | ||||||||||||||||||||
Total fixed maturity securities | $ | 3,287 | $ | (9 | ) | $ | 277 | $ | (364 | ) | $ | 370 | $ | (358 | ) | $ | 3,203 | |||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Non-redeemable preferred stock | $ | 258 | $ | 15 | $ | 6 | $ | (65 | ) | $ | — | $ | — | $ | 214 | |||||||||||||
Common stock | 11 | 5 | 3 | 3 | — | — | 22 | |||||||||||||||||||||
Total equity securities | $ | 269 | $ | 20 | $ | 9 | $ | (62 | ) | $ | — | $ | — | $ | 236 | |||||||||||||
Short-term investments | $ | 8 | $ | 1 | $ | — | $ | 164 | $ | — | $ | — | $ | 173 | ||||||||||||||
Net derivatives: (5) | ||||||||||||||||||||||||||||
Interest rate contracts | $ | 2 | $ | 10 | $ | (71 | ) | $ | (2 | ) | $ | — | $ | — | $ | (61 | ) | |||||||||||
Foreign currency contracts | 23 | — | — | — | — | (23 | ) | — | ||||||||||||||||||||
Credit contracts | 4 | 3 | 13 | (9 | ) | — | — | 11 | ||||||||||||||||||||
Equity market contracts | 18 | (6 | ) | — | — | — | — | 12 | ||||||||||||||||||||
Total net derivatives | $ | 47 | $ | 7 | $ | (58 | ) | $ | (11 | ) | $ | — | $ | (23 | ) | $ | (38 | ) | ||||||||||
Separate account assets (6) | $ | 153 | $ | (5 | ) | $ | — | $ | (12 | ) | $ | — | $ | (3 | ) | $ | 133 | |||||||||||
Net embedded derivatives (7) | $ | 445 | $ | 135 | $ | — | $ | 97 | $ | — | $ | — | $ | 677 |
F-90
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||||||
Other | Sales, | Transfer Into | ||||||||||||||||||||||||||
Balance, | Earnings | Comprehensive | Issuances and | and/or Out | Balance, | |||||||||||||||||||||||
January 1, | (1),(2) | Income (Loss) | Settlements (3) | of Level 3 (4) | December 31, | |||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||
U.S. corporate securities | $ | 1,401 | $ | (114 | ) | $ | 192 | $ | (172 | ) | $ | 298 | $ | 1,605 | ||||||||||||||
Foreign corporate securities | 926 | (95 | ) | 334 | (47 | ) | (124 | ) | 994 | |||||||||||||||||||
U.S. Treasury and agency securities | 36 | — | (1 | ) | (2 | ) | — | 33 | ||||||||||||||||||||
RMBS | 62 | (4 | ) | 5 | (9 | ) | (29 | ) | 25 | |||||||||||||||||||
CMBS | 116 | (42 | ) | 50 | (7 | ) | (72 | ) | 45 | |||||||||||||||||||
ABS | 558 | (51 | ) | 171 | (138 | ) | (3 | ) | 537 | |||||||||||||||||||
State and political subdivision securities | 24 | — | 6 | 2 | — | 32 | ||||||||||||||||||||||
Foreign government securities | 10 | — | 1 | (1 | ) | 6 | 16 | |||||||||||||||||||||
Total fixed maturity securities | $ | 3,133 | $ | (306 | ) | $ | 758 | $ | (374 | ) | $ | 76 | $ | 3,287 | ||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||
Non-redeemable preferred stock | $ | 318 | $ | (101 | ) | $ | 113 | $ | (66 | ) | $ | (6 | ) | $ | 258 | |||||||||||||
Common stock | 8 | — | (1 | ) | 4 | — | 11 | |||||||||||||||||||||
Total equity securities | $ | 326 | $ | (101 | ) | $ | 112 | $ | (62 | ) | $ | (6 | ) | $ | 269 | |||||||||||||
Other securities | $ | 50 | $ | — | $ | — | $ | (50 | ) | $ | — | $ | — | |||||||||||||||
Short-term investments | $ | — | $ | — | $ | — | $ | 8 | $ | — | $ | 8 | ||||||||||||||||
Net derivatives (5) | $ | 309 | $ | (40 | ) | $ | (3 | ) | $ | (15 | ) | $ | (204 | ) | $ | 47 | ||||||||||||
Separate account assets (6) | $ | 159 | $ | (7 | ) | $ | — | $ | 1 | $ | — | $ | 153 | |||||||||||||||
Net embedded derivatives (7) | $ | 657 | $ | (328 | ) | $ | — | $ | 116 | $ | — | $ | 445 |
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||
Total Realized/Unrealized | ||||||||||||||||||||||||||||||||
Gains (Losses) included in: | Purchases, | |||||||||||||||||||||||||||||||
Other | Sales, | Transfer Into | ||||||||||||||||||||||||||||||
Balance, | Impact of | Balance, | Earnings | Comprehensive | Issuances and | and/or Out | Balance, | |||||||||||||||||||||||||
December 31, 2007 | Adoption (8) | January 1, | (1, 2) | Income (Loss) | Settlements (3) | of Level 3 (4) | December 31, | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Year Ended December 31, 2008: | ||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||||||||||||
U.S. corporate securities | $ | 1,645 | $ | — | $ | 1,645 | $ | (167 | ) | $ | (313 | ) | $ | 101 | $ | 135 | $ | 1,401 | ||||||||||||||
Foreign corporate securities | 1,355 | — | 1,355 | (12 | ) | (504 | ) | (110 | ) | 197 | 926 | |||||||||||||||||||||
U.S. Treasury and agency securities | 19 | — | 19 | — | — | 34 | (17 | ) | 36 | |||||||||||||||||||||||
RMBS | 323 | — | 323 | 2 | (46 | ) | (156 | ) | (61 | ) | 62 | |||||||||||||||||||||
CMBS | 258 | — | 258 | (66 | ) | (76 | ) | — | — | 116 | ||||||||||||||||||||||
ABS | 925 | — | 925 | (20 | ) | (254 | ) | (84 | ) | (9 | ) | 558 | ||||||||||||||||||||
State and political subdivision securities | 44 | — | 44 | (1 | ) | (19 | ) | — | — | 24 | ||||||||||||||||||||||
Foreign government securities | 33 | — | 33 | 1 | (2 | ) | (17 | ) | (5 | ) | 10 | |||||||||||||||||||||
Total fixed maturity securities | $ | 4,602 | $ | — | $ | 4,602 | $ | (263 | ) | $ | (1,214 | ) | $ | (232 | ) | $ | 240 | $ | 3,133 | |||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
Non-redeemable preferred stock | $ | 521 | $ | — | $ | 521 | $ | (44 | ) | $ | (109 | ) | $ | (50 | ) | $ | — | $ | 318 | |||||||||||||
Common stock | 35 | — | 35 | (4 | ) | (1 | ) | (22 | ) | — | 8 | |||||||||||||||||||||
Total equity securities | $ | 556 | $ | — | $ | 556 | $ | (48 | ) | $ | (110 | ) | $ | (72 | ) | $ | — | $ | 326 | |||||||||||||
Other securities | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 50 | $ | — | $ | 50 | ||||||||||||||||
Net derivatives (5) | $ | 108 | $ | — | $ | 108 | $ | 266 | $ | — | $ | (65 | ) | $ | — | $ | 309 | |||||||||||||||
Separate account assets (6) | $ | 183 | $ | — | $ | 183 | $ | (22 | ) | $ | — | $ | — | $ | (2 | ) | $ | 159 | ||||||||||||||
Net embedded derivatives (7) | $ | 125 | $ | 92 | $ | 217 | $ | 366 | $ | — | $ | 74 | $ | — | $ | 657 |
F-91
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
(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 are included within net investment gains (losses) which are reported within the earnings caption of total gains (losses). Lapses associated with embedded derivatives are included with the earnings caption of total gains (losses). | |
(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 into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and out in the same period are excluded from the rollforward. | |
(5) | Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. | |
(6) | Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. | |
(7) | Embedded derivative assets and liabilities are presented net for purposes of the rollforward. | |
(8) | The impact of adoption of fair value measurement guidance represents the amount recognized in earnings resulting from a change in estimate for certain Level 3 financial instruments held at January 1, 2008. The net impact of adoption on Level 3 assets and liabilities presented in the table above was a $92 million increase to net assets. Such amount was also impacted by a reduction to DAC of $30 million resulting in a net increase of $62 million. This increase was offset by a $3 million reduction in the estimated fair value of Level 2 freestanding derivatives, resulting in a total net impact of adoption of $59 million. |
F-92
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Total Gains and Losses | ||||||||||||||||
Classification of Realized/Unrealized | ||||||||||||||||
Gains (Losses) included in Earnings | ||||||||||||||||
Net | Net | Net | ||||||||||||||
Investment | Investment | Derivative | ||||||||||||||
Income | Gains (Losses) | Gains (Losses) | Total | |||||||||||||
(In millions) | ||||||||||||||||
Year Ended December 31, 2010: | ||||||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | 7 | $ | (5 | ) | $ | — | $ | 2 | |||||||
Foreign corporate securities | (1 | ) | (3 | ) | — | (4 | ) | |||||||||
RMBS | — | — | — | — | ||||||||||||
CMBS | — | — | — | — | ||||||||||||
ABS | 1 | (8 | ) | — | (7 | ) | ||||||||||
Total fixed maturity securities | $ | 7 | $ | (16 | ) | $ | — | $ | (9 | ) | ||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | $ | — | $ | 15 | $ | — | $ | 15 | ||||||||
Common stock | — | 5 | — | 5 | ||||||||||||
Total equity securities | $ | — | $ | 20 | $ | — | $ | 20 | ||||||||
Short-term investments | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Net derivatives: | ||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | 10 | $ | 10 | ||||||||
Foreign currency contracts | — | — | — | — | ||||||||||||
Credit contracts | — | — | 3 | 3 | ||||||||||||
Equity market contracts | — | — | (6 | ) | (6 | ) | ||||||||||
Total net derivatives | $ | — | $ | — | $ | 7 | $ | 7 | ||||||||
Net embedded derivatives | $ | — | $ | — | $ | 135 | $ | 135 |
F-93
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Total Gains and Losses | ||||||||||||||||
Classification of Realized/Unrealized | ||||||||||||||||
Gains (Losses) included in Earnings | ||||||||||||||||
