e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED
JUNE 30,
2009
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD
FROM TO
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Commission file number:
001-15787
MetLife, Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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13-4075851
(I.R.S. Employer
Identification No.)
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200 Park Avenue, New York, NY
(Address of principal
executive offices)
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10166-0188
(Zip
Code)
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(212) 578-2211
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o (Do
not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
At July 31, 2009, 818,638,951 shares of the
registrants common stock, $0.01 par value per share,
were outstanding.
Note
Regarding Forward-Looking Statements
This Quarterly Report on
Form 10-Q,
including the Managements Discussion and Analysis of
Financial Condition and Results of Operations, may contain or
incorporate by reference information that includes or is based
upon forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements give expectations or forecasts of
future events. These statements can be identified by the fact
that they do not relate strictly to historical or current facts.
They use words such as anticipate,
estimate, expect, project,
intend, plan, believe and
other words and terms of similar meaning in connection with a
discussion of future operating or financial performance. In
particular, these include statements relating to future actions,
prospective services or products, future performance or results
of current and anticipated services or products, sales efforts,
expenses, the outcome of contingencies such as legal
proceedings, trends in operations and financial results. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
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
MetLife, Inc., its subsidiaries 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:
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should not in all instances be treated as categorical statements
of fact, but rather as a way of allocating the risk to one of
the parties if those statements prove to be inaccurate;
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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;
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may apply standards of materiality in a way that is different
from what may be viewed as material to investors; and
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were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement
and are subject to more recent developments.
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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 MetLife,
Inc. and its subsidiaries may be found elsewhere in this
Quarterly Report on
Form 10-Q
and MetLife, Inc.s other public filings, which are
available without charge through the SECs website at
www.sec.gov.
3
Part I
Financial Information
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Item 1.
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Financial
Statements
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June 30, 2009
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December 31, 2008
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Assets
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Investments:
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Fixed maturity securities available-for-sale, at estimated fair
value (amortized cost: $225,494 and $209,508, respectively)
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$
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211,563
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$
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188,251
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Equity securities available-for-sale, at estimated fair value
(cost: $3,679 and $4,131, respectively)
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3,045
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3,197
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Trading securities, at estimated fair value (cost: $1,523 and
$1,107, respectively)
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1,471
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946
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Mortgage and consumer loans:
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Held-for-investment, at amortized cost (net of valuation
allowances of $543 and $304, respectively)
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48,229
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49,352
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Held-for-sale, principally at estimated fair value
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4,271
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2,012
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Mortgage and consumer loans, net
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52,500
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51,364
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Policy loans
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9,907
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9,802
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Real estate and real estate joint ventures held-for-investment
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7,295
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7,585
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Real estate held-for-sale
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1
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1
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Other limited partnership interests
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5,193
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6,039
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Short-term investments
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8,117
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13,878
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Other invested assets
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13,071
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17,248
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Total investments
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312,163
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298,311
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Cash and cash equivalents
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13,213
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24,207
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Accrued investment income
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3,019
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3,061
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Premiums and other receivables
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16,730
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16,973
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Deferred policy acquisition costs and value of business acquired
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20,323
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20,144
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Current income tax recoverable
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253
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Deferred income tax assets
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3,856
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4,927
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Goodwill
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5,036
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5,008
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Other assets
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7,896
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7,262
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Assets of subsidiaries held-for-sale
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946
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Separate account assets
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126,968
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120,839
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Total assets
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$
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509,457
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$
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501,678
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Liabilities and Stockholders Equity
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Liabilities:
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Future policy benefits
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$
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132,823
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$
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130,555
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Policyholder account balances
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147,883
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149,805
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Other policyholder funds
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8,319
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7,762
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Policyholder dividends payable
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881
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1,023
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Short-term debt
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4,757
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2,659
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Long-term debt
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12,940
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9,667
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Collateral financing arrangements
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5,297
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5,192
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Junior subordinated debt securities
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2,691
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3,758
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Current income tax payable
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342
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Payables for collateral under securities loaned and other
transactions
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24,607
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31,059
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Other liabilities
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14,679
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14,284
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Liabilities of subsidiaries held-for-sale
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748
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Separate account liabilities
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126,968
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120,839
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Total liabilities
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481,845
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477,693
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Contingencies, Commitments and Guarantees (Note 11)
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Stockholders Equity:
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MetLife, Inc.s stockholders equity:
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Preferred stock, par value $0.01 per share;
200,000,000 shares authorized; 84,000,000 shares
issued and outstanding; $2,100 aggregate liquidation preference
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1
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1
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Common stock, par value $0.01 per share;
3,000,000,000 shares authorized; 822,359,818 shares
and 798,016,664 shares issued at June 30, 2009 and
December 31, 2008, respectively; 818,586,271 shares
and 793,629,070 shares outstanding at June 30, 2009
and December 31, 2008, respectively
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8
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8
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Additional paid-in capital
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16,849
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15,811
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Retained earnings
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20,472
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22,403
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Treasury stock, at cost; 3,773,547 shares and
4,387,594 shares at June 30, 2009 and
December 31, 2008, respectively
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(203
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)
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(236
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)
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Accumulated other comprehensive loss
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(9,834
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)
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(14,253
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)
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Total MetLife, Inc.s stockholders equity
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27,293
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23,734
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Noncontrolling interests
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319
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251
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Total equity
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27,612
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23,985
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Total liabilities and stockholders equity
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$
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509,457
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$
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501,678
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See accompanying notes to the interim condensed consolidated
financial statements.
4
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Three Months
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Six Months
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Ended
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Ended
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June 30,
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June 30,
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2009
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2008
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2009
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2008
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Revenues
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Premiums
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$
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6,576
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$
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6,340
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$
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12,698
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$
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12,631
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Universal life and investment-type product policy fees
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1,216
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1,396
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2,399
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2,793
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Net investment income
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3,731
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4,319
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6,994
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8,616
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Other revenues
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572
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351
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1,126
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720
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Net investment gains (losses):
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Other-than-temporary impairments on fixed maturity securities
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(566
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)
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(139
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)
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(1,119
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)
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(213
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)
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Other-than-temporary impairments on fixed maturity securities
transferred to other comprehensive loss
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234
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234
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Other net investment gains (losses), net
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(3,497
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)
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(218
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(3,850
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)
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(874
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)
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Total net investment gains (losses)
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(3,829
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)
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(357
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)
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(4,735
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)
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(1,087
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)
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Total revenues
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8,266
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12,049
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18,482
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23,673
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Expenses
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Policyholder benefits and claims
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6,946
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6,579
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13,528
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13,162
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Interest credited to policyholder account balances
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1,229
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1,196
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2,397
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2,429
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Policyholder dividends
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434
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446
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858
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875
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Other expenses
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2,031
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2,607
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5,033
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5,154
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Total expenses
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10,640
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10,828
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21,816
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21,620
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Income (loss) from continuing operations before provision for
income tax
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(2,374
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)
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1,221
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(3,334
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)
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2,053
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Provision for income tax expense (benefit)
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(956
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)
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342
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(1,332
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)
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549
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Income (loss) from continuing operations, net of income tax
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(1,418
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)
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879
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(2,002
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)
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1,504
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Income from discontinued operations, net of income tax
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117
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36
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152
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Net income (loss)
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(1,418
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)
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996
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(1,966
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)
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1,656
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Less: Net income (loss) attributable to noncontrolling interests
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(16
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)
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50
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|
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(20
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)
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62
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Net income (loss) attributable to MetLife, Inc.
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(1,402
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)
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|
946
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(1,946
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)
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1,594
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Less: Preferred stock dividends
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31
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|
|
31
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61
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64
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Net income (loss) available to MetLife, Inc.s common
shareholders
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$
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(1,433
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)
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$
|
915
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$
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(2,007
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)
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$
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1,530
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Income (loss) from continuing operations, net of income tax,
available to MetLife, Inc.s common shareholders per common
share:
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Basic
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$
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(1.74
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)
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$
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1.19
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$
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(2.50
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)
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$
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2.03
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Diluted
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$
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(1.74
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)
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$
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1.18
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$
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(2.50
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)
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$
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1.99
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Net income (loss) available to MetLife, Inc.s common
shareholders per common share:
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|
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Basic
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$
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(1.74
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)
|
|
$
|
1.28
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|
|
$
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(2.46
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)
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|
$
|
2.14
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|
|
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|
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|
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Diluted
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$
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(1.74
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)
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|
$
|
1.26
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|
$
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(2.46
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)
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|
$
|
2.10
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|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
See accompanying notes to the interim condensed consolidated
financial statements.
5
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Foreign
|
|
|
Defined
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Treasury
|
|
|
Investment
|
|
|
Other-Than-
|
|
|
Currency
|
|
|
Benefit
|
|
|
MetLife, Inc.s
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Stock at
|
|
|
Gains
|
|
|
Temporary
|
|
|
Translation
|
|
|
Plans
|
|
|
Stockholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Cost
|
|
|
(Losses)
|
|
|
Impairments
|
|
|
Adjustments
|
|
|
Adjustment
|
|
|
Equity
|
|
|
Interests
|
|
|
Equity
|
|
|
Balance at December 31, 2008
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
15,811
|
|
|
$
|
22,403
|
|
|
$
|
(236
|
)
|
|
$
|
(12,564
|
)
|
|
$
|
|
|
|
$
|
(246
|
)
|
|
$
|
(1,443
|
)
|
|
$
|
23,734
|
|
|
$
|
251
|
|
|
$
|
23,985
|
|
Cumulative effect of changes in accounting principle, net of
income tax (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance newly issued shares
|
|
|
|
|
|
|
|
|
|
|
1,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035
|
|
|
|
|
|
|
|
1,035
|
|
Treasury stock transactions, net
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
35
|
|
Deferral of stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
(61
|
)
|
Change in equity of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
|
|
|
|
95
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,946
|
)
|
|
|
(20
|
)
|
|
|
(1,966
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on derivative instruments, net of
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
(57
|
)
|
Unrealized investment gains (losses), net of related offsets and
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,624
|
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
4,479
|
|
|
|
(7
|
)
|
|
|
4,472
|
|
Foreign currency translation adjustments, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(6
|
)
|
Defined benefit plans adjustment, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
79
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,495
|
|
|
|
(7
|
)
|
|
|
4,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,549
|
|
|
|
(27
|
)
|
|
|
2,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
16,849
|
|
|
$
|
20,472
|
|
|
$
|
(203
|
)
|
|
$
|
(7,997
|
)
|
|
$
|
(221
|
)
|
|
$
|
(252
|
)
|
|
$
|
(1,364
|
)
|
|
$
|
27,293
|
|
|
$
|
319
|
|
|
$
|
27,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the
interim condensed consolidated financial statements.
6
MetLife,
Inc.
Interim Condensed Consolidated Statement of
Stockholders Equity
For the Six Months Ended June 30, 2008
(Unaudited) (Continued)
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Foreign
|
|
|
Defined
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Treasury
|
|
|
Investment
|
|
|
Currency
|
|
|
Benefit
|
|
|
MetLife, Inc.s
|
|
|
Noncontrolling Interests
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Stock
|
|
|
Gains
|
|
|
Translation
|
|
|
Plans
|
|
|
Stockholders
|
|
|
Discontinued
|
|
|
Continuing
|
|
|
Total
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
at Cost
|
|
|
(Losses)
|
|
|
Adjustments
|
|
|
Adjustment
|
|
|
Equity
|
|
|
Operations
|
|
|
Operations
|
|
|
Equity
|
|
|
Balance at December 31, 2007
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
17,098
|
|
|
$
|
19,884
|
|
|
$
|
(2,890
|
)
|
|
$
|
971
|
|
|
$
|
347
|
|
|
$
|
(240
|
)
|
|
$
|
35,179
|
|
|
$
|
1,534
|
|
|
$
|
272
|
|
|
$
|
36,985
|
|
Cumulative effect of changes in accounting principles, net of
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2008
|
|
|
1
|
|
|
|
8
|
|
|
|
17,098
|
|
|
|
19,911
|
|
|
|
(2,890
|
)
|
|
|
961
|
|
|
|
347
|
|
|
|
(240
|
)
|
|
|
35,196
|
|
|
|
1,534
|
|
|
|
272
|
|
|
|
37,002
|
|
Treasury stock transactions, net
|
|
|
|
|
|
|
|
|
|
|
408
|
|
|
|
|
|
|
|
(1,157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(749
|
)
|
|
|
|
|
|
|
|
|
|
|
(749
|
)
|
Deferral of stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
|
|
|
|
|
|
|
|
|
|
(64
|
)
|
Dividends on subsidiary common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
(16
|
)
|
Change in equity of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
(65
|
)
|
|
|
(51
|
)
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,594
|
|
|
|
71
|
|
|
|
(9
|
)
|
|
|
1,656
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on derivative instruments, net of
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
(33
|
)
|
Unrealized investment gains (losses), net of related offsets and
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,624
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,624
|
)
|
|
|
(128
|
)
|
|
|
(7
|
)
|
|
|
(3,759
|
)
|
Foreign currency translation adjustments, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
|
|
|
|
|
|
80
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,577
|
)
|
|
|
(131
|
)
|
|
|
(7
|
)
|
|
|
(3,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,983
|
)
|
|
|
(60
|
)
|
|
|
(16
|
)
|
|
|
(2,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
17,647
|
|
|
$
|
21,441
|
|
|
$
|
(4,047
|
)
|
|
$
|
(2,696
|
)
|
|
$
|
427
|
|
|
$
|
(240
|
)
|
|
$
|
32,541
|
|
|
$
|
1,472
|
|
|
$
|
191
|
|
|
$
|
34,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the
interim condensed consolidated financial statements.
7
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,966
|
)
|
|
$
|
1,656
|
|
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization expenses
|
|
|
259
|
|
|
|
334
|
|
Amortization of premiums and accretion of discounts associated
with investments, net
|
|
|
(287
|
)
|
|
|
(526
|
)
|
Loss from sales of investments and businesses, net
|
|
|
4,687
|
|
|
|
1,226
|
|
Undistributed equity earnings of real estate joint ventures and
other limited partnership interests
|
|
|
857
|
|
|
|
(66
|
)
|
Interest credited to policyholder account balances
|
|
|
2,400
|
|
|
|
2,576
|
|
Interest credited to bank deposits
|
|
|
84
|
|
|
|
84
|
|
Universal life and investment-type product policy fees
|
|
|
(2,413
|
)
|
|
|
(2,838
|
)
|
Change in accrued investment income
|
|
|
43
|
|
|
|
309
|
|
Change in premiums and other receivables
|
|
|
(997
|
)
|
|
|
(569
|
)
|
Change in deferred policy acquisition costs, net
|
|
|
(914
|
)
|
|
|
(643
|
)
|
Change in insurance-related liabilities
|
|
|
2,434
|
|
|
|
2,727
|
|
Change in trading securities
|
|
|
(459
|
)
|
|
|
(167
|
)
|
Change in residential mortgage loans held-for-sale, net
|
|
|
(2,291
|
)
|
|
|
|
|
Change in mortgage servicing rights
|
|
|
(479
|
)
|
|
|
|
|
Change in income tax payable
|
|
|
(1,675
|
)
|
|
|
243
|
|
Change in other assets
|
|
|
(463
|
)
|
|
|
904
|
|
Change in other liabilities
|
|
|
(96
|
)
|
|
|
157
|
|
Other, net
|
|
|
49
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1,227
|
)
|
|
|
5,418
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Sales, maturities and repayments of:
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
|
31,711
|
|
|
|
46,828
|
|
Equity securities
|
|
|
1,154
|
|
|
|
786
|
|
Mortgage and consumer loans
|
|
|
3,015
|
|
|
|
3,066
|
|
Real estate and real estate joint ventures
|
|
|
7
|
|
|
|
119
|
|
Other limited partnership interests
|
|
|
640
|
|
|
|
380
|
|
Purchases of:
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
|
(47,052
|
)
|
|
|
(52,188
|
)
|
Equity securities
|
|
|
(1,102
|
)
|
|
|
(705
|
)
|
Mortgage and consumer loans
|
|
|
(2,076
|
)
|
|
|
(5,205
|
)
|
Real estate and real estate joint ventures
|
|
|
(213
|
)
|
|
|
(622
|
)
|
Other limited partnership interests
|
|
|
(413
|
)
|
|
|
(880
|
)
|
Net change in short-term investments
|
|
|
5,761
|
|
|
|
684
|
|
Net change in other invested assets
|
|
|
(59
|
)
|
|
|
(1,013
|
)
|
Net change in policy loans
|
|
|
(105
|
)
|
|
|
(345
|
)
|
Purchases of businesses, net of cash received of $0 and $44,
respectively
|
|
|
|
|
|
|
(350
|
)
|
Sales of businesses, net of cash disposed of $180 and $0,
respectively
|
|
|
(46
|
)
|
|
|
(4
|
)
|
Other, net
|
|
|
(103
|
)
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
$
|
(8,881
|
)
|
|
$
|
(9,523
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the interim condensed consolidated
financial statements.
8
MetLife,
Inc.
Interim Condensed Consolidated Statements of Cash
Flows (Continued)
For the Six Months Ended June 30, 2009
and 2008 (Unaudited)
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Policyholder account balances:
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
62,300
|
|
|
$
|
29,146
|
|
Withdrawals
|
|
|
(62,086
|
)
|
|
|
(23,082
|
)
|
Net change in short-term debt
|
|
|
2,098
|
|
|
|
(44
|
)
|
Long-term debt issued
|
|
|
2,225
|
|
|
|
117
|
|
Long-term debt repaid
|
|
|
(134
|
)
|
|
|
(66
|
)
|
Collateral financing arrangements issued
|
|
|
105
|
|
|
|
115
|
|
Cash received in connection with collateral financing arrangement
|
|
|
400
|
|
|
|
|
|
Cash paid in connection with collateral financing arrangement
|
|
|
(400
|
)
|
|
|
|
|
Junior subordinated debt securities issued
|
|
|
|
|
|
|
750
|
|
Debt issuance costs
|
|
|
(17
|
)
|
|
|
(9
|
)
|
Net change in payables for collateral under securities loaned
and other transactions
|
|
|
(6,452
|
)
|
|
|
1,843
|
|
Stock options exercised
|
|
|
1
|
|
|
|
31
|
|
Common stock issued to settle stock forward contracts
|
|
|
1,035
|
|
|
|
|
|
Treasury stock acquired
|
|
|
|
|
|
|
(1,250
|
)
|
Dividends on preferred stock
|
|
|
(61
|
)
|
|
|
(64
|
)
|
Other, net
|
|
|
(16
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(1,002
|
)
|
|
|
7,495
|
|
|
|
|
|
|
|
|
|
|
Effect of change in foreign currency exchange rates on cash
balances
|
|
|
84
|
|
|
|
57
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(11,026
|
)
|
|
|
3,447
|
|
Cash and cash equivalents, beginning of period
|
|
|
24,239
|
|
|
|
10,368
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
13,213
|
|
|
$
|
13,815
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, subsidiaries held-for-sale, beginning
of period
|
|
$
|
32
|
|
|
$
|
407
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, subsidiaries held-for-sale, end of
period
|
|
$
|
|
|
|
$
|
401
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, from continuing operations, beginning
of period
|
|
$
|
24,207
|
|
|
$
|
9,961
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, from continuing operations, end of
period
|
|
$
|
13,213
|
|
|
$
|
13,414
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Net cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
475
|
|
|
$
|
572
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
$
|
195
|
|
|
$
|
315
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions during the period:
|
|
|
|
|
|
|
|
|
Business acquisitions:
|
|
|
|
|
|
|
|
|
Assets acquired
|
|
$
|
|
|
|
$
|
1,411
|
|
Cash paid
|
|
|
|
|
|
|
(394
|
)
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
$
|
|
|
|
$
|
1,017
|
|
|
|
|
|
|
|
|
|
|
Business disposition:
|
|
|
|
|
|
|
|
|
Assets disposed
|
|
$
|
841
|
|
|
$
|
|
|
Less: liabilities disposed
|
|
|
740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets disposed
|
|
|
101
|
|
|
|
|
|
Less: cash disposed
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business disposition, net of cash disposed
|
|
$
|
(79
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Remarketing of debt securities:
|
|
|
|
|
|
|
|
|
Fixed maturity securities redeemed
|
|
$
|
32
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt issued
|
|
$
|
1,035
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debt securities redeemed
|
|
$
|
1,067
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Real estate and real estate joint ventures acquired in
satisfaction of debt
|
|
$
|
172
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the interim condensed consolidated
financial statements.
