Metropolitan Life Insurance 10-Q 2018 Q1 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 MARCH 31, 2018

or

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

FOR THE TRANSITION PERIOD FROM TO

Commission file number: 000-55029

________________________________________

Metropolitan Life Insurance Company

(Exact name of registrant as specified in its charter)

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

(212) 578-9500

(Registrant’s telephone number, including area code)

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

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

At May 10, 2018, 494,466,664 shares of the registrant’s common stock, $0.01 par value per share, were outstanding, all of which were owned directly by MetLife, Inc.

REDUCED DISCLOSURE FORMAT

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

Table of Contents

		Page
Part I — Financial Information
Item 1.	Financial Statements (at March 31, 2018 (Unaudited) and December 31, 2017 and for the Three Months Ended March 31, 2018 and 2017 (Unaudited))
	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:
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	8
	Note 2 — Segment Information	12
	Note 3 — Insurance	16
	Note 4 — Closed Block	18
	Note 5 — Investments	21
	Note 6 — Derivatives	35
	Note 7 — Fair Value	50
	Note 8 — Equity	64
	Note 9 — Other Expenses	66
	Note 10 — Employee Benefit Plans	66
	Note 11 — Income Tax	67
	Note 12 — Contingencies, Commitments and Guarantees	67
	Note 13 — Related Party Transactions	74
	Note 14 — Subsequent Event	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	77
Item 4.	Controls and Procedures	88
Part II — Other Information
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	90
Item 6.	Exhibits	90
Signatures		91

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,” “will be,” “will not,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future 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 Metropolitan Life Insurance Company, its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in Metropolitan Life Insurance Company’s filings with the U.S. Securities and Exchange Commission. These factors include: (1) adverse effects which may arise in connection with the material weakness in our internal control over financial reporting or our failure to promptly remediate it; (2) difficult conditions in the global capital markets; (3) increased volatility and disruption of the global capital and credit markets, which may affect our ability to meet liquidity needs and access capital, including through credit facilities, generate market-related revenue and finance statutory reserve requirements; (4) exposure to global financial and capital market risks; (5) regulatory, legislative or tax changes relating to our insurance or other operations that may affect the cost of, or demand for, our products or services, or increase the cost or administrative burdens of providing benefits to employees; (6) impact on us of comprehensive financial services regulation reform; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (9) investment losses and changes to investment valuations; (10) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements or value of business acquired; (11) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (12) downgrades in our financial strength or credit ratings, or MetLife, Inc.’s credit ratings; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (15) differences between actual claims experience and underwriting and reserving assumptions; (16) ineffectiveness of MetLife’s risk management policies and procedures; (17) catastrophe losses; (18) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (19) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, dispositions of businesses, entry into joint ventures, or legal entity reorganizations; (20) changes in accounting standards, practices and/or policies; (21) difficulties in marketing and distributing products through our distribution channels; (22) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural catastrophes, including any related impact on the value of our investment portfolio, our disaster recovery systems, cyber- or other information security systems and management continuity planning; (23) any failure to protect the confidentiality of client information; (24) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; (25) the impact of technological changes on our businesses; and (26) other risks and uncertainties described from time to time in Metropolitan Life Insurance Company’s filings with the U.S. Securities and Exchange Commission.

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

2

Note Regarding Reliance on Statements in Our Contracts

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

3

Part I — Financial Information

Item 1. Financial Statements

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Balance Sheets

March 31, 2018 (Unaudited) and December 31, 2017

(In millions, except share and per share data)

	March 31, 2018		December 31, 2017
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $154,301 and $157,809, respectively)	$	163,254	$	170,272
Equity securities, at estimated fair value	882		1,658
Mortgage loans (net of valuation allowances of $281 and $271, respectively; includes $438 and $520, respectively, under the fair value option)	60,215		58,459
Policy loans	6,009		6,006
Real estate and real estate joint ventures (includes $1,331 and $1,077, respectively, relating to variable interest entities; includes $616 and $25, respectively, of real estate held-for-sale)	6,685		6,656
Other limited partnership interests	4,066		3,991
Short-term investments, principally at estimated fair value	3,391		3,155
Other invested assets (includes $129 and $131, respectively, relating to variable interest entities)	14,946		14,911
Total investments	259,448		265,108
Cash and cash equivalents, principally at estimated fair value (includes $7 and $12, respectively, relating to variable interest entities)	4,735		5,069
Accrued investment income	2,024		2,042
Premiums, reinsurance and other receivables (includes $2 and $3, respectively, relating to variable interest entities)	22,161		22,098
Deferred policy acquisition costs and value of business acquired	4,473		4,348
Current income tax recoverable	44		64
Other assets (includes $2 and $2, respectively, relating to variable interest entities)	4,887		4,741
Separate account assets	124,847		130,825
Total assets	$	422,619	$	434,295
Liabilities and Equity
Liabilities
Future policy benefits	$	119,129	$	119,415
Policyholder account balances	92,951		93,939
Other policy-related balances	7,146		7,176
Policyholder dividends payable	525		499
Policyholder dividend obligation	1,277		2,121
Payables for collateral under securities loaned and other transactions	19,490		19,871
Short-term debt	243		243
Long-term debt (includes $5 and $6, respectively, at estimated fair value, relating to variable interest entities)	1,650		1,667
Deferred income tax liability	768		1,369
Other liabilities (includes $2 and $3, respectively, relating to variable interest entities)	27,460		27,409
Separate account liabilities	124,847		130,825
Total liabilities	395,486		404,534
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	14,151		14,150
Retained earnings	8,787		10,035
Accumulated other comprehensive income (loss)	3,985		5,428
Total Metropolitan Life Insurance Company stockholder’s equity	26,928		29,618
Noncontrolling interests	205		143
Total equity	27,133		29,761
Total liabilities and equity	$	422,619	$	434,295

See accompanying notes to the interim condensed consolidated financial statements.

4

Metropolitan Life Insurance Company

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

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

For the Three Months Ended March 31, 2018 and 2017 (Unaudited)

(In millions)

	Three Months Ended March 31,
	2018			2017
Revenues
Premiums	$	4,949		$	5,181
Universal life and investment-type product policy fees	531			588
Net investment income	2,701			2,672
Other revenues	401			398
Net investment gains (losses)	(196		)	(43		)
Net derivative gains (losses)	60			(151		)
Total revenues	8,446			8,645
Expenses
Policyholder benefits and claims	5,514			5,841
Interest credited to policyholder account balances	581			542
Policyholder dividends	262			281
Other expenses	1,354			1,314
Total expenses	7,711			7,978
Income (loss) before provision for income tax	735			667
Provision for income tax expense (benefit)	63			120
Net income (loss)	672			547
Less: Net income (loss) attributable to noncontrolling interests	3			1
Net income (loss) attributable to Metropolitan Life Insurance Company	$	669		$	546
Comprehensive income (loss)	$	(1,695	)	$	1,061
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	3			1
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company	$	(1,698	)	$	1,060

See accompanying notes to the interim condensed consolidated financial statements.

5

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2018 and 2017 (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, 2017	$	5	$	14,150	$	10,035		$	5,428		$	29,618		$	143	$	29,761
Cumulative effects of changes in accounting principles, net of income tax (Note 1)					(917		)	924			7					7
Balance at January 1, 2018	5		14,150		9,118			6,352			29,625			143		29,768
Capital contributions from MetLife, Inc.			1								1					1
Dividends paid to MetLife, Inc.					(1,000		)				(1,000		)			(1,000		)
Change in equity of noncontrolling interests											—			59		59
Net income (loss)					669						669			3		672
Other comprehensive income (loss), net of income tax								(2,367		)	(2,367		)			(2,367		)
Balance at March 31, 2018	$	5	$	14,151	$	8,787		$	3,985		$	26,928		$	205	$	27,133

	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total Metropolitan Life Insurance Company Stockholder’s Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2016	$	5	$	14,413		$	9,250		$	3,119	$	26,787		$	190	$	26,977
Prior period revisions (Note 1)						(217		)			(217		)			(217		)
Balance at December 31, 2016	5		14,413			9,033			3,119		26,570			190		26,760
Capital contributions from MetLife, Inc.			1								1					1
Returns of capital			(5		)						(5		)			(5		)
Purchase of operating joint venture interest from an affiliate (Note 5)			(249		)						(249		)			(249		)
Change in equity of noncontrolling interests											—			4		4
Net income (loss)						546					546			1		547
Other comprehensive income (loss), net of income tax									514		514					514
Balance at March 31, 2017	$	5	$	14,160		$	9,579		$	3,633	$	27,377		$	195	$	27,572

See accompanying notes to the interim condensed consolidated financial statements.

6

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2018 and 2017 (Unaudited)

(In millions)

	Three Months Ended March 31,
	2018			2017
Net cash provided by (used in) operating activities	$	510		$	800
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	16,447			12,770
Equity securities	63			60
Mortgage loans	1,955			1,505
Real estate and real estate joint ventures	125			27
Other limited partnership interests	90			193
Purchases of:
Fixed maturity securities	(12,322		)	(13,366		)
Equity securities	(62		)	(15		)
Mortgage loans	(3,342		)	(2,320		)
Real estate and real estate joint ventures	(164		)	(246		)
Other limited partnership interests	(154		)	(159		)
Cash received in connection with freestanding derivatives	919			699
Cash paid in connection with freestanding derivatives	(1,316		)	(790		)
Net change in policy loans	(3		)	(7		)
Net change in short-term investments	(206		)	(2,079		)
Net change in other invested assets	(44		)	(78		)
Net change in property, equipment and leasehold improvements	(23		)	(71		)
Net cash provided by (used in) investing activities	1,963			(3,877		)
Cash flows from financing activities
Policyholder account balances:
Deposits	20,232			16,403
Withdrawals	(21,647		)	(15,807		)
Net change in payables for collateral under securities loaned and other transactions	(381		)	295
Long-term debt issued	14			—
Long-term debt repaid	(32		)	(13		)
Financing element on certain derivative instruments and other derivative related transactions, net	(51		)	(298		)
Dividends paid to MetLife, Inc.	(1,000		)	—
Returns of capital	—			(5		)
Other, net	58			3
Net cash provided by (used in) financing activities	(2,807		)	578
Change in cash and cash equivalents	(334		)	(2,499		)
Cash and cash equivalents, beginning of period	5,069			5,714
Cash and cash equivalents, end of period	$	4,735		$	3,215
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	11		$	11
Income tax	$	2		$	14
Non-cash transactions:
Capital contributions from MetLife, Inc.	$	1		$	1
Purchase of operating joint venture interest from an affiliate (Note 5)	$	—		$	249
Transfer of fixed maturity securities from affiliates	$	—		$	292

See accompanying notes to the interim condensed consolidated financial statements.

7

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

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

Business

Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of insurance, annuities, employee benefits and asset management and is organized into two segments: U.S. and MetLife Holdings. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).

Basis of Presentation

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

Consolidation

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

The Company uses the equity method of accounting for equity securities when it has significant influence or at least 20% interest and for real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. Subsequent to the adoption of guidance relating to the recognition and measurement of financial instruments on January 1, 2018, the Company accounts for interests in unconsolidated entities that are not accounted for under the equity method, at estimated fair value. Such investments were previously accounted for under the cost method of accounting. See “— Adoption of New Accounting Pronouncements.”

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2018 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

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

Revisions

As discussed in Note 1 of the Notes to the Consolidated Financial Statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”), the Company made adjustments for group annuity reserves for which amounts previously reported have been immaterially restated. In addition, the Company has corrected other unrelated immaterial errors which were previously recorded in the periods the Company identified them.

8

Metropolitan Life Insurance Company

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

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

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

The impact of the revisions is shown in the tables below:

	Three Months   Ended   March 31,
	2017
Interim Condensed Consolidated Statements of Operations  and Comprehensive Income (Loss)	As Previously Reported		Revisions			As Revised
	(In millions)
Expenses
Policyholder benefits and claims	$	5,835	$	6		$	5,841
Total expenses	$	7,972	$	6		$	7,978
Income (loss) before provision for income tax	$	673	$	(6	)	$	667
Provision for income tax expense (benefit)	$	122	$	(2	)	$	120
Net income (loss)	$	551	$	(4	)	$	547
Net income (loss) attributable to Metropolitan Life Insurance Company	$	550	$	(4	)	$	546
Comprehensive income (loss)	$	1,065	$	(4	)	$	1,061
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company	$	1,064	$	(4	)	$	1,060

Interim Condensed Consolidated Statements of Equity	As Previously Reported		Revisions			As Revised
	(In millions)
Retained Earnings
Balance at December 31, 2016	$	9,250	$	(217	)	$	9,033
Net income (loss)	$	550	$	(4	)	$	546
Balance at March 31, 2017	$	9,800	$	(221	)	$	9,579
Total Metropolitan Life Insurance Company Stockholder’s Equity
Balance at December 31, 2016	$	26,787	$	(217	)	$	26,570
Balance at March 31, 2017	$	27,598	$	(221	)	$	27,377
Total Equity
Balance at December 31, 2016	$	26,977	$	(217	)	$	26,760
Balance at March 31, 2017	$	27,793	$	(221	)	$	27,572

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2017 consolidated balance sheet data was derived from audited consolidated financial statements included in the 2017 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 2017 Annual Report.

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)

Adoption of New Accounting Pronouncements

Effective January 1, 2018, the Company early adopted guidance relating to income taxes. The new guidance was applied in the period of adoption. Current GAAP guidance requires that the effect of a change in tax laws or rates on deferred tax liabilities or assets to be included in income from continuing operations in the reporting period that includes the enactment date, even if the related income tax effects were originally charged or credited directly to accumulated other comprehensive income (“AOCI”). The Company’s accounting policy for the release of stranded tax effects in AOCI is on an aggregate portfolio basis. The new guidance allows a reclassification of AOCI to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). Due to U.S. Tax Reform and the change in corporate tax rates, at December 22, 2017, the Company reported stranded tax effects in AOCI related to unrealized gains and losses on available-for-sale (“AFS”) securities, cumulative foreign translation adjustments and deferred costs on pension benefit plans. With the adoption of the guidance, the Company released these stranded tax effects in AOCI resulting in a decrease to retained earnings as of January 1, 2018 of $1.0 billion with a corresponding increase to AOCI.