Net | Net | Net | ||||||||||||||
Investment | Investment | Derivative | ||||||||||||||
Income | Gains (Losses) | Gains (Losses) | Total | |||||||||||||
(In millions) | ||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | 3 | $ | (117 | ) | $ | — | $ | (114 | ) | ||||||
Foreign corporate securities | (1 | ) | (94 | ) | — | (95 | ) | |||||||||
RMBS | — | (4 | ) | — | (4 | ) | ||||||||||
CMBS | 1 | (43 | ) | — | (42 | ) | ||||||||||
ABS | — | (51 | ) | — | (51 | ) | ||||||||||
Total fixed maturity securities | $ | 3 | $ | (309 | ) | $ | — | $ | (306 | ) | ||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | $ | — | $ | (101 | ) | $ | — | $ | (101 | ) | ||||||
Total equity securities | $ | — | $ | (101 | ) | $ | — | $ | (101 | ) | ||||||
Net derivatives | $ | — | $ | — | $ | (40 | ) | $ | (40 | ) | ||||||
Net embedded derivatives | $ | — | $ | — | $ | (328 | ) | $ | (328 | ) |
Total Gains and Losses | ||||||||||||||||
Classification of Realized/Unrealized | ||||||||||||||||
Gains (Losses) included in Earnings | ||||||||||||||||
Net | Net | Net | ||||||||||||||
Investment | Investment | Derivative | ||||||||||||||
Income | Gains (Losses) | Gains (Losses) | Total | |||||||||||||
(In millions) | ||||||||||||||||
Year Ended December 31, 2008: | ||||||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | 5 | $ | (172 | ) | $ | — | $ | (167 | ) | ||||||
Foreign corporate securities | (3 | ) | (9 | ) | — | (12 | ) | |||||||||
RMBS | — | 2 | — | 2 | ||||||||||||
CMBS | 4 | (70 | ) | — | (66 | ) | ||||||||||
ABS | — | (20 | ) | — | (20 | ) | ||||||||||
State and political subdivision securities | (1 | ) | — | — | (1 | ) | ||||||||||
Foreign government securities | 1 | — | — | 1 | ||||||||||||
Total fixed maturity securities | $ | 6 | $ | (269 | ) | $ | — | $ | (263 | ) | ||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | $ | — | $ | (44 | ) | $ | — | $ | (44 | ) | ||||||
Common stock | — | (4 | ) | — | (4 | ) | ||||||||||
Total equity securities | $ | — | $ | (48 | ) | $ | — | $ | (48 | ) | ||||||
Net derivatives | $ | — | $ | — | $ | 266 | $ | 266 | ||||||||
Net embedded derivatives | $ | — | $ | — | $ | 366 | $ | 366 |
F-94
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Changes in Unrealized Gains (Losses) | ||||||||||||||||
Relating to Assets and Liabilities Held at | ||||||||||||||||
December 31, 2010 | ||||||||||||||||
Net | Net | Net | ||||||||||||||
Investment | Investment | Derivative | ||||||||||||||
Income | Gains (Losses) | Gains (Losses) | Total | |||||||||||||
(In millions) | ||||||||||||||||
Year Ended December 31, 2010: | ||||||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | 6 | $ | (10 | ) | $ | — | $ | (4 | ) | ||||||
Foreign corporate securities | — | — | — | — | ||||||||||||
CMBS | — | — | — | — | ||||||||||||
ABS | 1 | (2 | ) | — | (1 | ) | ||||||||||
Total fixed maturity securities | $ | 7 | $ | (12 | ) | $ | — | $ | (5 | ) | ||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | $ | — | $ | — | $ | — | $ | — | ||||||||
Total equity securities | $ | — | $ | — | $ | — | $ | — | ||||||||
Short-term investments | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Net derivatives: | ||||||||||||||||
Interest rate contracts | $ | — | $ | — | $ | 10 | $ | 10 | ||||||||
Foreign currency contracts | — | — | — | — | ||||||||||||
Credit contracts | — | — | 3 | 3 | ||||||||||||
Equity market contracts | — | — | (6 | ) | (6 | ) | ||||||||||
Total net derivatives | $ | — | $ | — | $ | 7 | $ | 7 | ||||||||
Net embedded derivatives | $ | — | $ | — | $ | 137 | $ | 137 |
F-95
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Changes in Unrealized Gains (Losses) | ||||||||||||||||
Relating to Assets and Liabilities Held at | ||||||||||||||||
December 31, 2009 | ||||||||||||||||
Net | Net | Net | ||||||||||||||
Investment | Investment | Derivative | ||||||||||||||
Income | Gains (Losses) | Gains (Losses) | Total | |||||||||||||
(In millions) | ||||||||||||||||
Year Ended December 31, 2009: | ||||||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | 6 | $ | (105 | ) | $ | — | $ | (99 | ) | ||||||
Foreign corporate securities | (1 | ) | (43 | ) | — | (44 | ) | |||||||||
CMBS | 1 | (56 | ) | — | (55 | ) | ||||||||||
ABS | — | (21 | ) | — | (21 | ) | ||||||||||
Total fixed maturity securities | $ | 6 | $ | (225 | ) | $ | — | $ | (219 | ) | ||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | $ | — | $ | (38 | ) | $ | — | $ | (38 | ) | ||||||
Total equity securities | $ | — | $ | (38 | ) | $ | — | $ | (38 | ) | ||||||
Net derivatives | $ | — | $ | — | $ | (33 | ) | $ | (33 | ) | ||||||
Net embedded derivatives | $ | — | $ | — | $ | (332 | ) | $ | (332 | ) |
Changes in Unrealized Gains (Losses) | ||||||||||||||||
Relating to Assets and Liabilities Held at | ||||||||||||||||
December 31, 2008 | ||||||||||||||||
Net | Net | Net | ||||||||||||||
Investment | Investment | Derivative | ||||||||||||||
Income | Gains (Losses) | Gains (Losses) | Total | |||||||||||||
(In millions) | ||||||||||||||||
Year Ended December 31, 2008: | ||||||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities: | ||||||||||||||||
U.S. corporate securities | $ | 4 | $ | (139 | ) | $ | — | $ | (135 | ) | ||||||
Foreign corporate securities | (3 | ) | (6 | ) | — | (9 | ) | |||||||||
CMBS | 4 | (69 | ) | — | (65 | ) | ||||||||||
ABS | — | (16 | ) | — | (16 | ) | ||||||||||
Foreign government securities | 1 | — | — | 1 | ||||||||||||
Total fixed maturity securities | $ | 6 | $ | (230 | ) | $ | — | $ | (224 | ) | ||||||
Equity securities: | ||||||||||||||||
Non-redeemable preferred stock | $ | — | $ | (29 | ) | $ | — | $ | (29 | ) | ||||||
Total equity securities | $ | — | $ | (29 | ) | $ | — | $ | (29 | ) | ||||||
Net derivatives | $ | — | $ | — | $ | 233 | $ | 233 | ||||||||
Net embedded derivatives | $ | — | $ | — | $ | 353 | $ | 353 |
F-96
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, 2010 | ||||
(In millions) | ||||
Unpaid principal balance | $ | 6,636 | ||
Excess of estimated fair value over unpaid principal balance | 204 | |||
Carrying value at estimated fair value | $ | 6,840 | ||
December 31, 2010 | ||||
(In millions) | ||||
Contractual principal balance | $ | 6,541 | ||
Excess of estimated fair value over contractual principal balance | 232 | |||
Carrying value at estimated fair value | $ | 6,773 | ||
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Estimated | Net | Estimated | Net | Estimated | Net | |||||||||||||||||||||||||||||||
Carrying | Fair | Investment | Carrying | Fair | Investment | Carrying | Fair | Investment | ||||||||||||||||||||||||||||
Value Prior to | Value After | Gains | Value Prior to | Value After | Gains | Value Prior to | Value After | Gains | ||||||||||||||||||||||||||||
Measurement | Measurement | (Losses) | Measurement | Measurement | (Losses) | Measurement | Measurement | (Losses) | ||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||
Mortgage loans, net (1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 24 | $ | — | $ | (24 | ) | |||||||||||||||||
Other limited partnership interests (2) | $ | 33 | $ | 22 | $ | (11 | ) | $ | 110 | $ | 44 | $ | (66 | ) | $ | 11 | $ | 6 | $ | (5 | ) | |||||||||||||||
Real estate joint ventures (3) | $ | 25 | $ | 5 | $ | (20 | ) | $ | 90 | $ | 48 | $ | (42 | ) | $ | — | $ | — | $ | — |
(1) | Mortgage loans —The impaired mortgage loans presented above were written down to their estimated fair values at the date the impairments were recognized. 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 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 method. Impairments on these cost method 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 |
F-97
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
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 $23 million and $32 million at December 31, 2010 and 2009, respectively. | ||
(3) | Real estate joint ventures —The impaired investments presented above were accounted for using the cost method. Impairments on these cost method 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 $3 million and $40 million at December 31, 2010 and 2009, respectively. |
F-98
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Estimated | ||||||||||||
Notional | Carrying | Fair | ||||||||||
December 31, 2010 | Amount | Value | Value | |||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Mortgage loans, net (1) | $ | 5,890 | $ | 6,022 | ||||||||
Policy loans | $ | 1,190 | $ | 1,260 | ||||||||
Real estate joint ventures (2) | $ | 79 | $ | 102 | ||||||||
Other limited partnership interests(2) | $ | 104 | $ | 116 | ||||||||
Short-term investments (3) | $ | 88 | $ | 88 | ||||||||
Cash and cash equivalents | $ | 1,928 | $ | 1,928 | ||||||||
Accrued investment income | $ | 559 | $ | 559 | ||||||||
Premiums, reinsurance and other receivables(2) | $ | 5,959 | $ | 6,164 | ||||||||
Liabilities | ||||||||||||