9
MetLife,
Inc.
|
|
1.
|
Business,
Basis of Presentation, and Summary of Significant Accounting
Policies
|
Business
MetLife or the Company refers to
MetLife, Inc., a Delaware corporation incorporated in 1999 (the
Holding Company), and its subsidiaries, including
Metropolitan Life Insurance Company (MLIC). MetLife
is a leading provider of insurance, employee benefits and
financial services with operations throughout the United States
and the Latin America, Europe, and Asia Pacific regions. Through
its subsidiaries and affiliates, MetLife offers life insurance,
annuities, auto and home insurance, retail banking and other
financial services to individuals, as well as group insurance
and retirement & savings products and services to
corporations and other institutions.
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 in the interim condensed consolidated
financial statements. The most critical estimates include those
used in determining:
|
|
|
|
(i)
|
the estimated fair value of investments in the absence of quoted
market values;
|
|
|
|
|
(ii)
|
investment impairments;
|
|
|
(iii)
|
the recognition of income on certain investment entities;
|
|
|
|
|
(iv)
|
the application of the consolidation rules to certain
investments;
|
|
|
(v)
|
the existence and estimated fair value of embedded derivatives
requiring bifurcation;
|
|
|
(vi)
|
the estimated fair value of and accounting for derivatives;
|
|
|
(vii)
|
the capitalization and amortization of deferred policy
acquisition costs (DAC) and the establishment and
amortization of value of business acquired (VOBA);
|
|
|
(viii)
|
the measurement of goodwill and related impairment, if any;
|
|
|
(ix)
|
the liability for future policyholder benefits;
|
|
|
(x)
|
accounting for income taxes and the valuation of deferred income
tax assets;
|
|
|
(xi)
|
accounting for reinsurance transactions;
|
|
|
(xii)
|
accounting for employee benefit plans; and
|
|
|
(xiii)
|
the liability for litigation and regulatory matters.
|
In applying the Companys accounting policies, management
makes subjective and complex judgments that frequently require
estimates about matters that are inherently uncertain. Many of
these policies, estimates and related judgments are common in
the insurance and financial services industries; others are
specific to the Companys businesses and operations. Actual
results could differ from these estimates.
The accompanying interim condensed consolidated financial
statements include the accounts of the Holding Company and its
subsidiaries as well as partnerships and joint ventures in which
the Company has control. 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. See Note 8. Intercompany accounts and transactions
have been eliminated.
In addition, the Company has invested in certain structured
transactions that are variable interest entities
(VIEs) under Financial Accounting Standards Board
(FASB) Interpretation (FIN)
No. 46(r), Consolidation of Variable Interest
Entities An Interpretation of Accounting Research
Bulletin No. 51. These structured
10
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
transactions include reinsurance trusts, asset-backed
securitizations, trust preferred securities, joint ventures,
limited partnerships and limited liability companies. The
Company is required to consolidate those VIEs for which it is
deemed to be the primary beneficiary. The Company reconsiders
whether it is the primary beneficiary for investments designated
as VIEs on a quarterly basis.
The Company uses the equity method of accounting for investments
in equity securities in which it has a significant influence or
more than a 20% interest and for real estate joint ventures and
other limited partnership interests in which it has more than a
minor equity interest or more than a minor influence over the
joint ventures or partnerships operations, but does
not have a controlling interest and is not the primary
beneficiary. The Company uses the cost method of accounting for
investments in real estate joint ventures and other limited
partnership interests in which it has a minor equity investment
and virtually no influence over the joint ventures or the
partnerships operations.
Certain amounts in the prior year periods interim
condensed consolidated financial statements have been
reclassified to conform with the 2009 presentation. Such
reclassifications include $57 million for the six months
ended June 30, 2008 relating to the effect of change in
foreign currency exchange rates on cash balances. These amounts
were reclassified from cash flows from operating activities in
the consolidated statements of cash flows for the six months
ended June 30, 2008. See also Note 17 for
reclassifications related to discontinued operations.
The accompanying interim condensed consolidated financial
statements reflect all adjustments (including normal recurring
adjustments) necessary to state fairly the consolidated
financial position of the Company at June 30, 2009, its
consolidated results of operations for the three months and six
months ended June 30, 2009 and 2008, its consolidated cash
flows for the six months ended June 30, 2009 and 2008, and
its consolidated statements of stockholders equity for the
six months ended June 30, 2009 and 2008, in conformity with
GAAP. Interim results are not necessarily indicative of full
year performance. The December 31, 2008 consolidated
balance sheet data was derived from audited consolidated
financial statements included in MetLifes Annual Report on
Form 10-K
for the year ended December 31, 2008, as amended on
Form 8-K
on June 12, 2009, (the 2008 Annual Report)
filed with the U.S. Securities and Exchange Commission
(SEC), which includes 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 2008 Annual
Report.
Adoption
of New Accounting Pronouncements
Financial
Instruments
Effective April 1, 2009, the Company adopted FASB Staff
Position (FSP)
No. FAS 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments
(FSP 115-2).
FSP 115-2
amends the recognition guidance for determining whether an
other-than-temporary impairment (OTTI) exists for
fixed maturity securities, changes the presentation of OTTI for
fixed maturity securities and requires additional disclosures
for OTTI on fixed maturity and equity securities in interim and
annual financial statements.
FSP 115-2
requires that an OTTI be recognized in earnings for a fixed
maturity security in an unrealized loss position when it is
anticipated that the amortized cost will not be recovered. In
such situations, the OTTI recognized in earnings is the entire
difference between the fixed maturity securitys amortized
cost and its fair value only when either (1) the Company
has the intent to sell the fixed maturity security or
(2) it is more likely than not that the Company will be
required to sell the fixed maturity security before recovery of
the decline in fair value below amortized cost. If neither of
these two conditions exists, the difference between the
amortized cost basis of the fixed maturity security and the
present value of projected future cash flows expected to be
collected is recognized as an OTTI in earnings (credit
loss). If fair value is less than the present value of
projected future cash flows expected to be collected, this
portion of OTTI related to other-than credit factors
(noncredit loss) is recorded as other comprehensive
income (loss). When an unrealized loss on a fixed maturity
security is considered temporary, the Company continues to
record the unrealized loss in other comprehensive income (loss)
and not in earnings. There was no change for equity
11
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
securities which, when an OTTI has occurred, continue to be
impaired for the entire difference between the equity
securitys cost or amortized cost and its fair value with a
corresponding charge to earnings.
Prior to the adoption of this new guidance, the Company
recognized in earnings an OTTI for a fixed maturity security in
an unrealized loss position unless it could assert that it had
both the intent and ability to hold the fixed maturity security
for a period of time sufficient to allow for a recovery of fair
value to the securitys amortized cost basis. Also prior to
the adoption of
FSP 115-2,
the entire difference between the fixed maturity securitys
amortized cost basis and its fair value was recognized in
earnings if it was determined to have an OTTI.
The Companys net cumulative effect adjustment of adopting
FSP 115-2
was an increase of $76 million to retained earnings with a
corresponding increase to accumulated other comprehensive loss
to reclassify the noncredit loss portion of previously
recognized OTTI losses on fixed maturity securities held at
April 1, 2009. This cumulative effect adjustment was
comprised of an increase in the amortized cost basis of fixed
maturity securities of $126 million, net of policyholder
related amounts of $10 million and net of deferred income
taxes of $40 million, resulting in the net cumulative
effect adjustment of $76 million. The increase in amortized
cost basis of fixed maturity securities of $126 million by
sector was as follows: $53 million - asset-backed
securities, $43 million residential
mortgage-backed securities, $17 million
U.S. corporate securities, and $13 million
commercial mortgage-backed securities.
As a result of the adoption of
FSP 115-2,
the Companys pre-tax earnings for the three months ended
June 30, 2009 increased by $216 million offset by an
increase in other comprehensive loss representing OTTI relating
to noncredit losses recognized in the three months period ended
June 30, 2009.
The enhanced financial statement presentation required by
FSP 115-2
of the total OTTI loss and the offset for the portion of non
credit OTTI loss transferred to and recognized in other
comprehensive loss is presented in the consolidated statements
of income and stockholders equity. The enhanced
disclosures required by
FSP 115-2
are included in Note 3.
Effective April 1, 2009, the Company adopted two FSPs
providing additional guidance relating to fair value measurement
and disclosure.
|
|
|
|
|
FSP
No. FAS 157-4,
Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
(FSP 157-4),
provides guidance on (1) estimating the fair value of an
asset or liability if there was a significant decrease in the
volume and level of trading activity for these assets or
liabilities and (2) identifying transactions that are not
orderly. Further,
FSP 157-4
requires disclosure in interim financial statements of the
inputs and valuation techniques used to measure fair value. The
adoption of
FSP 157-4
did not have an impact on the Companys consolidated
financial statements. Additionally, the Company has provided all
of the material required disclosures in its consolidated
financial statements.
|
|
|
|
FSP
No. FAS 107-1
and APB
28-1,
Interim Disclosures about Fair Value of Financial
Instruments, requires interim financial instrument fair
value disclosures similar to those included in annual financial
statements. The Company has provided all of the material
required disclosures in its consolidated financial statements.
|
Effective January 1, 2009, the Company adopted
prospectively FSP
No. FAS 140-3,
Accounting for Transfers of Financial Assets and Repurchase
Financing Transactions
(FSP 140-3).
FSP 140-3
provides guidance for evaluating whether to account for a
transfer of a financial asset and repurchase financing as a
single transaction or as two separate transactions. At adoption,
FSP 140-3
did not have an impact on the Companys consolidated
financial statements.
Business
Combinations and Noncontrolling Interests
Effective January 1, 2009, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 141
(revised 2007), Business Combinations A
Replacement of FASB Statement No. 141
(SFAS 141(r)),
12
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
FSP 141(r)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from
Contingencies (FSP 141(r)-1) and
SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements An Amendment of
ARB No. 51 (SFAS 160). Under this new
guidance:
|
|
|
|
|
All business combinations (whether full, partial or
step acquisitions) result in all assets and
liabilities of an acquired business being recorded at fair
value, with limited exceptions.
|
|
|
|
Acquisition costs are generally expensed as incurred;
restructuring costs associated with a business combination are
generally expensed as incurred subsequent to the acquisition
date.
|
|
|
|
The fair value of the purchase price, including the issuance of
equity securities, is determined on the acquisition date.
|
|
|
|
Assets acquired and liabilities assumed in a business
combination that arise from contingencies are recognized at fair
value if the acquisition-date fair value can be reasonably
determined. If the fair value is not estimable, an asset or
liability is recorded if existence or incurrence at the
acquisition date is probable and its amount is reasonably
estimable.
|
|
|
|
Changes in deferred income tax asset valuation allowances and
income tax uncertainties after the acquisition date generally
affect income tax expense.
|
|
|
|
Noncontrolling interests (formerly known as minority
interests) are valued at fair value at the acquisition
date and are presented as equity rather than liabilities.
|
|
|
|
Net income includes amounts attributable to noncontrolling
interests.
|
|
|
|
When control is attained on previously noncontrolling interests,
the previously held equity interests are remeasured at fair
value and a gain or loss is recognized.
|
|
|
|
Purchases or sales of equity interests that do not result in a
change in control are accounted for as equity transactions.
|
|
|
|
When control is lost in a partial disposition, realized gains or
losses are recorded on equity ownership sold and the remaining
ownership interest is remeasured and holding gains or losses are
recognized.
|
The adoption of SFAS 141(r) and FSP 141(r)-1 on a
prospective basis did not have an impact on the Companys
consolidated financial statements. Financial statements and
disclosures for periods prior to 2009 reflect the retrospective
application of the accounting for noncontrolling interests as
required under SFAS 160.
Effective January 1, 2009, the Company adopted
prospectively Emerging Issues Task Force (EITF)
Issue
No. 08-6,
Equity Method Investment Accounting Considerations
(EITF 08-6).
EITF 08-6
addresses a number of issues associated with the impact that
SFAS 141(r) and SFAS 160 might have on the accounting
for equity method investments, including how an equity method
investment should initially be measured, how it should be tested
for impairment, and how changes in classification from equity
method to cost method should be treated. The adoption of
EITF 08-6
did not have an impact on the Companys consolidated
financial statements.
Effective January 1, 2009, the Company adopted
prospectively EITF Issue
No. 08-7,
Accounting for Defensive Intangible Assets
(EITF 08-7).
EITF 08-7
requires that an acquired defensive intangible asset (i.e., an
asset an entity does not intend to actively use, but rather,
intends to prevent others from using) be accounted for as a
separate unit of accounting at time of acquisition, not combined
with the acquirers existing intangible assets. In
addition, the EITF concludes that a defensive intangible asset
may not be considered immediately abandoned following its
acquisition or have indefinite life. The adoption of
EITF 08-7
did not have an impact on the Companys consolidated
financial statements.
Effective January 1, 2009, the Company adopted
prospectively FSP
No. FAS 142-3,
Determination of the Useful Life of Intangible Assets
(FSP 142-3).
FSP 142-3
amends the factors that should be considered in
13
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
developing renewal or extension assumptions used to determine
the useful life of a recognized intangible asset under
SFAS No. 142, Goodwill and Other Intangible
Assets (SFAS 142). This change is intended
to improve the consistency between the useful life of a
recognized intangible asset under SFAS 142 and the period
of expected cash flows used to measure the fair value of the
asset under SFAS 141(r) and other GAAP. The Company will
determine useful lives and provide all of the material required
disclosures prospectively on intangible assets acquired on or
after January 1, 2009 in accordance with
FSP 142-3.
The adoption of
FSP 142-3
did not have an impact on the Companys consolidated
financial statements.
Other
Pronouncements
Effective April 1, 2009, the Company prospectively adopted
SFAS No. 165, Subsequent Events
(SFAS 165). SFAS 165 establishes
general standards for accounting and disclosures of events that
occur subsequent to the balance sheet date but before financial
statements are issued or available to be issued. SFAS 165
also requires disclosure of the date through which management
has evaluated subsequent events and the basis for that date. The
Company has provided all of the material required disclosures in
its consolidated financial statements.
Effective January 1, 2009, the Company adopted
SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities An Amendment of
FASB Statement No. 133 (SFAS 161).
SFAS 161 requires enhanced qualitative disclosures about
objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about
credit-risk-related contingent features in derivative
agreements. The Company has provided all of the material
required disclosures in its consolidated financial statements.
Effective January 1, 2009, the Company implemented guidance
of SFAS No. 157, Fair Value Measurements
(SFAS 157), for certain nonfinancial assets
and liabilities that are recorded at fair value on a
nonrecurring basis. This guidance which applies to such items as
(i) nonfinancial assets and nonfinancial liabilities
initially measured at estimated fair value in a business
combination, (ii) reporting units measured at estimated
fair value in the first step of a goodwill impairment test and
(iii) indefinite-lived intangible assets measured at
estimated fair value for impairment assessment, was previously
deferred under
FSP 157-2,
Effective Date of FASB Statement No. 157
(FSP 157-2).
The adoption of
FSP 157-2
did not have an impact on the Companys consolidated
financial statements.
Effective January 1, 2009, the Company adopted
prospectively EITF Issue
No. 08-5,
Issuers Accounting for Liabilities Measured at Fair
Value with a Third-Party Credit Enhancement
(EITF 08-5).
EITF 08-5
concludes that an issuer of a liability with a third-party
credit enhancement should not include the effect of the credit
enhancement in the fair value measurement of the liability. In
addition,
EITF 08-5
requires disclosures about the existence of any third-party
credit enhancement related to liabilities that are measured at
fair value. The adoption of
EITF 08-5
did not have an impact on the Companys consolidated
financial statements.
Effective January 1, 2009, the Company adopted EITF Issue
No. 07-5,
Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entitys Own Stock
(EITF 07-5).
EITF 07-5
provides a framework for evaluating the terms of a particular
instrument and whether such terms qualify the instrument as
being indexed to an entitys own stock. The adoption of
EITF 07-5
did not have an impact on Companys consolidated financial
statements.
Future
Adoption of New Accounting Pronouncements
In June 2009, the FASB issued two standards providing additional
guidance on financial instrument transfers and evaluation of
special purpose entities for consolidation. The standards must
be adopted in the first quarter of 2010.
|
|
|
|
|
SFAS No. 166, Accounting for Transfers of Financial
Assets (SFAS 166) eliminates the concept of a
qualifying special purpose entity, eliminates the
guaranteed mortgage securitization exception, changes
|
14
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
the criteria for achieving sale accounting when transferring a
financial asset and changes the initial recognition of retained
beneficial interests. SFAS 166 also requires additional
disclosures about transfers of financial assets, including
securitized transactions, as well as a companys continuing
involvement in transferred financial assets. The Company is
currently evaluating the impact of SFAS 166 on its
consolidated financial statements.
|
|
|
|
|
SFAS No. 167, Amendments to FASB Interpretation
No. 46(R) (SFAS 167) changes the
determination of the primary beneficiary of a VIE from a
quantitative model to a qualitative model. Under the new
qualitative model, the primary beneficiary must have both the
ability to direct the activities of the VIE and the obligation
to absorb either losses or gains that could be significant to
the VIE. SFAS 167 also changes when reassessment is needed,
as well as requires enhanced disclosures, including the effects
of a companys involvement with VIEs on its financial
statements. The Company is currently evaluating the impact of
SFAS 167 on its consolidated financial statements.
|
In December 2008, the FASB issued FSP
No. FAS 132(r)-1,
Employers Disclosures about Postretirement Benefit Plan
Assets (FSP 132(r)-1). FSP 132(r)-1
amends SFAS No. 132(r), Employers Disclosures
about Pensions and Other Postretirement Benefits, to enhance
the transparency surrounding the types of assets and associated
risks in an employers defined benefit pension or other
postretirement benefit plan. The FSP requires an employer to
disclose information about the valuation of plan assets similar
to that required under SFAS 157.
