Metropolitan Life Insurance 10-Q 2021 Q2 Quarterly report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________

Form 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

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,	NY	10166-0188
(Address of principal executive offices)			(Zip Code)

(212) 578-9500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

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 ☑    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes ☑   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 an 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	☑	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 ☑

At August 10, 2021, 494,466,664 shares of the registrant’s common stock 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 (Unaudited) (at June 30, 2021 and December 31, 2020 and for the Three Months and Six Months Ended June 30, 2021 and 2020)
	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	11
	Note 3 — Insurance	15
	Note 4 — Closed Block	17
	Note 5 — Investments	20
	Note 6 — Derivatives	37
	Note 7 — Fair Value	48
	Note 8 — Equity	65
	Note 9 — Other Revenues and Other Expenses	68
	Note 10 — Income Tax	69
	Note 11 — Contingencies, Commitments and Guarantees	69
	Note 12 — Related Party Transactions	73
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	76
Item 4.	Controls and Procedures	88
Part II — Other Information
Item 1.	Legal Proceedings	89
Item 1A.	Risk Factors	89
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 and do not relate strictly to historical or current facts. They use words and terms such as “anticipate,” “assume,” “become,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “if,” “intend,” “likely,” “may,” “permit,” “possible,” “potential,” “probable,” “project,” “prospect,” “remain,” “renew,” “risk,” “scheduled,” “should,” “ultimate,” “unlikely,” “vary,” “when,” “will,” “would” and other words and terms of similar meaning or that are otherwise tied to future periods or future performance, in each case in all derivative forms. They include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, future sales efforts, future expenses, the outcome of contingencies such as legal proceedings, and future trends in operations and financial results.

Many factors determine Company results, and they involve unpredictable risks and uncertainties. Our forward-looking statements depend on our assumptions, our expectations, and our understanding of the economic environment, but they may be inaccurate and may change. We do not guarantee any future performance. Our results could differ materially from those we express or imply in forward-looking statements. The risks, uncertainties and other factors identified in MetLife Inc.’s filings with the U.S. Securities and Exchange Commission, and others, may cause such differences. These factors include:

(1) economic condition difficulties, including risks relating to public health, interest rates, credit spreads, equity, real estate, obligors and counterparties, and derivatives;

(2) global capital and credit market adversity;

(3) credit facility inaccessibility;

(4) financial strength or credit ratings downgrades;

(5) unavailability, unaffordability, or inadequate reinsurance;

(6) statutory life insurance reserve financing costs or limited market capacity;

(7) legal, regulatory, and supervisory and enforcement policy changes;

(8) changes in tax rates, tax laws or interpretations;

(9) litigation and regulatory investigations;

(10) London Interbank Offered Rate termination and transition to alternative reference rates;

(11) unsuccessful efforts to meet all environmental, social, and governance standards or to enhance our sustainability;

(12) investment defaults, downgrades, or volatility;

(13) investment sales or lending difficulties;

(14) collateral or derivative-related payments;

(15) claims or other results that differ from our estimates, assumptions, or models;

(16) business competition;

(17) catastrophes;

(18) climate changes or responses to it;

(19) deficiencies in our closed block;

(20) acceleration of amortization of deferred policy acquisition costs, deferred sales inducements, or value of business acquired;

(21) product guarantee volatility, costs, and counterparty risks;

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(22) risk management failures;

(23) insufficient protection from operational risks;

(24) confidential information protection or other cybersecurity or disaster recovery failures;

(25) accounting standards changes;

(26) excessive risk-taking; and

(27) marketing and distribution difficulties.

The Company will not publicly correct or update any forward-looking statements if we believe we are not likely to achieve them or for any other reasons; nor will MetLife. Please consult any further disclosures we or MetLife make on related subjects in subsequent reports to the U.S. Securities and Exchange Commission.

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.

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Part I — Financial Information

Item 1. Financial Statements

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Balance Sheets

June 30, 2021 and December 31, 2020 (Unaudited)

(In millions, except share and per share data)

	June 30, 2021		December 31, 2020
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $156,669 and $156,423, respectively; allowance for credit loss of $59 and $51, respectively)	$	176,480	$	181,340
Mortgage loans (net of allowance for credit loss of $495 and $517, respectively; includes $199 and $199, respectively, relating to variable interest entities and $140 and $165, respectively, under the fair value option)	62,799		66,405
Policy loans	5,885		5,973
Real estate and real estate joint ventures (includes $1,150 and $1,435, respectively, relating to variable interest entities, $191 and $169, respectively, under the fair value option and $78 and $128, respectively, of real estate held-for-sale)	7,668		7,478
Other limited partnership interests	7,408		5,775
Short-term investments, at estimated fair value	2,132		2,623
Other invested assets (includes $968 and $992, respectively, of leveraged and direct financing leases and $100 and $79, respectively, relating to variable interest entities)	17,468		17,723
Total investments	279,840		287,317
Cash and cash equivalents, principally at estimated fair value (includes $90 and $9, respectively, relating to variable interest entities)	13,911		11,337
Accrued investment income (includes $1 and $1, respectively, relating to variable interest entities)	1,827		1,904
Premiums, reinsurance and other receivables (includes $3 and $3, respectively, relating to variable interest entities)	21,587		21,478
Deferred policy acquisition costs and value of business acquired	2,692		2,649
Current income tax recoverable	219		0
Other assets (includes $2 and $1, respectively, relating to variable interest entities)	4,611		4,276
Separate account assets	127,878		128,646
Total assets	$	452,565	$	457,607
Liabilities and Equity
Liabilities
Future policy benefits	$	131,394	$	133,921
Policyholder account balances	97,214		96,635
Other policy-related balances	7,619		7,430
Policyholder dividends payable	400		397
Policyholder dividend obligation	2,115		2,969
Payables for collateral under securities loaned and other transactions	23,932		23,122
Short-term debt	100		120
Long-term debt (includes $0 and $5, respectively, relating to variable interest entities)	1,626		1,619
Current income tax payable	0		486
Deferred income tax liability	2,029		1,980
Other liabilities (includes $1 and $0, respectively, relating to variable interest entities)	24,598		25,424
Separate account liabilities	127,878		128,646
Total liabilities	418,905		422,749
Contingencies, Commitments and Guarantees (Note 11)	0		0
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	12,462		12,460
Retained earnings	11,125		10,548
Accumulated other comprehensive income (loss) ("AOCI")	9,879		11,662
Total Metropolitan Life Insurance Company stockholder’s equity	33,471		34,675
Noncontrolling interests	189		183
Total equity	33,660		34,858
Total liabilities and equity	$	452,565	$	457,607

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

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

For the Three Months and Six Months Ended June 30, 2021 and 2020 (Unaudited)

(In millions)

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues
Premiums	$	6,451	$	4,721	$	12,256	$	9,969
Universal life and investment-type product policy fees	514		479		1,049		1,007
Net investment income	3,034		2,005		6,221		4,649
Other revenues	432		403		857		776
Net investment gains (losses)	342		56		502		(126)
Net derivative gains (losses)	25		(793)		(990)		2,762
Total revenues	10,798		6,871		19,895		19,037
Expenses
Policyholder benefits and claims	7,129		5,423		13,708		11,102
Interest credited to policyholder account balances	512		571		1,023		1,182
Policyholder dividends	200		246		405		494
Other expenses	1,205		1,087		2,391		2,378
Total expenses	9,046		7,327		17,527		15,156
Income (loss) before provision for income tax	1,752		(456)		2,368		3,881
Provision for income tax expense (benefit)	308		(171)		357		619
Net income (loss)	1,444		(285)		2,011		3,262
Less: Net income (loss) attributable to noncontrolling interests	1		0		4		(2)
Net income (loss) attributable to Metropolitan Life Insurance Company	$	1,443	$	(285)	$	2,007	$	3,264
Comprehensive income (loss)	$	2,644	$	2,650	$	228	$	7,463
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	1		0		4		(2)
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company	$	2,643	$	2,650	$	224	$	7,465

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Equity

For the Six Months Ended June 30, 2021 and 2020 (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, 2020	$	5	$	12,460	$	10,548	$	11,662	$	34,675	$	183	$	34,858
Capital contributions from MetLife, Inc.			1						1				1
Dividends to MetLife, Inc.					(1,030)				(1,030)				(1,030)
Net income (loss)					564				564		3		567
Other comprehensive income (loss), net of income tax							(2,983)		(2,983)				(2,983)
Balance at March 31, 2021	5		12,461		10,082		8,679		31,227		186		31,413
Capital contributions from MetLife, Inc.			1						1				1
Dividends to MetLife, Inc.					(400)				(400)				(400)
Change in equity of noncontrolling interests									0		2		2
Net income (loss)					1,443				1,443		1		1,444
Other comprehensive income (loss), net of income tax							1,200		1,200				1,200
Balance at June 30, 2021	$	5	$	12,462	$	11,125	$	9,879	$	33,471	$	189	$	33,660

	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, 2019	$	5	$	12,455	$	9,943	$	10,025	$	32,428	$	184	$	32,612
Cumulative effects of changes in accounting principles, net of income tax					(113)				(113)				(113)
Capital contributions from MetLife, Inc.			1						1				1
Dividends to MetLife, Inc.					(393)				(393)				(393)
Change in equity of noncontrolling interests									0		3		3
Net income (loss)					3,549				3,549		(2)		3,547
Other comprehensive income (loss), net of income tax							1,266		1,266				1,266
Balance at March 31, 2020	5		12,456		12,986		11,291		36,738		185		36,923
Capital contributions from MetLife, Inc.			1						1				1
Dividends to MetLife, Inc.					(784)				(784)				(784)
Change in equity of noncontrolling interests									0		(1)		(1)
Net income (loss)					(285)				(285)		0		(285)
Other comprehensive income (loss), net of income tax							2,935		2,935				2,935
Balance at June 30, 2020	$	5	$	12,457	$	11,917	$	14,226	$	38,605	$	184	$	38,789

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020 (Unaudited)

(In millions)

	Six Months Ended June 30,
	2021		2020
Net cash provided by (used in) operating activities	$	968	$	366
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities available-for-sale	23,549		23,674
Equity securities	244		89
Mortgage loans	7,891		4,430
Real estate and real estate joint ventures	733		55
Other limited partnership interests	241		204
Purchases and originations of:
Fixed maturity securities available-for-sale	(23,399)		(28,143)
Equity securities	(18)		(34)
Mortgage loans	(4,269)		(5,643)
Real estate and real estate joint ventures	(393)		(532)
Other limited partnership interests	(1,001)		(495)
Cash received in connection with freestanding derivatives	1,214		4,094
Cash paid in connection with freestanding derivatives	(4,386)		(1,270)
Cash received from the redemption of an investment in affiliated preferred stock	315		0
Net change in policy loans	88		57
Net change in short-term investments	435		(1,504)
Net change in other invested assets	184		100
Net change in property, equipment and leasehold improvements	9		6
Other, net	5		15
Net cash provided by (used in) investing activities	1,442		(4,897)
Cash flows from financing activities
Policyholder account balances:
Deposits	41,600		41,986
Withdrawals	(40,944)		(38,035)
Net change in payables for collateral under securities loaned and other transactions	810		6,045
Long-term debt issued	0		78
Long-term debt repaid	(15)		(12)
Financing element on certain derivative instruments and other derivative related transactions, net	165		(167)
Dividends paid to MetLife, Inc.	(1,430)		(1,177)
Other, net	(23)		2
Net cash provided by (used in) financing activities	163		8,720
Effect of change in foreign currency exchange rates on cash and cash equivalents balances	1		0
Change in cash and cash equivalents	2,574		4,189
Cash and cash equivalents, beginning of period	11,337		8,927
Cash and cash equivalents, end of period	$	13,911	$	13,116
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	48	$	50
Income tax	$	386	$	122
Non-cash transactions:
Capital contributions from MetLife, Inc.	$	2	$	2
Real estate and real estate joint ventures acquired in satisfaction of debt	$	171	$	0
Increase in equity securities due to in-kind distributions received from other limited partnership interests	$	128	$	34
Increase in other invested assets in connection with an affiliated reinsurance transaction	$	822	$	0
Increase in policyholder account balances associated with funding agreement backed notes issued but not settled	$	0	$	750

See accompanying notes to the interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

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

Business

Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of insurance, annuities, employee benefits and asset management and is organized into 2 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, including uncertainties associated with the novel coronavirus COVID-19 pandemic (the “COVID-19 Pandemic”). 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.

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, 2020 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 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 2020 Annual Report.

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 or the fair value option (“FVO”) for real estate joint ventures and other limited partnership interests (“investee”) 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 in net investment income 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.

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.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. The following tables provide a description of new ASUs issued by the FASB and the impact of the adoption on the Company’s interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

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

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

Adoption of New Accounting Pronouncements

The table below describes the impacts of the ASUs recently adopted by the Company.

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting; as clarified and amended by ASU 2021-01, Reference Rate Reform (Topic 848):Scope	The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, with certain exceptions. ASU 2021-01 amends the scope of the recent reference rate reform guidance. New optional expedients allow derivative instruments impacted by changes in the interest rate used for margining, discounting, or contract price alignment to qualify for certain optional relief.	Effective for contract modifications made between March 12, 2020 and December 31, 2022.	The new guidance reduces the operational and financial impacts of contract modifications that replace a reference rate, such as London Interbank Offered Rate (“LIBOR”), affected by reference rate reform. The adoption of the new guidance provides relief from current GAAP and is not expected to have a material impact on the Company’s interim condensed consolidated financial statements. The Company will continue to evaluate the impacts of reference rate reform on contract modifications and hedging relationships through December 31, 2022.
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	The new guidance simplifies the accounting for income taxes by removing certain exceptions to the tax accounting guidance and providing clarification to other specific tax accounting guidance to eliminate variations in practice. Specifically, it removes the exceptions related to the a) incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, b) recognition of a deferred tax liability when foreign investment ownership changes from equity method investment to consolidated subsidiary and vice versa and c) use of interim period tax accounting for year-to-date losses that exceed anticipated losses. The guidance also simplifies the application of the income tax guidance for franchise taxes that are partially based on income and the accounting for tax law changes during interim periods, clarifies the accounting for transactions that result in a step-up in tax basis of goodwill, provides for the option to elect allocation of consolidated income taxes to entities disregarded by taxing authorities for their stand-alone reporting, and requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.	January 1, 2021. The Company adopted, using a prospective approach.	The adoption of the new guidance did not have a material impact on the Company’s interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

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

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

Future Adoption of New Accounting Pronouncements

ASUs not listed below were assessed and either determined to be not applicable or are not expected to have a material impact on the Company’s interim condensed consolidated financial statements or disclosures. ASUs issued but not yet adopted as of June 30, 2021 that are currently being assessed and may or may not have a material impact on the Company’s interim condensed consolidated financial statements or disclosures are summarized in the table below.

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, as amended by ASU 2019-09, Financial Services—Insurance (Topic 944): Effective Date, as amended by ASU 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application	The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of deferred policy acquisition costs (“DAC”) for virtually all long-duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. The amendments in ASU 2019-09 defer the effective date of ASU 2018-12 to January 1, 2022 for all entities, and the amendments in ASU 2020-11 further defer the effective date of ASU 2018-12 for an additional year to January 1, 2023 for all entities.	January 1, 2023, to be applied retrospectively to January 1, 2021 (with early adoption permitted).	The implementation efforts of the Company and the evaluation of the impact of the new guidance are in progress. Given the nature and extent of the required changes to a significant portion of the Company’s operations, the adoption of this guidance is expected to have a material impact on its interim condensed consolidated financial statements.

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Metropolitan Life Insurance Company

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

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

2. Segment Information

The Company is organized into 2 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 (“RIS”).

•The Group Benefits business offers products such as term, variable and universal life insurance, dental, group and individual disability, vision and accident & health insurance.

•The RIS business offers a broad range of life and annuity-based insurance and investment products, including stable value and pension risk transfer products, institutional income annuities, structured settlements, and capital markets investment products, as well as solutions for funding postretirement benefits and company-, bank- and trust-owned life insurance.

MetLife Holdings

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

Corporate & Other

Corporate & Other contains various start-up, developing and run-off businesses. Also included in Corporate & Other are: the excess capital, as well as certain charges and activities, not allocated to the segments (including enterprise-wide strategic initiative restructuring charges), the Company’s ancillary non-U.S. operations, interest expense related to the majority of the Company’s outstanding debt, expenses associated with certain legal proceedings and income tax audit issues, and the elimination of intersegment amounts (which generally relate to affiliated reinsurance and intersegment loans, bearing 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 include 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).