Policyholder account balances (2) | $ | 24,622 | $ | 26,061 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 8,103 | $ | 8,103 | ||||||||
Long-term debt (4) | $ | 795 | $ | 930 | ||||||||
Other liabilities (2) | $ | 294 | $ | 294 | ||||||||
Separate account liabilities (2) | $ | 1,407 | $ | 1,407 | ||||||||
Commitments(5) | ||||||||||||
Mortgage loan commitments | $ | 270 | $ | — | $ | (2 | ) | |||||
Commitments to fund bank credit facilities and private corporate bond investments | $ | 315 | $ | — | $ | (12 | ) |
F-99
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Estimated | ||||||||||||
Notional | Carrying | Fair | ||||||||||
December 31, 2009 | Amount | Value | Value | |||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Mortgage loans, net | $ | 4,748 | $ | 4,345 | ||||||||
Policy loans | $ | 1,189 | $ | 1,243 | ||||||||
Real estate joint ventures (2) | $ | 64 | $ | 62 | ||||||||
Other limited partnership interests (2) | $ | 128 | $ | 151 | ||||||||
Short-term investments (3) | $ | 7 | $ | 7 | ||||||||
Cash and cash equivalents | $ | 2,574 | $ | 2,574 | ||||||||
Accrued investment income | $ | 516 | $ | 516 | ||||||||
Premiums, reinsurance and other receivables (2) | $ | 4,582 | $ | 4,032 | ||||||||
Liabilities | ||||||||||||
Policyholder account balances (2) | $ | 24,591 | $ | 24,233 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 7,169 | $ | 7,169 | ||||||||
Long-term debt | $ | 950 | $ | 1,003 | ||||||||
Other liabilities (2) | $ | 188 | $ | 188 | ||||||||
Separate account liabilities (2) | $ | 1,367 | $ | 1,367 | ||||||||
Commitments(5) | ||||||||||||
Mortgage loan commitments | $ | 131 | $ | — | $ | (5 | ) | |||||
Commitments to fund bank credit facilities and private corporate bond investments | $ | 445 | $ | — | $ | (29 | ) |
(1) | Mortgage loans as presented in the table above differs from the amount presented in the consolidated balance sheets because this table does not include commercial mortgage loans held by CSEs. | |
(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) | Long-term debt as presented in the table above differs from the amount presented in the consolidated balance sheet because this table does not include long-term debt of CSEs. | |
(5) | Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. |
F-100
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-101
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-102
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-103
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
5. | Deferred Policy Acquisition Costs and Value of Business Acquired |
DAC | VOBA | Total | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, 2008 | $ | 2,252 | $ | 2,696 | $ | 4,948 | ||||||
Capitalizations | 835 | — | 835 | |||||||||
Subtotal | 3,087 | 2,696 | 5,783 | |||||||||
Amortization related to: | ||||||||||||
Net investment gains (losses) | (190 | ) | (35 | ) | (225 | ) | ||||||
Other expenses | (504 | ) | (434 | ) | (938 | ) | ||||||
Total amortization | (694 | ) | (469 | ) | (1,163 | ) | ||||||
Unrealized investment gains (losses) | 389 | 434 | 823 | |||||||||
Effect of foreign currency translation | (3 | ) | — | (3 | ) | |||||||
Balance at December 31, 2008 | 2,779 | 2,661 | 5,440 | |||||||||
Capitalizations | 851 | — | 851 | |||||||||
Subtotal | 3,630 | 2,661 | 6,291 | |||||||||
Amortization related to: | ||||||||||||
Net investment gains (losses) | 225 | 86 | 311 | |||||||||
Other expenses | (408 | ) | (197 | ) | (605 | ) | ||||||
Total amortization | (183 | ) | (111 | ) | (294 | ) | ||||||
Unrealized investment gains (losses) | (322 | ) | (433 | ) | (755 | ) | ||||||
Effect of foreign currency translation | 2 | — | 2 | |||||||||
Balance at December 31, 2009 | 3,127 | 2,117 | 5,244 | |||||||||
Capitalizations | 978 | — | 978 | |||||||||
Subtotal | 4,105 | 2,117 | 6,222 | |||||||||
Amortization related to: | ||||||||||||
Net investment gains (losses) | (67 | ) | (17 | ) | (84 | ) | ||||||
Other expenses | (458 | ) | (297 | ) | (755 | ) | ||||||
Total amortization | (525 | ) | (314 | ) | (839 | ) | ||||||
Unrealized investment gains (losses) | (167 | ) | (117 | ) | (284 | ) | ||||||
Balance at December 31, 2010 | $ | 3,413 | $ | 1,686 | $ | 5,099 | ||||||
F-104
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
DAC | VOBA | Total | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Retirement Products | $ | 1,985 | $ | 1,785 | $ | 996 | $ | 1,275 | $ | 2,981 | $ | 3,060 | ||||||||||||
Corporate Benefit Funding | 8 | 6 | 1 | 1 | 9 | 7 | ||||||||||||||||||
Insurance Products | 1,329 | 1,292 | 689 | 841 | 2,018 | 2,133 | ||||||||||||||||||
Corporate & Other | 91 | 44 | — | — | 91 | 44 | ||||||||||||||||||
Total | $ | 3,413 | $ | 3,127 | $ | 1,686 | $ | 2,117 | $ | 5,099 | $ | 5,244 | ||||||||||||
6. | Goodwill |
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Retirement Products | $ | 219 | $ | 219 | ||||
Corporate Benefit Funding | 307 | 307 | ||||||
Insurance Products: | ||||||||
Non-medical health | 5 | 5 | ||||||
Individual life | 17 | 17 | ||||||
Total Insurance Products | 22 | 22 | ||||||
Corporate & Other | 405 | 405 | ||||||
Total | $ | 953 | $ | 953 | ||||
F-105
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
7. | Insurance |
Future Policy | Policyholder Account | Other Policy-Related | ||||||||||||||||||||||
Benefits | Balances | Balances | ||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Retirement Products | $ | 1,718 | $ | 1,435 | $ | 20,990 | $ | 21,059 | $ | 18 | $ | 19 | ||||||||||||
Corporate Benefit Funding | 12,991 | 12,697 | 9,452 | 9,393 | 5 | 5 | ||||||||||||||||||
Insurance Products | 3,060 | 2,391 | 6,592 | 6,052 | 2,268 | 1,997 | ||||||||||||||||||
Corporate & Other | 5,429 | 5,098 | 2,257 | 938 | 361 | 276 | ||||||||||||||||||
Total | $ | 23,198 | $ | 21,621 | $ | 39,291 | $ | 37,442 | $ | 2,652 | $ | 2,297 | ||||||||||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 215 | $ | 224 | $ | 232 | ||||||
Amortization | (12 | ) | (9 | ) | (8 | ) | ||||||
Balance at December 31, | $ | 203 | $ | 215 | $ | 224 | ||||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 493 | $ | 422 | $ | 403 | ||||||
Capitalization | 100 | 124 | 111 | |||||||||
Amortization | (56 | ) | (53 | ) | (92 | ) | ||||||
Balance at December 31, | $ | 537 | $ | 493 | $ | 422 | ||||||
F-106
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
F-107
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 805 | $ | 691 | $ | 612 | ||||||
Less: Reinsurance recoverables | 706 | 589 | 463 | |||||||||
Net balance at January 1, | 99 | 102 | 149 | |||||||||
Incurred related to: | ||||||||||||
Current year | 24 | 26 | 8 | |||||||||
Prior years | (12 | ) | (17 | ) | (29 | ) | ||||||
Total incurred | 12 | 9 | (21 | ) | ||||||||
Paid related to: | ||||||||||||
Current year | (1 | ) | (1 | ) | (2 | ) | ||||||
Prior years | (10 | ) | (11 | ) | (24 | ) | ||||||
Total paid | (11 | ) | (12 | ) | (26 | ) | ||||||
Net balance at December 31, | 100 | 99 | 102 | |||||||||
Add: Reinsurance recoverables | 878 | 706 | 589 | |||||||||
Balance at December 31, | $ | 978 | $ | 805 | $ | 691 | ||||||
F-108
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
In the | At | In the | At | |||||||||||||
Event of Death | Annuitization | Event of Death | Annuitization | |||||||||||||
(In millions) | ||||||||||||||||
Annuity Contracts (1) | ||||||||||||||||
Return of Net Deposits | ||||||||||||||||
Separate account value | $ | 21,840 | N/A | $ | 15,705 | N/A | ||||||||||
Net amount at risk (2) | $ | 415 | (3) | N/A | $ | 1,018 | (3) | N/A | ||||||||
Average attained age of contractholders | 62 years | N/A | 62 years | N/A | ||||||||||||
Anniversary Contract Value or Minimum Return | ||||||||||||||||
Separate account value | $ | 42,553 | $ | 30,613 | $ | 35,687 | $ | 22,157 | ||||||||
Net amount at risk (2) | $ | 3,200 | (3) | $ | 3,523 | (4) | $ | 5,093 | (3) | $ | 4,158 | (4) | ||||
Average attained age of contractholders | 60 years | 62 years | 60 years | 61 years |
December 31, | ||||||||
2010 | 2009 | |||||||
Secondary | Secondary | |||||||
Guarantees | Guarantees | |||||||
(In millions) | ||||||||
Universal and Variable Life Contracts (1) | ||||||||
Account value (general and separate account) | $ | 3,740 | $ | 3,805 | ||||
Net amount at risk (2) | $ | 51,639 | (3) | $ | 58,134 | (3) | ||
Average attained age of policyholders | 59 years | 58 years |
(1) | The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. | |
(2) | The net amount at risk is based on the direct and assumed amount at risk (excluding ceded reinsurance). | |
(3) | The net amount at risk for guarantees of amounts in the event of death is defined as the current GMDB in excess of the current account balance at the balance sheet date. | |
(4) | The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. |
F-109
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Universal and | ||||||||||||||||