FSP 132(r)-1
is effective for fiscal years ending after December 15,
2009. The Company will provide the required disclosures in the
appropriate future annual periods.
|
|
2.
|
Acquisitions
and Dispositions
|
Disposition
of Texas Life Insurance Company
On March 2, 2009, the Company sold Cova Corporation
(Cova), the parent company of Texas Life Insurance
Company (Texas Life) to a third party for
$134 million in cash consideration, excluding
$1 million of transaction costs. The net assets sold were
$101 million, resulting in a gain on disposal of
$32 million, net of income tax. The Company also
reclassified $4 million, net of income tax, of the 2009
operations of Texas Life into discontinued operations in the
consolidated financial statements. As a result, the Company
recognized income from discontinued operations of
$36 million, net of income tax, during the first quarter of
2009. See also Note 17.
15
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Fixed
Maturity and Equity Securities Available-for-Sale
The following tables present the cost or amortized cost, gross
unrealized gain and loss, estimated fair value of the
Companys fixed maturity and equity securities, and the
percentage that each sector represents by the respective total
holdings for the periods shown. The unrealized loss amounts
presented below at June 30, 2009 include the noncredit loss
component of OTTI loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
Cost or
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
Temporary
|
|
|
OTTI
|
|
|
Fair
|
|
|
% of
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Loss
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
U.S. corporate securities
|
|
$
|
70,682
|
|
|
$
|
1,350
|
|
|
$
|
6,016
|
|
|
$
|
35
|
|
|
$
|
65,981
|
|
|
|
31.2
|
%
|
Residential mortgage-backed securities
|
|
|
44,834
|
|
|
|
1,078
|
|
|
|
3,913
|
|
|
|
201
|
|
|
|
41,798
|
|
|
|
19.8
|
|
Foreign corporate securities
|
|
|
35,817
|
|
|
|
976
|
|
|
|
3,177
|
|
|
|
9
|
|
|
|
33,607
|
|
|
|
15.9
|
|
U.S. Treasury, agency and government guaranteed securities (1)
|
|
|
27,277
|
|
|
|
1,053
|
|
|
|
657
|
|
|
|
|
|
|
|
27,673
|
|
|
|
13.1
|
|
Commercial mortgage-backed securities
|
|
|
16,354
|
|
|
|
75
|
|
|
|
2,410
|
|
|
|
24
|
|
|
|
13,995
|
|
|
|
6.6
|
|
Asset-backed securities
|
|
|
14,619
|
|
|
|
97
|
|
|
|
2,206
|
|
|
|
96
|
|
|
|
12,414
|
|
|
|
5.8
|
|
Foreign government securities
|
|
|
9,987
|
|
|
|
834
|
|
|
|
261
|
|
|
|
|
|
|
|
10,560
|
|
|
|
5.0
|
|
State and political subdivision securities
|
|
|
5,905
|
|
|
|
119
|
|
|
|
507
|
|
|
|
|
|
|
|
5,517
|
|
|
|
2.6
|
|
Other fixed maturity securities
|
|
|
19
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities (2), (3)
|
|
$
|
225,494
|
|
|
$
|
5,582
|
|
|
$
|
19,148
|
|
|
$
|
365
|
|
|
$
|
211,563
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
1,730
|
|
|
$
|
59
|
|
|
$
|
71
|
|
|
$
|
|
|
|
$
|
1,718
|
|
|
|
56.4
|
%
|
Non-redeemable preferred stock (2)
|
|
|
1,949
|
|
|
|
28
|
|
|
|
650
|
|
|
|
|
|
|
|
1,327
|
|
|
|
43.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
3,679
|
|
|
$
|
87
|
|
|
$
|
721
|
|
|
$
|
|
|
|
$
|
3,045
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Cost or
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Amortized
|
|
|
Gross Unrealized
|
|
|
Fair
|
|
|
% of
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
U.S. corporate securities
|
|
$
|
72,211
|
|
|
$
|
994
|
|
|
$
|
9,902
|
|
|
$
|
63,303
|
|
|
|
33.6
|
%
|
Residential mortgage-backed securities
|
|
|
39,995
|
|
|
|
753
|
|
|
|
4,720
|
|
|
|
36,028
|
|
|
|
19.2
|
|
Foreign corporate securities
|
|
|
34,798
|
|
|
|
565
|
|
|
|
5,684
|
|
|
|
29,679
|
|
|
|
15.8
|
|
U.S. Treasury, agency and government guaranteed securities (1)
|
|
|
17,229
|
|
|
|
4,082
|
|
|
|
1
|
|
|
|
21,310
|
|
|
|
11.3
|
|
Commercial mortgage-backed securities
|
|
|
16,079
|
|
|
|
18
|
|
|
|
3,453
|
|
|
|
12,644
|
|
|
|
6.7
|
|
Asset-backed securities
|
|
|
14,246
|
|
|
|
16
|
|
|
|
3,739
|
|
|
|
10,523
|
|
|
|
5.6
|
|
Foreign government securities
|
|
|
9,474
|
|
|
|
1,056
|
|
|
|
377
|
|
|
|
10,153
|
|
|
|
5.4
|
|
State and political subdivision securities
|
|
|
5,419
|
|
|
|
80
|
|
|
|
942
|
|
|
|
4,557
|
|
|
|
2.4
|
|
Other fixed maturity securities
|
|
|
57
|
|
|
|
|
|
|
|
3
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities (2), (3)
|
|
$
|
209,508
|
|
|
$
|
7,564
|
|
|
$
|
28,821
|
|
|
$
|
188,251
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
1,778
|
|
|
$
|
40
|
|
|
$
|
133
|
|
|
$
|
1,685
|
|
|
|
52.7
|
%
|
Non-redeemable preferred stock (2)
|
|
|
2,353
|
|
|
|
4
|
|
|
|
845
|
|
|
|
1,512
|
|
|
|
47.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
4,131
|
|
|
$
|
44
|
|
|
$
|
978
|
|
|
$
|
3,197
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company has classified within the U.S. Treasury, agency and
government guaranteed securities caption above certain corporate
fixed maturity securities issued by U.S. financial institutions
that are guaranteed by the Federal Deposit Insurance Corporation
(FDIC) pursuant to the FDICs Temporary
Liquidity Guarantee Program (FDIC Program) of
$1,023 million and $2 million at estimated fair value
with unrealized gains (losses) of $5 million and less than
($1) million at June 30, 2009 and December 31,
2008, respectively. |
|
(2) |
|
The Company classifies perpetual securities that have attributes
of both debt and equity as fixed maturity securities if the
security has a punitive interest rate
step-up
feature as it believes in most instances this feature will
compel the issuer to redeem the security at the specified call
date. Perpetual securities that do not have a punitive interest
rate step-up
feature are classified as non-redeemable preferred stock. Many
of such securities have been issued by
non-U.S.
financial institutions that are accorded Tier 1 and Upper
Tier 2 capital treatment by their respective regulatory
bodies and are commonly referred to as perpetual hybrid
securities. Perpetual hybrid securities classified as
non-redeemable preferred stock held by the Company at
June 30, 2009 and December 31, 2008 had an estimated
fair value of $1,063 million and $1,224 million,
respectively. In addition, the Company held $264 million
and $288 million at estimated fair value at June 30,
2009 and December 31, 2008, respectively, of other
perpetual hybrid securities, primarily of U.S. financial
institutions, also included in non-redeemable preferred stock.
Perpetual hybrid securities held by the Company and included
within fixed maturity securities (primarily within foreign
corporate securities) at June 30, 2009 and
December 31, 2008 had an estimated fair value of
$2,378 million and $2,110 million, respectively. In
addition, the Company held $52 million and $46 million
at estimated fair value at June 30, 2009 and
December 31, 2008, respectively, of other perpetual hybrid
securities, primarily U.S. financial institutions, included in
U.S. corporate securities. |
|
(3) |
|
At June 30, 2009 and December 31, 2008, the Company
also held $2,082 million and $2,052 million at
estimated fair value, respectively, of redeemable preferred
stock which have stated maturity dates. These securities,
commonly referred to as capital securities, are
primarily issued by U.S. financial institutions, have cumulative
interest deferral features and are included in U.S. corporate
securities within fixed maturity securities. |
17
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Below-Investment-Grade or Non-Rated Fixed Maturity
Securities. The Company held fixed maturity
securities at estimated fair values that were below investment
grade or not rated by an independent rating agency that totaled
$18.3 billion and $12.4 billion at June 30, 2009
and December 31, 2008, respectively. These securities had
net unrealized losses of $5.6 billion and $5.1 billion
at June 30, 2009 and December 31, 2008, respectively.
Non-Income Producing Fixed Maturity
Securities. Non-income producing fixed maturity
securities at estimated fair value were $206 million and
$75 million at June 30, 2009 and December 31,
2008, respectively. Net unrealized losses associated with
non-income producing fixed maturity securities were
$31 million and $19 million at June 30, 2009 and
December 31, 2008, respectively.
Fixed Maturity Securities Credit Enhanced by Financial
Guarantee Insurers. At June 30, 2009,
$4.6 billion of the estimated fair value of the
Companys fixed maturity securities were credit enhanced by
financial guarantee insurers of which $2.1 billion,
$1.7 billion and $0.8 billion are included within
state and political subdivision securities, U.S. corporate
securities and asset-backed securities, respectively, and 18%
and 39% were guaranteed by financial guarantee insurers who were
rated Aa and A, respectively. At December 31, 2008,
$4.9 billion of the estimated fair value of the
Companys fixed maturity securities were credit enhanced by
financial guarantee insurers of which $2.0 billion,
$2.0 billion and $0.9 billion are included within
state and political subdivision securities, U.S. corporate
securities, and asset-backed securities, respectively, and 15%
and 68% were guaranteed by financial guarantee insurers who were
rated Aa and Baa, respectively. Approximately 50% of the
asset-backed securities held at June 30, 2009 that are
credit enhanced by financial guarantee insurers are asset-backed
securities which are backed by sub-prime mortgage loans.
Concentrations of Credit Risk (Fixed Maturity
Securities). The following section contains a
summary of the concentrations of credit risk related to fixed
maturity securities holdings.
The Company is not exposed to any concentrations of credit risk
of any single issuer greater than 10% of the Companys
stockholders equity, other than securities of the
U.S. government, certain U.S. government agencies, and
certain securities guaranteed by the U.S. government. At
June 30, 2009 and December 31, 2008, the
Companys holdings in U.S. Treasury, agency and
government guaranteed fixed maturity securities at estimated
fair value were $27.7 billion and $21.3 billion,
respectively. As shown in the sector table above, at
June 30, 2009 the Companys three largest exposures in
its fixed maturity security portfolio were U.S. corporate
securities 31.2%, residential mortgage-backed securities 19.8%
and foreign corporate securities 15.9%; and at December 31,
2008 were U.S. corporate securities 33.6%, residential
mortgage-backed securities 19.2% and foreign corporate
securities 15.8%.
Concentrations of Credit Risk (Fixed Maturity
Securities) U.S. and Foreign Corporate
Securities. At June 30, 2009 and
December 31, 2008, the Companys holdings in
U.S. corporate and foreign corporate securities at
estimated fair value were $99.6 billion and
$93.0 billion, respectively. The Company maintains a
diversified portfolio of corporate securities across industries
and issuers. The portfolio does not have exposure to any single
issuer in excess of 1% of total investments. The largest
exposure to a single issuer of corporate securities held at
June 30, 2009 and December 31, 2008 was
$1.1 billion and $1.5 billion, respectively. At
June 30, 2009 and December 31, 2008, the
Companys combined holdings in the ten issuers to which it
had the greatest exposure totaled $7.7 billion and
$8.4 billion, respectively, the total of these ten issuers
being less than 3% of the Companys
18
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
total investments at such dates. The table below shows the major
industry types that comprise the corporate securities holdings
at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Estimated
|
|
|
% of
|
|
|
Estimated
|
|
|
% of
|
|
|
|
Fair Value
|
|
|
Total
|
|
|
Fair Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Foreign (1)
|
|
$
|
33,607
|
|
|
|
33.7
|
%
|
|
$
|
29,679
|
|
|
|
32.0
|
%
|
Industrial
|
|
|
15,312
|
|
|
|
15.4
|
|
|
|
13,324
|
|
|
|
14.3
|
|
Consumer
|
|
|
14,948
|
|
|
|
15.0
|
|
|
|
13,122
|
|
|
|
14.1
|
|
Utility
|
|
|
13,697
|
|
|
|
13.8
|
|
|
|
12,434
|
|
|
|
13.4
|
|
Finance
|
|
|
13,482
|
|
|
|
13.5
|
|
|
|
14,996
|
|
|
|
16.1
|
|
Communications
|
|
|
5,898
|
|
|
|
5.9
|
|
|
|
5,714
|
|
|
|
6.1
|
|
Other
|
|
|
2,644
|
|
|
|
2.7
|
|
|
|
3,713
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
99,588
|
|
|
|
100.0
|
%
|
|
$
|
92,982
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes U.S. Dollar-denominated debt obligations of foreign
obligors, and other fixed maturity securities foreign
investments. |
Concentrations of Credit Risk (Fixed Maturity
Securities) Residential Mortgage-Backed
Securities. The Companys residential
mortgage-backed securities consist of the following holdings at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Estimated
|
|
|
% of
|
|
|
Estimated
|
|
|
% of
|
|
|
|
Fair Value
|
|
|
Total
|
|
|
Fair Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations
|
|
$
|
24,555
|
|
|
|
58.7
|
%
|
|
$
|
26,025
|
|
|
|
72.2
|
%
|
Pass-through securities
|
|
|
17,243
|
|
|
|
41.3
|
|
|
|
10,003
|
|
|
|
27.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total residential mortgage-backed securities
|
|
$
|
41,798
|
|
|
|
100.0
|
%
|
|
$
|
36,028
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations are a type of
mortgage-backed security that creates separate pools or tranches
of pass-through cash flows for different classes of bondholders
with varying maturities. Pass-through mortgage-backed securities
are a type of asset-backed security that is secured by a
mortgage or collection of mortgages. The monthly mortgage
payments from homeowners pass from the originating bank through
an intermediary, such as a government agency or investment bank,
which collects the payments, and for a fee, remits or passes
these payments through to the holders of the pass-through
securities.
The Companys residential mortgage-backed securities
portfolio consists of agency, prime and alternative residential
mortgage loans (Alt-A) securities of 75%, 18% and 7%
of the total holdings, respectively, at June 30, 2009 and
68%, 23% and 9% of the total holdings, respectively, at
December 31, 2008. At June 30, 2009 and
December 31, 2008, $34.5 billion and
$33.3 billion, respectively, or 83% and 92%, respectively,
of the residential mortgage-backed securities were rated Aaa/AAA
by Moodys Investors Service (Moodys),
Standard & Poors Ratings Services
(S&P) or Fitch Ratings (Fitch). The
majority of the agency residential mortgage-backed securities
are guaranteed or otherwise supported by the Federal National
Mortgage Association (FNMA), the Federal Home Loan
Mortgage Corporation (FHLMC) or the Government
National Mortgage Association. In September 2008, the
U.S. Treasury announced that FNMA and FHLMC had been placed
into conservatorship. Prime residential mortgage lending
includes the origination of residential mortgage loans to the
most credit-worthy customers with high quality credit profiles.
Alt-A residential mortgage loans are a classification of
mortgage loans where the risk profile of the borrower falls
between prime and sub-prime. At June 30, 2009 and
December 31, 2008,
19
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
the Companys Alt-A residential mortgage-backed securities
holdings at estimated fair value was $3.1 billion and
$3.4 billion, respectively, with an unrealized loss of
$1.8 billion and $2.0 billion, respectively. At
June 30, 2009 and December 31, 2008, $0.5 billion
and $2.1 billion, respectively, or 16% and 63%,
respectively, of the Companys Alt-A residential
mortgage-backed securities were rated Aa/AA or better by
Moodys, S&P or Fitch. In January 2009, certain Alt-A
residential mortgage-backed securities experienced ratings
downgrades from investment grade to below investment grade,
contributing to the decrease cited above in the Companys
Alt-A securities holdings rated Aa/AA or better. At
June 30, 2009, the Companys Alt-A holdings are
distributed by vintage year as follows at estimated fair value:
2% in the 2009 vintage year, 25% in the 2007 vintage year, and
73% in the 2006 and prior vintage years. At December 31,
2008, the Companys Alt-A holdings are distributed by
vintage year as follows at estimated fair value: 23% in the 2007
vintage year, 25% in the 2006 vintage year and 52% in the 2005
and prior vintage years. Vintage year refers to the year of
origination and not to the year of purchase.
Concentrations of Credit Risk (Fixed Maturity
Securities) Commercial Mortgage-Backed
Securities. At June 30, 2009 and
December 31, 2008, the Companys holdings in
commercial mortgage-backed securities were $14.0 billion
and $12.6 billion, respectively, at estimated fair value.
At June 30, 2009 and December 31, 2008,
$13.0 billion and $11.8 billion, respectively, of the
estimated fair value, or 93% for both years, of commercial
mortgage-backed securities was rated Aaa/AAA by Moodys,
S&P, or Fitch. At both June 30, 2009 and
December 31, 2008, the rating distribution of the
Companys commercial mortgage-backed securities holdings
was as follows: 93% Aaa, 4% Aa, 1% A, 1% Baa, and 1% Ba or
below. At June 30, 2009 and December 31, 2008, 85% and
84%, respectively, of the holdings are in the 2005 and prior
vintage years. At June 30, 2009 and December 31, 2008,
the Company had no exposure to the Commercial Mortgage-Backed
Securities index securities and its holdings of commercial real
estate collateralized debt obligations securities were
$111 million and $121 million, respectively, at
estimated fair value.
Concentrations of Credit Risk (Fixed Maturity
Securities) Asset-Backed
Securities. At June 30, 2009 and
December 31, 2008, the Companys holdings in
asset-backed securities were $12.4 billion and
$10.5 billion, respectively, at estimated fair value. The
Companys asset-backed securities are diversified both by
sector and by issuer. At June 30, 2009 and
December 31, 2008, $9.5 billion and $7.9 billion,
respectively, or 77% and 75%, respectively, of total
asset-backed securities were rated Aaa/AAA by Moodys,
S&P or Fitch. At June 30, 2009, the largest exposures
in the Companys asset-backed securities portfolio were
credit card receivables, student loan receivables, residential
mortgage-backed securities backed by sub-prime mortgage loans,
and automobile receivables of 57%, 13%, 8% and 8% of the total
holdings, respectively. At December 31, 2008, the largest
exposures in the Companys asset-backed securities
portfolio were credit card receivables, student loan
receivables, automobile receivables and residential
mortgage-backed securities backed by sub-prime mortgage loans of
49%, 10%, 10% and 10% of the total holdings, respectively.
