(Mark One) | ||
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009 | ||
OR
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
FOR THE TRANSITION PERIOD FROM TO |
Delaware | 13-4075851 | |
(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
200 Park Avenue, New York, NY
(Address of principal executive offices) |
10166-0188 (Zip Code) |
Large accelerated
filer þ
|
Accelerated filer o | |
Non-accelerated
filer o (Do
not check if a smaller reporting company)
|
Smaller reporting company o |
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256 | ||||||||
E-1 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
2
| should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; | |
| have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; | |
| may apply standards of materiality in a way that is different from what may be viewed as material to investors; and | |
| were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
3
Item 1. | Financial Statements |
September 30, 2009 | December 31, 2008 | |||||||
Assets
|
||||||||
Investments:
|
||||||||
Fixed maturity securities
available-for-sale,
at estimated fair value (amortized cost: $225,274 and $209,508,
respectively)
|
$ | 223,896 | $ | 188,251 | ||||
Equity securities
available-for-sale,
at estimated fair value (cost: $3,349 and $4,131, respectively)
|
3,117 | 3,197 | ||||||
Trading securities, at estimated fair value (cost: $1,895 and
$1,107, respectively)
|
1,970 | 946 | ||||||
Mortgage and consumer loans:
|
||||||||
Held-for-investment,
at amortized cost (net of valuation allowances of $671 and $304,
respectively)
|
48,239 | 49,352 | ||||||
Held-for-sale,
principally at estimated fair value
|
2,442 | 2,012 | ||||||
Mortgage and consumer loans, net
|
50,681 | 51,364 | ||||||
Policy loans
|
10,001 | 9,802 | ||||||
Real estate and real estate joint ventures
held-for-investment
|
6,982 | 7,535 | ||||||
Real estate
held-for-sale
|
50 | 51 | ||||||
Other limited partnership interests
|
5,255 | 6,039 | ||||||
Short-term investments
|
6,861 | 13,878 | ||||||
Other invested assets
|
13,916 | 17,248 | ||||||
Total investments
|
322,729 | 298,311 | ||||||
Cash and cash equivalents
|
15,562 | 24,207 | ||||||
Accrued investment income
|
3,236 | 3,061 | ||||||
Premiums and other receivables
|
16,903 | 16,973 | ||||||
Deferred policy acquisition costs and value of business acquired
|
19,208 | 20,144 | ||||||
Current income tax recoverable
|
412 | | ||||||
Deferred income tax assets
|
535 | 4,927 | ||||||
Goodwill
|
5,033 | 5,008 | ||||||
Other assets
|
7,140 | 7,262 | ||||||
Assets of subsidiaries
held-for-sale
|
| 946 | ||||||
Separate account assets
|
144,434 | 120,839 | ||||||
Total assets
|
$ | 535,192 | $ | 501,678 | ||||
Liabilities and Stockholders Equity
|
||||||||
Liabilities:
|
||||||||
Future policy benefits
|
$ | 134,492 | $ | 130,555 | ||||
Policyholder account balances
|
147,543 | 149,805 | ||||||
Other policyholder funds
|
8,549 | 7,762 | ||||||
Policyholder dividends payable
|
911 | 1,023 | ||||||
Short-term debt
|
2,131 | 2,659 | ||||||
Long-term debt
|
13,202 | 9,667 | ||||||
Collateral financing arrangements
|
5,297 | 5,192 | ||||||
Junior subordinated debt securities
|
3,191 | 3,758 | ||||||
Current income tax payable
|
| 342 | ||||||
Payables for collateral under securities loaned and other