Variable Life | ||||||||||||||||
Annuity Contracts | Contracts | |||||||||||||||
Guaranteed | Guaranteed | |||||||||||||||
Death | Annuitization | Secondary | ||||||||||||||
Benefits | Benefits | Guarantees | Total | |||||||||||||
(In millions) | ||||||||||||||||
Direct: | ||||||||||||||||
Balance at January 1, 2008 | $ | 30 | $ | 45 | $ | 65 | $ | 140 | ||||||||
Incurred guaranteed benefits | 118 | 176 | 43 | 337 | ||||||||||||
Paid guaranteed benefits | (50 | ) | — | — | (50 | ) | ||||||||||
Balance at December 31, 2008 | 98 | 221 | 108 | 427 | ||||||||||||
Incurred guaranteed benefits | 48 | (6 | ) | 187 | 229 | |||||||||||
Paid guaranteed benefits | (89 | ) | — | — | (89 | ) | ||||||||||
Balance at December 31, 2009 | 57 | 215 | 295 | 567 | ||||||||||||
Incurred guaranteed benefits | 52 | 66 | 601 | 719 | ||||||||||||
Paid guaranteed benefits | (30 | ) | — | — | (30 | ) | ||||||||||
Balance at December 31, 2010 | $ | 79 | $ | 281 | $ | 896 | $ | 1,256 | ||||||||
Ceded: | ||||||||||||||||
Balance at January 1, 2008 | $ | 28 | $ | 17 | $ | — | $ | 45 | ||||||||
Incurred guaranteed benefits | 94 | 55 | — | 149 | ||||||||||||
Paid guaranteed benefits | (36 | ) | — | — | (36 | ) | ||||||||||
Balance at December 31, 2008 | 86 | 72 | — | 158 | ||||||||||||
Incurred guaranteed benefits | 38 | 2 | 142 | 182 | ||||||||||||
Paid guaranteed benefits | (68 | ) | — | — | (68 | ) | ||||||||||
Balance at December 31, 2009 | 56 | 74 | 142 | 272 | ||||||||||||
Incurred guaranteed benefits | 38 | 23 | 515 | 576 | ||||||||||||
Paid guaranteed benefits | (18 | ) | — | — | (18 | ) | ||||||||||
Balance at December 31, 2010 | $ | 76 | $ | 97 | $ | 657 | $ | 830 | ||||||||
Net: | ||||||||||||||||
Balance at January 1, 2008 | $ | 2 | $ | 28 | $ | 65 | $ | 95 | ||||||||
Incurred guaranteed benefits | 24 | 121 | 43 | 188 | ||||||||||||
Paid guaranteed benefits | (14 | ) | — | — | (14 | ) | ||||||||||
Balance at December 31, 2008 | 12 | 149 | 108 | 269 | ||||||||||||
Incurred guaranteed benefits | 10 | (8 | ) | 45 | 47 | |||||||||||
Paid guaranteed benefits | (21 | ) | — | — | (21 | ) | ||||||||||
Balance at December 31, 2009 | 1 | 141 | 153 | 295 | ||||||||||||
Incurred guaranteed benefits | 14 | 43 | 86 | 143 | ||||||||||||
Paid guaranteed benefits | (12 | ) | — | — | (12 | ) | ||||||||||
Balance at December 31, 2010 | $ | 3 | $ | 184 | $ | 239 | $ | 426 | ||||||||
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Notes to the Consolidated Financial Statements — (Continued)
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Fund Groupings: | ||||||||
Equity | $ | 34,207 | $ | 27,202 | ||||
Balanced | 19,552 | 14,693 | ||||||
Bond | 4,330 | 2,682 | ||||||
Money Market | 1,136 | 1,454 | ||||||
Specialty | 1,004 | 824 | ||||||
Total | $ | 60,229 | $ | 46,855 | ||||
8. | Reinsurance |
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Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Premiums: | ||||||||||||
Direct premiums | $ | 1,559 | $ | 1,782 | $ | 1,042 | ||||||
Reinsurance assumed | 13 | 14 | 15 | |||||||||
Reinsurance ceded | (505 | ) | (484 | ) | (423 | ) | ||||||
Net premiums | $ | 1,067 | $ | 1,312 | $ | 634 | ||||||
Universal life and investment-type product policy fees: | ||||||||||||
Direct universal life and investment-type product policy fees | $ | 2,104 | $ | 1,681 | $ | 1,710 | ||||||
Reinsurance assumed | 120 | 115 | 197 | |||||||||
Reinsurance ceded | (585 | ) | (416 | ) | (529 | ) | ||||||
Net universal life and investment-type product policy fees | $ | 1,639 | $ | 1,380 | $ | 1,378 | ||||||
Other revenues: | ||||||||||||
Direct other revenues | $ | 200 | $ | 121 | $ | 147 | ||||||
Reinsurance ceded | 303 | 477 | 83 | |||||||||
Net other revenues | $ | 503 | $ | 598 | $ | 230 | ||||||
Policyholder benefits and claims: | ||||||||||||
Direct policyholder benefits and claims | $ | 3,708 | $ | 3,314 | $ | 2,775 | ||||||
Reinsurance assumed | 31 | 10 | 23 | |||||||||
Reinsurance ceded | (1,834 | ) | (1,259 | ) | (1,352 | ) | ||||||
Net policyholder benefits and claims | $ | 1,905 | $ | 2,065 | $ | 1,446 | ||||||
Interest credited to policyholder account balances: | ||||||||||||
Direct interest credited to policyholder account balances | $ | 1,265 | $ | 1,270 | $ | 1,095 | ||||||
Reinsurance assumed | 64 | 64 | 57 | |||||||||
Reinsurance ceded | (58 | ) | (33 | ) | (22 | ) | ||||||
Net interest credited to policyholder account balances | $ | 1,271 | $ | 1,301 | $ | 1,130 | ||||||
Other expenses: | ||||||||||||
Direct other expenses | $ | 2,110 | $ | 1,034 | $ | 1,796 | ||||||
Reinsurance assumed | 90 | 105 | 96 | |||||||||
Reinsurance ceded | 121 | 68 | 41 | |||||||||
Net other expenses | $ | 2,321 | $ | 1,207 | $ | 1,933 | ||||||
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December 31, 2010 | ||||||||||||||||
Total | ||||||||||||||||
Balance | Total, Net of | |||||||||||||||
Sheet | Assumed | Ceded | Reinsurance | |||||||||||||
(In millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Premiums, reinsurance and other receivables | $ | 17,008 | $ | 40 | $ | 16,592 | $ | 376 | ||||||||
Deferred policy acquisition costs and value of business acquired | 5,099 | 164 | (499 | ) | 5,434 | |||||||||||
Total assets | $ | 22,107 | $ | 204 | $ | 16,093 | $ | 5,810 | ||||||||
Liabilities: | ||||||||||||||||
Future policy benefits | $ | 23,198 | $ | 87 | $ | — | $ | 23,111 | ||||||||
Other policy-related balances | 2,652 | 1,435 | 543 | 674 | ||||||||||||
Other liabilities | 4,503 | 12 | 3,409 | 1,082 | ||||||||||||
Total liabilities | $ | 30,353 | $ | 1,534 | $ | 3,952 | $ | 24,867 | ||||||||
December 31, 2009 | ||||||||||||||||
Total | ||||||||||||||||
Balance | Total, Net of | |||||||||||||||
Sheet | Assumed | Ceded | Reinsurance | |||||||||||||
(In millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Premiums, reinsurance and other receivables | $ | 13,444 | $ | 30 | $ | 13,135 | $ | 279 | ||||||||
Deferred policy acquisition costs and value of business acquired | 5,244 | 230 | (414 | ) | 5,428 | |||||||||||
Total assets | $ | 18,688 | $ | 260 | $ | 12,721 | $ | 5,707 | ||||||||
Liabilities: | ||||||||||||||||
Future policy benefits | $ | 21,621 | $ | 80 | $ | — | $ | 21,541 | ||||||||
Other policy-related balances | 2,297 | 1,393 | 294 | 610 | ||||||||||||
Other liabilities | 2,177 | 10 | 1,332 | 835 | ||||||||||||
Total liabilities | $ | 26,095 | $ | 1,483 | $ | 1,626 | $ | 22,986 | ||||||||
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Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Premiums: | ||||||||||||
Reinsurance assumed | $ | 13 | $ | 14 | $ | 15 | ||||||
Reinsurance ceded (1) | (191 | ) | (166 | ) | (116 | ) | ||||||
Net premiums | $ | (178 | ) | $ | (152 | ) | $ | (101 | ) | |||
Universal life and investment-type product policy fees: | ||||||||||||
Reinsurance assumed | $ | 120 | $ | 115 | $ | 197 | ||||||
Reinsurance ceded (1) | (308 | ) | (168 | ) | (278 | ) | ||||||
Net universal life and investment-type product policy fees | $ | (188 | ) | $ | (53 | ) | $ | (81 | ) | |||
Other revenues: | ||||||||||||
Reinsurance assumed | $ | — | $ | — | $ | — | ||||||
Reinsurance ceded | 303 | 477 | 83 | |||||||||
Net other revenues | $ | 303 | $ | 477 | $ | 83 | ||||||
Policyholder benefits and claims: | ||||||||||||
Reinsurance assumed | $ | 29 | $ | 8 | $ | 19 | ||||||
Reinsurance ceded (1) | (343 | ) | (239 | ) | (274 | ) | ||||||
Net policyholder benefits and claims | $ | (314 | ) | $ | (231 | ) | $ | (255 | ) | |||
Interest credited to policyholder account balances: | ||||||||||||
Reinsurance assumed | $ | 64 | $ | 64 | $ | 57 | ||||||
Reinsurance ceded | (59 | ) | (33 | ) | (22 | ) | ||||||
Net interest credited to policyholder account balances | $ | 5 | $ | 31 | $ | 35 | ||||||
Other expenses: | ||||||||||||
Reinsurance assumed | $ | 90 | $ | 105 | $ | 97 | ||||||
Reinsurance ceded (1) | 152 | 102 | 76 | |||||||||
Net other expenses | $ | 242 | $ | 207 | $ | 173 | ||||||
(1) | In September 2008, MICC’s parent, MetLife, completed a tax-free split-off of its majority owned subsidiary, Reinsurance Group of America, Incorporated (“RGA”). After the split-off, reinsurance transactions with RGA were no longer considered affiliated transactions. For purposes of comparison, the 2008 affiliated transactions with RGA have been removed from the presentation in the table above. Affiliated transactions with RGA for the year ended December 31, 2008 include ceded premiums, ceded fees, ceded benefits and ceded other expenses of $9 million, $36 million, $47 million and ($1) million, respectively. |
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December 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Assumed | Ceded | Assumed | Ceded | |||||||||||||
(In millions) | ||||||||||||||||
Assets: | ||||||||||||||||
Premiums, reinsurance and other receivables | $ | 40 | $ | 9,826 | $ | 30 | $ | 7,157 | ||||||||