11

Metropolitan Life Insurance Company

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

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

2. Segment Information (continued)

The following additional adjustments are made to revenues, in the line items indicated, in calculating 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 guaranteed minimum income benefits (“GMIBs”) fees (“GMIB fees”); and

•Net investment income: (i) includes adjustments for 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 partnership interests that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in estimated fair value is recognized in net investment gains (losses) under GAAP.

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) amortization of basis adjustments associated with de-designated fair value hedges of future policy benefits, (ii) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (iii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and other pass-through adjustments, (iv) benefits and hedging costs related to GMIBs (“GMIB costs”) and (v) 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 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: (i) noncontrolling interests, (ii) acquisition, integration and other costs, and (iii) 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 the three months and six months ended June 30, 2021 and 2020. The segment accounting policies are the same as those used to prepare the Company’s interim condensed 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 businesses.

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.

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)

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.

Three Months Ended June 30, 2021	U.S.		MetLife Holdings		Corporate & Other		Total		Adjustments		Total Consolidated
	(In millions)
Revenues
Premiums	$	5,760	$	691	$	0	$	6,451	$	0	$	6,451
Universal life and investment-type product policy fees	274		221		0		495		19		514
Net investment income	1,804		1,400		(28)		3,176		(142)		3,034
Other revenues	222		66		144		432		0		432
Net investment gains (losses)	0		0		0		0		342		342
Net derivative gains (losses)	0		0		0		0		25		25
Total revenues	8,060		2,378		116		10,554		244		10,798
Expenses
Policyholder benefits and claims and policyholder dividends	5,917		1,319		0		7,236		93		7,329
Interest credited to policyholder account balances	346		167		0		513		(1)		512
Capitalization of DAC	(10)		0		0		(10)		0		(10)
Amortization of DAC and VOBA	6		38		0		44		(12)		32
Interest expense on debt	1		1		22		24		0		24
Other expenses	813		210		141		1,164		(5)		1,159
Total expenses	7,073		1,735		163		8,971		75		9,046
Provision for income tax expense (benefit)	205		130		(74)		261		47		308
Adjusted earnings	$	782	$	513	$	27	1,322
Adjustments to:
Total revenues							244
Total expenses							(75)
Provision for income tax (expense) benefit							(47)
Net income (loss)							$	1,444			$	1,444

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)

Three Months Ended June 30, 2020	U.S.		MetLife Holdings		Corporate & Other		Total		Adjustments		Total Consolidated
	(In millions)
Revenues
Premiums	$	3,981	$	740	$	0	$	4,721	$	0	$	4,721
Universal life and investment-type product policy fees	260		198		0		458		21		479
Net investment income	1,339		857		(55)		2,141		(136)		2,005
Other revenues	215		68		120		403		0		403
Net investment gains (losses)	0		0		0		0		56		56
Net derivative gains (losses)	0		0		0		0		(793)		(793)
Total revenues	5,795		1,863		65		7,723		(852)		6,871
Expenses
Policyholder benefits and claims and policyholder dividends	4,106		1,455		0		5,561		108		5,669
Interest credited to policyholder account balances	401		173		0		574		(3)		571
Capitalization of DAC	(18)		5		0		(13)		0		(13)
Amortization of DAC and VOBA	13		(6)		0		7		(23)		(16)
Interest expense on debt	2		1		23		26		0		26
Other expenses	742		208		137		1,087		3		1,090
Total expenses	5,246		1,836		160		7,242		85		7,327
Provision for income tax expense (benefit)	117		1��		(92)		26		(197)		(171)
Adjusted earnings	$	432	$	26	$	(3)	455
Adjustments to:
Total revenues							(852)
Total expenses							(85)
Provision for income tax (expense) benefit							197
Net income (loss)							$	(285)			$	(285)

Six Months Ended June 30, 2021	U.S.		MetLife Holdings		Corporate & Other		Total		Adjustments		Total Consolidated
	(In millions)
Revenues
Premiums	$	10,897	$	1,359	$	0	$	12,256	$	0	$	12,256
Universal life and investment-type product policy fees	561		449		0		1,010		39		1,049
Net investment income	3,651		2,891		(29)		6,513		(292)		6,221
Other revenues	446		124		287		857		0		857
Net investment gains (losses)	0		0		0		0		502		502
Net derivative gains (losses)	0		0		0		0		(990)		(990)
Total revenues	15,555		4,823		258		20,636		(741)		19,895
Expenses
Policyholder benefits and claims and policyholder dividends	11,368		2,583		0		13,951		162		14,113
Interest credited to policyholder account balances	691		334		0		1,025		(2)		1,023
Capitalization of DAC	(29)		0		0		(29)		0		(29)
Amortization of DAC and VOBA	22		69		0		91		(19)		72
Interest expense on debt	3		2		43		48		0		48
Other expenses	1,609		431		268		2,308		(8)		2,300
Total expenses	13,664		3,419		311		17,394		133		17,527
Provision for income tax expense (benefit)	393		285		(149)		529		(172)		357
Adjusted earnings	$	1,498	$	1,119	$	96	2,713
Adjustments to:
Total revenues							(741)
Total expenses							(133)
Provision for income tax (expense) benefit							172
Net income (loss)							$	2,011			$	2,011

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)

Six Months Ended June 30, 2020	U.S.		MetLife Holdings		Corporate & Other		Total		Adjustments		Total Consolidated
	(In millions)
Revenues
Premiums	$	8,491	$	1,478	$	0	$	9,969	$	0	$	9,969
Universal life and investment-type product policy fees	522		442		0		964		43		1,007
Net investment income	2,973		2,023		(125)		4,871		(222)		4,649
Other revenues	429		94		253		776		0		776
Net investment gains (losses)	0		0		0		0		(126)		(126)
Net derivative gains (losses)	0		0		0		0		2,762		2,762
Total revenues	12,415		4,037		128		16,580		2,457		19,037
Expenses
Policyholder benefits and claims and policyholder dividends	8,667		2,852		0		11,519		77		11,596
Interest credited to policyholder account balances	843		346		0		1,189		(7)		1,182
Capitalization of DAC	(32)		9		0		(23)		0		(23)
Amortization of DAC and VOBA	27		73		0		100		(13)		87
Interest expense on debt	4		3		44		51		0		51
Other expenses	1,536		408		315		2,259		4		2,263
Total expenses	11,045		3,691		359		15,095		61		15,156
Provision for income tax expense (benefit)	292		63		(239)		116		503		619
Adjusted earnings	$	1,078	$	283	$	8	1,369
Adjustments to:
Total revenues							2,457
Total expenses							(61)
Provision for income tax (expense) benefit							(503)
Net income (loss)							$	3,262			$	3,262

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

	June 30, 2021		December 31, 2020
	(In millions)
U.S.	$	260,801	$	262,478
MetLife Holdings	163,479		164,956
Corporate & Other	28,285		30,173
Total	$	452,565	$	457,607

3. Insurance

Guarantees

As discussed in Notes 1 and 3 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report, the Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and certain non-life contingent portions of GMIBs 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.

15

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:

	June 30, 2021						December 31, 2020
	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)	$	50,525		$	21,100		$	50,047		$	21,229
Separate account value (1)	$	41,273		$	20,269		$	40,583		$	20,368
Net amount at risk	$	1,108	(3)	$	406	(4)	$	1,178	(3)	$	552	(4)
Average attained age of contractholders	69 years			68 years			68 years			67 years
Other Annuity Guarantees:
Total account value (1), (2)	N/A			$	138		N/A			$	142
Net amount at risk	N/A			$	72	(5)	N/A			$	74	(5)
Average attained age of contractholders	N/A			55 years			N/A			55 years

	June 30, 2021				December 31, 2020
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(Dollars in millions)
Universal and Variable Life Contracts:
Total account value (1), (2)	$	5,912	$	842	$	5,607	$	861
Net amount at risk (6)	$	38,150	$	5,350	$	39,134	$	5,525
Average attained age of policyholders	58 years		65 years		58 years		65 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.

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)

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:

	Six Months Ended June 30,
	2021		2020
	(In millions)
Balance, beginning of period	$	13,523	$	13,140
Less: Reinsurance recoverables	1,639		1,525
Net balance, beginning of period	11,884		11,615
Incurred related to:
Current period	9,917		9,103
Prior periods (1)	436		(69)
Total incurred	10,353		9,034
Paid related to:
Current period	(6,044)		(5,588)
Prior periods	(4,135)		(3,277)
Total paid	(10,179)		(8,865)
Net balance, end of period	12,058		11,784
Add: Reinsurance recoverables	2,078		1,704
Balance, end of period (included in future policy benefits and other policy-related balances)	$	14,136	$	13,488

__________________

(1)For the six months ended June 30, 2021, incurred claim activity and claim adjustment expenses associated with prior periods increased due to unfavorable claims experience reported in the current period. For the six months ended June 30, 2020, incurred claim activity and claim adjustment expenses associated with prior periods decreased due to favorable claims experience reported in the current period.

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.

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.

17

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

	June 30, 2021		December 31, 2020
	(In millions)
Closed Block Liabilities
Future policy benefits	$	38,373	$	38,758
Other policy-related balances	271		321
Policyholder dividends payable	340		337
Policyholder dividend obligation	2,115		2,969
Deferred income tax liability	161		130
Other liabilities	276		172
Total closed block liabilities	41,536		42,687
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	26,320		27,186
Mortgage loans	6,447		6,807
Policy loans	4,272		4,355
Real estate and real estate joint ventures	551		559
Other invested assets	506		492
Total investments	38,096		39,399
Cash and cash equivalents	199		0
Accrued investment income	386		402
Premiums, reinsurance and other receivables	52		50
Current income tax recoverable	46		28
Total assets designated to the closed block	38,779		39,879
Excess of closed block liabilities over assets designated to the closed block	2,757		2,808
AOCI:
Unrealized investment gains (losses), net of income tax	2,911		3,524
Unrealized gains (losses) on derivatives, net of income tax	47		23
Allocated to policyholder dividend obligation, net of income tax	(1,671)		(2,346)
Total amounts included in AOCI	1,287		1,201
Maximum future earnings to be recognized from closed block assets and liabilities	$	4,044	$	4,009

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

	Six Months Ended June 30, 2021		Year   Ended   December 31, 2020
	(In millions)
Balance, beginning of period	$	2,969	$	2,020
Change in unrealized investment and derivative gains (losses)	(854)		949
Balance, end of period	$	2,115	$	2,969

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)

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

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In millions)
Revenues
Premiums	$	325	$	371	$	645	$	738
Net investment income	382		371		775		778
Net investment gains (losses)	(11)		10		(5)		(9)
Net derivative gains (losses)	6		(3)		7		23
Total revenues	702		749		1,422		1,530
Expenses
Policyholder benefits and claims	520		589		1,066		1,139
Policyholder dividends	173		217		351		436
Other expenses	24		25		49		52
Total expenses	717		831		1,466		1,627
Revenues, net of expenses before provision for income tax expense (benefit)	(15)		(82)		(44)		(97)
Provision for income tax expense (benefit)	(3)		(17)		(9)		(20)
Revenues, net of expenses and provision for income tax expense (benefit)	$	(12)	$	(65)	$	(35)	$	(77)

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.

19

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 available-for-sale (“AFS”) by sector. U.S. corporate and foreign corporate sectors include redeemable preferred stock. Residential mortgage-backed securities (“RMBS”) includes agency, prime, alternative and sub-prime mortgage-backed securities. Asset-backed securities (“ABS”) includes securities collateralized by corporate loans and consumer loans. Municipals includes taxable and tax-exempt revenue bonds and, to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) primarily includes securities collateralized by multiple commercial mortgage loans. RMBS, ABS and CMBS are, collectively, “Structured Products.”

	June 30, 2021										December 31, 2020
	Amortized Cost				Gross Unrealized				Estimated Fair Value		Amortized Cost				Gross Unrealized				Estimated Fair Value
Sector			Allowance for Credit Loss		Gains		Losses						Allowance for Credit Loss		Gains		Losses
	(In millions)
U.S. corporate	$	50,805	$	(39)	$	8,023	$	137	$	58,652	$	50,989	$	(43)	$	9,618	$	155	$	60,409
Foreign corporate	27,508		(14)		3,423		246		30,671		28,093		(8)		4,478		284		32,279
U.S. government and agency	27,224		0		4,460		104		31,580		24,620		0		6,178		27		30,771
RMBS	21,861		0		1,452		85		23,228		22,552		0		1,706		32		24,226
ABS	11,750		0		160		17		11,893		12,456		0		169		50		12,575
Municipals	6,862		0		1,894		4		8,752		6,888		0		2,096		1		8,983
CMBS	6,402		(6)		337		25		6,708		6,503		0		381		55		6,829
Foreign government	4,257		0		790		51		4,996		4,322		0		978		32		5,268
Total fixed maturity securities AFS	$	156,669	$	(59)	$	20,539	$	669	$	176,480	$	156,423	$	(51)	$	25,604	$	636	$	181,340

Maturities of Fixed Maturity Securities AFS

The amortized cost, net of allowance for credit loss (“ACL”), and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at June 30, 2021:

	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 Products		Total Fixed Maturity Securities AFS
	(In millions)
Amortized cost, net of ACL	$	6,251	$	26,239	$	27,280	$	56,833	$	40,007	$	156,610
Estimated fair value	$	6,272	$	27,461	$	30,775	$	70,143	$	41,829	$	176,480

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

20

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 without an ACL by sector and aggregated by length of time that the securities have been in a continuous unrealized loss position.

	June 30, 2021								December 31, 2020
	Less than 12 Months				Equal to or Greater than 12 Months				Less than 12 Months				Equal to or Greater than 12 Months
Sector & Credit Quality	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)
U.S. corporate	$	2,548	$	71	$	807	$	61	$	2,351	$	112	$	230	$	36
Foreign corporate	2,338		147		623		99		2,431		225		34		59
U.S. government and agency	5,963		104		0		0		1,686		27		0		0
RMBS	3,967		69		405		16		1,119		20		128		12
ABS	2,153		5		860		12		2,561		18		2,233		32
Municipals	175		4		3		0		51		1		0		0
CMBS	476		8		418		17		1,110		41		306		14
Foreign government	281		15		121		35		110		6		115		27
Total fixed maturity securities AFS	$	17,901	$	423	$	3,237	$	240	$	11,419	$	450	$	3,046	$	180
Investment grade	$	16,396	$	377	$	2,233	$	153	$	9,012	$	297	$	2,841	$	158
Below investment grade	1,505		46		1,004		87		2,407		153		205		22
Total fixed maturity securities AFS	$	17,901	$	423	$	3,237	$	240	$	11,419	$	450	$	3,046	$	180
Total number of securities in an unrealized loss position	1,209				431				984				385

Evaluation of Fixed Maturity Securities AFS for Credit Loss

Evaluation and Measurement Methodologies

Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the credit loss evaluation process include, but are not limited to: (i) the extent to which the estimated fair value has been below amortized cost, (ii) adverse conditions specifically related to a security, an industry sector or sub-sector, or an economically depressed geographic area, adverse change in the financial condition of the issuer of the security, changes in technology, discontinuance of a segment of the business that may affect future earnings, and changes in the quality of credit enhancement, (iii) payment structure of the security and likelihood of the issuer being able to make payments, (iv) failure of the issuer to make scheduled interest and principal payments, (v) whether the issuer, or series of issuers or an industry has suffered a catastrophic loss or has exhausted natural resources, (vi) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers, (vii) with respect to Structured Products, changes in forecasted cash flows after considering the changes in the financial condition of the underlying loan obligors and quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security, (viii) changes in the rating of the security by a rating agency, and (ix) other subjective factors, including concentrations and information obtained from regulators.

The methodology and significant inputs used to determine the amount of credit loss are as follows:

•The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security at the time of purchase for fixed-rate securities and the spot rate at the date of evaluation of credit loss for floating-rate securities.

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)

•When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall credit loss evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s single best estimate, the most likely outcome in a range of possible outcomes, after giving consideration to a variety of variables that include, but are not limited to: payment terms of the security; the likelihood that the issuer can service the interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; any private and public sector programs to restructure foreign government securities and municipals; and changes to the rating of the security or the issuer by rating agencies.

•Additional considerations are made when assessing the unique features that apply to certain Structured Products including, but not limited to: the quality of underlying collateral, historical performance of the underlying loan obligors, historical rent and vacancy levels, changes in the financial condition of the underlying loan obligors, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, changes in the quality of credit enhancement and the payment priority within the tranche structure of the security.