transactions
|
24,363 | 31,059 | ||||||
Other liabilities
|
16,486 | 14,284 | ||||||
Liabilities of subsidiaries
held-for-sale
|
| 748 | ||||||
Separate account liabilities
|
144,434 | 120,839 | ||||||
Total liabilities
|
500,599 | 477,693 | ||||||
Contingencies, Commitments and Guarantees (Note 12)
|
||||||||
Stockholders Equity:
|
||||||||
MetLife, Inc.s stockholders equity:
|
||||||||
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; 822,359,818 shares
and 798,016,664 shares issued at September 30, 2009
and December 31, 2008, respectively;
818,753,139 shares and 793,629,070 shares outstanding
at September 30, 2009 and December 31, 2008,
respectively
|
8 | 8 | ||||||
Additional paid-in capital
|
16,865 | 15,811 | ||||||
Retained earnings
|
19,822 | 22,403 | ||||||
Treasury stock, at cost; 3,606,679 shares and
4,387,594 shares at September 30, 2009 and
December 31, 2008, respectively |
(194 | ) | (236 | ) | ||||
Accumulated other comprehensive loss
|
(2,234 | ) | (14,253 | ) | ||||
Total MetLife, Inc.s stockholders equity
|
34,268 | 23,734 | ||||||
Noncontrolling interests
|
325 | 251 | ||||||
Total equity
|
34,593 | 23,985 | ||||||
Total liabilities and stockholders equity
|
$ | 535,192 | $ | 501,678 | ||||
4
Three Months |
Nine Months |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues
|
||||||||||||||||
Premiums
|
$ | 6,601 | $ | 6,785 | $ | 19,299 | $ | 19,416 | ||||||||
Universal life and investment-type product policy fees
|
1,251 | 1,352 | 3,650 | 4,145 | ||||||||||||
Net investment income
|
3,923 | 4,047 | 10,914 | 12,661 | ||||||||||||
Other revenues
|
602 | 421 | 1,728 | 1,141 | ||||||||||||
Net investment gains (losses):
|
||||||||||||||||
Other-than-temporary
impairments on fixed maturity securities
|
(650 | ) | (748 | ) | (1,769 | ) | (961 | ) | ||||||||
Other-than-temporary
impairments on fixed maturity securities transferred to other
comprehensive loss
|
245 | | 479 | | ||||||||||||
Other net investment gains (losses), net
|
(1,734 | ) | 1,494 | (5,584 | ) | 620 | ||||||||||
Total net investment gains (losses)
|
(2,139 | ) | 746 | (6,874 | ) | (341 | ) | |||||||||
Total revenues
|
10,238 | 13,351 | 28,717 | 37,022 | ||||||||||||
Expenses
|
||||||||||||||||
Policyholder benefits and claims
|
7,173 | 7,264 | 20,701 | 20,426 | ||||||||||||
Interest credited to policyholder account balances
|
1,258 | 1,129 | 3,655 | 3,558 | ||||||||||||
Policyholder dividends
|
439 | 448 | 1,297 | 1,323 | ||||||||||||
Other expenses
|
2,543 | 2,931 | 7,576 | 8,085 | ||||||||||||
Total expenses
|
11,413 | 11,772 | 33,229 | 33,392 | ||||||||||||
Income (loss) from continuing operations before provision for
income tax
|
(1,175 | ) | 1,579 | (4,512 | ) | 3,630 | ||||||||||
Provision for income tax expense (benefit)
|
(551 | ) | 529 | (1,884 | ) | 1,077 | ||||||||||
Income (loss) from continuing operations, net of income tax
|
(624 | ) | 1,050 | (2,628 | ) | 2,553 | ||||||||||
Income (loss) from discontinued operations, net of income tax
|
(1 | ) | (404 | ) | 37 | (251 | ) | |||||||||
Net income (loss)
|
(625 | ) | 646 | (2,591 | ) | 2,302 | ||||||||||
Less: Net income (loss) attributable to noncontrolling interests
|
(5 | ) | 16 | (25 | ) | 78 | ||||||||||
Net income (loss) attributable to MetLife, Inc.