Deferred policy acquisition costs and value of business acquired | 164 | (484 | ) | 230 | (399 | ) | ||||||||||
Total assets | $ | 204 | $ | 9,342 | $ | 260 | $ | 6,758 | ||||||||
Liabilities: | ||||||||||||||||
Future policy benefits | $ | 41 | $ | — | $ | 27 | $ | — | ||||||||
Other policy-related balances | 1,435 | 508 | 1,393 | 284 | ||||||||||||
Other liabilities | 12 | 3,200 | 9 | 1,150 | ||||||||||||
Total liabilities | $ | 1,488 | $ | 3,708 | $ | 1,429 | $ | 1,434 | ||||||||
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9. | Debt |
December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Surplus notes, interest rate 8.595%, due 2038 | $ | 750 | $ | 750 | ||||
Surplus notes, interest rate6-month LIBOR plus 1.80%, due 2011 | — | 200 | ||||||
Total long-term debt — affiliated | 750 | 950 | ||||||
Long-term debt — unaffiliated | 45 | — | ||||||
Total long-term debt(1) | $ | 795 | $ | 950 | ||||
(1) | Excludes $6,773 million at December 31, 2010 of long-term debt relating to CSEs. See Note 2. |
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Notes to the Consolidated Financial Statements — (Continued)
10. | Income Tax |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 55 | $ | 24 | $ | (50 | ) | |||||
State and local | — | 1 | (2 | ) | ||||||||
Foreign | (4 | ) | (4 | ) | — | |||||||
Subtotal | 51 | 21 | (52 | ) | ||||||||
Deferred: | ||||||||||||
Federal | 274 | (380 | ) | 260 | ||||||||
Foreign | (5 | ) | (9 | ) | (5 | ) | ||||||
Subtotal | 269 | (389 | ) | 255 | ||||||||
Provision for income tax expense (benefit) | $ | 320 | $ | (368 | ) | $ | 203 | |||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Tax provision at U.S. statutory rate | $ | 377 | $ | (285 | ) | $ | 273 | |||||
Tax effect of: | ||||||||||||
Tax-exempt investment income | (67 | ) | (69 | ) | (65 | ) | ||||||
Prior year tax | 8 | (17 | ) | (4 | ) | |||||||
Foreign tax rate differential and change in valuation allowance | 7 | 3 | — | |||||||||
State tax, net of federal benefit | — | — | (1 | ) | ||||||||
Tax credits | (6 | ) | — | — | ||||||||
Other, net | 1 | — | — | |||||||||
Provision for income tax expense (benefit) | $ | 320 | $ | (368 | ) | $ | 203 | |||||
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December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Deferred income tax assets: | ||||||||
Benefit, reinsurance and other reserves | $ | 1,298 | $ | 1,574 | ||||
Net operating loss carryforwards | 99 | 111 | ||||||
Net unrealized investment losses | — | 372 | ||||||
Operating lease reserves | 2 | 4 | ||||||
Capital loss carryforwards | 359 | 423 | ||||||
Investments, including derivatives | 297 | 304 | ||||||
Tax credit carryforwards | 167 | 102 | ||||||
Other | 20 | 16 | ||||||
2,242 | 2,906 | |||||||
Less: Valuation allowance | 4 | — | ||||||
2,238 | 2,906 | |||||||
Deferred income tax liabilities: | ||||||||
Net unrealized investment gains | 166 | — | ||||||
DAC and VOBA | 1,713 | 1,748 | ||||||
Other | 3 | 11 | ||||||
1,882 | 1,759 | |||||||
Net deferred income tax asset | $ | 356 | $ | 1,147 | ||||
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Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 44 | $ | 48 | $ | 53 | ||||||
Additions for tax positions of prior years | 1 | 2 | — | |||||||||
Additions for tax positions of current year | — | — | 2 | |||||||||
Reductions for tax positions of current year | (7 | ) | (6 | ) | (7 | ) | ||||||
Balance at December 31, | $ | 38 | $ | 44 | $ | 48 | ||||||
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11. | Contingencies, Commitments and Guarantees |
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December 31, | ||||||||
2010 | 2009 | |||||||
(In millions) | ||||||||
Other Assets: | ||||||||
Premium tax offset for future undiscounted assessments | $ | 8 | $ | 8 | ||||
Premium tax offsets currently available for paid assessments | 1 | 1 | ||||||
$ | 9 | $ | 9 | |||||
Other Liabilities: | ||||||||
Insolvency assessments | $ | 13 | $ | 13 | ||||
Gross | ||||||||
Rental | Rental | |||||||
Income | Payments | |||||||
(In millions) | ||||||||
2011 | $ | 10 | $ | 6 | ||||
2012 | $ | 9 | $ | — | ||||
2013 | $ | 9 | $ | — | ||||
2014 | $ | 7 | $ | — | ||||
2015 | $ | 6 | $ | — | ||||
Thereafter | $ | 74 | $ | — |
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12. | Equity |
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Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Holding gains (losses) on investments arising during the year | $ | 2,032 | $ | 3,365 | $ | (5,022 | ) | |||||
Income tax effect of holding gains (losses) | (705 | ) | (1,174 | ) | 1,760 | |||||||
Reclassification adjustments: | ||||||||||||
Recognized holding (gains) losses included in current year income | (130 | ) | 588 | 674 | ||||||||
Amortization of premiums and accretion of discounts associated with investments | (85 | ) | (83 | ) | (48 | ) | ||||||
Income tax effect | 74 | (176 | ) | (220 | ) | |||||||
Allocation of holding (gains) losses on investments relating to other policyholder amounts | (317 | ) | (755 | ) | 823 | |||||||
Income tax effect of allocation of holding (gains) losses to other policyholder amounts | 110 | 263 | (288 | ) | ||||||||
Net unrealized investment gains (losses), net of income tax | 979 | 2,028 | (2,321 | ) | ||||||||
Foreign currency translation adjustments, net of income tax | (16 | ) | 45 | (166 | ) | |||||||
Other comprehensive income (loss), excluding cumulative effect of change in accounting principle | 963 | 2,073 | (2,487 | ) | ||||||||
Cumulative effect of change in accounting principle, net of income tax expense (benefit) of $18 million, ($12) million and $0 (see Note 1) | 34 | (22 | ) | — | ||||||||
Other comprehensive income (loss) | $ | 997 | $ | 2,051 | $ | (2,487 | ) | |||||
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13. | Other Expenses |
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Compensation | $ | 283 | $ | 148 | $ | 118 | ||||||
Commissions | 936 | 796 | 735 | |||||||||
Volume-related costs | 130 | 308 | 374 | |||||||||
Affiliated interest costs on ceded reinsurance | 162 | 107 | 96 | |||||||||
Capitalization of DAC | (978 | ) | (851 | ) | (835 | ) | ||||||
Amortization of DAC and VOBA | 839 | 294 | 1,163 | |||||||||
Interest expense on debt and debt issue costs | 472 | 71 | 72 | |||||||||
Premium taxes, licenses & fees | 47 | 45 | 38 | |||||||||
Professional services | 38 | 17 | 18 | |||||||||
Rent | 29 | 3 | 4 | |||||||||
Other | 363 | 269 | 150 | |||||||||
Total other expenses | $ | 2,321 | $ | 1,207 | $ | 1,933 | ||||||
14. | Business Segment Information |
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Operating Earnings | ||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||
Retirement | Benefit | Insurance | Corporate | Total | ||||||||||||||||||||||||
Year Ended December 31, 2010 | Products | Funding | Products | & Other | Total | Adjustments | Consolidated | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Premiums | $ | 240 | $ | 643 | $ | 184 | $ | — | $ | 1,067 | $ | — | $ | 1,067 | ||||||||||||||
Universal life and investment-type product policy fees | 1,003 | 29 | 593 | 15 | 1,640 | (1 | ) | 1,639 | ||||||||||||||||||||
Net investment income | 939 | 1,102 | 486 | 207 | 2,734 | 423 | 3,157 | |||||||||||||||||||||
Other revenues | 337 | 6 | 117 | 43 | 503 | — | 503 | |||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | 150 | 150 | |||||||||||||||||||||
Net derivative gains (losses) | — | — | — | — | — | 58 | 58 | |||||||||||||||||||||
Total revenues | 2,519 | 1,780 | 1,380 | 265 | 5,944 | 630 | 6,574 | |||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Policyholder benefits and claims | 395 | 1,159 | 321 | — | 1,875 | 30 | 1,905 | |||||||||||||||||||||
Interest credited to policyholder account balances | 718 | 193 | 236 | 96 | 1,243 | 28 | 1,271 | |||||||||||||||||||||
Capitalization of DAC | (592 | ) | (4 | ) | (327 | ) | (55 | ) | (978 | ) | — | (978 | ) | |||||||||||||||
Amortization of DAC and VOBA | 409 | 2 | 337 | 7 | 755 | �� | 84 | 839 | ||||||||||||||||||||
Interest expense on debt | — | — | — | 70 | 70 | 402 | 472 | |||||||||||||||||||||
Other expenses | 1,023 | 36 | 806 | 123 | 1,988 | — | 1,988 | |||||||||||||||||||||
Total expenses | 1,953 | 1,386 | 1,373 | 241 | 4,953 | 544 | 5,497 | |||||||||||||||||||||
Provision for income tax expense (benefit) | 198 | 139 | 2 | (49 | ) | 290 | 30 | 320 | ||||||||||||||||||||
Operating earnings | $ | 368 | $ | 255 | $ | 5 | $ | 73 | 701 | |||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||
Total revenues | 630 | |||||||||||||||||||||||||||
Total expenses | (544 | ) | ||||||||||||||||||||||||||
Provision for income tax (expense) benefit | (30 | ) | ||||||||||||||||||||||||||
Income (loss) | $ | 757 | $ | 757 | ||||||||||||||||||||||||
Corporate | ||||||||||||||||||||
Retirement | Benefit | Insurance | Corporate | |||||||||||||||||