Sub-prime mortgage lending is the origination of residential
mortgage loans to customers with weak credit profiles. At
June 30, 2009 and December 31, 2008, the Company had
exposure to fixed maturity securities backed by sub-prime
mortgage loans with estimated fair values of $0.9 billion
and $1.1 billion, respectively, and unrealized losses of
$821 million and $730 million, respectively. At
June 30, 2009, 39% of the asset-backed securities backed by
sub-prime mortgage loans have been guaranteed by financial
guarantee insurers, of which 20% and 5% were guaranteed by
financial guarantee insurers who were Aa and A rated,
respectively. At December 31, 2008, 37% of the asset-backed
securities backed by sub-prime mortgage loans have been
guaranteed by financial guarantee insurers, of which 19% and 37%
were guaranteed by financial guarantee insurers who were Aa and
Baa rated, respectively.
Concentrations of Credit Risk (Equity
Securities). The Company is not exposed to any
concentrations of credit risk of any single issuer greater than
10% of the Companys stockholders equity in its
equity securities holdings.
20
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The amortized cost and estimated fair value of fixed maturity
securities, by contractual maturity date (excluding scheduled
sinking funds), are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In millions)
|
|
|
Due in one year or less
|
|
$
|
5,866
|
|
|
$
|
5,820
|
|
|
$
|
5,556
|
|
|
$
|
5,491
|
|
Due after one year through five years
|
|
|
37,648
|
|
|
|
37,040
|
|
|
|
33,604
|
|
|
|
30,884
|
|
Due after five years through ten years
|
|
|
41,453
|
|
|
|
39,858
|
|
|
|
41,481
|
|
|
|
36,895
|
|
Due after ten years
|
|
|
64,720
|
|
|
|
60,638
|
|
|
|
58,547
|
|
|
|
55,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
149,687
|
|
|
|
143,356
|
|
|
|
139,188
|
|
|
|
129,056
|
|
Mortgage-backed and asset-backed securities
|
|
|
75,807
|
|
|
|
68,207
|
|
|
|
70,320
|
|
|
|
59,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
$
|
225,494
|
|
|
$
|
211,563
|
|
|
$
|
209,508
|
|
|
$
|
188,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities not due at a single maturity date have
been included in the above table in the year of final
contractual maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Evaluating
Investments for an Other-Than-Temporary Impairment
As described more fully in Note 1 of the Notes to the
Consolidated Financial Statements included in the 2008 Annual
Report, the Company performs a regular evaluation, on a
security-by-security
basis, of its investment holdings in accordance with its
impairment policy in order to evaluate whether such investments
are other-than-temporarily impaired.
With respect to fixed maturity securities, the Company
considers, amongst other criteria, whether it has the intent to
sell a particular impaired fixed maturity security. The
assessment of the Companys intent to sell a particular
fixed maturity security considers broad portfolio management
objectives such as asset/liability duration management, issuer
and industry segment exposures, interest rate views and the
overall total return focus. In following these portfolio
management objectives, changes in facts and circumstances that
were present in past reporting periods may trigger a decision to
sell securities that were held in prior reporting periods.
Decisions to sell are based on current conditions or the
Companys need to shift the portfolio to maintain its
portfolio management objectives including liquidity needs or
duration targets on asset/liability managed portfolios. The
Company attempts to anticipate these types of changes and if a
sale decision has been made on an impaired security, the
security will be deemed other-than-temporarily impaired in the
period that the sale decision was made and an OTTI loss will be
recorded in earnings. In certain circumstances, the Company may
determine that it does not intend to sell a particular security
but that it is more likely than not that it will be required to
sell that security before recovery of the decline in fair value
below amortized cost. In such instances, the fixed maturity
security will be deemed other-than-temporarily impaired in the
period during which it was determined more likely than not that
the security will be required to be sold and an OTTI loss will
be recorded in earnings. If the Company does not have the intent
to sell (i.e. has not made the decision to sell) and it does not
believe that it is more likely than not that it will be required
to sell the security before recovery of its amortized cost, the
Company estimates the present value of the expected future cash
flows to be received from the security. If the present value of
the expected future cash flows to be received is less than the
amortized cost, the security will be deemed
other-than-temporarily impaired in the period that such present
value of the expected future cash flows falls below amortized
cost and this difference, referred to as the credit loss, will
be recognized in earnings. Any remaining difference between the
present value of the expected future cash flows to be received
and the estimated fair value of the security will be recognized
as a separate component of other comprehensive loss and is
referred to as the noncredit loss. Prior to April 1, 2009
the Companys
21
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
assessment of OTTI for fixed maturity securities was performed
in the same manner described below for equity securities.
With respect to equity securities, the Company considers in its
OTTI analysis its intent and ability to hold a particular equity
security for a period of time sufficient to allow for the
recovery of its value to an amount equal to or greater than cost
or amortized cost. Decisions to sell equity securities are based
on current conditions in relation to the same broad portfolio
management considerations in a manner consistent with that
described above for fixed maturity securities. If a sale
decision is made with respect to a particular equity security
and that equity security is not expected to recover to an amount
at least equal to cost or amortized cost prior to the expected
time of the sale, the security will be deemed
other-than-temporarily impaired in the period that the sale
decision was made and an OTTI loss will be recorded in earnings.
Net
Unrealized Investment Gains (Losses)
The components of net unrealized investment gains (losses),
included in accumulated other comprehensive loss, are as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
(In millions)
|
|
|
Fixed maturity securities that are temporarily impaired
|
|
$
|
(13,566
|
)
|
|
$
|
(21,246
|
)
|
Fixed maturity securities with noncredit OTTI losses in other
comprehensive loss
|
|
|
(365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
|
(13,931
|
)
|
|
|
(21,246
|
)
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
(634
|
)
|
|
|
(934
|
)
|
Derivatives
|
|
|
(138
|
)
|
|
|
(2
|
)
|
Other
|
|
|
50
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
(14,653
|
)
|
|
|
(22,129
|
)
|
|
|
|
|
|
|
|
|
|
Amounts allocated from:
|
|
|
|
|
|
|
|
|
Insurance liability loss recognition
|
|
|
(116
|
)
|
|
|
42
|
|
DAC and VOBA on which noncredit OTTI losses have been recognized
|
|
|
28
|
|
|
|
|
|
DAC and VOBA
|
|
|
2,206
|
|
|
|
3,025
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
2,118
|
|
|
|
3,067
|
|
Deferred income tax benefit on which noncredit OTTI losses have
been recognized
|
|
|
116
|
|
|
|
|
|
Deferred income tax benefit
|
|
|
4,204
|
|
|
|
6,508
|
|
|
|
|
|
|
|
|
|
|
Net unrealized investment gains (losses)
|
|
|
(8,215
|
)
|
|
|
(12,554
|
)
|
Net unrealized investment gains (losses) attributable to
noncontrolling interest
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized investment gains (losses) attributable to
MetLife, Inc.
|
|
$
|
(8,218
|
)
|
|
$
|
(12,564
|
)
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities with noncredit OTTI losses in other
comprehensive loss, as presented above, of $365 million
includes $126 million related to the transition adjustment,
$234 million ($216 million, net of DAC) of noncredit
losses recognized in the three months ended June 30, 2009
and $5 million of additional unrealized losses incurred
during the three months ended June 30, 2009 on such
securities for which a noncredit loss was previously recognized
in other comprehensive loss.
22
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The changes in net unrealized investment gains (losses) are as
follows:
|
|
|
|
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
|
June 30, 2009
|
|
|
|
(In millions)
|
|
|
Balance, end of prior period
|
|
$
|
(12,564
|
)
|
Cumulative effect of change in accounting principle, net of
income tax
|
|
|
(76
|
)
|
Fixed maturity securities on which noncredit OTTI losses have
been recognized
|
|
|
(239
|
)
|
Unrealized investment gains (losses) during the period
|
|
|
7,813
|
|
Unrealized investment loss of subsidiary at the date of disposal
|
|
|
28
|
|
Unrealized investment gains (losses) relating to:
|
|
|
|
|
Insurance liability gain (loss) recognition
|
|
|
(158
|
)
|
DAC and VOBA on which noncredit OTTI losses have been recognized
|
|
|
18
|
|
DAC and VOBA
|
|
|
(809
|
)
|
DAC and VOBA of subsidiary at date of disposal
|
|
|
(10
|
)
|
Deferred income tax on which noncredit OTTI losses have been
recognized
|
|
|
76
|
|
Deferred income tax benefit
|
|
|
(2,298
|
)
|
Deferred income tax benefit of subsidiary at date of disposal
|
|
|
(6
|
)
|
|
|
|
|
|
Change in net unrealized investment gains (losses)
|
|
|
(8,225
|
)
|
Change in net unrealized investment gains (losses) attributable
to noncontrolling interest
|
|
|
7
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
(8,218
|
)
|
|
|
|
|
|
Change in net unrealized investment gains (losses)
|
|
$
|
4,339
|
|
Change in net unrealized investment gains (losses) attributable
to noncontrolling interest
|
|
|
7
|
|
|
|
|
|
|
Change in net unrealized investment gains (losses) attributable
to MetLife, Inc.s common shareholders
|
|
$
|
4,346
|
|
|
|
|
|
|
23
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Continuous
Gross Unrealized Loss and OTTI Loss for Fixed Maturity and
Equity Securities
Available-for-Sale
by Sector
The following tables present the estimated fair value and gross
unrealized loss, of the Companys fixed maturity and equity
securities in an unrealized loss position, aggregated by sector
and by length of time that the securities have been in a
continuous unrealized loss position. The unrealized loss amounts
presented below at June 30, 2009 include the noncredit
component of OTTI loss. Fixed maturity securities on which a
noncredit OTTI loss has been recognized in accumulated other
comprehensive loss are categorized by length of time as being
less than 12 months or equal to or
greater than 12 months in a continuous unrealized
loss position based on the point in time that the estimated fair
value initially declined to below the amortized cost basis and
not the period of time since the unrealized loss was deemed a
noncredit OTTI loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
|
|
|
Equal to or Greater
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
than 12 Months
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
|
(In millions, except number of securities)
|
|
|
U.S. corporate securities
|
|
$
|
10,129
|
|
|
$
|
998
|
|
|
$
|
28,658
|
|
|
$
|
5,053
|
|
|
$
|
38,787
|
|
|
$
|
6,051
|
|
Residential mortgage-backed securities
|
|
|
5,507
|
|
|
|
334
|
|
|
|
10,447
|
|
|
|
3,780
|
|
|
|
15,954
|
|
|
|
4,114
|
|
Foreign corporate securities
|
|
|
6,425
|
|
|
|
907
|
|
|
|
10,939
|
|
|
|
2,279
|
|
|
|
17,364
|
|
|
|
3,186
|
|
U.S. Treasury, agency and government guaranteed securities
|
|
|
13,670
|
|
|
|
600
|
|
|
|
798
|
|
|
|
57
|
|
|
|
14,468
|
|
|
|
657
|
|
Commercial mortgage-backed securities
|
|
|
1,341
|
|
|
|
90
|
|
|
|
9,231
|
|
|
|
2,344
|
|
|
|
10,572
|
|
|
|
2,434
|
|
Asset-backed securities
|
|
|
3,263
|
|
|
|
200
|
|
|
|
6,195
|
|
|
|
2,102
|
|
|
|
9,458
|
|
|
|
2,302
|
|
Foreign government securities
|
|
|
2,229
|
|
|
|
101
|
|
|
|
372
|
|
|
|
160
|
|
|
|
2,601
|
|
|
|
261
|
|
State and political subdivision securities
|
|
|
830
|
|
|
|
59
|
|
|
|
2,038
|
|
|
|
448
|
|
|
|
2,868
|
|
|
|
507
|
|
Other fixed maturity securities
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
$
|
43,403
|
|
|
$
|
3,290
|
|
|
$
|
68,678
|
|
|
$
|
16,223
|
|
|
$
|
112,081
|
|
|
$
|
19,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
211
|
|
|
|
70
|
|
|
|
9
|
|
|
|
1
|
|
|
|
220
|
|
|
|
71
|
|
Non-redeemable preferred stock
|
|
|
263
|
|
|
|
144
|
|
|
|
868
|
|
|
|
506
|
|
|
|
1,131
|
|
|
|
650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
474
|
|
|
$
|
214
|
|
|
$
|
877
|
|
|
$
|
507
|
|
|
$
|
1,351
|
|
|
$
|
721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of securities in an unrealized loss position
|
|
|
2,124
|
|
|
|
|
|
|
|
4,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
Equal to or Greater
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
than 12 Months
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
|
(In millions, except number of securities)
|
|
|
U.S. corporate securities
|
|
$
|
30,076
|
|
|
$
|
4,479
|
|
|
$
|
18,011
|
|
|
$
|
5,423
|
|
|
$
|
48,087
|
|
|
$
|
9,902
|
|
Residential mortgage-backed securities
|
|
|
10,032
|
|
|
|
2,711
|
|
|
|
4,572
|
|
|
|
2,009
|
|
|
|
14,604
|
|
|
|
4,720
|
|
Foreign corporate securities
|
|
|
15,634
|
|
|
|
3,157
|
|
|
|
6,609
|
|
|
|
2,527
|
|
|
|
22,243
|
|
|
|
5,684
|
|
U.S. Treasury, agency and government guaranteed securities
|
|
|
106
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
106
|
|
|
|
1
|
|
Commercial mortgage-backed securities
|
|
|
9,259
|
|
|
|
1,665
|
|
|
|
3,093
|
|
|
|
1,788
|
|
|
|
12,352
|
|
|
|
3,453
|
|
Asset-backed securities
|
|
|
6,412
|
|
|
|
1,325
|
|
|
|
3,777
|
|
|
|
2,414
|
|
|
|
10,189
|
|
|
|
3,739
|
|
Foreign government securities
|
|
|
2,030
|
|
|
|
316
|
|
|
|
403
|
|
|
|
61
|
|
|
|
2,433
|
|
|
|
377
|
|
State and political subdivision securities
|
|
|
2,035
|
|
|
|
405
|
|
|
|
948
|
|
|
|
537
|
|
|
|
2,983
|
|
|
|
942
|
|
Other fixed maturity securities
|
|
|
20
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
22
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
$
|
75,604
|
|
|
$
|
14,062
|
|
|
$
|
37,415
|
|
|
$
|
14,759
|
|
|
$
|
113,019
|
|
|
$
|
28,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
$
|
727
|
|
|
$
|
306
|
|
|
$
|
978
|
|
|
$
|
672
|
|
|
$
|
1,705
|
|
|
$
|
978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of securities in an unrealized loss position
|
|
|
9,066
|
|
|
|
|
|
|
|
3,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aging
of Gross Unrealized Loss and OTTI Loss for Fixed Maturity and
Equity Securities Available-for-Sale
The following tables present the cost or amortized cost, gross
unrealized loss, including the portion of OTTI loss on fixed
maturity securities recognized in accumulated other
comprehensive loss at June 30, 2009, and number of
securities for fixed maturity and equity securities where the
estimated fair value had declined and remained below cost or
amortized cost by less than 20%, or 20% or more at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
Cost or Amortized Cost
|
|
|
Gross Unrealized Loss
|
|
|
Number of Securities
|
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
|
(In millions, except number of securities)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
27,591
|
|
|
$
|
6,804
|
|
|
$
|
940
|
|
|
$
|
1,973
|
|
|
|
739
|
|
|
|
315
|
|
Six months or greater but less than nine months
|
|
|
4,838
|
|
|
|
13,860
|
|
|
|
279
|
|
|
|
4,608
|
|
|
|
391
|
|
|
|
681
|
|
Nine months or greater but less than twelve months
|
|
|
9,909
|
|
|
|
8,978
|
|
|
|
599
|
|
|
|
3,724
|
|
|
|
589
|
|
|
|
464
|
|
Twelve months or greater
|
|
|
53,707
|
|
|
|
5,907
|
|
|
|
4,402
|
|
|
|
2,988
|
|
|
|
2,644
|
|
|
|
366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
96,045
|
|
|
$
|
35,549
|
|
|
$
|
6,220
|
|
|
$
|
13,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
61
|
|
|
$
|
400
|
|
|
$
|
5
|
|
|
$
|
143
|
|
|
|
89
|
|
|
|
54
|
|
Six months or greater but less than nine months
|
|
|
42
|
|
|
|
357
|
|
|
|
5
|
|
|
|
128
|
|
|
|
46
|
|
|
|
20
|
|
Nine months or greater but less than twelve months
|
|
|
46
|
|
|
|
525
|
|
|
|
6
|
|
|
|
221
|
|
|
|
29
|
|
|
|
19
|
|
Twelve months or greater
|
|
|
121
|
|
|
|
520
|
|
|
|
10
|
|
|
|
203
|
|
|
|
24
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
270
|
|
|
$
|
1,802
|
|
|
$
|
26
|
|
|
$
|
695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Cost or Amortized Cost
|
|
|
Gross Unrealized Loss
|
|
|
Number of Securities
|
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
|
(In millions, except number of securities)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
32,658
|
|
|
$
|
48,114
|
|
|
$
|
2,358
|
|
|
$
|
17,191
|
|
|
|
4,566
|
|
|
|
2,827
|
|
Six months or greater but less than nine months
|
|
|
14,975
|
|
|
|
2,180
|
|
|
|
1,313
|
|
|
|
1,109
|
|
|
|
1,314
|
|
|
|
157
|
|
Nine months or greater but less than twelve months
|
|
|
16,372
|
|
|
|
3,700
|
|
|
|
1,830
|
|
|
|
2,072
|
|
|
|
934
|
|
|
|
260
|
|
Twelve months or greater
|
|
|
23,191
|
|
|
|
650
|
|
|
|
2,533
|
|
|
|
415
|
|
|
|
1,809
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
87,196
|
|
|
$
|
54,644
|
|
|
$
|
8,034
|
|
|
$
|
20,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
386
|
|
|
$
|
1,190
|
|
|
$
|
58
|
|
|
$
|
519
|
|
|
|
351
|
|
|
|
551
|
|
Six months or greater but less than nine months
|
|
|
33
|
|
|
|
413
|
|
|
|
6
|
|
|
|
190
|
|
|
|
8
|
|
|
|
32
|
|
Nine months or greater but less than twelve months
|
|
|
3
|
|
|
|
487
|
|
|
|
|
|
|
|
194
|
|
|
|
5
|
|
|
|
15
|
|
Twelve months or greater
|
|
|
171
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
593
|
|
|
$
|
2,090
|
|
|
$
|
75
|
|
|
$
|
903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentration
of Gross Unrealized Loss and OTTI Loss for Fixed Maturity and
Equity Securities
Available-for-Sale
At June 30, 2009 and December 31, 2008, the
Companys gross unrealized losses related to its fixed
maturity and equity securities, including the portion of OTTI
loss on fixed maturity securities recognized in accumulated
other comprehensive loss at June 30, 2009, of
$20.2 billion and $29.8 billion, respectively, were
concentrated, calculated as a percentage of gross unrealized
loss, by sector and industry as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
Sector:
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
|
30
|
%
|
|
|
33
|
%
|
Residential mortgage-backed securities
|
|
|
20
|
|
|
|
16
|
|
Foreign corporate securities
|
|
|
16
|
|
|
|
19
|
|
Commercial mortgage-backed securities
|
|
|
12
|
|
|
|
11
|
|
Asset-backed securities
|
|
|
11
|
|
|
|
13
|
|
State and political subdivision securities
|
|
|
3
|
|
|
|
3
|
|
Foreign government securities
|
|
|
1
|
|
|
|
1
|
|
Other
|
|
|
7
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Industry:
|
|
|
|
|
|
|
|
|
Mortgage-backed
|
|
|
32
|
%
|
|
|
27
|
%
|
Finance
|
|
|
27
|
|
|
|
24
|
|
Asset-backed
|
|
|
11
|
|
|
|
13
|
|
Consumer
|
|
|
7
|
|
|
|
11
|
|
Utility
|
|
|
5
|
|
|
|
8
|
|
Communications
|
|
|
3
|
|
|
|
5
|
|
Industrial
|
|
|
2
|
|
|
|
4
|
|
Foreign government
|
|
|
5
|
|
|
|
1
|
|
Other
|
|
|
8
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
26
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Evaluating
Temporarily Impaired Investments
At June 30, 2009 and December 31, 2008,
$6.2 billion and $8.0 billion, respectively, of
unrealized losses related to fixed maturity securities with an
unrealized loss position of less than 20% of cost or amortized
cost, which represented 6% and 9%, respectively, of the cost or
amortized cost of such securities. At June 30, 2009 and
December 31, 2008, $26 million and $75 million,
respectively, of unrealized losses related to equity securities
with an unrealized loss position of less than 20% of cost, which
represented 10% and 13%, respectively, of the cost of such
securities.