With respect to securities that have attributes of debt and equity (“perpetual hybrid securities”), consideration is given in the credit loss analysis as to whether there has been any deterioration in the credit of the issuer and the likelihood of recovery in value of the securities that are in a severe unrealized loss position. Consideration is also given as to whether any perpetual hybrid securities with an unrealized loss, regardless of credit rating, have deferred any dividend payments.

In periods subsequent to the recognition of an initial ACL on a security, the Company reassesses credit loss quarterly. Subsequent increases or decreases in the expected cash flow from the security result in corresponding decreases or increases in the ACL which are recorded within net investment gains (losses); however, the previously recorded ACL is not reduced to an amount below zero. Full or partial write-offs are deducted from the ACL in the period the security, or a portion thereof, is considered uncollectible. Recoveries of amounts previously written off are recorded to the ACL in the period received. When the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, any ACL is written off and the amortized cost is written down to estimated fair value through a charge within net investment gains (losses), which becomes the new amortized cost of the security.

Evaluation of Fixed Maturity Securities AFS in an Unrealized Loss Position

Gross unrealized losses on securities without an ACL increased $33 million for the six months ended June 30, 2021 to $663 million primarily due to increases in interest rates, partially offset by narrowing credit spreads.

Gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater were $240 million at June 30, 2021, or 36% of the total gross unrealized losses on securities without an ACL.

Investment Grade Fixed Maturity Securities AFS

Of the $240 million of gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater, $153 million, or 64%, were related to 313 investment grade securities. Unrealized losses on investment grade securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate securities, rising interest rates since purchase.

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)

Below Investment Grade Fixed Maturity Securities AFS

Of the $240 million of gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater, $87 million, or 36%, were related to 118 below investment grade securities. Unrealized losses on below investment grade securities are principally related to U.S. and foreign corporate securities (primarily industrial and consumer) 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, as well as with respect to fixed-rate securities, rising interest rates since purchase. Management evaluates U.S. corporate and foreign corporate securities based on factors such as expected cash flows, financial condition and near-term and long-term prospects of the issuers. Management evaluates CMBS based on actual and projected cash flows after considering the quality of underlying collateral, credit enhancements, 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.

Current Period Evaluation

At June 30, 2021, with respect to securities in an unrealized loss position without an ACL, the Company did not intend to sell these securities, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost. Based on the Company’s current evaluation of its securities in an unrealized loss position without an ACL, the Company concluded that these securities had not incurred a credit loss and should not have an ACL at June 30, 2021.

Future provisions for credit loss 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 and collateral valuation.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	June 30, 2021				December 31, 2020
Portfolio Segment	Carrying Value		% of Total		Carrying Value		% of Total
	(Dollars in millions)
Commercial	$	36,828	58.7	%	$	38,528	58.0	%
Agricultural	15,827		25.2		16,426		24.7
Residential	10,499		16.7		11,803		17.8
Total amortized cost	63,154		100.6		66,757		100.5
Allowance for credit loss	(495)		(0.8)		(517)		(0.8)
Subtotal mortgage loans, net	62,659		99.8		66,240		99.7
Residential — FVO	140		0.2		165		0.3
Total mortgage loans, net	$	62,799	100.0	%	$	66,405	100.0	%

The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis. See Note 7 for further information.

The amount of net discounts, included within total amortized cost, primarily attributable to residential mortgage loans was $817 million and $924 million at June 30, 2021 and December 31, 2020, respectively. The accrued interest income excluded from total amortized cost for commercial, agricultural and residential mortgage loans at June 30, 2021 and December 31, 2020 was $152 million and $164 million; $137 million and $158 million; and $91 million and $101 million, respectively.

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)

Purchases of mortgage loans, consisting primarily of residential mortgage loans, were $461 million and $838 million for the three months and six months ended June 30, 2021, respectively, and $134 million and $1.2 billion for the three months and six months ended June 30, 2020, respectively. See “— Related Party Investment Transactions” for information regarding transfers from affiliates.

Allowance for Credit Loss Rollforward by Portfolio Segment

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

	Six Months Ended June 30,
	2021								2020
	Commercial		Agricultural		Residential		Total		Commercial		Agricultural		Residential		Total
	(In millions)
Balance, beginning of period	$	199	$	97	$	221	$	517	$	186	$	49	$	54	$	289
Provision (release)	17		(7)		(20)		(10)		36		5		59		100
Adoption of credit loss guidance	0		0		0		0		(87)		32		154		99
Initial credit losses on PCD loans (1)	0		0		2		2		0		0		16		16
Charge-offs, net of recoveries	0		(13)		(1)		(14)		0		(2)		(5)		(7)
Balance, end of period	$	216	$	77	$	202	$	495	$	135	$	84	$	278	$	497

__________________

(1)Represents the initial credit losses on purchased mortgage loans accounted for as purchased financial assets with credit deterioration (“PCD”).

Allowance for Credit Loss Methodology

The Company records an allowance for expected lifetime credit loss in an amount that represents the portion of the amortized cost basis of mortgage loans that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. In determining the Company’s ACL, management: (i) pools mortgage loans that share similar risk characteristics, (ii) considers expected lifetime credit loss over the contractual term of its mortgage loans adjusted for expected prepayments and any extensions, and (iii) considers past events and current and forecasted economic conditions. Each of the Company’s commercial, agricultural and residential mortgage loan portfolio segments are evaluated separately. The ACL is calculated for each mortgage loan portfolio segment based on inputs unique to each loan portfolio segment. On a quarterly basis, mortgage loans within a portfolio segment that share similar risk characteristics, such as internal risk ratings or consumer credit scores, are pooled for calculation of ACL. On an ongoing basis, mortgage loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is reasonably possible or probable) and reasonably expected troubled debt restructurings (“TDRs”) (i.e., the Company grants concessions to borrower that is experiencing financial difficulties) are evaluated individually for credit loss. The ACL for loans evaluated individually are established using the same methodologies for all three portfolio segments. For example, the ACL for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the ACL which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses).

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)

Commercial and Agricultural Mortgage Loan Portfolio Segments

Commercial and agricultural mortgage loan ACL are calculated in a similar manner. Within each loan portfolio segment, commercial and agricultural, loans are pooled by internal risk rating. Estimated lifetime loss rates, which vary by internal risk rating, are applied to the amortized cost of each loan, excluding accrued investment income, on a quarterly basis to develop the ACL. Internal risk ratings are based on an assessment of the loan’s credit quality, which can change over time. The estimated lifetime loss rates are based on several loan portfolio segment-specific factors, including (i) the Company’s experience with defaults and loss severity, (ii) expected default and loss severity over the forecast period, (iii) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, (iv) loan specific characteristics including loan-to-value (“LTV”) ratios, and (v) internal risk ratings. These evaluations are revised as conditions change and new information becomes available. The Company uses its several decades of historical default and loss severity experience which capture multiple economic cycles. The Company uses a forecast of economic assumptions for a two-year period for most of its commercial and agricultural mortgage loans, while a one-year period is used for loans originated in certain markets. After the applicable forecast period, the Company reverts to its historical loss experience using a straight-line basis over two years. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, recent loss and recovery trend experience as compared to historical loss and recovery experience, and loan specific characteristics including debt service coverage ratios (“DSCR”). In estimating expected lifetime credit loss over the term of its commercial mortgage loans, the Company adjusts for expected prepayment and extension experience during the forecast period using historical prepayment and extension experience considering the expected position in the economic cycle and the loan profile (i.e., floating rate, shorter-term fixed rate and longer-term fixed rate) and after the forecast period using long-term historical prepayment experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. In estimating expected lifetime credit loss over the term of its agricultural mortgage loans, the Company’s experience is much less sensitive to the position in the economic cycle and by loan profile; accordingly, historical prepayment experience is used, while extension terms are not prevalent with the Company’s agricultural mortgage loans.

Commercial mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, LTV ratios, DSCR and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher LTV ratios and lower DSCR. Agricultural mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, property inspections, market analysis, estimated valuations of the underlying collateral, LTV ratios and borrower creditworthiness, as well as reviews on a geographic and property-type basis. The monitoring process for agricultural mortgage loans also focuses on higher risk loans.

For commercial mortgage loans, the primary credit quality indicator is the DSCR, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the DSCR, the higher the risk of experiencing a credit loss. The Company also reviews the LTV ratio of its commercial mortgage loan portfolio. LTV ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the LTV ratio, the higher the risk of experiencing a credit loss. The DSCR and the values utilized in calculating the ratio are updated routinely. In addition, the LTV ratio is routinely updated for all but the lowest risk loans as part of the Company’s ongoing review of its commercial mortgage loan portfolio.

For agricultural mortgage loans, the Company’s primary credit quality indicator is the LTV ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated.

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)

Commitments to lend: After loans are approved, the Company makes commitments to lend and, typically, borrowers draw down on some or all of the commitments. The timing of mortgage loan funding is based on the commitment expiration dates. A liability for credit loss for unfunded commercial and agricultural mortgage loan commitments is recorded within net investment gains (losses). The liability is based on estimated lifetime loss rates as described above and the amount of the outstanding commitments, which for lines of credit, considers estimated utilization rates. When the commitment is funded or expires, the liability is adjusted accordingly.

Residential Mortgage Loan Portfolio Segment

The Company’s residential mortgage loan portfolio is comprised primarily of purchased closed end, amortizing residential mortgage loans, including both performing loans purchased within 12 months of origination and reperforming loans purchased after they have been performing for at least 12 months post-modification. Residential mortgage loans are pooled by loan type (i.e., new origination and reperforming) and pooled by similar risk profiles (including consumer credit score and LTV ratios). Estimated lifetime loss rates, which vary by loan type and risk profile, are applied to the amortized cost of each loan excluding accrued investment income on a quarterly basis to develop the ACL. The estimated lifetime loss rates are based on several factors, including (i) industry historical experience and expected results over the forecast period for defaults, (ii) loss severity, (iii) prepayment rates, (iv) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, and (v) loan pool specific characteristics including consumer credit scores, LTV ratios, payment history and home prices. These evaluations are revised as conditions change and new information becomes available. The Company uses industry historical experience which captures multiple economic cycles as the Company has purchased most of its residential mortgage loans in the last five years. The Company uses a forecast of economic assumptions for a two-year period for most of its residential mortgage loans. After the applicable forecast period, the Company immediately reverts to industry historical loss experience.

For residential mortgage loans, the Company’s primary credit quality indicator is whether the loan is performing or nonperforming. The Company generally defines nonperforming residential mortgage loans as those that are 60 or more days past due and/or in nonaccrual status which is assessed monthly. Generally, nonperforming residential mortgage loans have a higher risk of experiencing a credit loss.

Mortgage Loan Concessions

In response to the adverse economic impact of the COVID-19 Pandemic, in 2021 and 2020, the Company granted concessions to certain of its commercial, agricultural and residential mortgage loan borrowers, including payment deferrals and other loan modifications. The Company has elected the option under the Coronavirus Aid, Relief, and Economic Security Act, the Consolidated Appropriations Act, 2021 and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) issued by bank regulatory agencies, not to account for or report qualifying concessions as TDRs and not to classify such loans as either past due or nonaccrual during the payment deferral period. Additionally, in accordance with the FASB’s published response to a COVID-19 Pandemic technical inquiry, the Company continues to accrue interest income on such loans that have deferred payment. The Company records an ACL on this accrued interest income.

Commercial

For some commercial mortgage loan borrowers (principally in the retail and hotel sectors), the Company granted concessions which were primarily interest and principal payment deferrals generally ranging from three to four months and, to a much lesser extent, maturity date extensions. Deferred commercial mortgage loan interest and principal payments were $21 million at June 30, 2021.

Agricultural

For some agricultural mortgage loan borrowers (principally in the annual crops and agribusiness sectors), the Company granted concessions which were primarily principal payment deferrals generally ranging from three to 12 months, and covenant changes and, to a much lesser extent, maturity date extensions. Deferred agricultural mortgage loan interest and principal payments were $4 million at June 30, 2021.

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)

Residential

For some residential mortgage loan borrowers, the Company granted concessions which were primarily three-month interest and principal payment deferrals. Deferred residential mortgage loan interest and principal payments were $31 million at June 30, 2021.

Credit Quality of Mortgage Loans by Portfolio Segment

The amortized cost of commercial mortgage loans by credit quality indicator and vintage year was as follows at June 30, 2021:

Credit Quality Indicator	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		% of Total
	(Dollars in millions)
LTV ratios:
Less than 65%	$	1,120	$	3,255	$	2,185	$	3,614	$	2,681	$	10,350	$	1,980	$	25,185	68.4	%
65% to 75%	515		922		2,873		1,665		1,067		2,176		0		9,218		25.0
76% to 80%	47		0		193		64		388		451		0		1,143		3.1
Greater than 80%	5		0		0		49		249		979		0		1,282		3.5
Total	$	1,687	$	4,177	$	5,251	$	5,392	$	4,385	$	13,956	$	1,980	$	36,828	100.0	%
DSCR:
> 1.20x	$	1,612	$	3,662	$	4,978	$	5,367	$	3,883	$	12,620	$	1,980	$	34,102	92.6	%
1.00x - 1.20x	26		259		0		25		133		709		0		1,152		3.1
<1.00x	49		256		273		0		369		627		0		1,574		4.3
Total	$	1,687	$	4,177	$	5,251	$	5,392	$	4,385	$	13,956	$	1,980	$	36,828	100.0	%

The amortized cost of agricultural mortgage loans by credit quality indicator and vintage year was as follows at June 30, 2021:

Credit Quality Indicator	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		% of Total
	(Dollars in millions)
LTV ratios:
Less than 65%	$	498	$	2,311	$	1,781	$	2,536	$	937	$	5,345	$	846	$	14,254	90.1	%
65% to 75%	152		343		137		42		37		578		97		1,386		8.7
76% to 80%	0		0		0		0		0		11		0		11		0.1
Greater than 80%	0		0		134		0		0		42		0		176		1.1
Total	$	650	$	2,654	$	2,052	$	2,578	$	974	$	5,976	$	943	$	15,827	100.0	%

The amortized cost of residential mortgage loans by credit quality indicator and vintage year was as follows at June 30, 2021:

Credit Quality Indicator	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	1	$	239	$	1,170	$	698	$	270	$	7,677	$	0	$	10,055	95.8	%
Nonperforming (1)	0		1		50		13		2		378		0		444		4.2
Total	$	1	$	240	$	1,220	$	711	$	272	$	8,055	$	0	$	10,499	100.0	%

__________________

(1)Includes residential mortgage loans in process of foreclosure of $82 million and $102 million at June 30, 2021 and December 31, 2020, respectively.

LTV ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. At June 30, 2021, the amortized cost of commercial and agricultural mortgage loans with an LTV ratio in excess of 100% was $548 million, or 1% of total commercial and agricultural mortgage loans.

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)

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 June 30, 2021 and December 31, 2020. The Company defines delinquency consistent with industry practice, when mortgage loans are past due more than two or more months, as applicable, by portfolio segment. The past due and nonaccrual mortgage loans at amortized cost, prior to ACL, by portfolio segment, were as follows:

	Past Due				Greater than 90 Days Past Due and Still Accruing Interest				Nonaccrual
Portfolio Segment	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(In millions)
Commercial	$	0	$	0	$	0	$	0	$	154	$	293
Agricultural	227		251		3		20		259		261
Residential	444		516		2		54		443		503
Total	$	671	$	767	$	5	$	74	$	856	$	1,057

The amortized cost for nonaccrual commercial, agricultural and residential mortgage loans at beginning of year 2020 was $167 million, $137 million and $377 million, respectively. The amortized cost for nonaccrual commercial mortgage loans with no ACL was $0 and $156 million at June 30, 2021 and December 31, 2020, respectively. The amortized cost for nonaccrual agricultural mortgage loans with no ACL was $192 million and $173 million at June 30, 2021 and December 31, 2020, respectively. There were 0 nonaccrual residential mortgage loans without an ACL at either June 30, 2021 or December 31, 2020.

