Metropolitan Life Insurance 10-Q 2016 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number: 000-55029

________________________________________

Metropolitan Life Insurance Company

(Exact name of registrant as specified in its charter)

New York	13-5581829
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
200 Park Avenue, New York, N.Y.	10166-0188
(Address of principal executive offices)	(Zip Code)

(212) 578-9500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	þ	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No þ

At November 9, 2016, 494,466,664 shares of the registrant’s common stock, $0.01 par value per share, were outstanding, all of which were owned directly by MetLife, Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.

Table of Contents

		Page
Part I — Financial Information
Item 1.	Financial Statements (at September 30, 2016 (Unaudited) and December 31, 2015 and for the Three Months and Nine Months Ended September 30, 2016 and 2015 (Unaudited))	4
	Interim Condensed Consolidated Balance Sheets	4
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	5
	Interim Condensed Consolidated Statements of Equity	6
	Interim Condensed Consolidated Statements of Cash Flows	7
	Notes to the Interim Condensed Consolidated Financial Statements:	8
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	8
	Note 2 — Segment Information	10
	Note 3 — Insurance	17
	Note 4 — Deferred Policy Acquisition Costs and Value of Business Acquired	19
	Note 5 — Closed Block	19
	Note 6 — Investments	22
	Note 7 — Derivatives	36
	Note 8 — Fair Value	49
	Note 9 — Equity	71
	Note 10 — Other Expenses	74
	Note 11 — Employee Benefit Plans	74
	Note 12 — Contingencies, Commitments and Guarantees	76
	Note 13 — Related Party Transactions	83
	Note 14 — Subsequent Event	86
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	87
Item 4.	Controls and Procedures	112
Part II — Other Information
Item 1.	Legal Proceedings	113
Item 1A.	Risk Factors	115
Item 6.	Exhibits	117
Signatures		118
Exhibit Index		E - 1

As used in this Form 10-Q, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MLIC. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in Metropolitan Life Insurance Company’s filings with the U.S. Securities and Exchange Commission. These factors include: (1) difficult conditions in the global capital markets; (2) increased volatility and disruption of the global capital and credit markets, which may affect our ability to meet liquidity needs and access capital, including through credit facilities, generate fee income and market-related revenue and finance statutory reserve requirements and may require us to pledge collateral or make payments related to declines in value of specified assets, including assets supporting risks ceded to certain affiliated captive reinsurers or hedging arrangements associated with those risks; (3) exposure to global financial and capital market risks, including as a result of the pending withdrawal of the United Kingdom from the European Union, other disruption in Europe and possible withdrawal of one or more countries from the Euro zone; (4) impact on us of comprehensive financial services regulation reform, including potential regulation of MetLife, Inc. as a non-bank systemically important financial institution, or otherwise; (5) numerous rulemaking initiatives required or permitted by the Dodd-Frank Wall Street Reform and Consumer Protection Act which may impact how we conduct our business, including those compelling the liquidation of certain financial institutions; (6) regulatory, legislative or tax changes relating to our insurance or other operations that may affect the cost of, or demand for, our products or services, or increase the cost or administrative burdens of providing benefits to employees; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from (a) business acquisitions and integrating and managing the growth of such acquired businesses, (b) dispositions of businesses via sale, initial public offering, spin-off or otherwise, including failure to achieve projected operational benefit from such transactions; (c) entry into joint ventures, or (d) legal entity reorganizations; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (10) investment losses and defaults, and changes to investment valuations; (11) changes in assumptions related to investment valuations, deferred policy acquisition costs, deferred sales inducements, value of business acquired or goodwill; (12) impairments of goodwill and realized losses or market value impairments to illiquid assets; (13) defaults on our mortgage loans; (14) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (15) fluctuations in foreign currency exchange rates; (16) downgrades in our claims paying ability, financial strength or credit ratings, or MetLife, Inc.’s credit ratings; (17) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (18) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (19) differences between actual claims experience and underwriting and reserving assumptions; (20) ineffectiveness of MetLife’s risk management policies and procedures; (21) catastrophe losses; (22) increasing cost and limited market capacity for statutory life insurance reserve financings; (23) heightened competition, including with respect to pricing, entry of new competitors, consolidation of distributors, the development of new products by new and existing competitors, and for personnel; (24) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (25) changes in accounting standards, practices and/or policies; (26) increased expenses relating to pension and postretirement benefit plans for employees and retirees of MetLife, as well as health care and other employee benefits; (27) inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (28) difficulties in marketing and distributing products through our distribution channels; (29) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural

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catastrophes, including any related impact on the value of our investment portfolio, MetLife’s disaster recovery systems, cyber- or other information security systems and management continuity planning; (30) any failure to protect the confidentiality of client information; (31) the effectiveness of MetLife’s programs and practices in avoiding giving associates incentives to take excessive risks; and (32) other risks and uncertainties described from time to time in Metropolitan Life Insurance Company’s filings with the U.S. Securities and Exchange Commission.

Metropolitan Life Insurance Company does not undertake any obligation to publicly correct or update any forward-looking statement if Metropolitan Life Insurance Company later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures Metropolitan Life Insurance Company makes on related subjects in reports to the U.S. Securities and Exchange Commission.

Note Regarding Reliance on Statements in Our Contracts

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

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Part I — Financial Information

Item 1. Financial Statements

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Balance Sheets

September 30, 2016 (Unaudited) and December 31, 2015

(In millions, except share and per share data)

	September 30, 2016		December 31, 2015
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $169,798 and $168,361, respectively; includes $0 and $103, respectively, relating to variable interest entities)	$	186,645	$	175,686
Equity securities available-for-sale, at estimated fair value (cost: $1,841 and $1,985, respectively)	1,907		1,949
Trading and fair value option securities, at estimated fair value (includes $0 and $404, respectively, of actively traded securities; and $9 and $13, respectively, relating to variable interest entities)	23		431
Mortgage loans (net of valuation allowances of $256 and $257, respectively; includes $481 and $314, respectively, under the fair value option)	55,238		53,722
Policy loans	8,048		8,134
Real estate and real estate joint ventures (includes $492 and $0, respectively, relating to variable interest entities; includes $33 and $42, respectively, of real estate held-for-sale)	6,556		6,008
Other limited partnership interests (includes $15 and $27, respectively, relating to variable interest entities)	3,943		4,088
Short-term investments, principally at estimated fair value	5,734		5,595
Other invested assets (includes $31 and $43, respectively, relating to variable interest entities)	19,869		16,869
Total investments	287,963		272,482
Cash and cash equivalents, principally at estimated fair value (includes $0 and $1, respectively, relating to variable interest entities)	4,176		4,651
Accrued investment income (includes $0 and $1, respectively, relating to variable interest entities)	2,278		2,250
Premiums, reinsurance and other receivables (includes $5 and $2, respectively, relating to variable interest entities)	26,339		23,722
Deferred policy acquisition costs and value of business acquired	5,529		6,043
Current income tax recoverable	—		36
Other assets (includes $3 and $3, respectively, relating to variable interest entities)	4,455		4,397
Separate account assets	144,162		135,939
Total assets	$	474,902	$	449,520
Liabilities and Equity
Liabilities
Future policy benefits	$	123,356	$	118,914
Policyholder account balances	98,125		94,420
Other policy-related balances	7,404		7,201
Policyholder dividends payable	666		624
Policyholder dividend obligation	3,352		1,783
Payables for collateral under securities loaned and other transactions	23,635		21,937
Short-term debt	100		100
Long-term debt (includes $12 and $61, respectively, at estimated fair value, relating to variable interest entities)	1,661		1,715
Current income tax payable	65		—
Deferred income tax liability	4,856		2,888
Other liabilities (includes $0 and $2, respectively, relating to variable interest entities)	34,529		32,755
Separate account liabilities	144,162		135,939
Total liabilities	441,911		418,276
Contingencies, Commitments and Guarantees (Note 12)
Equity
Metropolitan Life Insurance Company stockholder’s equity:
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding	5		5
Additional paid-in capital	14,375		14,444
Retained earnings	11,599		13,738
Accumulated other comprehensive income (loss)	6,852		2,685
Total Metropolitan Life Insurance Company stockholder’s equity	32,831		30,872
Noncontrolling interests	160		372
Total equity	32,991		31,244
Total liabilities and equity	$	474,902	$	449,520

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months and Nine Months Ended September 30, 2016 and 2015 (Unaudited)

(In millions)

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
Revenues
Premiums	$	6,142		$	6,260		$	16,801		$	16,463
Universal life and investment-type product policy fees	638			642			1,928			1,925
Net investment income	2,870			2,797			8,349			8,822
Other revenues	389			383			1,121			1,166
Net investment gains (losses):
Other-than-temporary impairments on fixed maturity securities	(4		)	(18		)	(66		)	(24		)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)	(5		)	8			(9		)	(3		)
Other net investment gains (losses)	51			142			190			291
Total net investment gains (losses)	42			132			115			264
Net derivative gains (losses)	(205		)	558			(562		)	827
Total revenues	9,876			10,772			27,752			29,467
Expenses
Policyholder benefits and claims	6,897			6,897			19,019			18,395
Interest credited to policyholder account balances	560			547			1,675			1,628
Policyholder dividends	302			332			924			940
Other expenses	1,364			1,861			4,450			4,789
Total expenses	9,123			9,637			26,068			25,752
Income (loss) before provision for income tax	753			1,135			1,684			3,715
Provision for income tax expense (benefit)	123			867			232			1,589
Net income (loss)	630			268			1,452			2,126
Less: Net income (loss) attributable to noncontrolling interests	(7		)	(8		)	(9		)	(1		)
Net income (loss) attributable to Metropolitan Life Insurance Company	$	637		$	276		$	1,461		$	2,127
Comprehensive income (loss)	$	637		$	936		$	5,619		$	908
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	(7		)	(8		)	(9		)	(1		)
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company	$	644		$	944		$	5,628		$	909

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Statements of Equity

For the Nine Months Ended September 30, 2016 and 2015 (Unaudited)

(In millions)

	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total Metropolitan Life Insurance Company Stockholder’s Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2015	$	5	$	14,444		$	13,738		$	2,685	$	30,872		$	372		$	31,244
Capital contributions from MetLife, Inc.			4								4						4
Returns of capital			(62		)						(62		)				(62		)
Tax deficiencies related to stock-based compensation			(11		)						(11		)				(11		)
Dividends paid to MetLife, Inc.						(3,600		)			(3,600		)				(3,600		)
Change in equity of noncontrolling interests											—			(203		)	(203		)
Net income (loss)						1,461					1,461			(9		)	1,452
Other comprehensive income (loss), net of income tax									4,167		4,167						4,167
Balance at September 30, 2016	$	5	$	14,375		$	11,599		$	6,852	$	32,831		$	160		$	32,991

	Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Metropolitan Life Insurance Company Stockholder’s Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2014	$	5	$	14,448	$	12,470		$	5,034		$	31,957		$	392		$	32,349
Capital contributions from MetLife, Inc.			3								3						3
Returns of capital			—								—						—
Excess tax benefits related to stock-based compensation			2								2						2
Dividends paid to MetLife, Inc.					(600		)				(600		)				(600		)
Change in equity of noncontrolling interests											—			(8		)	(8		)
Net income (loss)					2,127						2,127			(1		)	2,126
Other comprehensive income (loss), net of income tax								(1,218		)	(1,218		)				(1,218		)
Balance at September 30, 2015	$	5	$	14,453	$	13,997		$	3,816		$	32,271		$	383		$	32,654

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2016 and 2015 (Unaudited)

(In millions)

	Nine Months   Ended  September 30,
	2016			2015
Net cash provided by (used in) operating activities	$	3,625		$	3,128
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	53,466			61,813
Equity securities	798			273
Mortgage loans	9,008			8,554
Real estate and real estate joint ventures	353			1,295
Other limited partnership interests	618			558
Purchases of:
Fixed maturity securities	(53,863		)	(53,554		)
Equity securities	(703		)	(323		)
Mortgage loans	(11,010		)	(11,082		)
Real estate and real estate joint ventures	(1,125		)	(559		)
Other limited partnership interests	(589		)	(474		)
Cash received in connection with freestanding derivatives	1,165			932
Cash paid in connection with freestanding derivatives	(1,589		)	(589		)
Net change in policy loans	86			(32		)
Net change in short-term investments	(128		)	(3,664		)
Net change in other invested assets	(316		)	(193		)
Net change in property, equipment and leasehold improvements	(154		)	(149		)
Net cash provided by (used in) investing activities	(3,983		)	2,806
Cash flows from financing activities
Policyholder account balances:
Deposits	46,119			45,992
Withdrawals	(44,175		)	(48,144		)
Net change in payables for collateral under securities loaned and other transactions	1,698			(1,807		)
Long-term debt issued	11			14
Long-term debt repaid	(55		)	(156		)
Dividends paid to MetLife, Inc.	(3,600		)	(600		)
Returns of capital	(62		)	—
Other, net	(53		)	(149		)
Net cash provided by (used in) financing activities	(117		)	(4,850		)
Change in cash and cash equivalents	(475		)	1,084
Cash and cash equivalents, beginning of period	4,651			1,993
Cash and cash equivalents, end of period	$	4,176		$	3,077
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	71		$	77
Income tax	$	596		$	1,139
Non-cash transactions:
Capital contributions from MetLife, Inc.	$	4		$	3
Fixed maturity securities received in connection with pension risk transfer transactions	$	985		$	903
Transfer of fixed maturity securities to affiliates	$	3,435		$	—
Transfer of mortgage loans to affiliates	$	375		$	—
Deconsolidation of real estate joint venture:
Reduction of real estate and real estate joint ventures	$	339		$	—
Reduction of noncontrolling interests	$	339		$	—

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of life insurance, annuities, employee benefits and asset management. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”). In anticipation of MetLife, Inc.’s plan to separate a substantial portion of its former Retail segment, as well as certain portions of its former Corporate Benefit Funding segment and Corporate & Other (the “Separation”), in the third quarter of 2016, the Company reorganized its businesses into two segments: U.S. and MetLife Holdings. See Note 2 for further information on the reorganization of the Company’s segments in the third quarter of 2016, which was applied retrospectively.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from estimates.

Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of Metropolitan Life Insurance Company and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany accounts and transactions have been eliminated.

The Company uses the equity method of accounting for equity securities when it has significant influence or at least 20% interest and for real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than a minor influence over the investee’s operations, but does not have a controlling financial interest. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. The Company uses the cost method of accounting for investments in which it has virtually no influence over the investee’s operations.

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2016 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2015 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2015 Annual Report.

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Adoption of New Accounting Pronouncement

Effective January 1, 2016, the Company retrospectively adopted new guidance relating to the consolidation of certain entities. The objective of the new standard is to improve targeted areas of the consolidation guidance and to reduce the number of consolidation models. The new consolidation standard provides guidance on how a reporting entity (i) evaluates whether the entity should consolidate limited partnerships and similar entities, (ii) assesses whether the fees paid to a decisionmaker or service provider are variable interests in a VIE, and (iii) assesses the variable interests in a VIE held by related parties of the reporting entity. The new guidance also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The adoption of the new guidance did not impact which entities are consolidated by the Company. The consolidated VIE assets and liabilities and unconsolidated VIE carrying amounts and maximum exposure to loss as of September 30, 2016, disclosed in Note 6, reflect the application of the new guidance.

Future Adoption of New Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on consolidation evaluation for entities under common control (Accounting Standards Update (“ASU”) 2016-17,Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control). The new guidance is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years, and should be applied on a retrospective basis. Early adoption is permitted. The new guidance does not change the characteristics of a primary beneficiary under current GAAP. It changes how a reporting entity evaluates whether it is the primary beneficiary of a VIE by changing how a reporting entity that is a single decisionmaker of a VIE handles indirect interests in the entity held through related parties that are under common control with the reporting entity. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In October 2016, the FASB issued new guidance on tax accounting for intra-entity transfers of assets (ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a modified retrospective basis. Early adoption is permitted in the first interim or annual reporting period. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Also, the guidance eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2016, the FASB issued new guidance on cash flow statement presentation (ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Early adoption is permitted in any interim or annual period. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The guidance also requires enhanced disclosures. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02,Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach which includes a number of optional practical expedients. Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current guidance, leases would be classified as finance or operating leases. However, unlike current guidance, the new guidance will require both types of leases to be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

9

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In January 2016, the FASB issued new guidance (ASU 2016-01,Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities)on the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the instrument-specific credit risk provision. The new guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In May 2015, the FASB issued new guidance on short-duration insurance contracts (ASU 2015-09,Financial Services - Insurance (Topic 944): Disclosures about Short-Duration Contracts). The amendments in this new guidance are effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. The new guidance should be applied retrospectively by providing comparative disclosures for each period presented, except for those requirements that apply only to the current period. The new guidance requires insurance entities to provide users of financial statements with more transparent information about initial claim estimates and subsequent adjustments to these estimates, including information on: (i) reconciling from the claim development table to the balance sheet liability, (ii) methodologies and judgments in estimating claims, and (iii) the timing, and frequency of claims. The adoption will not have an impact on the Company’s consolidated financial statements other than expanded disclosures in Note 3.

In May 2014, the FASB issued a comprehensive new revenue recognition standard (ASU 2014-09,Revenue from Contracts with Customers (Topic 606)), effective for fiscal years beginning after December 15, 2016 and interim periods within those years and should be applied retrospectively. In August 2015, the FASB amended the guidance to defer the effective date by one year, effective for the fiscal years beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance will supersede nearly all existing revenue recognition guidance under GAAP; however, it will not impact the accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

2. Segment Information

In anticipation of the Separation, in the third quarter of 2016, the Company reorganized its businesses into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other. These changes were applied retrospectively and did not have an impact on total consolidated net income (loss) or operating earnings in the prior periods.

On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. Additionally, on July 21, 2016, MetLife, Inc. announced that following the Separation, the separated business will be rebranded as “Brighthouse Financial.” On October 5, 2016, Brighthouse Financial, Inc., a subsidiary of MetLife, Inc. (“Brighthouse”), filed a registration statement on Form 10 (the “Form 10”) with the U.S. Securities and Exchange Commission (“SEC”). The information statement filed as an exhibit to the Form 10, disclosed that MetLife, Inc. intends to include MetLife Insurance Company USA (“MetLife USA”), New England Life Insurance Company (“NELICO”), a wholly-owned subsidiary of Metropolitan Life Insurance Company, First MetLife Investors Insurance Company (“First MetLife”), MetLife Advisers, LLC and certain captive reinsurance companies in the proposed separated business and distribute at least 80.1% of the shares of Brighthouse’s common stock on apro ratabasis to the holders of MetLife, Inc. common stock.

The ultimate form and timing of the Separation will be influenced by a number of factors, including regulatory considerations and economic conditions. MetLife continues to evaluate and pursue structural alternatives for the proposed Separation. The Separation remains subject to certain conditions, including among others, obtaining final approval from the MetLife, Inc. Board of Directors, receipt of a favorable ruling from the Internal Revenue Service and an opinion from MetLife’s tax advisor regarding certain U.S. federal income tax matters, and an SEC declaration of the effectiveness of the Form 10.

10

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

U.S.

The U.S. segment offers a broad range of protection products and services aimed at serving the financial needs of customers throughout their lives. These products are sold to corporations and their respective employees, other institutions and their respective members, as well as individuals. The U.S. segment is organized into two businesses: Group Benefits and Retirement and Income Solutions.

• The Group Benefits business offers insurance products and services which include life, dental, group short- and long-term disability, individual disability, accidental death and dismemberment, critical illness, vision and accident & health coverages, as well as prepaid legal plans. This business also sells administrative services-only arrangements to some employers.

• The Retirement and Income Solutions business offers a broad range of annuity and investment products, including guaranteed interest contracts and other stable value products, income annuities and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This business also includes structured settlements and certain products to fund postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives.

MetLife Holdings

The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company in the U.S. These products and businesses include variable life, universal life, term life, whole life, variable annuities, fixed annuities and index-linked annuities. The MetLife Holdings segment also includes the Company’s discontinued long-term care businesses.

Corporate & Other

Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including enterprise-wide strategic initiative restructuring charges and various start-up businesses (including the investment management business through which the Company offers fee-based investment management services to institutional clients, as well as the direct to consumer portion of the U.S. Direct business). Corporate & Other also includes the Company’s ancillary international operations, the businesses of the Company that MetLife, Inc. plans to separate and include in Brighthouse Financial and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings.

Financial Measures and Segment Accounting Policies

Operating earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also the Company’s GAAP measure of segment performance and is reported below. Operating earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of operating earnings as the Company measures it for management purposes enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings allows analysis of the Company’s performance and facilitates comparisons to industry results.

Operating earnings is defined as operating revenues less operating expenses, both net of income tax.

The financial measures of operating revenues and operating expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and divested businesses and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations and other businesses that have been or will be sold or exited by MetLife and are referred to as divested businesses. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses).

11

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

The following additional adjustments are made to revenues, in the line items indicated, in calculating operating revenues:

• Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”); and

• Net investment income: (i) includes investment hedge adjustments which represent earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method and (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP.

The following additional adjustments are made to expenses, in the line items indicated, in calculating operating expenses:

• Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);

• Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;

• Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;

• Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and

• Other expenses excludes costs related to noncontrolling interests and goodwill impairments.

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate.

Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months and nine months endedSeptember 30, 2016and2015. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operating earnings adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below.

Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in MetLife’s and the Company’s business.

MetLife’s economic capital model, coupled with considerations of local capital requirements, aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required economic capital shock factors to a specific confidence level and time horizon while applying an industry standard method for the inclusion of diversification benefits among risk types. MetLife’s management is responsible for the ongoing production and enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards.

Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, net income (loss) or operating earnings.

Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.

12

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

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

13

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

	Operating Results
Three Months Ended September 30, 2015	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	5,134		$	1,111		$	15		$	6,260		$	—		$	6,260
Universal life and investment-type product policy fees	232			320			65			617			25			642
Net investment income	1,482			1,482			(58		)	2,906			(109		)	2,797
Other revenues	180			26			177			383			—			383
Net investment gains (losses)	—			—			—			—			132			132
Net derivative gains (losses)	—			—			—			—			558			558
Total revenues	7,028			2,939			199			10,166			606			10,772
Expenses
Policyholder benefits and claims and policyholder dividends	5,379			1,841			27			7,247			(18		)	7,229
Interest credited to policyholder account balances	303			233			9			545			2			547
Capitalization of DAC	(14		)	(100		)	(3		)	(117		)	—			(117		)
Amortization of DAC and VOBA	15			169			20			204			99			303
Interest expense on debt	1			—			30			31			—			31
Other expenses	661			408			564			1,633			11			1,644
Total expenses	6,345			2,551			647			9,543			94			9,637
Provision for income tax expense (benefit)	247			117			324			688			179			867
Operating earnings	$	436		$	271		$	(772	)	(65		)
Adjustments to:
Total revenues										606
Total expenses										(94		)
Provision for income tax (expense) benefit										(179		)
Net income (loss)										$	268					$	268

14

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

	Operating Results
Nine Months Ended September 30, 2016	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	13,451		$	3,303		$	47		$	16,801		$	—		$	16,801
Universal life and investment-type product policy fees	741			928			182			1,851			77			1,928
Net investment income	4,518			4,260			(35		)	8,743			(394		)	8,349
Other revenues	561			98			462			1,121			—			1,121
Net investment gains (losses)	—			—			—			—			115			115
Net derivative gains (losses)	—			—			—			—			(562		)	(562		)
Total revenues	19,271			8,589			656			28,516			(764		)	27,752
Expenses
Policyholder benefits and claims and policyholder dividends	14,232			5,475			103			19,810			133			19,943
Interest credited to policyholder account balances	964			687			26			1,677			(2		)	1,675
Capitalization of DAC	(43		)	(239		)	(3		)	(285		)	—			(285		)
Amortization of DAC and VOBA	43			591			51			685			(265		)	420
Interest expense on debt	7			5			72			84			—			84
Other expenses	2,057			1,439			612			4,108			123			4,231
Total expenses	17,260			7,958			861			26,079			(11		)	26,068
Provision for income tax expense (benefit)	720			178			(403		)	495			(263		)	232
Operating earnings	$	1,291		$	453		$	198		1,942
Adjustments to:
Total revenues										(764		)
Total expenses										11
Provision for income tax (expense) benefit										263
Net income (loss)										$	1,452					$	1,452

15

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

	Operating Results
Nine Months Ended September 30, 2015	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	13,080		$	3,331		$	52		$	16,463		$	—		$	16,463
Universal life and investment-type product policy fees	699			960			191			1,850			75			1,925
Net investment income	4,590			4,488			85			9,163			(341		)	8,822
Other revenues	550			100			516			1,166			—			1,166
Net investment gains (losses)	—			—			—			—			264			264
Net derivative gains (losses)	—			—			—			—			827			827
Total revenues	18,919			8,879			844			28,642			825			29,467
Expenses
Policyholder benefits and claims and policyholder dividends	13,858			5,365			100			19,323			12			19,335
Interest credited to policyholder account balances	902			696			26			1,624			4			1,628
Capitalization of DAC	(50		)	(291		)	(5		)	(346		)	—			(346		)
Amortization of DAC and VOBA	46			410			47			503			92			595
Interest expense on debt	4			3			88			95			1			96
Other expenses	2,029			1,328			1,084			4,441			3			4,444
Total expenses	16,789			7,511			1,340			25,640			112			25,752
Provision for income tax expense (benefit)	764			432			144			1,340			249			1,589
Operating earnings	$	1,366		$	936		$	(640	)	1,662
Adjustments to:
Total revenues										825
Total expenses										(112		)
Provision for income tax (expense) benefit										(249		)
Net income (loss)										$	2,126					$	2,126

The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:

	September 30, 2016		December 31, 2015
	(In millions)
U.S.	$	252,095	$	231,653
MetLife Holdings	183,986		178,734
Corporate & Other	38,821		39,133
Total	$	474,902	$	449,520

16

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

3. Insurance

Insurance Liabilities

Insurance liabilities, including affiliated insurance liabilities on reinsurance assumed and ceded, are comprised of future policy benefits, policyholder account balances and other policy-related balances. Information regarding insurance liabilities by segment, as well as Corporate & Other, was as follows at:

	September 30, 2016		December 31, 2015
	(In millions)
U.S.	$	125,762	$	119,806
MetLife Holdings	100,706		98,346
Corporate & Other	2,417		2,383
Total	$	228,885	$	220,535

See Note 13 for discussion of affiliated reinsurance liabilities included in the table above.