At December 31, 2010: | Products | Funding | Products | & Other | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Total assets | $ | 87,461 | $ | 30,491 | $ | 16,296 | $ | 20,637 | $ | 154,885 | ||||||||||
Separate account assets | $ | 58,917 | $ | 1,625 | $ | 1,077 | $ | — | $ | 61,619 | ||||||||||
Separate account liabilities | $ | 58,917 | $ | 1,625 | $ | 1,077 | $ | — | $ | 61,619 |
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Operating Earnings | ||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||
Retirement | Benefit | Insurance | Corporate | Total | ||||||||||||||||||||||||
Year Ended December 31, 2009: | Products | Funding | Products | & Other | Total | Adjustments | Consolidated | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Premiums | $ | 339 | $ | 849 | $ | 124 | $ | — | $ | 1,312 | $ | — | $ | 1,312 | ||||||||||||||
Universal life and investment-type product policy fees | 748 | 29 | 618 | 5 | 1,400 | (20 | ) | 1,380 | ||||||||||||||||||||
Net investment income | 884 | 1,061 | 381 | 40 | 2,366 | (31 | ) | 2,335 | ||||||||||||||||||||
Other revenues | 264 | 6 | 328 | — | 598 | — | 598 | |||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | (835 | ) | (835 | ) | |||||||||||||||||||
Net derivative gains (losses) | — | — | — | — | — | (1,031 | ) | (1,031 | ) | |||||||||||||||||||
Total revenues | 2,235 | 1,945 | 1,451 | 45 | 5,676 | (1,917 | ) | 3,759 | ||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Policyholder benefits and claims | 420 | 1,360 | 223 | 1 | 2,004 | 61 | 2,065 | |||||||||||||||||||||
Interest credited to policyholder account balances | 741 | 265 | 243 | 91 | 1,340 | (39 | ) | 1,301 | ||||||||||||||||||||
Capitalization of DAC | (528 | ) | (2 | ) | (285 | ) | (36 | ) | (851 | ) | — | (851 | ) | |||||||||||||||
Amortization of DAC and VOBA | 329 | 3 | 271 | 2 | 605 | (311 | ) | 294 | ||||||||||||||||||||
Interest expense on debt | — | 2 | — | 69 | 71 | — | 71 | |||||||||||||||||||||
Other expenses | 928 | 34 | 648 | 84 | 1,694 | (1 | ) | 1,693 | ||||||||||||||||||||
Total expenses | 1,890 | 1,662 | 1,100 | 211 | 4,863 | (290 | ) | 4,573 | ||||||||||||||||||||
Provision for income tax expense (benefit) | 121 | 97 | 123 | (138 | ) | 203 | (571 | ) | (368 | ) | ||||||||||||||||||
Operating earnings | $ | 224 | $ | 186 | $ | 228 | $ | (28 | ) | 610 | ||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||
Total revenues | (1,917 | ) | ||||||||||||||||||||||||||
Total expenses | 290 | |||||||||||||||||||||||||||
Provision for income tax (expense) benefit | 571 | |||||||||||||||||||||||||||
Income (loss) | $ | (446 | ) | $ | (446 | ) | ||||||||||||||||||||||
Corporate | ||||||||||||||||||||
Retirement | Benefit | Insurance | Corporate | |||||||||||||||||
At December 31, 2009: | Products | Funding | Products | & Other | Total | |||||||||||||||
(In millions) | ||||||||||||||||||||
Total assets | $ | 73,840 | $ | 28,046 | $ | 13,647 | $ | 12,156 | $ | 127,689 | ||||||||||
Separate account assets | $ | 47,000 | $ | 1,502 | $ | 947 | $ | — | $ | 49,449 | ||||||||||
Separate account liabilities | $ | 47,000 | $ | 1,502 | $ | 947 | $ | — | $ | 49,449 |
F-131
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Operating Earnings | ||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||
Retirement | Benefit | Insurance | Corporate | Total | ||||||||||||||||||||||||
Year Ended December 31, 2008: | Products | Funding | Products | & Other | Total | Adjustments | Consolidated | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Premiums | $ | 118 | $ | 415 | $ | 90 | $ | 11 | $ | 634 | $ | — | $ | 634 | ||||||||||||||
Universal life and investment-type product policy fees | 831 | 41 | 486 | 3 | 1,361 | 17 | 1,378 | |||||||||||||||||||||
Net investment income | 788 | 1,334 | 337 | 59 | 2,518 | (24 | ) | 2,494 | ||||||||||||||||||||
Other revenues | 160 | 9 | 55 | 6 | 230 | — | 230 | |||||||||||||||||||||
Net investment gains (losses) | — | — | — | — | — | (445 | ) | (445 | ) | |||||||||||||||||||
Net derivative gains (losses) | — | — | — | — | — | 994 | 994 | |||||||||||||||||||||
Total revenues | 1,897 | 1,799 | 968 | 79 | 4,743 | 542 | 5,285 | |||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||
Policyholder benefits and claims | 384 | 893 | 193 | 29 | 1,499 | (53 | ) | 1,446 | ||||||||||||||||||||
Interest credited to policyholder account balances | 479 | 430 | 223 | (21 | ) | 1,111 | 19 | 1,130 | ||||||||||||||||||||
Capitalization of DAC | (474 | ) | (5 | ) | (347 | ) | (9 | ) | (835 | ) | — | (835 | ) | |||||||||||||||
Amortization of DAC and VOBA | 640 | 13 | 283 | 2 | 938 | 225 | 1,163 | |||||||||||||||||||||
Interest expense on debt | 1 | 2 | — | 69 | 72 | — | 72 | |||||||||||||||||||||
Other expenses | 769 | 36 | 683 | 45 | 1,533 | — | 1,533 | |||||||||||||||||||||
Total expenses | 1,799 | 1,369 | 1,035 | 115 | 4,318 | 191 | 4,509 | |||||||||||||||||||||
Provision for income tax expense (benefit) | 34 | 150 | (24 | ) | (79 | ) | 81 | 122 | 203 | |||||||||||||||||||
Operating earnings | $ | 64 | $ | 280 | $ | (43 | ) | $ | 43 | 344 | ||||||||||||||||||
Adjustments to: | ||||||||||||||||||||||||||||
Total revenues | 542 | |||||||||||||||||||||||||||
Total expenses | (191 | ) | ||||||||||||||||||||||||||
Provision for income tax (expense) benefit | (122 | ) | ||||||||||||||||||||||||||
Income (loss) | $ | 573 | $ | 573 | ||||||||||||||||||||||||
15. | Related Party Transactions |
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Consolidated Financial Statements — (Continued)
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Compensation | $ | 244 | $ | 110 | $ | 98 | ||||||
Commissions | 561 | 511 | 452 | |||||||||
Volume-related costs | 177 | 279 | 331 | |||||||||
Professional services | 16 | — | — | |||||||||
Rent | 26 | — | — | |||||||||
Other | 300 | 200 | 74 | |||||||||
Total other expenses | $ | 1,324 | $ | 1,100 | $ | 955 | ||||||
Years Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
(In millions) | ||||||||||||
Universal life and investment-type product policy fees | $ | 114 | $ | 85 | $ | 91 | ||||||
Other revenues | $ | 101 | $ | 71 | $ | 65 |
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Consolidated Summary of Investments —
Other Than Investments in Related Parties
December 31, 2010
(In millions)
Amount at | ||||||||||||
Cost or | Estimated | Which Shown on | ||||||||||
Type of Investments | Amortized Cost (1) | Fair Value | Balance Sheet | |||||||||
Fixed maturity securities: | ||||||||||||
Bonds: | ||||||||||||
U.S. Treasury and agency securities | $ | 7,665 | $ | 7,676 | $ | 7,676 | ||||||
Foreign government securities | 824 | 903 | 903 | |||||||||
Public utilities | 2,247 | 2,344 | 2,344 | |||||||||
State and political subdivision securities | 1,755 | 1,646 | 1,646 | |||||||||
All other corporate bonds | 19,558 | 20,395 | 20,395 | |||||||||
Total bonds | 32,049 | 32,964 | 32,964 | |||||||||
Mortgage-backed and asset-backed securities | 10,933 | 10,855 | 10,855 | |||||||||
Redeemable preferred stock | 1,150 | 1,105 | 1,105 | |||||||||
Total fixed maturity securities | 44,132 | 44,924 | 44,924 | |||||||||
Other securities | 2,126 | 2,247 | 2,247 | |||||||||
Equity securities: | ||||||||||||
Non-redeemable preferred stock | 306 | 268 | 268 | |||||||||
Common stock: | ||||||||||||
Industrial, miscellaneous and all other | 121 | 137 | 137 | |||||||||
Total equity securities | 427 | 405 | 405 | |||||||||
Mortgage loans, net | 12,730 | 12,730 | ||||||||||
Policy loans | 1,190 | 1,190 | ||||||||||
Real estate and real estate joint ventures | 473 | 473 | ||||||||||
Real estate acquired in satisfaction of debt | 28 | 28 | ||||||||||
Other limited partnership interests | 1,538 | 1,538 | ||||||||||
Short-term investments | 1,235 | 1,235 | ||||||||||
Other invested assets | 1,716 | 1,716 | ||||||||||
Total investments | $ | 65,595 | $ | 66,486 | ||||||||
(1) | The Company’s other securities portfolio is mainly comprised of fixed maturity and equity securities, including mutual funds. Cost or amortized cost for fixed maturity securities and mortgage loans represents original cost reduced by repayments, valuation allowances and impairments fromother-than-temporary declines in estimated fair value that are charged to earnings and adjusted for amortization of premiums or discounts; for equity securities, cost represents original cost reduced by impairments fromother-than-temporary declines in estimated fair value; for real estate, cost represents original cost reduced by impairments and adjusted for valuation allowances and depreciation; for real estate joint ventures and other limited partnership interests cost represents original cost reduced forother-than-temporary impairments or original cost adjusted for equity in earnings and distributions. |
F-134
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(A Wholly-Owned Subsidiary of MetLife, Inc.)
