UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission file number: 001-15787
MetLife, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 13-4075851 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
200 Park Avenue, New York, N.Y. | 10166-0188 | |
(Address of principal executive offices) |
(Zip Code) |
(212) 578-2211
(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 ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
þ |
Accelerated filer |
¨ | |||
Non-accelerated filer |
¨ (Do not check if a smaller reporting company) |
Smaller reporting company |
¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
At October 31, 2012, 1,091,044,048 shares of the registrants common stock, $0.01 par value per share, were outstanding.
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As used in this Form 10-Q, MetLife, the Company, we, our and us refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including 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.
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MetLife, Inc., its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in MetLife, Inc.s filings with the U.S. Securities and Exchange Commission (the SEC). These factors include: (1) difficult conditions in the global capital markets; (2) concerns over U.S. fiscal policy and the fiscal cliff in the U.S., as well as rating agency downgrades of U.S. Treasury securities; (3) uncertainty about the effectiveness of governmental and regulatory actions to stabilize the financial system, the imposition of fees relating thereto, or the promulgation of additional regulations; (4) increased volatility and disruption of the capital and credit markets, which may affect our ability to seek financing or access our credit facilities; (5) impact of comprehensive financial services regulation reform on us; (6) economic, political, legal, currency and other risks relating to our international operations, including with respect to fluctuations of exchange rates; (7) exposure to financial and capital market risk, including as a result of the disruption in Europe and possible withdrawal of one or more countries from the Euro zone; (8) changes in general economic conditions, including the performance of financial markets and interest rates, which may affect our ability to raise capital, generate fee income and market-related revenue and finance statutory reserve requirements and may require us to pledge collateral or make payments related to declines in value of specified assets; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (10) investment losses and defaults, and changes to investment valuations; (11) impairments of goodwill and realized losses or market value impairments to illiquid assets; (12) defaults on our mortgage loans; (13) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (14) our ability to address unforeseen liabilities, asset impairments, or rating actions arising from acquisitions or dispositions, including our acquisition of American Life Insurance Company and Delaware American Life Insurance Company (collectively, ALICO) and to successfully integrate and manage the growth of acquired businesses with minimal disruption; (15) uncertainty with respect to the outcome of the closing agreement entered into with the United States Internal Revenue Service in connection with the acquisition of ALICO; (16) the dilutive impact on our stockholders resulting from the settlement of common equity units issued in connection with the acquisition of ALICO or otherwise; (17) regulatory and other restrictions affecting MetLife, Inc.s ability to pay dividends and repurchase common stock; (18) MetLife, Inc.s primary reliance, as a holding company, on dividends from its subsidiaries to meet debt payment obligations and the applicable regulatory restrictions on the ability of the subsidiaries to pay such dividends; (19) downgrades in our claims paying ability, financial strength or credit ratings; (20) ineffectiveness of risk management policies and procedures; (21) availability and effectiveness of reinsurance or indemnification arrangements, as well as default or failure of counterparties to perform; (22) discrepancies between actual claims experience and
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assumptions used in setting prices for our products and establishing the liabilities for our obligations for future policy benefits and claims; (23) catastrophe losses; (24) heightened competition, including with respect to pricing, entry of new competitors, consolidation of distributors, the development of new products by new and existing competitors, distribution of amounts available under U.S. government programs, and for personnel; (25) unanticipated changes in industry trends; (26) changes in assumptions related to investment valuations, deferred policy acquisition costs, deferred sales inducements, value of business acquired or goodwill; (27) changes in accounting standards, practices and/or policies; (28) increased expenses relating to pension and postretirement benefit plans, as well as health care and other employee benefits; (29) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and the adjustment for nonperformance risk; (30) deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (31) adverse results or other consequences from litigation, arbitration or regulatory investigations; (32) inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (33) discrepancies between actual experience and assumptions used in establishing liabilities related to other contingencies or obligations; (34) regulatory, legislative or tax changes relating to our insurance, banking, international, or other operations that may affect the cost of, or demand for, our products or services, or increase the cost or administrative burdens of providing benefits to employees; (35) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural catastrophes, including any related impact on our disaster recovery systems, cyber- or other information security systems and management continuity planning; (36) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; and (37) other risks and uncertainties described from time to time in MetLife, Inc.s filings with the SEC.
MetLife, Inc. does not undertake any obligation to publicly correct or update any forward-looking statement if MetLife, Inc. later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures MetLife, Inc. makes on related subjects in reports to the SEC.
Note Regarding Reliance on Statements in Our Contracts
See Exhibit Index Note Regarding Reliance on Statements in Our Contracts for information regarding agreements included as exhibits to this Quarterly Report on Form 10-Q.
4
Part I Financial Information
MetLife, Inc.
Interim Condensed Consolidated Balance Sheets
September 30, 2012 (Unaudited) and December 31, 2011
(In millions, except share and per share data)
September 30, 2012 | December 31, 2011 | |||||||
Assets |
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Investments: |
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Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $344,791 and $329,811, respectively; includes $3,349 and $3,225, respectively, relating to variable interest entities) |
$ | 378,005 | $ | 350,271 | ||||
Equity securities available-for-sale, at estimated fair value (cost: $2,838 and $3,208, respectively) |
2,803 | 3,023 | ||||||
Trading and other securities, at estimated fair value (includes $565 and $473, respectively, of actively traded securities; and $146 and $280, respectively, relating to variable interest entities) |
15,995 | 18,268 | ||||||
Mortgage loans: |
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Held-for-investment, principally at amortized cost (net of valuation allowances of $354 and $481, respectively; includes $2,928 and $3,187, respectively, at estimated fair value, relating to variable interest entities) |
57,884 | 56,915 | ||||||
Held-for-sale, principally at estimated fair value (includes $64 and $10,716, respectively, under the fair value option) |
1,286 | 15,178 | ||||||
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Mortgage loans, net |
59,170 | 72,093 | ||||||
Policy loans |
11,949 | 11,892 | ||||||
Real estate and real estate joint ventures (includes $10 and $15, respectively, relating to variable interest entities) |
8,749 | 8,563 | ||||||
Other limited partnership interests (includes $271 and $259, respectively, relating to variable interest entities) |
6,730 | 6,378 | ||||||
Short-term investments, principally at estimated fair value |
14,678 | 17,310 | ||||||
Other invested assets, principally at estimated fair value (includes $81 and $98, respectively, relating to variable interest entities) |
23,477 | 23,581 | ||||||
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Total investments |
521,556 | 511,379 | ||||||
Cash and cash equivalents, principally at estimated fair value (includes $88 and $176, respectively, relating to variable interest entities) |
16,950 | 10,461 | ||||||
Accrued investment income (includes $14 and $16, respectively, relating to variable interest entities) |
4,716 | 4,344 | ||||||
Premiums, reinsurance and other receivables (includes $3 and $12, respectively, relating to variable interest entities) |
22,939 | 22,481 | ||||||
Deferred policy acquisition costs and value of business acquired |
24,604 | 24,619 | ||||||
Goodwill |
10,024 | 11,935 | ||||||
Other assets (includes $6 and $5, respectively, relating to variable interest entities) |
8,123 | 7,984 | ||||||
Separate account assets |
237,373 | 203,023 | ||||||
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Total assets |
$ | 846,285 | $ | 796,226 | ||||
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Liabilities and Equity |
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Liabilities |
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Future policy benefits |
$ | 191,068 | $ | 184,275 | ||||
Policyholder account balances |
226,882 | 217,700 | ||||||
Other policy-related balances |
15,836 | 15,599 | ||||||
Policyholder dividends payable |
817 | 774 | ||||||
Policyholder dividend obligation |
3,909 | 2,919 | ||||||
Payables for collateral under securities loaned and other transactions |
38,493 | 33,716 | ||||||
Bank deposits |
6,515 | 10,507 | ||||||
Short-term debt |
100 | 686 | ||||||
Long-term debt (includes $2,733 and $3,068, respectively, at estimated fair value, relating to variable interest entities) |
19,621 | 23,692 | ||||||
Collateral financing arrangements |
4,196 | 4,647 | ||||||
Junior subordinated debt securities |
3,192 | 3,192 | ||||||
Current income tax payable |
451 | 193 | ||||||
Deferred income tax liability |
9,275 | 6,395 | ||||||
Other liabilities (includes $41 and $60, respectively, relating to variable interest entities; and $0 and $7,626, respectively, under the fair value option) |
24,007 | 30,914 | ||||||
Separate account liabilities |
237,373 | 203,023 | ||||||
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Total liabilities |
781,735 | 738,232 | ||||||
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Contingencies, Commitments and Guarantees (Note 12) |
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Redeemable noncontrolling interests in partially owned consolidated subsidiaries |
152 | 105 | ||||||
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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 |
1 | 1 | ||||||
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 1,065,840,714 and 1,061,150,915 shares issued at September 30, 2012 and December 31, 2011, respectively; 1,062,646,827 and 1,057,957,028 shares outstanding at September 30, 2012 and December 31, 2011, respectively |
11 | 11 | ||||||
Additional paid-in capital |
26,964 | 26,782 | ||||||
Retained earnings |
25,920 | 24,814 | ||||||
Treasury stock, at cost; 3,193,887 shares at September 30, 2012 and December 31, 2011 |
(172 | ) | (172 | ) | ||||
Accumulated other comprehensive income (loss) |
11,325 | 6,083 | ||||||
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Total MetLife, Inc.s stockholders equity |
64,049 | 57,519 | ||||||
Noncontrolling interests |
349 | 370 | ||||||
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Total equity |
64,398 | 57,889 | ||||||
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Total liabilities and equity |
$ | 846,285 | $ | 796,226 | ||||
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See accompanying notes to the interim condensed consolidated financial statements.
5
MetLife, Inc.