Real Estate and Real Estate Joint Ventures

The Company’s real estate investment portfolio is diversified by property type, geography and income stream, including income from operating leases, operating income and equity in earnings from equity method real estate joint ventures. Real estate investments, by income type, as well as income earned, were as follows at and for the periods indicated:

	June 30, 2021		December 31, 2020		Three Months   Ended   June 30,				Six Months Ended June 30,
					2021		2020		2021		2020
Income Type	Carrying Value				Income
	(In millions)
Leased real estate investments	$	1,990	$	1,965	$	53	$	47	$	107	$	93
Other real estate investments	440		418		46		15		80		49
Real estate joint ventures	5,238		5,095		31		(27)		37		(20)
Total real estate and real estate joint ventures	$	7,668	$	7,478	$	130	$	35	$	224	$	122

The carrying value of real estate investments acquired through foreclosure was $183 million and $18 million at June 30, 2021 and December 31, 2020, respectively. Depreciation expense on real estate investments was $22 million and $43 million for the three months and six months ended June 30, 2021, respectively, and $19 million and $35 million for the three months and six months ended June 30, 2020, respectively. Real estate investments were net of accumulated depreciation of $618 million and $789 million at June 30, 2021 and December 31, 2020, respectively.

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)

Leases

Leased Real Estate Investments - Operating Leases

The Company, as lessor, leases investment real estate, principally commercial real estate for office and retail use, through a variety of operating lease arrangements, which typically include tenant reimbursement for property operating costs and options to renew or extend the lease. In some circumstances, leases may include an option for the lessee to purchase the property. In addition, certain leases of retail space may stipulate that a portion of the income earned is contingent upon the level of the tenants’ revenues. The Company has elected a practical expedient of not separating non-lease components related to reimbursement of property operating costs from associated lease components. These property operating costs have the same timing and pattern of transfer as the related lease component, because they are incurred over the same period of time as the operating lease. Therefore, the combined component is accounted for as a single operating lease. Risk is managed through lessee credit analysis, property type diversification, and geographic diversification.

See Note 7 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report for a summary of leased real estate investments and income earned, by property type.

Leveraged and Direct Financing Leases

The Company has diversified leveraged lease and direct financing lease portfolios. Its leveraged leases principally include renewable energy generation facilities, rail cars, commercial real estate and commercial aircraft, and its direct financing leases principally include renewable energy generation facilities. These assets are leased through a variety of lease arrangements, which may include options to renew or extend the lease and options for the lessee to purchase the property. Residual values are estimated using available third-party data at inception of the lease. Risk is managed through lessee credit analysis, asset allocation, geographic diversification, and ongoing reviews of estimated residual values, using available third-party data and, in certain leases, linking the amount of future rental receipts to changes in inflation rates. Generally, estimated residual values are not guaranteed by the lessee or a third-party.

Lease receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 11 years, but in certain circumstances can be over 11 years, while the payment periods for direct financing leases generally range from one to 16 years.

The Company records an allowance for expected lifetime credit loss in an amount that represents the portion of the investment in leases that the Company does not expect to collect, resulting in the investment in leases being presented at the net amount expected to be collected. In determining the ACL, management: (i) pools leases that share similar risk characteristics, (ii) considers expected lifetime credit loss over the contractual term of the lease, and (iii) considers past events and current and forecasted economic conditions. Leases with dissimilar risk characteristics are evaluated individually for credit loss. Expected lifetime credit loss on leveraged and direct financing lease receivables is estimated using a probability of default and loss given default model, where the probability of default incorporates third-party credit ratings of the lessee and the related historical default data. The Company also assesses the non-guaranteed residual values for recoverability by comparison to the current estimated fair value of the leased asset and considers other relevant market information such as independent third-party forecasts, consulting, asset brokerage and investment banking reports and data, comparable market transactions, and factors such as the competitive dynamics impacting specific industries, technological change and obsolescence, government and regulatory rules, tax policy, potential environmental liabilities and litigation.

The investment in leveraged and direct financing leases, net of ACL, was $796 million and $172 million, respectively, at June 30, 2021 and $816 million and $176 million respectively, at December 31, 2020. The ACL for leveraged and direct financing leases was $35 million and $38 million at June 30, 2021 and December 31, 2020, respectively.

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 $9.4 billion and $6.8 billion at June 30, 2021 and December 31, 2020, respectively.

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)

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity securities AFS and derivatives and the effect on policyholder liabilities, DAC, VOBA, and deferred sales inducements (“DSI”) 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:

	June 30, 2021		December 31, 2020
	(In millions)
Fixed maturity securities AFS	$	19,862	$	24,954
Derivatives	1,789		2,259
Other	221		235
Subtotal	21,872		27,448
Amounts allocated from:
Policyholder liabilities	(7,402)		(10,572)
DAC, VOBA and DSI	(1,416)		(1,511)
Subtotal	(8,818)		(12,083)
Deferred income tax benefit (expense)	(2,697)		(3,190)
Net unrealized investment gains (losses)	$	10,357	$	12,175

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

	Six Months Ended June 30, 2021
	(In millions)
Balance, beginning of period	$	12,175
Unrealized investment gains (losses) during the period	(5,576)
Unrealized investment gains (losses) relating to:
Policyholder liabilities	3,170
DAC, VOBA and DSI	95
Deferred income tax benefit (expense)	493
Balance, end of period	$	10,357
Change in net unrealized investment gains (losses)	$	(1,818)

Concentrations of Credit Risk

There were 0 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 June 30, 2021 and December 31, 2020.

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)

Securities Lending and Repurchase Agreements

Securities, Collateral and Reinvestment Portfolio

A summary of the outstanding securities lending and repurchase agreements is as follows:

	June 30, 2021						December 31, 2020
	Securities (1)						Securities (1)
Agreement Type	Estimated Fair Value		Cash Collateral Received from Counterparties (2), (3)		Reinvestment Portfolio at Estimated Fair Value		Estimated Fair Value		Cash Collateral Received from Counterparties (2), (3)		Reinvestment Portfolio at Estimated Fair Value
	(In millions)
Securities lending	$	14,388	$	14,659	$	14,737	$	13,289	$	13,566	$	13,739
Repurchase agreements	$	3,551	$	3,460	$	3,497	$	3,276	$	3,210	$	3,251

__________________

(1)Securities on loan in connection with these programs are included within fixed maturity securities AFS and short-term investments.

(2)In connection with securities lending and repurchase agreements, in addition to cash collateral received, the Company received from counterparties non-cash security collateral of $27 million and $1 million at June 30, 2021 and December 31, 2020, respectively, which is not reflected on the interim condensed consolidated financial statements.

(3)The liability for cash collateral for these programs is included within payables for collateral under securities loaned and other transactions and other liabilities.

Contractual Maturities

A summary of the remaining contractual maturities of securities lending and repurchase agreements is as follows:

	June 30, 2021								December 31, 2020
	Remaining Maturities									Remaining Maturities
Security Type	Open (1)		1 Month or Less		Over 1  Month to 6 Months		Total				Open (1)		1 Month or Less		Over 1 Month to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
Securities lending:
U.S. government and agency	$	3,071	$	6,485	$	5,103	$	14,659			$	1,705	$	8,768	$	3,093	$	13,566
Repurchase agreements:
U.S. government and agency	$	0	$	3,460	$	0	$	3,460			$	0	$	3,210	$	0	$	3,210

__________________

(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 securities lending and repurchase agreements reinvestment portfolios consist principally of high quality, liquid, publicly-traded fixed maturity securities AFS, short-term investments, cash equivalents or cash. If the securities on loan or the reinvestment portfolio become less liquid, liquidity resources within the general account are available to meet any potential cash demands when securities on loan are put back by the counterparty.

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)

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:

	June 30, 2021		December 31, 2020
	(In millions)
Invested assets on deposit (regulatory deposits)	$	120	$	123
Invested assets pledged as collateral (1)	21,682		22,405
Total invested assets on deposit and pledged as collateral	$	21,802	$	22,528

__________________

(1)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements, secured debt (see Notes 3 and 11 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report) and derivative transactions (see Note 6).

See “— Securities Lending and Repurchase Agreements” for information regarding securities supporting securities lending and repurchase agreement transactions and Note 4 for information regarding investments designated to the closed block. In addition, the Company’s investment in Federal Home Loan Bank common stock, which is considered restricted until redeemed by the issuer, was $740 million and $765 million, at redemption value, at June 30, 2021 and December 31, 2020, respectively.

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.

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:

	June 30, 2021				December 31, 2020
Asset Type	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
Real estate joint ventures (1)	$	1,150	$	0	$	1,435	$	0
Investment fund (primarily mortgage loans) (2)	210		0		201		0
Other investments (3)	103		1		4		5
Renewable energy partnership (4)	82		0		87		0
Total	$	1,545	$	1	$	1,727	$	5

__________________

(1)    The Company’s investment in affiliated real estate joint ventures was $1.0 billion and $1.3 billion at June 30, 2021 and December 31, 2020, respectively. Other affiliates’ investments in these affiliated real estate joint ventures were $126 million and $130 million at June 30, 2021 and December 31, 2020, respectively.

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)

(2)The Company’s investment in this affiliated investment fund was $172 million and $164 million at June 30, 2021 and December 31, 2020, respectively. An affiliate had an investment in this affiliated investment fund of $38 million and $37 million at June 30, 2021 and December 31, 2020, respectively.

(3)Assets of other investments primarily consisted of cash and cash equivalents, other invested assets and other assets at June 30, 2021, and cash and cash equivalents at December 31, 2020.

(4)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:

	June 30, 2021				December 31, 2020
Asset Type	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS (2)	$	42,521	$	42,521	$	43,708	$	43,708
Other limited partnership interests	6,754		9,935		5,247		8,589
Other invested assets	1,544		1,698		1,436		1,517
Real estate joint ventures	19		22		18		21
Total	$	50,838	$	54,176	$	50,409	$	53,835

__________________

(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 $3 million at both June 30, 2021 and December 31, 2020. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(2)For variable interests in Structured Products included within fixed maturity securities AFS, 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 11, 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 for either the six months ended June 30, 2021 or 2020.

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)

Net Investment Income

The components of net investment income were as follows:

	Three Months   Ended   June 30,				Six Months Ended June 30,
Asset Type	2021		2020		2021		2020
	(In millions)
Fixed maturity securities AFS	$	1,534	$	1,636	$	3,054	$	3,294
Equity securities	7		5		12		14
Mortgage loans	695		705		1,372		1,423
Policy loans	75		76		149		153
Real estate and real estate joint ventures	130		35		224		122
Other limited partnership interests	689		(391)		1,577		(176)
Cash, cash equivalents and short-term investments	2		18		5		61
FVO securities (1)	35		36		61		2
Operating joint venture	16		26		33		47
Other	10		21		45		96
Subtotal investment income	3,193		2,167		6,532		5,036
Less: Investment expenses	159		162		311		387
Net investment income	$	3,034	$	2,005	$	6,221	$	4,649

__________________

(1)Changes in estimated fair value subsequent to purchase of equity-linked notes included within FVO securities, still held at the end of the respective periods and included in net investment income were $33 million and $39 million for the three months and six months ended June 30, 2021, respectively, and $36 million and $2 million for the three months and six months ended June 30, 2020, respectively.

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

Net investment income from equity method investments, comprised of real estate joint ventures, other limited partnership interests, tax credit and renewable energy partnerships and an operating joint venture, totaled $679 million and $1.5 billion for the three months and six months ended June 30, 2021, respectively, and ($482) million and ($284) million for the three months and six months ended June 30, 2020, respectively.

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)

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

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

		Three Months   Ended   June 30,				Six Months Ended June 30,
Asset Type		2021		2020		2021		2020
	(In millions)
Fixed maturity securities AFS		$	(6)	$	(4)	$	(29)	$	(85)
Equity securities (1)		26		39		45		(97)
Mortgage loans		(45)		(92)		16		(137)
Real estate and real estate joint ventures		368		2		416		3
Other limited partnership interests		(9)		0		(14)		0
Other (2)		19		151		48		181
Subtotal		353		96		482		(135)
Change in estimated fair value of other limited partnership interests and real estate joint ventures		6		(13)		14		(12)
Non-investment portfolio gains (losses)		(17)		(27)		6		21
Subtotal		(11)		(40)		20		9
Total net investment gains (losses)		$	342	$	56	$	502	$	(126)

__________________

(1)    Changes in estimated fair value subsequent to purchase for equity securities still held as of the end of the periods included in net investment gains (losses) were $19 million and $32 million for the three months and six months ended June 30, 2021, respectively, and $31 million and ($92) million for the three months and six months ended June 30, 2020, respectively.

(2)    Other gains (losses) included de-designated cash flow hedge gains of $19 million and $48 million for the three months and six months ended June 30, 2021, respectively, and $43 million and $55 million for the three months and six months ended June 30, 2020, respectively.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($14) million and $19 million for the three months and six months ended June 30, 2021, respectively, and ($15) million and $33 million for the three months and six months ended June 30, 2020, respectively.

Fixed Maturity Securities AFS - Sales and Disposals and Credit Loss

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

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In millions)
Proceeds	$	4,757	$	5,533	$	11,844	$	10,997
Gross investment gains	$	34	$	185	$	108	$	246
Gross investment (losses)	(34)		(178)		(116)		(243)
Net credit loss (provision) release	(6)		(11)		(21)		(88)
Net investment gains (losses)	$	(6)	$	(4)	$	(29)	$	(85)

35

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 AFS, mortgage loans, other limited partnership interests and real estate joint ventures to and from affiliates. Invested assets transferred were as follows:

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In millions)
Estimated fair value of invested assets transferred to affiliates	$	53	$	0	$	303	$	0
Amortized cost of invested assets transferred to affiliates	$	51	$	0	$	300	$	0
Net investment gains (losses) recognized on transfers	$	2	$	0	$	3	$	0
Estimated fair value of invested assets transferred from affiliates	$	165	$	0	$	644	$	0

Recurring related party investments and related net investment income were as follows at and for the periods ended:

		June 30, 2021		December 31, 2020		Three Months   Ended   June 30,				Six Months Ended June 30,
						2021		2020		2021		2020
Investment Type/ Balance Sheet Category	Related Party	Carrying Value				Net Investment Income
		(In millions)
Affiliated investments (1)	MetLife, Inc.	$	1,526	$	1,643	$	8	$	9	$	16	$	18
Affiliated investments (2)	American Life Insurance Company	100		100		0		1		1		2
Affiliated investments (3)	Metropolitan Property and Casualty Insurance Company	0		315		0		2		1		4
Other invested assets		$	1,626	$	2,058	$	8	$	12	$	18	$	24

________________

(1)Represents an investment in affiliated senior unsecured notes which have maturity dates from July 2021 to October 2029 and bear interest, payable semi-annually, at rates per annum ranging from 1.60% to 3.14%. See Note 7 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report for further information. In July 2021, ¥38.4 billion (the equivalent of $351 million) of 2.97% affiliated senior unsecured notes matured and were refinanced with the following senior unsecured notes: (i) ¥7.8 billion 1.61% due July 2026, (ii) ¥11.5 billion 1.76% due July 2028 and (iii) ¥19.1 billion 1.85% due July 2031.

(2)Represents an affiliated surplus note which matures in June 2025 and bears interest, payable semi-annually, at a rate per annum of 1.88%.

(3)The affiliated preferred stock was redeemed at par plus accrued dividends in April 2021.

The Company incurred investment advisory charges from an affiliate of $73 million and $144 million, for the three months and six months ended June 30, 2021, respectively, and $68 million and $137 million, for the three months and six months ended June 30,2020, respectively.

See “— Variable Interest Entities — Consolidated VIEs” for information on investments in affiliated real estate joint ventures and an affiliated investment fund.

36

Metropolitan Life Insurance Company

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

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

6. Derivatives

Accounting for Derivatives

See Note 1 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report for a description of the Company’s accounting policies for derivatives and Note 7 for information about the fair value hierarchy for derivatives.

Derivative Strategies

Types of Derivative Instruments and 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. Commonly used derivative instruments include, but are not limited to:    

•Interest rate derivatives: swaps, total return swaps, caps, floors, futures, swaptions, forwards and synthetic guaranteed interest contracts (“GICs”);

•Foreign currency exchange rate derivatives: swaps and forwards;

•Credit derivatives: purchased or written single name or index credit default swaps, and forwards; and

•Equity derivatives: index options, variance swaps, exchange-traded futures and total return swaps.        

For detailed information on these contracts and the related strategies, see Note 8 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report.