Effective January 1, 2018 the Company retrospectively adopted guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement to present the other components of net periodic benefit cost must be disclosed. In addition, the guidance allows only the service cost component to be eligible for capitalization when applicable. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to de-recognition of nonfinancial assets. The new guidance clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” The new guidance also adds guidance for partial sales of nonfinancial assets. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company retrospectively adopted guidance relating to restricted cash. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to tax accounting for intra-entity transfers of assets. Prior guidance prohibited 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. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company retrospectively adopted guidance relating to cash flow statement presentation. The new guidance addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to recognition and measurement of financial instruments. The guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Effective January 1, 2018, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. Additionally, there will no longer be a requirement to assess equity securities for embedded derivatives requiring bifurcation. The adoption of this guidance resulted in a $101 million, net of income tax, increase to retained earnings largely offset by a decrease to AOCI that was primarily attributable to $925 million of equity securities previously classified and measured as equity securities AFS. The Company has included the required disclosures related to equity securities held at March 31, 2018 within Note 5.

10

Metropolitan Life Insurance Company

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

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

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

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to revenue recognition. The new guidance supersedes nearly all existing revenue recognition guidance under U.S. GAAP. However, it does not impact the accounting for insurance and investment contracts within the scope of Accounting Standards Codification Topic 944,Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

For the three months ended March 31, 2018, the Company identified $199 million of revenue streams within the scope of the guidance that are all included within other revenues on the interim condensed consolidated statements of operations and comprehensive income (loss). Such amount primarily consisted of prepaid legal plans and administrative-only contracts within the U.S. segment of $129 million, and distribution and administrative services fees within the MetLife Holdings segment of $58 million.

Substantially all of the revenue from these services is recognized over time as the applicable services are provided or are made available to the customers and control is transferred continuously. The consideration received for these services is variable and constrained to the amount not probable of a significant revenue reversal.

Other

Effective January 16, 2018, the London Clearing House (“LCH”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives, for which the LCH serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $2 million, gross derivative liabilities by $182 million, accrued investment income by $4 million and collateral receivables recorded within premiums, reinsurance and other receivables by $176 million.

Future Adoption of New Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance on hedging activities (Accounting Standards Update (“ASU”) 2017-12,Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. Early adoption is permitted. The new guidance simplifies the application of hedge accounting in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in their financial statements. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2017, the FASB issued new guidance on purchased callable debt securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04,Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for a description of the two-step test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company expects the adoption of this new guidance will reduce the complexity involved with the evaluation of goodwill for impairment. The impact of the new guidance will depend on the outcomes of future goodwill impairment tests.

11

Metropolitan Life Insurance Company

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

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

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

In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other-than-temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and is currently assessing the accounting and reporting system changes that will be required to comply with the new guidance. The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is currently evaluating the impact of the new 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. Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. The Company’s implementation efforts are primarily focused on the review of its existing lease contracts, identification of other contracts that may fall under the scope of the new guidance, and performing a gap analysis on the current state of lease-related activities compared with the future state of lease-related activities. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

2. Segment Information

The Company is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other.

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, 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 stable value and pension risk transfer products, institutional income annuities, tort settlements, capital market investment products, as well as postretirement benefits and company-, bank- or trust-owned life insurance.

MetLife Holdings

The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company, such as variable, universal, term and whole life insurance, variable, fixed and index-linked annuities and long-term care insurance.

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)

Corporate & Other

Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including enterprise-wide strategic initiative restructuring charges and various start-up businesses. Additionally, Corporate & Other includes run-off businesses such as the direct to consumer portion of the U.S. Direct business. Corporate & Other also includes the Company’s ancillary international operations, interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to affiliated reinsurance and intersegment loans, which bear interest rates commensurate with related borrowings.

Financial Measures and Segment Accounting Policies

Adjusted earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings is also the Company’s GAAP measure of segment performance and is reported below. Adjusted earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of adjusted 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.

Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax.

The financial measures of adjusted revenues and adjusted expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. Adjusted 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 adjusted 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 annuityguaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”); and

• Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnerships that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in fair value is recognized in net investment gains (losses) for GAAP.

13

Metropolitan Life Insurance Company

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

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

2. Segment Information (continued)

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

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

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

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

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

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

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.

Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for thethree months endedMarch 31, 2018and2017. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for adjusted 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 adjusted 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.

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)

Three Months Ended March 31, 2018	U.S.			MetLife Holdings		Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	4,177		$	773	$	(1	)	$	4,949		$	—		$	4,949
Universal life and investment-type product policy fees	253			255		—			508			23			531
Net investment income	1,593			1,204		(4		)	2,793			(92		)	2,701
Other revenues	196			66		139			401			—			401
Net investment gains (losses)	—			—		—			—			(196		)	(196		)
Net derivative gains (losses)	—			—		—			—			60			60
Total revenues	6,219			2,298		134			8,651			(205		)	8,446
Expenses
Policyholder benefits and claims and policyholder dividends	4,411			1,374		(11		)	5,774			2			5,776
Interest credited to policyholder account balances	394			188		—			582			(1		)	581
Capitalization of DAC	(12		)	2		—			(10		)	—			(10		)
Amortization of DAC and VOBA	17			77		—			94			(6		)	88
Interest expense on debt	3			2		21			26			—			26
Other expenses	719			255		278			1,252			(2		)	1,250
Total expenses	5,532			1,898		288			7,718			(7		)	7,711
Provision for income tax expense (benefit)	147			77		(119		)	105			(42		)	63
Adjusted earnings	$	540		$	323	$	(35	)	828
Adjustments to:
Total revenues									(205		)
Total expenses									7
Provision for income tax (expense) benefit									42
Net income (loss)									$	672					$	672

Three Months Ended March 31, 2017	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	4,299		$	876		$	6		$	5,181		$	—		$	5,181
Universal life and investment-type product policy fees	263			301			—			564			24			588
Net investment income	1,564			1,256			(30		)	2,790			(118		)	2,672
Other revenues	197			54			147			398			—			398
Net investment gains (losses)	—			—			—			—			(43		)	(43		)
Net derivative gains (losses)	—			—			—			—			(151		)	(151		)
Total revenues	6,323			2,487			123			8,933			(288		)	8,645
Expenses
Policyholder benefits and claims and policyholder dividends	4,581			1,473			2			6,056			66			6,122
Interest credited to policyholder account balances	348			195			—			543			(1		)	542
Capitalization of DAC	(12		)	(11		)	—			(23		)	—			(23		)
Amortization of DAC and VOBA	15			132			—			147			(10		)	137
Interest expense on debt	3			2			21			26			—			26
Other expenses	685			270			221			1,176			(2		)	1,174
Total expenses	5,620			2,061			244			7,925			53			7,978
Provision for income tax expense (benefit)	245			135			(141		)	239			(119		)	120
Adjusted earnings	$	458		$	291		$	20		769
Adjustments to:
Total revenues										(288		)
Total expenses										(53		)
Provision for income tax (expense) benefit										119
Net income (loss)										$	547					$	547

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)

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

	March 31, 2018		December 31, 2017
	(In millions)
U.S.	$	240,152	$	245,750
MetLife Holdings	158,076		163,397
Corporate & Other	24,391		25,148
Total	$	422,619	$	434,295

3. Insurance

Guarantees

As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report, the Company issues variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 6.

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

16

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:

	March 31, 2018								December 31, 2017
	In the Event of Death				At Annuitization				In the Event of Death				At Annuitization
	(Dollars in millions)
Annuity Contracts:
Variable Annuity Guarantees:
Total account value (1), (2)	$	54,211			$	24,206			$	56,136			$	25,257
Separate account value (1)	$	43,714			$	23,302			$	45,431			$	24,336
Net amount at risk	$	1,224	(3	)	$	307	(4	)	$	990	(3	)	$	353	(4	)
Average attained age of contractholders	67 years				65 years				66 years				65 years
Other Annuity Guarantees:
Total account value (1), (2)	N/A				$	142			N/A				$	141
Net amount at risk	N/A				$	89	(5	)	N/A				$	92	(5	)
Average attained age of contractholders	N/A				52 years				N/A				52 years

	March 31, 2018				December 31, 2017
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(Dollars in millions)
Universal and Variable Life Contracts:
Total account value (1), (2)	$	4,708	$	967	$	4,679	$	977
Net amount at risk (6)	$	46,156	$	6,603	$	46,704	$	6,713
Average attained age of policyholders	55 years		63 years		54 years		62 years

__________________

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

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

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

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

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

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

17

Metropolitan Life Insurance Company

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

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

3. Insurance (continued)

Liabilities for Unpaid Claims and Claim Expenses

Rollforward of Claims and Claim Adjustment Expenses

Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:

	Three Months Ended March 31,
	2018			2017 (1)
	(In millions)
Balance, beginning of period	$	12,090		$	11,621
Less: Reinsurance recoverables	1,401			1,251
Net balance, beginning of period	10,689			10,370
Incurred related to:
Current period	4,469			4,419
Prior periods (2)	(161		)	(179		)
Total incurred	4,308			4,240
Paid related to:
Current period	(2,044		)	(2,295		)
Prior periods	(2,138		)	(1,996		)
Total paid	(4,182		)	(4,291		)
Net balance, end of period	10,815			10,319
Add: Reinsurance recoverables	1,414			1,349
Balance, end of period (included in future policy benefits and other policy-related balances)	$	12,229		$	11,668

__________________

(1) As discussed in Note 4 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report, at December 31, 2016, the Net balance decreased and the Reinsurance recoverables increased from those amounts previously reported. Additionally, at March 31, 2017, the Net balance decreased by $133 million and the Reinsurance recoverables increased by $146 million from those amounts previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017. These adjustments to the Net balance and the Reinsurance recoverables, at both periods, are primarily to correct for improper classification of reinsurance recoverables.

(2) During both the three months ended March 31, 2018 and 2017, as a result of changes in estimates of insured events in the respective prior periods, the claims and claim adjustment expenses associated with prior periods decreased due to favorable claims experience.

4. Closed Block

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

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

18

Metropolitan Life Insurance Company

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

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

4. Closed Block (continued)

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

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

	March 31, 2018			December 31, 2017
	(In millions)
Closed Block Liabilities
Future policy benefits	$	40,285		$	40,463
Other policy-related balances	213			222
Policyholder dividends payable	462			437
Policyholder dividend obligation	1,277			2,121
Other liabilities	285			212
Total closed block liabilities	42,522			43,455
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	26,815			27,904
Equity securities, at estimated fair value	68			70
Mortgage loans	6,040			5,878
Policy loans	4,532			4,548
Real estate and real estate joint ventures	595			613
Other invested assets	607			731
Total investments	38,657			39,744
Accrued investment income	475			477
Premiums, reinsurance and other receivables; cash and cash equivalents	208			14
Current income tax recoverable	40			35
Deferred income tax assets	23			36
Total assets designated to the closed block	39,403			40,306
Excess of closed block liabilities over assets designated to the closed block	3,119			3,149
Amounts included in AOCI:
Unrealized investment gains (losses), net of income tax	1,711			1,863
Unrealized gains (losses) on derivatives, net of income tax	(57		)	(7		)
Allocated to policyholder dividend obligation, net of income tax	(1,009		)	(1,379		)
Total amounts included in AOCI	645			477
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,764		$	3,626

See Note 1 for discussion of new accounting guidance related to U.S. Tax Reform.

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

	Three Months Ended March 31, 2018			Year   Ended   December 31, 2017
	(In millions)
Balance, beginning of period	$	2,121		$	1,931
Change in unrealized investment and derivative gains (losses)	(844		)	190
Balance, end of period	$	1,277		$	2,121

19

Metropolitan Life Insurance Company

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

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

4. Closed Block (continued)

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

		Three Months Ended March 31,
		2018			2017
	(In millions)
Revenues
Premiums		$	387		$	402
Net investment income		444			466
Net investment gains (losses)		(29		)	(8		)
Net derivative gains (losses)		(3		)	(8		)
Total revenues		799			852
Expenses
Policyholder benefits and claims		571			568
Policyholder dividends		244			250
Other expenses		29			32
Total expenses		844			850
Revenues, net of expenses before provision for income tax expense (benefit)		(45		)	2
Provision for income tax expense (benefit)		(10		)	—
Revenues, net of expenses and provision for income tax expense (benefit)		$	(35	)	$	2

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

20

Metropolitan Life Insurance Company

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

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

5. Investments

Fixed Maturity Securities Available-for-Sale

Fixed Maturity Securities Available-for-Sale by Sector

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

	March 31, 2018											December 31, 2017
	Amortized Cost		Gross Unrealized							Estimated Fair Value		Amortized Cost		Gross Unrealized							Estimated Fair Value
			Gains		Temporary Losses		OTTI Losses (1)							Gains		Temporary Losses		OTTI Losses (1)
	(In millions)
Fixed maturity securities:
U.S. corporate	$	53,597	$	3,738	$	587	$	—		$	56,748	$	53,291	$	5,037	$	238	$	—		$	58,090
U.S. government and agency	32,453		3,036		430		—			35,059		35,021		3,755		231		—			38,545
Foreign corporate	23,986		1,393		443		—			24,936		24,367		1,655		426		—			25,596
RMBS	21,488		918		357		(35		)	22,084		21,735		1,039		181		(41		)	22,634
ABS	7,562		75		10		—			7,627		7,808		73		15		—			7,866
State and political subdivision	6,330		1,094		14		—			7,410		6,310		1,245		3		1			7,551
CMBS	4,958		60		49		—			4,969		5,390		124		26		—			5,488
Foreign government	3,927		538		44		—			4,421		3,887		641		26		—			4,502
Total fixed maturity securities	$	154,301	$	10,852	$	1,934	$	(35	)	$	163,254	$	157,809	$	13,569	$	1,146	$	(40	)	$	170,272

__________________

(1) Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”

The Company held non-income producing fixed maturity securities with an estimated fair value of $23 million and $4 million, and unrealized gains (losses) of ($1) million and ($3) million at March 31, 2018 and December 31, 2017, respectively.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at March 31, 2018:

	Due in One Year or Less		Due After  One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities		Total Fixed Maturity Securities
	(In millions)
Amortized cost	$	7,390	$	31,521	$	29,596	$	51,786	$	34,008	$	154,301
Estimated fair value	$	7,371	$	32,234	$	30,643	$	58,326	$	34,680	$	163,254

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

21

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector

The following table presents the estimated fair value and gross unrealized losses of fixed maturity 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:

	March 31, 2018								December 31, 2017
	Less than 12 Months				Equal to or Greater than 12 Months				Less than 12 Months				Equal to or Greater than 12 Months
	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	$	12,484	$	349	$	2,450	$	238	$	3,727	$	57	$	2,523	$	181
U.S. government and agency	14,171		163		2,813		267		13,905		76		3,018		155
Foreign corporate	4,315		111		3,010		332		1,677		43		3,912		383
RMBS	8,007		165		2,945		157		3,673		30		3,332		110
ABS	1,311		6		204		4		732		3		358		12
State and political subdivision	280		8		117		6		106		1		120		3
CMBS	2,043		29		212		20		844		6		193		20
Foreign government	765		21		250		23		247		6		265		20
Total fixed maturity securities	$	43,376	$	852	$	12,001	$	1,047	$	24,911	$	222	$	13,721	$	884
Total number of securities in an unrealized loss position	3,337				1,007				1,295				1,103

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

As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity 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 March 31, 2018. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

Gross unrealized losses on fixed maturity securities increased $793 billion during the three months ended March 31, 2018 to $1.9 billion. The increase in gross unrealized losses for the three months ended March 31, 2018 was primarily attributable to widening credit spreads and increases in interest rates, partially offset by strengthening foreign currencies on non-functional currency denominated fixed maturity securities.