Interim Condensed Consolidated Statements of Operations and Comprehensive Income
For the Three Months and Nine Months Ended September 30, 2012 and 2011 (Unaudited)
(In millions, except per share data)
Three Months Ended September 30, |
Nine Months Ended September 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||||
Revenues |
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Premiums |
$ | 9,096 | $ | 9,342 | $ | 27,386 | $ | 27,190 | ||||||||||
Universal life and investment-type product policy fees |
2,131 | 1,998 | 6,306 | 5,856 | ||||||||||||||
Net investment income |
5,517 | 4,252 | 16,436 | 14,658 | ||||||||||||||
Other revenues |
455 | 720 | 1,445 | 1,878 | ||||||||||||||
Net investment gains (losses): |
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Other-than-temporary impairments on fixed maturity securities |
(57 | ) | (95 | ) | (310 | ) | (525 | ) | ||||||||||
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss) |
10 | (189 | ) | 39 | (5 | ) | ||||||||||||
Other net investment gains (losses) |
69 | 229 | 119 | 221 | ||||||||||||||
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Total net investment gains (losses) |
22 | (55 | ) | (152 | ) | (309 | ) | |||||||||||
Net derivative gains (losses) |
(718 | ) | 4,196 | (604 | ) | 4,233 | ||||||||||||
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Total revenues |
16,503 | 20,453 | 50,817 | 53,506 | ||||||||||||||
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Expenses |
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Policyholder benefits and claims |
8,943 | 9,018 | 26,958 | 26,376 | ||||||||||||||
Interest credited to policyholder account balances |
2,102 | 738 | 5,681 | 4,104 | ||||||||||||||
Policyholder dividends |
355 | 384 | 1,050 | 1,130 | ||||||||||||||
Goodwill impairment |
1,868 | | 1,868 | | ||||||||||||||
Other expenses |
4,245 | 5,198 | 13,341 | 13,987 | ||||||||||||||
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Total expenses |
17,513 | 15,338 | 48,898 | 45,597 | ||||||||||||||
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Income (loss) from continuing operations before provision for income tax |
(1,010 | ) | 5,115 | 1,919 | 7,909 | |||||||||||||
Provision for income tax expense (benefit) |
(53 | ) | 1,673 | 710 | 2,481 | |||||||||||||
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Income (loss) from continuing operations, net of income tax |
(957 | ) | 3,442 | 1,209 | 5,428 | |||||||||||||
Income (loss) from discontinued operations, net of income tax |
| 8 | 17 | (1 | ) | |||||||||||||
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Net income (loss) |
(957 | ) | 3,450 | 1,226 | 5,427 | |||||||||||||
Less: Net income (loss) attributable to noncontrolling interests |
(3 | ) | (6 | ) | 29 | (6 | ) | |||||||||||
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Net income (loss) attributable to MetLife, Inc. |
(954 | ) | 3,456 | 1,197 | 5,433 | |||||||||||||
Less: |
Preferred stock dividends |
30 | 30 | 91 | 91 | |||||||||||||
Preferred stock redemption premium |
| | | 146 | ||||||||||||||
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Net income (loss) available to MetLife, Inc.s common shareholders |
$ | (984 | ) | $ | 3,426 | $ | 1,106 | $ | 5,196 | |||||||||
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Comprehensive income (loss) |
$ | 1,655 | $ | 6,966 | $ | 6,474 | $ | 11,291 | ||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax |
19 | (12 | ) | 35 | (21 | ) | ||||||||||||
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Comprehensive income (loss) attributable to MetLife, Inc. |
$ | 1,636 | $ | 6,978 | $ | 6,439 | $ | 11,312 | ||||||||||
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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 |
$ | (0.92 | ) | $ | 3.22 | $ | 1.02 | $ | 4.91 | |||||||||
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Diluted |
$ | (0.92 | ) | $ | 3.20 | $ | 1.01 | $ | 4.86 | |||||||||
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Net income (loss) available to MetLife, Inc.s common shareholders per common share: |
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Basic |
$ | (0.92 | ) | $ | 3.23 | $ | 1.04 | $ | 4.91 | |||||||||
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Diluted |
$ | (0.92 | ) | $ | 3.21 | $ | 1.03 | $ | 4.86 | |||||||||
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See accompanying notes to the interim condensed consolidated financial statements.
6
MetLife, Inc.
Interim Condensed Consolidated Statements of Equity
For the Nine Months Ended September 30, 2012 (Unaudited)
(In millions)
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Treasury Stock at Cost |
Net Unrealized Investment Gains (Losses) |
Other-Than- Temporary Impairments |
Foreign Currency Translation Adjustments |
Defined Benefit Plans Adjustment |
Total MetLife, Inc.s Stockholders Equity |
Noncontrolling Interests (1) |
Total Equity |
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Balance at December 31, 2011 |
$ | 1 | $ | 11 | $ | 26,782 | $ | 24,814 | $ | (172 | ) | $ | 9,115 | $ | (441 | ) | $ | (648 | ) | $ | (1,943 | ) | $ | 57,519 | $ | 370 | $ | 57,889 | ||||||||||||||||||||
Stock-based compensation |
182 | 182 | 182 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock |
(91 | ) | (91 | ) | (91 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests |
(56 | ) | (56 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
1,197 | 1,197 | 24 | 1,221 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of income tax |
4,908 | 170 | 89 | 75 | 5,242 | 11 | 5,253 | |||||||||||||||||||||||||||||||||||||||||
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Balance at September 30, 2012 |
$ | 1 | $ | 11 | $ | 26,964 | $ | 25,920 | $ | (172 | ) | $ | 14,023 | $ | (271 | ) | $ | (559 | ) | $ | (1,868 | ) | $ | 64,049 | $ | 349 | $ | 64,398 | ||||||||||||||||||||
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(1) | Net income (loss) attributable to noncontrolling interests excludes gains (losses) of redeemable noncontrolling interests in partially owned consolidated subsidiaries of $5 million. |
See accompanying notes to the interim condensed consolidated financial statements.
7
MetLife, Inc.
Interim Condensed Consolidated Statements of Equity (Continued)
For the Nine Months Ended September 30, 2011 (Unaudited)
(In millions)
Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Retained Earnings |
Treasury Stock at Cost |
Net Unrealized Investment Gains (Losses) |
Other-Than- Temporary Impairments |
Foreign Currency Translation Adjustments |
Defined Benefit Plans Adjustment |
Total MetLife, Inc.s Stockholders Equity |
Noncontrolling Interests (1) |
Total Equity |
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Balance at December 31, 2010 |
$ | 1 | $ | 10 | $ | 26,423 | $ | 21,363 | $ | (172 | ) | $ | 3,356 | $ | (366 | ) | $ | (541 | ) | $ | (1,449 | ) | $ | 48,625 | $ | 371 | $ | 48,996 | ||||||||||||||||||||
Cumulative effect of change in accounting |
(1,917 | ) | 132 | 13 | (1,772 | ) | (6 | ) | (1,778 | ) | ||||||||||||||||||||||||||||||||||||||
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Balance at January 1, 2011 |
1 | 10 | 26,423 | 19,446 | (172 | ) | 3,488 | (366 | ) | (528 | ) | (1,449 | ) | 46,853 | 365 | 47,218 | ||||||||||||||||||||||||||||||||
Redemption of convertible preferred stock |
(2,805 | ) | (2,805 | ) | (2,805 | ) | ||||||||||||||||||||||||||||||||||||||||||
Preferred stock redemption premium |
(146 | ) | (146 | ) | (146 | ) | ||||||||||||||||||||||||||||||||||||||||||
Common stock issuancenewly issued shares |
1 | 2,949 | 2,950 | 2,950 | ||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation |
177 | 177 | 177 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock |
(91 | ) | (91 | ) | (91 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests |
48 | 48 | ||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) |
5,433 | 5,433 | 1 | 5,434 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss), net of |
5,584 | (51 | ) | 281 | 65 | 5,879 | (22 | ) | 5,857 | |||||||||||||||||||||||||||||||||||||||
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Balance at September 30, 2011 |
$ | 1 | $ | 11 | $ | 26,744 | $ | 24,642 | $ | (172 | ) | $ | 9,072 | $ | (417 | ) | $ | (247 | ) | $ | (1,384 | ) | $ | 58,250 | $ | 392 | $ | 58,642 | ||||||||||||||||||||
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(1) | Net income (loss) attributable to noncontrolling interests excludes gains (losses) of redeemable noncontrolling interests in partially owned consolidated subsidiaries of ($7) million. |
See accompanying notes to the interim condensed consolidated financial statements.