|
(620 | ) | 630 | (2,566 | ) | 2,224 | ||||||||||
Less: Preferred stock dividends
|
30 | 30 | 91 | 94 | ||||||||||||
Net income (loss) available to MetLife, Inc.s common
shareholders
|
$ | (650 | ) | $ | 600 | $ | (2,657 | ) | $ | 2,130 | ||||||
Income (loss) from continuing operations, net of income tax,
available to MetLife, Inc.s common shareholders per common
share:
|
||||||||||||||||
Basic
|
$ | (0.79 | ) | $ | 1.43 | $ | (3.30 | ) | $ | 3.45 | ||||||
Diluted
|
$ | (0.79 | ) | $ | 1.42 | $ | (3.30 | ) | $ | 3.39 | ||||||
Net income (loss) available to MetLife, Inc.s common
shareholders per common share:
|
||||||||||||||||
Basic
|
$ | (0.79 | ) | $ | 0.84 | $ | (3.25 | ) | $ | 2.97 | ||||||
Diluted
|
$ | (0.79 | ) | $ | 0.83 | $ | (3.25 | ) | $ | 2.92 | ||||||
5
Accumulated Other Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||||||
Net |
||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized |
Foreign |
Defined |
Total |
|||||||||||||||||||||||||||||||||||||||||||||
Additional |
Treasury |
Investment |
Other-Than- |
Currency |
Benefit |
MetLife, Inc.s |
||||||||||||||||||||||||||||||||||||||||||
Preferred |
Common |
Paid-in |
Retained |
Stock at |
Gains |
Temporary |
Translation |
Plans |
Stockholders |
Noncontrolling |
Total |
|||||||||||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | Cost | (Losses) | Impairments | Adjustments | Adjustment | Equity | Interests | Equity | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008
|
$ | 1 | $ | 8 | $ | 15,811 | $ | 22,403 | $ | (236 | ) | $ | (12,564 | ) | $ | | $ | (246 | ) | $ | (1,443 | ) | $ | 23,734 | $ | 251 | $ | 23,985 | ||||||||||||||||||||
Cumulative effect of changes in accounting principle, net of
income tax (Note 1)
|
76 | (76 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Common stock issuance newly issued shares
|
1,035 | 1,035 | 1,035 | |||||||||||||||||||||||||||||||||||||||||||||
Treasury stock transactions, net
|
20 | 42 | 62 | 62 | ||||||||||||||||||||||||||||||||||||||||||||
Deferral of stock-based compensation
|
(1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock
|
(91 | ) | (91 | ) | (91 | ) | ||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests
|
109 | 109 | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||||||||||||||||
Net loss
|
(2,566 | ) | (2,566 | ) | (25 | ) | (2,591 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of
income tax
|
| | | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and
income tax
|
12,092 | (251 | ) | 11,841 | (10 | ) | 11,831 | |||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax
|
134 | 134 | 134 | |||||||||||||||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax
|
120 | 120 | 120 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss)
|
12,095 | (10 | ) | 12,085 | ||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss)
|
9,529 | (35 | ) | 9,494 | ||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2009
|
$ | 1 | $ | 8 | $ | 16,865 | $ | 19,822 | $ | (194 | ) | $ | (472 | ) | $ | (327 | ) | $ | (112 | ) | $ | (1,323 | ) | $ | 34,268 | $ | 325 | $ | 34,593 | |||||||||||||||||||
6
Accumulated Other Comprehensive |
||||||||||||||||||||||||||||||||||||||||||||||||
Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Net |
||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized |
Foreign |
Defined |
Total |
|||||||||||||||||||||||||||||||||||||||||||||
Additional |
Treasury |
Investment |
Currency |
Benefit |
MetLife, Inc.s |
Noncontrolling Interests | ||||||||||||||||||||||||||||||||||||||||||
Preferred |
Common |
Paid-in |
Retained |
Stock |
Gains |
Translation |
Plans |
Stockholders |
Discontinued |
Continuing |
Total |
|||||||||||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | (Losses) | Adjustments | Adjustment | Equity | Operations | Operations | Equity | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007
|
$ | 1 | $ | 8 | $ | 17,098 | $ | 19,884 | $ | (2,890 | ) | $ | 971 | $ | 347 | $ | (240 | ) | $ | 35,179 | $ | 1,534 | $ | 272 | $ | 36,985 | ||||||||||||||||||||||
Cumulative effect of changes in accounting principles, net of
income tax
|
27 | (10 | ) | 17 | 17 | |||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2008
|