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)

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:

		June 30, 2021						December 31, 2020
	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	$	3,571	$	2,165	$	3	$	3,175	$	3,224	$	4
Foreign currency swaps	Foreign currency exchange rate	868		3		58		1,049		5		76
Subtotal		4,439		2,168		61		4,224		3,229		80
Cash flow hedges:
Interest rate swaps	Interest rate	4,129		5		0		4,400		14		0
Interest rate forwards	Interest rate	4,103		69		18		5,081		489		0
Foreign currency swaps	Foreign currency exchange rate	29,946		1,109		1,100		28,017		1,102		1,353
Subtotal		38,178		1,183		1,118		37,498		1,605		1,353
Total qualifying hedges		42,617		3,351		1,179		41,722		4,834		1,433
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	23,720		3,457		4		30,512		3,041		7
Interest rate floors	Interest rate	12,201		241		0		12,701		350		0
Interest rate caps	Interest rate	75,364		60		0		40,104		13		0
Interest rate futures	Interest rate	775		0		1		406		0		0
Interest rate options	Interest rate	11,316		404		11		15,337		174		0
Interest rate forwards	Interest rate	265		0		33		265		0		9
Interest rate total return swaps	Interest rate	1,048		15		22		1,048		0		59
Synthetic GICs	Interest rate	11,405		0		0		11,739		0		0
Foreign currency swaps	Foreign currency exchange rate	4,750		255		170		5,596		292		238
Foreign currency forwards	Foreign currency exchange rate	1,411		25		1		1,236		9		18
Credit default swaps — purchased	Credit	918		11		5		886		8		9
Credit default swaps — written	Credit	6,674		122		6		6,961		126		0
Equity futures	Equity market	1,614		0		2		2,591		0		16
Equity index options	Equity market	27,724		594		172		19,601		459		189
Equity variance swaps	Equity market	425		12		10		425		11		9
Equity total return swaps	Equity market	1,835		1		54		2,542		1		274
Total non-designated or nonqualifying derivatives		181,445		5,197		491		151,950		4,484		828
Total		$	224,062	$	8,548	$	1,670	$	193,672	$	9,318	$	2,261

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 June 30, 2021 and December 31, 2020. 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.

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)

The Effects of Derivatives on the Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

The following table presents the interim condensed consolidated financial statement location and amount of gain (loss) recognized on fair value, cash flow, nonqualifying hedging relationships and embedded derivatives:

	Three Months Ended June 30, 2021
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)		Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	0	$	0	$	0	$	237	$	0	N/A
Hedged items	1		0		0		(242)		0		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	(2)		0		0		0		0		N/A
Hedged items	2		0		0		0		0		N/A
Subtotal	1		0		0		(5)		0		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		$	508
Amount of gains (losses) reclassified from AOCI into income	14		19		0		0		0		(33)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		351
Amount of gains (losses) reclassified from AOCI into income	1		108		0		0		0		(109)
Foreign currency transaction gains (losses) on hedged items	0		(106)		0		0		0		0
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		0
Subtotal	15		21		0		0		0		717
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	0		0		358		0		0		N/A
Foreign currency exchange rate derivatives (1)	0		0		24		0		0		N/A
Credit derivatives — purchased (1)	0		0		(8)		0		0		N/A
Credit derivatives — written (1)	0		0		22		0		0		N/A
Equity derivatives (1)	(1)		0		(270)		(92)		0		N/A
Foreign currency transaction gains (losses) on hedged items	0		0		(9)		0		0		N/A
Subtotal	(1)		0		117		(92)		0		N/A
Earned income on derivatives	32		0		160		51		(38)		0
Embedded derivatives (2)	N/A		N/A		(252)		0		N/A		N/A
Total	$	47	$	21	$	25	$	(46)	$	(38)	$	717

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)

	Three Months Ended June 30, 2020
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)		Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	(1)	$	0	$	0	$	(31)	$	0	N/A
Hedged items	4		0		0		17		0		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	(5)		0		0		0		0		N/A
Hedged items	4		0		0		0		0		N/A
Subtotal	2		0		0		(14)		0		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		$	(110)
Amount of gains (losses) reclassified from AOCI into income	9		42		0		0		0		(51)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		(305)
Amount of gains (losses) reclassified from AOCI into income	0		266		0		0		0		(266)
Foreign currency transaction gains (losses) on hedged items	0		(223)		0		0		0		0
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		0
Subtotal	9		85		0		0		0		(732)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	(2)		0		(57)		0		0		N/A
Foreign currency exchange rate derivatives (1)	0		0		(85)		0		0		N/A
Credit derivatives — purchased (1)	0		0		(19)		0		0		N/A
Credit derivatives — written (1)	0		0		121		0		0		N/A
Equity derivatives (1)	0		0		(783)		(78)		0		N/A
Foreign currency transaction gains (losses) on hedged items	0		0		(28)		0		0		N/A
Subtotal	(2)		0		(851)		(78)		0		N/A
Earned income on derivatives	74		0		144		43		(38)		0
Embedded derivatives (2)	N/A		N/A		(86)		0		N/A		N/A
Total	$	83	$	85	$	(793)	$	(49)	$	(38)	$	(732)

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)

	Six Months Ended June 30, 2021
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)		Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	3	$	0	$	0	$	(365)	$	0	N/A
Hedged items	(2)		0		0		331		0		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	11		0		0		0		0		N/A
Hedged items	(10)		0		0		0		0		N/A
Subtotal	2		0		0		(34)		0		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		$	(703)
Amount of gains (losses) reclassified from AOCI into income	27		48		0		0		0		(75)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		302
Amount of gains (losses) reclassified from AOCI into income	2		(8)		0		0		0		6
Foreign currency transaction gains (losses) on hedged items	0		4		0		0		0		0
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		0
Subtotal	29		44		0		0		0		(470)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	2		0		(1,187)		0		0		N/A
Foreign currency exchange rate derivatives (1)	0		0		43		0		0		N/A
Credit derivatives — purchased (1)	0		0		4		0		0		N/A
Credit derivatives — written (1)	0		0		21		0		0		N/A
Equity derivatives (1)	(2)		0		(827)		(182)		0		N/A
Foreign currency transaction gains (losses) on hedged items	0		0		(12)		0		0		N/A
Subtotal	0		0		(1,958)		(182)		0		N/A
Earned income on derivatives	78		0		334		102		(77)		0
Embedded derivatives (2)	N/A		N/A		634		0		N/A		N/A
Total	$	109	$	44	$	(990)	$	(114)	$	(77)	$	(470)

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)

	Six Months Ended June 30, 2020
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)		Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	(11)	$	0	$	0	$	743	$	0	N/A
Hedged items	8		0		0		(752)		0		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	64		0		0		0		0		N/A
Hedged items	(58)		0		0		0		0		N/A
Subtotal	3		0		0		(9)		0		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		$	1,892
Amount of gains (losses) reclassified from AOCI into income	15		48		0		0		0		(63)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		984
Amount of gains (losses) reclassified from AOCI into income	0		(185)		0		0		0		185
Foreign currency transaction gains (losses) on hedged items	0		234		0		0		0		0
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A		N/A		N/A		0
Subtotal	15		97		0		0		0		2,998
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	(6)		0		3,337		0		0		N/A
Foreign currency exchange rate derivatives (1)	0		0		289		0		0		N/A
Credit derivatives — purchased (1)	0		0		26		0		0		N/A
Credit derivatives — written (1)	0		0		(113)		0		0		N/A
Equity derivatives (1)	0		0		298		53		0		N/A
Foreign currency transaction gains (losses) on hedged items	0		0		(140)		0		0		N/A
Subtotal	(6)		0		3,697		53		0		N/A
Earned income on derivatives	156		0		224		81		(82)		0
Embedded derivatives (2)	N/A		N/A		(1,159)		0		N/A		N/A
Total	$	168	$	97	$	2,762	$	125	$	(82)	$	2,998

__________________

(1)Excludes earned income on derivatives.

(2)The valuation of guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were $3 million and ($15) million for the three months and six months ended June 30, 2021, respectively, and ($46) million and $65 million for the three months and six months ended June 30, 2020, respectively.

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.

The following table presents the balance sheet classification, carrying amount and cumulative fair value hedging adjustments for items designated and qualifying as hedged items in fair value hedges:

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)

Balance Sheet Line Item	Carrying Amount of the Hedged Assets/(Liabilities)				Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets/(Liabilities) (1)
	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(In millions)
Fixed maturity securities AFS	$	408	$	461	$	(1)	$	(1)
Mortgage loans	$	766	$	925	$	(1)	$	20
Future policy benefits	$	(4,715)	$	(5,512)	$	(969)	$	(1,307)

__________________

(1)Includes ($181) million and ($1) million of hedging adjustments on discontinued hedging relationships at June 30, 2021 and December 31, 2020, respectively.

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 income. These amounts were $6 million for both the three months and six months ended June 30, 2021 and $31 million and $32 million for the three months and six months ended June 30, 2020, respectively.

At both June 30, 2021 and December 31, 2020, 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 eight years.

At June 30, 2021 and December 31, 2020, the balance in AOCI associated with cash flow hedges was $1.8 billion and $2.3 billion, respectively.

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

At June 30, 2021, the Company expected to reclassify ($7) million of deferred net gains (losses) on derivatives in AOCI 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 effects of derivatives on the interim condensed consolidated statements of operations and comprehensive income (loss) 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 $6.7 billion and $7.0 billion at June 30, 2021 and December 31, 2020, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At June 30, 2021 and December 31, 2020, the Company would have received $116 million and $126 million, respectively, to terminate all of these contracts.

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

	June 30, 2021					December 31, 2020
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)	$	0	$	20	1.7	$	0	$	54	0.6
Credit default swaps referencing indices	24		1,779		2.0	27		1,779		2.5
Subtotal	24		1,799		2.0	27		1,833		2.4
Baa
Single name credit default swaps (3)	1		105		2.4	2		174		2.1
Credit default swaps referencing indices	96		4,735		5.2	97		4,954		5.3
Subtotal	97		4,840		5.2	99		5,128		5.2
Ba
Credit default swaps referencing indices	(1)		20		4.5	0		0		—
Subtotal	(1)		20		4.5	0		0		—
Caa3
Credit default swaps referencing indices	(4)		15		4.5	0		0		—
Subtotal	(4)		15		4.5	0		0		—
Total	$	116	$	6,674	4.3	$	126	$	6,961	4.5

__________________

(1)The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), S&P 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 municipals.

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.

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 clearinghouses (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”).

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 Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company enters into contracts with counterparties in jurisdictions which it understands that close-out netting should be enforceable. The Company’s OTC-bilateral derivative transactions are governed by the International Swaps and Derivatives Association, Inc. (“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, close-out netting permits the Company (subject to financial regulations such as the Orderly Liquidation Authority under Title II of Dodd-Frank) to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions and to apply collateral to the obligations without application of the automatic stay, upon the counterparty’s bankruptcy. 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 as required by applicable law.

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 brokers and central clearinghouses 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:

	June 30, 2021				December 31, 2020
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement	Assets		Liabilities		Assets		Liabilities
	(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)	$	8,518	$	1,653	$	9,244	$	2,192
OTC-cleared (1)	114		4		139		6
Exchange-traded	0		3		0		16
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)	8,632		1,660		9,383		2,214
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(1,615)		(1,615)		(1,996)		(1,996)
OTC-cleared	0		0		(5)		(5)
Cash collateral: (3), (4)
OTC-bilateral	(5,679)		0		(6,073)		0
OTC-cleared	(97)		0		(98)		0
Securities collateral: (5)
OTC-bilateral	(1,151)		(38)		(1,115)		(188)
OTC-cleared	0		(4)		0		(1)
Exchange-traded	0		(3)		0		(16)
Net amount after application of master netting agreements and collateral	$	90	$	0	$	96	$	8

__________________

(1)At June 30, 2021 and December 31, 2020, derivative assets included income (expense) accruals reported in accrued investment income or in other liabilities of $84 million and $65 million, respectively, and derivative liabilities included (income) expense accruals reported in accrued investment income or in other liabilities of ($10) million and ($47) million, respectively.

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

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)

(3)Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives, where the centralized clearinghouse treats variation margin as collateral, is included in cash and cash equivalents, short-term investments or in fixed maturity securities AFS, 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 June 30, 2021 and December 31, 2020, the Company received excess cash collateral of $37 million and $175 million, respectively, and provided 0 excess cash collateral.

(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 June 30, 2021, NaN of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities AFS 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 June 30, 2021 and December 31, 2020, the Company received excess securities collateral with an estimated fair value of $29 million and $150 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At June 30, 2021 and December 31, 2020, the Company provided excess securities collateral with an estimated fair value of $32 million and $185 million, respectively, for its OTC-bilateral derivatives, $746 million and $1.4 billion, respectively, for its OTC-cleared derivatives, and $96 million and $188 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

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

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that 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.

	Derivatives Subject to Financial Strength-Contingent Provisions
	June 30, 2021		December 31, 2020
	(In millions)
Estimated fair value of derivatives in a net liability position (1)	$	39	$	196
Estimated fair value of collateral provided:
Fixed maturity securities AFS	$	53	$	239

__________________

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

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)

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.

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	June 30, 2021		December 31, 2020
		(In millions)
Embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	Policyholder account balances	$	159	$	488
Assumed guaranteed minimum benefits	Policyholder account balances	4		5
Funds withheld on ceded reinsurance (including affiliated)	Other liabilities	1,186		1,428
Fixed annuities with equity indexed returns	Policyholder account balances	162		139
Other guarantees	Policyholder account balances	0		1
Embedded derivatives within liability host contracts		$	1,511	$	2,061

47

Metropolitan Life Insurance Company

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

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

7. Fair Value

Considerable judgment is often required in interpreting the market data used 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:

	June 30, 2021
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities AFS:
U.S. corporate	$	0	$	52,282	$	6,370	$	58,652
Foreign corporate	0		22,936		7,735		30,671
U.S. government and agency	16,084		15,496		0		31,580
RMBS	111		19,942		3,175		23,228
ABS	0		10,542		1,351		11,893
Municipals	0		8,752		0		8,752
CMBS	0		6,403		305		6,708
Foreign government	0		4,985		11		4,996
Total fixed maturity securities AFS	16,195		141,338		18,947		176,480
Short-term investments	1,838		217		77		2,132
Residential mortgage loans — FVO	0		0		140		140
Other investments	407		200		724		1,331
Derivative assets: (1)
Interest rate	0		6,343		73		6,416
Foreign currency exchange rate	0		1,392		0		1,392
Credit	0		110		23		133
Equity market	0		607		0		607
Total derivative assets	0		8,452		96		8,548
Separate account assets (2)	29,952		96,816		1,110		127,878
Total assets (3)	$	48,392	$	247,023	$	21,094	$	316,509
Liabilities
Derivative liabilities: (1)
Interest rate	$	1	$	40	$	51	$	92
Foreign currency exchange rate	0		1,329		0		1,329
Credit	0		5		6		11
Equity market	2		236		0		238
Total derivative liabilities	3		1,610		57		1,670
Embedded derivatives within liability host contracts (4)	0		0		1,511		1,511
Separate account liabilities (2)	5		10		5		20
Total liabilities	$	8	$	1,620	$	1,573	$	3,201

48

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, 2020
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities AFS:
U.S. corporate	$	0	$	53,717	$	6,692	$	60,409
Foreign corporate	0		24,098		8,181		32,279
U.S. government and agency	12,697		18,074		0		30,771
RMBS	0		21,186		3,040		24,226
ABS	0		11,351		1,224		12,575
Municipals	0		8,983		0		8,983
CMBS	0		6,628		201		6,829
Foreign government	0		5,263		5		5,268
Total fixed maturity securities AFS	12,697		149,300		19,343		181,340
Short-term investments	2,216		406		1		2,623
Residential mortgage loans — FVO	0		0		165		165
Other investments	431		270		565		1,266
Derivative assets: (1)
Interest rate	0		6,816		489		7,305
Foreign currency exchange rate	0		1,408		0		1,408
Credit	0		109		25		134
Equity market	0		454		17		471
Total derivative assets	0		8,787		531		9,318
Separate account assets (2)	28,296		99,405		945		128,646
Total assets (3)	$	43,640	$	258,168	$	21,550	$	323,358
Liabilities
Derivative liabilities: (1)
Interest rate	$	0	$	11	$	68	$	79
Foreign currency exchange rate	0		1,683		2		1,685
Credit	0		9		0		9
Equity market	16		463		9		488
Total derivative liabilities	16		2,166		79		2,261
Embedded derivatives within liability host contracts (4)	0		0		2,061		2,061
Separate account liabilities (2)	12		8		6		26
Total liabilities	$	28	$	2,174	$	2,146	$	4,348

__________________

(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)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.

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 (continued)

(3)Total assets included in the fair value hierarchy exclude other limited partnership interests that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient. At both June 30, 2021 and December 31, 2020, the estimated fair value of such investments was $70 million.

(4)Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets.

The following describes the valuation methodologies used to measure assets and liabilities at fair value.