8
Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2012 and 2011 (Unaudited)
(In millions)
Nine Months Ended September 30, |
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2012 | 2011 | |||||||
Net cash provided by operating activities |
$ | 15,288 | $ | 9,034 | ||||
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Cash flows from investing activities |
||||||||
Sales, maturities and repayments of: |
||||||||
Fixed maturity securities |
78,296 | 81,918 | ||||||
Equity securities |
1,011 | 1,342 | ||||||
Mortgage loans |
6,696 | 8,784 | ||||||
Real estate and real estate joint ventures |
669 | 856 | ||||||
Other limited partnership interests |
690 | 852 | ||||||
Purchases of: |
||||||||
Fixed maturity securities |
(91,998 | ) | (95,660 | ) | ||||
Equity securities |
(499 | ) | (869 | ) | ||||
Mortgage loans |
(7,585 | ) | (12,248 | ) | ||||
Real estate and real estate joint ventures |
(595 | ) | (608 | ) | ||||
Other limited partnership interests |
(1,017 | ) | (849 | ) | ||||
Cash received in connection with freestanding derivatives |
1,560 | 2,841 | ||||||
Cash paid in connection with freestanding derivatives |
(2,534 | ) | (3,102 | ) | ||||
Net change in securitized reverse residential mortgage loans |
(1,198 | ) | | |||||
Sale of interest in joint venture |
| 265 | ||||||
Net change in policy loans |
(116 | ) | (84 | ) | ||||
Net change in short-term investments |
2,825 | (6,508 | ) | |||||
Net change in other invested assets |
(206 | ) | (169 | ) | ||||
Other, net |
(74 | ) | (104 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(14,075 | ) | (23,343 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities |
||||||||
Policyholder account balances: |
||||||||
Deposits |
69,438 | 69,911 | ||||||
Withdrawals |
(64,718 | ) | (67,001 | ) | ||||
Net change in payables for collateral under securities loaned and other transactions |
4,777 | 7,661 | ||||||
Net change in bank deposits |
(4,052 | ) | 296 | |||||
Net change in short-term debt |
(586 | ) | 145 | |||||
Long-term debt issued |
750 | 1,346 | ||||||
Long-term debt repaid |
(1,106 | ) | (1,192 | ) | ||||
Collateral financing arrangements repaid |
(349 | ) | | |||||
Cash received in connection with collateral financing arrangements |
| 100 | ||||||
Cash paid in connection with collateral financing arrangements |
(44 | ) | | |||||
Debt issuance costs |
(7 | ) | (1 | ) | ||||
Net change in liability for securitized reverse residential mortgage loans |
1,198 | | ||||||
Common stock issued, net of issuance costs |
| 2,950 | ||||||
Stock options exercised |
89 | 77 | ||||||
Redemption of convertible preferred stock |
| (2,805 | ) | |||||
Preferred stock redemption premium |
| (146 | ) | |||||
Dividends on preferred stock |
(91 | ) | (91 | ) | ||||
Other, net |
(47 | ) | (68 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
5,252 | 11,182 | ||||||
|
|
|
|
|||||
Effect of change in foreign currency exchange rates on cash and cash equivalents balances |
24 | 133 | ||||||
|
|
|
|
|||||
Change in cash and cash equivalents |
6,489 | (2,994 | ) | |||||
Cash and cash equivalents, beginning of period |
10,461 | 13,046 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 16,950 | $ | 10,052 | ||||
|
|
|
|
|||||
Cash and cash equivalents, subsidiaries held-for-sale, beginning of period |
$ | | $ | 89 | ||||
|
|
|
|
|||||
Cash and cash equivalents, subsidiaries held-for-sale, end of period |
$ | | $ | 51 | ||||
|
|
|
|
|||||
Cash and cash equivalents, from continuing operations, beginning of period |
$ | 10,461 | $ | 12,957 | ||||
|
|
|
|
|||||
Cash and cash equivalents, from continuing operations, end of period |
$ | 16,950 | $ | 10,001 | ||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Net cash paid during the period for: |
||||||||
Interest |
$ | 946 | $ | 1,184 | ||||
|
|
|
|
|||||
Income tax |
$ | 442 | $ | 668 | ||||
|
|
|
|
|||||
Non-cash transactions during the period: |
||||||||
Real estate and real estate joint ventures acquired in satisfaction of debt |
$ | 334 | $ | 106 | ||||
|
|
|
|
|||||
Collateral financing arrangements repaid |
$ | 102 | $ | | ||||
|
|
|
|
|||||
Redemption of advances agreements in long-term debt (1) |
$ | 3,806 | $ | | ||||
|
|
|
|
|||||
Issuance of funding agreements in policyholder account balances (1) |
$ | 3,806 | $ | | ||||
|
|
|
|
(1) | See Note 2. |
See accompanying notes to the interim condensed consolidated financial statements.
9
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)
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, its subsidiaries and affiliates. MetLife is a leading global provider of insurance, annuities and employee benefit programs throughout the United States, Japan, Latin America, Asia, Europe and the Middle East. Through its subsidiaries and affiliates, MetLife offers life insurance, annuities, property & casualty insurance, and other financial services to individuals, as well as group insurance and retirement & savings products and services to corporations and other institutions.
MetLife is organized into six segments: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, The Americas); Asia; and Europe, the Middle East and Africa (EMEA). See Note 17 for information on the reorganization of the Companys segments and continued realignment of certain products and businesses among its existing segments during 2012, which were retrospectively applied.
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.
Certain international subsidiaries have a fiscal year-end of November 30. Accordingly, the Companys interim condensed consolidated financial statements reflect the assets and liabilities of such subsidiaries as of August 31, 2012 and November 30, 2011 and the operating results of such subsidiaries for the three months and nine months ended August 31, 2012 and 2011.
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 business and operations. Actual results could differ from these estimates.
The accompanying interim condensed consolidated financial statements include the accounts of MetLife, Inc. and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities (VIEs) for which the Company is the primary beneficiary. 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 9. Intercompany accounts and transactions have been eliminated.
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 ownership 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 and related footnotes thereto have been reclassified to conform with the 2012 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements. See Adoption of New Accounting Pronouncements for discussion of accounting pronouncements adopted in the first quarter of 2012, which were retrospectively applied.
10
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company at September 30, 2012, its consolidated results of operations and comprehensive income for the three months and nine months ended September 30, 2012 and 2011, its consolidated statements of equity for the nine months ended September 30, 2012 and 2011, and its consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011, in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2011 consolidated balance sheet data was derived from audited consolidated financial statements included in MetLife, Inc.s Annual Report on Form 10-K for the year ended December 31, 2011, as revised by MetLife, Inc.s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) on May 23, 2012 (as revised, the 2011 Annual Report), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2011 Annual Report.
Adoption of New Accounting Pronouncements
Effective January 1, 2012, the Company adopted new guidance regarding comprehensive income that defers the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income. The amendments in this guidance are being made to allow the Financial Accounting Standards Board (FASB) time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. All other requirements in the new comprehensive income standard are not affected by this guidance, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements on an annual basis.
On January 1, 2012, the Company adopted new guidance regarding comprehensive income, which was retrospectively applied, that provides companies with the option to present the total of comprehensive income, components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements in annual financial statements. The objective of the standard is to increase the prominence of items reported in other comprehensive income and to facilitate convergence of GAAP and International Financial Reporting Standards (IFRS). The standard eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders equity. The amendments in this guidance do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified in net income. The Company adopted the two-statement approach for annual financial statements.
Effective January 1, 2012, the Company adopted new guidance on goodwill impairment testing that simplifies how an entity tests goodwill for impairment. This new guidance allows an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it needs to perform the quantitative two-step goodwill impairment test. Only if an entity determines, based on qualitative assessment, that it is more likely than not that a reporting units fair value is less than its carrying value will it be required to calculate the fair value of the reporting unit. The adoption did not have a material impact on the Companys consolidated financial statements.
Effective January 1, 2012, the Company adopted new guidance regarding fair value measurements that establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. Some of the amendments clarify the FASBs intent on the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The adoption did not have a material impact on the Companys consolidated financial statements. See also expanded disclosures in Note 5.
11
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Effective January 1, 2012, the Company adopted new guidance regarding effective control in repurchase agreements. The guidance removes from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets. The adoption did not have a material impact on the Companys consolidated financial statements.
On January 1, 2012, the Company adopted new guidance regarding accounting for deferred policy acquisition costs (DAC), which was retrospectively applied. The guidance specifies that only costs related directly to successful acquisition of new or renewal contracts can be capitalized as DAC; all other acquisition-related costs must be expensed as incurred. Under the new guidance, advertising costs may only be included in DAC if the capitalization criteria in the direct-response advertising guidance in Subtopic 340-20, Other Assets and Deferred CostsCapitalized Advertising Costs, are met. As a result, certain direct marketing, sales manager compensation and administrative costs previously capitalized by the Company will no longer be deferred.
The following table presents the effects of the retrospective application of the adoption of such new accounting guidance to the Companys previously reported consolidated statements of operations and comprehensive income:
Three Months Ended September 30, 2011 |
Nine Months Ended September 30, 2011 |
|||||||||||||||||||||||
As Previously Reported |
Adjustment | As Adjusted | As Previously Reported |
Adjustment | As Adjusted | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Net investment income |
$ | 4,253 | (1) | $ | (1 | ) | $ | 4,252 | $ | 14,663 | (1) | $ | (5 | ) | $ | 14,658 | ||||||||
Expenses |
||||||||||||||||||||||||
Policyholder benefits and claims |
$ | 9,017 | $ | 1 | $ | 9,018 | $ | 26,367 | $ | 9 | $ | 26,376 | ||||||||||||
Other expenses |
$ | 5,013 | $ | 185 | $ | 5,198 | $ | 13,410 | $ | 577 | $ | 13,987 | ||||||||||||
Income (loss) from continuing operations before provision for income tax |
$ | 5,302 | (1) | $ | (187 | ) | $ | 5,115 | $ | 8,500 | (1) | $ | (591 | ) | $ | 7,909 | ||||||||
Provision for income tax expense (benefit) |
$ | 1,734 | $ | (61 | ) | $ | 1,673 | $ | 2,680 | (1) | $ | (199 | ) | $ | 2,481 | |||||||||
Income (loss) from continuing operations, net of income tax |
$ | 3,568 | (1) | $ | (126 | ) | $ | 3,442 | $ | 5,820 | (1) | $ | (392 | ) | $ | 5,428 | ||||||||
Net income (loss) |
$ | 3,576 | $ | (126 | ) | $ | 3,450 | $ | 5,819 | $ | (392 | ) | $ | 5,427 | ||||||||||
Net income (loss) attributable to MetLife, Inc. |
$ | 3,582 | $ | (126 | ) | $ | 3,456 | $ | 5,825 | $ | (392 | ) | $ | 5,433 | ||||||||||
Net income (loss) available to MetLife, Inc.s common shareholders |
$ | 3,552 | $ | (126 | ) | $ | 3,426 | $ | 5,588 | $ | (392 | ) | $ | 5,196 | ||||||||||
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.s common shareholders per common share: |
||||||||||||||||||||||||
Basic |
$ | 3.35 | $ | (0.13 | ) | $ | 3.22 | $ | 5.29 | $ | (0.38 | ) | $ | 4.91 | ||||||||||
Diluted |
$ | 3.33 | $ | (0.13 | ) | $ | 3.20 | $ | 5.24 | $ | (0.38 | ) | $ | 4.86 | ||||||||||
Net income (loss) available to MetLife, Inc.s common shareholders per common share: |
||||||||||||||||||||||||
Basic |
$ | 3.35 | $ | (0.12 | ) | $ | 3.23 | $ | 5.28 | $ | (0.37 | ) | $ | 4.91 | ||||||||||
Diluted |
$ | 3.33 | $ | (0.12 | ) | $ | 3.21 | $ | 5.23 | $ | (0.37 | ) | $ | 4.86 |
12
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
(1) | Amounts in the table above differ from the amounts previously reported in the consolidated statements of operations and comprehensive income due to the inclusion of the impact of discontinued real estate operations of $4 million for the three months ended September 30, 2011 and $5 million (net investment income of $6 million, net of $1 million of income tax) for the nine months ended September 30, 2011. |
The following table presents the effects of the retrospective application of the adoption of such new accounting guidance to the Companys previously reported consolidated statement of cash flows:
Nine Months Ended September 30, 2011 |
||||||||||||
As Previously Reported |
Adjustment | As Adjusted | ||||||||||
(In millions) | ||||||||||||
Net cash provided by operating activities |
$ | 9,040 | $ | (6 | ) | $ | 9,034 | |||||
Net change in other invested assets |
$ | (175 | ) | $ | 6 | $ | (169 | ) |
Future Adoption of New Accounting Pronouncements
In December 2011, the FASB issued new guidance regarding balance sheet offsetting disclosures (Accounting Standards Update (ASU) 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities), effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance should be applied retrospectively for all comparative periods presented. The amendments in ASU 2011-11 require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effects of those arrangements on its financial position. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The objective of ASU 2011-11 is to facilitate comparison between those entities that prepare their financial statements on the basis of GAAP and those entities that prepare their financial statements on the basis of IFRS. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In July 2011, the FASB issued new guidance on other expenses (ASU 2011-06, Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers), effective for calendar years beginning after December 31, 2013. The objective of this standard is to address how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. The amendments in this standard specify that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using the straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
2. Acquisitions and Dispositions
2012 Pending Dispositions
MetLife Bank
In December 2011, MetLife Bank, National Association (MetLife Bank) and MetLife, Inc. entered into a definitive agreement to sell most of the depository business of MetLife Bank to GE Capital Bank (formerly
13
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
known as GE Capital Financial Inc.). In September 2012, this agreement was amended. Under the new structure, MetLife Banks depository business would be assumed by GE Capital Retail Bank, rather than by GE Capital Bank. The key terms of the agreement, whereby a GE Capital affiliate will acquire approximately $7 billion in MetLife Bank deposits, including certificates of deposit and money market accounts, remain unchanged. The transaction, as amended, will now be subject to approval by the Office of the Comptroller of the Currency (the OCC), the primary regulator of GE Capital Retail Bank, and other customary closing conditions. The approval of the Federal Deposit Insurance Corporation (the FDIC) will no longer be required for the transaction. Upon completion of the sale, MetLife Bank would take the remaining administrative steps with the FDIC to terminate its deposit insurance and MetLife, Inc. would deregister as a bank holding company.