Guarantees

As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report, the Company issues variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 7.

The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.

17

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

3. Insurance (continued)

Information regarding the Company’s guarantee exposure, which includes direct business, but excludes offsets from hedging or reinsurance, if any, was as follows at:

	September 30, 2016								December 31, 2015
	In the Event of Death				At Annuitization				In the Event of Death				At Annuitization
	(Dollars in millions)
Annuity Contracts (1):
Variable Annuity Guarantees:
Total account value (2)	$	60,910			$	28,123			$	59,858			$	27,648
Separate account value	$	49,162			$	26,964			$	48,216			$	26,530
Net amount at risk	$	1,243	(3	)	$	727	(4	)	$	1,698	(3	)	$	379	(4	)
Average attained age of contractholders	66 years				64 years				65 years				63 years
Other Annuity Guarantees:
Total account value (2)	N/A				$	404			N/A				$	406
Net amount at risk	N/A				$	143	(5	)	N/A				$	144	(5	)
Average attained age of contractholders	N/A				57 years				N/A				56 years

	September 30, 2016				December 31, 2015
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(Dollars in millions)
Universal and Variable Life Contracts (1):
Total account value (2)	$	8,223	$	1,022	$	8,166	$	1,052
Net amount at risk (6)	$	73,785	$	7,270	$	75,994	$	7,658
Average attained age of policyholders	55 years		61 years		55 years		61 years

__________________

(1) The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.

(2) Includes the contractholder’s investments in the general account and separate account, if applicable.

(3) Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

(4) Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved.

(5) Defined as either the excess of the upper tier, adjusted for a profit margin, less the lower tier, as of the balance sheet date or the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. These amounts represent the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date.

(6) Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

18

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Deferred Policy Acquisition Costs and Value of Business Acquired

Information regarding total DAC and VOBA by segment, as well as Corporate & Other, was as follows at:

	September 30, 2016		December 31, 2015
	(In millions)
U.S.	$	418	$	418
MetLife Holdings	4,550		5,000
Corporate & Other	561		625
Total	$	5,529	$	6,043

5. Closed Block

On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance approving Metropolitan Life Insurance Company’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company.

Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company’s net income continues to be sensitive to the actual performance of the closed block.

Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item.

19

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Closed Block (continued)

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:

	September 30, 2016			December 31, 2015
	(In millions)
Closed Block Liabilities
Future policy benefits	$	40,840		$	41,278
Other policy-related balances	256			249
Policyholder dividends payable	506			468
Policyholder dividend obligation	3,352			1,783
Current income tax payable	8			—
Other liabilities	601			380
Total closed block liabilities	45,563			44,158
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	29,194			27,556
Equity securities available-for-sale, at estimated fair value	107			111
Mortgage loans	5,739			6,022
Policy loans	4,553			4,642
Real estate and real estate joint ventures	672			462
Other invested assets	1,233			1,066
Total investments	41,498			39,859
Cash and cash equivalents	72			236
Accrued investment income	482			474
Premiums, reinsurance and other receivables	65			56
Current income tax recoverable	—			11
Deferred income tax assets	195			234
Total assets designated to the closed block	42,312			40,870
Excess of closed block liabilities over assets designated to the closed block	3,251			3,288
Amounts included in accumulated other comprehensive income (loss) (“AOCI”)
Unrealized investment gains (losses), net of income tax	2,452			1,382
Unrealized gains (losses) on derivatives, net of income tax	88			76
Allocated to policyholder dividend obligation, net of income tax	(2,179		)	(1,159		)
Total amounts included in AOCI	361			299
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,612		$	3,587

Information regarding the closed block policyholder dividend obligation was as follows:

	Nine Months   Ended   September 30, 2016		Year   Ended   December 31, 2015
	(In millions)
Balance, beginning of period	$	1,783	$	3,155
Change in unrealized investment and derivative gains (losses)	1,569		(1,372		)
Balance, end of period	$	3,352	$	1,783

20

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Closed Block (continued)

Information regarding the closed block revenues and expenses was as follows:

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Revenues
Premiums	$	436		$	447		$	1,297		$	1,334
Net investment income	486			487			1,435			1,500
Net investment gains (losses)	(3		)	(9		)	(19		)	(8		)
Net derivative gains (losses)	4			13			(3		)	25
Total revenues	923			938			2,710			2,851
Expenses
Policyholder benefits and claims	619			635			1,861			1,886
Policyholder dividends	232			273			723			757
Other expenses	33			36			100			109
Total expenses	884			944			2,684			2,752
Revenues, net of expenses before provision for income tax expense  (benefit)	39			(6		)	26			99
Provision for income tax expense (benefit)	13			(1		)	8			36
Revenues, net of expenses and provision for income tax expense (benefit)	$	26		$	(5	)	$	18		$	63

Metropolitan Life Insurance Company charges the closed block with federal income taxes, state and local premium taxes and other state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan of Reorganization. Metropolitan Life Insurance Company also charges the closed block for expenses of maintaining the policies included in the closed block.

21

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments

Fixed Maturity and Equity Securities Available-for-Sale

Fixed Maturity and Equity Securities Available-for-Sale by Sector

The following table presents the fixed maturity and equity securities available-for-sale (“AFS”) by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”) (collectively, “Structured Securities”).

	September 30, 2016											December 31, 2015
	Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized						Estimated Fair Value
			Gains		Temporary Losses		OTTI Losses							Gains		Temporary Losses		OTTI Losses
	(In millions)
Fixed maturity securities:
U.S. corporate	$	56,531	$	6,548	$	361	$	—		$	62,718	$	59,305	$	3,763	$	1,511	$	—	$	61,557
U.S. government and agency	36,365		5,985		9		—			42,341		36,183		3,638		128		—		39,693
Foreign corporate	26,263		1,710		870		—			27,103		27,218		1,005		1,427		1		26,795
RMBS (1)	26,177		1,262		211		(6		)	27,234		23,195		1,008		252		36		23,915
State and political subdivision	6,314		1,586		1		1			7,898		6,070		935		29		2		6,974
CMBS	5,486		339		34		—			5,791		6,547		114		82		—		6,579
ABS	8,343		46		82		—			8,307		6,665		40		138		—		6,567
Foreign government	4,319		974		40		—			5,253		3,178		536		108		—		3,606
Total fixed maturity securities	$	169,798	$	18,450	$	1,608	$	(5	)	$	186,645	$	168,361	$	11,039	$	3,675	$	39	$	175,686
Equity securities:
Common stock	$	1,272	$	80	$	12	$	—		$	1,340	$	1,298	$	46	$	101	$	—	$	1,243
Non-redeemable preferred stock	569		36		38		—			567		687		59		40		—		706
Total equity securities	$	1,841	$	116	$	50	$	—		$	1,907	$	1,985	$	105	$	141	$	—	$	1,949

__________________

(1) The noncredit loss component of other-than-temporary impairment (“OTTI”) losses for RMBS was in an unrealized gain position of $6 million at September 30, 2016 due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”

The Company held non-income producing fixed maturity securities with an estimated fair value of $38 million and $3 million with unrealized gains (losses) of ($2) million and less than $1 million at September 30, 2016 and December 31, 2015, respectively.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2016:

	Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities		Total Fixed Maturity Securities
	(In millions)
Amortized cost	$	6,763	$	37,857	$	31,864	$	53,308	$	40,006	$	169,798
Estimated fair value	$	6,770	$	39,660	$	33,892	$	64,991	$	41,332	$	186,645

22

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector

The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:

	September 30, 2016								December 31, 2015
	Less than 12 Months				Equal to or Greater than 12 Months				Less than 12 Months				Equal to or Greater than 12 Months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(Dollars in millions)
Fixed maturity securities:
U.S. corporate	$	2,257	$	71	$	3,046	$	290	$	17,480	$	1,078	$	2,469	$	433
U.S. government and agency	2,568		9		—		—		11,683		125		248		3
Foreign corporate	2,640		167		4,832		703		8,823		669		4,049		759
RMBS	3,170		80		2,162		125		6,065		158		1,769		130
State and political subdivision	87		1		13		1		767		26		15		5
CMBS	222		1		426		33		2,266		42		509		40
ABS	1,039		9		2,172		73		3,211		54		1,817		84
Foreign government	114		3		445		37		961		91		87		17
Total fixed maturity securities	$	12,097	$	341	$	13,096	$	1,262	$	51,256	$	2,243	$	10,963	$	1,471
Equity securities:
Common stock	$	62	$	11	$	5	$	1	$	182	$	99	$	19	$	2
Non-redeemable preferred stock	37		3		117		35		56		2		132		38
Total equity securities	$	99	$	14	$	122	$	36	$	238	$	101	$	151	$	40
Total number of securities in an unrealized loss position	1,189				1,169				4,167				807

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities

As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired.

Current Period Evaluation

Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at September 30, 2016. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

Gross unrealized losses on fixed maturity securities decreased $2.1 billion during the nine months ended September 30, 2016 to $1.6 billion. The decrease in gross unrealized losses for the nine months ended September 30, 2016 was primarily attributable to a decrease in interest rates and, to a lesser extent, narrowing credit spreads.

23

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

At September 30, 2016, $239 million of the total $1.6 billion of gross unrealized losses were from 56 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.

Investment Grade Fixed Maturity Securities

Of the $239 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $140 million, or 59%, were related to gross unrealized losses on 24 investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities

Of the $239 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $99 million, or 41%, were related to gross unrealized losses on 32 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily industrial securities) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainties including concerns over lower oil prices in the energy sector. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers.

Equity Securities

Gross unrealized losses on equity securities decreased $91 million during the nine months ended September 30, 2016 to $50 million. Of the $50 million, $32 million were from six securities with gross unrealized losses of 20% or more of cost for 12 months or greater. Of the $32 million, 66% were rated A or better, and all were from financial services industry investment grade non-redeemable preferred stock.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	September 30, 2016					December 31, 2015
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	33,286		60.3	%	$	33,440		62.3	%
Agricultural	12,369			22.4		11,663			21.7
Residential	9,358			16.9		8,562			15.9
Subtotal (1)	55,013			99.6		53,665			99.9
Valuation allowances	(256		)	(0.5	)	(257		)	(0.5	)
Subtotal mortgage loans, net	54,757			99.1		53,408			99.4
Residential — FVO	481			0.9		314			0.6
Total mortgage loans, net	$	55,238		100.0	%	$	53,722		100.0	%

__________________

(1) Purchases of mortgage loans were $732 million and $1.9 billion for the three months and nine months endedSeptember 30, 2016, respectively, and$821 million and $3.0 billion for the three monthsand nine months endedSeptember 30, 2015, respectively.

24

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on residential — FVO is presented in Note 8. The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis.

Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment

Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at:

	Evaluated Individually for Credit Losses										Evaluated Collectively for Credit Losses				Impaired Loans
	Impaired Loans with a Valuation Allowance						Impaired Loans without a Valuation Allowance
	Unpaid Principal Balance		Recorded Investment		Valuation Allowances		Unpaid Principal Balance		Recorded Investment		Recorded Investment		Valuation Allowances		Carrying Value
	(In millions)
September 30, 2016
Commercial	$	—	$	—	$	—	$	12	$	12	$	33,274	$	165	$	12
Agricultural	12		10		1		39		38		12,321		36		47
Residential	—		—		—		235		215		9,143		54		215
Total	$	12	$	10	$	1	$	286	$	265	$	54,738	$	255	$	274
December 31, 2015
Commercial	$	—	$	—	$	—	$	57	$	57	$	33,383	$	165	$	57
Agricultural	45		43		3		22		21		11,599		34		61
Residential	—		—		—		141		131		8,431		55		131
Total	$	45	$	43	$	3	$	220	$	209	$	53,413	$	254	$	249

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $12 million, $48 million and $202 million, respectively, for the three months ended September 30, 2016; and $34 million, $52 million and $174 million, respectively, for the nine months ended September 30, 2016.

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $118 million, $58 million and $96 million, respectively, for the three months ended September 30, 2015; and $136 million, $59 million and $72 million, respectively, for the nine months ended September 30, 2015.

Valuation Allowance Rollforward by Portfolio Segment

The changes in the valuation allowance, by portfolio segment, were as follows:

	Nine Months   Ended  September 30,
	2016											2015
	Commercial		Agricultural			Residential			Total			Commercial			Agricultural		Residential			Total
	(In millions)
Balance, beginning of period	$	165	$	37		$	55		$	257		$	182		$	35	$	41		$	258
Provision (release)	—		2			11			13			(4		)	2		26			24
Charge-offs, net of recoveries	—		(2		)	(12		)	(14		)	(12		)	—		(14		)	(26		)
Balance, end of period	$	165	$	37		$	54		$	256		$	166		$	37	$	53		$	256

25

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans was as follows at:

	Recorded Investment										Estimated Fair Value		% of Total
	Debt Service Coverage Ratios								% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x		Total
	(Dollars in millions)
September 30, 2016
Loan-to-value ratios:
Less than 65%	$	30,025	$	743	$	474	$	31,242	93.9	%	$	32,512	94.0	%
65% to 75%	1,493		31		277		1,801		5.4		1,826		5.3
76% to 80%	—		—		—		—		—		—		—
Greater than 80%	118		38		87		243		0.7		261		0.7
Total	$	31,636	$	812	$	838	$	33,286	100	%	$	34,599	100	%
December 31, 2015
Loan-to-value ratios:
Less than 65%	$	28,828	$	909	$	408	$	30,145	90.2	%	$	30,996	90.5	%
65% to 75%	2,550		138		61		2,749		8.2		2,730		8.0
76% to 80%	—		—		—		—		—		—		—
Greater than 80%	208		115		223		546		1.6		519		1.5
Total	$	31,586	$	1,162	$	692	$	33,440	100	%	$	34,245	100	%

Credit Quality of Agricultural Mortgage Loans

The credit quality of agricultural mortgage loans was as follows at:

	September 30, 2016				December 31, 2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	11,878	96.0	%	$	10,975	94.1	%
65% to 75%	424		3.4		609		5.2
76% to 80%	20		0.2		21		0.2
Greater than 80%	47		0.4		58		0.5
Total	$	12,369	100.0	%	$	11,663	100.0	%

The estimated fair value of agricultural mortgage loans was $12.7 billion and $11.9 billion at September 30, 2016 and December 31, 2015, respectively.

26

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Credit Quality of Residential Mortgage Loans

The credit quality of residential mortgage loans was as follows at:

	September 30, 2016				December 31, 2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	9,056	96.8	%	$	8,261	96.5	%
Nonperforming	302		3.2		301		3.5
Total	$	9,358	100.0	%	$	8,562	100.0	%

The estimated fair value of residential mortgage loans was $9.8 billion and $8.8 billion at September 30, 2016 and December 31, 2015, respectively.

Past Due and Interest Accrual Status of Mortgage Loans

The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both September 30, 2016 and December 31, 2015. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and accrual status of mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:

	Past Due				Nonaccrual Status
	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
	(In millions)
Commercial	$	—	$	—	$	—	$	—
Agricultural	144		103		39		46
Residential	302		301		302		301
Total	$	446	$	404	$	341	$	347

Mortgage Loans Modified in a Troubled Debt Restructuring

During both thethree monthsand nine months endedSeptember 30, 2016 and 2015, the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring.

Cash Equivalents

The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $2.8 billion and $3.9 billion at September 30, 2016 and December 31, 2015, respectively.

27

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, deferred sales inducements (“DSI”), future policy benefits and the policyholder dividend obligation, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.

The components of net unrealized investment gains (losses), included in AOCI, were as follows:

	September 30, 2016			December 31, 2015
	(In millions)
Fixed maturity securities	$	16,779		$	7,331
Fixed maturity securities with noncredit OTTI losses included in AOCI	5			(39		)
Total fixed maturity securities	16,784			7,292
Equity securities	144			27
Derivatives	2,684			2,208
Other	170			137
Subtotal	19,782			9,664
Amounts allocated from:
Future policy benefits	(1,668		)	(7		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	(1		)	—
DAC, VOBA and DSI	(964		)	(572		)
Policyholder dividend obligation	(3,352		)	(1,783		)
Subtotal	(5,985		)	(2,362		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(1		)	14
Deferred income tax benefit (expense)	(4,802		)	(2,542		)
Net unrealized investment gains (losses)	8,994			4,774
Net unrealized investment gains (losses) attributable to noncontrolling interests	(1		)	(1		)
Net unrealized investment gains (losses) attributable to Metropolitan Life    Insurance Company	$	8,993		$	4,773

The changes in fixed maturity securities with noncredit OTTI losses included in AOCI were as follows:

	Nine Months   Ended   September 30, 2016			Year   Ended   December 31, 2015
	(In millions)
Balance, beginning of period	$	(39	)	$	(66	)
Noncredit OTTI losses and subsequent changes recognized	9			5
Securities sold with previous noncredit OTTI loss	26			105
Subsequent changes in estimated fair value	9			(83		)
Balance, end of period (1)	$	5		$	(39	)

__________________

(1) The noncredit loss component of OTTI losses was in an unrealized gain position of $5 million at September 30, 2016 due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”

28

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

The changes in net unrealized investment gains (losses) were as follows:

	Nine Months   Ended   September 30, 2016
	(In millions)
Balance, beginning of period	$	4,773
Fixed maturity securities on which noncredit OTTI losses have been recognized	44
Unrealized investment gains (losses) during the period	10,074
Unrealized investment gains (losses) relating to:
Future policy benefits	(1,661		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	(1		)
DAC, VOBA and DSI	(392		)
Policyholder dividend obligation	(1,569		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(15		)
Deferred income tax benefit (expense)	(2,260		)
Net unrealized investment gains (losses)	8,993
Net unrealized investment gains (losses) attributable to noncontrolling interests	—
Balance, end of period	$	8,993
Change in net unrealized investment gains (losses)	$	4,220
Change in net unrealized investment gains (losses) attributable to noncontrolling interests	—
Change in net unrealized investment gains (losses) attributable to Metropolitan Life Insurance Company	$	4,220

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 2016 and December 31, 2015.

Securities Lending

Elements of the securities lending program are presented below at:

	September 30, 2016		December 31, 2015
	(In millions)
Securities on loan: (1)
Amortized cost	$	15,009	$	16,257
Estimated fair value	$	17,308	$	17,700
Cash collateral on deposit from counterparties (2)	$	17,770	$	18,053
Security collateral on deposit from counterparties (3)	$	45	$	22
Reinvestment portfolio — estimated fair value	$	17,977	$	18,138

__________________

(1) Included within fixed maturity securities, cash equivalents and short-term investments.

(2) Included within payables for collateral under securities loaned and other transactions.

(3) Security collateral on deposit from counterparties may not be sold or re-pledged, unless the counterparty is in default,and is not reflected on the consolidated financial statements.

29

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:

	September 30, 2016								December 31, 2015
	Remaining Tenor of Securities Lending Agreements								Remaining Tenor of Securities Lending Agreements
	Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less		1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	4,933	$	6,439	$	6,347	$	17,719	$	6,260	$	7,421	$	4,303	$	17,984
All other securities	—		46		5		51		1		47		21		69
Total	$	4,933	$	6,485	$	6,352	$	17,770	$	6,261	$	7,468	$	4,324	$	18,053

__________________

(1) The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2016 was $4.8 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including U.S. government and agency, agency RMBS, ABS, short-term investments and U.S. corporate securities) with 65% invested in U.S. government and agency securities, agency RMBS, short-term investments, or held in cash and cash equivalents. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

Invested Assets on Deposit and Pledged as Collateral

Invested assets on deposit and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value at:

	September 30, 2016		December 31, 2015
	(In millions)
Invested assets on deposit (regulatory deposits)	$	1,417	$	1,245
Invested assets pledged as collateral (1)	21,832		19,011
Total invested assets on deposit and pledged as collateral	$	23,249	$	20,256

__________________

(1) The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report) and derivative transactions (see Note 7).

See “— Securities Lending” for information regarding securities on loan and Note 5 for information regarding investments designated to the closed block.

Variable Interest Entities

The Company is involved with certain legal entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity.

30

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Consolidated VIEs

Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.

The following table presents the total assets and total liabilities relating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at:

	September 30, 2016				December 31, 2015
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
Real estate joint ventures (1)	$	492	$	—	$	—	$	—
Fixed maturity securities (2)	—		—		104		50
Other investments (3)	63		12		89		13
Total	$	555	$	12	$	193	$	63

__________________

(1) The Company consolidates certain affiliated real estate joint ventures. At September 30, 2016, the Company and its affiliates invested $428 million and $64 million, respectively, in these affiliated real estate joint ventures.

(2) The Company consolidated certain fixed maturity securities purchased in an investment structure which was partially funded with affiliated long-term debt. These investments were sold in June 2016. The long-term debt bore interest primarily at variable rates, payable on a bi-annual basis.

(3) Other investments is primarily comprised of other invested assets and other limited partnership interests. The Company consolidates entities that are structured as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise. The Company’s exposure was limited to that of its remaining investment in these entities of less than $1 million at estimated fair value at both September 30, 2016 and December 31, 2015.

Unconsolidated VIEs

The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:

	September 30, 2016				December 31, 2015
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	41,332	$	41,332	$	37,061	$	37,061
U.S. and foreign corporate	1,657		1,657		1,593		1,593
Other limited partnership interests	3,384		5,575		2,874		3,672
Other invested assets	2,022		2,604		1,564		2,116
Real estate joint ventures	85		110		31		44
Total	$	48,480	$	51,278	$	43,123	$	44,486

__________________

31

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

(1) The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $151 million and $179 million at September 30, 2016 and December 31, 2015, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(2) For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset backed securities issued by trusts that do not have substantial equity.

As described in Note 12, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during both the nine months ended September 30, 2016 and 2015.

Net Investment Income

The components of net investment income were as follows:

	Three Months   Ended  September 30,					Nine Months   Ended  September 30,
	2016		2015			2016		2015
	(In millions)
Investment income:
Fixed maturity securities	$	1,907	$	1,918		$	5,803	$	5,992
Equity securities	19		21			65		64
Trading and FVO securities — Actively traded and FVO general account securities (1)	—		(39		)	3		(21		)
Mortgage loans	630		623			1,930		1,871
Policy loans	104		105			311		324
Real estate and real estate joint ventures	159		190			366		599
Other limited partnership interests	154		169			274		485
Cash, cash equivalents and short-term investments	10		5			31		17
Operating joint venture	2		—			7		6
Other	67		25			133		154
Subtotal	3,052		3,017			8,923		9,491
Less: Investment expenses	182		220			574		670
Subtotal, net	2,870		2,797			8,349		8,821
FVO CSEs — interest income:
Securities	—		—			—		1
Subtotal	—		—			—		1
Net investment income	$	2,870	$	2,797		$	8,349	$	8,822

__________________

(1) Changes in estimated fair value subsequent to purchase for securities still held as of the end of the respective periods included in net investment income were less than $1 million for both the three months and nine months endedSeptember 30, 2016, and ($39) million and ($47) million for the three monthsandnine months endedSeptember 30, 2015, respectively.

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

32

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

The Company previously maintained a trading securities portfolio, principally invested in fixed maturity securities, to support investment strategies that involved the active and frequent purchase and sale of actively traded securities and the execution of short sale agreements. In June 2016, the Company commenced a reinvestment of this portfolio into other asset classes. Fair value option securities (“FVO securities”) include certain fixed maturity and equity securities held-for-investment by the general account to support asset/liability management strategies for certain insurance products and securities held by consolidated securitization entities (“CSEs”).

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

The components of net investment gains (losses) were as follows:

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Total gains (losses) on fixed maturity securities:
Total OTTI losses recognized — by sector and industry:
U.S. and foreign corporate securities — by industry:
Consumer	$	—		$	(9	)	$	—		$	(12	)
Industrial	—			—			(58		)	—
Communications	—			—			(3		)	—
Total U.S. and foreign corporate securities	—			(9		)	(61		)	(12		)
State and political subdivision	—			(1		)	—			(1		)
RMBS	(9		)	—			(14		)	(14		)
OTTI losses on fixed maturity securities recognized in earnings	(9		)	(10		)	(75		)	(27		)
Fixed maturity securities — net gains (losses) on sales and disposals	61			(65		)	268			50
Total gains (losses) on fixed maturity securities	52			(75		)	193			23
Total gains (losses) on equity securities:
Total OTTI losses recognized — by sector:
Common stock	(5		)	(6		)	(71		)	(14		)
OTTI losses on equity securities recognized in earnings	(5		)	(6		)	(71		)	(14		)
Equity securities — net gains (losses) on sales and disposals	7			7			21			5
Total gains (losses) on equity securities	2			1			(50		)	(9		)
Mortgage loans	(9		)	(26		)	(6		)	(70		)
Real estate and real estate joint ventures	20			206			28			214
Other limited partnership interests	(8		)	(75		)	(38		)	(52		)
Other	(14		)	19			(44		)	7
Subtotal	43			50			83			113
FVO CSEs:
Securities	1			—			2			—
Non-investment portfolio gains (losses)	(2		)	82			30			151
Subtotal	(1		)	82			32			151
Total net investment gains (losses)	$	42		$	132		$	115		$	264

See “— Related Party Investment Transactions” for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates.