At March 31, 2018, $76 million of the total $1.9 billion of gross unrealized losses were from 19 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.

22

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Investment Grade Fixed Maturity Securities

Of the $76 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $35 million, or 46%, were related to gross unrealized losses on five investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities

Of the $76 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $41 million, or 54%, were related to gross unrealized losses on 14 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily industrial and utility securities) and CMBS and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty including concerns over lower oil prices in the energy sector. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers and evaluates CMBS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security.

Equity Securities

Equity securities are summarized as follows at:

	March 31, 2018				December 31, 2017
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	(Dollars in millions)
Equity securities:
Common stock	$	473	53.6	%	$	1,251	75.5	%
Non-redeemable preferred stock	409		46.4		407		24.5
Total equity securities	$	882	100.0	%	$	1,658	100.0	%

In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company has reclassified its investment in common stock in regional banks of the Federal Home Loan Bank (“FHLB”) system from equity securities to other invested assets. These investments are carried at redemption value and are considered restricted investments until redeemed by the respective FHLB regional banks. The carrying value of these investments at December 31, 2017 was $733 million.

23

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	March 31, 2018					December 31, 2017
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	37,269		61.9	%	$	35,440		60.6	%
Agricultural	12,747			21.2		12,712			21.8
Residential	10,042			16.7		10,058			17.2
Subtotal (1)	60,058			99.8		58,210			99.6
Valuation allowances	(281		)	(0.5	)	(271		)	(0.5	)
Subtotal mortgage loans, net	59,777			99.3		57,939			99.1
Residential — FVO	438			0.7		520			0.9
Total mortgage loans, net	$	60,215		100.0	%	$	58,459		100.0	%

__________________

(1) Purchases of mortgage loans, primarily residential mortgage loans, were$288 millionand$762 millionfor the three months ended March 31, 2018 and 2017, respectively.

Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on residential mortgage loans — FVO is presented in Note 7. The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis.

Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment

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

	Evaluated Individually for Credit Losses										Evaluated Collectively for Credit Losses				Impaired Loans
	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)
March 31, 2018
Commercial	$	—	$	—	$	—	$	—	$	—	$	37,269	$	184	$	—
Agricultural	22		21		2		101		100		12,626		38		119
Residential	—		—		—		376		339		9,703		57		339
Total	$	22	$	21	$	2	$	477	$	439	$	59,598	$	279	$	458
December 31, 2017
Commercial	$	—	$	—	$	—	$	—	$	—	$	35,440	$	173	$	—
Agricultural	22		21		2		27		27		12,664		38		46
Residential	—		—		—		358		324		9,734		58		324
Total	$	22	$	21	$	2	$	385	$	351	$	57,838	$	269	$	370

24

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $84 million and $331 million, respectively, for the three months ended March 31, 2018; and $12 million, $25 million and $253 million, respectively, for the three months ended March 31, 2017.

Valuation Allowance Rollforward by Portfolio Segment

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

	Three Months Ended March 31,
	2018										2017
	Commercial		Agricultural		Residential			Total			Commercial		Agricultural		Residential			Total
	(In millions)
Balance, beginning of period	$	173	$	40	$	58		$	271		$	167	$	38	$	62		$	267
Provision (release)	11		—		—			11			3		—		5			8
Charge-offs, net of recoveries	—		—		(1		)	(1		)	—		—		(4		)	(4		)
Balance, end of period	$	184	$	40	$	57		$	281		$	170	$	38	$	63		$	271

Credit Quality of Commercial Mortgage Loans

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

	Recorded Investment										Estimated Fair Value		% of Total
	Debt Service Coverage Ratios								% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x		Total
	(Dollars in millions)
March 31, 2018
Loan-to-value ratios:
Less than 65%	$	31,534	$	923	$	139	$	32,596	87.5	%	$	32,956	87.7	%
65% to 75%	3,297		95		135		3,527		9.5		3,516		9.4
76% to 80%	165		210		126		501		1.3		480		1.3
Greater than 80%	401		167		77		645		1.7		606		1.6
Total	$	35,397	$	1,395	$	477	$	37,269	100.0	%	$	37,558	100.0	%
December 31, 2017
Loan-to-value ratios:
Less than 65%	$	29,346	$	1,359	$	198	$	30,903	87.2	%	$	31,563	87.5	%
65% to 75%	3,245		95		114		3,454		9.7		3,465		9.6
76% to 80%	149		171		57		377		1.1		363		1.0
Greater than 80%	400		159		147		706		2.0		665		1.9
Total	$	33,140	$	1,784	$	516	$	35,440	100.0	%	$	36,056	100.0	%

25

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Credit Quality of Agricultural Mortgage Loans

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

	March 31, 2018				December 31, 2017
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	12,118	95.1	%	$	12,082	95.0	%
65% to 75%	581		4.5		581		4.6
76% to 80%	40		0.3		40		0.3
Greater than 80%	8		0.1		9		0.1
Total	$	12,747	100.0	%	$	12,712	100.0	%

The estimated fair value of agricultural mortgage loans was $12.7 billion and $12.8 billion at March 31, 2018 and December 31, 2017, respectively.

Credit Quality of Residential Mortgage Loans

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

	March 31, 2018				December 31, 2017
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	9,711	96.7	%	$	9,614	95.6	%
Nonperforming	331		3.3		444		4.4
Total	$	10,042	100.0	%	$	10,058	100.0	%

The estimated fair value of residential mortgage loans was $10.8 billion and $10.6 billion at March 31, 2018 and December 31, 2017, respectively.

26

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Past Due and Nonaccrual Mortgage Loans

The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both March 31, 2018 and December 31, 2017. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and nonaccrual mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:

	Past Due				Greater than 90 Days Past Due and Still Accruing Interest				Nonaccrual
	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
	(In millions)
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural	219		134		114		125		106		36
Residential	331		444		—		—		331		444
Total	$	550	$	578	$	114	$	125	$	437	$	480

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 $2.6 billion and $3.1 billion at March 31, 2018 and December 31, 2017, respectively.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities AFS and equity securities 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:

	March 31, 2018			December 31, 2017
	(In millions)
Fixed maturity securities	$	8,845		$	12,349
Fixed maturity securities with noncredit OTTI losses included in AOCI	35			40
Total fixed maturity securities	8,880			12,389
Equity securities	—			119
Derivatives	706			1,396
Other	77			1
Subtotal	9,663			13,905
Amounts allocated from:
Future policy benefits	(11		)	(19		)
DAC, VOBA and DSI	(579		)	(790		)
Policyholder dividend obligation	(1,277		)	(2,121		)
Subtotal	(1,867		)	(2,930		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(7		)	(14		)
Deferred income tax benefit (expense)	(1,629		)	(3,704		)
Net unrealized investment gains (losses)	$	6,160		$	7,257

27

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

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

	Three Months Ended March 31, 2018
	(In millions)
Balance, beginning of period	$	7,257
Cumulative effects of changes in accounting principles, net of income tax (Note 1)	1,310
Fixed maturity securities on which noncredit OTTI losses have been recognized	(5		)
Unrealized investment gains (losses) during the period	(4,118		)
Unrealized investment gains (losses) relating to:
Future policy benefits	8
DAC, VOBA and DSI	211
Policyholder dividend obligation	844
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	7
Deferred income tax benefit (expense)	646
Balance, end of period	$	6,160
Change in net unrealized investment gains (losses)	$	(1,097	)

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both March 31, 2018 and December 31, 2017.

Securities Lending

Elements of the Company’s securities lending program are presented below at:

	March 31, 2018		December 31, 2017
	(In millions)
Securities on loan: (1)
Amortized cost	$	12,702	$	13,887
Estimated fair value	$	13,300	$	14,852
Cash collateral received from counterparties (2)	$	13,542	$	15,170
Security collateral received from counterparties (3)	$	27	$	11
Reinvestment portfolio — estimated fair value	$	13,518	$	15,188

__________________

(1) Included within fixed maturity securities.

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

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

28

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

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

	March 31, 2018								December 31, 2017
	Remaining Tenor of Securities Lending Agreements								Remaining Tenor of Securities Lending Agreements
	Open (1)		1 Month or Less		Over 1 to 6 Months		Total		Open (1)		1 Month or Less		Over 1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	2,457	$	5,163	$	5,922	$	13,542	$	2,927	$	5,279	$	6,964	$	15,170

__________________

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

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at March 31, 2018 was $2.4 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including U.S. government and agency securities, agency RMBS, ABS and U.S. corporate securities) and short-term investments with 64% invested in U.S. government and agency securities, agency RMBS, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

Repurchase Agreements

Elements of the Company’s short-term repurchase agreements are presented below at:

	March 31, 2018		December 31, 2017
	(In millions)
Securities on loan: (1)
Amortized cost	$	2,700	$	900
Estimated fair value	$	2,819	$	1,031
Cash collateral received from counterparties (2)	$	2,760	$	1,000
Reinvestment portfolio — estimated fair value	$	2,754	$	1,000

__________________

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

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

29

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

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

	March 31, 2018				December 31, 2017
	Remaining Tenor of Repurchase Agreements				Remaining Tenor of Repurchase Agreements
	1 Month or Less		Total		1 Month or Less		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	2,760	$	2,760	$	1,000	$	1,000

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

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:

	March 31, 2018		December 31, 2017
	(In millions)
Invested assets on deposit (regulatory deposits)	$	47	$	49
Invested assets pledged as collateral	21,097		20,775
Total invested assets on deposit and pledged as collateral	$	21,144	$	20,824

The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report) and derivative transactions (see Note 6). Amounts in the table above include invested assets and cash and cash equivalents.

See “— Securities Lending” and “— Repurchase Agreements” for information regarding securities on loan and Note 4 for information regarding investments designated to the closed block and “— Equity Securities” for information on common stock holdings in regional banks of the FHLB system, which are considered restricted investments.

Variable Interest Entities

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

Consolidated VIEs

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

30

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

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

	March 31, 2018				December 31, 2017
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
Real estate joint ventures (1)	$	1,331	$	—	$	1,077	$	—
Renewable energy partnership (2)	109		1		116		3
Other investments	31		6		32		6
Total	$	1,471	$	7	$	1,225	$	9

__________________

(1) The Company’s investment in these affiliated real estate joint ventures was $1.2 billion and $1.0 billion at March 31, 2018 and December 31, 2017, respectively. Other affiliates’ investments in these affiliated real estate joint ventures totaled $144 million and $85 million at March 31, 2018 and December 31, 2017, respectively.

(2) Assets of the renewable energy partnership primarily consisted of other invested assets.

Unconsolidated VIEs

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

	March 31, 2018				December 31, 2017
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	33,350	$	33,350	$	34,284	$	34,284
U.S. and foreign corporate	990		990		1,166		1,166
Other limited partnership interests	3,587		5,922		3,561		5,765
Other invested assets	2,183		2,440		2,172		2,506
Real estate joint ventures	41		46		38		43
Total	$	40,151	$	42,748	$	41,221	$	43,764

__________________

(1) The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $113 million and $117 million at March 31, 2018 and December 31, 2017, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(2) For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset-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 three months ended March 31, 2018 and 2017.

31

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Net Investment Income

The components of net investment income were as follows:

		Three Months Ended March 31,
		2018		2017
	(In millions)
Investment income:
Fixed maturity securities		$	1,785	$	1,766
Equity securities		11		24
Mortgage loans		671		637
Policy loans		72		76
Real estate and real estate joint ventures		111		98
Other limited partnership interests		147		196
Cash, cash equivalents and short-term investments		20		16
Operating joint venture		7		1
Other		79		65
Subtotal		2,903		2,879
Less: Investment expenses		202		207
Net investment income		$	2,701	$	2,672

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)

5. Investments (continued)

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

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

		Three Months Ended March 31,
		2018			2017
	(In millions)
Total gains (losses) on fixed maturity securities:
OTTI losses on fixed maturity securities recognized in earnings		$	—		$	—
Fixed maturity securities — net gains (losses) on sales and disposals		(45		)	31
Total gains (losses) on fixed maturity securities		(45		)	31
Total gains (losses) on equity securities:
OTTI losses recognized — by security type:
Common stock		—			(7		)
Non-redeemable preferred stock		—			(1		)
Total OTTI losses on equity securities recognized in earnings		—			(8		)
Equity securities — net gains (losses) on sales and disposals		—			(3		)
Change in estimated fair value of equity securities (1)		(39		)	—
Total gains (losses) on equity securities		(39		)	(11		)
Mortgage loans		(21		)	(12		)
Real estate and real estate joint ventures		25			(3		)
Other limited partnership interests		—			(3		)
Other (2)		(106		)	(38		)
Subtotal		(186		)	(36		)
Change in estimated fair value of other limited partnership interests and real estate joint ventures		(6		)	—
Non-investment portfolio gains (losses)		(4		)	(7		)
Subtotal		(10		)	(7		)
Total net investment gains (losses)		$	(196	)	$	(43	)

__________________

(1) Changes in estimated fair value subsequent to purchase for equity securities still held as of the end of the period included in net investment gains (losses) were ($39) million for the three months ended March 31, 2018. See Note1.