Condensed Financial Information of Registrant
December 31, 2010 and 2009
(In millions, except share and per share data)
2010 | 2009 | |||||||
Condensed Balance Sheets | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securitiesavailable-for-sale, at estimated fair value (amortized cost: $33,974 and $33,325, respectively) | $ | 34,300 | $ | 32,132 | ||||
Equity securitiesavailable-for-sale, at estimated fair value (cost: $420 and $484, respectively) | 396 | 448 | ||||||
Mortgage loans (net of valuation allowances of $54 and $52, respectively) | 4,698 | 4,122 | ||||||
Policy loans | 1,127 | 1,139 | ||||||
Real estate and real estate joint ventures | 329 | 278 | ||||||
Other limited partnership interests | 1,057 | 925 | ||||||
Short-term investments, principally at estimated fair value | 1,098 | 923 | ||||||
Investment in subsidiaries | 4,658 | 4,131 | ||||||
Other invested assets, principally at estimated fair value | 1,481 | 1,467 | ||||||
Total investments | 49,144 | 45,565 | ||||||
Cash and cash equivalents, principally at estimated fair value | 1,364 | 1,817 | ||||||
Accrued investment income | 377 | 397 | ||||||
Premiums, reinsurance and other receivables | 6,549 | 5,827 | ||||||
Receivables from subsidiaries | 665 | 627 | ||||||
Deferred policy acquisition costs and value of business acquired | 2,039 | 2,640 | ||||||
Current income tax recoverable | 16 | — | ||||||
Deferred income tax assets | 912 | 1,513 | ||||||
Goodwill | 885 | 885 | ||||||
Other assets | 149 | 162 | ||||||
Separate account assets | 19,184 | 19,491 | ||||||
Total assets | $ | 81,284 | $ | 78,924 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Future policy benefits | $ | 19,453 | $ | 19,036 | ||||
Policyholder account balances | 25,837 | 26,127 | ||||||
Other policy-related balances | 485 | 466 | ||||||
Payables for collateral under securities loaned and other transactions | 6,857 | 5,562 | ||||||
Long-term debt — affiliated | 750 | 950 | ||||||
Current income tax payable | — | 7 | ||||||
Other liabilities | 767 | 724 | ||||||
Separate account liabilities | 19,184 | 19,491 | ||||||
Total liabilities | 73,333 | 72,363 | ||||||
Stockholders’ Equity | ||||||||
Common stock, par value $2.50 per share; 40,000,000 shares authorized; 34,595,317 shares issued and outstanding at December 31, 2010 and 2009 | 86 | 86 | ||||||
Additional paid-in capital | 6,719 | 6,719 | ||||||
Retained earnings | 934 | 541 | ||||||
Accumulated other comprehensive income (loss) | 212 | (785 | ) | |||||
Total stockholders’ equity | 7,951 | 6,561 | ||||||
Total liabilities and stockholders’ equity | $ | 81,284 | $ | 78,924 | ||||
F-135
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Schedule II
Condensed Financial Information of Registrant — (Continued)
For the Years Ended December 31, 2010, 2009 and 2008
(In millions)
2010 | 2009 | 2008 | ||||||||||
Condensed Statements of Operations | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 148 | $ | 141 | $ | 110 | ||||||
Universal life and investment-type product policy fees | 633 | 631 | 741 | |||||||||
Net investment income | 2,018 | 1,895 | 2,226 | |||||||||
Equity in earnings from subsidiaries | 236 | (316 | ) | 278 | ||||||||
Other revenues | 162 | 328 | 60 | |||||||||
Net investment gains (losses): | ||||||||||||
Other-than-temporary impairments on fixed maturity securities | (97 | ) | (534 | ) | (386 | ) | ||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) | 47 | 160 | — | |||||||||
Other net investment gains (losses) | 152 | (418 | ) | 41 | ||||||||
Total net investment gains (losses) | 102 | (792 | ) | (345 | ) | |||||||
Net derivative gains (losses) | (67 | ) | (405 | ) | 166 | |||||||
Total revenues | 3,232 | 1,482 | 3,236 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 800 | 801 | 682 | |||||||||
Interest credited to policyholder account balances | 691 | 801 | 896 | |||||||||
Other expenses | 753 | 494 | 1,006 | |||||||||
Total expenses | 2,244 | 2,096 | 2,584 | |||||||||
Income (loss) before provision for income tax | 988 | (614 | ) | 652 | ||||||||
Provision for income tax expense (benefit) | 231 | (168 | ) | 79 | ||||||||
Net income (loss) | $ | 757 | $ | (446 | ) | $ | 573 | |||||
F-136
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Schedule II
Condensed Financial Information of Registrant — (Continued)
For the Years Ended December 31, 2010, 2009 and 2008
(In millions)
2010 | 2009 | 2008 | ||||||||||
Condensed Statements of Cash Flows | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net cash provided by operating activities | $ | 1,129 | $ | 993 | $ | 856 | ||||||
Cash flows from investing activities | ||||||||||||
Sales, maturities and repayments of: | ||||||||||||
Fixed maturity securities | 13,203 | 10,125 | 18,221 | |||||||||
Equity securities | 127 | 129 | 119 | |||||||||
Mortgage loans | 279 | 429 | 458 | |||||||||
Real estate and real estate joint ventures | 14 | 3 | 15 | |||||||||
Other limited partnership interests | 92 | 94 | 181 | |||||||||
Purchases of: | ||||||||||||
Fixed maturity securities | (13,715 | ) | (9,247 | ) | (11,263 | ) | ||||||
Equity securities | (38 | ) | (61 | ) | (65 | ) | ||||||
Mortgage loans | (868 | ) | (531 | ) | (560 | ) | ||||||
Real estate and real estate joint ventures | (80 | ) | (19 | ) | (47 | ) | ||||||
Other limited partnership interests | (204 | ) | (127 | ) | (340 | ) | ||||||
Cash received in connection with freestanding derivatives | 93 | 225 | 221 | |||||||||
Cash paid in connection with freestanding derivatives | (102 | ) | (434 | ) | (227 | ) | ||||||
Net change in policy loans | 12 | 12 | (277 | ) | ||||||||
Net change in short-term investments | (169 | ) | 619 | (934 | ) | |||||||
Net change in other invested assets | (401 | ) | (941 | ) | (60 | ) | ||||||
Net cash (used in) provided by investing activities | (1,757 | ) | 276 | 5,442 | ||||||||
Cash flows from financing activities | ||||||||||||
Policyholder account balances: | ||||||||||||
Deposits | 20,496 | 15,236 | 3,275 | |||||||||
Withdrawals | (21,062 | ) | (17,667 | ) | (4,008 | ) | ||||||
Net change in payables for collateral under securities loaned and other transactions | 1,295 | (1,421 | ) | (2,560 | ) | |||||||
Net change in short-term debt | — | (300 | ) | 300 | ||||||||
Long-term debt issued — affiliated | — | — | 750 | |||||||||
Long-term debt repaid — affiliated | (200 | ) | — | — | ||||||||
Debt issuance costs | — | — | (8 | ) | ||||||||
Financing element on certain derivative instruments | (24 | ) | (53 | ) | (46 | ) | ||||||
Dividends on common stock | (330 | ) | — | (500 | ) | |||||||
Net cash provided by (used in) financing activities | 175 | (4,205 | ) | (2,797 | ) | |||||||
Change in cash and cash equivalents | (453 | ) | (2,936 | ) | 3,501 | |||||||
Cash and cash equivalents, beginning of year | 1,817 | 4,753 | 1,252 | |||||||||
Cash and cash equivalents, end of year | $ | 1,364 | $ | 1,817 | $ | 4,753 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Net cash paid (received) during the year for: | ||||||||||||
Interest | $ | 74 | $ | 73 | $ | 44 | ||||||
Income tax | $ | 98 | $ | 76 | $ | (41 | ) | |||||
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Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Schedule II
Notes to the Condensed Financial Information of Registrant
1. | Basis of Presentation |
• | Reclassification from other net investment gains (losses) of ($405) million and $166 million to net derivative gains (losses) in the condensed statements of operations for the years ended December 31, 2009 and 2008, respectively; and | |
• | Reclassification from net change in other invested assets of $225 million and $221 million to cash received in connection with freestanding derivatives and ($434) million and ($227) million to cash paid in connection with freestanding derivatives, all within cash flows from investing activities, in the condensed statements of cash flows for the years ended December 31, 2009 and 2008, respectively. |
2. | Support Agreements |
F-138
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Future Policy | ||||||||||||||||
DAC | Benefits and Other | Policyholder | ||||||||||||||
and | Policy-Related | Account | Unearned | |||||||||||||