1 | 8 | 17,098 | 19,911 | (2,890 | ) | 961 | 347 | (240 | ) | 35,196 | 1,534 | 272 | 37,002 | ||||||||||||||||||||||||||||||||||
Treasury stock transactions:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Acquired in connection with share repurchase agreements
(Note 9)
|
450 | (1,250 | ) | (800 | ) | (800 | ) | |||||||||||||||||||||||||||||||||||||||||
Issued to settle stock forward contracts
|
(29 | ) | 1,064 | 1,035 | 1,035 | |||||||||||||||||||||||||||||||||||||||||||
Acquired in connection with split-off of subsidiary
|
(1,318 | ) | (1,318 | ) | (1,318 | ) | ||||||||||||||||||||||||||||||||||||||||||
Other, net
|
(58 | ) | 115 | 57 | 57 | |||||||||||||||||||||||||||||||||||||||||||
Deferral of stock-based compensation
|
141 | 141 | 141 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends on preferred stock
|
(94 | ) | (94 | ) | (94 | ) | ||||||||||||||||||||||||||||||||||||||||||
Dividends on subsidiary common stock
|
34 | 34 | ||||||||||||||||||||||||||||||||||||||||||||||
Change in equity of noncontrolling interests
|
(1,409 | ) | (41 | ) | (1,450 | ) | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss)
|
2,224 | 2,224 | 94 | (16 | ) | 2,302 | ||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of
income tax
|
135 | 135 | 135 | |||||||||||||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and
income tax
|
(8,448 | ) | (8,448 | ) | (150 | ) | (7 | ) | (8,605 | ) | ||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax
|
(299 | ) | (299 | ) | (107 | ) | (406 | ) | ||||||||||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax
|
4 | 4 | 4 | 8 | ||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss
|
(8,608 | ) | (253 | ) | (7 | ) | (8,868 | ) | ||||||||||||||||||||||||||||||||||||||||
Comprehensive loss
|
(6,384 | ) | (159 | ) | (23 | ) | (6,566 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2008
|
$ | 1 | $ | 8 | $ | 17,602 | $ | 22,041 | $ | (4,279 | ) | $ | (7,352 | ) | $ | 48 | $ | (236 | ) | $ | 27,833 | $ | | $ | 208 | $ | 28,041 | |||||||||||||||||||||
7
Nine Months |
||||||||
Ended |
||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Net cash provided by operating activities
|
$ | 2,718 | $ | 7,002 | ||||
Cash flows from investing activities
|
||||||||
Sales, maturities and repayments of:
|
||||||||
Fixed maturity securities
|
48,802 | 74,011 | ||||||
Equity securities
|
1,900 | 2,466 | ||||||
Mortgage and consumer loans
|
5,145 | 4,570 | ||||||
Real estate and real estate joint ventures
|
23 | 147 | ||||||
Other limited partnership interests
|
824 | 580 | ||||||
Purchases of:
|
||||||||
Fixed maturity securities
|
(63,363 | ) | (74,701 | ) | ||||
Equity securities
|
(1,543 | ) | (1,138 | ) | ||||
Mortgage and consumer loans
|
(4,204 | ) | (8,009 | ) | ||||
Real estate and real estate joint ventures
|
(466 | ) | (938 | ) | ||||
Other limited partnership interests
|
(570 | ) | (1,341 | ) | ||||
Net change in short-term investments
|
7,022 | 36 | ||||||
Net change in other invested assets
|
(530 | ) | (689 | ) | ||||
Net change in policy loans
|
(199 | ) | (405 | ) | ||||
Purchases of businesses, net of cash received of $0 and $313,
respectively
|
| (465 | ) | |||||
Sales of businesses, net of cash disposed of $180 and $0,
respectively
|
(50 | ) | (4 | ) | ||||
Disposal of subsidiary
|
(19 | ) | (281 | ) | ||||
Other, net
|
(129 | ) | (96 | ) | ||||
Net cash used in investing activities
|
(7,357 | ) | (6,257 | ) | ||||
Cash flows from financing activities
|
||||||||
Policyholder account balances:
|
||||||||
Deposits
|
63,597 | 47,217 | ||||||
Withdrawals
|
(64,382 | ) | (38,896 | ) | ||||
Net change in short-term debt
|
(528 | ) | 439 | |||||
Long-term debt issued
|
2,625 | 1,032 | ||||||
Long-term debt repaid
|
(244 | ) | (217 | ) | ||||
Collateral financing arrangements issued
|
105 | 250 | ||||||
Cash received in connection with collateral financing arrangement
|
400 | | ||||||
Cash paid in connection with collateral financing arrangement
|
(400 | ) | (238 | ) | ||||
Junior subordinated debt securities issued
|
500 | 750 | ||||||
Debt issuance costs
|
(22 | ) | (10 | ) | ||||
Net change in payables for collateral under securities loaned
and other transactions
|
(6,696 | ) | (837 | ) | ||||
Stock options exercised