Additionally, in January 2012, MetLife, Inc. announced it was exiting the business of originating forward residential mortgage loans and, in April 2012, announced it was exiting the businesses of originating and servicing reverse residential mortgage loans and that it and MetLife Bank entered into a definitive agreement to sell MetLife Banks reverse mortgage servicing portfolio. In June 2012, the Company sold the majority of MetLife Banks reverse mortgage servicing rights and related assets and liabilities, with the remainder sold in September 2012 pursuant to the same sales agreement. Also, in the third quarter of 2012, MetLife began exploring the sale of MetLife Banks forward mortgage servicing assets and operations. On November 2, 2012, MetLife, Inc. and MetLife Bank entered into a definitive agreement to sell MetLife Banks forward mortgage servicing portfolio to JPMorganChase Bank, N.A. The transaction is subject to certain regulatory approvals and other customary closing conditions. Upon entering into this agreement, MetLife Bank has committed to sell or has otherwise exited most of its operations.
In conjunction with exiting the depository, reverse mortgage servicing rights and mortgage loan origination businesses, for the three months and nine months ended September 30, 2012, the Company recorded a net loss of $45 million and $155 million, respectively, net of income tax, related to the loss on disposal of the reverse mortgage servicing rights, lease impairments, other employee-related charges, impairments on mortgage loans, and gains (losses) on securities and mortgage loans sold. The Company expects to incur additional charges of $10 million to $40 million, net of income tax, through 2013, related to exiting these businesses. For reverse mortgage servicing rights, collective net assets of $140 million were sold for $38 million in net consideration. In conjunction with the sale of reverse servicing rights, the Company also de-recognized $9.1 billion of the associated securitized reverse residential mortgage loans that previously did not qualify as sales, as well as the corresponding liability of $9.1 billion related to these mortgage loans, from the consolidated balance sheet. In addition, the total assets and liabilities recorded in the consolidated balance sheets related to the depository and origination businesses were approximately $6.8 billion and $6.0 billion at September 30, 2012, respectively, and $11.3 billion and $10.5 billion at December 31, 2011, respectively. These businesses did not qualify for classification as discontinued operations under GAAP.
MetLife Bank has historically taken advantage of collateralized borrowing opportunities with the Federal Home Loan Bank of New York (FHLB of NY). In January 2012, MetLife Bank discontinued taking advances from the FHLB of NY. In April 2012, MetLife Bank transferred cash to Metropolitan Life Insurance Company (MLIC) related to $3.8 billion of outstanding advances which had been included in long-term debt, and MLIC assumed the associated obligations under terms similar to those of the transferred advances by issuing funding agreements which are included in policyholder account balances (PABs).
14
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Caribbean Business
In November 2011, the Company entered into an agreement to sell its insurance operations in the Caribbean region, Panama and Costa Rica (the Caribbean Business). During the third quarter of 2012, regulatory approvals have been received and closings have taken place in the majority of the jurisdictions. The net assets sold were $127 million. During the three months and nine months ended September 30, 2012, the Company recorded an additional loss of $8 million, net of income tax, related to these closings in net investment gains (losses) within the interim condensed consolidated statements of operations and comprehensive income. See Note 2 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report. Sales in the remaining jurisdictions are expected to close in the fourth quarter of 2012, subject to regulatory approval and other customary closing conditions in each of the jurisdictions. The total assets and liabilities recorded in the consolidated balance sheets related to the pending disposition of these insurance operations were $127 million and $102 million at September 30, 2012, respectively, and $859 million and $707 million at December 31, 2011, respectively. The results of the Caribbean Business are included in continuing operations.
2012 Disposition
American Life U.K. Assumption Reinsurance
During July 2012, the Company completed the disposal, through a ceded assumption reinsurance agreement, of certain closed blocks of business in the United Kingdom (U.K.), to a third party. Simultaneously, the Company recaptured from the third party the indemnity reinsurance agreement related to this business, previously reinsured as of July 1, 2011. These transactions resulted in a decrease in both insurance and reinsurance assets and liabilities of $4.1 billion. The Company recognized a gain of $34 million, net of income tax, on the transactions for both the three months and nine months ended September 30, 2012, which was recorded in net investment gains (losses) in the interim condensed consolidated statement of operations and comprehensive income.
2010 Acquisition
American Life Insurance Company
Contingent Consideration
Related to the 2010 acquisition of American Life Insurance Company (American Life), the Company guaranteed that the fair value of a fund of assets backing certain U.K. unit-linked contracts would have a value of at least £1 per unit on July 1, 2012. If the shortfall between the aggregate guaranteed amount and the fair value of the fund exceeded £106 million (as adjusted for withdrawals), American International Group, Inc. (AIG) would pay the difference to the Company and, conversely, if the shortfall at July 1, 2012 was less than £106 million, the Company would pay the difference to AIG. At July 1, 2012, the shortfall between the aggregate guaranteed amount and the fair value of the fund was less than £106 million, resulting in a payment of $108 million by the Company to AIG during the third quarter of 2012. The contingent consideration liability was $109 million at December 31, 2011. The decrease in the contingent consideration liability amount from December 31, 2011 to the date of settlement was recorded in net derivative gains (losses) in the interim condensed consolidated statement of operations and comprehensive income. See Note 2 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report.
15
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Branch Restructuring
During the second quarter of 2012, and in accordance with the closing agreement American Life entered into on March 4, 2010 (the Closing Agreement) with the Commissioner of the Internal Revenue Service, the Company transferred the business of the Japan branch to a newly incorporated wholly-owned subsidiary in Japan, MetLife Alico Life Insurance K. K. (MLKK). Also during the second quarter of 2012, the Company revised the estimate of the valuation allowance required for U.S. deferred tax assets relating to the ongoing restructuring of American Lifes other non-U.S. branches. At December 31, 2011, the Company had recorded a valuation allowance related to the branch restructuring of $720 million to reduce the net amount of U.S. deferred tax assets to an amount that is more likely than not realizable. This valuation allowance was reduced to $118 million at September 30, 2012. The net reduction in the valuation allowance was primarily due to the following factors:
| Additional U.S. deferred tax assets that were determined to be realizable; |
| Additional tax basis in assets as a result of the gain recognized related to the branch restructuring that more likely than not will not be realizable; and |
| A reduction in both the gross deferred tax asset and the valuation allowance related to the completion of the Companys transfer of the Japan branch business to MLKK. |
The following table provides a rollforward of the deferred tax asset valuation allowance associated with the branch restructuring:
Nine Months Ended September 30, 2012 |
||||||||||||
Japan | Other Non-U.S. Branches |
Total | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period |
$ | 566 | $ | 154 | $ | 720 | ||||||
Income tax expense (benefit) |
10 | (11 | ) | (1 | ) | |||||||
Deferred income tax expense (benefit) related to unrealized investment gains (losses) |
320 | (25 | ) | 295 | ||||||||
Offsetting reduction in gross deferred tax asset related to the branch transfer to subsidiary |
(896 | ) | | (896 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance, end of period |
$ | | $ | 118 | $ | 118 | ||||||
|
|
|
|
|
|
A liability of $277 million was recognized in purchase accounting at November 1, 2010 for the anticipated and estimated costs associated with restructuring American Lifes foreign branches into subsidiaries in connection with the Closing Agreement. This liability has been reduced based on payments through September 30, 2012. In addition, based on revised estimates of anticipated costs, this liability was reduced by $35 million for the nine months ended September 30, 2012, which was recorded as a reduction in other expenses in the interim condensed consolidated statements of operations and comprehensive income, resulting in a liability of $92 million at September 30, 2012.