(2) Other gains (losses) for the three months ended March 31, 2018 includes a leveraged lease impairment of $105 million.

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

Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($10) million and ($48) millionfor thethree months endedMarch 31, 2018and2017, respectively.

33

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Sales or Disposals and Impairments of Fixed Maturity Securities AFS

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

	Three Months   Ended   March 31,
	2018			2017
	Fixed Maturity Securities
	(In millions)
Proceeds	$	13,255		$	7,478
Gross investment gains	$	51		$	130
Gross investment losses	(96		)	(99		)
OTTI losses	—			—
Net investment gains (losses)	$	(45	)	$	31

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 March 31,
		2018			2017
	(In millions)
Balance, beginning of period		$	110		$	157
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI		(6		)	(16		)
Balance, end of period		$	104		$	141

34

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Related Party Investment Transactions

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

		Three Months Ended March 31,
		2018		2017
	(In millions)
Estimated fair value of invested assets transferred to affiliates		$	—	$	453
Amortized cost of invested assets transferred to affiliates		$	—	$	416
Net investment gains (losses) recognized on transfers		$	—	$	37
Estimated fair value of invested assets transferred from affiliates		$	—	$	293

In January 2017, the Company received transferred investments with an estimated fair value of $292 million, which are included in the table above, in addition to $275 million in cash related to the recapture of risks from minimum benefit guarantees on certain variable annuities previously reinsured by Brighthouse Life Insurance Company (“Brighthouse Insurance”).

The unpaid principal balance of MetLife, Inc. affiliated loans held by the Company totals $1.8 billion. In March 2018, three senior notes previously issued by MetLife, Inc. to the Company were redenominated to Japanese yen. A $500 million senior note was redenominated to a new 53.3 billion Japanese yen senior note to the Company. The 53.3 billion Japanese yen senior note matures in June 2019 and bears interest at a rate per annum of 1.45%, payable semi-annually. A $250 million senior note was redenominated to a new 26.5 billion Japanese yen senior note to the Company. The 26.5 billion Japanese yen senior note matures in October 2019 and bears interest at a rate per annum of 1.72%, payable semi-annually. A $250 million senior note was also redenominated to a new 26.5 billion Japanese yen senior note to the Company. The 26.5 billion Japanese yen senior note matures in September 2020 and bears interest at a rate per annum of 0.82%, payable semi-annually. Other previously issued notes of $358 million at 5.64% due on July 15, 2021 and $467 million at 5.86% due on December 16, 2021 also remain outstanding. The carrying value of these MetLife, Inc. affiliated loans totaled $1.8 billion at both March 31, 2018andDecember 31, 2017, and are included in other invested assets. Net investment income from these affiliated loans was$11 millionand $19 millionfor thethree months endedMarch 31, 2018and 2017, respectively.

As a structured settlements assignment company, the Company purchases annuities from Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) to fund the periodic structured settlement claim payment obligations it assumes. Each annuity purchased is contractually designated to the assumed claim obligation it funds. The aggregate annuity contract values recorded, for which the Company has also recorded unpaid claim obligations of equal amounts, were $1.3 billion at both March 31, 2018 and December 31, 2017. The related net investment income and corresponding policyholder benefits and claims recognized were $18 million and $16 millionfor thethree months endedMarch 31, 2018and 2017, respectively.

The Company holds a surplus note from American Life Insurance Company, an affiliate, which is included in other invested assets, with a carrying value of $100 million at both March 31, 2018 and December 31, 2017. Net investment income from this surplus note was $1 million for both thethree months endedMarch 31, 2018and 2017.

The Company held preferred stock of Metropolitan Property and Casualty Insurance Company, an affiliate, which was included in other invested assets, with a carrying value of $315 million at both March 31, 2018 and December 31, 2017. Net investment income from the affiliated preferred stock dividends was $2 million and $1 million for thethree months endedMarch 31, 2018and 2017, respectively.

In March 2017, the Company purchased from Brighthouse Insurance an interest in an operating joint venture for $286 million, which was settled in cash in April 2017.

See Note 2 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for information regarding the separation of Brighthouse.

The Company provides investment administrative services to certain affiliates. The related investment administrative service charges to these affiliates were$19 millionand $18 millionfor thethree months endedMarch 31, 2018and 2017, respectively.

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

6. Derivatives

Accounting for Derivatives

Freestanding Derivatives

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

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

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

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

Hedge Accounting

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

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

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

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

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

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

35

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

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

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

Embedded Derivatives

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

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

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

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

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

See Note 7 for information about the fair value hierarchy for derivatives.

Derivative Strategies

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

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

36

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

Interest Rate Derivatives

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

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

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

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

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

In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures in nonqualifying hedging relationships.

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

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

A synthetic guaranteed interest contract (“GIC”) is a contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the contractholder owns the underlying assets. The Company guarantees a rate of return on those assets for a premium. Synthetic GICs are not designated as hedging instruments.

37

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

Foreign Currency Exchange Rate Derivatives

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

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

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

Credit Derivatives

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

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

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

Equity Derivatives

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

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

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

38

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

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

39

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

Primary Risks Managed by Derivatives

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

		March 31, 2018						December 31, 2017
	Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
				Assets		Liabilities				Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps	Interest rate	$	2,517	$	2,111	$	2	$	3,826	$	2,289	$	3
Foreign currency swaps	Foreign currency exchange rate	1,112		62		35		1,082		47		17
Subtotal		3,629		2,173		37		4,908		2,336		20
Cash flow hedges:
Interest rate swaps	Interest rate	3,245		158		10		3,337		234		—
Interest rate forwards	Interest rate	3,143		—		217		3,333		—		127
Foreign currency swaps	Foreign currency exchange rate	23,916		701		1,206		22,287		795		1,078
Subtotal		30,304		859		1,433		28,957		1,029		1,205
Total qualifying hedges		33,933		3,032		1,470		33,865		3,365		1,225
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	36,747		1,456		87		43,028		1,722		336
Interest rate floors	Interest rate	7,201		66		—		7,201		91		—
Interest rate caps	Interest rate	46,021		221		2		53,079		78		2
Interest rate futures	Interest rate	1,025		1		—		2,257		1		2
Interest rate options	Interest rate	11,125		125		—		7,525		142		11
Interest rate total return swaps	Interest rate	1,048		14		25		1,048		8		2
Synthetic GICs	Interest rate	9,631		—		—		11,318		—		—
Foreign currency swaps	Foreign currency exchange rate	6,573		410		204		6,739		547		164
Foreign currency forwards	Foreign currency exchange rate	1,025		18		4		961		16		7
Credit default swaps — purchased	Credit	848		5		7		980		7		8
Credit default swaps — written	Credit	7,891		140		2		7,874		181		—
Equity futures	Equity market	937		—		—		1,282		5		1
Equity index options	Equity market	14,359		406		414		14,408		384		476
Equity variance swaps	Equity market	3,530		44		165		3,530		45		169
Equity total return swaps	Equity market	971		31		—		1,077		—		39
Total non-designated or nonqualifying derivatives		148,932		2,937		910		162,307		3,227		1,217
Total		$	182,865	$	5,969	$	2,380	$	196,172	$	6,592	$	2,442

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both March 31, 2018 and December 31, 2017. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

40

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

Net Derivative Gains (Losses)

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

		Three Months Ended March 31,
		2018			2017
	(In millions)
Freestanding derivatives and hedging gains (losses) (1)		$	(273	)	$	(526	)
Embedded derivatives gains (losses)		333			375
Total net derivative gains (losses)		$	60		$	(151	)

__________________

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

The following table presents earned income on derivatives:

	Three Months Ended March 31,
	2018			2017
	(In millions)
Qualifying hedges:
Net investment income	$	77		$	75
Interest credited to policyholder account balances	(23		)	(6		)
Nonqualifying hedges:
Net derivative gains (losses)	82			127
Policyholder benefits and claims	2			1
Total	$	138		$	197

41

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging

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

	Net Derivative Gains (Losses)			Net Investment Income (1)			Policyholder Benefits and Claims (2)
	(In millions)
Three Months Ended March 31, 2018
Interest rate derivatives	$	(256	)	$	4		$	—
Foreign currency exchange rate derivatives	(214		)	—			—
Credit derivatives — purchased	(1		)	—			—
Credit derivatives — written	(28		)	—			—
Equity derivatives	10			1			1
Total	$	(489	)	$	5		$	1
Three Months Ended March 31, 2017
Interest rate derivatives	$	(266	)	$	2		$	—
Foreign currency exchange rate derivatives	(125		)	—			—
Credit derivatives — purchased	(6		)	—			—
Credit derivatives — written	27			—			—
Equity derivatives	(221		)	(1		)	(60		)
Total	$	(591	)	$	1		$	(60	)

__________________

(1) Changes in estimated fair value related to economic hedges of equity method investments in joint ventures.

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

Fair Value Hedges

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

42

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

Derivatives in Fair Value Hedging Relationships	Hedged Items in Fair Value Hedging Relationships	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Ineffectiveness Recognized in Net Derivative Gains (Losses)
		(In millions)
Three Months Ended March 31, 2018
Interest rate swaps:	Fixed maturity securities	$	3		$	(2	)	$	1
	Policyholder liabilities (1)	(213		)	212			(1		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities and mortgage loans	(25		)	25			—
	Foreign-denominated policyholder account balances (2)	18			(18		)	—
Total		$	(217	)	$	217		$	—
Three Months Ended March 31, 2017
Interest rate swaps:	Fixed maturity securities	$	1		$	(1	)	$	—
	Policyholder liabilities (1)	(52		)	51			(1		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	(3		)	3			—
	Foreign-denominated policyholder account balances (2)	1			2			3
Total		$	(53	)	$	55		$	2

__________________

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

(2) Fixed rate or floating rate liabilities.

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

Cash Flow Hedges

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

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). These amounts were less than $1 million and $20 million for the three months ended March 31, 2018 and 2017, respectively.

At March 31, 2018 and December 31, 2017, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed four years and five years, respectively.

At March 31, 2018 and December 31, 2017, the balance in AOCI associated with cash flow hedges was $706 million and $1.4 billion, respectively.

43

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

Derivatives in Cash Flow Hedging Relationships	Amount of Gains (Losses) Deferred in AOCI on Derivatives			Amount and Location of Gains (Losses) Reclassified from AOCI into Income (Loss)					Amount and Location of Gains (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)			(Effective Portion)					(Ineffective Portion)
				Net Derivative Gains (Losses)			Net Investment Income		Net Derivative Gains (Losses)
	(In millions)
Three Months Ended March 31, 2018
Interest rate swaps	$	(173	)	$	16		$	3	$	(2	)
Interest rate forwards	(104		)	4			1		—
Foreign currency swaps	(229		)	160			—		(1		)
Total	$	(506	)	$	180		$	4	$	(3	)
Three Months Ended March 31, 2017
Interest rate swaps	$	4		$	8		$	4	$	1
Interest rate forwards	44			(4		)	1		—
Foreign currency swaps	18			203			—		1
Total	$	66		$	207		$	5	$	2

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

At March 31, 2018,the Company expected to reclassify $60 millionof deferred net gains (losses) on derivatives in AOCI, included in the table above, to earnings within the next 12 months.

Credit Derivatives

In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $7.9 billion at both March 31, 2018 and December 31, 2017. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At March 31, 2018 and December 31, 2017, the Company would have received $138 million and $181 million, respectively, to terminate all of these contracts.

44

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

	March 31, 2018					December 31, 2017
Rating Agency Designation of Referenced Credit Obligations (1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)
	(Dollars in millions)
Aaa/Aa/A
Single name credit default swaps (3)	$	2	$	159	2.6	$	3	$	159	2.8
Credit default swaps referencing indices	39		2,192		2.5	42		2,193		2.7
Subtotal	41		2,351		2.5	45		2,352		2.7
Baa
Single name credit default swaps (3)	4		463		1.8	4		416		1.5
Credit default swaps referencing indices	78		4,817		5.4	111		4,761		5.2
Subtotal	82		5,280		5.1	115		5,177		4.9
Ba
Single name credit default swaps (3)	—		20		1.2	1		105		3.4
Credit default swaps referencing indices	—		—		—	—		—		—
Subtotal	—		20		1.2	1		105		3.4
B
Single name credit default swaps (3)	2		20		3.2	2		20		3.5
Credit default swaps referencing indices	13		220		5.2	18		220		5.0
Subtotal	15		240		5.1	20		240		4.9
Total	$	138	$	7,891	4.3	$	181	$	7,874	4.2

__________________

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

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

(3) Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.

The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amount of potential future recoveries available to offset the $7.9 billion of future payments under credit default provisions at both March 31, 2018 and December 31, 2017 set forth in the table above was $16 million and $27 million at March 31, 2018 and December 31, 2017, respectively.

Credit Risk on Freestanding Derivatives

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

45

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

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

See Note 7 for a description of the impact of credit risk on the valuation of derivatives.