33

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Gains (losses) from foreign currency transactions included within net investment gains (losses) were $1 million and $24 million for the three months and nine months ended September 30, 2016, respectively, and $76 million and $93 million for thethree monthsand nine months endedSeptember 30, 2015, respectively.

Sales or Disposals and Impairments of Fixed Maturity and Equity Securities

Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below.

	Three Months   Ended  September 30,
	2016			2015			2016			2015
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	15,343		$	13,895		$	28		$	16
Gross investment gains	$	135		$	74		$	9		$	9
Gross investment losses	(74		)	(139		)	(2		)	(2		)
OTTI losses	(9		)	(10		)	(5		)	(6		)
Net investment gains (losses)	$	52		$	(75	)	$	2		$	1

	Nine Months   Ended  September 30,
	2016			2015			2016			2015
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	41,425		$	45,974		$	85		$	44
Gross investment gains	$	637		$	474		$	28		$	15
Gross investment losses	(369		)	(424		)	(7		)	(10		)
OTTI losses	(75		)	(27		)	(71		)	(14		)
Net investment gains (losses)	$	193		$	23		$	(50	)	$	(9	)

34

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Credit Loss Rollforward

The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in other comprehensive income (loss) (“OCI”):

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Balance, beginning of period	$	171		$	194		$	188		$	263
Additions:
Initial impairments — credit loss OTTI on securities not previously impaired	1			—			1			1
Additional impairments — credit loss OTTI on securities previously impaired	7			1			10			12
Reductions:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI	(10		)	(15		)	(29		)	(95		)
Securities impaired to net present value of expected future cash flows	—			—			(1		)	—
Increase in cash flows — accretion of previous credit loss OTTI	—			(1		)	—			(2		)
Balance, end of period	$	169		$	179		$	169		$	179

Related Party Investment Transactions

The Company transfers invested assets, primarily consisting of fixed maturity securities and mortgage loans to and from affiliates. Invested assets transferred to and from affiliates were as follows:

	Three Months   Ended  September 30,				Nine Months   Ended  September 30,
	2016		2015		2016		2015
	(In millions)
Estimated fair value of invested assets transferred to affiliates	$	179	$	—	$	4,555	$	600
Amortized cost of invested assets transferred to affiliates	$	169	$	—	$	4,297	$	567
Net investment gains (losses) recognized on transfers	$	10	$	—	$	258	$	33
Estimated fair value of invested assets transferred from affiliates	$	51	$	74	$	150	$	175

In April 2016, the Company transferred investments and cash and cash equivalents with an amortized cost and fair value of $4.0 billion and $4.3 billion, respectively, for the recapture of risks related to certain single premium deferred annuity contracts previously reinsured to MetLife USA, an affiliate, which are included in the table above. See Note 13 for additional information related to the transfer.

Below is a summary of certain affiliated loans, which are more fully described in Note 8 of the Notes of the Consolidated Financial Statements, included in the 2015 Annual Report.

The Company had affiliated loans outstanding to MetLife, Inc., which are included in other invested assets, totaling $2.0 billion at both September 30, 2016 and December 31, 2015. During the three months ended September 30, 2016, an affiliated loan for $250 million matured and, subsequently, a new loan was issued for $250 million, which bears interest, payable semiannually, at a fixed rate of 3.03%, and matures on September 30, 2020. Net investment income from affiliated loans was $23 million and $70 million for the three months and nine months ended September 30, 2016, respectively, and $24 million and $72 million for thethree monthsandnine months endedSeptember 30, 2015, respectively.

As a structured settlements assignment company, the Company purchases annuities from affiliates to fund the periodic structured settlement claim payment obligations it assumes. Each annuity purchased is contractually designated to the assumed claim obligation it funds. The aggregate annuity contract values recorded, for which the Company has also recorded an unpaid claim obligation of equal amounts, were $1.3 billion at both September 30, 2016 and December 31, 2015. The related net investment income and corresponding policyholder benefits and claims recognized were $17 million and $46 million for the three months and nine months ended September 30, 2016, respectively, and $17 million and $48 million for the three monthsandnine months endedSeptember 30, 2015, respectively.

The Company holds a surplus note from American Life Insurance Company, an affiliate, which is included in other invested assets, totaling $100 million at both September 30, 2016 and December 31, 2015. Net investment income from this surplus note was $1 million and $3 million for the three months and nine months ended September 30, 2016, respectively, and $1 million and $3 million for thethree monthsandnine months endedSeptember 30, 2015, respectively.

The Company provides investment administrative services to certain affiliates. The related investment administrative service charges to these affiliates were $42 million and $127 million for the three months and nine months ended September 30, 2016, respectively, and $40 million and $119 million for the three months and nine months ended September 30, 2015, respectively. The Company also earned additional affiliated net investment income of $2 million and $4 million for the three months and nine months ended September 30, 2016, respectively, and $1 million and $3 million for the three months and nine months ended September 30, 2015, respectively.

See “— Variable Interest Entities” for information on investments in affiliated real estate joint ventures.

35

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives

Accounting for Derivatives

Freestanding Derivatives

Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.

Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivatives carrying value in other invested assets or other liabilities.

If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows:

Statement of Operations Presentation:	Derivative:
Policyholder benefits and claims	•	Economic hedges of variable annuity guarantees included in future policy benefits
Net investment income	•	Economic hedges of equity method investments in joint ventures
	•	All derivatives held in relation to trading portfolios

Hedge Accounting

To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:

• Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.

• Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).

The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item.

In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.

The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

36

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.

When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).

In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).

Embedded Derivatives

The Company sells variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:

• the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;

• the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and

• a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.

Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.

See Note 8 for information about the fair value hierarchy for derivatives.

Derivative Strategies

The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.

Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash market.

37

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

Interest Rate Derivatives

The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, interest rate total return swaps, caps, floors, swaptions, futures and forwards.

Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.

The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. government and agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.

Interest rate total return swaps are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Interbank Offered Rate (“LIBOR”), calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. Interest rate total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate total return swaps in nonqualifying hedging relationships.

The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in nonqualifying hedging relationships.

Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.

The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow hedging relationships.

To a lesser extent, the Company uses exchange-traded interest rate futures in nonqualifying hedging relationships.

Foreign Currency Exchange Rate Derivatives

The Company uses foreign currency exchange rate derivatives, including foreign currency swaps and foreign currency forwards, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and nonqualifying hedging relationships.

In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in nonqualifying hedging relationships.

38

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

Credit Derivatives

The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations, repudiation, moratorium, involuntary restructuring or governmental intervention. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.

The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.

The Company also enters into certain purchased and written credit default swaps held in relation to trading portfolios for the purpose of generating profits on short-term differences in price. These credit default swaps are not designated as hedging instruments.

The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.

Equity Derivatives

The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.

Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.

Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.

In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

Primary Risks Managed by Derivatives

The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company’s derivatives, excluding embedded derivatives, held at:

		September 30, 2016						December 31, 2015
	Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
				Assets		Liabilities				Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps	Interest rate	$	5,025	$	2,760	$	12	$	5,089	$	2,177	$	11
Foreign currency swaps	Foreign currency exchange rate	1,200		23		156		2,133		61		159
Subtotal		6,225		2,783		168		7,222		2,238		170
Cash flow hedges:
Interest rate swaps	Interest rate	1,904		618		—		1,960		426		—
Interest rate forwards	Interest rate	1,997		33		10		70		15		—
Foreign currency swaps	Foreign currency exchange rate	20,099		1,380		1,352		18,743		1,132		1,376
Subtotal		24,000		2,031		1,362		20,773		1,573		1,376
Total qualifying hedges		30,225		4,814		1,530		27,995		3,811		1,546
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	36,069		4,238		1,609		51,489		2,613		1,197
Interest rate floors	Interest rate	10,001		314		9		13,701		252		10
Interest rate caps	Interest rate	64,838		28		3		55,136		67		2
Interest rate futures	Interest rate	3,662		—		12		2,023		—		2
Interest rate options	Interest rate	1,450		264		1		2,295		227		4
Interest rate total return swaps	Interest rate	1,549		76		—		—		—		—
Synthetic GICs	Interest rate	5,328		—		—		4,216		—		—
Foreign currency swaps	Foreign currency exchange rate	8,345		935		97		8,095		600		94
Foreign currency forwards	Foreign currency exchange rate	1,978		34		6		3,014		83		36
Credit default swaps — purchased	Credit	950		10		9		819		28		8
Credit default swaps — written	Credit	7,320		90		9		6,577		51		11
Equity futures	Equity market	1,850		—		11		1,452		15		—
Equity index options	Equity market	8,276		296		403		7,364		326		349
Equity variance swaps	Equity market	5,676		69		188		5,676		62		160
Equity total return swaps	Equity market	1,270		1		23		952		11		9
Total non-designated or nonqualifying derivatives		158,562		6,355		2,380		162,809		4,335		1,882
Total		$	188,787	$	11,169	$	3,910	$	190,804	$	8,146	$	3,428

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2016 and December 31, 2015. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to synthetically create credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

40

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

Net Derivative Gains (Losses)

The components of net derivative gains (losses) were as follows:

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Freestanding derivatives and hedging gains (losses) (1)	$	(342	)	$	850		$	947		$	716
Embedded derivatives gains (losses)	137			(292		)	(1,509		)	111
Total net derivative gains (losses)	$	(205	)	$	558		$	(562	)	$	827

__________________

(1) Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.

The following table presents earned income on derivatives:

	Three Months   Ended  September 30,					Nine Months   Ended  September 30,
	2016		2015			2016			2015
	(In millions)
Qualifying hedges:
Net investment income	$	70	$	57		$	199		$	164
Interest credited to policyholder account balances	—		5			7			22
Nonqualifying hedges:
Net investment income	—		(1		)	(1		)	(3		)
Net derivative gains (losses)	152		124			428			390
Policyholder benefits and claims	1		1			3			2
Total	$	223	$	186		$	636		$	575

41

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging

The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:

	Net Derivative Gains (Losses)			Net Investment Income (1)			Policyholder Benefits and Claims (2)
	(In millions)
Three Months Ended September 30, 2016
Interest rate derivatives	$	(305	)	$	—		$	—
Foreign currency exchange rate derivatives	65			—			—
Credit derivatives — purchased	(13		)	—			—
Credit derivatives — written	36			—			—
Equity derivatives	(231		)	(2		)	(62		)
Total	$	(448	)	$	(2	)	$	(62	)
Three Months Ended September 30, 2015
Interest rate derivatives	$	493		$	—		$	—
Foreign currency exchange rate derivatives	258			—			—
Credit derivatives — purchased	15			3			—
Credit derivatives — written	(53		)	(1		)	—
Equity derivatives	142			(1		)	80
Total	$	855		$	1		$	80
Nine Months Ended September 30, 2016
Interest rate derivatives	$	867		$	—		$	—
Foreign currency exchange rate derivatives	275			—			—
Credit derivatives — purchased	(31		)	—			—
Credit derivatives — written	38			—			—
Equity derivatives	(304		)	(12		)	(57		)
Total	$	845		$	(12	)	$	(57	)
Nine Months Ended September 30, 2015
Interest rate derivatives	$	74		$	—		$	—
Foreign currency exchange rate derivatives	488			—			—
Credit derivatives — purchased	19			3			—
Credit derivatives — written	(76		)	—			—
Equity derivatives	58			(7		)	49
Total	$	563		$	(4	)	$	49

__________________

(1) Changes in estimated fair value related to economic hedges of equity method investments in joint ventures and derivatives held in relation to trading portfolios.

(2) Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.

Fair Value Hedges

The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

42

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):

Derivatives in Fair Value Hedging Relationships	Hedged Items in Fair Value Hedging Relationships	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Ineffectiveness Recognized in Net Derivative Gains (Losses)
		(In millions)
Three Months Ended September 30, 2016
Interest rate swaps:	Fixed maturity securities	$	5		$	(3	)	$	2
	Policyholder liabilities (1)	(47		)	42			(5		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	1			(1		)	—
	Foreign-denominated policyholder account balances (2)	(1		)	1			—
Total		$	(42	)	$	39		$	(3	)
Three Months Ended September 30, 2015
Interest rate swaps:	Fixed maturity securities	$	(2	)	$	1		$	(1	)
	Policyholder liabilities (1)	277			(279		)	(2		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	5			(3		)	2
	Foreign-denominated policyholder account balances (2)	(47		)	46			(1		)
Total		$	233		$	(235	)	$	(2	)
Nine Months Ended September 30, 2016
Interest rate swaps:	Fixed maturity securities	$	(3	)	$	1		$	(2	)
	Policyholder liabilities (1)	472			(482		)	(10		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	5			(4		)	1
	Foreign-denominated policyholder account     balances (2)	(27		)	24			(3		)
Total		$	447		$	(461	)	$	(14	)
Nine Months Ended September 30, 2015
Interest rate swaps:	Fixed maturity securities	$	(2	)	$	4		$	2
	Policyholder liabilities (1)	115			(121		)	(6		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	12			(6		)	6
	Foreign-denominated policyholder account     balances (2)	(186		)	179			(7		)
Total		$	(61	)	$	56		$	(5	)

__________________

(1) Fixed rate liabilities reported in policyholder account balances or future policy benefits.

(2) Fixed rate or floating rate liabilities.

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Cash Flow Hedges

The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments; and (v) interest rate forwards to hedge forecasted fixed-rate borrowings.

43

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). These amounts were $7 million and $10 million for the three months and nine months ended September 30, 2016, respectively. For the three months ended September 30, 2015, the amounts reclassified from AOCI into net derivative gains (losses) were not significant, and for the nine months ended September 30, 2015, these amounts were $4 million.

At September 30, 2016 and December 31, 2015, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed six years and five years, respectively.

At September 30, 2016 and December 31, 2015, the balance in AOCI associated with cash flow hedges was $2.7 billion and $2.2 billion, respectively.

The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:

Derivatives in Cash Flow Hedging Relationships	Amount of Gains (Losses) Deferred in AOCI on Derivatives			Amount and Location of Gains (Losses) Reclassified from AOCI into Income (Loss)						Amount and Location of Gains (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)			(Effective Portion)						(Ineffective Portion)
				Net Derivative Gains (Losses)			Net Investment Income			Net Derivative Gains (Losses)
	(In millions)
Three Months Ended September 30, 2016
Interest rate swaps	$	21		$	27		$	4		$	—
Interest rate forwards	(6		)	1			—			—
Foreign currency swaps	24			69			—			(4		)
Credit forwards	—			—			—			—
Total	$	39		$	97		$	4		$	(4	)
Three Months Ended September 30, 2015
Interest rate swaps	$	179		$	39		$	2		$	1
Interest rate forwards	4			—			1			—
Foreign currency swaps	(91		)	(260		)	—			4
Credit forwards	—			—			1			—
Total	$	92		$	(221	)	$	4		$	5
Nine Months Ended September 30, 2016
Interest rate swaps	$	330		$	44		$	10		$	—
Interest rate forwards	34			—			2			—
Foreign currency swaps	339			169			(1		)	(3		)
Credit forwards	—			3			—			—
Total	$	703		$	216		$	11		$	(3	)
Nine Months Ended September 30, 2015
Interest rate swaps	$	96		$	51		$	8		$	2
Interest rate forwards	(1		)	3			2			—
Foreign currency swaps	(158		)	(537		)	(1		)	5
Credit forwards	—			1			1			—
Total	$	(63	)	$	(482	)	$	10		$	7

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

At September 30, 2016,the Company expects to reclassify ($82) millionof deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months.

44

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

Credit Derivatives

In connection with synthetically created credit investment transactions and credit default swaps held in relation to the trading portfolio, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $7.3 billion and $6.6 billion at September 30, 2016 and December 31, 2015, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At September 30, 2016 and December 31, 2015, the Company would have received $81 million and $40 million, respectively, to terminate all of these contracts.

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:

	September 30, 2016						December 31, 2015
Rating Agency Designation of Referenced Credit Obligations (1)	Estimated Fair Value of Credit Default Swaps			Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Estimated Fair Value of Credit Default Swaps			Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)
	(Dollars in millions)
Aaa/Aa/A
Single name credit default swaps (corporate)	$	1		$	217	3.0	$	2		$	245	2.5
Credit default swaps referencing indices	14			1,375		3.2	5			1,366		3.3
Subtotal	15			1,592		3.2	7			1,611		3.2
Baa
Single name credit default swaps (corporate)	4			575		2.5	5			752		2.6
Credit default swaps referencing indices	59			4,867		5.0	21			3,452		4.8
Subtotal	63			5,442		4.7	26			4,204		4.4
Ba
Single name credit default swaps (corporate)	(4		)	115		4.5	(2		)	60		2.2
Credit default swaps referencing indices	—			—		—	(1		)	100		1.0
Subtotal	(4		)	115		4.5	(3		)	160		1.4
B
Single name credit default swaps (corporate)	1			70		2.1	—			—		—
Credit default swaps referencing indices	6			101		5.3	10			602		4.9
Subtotal	7			171		4.0	10			602		4.9
Total	$	81		$	7,320	4.4	$	40		$	6,577	4.1

__________________

(1) The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.

(2) The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.

45

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amounts of potential future recoveries available to offset the $7.3 billion and $6.6 billion from the table above were $27 million and $70 million at September 30, 2016 and December 31, 2015, respectively.

At September 30, 2016, there were no written credit default swaps held in relation to the trading portfolio. At December 31, 2015, written credit default swaps held in relation to the trading portfolio amounted to $20 million in gross notional amount and ($2) million in estimated fair value.

Credit Risk on Freestanding Derivatives

The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.

The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.

See Note 8 for a description of the impact of credit risk on the valuation of derivatives.

46

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:

	September 30, 2016						December 31, 2015
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement	Assets			Liabilities			Assets			Liabilities
	(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)	$	9,722		$	2,972		$	7,368		$	2,667
OTC-cleared (1)	1,625			896			909			783
Exchange-traded	—			23			15			2
Total gross estimated fair value of derivatives (1)	11,347			3,891			8,292			3,452
Amounts offset on the consolidated balance sheets	—			—			—			—
Estimated fair value of derivatives presented on the consolidated balance  sheets (1)	11,347			3,891			8,292			3,452
Gross amounts not offset on the consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(2,402		)	(2,402		)	(2,117		)	(2,117		)
OTC-cleared	(878		)	(878		)	(776		)	(776		)
Exchange-traded	—			—			—			—
Cash collateral: (3), (4)
OTC-bilateral	(5,022		)	—			(3,705		)	(3		)
OTC-cleared	(743		)	—			(119		)	—
Exchange-traded	—			(1		)	—			—
Securities collateral: (5)
OTC-bilateral	(2,154		)	(567		)	(1,345		)	(541		)
OTC-cleared	—			—			—			—
Exchange-traded	—			(20		)	—			—
Net amount after application of master netting agreements and collateral	$	148		$	23		$	230		$	15

__________________

(1) At September 30, 2016 and December 31, 2015, derivative assets included income or expense accruals reported in accrued investment income or in other liabilities of $178 million and $146 million, respectively, and derivative liabilities included income or expense accruals reported in accrued investment income or in other liabilities of($19) millionand $24 million, respectively.

(2) Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.

(3) Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.

(4) The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2016 and December 31, 2015, the Company received excess cash collateral of $57 million and $17 million, respectively, and provided excess cash collateral of $7 million and $58 million, respectively, which is not included in the table above due to the foregoing limitation.

47

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

(5) Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2016, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2016 and December 31, 2015, the Company received excess securities collateral with an estimated fair value of $38 million and $71 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2016 and December 31, 2015, the Company provided excess securities collateral with an estimated fair value of $76 million and $81 million, respectively, for its OTC-bilateral derivatives, and $404 million and $239 million, respectively, for its OTC-cleared derivatives, and $84 million and $15 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the party in a net liability position, after considering the effect of netting agreements, to pledge collateral when the estimated fair value of that party’s derivatives reaches a minimum transfer amount. A small number of these arrangements also include financial strength or credit rating contingent provisions that include a threshold above which collateral must be posted. Such agreements provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the financial strength or credit ratings of Metropolitan Life Insurance Company, or its subsidiaries, as applicable, and/or the credit ratings of the counterparty. In addition, substantially all of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company, or its subsidiaries, as applicable, and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that are in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that Metropolitan Life Insurance Company, or its subsidiaries, as applicable, would be required to provide if there was a one-notch downgrade in such companies’ financial strength or credit rating, as applicable, at the reporting date or if such companies’ financial strength or credit rating, as applicable, sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.

	September 30, 2016						December 31, 2015
	Derivatives Subject to Financial Strength- Contingent Provisions		Derivatives Not Subject to Financial Strength- Contingent Provisions		Total		Derivatives Subject to Financial Strength- Contingent Provisions		Derivatives Not Subject to Financial Strength- Contingent Provisions		Total
	(In millions)
Estimated Fair Value of Derivatives in a Net Liability Position (1)	$	569	$	—	$	569	$	547	$	3	$	550
Estimated Fair Value of Collateral Provided:
Fixed maturity securities	$	643	$	—	$	643	$	622	$	—	$	622
Cash	$	—	$	—	$	—	$	—	$	4	$	4
Estimated Fair Value of Incremental Collateral Provided Upon:
One-notch downgrade in financial strength or credit rating, as applicable	$	—	$	—	$	—	$	—	$	—	$	—
Downgrade in financial strength or credit rating, as applicable, to a level that triggers full overnight collateralization or termination of the derivative position	$	—	$	—	$	—	$	—	$	—	$	—

__________________

48

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

(1) After taking into consideration the existence of netting agreements.

Embedded Derivatives

The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance; funding agreements with equity or bond indexed crediting rates; and certain debt and equity securities.

The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:

	Balance Sheet Location	September 30, 2016			December 31, 2015
		(In millions)
Net embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefits	Premiums, reinsurance and other receivables	$	993		$	712
Options embedded in debt or equity securities	Investments	(153		)	(142		)
Net embedded derivatives within asset host contracts		$	840		$	570
Net embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	Policyholder account balances	$	861		$	(284	)
Assumed guaranteed minimum benefits	Policyholder account balances	262			126
Funds withheld on ceded reinsurance	Other liabilities	1,310			687
Other	Policyholder account balances	6			(3		)
Net embedded derivatives within liability host contracts		$	2,439		$	526

The following table presents changes in estimated fair value related to embedded derivatives:

	Three Months   Ended  September 30,					Nine Months   Ended  September 30,
	2016		2015			2016			2015
	(In millions)
Net derivative gains (losses) (1), (2)	$	137	$	(292	)	$	(1,509	)	$	111

__________________

(1) The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($47) million and $173 million for the three months and nine months ended September 30, 2016, respectively, and $37 million and $33 million for the three months and nine months ended September 30, 2015, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were $9 million and ($64) million for the three months and nine months ended September 30, 2016, respectively, and($11) millionand($8) millionfor thethree monthsand nine months endedSeptember 30, 2015, respectively.

(2) See Note 13 for discussion of affiliated net derivative gains (losses).