16
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
3. Investments
Fixed Maturity and Equity Securities Available-for-Sale
Presented below is certain information about fixed maturity and equity securities for the periods shown. The unrealized loss amounts presented below include the noncredit loss component of other-than-temporary impairment (OTTI) losses:
September 30, 2012 | ||||||||||||||||||||||||
Cost
or Amortized Cost |
Gross Unrealized | Estimated Fair Value |
% of Total |
|||||||||||||||||||||
Gains | Temporary Losses |
OTTI Losses |
||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fixed Maturity Securities: |
||||||||||||||||||||||||
U.S. corporate securities |
$ | 102,483 | $ | 11,975 | $ | 516 | $ | | $ | 113,942 | 30.1 | % | ||||||||||||
Foreign corporate securities (1) |
60,235 | 5,400 | 379 | (1 | ) | 65,257 | 17.3 | |||||||||||||||||
Foreign government securities |
52,205 | 5,323 | 123 | | 57,405 | 15.2 | ||||||||||||||||||
U.S. Treasury and agency securities |
44,964 | 6,489 | 5 | | 51,448 | 13.6 | ||||||||||||||||||
Residential mortgage-backed securities (RMBS) |
38,788 | 2,685 | 454 | 428 | 40,591 | 10.7 | ||||||||||||||||||
Commercial mortgage-backed securities (CMBS) |
18,495 | 1,029 | 84 | | 19,440 | 5.1 | ||||||||||||||||||
Asset-backed securities (ABS) |
14,809 | 370 | 160 | 14 | 15,005 | 4.0 | ||||||||||||||||||
State and political subdivision securities |
12,812 | 2,184 | 79 | | 14,917 | 4.0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturity securities |
$ | 344,791 | $ | 35,455 | $ | 1,800 | $ | 441 | $ | 378,005 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity Securities: |
||||||||||||||||||||||||
Common stock |
$ | 1,999 | $ | 112 | $ | 42 | $ | | $ | 2,069 | 73.8 | % | ||||||||||||
Non-redeemable preferred stock |
839 | 52 | 157 | | 734 | 26.2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total equity securities |
$ | 2,838 | $ | 164 | $ | 199 | $ | | $ | 2,803 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 | ||||||||||||||||||||||||
Cost
or Amortized Cost |
Gross Unrealized | Estimated Fair Value |
||||||||||||||||||||||
Gains | Temporary Losses |
OTTI Losses |
% of Total |
|||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fixed Maturity Securities: |
||||||||||||||||||||||||
U.S. corporate securities |
$ | 98,621 | $ | 8,544 | $ | 1,380 | $ | | $ | 105,785 | 30.2 | % | ||||||||||||
Foreign corporate securities |
61,568 | 3,789 | 1,338 | 1 | 64,018 | 18.3 | ||||||||||||||||||
Foreign government securities |
49,840 | 3,053 | 357 | | 52,536 | 15.0 | ||||||||||||||||||
U.S. Treasury and agency securities |
34,132 | 5,882 | 2 | | 40,012 | 11.4 | ||||||||||||||||||
RMBS |
42,092 | 2,281 | 1,033 | 703 | 42,637 | 12.2 | ||||||||||||||||||
CMBS |
18,565 | 730 | 218 | 8 | 19,069 | 5.4 | ||||||||||||||||||
ABS |
13,018 | 278 | 305 | 12 | 12,979 | 3.7 | ||||||||||||||||||
State and political subdivision securities |
11,975 | 1,416 | 156 | | 13,235 | 3.8 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturity securities |
$ | 329,811 | $ | 25,973 | $ | 4,789 | $ | 724 | $ | 350,271 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity Securities: |
||||||||||||||||||||||||
Common stock |
$ | 2,219 | $ | 83 | $ | 97 | $ | | $ | 2,205 | 72.9 | % | ||||||||||||
Non-redeemable preferred stock |
989 | 31 | 202 | | 818 | 27.1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total equity securities |
$ | 3,208 | $ | 114 | $ | 299 | $ | | $ | 3,023 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
17
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
(1) | OTTI losses as presented above represent the noncredit portion of OTTI losses that is included in accumulated other comprehensive income (loss). OTTI losses include both the initial recognition of noncredit losses, and the effects of subsequent increases and decreases in estimated fair value for those fixed maturity securities that were previously noncredit loss impaired. The noncredit loss component of OTTI losses for foreign corporate securities was in an unrealized gain (loss) position of $1 million at September 30, 2012 due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also Net Unrealized Investment Gains (Losses). |
The Company held non-income producing fixed maturity securities with an estimated fair value of $66 million and $62 million with unrealized gains (losses) of $4 million and ($19) million at September 30, 2012 and December 31, 2011, respectively.
Concentrations of Credit Risk Summary. The Company was not exposed to any concentrations of credit risk of any single issuer within its fixed maturity securities and equity securities greater than 10% of the Companys equity, other than the government and agency securities summarized in the table below at:
September 30, 2012 | December 31, 2011 | |||||||
Carrying Value (1) | ||||||||
(In millions) | ||||||||
U.S. Treasury and agency securities included in: |
||||||||
Fixed maturity securities |
$ | 51,448 | $ | 40,012 | ||||
Short-term investments |
11,553 | 15,775 | ||||||
Cash equivalents |
3,050 | 1,748 | ||||||
|
|
|
|
|||||
Total U.S. Treasury and agency securities |
$ | 66,051 | $ | 57,535 | ||||
|
|
|
|
|||||
Japan government and agency securities included in: |
||||||||
Fixed maturity securities |
$ | 21,925 | $ | 21,003 | ||||
Short-term investments |
333 | | ||||||
Cash equivalents |
623 | | ||||||
Total Japan government and agency securities |
$ | 22,881 | $ | 21,003 | ||||
|
|
|
|
(1) | Represents estimated fair value for fixed maturity securities, and for short-term investments and cash equivalents, estimated fair value or amortized cost, which approximates estimated fair value. |
Maturities of Fixed Maturity Securities. The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), were as follows at:
September 30, 2012 | December 31, 2011 | |||||||||||||||
Amortized Cost |
Estimated Fair Value |
Amortized Cost |
Estimated Fair Value |
|||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less |
$ | 23,569 | $ | 23,771 | $ | 16,747 | $ | 16,862 | ||||||||
Due after one year through five years |
69,820 | 73,205 | 62,819 | 64,414 | ||||||||||||
Due after five years through ten years |
82,628 | 92,009 | 82,694 | 88,036 | ||||||||||||
Due after ten years |
96,682 | 113,984 | 93,876 | 106,274 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
272,699 | 302,969 | 256,136 | 275,586 | ||||||||||||
RMBS, CMBS and ABS |
72,092 | 75,036 | 73,675 | 74,685 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturity securities |
$ | 344,791 | $ | 378,005 | $ | 329,811 | $ | 350,271 | ||||||||
|
|
|
|
|
|
|
|
18
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been included in the above table in the year of final contractual maturity. RMBS, CMBS and ABS are shown separately in the table, as they are not due at a single maturity.
Evaluating Available-for-Sale Securities for Other-Than-Temporary Impairment
As described more fully in Note 1 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report, the Company performs a regular evaluation, on a security-by-security basis, of its available-for-sale securities holdings, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy in order to evaluate whether such investments are other-than-temporarily impaired.
Net Unrealized Investment Gains (Losses)
The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), were as follows at:
September 30, 2012 | December 31, 2011 | |||||||
(In millions) | ||||||||
Fixed maturity securities |
$ | 33,589 | $ | 21,096 | ||||
Fixed maturity securities with noncredit OTTI losses in accumulated other comprehensive income (loss) |
(441 | ) | (724 | ) | ||||
|
|
|
|
|||||
Total fixed maturity securities |
33,148 | 20,372 | ||||||
Equity securities |
15 | (167 | ) | |||||
Derivatives |
1,508 | 1,514 | ||||||
Other |
(11 | ) | 72 | |||||
|
|
|
|
|||||
Subtotal |
34,660 | 21,791 | ||||||
|
|
|
|
|||||
Amounts allocated from: |
||||||||
Insurance liability loss recognition |
(6,902 | ) | (3,996 | ) | ||||
DAC and value of business acquired (VOBA) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) |
25 | 47 | ||||||
DAC and VOBA |
(2,616 | ) | (1,800 | ) | ||||
Policyholder dividend obligation |
(3,909 | ) | (2,919 | ) | ||||
|
|
|
|
|||||
Subtotal |
(13,402 | ) | (8,668 | ) | ||||
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) |
145 | 236 | ||||||
Deferred income tax benefit (expense) |
(7,652 | ) | (4,694 | ) | ||||
|
|
|
|
|||||
Net unrealized investment gains (losses) |
13,751 | 8,665 | ||||||
Net unrealized investment gains (losses) attributable to noncontrolling interests |
1 | 9 | ||||||
|
|
|
|
|||||
Net unrealized investment gains (losses) attributable to MetLife, Inc. |
$ | 13,752 | $ | 8,674 | ||||
|
|
|
|
19
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
The changes in fixed maturity securities with noncredit OTTI losses included in accumulated other comprehensive income (loss), were as follows:
Nine Months Ended September 30, 2012 |
Year Ended December 31, 2011 |
|||||||
(In millions) | ||||||||
Balance, beginning of period |
$ | (724 | ) | $ | (601 | ) | ||
Noncredit OTTI losses recognized (1) |
(39 | ) | 31 | |||||
Securities sold with previous noncredit OTTI loss |
119 | 125 | ||||||
Subsequent changes in estimated fair value |
203 | (279 | ) | |||||
|
|
|
|
|||||
Balance, end of period |
$ | (441 | ) | $ | (724 | ) | ||
|
|
|
|
(1) | Noncredit OTTI losses recognized, net of DAC, were ($48) million and $33 million for the nine months ended September 30, 2012 and year ended December 31, 2011, respectively. |
The changes in net unrealized investment gains (losses) were as follows:
Nine Months Ended September 30, 2012 |
||||
(In millions) | ||||
Balance, beginning of period |
$ | 8,674 | ||
Fixed maturity securities on which noncredit OTTI losses have been recognized |
283 | |||
Unrealized investment gains (losses) during the period |
12,586 | |||
Unrealized investment gains (losses) relating to: |
||||
Insurance liability gain (loss) recognition |
(2,906 | ) | ||
DAC and VOBA related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) |
(22 | ) | ||
DAC and VOBA |
(816 | ) | ||
Policyholder dividend obligation |
(990 | ) | ||
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in accumulated other comprehensive income (loss) |
(91 | ) | ||
Deferred income tax benefit (expense) |
(2,958 | ) | ||
|
|
|||
Net unrealized investment gains (losses) |
13,760 | |||
Net unrealized investment gains (losses) attributable to noncontrolling interests |
(8 | ) | ||
|
|
|||
Balance, end of period |
$ | 13,752 | ||
|
|
|||
Change in net unrealized investment gains (losses) |
$ | 5,086 | ||
Change in net unrealized investment gains (losses) attributable to noncontrolling interests |
(8 | ) | ||
|
|
|||
Change in net unrealized investment gains (losses) attributable to MetLife, Inc. |
$ | 5,078 | ||
|
|
Continuous Gross Unrealized Losses and OTTI Losses for Fixed Maturity and Equity Securities Available-for-Sale by Sector
Presented below is certain information about the estimated fair value and gross unrealized losses of fixed maturity and equity securities in an unrealized loss position. The unrealized loss amounts presented below include the noncredit component of OTTI loss. Fixed maturity securities on which a noncredit OTTI loss has been recognized in accumulated other comprehensive income (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
20
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
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.