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

	March 31, 2018						December 31, 2017
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1)	Assets			Liabilities			Assets			Liabilities
	(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)	$	5,908		$	2,325		$	6,478		$	2,203
OTC-cleared (1), (6)	111			26			168			216
Exchange-traded	1			—			6			3
Total gross estimated fair value of derivatives (1)	6,020			2,351			6,652			2,422
Amounts offset on the interim condensed consolidated balance sheets	—			—			—			—
Estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1), (6)	6,020			2,351			6,652			2,422
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(1,811		)	(1,811		)	(1,891		)	(1,891		)
OTC-cleared	(16		)	(16		)	(31		)	(31		)
Exchange-traded	—			—			—			—
Cash collateral: (3), (4)
OTC-bilateral	(3,038		)	—			(3,448		)	—
OTC-cleared	(93		)	—			(131		)	(179		)
Exchange-traded	—			—			—			—
Securities collateral: (5)
OTC-bilateral	(890		)	(514		)	(954		)	(312		)
OTC-cleared	—			(10		)	—			(6		)
Exchange-traded	—			—			—			(3		)
Net amount after application of master netting agreements and collateral	$	172		$	—		$	197		$	—

__________________

(1) At March 31, 2018 and December 31, 2017, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $51 million and $60 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($29) millionand ($20) million, respectively.

46

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

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

(4) The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At March 31, 2018 and December 31, 2017, the Company received excess cash collateral of $57 million and $122 million, respectively, and provided excess cash collateral of $0 and $9 million, respectively, which is not included in the table above due to the foregoing limitation.

(5) Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at March 31, 2018, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At March 31, 2018 and December 31, 2017, the Company received excess securities collateral with an estimated fair value of $1 million and $30 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2018 and December 31, 2017, the Company provided excess securities collateral with an estimated fair value of $206 million and $152 million, respectively, for its OTC-bilateral derivatives, and $215 million and $299 million, respectively, for its OTC-cleared derivatives, and $48 million and $50 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

(6) Effective January 16, 2018, the LCH amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the LCH amendments.

The Company’s collateral arrangements for its OTC-bilateral derivatives require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that party reaches a minimum transfer amount. Substantially all of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

47

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.

	March 31, 2018						December 31, 2017
	Derivatives Subject to Financial Strength- Contingent Provisions		Derivatives Not Subject to Financial Strength- Contingent Provisions		Total		Derivatives Subject to Financial Strength- Contingent Provisions		Derivatives Not Subject to Financial Strength- Contingent Provisions		Total
	(In millions)
Estimated Fair Value of Derivatives in a Net Liability Position (1)	$	514	$	—	$	514	$	313	$	—	$	313
Estimated Fair Value of Collateral Provided:
Fixed maturity securities	$	700	$	—	$	700	$	399	$	—	$	399
Cash	$	—	$	—	$	—	$	—	$	—	$	—

__________________

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

Embedded Derivatives

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

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

	Balance Sheet Location	March 31, 2018			December 31, 2017
		(In millions)
Embedded derivatives within asset host contracts:
Options embedded in debt or equity securities (1)	Investments	$	—		$	(113	)
Embedded derivatives within asset host contracts		$	—		$	(113	)
Embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	Policyholder account balances	$	(135	)	$	(94	)
Assumed guaranteed minimum benefits	Policyholder account balances	2			3
Funds withheld on ceded reinsurance	Other liabilities	656			898
Fixed annuities with equity indexed returns	Policyholder account balances	68			69
Embedded derivatives within liability host contracts		$	591		$	876

__________________

(1) In connection with the adoption of new guidance related to the recognition and measurement of financial instruments (see Note 1), effective January 1, 2018, the Company is no longer required to bifurcate and account separately for derivatives embedded in equity securities. Beginning January 1, 2018, the entire change in fair value of equity securities is recognized as a component of net investment gains and losses.

48

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

	Three Months   Ended   March 31,
	2018		2017
	(In millions)
Net derivative gains (losses) (1), (2)	$	333	$	375

__________________

(1) The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($21) million and ($12) million for the three months ended March 31, 2018 and 2017, respectively.

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

49

Metropolitan Life Insurance Company

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

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

7. Fair Value

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

Recurring Fair Value Measurements

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

	March 31, 2018
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	53,534	$	3,214	$	56,748
U.S. government and agency	15,790		19,269		—		35,059
Foreign corporate	—		20,855		4,081		24,936
RMBS	—		19,011		3,073		22,084
ABS	—		6,921		706		7,627
State and political subdivision	—		7,410		—		7,410
CMBS	—		4,896		73		4,969
Foreign government	—		4,408		13		4,421
Total fixed maturity securities	15,790		136,304		11,160		163,254
Equity securities	359		164		359		882
Other limited partnership interests	—		—		189		189
Short-term investments	1,932		909		550		3,391
Residential mortgage loans — FVO	—		—		438		438
Derivative assets: (1)
Interest rate	1		4,137		14		4,152
Foreign currency exchange rate	—		1,191		—		1,191
Credit	—		110		35		145
Equity market	—		412		69		481
Total derivative assets	1		5,850		118		5,969
Embedded derivatives within asset host contracts (3)	—		—		—		—
Separate account assets (3)	21,963		101,657		1,227		124,847
Total assets	$	40,045	$	244,884	$	14,041	$	298,970
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	101	$	242	$	343
Foreign currency exchange rate	—		1,445		4		1,449
Credit	—		9		—		9
Equity market	—		414		165		579
Total derivative liabilities	—		1,969		411		2,380
Embedded derivatives within liability host contracts (2)	—		—		591		591
Separate account liabilities (3)	—		12		5		17
Total liabilities	$	—	$	1,981	$	1,007	$	2,988

50

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

	December 31, 2017
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	54,629	$	3,461	$	58,090
U.S. government and agency	18,802		19,743		—		38,545
Foreign corporate	—		21,471		4,125		25,596
RMBS	—		19,372		3,262		22,634
ABS	—		7,079		787		7,866
State and political subdivision	—		7,551		—		7,551
CMBS	—		5,461		27		5,488
Foreign government	—		4,471		31		4,502
Total fixed maturity securities	18,802		139,777		11,693		170,272
Equity securities	399		893		366		1,658
Short-term investments	2,056		1,092		7		3,155
Residential mortgage loans — FVO	—		—		520		520
Derivative assets: (1)
Interest rate	1		4,556		8		4,565
Foreign currency exchange rate	—		1,405		—		1,405
Credit	—		149		39		188
Equity market	5		363		66		434
Total derivative assets	6		6,473		113		6,592
Embedded derivatives within asset host contracts (2)	—		—		—		—
Separate account assets (3)	23,571		106,294		960		130,825
Total assets	$	44,834	$	254,529	$	13,659	$	313,022
Liabilities
Derivative liabilities: (1)
Interest rate	$	2	$	351	$	130	$	483
Foreign currency exchange rate	—		1,261		5		1,266
Credit	—		8		—		8
Equity market	1		515		169		685
Total derivative liabilities	3		2,135		304		2,442
Embedded derivatives within liability host contracts (3)	—		—		876		876
Separate account liabilities (3)	—		7		2		9
Total liabilities	$	3	$	2,142	$	1,182	$	3,327

__________________

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

(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets. At March 31, 2018 and December 31, 2017, debt and equity securities also included embedded derivatives of $0 and ($113) million, respectively.

51

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

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

Investments

Valuation Controls and Procedures

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

The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and less than 1% of the total estimated fair value of Level 3 fixed maturity securities at March 31, 2018.

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

Securities and Short-term Investments

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

52

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

Other Limited Partnership Interests

The estimated fair values of other limited partnership interests are generally based on the Company’s share of the net asset value (“NAV”) of the other limited partnership interests as provided on the financial statements of the investee. In certain circumstances, management may adjust the NAV when it has sufficient evidence to support applying such adjustments.

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

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

53

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

__________________

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

Derivatives

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

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

54

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

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

Freestanding Derivatives

Level 2 Valuation Approaches and Key Inputs:

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

Level 3 Valuation Approaches and Key Inputs:

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

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

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

__________________

(1) Option-based only.

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

55

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

Embedded Derivatives

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

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

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

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

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

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

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

The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as described in “— Investments — Securities and Short-term Investments.” 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.

56

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

Embedded Derivatives Within Asset and Liability Host Contracts

Level 3 Valuation Approaches and Key Inputs:

Direct and assumed guaranteed minimum benefits

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

Reinsurance ceded on certain guaranteed minimum benefits

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

Embedded derivatives within funds withheld related to certain ceded reinsurance

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

Transfers between Levels

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

Transfers between Levels 1 and 2:

There were no transfers between Levels 1 and 2 for assets and liabilities measured at estimated fair value and still held at March 31, 2018 and December 31, 2017.

Transfers into or out of Level 3:

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

57

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

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

					March 31, 2018				December 31, 2017				Impact of Increase in Input on Estimated Fair Value (2)
	Valuation Techniques		Significant Unobservable Inputs		Range			Weighted Average (1)	Range			Weighted Average (1)
Fixed maturity securities (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Offered quotes (4)	89	-	139	108	83	-	142	111	Increase
	•	Market pricing	•	Quoted prices (4)	25	-	846	127	10	-	443	123	Increase
RMBS	•	Market pricing	•	Quoted prices (4)	—	-	107	94	—	-	126	94	Increase (5)
ABS	•	Market pricing	•	Quoted prices (4)	20	-	104	100	27	-	104	100	Increase (5)
	•	Consensus pricing	•	Offered quotes (4)					100	-	101	100	Increase (5)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (6)	277	-	313		200	-	300		Increase (7)
			•	Repurchase rates (8)	(4)	-	6		(5)	-	5		Decrease (7)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (6)	(19)	-	2		(14)	-	(3)		Increase (7)
Credit	•	Present value techniques	•	Credit spreads (9)	97	-	100		—	-	—		Decrease (7)
	•	Consensus pricing	•	Offered quotes (10)
Equity market	•	Present value    techniques or    option pricing    models	•	Volatility (11)	20%	-	31%		11%	-	31%		Increase (7)
			•	Correlation (12)	10%	-	30%		10%	-	30%
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0%	-	0.09%		0%	-	0.09%		Decrease (13)
				Ages 41 - 60	0.04%	-	0.65%		0.04%	-	0.65%		Decrease (13)
				Ages 61 - 115	0.26%	-	100%		0.26%	-	100%		Decrease (13)
			•	Lapse rates:
				Durations 1 - 10	0.25%	-	100%		0.25%	-	100%		Decrease (14)
				Durations 11 - 20	3%	-	100%		3%	-	100%		Decrease (14)
				Durations 21 - 116	3%	-	100%		3%	-	100%		Decrease (14)
			•	Utilization rates	0%	-	25%		0%	-	25%		Increase (15)
			•	Withdrawal rates	0.25%	-	10%		0.25%	-	10%		(16)
			•	Long-term equity volatilities	17.40%	-	25%		17.40%	-	25%		Increase (17)
			•	Nonperformance risk spread	0.03%	-	0.50%		0.02%	-	0.44%		Decrease (18)

__________________

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

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

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

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

58

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

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

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

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

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

(10) At both March 31, 2018 and December 31, 2017, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.

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

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

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

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

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

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

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

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

59

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3, including those within separate account assets, and embedded derivatives within funds withheld related to certain ceded reinsurance, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The residential mortgage loans — FVO are valued using independent non-binding broker quotations and internal models including matrix pricing and discounted cash flow methodologies using current interest rates. Other limited partnership interests valuations are generally based on the Company’s share of the NAV as provided on the financial statements of the investees. In certain circumstances, management may adjust the NAV when it has sufficient evidence to support applying such adjustments. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table.

The following tables summarize the change of all assets (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)			Structured Securities			Foreign Government			Equity Securities
	(In millions)
Three Months Ended March 31, 2018
Balance, beginning of period	$	7,586		$	4,076		$	31		$	366
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	6			23			—			(8		)
Total realized/unrealized gains (losses) included in AOCI	(36		)	6			—			—
Purchases (4)	385			445			—			1
Sales (4)	(425		)	(247		)	—			—
Issuances (4)	—			—			—			—
Settlements (4)	—			—			—			—
Transfers into Level 3 (5)	45			45			1			—
Transfers out of Level 3 (5)	(266		)	(496		)	(19		)	—
Balance, end of period	$	7,295		$	3,852		$	13		$	359
Three Months Ended March 31, 2017
Balance, beginning of period	$	8,839		$	4,541		$	21		$	420
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			31			—			(10		)
Total realized/unrealized gains (losses) included in AOCI	103			29			—			19
Purchases (4)	603			872			4			1
Sales (4)	(334		)	(343		)	—			—
Issuances (4)	—			—			—			—
Settlements (4)	—			—			—			—
Transfers into Level 3 (5)	52			23			—			—
Transfers out of Level 3 (5)	(1,215		)	(186		)	(7		)	—
Balance, end of period	$	8,048		$	4,967		$	18		$	430
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2018 (6)	$	(1	)	$	21		$	—		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2017 (6)	$	1		$	23		$	—		$	(10	)

60

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Other Limited Partnership Interests			Short-term Investments			Residential Mortgage Loans - FVO			Net Derivatives (7)			Net Embedded Derivatives (8)			Separate Accounts (9)
	(In millions)
Three Months Ended March 31, 2018
Balance, beginning of period	$	—		$	7		$	520		$	(191	)	$	(876	)	$	958
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	(6		)	—			2			(47		)	333			2
Total realized/unrealized gains (losses) included in AOCI	2			—			—			(104		)	—			—
Purchases (4)	—			550			—			—			—			407
Sales (4)	(19		)	(2		)	(64		)	—			—			(123		)
Issuances (4)	—			—			—			—			—			1
Settlements (4)	—			—			(20		)	49			(48		)	(1		)
Transfers into Level 3 (5)	212			—			—			—			—			53
Transfers out of Level 3 (5)	—			(5		)	—			—			—			(75		)
Balance, end of period	$	189		$	550		$	438		$	(293	)	$	(591	)	$	1,222
Three Months Ended March 31, 2017
Balance, beginning of period	—			$	25		$	566		$	(559	)	$	(893	)	$	1,141
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			—			(3		)	(2		)	391			(24		)
Total realized/unrealized gains (losses) included in AOCI	—			—			—			44			—			—
Purchases (4)	—			773			135			—			—			136
Sales (4)	—			(2		)	(33		)	—			—			(42		)
Issuances (4)	—			—			—			—			—			39
Settlements (4)	—			—			(26		)	93			(388		)	(33		)
Transfers into Level 3 (5)	—			—			—			—			—			69
Transfers out of Level 3 (5)	—			(21		)	—			—			—			(102		)
Balance, end of period	$	—		$	775		$	639		$	(424	)	$	(890	)	$	1,184
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2018 (6)	$	(6	)	$	—		$	(8	)	$	(5	)	$	335		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2017 (6)	$	—		$	—		$	(3	)	$	(10	)	$	391		$	—

__________________

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

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

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

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

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

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

61

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

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

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

Fair Value Option

The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis. The following table presents information for residential mortgage loans, which are accounted for under the FVO, and were initially measured at fair value.