8. Fair Value

Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

49

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Recurring Fair Value Measurements

The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:

	September 30, 2016
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	57,730	$	4,988	$	62,718
U.S. government and agency	22,584		19,486		271		42,341
Foreign corporate	—		22,896		4,207		27,103
RMBS	2,610		20,733		3,891		27,234
State and political subdivision	—		7,860		38		7,898
CMBS	—		5,669		122		5,791
ABS	—		7,572		735		8,307
Foreign government	—		5,182		71		5,253
Total fixed maturity securities	25,194		147,128		14,323		186,645
Equity securities	429		1,041		437		1,907
Trading and FVO securities:
Actively traded securities	—		—		—		—
FVO general account securities	—		—		14		14
FVO securities held by CSEs	—		2		7		9
Total trading and FVO securities	—		2		21		23
Short-term investments (1)	2,564		2,484		186		5,234
Residential mortgage loans — FVO	—		—		481		481
Derivative assets: (2)
Interest rate	—		8,222		109		8,331
Foreign currency exchange rate	—		2,372		—		2,372
Credit	—		86		14		100
Equity market	—		250		116		366
Total derivative assets	—		10,930		239		11,169
Net embedded derivatives within asset host contracts (3)	—		—		993		993
Separate account assets (4)	28,601		114,301		1,260		144,162
Total assets	$	56,788	$	275,886	$	17,940	$	350,614
Liabilities
Derivative liabilities: (2)
Interest rate	$	12	$	1,633	$	11	$	1,656
Foreign currency exchange rate	—		1,610		1		1,611
Credit	—		18		—		18
Equity market	11		426		188		625
Total derivative liabilities	23		3,687		200		3,910
Net embedded derivatives within liability host contracts (3)	—		—		2,439		2,439
Long-term debt	—		—		42		42
Long-term debt of CSEs — FVO	—		—		12		12
Trading liabilities (5)	—		—		—		—
Separate account liabilities (4)	1		75		6		82
Total liabilities	$	24	$	3,762	$	2,699	$	6,485

50

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

	December 31, 2015
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	56,848	$	4,709	$	61,557
U.S. government and agency	23,015		16,678		—		39,693
Foreign corporate	—		23,222		3,573		26,795
RMBS	—		20,585		3,330		23,915
State and political subdivision	—		6,941		33		6,974
CMBS	—		6,361		218		6,579
ABS	—		5,699		868		6,567
Foreign government	—		3,331		275		3,606
Total fixed maturity securities	23,015		139,665		13,006		175,686
Equity securities	424		1,197		328		1,949
Trading and FVO securities:
Actively traded securities	—		400		4		404
FVO general account securities	—		—		15		15
FVO securities held by CSEs	—		2		10		12
Total trading and FVO securities	—		402		29		431
Short-term investments (1)	1,513		3,882		200		5,595
Residential mortgage loans — FVO	—		—		314		314
Derivative assets: (2)
Interest rate	—		5,762		15		5,777
Foreign currency exchange rate	—		1,876		—		1,876
Credit	—		72		7		79
Equity market	15		282		117		414
Total derivative assets	15		7,992		139		8,146
Net embedded derivatives within asset host contracts (3)	—		—		712		712
Separate account assets (4)	23,498		110,921		1,520		135,939
Total assets	$	48,465	$	264,059	$	16,248	$	328,772
Liabilities
Derivative liabilities: (2)
Interest rate	$	2	$	1,224	$	—	$	1,226
Foreign currency exchange rate	—		1,665		—		1,665
Credit	—		17		2		19
Equity market	—		358		160		518
Total derivative liabilities	2		3,264		162		3,428
Net embedded derivatives within liability host contracts (3)	—		—		526		526
Long-term debt	—		50		36		86
Long-term debt of CSEs — FVO	—		—		11		11
Trading liabilities (5)	103		50		—		153
Separate account liabilities (4)	—		—		—		—
Total liabilities	$	105	$	3,364	$	735	$	4,204

__________________

(1) Short-term investments as presented in the tables above differ from the amounts presented on the consolidated balance sheets because certain short-term investments are not measured at estimated fair value on a recurring basis.

51

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

(2) Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.

(3) Net embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Net embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the consolidated balance sheets. At September 30, 2016 and December 31, 2015, debt and equity securities also included embedded derivatives of ($153) million and ($142) million, respectively.

(4) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.

(5) Trading liabilities are presented within other liabilities on the consolidated balance sheets.

The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy.

Investments

Valuation Controls and Procedures

On behalf of the Company and MetLife, Inc.’s Chief Investment Officer and Chief Financial Officer, a pricing and valuation committee that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a quarterly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. This committee also provides oversight of the selection of independent third-party pricing providers and the controls and procedures to evaluate third-party pricing. Periodically, the Chief Accounting Officer reports to the Audit Committee of the Board of Directors of each of MetLife, Inc. and Metropolitan Life Insurance Company regarding compliance with fair value accounting standards.

The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and 3% of the total estimated fair value of Level 3 fixed maturity securities at September 30, 2016.

52

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained, or an internally developed valuation is prepared. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and nonperformance risks, compared with pricing received from the independent pricing services, did not produce material differences in the estimated fair values for the majority of the portfolio; accordingly, overrides were not material. This is, in part, because internal estimates of liquidity and nonperformance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used.

Securities, Short-term Investments, Long-term Debt, Long-term Debt of CSEs — FVO and Trading Liabilities

When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment.

When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances.

The estimated fair value of FVO securities held by CSEs, long-term debt, long-term debt of CSEs — FVO and trading liabilities is determined on a basis consistent with the methodologies described herein for securities.

The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.

53

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Instrument		Level 2 Observable Inputs		Level 3 Unobservable Inputs
Fixed Maturity Securities
U.S. corporate and Foreign corporate securities
	Valuation Techniques: Principally the market and income approaches.			Valuation Techniques: Principally the market approach.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	illiquidity premium
	•	benchmark yields; spreads off benchmark yields; new issuances; issuer rating		•	delta spread adjustments to reflect specific credit-related issues
	•	trades of identical or comparable securities; duration		•	credit spreads
	•	Privately-placed securities are valued using the additional key inputs:		•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
		•	market yield curve; call provisions
		•	observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer	•	independent non-binding broker quotations
		•	delta spread adjustments to reflect specific credit-related issues
U.S. government and agency, State and political subdivision and Foreign government securities
	Valuation Techniques: Principally the market approach.			Valuation Techniques: Principally the market approach.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	independent non-binding broker quotations
	•	benchmark U.S. Treasury yield or other yields		•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
	•	the spread off the U.S. Treasury yield curve for the identical security
	•	issuer ratings and issuer spreads; broker-dealer quotes		•	credit spreads
	•	comparable securities that are actively traded
Structured Securities
	Valuation Techniques: Principally the market and income approaches.			Valuation Techniques: Principally the market and income approaches.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	credit spreads
	•	spreads for actively traded securities; spreads off benchmark yields		•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
	•	expected prepayment speeds and volumes
	•	current and forecasted loss severity; ratings; geographic region		•	independent non-binding broker quotations
	•	weighted average coupon and weighted average maturity
	•	average delinquency rates; debt-service coverage ratios
	•	issuance-specific information, including, but not limited to:
		•	collateral type; structure of the security; vintage of the loans
		•	payment terms of the underlying assets
		•	payment priority within the tranche; deal performance

54

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Instrument	Level 2 Observable Inputs		Level 3 Unobservable Inputs
Equity Securities
	Valuation Techniques: Principally the market approach.		Valuation Techniques: Principally the market and income approaches.
	Key Input:		Key Inputs:
	•	quoted prices in markets that are not considered active	•	credit ratings; issuance structures
			•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
			•	independent non-binding broker quotations
Trading and FVO securities and Short-term investments
	•	Trading and FVO securities and short-term investments are of a similar nature and class to the fixed maturity and equity securities described above; accordingly, the valuation techniques and observable inputs used in their valuation are also similar to those described above.	•	Trading and FVO securities and short-term investments are of a similar nature and class to the fixed maturity and equity securities described above; accordingly, the valuation techniques and unobservable inputs used in their valuation are also similar to those described above.
Residential mortgage loans — FVO
	•	N/A	Valuation Techniques: Principally the market approach, including matrix pricing or other similar techniques.
			Key Inputs:
			•	Inputs that are unobservable or cannot be derived principally from, or corroborated by, observable market data
Separate Account Assets and Separate Account Liabilities (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
	Key Input:		•	N/A
	•	quoted prices or reported NAV provided by the fund managers
Other limited partnership interests
	•	N/A	Valuation Techniques: Valued giving consideration to the underlying holdings of the partnerships and by applying a premium or discount, if appropriate.
			Key Inputs:
			•	liquidity; bid/ask spreads; performance record of the fund manager
			•	other relevant variables that may impact the exit value of the particular partnership interest

__________________

(1) Estimated fair value equals carrying value, based on the value of the underlying assets, including: mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. Fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents are similar in nature to the instruments described under “— Securities, Short-term Investments, Long-term Debt, Long-term Debt of CSEs — FVO and Trading Liabilities” and “— Derivatives — Freestanding Derivatives.”

Derivatives

The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments.”

The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.

55

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.

The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.

Freestanding Derivatives

Level 2 Valuation Techniques and Key Inputs:

This level includes all types of derivatives utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivatives with unobservable inputs as described in Level 3.

Level 3 Valuation Techniques and Key Inputs:

These valuation methodologies generally use the same inputs as described in the corresponding sections for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.

Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. Key inputs are as follows:

Instrument		Interest Rate		Foreign Currency Exchange Rate		Credit		Equity Market
Inputs common to Level 2 and Level 3 by instrument type	•	swap yield curves	•	swap yield curves	•	swap yield curves	•	swap yield curves
	•	basis curves	•	basis curves	•	credit curves	•	spot equity index levels
	•	interest rate volatility (1)	•	currency spot rates	•	recovery rates	•	dividend yield curves
			•	cross currency basis curves			•	equity volatility (1)
Level 3	•	swap yield curves (2)	•	swap yield curves (2)	•	swap yield curves (2)	•	dividend yield curves (2)
	•	basis curves (2)	•	basis curves (2)	•	credit curves (2)	•	equity volatility (1), (2)
	•	repurchase rates	•	cross currency basis curves (2)	•	credit spreads	•	correlation between model inputs (1)
			•	currency correlation	•	repurchase rates
					•	independent non-binding broker quotations

__________________

(1) Option-based only.

(2) Extrapolation beyond the observable limits of the curve(s).

56

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Embedded Derivatives

Embedded derivatives principally include certain direct, assumed and ceded variable annuity guarantees, certain affiliated ceded reinsurance agreements related to such variable annuity guarantees, equity or bond indexed crediting rates within certain funding agreements and those related to funds withheld on ceded reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.

The Company’s actuarial department calculates the fair value of these embedded derivatives, which are estimated as the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates.

Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.

The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc.

Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income.

The Company ceded the risk associated with certain of the GMIBs, GMABs and GMWBs previously described. In addition to ceding risks associated with guarantees that are accounted for as embedded derivatives, the Company also ceded directly written GMIBs that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance agreement contains an embedded derivative. These embedded derivatives are included within premiums, reinsurance and other receivables on the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.

The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as previously described in “— Investments — Securities, Short-term Investments, Long-term Debt, Long-term Debt of CSEs — FVO and Trading Liabilities.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities on the consolidated balance sheets with changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

57

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including a nonperformance risk adjustment. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within policyholder account balances with changes in estimated fair value recorded in net derivative gains (losses). Changes in equity and bond indices, interest rates and the Company’s credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

Embedded Derivatives Within Asset and Liability Host Contracts

Level 3 Valuation Techniques and Key Inputs:

Direct and assumed guaranteed minimum benefits

These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curves, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curves and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin.

Reinsurance ceded on certain guaranteed minimum benefits

These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in “— Direct and assumed guaranteed minimum benefits” and also include counterparty credit spreads.

Embedded derivatives within funds withheld related to certain ceded reinsurance

These embedded derivatives are principally valued using the income approach. The valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curves and the fair value of assets within the reference portfolio. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include the fair value of certain assets within the reference portfolio which are not observable in the market and cannot be derived principally from, or corroborated by, observable market data.

Transfers between Levels

Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into or out of any level are assumed to occur at the beginning of the period.

Transfers between Levels 1 and 2:

For assets and liabilities measured at estimated fair value and still held at September 30, 2016, there were no transfers between Levels 1 and 2. For assets and liabilities measured at estimated fair value and still held at December 31, 2015, transfers between Levels 1 and 2 were not significant.

Transfers into or out of Level 3:

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

58

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:

					September 30, 2016				December 31, 2015				Impact of Increase in Input on Estimated Fair Value (2)
	Valuation Techniques		Significant Unobservable Inputs		Range			Weighted Average (1)	Range			Weighted Average (1)
Fixed maturity securities (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Delta spread  adjustments (4)	(269)	-	603	(10)	(65)	-	240	37	Decrease
			•	Offered quotes (5)	98	-	100	99	39	-	96	60	Increase
	•	Market pricing	•	Quoted prices (5)	6	-	788	132	—	-	385	125	Increase
	•	Consensus pricing	•	Offered quotes (5)	23	-	119	87	100	-	119	103	Increase
RMBS	•	Market pricing	•	Quoted prices (5)	7	-	131	90	19	-	121	92	Increase (6)
ABS	•	Market pricing	•	Quoted prices (5)	19	-	102	99	16	-	103	100	Increase (6)
	•	Consensus pricing	•	Offered quotes (5)	98	-	100	100	97	-	105	99	Increase (6)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (7)	200	-	300		307	-	307		Increase (8)
			•	Repurchase rates (9)	(6)	-	17						Decrease (8)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (7)	50	-	164		—	-	—		Increase (8)
Credit	•	Present value techniques	•	Credit spreads (10)	97	-	100		98	-	100		Decrease (8)
	•	Consensus pricing	•	Offered quotes (11)
Equity market	•	Present value    techniques or    option pricing    models	•	Volatility (12)	13%	-	36%		17%	-	36%		Increase (8)
			•	Correlation (13)	40%	-	40%		70%	-	70%
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0%	-	0.09%		0%	-	0.09%		Decrease (14)
				Ages 41 - 60	0.04%	-	0.65%		0.04%	-	0.65%		Decrease (14)
				Ages 61 - 115	0.26%	-	100%		0.26%	-	100%		Decrease (14)
			•	Lapse rates:
				Durations 1 - 10	0.25%	-	100%		0.25%	-	100%		Decrease (15)
				Durations 11 - 20	3%	-	100%		3%	-	100%		Decrease (15)
				Durations 21 - 116	3%	-	100%		3%	-	100%		Decrease (15)
			•	Utilization rates	0%	-	25%		0%	-	25%		Increase (16)
			•	Withdrawal rates	0.25%	-	10%		0.25%	-	10%		(17)
			•	Long-term equity volatilities	17.40%	-	25%		17.40%	-	25%		Increase (18)
			•	Nonperformance risk spread	0.06%	-	0.68%		0.04%	-	0.52%		Decrease (19)

__________________

(1) The weighted average for fixed maturity securities is determined based on the estimated fair value of the securities.

(2) The impact of a decrease in input would have the opposite impact on estimated fair value. For embedded derivatives, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions.

(3) Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations.

(4) Range and weighted average are presented in basis points.

(5) Range and weighted average are presented in accordance with the market convention for fixed maturity securities of dollars per hundred dollars of par.

59

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

(6) Changes in the assumptions used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.

(7) Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curves are utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.

(8) Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.

(9) Ranges represent different repurchase rates utilized as components within the valuation methodology and are presented in basis points.

(10) Represents the risk quoted in basis points of a credit default event on the underlying instrument. Credit derivatives with significant unobservable inputs are primarily comprised of written credit default swaps.

(11) At both September 30, 2016 and December 31, 2015, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.

(12) Ranges represent the underlying equity volatility quoted in percentage points. Since this valuation methodology uses a range of inputs across multiple volatility surfaces to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.

(13) Ranges represent the different correlation factors utilized as components within the valuation methodology. Presenting a range of correlation factors is more representative of the unobservable input used in the valuation. Increases (decreases) in correlation in isolation will increase (decrease) the significance of the change in valuations.

(14) Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(15) Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(16) The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(17) The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.

(18) Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(19) Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

60

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3, including those within separate account assets and embedded derivatives within funds withheld related to certain ceded reinsurance, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The residential mortgage loans — FVO, long-term debt and long-term debt of CSEs — FVO are valued using independent non-binding broker quotations and internal models including matrix pricing and discounted cash flow methodologies using current interest rates. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table. The valuation techniques and significant unobservable inputs used in the fair value measurement for the more significant assets measured at estimated fair value on a nonrecurring basis and determined using significant unobservable inputs (Level 3) are summarized in “— Nonrecurring Fair Value Measurements.”

61

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)			U.S. Government and Agency			Structured Securities			State and Political Subdivision			Foreign Government			Equity Securities			Trading and FVO Securities (2)
	(In millions)
Three Months Ended September 30, 2016
Balance, beginning of period	$	8,904		$	175		$	4,415		$	28		$	65		$	456		$	22
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	9			—			25			—			—			4			1
Total realized/unrealized gains (losses) included in AOCI	66			—			23			3			—			(12		)	—
Purchases (5)	431			98			702			—			17			4			—
Sales (5)	(407		)	—			(294		)	—			(1		)	(11		)	(2		)
Issuances (5)	—			—			—			—			—			—			—
Settlements (5)	—			—			—			—			—			—			—
Transfers into Level 3 (6)	331			—			36			7			—			1			—
Transfers out of Level 3 (6)	(139		)	(2		)	(159		)	—			(10		)	(5		)	—
Balance, end of period	$	9,195		$	271		$	4,748		$	38		$	71		$	437		$	21
Three Months Ended September 30, 2015
Balance, beginning of period	$	8,547		$	30		$	4,359		$	48		$	165		$	345		$	38
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	10			—			23			—			1			6			—
Total realized/unrealized gains (losses) included in AOCI	(164		)	—			(34		)	1			(1		)	(16		)	—
Purchases (5)	599			—			1,267			15			—			12			32
Sales (5)	(294		)	(1		)	(270		)	—			—			(12		)	—
Issuances (5)	—			—			—			—			—			—			—
Settlements (5)	—			—			—			—			—			—			—
Transfers into Level 3 (6)	485			18			273			—			—			—			—
Transfers out of Level 3 (6)	(878		)	(30		)	(394		)	(30		)	(18		)	(2		)	(5		)
Balance, end of period	$	8,305		$	17		$	5,224		$	34		$	147		$	333		$	65
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (7)	$	1		$	—		$	26		$	—		$	—		$	—		$	1
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2015 (7)	$	1		$	—		$	27		$	—		$	1		$	—		$	—

62

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Short-term Investments			Residential Mortgage Loans - FVO			Net Derivatives (8)			Net Embedded Derivatives (9)			Separate Accounts (10)			Long-term Debt			Long-term Debt of CSEs - FVO			Trading Liabilities
	(In millions)
Three Months Ended September 30, 2016
Balance, beginning of period	$	—		$	449		$	102		$	(1,508	)	$	1,485		$	(44	)	$	(12	)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	—			10			(44		)	119			(25		)	—			—			—
Total realized/unrealized gains (losses) included in AOCI	—			—			(8		)	—			—			—			—			—
Purchases (5)	187			42			—			—			4			—			—			—
Sales (5)	(1		)	(5		)	—			—			(25		)	—			—			—
Issuances (5)	—			—			(1		)	—			30			—			—			—
Settlements (5)	—			(15		)	(10		)	(57		)	(45		)	2			—			—
Transfers into Level 3 (6)	—			—			—			—			8			—			—			—
Transfers out of Level 3 (6)	—			—			—			—			(178		)	—			—			—
Balance, end of period	$	186		$	481		$	39		$	(1,446	)	$	1,254		$	(42	)	$	(12	)	$	—
Three Months Ended September 30, 2015
Balance, beginning of period	$	933		$	345		$	5		$	253		$	1,563		$	(25	)	$	(12	)	$	(4	)
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	—			(2		)	(11		)	(295		)	25			—			—			—
Total realized/unrealized gains (losses) included in AOCI	—			—			5			—			—			—			—			—
Purchases (5)	557			18			—			—			81			—			—			(2		)
Sales (5)	(1		)	(37		)	—			—			(34		)	—			—			—
Issuances (5)	—			—			(1		)	—			—			(38		)	—			—
Settlements (5)	—			(9		)	(1		)	(52		)	—			24			1			—
Transfers into Level 3 (6)	—			—			—			—			1			—			—			—
Transfers out of Level 3 (6)	(921		)	—			—			—			(118		)	—			—			4
Balance, end of period	$	568		$	315		$	(3	)	$	(94	)	$	1,518		$	(39	)	$	(11	)	$	(2	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (7)	$	—		$	10		$	(33	)	$	119		$	—		$	—		$	—		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2015 (7)	$	—		$	(2	)	$	(11	)	$	(291	)	$	—		$	—		$	—		$	—

63

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)			U.S. Government and Agency			Structured Securities			State and Political Subdivision			Foreign Government			Equity Securities			Trading and FVO Securities (2)
	(In millions)
Nine Months Ended September 30, 2016
Balance, beginning of period	$	8,282		$	—		$	4,416		$	33		$	275		$	328		$	29
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	1			—			73			1			—			(21		)	2
Total realized/unrealized gains (losses) included in AOCI	633			13			(19		)	2			(1		)	38			—
Purchases (5)	1,155			98			1,726			—			18			20			—
Sales (5)	(717		)	—			(966		)	—			(1		)	(15		)	(5		)
Issuances (5)	—			—			—			—			—			—			—
Settlements (5)	—			—			—			—			—			—			—
Transfers into Level 3 (6)	589			160			4			7			—			282			—
Transfers out of Level 3 (6)	(748		)	—			(486		)	(5		)	(220		)	(195		)	(5		)
Balance, end of period	$	9,195		$	271		$	4,748		$	38		$	71		$	437		$	21
Nine Months Ended September 30, 2015
Balance, beginning of period	$	8,528		$	—		$	5,570		$	—		$	202		$	215		$	31
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	31			—			73			—			1			7			1
Total realized/unrealized gains (losses) included in AOCI	(455		)	(1		)	(47		)	1			9			(20		)	—
Purchases (5)	1,090			—			1,752			33			—			58			35
Sales (5)	(698		)	(1		)	(1,025		)	—			—			(15		)	(1		)
Issuances (5)	—			—			—			—			—			—			—
Settlements (5)	—			—			—			—			—			—			—
Transfers into Level 3 (6)	592			19			290			—			—			88			—
Transfers out of Level 3 (6)	(783		)	—			(1,389		)	—			(65		)	—			(1		)
Balance, end of period	$	8,305		$	17		$	5,224		$	34		$	147		$	333		$	65
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (7)	$	3		$	—		$	76		$	1		$	—		$	(26	)	$	2
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2015 (7)	$	3		$	—		$	74		$	—		$	1		$	—		$	1

64

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Short-term Investments			Residential Mortgage Loans - FVO			Net Derivatives (8)			Net Embedded Derivatives (9)			Separate Accounts (10)			Long-term Debt			Long-term Debt of CSEs - FVO			Trading Liabilities
	(In millions)
Nine Months Ended September 30, 2016
Balance, beginning of period	$	200		$	314		$	(23	)	$	186		$	1,520		$	(36	)	$	(11	)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	—			22			63			(1,476		)	7			—			—			—
Total realized/unrealized gains (losses) included in AOCI	—			—			27			—			—			—			—			—
Purchases (5)	187			187			6			—			107			—			—			—
Sales (5)	(199		)	(12		)	—			—			(64		)	—			—			—
Issuances (5)	—			—			(1		)	—			28			(11		)	—			—
Settlements (5)	—			(30		)	(33		)	(156		)	(57		)	5			(1		)	—
Transfers into Level 3 (6)	—			—			—			—			9			—			—			—
Transfers out of Level 3 (6)	(2		)	—			—			—			(296		)	—			—			—
Balance, end of period	$	186		$	481		$	39		$	(1,446	)	$	1,254		$	(42	)	$	(12	)	$	—
Nine Months Ended September 30, 2015
Balance, beginning of period	$	230		$	308		$	6		$	(67	)	$	1,615		$	(35	)	$	(13	)	$	—
Total realized/unrealized gains (losses) included in net income (loss) (3) (4)	—			18			(7		)	117			5			—			—			—
Total realized/unrealized gains (losses) included in AOCI	—			—			—			—			—			—			—			—
Purchases (5)	569			114			—			—			196			—			—			(2		)
Sales (5)	(1		)	(100		)	—			—			(144		)	—			—			—
Issuances (5)	—			—			(1		)	—			—			(38		)	—			—
Settlements (5)	—			(25		)	(1		)	(144		)	(2		)	34			2			—
Transfers into Level 3 (6)	—			—			—			—			3			—			—			—
Transfers out of Level 3 (6)	(230		)	—			—			—			(155		)	—			—			—
Balance, end of period	$	568		$	315		$	(3	)	$	(94	)	$	1,518		$	(39	)	$	(11	)	$	(2	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (7)	$	—		$	22		$	66		$	(1,470	)	$	—		$	—		$	—		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2015 (7)	$	—		$	18		$	(4	)	$	128		$	—		$	—		$	—		$	—

__________________

(1) Comprised of U.S. and foreign corporate securities.

(2) Comprised of actively traded securities, FVO general account securities and FVO securities held by CSEs.

(3) Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses), while changes in estimated fair value of residential mortgage loans — FVO are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivatives gains (losses).

(4) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

(5) Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.

65

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

(6) Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

(7) Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).

(8) Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.

(9) Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

(10) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). Separate account assets and liabilities are presented net for the purposes of the rollforward.

Fair Value Option

The following table presents information for residential mortgage loans, which are accounted for under the FVO, and were initially measured at fair value.

	September 30, 2016			December 31, 2015
	(In millions)
Unpaid principal balance	$	641		$	436
Difference between estimated fair value and unpaid principal balance	(160		)	(122		)
Carrying value at estimated fair value	$	481		$	314
Loans in non-accrual status	$	186		$	122

The following table presents information for long-term debt, which is accounted for under the FVO, and was initially measured at fair value.

	Long-term Debt				Long-term Debt of CSEs - FVO
	September 30, 2016		December 31, 2015		September 30, 2016			December 31, 2015
	(In millions)
Contractual principal balance	$	39	$	82	$	25		$	24
Difference between estimated fair value and contractual principal balance	3		4		(13		)	(13		)
Carrying value at estimated fair value (1)	$	42	$	86	$	12		$	11

__________________

(1) Changes in estimated fair value are recognized in net investment gains (losses). Interest expense is recognized in other expenses.

66

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Nonrecurring Fair Value Measurements

The following table presents information for assets measured at estimated fair value on a nonrecurring basis during the periods and still held at the reporting dates (for example, when there is evidence of impairment). The estimated fair values for these assets were determined using significant unobservable inputs (Level 3).

	At September 30,				Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016		2015		2016			2015			2016			2015
	Carrying Value After Measurement				Gains (Losses)
	(In millions)
Mortgage loans (1)	$	9	$	41	$	—		$	—		$	—		$	(1	)
Other limited partnership interests (2)	$	74	$	53	$	(9	)	$	(8	)	$	(38	)	$	(26	)
Other assets (3)	$	—	$	—	$	—		$	—		$	(30	)	$	—

__________________

(1) Estimated fair values for impaired mortgage loans are based on independent broker quotations or valuation models using unobservable inputs or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, are based on the estimated fair value of the underlying collateral or the present value of the expected future cash flows.