September 30, 2012 | ||||||||||||||||||||||||
Less than 12 Months | Equal to or Greater than 12 Months |
Total | ||||||||||||||||||||||
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: |
||||||||||||||||||||||||
U.S. corporate securities |
$ | 3,380 | $ | 91 | $ | 4,377 | $ | 425 | $ | 7,757 | $ | 516 | ||||||||||||
Foreign corporate securities |
3,006 | 88 | 4,062 | 290 | 7,068 | 378 | ||||||||||||||||||
Foreign government securities |
1,935 | 53 | 864 | 70 | 2,799 | 123 | ||||||||||||||||||
U.S. Treasury and agency securities |
1,475 | 5 | | | 1,475 | 5 | ||||||||||||||||||
RMBS |
531 | 37 | 4,822 | 845 | 5,353 | 882 | ||||||||||||||||||
CMBS |
524 | 10 | 829 | 74 | 1,353 | 84 | ||||||||||||||||||
ABS |
1,363 | 11 | 1,783 | 163 | 3,146 | 174 | ||||||||||||||||||
State and political subdivision securities |
154 | 1 | 352 | 78 | 506 | 79 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturity securities |
$ | 12,368 | $ | 296 | $ | 17,089 | $ | 1,945 | $ | 29,457 | $ | 2,241 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity Securities: |
||||||||||||||||||||||||
Common stock |
$ | 271 | $ | 35 | $ | 109 | $ | 7 | $ | 380 | $ | 42 | ||||||||||||
Non-redeemable preferred stock |
10 | | 328 | 157 | 338 | 157 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total equity securities |
$ | 281 | $ | 35 | $ | 437 | $ | 164 | $ | 718 | $ | 199 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total number of securities in an |
1,342 | 1,587 | ||||||||||||||||||||||
|
|
|
|
December 31, 2011 | ||||||||||||||||||||||||
Less than 12 Months | Equal to or Greater than 12 Months |
Total | ||||||||||||||||||||||
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
Estimated Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: |
||||||||||||||||||||||||
U.S. corporate securities |
$ | 15,642 | $ | 590 | $ | 5,135 | $ | 790 | $ | 20,777 | $ | 1,380 | ||||||||||||
Foreign corporate securities |
12,618 | 639 | 5,957 | 700 | 18,575 | 1,339 | ||||||||||||||||||
Foreign government securities |
11,227 | 230 | 1,799 | 127 | 13,026 | 357 | ||||||||||||||||||
U.S. Treasury and agency securities |
2,611 | 1 | 50 | 1 | 2,661 | 2 | ||||||||||||||||||
RMBS |
4,040 | 547 | 4,724 | 1,189 | 8,764 | 1,736 | ||||||||||||||||||
CMBS |
2,825 | 135 | 678 | 91 | 3,503 | 226 | ||||||||||||||||||
ABS |
4,972 | 103 | 1,316 | 214 | 6,288 | 317 | ||||||||||||||||||
State and political subdivision securities |
177 | 2 | 1,007 | 154 | 1,184 | 156 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturity securities |
$ | 54,112 | $ | 2,247 | $ | 20,666 | $ | 3,266 | $ | 74,778 | $ | 5,513 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity Securities: |
||||||||||||||||||||||||
Common stock |
$ | 581 | $ | 96 | $ | 5 | $ | 1 | $ | 586 | $ | 97 | ||||||||||||
Non-redeemable preferred stock |
204 | 30 | 370 | 172 | 574 | 202 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total equity securities |
$ | 785 | $ | 126 | $ | 375 | $ | 173 | $ | 1,160 | $ | 299 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total number of securities in an |
3,978 | 1,963 | ||||||||||||||||||||||
|
|
|
|
21
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Aging of Gross Unrealized Losses and OTTI Losses for Fixed Maturity and Equity Securities Available-for-Sale
Presented below is certain information about the aging and severity of gross unrealized losses on fixed maturity and equity securities, including the portion of OTTI loss on fixed maturity securities recognized in accumulated other comprehensive income (loss) at:
September 30, 2012 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Losses | Number of Securities | ||||||||||||||||||||||
Less than 20% |
20% or more |
Less than 20% |
20% or more |
Less than 20% |
20% or more |
|||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: |
||||||||||||||||||||||||
Less than six months |
$ | 9,978 | $ | 430 | $ | 140 | $ | 111 | 914 | 66 | ||||||||||||||
Six months or greater but less than nine months |
1,265 | 147 | 37 | 49 | 116 | 40 | ||||||||||||||||||
Nine months or greater but less than twelve months |
1,209 | 233 | 50 | 69 | 175 | 40 | ||||||||||||||||||
Twelve months or greater |
15,871 | 2,565 | 930 | 855 | 1,303 | 166 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 28,323 | $ | 3,375 | $ | 1,157 | $ | 1,084 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Percentage of amortized cost |
4 | % | 32 | % | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Equity Securities: |
||||||||||||||||||||||||
Less than six months |
$ | 195 | $ | 102 | $ | 11 | $ | 28 | 77 | 32 | ||||||||||||||
Six months or greater but less than nine months |
37 | | 4 | | 16 | | ||||||||||||||||||
Nine months or greater but less than twelve months |
26 | 42 | 2 | 14 | 9 | 2 | ||||||||||||||||||
Twelve months or greater |
225 | 290 | 16 | 124 | 37 | 15 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 483 | $ | 434 | $ | 33 | $ | 166 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Percentage of cost |
7 | % | 38 | % | ||||||||||||||||||||
|
|
|
|
December 31, 2011 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Losses | Number of Securities | ||||||||||||||||||||||
Less than 20% |
20% or more |
Less than 20% |
20% or more |
Less than 20% |
20% or more |
|||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities: |
||||||||||||||||||||||||
Less than six months |
$ | 49,249 | $ | 4,736 | $ | 1,346 | $ | 1,332 | 3,260 | 320 | ||||||||||||||
Six months or greater but less than nine months |
4,104 | 1,049 | 279 | 349 | 375 | 63 | ||||||||||||||||||
Nine months or greater but less than twelve months |
1,160 | 288 | 55 | 93 | 143 | 14 | ||||||||||||||||||
Twelve months or greater |
17,590 | 2,115 | 1,216 | 843 | 1,523 | 167 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 72,103 | $ | 8,188 | $ | 2,896 | $ | 2,617 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Percentage of amortized cost |
4 | % | 32 | % | ||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Equity Securities: |
||||||||||||||||||||||||
Less than six months |
$ | 714 | $ | 376 | $ | 64 | $ | 123 | 154 | 42 | ||||||||||||||
Six months or greater but less than nine months |
22 | 8 | 2 | 4 | 19 | 3 | ||||||||||||||||||
Nine months or greater but less than twelve months |
18 | | 2 | | 8 | | ||||||||||||||||||
Twelve months or greater |
98 | 223 | 8 | 96 | 24 | 20 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 852 | $ | 607 | $ | 76 | $ | 223 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Percentage of cost |
9 | % | 37 | % | ||||||||||||||||||||
|
|
|
|
22
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Equity securities with gross unrealized losses of 20% or more for twelve months or greater increased from $96 million at December 31, 2011 to $124 million at September 30, 2012. As shown in the section Evaluating Temporarily Impaired Available-for-Sale Securities below, over 90% of the equity securities with gross unrealized losses of 20% or more for twelve months or greater at September 30, 2012 were financial services industry investment grade non-redeemable preferred stock, of which 72% were rated A or better.
Concentration of Gross Unrealized Losses and OTTI Losses for Fixed Maturity and Equity Securities Available-for-Sale
The gross unrealized losses related to fixed maturity and equity securities, including the portion of OTTI losses on fixed maturity securities recognized in accumulated other comprehensive income (loss) were $2.4 billion and $5.8 billion at September 30, 2012 and December 31, 2011, respectively. The concentration, calculated as a percentage of gross unrealized losses (including OTTI losses), by sector and industry was as follows at:
September 30, 2012 | December 31, 2011 | |||||||
Sector: |
||||||||
RMBS |
36 | % | 30 | % | ||||
U.S. corporate securities |
21 | 24 | ||||||
Foreign corporate securities |
16 | 23 | ||||||
ABS |
7 | 5 | ||||||
Foreign government securities |
5 | 6 | ||||||
CMBS |
4 | 4 | ||||||
State and political subdivision securities |
3 | 3 | ||||||
Other |
8 | 5 | ||||||
|
|
|
|
|||||
Total |
100 | % | 100 | % | ||||
|
|
|
|
|||||
Industry: |
||||||||
Mortgage-backed |
40 | % | 34 | % | ||||
Finance |
23 | 27 | ||||||
Asset-backed |
7 | 5 | ||||||
Utility |
7 | 8 | ||||||
Foreign government securities |
5 | 6 | ||||||
Consumer |
5 | 6 | ||||||
State and political subdivision securities |
3 | 3 | ||||||
Communications |
3 | 3 | ||||||
Industrial |
2 | 2 | ||||||
Other |
5 | 6 | ||||||
|
|
|
|
|||||
Total |
100 | % | 100 | % | ||||
|
|
|
|
23
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Evaluating Temporarily Impaired Available-for-Sale Securities
The following table presents fixed maturity and equity securities, each with gross unrealized losses of greater than $10 million, the number of securities, total gross unrealized losses and percentage of total gross unrealized losses at:
September 30, 2012 | December 31, 2011 | |||||||||||||||
Fixed Maturity Securities |
Equity Securities |
Fixed Maturity Securities |
Equity Securities |
|||||||||||||
(In millions, except number of securities) | ||||||||||||||||
Number of securities |
37 | 5 | 96 | 8 | ||||||||||||
Total gross unrealized losses |
$ | 676 | $ | 87 | $ | 1,703 | $ | 117 | ||||||||
Percentage of total gross unrealized losses |
30 | % | 44 | % | 31 | % | 39 | % |
Fixed maturity and equity securities, each with gross unrealized losses greater than $10 million, decreased $1.1 billion during the nine months ended September 30, 2012. The decline in, or improvement in, gross unrealized losses for the nine months ended September 30, 2012 was primarily attributable to narrowing credit spreads and a decrease in interest rates. These securities were included in the Companys OTTI review process.