Segment | VOBA | Balances | Balances | Revenue(1) | ||||||||||||
2010 | ||||||||||||||||
Retirement Products | $ | 2,981 | $ | 1,736 | $ | 20,990 | $ | — | ||||||||
Corporate Benefit Funding | 9 | 12,996 | 9,452 | — | ||||||||||||
Insurance Products | 2,018 | 5,328 | 6,592 | 217 | ||||||||||||
Corporate & Other | 91 | 5,790 | 2,257 | 45 | ||||||||||||
Total | $ | 5,099 | $ | 25,850 | $ | 39,291 | $ | 262 | ||||||||
2009 | ||||||||||||||||
Retirement Products | $ | 3,060 | $ | 1,454 | $ | 21,059 | $ | — | ||||||||
Corporate Benefit Funding | 7 | 12,702 | 9,393 | — | ||||||||||||
Insurance Products | 2,133 | 4,388 | 6,052 | 286 | ||||||||||||
Corporate & Other | 44 | 5,374 | 938 | 14 | ||||||||||||
Total | $ | 5,244 | $ | 23,918 | $ | 37,442 | $ | 300 | ||||||||
2008 | ||||||||||||||||
Retirement Products | $ | 3,171 | $ | 1,245 | $ | 18,905 | $ | — | ||||||||
Corporate Benefit Funding | 8 | 12,048 | 12,553 | — | ||||||||||||
Insurance Products | 2,254 | 3,971 | 5,531 | 545 | ||||||||||||
Corporate & Other | 7 | 5,034 | 186 | 3 | ||||||||||||
Total | $ | 5,440 | $ | 22,298 | $ | 37,175 | $ | 548 | ||||||||
(1) | Amounts are included within the future policy benefits and other policy-related balances. |
F-139
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Schedule III
Consolidated Supplementary Insurance Information — (Continued)
December 31, 2010, 2009 and 2008
Amortization of | ||||||||||||||||||||||||
Premium | Net | Policyholder | DAC and VOBA | Other | ||||||||||||||||||||
Revenue and | Investment | Benefits and | Charged to | Operating | Premiums Written | |||||||||||||||||||
Segment | Policy Charges | Income | Interest Credited | Other Expenses | Expenses(1) | (Excluding Life) | ||||||||||||||||||
2010 | ||||||||||||||||||||||||
Retirement Products | $ | 1,243 | $ | 903 | $ | 1,113 | $ | 483 | $ | 431 | $ | — | ||||||||||||
Corporate Benefit Funding | 672 | 1,098 | 1,341 | 2 | 32 | — | ||||||||||||||||||
Insurance Products | 776 | 478 | 557 | 347 | 479 | 5 | ||||||||||||||||||
Corporate & Other | 15 | 678 | 165 | 7 | 540 | — | ||||||||||||||||||
Total | $ | 2,706 | $ | 3,157 | $ | 3,176 | $ | 839 | $ | 1,482 | $ | 5 | ||||||||||||
2009 | ||||||||||||||||||||||||
Retirement Products | $ | 1,087 | $ | 854 | $ | 1,161 | $ | 77 | $ | 399 | $ | — | ||||||||||||
Corporate Benefit Funding | 878 | 1,069 | 1,647 | 3 | 34 | — | ||||||||||||||||||
Insurance Products | 722 | 375 | 466 | 213 | 362 | 4 | ||||||||||||||||||
Corporate & Other | 5 | 37 | 92 | 1 | 118 | — | ||||||||||||||||||
Total | $ | 2,692 | $ | 2,335 | $ | 3,366 | $ | 294 | $ | 913 | $ | 4 | ||||||||||||
2008 | ||||||||||||||||||||||||
Retirement Products | $ | 949 | $ | 773 | $ | 863 | $ | 860 | $ | 296 | $ | — | ||||||||||||
Corporate Benefit Funding | 456 | 1,334 | 1,289 | 13 | 33 | — | ||||||||||||||||||
Insurance Products | 593 | 333 | 416 | 288 | 336 | 5 | ||||||||||||||||||
Corporate & Other | 14 | 54 | 8 | 2 | 105 | 12 | ||||||||||||||||||
Total | $ | 2,012 | $ | 2,494 | $ | 2,576 | $ | 1,163 | $ | 770 | $ | 17 | ||||||||||||
(1) | Includes other expenses, excluding amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) charged to other expenses. |
F-140
Table of Contents
(A Wholly-Owned Subsidiary of MetLife, Inc.)
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2010 | ||||||||||||||||||||
Life insurance in-force | $ | 326,366 | $ | 289,559 | $ | 8,217 | $ | 45,024 | 18.3 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 1,310 | $ | 263 | $ | 13 | $ | 1,060 | 1.2 | % | ||||||||||
Accident and health | 249 | 242 | — | 7 | — | % | ||||||||||||||
Total insurance premium | $ | 1,559 | $ | 505 | $ | 13 | $ | 1,067 | 1.2 | % | ||||||||||
2009 | ||||||||||||||||||||
Life insurance in-force | $ | 278,335 | $ | 242,647 | $ | 9,044 | $ | 44,732 | 20.2 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 1,525 | $ | 235 | $ | 14 | $ | 1,304 | 1.1 | % | ||||||||||
Accident and health | 257 | 249 | — | 8 | — | % | ||||||||||||||
Total insurance premium | $ | 1,782 | $ | 484 | $ | 14 | $ | 1,312 | 1.1 | % | ||||||||||
2008 | ||||||||||||||||||||
Life insurance in-force | $ | 226,418 | $ | 191,146 | $ | 8,800 | $ | 44,072 | 20.0 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 779 | $ | 181 | $ | 15 | $ | 613 | 2.4 | % | ||||||||||
Accident and health | 263 | 242 | — | 21 | — | % | ||||||||||||||
Total insurance premium | $ | 1,042 | $ | 423 | $ | 15 | $ | 634 | 2.4 | % | ||||||||||
F-141
Table of Contents
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
69
Table of Contents
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
2010 | 2009 | |||||||
(In millions) | ||||||||
Audit Fees (2) | $ | 5.62 | $ | 5.52 | ||||
Audit-Related Fees (3) | $ | 0.14 | $ | 0.12 | ||||
Tax Fees (4) | $ | — | $ | — | ||||
All Other Fees (5) | $ | — | $ | — |
(1) | All fees shown in the table related to services that were approved by the Audit Committee of MetLife (“Audit Committee”). | |
(2) | Fees for services to perform an audit or review in accordance with auditing standards of the PCAOB and services that generally only the Company’s independent auditor can reasonably provide, such as comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the U.S. Securities and Exchange Commission (“SEC”). | |
(3) | Fees for assurance and related services that are traditionally performed by the Company’s independent auditor, such as audit and related services for due diligence related to mergers, acquisitions and divestitures, accounting consultations and audits in connection with proposed or consummated acquisitions and divestitures, control reviews, attest services not required by statute or regulation, and consultation concerning financial accounting and reporting standards. | |
(4) | Fees for tax compliance, consultation and planning services. Tax compliance generally involves preparation of original and amended tax returns, claims for refunds and tax payment planning services. Tax consultation and tax planning encompass a diverse range of services, including assistance in connection with tax audits and filing appeals, tax advice related to mergers, acquisitions and divestitures, advice related to requests for rulings or technical advice from taxing authorities. | |
(5) | Fees for other types of permitted services. |
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71
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Item 15. | Exhibits and Financial Statement Schedules |
72
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By: | /s/ Michael K. Farrell |
Title: | Chairman of the Board, President |
Signature | Title | Date | ||||
/s/ Maria R. Morris Maria R. Morris | Director | March 23, 2011 | ||||
/s/ Robert E. Sollmann, Jr. Robert E. Sollmann, Jr. | Director | March 23, 2011 | ||||
/s/ Michael K. Farrell Michael K. Farrell | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) | March 23, 2011 | ||||
/s/ Stanley J. Talbi Stanley J. Talbi | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | March 23, 2011 | ||||
/s/ Peter M. Carlson Peter M. Carlson | Executive Vice President and Chief Accounting Officer (Principal Accounting Officer) | March 23, 2011 |
73
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Exhibit | |||||
No. | Description | ||||
2 | .1 | Acquisition Agreement between MetLife, Inc. and Citigroup Inc., dated as of January 31, 2005 (Incorporated by reference to Exhibit 2.3 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2009) | |||
3 | .1 | Charter of The Travelers Insurance Company (now MetLife Insurance Company of Connecticut), as effective October 19, 1994 | |||
3 | .2 | Certificate of Amendment of the Charter as Amended and Restated of MetLife Insurance Company of Connecticut, as effective May 1, 2006 (the “Certificate of Amendment”) | |||
3 | .3 | Certificate of Correction to the Certificate of Amendment. Filed April 9, 2007 (Incorporated by reference to Exhibit 3.3 to MetLife Insurance Company of Connecticut’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2007) | |||
3 | .4 | By-laws of MetLife Insurance Company of Connecticut, as effective October 20, 1994 | |||
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 |
E-1