|
6 | 43 | ||||||
Common stock issued to settle stock forward contracts
|
1,035 | | ||||||
Treasury stock acquired
|
| (1,250 | ) | |||||
Treasury stock issued to settle stock forward contracts
|
| 1,035 | ||||||
Dividends on preferred stock
|
(91 | ) | (94 | ) | ||||
Other, net
|
(31 | ) | (16 | ) | ||||
Net cash (used in) provided by financing activities
|
(4,126 | ) | 9,208 | |||||
Effect of change in foreign currency exchange rates on cash
balances
|
88 | (112 | ) | |||||
Change in cash and cash equivalents
|
(8,677 | ) | 9,841 | |||||
Cash and cash equivalents, beginning of period
|
24,239 | 10,368 | ||||||
Cash and cash equivalents, end of period
|
$ | 15,562 | $ | 20,209 | ||||
8
Nine Months |
||||||||
Ended |
||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
Cash and cash equivalents, subsidiaries
held-for-sale,
beginning of period
|
$ | 32 | $ | 407 | ||||
Cash and cash equivalents, subsidiaries
held-for-sale,
end of period
|
$ | | $ | 28 | ||||
Cash and cash equivalents, from continuing operations, beginning
of period
|
$ | 24,207 | $ | 9,961 | ||||
Cash and cash equivalents, from continuing operations, end of
period
|
$ | 15,562 | $ | 20,181 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Net cash paid during the period for:
|
||||||||
Interest
|
$ | 611 | $ | 677 | ||||
Income tax
|
$ | 298 | $ | 430 | ||||
Non-cash transactions during the period:
|
||||||||
Business acquisitions:
|
||||||||
Assets acquired
|
$ | | $ | 1,808 | ||||
Cash paid
|
| (778 | ) | |||||
Liabilities assumed
|
$ | | $ | 1,030 | ||||
Disposal of subsidiary:
|
||||||||
Assets disposed
|
$ | | $ | 22,135 | ||||
Less: liabilities disposed
|
| (20,689 | ) | |||||
Net assets disposed
|
| 1,446 | ||||||
Add: cash disposed
|
| 270 | ||||||
Add: transaction costs, including cash paid of $19 and $11,
respectively
|
2 | 60 | ||||||
Less: treasury stock received in common stock exchange
|
| (1,318 | ) | |||||
Loss on disposal of subsidiary
|
$ | 2 | $ | 458 | ||||
Remarketing of debt securities:
|
||||||||
Fixed maturity securities redeemed
|
$ | 32 | $ | 32 | ||||
Long-term debt issued
|
$ | 1,035 | $ | 1,035 | ||||
Junior subordinated debt securities redeemed
|
$ | 1,067 | $ | 1,067 | ||||
Fixed maturity securities received in connection with insurance
contract commutation
|
$ | | $ | 115 | ||||
Real estate and real estate joint ventures acquired in
satisfaction of debt
|
$ | 211 | $ | 1 | ||||
Purchase money mortgage on real estate joint venture sale
|
$ | 74 | $ | | ||||
9
1. | Business, Basis of Presentation, and Summary of Significant Accounting Policies |
(i) | the estimated fair value of investments in the absence of quoted market values; | |
(ii) | investment impairments; | |
(iii) | the recognition of income on certain investment entities; | |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the existence and estimated fair value of embedded derivatives requiring bifurcation; | |
(vi) | the estimated fair value of and accounting for derivatives; | |
(vii) | the capitalization and amortization of deferred policy acquisition costs (DAC) and the establishment and amortization of value of business acquired (VOBA); | |
(viii) | the measurement of goodwill and related impairment, if any; | |
(ix) | the liability for future policyholder benefits; | |
(x) | accounting for income taxes and the valuation of deferred income tax assets; | |
(xi) | accounting for reinsurance transactions; | |
(xii) | accounting for employee benefit plans; and | |
(xiii) | the liability for litigation and regulatory matters. |
10
11
| The first update provides guidance on: (i) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities; and (ii) identifying transactions that are not orderly. Further, it requires disclosure in interim financial statements of the inputs and valuation techniques used to measure fair value. The adoption of this update did not have an impact on the Companys consolidated financial statements. Additionally, the Company has provided all of the material required disclosures in its consolidated financial statements. | |