At June 30, 2009, $13.3 billion and $695 million
of unrealized losses related to fixed maturity securities and
equity securities, respectively, with an unrealized loss
position of 20% or more of cost or amortized cost, which
represented 37% and 39% of the cost or amortized cost of such
fixed maturity and equity securities, respectively. Of such
unrealized losses of $13.3 billion and $695 million,
$2.0 billion and $143 million related to fixed
maturity and equity securities, respectively, that were in an
unrealized loss position for a period of less than six months.
At December 31, 2008, $20.8 billion and
$903 million of unrealized losses related to fixed maturity
and equity securities, respectively, with an unrealized loss
position of 20% or more of cost or amortized cost, which
represented 38% and 43% of the cost or amortized cost of such
fixed maturity and equity securities, respectively. Of such
unrealized losses of $20.8 billion and $903 million,
$17.2 billion and $519 million related to fixed
maturity and equity securities, respectively, that were in an
unrealized loss position for a period of less than six months.
The Company held 469 fixed maturity securities and 23 equity
securities, each with a gross unrealized loss at June 30,
2009 of greater than $10 million. These 469 fixed maturity
securities represented 50%, or $9.7 billion in the
aggregate, of the gross unrealized loss on fixed maturity
securities. These 23 equity securities represented 70%, or
$506 million in the aggregate, of the gross unrealized loss
on equity securities. The Company held 699 fixed maturity
securities and 33 equity securities, each with a gross
unrealized loss at December 31, 2008 of greater than
$10 million. These 699 fixed maturity securities
represented 50%, or $14.5 billion in the aggregate, of the
gross unrealized loss on fixed maturity securities. These 33
equity securities represented 71%, or $699 million in the
aggregate, of the gross unrealized loss on equity securities.
The fixed maturity and equity securities, each with a gross
unrealized loss greater than $10 million, decreased
$6.3 billion and $5.0 billion during the three months
and six months ended June 30, 2009, respectively. These
securities were included in the regular evaluation of whether
such investments are
other-than-temporarily
impaired. Based upon the Companys current evaluation of
these securities in accordance with its impairment policy, the
cause of the decline being primarily attributable to a rise in
market yields caused principally by an extensive widening of
credit spreads which resulted from a lack of market liquidity
and a short-term market dislocation versus a long-term
deterioration in credit quality, and its current intentions and
assessments (as applicable to the type of security) about
holding, selling, and any requirements to sell these securities,
the Company has concluded that these securities are not
other-than-temporarily
impaired.
In the Companys impairment review process, the duration
of, and severity of, an unrealized loss position, such as
unrealized losses of 20% or more for equity securities, which
was $695 million and $903 million at June 30,
2009 and December 31, 2008, respectively, is given greater
weight and consideration, than for fixed maturity securities. An
extended and severe unrealized loss position on a fixed maturity
security may not have any impact on the ability of the issuer to
service all scheduled interest and principal payments and the
Companys evaluation of recoverability of all contractual
cash flows or the ability to recover an amount at least equal to
its amortized cost based on the present value of the expected
future cash flows to be collected. In contrast, for an equity
security, greater weight and consideration is given by the
Company to a decline in market value and the likelihood such
market value decline will recover.
Equity securities with an unrealized loss of 20% or more for
less than six months was $143 million at June 30,
2009, of which $82 million of the unrealized losses, or
57%, were for non-redeemable preferred securities, of which
$68 million, of the unrealized losses, or 83%, were for
investment grade non-redeemable preferred securities. Of the
$68 million of unrealized losses for investment grade
non-redeemable preferred securities, $61 million of the
27
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
unrealized losses, or 90%, was comprised of unrealized losses on
investment grade financial services industry non-redeemable
preferred securities, of which 97% were rated A or higher.
Equity securities with an unrealized loss of 20% or more for six
months or greater but less than twelve months was
$349 million at June 30, 2009, all of which were for
non-redeemable preferred securities, of which, $248 million
of the unrealized losses, or 71%, are investment grade
securities, and $243 million, or 98%, of which are within
the financial services industry non-redeemable preferred
securities, of which 56% were rated A or higher.
Equity securities with an unrealized loss of 20% or more for
twelve months or greater was $203 million at June 30,
2009, of which $197 million of the unrealized losses, or
97%, were for investment grade non-redeemable preferred
securities, within the financial services industry, of which 57%
were rated A or higher.
In connection with the equity securities impairment review
process at June 30, 2009, the Company evaluated its
holdings in non-redeemable preferred securities, particularly
those of financial services companies. The Company considered
several factors including whether there has been any
deterioration in credit of the issuer and the likelihood of
recovery in value of non-redeemable preferred securities with a
severe or an extended unrealized loss. With respect to common
stock holdings, the Company considered the duration and severity
of the unrealized losses for securities in an unrealized loss
position of 20% or more; and the duration of unrealized losses
for securities in an unrealized loss position of 20% or less in
an extended unrealized loss position (i.e., 12 months or
greater).
At June 30, 2009, there were $695 million of equity
securities with an unrealized loss of 20% or more, of which
$634 million of the unrealized losses, or 91%, were for
non-redeemable preferred securities. At June 30, 2009,
$513 million of the unrealized losses of 20% or more, or
81%, of the non-redeemable preferred securities were investment
grade securities, of which, $501 million of the unrealized
losses of 20% or more, or 98%, are investment grade financial
services industry non-redeemable preferred securities, of which
61% were rated A or higher. Also all non-redeemable preferred
securities with unrealized losses of 20% or more, regardless of
credit rating, have not deferred any dividend payments.
Future
other-than-temporary
impairments will depend primarily on economic fundamentals,
issuer performance including changes in the present value of
expected future cash flows to be collected, changes in credit
rating, changes in collateral valuation, changes in interest
rates, and changes in credit spreads. If economic fundamentals
and any of the above factors continue to deteriorate, additional
other-than-temporary
impairments may be incurred in upcoming quarters.
Net
Investment Gains (Losses)
Effective April 1, 2009, the Company adopted
FSP 115-2.
With the adoption of
FSP 115-2,
for those fixed maturity securities that are intended to be sold
or for which it is more likely than not that the security will
be required to be sold before recovery of the decline in fair
value below amortized cost, the full OTTI loss from the fair
value being less than the amortized cost is recognized in
earnings. For those fixed maturity securities which the Company
has no intent to sell (i.e., has not made the decision to sell)
and the Company believes it is not more likely than not that it
will be required to sell prior to recovery of the decline in
fair value, and an assessment has been made that the amortized
cost will not be fully recovered, only the OTTI credit loss
component is recognized in earnings, while the remaining decline
in fair value is recognized in accumulated other comprehensive
income (loss), not in earnings, as a noncredit OTTI loss. Prior
to the adoption of this new guidance, the Company recognized an
OTTI loss in earnings for a fixed maturity security in an
unrealized loss position unless it could assert that it had both
the intent and ability to hold the fixed maturity security for a
period of time to allow for a recovery of fair value to the
securitys amortized cost basis. There was no change for
equity securities which, when an OTTI has occurred, continue to
be impaired for the entire difference between the equity
securitys cost and its fair value with a corresponding
charge to earnings.
28
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The discussion below describes the Companys methodology
and significant inputs used to determine the amount of the
credit loss effective April 1, 2009.
In order to determine the amount of the credit loss for a fixed
maturity security, the Company calculates the recovery value by
performing a discounted cash flow analysis based on the present
value of future cash flows expected to be received. The discount
rate is generally the effective interest rate of the fixed
maturity security prior to impairment.
When determining the collectability and the period over which
the fixed maturity security is expected to recover, the Company
applies the same considerations utilized in its overall
impairment evaluation process which incorporates information
regarding the specific security, fundamentals of the industry
and geographic area in which the security issuer operates, and
overall macroeconomic conditions. Projected future cash flows
are estimated using assumptions derived from managements
best estimates of likely scenario-based outcomes after giving
consideration to a variety of variables that include, but are
not limited to: general payment terms of the security; the
likelihood that the issuer can service the scheduled interest
and principal payments; the quality and amount of any credit
enhancements; the securitys position within the capital
structure of the issuer; possible corporate restructurings or
asset sales by the issuer, and changes to the rating of the
security or the issuer by rating agencies. Additional
considerations are made when assessing the unique features that
apply to certain structured securities such as residential
mortgage-backed securities, commercial mortgage-backed
securities and asset-backed securities. These additional factors
for structured securities include, but are not limited to: the
quality of underlying collateral; expected prepayment speeds;
current and forecasted loss severity; consideration of the
payment terms of the underlying assets backing a particular
security; and the payment priority within the tranche structure
of the security.
The components of net investment gains (losses) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Total losses on fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses recognized
|
|
$
|
(566
|
)
|
|
$
|
(139
|
)
|
|
$
|
(1,119
|
)
|
|
$
|
(213
|
)
|
Less: Noncredit portion of OTTI losses transferred to and
recognized in other comprehensive loss
|
|
|
234
|
|
|
|
|
|
|
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net OTTI losses on fixed maturity securities recognized in
earnings
|
|
|
(332
|
)
|
|
|
(139
|
)
|
|
|
(885
|
)
|
|
|
(213
|
)
|
Fixed maturity securities net gains (losses) on
sales and disposals
|
|
|
(46
|
)
|
|
|
(167
|
)
|
|
|
(102
|
)
|
|
|
(296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total losses on fixed maturity securities
|
|
|
(378
|
)
|
|
|
(306
|
)
|
|
|
(987
|
)
|
|
|
(509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other net investment gains (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
(108
|
)
|
|
|
|
|
|
|
(377
|
)
|
|
|
(10
|
)
|
Mortgage and consumer loans
|
|
|
(125
|
)
|
|
|
(34
|
)
|
|
|
(271
|
)
|
|
|
(62
|
)
|
Real estate and real estate joint ventures
|
|
|
(68
|
)
|
|
|
4
|
|
|
|
(93
|
)
|
|
|
2
|
|
Other limited partnership interests
|
|
|
(247
|
)
|
|
|
(12
|
)
|
|
|
(344
|
)
|
|
|
(15
|
)
|
Freestanding derivatives
|
|
|
(3,637
|
)
|
|
|
(416
|
)
|
|
|
(4,687
|
)
|
|
|
(358
|
)
|
Embedded derivatives
|
|
|
793
|
|
|
|
366
|
|
|
|
2,010
|
|
|
|
(60
|
)
|
Other
|
|
|
(59
|
)
|
|
|
41
|
|
|
|
14
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net investment gains (losses)
|
|
$
|
(3,829
|
)
|
|
$
|
(357
|
)
|
|
$
|
(4,735
|
)
|
|
$
|
(1,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Proceeds from sales or disposals of fixed maturity and equity
securities and the components of fixed maturity and equity
securities net investment gains (losses) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Maturity Securities
|
|
|
Equity Securities
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Proceeds
|
|
$
|
7,573
|
|
|
$
|
14,018
|
|
|
$
|
19,351
|
|
|
$
|
26,809
|
|
|
$
|
195
|
|
|
$
|
358
|
|
|
$
|
253
|
|
|
$
|
630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross investment gains
|
|
|
189
|
|
|
|
131
|
|
|
|
545
|
|
|
|
290
|
|
|
|
13
|
|
|
|
70
|
|
|
|
20
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross investment losses
|
|
|
(235
|
)
|
|
|
(298
|
)
|
|
|
(647
|
)
|
|
|
(586
|
)
|
|
|
(49
|
)
|
|
|
(14
|
)
|
|
|
(67
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses recognized in earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-related
|
|
|
(287
|
)
|
|
|
(136
|
)
|
|
|
(743
|
)
|
|
|
(210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (1)
|
|
|
(45
|
)
|
|
|
(3
|
)
|
|
|
(142
|
)
|
|
|
(3
|
)
|
|
|
(72
|
)
|
|
|
(56
|
)
|
|
|
(330
|
)
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses recognized in earnings
|
|
|
(332
|
)
|
|
|
(139
|
)
|
|
|
(885
|
)
|
|
|
(213
|
)
|
|
|
(72
|
)
|
|
|
(56
|
)
|
|
|
(330
|
)
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
$
|
(378
|
)
|
|
$
|
(306
|
)
|
|
$
|
(987
|
)
|
|
$
|
(509
|
)
|
|
$
|
(108
|
)
|
|
$
|
|
|
|
$
|
(377
|
)
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other OTTI losses recognized in earnings include impairments on
equity securities, impairments on non-redeemable preferred
securities classified within fixed maturity securities where the
primary reason for the impairment was the severity and/or the
duration of an unrealized loss position, and fixed maturity
securities where there is an intent to sell or it is more likely
than not that the Company will be required to sell the security
before recovery of the decline in fair value. |
The Company periodically disposes of fixed maturity and equity
securities at a loss. Generally, such losses are insignificant
in amount or in relation to the cost basis of the investment,
are attributable to declines in fair value occurring in the
period of the disposition or are as a result of
managements decision to sell securities based on current
conditions, or the Companys need to shift the portfolio to
maintain its portfolio management objectives. Investment gains
and losses on sales of securities are determined on a specific
identification basis.
OTTI losses recognized in earnings on fixed maturity and equity
securities, were $404 million and $1,215 million for
the three months and six months ended June 30, 2009 and
$195 million and $330 million for the three months and
six months ended June 30, 2008, respectively. The
substantial increase in the three months and six months ended
June 30, 2009 was driven in part by impairments totaling
$127 million and $478 million, respectively, on
financial services industry securities holdings, comprised of
$67 million and $188 million, respectively, of fixed
maturity securities and $60 million and $290 million,
respectively, of equity securities, as well as increased fixed
maturity security impairments across several industry sectors as
shown in the table below, which increased due to financial
restructurings, bankruptcy filings, ratings downgrades or
difficult underlying operating environments of the issuers.
These financial services industry impairments included
$68 million and $361 million, respectively, of
perpetual hybrid securities, some classified as fixed maturity
securities and some classified as non-redeemable preferred
stock, where there had been a deterioration in the credit rating
of the issuer to below investment grade and due to a severe and
extended unrealized loss position.
30
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Fixed maturity security OTTI losses recognized in earnings of
$332 million and $139 million for the three months
ended June 30, 2009 and 2008, respectively, and
$885 million and $213 million for the six months ended
June 30, 2009 and 2008, respectively, related to the
following sectors and industries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
U.S. and foreign corporate securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Communications
|
|
$
|
61
|
|
|
$
|
|
|
|
$
|
203
|
|
|
$
|
17
|
|
Finance
|
|
|
67
|
|
|
|
83
|
|
|
|
188
|
|
|
|
114
|
|
Consumer
|
|
|
74
|
|
|
|
48
|
|
|
|
164
|
|
|
|
48
|
|
Utility
|
|
|
43
|
|
|
|
1
|
|
|
|
76
|
|
|
|
1
|
|
Industrial
|
|
|
3
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
Other
|
|
|
2
|
|
|
|
3
|
|
|
|
26
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total U.S. and foreign corporate securities
|
|
|
250
|
|
|
|
135
|
|
|
|
677
|
|
|
|
185
|
|
Asset-backed securities
|
|
|
28
|
|
|
|
4
|
|
|
|
94
|
|
|
|
28
|
|
Residential mortgage-backed securities
|
|
|
20
|
|
|
|
|
|
|
|
78
|
|
|
|
|
|
Commercial mortgage-backed securities
|
|
|
34
|
|
|
|
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
332
|
|
|
$
|
139
|
|
|
$
|
885
|
|
|
$
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTTI losses recognized in earnings on equity securities were
$72 million and $330 million for the three months and
six months ended June 30, 2009, respectively, which
included $60 million and $290 million of impairments
on financial services industry holdings and $12 million and
$40 million of impairments across several industries. Of
the financial services industry equity security impairments in
the three months and six months ended June 30, 2009 of
$60 million and $290 million, respectively,
$60 million and $260 million, respectively, related to
perpetual hybrid securities where there had been a deterioration
in the credit rating of the issuer to below investment grade and
due to a severe and extended unrealized loss position.