Investments

Securities, Short-term Investments and Other 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.

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

The estimated fair value of short-term investments and other investments is determined on a basis consistent with the methodologies described herein.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy are presented below. The primary valuation approaches are the market approach, which considers recent prices from market transactions involving identical or similar assets or liabilities, and the income approach, which converts expected future amounts (e.g. cash flows) to a single current, discounted amount. 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.

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)

Instrument		Level 2 Observable Inputs		Level 3 Unobservable Inputs
Fixed maturity securities AFS
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 ratings		•	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 securities, Municipals 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 quotations		•	credit spreads
	•	comparable securities that are actively traded
Structured Products
	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		•	credit ratings
	•	average delinquency rates; debt-service coverage ratios
	•	credit ratings
	•	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

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)

Instrument	Level 2 Observable Inputs		Level 3 Unobservable Inputs
Short-term investments and Other investments
	•	Certain short-term investments and certain other investments are of a similar nature and class to the fixed maturity securities AFS described above; while certain other investments are similar to equity securities. The valuation approaches and observable inputs used in their valuation are also similar to those described above. Other investments contain equity securities valued using quoted prices in markets that are not considered active.	•	Certain short-term investments and certain other investments are of a similar nature and class to the fixed maturity securities AFS described above; while certain other investments are similar to equity securities. The valuation approaches and unobservable inputs used in their valuation are also similar to those described above. Other investments contain equity securities that use key unobservable inputs such as credit ratings; issuance structures, in addition to those described above for fixed maturities AFS. Other investments include certain real estate joint ventures and use the valuation approach and key inputs as described for other limited partnership interests 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, Short-term Investments and Other Investments” 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 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.

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)

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)
	•	interest rate volatility (1), (2)	•	currency correlation	•	repurchase rates
					•	independent non-binding broker quotations

__________________

(1)Option-based only.

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

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)

Embedded Derivatives

Embedded derivatives principally include certain direct and assumed variable annuity guarantees, annuity contracts, and investment risk within funds withheld related to certain 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 interim condensed consolidated balance sheets.

The Company calculates the fair value of these embedded derivatives, which is 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, projecting 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 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, Short-term Investments and Other Investments.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities on the interim condensed 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.

The Company issues certain annuity contracts which allow the policyholder to participate in returns from equity indices. These equity indexed features are embedded derivatives which are measured at estimated fair value separately from the host fixed 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 interim condensed consolidated balance sheets.

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)

The estimated fair value of the embedded equity indexed derivatives, based on the present value of future equity returns to the policyholder using actuarial and present value assumptions including expectations concerning policyholder behavior, is calculated by the Company’s actuarial department. The calculation is based on in-force business and uses standard capital market techniques, such as Black-Scholes, to calculate the value of the portion of the embedded derivative for which the terms are set. The portion of the embedded derivative covering the period beyond where terms are set is calculated as the present value of amounts expected to be spent to provide equity indexed returns in those periods. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.

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.

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 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.

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)

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:

					June 30, 2021				December 31, 2020				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 AFS (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Offered quotes (4)	1	-	172	113	0	-	186	118	Increase
	•	Market pricing	•	Quoted prices (4)	0	-	123	100	0	-	116	99	Increase
RMBS	•	Market pricing	•	Quoted prices (4)	0	-	147	99	0	-	159	98	Increase (5)
ABS	•	Market pricing	•	Quoted prices (4)	91	-	110	100	1	-	107	100	Increase (5)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (6)	148	-	228	199	92	-	184	149	Increase (7)
			•	Repurchase rates (8)	0	-	0	0	(12)	-	1	(6)	Decrease (7)
			•	Volatility (9)	0%	-	1%	0%	0	-	0	0	Increase (7)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (6)	0	-	0	0	(31)	-	(13)	(20)	Increase (7)
Credit	•	Present value techniques	•	Credit spreads (10)	96	-	128	103	96	-	99	98	Decrease (7)
	•	Consensus pricing	•	Offered quotes (11)
Equity market	•	Present value techniques or option pricing models	•	Volatility (12)	0	-	0	0	21%	-	28%	28%	Increase (7)
			•	Correlation (13)	10%	-	10%	10%	10%	-	30%	10%
Embedded derivatives
Direct and assumed guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0.01%	-	0.12%	0.06%	0.01%	-	0.12%	0.06%	Decrease (14)
				Ages 41 - 60	0.05%	-	0.65%	0.30%	0.05%	-	0.65%	0.30%	Decrease (14)
				Ages 61 - 115	0.31%	-	100%	1.90%	0.31%	-	100%	1.90%	Decrease (14)
			•	Lapse rates:
				Durations 1 - 10	0.25%	-	100%	6.86%	0.25%	-	100%	6.86%	Decrease (15)
				Durations 11 - 20	4.70%	-	100%	5.18%	4.70%	-	100%	5.18%	Decrease (15)
				Durations 21 - 116	2%	-	100%	5.18%	2%	-	100%	5.18%	Decrease (15)
			•	Utilization rates	0%	-	22%	0.17%	0%	-	22%	0.17%	Increase (16)
			•	Withdrawal rates	0.25%	-	10%	3.98%	0.25%	-	10%	3.98%	(17)
			•	Long-term equity volatilities	16.66%	-	22.21%	18.70%	16.66%	-	22.21%	18.70%	Increase (18)
			•	Nonperformance risk spread	0.04%	-	0.38%	0.40%	0.04%	-	0.39%	0.40%	Decrease (19)

__________________

(1)The weighted average for fixed maturity securities AFS and derivatives is determined based on the estimated fair value of the securities and derivatives. The weighted average for embedded derivatives is determined based on a combination of account values and experience data.

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

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

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

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)

(5)Changes in the assumptions used for the probability of default would have been 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)Ranges represent the underlying interest rate volatility quoted in percentage points. Since this valuation methodology uses an equivalent of LIBOR for secured overnight financing rate volatility, presenting a range is more representative of the unobservable input used in the valuation.

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

(11)At both June 30, 2021 and December 31, 2020, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.

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

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

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

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

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

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

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)

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

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

Generally, all other classes of assets and liabilities classified within Level 3 that are not included in the preceding table use the same valuation techniques and significant unobservable inputs as previously described for Level 3. 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.

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)

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 AFS
	Corporate (6)		Structured Products		Municipals		Foreign Government		Short-term Investments
	(In millions)
Three Months Ended June 30, 2021
Balance, beginning of period	$	14,248	$	4,490	$	0	$	7	$	37
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	(6)		14		0		0		0
Total realized/unrealized gains (losses) included in AOCI	220		16		0		0		0
Purchases (3)	344		588		0		8		24
Sales (3)	(235)		(308)		0		(3)		(34)
Issuances (3)	0		0		0		0		0
Settlements (3)	0		0		0		0		0
Transfers into Level 3 (4)	38		307		0		0		50
Transfers out of Level 3 (4)	(504)		(276)		0		(1)		0
Balance, end of period	$	14,105	$	4,831	$	0	$	11	$	77
Three Months Ended June 30, 2020
Balance, beginning of period	$	12,978	$	3,240	$	0	$	33	$	354
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	(23)		9		0		0		(1)
Total realized/unrealized gains (losses) included in AOCI	789		191		0		0		1
Purchases (3)	688		1,192		0		9		0
Sales (3)	(396)		(166)		0		(1)		(4)
Issuances (3)	0		0		0		0		0
Settlements (3)	0		0		0		0		0
Transfers into Level 3 (4)	116		122		0		0		0
Transfers out of Level 3 (4)	(1,174)		(42)		0		(26)		(350)
Balance, end of period	$	12,978	$	4,546	$	0	$	15	$	0
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2021 (5)	$	(7)	$	14	$	0	$	0	$	0
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (5)	$	(15)	$	12	$	0	$	0	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2021 (5)	$	221	$	15	$	0	$	0	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2020 (5)	$	780	$	187	$	0	$	0	$	0

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)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Residential Mortgage Loans - FVO		Other Investments		Net Derivatives (7)		Net Embedded Derivatives (8)		Separate Accounts (9)
	(In millions)
Three Months Ended June 30, 2021
Balance, beginning of period	$	149	$	673	$	(277)	$	(1,216)	$	992
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	(1)		42		35		(252)		9
Total realized/unrealized gains (losses) included in AOCI	0		0		206		0		0
Purchases (3)	0		27		3		0		118
Sales (3)	(2)		(13)		0		0		(27)
Issuances (3)	0		0		(5)		0		1
Settlements (3)	(6)		0		12		(43)		3
Transfers into Level 3 (4)	0		0		0		0		9
Transfers out of Level 3 (4)	0		(5)		65		0		0
Balance, end of period	$	140	$	724	$	39	$	(1,511)	$	1,105
Three Months Ended June 30, 2020
Balance, beginning of period	$	180	$	655	$	1,192	$	(2,442)	$	927
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	1		46		(29)		(86)		10
Total realized/unrealized gains (losses) included in AOCI	0		0		(74)		0		0
Purchases (3)	0		16		0		0		57
Sales (3)	(2)		(2)		0		0		(93)
Issuances (3)	0		0		0		0		(2)
Settlements (3)	(4)		0		(151)		(43)		1
Transfers into Level 3 (4)	0		0		0		0		13
Transfers out of Level 3 (4)	0		(19)		0		0		(1)
Balance, end of period	$	175	$	696	$	938	$	(2,571)	$	912
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2021 (5)	$	(2)	$	38	$	16	$	(249)	$	0
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (5)	$	0	$	46	$	(16)	$	(89)	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2021 (5)	$	0	$	0	$	200	$	0	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2020 (5)	$	0	$	0	$	(70)	$	0	$	0

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)
	Fixed Maturity Securities AFS
	Corporate (6)		Structured Products		Municipals		Foreign Government		Short-term Investments
	(In millions)
Six Months Ended June 30, 2021
Balance, beginning of period	$	14,873	$	4,465	$	0	$	5	$	1
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	(8)		23		0		0		0
Total realized/unrealized gains (losses) included in AOCI	(425)		(3)		0		(1)		0
Purchases (3)	648		932		0		8		75
Sales (3)	(404)		(637)		0		(1)		0
Issuances (3)	0		0		0		0		0
Settlements (3)	0		0		0		0		0
Transfers into Level 3 (4)	82		269		0		0		1
Transfers out of Level 3 (4)	(661)		(218)		0		0		0
Balance, end of period	$	14,105	$	4,831	$	0	$	11	$	77
Six Months Ended June 30, 2020
Balance, beginning of period	$	9,382	$	3,395	$	7	$	10	$	17
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	(71)		19		0		0		0
Total realized/unrealized gains (losses) included in AOCI	(233)		(98)		0		(1)		0
Purchases (3)	1,658		1,431		0		9		0
Sales (3)	(515)		(326)		0		(1)		0
Issuances (3)	0		0		0		0		0
Settlements (3)	0		0		0		0		0
Transfers into Level 3 (4)	3,128		144		0		0		0
Transfers out of Level 3 (4)	(371)		(19)		(7)		(2)		(17)
Balance, end of period	$	12,978	$	4,546	$	0	$	15	$	0
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2021 (5)	$	(9)	$	21	$	0	$	0	$	0
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (5)	$	(39)	$	22	$	0	$	0	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2021 (5)	$	(423)	$	(2)	$	0	$	(1)	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2020 (5)	$	(257)	$	(97)	$	0	$	0	$	0

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)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Residential Mortgage Loans - FVO		Other  Investments		Net Derivatives (7)		Net Embedded Derivatives (8)		Separate Accounts (9)
	(In millions)
Six Months Ended June 30, 2021
Balance, beginning of period	$	165	$	565	$	452	$	(2,061)	$	939
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	(3)		76		(120)		634		(1)
Total realized/unrealized gains (losses) included in AOCI	0		0		(409)		0		0
Purchases (3)	0		27		3		0		187
Sales (3)	(11)		(14)		0		0		(32)
Issuances (3)	0		0		(6)		0		0
Settlements (3)	(11)		0		117		(84)		5
Transfers into Level 3 (4)	0		74		1		0		10
Transfers out of Level 3 (4)	0		(4)		1		0		(3)
Balance, end of period	$	140	$	724	$	39	$	(1,511)	$	1,105
Six Months Ended June 30, 2020
Balance, beginning of period	$	188	$	799	$	(72)	$	(1,325)	$	915
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)	3		(2)		240		(1,159)		1
Total realized/unrealized gains (losses) included in AOCI	0		0		1,021		0		0
Purchases (3)	0		31		0		0		94
Sales (3)	(7)		(35)		0		0		(101)
Issuances (3)	0		0		0		0		(3)
Settlements (3)	(9)		0		(251)		(87)		1
Transfers into Level 3 (4)	0		0		0		0		10
Transfers out of Level 3 (4)	0		(97)		0		0		(5)
Balance, end of period	$	175	$	696	$	938	$	(2,571)	$	912
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2021 (5)	$	(7)	$	72	$	(34)	$	636	$	0
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2020 (5)	$	0	$	1	$	84	$	(1,160)	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2021 (5)	$	0	$	0	$	(274)	$	0	$	0
Changes in unrealized gains (losses) included in AOCI for the instruments still held at June 30, 2020 (5)	$	0	$	0	$	923	$	0	$	0

__________________

(1)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).

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

(3)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.

(4)Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

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)

(5)Changes in unrealized gains (losses) included in net income (loss) and included in AOCI 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).

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

(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.

	June 30, 2021		December 31, 2020
	(In millions)
Unpaid principal balance	$	141	$	172
Difference between estimated fair value and unpaid principal balance	(1)		(7)
Carrying value at estimated fair value	$	140	$	165
Loans in nonaccrual status	$	35	$	45
Loans more than 90 days past due	$	18	$	27
Loans in nonaccrual status or more than 90 days past due, or both — difference between aggregate estimated fair value and unpaid principal balance	$	(6)	$	(13)

Nonrecurring Fair Value Measurements

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

	June 30,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
	Carrying Value After Measurement				Gains (Losses)
	(In millions)
Mortgage loans, net (1)	$	321	$	320	$	(35)	$	(9)	$	(30)	$	(9)

__________________

(1)Estimated fair values for impaired mortgage loans are based on estimated fair value of the underlying collateral.

63

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 of Financial Instruments Carried at Other Than Fair Value

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

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:

	June 30, 2021
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans (1)	$	62,659	$	0	$	0	$	66,300	$	66,300
Policy loans	$	5,885	$	0	$	0	$	6,879	$	6,879
Other invested assets	$	2,377	$	0	$	2,417	$	2	$	2,419
Premiums, reinsurance and other receivables	$	13,193	$	0	$	492	$	13,098	$	13,590
Liabilities
Policyholder account balances	$	79,488	$	0	$	0	$	82,970	$	82,970
Long-term debt	$	1,626	$	0	$	2,021	$	0	$	2,021
Other liabilities	$	12,841	$	0	$	504	$	12,573	$	13,077
Separate account liabilities	$	57,878	$	0	$	57,878	$	0	$	57,878

	December 31, 2020
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans (1)	$	66,240	$	0	$	0	$	70,391	$	70,391
Policy loans	$	5,973	$	0	$	0	$	7,148	$	7,148
Other invested assets	$	2,849	$	0	$	2,586	$	167	$	2,753
Premiums, reinsurance and other receivables	$	13,173	$	0	$	363	$	13,274	$	13,637
Liabilities
Policyholder account balances	$	78,059	$	0	$	0	$	82,982	$	82,982
Long-term debt	$	1,615	$	0	$	2,018	$	0	$	2,018
Other liabilities	$	12,595	$	0	$	134	$	12,778	$	12,912
Separate account liabilities	$	59,103	$	0	$	59,103	$	0	$	59,103

_________________

(1)Includes mortgage loans measured at estimated fair value on a nonrecurring basis and excludes mortgage loans measured at estimated fair value on a recurring basis.