	March 31, 2018			December 31, 2017
	(In millions)
Unpaid principal balance	$	544		$	650
Difference between estimated fair value and unpaid principal balance	(106		)	(130		)
Carrying value at estimated fair value	$	438		$	520
Loans in nonaccrual status	$	159		$	198
Loans more than 90 days past due	$	78		$	94
Loans in nonaccrual status or more than 90 days past due, or both - difference between aggregate estimated fair value and unpaid principal balance	$	(82	)	$	(102	)

Fair Value of Financial Instruments Carried at Other Than Fair Value

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

62

Metropolitan Life Insurance Company

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

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

7. Fair Value (continued)

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

	March 31, 2018
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	59,777	$	—	$	—	$	61,006	$	61,006
Policy loans	$	6,009	$	—	$	264	$	6,670	$	6,934
Other invested assets	$	2,993	$	—	$	2,740	$	143	$	2,883
Premiums, reinsurance and other receivables	$	14,698	$	—	$	347	$	14,784	$	15,131
Liabilities
Policyholder account balances	$	74,591	$	—	$	—	$	75,107	$	75,107
Long-term debt	$	1,645	$	—	$	1,941	$	—	$	1,941
Other liabilities	$	14,461	$	—	$	1,124	$	12,385	$	13,509
Separate account liabilities	$	58,434	$	—	$	58,434	$	—	$	58,434

	December 31, 2017
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	57,939	$	—	$	—	$	59,465	$	59,465
Policy loans	$	6,006	$	—	$	261	$	6,797	$	7,058
Other limited partnership interests	$	214	$	—	$	—	$	212	$	212
Other invested assets	$	2,260	$	—	$	2,028	$	154	$	2,182
Premiums, reinsurance and other receivables	$	15,024	$	—	$	679	$	14,859	$	15,538
Liabilities
Policyholder account balances	$	75,323	$	—	$	—	$	76,452	$	76,452
Long-term debt	$	1,661	$	—	$	2,021	$	—	$	2,021
Other liabilities	$	13,954	$	—	$	547	$	13,490	$	14,037
Separate account liabilities	$	61,757	$	—	$	61,757	$	—	$	61,757

63

Metropolitan Life Insurance Company

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

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

8. Equity

Accumulated Other Comprehensive Income (Loss)

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

	Three Months Ended March 31, 2018
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	6,351		$	906		$	(47	)	$	(1,782	)	$	5,428
OCI before reclassifications	(2,380		)	(506		)	22			—			(2,864		)
Deferred income tax benefit (expense)	515			103			(6		)	—			612
AOCI before reclassifications, net of income tax	4,486			503			(31		)	(1,782		)	3,176
Amounts reclassified from AOCI	10			(184		)	—			31			(143		)
Deferred income tax benefit (expense)	(2		)	37			—			(7		)	28
Amounts reclassified from AOCI, net of income tax	8			(147		)	—			24			(115		)
Cumulative effects of changes in accounting principles	(119		)	—			—			—			(119		)
Deferred income tax benefit (expense), cumulative effects of changes in accounting principles	1,222			207			(7		)	(379		)	1,043
Cumulative effects of changes in accounting principles, net of income tax (2)	1,103			207			(7		)	(379		)	924
Balance, end of period	$	5,597		$	563		$	(38	)	$	(2,137	)	$	3,985

	Three Months Ended March 31, 2017
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	3,592		$	1,459		$	(67	)	$	(1,865	)	$	3,119
OCI before reclassifications	787			66			(33		)	—			820
Deferred income tax benefit (expense)	(264		)	(23		)	8			—			(279		)
AOCI before reclassifications, net of income tax	4,115			1,502			(92		)	(1,865		)	3,660
Amounts reclassified from AOCI	126			(212		)	—			41			(45		)
Deferred income tax benefit (expense)	(42		)	74			—			(14		)	18
Amounts reclassified from AOCI, net of income tax	84			(138		)	—			27			(27		)
Balance, end of period	$	4,199		$	1,364		$	(92	)	$	(1,838	)	$	3,633

__________________

(1) See Note 5 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.

(2) See Note 1 for further information on adoption of new accounting pronouncements.

64

Metropolitan Life Insurance Company

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

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

8. Equity (continued)

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

AOCI Components	Amounts Reclassified from AOCI						Consolidated Statements of Operations and Comprehensive Income (Loss) Locations
	Three Months Ended March 31,
	2018			2017
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	$	(47	)	$	28		Net investment gains (losses)
Net unrealized investment gains (losses)	3			3			Net investment income
Net unrealized investment gains (losses)	34			(157		)	Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	(10		)	(126		)
Income tax (expense) benefit	2			42
Net unrealized investment gains (losses), net of income tax	(8		)	(84		)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	16			8			Net derivative gains (losses)
Interest rate swaps	3			4			Net investment income
Interest rate forwards	4			(4		)	Net derivative gains (losses)
Interest rate forwards	1			1			Net investment income
Foreign currency swaps	160			203			Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax	184			212
Income tax (expense) benefit	(37		)	(74		)
Gains (losses) on cash flow hedges, net of income tax	147			138
Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)	(36		)	(45		)
Amortization of prior service (costs) credit	5			4
Amortization of defined benefit plan items, before income tax	(31		)	(41		)
Income tax (expense) benefit	7			14
Amortization of defined benefit plan items, net of income tax	(24		)	(27		)
Total reclassifications, net of income tax	$	115		$	27

__________________

(1) These AOCI components are included in the computation of net periodic benefit costs. See Note 10.

65

Metropolitan Life Insurance Company

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

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

9. Other Expenses

Information on other expenses was as follows:

	Three Months   Ended   March 31,
	2018			2017
	(In millions)
General and administrative expenses	$	691		$	590
Pension, postretirement and postemployment benefit costs	17			46
Premium taxes, other taxes, and licenses & fees	95			95
Commissions and other variable expenses	447			443
Capitalization of DAC	(10		)	(23		)
Amortization of DAC and VOBA	88			137
Interest expense on debt	26			26
Total other expenses	$	1,354		$	1,314

Certain prior year amounts have been reclassified to conform to the current year presentation, which has been revised to align the expense categories with the Company’s businesses. The reclassifications did not result in a change to total other expenses.

Affiliated Expenses

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

10. Employee Benefit Plans

Pension and Other Postretirement Benefit Plans

The Company sponsors and administers various qualified and nonqualified defined benefit pension plans and other postretirement employee benefit plans covering employees 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.

The components of net periodic benefit costs, reported in other expenses, were as follows:

	Three Months Ended March 31,
	2018						2017
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	40		$	1		$	40		$	1
Interest costs	93			11			99			13
Expected return on plan assets	(131		)	(18		)	(121		)	(14		)
Amortization of net actuarial (gains) losses	44			(8		)	45			—
Amortization of prior service costs (credit)	—			(5		)	—			(4		)
Allocated to affiliates	(17		)	5			(9		)	—
Net periodic benefit costs (credit)	$	29		$	(14	)	$	54		$	(4	)

66

Metropolitan Life Insurance Company

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

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

11. Income Tax

On December 22, 2017, President Trump signed into law U.S. Tax Reform. U.S. Tax Reform includes numerous changes in tax law, including a permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, which took effect for taxable years beginning on or after January 1, 2018. U.S. Tax Reform moves the United States from a worldwide tax system to a participation exemption system by providing corporations a 100% dividends received deduction for dividends distributed by a controlled foreign corporation. To transition to that new system, U.S. Tax Reform imposed a one-time deemed repatriation tax on unremitted earnings and profits at a rate of 8.0% for illiquid assets and 15.5% for cash and cash equivalents.

In accordance with Staff Accounting Bulletin 118 issued by the U.S. Securities and Exchange Commission (“SEC”) in December 2017, the Company recorded provisional amounts for certain items for which the income tax accounting is not complete. For these items, the Company recorded a reasonable estimate of the tax effects of U.S. Tax Reform. The estimates will be reported as provisional amounts during a measurement period, which will not exceed one year from the date of enactment of U.S. Tax Reform. The Company may reflect adjustments to its provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.

See Note 15 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for further information. As of March 31, 2018, no updates were made to the provisional amounts.

12. Contingencies, Commitments and Guarantees

Contingencies

Litigation

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

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

The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at March 31, 2018. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.

Matters as to Which an Estimate Can Be Made

For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of March 31, 2018, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $575 million.

67

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

Matters as to Which an Estimate Cannot Be Made

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

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 2017 Annual Report, Metropolitan Life Insurance Company received approximately 3,514 asbestos-related claims in 2017. During the three months ended March 31, 2018 and 2017, Metropolitan Life Insurance Company received approximately 823 and 1,104 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2017. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

68

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

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

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

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 March 31, 2018.

Regulatory Matters

The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the 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.

69

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

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

In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain environmental testing at the Chemform Site. The EPA may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reached a settlement in principal on the EPA’s claim for past costs. The Company estimates that the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.

Sales Practices Regulatory Matters

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

Unclaimed Property Litigation

Total Asset Recovery Services, LLC. v. MetLife, Inc., et al. (Supreme Court of the State of New York, County of New York, filed November 17, 2017)

Alleging that MetLife, Inc., Metropolitan Life Insurance Company, and several other insurance companies violated the New York False Claims Act (the “Act”) by filing false unclaimed property reports from 1986 to 2017 with New York to avoid having to escheat the proceeds of more than 25,000 life insurance policies, including policies for which the defendants escheated funds as part of their demutualizations in the late 1990s, Total Asset Recovery Services (“The Relator”) has brought an action under the qui tam provision of the Act on behalf of itself and New York. The Relator originally filed this action under seal in 2010, and the complaint was unsealed on December 19, 2017. The Relator seeks treble damages and other relief. The Company intends to defend this action vigorously.

Total Control Accounts Litigation

Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as Total Control Accounts (“TCA”), as a settlement option for death benefits.

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

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

70

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

Inquiries into Pension Benefits

The Company informed its primary state regulator, the New York Department of Financial Services (“NYDFS”), about its practices in connection with the payment of certain pension benefits to annuitants and related matters. The NYDFS is examining the issue. The Division of Enforcement of the SEC is also investigating this matter and several additional regulators, including, but not limited to, the Massachusetts Securities Division, have made inquiries into these practices, including as to related disclosures. It is possible that other jurisdictions may pursue similar investigations or inquiries. As previously disclosed in the 2017 Annual Report, the Company, in connection with a review of practices and procedures used to estimate reserves related to certain Retirement Income Solutions (“RIS”) group annuitants who have been unresponsive or missing over time, identified a material weakness in its internal control over financial reporting related to certain RIS group annuity reserves. In conjunction with the material weakness, the Company increased reserves by $510 million pre-tax to reinstate reserves previously released, and to reflect accrued interest and other related liabilities. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report.

The Company is exposed to lawsuits and regulatory investigations, and could be exposed to additional legal actions relating to these matters. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or awarded by courts or regulatory authorities under applicable escheat, tax, securities, ERISA, or other laws or regulations. The Company could incur significant costs in connection with these actions. The Company’s increase in reserves does not reflect, and the Company has not recorded an accrual for, any such potential amounts. An estimate of the possible loss or range of loss cannot be made at this time.

Other Litigation

Sun Life Assurance Company of Canada Indemnity Claim

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

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

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

71

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

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

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

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

This putative class action lawsuit was filed by a single defined contribution plan participant on behalf of all ERISA plans whose assets were invested in Metropolitan Life Insurance Company’s “Group Annuity Contract Stable Value Funds” within the past six years. The suit alleges breaches of fiduciary duty under ERISA and challenges the “spread” with respect to the stable value fund group annuity products sold to retirement plans. The allegations focus on the methodology Metropolitan Life Insurance Company uses to establish and reset the crediting rate, the terms under which plan participants are permitted to transfer funds from a stable value option to another investment option, the procedures followed if an employer terminates a contract, and the level of disclosure provided. Plaintiff seeks declaratory and injunctive relief, as well as damages in an unspecified amount. The parties settled on January 2, 2018 and the court has dismissed the action.

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

Plaintiff filed this putative class action alleging causes of action for breach of contract, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, based on Metropolitan Life Insurance Company’s class-wide increase in premiums charged for long-term care insurance policies. Plaintiff alleges a class consisting of herself and all persons over age 65 who selected a Reduced Pay at Age 65 payment feature and whose premium rates were increased after age 65. Plaintiff asserts that premiums could not be increased for these class members and/or that marketing material was misleading as to Metropolitan Life Insurance Company’s right to increase premiums. Plaintiff seeks unspecified compensatory, statutory and punitive damages, as well as recessionary and injunctive relief. On April 12, 2017, the court granted Metropolitan Life Insurance Company’s motion, dismissing the action with prejudice. Plaintiff appealed this ruling to the United States Court of Appeals for the Seventh Circuit (the “Seventh Circuit”) and on February 6, 2018, the Seventh Circuit reversed and remanded for further proceedings, ruling that Plaintiff is entitled to relief on her contract claim. Following Metropolitan Life Insurance Company’s petition for rehearing, the Seventh Circuit issued an amended opinion on March 22, 2018, holding that plaintiff’s claim survived Metropolitan Life Insurance Company’s motion to dismiss but finding that the policy is ambiguous as to Metropolitan Life Insurance Company’s right to raise plaintiff’s premiums. The Seventh Circuit held that on remand to the district court, the parties may introduce evidence to try to resolve this ambiguity.

Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)

Plaintiffs filed this putative class action against MetLife, Inc. and Metropolitan Life Insurance Company in the U.S. District Court for the Central District of California, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy with a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, plaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York. On November 9, 2017, plaintiffs dismissed MetLife, Inc. without prejudice from the action. Metropolitan Life Insurance Company intends to defend this action vigorously.

72

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)

Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. On March 22, 2018, the Court conditionally certified the case as a collective action, requiring that notice be mailed to LTD claims specialists who worked for the Company from February 8, 2014 to the present. The Company intends to defend this action vigorously.

Sales Practices Claims

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

Summary

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

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

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.6 billion and $3.3 billion at March 31, 2018 and December 31, 2017, respectively.

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

The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $3.8 billion and $3.9 billion at March 31, 2018 and December 31, 2017, respectively.

73

Metropolitan Life Insurance Company

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

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

12. Contingencies, Commitments and Guarantees (continued)

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $493 million, with a cumulative maximum of $898 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

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

The Company’s recorded liabilities were $4 million at both March 31, 2018 and December 31, 2017 for indemnities, guarantees and commitments.

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. 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 $516 million and $589 million for the three months ended March 31, 2018 and 2017, respectively. Total revenues received from affiliates related to these agreements were $58 million and $60 million for the three months ended March 31, 2018 and 2017, 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 $298 million and $336 million for the three months ended March 31, 2018, and 2017, respectively, and were reimbursed to the Company by these affiliates.

The Company had net payables to affiliates, related to the items discussed above, of $30 million and $205 million at March 31, 2018 and December 31, 2017, respectively.

See Notes 5 and 10 for additional information on related party transactions.

Related Party Reinsurance Transactions

The Company has reinsurance agreements with certain of MetLife, Inc.’s subsidiaries, including MetLife Reinsurance Company of Charleston (“MRC”), MetLife Reinsurance Company of Vermont, Metropolitan Tower Life Insurance Company and General American Life Insurance Company, all of which are related parties. Additionally, the Company has reinsurance agreements with Brighthouse Insurance, Brighthouse Life Insurance Company of NY and New England Life Insurance Company, former subsidiaries of MetLife, Inc. that were part of the separation of Brighthouse and are related parties.

74

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 interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:

	Three Months Ended March 31,
	2018			2017
	(In millions)
Premiums
Reinsurance assumed	$	3		$	86
Reinsurance ceded	(32		)	(36		)
Net premiums	$	(29	)	$	50
Universal life and investment-type product policy fees
Reinsurance assumed	$	1		$	13
Reinsurance ceded	(5		)	(5		)
Net universal life and investment-type product policy fees	$	(4	)	$	8
Other revenues
Reinsurance assumed	$	3		$	23
Reinsurance ceded	133			142
Net other revenues	$	136		$	165
Policyholder benefits and claims
Reinsurance assumed	$	4		$	60
Reinsurance ceded	(28		)	(33		)
Net policyholder benefits and claims	$	(24	)	$	27
Interest credited to policyholder account balances
Reinsurance assumed	$	11		$	13
Reinsurance ceded	(3		)	(3		)
Net interest credited to policyholder account balances	$	8		$	10
Other expenses
Reinsurance assumed	$	8		$	1
Reinsurance ceded	132			153
Net other expenses	$	140		$	154

75

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 interim condensed consolidated balance sheets was as follows at:

	March 31, 2018					December 31, 2017
	Assumed		Ceded			Assumed		Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	46	$	12,691		$	47	$	12,762
Deferred policy acquisition costs and value of business acquired	—		(182		)	—		(180		)
Total assets	$	46	$	12,509		$	47	$	12,582
Liabilities
Future policy benefits	$	377	$	(2	)	$	380	$	(4	)
Policyholder account balances	161		—			166		—
Other policy-related balances	101		14			104		15
Other liabilities	1,850		12,651			1,858		12,970
Total liabilities	$	2,489	$	12,663		$	2,508	$	12,981

The Company ceded two blocks of business to an affiliate on a 75% coinsurance with funds withheld basis. Certain contractual features of these agreements qualify as embedded derivatives, which are separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivatives related to the funds withheld associated with these reinsurance agreements are included within other liabilities and were $10 million and $16 million at March 31, 2018 and December 31, 2017, respectively. Net derivative gains (losses) associated with these embedded derivatives were $6 million and ($2) millionfor the three months ended March 31, 2018 and 2017, respectively.

Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and was $647 million and $882 million at March 31, 2018 and December 31, 2017, respectively. Net derivative gains (losses) associated with the embedded derivative were $235 million and ($27) million for the three months ended March 31, 2018 and 2017, respectively.

The Company assumes risks from affiliates related to guaranteed minimum benefit guarantees written directly by the affiliates. These assumed reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $2 million and $3 million at March 31, 2018 and December 31, 2017, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than $1 million and $262 million for the three months endedMarch 31, 2018and 2017, respectively.

14. Subsequent Event

In the second quarter of 2018, the remaining $825 million of affiliated senior notes previously issued by MetLife, Inc. to the Company (see Note 5) were redenominated to a new 38.5 billion Japanese yen senior note which matures in July 2021 and bears interest at a rate per annum of 2.97%, payable semi-annually and a new 51.0 billion Japanese yen senior note which matures in December 2021 and bears interest at a rate per annum of 3.14%, payable semi-annually.

76

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	78
Business	78
Summary of Critical Accounting Estimates	80
Results of Operations	81
Adoption of New Accounting Pronouncements	86
Future Adoption of New Accounting Pronouncements	86
Non-GAAP and Other Financial Disclosures	87
Subsequent Event	88

77

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, 2017 (the “2017 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, and the Company’s interim condensed consolidated financial statements included elsewhere herein.

This narrative analysis may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will be,” “will not,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future 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, adjusted 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, adjusted earnings is also our GAAP measure of segment performance. Adjusted earnings allows analysis of our performance and facilitates comparisons to industry results. Forward-looking guidance provided on a non-GAAP basis cannot be reconciled to the most directly comparable GAAP measures on a forward-looking basis because net income may fluctuate significantly if net investment gains and losses and net derivative gains and losses move outside of estimated ranges. See “— Non-GAAP and Other Financial Disclosures” for a definition and discussion of this and other financial measures, and “— Results of Operations” for reconciliations of historical non-GAAP financial measures to the most directly comparable GAAP measures.

Business

Overview

MLIC is a provider of insurance, annuities, employee benefits and asset management. MLIC is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.

Group Annuity Reserves and Other Revisions

As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Group Annuity Reserves and Other Revisions” included in the 2017 Annual Report, a material weakness was identified in internal control over financial reporting relating to the review of practices and procedures used to estimate the Company’s reserves related to certain Retirement and Income Solutions (“RIS”) group annuitants who have been unresponsive or missing over time. An update of the remediation plan to remove the material weakness is further described in “Controls and Procedures.” Also, see Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements for prior period revisions related to the Company’s consolidated results, as well as “Risk Factors” disclosed in the 2017 Annual Report for further information.

U.S. Tax Reform

On December 22, 2017, President Trump signed into law H.R.1, commonly referred to as the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). U.S. Tax Reform includes numerous changes in tax law, including a permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, which took effect for taxable years beginning on or after January 1, 2018, a participation exemption system which generally eliminates U.S. federal income tax on dividends received from foreign subsidiaries, and a number of other revenue raisers.

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Given the complexities of U.S. Tax Reform, amounts recorded may change, possibly materially, due to, among other things, changes in interpretations and assumptions made by the Company, additional guidance that may be issued and actions that the Company may take. See Notes 1 and 11 of the Notes to the Interim Condensed Consolidated Financial Statements for a further discussion of U.S. Tax Reform and the impact to the Company in the first quarter of 2018. 

Separation of Brighthouse

On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) through a distribution of 96,776,670 shares of Brighthouse Financial, Inc. common stock to the MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding.

Regulatory Developments

The following discussion on regulatory developments should be read in conjunction with “Business — Regulation” in the 2017 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments.”

The U.S. insurance industry is regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, we are subject to regulation under the insurance holding company laws of New York. Furthermore, some of our operations, products and services are subject to consumer protection laws, securities regulation, environmental and unclaimed property laws and regulations, and to the Employee Retirement Income Security Act of 1974 (“ERISA”). See “— Insurance Regulation” below, as well as “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” included in the 2017 Annual Report.

Insurance Regulation

Surplus and Capital; Risk-Based Capital

The National Association of Insurance Commissioners (“NAIC”) adopted for 2018 a Risk-Based Capital (“RBC”) revision for collateral pledged to support Federal Home Loan Bank advances, which we expect to have a modest positive impact on our RBC ratio, and a RBC charge for operational risk, which we expect to have an immaterial impact on our RBC ratio. The NAIC is also studying RBC revisions for bonds, real estate, and longevity risk, but it is premature to project the impact of any potential regulatory changes resulting from such studies.

New York Insurance Regulation 210

Insurance Regulation 210 went into effect in New York on March 19, 2018. Insurance Regulation 210 establishes standards for the determination and any readjustment of non-guaranteed elements (“NGEs”) that may vary at the insurer's discretion for life insurance policies and annuity contracts delivered or issued for delivery in New York State. Examples of NGEs include cost of insurance for universal life insurance policies, as well as interest crediting rates for annuities and universal life insurance policies. The regulation requires insurers to notify policyholders at least 60 days in advance of any change in NGEs that is adverse to policyholders and, with respect to life insurance, to notify the New York Department of Financial Services (“NYDFS”) at least 120 days prior to any such changes. Additionally, the regulation requires insurers to file annually with NYDFS to inform the NYDFS of any changes adverse to policyholders made in the prior year. The regulation generally prohibits insurers from increasing profit margins for in-force policies or adjusting NGEs in order to recoup past losses.

ERISA and Fiduciary Considerations

The Department of Labor (“DOL”) issued regulations, which became for the most part applicable on June 9, 2017, that substantially expanded the definition of “investment advice” and require that an impartial or “best interests” standard be met in providing such advice, thereby broadening the circumstances under which we or our representatives, in providing investment advice with respect to ERISA plans, plan participants or Individual Retirement Accounts (“IRAs”), could be deemed a fiduciary under ERISA or the Internal Revenue Code of 1986, as amended. Several financial services industry groups have initiated litigation challenging the regulations on both procedural and substantive grounds. In particular, on March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) vacated the regulations (including related prohibited transaction exemptions), holding that the regulations were unreasonable, that the DOL lacked statutory authority to promulgate them, and that the DOL overreached its authority by doing so. This decision, which could take effect as early as May 2018, if it is not further litigated, may alter whether and how some or all of the rules are applied to our business or the way in which predecessor prohibited transaction exemptions may be interpreted in the future.

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On November 24, 2017, the NAIC issued an exposure draft of an expanded Suitability in Annuity Transactions Model Regulation, intended to result in the adoption of a “best interest” standard on a nationwide basis. The amendments to the regulation originally proposed are expected to be modified following the decision by the Fifth Circuit described above. In addition, on December 27, 2017, the NYDFS proposed revisions to Insurance Regulation 187, which not only incorporate the “best interest” standard, but also would expand the scope of the regulations to include sales of life insurance policies, as well as annuities, to consumers. The NYDFS’s proposed revisions to Insurance Regulation 187 were open for public comment until February 25, 2018, and on April 27, 2018, the NYDFS exposed an updated draft of the regulation for a 30-day comment period. Separately, on April 18, 2018, the U.S. Securities and Exchange Commission proposed and opened for public comment, Regulation Best Interest, which would require broker-dealers to act in the best interest of “retail” customers, including participants in ERISA-covered plans and IRAs, when making a recommendation of any securities transaction or investment strategy involving securities. See “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” included in the 2017 Annual Report.

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 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 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 2017 Annual Report.

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Results of Operations

Consolidated Results

Business Overview. Overall sales for the three months ended March 31, 2018 decreased compared to the prior period reflecting lower sales of stable value, pension risk transfer, structured settlement and specialized benefit products, partially offset by an increase in funding agreement issuances, all within our RIS business. Sales in our Group Benefits business also declined slightly, as lower sales in our core insurance products were mostly offset by continued growth in our voluntary products. Revenues in our MetLife Holdings segment decreased as a result of the discontinuance of the marketing of life and annuity products in early 2017.

	Three Months Ended March 31,
	2018			2017
	(In millions)
Revenues
Premiums	$	4,949		$	5,181
Universal life and investment-type product policy fees	531			588
Net investment income	2,701			2,672
Other revenues	401			398
Net investment gains (losses)	(196		)	(43		)
Net derivative gains (losses)	60			(151		)
Total revenues	8,446			8,645
Expenses
Policyholder benefits and claims and policyholder dividends	5,776			6,122
Interest credited to policyholder account balances	581			542
Capitalization of DAC	(10		)	(23		)
Amortization of DAC and VOBA	88			137
Interest expense on debt	26			26
Other expenses	1,250			1,174
Total expenses	7,711			7,978
Income (loss) before provision for income tax	735			667
Provision for income tax expense (benefit)	63			120
Net income (loss)	672			547
Less: Net income (loss) attributable to noncontrolling interests	3			1
Net income (loss) attributable to Metropolitan Life Insurance Company	$	669		$	546

Three Months Ended March 31, 2018 Compared with the Three Months Ended March 31, 2017

During the three months ended March 31, 2018, net income (loss) increased $125 million from the prior period primarily driven by favorable changes in net derivative gains (losses) and adjusted earnings, including the favorable impact of U.S. Tax Reform, partially offset by an unfavorable change in net investment gains (losses).