(2) For these cost method investments, estimated fair value is determined from information provided on the financial statements of the underlying entities including net asset value (“NAV”) data. These investments include private equity and debt funds that typically invest primarily in various strategies including domestic and international leveraged buyout funds; power, energy, timber and infrastructure development funds; venture capital funds; and below investment grade debt and mezzanine debt funds. Distributions 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 two to 10 years. Unfunded commitments for these investments at both September 30, 2016 and 2015 were not significant.

(3) During the nine months ended September 30, 2016, the Company recognized an impairment of computer software in connection with the sale to Massachusetts Mutual Life Insurance Company (“MassMutual”) of MetLife, Inc.’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc. (“MSI”), a wholly-owned subsidiary of MetLife, Inc. See Note 13.

Fair Value of Financial Instruments Carried at Other Than Fair Value

The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.

67

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:

	September 30, 2016
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	54,757	$	—	$	—	$	57,154	$	57,154
Policy loans	$	8,048	$	—	$	323	$	9,805	$	10,128
Real estate joint ventures	$	8	$	—	$	—	$	34	$	34
Other limited partnership interests	$	363	$	—	$	—	$	406	$	406
Other invested assets	$	2,378	$	11	$	2,182	$	136	$	2,329
Premiums, reinsurance and other receivables	$	14,599	$	—	$	185	$	15,460	$	15,645
Liabilities
Policyholder account balances	$	73,443	$	—	$	—	$	76,157	$	76,157
Long-term debt	$	1,607	$	—	$	1,945	$	—	$	1,945
Other liabilities	$	17,483	$	—	$	3,366	$	14,386	$	17,752
Separate account liabilities	$	66,934	$	—	$	66,934	$	—	$	66,934

	December 31, 2015
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	53,408	$	—	$	—	$	54,969	$	54,969
Policy loans	$	8,134	$	—	$	330	$	9,539	$	9,869
Real estate joint ventures	$	12	$	—	$	—	$	39	$	39
Other limited partnership interests	$	467	$	—	$	—	$	553	$	553
Other invested assets	$	2,372	$	—	$	2,197	$	202	$	2,399
Premiums, reinsurance and other receivables	$	13,879	$	—	$	229	$	14,610	$	14,839
Liabilities
Policyholder account balances	$	71,331	$	—	$	—	$	73,506	$	73,506
Long-term debt	$	1,618	$	—	$	1,912	$	—	$	1,912
Other liabilities	$	19,545	$	—	$	323	$	19,882	$	20,205
Separate account liabilities	$	60,767	$	—	$	60,767	$	—	$	60,767

The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:

Mortgage Loans

The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans.

68

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Policy Loans

Policy loans with fixed interest rates are classified within Level 3. The estimated fair values for these loans are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk, as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. Policy loans with variable interest rates are classified within Level 2 and the estimated fair value approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates.

Real Estate Joint Ventures and Other Limited Partnership Interests

The estimated fair values of these cost method investments are generally based on the Company’s share of the NAV as provided on the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments.

Other Invested Assets

These other invested assets are principally comprised of loans to affiliates. The estimated fair value of loans to affiliates is determined by discounting the expected future cash flows using market interest rates currently available for instruments with similar terms and remaining maturities.

Premiums, Reinsurance and Other Receivables

Premiums, reinsurance and other receivables are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivatives and amounts receivable for securities sold but not yet settled.

Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been classified as Level 3. The valuation is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty.

The amounts on deposit for derivative settlements, classified within Level 2, essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value.

Policyholder Account Balances

These policyholder account balances include investment contracts which primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts (“TCA”). The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability.

Long-term Debt

The estimated fair value of long-term debt is principally determined using market standard valuation methodologies.

Valuations of instruments are based primarily on quoted prices in markets that are not active or using matrix pricing that use standard market observable inputs such as quoted prices in markets that are not active and observable yields and spreads in the market. Instruments valued using discounted cash flow methodologies use standard market observable inputs including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues.

69

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

Other Liabilities

Other liabilities consist primarily of interest payable, amounts due for securities purchased but not yet settled, funds withheld amounts payable, which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements, and amounts payable under certain assumed reinsurance agreements, which are recorded using the deposit method of accounting. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For such payables, the estimated fair value is determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty.

Separate Account Liabilities

Separate account liabilities represent those balances due to policyholders under contracts that are classified as investment contracts.

Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding.

Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section “— Recurring Fair Value Measurements,” the value of those assets approximates the estimated fair value of the related separate account liabilities. The valuation techniques and inputs for separate account liabilities are similar to those described for separate account assets.

70

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Equity

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in the balances of each component of AOCI attributable to Metropolitan Life Insurance Company, was as follows:

	Three Months   Ended   September 30, 2016
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	7,051		$	1,785		$	(53	)	$	(1,938	)	$	6,845
OCI before reclassifications	343			39			(16		)	(258		)	108
Deferred income tax benefit (expense)	(117		)	(14		)	5			90			(36		)
AOCI before reclassifications, net of income tax	7,277			1,810			(64		)	(2,106		)	6,917
Amounts reclassified from AOCI	(44		)	(101		)	—			46			(99		)
Deferred income tax benefit (expense)	15			36			—			(17		)	34
Amounts reclassified from AOCI, net of income tax	(29		)	(65		)	—			29			(65		)
Balance, end of period	$	7,248		$	1,745		$	(64	)	$	(2,077	)	$	6,852

	Three Months   Ended   September 30, 2015
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	4,238		$	1,138		$	(66	)	$	(2,162	)	$	3,148
OCI before reclassifications	547			92			7			—			646
Deferred income tax benefit (expense)	(187		)	(32		)	(5		)	—			(224		)
AOCI before reclassifications, net of income tax	4,598			1,198			(64		)	(2,162		)	3,570
Amounts reclassified from AOCI	108			217			—			55			380
Deferred income tax benefit (expense)	(39		)	(76		)	—			(19		)	(134		)
Amounts reclassified from AOCI, net of income tax	69			141			—			36			246
Balance, end of period	$	4,667		$	1,339		$	(64	)	$	(2,126	)	$	3,816

71

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Equity (continued)

	Nine Months   Ended   September 30, 2016
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	3,337		$	1,436		$	(74	)	$	(2,014	)	$	2,685
OCI before reclassifications	6,132			703			6			(241		)	6,600
Deferred income tax benefit (expense)	(2,148		)	(247		)	4			84			(2,307		)
AOCI before reclassifications, net of income tax	7,321			1,892			(64		)	(2,171		)	6,978
Amounts reclassified from AOCI	(113		)	(227		)	—			145			(195		)
Deferred income tax benefit (expense)	40			80			—			(51		)	69
Amounts reclassified from AOCI, net of income tax	(73		)	(147		)	—			94			(126		)
Balance, end of period	$	7,248		$	1,745		$	(64	)	$	(2,077	)	$	6,852

	Nine Months   Ended   September 30, 2015
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	6,200		$	1,073		$	(3	)	$	(2,236	)	$	5,034
OCI before reclassifications	(2,551		)	(63		)	(89		)	—			(2,703		)
Deferred income tax benefit (expense)	900			22			28			—			950
AOCI before reclassifications, net of income tax	4,549			1,032			(64		)	(2,236		)	3,281
Amounts reclassified from AOCI	183			472			—			169			824
Deferred income tax benefit (expense)	(65		)	(165		)	—			(59		)	(289		)
Amounts reclassified from AOCI, net of income tax	118			307			—			110			535
Balance, end of period	$	4,667		$	1,339		$	(64	)	$	(2,126	)	$	3,816

__________________

(1) See Note 6 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.

72

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Equity (continued)

Information regarding amounts reclassified out of each component of AOCI was as follows:

AOCI Components	Amounts Reclassified from AOCI												Consolidated Statement of Operations and Comprehensive Income (Loss) Locations
	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	$	52		$	(66	)	$	144		$	8		Net investment gains (losses)
Net unrealized investment gains (losses)	—			(3		)	11			37			Net investment income
Net unrealized investment gains (losses)	(8		)	(39		)	(42		)	(228		)	Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	44			(108		)	113			(183		)
Income tax (expense) benefit	(15		)	39			(40		)	65
Net unrealized investment gains (losses), net of income tax	29			(69		)	73			(118		)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	27			39			44			51			Net derivative gains (losses)
Interest rate swaps	4			2			10			8			Net investment income
Interest rate forwards	1			—			—			3			Net derivative gains (losses)
Interest rate forwards	—			1			2			2			Net investment income
Foreign currency swaps	69			(260		)	169			(537		)	Net derivative gains (losses)
Foreign currency swaps	—			—			(1		)	(1		)	Net investment income
Credit forwards	—			—			3			1			Net derivative gains (losses)
Credit forwards	—			1			—			1			Net investment income
Gains (losses) on cash flow hedges, before income tax	101			(217		)	227			(472		)
Income tax (expense) benefit	(36		)	76			(80		)	165
Gains (losses) on cash flow hedges, net of income tax	65			(141		)	147			(307		)
Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)	(48		)	(56		)	(150		)	(172		)
Amortization of prior service (costs) credit	2			1			5			3
Amortization of defined benefit plan items, before income tax	(46		)	(55		)	(145		)	(169		)
Income tax (expense) benefit	17			19			51			59
Amortization of defined benefit plan items, net of  income tax	(29		)	(36		)	(94		)	(110		)
Total reclassifications, net of income tax	$	65		$	(246	)	$	126		$	(535	)

__________________

(1) These AOCI components are included in the computation of net periodic benefit costs. See Note 11.

73

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

10. Other Expenses

Information on other expenses was as follows:

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Compensation	$	488		$	472		$	1,598		$	1,562
Pension, postretirement and postemployment benefit costs	41			62			199			178
Commissions	168			176			527			498
Volume-related costs	40			47			162			151
Affiliated expenses on ceded and assumed reinsurance	152			201			774			616
Capitalization of DAC	(59		)	(117		)	(285		)	(346		)
Amortization of DAC and VOBA	212			303			420			595
Interest expense on debt	28			31			84			96
Premium taxes, licenses and fees	89			82			272			269
Professional services	235			283			662			811
Rent and related expenses, net of sublease income	38			21			108			61
Other (1)	(68		)	300			(71		)	298
Total other expenses	$	1,364		$	1,861		$	4,450		$	4,789

__________________

(1) The Company recorded a non-cash charge to net income of $792 million, net of income tax, during the third quarter of 2015. The charge was related to an uncertain tax position and was comprised of a $557 million charge included in provision for income tax expense (benefit) and a $362 million ($235 million, net of income tax) charge included in other expenses.

Affiliated Expenses

Commissions, capitalization of DAC and amortization of DAC and VOBA include the impact of affiliated reinsurance transactions. See Note 13 for a discussion of affiliated expenses included in the table above.

11. Employee Benefit Plans

Pension and Other Postretirement Benefit Plans

The Company sponsors and administers various defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. Participating affiliates are allocated an equitable share of net expense related to the plans, proportionate to other expenses being allocated to these affiliates.

The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. Participating affiliates are allocated a proportionate share of net expense and contributions related to the postemployment and other postretirement plans.

74

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Employee Benefit Plans (continued)

The components of net periodic benefit costs were as follows:

	Three Months   Ended  September 30,
	2016						2015
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	49		$	3		$	54		$	3
Interest costs	100			20			101			22
Curtailment costs (1)	(1		)	(1		)	—			—
Expected return on plan assets	(139		)	(20		)	(134		)	(19		)
Amortization of net actuarial (gains) losses	45			3			46			10
Amortization of prior service costs (credit)	—			(2		)	(1		)	—
Allocated to affiliates	(15		)	(3		)	(14		)	(4		)
Net periodic benefit costs (credit)	$	39		$	—		$	52		$	12

	Nine Months   Ended  September 30,
	2016						2015
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	155		$	7		$	162		$	11
Interest costs	314			62			303			66
Curtailment costs (1)	(1		)	26			—			—
Expected return on plan assets	(389		)	(56		)	(403		)	(59		)
Amortization of net actuarial (gains) losses	143			7			141			31
Amortization of prior service costs (credit)	—			(5		)	(1		)	(2		)
Allocated to affiliates	(50		)	(7		)	(44		)	(12		)
Net periodic benefit costs (credit)	$	172		$	34		$	158		$	35

__________________

(1) The Company recognized curtailment charges on certain postretirement benefit plans in connection with the sale to MassMutual of MetLife, Inc.’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MSI. See Note 13.

75

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees

Contingencies

Litigation

The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at September 30, 2016. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.

Matters as to Which an Estimate Can Be Made

For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. As of September 30, 2016, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $400 million.

Matters as to Which an Estimate Cannot Be Made

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

76

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees (continued)

Asbestos-Related Claims

Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life Insurance Company has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life Insurance Company issued liability or workers’ compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life Insurance Company’s employees during the period from the 1920’s through approximately the 1950’s and allege that Metropolitan Life Insurance Company learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life Insurance Company believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life Insurance Company. Metropolitan Life Insurance Company employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances.

Claims asserted against Metropolitan Life Insurance Company have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life Insurance Company’s defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life Insurance Company owed no duty to the plaintiffs — it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs did not rely on any actions of Metropolitan Life Insurance Company; (iii) Metropolitan Life Insurance Company’s conduct was not the cause of the plaintiffs’ injuries; (iv) plaintiffs’ exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against Metropolitan Life Insurance Company, while other trial courts have denied Metropolitan Life Insurance Company’s motions. There can be no assurance that Metropolitan Life Insurance Company will receive favorable decisions on motions in the future. While most cases brought to date have settled, Metropolitan Life Insurance Company intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials.

As reported in the 2015 Annual Report, Metropolitan Life Insurance Company received approximately 3,856 asbestos-related claims in 2015. During the nine months ended September 30, 2016 and 2015, Metropolitan Life Insurance Company received approximately 3,267 and 2,971 new asbestos-related claims, respectively. See Note 17 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

The ability of Metropolitan Life Insurance Company to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life Insurance Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.

The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.

77

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees (continued)

The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life Insurance Company’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against Metropolitan Life Insurance Company, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against Metropolitan Life Insurance Company, but which Metropolitan Life Insurance Company believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life Insurance Company’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.

Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2016.

Regulatory Matters

The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the SEC; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”). The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.

In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida

In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA is requesting payment of an amount under $1 million from Metropolitan Life Insurance Company and such third party for past costs and an additional amount for future environmental testing costs at the Chemform Site. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party have agreed to be responsible for certain environmental testing at the Chemform Site. The Company estimates that its costs for the environmental testing will not exceed $100,000. The September 2012 Administrative Order on Consent does not resolve the EPA’s claim for past clean-up costs. The EPA may seek additional costs if the environmental testing identifies issues. The Company estimates that the aggregate cost to resolve this matter will not exceed $1 million.

Sales Practices Regulatory Matters

Regulatory authorities in a number of states and FINRA, and occasionally the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by Metropolitan Life Insurance Company, NELICO and General American Life Insurance Company (“GALIC”). These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for these sales practices-related investigations or inquiries.

78

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees (continued)

Unclaimed Property Litigation

West Virginia Lawsuits

On September 20, 2012, the West Virginia Treasurer filed an action against Metropolitan Life Insurance Company in West Virginia state court (West Virginia ex rel. John D. Perdue v. Metropolitan Life Insurance Company, Circuit Court of Putnam County, Civil Action No. 12-C-295)alleging that Metropolitan Life Insurance Company violated the West Virginia Uniform Unclaimed Property Act (the “Act”), seeking to compel compliance with the Act, and seeking payment of unclaimed property, interest, and penalties. On November 21, 2012 and January 9, 2013, the Treasurer filed substantially identical suits against NELICO and GALIC, respectively. On August 17, 2016, these companies and the West Virginia Treasurer reached an agreement in principle to resolve these actions.

Total Control Accounts Litigation

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)

Plaintiff filed this putative class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the putative class. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. The Company intends to defend this action vigorously.

Reinsurance Litigation

Robainas, et al. v. Metropolitan Life Insurance Company (S.D.N.Y., December 16, 2014)

Plaintiffs filed this putative class action lawsuit on behalf of themselves and all persons and entities who, directly or indirectly, purchased, renewed or paid premiums on life insurance policies issued by Metropolitan Life Insurance Company from 2009 through 2014 (the “Policies”). Two similar actions were subsequently filed,Yale v. Metropolitan Life Ins. Co. (S.D.N.Y., January 12, 2015) and International Association of Machinists and Aerospace Workers District Lodge 15 v. Metropolitan Life Ins. Co. (E.D.N.Y., February 2, 2015). Both of these actions were consolidated with the Robainas action. The consolidated complaint alleges that Metropolitan Life Insurance Company inadequately disclosed in its statutory annual statements that certain reinsurance transactions with affiliated reinsurance companies were collateralized using “contractual parental guarantees,” and thereby allegedly misrepresented its financial condition and the adequacy of its reserves. The lawsuit sought recovery under Section 4226 of the New York Insurance Law of a statutory penalty in the amount of the premiums paid for the Policies. On October 9, 2015, the court granted Metropolitan Life Insurance Company’s motion to dismiss the consolidated complaint, finding that plaintiffs lacked Article III standing because they did not allege any concrete injury as a result of the alleged conduct. Plaintiffs appealed this decision to the Second Circuit Court of Appeals.

Intoccia v. Metropolitan Life Insurance Company (S.D.N.Y., April 20, 2015)

Plaintiffs filed this putative class action on behalf of themselves and all persons and entities who, directly or indirectly, purchased, renewed or paid premiums for Guaranteed Benefits Insurance Riders attached to variable annuity contracts with Metropolitan Life Insurance Company from 2009 through 2015 (the “Annuities”). The court consolidatedWeilert v. Metropolitan Life Ins. Co. (S.D.N.Y., April 30, 2015) with theIntocciacase, and the consolidated, amended complaint alleges that Metropolitan Life Insurance Company inadequately disclosed in its statutory annual statements that certain reinsurance transactions with affiliated reinsurance companies were collateralized using “contractual parental guarantees,” and thereby allegedly misrepresented its financial condition and the adequacy of its reserves. The lawsuits seek recovery under Section 4226 of the New York Insurance Law of a statutory penalty in the amount of the premiums paid for Guaranteed Benefits Insurance Riders attached to the Annuities. The Court granted Metropolitan Life Insurance Company’s motion to dismiss, adopting the reasoning of theRobainas decision. Plaintiffs appealed this decision to the Second Circuit Court of Appeals.

79

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees (continued)

Diversified Lending Group Litigations

Hartshorne v. MetLife Inc., et al. (Los Angeles County Superior Court, filed March 25, 2015)

Plaintiffs have named MetLife, Inc., MSI and NELICO in 12 related lawsuits in California state court alleging various causes of action including multiple negligence and statutory claims relating to a Ponzi scheme involving the Diversified Lending Group. In August 2016, a trial of claims by one of the plaintiffs, Christine Ramirez, resulted in a verdict against MetLife, Inc., MSI and NELICO for approximately $200 thousand in compensatory damages and $15 million in punitive damages. These companies intend to appeal this verdict.

Other Litigation

McGuire v. Metropolitan Life Insurance Company (E.D. Mich., filed February 22, 2012)

The fiduciary for the Union Carbide Employees’ Pension Plan alleged that Metropolitan Life Insurance Company, which issued annuity contracts to fund some of the benefits the Plan provides, engaged in transactions that ERISA prohibits and violated duties under ERISA and federal common law by determining that no dividends were payable with respect to the contracts from and after 1999. The parties have resolved this matter, and the court has dismissed the action.

Sun Life Assurance Company of Canada Indemnity Claim

In 2006, Sun Life Assurance Company of Canada (“Sun Life”), as successor to the purchaser of Metropolitan Life Insurance Company’s Canadian operations, filed a lawsuit in Toronto, seeking a declaration that Metropolitan Life Insurance Company remains liable for “market conduct claims” related to certain individual life insurance policies sold by Metropolitan Life Insurance Company that were subsequently transferred to Sun Life. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted Metropolitan Life Insurance Company’s motion for summary judgment. Both parties agreed to consider the indemnity claim through arbitration. In September 2010, Sun Life notified Metropolitan Life Insurance Company that a purported class action lawsuit was filed against Sun Life in Toronto alleging sales practices claims regarding the policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. On August 30, 2011, Sun Life notified Metropolitan Life Insurance Company that another purported class action lawsuit was filed against Sun Life in Vancouver, BC alleging sales practices claims regarding certain of the same policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. Sun Life contends that Metropolitan Life Insurance Company is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. These sales practices cases against Sun Life are ongoing, and the Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation.

Fauley v. Metropolitan Life Insurance Company, et al. (Circuit Court of the 19th Judicial Circuit, Lake County, Ill., July 3, 2014)

Plaintiffs filed this lawsuit against defendants, including Metropolitan Life Insurance Company and a former MetLife financial services representative, alleging that the defendants sent unsolicited fax advertisements to plaintiff and others in violation of the Telephone Consumer Protection Act, as amended by the Junk Fax Prevention Act, 47 U.S.C. § 227. The court issued a final order certifying a nationwide settlement class and approving a settlement under which Metropolitan Life Insurance Company has agreed to pay up to $23 million to resolve claims as to fax advertisements sent between August 23, 2008 and August 7, 2014. On March 23, 2016, the intermediate appellate court affirmed the trial court’s order. On September 28, 2016, the Illinois Supreme Court denied an objector’s petition for leave to appeal.

Voshall v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Los Angeles, April 8, 2015)

Plaintiff filed this putative class action lawsuit on behalf of himself and all persons covered under a long-term group disability income insurance policy issued by Metropolitan Life Insurance Company to public entities in California between April 8, 2011 and April 8, 2015. Plaintiff alleges that Metropolitan Life Insurance Company improperly reduced benefits by including cost of living adjustments and employee paid contributions in the employer retirement benefits and other income that reduces the benefit payable under such policies. Plaintiff asserts causes of action for declaratory relief, violation of the California Business & Professions Code, breach of contract and breach of the implied covenant of good faith and fair dealing. The Company intends to defend this action vigorously.

80

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees (continued)

Martin v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Contra Costa, filed December 17, 2015)

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

Lau v. Metropolitan Life Insurance Company (S.D.N.Y. filed, December 3, 2015)

This putative class action lawsuit was filed by a single defined contribution plan participant on behalf of all ERISA plans whose assets were invested in Metropolitan Life Insurance Company’s “Group Annuity Contract Stable Value Funds” within the past six years. The suit alleges breaches of fiduciary duty under ERISA and challenges the “spread” with respect to the stable value fund group annuity products sold to retirement plans. The allegations focus on the methodology Metropolitan Life Insurance Company uses to establish and reset the crediting rate, the terms under which plan participants are permitted to transfer funds from a stable value option to another investment option, the procedures followed if an employer terminates a contract, and the level of disclosure provided. Plaintiff seeks declaratory and injunctive relief, as well as damages in an unspecified amount. The Company intends to defend this action vigorously.

Newman v. Metropolitan Life Insurance Company (N.D. Ill., filed March 23, 2016)

Plaintiff filed this putative class action alleging causes of action for breach of contract, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, based on Metropolitan Life Insurance Company’s class-wide increase in premiums charged for long-term care insurance policies. Plaintiff alleges a class consisting of herself and all persons over age 65 who selected a Reduced Pay at Age 65 payment feature and whose premium rates were increased after age 65. Plaintiff asserts that premiums could not be increased for these class members and/or that marketing material was misleading as to Metropolitan Life Insurance Company’s right to increase premiums. Plaintiff seeks unspecified compensatory, statutory and punitive damages as well as recessionary and injunctive relief. The Company intends to defend this action vigorously.

Sales Practices Claims

Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds, other products or the misuse of client assets. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys’ fees. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.

Summary

Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

81

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.7 billion and $4.2 billion at September 30, 2016 and December 31, 2015, respectively.

Commitments to Fund Partnership Investments, Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments

The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $4.9 billion and $4.4 billion at September 30, 2016 and December 31, 2015, respectively.

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $127 million, with a cumulative maximum of $411 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

The Company’s recorded liabilities were $5 million and $4 million at September 30, 2016 and December 31, 2015, respectively, for indemnities, guarantees and commitments.

82

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Related Party Transactions

Service Agreements

The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include personnel, policy administrative functions and distribution services. For certain agreements, charges are based on various performance measures or activity-based costing. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual cost incurred by the Company and/or affiliate. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $631 million and $1.7 billion for the three months and nine months ended September 30, 2016, respectively, and $534 million and $1.6 billion for the three months and nine months endedSeptember 30, 2015, respectively. Revenues received from affiliates related to these agreements, recorded in universal life and investment-type product policy fees, were $37 million and $104 million for the three months and nine months ended September 30, 2016, respectively, and $34 million and $103 million for the three months and nine months ended September 30, 2015, respectively. Revenues received from affiliates related to these agreements, recorded in other revenues, were $37 million and $110 million for the three months and nine months ended September 30, 2016, respectively, and $38 million and $114 million for the three months and nine months ended September 30, 2015, respectively.