As of September 30, 2012, $973 million of unrealized losses were from fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater. Of the $973 million, $430 million, or 44%, was related to unrealized losses on investment grade securities. Unrealized losses on investment grade securities were principally related to widening credit spreads or rising interest rates since purchase. Of the $973 million, $543 million, or 56%, was related to unrealized losses on below investment grade securities. Unrealized losses on below investment grade securities were principally related to non-agency RMBS (primarily sub- prime residential mortgage loans and alternative residential mortgage loans), U.S. and foreign corporate securities (primarily financial services and utility industry securities) and foreign government securities (primarily European sovereign bonds) and were the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainties including concerns over the financial services sector, unemployment levels, sovereign debt levels and valuations of residential real estate supporting non-agency RMBS. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report for the factors management considers in evaluating these corporate, sovereign and structured securities. See Aging of Gross Unrealized Losses and OTTI Losses for Fixed Maturity and Equity Securities Available-for-Sale for a discussion of equity securities with an unrealized loss position of 20% or more of cost for 12 months or greater.
In the Companys impairment review process, the duration and severity of an unrealized loss position for equity securities are 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 are given by the Company to a decline in market value and the likelihood such market value decline will recover.
24
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
The following table presents certain information about the Companys equity securities available-for-sale with gross unrealized losses of 20% or more at September 30, 2012:
Non-Redeemable Preferred Stock | ||||||||||||||||||||||||||||||||
All Equity Securities |
All Types of Non-Redeemable Preferred Stock |
Investment Grade | ||||||||||||||||||||||||||||||
All Industries | Financial Services Industry | |||||||||||||||||||||||||||||||
Gross Unrealized Losses |
Gross Unrealized Losses |
% of All Equity Securities |
Gross Unrealized Losses |
% of All Non-Redeemable Preferred Stock |
Gross Unrealized Losses |
% of All Industries |
% A Rated or Better |
|||||||||||||||||||||||||
(In millions) | (In millions) | (In millions) | ||||||||||||||||||||||||||||||
Less than six months |
$ | 28 | $ | 7 | 25 | % | $ | 6 | 86 | % | $ | 6 | 100 | % | 100 | % | ||||||||||||||||
Six months or greater but less |
14 | 14 | 100 | % | 2 | 14 | % | 2 | 100 | % | 100 | % | ||||||||||||||||||||
Twelve months or greater |
124 | 124 | 100 | % | 115 | 93 | % | 115 | 100 | % | 72 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
All equity securities with gross unrealized losses of 20% or more |
$ | 166 | $ | 145 | 87 | % | $ | 123 | 85 | % | $ | 123 | 100 | % | 74 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
In connection with the equity securities impairment review process, the Company evaluated its holdings in non-redeemable preferred stock, particularly those in the financial services sector. 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 stock with a severe or an extended unrealized loss. The Company also considered whether any issuers of non-redeemable preferred stock with an unrealized loss held by the Company, regardless of credit rating, have deferred any dividend payments. No such dividend payments had been deferred.
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 less than 20% in an extended unrealized loss position (i.e., 12 months or greater).
Based on the Companys current evaluation of available-for-sale securities in an unrealized loss position in accordance with its impairment policy, and the Companys 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.
Future OTTIs will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, changes in collateral valuation, changes in interest rates and changes in credit spreads. If economic fundamentals or any of the above factors deteriorate, additional OTTIs may be incurred in upcoming quarters.
25
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Trading and Other Securities
The table below presents certain information about the Companys trading securities that are actively purchased and sold (Actively Traded Securities) and other securities for which the fair value option (FVO) has been elected at:
September 30, 2012 | December 31, 2011 | |||||||
(In millions) | ||||||||
Actively Traded Securities |
$ | 565 | $ | 473 | ||||
FVO general account securities |
178 | 267 | ||||||
FVO contractholder-directed unit-linked investments |
15,199 | 17,411 | ||||||
FVO securities held by CSEs |
53 | 117 | ||||||
|
|
|
|
|||||
Total trading and other securities at estimated fair value |
$ | 15,995 | $ | 18,268 | ||||
|
|
|
|
|||||
Actively Traded Securities at estimated fair value |
$ | 565 | $ | 473 | ||||
Short sale agreement liabilities at estimated fair value |
(121 | ) | (127 | ) | ||||
|
|
|
|
|||||
Net long/short position at estimated fair value |
$ | 444 | $ | 346 | ||||
|
|
|
|
|||||
Investments pledged to secure short sale agreement liabilities |
$ | 609 | $ | 558 | ||||
|
|
|
|
See Note 1 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report for a discussion of FVO contractholder-directed unit-linked investments and Variable Interest Entities for a discussion of consolidated securitization entities (CSEs) included in the table above. See Net Investment Income and Net Investment Gains (Losses) for the net investment income recognized on trading and other securities and the related changes in estimated fair value subsequent to purchase included in earnings for securities still held as of the end of the respective periods.
26
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In millions) | ||||||||||||||||
Total gains (losses) on fixed maturity securities: |
||||||||||||||||
Total OTTI losses recognized |
$ | (57 | ) | $ | (95 | ) | $ | (310 | ) | $ | (525 | ) | ||||
Less: Noncredit portion of OTTI losses transferred to and recognized in other comprehensive income (loss) |
10 | (189 | ) | 39 | (5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net OTTI losses on fixed maturity securities recognized in earnings |
(47 | ) | (284 | ) | (271 | ) | (530 | ) | ||||||||
Fixed maturity securities net gains (losses) on sales and disposals (1) |
80 | 101 | 146 | 79 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total gains (losses) on fixed maturity securities |
33 | (183 | ) | (125 | ) | (451 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Other net investment gains (losses): |
||||||||||||||||
Equity securities |
3 | (3 | ) | 13 | (37 | ) | ||||||||||
Trading and other securities FVO general account securities - changes in estimated fair value subsequent to purchase |
1 | (3 | ) | 4 | (3 | ) | ||||||||||
Mortgage loans (1) |
| 45 | 49 | 160 | ||||||||||||
Real estate and real estate joint ventures |
(15 | ) | 139 | (35 | ) | 144 | ||||||||||
Other limited partnership interests |
(7 | ) | | (18 | ) | 8 | ||||||||||
Other investment portfolio gains (losses) |
15 | | (20 | ) | (2 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal investment portfolio gains (losses) (1) |
30 | (5 | ) | (132 | ) | (181 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
FVO CSEs changes in estimated fair value: |
||||||||||||||||
Commercial mortgage loans |
9 | (64 | ) | 8 | (39 | ) | ||||||||||
Securities |
| 2 | | 1 | ||||||||||||
Long-term debt related to commercial mortgage loans |
(2 | ) | 56 | 8 | 48 | |||||||||||
Long-term debt related to securities |
8 | (1 | ) | (2 | ) | (8 | ) | |||||||||
Non-investment portfolio gains (losses) (2) |
(23 | ) | (43 | ) | (34 | ) | (130 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal FVO CSEs and non-investment portfolio gains (losses) |
(8 | ) | (50 | ) | (20 | ) | (128 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total net investment gains (losses) |
$ | 22 | $ | (55 | ) | $ | (152 | ) | $ | (309 | ) | |||||
|
|
|
|
|
|
|
|
(1) | Investment portfolio gains (losses) for the three months and nine months ended September 30, 2012 includes a net gain (loss) of ($26) million and $34 million, respectively, as a result of the pending disposition of certain operations of MetLife Bank, which is comprised of gains (losses) on securities and mortgage loans sold of $0 and $75 million, and impairments on mortgage loans of ($26) million and ($41) million, for the three months and nine months ended September 30, 2012, respectively. See Note 2. |
(2) | Non-investment portfolio gains (losses) for both the three months and nine months ended September 30, 2012 includes gains of $41 million, related to certain dispositions as more fully described in Note 2. Non-investment portfolio gains (losses) for the three months and nine months ended September 30, 2011 includes a loss of $0 and $87 million, respectively, in connection with a disposition and a goodwill impairment loss of $65 million related to MetLife Bank. See Notes 2 and 7 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report for further information about the 2011 transactions. |
27
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
See Variable Interest Entities for discussion of CSEs included in the table above.
Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($79) million and ($56) million for the three months and nine months ended September 30, 2012, respectively, and $94 million and $80 million for the three months and nine months ended September 30, 2011, respectively.
Proceeds from sales or disposals of fixed maturity and equity securities resulting in a net investment gain (loss) and the components of fixed maturity and equity securities net investment gains (losses) are as shown in the tables below. Investment gains and losses on sales of securities are determined on a specific identification basis.