64

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   June 30, 2021
	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	$	8,305	$	854	$	(29)	$	(451)	$	8,679
Other comprehensive income (loss) (“OCI”) before reclassifications	759		859		(6)		(2)		1,610
Deferred income tax benefit (expense)	(153)		(181)		2		0		(332)
AOCI before reclassifications, net of income tax	8,911		1,532		(33)		(453)		9,957
Amounts reclassified from AOCI	35		(142)		0		10		(97)
Deferred income tax benefit (expense)	(8)		29		0		(2)		19
Amounts reclassified from AOCI, net of income tax	27		(113)		0		8		(78)
Balance, end of period	$	8,938	$	1,419	$	(33)	$	(445)	$	9,879

	Three Months   Ended   June 30, 2020
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)		Unrealized  Gains (Losses) on Derivatives		Foreign Currency Translation Adjustments		Defined  Benefit  Plans Adjustment		Total
	(In millions)
Balance, beginning of period	$	7,177	$	4,567	$	(86)	$	(367)	$	11,291
OCI before reclassifications	4,447		(415)		(25)		4		4,011
Deferred income tax benefit (expense)	(956)		87		7		(1)		(863)
AOCI before reclassifications, net of income tax	10,668		4,239		(104)		(364)		14,439
Amounts reclassified from AOCI	41		(317)		0		6		(270)
Deferred income tax benefit (expense)	(8)		66		0		(1)		57
Amounts reclassified from AOCI, net of income tax	33		(251)		0		5		(213)
Balance, end of period	$	10,701	$	3,988	$	(104)	$	(359)	$	14,226

65

Metropolitan Life Insurance Company

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

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

8. Equity (continued)

	Six Months Ended June 30, 2021
	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	$	10,384	$	1,791	$	(53)	$	(460)	$	11,662
OCI before reclassifications	(1,900)		(401)		24		(2)		(2,279)
Deferred income tax benefit (expense)	408		84		(4)		0		488
AOCI before reclassifications, net of income tax	8,892		1,474		(33)		(462)		9,871
Amounts reclassified from AOCI	59		(69)		0		21		11
Deferred income tax benefit (expense)	(13)		14		0		(4)		(3)
Amounts reclassified from AOCI, net of income tax	46		(55)		0		17		8
Balance, end of period	$	8,938	$	1,419	$	(33)	$	(445)	$	9,879

	Six Months Ended June 30, 2020
	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	$	8,876	$	1,620	$	(97)	$	(374)	$	10,025
OCI before reclassifications	2,228		2,876		(9)		4		5,099
Deferred income tax benefit (expense)	(462)		(604)		2		(1)		(1,065)
AOCI before reclassifications, net of income tax	10,642		3,892		(104)		(371)		14,059
Amounts reclassified from AOCI	74		122		0		15		211
Deferred income tax benefit (expense)	(15)		(26)		0		(3)		(44)
Amounts reclassified from AOCI, net of income tax	59		96		0		12		167
Balance, end of period	$	10,701	$	3,988	$	(104)	$	(359)	$	14,226

__________________

(1)See Note 5 for information on offsets to investments related to policyholder liabilities, DAC, VOBA and DSI.

66

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:

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
AOCI Components	Amounts Reclassified from AOCI								Consolidated Statements of Operations and Comprehensive Income (Loss) Locations
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	$	(19)	$	(32)	$	(34)	$	(58)	Net investment gains (losses)
Net unrealized investment gains (losses)	(4)		(2)		(7)		(8)		Net investment income
Net unrealized investment gains (losses)	(12)		(7)		(18)		(8)		Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	(35)		(41)		(59)		(74)
Income tax (expense) benefit	8		8		13		15
Net unrealized investment gains (losses), net of income tax	(27)		(33)		(46)		(59)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate derivatives	14		9		27		15		Net investment income
Interest rate derivatives	19		42		48		48		Net investment gains (losses)
Foreign currency exchange rate derivatives	1		0		2		0		Net investment income
Foreign currency exchange rate derivatives	108		266		(8)		(185)		Net investment gains (losses)
Gains (losses) on cash flow hedges, before income tax	142		317		69		(122)
Income tax (expense) benefit	(29)		(66)		(14)		26
Gains (losses) on cash flow hedges, net of income tax	113		251		55		(96)
Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)	(11)		(6)		(23)		(16)
Amortization of prior service (costs) credit	1		0		2		1
Amortization of defined benefit plan items, before income tax	(10)		(6)		(21)		(15)
Income tax (expense) benefit	2		1		4		3
Amortization of defined benefit plan items, net of income tax	(8)		(5)		(17)		(12)
Total reclassifications, net of income tax	$	78	$	213	$	(8)	$	(167)

__________________

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

67

Metropolitan Life Insurance Company

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

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

9. Other Revenues and Other Expenses

Other Revenues

Information on other revenues, which primarily includes fees related to service contracts from customers, was as follows:

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In millions)
Prepaid legal plans	$	99	$	94	$	199	$	189
Recordkeeping and administrative services (1)	53		45		105		94
Administrative services-only contracts	54		54		112		110
Other revenue from service contracts from customers	11		9		20		18
Total revenues from service contracts from customers	217		202		436		411
Other (2)	215		201		421		365
Total other revenues	$	432	$	403	$	857	$	776

__________________

(1)Related to products and businesses no longer actively marketed by the Company.

(2)Primarily includes reinsurance ceded. See Note 12.

Other Expenses

Information on other expenses was as follows:

	Three Months   Ended   June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In millions)
General and administrative expenses (1)	$	547	$	537	$	1,094	$	1,132
Pension, postretirement and postemployment benefit costs	25		8		58		17
Premium taxes, other taxes, and licenses & fees	93		95		166		192
Commissions and other variable expenses	494		450		982		922
Capitalization of DAC	(10)		(13)		(29)		(23)
Amortization of DAC and VOBA	32		(16)		72		87
Interest expense on debt	24		26		48		51
Total other expenses	$	1,205	$	1,087	$	2,391	$	2,378

__________________

(1)Includes ($44) million and ($57) million for the three months and six months ended June 30, 2021, respectively, and ($53) million and ($25) million for the three months and six months ended June 30, 2020, respectively, for the net change in cash surrender value of investments in certain life insurance policies, net of premiums paid.

Affiliated Expenses

See Note 12 for a discussion of affiliated expenses included in the table above.

68

Metropolitan Life Insurance Company

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

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

10. Income Tax

For the three months and six months ended June 30, 2021, the effective tax rate on income (loss) before provision for income tax was 18% and 15%, respectively. The Company’s effective tax rate for the three months ended June 30, 2021 differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income and tax credits. The Company’s effective tax rate for the six months ended June 30, 2021 differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income, tax credits and the corporate tax deduction for stock compensation.

For the three months and six months ended June 30, 2020, the effective tax rate on income (loss) before provision for income tax was 38% and 16%, respectively. The Company’s effective tax rate for the three months ended June 30, 2020 differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income and tax credits. The Company’s effective tax rate for the six months ended June 30, 2020 differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income, tax credits and the finalization of bankruptcy proceedings for a leveraged lease investment.

11. Contingencies, Commitments and Guarantees

Contingencies

Litigation

The Company is a defendant in a large number of litigation matters. Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed below and those otherwise provided for in the Company’s interim condensed 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, mortgage lending bank, employer, investor, investment advisor, broker-dealer, and taxpayer.

The Company also 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 U.S. Securities and Exchange Commission; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority, as well as from local and national regulators and government authorities in jurisdictions outside the United States where the Company conducts business. The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. The Company cooperates in these inquiries.

In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States 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 Company’s actual experience 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.

69

Metropolitan Life Insurance Company

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

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

11. Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. 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. In certain circumstances where liabilities have been established there may be coverage under one or more corporate insurance policies, pursuant to which there may be an insurance recovery. Insurance recoveries are recognized as gains when any contingencies relating to the insurance claim have been resolved, which is the earlier of when the gains are realized or realizable. 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 June 30, 2021. 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. 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.

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 matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of June 30, 2021, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $175 million.

Matters as to Which an Estimate Cannot Be Made

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

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.

70

Metropolitan Life Insurance Company

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

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

11. Contingencies, Commitments and Guarantees (continued)

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 2020 Annual Report, Metropolitan Life Insurance Company received approximately 2,496 asbestos-related claims in 2020. For the six months ended June 30, 2021 and 2020, Metropolitan Life Insurance Company received approximately 1,304 and 1,121 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2020 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s update in its recorded liability at December 31, 2020. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

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

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

The Company believes adequate provision has been made in its interim condensed 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.

71

Metropolitan Life Insurance Company

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

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

11. Contingencies, Commitments and Guarantees (continued)

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 June 30, 2021.

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. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. 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 Metropolitan Life Insurance Company from February 8, 2014 to the present. Metropolitan Life Insurance Company intends to defend this action vigorously.

Total Asset Recovery Services, LLC. v. MetLife, Inc., et al. (Supreme Court of the State of New York, County of New York, filed December 27, 2017)

Total Asset Recovery Services (the “Relator”) brought an action under the qui tam provision of the New York False Claims Act (the “Act”) on behalf of itself and the State of New York. The Relator originally filed this action under seal in 2010, and the complaint was unsealed on December 19, 2017. The Relator alleges that MetLife, Inc., Metropolitan Life Insurance Company and several other insurance companies violated the Act by filing false unclaimed property reports with the State of New York from 1986 to 2017, 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. The Relator seeks treble damages and other relief. On April 3, 2019, the court granted MetLife, Inc.’s and Metropolitan Life Insurance Company’s motion to dismiss and dismissed the complaint in its entirety. The Relator filed an appeal with the Appellate Division of the New York State Supreme Court, First Department. On December 10, 2020, the Appellate Division reversed the court’s order granting MetLife, Inc. and Metropolitan Life Insurance Company’s motion to dismiss, remanded the case to the trial court, and permitted the Relator’s counsel to file an amended complaint. On March 5, 2021, the Relator filed an amended complaint. The Company intends to defend the action vigorously.

Matters Related to Group Annuity Benefits

In 2018, the Company announced that it identified a material weakness in its internal control over financial reporting related to the practices and procedures for estimating reserves for certain group annuity benefits. Several regulators have made inquiries into this issue and it is possible that other jurisdictions may pursue similar investigations or inquiries. The Company is also exposed to lawsuits, and could be exposed to additional legal actions relating to this issue. 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, Employee Retirement Income Security Act of 1974, or other laws or regulations. The Company could incur significant costs in connection with these actions.

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.2 billion and $2.4 billion at June 30, 2021 and December 31, 2020, respectively.

72

Metropolitan Life Insurance Company

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

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

11. Contingencies, Commitments and Guarantees (continued)

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

The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $4.1 billion and $4.3 billion at June 30, 2021 and December 31, 2020, respectively.

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $315 million, with a cumulative maximum of $431 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 $2 million and $3 million at June 30, 2021 and December 31, 2020, respectively, for indemnities, guarantees and commitments.

12. 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 its affiliates. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $593 million and $1.2 billion for the three months and six months ended June 30, 2021, respectively, and $575 million and $1.2 billion for the three months and six months ended June 30, 2020, respectively. Total revenues received from affiliates related to these agreements were $9 million and $21 million for the three months and six months ended June 30, 2021, respectively, and $9 million and $19 million for the three months and six months ended June 30, 2020, respectively.

The Company had net payables to affiliates, related to the items discussed above, of $112 million and $198 million at June 30, 2021 and December 31, 2020, respectively.

See Note 5 for additional information on related party transactions.

73

Metropolitan Life Insurance Company

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

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

12. Related Party Transactions (continued)

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, and Metropolitan Tower Life Insurance Company (“MTL”), all of which are related parties.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(In millions)
Premiums
Reinsurance assumed	$	840	$	2	$	842	$	4
Reinsurance ceded	(29)		(29)		(60)		(58)
Net premiums	$	811	$	(27)	$	782	$	(54)
Universal life and investment-type product policy fees
Reinsurance assumed	$	0	$	0	$	0	$	0
Reinsurance ceded	(3)		(3)		(1)		(2)
Net universal life and investment-type product policy fees	$	(3)	$	(3)	$	(1)	$	(2)
Other revenues
Reinsurance assumed	$	5	$	0	$	2	$	(9)
Reinsurance ceded	142		119		283		251
Net other revenues	$	147	$	119	$	285	$	242
Policyholder benefits and claims
Reinsurance assumed	$	831	$	0	$	832	$	1
Reinsurance ceded	(37)		(34)		(72)		(69)
Net policyholder benefits and claims	$	794	$	(34)	$	760	$	(68)
Interest credited to policyholder account balances
Reinsurance assumed	$	7	$	7	$	14	$	14
Reinsurance ceded	(3)		(3)		(6)		(6)
Net interest credited to policyholder account balances	$	4	$	4	$	8	$	8
Other expenses
Reinsurance assumed	$	19	$	0	$	19	$	0
Reinsurance ceded	132		119		234		254
Net other expenses	$	151	$	119	$	253	$	254

74

Metropolitan Life Insurance Company

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

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

12. Related Party Transactions (continued)

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

	June 30, 2021				December 31, 2020
	Assumed		Ceded		Assumed		Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	17	$	12,409	$	1	$	12,453
Deferred policy acquisition costs and value of business acquired	0		(142)		0		(145)
Total assets	$	17	$	12,267	$	1	$	12,308
Liabilities
Future policy benefits	$	863	$	(11)	$	48	$	(14)
Policyholder account balances	118		0		123		0
Other policy-related balances	14		3		1		5
Other liabilities	890		12,450		864		12,816
Total liabilities	$	1,885	$	12,442	$	1,036	$	12,807

Effective April 1, 2021, the Company, through its wholly owned subsidiary Missouri Reinsurance Inc., entered into an agreement to assume certain group annuity contracts issued in connection with a qualifying pension risk transfer on a modified coinsurance basis from MTL. The significant effects to the Company were primarily increases in other invested assets of $830 million and future policy benefits of $816 million at June 30, 2021, as well as premiums of $838 million and policyholder benefits and claims of $829 million for both the three months and six months ended June 30, 2021.

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 $32 million and $45 million at June 30, 2021 and December 31, 2020, respectively. Net derivative gains (losses) associated with these embedded derivatives were ($10) million and $13 million for the three months and six months ended June 30, 2021, respectively, and ($12) million and ($27) million for the three months and six months ended June 30, 2020, 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 $1.2 billion and $1.4 billion at June 30, 2021 and December 31, 2020, respectively. Net derivative gains (losses) associated with the embedded derivative were ($190) million and $229 million for the three months and six months ended June 30, 2021, respectively, and ($379) million and ($290) million for the three months and six months ended June 30, 2020, respectively.

75

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	77
Business	77
Summary of Critical Accounting Estimates	78
Results of Operations	80
Adoption of New Accounting Pronouncements	86
Future Adoption of New Accounting Pronouncements	86
Non-GAAP and Other Financial Disclosures	86

76

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, 2020 (the “2020 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. See “Note Regarding Forward-Looking Statements” for cautionary language 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”). See “— Non-GAAP and Other Financial Disclosures” for definitions and a 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.

COVID-19 Pandemic and Current Market Conditions

We continue to closely monitor developments relating to the novel coronavirus COVID-19 pandemic (the “COVID-19 Pandemic”) and assess its impact on our business. The COVID-19 Pandemic continues to impact the global economy and financial markets and has caused volatility in the global equity, credit and real estate markets. Governments and central banks around the world are responding to the COVID-19 Pandemic with unprecedented fiscal and monetary policies, which have had significant effects and may have ongoing effects on financial markets and the global economy. We have implemented risk management and business continuity plans and taken preventive measures and other precautions, such as employee business travel restrictions and remote work arrangements which, to date, have enabled us to maintain our critical business processes, customer service levels, relationships with key vendors, financial reporting systems, internal controls over financial reporting and disclosure controls and procedures.

We continue to grant certain accommodations to our customers and borrowers, including (i) relaxing claim documentation requirements for disability claims and (ii) payment deferrals and other loan modifications on certain commercial, agricultural and residential mortgage loans. See Note 5 of the Notes to the Interim Condensed Consolidated Financial Statements for further information regarding COVID-19 Pandemic-related mortgage loan concessions. See also “— Results of Operations” for further information regarding the effect of the COVID-19 Pandemic on our businesses.

Regulatory Developments

The following discussion on regulatory developments should be read in conjunction with “Business — Regulation” in the 2020 Annual Report, as amended or supplemented here.

NYDFS Guidance on Diversity and Corporate Governance

On March 16, 2021, the New York State Department of Financial Services (“NYDFS”) stated it expects the insurers it regulates to make diversity of their leadership a business priority and a key element of their corporate governance. The NYDFS is collecting data from insurers that meet certain New York premium thresholds, including Metropolitan Life Insurance Company, regarding the diversity of their corporate boards and management. We provided such data to the NYDFS by the July 30, 2021 deadline. The NYDFS will include diversity-related questions in its examination process starting in 2022.

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Securities, Broker-Dealer and Investment Adviser Regulation

In April 2021, the Appellate Division of the New York State Supreme Court overturned NYDFS Regulation 187-Suitability and Best Interests in Life Insurance and Annuity Transactions for being unconstitutionally vague. The NYDFS has appealed the decision.