| The second update requires interim financial instrument fair value disclosures similar to those included in annual financial statements. The Company has provided all of the material required disclosures in its consolidated financial statements. |
12
| All business combinations (whether full, partial or step acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
| Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. | |
| The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
| Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition-date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. | |
| Changes in deferred income tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
| Noncontrolling interests (formerly known as minority interests) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
| Net income includes amounts attributable to noncontrolling interests. | |
| When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
| Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
| When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
13
14
| The financial instrument transfer guidance eliminates the concept of a qualifying special purpose entity, eliminates the guaranteed mortgage securitization exception, changes the criteria for achieving sale accounting when transferring a financial asset and changes the initial recognition of retained beneficial interests. The guidance also requires additional disclosures about transfers of financial assets, including securitized transactions, as well as a companys continuing involvement in transferred financial assets. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. | |
| The consolidation guidance relating to special purpose entities changes the determination of the primary beneficiary of a VIE from a quantitative model to a qualitative model. Under the new qualitative model, the primary beneficiary must have both the ability to direct the activities of the VIE and the obligation to absorb either losses or gains that could be significant to the VIE. The guidance also changes when reassessment is needed, as well as requires enhanced disclosures, including the effects of a companys involvement with VIEs on its financial statements. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. |
2. | Acquisitions and Dispositions |
15
3. | Investments |
September 30, 2009 | ||||||||||||||||||||||||
Cost or |
Gross Unrealized |
Estimated |
||||||||||||||||||||||
Amortized |
Temporary |
OTTI |
Fair |
% of |
||||||||||||||||||||
Cost | Gain | Loss | Loss | Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
U.S. corporate securities
|
$ | 71,375 | $ | 3,416 | $ | 3,144 | $ | 5 | $ | 71,642 | 32.1 | % | ||||||||||||
Residential mortgage-backed securities
|
45,267 | 1,389 | 2,849 | 410 | 43,397 | 19.4 | ||||||||||||||||||
Foreign corporate securities
|
35,991 | 2,021 | 1,411 | 9 | 36,592 | 16.3 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed
securities (1)
|
24,281 | 1,468 | 282 | | 25,467 | 11.4 | ||||||||||||||||||
Commercial mortgage-backed securities
|
16,615 | 181 | 1,247 | 14 | 15,535 | 6.9 | ||||||||||||||||||
Asset-backed securities
|
14,703 | 198 | 1,541 | 109 | 13,251 | 5.9 | ||||||||||||||||||
Foreign government securities
|
10,473 | 1,107 | 133 | | 11,447 | 5.1 | ||||||||||||||||||
State and political subdivision securities
|
6,551 | 282 | 284 | | 6,549 | 2.9 | ||||||||||||||||||
Other fixed maturity securities
|
18 | | 2 | | 16 | | ||||||||||||||||||
Total fixed maturity
securities (2), (3)
|
$ | 225,274 | $ | 10,062 | $ | 10,893 | $ | 547 | $ | 223,896 | 100.0 | % | ||||||||||||
Common stock
|
$ | 1,576 | $ | 91 | $ | 31 | $ | | $ | 1,636 | 52.5 | % | ||||||||||||
Non-redeemable preferred stock (2)
|
1,773 | 75 | 367 | | 1,481 | 47.5 | ||||||||||||||||||
Total equity securities (4)
|
$ | 3,349 | $ | 166 | $ | 398 | $ | | $ | 3,117 | 100.0 | % | ||||||||||||
16
December 31, 2008 | ||||||||||||||||||||
Cost or |
Estimated |
|||||||||||||||||||
Amortized |
Gross Unrealized |
Fair |
% of |
|||||||||||||||||
Cost | Gain | Loss | Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities
|
$ | 72,211 | $ | 994 | $ | 9,902 | $ | 63,303 | 33.6 | % | ||||||||||
Residential mortgage-backed securities
|
39,995 | 753 | 4,720 | 36,028 | 19.2 | |||||||||||||||
Foreign corporate securities
|