The Company also entered into agreements with affiliates to provide additional services necessary to conduct the affiliates’ activities. Typical services provided under these agreements include management, policy administrative functions, investment advice and distribution services. Expenses incurred by the Company related to these agreements, included in other expenses, were $304 million and $1.1 billion for the three months and nine months ended September 30, 2016, respectively, and $444 million and $1.2 billion for the three months and nine months ended September 30, 2015, respectively, and were reimbursed to the Company by these affiliates.

The Company had net payables to affiliates, related to the items discussed above, of $106 million and $282 million at September 30, 2016 and December 31, 2015, respectively.

See Notes 6 and 11 for additional information on related party transactions.

Sales Distribution Services

In July 2016, MetLife, Inc. completed the sale to MassMutual of MetLife, Inc.’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MSI. MassMutual assumed all of the liabilities related to such assets and that arise or occur after the closing of the sale.

Related Party Reinsurance Transactions

The Company has reinsurance agreements with certain of MetLife, Inc.’s subsidiaries, including MetLife USA, First MetLife, MetLife Reinsurance Company of Charleston (“MRC”), MetLife Reinsurance Company of Vermont and Metropolitan Tower Life Insurance Company, all of which are related parties.

83

Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on the consolidated statements of operations and comprehensive income (loss) was as follows:

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Premiums
Reinsurance assumed	$	188		$	164		$	569		$	508
Reinsurance ceded	(9		)	(9		)	(30		)	(28		)
Net premiums	$	179		$	155		$	539		$	480
Universal life and investment-type product policy fees
Reinsurance assumed	$	14		$	20		$	45		$	46
Reinsurance ceded	(40		)	(43		)	(109		)	(117		)
Net universal life and investment-type product policy fees	$	(26	)	$	(23	)	$	(64	)	$	(71	)
Other revenues
Reinsurance assumed	$	9		$	—		$	(5	)	$	—
Reinsurance ceded	143			155			429			467
Net other revenues	$	152		$	155		$	424		$	467
Policyholder benefits and claims
Reinsurance assumed	$	197		$	164		$	532		$	484
Reinsurance ceded	(34		)	(38		)	(72		)	(89		)
Net policyholder benefits and claims	$	163		$	126		$	460		$	395
Interest credited to policyholder account balances
Reinsurance assumed	$	8		$	9		$	24		$	24
Reinsurance ceded	(22		)	(23		)	(66		)	(67		)
Net interest credited to policyholder account balances	$	(14	)	$	(14	)	$	(42	)	$	(43	)
Other expenses
Reinsurance assumed	$	9		$	53		$	456		$	169
Reinsurance ceded	145			149			417			444
Net other expenses	$	154		$	202		$	873		$	613

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on the consolidated balance sheets was as follows at:

	September 30, 2016					December 31, 2015
	Assumed		Ceded			Assumed		Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	250	$	15,681		$	280	$	15,466
Deferred policy acquisition costs and value of business acquired	362		(223		)	439		(193		)
Total assets	$	612	$	15,458		$	719	$	15,273
Liabilities
Future policy benefits	$	1,688	$	(15	)	$	1,436	$	(5	)
Policyholder account balances	436		—			326		—
Other policy-related balances	183		43			187		43
Other liabilities	2,194		13,443			6,463		13,000
Total liabilities	$	4,501	$	13,471		$	8,412	$	13,038

The Company ceded two blocks of business to an affiliate on a 75% coinsurance with funds withheld basis. Certain contractual features of these agreements qualify as embedded derivatives, which are separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivatives related to the funds withheld associated with these reinsurance agreements are included within other liabilities and increased the funds withheld balance by $25 million and $8 million at September 30, 2016 and December 31, 2015, respectively. Net derivative gains (losses) associated with these embedded derivatives were less than ($1) million and ($17) million for the three months and nine months ended September 30, 2016, respectively, and less than $1 million and $10 million for the three months and nine months ended September 30, 2015, respectively.

The Company ceded risks to an affiliate related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were $993 million and $712 million at September 30, 2016 and December 31, 2015, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($33) million and $275 million for the three months and nine months ended September 30, 2016, respectively, and$155 millionand$98 millionfor thethree monthsand nine months ended September 30, 2015, respectively.

Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and increased the funds withheld balance by $1.2 billion and $694 million at September 30, 2016 and December 31, 2015, respectively. Net derivative gains (losses) associated with the embedded derivative were ($3) million and ($512) million for the three months and nine months ended September 30, 2016, respectively, and ($5) million and $255 million for the three monthsand nine months ended September 30, 2015, respectively.

The Company assumes risks from affiliates related to guaranteed minimum benefit guarantees written directly by the affiliates. These assumed reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $262 million and $126 million at September 30, 2016 and December 31, 2015, respectively. Net derivative gains (losses) associated with the embedded derivatives were $6 million and ($136) million for the three months and nine months endedSeptember 30, 2016, respectively, and ($87) million and ($75) million for the three months and nine months endedSeptember 30, 2015, respectively.

In April 2016, the Company recaptured risks related to certain single premium deferred annuity contracts from MetLife USA. As a result of this recapture, the significant effects to the Company were a decrease in investments and cash and cash equivalents of $4.3 billion and a decrease in DAC of $87 million, offset by a decrease in other liabilities of $4.0 billion. The Company recognized a loss of $95 million, net of income tax, as a result of this reinsurance termination.

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Metropolitan Life Insurance Company

(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

14. Subsequent Event

In September 2016, the Company’s Board of Directors approved extraordinary dividends to MetLife, Inc. consisting of all of the issued and outstanding shares of common stock of its wholly-owned subsidiaries, GALIC and NELICO. The Company expects to distribute such dividends in the fourth quarter of 2016, subject to certain regulatory approvals. At the dividend effective date, the Company’s stockholder’s equity will be reduced by the aggregate carrying amount of GALIC and NELICO’s assets in excess of their liabilities. The aggregate carrying amount of GALIC and NELICO’s assets in excess of their liabilities was $3.1 billion at September 30, 2016.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Page
Forward-Looking Statements and Other Financial Information	88
Business	88
Summary of Critical Accounting Estimates	91
Economic Capital	91
Results of Operations	92
Adoption of New Accounting Pronouncements	110
Future Adoption of New Accounting Pronouncements	110
Non-GAAP and Other Financial Disclosures	111
Subsequent Events	112

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Forward-Looking Statements and Other Financial Information

For purposes of this discussion, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”). Management’s narrative analysis of the Company’s results of operations is presented pursuant to General Instruction H(2)(a) of Form 10-Q. This narrative analysis should be read in conjunction with Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, and the Company's interim condensed consolidated financial statements included elsewhere herein.

This narrative analysis may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results. Any or all forward-looking statements may turn out to be wrong. Actual results could differ materially from those expressed or implied in the forward-looking statements. See “Note Regarding Forward-Looking Statements.”

This narrative analysis includes references to our performance measure, operating earnings, that is not based on accounting principles generally accepted in the United States of America (“GAAP”). This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also our GAAP measure of segment performance. Operating earnings allows analysis of our performance and facilitates comparisons to industry results. Forward-looking guidance provided on a non-GAAP basis cannot be reconciled to the most directly comparable GAAP measures on a forward-looking basis because net income may fluctuate significantly if net investment gains and losses and net derivative gains and losses move outside of estimated ranges. See “— Non-GAAP and Other Financial Disclosures” for definitions and a discussion of these measures, and “— Results of Operations” for reconciliations of historical non-GAAP measures to the most directly comparable GAAP measures.

Business

Overview

The Company is a provider of life insurance, annuities, employee benefits and asset management. In anticipation of MetLife, Inc.’s plan to separate a substantial portion of its former Retail segment, as well as certain portions of its former Corporate Benefit Funding segment and Corporate & Other (the “Separation”), in the third quarter of 2016, the Company reorganized its businesses into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other. See “— Other Key Information — Segment Information” and Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. See also “— Other Key Information — Significant Events” for information on the Separation. Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.

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Other Key Information

Segment Information

Based on the proposed Separation, in the third quarter of 2016, the Company reorganized its businesses as follows:

• The businesses of the Company that MetLife, Inc. plans to separate and include in Brighthouse Financial are reflected in Corporate & Other.

• The businesses in the Company’s former Retail segment that MetLife, Inc. does not plan to separate are reflected in a new segment, MetLife Holdings. This segment also includes the long-term care business, reported as part of the Company’s former Group, Voluntary & Worksite Benefit (“GVWB”) segment.

• The Retirement and Income Solutions business (which represents most of the segment formerly known as Corporate Benefit Funding), and the Group Benefits business (consisting of the remaining components of the Company’s former GVWB segment, including the individual disability insurance business previously reported in the former Retail segment), are reflected in a new segment, U.S.

These changes were applied retrospectively and did not have an impact on total consolidated net income or operating earnings in the prior periods. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments.

Significant Events

In September 2016, the Company’s Board of Directors approved extraordinary dividends to MetLife, Inc. consisting of all of the issued and outstanding shares of common stock of its wholly-owned subsidiaries, General American Life Insurance Company and New England Life Insurance Company (“NELICO”). The Company expects to distribute such dividends in the fourth quarter of 2016, subject to certain regulatory approvals. See Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements.

In July 2016, MetLife, Inc. completed the sale to Massachusetts Mutual Life Insurance Company (“MassMutual”) of MetLife’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc. (collectively, the “U.S. Retail Advisor Force Divestiture”). MassMutual assumed all of the liabilities related to such assets that arise or occur at or after the closing of the sale. As part of the transactions, MetLife, Inc. and MassMutual entered into a product development agreement under which MetLife’s U.S. retail business will be the exclusive developer of certain annuity products to be issued by MassMutual. In the MassMutual purchase agreement, MetLife, Inc. agreed to indemnify MassMutual for certain claims, liabilities and breaches of representations and warranties up to limits described in the purchase agreement.

On December 18, 2014, the Financial Stability Oversight Council (“FSOC”) designated MetLife, Inc. as a non-bank systemically important financial institution (“non-bank SIFI”) subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of New York (collectively with the Federal Reserve Board, the “Federal Reserve”) and the Federal Deposit Insurance Corporation (the “FDIC”), as well as to enhanced supervision and prudential standards. On March 30, 2016, the D.C. District Court ordered that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded. On April 8, 2016, the FSOC appealed the D.C. District Court’s order to the United States Court of Appeals for the District of Columbia. If the FSOC prevails on appeal or designates MetLife, Inc. as systemically important as part of its ongoing review of non-bank financial companies, MetLife, Inc. could once again be subject to regulation as a non-bank SIFI. See “Business — Regulation — Regulation of MetLife, Inc. as a Non-Bank SIFI” in the 2015 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments” and similarly named sections under the caption “Risk Factors.”

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On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. Additionally, on July 21, 2016, MetLife, Inc. announced that, following the Separation, the separated business will be rebranded as “Brighthouse Financial.” On October 5, 2016, Brighthouse Financial, Inc., a subsidiary of MetLife, Inc. (“Brighthouse”), filed a registration statement on Form 10 (the “Form 10”) with the U.S. Securities and Exchange Commission (“SEC”). The information statement filed as an exhibit to the Form 10 disclosed that MetLife, Inc. intends to include MetLife Insurance Company USA (“MetLife USA”), NELICO, a wholly-owned subsidiary of Metropolitan Life Insurance Company, First MetLife Investors Insurance Company, MetLife Advisers, LLC and certain captive reinsurance companies in the proposed separated business and distribute at least 80.1% of the shares of Brighthouse’s common stock on a pro rata basis to the holders of MetLife, Inc. common stock. The ultimate form and timing of the Separation will be influenced by a number of factors, including regulatory considerations and economic conditions. MetLife continues to evaluate and pursue structural alternatives for the proposed Separation. MetLife expects that the life insurance closed block and the life and annuity business sold through Metropolitan Life Insurance Company will not be a part of Brighthouse Financial. The Separation remains subject to certain conditions including, among others, obtaining final approval from the MetLife, Inc. Board of Directors, receipt of a favorable ruling from the Internal Revenue Service (“IRS”) and an opinion from MetLife’s tax advisor regarding certain U.S. federal income tax matters, and an SEC declaration of the effectiveness of the Form 10.

Regulatory Developments

The U.S. insurance industry is regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, we are subject to regulation under the insurance holding company laws of the states of domicile of our U.S. insurance companies. Furthermore, some of our operations, products and services are subject to consumer protection laws, securities regulation, environmental and unclaimed property laws and regulations, and to the Employee Retirement Income Security Act of 1974 (“ERISA”). If MetLife, Inc. were re-designated as a non-bank SIFI, it could also be subject to regulation by the Federal Reserve and the FDIC and, as a subsidiary of MetLife, Inc., we could be affected by such regulation. We may also be affected by any additional capital requirements to which MetLife, Inc. may become subject as a global systemically important insurer (“G-SII”). See “— Insurance Regulation,” “— ERISA Considerations,” and “— Designation Process and Policy Measures that May Apply to Global Systemically Important Insurers” below, as well as “Business — Regulation,” “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth,” “Risk Factors — Risks Related to Our Business — Our Statutory Life Insurance Reserve Financings May Be Subject to Cost Increases and New Financings May Be Subject to Limited Market Capacity,” and “Risk Factors — Regulatory and Legal Risks — Changes in U.S. Federal, State Securities and State Insurance Laws and Regulations May Affect Our Operations and Our Profitability” included in the 2015 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments” and similarly named sections under the caption “Risk Factors.”

Insurance Regulation

Insurance Regulatory Examinations and Other Activities

The International Association of Insurance Supervisors (“IAIS”) has encouraged U.S. insurance supervisors, such as the New York State Department of Financial Services (“NYDFS”), to establish Supervisory Colleges for U.S.-based insurance groups with international operations, including MetLife, to facilitate cooperation and coordination among the insurance groups’ supervisors and to enhance the member regulators’ understanding of an insurance group’s risk profile. A September 2016 Supervisory College was chaired by the NYDFS and attended by MetLife’s key U.S. and international regulators. MetLife, Inc. has not received any reports or recommendations from the Supervisory College meeting, and we do not expect any outcome of the meeting to have a material adverse effect on our business.

New York’s Proposed Cybersecurity Regulation

Since late 2015, the NYDFS has been considering a potential cybersecurity regulation for those banking and insurance entities under its jurisdiction. On September 13, 2016, the NYDFS released a proposed regulation for a 45-day comment period. The proposed regulation would require any person operating under a license or similar authorization under the New York banking, insurance or financial services law to establish a cybersecurity program meeting certain core functions, adopt a cybersecurity policy, appoint a Chief Information Security Officer, and oversee the cybersecurity practices of third-party service providers, among other requirements.

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ERISA Considerations

The Department of Labor (“DOL”) issued new regulations on April 6, 2016 with an effective date for most provisions of April 10, 2017. These regulations substantially expand the definition of “investment advice” and thereby broaden the circumstances under which MLIC or its representatives, in providing investment advice with respect to ERISA plans, plan participants or Individual Retirement Accounts or Annuities (“IRAs”), will be deemed a fiduciary under ERISA or the Internal Revenue Code of 1986, as amended (the “Code”). Pursuant to the final regulations, certain communications with plans, plan participants and IRA holders, including the marketing of products, and marketing of investment management or advisory services, could be deemed fiduciary investment advice, thus, causing increased exposure to fiduciary liability if the distributor does not recommend what is in the client’s best interests. The DOL also issued amendments to certain of its prohibited transaction exemptions, and issued a new exemption, that applies more onerous disclosure and contract requirements to, and increases fiduciary requirements and fiduciary liability exposure in respect of, transactions involving ERISA plans, plan participants and IRAs. On September 27, 2016, the DOL released Frequently Asked Questions on the new exemption and amendments to certain existing exemptions, which provide guidance concerning the application and implementation of the new and amended prohibited transaction exemptions.

We anticipate that we will need to undertake certain additional tasks in order to comply with certain of the exemptions provided in the DOL regulations, including additional compliance reviews of material shared with distributors, wholesaler and call center training and product reporting and analysis. See “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and In Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.”

On July 11, 2016, the DOL, the IRS and the Pension Benefit Guaranty Corporation proposed revisions to the Form 5500, the form used for ERISA annual reporting. The revisions affect employee pension and welfare benefit plans, including our ERISA plans, and require audits of information, self-directed brokerage account disclosure and additional extensive disclosure. We cannot predict the effect these proposals will have on our business, if enacted, or what other proposals may be made, what legislation may be introduced or enacted, or what impact any such legislation may have on our results of operations and financial condition.

Designation Process and Policy Measures that May Apply to Global Systemically Important Insurers

The IAIS, an association of insurance supervisors and regulators and a member of the Financial Stability Board (“FSB”), an international entity established to coordinate, develop and promote regulatory, supervisory and other financial sector policies in the interest of financial stability, is participating in the FSB’s initiative to identify and manage global systemically important financial institutions. To this end, the IAIS published a methodology to assess the systemic relevance of global insurers and a framework of policy measures to be applied to G-SIIs and, on this basis, the FSB again so designated MetLife, Inc. in 2015. The IAIS/FSB process is separate from the U.S. FSOC designation process and MetLife, Inc. remains a G-SII in spite of the rescission of its U.S. non-bank SIFI designation on March 30, 2016. The global designation process is an annual process. Every three years, the IAIS evaluates whether updates to its assessment methodology are necessary.

Current standards call for G-SIIs to be subject to higher loss absorbency requirements (“HLA”). Given the absence of a common global base on which to calculate HLA for insurers, the FSB directed the IAIS to develop basic capital requirements (“BCR”). The first version of the IAIS HLA framework was endorsed by the FSB and the G20 in September and November 2015, respectively, and the BCR and HLA requirements are expected to be refined based on data confidentially submitted by certain G-SIIs to their group-wide supervisors until they are fully adopted and implemented in 2019. The IAIS published a new assessment methodology on June 16, 2016 which was used this year to assess a pool of approximately 50 insurers, including MetLife, Inc. The new methodology reflects changes in the previous definitions of non-traditional and non-insurance activity, along with certain other changes in both quantitative and qualitative assessments. The assessments are complete and designations are pending. It is uncertain whether MetLife, Inc. will be designated a G-SII by the FSB under this new methodology.

Summary of Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements. The most critical estimates include those used in determining:

(i) liabilities for future policy benefits and the accounting for reinsurance;

(ii) capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”);

(iii) estimated fair values of investments in the absence of quoted market values;

(iv) investment impairments;

(v) estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;

(vi) measurement of employee benefit plan liabilities;

(vii) measurement of income taxes and the valuation of deferred tax assets; and

(viii) liabilities for litigation and regulatory matters.

In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.

The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

We accelerated the annual review of our actuarial assumptions for our variable annuities business from the third quarter to the second quarter of 2016 in connection with the proposed Separation. As a result of this review, we made changes to policyholder behavior and long-term economic assumptions, as well as risk margins. With respect to policyholder behavior, which was the significant update for the second quarter of 2016, we have recorded charges, and in some cases benefits, in prior years as a result of the availability of sufficient and credible data at the conclusion of each review. As an example, in 2012, we recorded a charge to reflect better than expected persistency; and in 2014, we recorded a charge as we began to reflect lower utilization of the elective annuitization option in early generations of our guaranteed minimum income benefit (“GMIBs”). In addition, in the third quarter of 2016, we performed the annual review of our actuarial assumptions for all of our remaining annuity and life businesses. See “— Results of Operations — Consolidated Results — Three Months Ended September 30, 2016 Compared with the Three Months Ended September 30, 2015 — Actuarial Assumption Review” and “— Results of Operations — Consolidated Results — Nine Months Ended September 30, 2016 Compared with the Nine Months Ended September 30, 2015 — Actuarial Assumption Review” for further information.

Economic Capital

Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in MetLife’s and the Company’s business.

MetLife’s economic capital model, coupled with considerations of local capital requirements, aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required economic capital shock factors to a specific confidence level and time horizon while applying an industry standard method for the inclusion of diversification benefits among risk types. Economic capital-based risk estimation is an evolving science and industry best practices have emerged and continue to evolve. Areas of evolving industry best practices include stochastic liability valuation techniques, alternative methodologies for the calculation of diversification benefits, and the quantification of appropriate shock levels. MetLife’s management is responsible for the ongoing production and enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards.

Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, operating earnings or net income (loss).

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Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.

Results of Operations

Consolidated Results

Business Overview. Overall sales improved from prior period levels as a result of increased sales of certain products within our segments for the three months ended September 30, 2016, as compared to the three months ended September 30, 2015. An overall increase in sales from our U.S. segment was primarily driven by the timing of our funding agreement issuances and an increase in structured settlement annuity sales due to price competition, partially offset by lower pension risk transfers and decreases in sales of income annuities and post-retirement benefit products. In our MetLife Holdings segment, life and annuity sales declined as a result of the proposed Separation and the U.S. Retail Advisor Force Divestiture.

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Revenues
Premiums	$	6,142		$	6,260		$	16,801		$	16,463
Universal life and investment-type product policy fees	638			642			1,928			1,925
Net investment income	2,870			2,797			8,349			8,822
Other revenues	389			383			1,121			1,166
Net investment gains (losses)	42			132			115			264
Net derivative gains (losses)	(205		)	558			(562		)	827
Total revenues	9,876			10,772			27,752			29,467
Expenses
Policyholder benefits and claims and policyholder dividends	7,199			7,229			19,943			19,335
Interest credited to policyholder account balances	560			547			1,675			1,628
Capitalization of DAC	(59		)	(117		)	(285		)	(346		)
Amortization of DAC and VOBA	212			303			420			595
Interest expense on debt	28			31			84			96
Other expenses	1,183			1,644			4,231			4,444
Total expenses	9,123			9,637			26,068			25,752
Income (loss) before provision for income tax	753			1,135			1,684			3,715
Provision for income tax expense (benefit)	123			867			232			1,589
Net income (loss)	630			268			1,452			2,126
Less: Net income (loss) attributable to noncontrolling interests	(7		)	(8		)	(9		)	(1		)
Net income (loss) attributable to Metropolitan Life Insurance Company	$	637		$	276		$	1,461		$	2,127

Three Months Ended September 30, 2016 Compared with the Three Months Ended September 30, 2015

During the three months ended September 30, 2016, income (loss) before provision for income tax decreased $382 million (increased $362 million, net of income tax) from the prior period primarily driven by unfavorable changes in net derivative gains (losses) and net investment gains (losses), partially offset by an increase in operating earnings.

Management of Investment Portfolio and Hedging Market Risks with Derivatives. We manage our investment portfolio using disciplined asset/liability management principles, focusing on cash flow and duration to support our current and future liabilities. Our intent is to match the timing and amount of liability cash outflows with invested assets that have cash inflows of comparable timing and amount, while optimizing risk-adjusted net investment income and risk-adjusted total return. Our investment portfolio is heavily weighted toward fixed income investments, with over 80% of our portfolio invested in fixed maturity securities and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities. We also use derivatives as an integral part of our management of the investment portfolio to hedge certain risks, including changes in interest rates, foreign currency exchange rates, credit spreads and equity market levels.

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We purchase investments to support our insurance liabilities and not to generate net investment gains and losses. However, net investment gains and losses are incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign currency exchange rates, credit spreads and equity markets; counterparty specific factors such as financial performance, credit rating and collateral valuation; and internal factors such as portfolio rebalancing. Changes in these factors from period to period can significantly impact the levels of both impairments and realized gains and losses on investments sold.

We use freestanding interest rate, equity, credit and currency derivatives to hedge certain invested assets and insurance liabilities. Certain of these hedges are designated and qualify as accounting hedges, which reduce volatility in earnings. For those hedges not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings.

Certain direct or assumed variable annuity products with guaranteed minimum benefits contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). We use reinsurance and derivatives to hedge the market and other risks inherent in these variable annuity guarantees. Ceded reinsurance of direct variable annuity products with guaranteed minimum benefits generally contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). The valuation of these embedded derivatives includes a nonperformance risk adjustment, which is unhedged, and can be a significant driver of net derivative gains (losses) and volatility in earnings, but does not have an economic impact on us.

Net Derivative Gains (Losses). Direct, assumed and ceded variable annuity embedded derivatives, as well as the associated freestanding derivatives, are referred to as “VA program derivatives” in the following table. All other embedded derivatives and freestanding derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table. The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:

	Three Months   Ended  September 30,
	2016			2015
	(In millions)
Non-VA program derivatives
Interest rate	$	(91	)	$	474
Foreign currency exchange rate	10			92
Credit	36			(21		)
Equity	6			—
Non-VA embedded derivatives	2			39
Total non-VA program derivatives	(37		)	584
VA program derivatives
Embedded derivatives-direct and assumed guarantees:
Market risks	296			(377		)
Nonperformance risk adjustment	(47		)	37
Other risks	(82		)	(145		)
Total	167			(485		)
Embedded derivatives-ceded reinsurance:
Market and other risks	(41		)	165
Nonperformance risk adjustment	9			(11		)
Total	(32		)	154
Freestanding derivatives hedging direct and assumed embedded derivatives	(303		)	305
Total VA program derivatives	(168		)	(26		)
Net derivative gains (losses)	$	(205	)	$	558

93

The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $621 million ($404 million, net of income tax). This was primarily due to long-term interest rates decreasing less in the current period versus the prior period, unfavorably impacting receive-fixed interest rate swaps, interest rate swaptions and interest rate floors, primarily hedging long duration liability portfolios. Additionally, the U.S. dollar weakened in comparison to the Euro in the current period versus remaining unchanged in the prior period, unfavorably impacting foreign currency swaps. In addition, a change in the value of the assets underlying reinsurance-related funds withheld unfavorably impacted non-VA embedded derivatives. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.