Environmental Laws and Regulations

On March 25, 2021, the NYDFS issued for public comment proposed guidance for New York domestic insurers, which states that insurers are expected to take a proportionate approach to managing climate risks that reflects their exposure to climate risks. The NYDFS intends to formally adopt the guidance, as modified by the comment process, in the third quarter of 2021, and it has integrated questions on this topic as part of its supervisory activities.

On July 14, 2021, the NYDFS published notice of the adoption of amendments to regulations governing enterprise risk management, effective August 13, 2021. Among other provisions, the amendments require that certain additional risks, including climate change risk, be specifically included in an insurance group's enterprise risk management function.

The U.S. Securities and Exchange Commission (the “SEC”) is continuing its focus on climate, and environmental, social and governance (“ESG”) risks and opportunities, and has published its rulemaking list which contains several ESG-related rulemakings that the SEC is considering.

London Interbank Offered Rate

The Financial Conduct Authority, the United Kingdom regulator of London Interbank Offered Rates (“LIBOR”), previously indicated that it intends to stop persuading or compelling panel banks to submit quotes used to determine LIBOR after 2021. On March 5, 2021, the Intercontinental Exchange Benchmark Administration, the administrator of LIBOR, announced that it will cease the publication of one week and two-month U.S. Dollar LIBOR and all non-USD (GBP, EUR, CHF and JPY) LIBOR settings at the end of December 2021, but will extend the publication of the remaining U.S. Dollar LIBOR settings (overnight and one, three, six and 12 month U.S. Dollar LIBOR) until the end of June 2023. U.S. bank regulators have advised banks to cease writing, subject to certain limited exceptions, new U.S. Dollar LIBOR contracts by the end of 2021.

We use LIBOR and other interbank offered rates as interest reference rates in many of our financial instruments. Existing contract fallback provisions, and whether, how, and when we and others develop and adopt alternative reference rates, will influence the effect of any changes to or discontinuation of LIBOR on us. We actively participate in the New York Federal Reserve Bank convened Alternative Reference Rate Committee (“ARRC”) and other industry association efforts on the transition to alternative reference rates. In April 2021, the State of New York enacted legislation to address the transition from LIBOR for certain New York law governed agreements, which is generally consistent with the ARRC’s recommendations to facilitate the transition. We continue to assess current and alternative reference rates’ merits, limitations, risks and suitability for our investment and insurance processes.

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 allowance for credit loss and 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.

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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 Company’s 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 2020 Annual Report.

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Results of Operations

Consolidated Results

	Six Months Ended June 30,
		2021		2020
		(In millions)
Revenues
Premiums		$	12,256	$	9,969
Universal life and investment-type product policy fees		1,049		1,007
Net investment income		6,221		4,649
Other revenues		857		776
Net investment gains (losses)		502		(126)
Net derivative gains (losses)		(990)		2,762
Total revenues		19,895		19,037
Expenses
Policyholder benefits and claims and policyholder dividends		14,113		11,596
Interest credited to policyholder account balances		1,023		1,182
Capitalization of DAC		(29)		(23)
Amortization of DAC and VOBA		72		87
Interest expense on debt		48		51
Other expenses		2,300		2,263
Total expenses		17,527		15,156
Income (loss) before provision for income tax		2,368		3,881
Provision for income tax expense (benefit)		357		619
Net income (loss)		2,011		3,262
Less: Net income (loss) attributable to noncontrolling interests		4		(2)
Net income (loss) attributable to Metropolitan Life Insurance Company		$	2,007	$	3,264

Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020

During the six months ended June 30, 2021, net income (loss) decreased $1.3 billion from the prior period, primarily driven by an unfavorable change in net derivative gains (losses), net of investment hedge adjustments, partially offset by favorable changes in adjusted earnings and 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 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 available-for-sale and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities.

We 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 provision for credit loss and impairments on our investment portfolio, as well as realized gains and losses on investments sold.

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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 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. 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 freestanding derivatives to hedge the market risks inherent in these variable annuity guarantees. 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.

We continuously review and refine our strategy and ongoing refinement of the strategy may be required to take advantage of the National Association of Insurance Commissioners rules related to a statutory accounting election for derivatives that mitigate interest rate sensitivity related to variable annuity guarantees. As a part of our current hedge strategy, we maintain portfolio level derivatives in our macro hedge program. These macro hedge program derivatives, which are included in the non-VA program derivatives section of the table below, mitigate the potential loss of our overall statutory capital from significant adverse economic conditions.

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

	Six Months Ended June 30,
	2021		2020
	(In millions)
Non-VA program derivatives:
Interest rate	$	(702)	$	3,503
Foreign currency exchange rate	51		180
Credit	38		(63)
Equity	(601)		(21)
Non-VA embedded derivatives	221		(295)
Total non-VA program derivatives	(993)		3,304
VA program derivatives:
Embedded derivatives-direct and assumed guarantees:
Market risks	488		(669)
Nonperformance risk adjustment	(15)		65
Other risks	(60)		(260)
Total	413		(864)
Freestanding derivatives hedging direct and assumed embedded derivatives	(410)		322
Total VA program derivatives	3		(542)
Net derivative gains (losses)	$	(990)	$	2,762

The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $4.3 billion ($3.4 billion, net of income tax). This was primarily due to long-term rates increasing in the current period versus decreasing significantly in the prior period. This unfavorably impacted the estimated fair value of receive fixed interest rate swaps and options that are part of our macro hedge program. Key equity indexes also increased in the current period versus decreased in the prior period. This unfavorably impacted the estimated fair value of equity options and total rate of return swaps that are part of our macro hedge program. These unfavorable impacts were partially offset by a change in the value of the underlying assets, which favorably impacted 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 items being hedged.

The favorable change in net derivative gains (losses) on VA program derivatives was $545 million ($431 million, net of income tax). This was due to: (i) a favorable change of $425 million ($336 million, net of income tax) in market risks in embedded derivatives, net of freestanding derivatives that hedge market risks in embedded derivatives, and (ii) a favorable change of $200 million ($158 million, net of income tax) in other risks in embedded derivatives (primarily policyholder behavior and other non-market risks that generally cannot be hedged), partially offset by an unfavorable change of $80 million ($63 million, net of income tax) in the nonperformance risk adjustment included in the valuation of the direct and assumed variable annuity embedded derivatives.

The aforementioned $425 million ($336 million, net of income tax) favorable change reflects a $1.2 billion ($914 million, net of income tax) favorable change in market risks in embedded derivatives, partially offset by a $732 million ($578 million, net of income tax) unfavorable change in freestanding derivatives that hedge market risks in embedded derivatives.

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The primary changes in market factors affecting the valuation of VA program derivatives are summarized as follows:

•Long-term interest rates increased in the current period and decreased significantly in the prior period, contributing to a favorable change in our embedded derivatives and an unfavorable change in our freestanding derivatives. For example, the 30-year U.S. swap rate increased 37 basis points in the current period and decreased 117 basis points in the prior period.

•Key equity index levels increased in the current period versus decreased in the prior period, contributing to a favorable change in our embedded derivatives and an unfavorable change in our freestanding derivatives. For example, the S&P Global Ratings 500 Index increased 14% in the current period and decreased 4% in the prior period.

The aforementioned $200 million ($158 million, net of income tax) favorable change in other risks in embedded derivatives reflects actuarial assumption updates and a combination of other factors, such as fees deducted from accounts, changes in the benefit base, premiums, lapses, withdrawals and deaths, and changes to cross-effect, basis mismatch, risk margin and fund allocation.

The aforementioned $80 million ($63 million, net of income tax) unfavorable change in the nonperformance risk adjustment included in the valuation of the direct and assumed variable annuity embedded derivatives resulted from an unfavorable change of $71 million, before income tax, related to model changes and changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees. Also included is an unfavorable change of $9 million, before income tax, related to changes in our own credit spread.

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

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

When our own credit spread increases in isolation, discounting the embedded derivative liability produces a lower valuation of the liability than if our own credit spread had remained constant. As a result, a gain is created from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. For each of these primary market drivers, the opposite effect occurs when the driver moves in the opposite direction.

Net Investment Gains (Losses). The favorable change in net investment gains (losses) of $628 million ($496 million, net of income tax) primarily reflects: (i) current period gains on sales of real estate investments, (ii) a current period release compared to a prior period provision for mortgage loan credit loss, and (iii) mark-to-market gains in the current period compared to mark-to-market losses in the prior period on equity securities, which are measured at estimated fair value through net income (loss). These favorable changes were partially offset by a prior period recovery on a leveraged lease that was previously impaired and lower foreign currency transaction gains in the current period.

Taxes. For the six months ended June 30, 2021, our effective tax rate on income (loss) before provision for income tax was 15%, which differed from the U.S. statutory rate of 21% primarily due to tax benefits related to non-taxable investment income, tax credits and the corporate tax deduction for stock compensation. For the six months ended June 30, 2020, our effective tax rate on income (loss) before provision for income tax was 16%, which differed from the U.S. statutory rate of 21% primarily due to tax benefits related to non-taxable investment income, tax credits and the finalization of bankruptcy proceedings for a leveraged lease investment.

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 $1.3 billion, net of income tax, to $2.7 billion, net of income tax, for the six months ended June 30, 2021 from $1.4 billion, net of income tax, for the six months ended June 30, 2020.

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Reconciliation of net income (loss) to adjusted earnings and premiums, fees and other revenues to adjusted premiums, fees and other revenues

		Six Months Ended June 30,
		2021		2020
		(In millions)
Net income (loss)		$	2,011	$	3,262
Less: adjustments from net income (loss) to adjusted earnings:
Revenues:
	Net investment gains (losses)	502		(126)
	Net derivative gains (losses)	(990)		2,762
	Premiums	—		—
	Universal life and investment-type product policy fees	39		43
	Net investment income	(292)		(222)
	Other revenues	—		—
Expenses:
	Policyholder benefits and claims and policyholder dividends	(162)		(77)
	Interest credited to policyholder account balances	2		7
	Capitalization of DAC	—		—
	Amortization of DAC and VOBA	19		13
	Interest expense on debt	—		—
	Other expenses	8		(4)
Provision for income tax (expense) benefit		172		(503)
Adjusted earnings		$	2,713	$	1,369
Premiums, fees and other revenues		$	14,162	$	11,752
Less: adjustments to premiums, fees and other revenues		39		43
Adjusted premiums, fees and other revenues		$	14,123	$	11,709

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Consolidated Results — Adjusted Earnings

Business Overview. Adjusted premiums, fees and other revenues for the six months ended June 30, 2021 increased $2.4 billion, or 21%, compared to the prior period, primarily attributable to our U.S. segment driven by growth in both our Group Benefits and Retirement and Income Solutions (“RIS”) businesses. The increase in our Group Benefits business was primarily due to higher dental premiums driven by the impact of an unearned premium reserve established in the prior period to recognize the limited availability of services that could be provided due to the COVID-19 Pandemic restrictions, coupled with the impact of premium credits we offered to our customers in the prior period due to such restrictions. In addition, growth in other core products was driven by increases in the group life and group disability businesses. Growth from our group life business included increased premiums from our participating contracts, which can fluctuate with claims experience. Growth in voluntary products was due to the impact of new sales and growth in membership in our accident & health and legal plans businesses. The increase in premiums in RIS was mainly from our pension risk transfer and post-retirement benefits businesses. Changes in RIS premiums are mostly offset by a corresponding change in policyholder benefits. In our MetLife Holdings segment, we anticipate an annual decline in adjusted premiums, fees and other revenues from expected business run-off.

Growth in RIS’s stable value and capital market investments businesses drove increases in policyholder account and separate account balances, resulting in higher fees and interest margins.

Six Months Ended June 30, 2021 Compared with the Six Months Ended June 30, 2020

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

Overview. The primary drivers of the increase in adjusted earnings were higher investment yields, due to strong returns in our private equity portfolio, and lower interest credited expenses, partially offset by unfavorable underwriting, which reflected impacts from the COVID-19 Pandemic.

Business Growth. Average invested assets and net investment income were essentially flat as higher average invested assets in our U.S. segment from positive flows, primarily from funding agreement issuances, were offset by the impact of dividend payments to MetLife, Inc. Consistent with the growth in the U.S. segment’s average invested assets from net flows, interest credited expenses on deposit-type liabilities increased; however, this was more than offset by lower interest credited expenses on our long-duration liabilities. In our MetLife Holdings segment, negative net flows in our annuity business resulted in lower asset-based fee income, and premiums declined due to business run-off and the impact of dividend scale reductions. In our U.S. segment, higher volume-related, premium tax and direct expenses, driven by business growth, were partially offset by the 2021 abatement of the annual health insurer fee under the Patient Protection and Affordable Care Act. This net increase in expenses was more than offset by a corresponding increase in adjusted premiums, fees and other revenues. The combined impact of the items affecting our business growth increased adjusted earnings by $13 million.

Market Factors. Market factors, including interest rate levels, variability in equity market returns, and foreign currency fluctuations, continued to impact our results; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields increased primarily driven by the favorable impact of equity market returns on our private equity funds, partially offset by lower yields on fixed income securities. In our U.S. segment, interest rate fluctuations resulted in a decline in our average interest credited rates on deposit-type and long-duration liabilities, which drove a decrease in interest credited expenses. In our MetLife Holdings segment, higher equity market returns drove higher asset-based fee income, which increased adjusted earnings. The changes in market factors discussed above resulted in a $1.5 billion increase in adjusted earnings.

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Underwriting and Other Insurance Adjustments. Underwriting results decreased adjusted earnings by $225 million primarily due to unfavorable mortality and claims experience in our U.S. segment, partially offset by favorable claims experience in our long-term care business and favorable mortality in our life businesses, both in our MetLife Holdings segment. Unfavorable mortality in the U.S. segment was primarily driven by our Group Benefits business, partially offset by favorable mortality in our RIS business. Our Group Benefits business experienced (i) increases in both incidence and severity in both COVID-19 and core claims across our life businesses, and (ii) unfavorable results in our accidental death & dismemberment business due to lower incidence in the prior period as a result of the COVID-19 Pandemic. The mortality experience in our RIS business was due to the impact of the COVID-19 Pandemic on our pension risk transfer business, as well as favorable mortality in our specialized benefit resource business, partially offset by unfavorable mortality in the institutional income annuity business. In addition, unfavorable claims experience within our U.S. segment was primarily driven by: (i) our group disability business, and (ii) unfavorable dental results, as a result of the COVID-19 Pandemic, which limited availability of services and reduced utilization in the prior period, partially offset by (i) favorable claims experience in our individual disability and accident & health businesses, and (ii) the impact of business growth in our accident & health business. Dividend scale reductions, as well as run-off in MLIC’s closed block, contributed to lower dividend expense and resulted in a $70 million increase in adjusted earnings.

Expenses. Adjusted earnings increased $57 million compared to the prior period, primarily due to declines in certain corporate-related expenses and lower interest expenses on tax positions due to audit settlements in the current period.

Taxes. For the six months ended June 30, 2021, our effective tax rate on adjusted earnings was 16%, which differed from the U.S. statutory rate of 21% primarily due to tax benefits from non-taxable investment income, tax credits and the corporate tax deduction for stock compensation. For the six months ended June 30, 2020, our effective tax rate on adjusted earnings was 8%, which differed from the U.S. statutory rate of 21% primarily due to tax benefits from non-taxable investment income, tax credits and the finalization of bankruptcy proceedings for a leveraged lease investment.

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.

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 for the Company and our investors 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 premiums, fees and other revenues	(i)	premiums, fees and other revenues
(ii)	adjusted earnings	(ii)	net income (loss)

Reconciliations of these non-GAAP financial measures to the most directly comparable historical GAAP financial measures are included in “— 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 effort to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income.

Our definitions of 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.

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Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax. Adjusted loss is defined as negative adjusted earnings. For information relating to adjusted revenues and adjusted expenses, see “Financial Measures and Segment Accounting Policies” in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.

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.

•Near-term represents one to three years.

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Item 4. Controls and Procedures

Management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that these disclosure controls and procedures are effective.

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended June 30, 2021 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 11 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 2020 Annual Report. There have been no material changes to our risk factors from the risk factors previously disclosed in the 2020 Annual Report.

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Item 6. Exhibits

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

		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.SCH	Inline XBRL Taxonomy Extension Schema Document.					X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.					X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.					X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.					X
104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).					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/ Tamara L. Schock
	Name:  Tamara L. Schock Title:    Executive Vice President              and Chief Accounting Officer              (Authorized Signatory and Principal               Accounting Officer)

Date: August 10, 2021

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