34,798 | 565 | 5,684 | 29,679 | 15.8 | |||||||||||||||
U.S. Treasury, agency and government guaranteed
securities (1)
|
17,229 | 4,082 | 1 | 21,310 | 11.3 | |||||||||||||||
Commercial mortgage-backed securities
|
16,079 | 18 | 3,453 | 12,644 | 6.7 | |||||||||||||||
Asset-backed securities
|
14,246 | 16 | 3,739 | 10,523 | 5.6 | |||||||||||||||
Foreign government securities
|
9,474 | 1,056 | 377 | 10,153 | 5.4 | |||||||||||||||
State and political subdivision securities
|
5,419 | 80 | 942 | 4,557 | 2.4 | |||||||||||||||
Other fixed maturity securities
|
57 | | 3 | 54 | | |||||||||||||||
Total fixed maturity securities (2), (3)
|
$ | 209,508 | $ | 7,564 | $ | 28,821 | $ | 188,251 | 100.0 | % | ||||||||||
Common stock
|
$ | 1,778 | $ | 40 | $ | 133 | $ | 1,685 | 52.7 | % | ||||||||||
Non-redeemable preferred stock (2)
|
2,353 | 4 | 845 | 1,512 | 47.3 | |||||||||||||||
Total equity securities (4)
|
$ | 4,131 | $ | 44 | $ | 978 | $ | 3,197 | 100.0 | % | ||||||||||
(1) | The Company has classified within the U.S. Treasury, agency and government guaranteed securities caption above certain corporate fixed maturity securities issued by U.S. financial institutions that were guaranteed by the Federal Deposit Insurance Corporation (FDIC) pursuant to the FDICs Temporary Liquidity Guarantee Program (FDIC Program) of $560 million and $2 million at estimated fair value with unrealized gains (losses) of $4 million and less than ($1) million at September 30, 2009 and December 31, 2008, respectively. | |
(2) | The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest rate step-up feature, as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest rate step-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued by non-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as perpetual hybrid securities. The following table presents the perpetual hybrid securities held by the Company at: |
Classification | September 30, 2009 | December 31, 2008 | ||||||||||
Estimated |
Estimated |
|||||||||||
Fair |
Fair |
|||||||||||
Consolidated Balance Sheets
|
Sector Table | Primary Issuers | Value | Value | ||||||||
(In millions) | ||||||||||||
Equity securities
|
Non-redeemable preferred stock | Non-U.S. financial institutions | $ | 1,136 | $ | 1,224 | ||||||
Equity securities
|
Non-redeemable preferred stock | U.S. financial institutions | $ | 332 | $ | 288 | ||||||
Fixed maturity securities
|
Foreign corporate securities | Non-U.S. financial institutions | $ | 2,719 | $ | 2,110 | ||||||
Fixed maturity securities
|
U.S. corporate securities | U.S. financial institutions | $ | 59 | $ | 46 |
(3) | At September 30, 2009 and December 31, 2008, the Company held $2,457 million and $2,052 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates. These securities, commonly referred to as capital securities, are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are included in the U.S. corporate securities sector within fixed maturity securities. |
17
(4) | Equity securities primarily consist of investments in common and preferred stocks, including certain perpetual hybrid securities, and mutual fund interests. Such securities include common stock of privately held companies with an estimated fair value of $1.1 billion at both September 30, 2009 and December 31, 2008. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Below investment grade or non-rated fixed maturity securities:
|
||||||||
Estimated fair value
|
$ | 21,391 | $ | 12,365 | ||||
Net unrealized loss
|
$ | 4,085 | $ | 5,094 | ||||
Non-income producing fixed maturity securities:
|
||||||||
Estimated fair value
|
$ | 274 | $ | 75 | ||||
Net unrealized loss
|
$ | 22 | $ | 19 | ||||
Fixed maturity securities credit enhanced by financial guarantor
insurers by sector at estimated fair
value:
|
||||||||
State and political subdivision securities
|
$ | 2,177 | $ | 2,005 | ||||
U.S. corporate securities
|
1,736 | 2,007 | ||||||
Asset-backed securities
|
788 | 833 | ||||||
Other
|
89 | 51 | ||||||
Total fixed maturity securities credit enhanced by financial
guarantor insurers
|
$ | 4,790 | $ | 4,896 | ||||
Ratings of the financial guarantor insurers providing the credit
enhancement:
|
||||||||
Portion rated Aa/AA
|
19 | % | 15 | % | ||||