The unfavorable change in net derivative gains (losses) on VA program derivatives was $142 million ($92 million, net of income tax). This was due to an unfavorable change of $78 million ($51 million, net of income tax) in market and other risks on direct and assumed variable annuity embedded derivatives, net of the impact of market and other risks on the ceded reinsurance embedded derivatives and net of freestanding derivatives hedging those risks, as well as by an unfavorable change of $64 million ($42 million, net of income tax) related to the change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives, net of the impact of the nonperformance risk adjustment on the ceded variable annuity embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.

The foregoing unfavorable change of $78 million ($51 million, net of income tax) was primarily driven by changes in market factors.

The primary changes in market factors are summarized as follows:

• Long-term interest rates decreased less in the current period than in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased by 3% in the current period and decreased by 14% in the prior period.

• Key equity index levels mainly increased in the current period and decreased in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the Standard & Poor’s Ratings Services (“S&P”) 500 Index increased by 3% in the current period and decreased by 7% in the prior period.

• Key equity volatility measures decreased in the current period and were mixed in the prior period, contributing to a favorable change in our embedded derivatives and an unfavorable change in our freestanding derivatives.

We calculate the nonperformance risk adjustment as the change in the embedded derivative discounted at the risk-adjusted rate (which includes our own credit spread to the extent that the embedded derivative is in-the-money) less the change in the embedded derivative discounted at the risk-free rate. The unfavorable change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives of $84 million ($55 million, net of income tax) was primarily due to an unfavorable change of $63 million, before income tax, as a result of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and an unfavorable change of $21 million, before income tax, related to changes in our own credit spread. The favorable change in the nonperformance risk adjustment on the ceded variable annuity embedded derivatives of $20 million ($13 million, net of income tax) was due to a favorable change of $13 million, before income tax, related to changes in our own credit spread, and a favorable change of $7 million, before income tax, as a result of the impact of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees.

When equity index levels decrease in isolation, the direct and assumed variable annuity guarantees become more valuable to policyholders, which results in an increase in the undiscounted embedded derivative liability. Discounting this unfavorable change by the risk-adjusted rate yields a smaller loss than by discounting at the risk-free rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.

When the risk-free interest rate decreases in isolation, discounting the embedded derivative liability produces a higher valuation of the liability than if the risk-free interest rate had remained constant. Discounting this unfavorable change by the risk-adjusted rate yields a smaller loss than by discounting at the risk-free interest rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.

94

When our own credit spread increases in isolation, discounting the embedded derivative liability produces a lower valuation of the liability than if our own credit spread had remained constant. As a result, a gain is created from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees when the reinsurer’s credit spread increases in isolation. For each of these primary market drivers, the opposite effect occurs when they move in the opposite direction.

Generally, a higher portion of the ceded reinsurance for GMIBs is accounted for as an embedded derivative as compared to the direct guarantees since the settlement provisions of the reinsurance agreements generally meet the accounting criteria of “net settlement.” This mismatch in accounting can lead to significant volatility in earnings, even though the risks inherent in these direct guarantees are fully covered by the ceded reinsurance.

Net Investment Gains (Losses). The unfavorable change in net investment gains (losses) of $90 million ($59 million, net of income tax) primarily reflects lower gains on real estate, partially offset by current period gains on sales of fixed maturity securities.

Actuarial Assumption Review. We annually review our long-term actuarial assumptions for policyholder behavior, market returns and other actuarial items. With respect to policyholder behavior, we have recorded charges, and in some cases benefits, in prior years as a result of the availability of sufficient and credible data at the conclusion of each review. See “— Summary of Critical Accounting Estimates.” During the current period, we performed a review of actuarial assumptions related to reserves and DAC for our annuity and life businesses with the exception of our variable annuity business, which was reviewed in the second quarter of 2016 in connection with the proposed Separation.

Results for the current period include a $94 million loss ($61 million, net of income tax) associated with our annual assumption review related to reserves and DAC, of which a $1 million gain ($1 million, net of income tax) was recognized in net derivative gains (losses). Of the $94 million charge, a gain of $19 million ($12 million, net of income tax) was related to reserves and a loss of $113 million ($73 million, net of income tax) was associated with DAC.

The $1 million gain recognized in net derivative gains (losses) associated with this review of actuarial assumptions was included within the other risks in embedded derivatives - direct and assumed guarantees and market and other risks in embedded derivatives - ceded reinsurance captions in the table above.

As a result of our current period annual actuarial assumption review, changes were made to economic, policyholder behavior and mortality assumptions, as well as operational updates. The most significant impacts were in the MetLife Holdings segment and are summarized as follows:

• Changes in policyholder behavior, mortality assumptions and economic assumptions resulted in reserve increases, net of reinsurance, offset by favorable DAC for a net gain of $13 million ($8 million, net of income tax).

• The remaining updates resulted in reserve decreases, net of reinsurance, offset by unfavorable DAC for a net loss of $107 million ($69 million, net of income tax). The most notable assumption update related to our projection of closed block results and resulted in a net loss.

Results for the prior period include a $163 million ($106 million, net of income tax), net of reinsurance, charge associated with our annual actuarial assumption review related to reserves and DAC for all of our annuity and life businesses, of which a $2 million loss ($1 million, net of income tax) was recognized in net derivative gains (losses). Of the $163 million charge, $60 million ($39 million, net of income tax) was related to reserves and $103 million ($67 million, net of income tax) was associated with DAC.

Taxes. Income tax expense for the three months ended September 30, 2016 was $123 million, or 16% of income (loss) before provision for income tax, compared with $867 million, or 76% of income (loss) before provision for income tax, for the three months ended September 30, 2015. The Company’s current and prior period effective tax rates differ from the U.S. statutory rate of 35% typically due to non-taxable investment income and tax credits for low income housing. Current period results include a one-time tax benefit of $36 million for tax audit settlements. Prior period results include a one-time tax charge of $557 million recorded under accounting guidance for the recognition of tax uncertainties.

95

Operating Earnings. As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use operating earnings, which does not equate to net income (loss) as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. We believe that the presentation of operating earnings, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings should not be viewed as a substitute for net income (loss). Operating earnings increased $912 million, net of income tax, to $847 million, net of income tax, for the three months ended September 30, 2016 from a loss of $65 million, net of income tax, for the three months ended September 30, 2015.

Nine Months Ended September 30, 2016 Compared with the Nine Months Ended September 30, 2015

During the nine months ended September 30, 2016, income (loss) before provision for income tax decreased $2.0 billion ($674 million, net of income tax) from the prior period primarily driven by unfavorable changes in net derivative gains (losses) and net investment gains (losses), partially offset by a favorable change in operating earnings.

Net Derivative Gains (Losses). Direct, assumed and ceded variable annuity embedded derivatives, as well as the associated freestanding derivatives, are referred to as “VA program derivatives” in the following table. All other embedded derivatives and all freestanding derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table. The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:

	Nine Months   Ended  September 30,
	2016			2015
	(In millions)
Non-VA program derivatives
Interest rate	$	992		$	344
Foreign currency exchange rate	(50		)	198
Credit	45			(6		)
Equity	9			—
Non-VA embedded derivatives	(664		)	339
Total non-VA program derivatives	332			875
VA program derivatives
Embedded derivatives-direct and assumed guarantees:
Market risks	(85		)	(155		)
Nonperformance risk adjustment	173			33
Other risks	(1,209		)	(203		)
Total	(1,121		)	(325		)
Embedded derivatives-ceded reinsurance:
Market and other risks	340			105
Nonperformance risk adjustment	(64		)	(8		)
Total	276			97
Freestanding derivatives hedging direct and assumed embedded derivatives	(49		)	180
Total VA program derivatives	(894		)	(48		)
Net derivative gains (losses)	$	(562	)	$	827

The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $543 million ($353 million, net of income tax). This was unfavorable change was driven by a change in the value of the assets underlying reinsurance-related funds withheld unfavorably impacting non-VA embedded derivatives. This unfavorable change was partially offset by a favorable change due to long-term interest rates decreasing more in the current period versus the prior period, favorably impacting receive-fixed interest rate swaps, interest rate total return swaps and interest rates floors. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.

96

The unfavorable change in net derivative gains (losses) on VA program derivatives was $846 million ($550 million, net of income tax). This was due to an unfavorable change of $930 million ($605 million, net of income tax) in market and other risks on direct and assumed variable annuity embedded derivatives, net of the impact of market and other risks on the ceded reinsurance embedded derivatives and net of freestanding derivatives hedging those risks, partially offset by a favorable change of $84 million ($55 million, net of income tax) related to the change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives, net of the impact of the nonperformance risk adjustment on the ceded variable annuity embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.

The foregoing unfavorable change of $930 million ($605 million, net of income tax) was primarily driven by changes in other risks and market factors.

The primary changes in other risks are summarized as follows:

• Updates to actuarial policyholder behavior assumptions within the valuation model. For details, see “— Actuarial Assumption Review.”

• An increase in the risk margin adjustment, measuring policyholder behavior risks, which was also affected by the actuarial assumption update, along with market and interest rate changes.

• A combination of other factors, including reserve changes influenced by benefit features and actual policyholder behavior.

The primary changes in market factors are summarized as follows:

• Long-term interest rates decreased more in the current period than in the prior period, contributing to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased by 32% in the current period and decreased by 7% in the prior period.

• Key equity index levels were mixed in the current period and mostly decreased in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the S&P 500 Index increased by 6% in the current period and decreased by 7% in the prior period.

We calculate the nonperformance risk adjustment as the change in the embedded derivative discounted at the risk-adjusted rate (which includes our own credit spread to the extent that the embedded derivative is in-the-money) less the change in the embedded derivative discounted at the risk-free rate. The favorable change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives of $140 million ($91 million, net of income tax) was primarily due to a favorable change of $138 million, before income tax, as a result of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and a favorable change of $2 million, before income tax, related to changes in our own credit spread. The unfavorable change in the nonperformance risk adjustment on the ceded variable annuity embedded derivatives of $56 million ($36 million, net of income tax) was due to an unfavorable change of $52 million, before income tax, as a result of the impact of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and an unfavorable change of $4 million, before income tax, related to changes in our own credit spread.

Net Investment Gains (Losses). The unfavorable change in net investment gains (losses) of $149 million ($97 million, net of income tax) primarily reflects lower gains in real estate and real estate joint ventures and higher impairments on common stock, and were partially offset by increased net gains on the transfer of fixed maturity securities to MetLife USA, related to the recapture of risks related to certain single premium deferred annuity contracts.

Actuarial Assumption Review. Results for the current period include a non-cash charge of $722 million ($469 million, net of income tax) associated with the annual review of actuarial assumptions, of which $798 million ($519 million, net of income tax) was recognized in net derivative gains (losses). Of the $722 million charge, $787 million ($512 million, net of income tax) was related to reserves and a benefit of $65 million ($43 million, net of income tax) was associated with DAC.

The $798 million loss recognized in net derivative gains (losses) associated with this review of assumptions was included within the other risks in embedded derivatives - direct and assumed guarantees and market and other risks in embedded derivatives - ceded reinsurance captions in the table above.

97

As a result of the annual review of actuarial assumptions, changes were made to economic, policyholder behavior and mortality assumptions, as well as operational updates. The significant impacts of the assumption review were on the variable annuity block of business and are summarized as follows:

• Changes in policyholder behavior assumptions resulted in reserve increases, partially offset by favorable DAC amortization resulting in a net charge of $444 million ($289 million, net of income tax). The policyholder behavior assumption changes included:

– Lower utilization of the elective annuitization option on the guarantee riders on the contracts;

– Lower election of the guaranteed principal option in certain of our GMIBs, which, if exercised, returns to the policyholder the original purchase payment amounts;

– Adjusting the rate at which policyholders withdrew funds through systematic withdrawals; and

– Higher policyholder persistency related to the portion of the business that will remain with the Company after the proposed Separation, dependent on the amount a contract is in-the-money.

• Changes in economic assumptions resulted in reserve increases and unfavorable DAC amortization resulting in a charge of $90 million ($59 million, net of income tax). These changes include reducing the long-term separate account return assumption from 7.25% to 7.00% (from 7.00% to 6.75% for GMIB’s invested in managed volatility funds), and reducing the projected ultimate 10-year treasury rate from 4.50% to 4.25%.

• The remaining updates resulted in reserve increases and unfavorable DAC resulting in a charge of $186 million ($121 million, net of income tax). The most notable assumption update related to our projection of closed block results and resulted in a net loss.

Results for the prior period include a $163 million ($106 million, net of income tax), net of reinsurance, charge associated with our annual assumption review related to reserves and DAC, of which a $2 million loss ($1 million, net of income tax) was recognized in net derivative gains (losses). Of the $163 million charge, $60 million ($39 million, net of income tax) was related to reserves and $103 million ($67 million, net of income tax) was associated with DAC.

Taxes. Income tax expense for the nine months ended September 30, 2016 was $232 million, or 14% of income (loss) before provision for income tax, compared with $1.6 billion, or 43% of income (loss) before provision for income tax, for the nine months ended September 30, 2015. The Company’s effective tax rates differ from the U.S. statutory rate of 35% typically due to non-taxable investment income, and tax credits for low income housing. Current period results include a one-time tax benefit of $36 million for tax audit settlements. Prior period results include a one-time tax charge of $557 million recorded under accounting guidance for the recognition of tax uncertainties.

Operating Earnings. Operating earnings increased $280 million, net of income tax, to $1.9 billion, net of income tax, for the nine months ended September 30, 2016 from $1.7 billion, net of income tax, for the nine months ended September 30, 2015.

98

Reconciliation of net income (loss) to operating earnings

Three Months Ended September 30, 2016

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Net income (loss)	$	446		$	71		$	113		$	630
Less: Net investment gains (losses)	34			10			(2		)	42
Less: Net derivative gains (losses)	(19		)	(184		)	(2		)	(205		)
Less: Other adjustments to net income (1)	(73		)	(85		)	(12		)	(170		)
Less: Provision for income tax (expense) benefit	21			89			6			116
Operating earnings	$	483		$	241		$	123		$	847

Three Months Ended September 30, 2015

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Net income (loss)	$	653		$	347		$	(732	)	$	268
Less: Net investment gains (losses)	129			32			(29		)	132
Less: Net derivative gains (losses)	245			174			139			558
Less: Other adjustments to net income (1)	(42		)	(89		)	(47		)	(178		)
Less: Provision for income tax (expense) benefit	(115		)	(41		)	(23		)	(179		)
Operating earnings	$	436		$	271		$	(772	)	$	(65	)

__________________

(1) See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

99

Nine Months Ended September 30, 2016

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Net income (loss)	$	1,485		$	220		$	(253	)	$	1,452
Less: Net investment gains (losses)	(16		)	171			(40		)	115
Less: Net derivative gains (losses)	518			(554		)	(526		)	(562		)
Less: Other adjustments to net income (1)	(204		)	25			(127		)	(306		)
Less: Provision for income tax (expense) benefit	(104		)	125			242			263
Operating earnings	$	1,291		$	453		$	198		$	1,942

Nine Months Ended September 30, 2015

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Net income (loss)	$	1,587		$	1,013		$	(474	)	$	2,126
Less: Net investment gains (losses)	288			87			(111		)	264
Less: Net derivative gains (losses)	158			268			401			827
Less: Other adjustments to net income (1)	(108		)	(237		)	(33		)	(378		)
Less: Provision for income tax (expense) benefit	(117		)	(41		)	(91		)	(249		)
Operating earnings	$	1,366		$	936		$	(640	)	$	1,662

__________________

(1) See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

100

Reconciliation of revenues to operating revenues and expenses to operating expenses

Three Months Ended September 30, 2016

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Total revenues	$	6,966		$	2,696		$	214		$	9,876
Less: Net investment gains (losses)	35			10			(3		)	42
Less: Net derivative gains (losses)	(18		)	(184		)	(3		)	(205		)
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			—			—			—
Less: Other adjustments to revenues (1)	(73		)	(40		)	(1		)	(114		)
Total operating revenues	$	7,022		$	2,910		$	221		$	10,153
Total expenses	$	6,270		$	2,606		$	247		$	9,123
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			(28		)	9			(19		)
Less: Other adjustments to expenses (1)	—			74			1			75
Total operating expenses	$	6,270		$	2,560		$	237		$	9,067

Three Months Ended September 30, 2015

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Total revenues	$	7,362		$	3,099		$	311		$	10,772
Less: Net investment gains (losses)	129			32			(29		)	132
Less: Net derivative gains (losses)	244			175			139			558
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			—			—			—
Less: Other adjustments to revenues (1)	(39		)	(47		)	2			(84		)
Total operating revenues	$	7,028		$	2,939		$	199		$	10,166
Total expenses	$	6,347		$	2,594		$	696		$	9,637
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			67			24			91
Less: Other adjustments to expenses (1)	2			(24		)	25			3
Total operating expenses	$	6,345		$	2,551		$	647		$	9,543

__________________

(1) See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

101

Nine Months Ended September 30, 2016

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Total revenues	$	19,580		$	8,084		$	88		$	27,752
Less: Net investment gains (losses)	(16		)	171			(40		)	115
Less: Net derivative gains (losses)	518			(555		)	(525		)	(562		)
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			—			—			—
Less: Other adjustments to revenues (1)	(193		)	(121		)	(3		)	(317		)
Total operating revenues	$	19,271		$	8,589		$	656		$	28,516
Total expenses	$	17,272		$	7,812		$	984		$	26,068
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			(288		)	7			(281		)
Less: Other adjustments to expenses (1)	12			142			116			270
Total operating expenses	$	17,260		$	7,958		$	861		$	26,079

Nine Months Ended September 30, 2015

	U.S.			MetLife Holdings			Corporate & Other			Total
	(In millions)
Total revenues	$	19,247		$	9,082		$	1,138		$	29,467
Less: Net investment gains (losses)	288			87			(111		)	264
Less: Net derivative gains (losses)	158			268			401			827
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			—			—			—
Less: Other adjustments to revenues (1)	(118		)	(152		)	4			(266		)
Total operating revenues	$	18,919		$	8,879		$	844		$	28,642
Total expenses	$	16,779		$	7,596		$	1,377		$	25,752
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			66			18			84
Less: Other adjustments to expenses (1)	(10		)	19			19			28
Total operating expenses	$	16,789		$	7,511		$	1,340		$	25,640

__________________

(1) See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

102

Consolidated Results — Operating

Three Months Ended September 30, 2016 Compared with the Three Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Overview. The primary drivers of the increase in operating earnings were prior period charges for taxes and related interest expenses, as well as higher investment yields. Our financial results include fees earned related to an affiliated reinsurance agreement, which were recorded in other revenues, but were almost entirely offset by related charges in other expenses.

Business Growth. We benefited from higher sales and business growth in certain of our products. An increase in our investment portfolio from premiums and deposits in our Retirement and Income Solutions business and positive net flows in our MetLife Holdings segment generated higher net investment income. These increases in net investment income were partially offset by a reduction in the invested asset base due to the recapture of an assumed fixed annuity agreement with an affiliate in the second quarter of 2016. In addition, consistent with the growth in average invested assets from increased premiums, interest credited on long-duration contracts increased. Lower interest expense related to the aforementioned recapture of the assumed fixed annuity agreement resulted in an increase in operating earnings. The changes in business growth discussed above resulted in an $18 million increase in operating earnings.

Market Factors. Market factors, including sustained low interest rates, volatile equity markets, and foreign currency fluctuations continued to impact our investment yields; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields increased as a result of higher returns on alternate investments, prior period mark-to-market losses on trading securities and higher income on currency and interest rate derivatives. These favorable changes were partially offset by the adverse impact of the sustained low interest rate environment on fixed maturity securities and mortgage loans, as proceeds from maturing investments and the growth in the investment portfolio described above were invested at lower yields. In addition, lower interest crediting rates, consistent with the sustained low interest rate environment, contributed to the increase to operating earnings. The changes in market factors discussed above resulted in a $58 million increase in operating earnings.

Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Unfavorable underwriting resulted in a $35 million decrease in operating earnings and was primarily due to unfavorable mortality, primarily in our MetLife Holdings and U.S. segments, partially offset by favorable morbidity, primarily in our U.S. segment. The impact of the annual actuarial assumption review resulted in a net operating earnings decrease of $11 million and was primarily related to unfavorable DAC unlockings in our MetLife Holdings segment. The annual actuarial assumption review in the current period included our annuity and life businesses with the exception of our variable annuity business, which was reviewed in the second quarter of 2016; whereas, the annual review in the prior period included all of our annuity and life businesses.

Expenses and Taxes. Operating earnings increased due to a decline in expenses of $245 million, mainly the result of a $235 million charge for interest on uncertain tax positions in the prior period. The Company’s effective tax rates differ from the U.S. statutory rate of 35% typically due to non-taxable investment income and tax credits for investments in low income housing. Current period results include a one-time tax benefit of $36 million for tax audit settlements. Prior period results include a one-time tax charge of $557 million recorded under accounting guidance for the recognition of tax uncertainties. In addition, the Company realized additional tax benefits of $18 million compared to the prior period, primarily from the higher utilization of tax preferenced investments.

Nine Months Ended September 30, 2016 Compared with the Nine Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Overview. The primary drivers of the increase in operating earnings were prior period charges for taxes and related interest expenses, partially offset by lower investment yields and refinements to DAC and certain insurance liabilities. Our financial results include fees earned related to an affiliated reinsurance agreement, which were recorded in other revenues, but were almost entirely offset by related charges in other expenses.

Business Growth. We benefited from higher sales and business growth in certain of our products. An increase in our investment portfolio from premiums and deposits in our Retirement and Income Solutions business, positive net flows from our life businesses in our MetLife Holdings segment and positive net flows in our Group Benefits business generated higher net investment income. These increases in net investment income were partially offset by a reduction in the invested asset base due to the aforementioned recapture of an assumed fixed annuity agreement with an affiliate. In addition, consistent with the growth in average invested assets from increased premiums, interest credited on long-duration contracts increased. Lower interest expense related to the aforementioned recapture of the assumed fixed annuity agreement resulted in an increase in operating earnings. The changes in business growth discussed above resulted in a $42 million increase in operating earnings.

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Market Factors. Market factors, including sustained low interest rates, volatile equity markets and foreign currency fluctuations continued to impact our investment yields; however, certain impacts were mitigated by derivatives used to hedge these risks. The sustained low interest rate environment resulted in a decline in net investment income on fixed maturity securities and mortgage loans, as proceeds from maturing investments and the growth in the investment portfolio described above were invested at lower yields. Additionally, investment yields decreased as a result of lower returns on other limited partnership interests, real estate joint ventures and alternative investments. Additionally, lower earnings on our securities lending program resulted from lower margins due to the impact of a flatter yield curve, as margins correlate more to the slope of the yield curve rather than the absolute level of interest rates, as well as lower program size. These unfavorable changes were partially offset by higher income on currency and interest rate derivatives and resulted in a $346 million decrease in operating earnings.

Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Unfavorable underwriting decreased operating earnings by $22 million as unfavorable mortality and morbidity in our MetLife Holdings segment was partially offset by favorable mortality in our U.S. segment. The impact of the annual actuarial assumption review, which occurred in both periods, resulted in a net operating earnings decrease of $42 million and was primarily related to unfavorable DAC unlockings in our MetLife Holdings segment. Refinements to DAC and certain insurance-related and other liabilities, which were recorded in both periods, resulted in a $90 million decrease in operating earnings, primarily in our MetLife Holdings and U.S. segments.

Expenses and Taxes. Operating earnings increased due to a decline in expenses of $99 million, mainly the result of the aforementioned $235 million charge for interest on uncertain tax positions in the prior period, partially offset by costs associated with the aforementioned recapture of an assumed fixed annuity agreement. In addition, expenses declined as a result of lower costs associated with corporate initiatives and projects. The Company’s effective tax rates differ from the U.S. statutory rate of 35% typically due to non-taxable investment income and tax credits for investments in low income housing. Current period results include a one-time tax benefit of $36 million for tax audit settlements. Prior period results included the aforementioned one-time tax charge of $557 million recorded under accounting guidance for the recognition of tax uncertainties. In addition, the Company realized additional tax benefits of $54 million compared to the prior period, primarily from the higher utilization of tax preferenced investments.

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Segment Results and Corporate & Other

U.S.

Business Overview. An increase in sales was primarily driven by the timing of our funding agreement issuances in our Retirement and Income Solutions business. Funding ratios for defined benefit pension plans of S&P 500 companies continued to fall in 2016, limiting their ability to engage in full pension plan buyouts. However, we expect that customers may choose to close out portions of pension plans over time, with the largest volume of business generally occurring near the end of any year. The impact of this decline in funding ratios for defined benefit pension plans of S&P 500 companies was lower pension risk transfers, which resulted in lower premiums. In addition, sales of income annuities and post-retirement benefit products were lower. These decreases were partially offset by the impact of a change in competitive pricing in the market, which drove an increase in structured settlement annuity sales. Changes in premiums for the Retirement and Income Solutions business were almost entirely offset by the related changes in policyholder benefits and claims. Sales improved across the Group Benefits business compared to the prior period.