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

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

We also use derivatives as an integral part of our management of the investment portfolio and insurance liabilities to hedge certain risks, including changes in interest rates, foreign currency exchange rates, credit spreads and equity market levels. We use freestanding interest rate, equity, credit and currency derivatives to hedge certain invested assets and insurance liabilities. A small portion of these hedges are designated and qualify as accounting hedges, which reduce volatility in earnings. For those hedges not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings. During 2017, we restructured certain derivative hedges to decrease volatility from nonqualified interest rate derivatives and to help meet liquidity objectives under varying interest rate scenarios. As part of this restructuring, we replaced certain nonqualified derivatives with derivatives that qualify for hedge accounting treatment. In addition, we also entered into replication transactions using interest rate swaps, which are accounted for at amortized cost under statutory guidelines and are nonqualified derivatives under GAAP. We actively evaluate market risk hedging needs and strategies to ensure our liquidity objectives are met under a range of market conditions.

Certain direct or assumed variable annuity products with guaranteed minimum benefits contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). We use reinsurance and derivatives to hedge the market and other risks inherent in these variable annuity guarantees. Ceded reinsurance of direct variable annuity products with guaranteed minimum benefits generally contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). Ongoing refinement of the strategy may be required to adapt to changing NAIC rules, which may become effective as early as January 1, 2019. The restructured hedge strategy is classified as a macro hedge program, included in the non-VA program derivatives section of the table below, to protect our overall statutory capital from significant adverse economic conditions. The valuation of these embedded derivatives includes a nonperformance risk adjustment, which is unhedged, and can be a significant driver of net derivative gains (losses) and volatility in earnings, but does not have an economic impact on us.

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

	Three Months   Ended March 31,
	2018			2017
	(In millions)
Non-VA program derivatives
Interest rate	$	(142	)	$	(113	)
Foreign currency exchange rate	(83		)	(170		)
Credit	(16		)	33
Equity	13			9
Non-VA embedded derivatives	244			(56		)
Total non-VA program derivatives	16			(297		)
VA program derivatives
Embedded derivatives-direct and assumed guarantees:
Market risks	150			207
Nonperformance risk adjustment	(21		)	(12		)
Other risks	(40		)	233
Total	89			428
Embedded derivatives - ceded reinsurance:
Market and other risks	—			3
Nonperformance risk adjustment	—			—
Total	—			3
Freestanding derivatives hedging direct and assumed embedded derivatives	(45		)	(285		)
Total VA program derivatives	44			146
Net derivative gains (losses)	$	60		$	(151	)

The favorable change in net derivative gains (losses) on non-VA program derivatives was $313 million ($247 million, net of income tax). This was primarily due to a change in the value of the underlying assets favorably impacting non-VA embedded derivatives related to funds withheld on a certain reinsurance agreement. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.

The unfavorable change in net derivative gains (losses) on VA program derivatives was $102 million ($81 million, net of income tax). This was due to an unfavorable change of $93 million ($73 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 an unfavorable change of $9 million ($7 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 $93 million ($73 million, net of income tax) was primarily driven by changes in market factors and other risks.

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The primary changes in market factors are summarized as follows:

• Key equity index levels decreased in the current period and increased in the prior period, contributing to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the S&P 500 Index decreased 1% in the current period and increased 6% in the prior period.

• Long-term interest rates increased more in the current period versus the prior period, contributing to a favorable change in our embedded derivatives. Our freestanding interest rate derivatives were favorably impacted by the restructuring of the VA hedging strategy. For example, the 30-year U.S. swap rate increased 28 basis points in the current period and increased 5 basis points in the prior period.

The primary changes in other risks are summarized as follows:

• Updates to actuarial policyholder behavior assumptions within the valuation model;

• Impacts due to variable annuity reinsurance recaptures, which became effective in the first quarter of 2017;

• A change in the risk margin adjustment measuring policyholder behavior risks, which was affected by market and interest rate changes, as well as updates to actuarial policyholder behavior assumptions; and

• A combination of other factors, which include fees being deducted from accounts and changes in the benefit base, premiums, lapses, withdrawals and mortality rates.

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

Net Investment Gains (Losses). The unfavorable change in net investment gains (losses) of $153 million ($121 million, net of income tax) primarily reflects higher losses on sales of fixed maturity securities, and a leveraged lease impairment, as well as mark-to-market losses on our equity securities which are measured at fair value through net income. These unfavorable changes were partially offset by higher gains on sales of real estate joint ventures.

Taxes. Income tax expense for the three months ended March 31, 2018 was $63 million, or 9% of income (loss) before provision for income tax, compared with $120 million, or 18% of income (loss) before provision for income tax, for the three months ended March 31, 2017. The Company’s effective tax rates differ from the U.S. statutory rate of 21% typically due to non-taxable investment income and tax credits for low income housing. The changes from U.S. Tax Reform resulted in an increase in earnings of $88 million for the first quarter of 2018 compared to the prior period.

Adjusted Earnings. As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use adjusted 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 adjusted 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. Adjusted earnings allows analysis of our performance and facilitates comparisons to industry results. Adjusted earnings should not be viewed as a substitute for net income (loss). Adjusted earnings increased $59 million, net of income tax, to $828 million, net of income tax, for the three months ended March 31, 2018 from $769 million, net of income tax, for the three months ended March 31, 2017.

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Reconciliation of net income (loss) to adjusted earnings

	Three Months Ended March 31,
	2018			2017
	(In millions)
Net income (loss)	$	672		$	547
Less: Net investment gains (losses)	(196		)	(43		)
Less: Net derivative gains (losses)	60			(151		)
Less: Other adjustments to net income (1)	(62		)	(147		)
Less: Provision for income tax (expense) benefit	42			119
Adjusted earnings	$	828		$	769

__________________

(1) See definitions of adjusted revenues and adjusted expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments and Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for additional details on these adjustments by financial statement line item.

Reconciliation of revenues to adjusted revenues and expenses to adjusted expenses

	Three Months Ended March 31,
	2018			2017
	(In millions)
Total revenues	$	8,446		$	8,645
Less: Net investment gains (losses)	(196		)	(43		)
Less: Net derivative gains (losses)	60			(151		)
Less: Other adjustments to revenues (1)	(69		)	(94		)
Total adjusted revenues	$	8,651		$	8,933
Total expenses	$	7,711		$	7,978
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	(7		)	2
Less: Other adjustments to expenses (1)	—			51
Total adjusted expenses	$	7,718		$	7,925

__________________

(1) See definitions of adjusted revenues and adjusted expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments and Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for additional details on these adjustments by financial statement line item.

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Consolidated Results — Adjusted Earnings

Three Months Ended March 31, 2018 Compared with the Three Months Ended March 31, 2017

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

U.S. Tax Reform. The changes from U.S. Tax Reform resulted in an increase in adjusted earnings of $134 million for the first quarter of 2018 compared to the prior period.

Business Growth. An increase in net investment income resulted from asset growth in our U.S. segment, consistent with the growth in average invested assets from increased net flows in our RIS business from funding agreements. This increase was partially offset by negative net flows, primarily as a result of a reduced asset base in our MetLife Holdings segment. Consistent with the growth in average invested assets from positive net flows in the U.S segment, interest credited on long-duration contracts increased. In our MetLife Holdings segment, negative net flows in our deferred annuities business and a decrease in universal life sales resulted in lower asset-based fee income, decreasing adjusted earnings. Higher interest credited on insurance liabilities and DAC amortization in our MetLife Holdings segment also decreased adjusted earnings. In our U.S. segment, higher volume-related, direct and premium tax expenses were mostly offset by lower pension and post-retirement expenses. This net increase in expenses, coupled with the increase due to the current period reinstatement of the annual health insurer fee under the Patient Protection and Affordable Care Act, were mostly offset by a corresponding increase in premiums, fees and other revenues. The combined impact of the items discussed above decreased adjusted earnings by $40 million.

Market Factors. Market factors, including interest rate levels, variability in equity market returns, and foreign currency exchange rate fluctuations, continued to impact our results; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields were negatively affected by lower returns on private equities, driven by a decrease in certain partnership distributions, and lower income on derivatives. This decrease in net investment income was partially offset by lower investment expenses, increased yields on fixed maturity securities and mortgage loans, as well as higher real estate joint venture income. Higher average interest credited rates drove an increase in interest credited expenses in our U.S. segment; however, this was partially offset by an increase in adjusted earnings due to a decrease in the crediting rate on certain long-duration insurance contracts. In our MetLife Holdings segment, lower equity returns drove a decrease in average separate account balances within our deferred annuity business which resulted in lower asset-based fee income. Adjusted earnings also increased due to lower DAC amortization. The changes in market factors discussed above resulted in a $17 million decrease in adjusted earnings.

Underwriting and Other Insurance Adjustments. Favorable underwriting increased adjusted earnings by $33 million due to favorable morbidity and mortality. A $25 million increase in adjusted earnings was driven by favorable morbidity experience in our individual disability and critical illness businesses in our U.S. segment, as well as in our long-term care business in our MetLife Holdings segment. Mortality results improved by $8 million primarily as a result of favorable claims experience in our MetLife Holdings segment due to lower life claim severity. Mortality results in our U.S. segment were essentially unchanged as less favorable claim experience in our term life business, driven by the impact of a more severe flu season, was offset by lower incidence in our accidental death and dismemberment and universal life businesses, as well as favorable mortality in our specialized life insurance business. Refinements to DAC and certain insurance-related liabilities, which were recorded in both periods, resulted in a slight increase in adjusted earnings. This includes favorable prior period refinements in the MetLife Holdings segment of (i) a reserve adjustment resulting from modeling improvements in our life business reserving process; and (ii) a DAC adjustment related to certain participating whole life business assumed from Brighthouse.

Expenses. Adjusted earnings decreased $28 million as a result of an increase in litigation reserves and higher corporate-related expenses, partially offset by expenses incurred in the prior period related to the guaranty fund assessment for Penn Treaty Network America Insurance Company and lower Separation-related expenses.

Other. Adjusted earnings decreased by $19 million as a result of continued annuities reinsurance activity with Brighthouse. This unfavorable impact was due to the prior period recapture and novation of assumed and ceded agreements covering certain variable annuity business.

Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

Future Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

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Non-GAAP and Other Financial Disclosures

In this report, the Company presents certain measures of its performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.

The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:

Non-GAAP financial measures:		Comparable GAAP financial measures:
(i)	adjusted revenues	(i)	revenues
(ii)	adjusted expenses	(ii)	expenses
(iii)	adjusted earnings	(iii)	net income (loss)

Reconciliations of these non-GAAP measures to the most directly comparable historical GAAP measures are included in the results of operations, see “— Results of Operations.” Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are not accessible on a forward-looking basis because we believe it is not possible without unreasonable efforts to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income. These “adjusted” non-GAAP financial measures were formerly referred to as “operating” non-GAAP financial measures.

Our definitions of the various non-GAAP and other financial measures discussed in this report may differ from those used by other companies:

Adjusted earnings

This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings is also our GAAP measure of segment performance. Adjusted earnings allows analysis of our performance and facilitates comparisons to industry results.

Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax.

Adjusted revenues and adjusted expenses

These financial measures focus on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. Adjusted 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 adjusted revenues:

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

• Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to securitization entities that are variable interest entities (“VIEs”) consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnerships that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in fair value is recognized in net investment gains (losses) for GAAP.

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

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

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

• Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;

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

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

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.

The following additional information is relevant to an understanding of our performance results:

• We sometimes refer to sales activity for various products. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.

Subsequent Event

See Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements.

Item 4. Controls and Procedures

Based on the Company’s internal review, Metropolitan Life Insurance Company’s Chief Executive Officer (“CEO”) and former Chief Financial Officer (“CFO”) identified a material weakness in the design and operation of its internal control over financial reporting. Management concluded that the Company has not maintained effective controls over the administrative and accounting practices relating to certain RIS group annuity reserves and the timely communication and escalation of issues regarding those reserves throughout the Company. Management identified an error in the reserve balance in connection with this material weakness. For more information on this reserve adjustment, see Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report. This material weakness remains unremediated as of March 31, 2018.

Evaluation of Disclosure Controls and Procedures

Management, including the CEO and current CFO, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of March 31, 2018. Solely because of the material weakness in internal control over financial reporting reported in the 2017 Annual Report, our CEO and current CFO concluded that as of March 31, 2018, our disclosure controls and procedures were not effective.

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Remediation Status of Reported Material Weakness

Management is executing its plan to remediate the material weakness noted above and has developed Steering Committees, project teams and working groups to lead the remediation efforts. To date, management has performed the following:

• Implemented immediate changes to improve its administrative and accounting procedures and search practices to identify, contact, and record responses from “unresponsive and missing” plan annuitants and to otherwise locate missing annuitants;

• Instituted additional procedures to help address the timely communication and escalation of issues throughout the Company; and

• Engaged third party advisors who have commenced procedures associated with the comprehensive examination and analysis of the facts and circumstances giving rise to the material weakness, under the supervision of MetLife, Inc.’s Chief Risk Officer.

Management believes the remediation steps outlined above will further strengthen our internal control over financial reporting. Management will test the ongoing operating effectiveness of all new controls subsequent to implementation and consider the material weakness remediated after the applicable controls operate effectively for a sufficient period of time. The Company will continue to evaluate, update and improve its internal control over financial reporting as management executes on its remediation plan.

Changes in Internal Control Over Financial Reporting

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rules 13a-15(d) and 15d-15(d) that occurred during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

See Note 12 of the Notes to the Interim Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

Certain factors that may affect the Company’s business or operations are described under “Risk Factors” in Part I, Item 1A, of the 2017 Annual Report. There have been no material changes to our risk factors from the risk factors previously disclosed in the 2017 Annual Report.

Item 6. Exhibits

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Metropolitan Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Metropolitan Life Insurance Company, its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and Metropolitan Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)

		Incorporated by Reference
Exhibit No.	Description	Form	File Number	Exhibit	Filing Date	Filed or Furnished Herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X

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Signatures

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

METROPOLITAN LIFE INSURANCE COMPANY
By:		/s/ William O’Donnell
	Name:	William O’Donnell
	Title:	Executive Vice President and Chief
		Accounting Officer (Authorized Signatory
		and Principal Accounting Officer)

Date: May 10, 2018

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