The $72 million and $56 million of equity security
impairments in the three months ended June 30, 2009 and
2008, respectively, and $330 million and $117 million
in the six months ended June 30, 2009 and 2008,
respectively, related to the following sectors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Common stock
|
|
$
|
12
|
|
|
$
|
55
|
|
|
$
|
50
|
|
|
$
|
79
|
|
Non-redeemable preferred stock
|
|
|
60
|
|
|
|
1
|
|
|
|
280
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
72
|
|
|
$
|
56
|
|
|
$
|
330
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Credit
Loss Rollforward Rollforward of the Cumulative
Credit Loss Component of OTTI Loss Recognized in Earnings on
Fixed Maturity Securities Still Held for Which a Portion of the
OTTI Loss was Recognized in Other Comprehensive
Loss
The table below is a rollforward of the cumulative credit loss
component of OTTI loss recognized in earnings on fixed maturity
securities still held for which a portion of the OTTI loss was
recognized in other comprehensive loss and are still held on
June 30, 2009:
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
June 30, 2009
|
|
|
|
(In millions)
|
|
|
Balance, beginning of period
|
|
$
|
|
|
Credit loss component of OTTI loss not reclassified to other
comprehensive loss in the cumulative effect transition adjustment
|
|
|
230
|
|
Additions:
|
|
|
|
|
Initial impairments credit loss OTTI recognized on
securities not previously impaired
|
|
|
152
|
|
Additional impairments credit loss OTTI recognized
on securities previously impaired
|
|
|
5
|
|
Reductions:
|
|
|
|
|
Due to sales (or maturities, pay downs or prepayments) of
securities previously credit loss OTTI impaired
|
|
|
(7
|
)
|
|
|
|
|
|
Balance, end of period
|
|
$
|
380
|
|
|
|
|
|
|
Net
Investment Income
The components of net investment income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Fixed maturity securities
|
|
$
|
2,936
|
|
|
$
|
3,431
|
|
|
$
|
5,754
|
|
|
$
|
6,978
|
|
Equity securities
|
|
|
55
|
|
|
|
82
|
|
|
|
93
|
|
|
|
150
|
|
Trading securities (1)
|
|
|
130
|
|
|
|
9
|
|
|
|
147
|
|
|
|
(42
|
)
|
Mortgage and consumer loans
|
|
|
696
|
|
|
|
695
|
|
|
|
1,378
|
|
|
|
1,397
|
|
Policy loans
|
|
|
161
|
|
|
|
151
|
|
|
|
318
|
|
|
|
299
|
|
Real estate and real estate joint ventures (2)
|
|
|
(71
|
)
|
|
|
206
|
|
|
|
(156
|
)
|
|
|
380
|
|
Other limited partnership interests (3)
|
|
|
72
|
|
|
|
71
|
|
|
|
(181
|
)
|
|
|
203
|
|
Cash, cash equivalents and short-term investments
|
|
|
34
|
|
|
|
102
|
|
|
|
82
|
|
|
|
212
|
|
International joint ventures (4)
|
|
|
(77
|
)
|
|
|
(1
|
)
|
|
|
(70
|
)
|
|
|
(5
|
)
|
Other
|
|
|
44
|
|
|
|
71
|
|
|
|
119
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment income
|
|
|
3,980
|
|
|
|
4,817
|
|
|
|
7,484
|
|
|
|
9,719
|
|
Less: Investment expenses
|
|
|
249
|
|
|
|
498
|
|
|
|
490
|
|
|
|
1,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
3,731
|
|
|
$
|
4,319
|
|
|
$
|
6,994
|
|
|
$
|
8,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
(1) |
|
Net investment income from trading securities includes interest
and dividends earned on trading securities in addition to the
net realized gains (losses) and subsequent changes in estimated
fair value recognized on trading securities and the short sale
agreements liabilities. During the three months and six months
ended June 30, 2009, changes in estimated fair value were
recognized in net investment income on certain equity securities
within the trading securities portfolio, due to recovery in
certain equity markets, in addition to interest and dividends
earned and net realized gains (losses) on securities sold. |
|
(2) |
|
Net investment income from real estate joint ventures within the
real estate and real estate joint ventures caption represents
distributions for investments accounted for under the cost
method and equity in earnings for investments accounted for
under the equity method. Overall, for the three months and six
months ended June 30, 2009, the net amount recognized were
losses of $71 million and $156 million, respectively,
resulting primarily from declining property valuations on real
estate held by certain real estate investment funds that carry
their real estate at fair value and operating losses incurred on
real estate properties that were developed for sale by real
estate development joint ventures, in excess of earnings from
wholly-owned real estate. The commercial real estate properties
underlying real estate investment funds have experienced
declines in value driven by capital market factors and
deteriorating market conditions, which has led to declining
property valuations, while the real estate development joint
ventures have experienced fewer property sales due to declining
real estate market fundamentals and decreased availability of
real estate lending to finance transactions. |
|
(3) |
|
Net investment income from other limited partnership interests,
including hedge funds, represents distributions from other
limited partnership interests accounted for under the cost
method and equity in earnings from other limited partnership
interests accounted for under the equity method. Overall for the
six months ended June 30, 2009, the net amount recognized
were losses of $181 million, resulting principally from
losses on equity method investments. Such earnings and losses
recognized for other limited partnership interests are impacted
by volatility in the equity and credit markets. |
|
(4) |
|
Net of changes in estimated fair value of derivatives related to
economic hedges of these equity method investments that do not
qualify for hedge accounting of ($92) million and
($116) million for the three months and six months ended
June 30, 2009, respectively, and ($33) million and
$8 million for the three months and six months ended
June 30, 2008, respectively. |
Securities
Lending
The Company participates in securities lending programs whereby
blocks of securities, which are included in fixed maturity
securities and short-term investments, are loaned to third
parties, primarily major brokerage firms and commercial banks.
The Company generally obtains collateral in an amount equal to
102% of the estimated fair value of the securities loaned.
Securities with a cost or amortized cost of $20.7 billion
and $20.8 billion and an estimated fair value of
$20.9 billion and $22.9 billion were on loan under the
program at June 30, 2009 and December 31, 2008,
respectively. Securities loaned under such transactions may be
sold or repledged by the transferee. The Company was liable for
cash collateral under its control of $21.5 billion and
$23.3 billion at June 30, 2009 and December 31,
2008, respectively. Of this $21.5 billion of cash
collateral at June 30, 2009, $2.4 billion was on open
terms, meaning that the related loaned security could be
returned to the Company on the next business day requiring
return of cash collateral, and $11.0 billion,
$4.0 billion, $2.4 billion and $1.7 billion,
respectively, were due within 30 days, 60 days,
90 days and over 90 days. Substantially all (99%) of
the $2.3 billion of estimated fair value of the securities
related to the cash collateral on open terms at June 30,
2009, were U.S. Treasury, agency and government guaranteed
securities which, if put to the Company, can be immediately sold
to satisfy the cash requirements. The remainder of the
securities on loan are primarily U.S. Treasury, agency and
government guaranteed securities, and very liquid residential
mortgage-backed securities. The estimated fair value of the
reinvestment portfolio acquired with the cash collateral was
$19.6 billion at June 30, 2009, and consisted
principally of fixed maturity securities (including residential
mortgage-backed, asset-backed, U.S. corporate and foreign
corporate securities).
33
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Security collateral of $29 million and $279 million on
deposit from counterparties in connection with the securities
lending transactions at June 30, 2009 and December 31,
2008, respectively, may not be sold or repledged, unless the
counterparty is in default, and is not reflected in the
consolidated financial statements.
Assets
on Deposit, Held in Trust and Pledged as
Collateral
The assets on deposit, assets held in trust and assets pledged
as collateral are summarized in the table below. The amounts
presented in the table below are at estimated fair value for
cash, fixed maturity and equity securities and at carrying value
for mortgage loans.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
(In millions)
|
|
|
Assets on deposit:
|
|
|
|
|
|
|
|
|
Regulatory agencies (1)
|
|
$
|
1,279
|
|
|
$
|
1,282
|
|
Assets held in trust:
|
|
|
|
|
|
|
|
|
Collateral financing arrangements (2)
|
|
|
5,750
|
|
|
|
4,754
|
|
Reinsurance arrangements (3)
|
|
|
1,244
|
|
|
|
1,714
|
|
Assets pledged as collateral:
|
|
|
|
|
|
|
|
|
Debt and funding agreements FHLB of NY (4)
|
|
|
22,065
|
|
|
|
20,880
|
|
Debt and funding agreements FHLB of Boston (4)
|
|
|
434
|
|
|
|
1,284
|
|
Funding agreements Farmer MAC(5)
|
|
|
2,870
|
|
|
|
2,875
|
|
Federal Reserve Bank of New York (6)
|
|
|
2,961
|
|
|
|
1,577
|
|
Collateral financing arrangements Holding Company (7)
|
|
|
123
|
|
|
|
316
|
|
Derivative transactions (8)
|
|
|
1,257
|
|
|
|
1,744
|
|
Short sale agreements (9)
|
|
|
545
|
|
|
|
346
|
|
Other
|
|
|
190
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
Total assets on deposit, held in trust and pledged as collateral
|
|
$
|
38,718
|
|
|
$
|
36,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company had investment assets on deposit with regulatory
agencies consisting primarily of fixed maturity and equity
securities. |
|
(2) |
|
The Company held in trust cash and securities, primarily fixed
maturity and equity securities to satisfy collateral
requirements. The Company has also pledged certain fixed
maturity securities in support of the collateral financing
arrangements described in Note 10. |
|
(3) |
|
The Company has pledged certain investments, primarily fixed
maturity securities, in connection with certain reinsurance
transactions. |
|
(4) |
|
The Company has pledged fixed maturity securities and mortgage
loans in support of its debt and funding agreements with the
Federal Home Loan Bank of New York (FHLB of NY) and
has pledged fixed maturity securities to the Federal Home Loan
Bank of Boston (FHLB of Boston). The nature of the
Federal Home Loan Bank arrangements is described in Note 7
of the Notes to the Consolidated Financial Statements included
in the 2008 Annual Report. |
|
(5) |
|
The Company has pledged certain agricultural real estate
mortgage loans in connection with funding agreements with the
Federal Agricultural Mortgage Corporation (Farmer
MAC). The nature of the Farmer MAC arrangements is
described in Note 7 of the Notes to the Consolidated
Financial Statements included in the 2008 Annual Report. |
34
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
(6) |
|
The Company has pledged qualifying mortgage loans and securities
in connection with collateralized borrowings from the Federal
Reserve Bank of New Yorks Term Auction Facility. The
nature of the Federal Reserve Bank of New York arrangements is
described in Note 9. |
|
(7) |
|
The Holding Company has pledged certain collateral in support of
the collateral financing arrangements described in Note 10. |
|
(8) |
|
Certain of the Companys invested assets are pledged as
collateral for various derivative transactions as described in
Note 4. |
|
(9) |
|
Certain of the Companys trading securities are pledged to
secure liabilities associated with short sale agreements in the
trading securities portfolio as described in the following
section. |
See also the immediately preceding section Securities
Lending for the amount of the Companys cash and
invested assets received from and due back to counterparties
pursuant to the securities lending program.
Trading
Securities
The Company has trading securities portfolios to support
investment strategies that involve the active and frequent
purchase and sale of securities, the execution of short sale
agreements and asset and liability matching strategies for
certain insurance products. Trading securities and short sale
agreement liabilities are recorded at estimated fair value with
subsequent changes in estimated fair value recognized in net
investment income.
At June 30, 2009 and December 31, 2008, trading
securities at estimated fair value were $1,471 million and
$946 million, respectively, and liabilities associated with
the short sale agreements in the trading securities portfolio,
which were included in other liabilities, were $201 million
and $57 million, respectively. The Company had pledged
$545 million and $346 million of its assets, at
estimated fair value, consisting of trading securities and cash
and cash equivalents, as collateral to secure the liabilities
associated with the short sale agreements in the trading
securities portfolio at June 30, 2009 and December 31,
2008, respectively.
Interest and dividends earned on trading securities in, addition
to the net realized gains (losses) and subsequent changes in
estimated fair value recognized on the trading securities and
the related short sale agreement liabilities included within net
investment income, totaled $130 million and
$147 million for the three months and six months ended
June 30, 2009, respectively, and $9 million and
($42) million for the three months and six months ended
June 30, 2008, respectively. Changes in estimated fair
value in net investment income of such trading securities and
short sale agreement liabilities were $141 million and
$143 million for the three months and six months ended
June 30, 2009, respectively, and ($4) million and
($47) million for the three months and six months ended
June 30, 2008, respectively.
35
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Mortgage
Servicing Rights
The following table presents the changes in capitalized mortgage
servicing rights (MSRs), which are included in other
invested assets, for the six months ended June 30, 2009:
|
|
|
|
|
|
|
Carrying Value
|
|
|
|
(In millions)
|
|
|
Fair value, beginning of period
|
|
$
|
191
|
|
Acquisition of mortgage servicing rights
|
|
|
117
|
|
Origination of mortgage servicing rights
|
|
|
289
|
|
Reduction due to loan payments
|
|
|
(61
|
)
|
Changes in fair value due to:
|
|
|
|
|
Changes in valuation model inputs or assumptions
|
|
|
133
|
|
Other changes in fair value
|
|
|
1
|
|
|
|
|
|
|
Fair value, end of period
|
|
$
|
670
|
|
|
|
|
|
|
The Company recognizes the rights to service residential
mortgage loans as MSRs. MSRs are either acquired or are
generated from the sale of originated residential mortgage loans
where the servicing rights are retained by the Company. MSRs are
carried at estimated fair value and changes in estimated fair
value, primarily due to changes in valuation inputs and
assumptions and to the collection of expected cash flows, are
reported in other revenues in the period in which the change
occurs. See also Note 18 for further information about how
the estimated fair value of MSRs is determined and other related
information.
Variable
Interest Entities
The following table presents the total assets and total
liabilities relating to VIEs for which the Company has concluded
that it is the primary beneficiary and which are consolidated in
the Companys financial statements at June 30, 2009
and December 31, 2008. Generally, creditors or beneficial
interest holders of VIEs where the Company is the primary
beneficiary have no recourse to the general credit of the
Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
(In millions)
|
|
|
MRSC collateral financing arrangement (1)
|
|
$
|
3,073
|
|
|
$
|
|
|
|
$
|
2,361
|
|
|
$
|
|
|
Real estate joint ventures (2)
|
|
|
23
|
|
|
|
13
|
|
|
|
26
|
|
|
|
15
|
|
Other limited partnership interests (3)
|
|
|
135
|
|
|
|
33
|
|
|
|
20
|
|
|
|
3
|
|
Other invested assets (4)
|
|
|
31
|
|
|
|
2
|
|
|
|
10
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,262
|
|
|
$
|
48
|
|
|
$
|
2,417
|
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 10 for a description of the MetLife Reinsurance
Company of South Carolina (MRSC) collateral
financing arrangement. At June 30, 2009 and
December 31, 2008, these assets are reflected at estimated
fair value and consist of the following: |
36
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
(In millions)
|
|
|
Fixed maturity securities
available-for-sale:
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
977
|
|
|
$
|
948
|
|
Asset-backed securities
|
|
|
848
|
|
|
|
409
|
|
Residential mortgage-backed securities
|
|
|
601
|
|
|
|
561
|
|
U.S. Treasury, agency and government guaranteed securities
|
|
|
262
|
|
|
|
|
|
Commercial mortgage-backed securities
|
|
|
168
|
|
|
|
98
|
|
Foreign corporate securities
|
|
|
93
|
|
|
|
95
|
|
State and political subdivision securities
|
|
|
21
|
|
|
|
21
|
|
Foreign government securities
|
|
|
5
|
|
|
|
5
|
|
Cash and cash equivalents (including cash
held-in-trust
of less than $1 million and $60 million, respectively)
|
|
|
98
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,073
|
|
|
$
|
2,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Real estate joint ventures include partnerships and other
ventures which engage in the acquisition, development,
management and disposal of real estate investments. Upon
consolidation, the assets and liabilities are reflected at the
VIEs carrying amounts. At June 30, 2009 and
December 31, 2008, the assets consist of $18 million
and $20 million, respectively, of real estate and real
estate joint ventures
held-for-investment,
$4 million and $5 million, respectively, of cash and
cash equivalents and $1 million and $1 million,
respectively, of other assets. At June 30, 2009 and
December 31, 2008, liabilities consist of $13 million
and $15 million of other liabilities, respectively. |
|
(3) |
|
Other limited partnership interests include partnerships
established for the purpose of investing in public and private
debt and equity securities. Upon consolidation, the assets and
liabilities are reflected at the VIEs carrying amounts. At
June 30, 2009 and December 31, 2008, the assets of
$135 million and $20 million, respectively, are
included within other limited partnership interests while the
liabilities of $33 million and $3 million,
respectively, are included within other liabilities. |
|
(4) |
|
Other invested assets includes tax-credit partnerships and other
investments established for the purpose of investing in
low-income housing and other social causes, where the primary
return on investment is in the form of tax credits. Upon
consolidation, the assets and liabilities are reflected at the
VIEs carrying amounts. At June 30, 2009 and
December 31, 2008, the assets of $31 million and
$10 million, respectively, are included within other
invested assets. At June 30, 2009 and December 31,
2008, the liabilities consist of $1 million and
$2 million, respectively, of long-term debt and less than
$1 million and $1 million, respectively, of other
liabilities. |
37
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The following table presents the carrying amount and maximum
exposure to loss relating to VIEs for which the Company holds
significant variable interests but is not the primary
beneficiary and which have not been consolidated at
June 30, 2009 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
Maximum
|
|
|
|
Carrying
|
|
|
Exposure
|
|
|
Carrying
|
|
|
Exposure
|
|
|
|
Amount (1)
|
|
|
to Loss (2)
|
|
|
Amount(1)
|
|
|
to Loss (2)
|
|
|
|
(In millions)
|
|
|
Fixed maturity securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporate securities
|
|
$
|
892
|
|
|
$
|
892
|
|
|
$
|
1,080
|
|
|
$
|
1,080
|
|
U.S. corporate securities
|
|
|
711
|
|
|
|
711
|
|
|
|
992
|
|
|
|
992
|
|
Real estate joint ventures
|
|
|
31
|
|
|
|
31
|
|
|
|
32
|
|
|
|
32
|
|
Other limited partnership interests
|
|
|
2,243
|
|
|
|
2,578
|
|
|
|
3,496
|
|
|
|
4,004
|
|
Other invested assets
|
|
|
383
|
|
|
|
257
|
|
|
|
318
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,260
|
|
|
$
|
4,469
|
|
|
$
|
5,918
|
|
|
$
|
6,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 1 of the Notes to the Consolidated Financial
Statements included in the 2008 Annual Report for further
discussion of the Companys accounting policies with
respect to the basis for determining carrying value of these
investments. |
|
(2) |
|
The maximum exposure to loss relating to the fixed maturity
securities
available-for-sale
is equal to the carrying amounts or carrying amounts of retained
interests. The maximum exposure to loss relating to the real
estate joint ventures and other limited partnership interests is
equal to the carrying amounts plus any unfunded commitments.
Such a maximum loss would be expected to occur only upon
bankruptcy of the issuer or investee. For certain of its
investments in other invested assets, the Companys return
is in the form of tax credits which are guaranteed by a
creditworthy third party. For such investments, the maximum
exposure to loss is equal to the carrying amounts plus any
unfunded commitments, reduced by tax credits guaranteed by third
parties of $254 million and $278 million at
June 30, 2009 and December 31, 2008, respectively. |
As described in Note 11, the Company makes commitments to
fund partnership investments in the normal course of business.