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Operating revenues
Premiums	$	5,036		$	5,134		$	13,451		$	13,080
Universal life and investment-type product policy fees	244			232			741			699
Net investment income	1,554			1,482			4,518			4,590
Other revenues	188			180			561			550
Total operating revenues	7,022			7,028			19,271			18,919
Operating expenses
Policyholder benefits and claims and policyholder dividends	5,281			5,379			14,232			13,858
Interest credited to policyholder account balances	322			303			964			902
Capitalization of DAC	(17		)	(14		)	(43		)	(50		)
Amortization of DAC and VOBA	14			15			43			46
Interest expense on debt	2			1			7			4
Other operating expenses	668			661			2,057			2,029
Total operating expenses	6,270			6,345			17,260			16,789
Provision for income tax expense (benefit)	269			247			720			764
Operating earnings	$	483		$	436		$	1,291		$	1,366

Three Months Ended September 30, 2016 Compared with the Three Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. The impact of higher deposits and funding agreement issuances in the current period resulted in higher invested assets, which drove an increase in net investment income. However, consistent with the growth in average invested assets from increased premiums, interest credited on long-duration contracts increased. In addition, an increase in other operating expenses, mainly the result of growth across the segment, was more than offset by the remaining increase in premiums, fees and other revenues. The combined impact of the items discussed above increased operating earnings by $42 million.

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Market Factors. Market factors, including sustained low interest rates, volatile equity markets and foreign currency fluctuations continued to impact our investment yields; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields increased driven by higher income on interest rate derivatives, higher returns on real estate and real estate joint ventures and hedge funds. These increases were partially offset by the adverse impact of the sustained low interest rate environment on our fixed maturity securities, as proceeds from maturing investments and the growth in the investment portfolio described above were invested at lower yields, as well as lower returns on private equities. In addition, lower interest crediting rates, consistent with the sustained low interest rate environment, contributed to the increase to operating earnings. The changes in market factors discussed above resulted in a $6 million increase in operating earnings.

Underwriting. Less favorable mortality in our term life business, mainly due to higher severity, was partially offset by favorable claims experience in our universal life business, which resulted in a decrease of $25 million in operating earnings. Favorable claims experience in our dental business combined with favorable morbidity in our individual disability business drove an increase in operating earnings of $20 million. Favorable mortality from our income annuity business was mostly offset by less favorable mortality in our specialized life insurance products.

Nine Months Ended September 30, 2016 Compared with the Nine Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. The impact of deposits, funding agreement issuances and increased premiums in the current period resulted in higher average invested assets, improving net investment income. However, consistent with the growth in average invested assets from increased premiums, interest credited on long-duration contracts increased. In addition, an increase in other operating expenses, mainly the result of growth across the segment, was more than offset by the remaining increase in premiums, fees and other revenues. The combined impact of the items discussed above increased operating earnings by $89 million.

Market Factors. Market factors, including sustained low interest rates, volatile equity markets and foreign currency fluctuations continued to impact our investment yields; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields decreased as a result of the impact of the sustained low interest rate environment on fixed maturity securities, as proceeds from maturing investments and the growth in the investment portfolio described above were invested at lower yields, as well as lower returns on other limited partnership interests and alternative investments. Additionally, lower investment earnings on our securities lending program resulted primarily from the impact of a flatter yield curve, as margins correlate more to the slope of the yield curve rather than the absolute level of interest rates, as well as a lower program size. These unfavorable changes were partially offset by higher income on interest rate and currency derivatives and higher returns on real estate and real estate joint ventures. Certain of our funding agreements and guaranteed interest contract liabilities have interest credited rates that are contractually tied to current market rates, specifically the 3-month London Interbank Offered Rate (“LIBOR”) and, as a result, a higher average interest credited rate drove an increase in interest credited expense. The changes in market factors discussed above resulted in a $155 million decrease in operating earnings.

Underwriting and Other Insurance Adjustments. Unfavorable claims experience in our group disability and dental businesses were mostly offset by favorable claims experience in our individual disability and voluntary businesses and resulted in a slight decrease in operating earnings. Favorable mortality in the current period, mainly due to favorable claims experience in our life business, resulted in a $28 million increase in operating earnings. Less favorable mortality from our specialized life insurance products and pension risk transfer business resulted in a $14 million decrease in operating earnings. Refinements to certain insurance and other liabilities, which were recorded in both periods, resulted in a $24 million decrease in operating earnings.

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MetLife Holdings

Business Overview. As a result of the proposed Separation and the U.S. Retail Advisor Force Divestiture, we have discontinued marketing of life and annuity products in this segment, which has led to lower sales. A significant portion of our operating earnings is driven by separate account balances. Most directly, these balances determine asset-based fee income but they also impact DAC amortization and asset-based commissions. Separate account balances are driven by sales, movements in the market, surrenders, withdrawals, benefit payments, transfers and policy charges. Separate account balances have increased due to market performance, partially offset by the impact of negative net flows, as benefits, surrenders and withdrawals exceeded sales. While net flows are still negative, we are seeing stability in surrenders and withdrawals. Although we have discontinued selling our long-term care product, we continue to collect premiums and administer the existing block of business, which contributed to asset growth in the segment.

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Operating revenues
Premiums	$	1,091		$	1,111		$	3,303		$	3,331
Universal life and investment-type product policy fees	310			320			928			960
Net investment income	1,463			1,482			4,260			4,488
Other revenues	46			26			98			100
Total operating revenues	2,910			2,939			8,589			8,879
Operating expenses
Policyholder benefits and claims and policyholder dividends	1,814			1,841			5,475			5,365
Interest credited to policyholder account balances	230			233			687			696
Capitalization of DAC	(44		)	(100		)	(239		)	(291		)
Amortization of DAC and VOBA	217			169			591			410
Interest expense on debt	2			—			5			3
Other operating expenses	341			408			1,439			1,328
Total operating expenses	2,560			2,551			7,958			7,511
Provision for income tax expense (benefit)	109			117			178			432
Operating earnings	$	241		$	271		$	453		$	936

Three Months Ended September 30, 2016 Compared with the Three Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. A decrease in our invested asset base was primarily due to the recapture of an assumed fixed annuity reinsurance agreement with an affiliate in the second quarter of 2016. This decline was partially offset by positive net flows in our life business coupled with the aforementioned impact of our long-term care business on asset growth, resulting in a decrease in net investment income. Consistent with the asset growth in the long-term care business, interest credited on insurance liabilities increased. In addition, the impact of lower sales and lower surrender charges in the current period reduced operating earnings. More than offsetting these decreases in operating earnings was lower interest expense related to the aforementioned recapture of the assumed fixed annuity agreement. The net impact of the aforementioned items resulted in a $4 million increase in operating earnings.

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Market Factors. Market factors, including sustained low interest rates, volatile equity markets, and foreign currency fluctuations, continued to impact our investment yields; however, certain impacts were mitigated by derivatives used to hedge these risks. Higher returns on other limited partnership interests and increased prepayment fees contributed to this increase in operating earnings. In addition, the impact of lower average crediting rates on certain insurance liabilities and a decrease in DAC amortization contributed to the increase in operating earnings. These increases were partially offset by the impact of the sustained low interest rate environment on net investment income, specifically from fixed maturity securities and mortgage loans as proceeds from maturing investments were reinvested at lower yields. In addition, we had lower income on interest rate derivatives. The changes in market factors discussed above resulted in an $8 million increase in operating earnings.

Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Unfavorable mortality in our universal life and traditional life, businesses was partially offset by favorable morbidity in our long-term care business and resulted in a decrease of $34 million in operating earnings. The results of our annual review of actuarial assumptions resulted in a decrease in operating earnings of $9 million. The annual actuarial assumption review in the current period included our annuity and life businesses with the exception of our U.S. variable annuity business, which was reviewed in the second quarter of 2016; whereas, the annual review in the prior period included all of our annuity and life businesses. Refinements to DAC and certain insurance-related liabilities recorded in the current period resulted in an increase in operating earnings of $7 million. In addition, an increase in policyholder dividends in the closed block, which we instituted in the fourth quarter of 2015, decreased operating earnings by $10 million.

Expenses. Operating earnings increased due to a decline in expenses of $10 million, mainly the result of lower amortization of deferred reinsurance commissions related to certain variable annuity reinsurance agreements entered into with an affiliate.

Nine Months Ended September 30, 2016 Compared with the Nine Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. Our life, annuities and long-term care businesses experienced net asset growth, which resulted in higher net investment income; however, consistent with the aforementioned asset growth, interest credited on insurance liabilities also increased. The aforementioned recapture of an assumed fixed annuity reinsurance agreement resulted in lower interest expense, which was partially offset by an increase in DAC amortization. These increases were partially offset by a lower invested asset base due to the aforementioned recapture of an assumed fixed annuity reinsurance agreement, the impact of lower sales and lower surrender charges in the current period. The combined impact of the items discussed above resulted in a $19 million increase in operating earnings.

Market Factors. Market factors, including sustained low interest rates, volatile equity markets, and foreign currency fluctuations, continued to impact our investment yields; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields decreased on our fixed maturity securities and mortgage loans as proceeds from maturing investments and the growth in the investment portfolio described above were invested at lower yields. In addition, we had lower income on interest rate derivatives and alternative investments, as well as lower returns on other limited partnership interests. These decreases in net investment income were partially offset by higher prepayment fees and higher income on currency derivatives. In the deferred annuity business, operating earnings declined due to lower asset-based fee income, as average separate account balances decreased and DAC amortization increased. The changes in market factors discussed above resulted in a $182 million decrease in operating earnings.

Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Unfavorable claims experience in our long-term care business, unfavorable mortality in our traditional life businesses and less favorable fund returns related to a significant reinsurance treaty resulted in a $37 million decrease in operating earnings. The impact of our annual actuarial assumption review, which occurred in both periods, resulted in a net operating earnings decrease of $33 million and was primarily related to unfavorable DAC unlockings. Refinements to DAC and certain insurance-related liabilities that were recorded in both periods resulted in a $66 million decrease in operating earnings, which includes a current period reserve adjustment resulting from modeling improvements in the reserving process in our universal life business. In addition, an increase in policyholder dividends in the closed block, which we instituted in the fourth quarter of 2015, decreased operating earnings by $19 million.

Expenses. A $162 million net increase in expenses was primarily the result of costs associated with the aforementioned recapture of an assumed fixed annuity agreement. This increase in expenses was partially offset by lower amortization of deferred reinsurance commissions related to certain variable annuity reinsurance agreements entered into with an affiliate, as well as lower technology and employee-related costs.

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Corporate & Other

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Operating revenues
Premiums	$	15		$	15		$	47		$	52
Universal life and investment-type product policy fees	58			65			182			191
Net investment income	(7		)	(58		)	(35		)	85
Other revenues	155			177			462			516
Total operating revenues	221			199			656			844
Operating expenses
Policyholder benefits and claims and policyholder dividends	29			27			103			100
Interest credited to policyholder account balances	9			9			26			26
Capitalization of DAC	2			(3		)	(3		)	(5		)
Amortization of DAC and VOBA	10			20			51			47
Interest expense on debt	24			30			72			88
Other operating expenses	163			564			612			1,084
Total operating expenses	237			647			861			1,340
Provision for income tax expense (benefit)	(139		)	324			(403		)	144
Operating earnings	$	123		$	(772	)	$	198		$	(640	)

The table below presents operating earnings by source, net of income tax:

	Three Months   Ended  September 30,						Nine Months   Ended  September 30,
	2016			2015			2016			2015
	(In millions)
Other business activities	$	31		$	22		$	49		$	61
Other net investment income	(16		)	(49		)	(68		)	2
Interest expense on debt	(16		)	(20		)	(47		)	(57		)
Corporate initiatives and projects	(14		)	(18		)	(32		)	(64		)
Incremental tax benefit	133			(481		)	331			(318		)
Other	5			(226		)	(35		)	(264		)
Operating earnings	$	123		$	(772	)	$	198		$	(640	)

Three Months Ended September 30, 2016 Compared with the Three Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Other Business Activities. Operating earnings from other business activities increased $9 million. This was primarily related to improved results from our start-up operations.

Other Net Investment Income. A $33 million increase in other net investment income was driven by higher returns on alternative investments and prior period mark-to-market losses on our trading securities. These increases were partially offset by a decrease in net investment income as a result of a lower invested asset base.

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Incremental Tax Benefit. Corporate & Other benefits from the impact of certain permanent tax preferenced items, including non-taxable investment income and tax credits for investments in low income housing. As a result, our effective tax rate differs from the U.S. statutory rate of 35%. The current period includes a one-time tax benefit of $36 million for tax audit settlements. The prior period included the aforementioned tax charge of $557 million, which was recorded under accounting guidance for the recognition of tax uncertainties. In addition, we had higher utilization of tax preferenced items, which increased our operating earnings by $21 million over the prior period.

Other. The prior period included the aforementioned $235 million charge for interest on uncertain tax positions. The prior period also included a $7 million impairment charge on a real estate property. These increases were partially offset by a $7 million decrease in refunds received for favorable outcomes on prior years’ tax audits and $5 million of higher interest on uncertain tax positions in the current period. Additionally, our results include fees earned related to an affiliated reinsurance agreement, which were recorded in other revenues, but were almost entirely offset by related charges in other expenses.

Nine Months Ended September 30, 2016 Compared with the Nine Months Ended September 30, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Other Business Activities. Operating earnings from other business activities decreased $12 million. This was primarily related to lower fees and higher employee-related expenses in our life business. In addition, the impact of our annual actuarial assumption review, which occurred in both periods, resulted in a decrease in operating earnings of $9 million. These decreases were partially offset by higher results from our start-up operations.

Other Net Investment Income. A $70 million decrease in other net investment income was driven by a lower invested asset base, as well as lower returns on real estate and real estate joint ventures and private equities. These decreases were partially offset by prior period mark-to-market losses on trading securities.

Corporate Initiatives and Projects. Expenses associated with corporate initiatives and projects decreased by $32 million, primarily due to lower relocation costs, severance and consulting expenses associated with certain enterprise-wide initiatives.

Incremental Tax Benefit. Corporate & Other benefits from the impact of certain permanent tax preferenced items, including non-taxable investment income and tax credits for investments in low income housing. As a result, our effective tax rate differs from the U.S. statutory rate of 35%. The current period includes a one-time tax benefit of $36 million for tax audit settlements. The prior period included the aforementioned tax charge of $557 million, which was recorded under accounting guidance for the recognition of tax uncertainties. In addition, we had higher utilization of tax preferenced investments, which increased our operating earnings by $56 million over the prior period.

Other. The prior period included the aforementioned $235 million charge for interest on uncertain tax positions. The prior period also included a $7 million impairment charge on real estate property. These increases were partially offset by $12 million of higher interest on uncertain tax positions and a $7 million decrease in refunds received for favorable outcomes on prior years’ tax audits. Additionally, our results include fees earned related to an affiliated reinsurance agreement, which were recorded in other revenues, but were almost entirely offset by related charges in other expenses.

Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

Future Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

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Non-GAAP and Other Financial Disclosures

In this report, the Company presents certain measures of its performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.

The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:

Non-GAAP financial measures:		Comparable GAAP financial measures:
(i)	operating revenues	(i)	revenues
(ii)	operating expenses	(ii)	expenses
(iii)	operating earnings	(iii)	net income (loss)

See “— Results of Operations” for reconciliations of these measures to the most directly comparable historical GAAP measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is not accessible on a forward-looking basis because we believe it is not possible without unreasonable efforts to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income.

Our definitions of the various non-GAAP and other financial measures discussed in this report may differ from those used by other companies:

Operating earnings

This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also our GAAP measure of segment performance. Operating earnings allows analysis of our performance and facilitates comparisons to industry results.

Operating earnings is defined as operating revenues less operating expenses, both net of income tax.

Operating revenues and operating expenses

These financial measures focus on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and divested businesses and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations and other businesses that have been or will be sold or exited by MetLife and are referred to as divested businesses. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses).

The following additional adjustments are made to revenues, in the line items indicated, in calculating operating revenues:

• Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”); and

• Net investment income: (i) includes investment hedge adjustments which represent earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, and (iii) excludes certain amounts related to securitization entities that are variable interest entities (“VIEs”) consolidated under GAAP.

111

The following additional adjustments are made to expenses, in the line items indicated, in calculating operating expenses:

• Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”), and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);

• Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;

• Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs, and (iii) Market Value Adjustments;

• Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and

• Other operating expenses excludes costs related to noncontrolling interests and goodwill impairments.

The tax impact of the adjustments mentioned are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate.

The following additional information is relevant to an understanding of our performance results:

• We sometimes refer to sales activity for various products. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.

• Allocated equity is the portion of common stockholders’ equity that MetLife’s management allocates to each of its segments and sub-segments based on local capital requirements and economic capital. See “— Economic Capital.”

Subsequent Events

See Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements.

Item 4. Controls and Procedures

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

112

Part II — Other Information

Item 1. Legal Proceedings

The following should be read in conjunction with (i) Part I, Item 3, of the 2015 Annual Report; (ii) Part II, Item 1, of Metropolitan Life Insurance Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016; and (iii) Note 12 of the Notes to the Interim Condensed Consolidated Financial Statements in Part I of this report.

Asbestos-Related Claims

Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages.

As reported in the 2015 Annual Report, Metropolitan Life Insurance Company received approximately 3,856 asbestos-related claims in 2015. During the nine months ended September 30, 2016 and 2015, Metropolitan Life Insurance Company received approximately 3,267 and 2,971 new asbestos-related claims, respectively. See Note 17 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2016.

Unclaimed Property Litigation

West Virginia Lawsuits

On September 20, 2012, the West Virginia Treasurer filed an action against Metropolitan Life Insurance Company in West Virginia state court (West Virginia ex rel. John D. Perdue v. Metropolitan Life Insurance Company, Circuit Court of Putnam County, Civil Action No. 12-C-295) alleging that Metropolitan LifeInsurance Company violated the West Virginia Uniform Unclaimed Property Act (the “Act”), seeking tocompel compliance with the Act, and seeking payment of unclaimed property, interest, and penalties. OnNovember 21, 2012 and January 9, 2013, the Treasurer filed substantially identical suits against NELICO andGeneral American Life Insurance Company, respectively. On August 17 2016, these companies and the West Virginia Treasurer reached an agreement in principle to resolve these actions.

Total Control Accounts Litigation

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)

Plaintiff filed this putative class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a total control account (“TCA”), to pay death benefits under an ERISA plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the putative class. On September 27, 2016 the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. The Company intends to defend this action vigorously.

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Diversified Lending Group Litigations

Hartshorne v. MetLife Inc., et al. (Los Angeles County Superior Court, filed March 25, 2015)

Plaintiffs have named MetLife, Inc., MetLife Securities, Inc. and NELICO in 12 related lawsuits in California state court alleging various causes of action including multiple negligence and statutory claims relating to a Ponzi scheme involving the Diversified Lending Group. In August 2016, a trial of claims by one of the plaintiffs, Christine Ramirez, resulted in a verdict against MetLife, Inc., MetLife Securities, Inc. and NELICO for approximately $200 thousand in compensatory damages and $15 million in punitive damages. These companies intend to appeal this verdict.

Other Litigation

Fauley v. Metropolitan Life Insurance Company, et al. (Circuit Court of the 19th Judicial Circuit, Lake County, Ill., July 3, 2014)

Plaintiffs filed this lawsuit against defendants, including Metropolitan Life Insurance Company and a former MetLife financial services representative, alleging that the defendants sent unsolicited fax advertisements to plaintiff and others in violation of the Telephone Consumer Protection Act, as amended by the Junk Fax Prevention Act, 47 U.S.C. § 227. The court issued a final order certifying a nationwide settlement class and approving a settlement under which Metropolitan Life Insurance Company has agreed to pay up to $23 million to resolve claims as to fax advertisements sent between August 23, 2008 and August 7, 2014. On March 23, 2016, the intermediate appellate court affirmed the trial court’s order. On September 28, 2016, the Illinois Supreme Court denied an objector’s petition for leave to appeal.

Summary

Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

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Item 1A. Risk Factors

The following should be read in conjunction with, and supplements and amends, the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the 2015 Annual Report, as amended or supplemented by the information under “Risk Factors” in Part II, Item 1A, of each of Metropolitan Life Insurance Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016. Other than as described in this Item 1A, there have been no other material changes to our risk factors from the risk factors previously disclosed in the 2015 Annual Report, as amended or supplemented by such information in Metropolitan Life Insurance Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016.

Regulatory and Legal Risks

The following updates and replaces the similarly named sections of the risk factor entitled “Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” included in the 2015 Annual Report, as amended or supplemented by such information in Metropolitan Life Insurance Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. There have been no material changes to other sections of such risk factor, which include: “Insurance Regulation — U.S. Federal Regulation Affecting Insurance” and “General.”

Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth

Our insurance operations are subject to a wide variety of insurance and other laws and regulations. See “Business — Regulation” included in the 2015 Annual Report, as amended or supplemented by discussions of regulatory developments elsewhere herein, and in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments,” and as further amended or supplemented below.

Insurance Regulation

ERISA Considerations

We provide products and services to certain employee benefit plans that are subject to ERISA or the Code. As such, our activities are subject to the restrictions imposed by ERISA and the Code, including the requirement under ERISA that fiduciaries must perform their duties solely in the interests of ERISA plan participants and beneficiaries, and those fiduciaries may not cause a covered plan to engage in certain prohibited transactions. The prohibited transaction rules of ERISA and the Code generally restrict the provision of investment advice to ERISA plans and participants and IRAs if the investment recommendation results in fees paid to the individual advisor, the firm that employs the advisor or their affiliates that vary according to the investment recommendation chosen. Similarly, without an exemption, fiduciary advisors are prohibited from receiving compensation from third parties in connection with their advice. ERISA also affects certain of our in-force insurance policies and annuity contracts as well as insurance policies and annuity contracts we may sell in the future.

The DOL issued new regulations on April 6, 2016 with an effective date for most provisions of April 10, 2017. These regulations substantially expand the definition of “investment advice” and thereby broaden the circumstances under which MLIC or its representatives, in providing investment advice with respect to ERISA plans, plan participants or IRAs, will be deemed a fiduciary under ERISA or the Code. Pursuant to the final regulations, certain communications with plans, plan participants and IRA holders, including the marketing of products, and marketing of investment management or advisory services, could be deemed fiduciary investment advice, thus causing increased exposure to fiduciary liability if the distributor does not recommend what is in the client’s best interests. While the final regulations also provide that, to a limited extent, contracts sold and advice provided prior to April 10, 2017 do not have to be modified to comply with the new investment advice regulations, there is lack of clarity surrounding some of the conditions for qualifying for this limited exception. There can be no assurance that the DOL will agree with our interpretation of these provisions, in which case the DOL and IRS could assess significant penalties against a portion of products sold prior to April 10, 2017. The assessment of such penalties could also trigger substantial litigation risk. Any such penalties and related litigation could adversely affect our results of operations and financial condition.

The DOL also issued amendments to certain of its prohibited transaction exemptions, and issued a new exemption that applies more onerous disclosure and contract requirements to, and increases fiduciary requirements and fiduciary liability exposure in respect of, transactions involving ERISA plans, plan participants and IRAs.

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While we continue to analyze the impact of the final regulations on our business, we believe they could have an adverse effect on sales of annuity products to ERISA qualified plans such as IRAs through our independent distribution partners. The new regulations deem advisors, including independent distributors, who sell fixed index-linked annuities to IRAs, IRA rollovers or 401(k) plans, fiduciaries and prohibit them from receiving compensation unless they comply with a prohibited transaction exemption. The exemption requires advisors to comply with impartial conduct standards and may require us to exercise additional oversight of the sales process. Compliance with the prohibited transaction exemption will likely result in increased regulatory burdens on us and our independent distribution partners, changes to our compensation practices and product offerings and increased litigation risk, which could adversely affect our results of operations and financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments — ERISA Considerations,” as well as “Business — Regulation — ERISA Considerations” included in the 2015 Annual Report.

We cannot predict what other proposals may be made, what legislation may be introduced or enacted, or what impact any such legislation may have on our business, results of operations and financial condition.

Operational Risks

Any Failure to Protect the Confidentiality of Client Information Could Adversely Affect Our Reputation and Have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations

Pursuant to U.S. federal and state laws, and laws of other jurisdictions in which MetLife operates, various government agencies have established rules protecting the privacy and security of personal information. In addition, most U.S. states and a number of jurisdictions outside the United States have enacted laws, which vary significantly from jurisdiction to jurisdiction, to safeguard the privacy and security of personal information. The MetLife employees who conduct our business have access to, and routinely process, personal information of clients through a variety of media, including information technology systems. We rely on various internal processes and controls to protect the confidentiality of client information that is accessible to, or in the possession of, our company and MetLife employees. It is possible that a MetLife employee could, intentionally or unintentionally, disclose or misappropriate confidential client information or our data could be the subject of a cybersecurity attack. If we fail to maintain adequate internal controls or if MetLife employees fail to comply with our policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of client information could occur. Such internal control inadequacies or non-compliance could materially damage our reputation or lead to civil or criminal penalties, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. In addition, we analyze customer data to better manage our business. There has been increased scrutiny, including from U.S. state regulators, regarding the use of “big data” techniques such as price optimization. We cannot predict what, if any, actions may be taken with regard to “big data,” but any inquiries could cause reputational harm and any limitations could have a material impact on our business, financial condition and results of operations.

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Item 6. Exhibits

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Metropolitan Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Metropolitan Life Insurance Company, its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and Metropolitan Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

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Signatures

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

METROPOLITAN LIFE INSURANCE COMPANY
By:		/s/ Peter M. Carlson
	Name:	Peter M. Carlson
	Title:	Executive Vice President and Chief
		Accounting Officer (Authorized Signatory
		and Principal Accounting Officer)

Date: November 9, 2016

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Exhibit Index

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Metropolitan Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Metropolitan Life Insurance Company, its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and Metropolitan Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

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