Three Months Ended September 30, | ||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Proceeds |
$ | 12,004 | $ | 19,368 | $ | 231 | $ | 169 | $ | 12,235 | $ | 19,537 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross investment gains |
$ | 192 | $ | 252 | $ | 23 | $ | 9 | $ | 215 | $ | 261 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross investment losses |
(112 | ) | (151 | ) | (11 | ) | (7 | ) | (123 | ) | (158 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total OTTI losses recognized in earnings: |
||||||||||||||||||||||||
Credit-related |
(36 | ) | (269 | ) | | | (36 | ) | (269 | ) | ||||||||||||||
Other (1) |
(11 | ) | (15 | ) | (9 | ) | (5 | ) | (20 | ) | (20 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total OTTI losses recognized in earnings |
(47 | ) | (284 | ) | (9 | ) | (5 | ) | (56 | ) | (289 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net investment gains (losses) |
$ | 33 | $ | (183 | ) | $ | 3 | $ | (3 | ) | $ | 36 | $ | (186 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | ||||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Fixed Maturity Securities | Equity Securities | Total | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Proceeds |
$ | 47,023 | $ | 55,216 | $ | 594 | $ | 974 | $ | 47,617 | $ | 56,190 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross investment gains |
$ | 742 | $ | 680 | $ | 56 | $ | 83 | $ | 798 | $ | 763 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross investment losses |
(596 | ) | (601 | ) | (17 | ) | (62 | ) | (613 | ) | (663 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total OTTI losses recognized in earnings: |
||||||||||||||||||||||||
Credit-related |
(177 | ) | (382 | ) | | | (177 | ) | (382 | ) | ||||||||||||||
Other (1) |
(94 | ) | (148 | ) | (26 | ) | (58 | ) | (120 | ) | (206 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total OTTI losses recognized in earnings |
(271 | ) | (530 | ) | (26 | ) | (58 | ) | (297 | ) | (588 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net investment gains (losses) |
$ | (125 | ) | $ | (451 | ) | $ | 13 | $ | (37 | ) | $ | (112 | ) | $ | (488 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Other OTTI losses recognized in earnings include impairments on equity securities, impairments on perpetual hybrid securities classified within fixed maturity securities where the primary reason for the impairment was the severity and/or the duration of an unrealized loss position and fixed maturity securities where there is an intent-to-sell or it is more likely than not that the Company will be required to sell the security before recovery of the decline in estimated fair value. |
28
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Fixed maturity security OTTI losses recognized in earnings related to the following sectors and industries within the U.S. and foreign corporate securities sector:
Three Months Ended September 30, |
Nine
Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: |
||||||||||||||||
U.S. and foreign corporate securities by industry: |
||||||||||||||||
Utility |
$ | 10 | $ | 6 | $ | 61 | $ | 7 | ||||||||
Finance |
| 7 | 32 | 48 | ||||||||||||
Communications |
1 | 12 | 19 | 26 | ||||||||||||
Transportation |
11 | | 17 | | ||||||||||||
Consumer |
4 | 6 | 16 | 35 | ||||||||||||
Industrial |
4 | | 5 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total U.S. and foreign corporate securities |
30 | 31 | 150 | 116 | ||||||||||||
RMBS |
15 | 34 | 61 | 100 | (1) | |||||||||||
CMBS |
| 5 | 50 | 8 | ||||||||||||
ABS |
2 | 8 | 9 | 11 | (1) | |||||||||||
State and political subdivision securities |
| | 1 | | ||||||||||||
Foreign government securities |
| 206 | | 295 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 47 | $ | 284 | $ | 271 | $ | 530 | ||||||||
|
|
|
|
|
|
|
|
(1) | See Note 3 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report for discussion of a reclassification from the ABS sector to the RMBS sector for securities backed by sub-prime residential mortgage loans. |
Equity security OTTI losses recognized in earnings related to the following sectors and industries:
Three Months Ended September 30, |
Nine
Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In millions) | ||||||||||||||||
Sector: |
||||||||||||||||
Common stock |
$ | 9 | $ | 5 | $ | 26 | $ | 20 | ||||||||
Non-redeemable preferred stock |
| | | 38 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 9 | $ | 5 | $ | 26 | $ | 58 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Industry: |
||||||||||||||||
Financial services industry perpetual hybrid securities |
$ | | $ | | $ | | $ | 38 | ||||||||
Other industries |
9 | 5 | 26 | 20 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 9 | $ | 5 | $ | 26 | $ | 58 | ||||||||
|
|
|
|
|
|
|
|
29
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Credit Loss Rollforward
Presented 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 income (loss):
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In millions) | ||||||||||||||||
Balance, beginning of period |
$ | 391 | $ | 401 | $ | 471 | $ | 443 | ||||||||
Additions: |
||||||||||||||||
Initial impairments credit loss OTTI on securities not previously impaired |
2 | 6 | 39 | 32 | ||||||||||||
Additional impairments credit loss OTTI on securities previously impaired |
15 | 39 | 41 | 79 | ||||||||||||
Reductions: |
||||||||||||||||
Sales, maturities, pay downs and prepayments during the period on securities previously impaired as credit loss OTTI |
(36 | ) | (8 | ) | (155 | ) | (63 | ) | ||||||||
Securities impaired to net present value of expected future cash flows |
| (1 | ) | (23 | ) | (45 | ) | |||||||||
Increases in cash flows accretion of previous credit loss OTTI |
(1 | ) | | (2 | ) | (9 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, end of period |
$ | 371 | $ | 437 | $ | 371 | $ | 437 | ||||||||
|
|
|
|
|
|
|
|
30
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Net Investment Income
The components of net investment income were as follows:
Three Months Ended September 30, |
Nine
Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In millions) | ||||||||||||||||
Investment income: |
||||||||||||||||
Fixed maturity securities |
$ | 3,825 | $ | 3,770 | $ | 11,370 | $ | 11,244 | ||||||||
Equity securities |
26 | 28 | 96 | 106 | ||||||||||||
Trading and other securities Actively Traded Securities and FVO general account securities (1) |
24 | (38 | ) | 68 | 6 | |||||||||||
Mortgage loans |
811 | 806 | 2,405 | 2,331 | ||||||||||||
Policy loans |
157 | 162 | 471 | 482 | ||||||||||||
Real estate and real estate joint ventures |
173 | 206 | 630 | 539 | ||||||||||||
Other limited partnership interests |
145 | 180 | 593 | 582 | ||||||||||||
Cash, cash equivalents and short-term investments |
40 | 41 | 115 | 131 | ||||||||||||
International joint ventures (2) |
7 | 6 | 11 | (8 | ) | |||||||||||
Other |
27 | 82 | 148 | 151 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
5,235 | 5,243 | 15,907 | 15,564 | ||||||||||||
Less: Investment expenses |
276 | 268 | 793 | 762 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal, net |
4,959 | 4,975 | 15,114 | 14,802 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Trading and other securities FVO contractholder-directed unit-linked investments (1) |
512 | (824 | ) | 1,010 | (437 | ) | ||||||||||
Securitized reverse residential mortgage loans |
3 | | 177 | | ||||||||||||
FVO CSEs: |
||||||||||||||||
Commercial mortgage loans |
42 | 95 | 131 | 286 | ||||||||||||
Securities |
1 | 6 | 4 | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Subtotal |
558 | (723 | ) | 1,322 | (144 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net investment income |
$ | 5,517 | $ | 4,252 | $ | 16,436 | $ | 14,658 | ||||||||
|
|
|
|
|
|
|
|
(1) | Changes in estimated fair value subsequent to purchase for securities still held as of the end of the respective periods included in net investment income were: |
Three
Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(In millions) | ||||||||||||||||
Actively Traded Securities and FVO general account securities |
$ | 6 | $ | (46 | ) | $ | 36 | $ | (25 | ) | ||||||
FVO contractholder-directed unit-linked investments |
$ | 247 | $ | (873 | ) | $ | 741 | $ | (641 | ) |
(2) | Amounts are presented net of changes in estimated fair value of derivatives related to economic hedges of the Companys investment in these equity method international joint venture investments that do not qualify for hedge accounting of $0 for both the three months and nine months ended September 30, 2012, and $0 and ($23) million for the three months and nine months ended September 30, 2011, respectively. |
See Variable Interest Entities for discussion of CSEs included in the table above.
31
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
Securities Lending
As described more fully in Note 1 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report, the Company participates in a securities lending program whereby blocks of securities are loaned to third parties. These transactions are treated as financing arrangements and the associated cash collateral received is recorded as a liability. The Company is obligated to return the cash collateral received to its counterparties.
Elements of the securities lending program are presented below at:
September 30, 2012 | December 31, 2011 | |||||||
(In millions) | ||||||||
Securities on loan: (1) |
||||||||
Amortized cost |
$ | 25,106 | $ | 20,613 | ||||
Estimated fair value |
$ | 29,302 | $ | 24,072 | ||||
Cash collateral on deposit from counterparties (2) |
$ | 29,932 | $ | 24,223 | ||||
Security collateral on deposit from counterparties |
$ | 63 | $ | 371 | ||||
Reinvestment portfolio estimated fair value |
$ | 30,210 | $ | 23,940 |
(1) | Included within fixed maturity securities, short-term investments, equity securities and cash and cash equivalents. |
(2) | Included within payables for collateral under securities loaned and other transactions. |
Security collateral on deposit from counterparties in connection with the securities lending transactions may not be sold or repledged, unless the counterparty is in default, and is not reflected in the interim condensed consolidated financial statements.
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are presented in the table below at estimated fair value for cash and cash equivalents, short-term investments, fixed maturity securities, equity securities, and trading and other securities and at carrying value for mortgage loans.
September 30, 2012 | December 31, 2011 | |||||||
(In millions) | ||||||||
Invested assets on deposit (1) |
$ | 2,329 | $ | 1,660 | ||||
Invested assets held in trust (2) |
11,866 | 11,135 | ||||||
Invested assets pledged as collateral (3) |
22,390 | 29,899 | ||||||
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Total invested assets on deposit, held in trust and pledged as collateral |
$ | 36,585 | $ | 42,694 | ||||
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(1) | The Company has invested assets on deposit with regulatory agencies consisting primarily of cash and cash equivalents, short-term investments, fixed maturity securities and equity securities. |
(2) | The Company held in trust cash and securities, primarily fixed maturity and equity securities, to satisfy requirements under certain collateral financing agreements and certain reinsurance agreements. |
32
MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) (Continued)
(3) | The Company has pledged fixed maturity securities, mortgage loans and cash and cash equivalents in connection with various agreements and transactions, including funding and advances agreements (see Notes 8 and 11 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report), collateralized borrowings (see Note 11 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report), collateral financing arrangements (see Note 12 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report), derivative transactions (see Note 4), and short sale agreements (see Trading and Other Securities). |
Mortgage Loans
Mortgage loans are summarized as follows at:
September 30, 2012 | December 31, 2011 | |||||||||||||||
Carrying Value |
% of Total |
Carrying Value |
% of Total |
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(In millions) | (In millions) | |||||||||||||||
Mortgage loans held-for-investment: |
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Commercial |
$ | 41,941 | 70.9 | % | $ | 40,440 | 56.1 | % | ||||||||
Agricultural |
12,600 | 21.3 | 13,129 | 18.2 | ||||||||||||
Residential |
818 | 1.4 | 689 | 1.0 | ||||||||||||
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Subtotal |
55,359 | 93.6 | 54,258 | 75.3 | ||||||||||||
Valuation allowances |
(354 | ) | (0.6 | ) | (481 | ) | (0.7 | ) | ||||||||
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Subtotal mortgage loans held-for-investment, net |
55,005 | 93.0 | 53,777 | 74.6 | ||||||||||||
Commercial mortgage loans held by CSEs |
2,879 | 4.9 | 3,138 | 4.4 | ||||||||||||