Excluding these commitments, MetLife did not provide financial
or other support to investees designated as VIEs during the six
months ended June 30, 2009.
|
|
4.
|
Derivative
Financial Instruments
|
Accounting
for Derivative Financial Instruments
Derivatives are financial instruments whose values are derived
from interest rates, foreign currency exchange rates, or other
financial indices. Derivatives may be exchange-traded or
contracted in the
over-the-counter
market. The Company uses a variety of derivatives, including
swaps, forwards, futures and option contracts, to manage the
risk associated with variability in cash flows or changes in
estimated fair values related to the Companys financial
instruments. The Company also uses derivative instruments to
hedge its currency exposure associated with net investments in
certain foreign operations. To a lesser extent, the Company uses
credit derivatives, such as credit default swaps, to
synthetically replicate investment risks and returns which are
not readily available in the cash market. The Company also
purchases certain securities, issues certain insurance policies
and investment contracts and engages in certain reinsurance
contracts that have embedded derivatives.
Freestanding derivatives are carried on the Companys
consolidated balance sheet either as assets within other
invested assets or as liabilities within other liabilities at
estimated fair value as determined through the use of quoted
market prices for exchange-traded derivatives and interest rate
forwards to sell residential mortgage backed securities or
through the use of pricing models for
over-the-counter
derivatives. The determination of estimated fair
38
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
value, when quoted market values are not available, is based on
market standard valuation methodologies and inputs that are
assumed to be consistent with what other market participants
would use when pricing the instruments. Derivative valuations
can be affected by changes in interest rates, foreign currency
exchange rates, financial indices, credit spreads, default risk
(including the counterparties to the contract), volatility,
liquidity and changes in estimates and assumptions used in the
pricing models.
The significant inputs to the pricing models for most
over-the-counter
derivatives are inputs that are observable in the market or can
be derived principally from or corroborated by observable market
data. Significant inputs that are observable generally include:
interest rates, foreign currency exchange rates, interest rate
curves, credit curves and volatility. However, certain
over-the-counter
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. Significant inputs that are unobservable generally
include: independent broker quotes, credit correlation
assumptions, references to emerging market currencies and inputs
that are outside the observable portion of the interest rate
curve, credit curve, volatility or other relevant market
measure. 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 consistent with what other market
participants would use when pricing such instruments. Most
inputs for
over-the-counter
derivatives are mid market inputs but, in certain cases, bid
level inputs are used 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 Companys 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
over-the-counter
derivatives after taking into account the effects of netting
agreements and collateral arrangements. Credit risk is monitored
and consideration of any potential credit adjustment is based on
a net exposure by counterparty. This is due to the existence of
netting agreements and collateral arrangements which effectively
serve to mitigate credit risk. The Company values its derivative
positions using the standard swap curve which includes a credit
risk adjustment. This credit risk adjustment is appropriate for
those parties that execute trades at pricing levels consistent
with the standard swap curve. As the Company and its significant
derivative counterparties consistently execute trades at such
pricing levels, additional credit risk adjustments are not
currently required in the valuation process. The need for such
additional credit risk adjustments is monitored by the Company.
The Companys 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. The evaluation of the
requirement to make an additional credit risk adjustments is
performed by the Company each reporting period.
Pursuant to FIN No. 39, Offsetting of Amounts
Related to Certain Contracts, the Companys policy is
to not offset the fair value amounts recognized for derivatives
executed with the same counterparty under the same master
netting agreement.
If a derivative is not designated as an accounting hedge or its
use in managing risk does not qualify for hedge accounting,
changes in the estimated fair value of the derivative are
generally reported in net investment gains (losses) except for
those (i) in policyholder benefits and claims for economic
hedges of liabilities embedded in certain variable annuity
products offered by the Company, (ii) in net investment
income for economic hedges of equity method investments in joint
ventures, or for all derivatives held in relation to the trading
portfolios and (iii) in other revenues for derivatives held
in connection with the Companys mortgage banking
activities. The fluctuations in estimated fair value of
derivatives which have not been designated for hedge accounting
can result in significant volatility in net income.
To qualify for hedge accounting, at the inception of the hedging
relationship, the Company formally documents its risk management
objective and strategy for undertaking the hedging transaction,
as well as its designation of the hedge as either (i) a
hedge of the estimated fair value of a recognized asset or
liability or an unrecognized firm commitment (fair value
hedge); (ii) a hedge of a forecasted transaction or
of the variability of cash flows to be received or paid related
to a recognized asset or liability (cash flow
hedge); or (iii) a hedge of a
39
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
net investment in a foreign operation. In this documentation,
the Company sets forth how the hedging instrument is expected to
hedge the designated risks related to the hedged item and sets
forth the method that will be used to retrospectively and
prospectively assess the hedging instruments effectiveness
and the method which will be used to measure ineffectiveness. A
derivative designated as a hedging instrument must be assessed
as being highly effective in offsetting the designated risk of
the hedged item. Hedge effectiveness is formally assessed at
inception and periodically throughout the life of the designated
hedging relationship. Assessments of hedge effectiveness and
measurements of ineffectiveness are also subject to
interpretation and estimation and different interpretations or
estimates may have a material effect on the amount reported in
net income.
The accounting for derivatives is complex and interpretations of
the primary accounting standards continue to evolve in practice.
Judgment is applied in determining the availability and
application of hedge accounting designations and the appropriate
accounting treatment under these accounting standards. If it was
determined that hedge accounting designations were not
appropriately applied, reported net income could be materially
affected. Differences in judgment as to the availability and
application of hedge accounting designations and the appropriate
accounting treatment may result in a differing impact on the
consolidated financial statements of the Company from that
previously reported.
Under a fair value hedge, changes in the estimated fair value of
the hedging derivative, including amounts measured as
ineffectiveness, and changes in the estimated fair value of the
hedged item related to the designated risk being hedged, are
reported within net investment gains (losses). The estimated
fair values of the hedging derivatives are exclusive of any
accruals that are separately reported in the consolidated
statement of income within interest income or interest expense
to match the location of the hedged item. However, balances that
are not scheduled to settle until maturity are included in the
estimated fair value of derivatives.
Under a cash flow hedge, changes in the estimated fair value of
the hedging derivative measured as effective are reported within
other comprehensive income (loss), a separate component of
stockholders equity, and the deferred gains or losses on
the derivative are reclassified into the consolidated statement
of income when the Companys earnings are affected by the
variability in cash flows of the hedged item. Changes in the
estimated fair value of the hedging instrument measured as
ineffectiveness are reported within net investment gains
(losses). The estimated fair values of the hedging derivatives
are exclusive of any accruals that are separately reported in
the consolidated statement of income within interest income or
interest expense to match the location of the hedged item.
However, balances that are not scheduled to settle until
maturity are included in the estimated fair value of derivatives.
In a hedge of a net investment in a foreign operation, changes
in the estimated fair value of the hedging derivative that are
measured as effective are reported within other comprehensive
income (loss) consistent with the translation adjustment for the
hedged net investment in the foreign operation. Changes in the
estimated fair value of the hedging instrument measured as
ineffectiveness are reported within net investment gains
(losses).
The Company discontinues hedge accounting prospectively when:
(i) it is determined that the derivative is no longer
highly effective in offsetting changes in the estimated fair
value or cash flows of a hedged item; (ii) the derivative
expires, is sold, terminated, or exercised; (iii) it is no
longer probable that the hedged forecasted transaction will
occur; (iv) a hedged firm commitment no longer meets the
definition of a firm commitment; or (v) the derivative is
de-designated as a hedging instrument.
When hedge accounting is discontinued because it is determined
that the derivative is not highly effective in offsetting
changes in the estimated fair value or cash flows of a hedged
item, the derivative continues to be carried on the consolidated
balance sheet at its estimated fair value, with changes in
estimated fair value recognized currently in net investment
gains (losses). The carrying value of the hedged recognized
asset or liability under a fair value hedge is no longer
adjusted for changes in its estimated fair value due to the
hedged risk, and the cumulative adjustment to its carrying value
is amortized into income over the remaining life of the hedged
item. Provided the hedged forecasted transaction is still
probable of occurrence, the changes in estimated fair value of
derivatives recorded in other comprehensive income (loss)
related to discontinued cash flow hedges are released into the
40
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
consolidated statement of income when the Companys
earnings are affected by the variability in cash flows of the
hedged item.
When hedge accounting is discontinued because it is no longer
probable that the forecasted transactions will occur by the end
of the specified time period or the hedged item no longer meets
the definition of a firm commitment, the derivative continues to
be carried on the consolidated balance sheet at its estimated
fair value, with changes in estimated fair value recognized
currently in net investment gains (losses). Any asset or
liability associated with a recognized firm commitment is
derecognized from the consolidated balance sheet, and recorded
currently in net investment gains (losses). Deferred gains and
losses of a derivative recorded in other comprehensive income
(loss) pursuant to the cash flow hedge of a forecasted
transaction are recognized immediately in net investment gains
(losses).
In all other situations in which hedge accounting is
discontinued, the derivative is carried at its estimated fair
value on the consolidated balance sheet, with changes in its
estimated fair value recognized in the current period as net
investment gains (losses).
The Company is also a party to financial instruments that
contain terms which are deemed to be embedded derivatives. The
Company assesses each identified embedded derivative to
determine whether it is required to be bifurcated. If the
instrument would not be accounted for in its entirety at
estimated fair value and it is determined that the terms of the
embedded derivative are not clearly and closely related to the
economic characteristics of the host contract, and that a
separate instrument with the same terms would qualify as a
derivative instrument, the embedded derivative is bifurcated
from the host contract and accounted for as a freestanding
derivative. Such embedded derivatives are carried on the
consolidated balance sheet at estimated fair value with the host
contract and changes in their estimated fair value are reported
currently in net investment gains (losses) or in policyholder
benefits and claims. If the Company is unable to properly
identify and measure an embedded derivative for separation from
its host contract, the entire contract is carried on the balance
sheet at estimated fair value, with changes in estimated fair
value recognized in the current period in net investment gains
(losses) or in policyholder benefits and claims. Additionally,
the Company may elect to carry an entire contract on the balance
sheet at estimated fair value, with changes in estimated fair
value recognized in the current period in net investment gains
(losses) or in policyholder benefits and claims if that contract
contains an embedded derivative that requires bifurcation. There
is a risk that embedded derivatives requiring bifurcation may
not be identified and reported at estimated fair value in the
consolidated financial statements and that their related changes
in estimated fair value could materially affect reported net
income.
See Note 18 for information about the fair value hierarchy
for derivatives.
Primary
Risks Managed by Derivative Financial Instruments and Non
Derivative Financial Instruments
The Company is exposed to various risks relating to its ongoing
business operations, including interest rate risk, foreign
currency risk, credit risk, and equity market risk. The Company
uses a variety of strategies to manage these risks, including
the use of derivative instruments. The following table presents
the notional amount, estimated
41
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
fair value, and primary underlying risk exposure of the
Companys derivative financial instruments, excluding
embedded derivatives held at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
Current Market
|
|
|
|
|
|
Current Market
|
|
Primary Underlying
|
|
|
|
Notional
|
|
|
or Fair Value (1)
|
|
|
Notional
|
|
|
or Fair Value (1)
|
|
Risk Exposure
|
|
Instrument Type
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
|
(In millions)
|
|
|
Interest rate
|
|
Interest rate swaps
|
|
$
|
35,613
|
|
|
$
|
1,887
|
|
|
$
|
1,336
|
|
|
$
|
34,060
|
|
|
$
|
4,617
|
|
|
$
|
1,468
|
|
|
|
Interest rate floors
|
|
|
26,191
|
|
|
|
544
|
|
|
|
51
|
|
|
|
48,517
|
|
|
|
1,748
|
|
|
|
|
|
|
|
Interest rate caps
|
|
|
22,635
|
|
|
|
183
|
|
|
|
|
|
|
|
24,643
|
|
|
|
11
|
|
|
|
|
|
|
|
Interest rate futures
|
|
|
8,711
|
|
|
|
14
|
|
|
|
11
|
|
|
|
13,851
|
|
|
|
44
|
|
|
|
117
|
|
|
|
Interest rate options
|
|
|
300
|
|
|
|
6
|
|
|
|
|
|
|
|
2,365
|
|
|
|
939
|
|
|
|
35
|
|
|
|
Interest rate forwards
|
|
|
19,577
|
|
|
|
191
|
|
|
|
39
|
|
|
|
16,616
|
|
|
|
49
|
|
|
|
70
|
|
|
|
Synthetic GICs
|
|
|
4,313
|
|
|
|
|
|
|
|
|
|
|
|
4,260
|
|
|
|
|
|
|
|
|
|
Foreign currency
|
|
Foreign currency swaps
|
|
|
17,527
|
|
|
|
1,438
|
|
|
|
1,222
|
|
|
|
19,438
|
|
|
|
1,953
|
|
|
|
1,866
|
|
|
|
Foreign currency forwards
|
|
|
6,292
|
|
|
|
61
|
|
|
|
142
|
|
|
|
5,167
|
|
|
|
153
|
|
|
|
129
|
|
|
|
Currency options
|
|
|
890
|
|
|
|
36
|
|
|
|
|
|
|
|
932
|
|
|
|
73
|
|
|
|
|
|
|
|
Non-derivative hedging instruments (2)
|
|
|
351
|
|
|
|
|
|
|
|
344
|
|
|
|
351
|
|
|
|
|
|
|
|
323
|
|
Credit
|
|
Swap spreadlocks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,338
|
|
|
|
|
|
|
|
99
|
|
|
|
Credit default swaps
|
|
|
6,867
|
|
|
|
166
|
|
|
|
108
|
|
|
|
5,219
|
|
|
|
152
|
|
|
|
69
|
|
|
|
Other
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity market
|
|
Equity futures
|
|
|
6,345
|
|
|
|
20
|
|
|
|
10
|
|
|
|
6,057
|
|
|
|
1
|
|
|
|
88
|
|
|
|
Equity options
|
|
|
23,438
|
|
|
|
2,083
|
|
|
|
659
|
|
|
|
5,153
|
|
|
|
2,150
|
|
|
|
|
|
|
|
Variance swaps
|
|
|
11,969
|
|
|
|
283
|
|
|
|
13
|
|
|
|
9,222
|
|
|
|
416
|
|
|
|
|
|
|
|
Other
|
|
|
250
|
|
|
|
|
|
|
|
98
|
|
|
|
250
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
191,279
|
|
|
$
|
6,912
|
|
|
$
|
4,033
|
|
|
$
|
198,439
|
|
|
$
|
12,306
|
|
|
$
|
4,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The estimated fair value of all derivatives in an asset position
is reported within other invested assets in the consolidated
balance sheets and the estimated fair value of all derivatives
in a liability position is reported within other liabilities in
the consolidated balance sheets. |
|
(2) |
|
The estimated fair value of non-derivative hedging instruments
represents the amortized cost of the instruments, as adjusted
for foreign currency transaction gains or losses. Non-derivative
hedging instruments are reported within policyholder account
balances in the consolidated balance sheets. |
Interest rate swaps are used by the Company primarily to reduce
market risks from changes in interest rates and to alter
interest rate exposure arising from mismatches between assets
and liabilities (duration mismatches). In an interest rate swap,
the Company agrees with another party to exchange, at specified
intervals, the difference between fixed rate and floating rate
interest amounts as calculated by reference to an agreed
notional principal amount. These transactions are entered into
pursuant to master agreements that provide for a single net
payment to be made by the counterparty at each due date. The
Company utilizes interest rate swaps in fair value, cash flow,
and non-qualifying hedging relationships.
The Company also enters into basis swaps to better match the
cash flows from assets and related liabilities. In a basis swap,
both legs of the swap are floating with each based on a
different index. Generally, no cash is exchanged at the outset
of the contract and no principal payments are made by either
party. A single net payment is usually made by one counterparty
at each due date. Basis swaps are included in interest rate
swaps in the preceding table. The Company utilizes basis swaps
in non-qualifying hedging relationships.
42
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Inflation swaps are used as an economic hedge to reduce
inflation risk generated from inflation-indexed liabilities.
Inflation swaps are included in interest rate swaps in the
preceding table. The Company utilizes inflation swaps in
non-qualifying hedging relationships.
Implied volatility swaps are used by the Company primarily as
economic hedges of interest rate risk associated with the
Companys investments in mortgage-backed securities. In an
implied volatility swap, the Company exchanges fixed payments
for floating payments that are linked to certain market
volatility measures. If implied volatility rises, the floating
payments that the Company receives will increase, and if implied
volatility falls, the floating payments that the Company
receives will decrease. Implied volatility swaps are included in
interest rate swaps in the preceding table. The Company utilizes
implied volatility swaps in non-qualifying hedging relationships.
The Company purchases interest rate caps and floors primarily to
protect its floating rate liabilities against rises in interest
rates above a specified level, and against interest rate
exposure arising from mismatches between assets and liabilities
(duration mismatches), as well as to protect its minimum rate
guarantee liabilities against declines in interest rates below a
specified level, respectively. In certain instances, the Company
locks in the economic impact of existing purchased caps and
floors by entering into offsetting written caps and floors. The
Company utilizes interest rate caps and floors in non-qualifying
hedging relationships.
In exchange-traded interest rate (Treasury and swap) futures
transactions, the Company agrees to purchase or sell a specified
number of contracts, the value of which is determined by the
different classes of interest rate securities, and to post
variation margin on a daily basis in an amount equal to the
difference in the daily market values of those contracts. The
Company enters into exchange-traded futures with regulated
futures commission merchants that are members of the exchange.
Exchange-traded interest rate (Treasury and swap) futures are
used primarily to hedge mismatches between the duration of
assets in a portfolio and the duration of liabilities supported
by those assets, to hedge against changes in value of securities
the Company owns or anticipates acquiring, and to hedge against
changes in interest rates on anticipated liability issuances by
replicating Treasury or swap curve performance. The value of
interest rate futures is substantially impacted by changes in
interest rates and they can be used to modify or hedge existing
interest rate risk. The Company utilizes exchange-traded
interest rate futures in non-qualifying hedging relationships.
Swaptions are used by the Company to hedge interest rate risk
associated with the Companys long-term liabilities. A
swaption is an option to enter into a swap with a forward
starting effective date. In certain instances, the Company locks
in the economic impact of existing purchased swaptions by
entering into offsetting written swaptions. The Company pays a
premium for purchased swaptions and receives a premium for
written swaptions. Swaptions are included in interest rate
options in the preceding table. The Company utilizes swaptions
in non-qualifying hedging relationships.
The Company enters into interest rate forwards to buy and sell
securities. The price is agreed upon at the time of the contract
and payment for such a contract is made at a specified future
date. The Company also uses interest rate forwards to sell
securities as economic hedges against the risk of changes in the
fair value of mortgage loans
held-for-sale
and interest rate lock commitments. The Company utilizes
interest rate forwards in cash flow and non-qualifying hedging
relationships.
Interest rate lock commitments are short-term commitments to
fund mortgage loan applications in process (the pipeline) for a
fixed term at a fixed price. During the term of an interest rate
lock commitment, the Company is exposed to the risk that
interest rates will change from the rate quoted to the potential
borrower. Interest rate lock commitments to fund mortgage loans
that will be
held-for-sale
are considered derivatives pursuant to SFAS No. 133,
Accounting for Derivative Instruments and Hedging
(SFAS 133). Interest rate lock commitments
are included in interest rate forwards in the preceding table.
Interest rate lock commitments are not designated as hedging
instruments.
A synthetic guaranteed interest contract (GIC) is a
contract that simulates the performance of a traditional GIC
through the use of financial instruments. Under a synthetic GIC,
the policyholder owns the underlying assets.
43
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The Company guarantees a rate return on those assets for a
premium. Synthetic GICs are not designated as hedging
instruments.
Foreign currency derivatives, including foreign currency swaps,
foreign currency forwards and currency option contracts, are
used by the Company to reduce the risk from fluctuations in
foreign currency exchange rates associated with its assets and
liabilities denominated in foreign currencies. The Company also
uses foreign currency forwards and swaps to hedge the foreign
currency risk associated with certain of its net investments in
foreign operations.
In a foreign currency swap transaction, the Company agrees with
another party to exchange, at specified intervals, the
difference between one currency and another at a fixed exchange
rate, generally set at inception, calculated by reference to an
agreed upon principal amount. The principal amount of each
currency is exchanged at the inception and termination of the
currency swap by each party. The Company utilizes foreign
currency swaps in fair value, cash flow, net investment in
foreign operations, and non-qualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees
with another party to deliver a specified amount of an
identified currency at a specified future date. The price is
agreed upon at the time of the contract and payment for such a
contract is made in a different currency at the specified future
date. The Company utilizes foreign currency forwards in net
investment in foreign operations and non-qualifying hedging
relationships.
The Company enters into currency option contracts that give it
the right, but not the obligation, to sell the foreign currency
amount in exchange for a functional currency amount within a
limited time at a contracted price. The contracts may also be
net settled in cash, based on differentials in the foreign
exchange rate and the strike price. The Company uses currency
options to hedge against the foreign currency exposure inherent
in certain of its variable annuity products. The Company
utilizes currency options in non-qualifying hedging
relationships.
The Company uses certain of its foreign currency denominated
GICs to hedge portions of its net investments in foreign
operations against adverse movements in exchange rates. Such
contracts are included in non-derivative hedging instruments in
the preceding table.
Swap spreadlocks are used by the Company to hedge invested
assets on an economic basis against the risk of changes in
credit spreads. Swap spreadlocks are forward transactions
between two parties whose underlying reference index is a
forward starting interest rate swap where the Company agrees to
pay a coupon based on a predetermined reference swap spread in
exchange for receiving a coupon based on a floating rate. The
Company has the option to cash settle with the counterparty in
lieu of maintaining the swap after the effective date. The
Company utilizes swap spreadlocks in non-qualifying hedging
relationships.
Certain credit default swaps are used by the Company to hedge
against credit-related changes in the value of its investments
and to diversify its credit risk exposure in certain portfolios.
In a credit default swap transaction, the Company agrees with
another party, at specified intervals, to pay a premium to
insure credit risk. If a credit event, as defined by the
contract, occurs, generally the contract will require the swap
to be settled gross by the delivery of par quantities of the
referenced investment equal to the specified swap notional in
exchange for the payment of cash amounts by the counterparty
equal to the par value of the investment surrendered. The
Company utilizes credit default swaps in non-qualifying hedging
relationships.
Credit default swaps are also used to synthetically create
investments that are either more expensive to acquire or
otherwise unavailable in the cash markets. These transactions
are a combination of a derivative and a cash instrument such as
a U.S. Treasury or Agency security. The Company also enters
into certain credit default swaps held in relation to trading
portfolios for the purpose of generating profits on short-term
differences in price. These credit default swaps are not
designated as hedging instruments.
In exchange-traded equity futures transactions, the Company
agrees to purchase or sell a specified number of contracts, the
value of which is determined by the different classes of equity
securities, and to post variation margin on a daily basis in an
amount equal to the difference in the daily market values of
those contracts. The Company enters into exchange-traded futures
with regulated futures commission merchants that are members of
the exchange. Exchange-
44
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
traded equity futures are used primarily to hedge liabilities
embedded in certain variable annuity products offered by the
Company. The Company utilizes exchange-traded equity futures in
non-qualifying hedging relationships.
Equity index options are used by the Company primarily to hedge
minimum guarantees embedded in certain variable annuity products
offered by the Company. To hedge against adverse changes in
equity indices, the Company enters into contracts to sell the
equity index within a limited time at a contracted price. The
contracts will be net settled in cash based on differentials in
the indices at the time of exercise and the strike price. In
certain instances, the Company may enter into a combination of
transactions to hedge adverse changes in equity indices within a
pre-determined range through the purchase and sale of options.
Equity index options are included in equity options in the
preceding table. The Company utilizes equity index options in
non-qualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge
minimum guarantees embedded in certain variable annuity products
offered by the Company. In an equity variance swap, the Company
agrees with another party to exchange amounts in the future,
based on changes in equity volatility over a defined period.
Equity variance swaps are included in variance swaps in the
preceding table. The Company utilizes equity variance swaps in
non-qualifying hedging relationships.
Total rate of return swaps (TRRs) are swaps whereby
the Company agrees with another party to exchange, at specified
intervals, the difference between the economic risk and reward
of an asset or a market index and LIBOR, calculated by reference
to an agreed notional principal amount. No cash is exchanged at
the outset of the contract. Cash is paid and received over the
life of the contract based on the terms of the swap. These
transactions are entered into pursuant to master agreements that
provide for a single net payment to be made by the counterparty
at each due date. The Company uses total return swaps to hedge
its equity market guarantees in certain of its insurance
products. TRRs can be used as hedges or to synthetically create
investments. TRRs are included in the other classification in
the preceding table. The Company utilizes TRRs in non-qualifying
hedging relationships.
Hedging
The following table presents the notional amount and estimated
fair value of derivatives designated as hedging instruments
under SFAS 133 by type of hedge designation at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Notional
|
|
|
Fair Value
|
|
|
Notional
|
|
|
Fair Value
|
|
Derivatives Designated as Hedging Instruments
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
(In millions)
|
|
|
Fair Value Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency swaps
|
|
$
|
5,665
|
|
|
$
|
744
|
|
|
$
|
159
|
|
|
$
|
6,093
|
|
|
$
|
467
|
|
|
$
|
550
|
|
Interest rate swaps
|
|
|
4,507
|
|
|
|
599
|
|
|
|
89
|
|
|
|
4,141
|
|
|
|
1,338
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
10,172
|
|
|
|
1,343
|
|
|
|
248
|
|
|
|
10,234
|
|
|
|
1,805
|
|
|
|
703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency swaps
|
|
|
3,558
|
|
|
|
164
|
|
|
|
251
|
|
|
|
3,782
|
|
|
|
463
|
|
|
|
381
|
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286
|
|
|
|
|
|
|
|
6
|
|
Interest rate forwards
|
|
|
4,691
|
|
|
|
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
8,259
|
|
|
|
237
|
|
|
|
251
|
|
|
|
4,068
|
|
|
|
463
|
|
|
|
387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Operations Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forwards
|
|
|
1,787
|
|
|
|
8
|
|
|
|
60
|
|
|
|
1,670
|
|
|
|
32
|
|
|
|
50
|
|
Foreign currency swaps
|
|
|
102
|
|
|
|
|
|
|
|
5
|
|
|
|
164
|
|
|
|
1
|
|
|
|
|
|
Non-derivative hedging instruments
|
|
|
351
|
|
|
|
|
|
|
|
344
|
|
|
|
351
|
|
|
|
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
2,240
|
|
|
|
8
|
|
|
|
409
|
|
|
|
2,185
|
|
|
|
33
|
|
|
|
373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Qualifying Hedges
|
|
$
|
20,671
|
|
|
$
|
1,588
|
|
|
$
|
908
|
|
|
$
|
16,487
|
|
|
$
|
2,301
|
|
|
$
|
1,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The following table presents the notional amount and estimated
fair value of derivatives that are not designated or do not
qualify as hedging instruments under SFAS 133 by derivative
type at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Notional
|
|
|
Fair Value
|
|
|
Notional
|
|
|
Fair Value
|
|
Derivatives Not Designated or Not Qualifying as Hedging
Instruments
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
(In millions)
|
|
|
Interest rate swaps
|
|
$
|
31,106
|
|
|
$
|
1,288
|
|
|
$
|
1,247
|
|
|
$
|
29,633
|
|
|
$
|
3,279
|
|
|
$
|
1,309
|
|
Interest rate floors
|
|
|
26,191
|
|
|
|
544
|
|
|
|
51
|
|
|
|
48,517
|
|
|
|
1,748
|
|
|
|
|
|
Interest rate caps
|
|
|
22,635
|
|
|
|
183
|
|
|
|
|
|
|
|
24,643
|
|
|
|
11
|
|
|
|
|
|
Interest rate futures
|
|
|
8,711
|
|
|
|
14
|
|
|
|
11
|
|
|
|
13,851
|
|
|
|
44
|
|
|
|
117
|
|
Interest rate options
|
|
|
300
|
|
|
|
6
|
|
|
|
|
|
|
|
2,365
|
|
|
|
939
|
|
|
|
35
|
|
Interest rate forwards
|
|
|
14,886
|
|
|
|
118
|
|
|
|
39
|
|
|
|
16,616
|
|
|
|
49
|
|
|
|
70
|
|
Synthetic GICs
|
|
|
4,313
|
|
|
|
|
|
|
|
|
|
|
|
4,260
|
|
|
|
|
|
|
|
|
|
Foreign currency swaps
|
|
|
8,202
|
|
|
|
530
|
|
|
|
807
|
|
|
|
9,399
|
|
|
|
1,022
|
|
|
|
935
|
|
Foreign currency forwards
|
|
|
4,505
|
|
|
|
53
|
|
|
|
82
|
|
|
|
3,497
|
|
|
|
121
|
|
|
|
79
|
|
Currency options
|
|
|
890
|
|
|
|
36
|
|
|
|
|
|
|
|
932
|
|
|
|
73
|
|
|
|
|
|
Swaps spreadlocks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,338
|
|
|
|
|
|
|
|
99
|
|
Credit default swaps
|
|
|
6,867
|
|
|
|
166
|
|
|
|
108
|
|
|
|
5,219
|
|
|
|
152
|
|
|
|
69
|
|
Equity futures
|
|
|
6,345
|
|
|
|
20
|
|
|
|
10
|
|
|
|
6,057
|
|
|
|
1
|
|
|
|
88
|
|
Equity options
|
|
|
23,438
|
|
|
|
2,083
|
|
|
|
659
|
|
|
|
5,153
|
|
|
|
2,150
|
|
|
|
|
|
Variance swaps
|
|
|
11,969
|
|
|
|
283
|
|
|
|
13
|
|
|
|
9,222
|
|
|
|
416
|
|
|
|
|
|
Other
|
|
|
250
|
|
|
|
|
|
|
|
98
|
|
|
|
250
|
|
|
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-designated or non-qualifying derivatives
|
|
$
|
170,608
|
|
|
$
|
5,324
|
|
|
$
|
3,125
|
|
|
$
|
181,952
|
|
|
$
|
10,005
|
|
|
$
|
2,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the settlement payments recorded in
income for the:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Qualifying hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
10
|
|
|
$
|
4
|
|
|
$
|
27
|
|
|
$
|
2
|
|
Interest credited to policyholder account balances
|
|
|
55
|
|
|
|
42
|
|
|
|
97
|
|
|
|
63
|
|
Other expenses
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Non-qualifying hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Net investment gains (losses)
|
|
|
33
|
|
|
|
(27
|
)
|
|
|
63
|
|
|
|
(19
|
)
|
Other revenues
|
|
|
14
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
115
|
|
|
$
|
19
|
|
|
$
|
207
|
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value Hedges
The Company designates and accounts for the following as fair
value hedges when they have met the requirements of
SFAS 133: (i) interest rate swaps to convert fixed
rate investments to floating rate
investments; (ii) interest rate swaps to convert fixed
rate liabilities to floating rate liabilities; and
(iii) foreign
46
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
currency swaps to hedge the foreign currency fair value exposure
of foreign currency denominated investments and liabilities.
The Company recognizes gains and losses on derivatives and the
related hedged items in fair value hedges within net investment
gains (losses). The following table represents the amount of
such net investment gains (losses) recognized for the three
months and six months ended June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ineffectiveness
|
|
|
|
|
|
Net Investment Gains
|
|
|
Net Investment Gains
|
|
|
Recognized in
|
|
Derivatives in Fair Value
|
|
Hedge Items in Fair Value
|
|
(Losses) Recognized
|
|
|
(Losses) Recognized
|
|
|
Net Investment
|
|
Hedging Relationships
|
|
Hedging Relationships
|
|
for Derivatives
|
|
|
for Hedged Items
|
|
|
Gains (Losses)
|
|
|
|
|
|
(In millions)
|
|
|
For the Three Months Ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
Fixed maturity securities
|
|
$
|
33
|
|
|
$
|
(29
|
)
|
|
$
|
4
|
|
|
|
Policyholder account balances (1)
|
|
|
(518
|
)
|
|
|
509
|
|
|
|
(9
|
)
|
Foreign currency swaps:
|
|
Foreign-denominated fixed maturity securities
|
|
|
(16
|
)
|
|
|
15
|
|
|
|
(1
|
)
|
|
|
Foreign-denominated policyholder account balances (2)
|
|
|
427
|
|
|
|
(421
|
)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(74
|
)
|
|
$
|
74
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(323
|
)
|
|
$
|
313
|
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
Fixed maturity securities
|
|
$
|
47
|
|
|
$
|
(41
|
)
|
|
$
|
6
|
|
|
|
Policyholder account balances (1)
|
|
|
(812
|
)
|
|
|
801
|
|
|
|
(11
|
)
|
Foreign currency swaps:
|
|
Foreign-denominated fixed maturity securities
|
|
|
(13
|
)
|
|
|
11
|
|
|
|
(2
|
)
|
|
|
Foreign-denominated policyholder account balances (2)
|
|
|
320
|
|
|
|
(308
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(458
|
)
|
|
$
|
463
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22
|
|
|
$
|
(27
|
)
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fixed rate liabilities |
|
(2) |
|
Fixed rate or floating rate liabilities |
All components of each derivatives gain or loss were
included in the assessment of hedge effectiveness. There were no
instances in which the Company discontinued fair value hedge
accounting due to a hedged firm commitment no longer qualifying
as a fair value hedge.
Cash
Flow Hedges
The Company designates and accounts for the following as cash
flow hedges when they have met the requirements of
SFAS 133: (i) interest rate swaps to convert floating
rate investments to fixed rate investments; (ii) interest
rate swaps to convert floating rate liabilities to fixed rate
liabilities; (iii) foreign currency swaps to hedge the
foreign currency cash flow exposure of foreign currency
denominated investments and liabilities; and (iv) interest
rate forwards to lock in the price to be paid for forward
purchases of fixed rate investments.
For the three months and six months ended June 30, 2009,
the Company recognized insignificant net investment losses which
represented the ineffective portion of all cash flow hedges. For
the three months and six months ended June 30, 2008, the
Company did not recognize any net investment gains (losses)
which represented
47
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
the ineffective portion of all cash flow hedges. All components
of each derivatives gain or loss were included in the
assessment of hedge effectiveness. In certain instances, the
Company discontinued cash flow hedge accounting because the
forecasted transactions did not occur on the anticipated date or
in the additional time period permitted by SFAS 133. The
net amounts reclassified into net investment gains (losses) for
the three months and six months ended June 30, 2009 related
to such discontinued cash flow hedges were gains (losses) of $0
and $1 million, respectively, and for the three months and
six months ended June 30, 2008, related to such
discontinued cash flow hedges were gains (losses) of
($3) million and ($7) million, respectively. With the
exception of certain cash flow hedges involving interest rate
forwards, there were no hedged forecasted transactions, other
than the variable payments or receipts on existing assets and
liabilities, for the three months and six months ended
June 30, 2009. In connection with certain interest rate
forwards, the maximum length of time over which the Company is
hedging its exposure to variability in future cash flows for
forecasted transactions does not exceed one year. There were no
hedged forecasted transactions, other than the variable payments
or receipts on existing assets and liabilities, for the three
months and six months ended June 30, 2008.
The following table presents the components of other
comprehensive loss, before income tax, related to cash flow
hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Other comprehensive income (loss), beginning of period
|
|
$
|
113
|
|
|
$
|
(361
|
)
|
|
$
|
82
|
|
|
$
|
(270
|
)
|
Gains (losses) deferred in other comprehensive loss on the
effective portion of cash flow hedges
|
|
|
(97
|
)
|
|
|
(11
|
)
|
|
|
(105
|
)
|
|
|
(46
|
)
|
Amounts reclassified to net investment gains (losses)
|
|
|
(6
|
)
|
|
|
51
|
|
|
|
33
|
|
|
|
(7
|
)
|
Amounts reclassified to net investment income
|
|
|
4
|
|
|
|
3
|
|
|
|
6
|
|
|
|
5
|
|
Amounts reclassified to other expenses
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Amortization of transition adjustment
|
|
|
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), end of period
|
|
$
|
13
|
|
|
$
|
(318
|
)
|
|
$
|
13
|
|
|
$
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2009, $40 million of deferred net losses
on derivatives accumulated in other comprehensive loss is
expected to be reclassified to earnings within the next
12 months.
48
MetLife,
Inc.
Notes to
the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The following table presents the effects of derivatives in cash
flow hedging relationships on the consolidated statements of
income and the consolidated statements of stockholders
equity for the three months and six months ended June 30,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Location
|
|
|
|
Amount of Gains
|
|
|
Amount and Location
|
|
|
of Gains (Losses)
|
|
|
|
(Losses) Deferred
|
|
|
of Gains (Losses)
|
|
|
Recognized in Income
|
|
|
|
in Accumulated
|
|
|
Reclassified from
|
|
|
on Derivatives
|
|
Derivatives in Cash Flow
|
|
Other Comprehensive
|
|
|
Accumulated Other
|
|
|
(Ineffective Portion and
|
|
Hedging Relationships
|
|
Loss on Derivatives
|
|
|
Comprehensive Loss into Income
|
|
|
Amount Excluded from
|
|
|
|
(Effective Portion)
|
|
|
(Effective Portion)
|
|
|
Effectiveness Testing)
|
|
|
|
|
|
|
Net Investment
|
|
  |