Portion rated A
|
38 | % | | % | ||||
Portion rated Baa/BBB
|
| % | 68 | % | ||||
18
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated |
Estimated |
|||||||||||||||
Fair |
% of |
Fair |
% of |
|||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Corporate fixed maturity securities by industry type:
|
||||||||||||||||
Foreign (1)
|
$ | 36,592 | 33.8 | % | $ | 29,679 | 32.0 | % | ||||||||
Consumer
|
16,588 | 15.3 | 13,122 | 14.1 | ||||||||||||
Industrial
|
16,539 | 15.3 | 13,324 | 14.3 | ||||||||||||
Utility
|
14,942 | 13.8 | 12,434 | 13.4 | ||||||||||||
Finance
|
14,188 | 13.1 | 14,996 | 16.1 | ||||||||||||
Communications
|
6,554 | 6.1 | 5,714 | 6.1 | ||||||||||||
Other
|
2,831 | 2.6 | 3,713 | 4.0 | ||||||||||||
Total
|
$ | 108,234 | 100.0 | % | $ | 92,982 | 100.0 | % | ||||||||
(1) | Includes U.S. Dollar-denominated debt obligations of foreign obligors and other fixed maturity securities foreign investments. |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated |
Estimated |
|||||||||||||||
Fair |
% of Total |
Fair |
% of Total |
|||||||||||||
Value | Investments | Value | Investments | |||||||||||||
(In millions) | ||||||||||||||||
Concentrations within corporate fixed maturity securities:
|
||||||||||||||||
Largest exposure to a single issuer
|
$ | 1,250 | 0.4 | % | $ | 1,469 | 0.5 | % | ||||||||
Holdings in top ten issuers
|
$ | 8,009 | 2.5 | % | $ | 8,446 | 2.8 | % |
19
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated |
Estimated |
|||||||||||||||
Fair |
% of |
Fair |
% of |
|||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By security type:
|
||||||||||||||||
Collateralized mortgage obligations
|
$ | 24,594 | 56.7 | % | $ | 26,025 | 72.2 | % | ||||||||
Pass-through securities
|
18,803 | 43.3 | 10,003 | 27.8 | ||||||||||||
Total residential mortgage-backed securities
|
$ | 43,397 | 100.0 | % | $ | 36,028 | 100.0 | % | ||||||||
By risk profile:
|
||||||||||||||||
Agency
|
$ | 32,851 | 75.7 | % | $ | 24,409 | 67.8 | % | ||||||||
Prime
|
6,711 | 15.5 | 8,254 | 22.9 | ||||||||||||
Alternative residential mortgage loans
|
3,835 | 8.8 | 3,365 | 9.3 | ||||||||||||
Total residential mortgage-backed securities
|
$ | 43,397 | 100.0 | % | $ | 36,028 | 100.0 | % | ||||||||
Portion rated Aaa/AAA
|
$ | 35,341 | 81.4 | % | $ | 33,265 | 92.3 | % | ||||||||
20
Alt-A Residential MortgageBacked Securities | ||||||||||||||||||||||||||||||||||||||||||||||||
Estimated |
Net |
Hybrid |
||||||||||||||||||||||||||||||||||||||||||||||
2003 & |
Fair |
Unrealized |
Rated Aa/AA or |
Fixed |
ARM |
|||||||||||||||||||||||||||||||||||||||||||
Prior | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Value | Loss | Better | Rate% | % | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
September 30, 2009:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Amount
|
$ | 53 | $ | 49 | $ | 1,338 | $ | 812 | $ | 781 | $ | | $ | 802 | $ | 3,835 | $ | 1,570 | ||||||||||||||||||||||||||||||
Percentage
|
1.4% | 1.3% | 34.9% | 21.2% | 20.3% | % | 20.9% | 100.0% | 26.9 | % | 89.2 | % | 10.8 | % | ||||||||||||||||||||||||||||||||||
December 31, 2008:
|
||||||||||||||||||||||||||||||||||||||||||||||||
Amount
|
$ | 113 | $ | 137 | $ | 1,493 | $ | 857 | $ | 765 | $ | | $ | | $ | 3,365 | $ | 1,951 | ||||||||||||||||||||||||||||||
Percentage
|
3.3% | 4.1% | 44.4% | 25.5% | 22.7% | % | % | 100.0% | 63.4 | % | 87.9 | % | 12.1 | % |
Commercial MortgageBacked Securities | ||||||||||||||||||||||||||||||||||||||||
Estimated |
Net |
|||||||||||||||||||||||||||||||||||||||
2003 & |
Fair |
Unrealized |
||||||||||||||||||||||||||||||||||||||
Prior | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | Value | Loss | Rated Aaa | |||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||
September 30, 2009:
|
||||||||||||||||||||||||||||||||||||||||
Amount
|
$ | 7,485 | $ | 2,538 | $ | 3,104 | $ | 1,649 | $ | 759 | $ | | $ | | $ | 15,535 | $ | 1,080 | ||||||||||||||||||||||
Percentage
|
48.2% | 16.3% | 20.0% | 10.6% | 4.9% | % | % | 100.0% | 88.9 | % | ||||||||||||||||||||||||||||||
December 31, 2008:
|
||||||||||||||||||||||||||||||||||||||||
Amount
|
$ | 5,412 | $ | 2,457 | $ | 2,737 | $ | 1,437 | $ | 600 | $ | 1 | $ | | $ | 12,644 | $ | 3,435 | ||||||||||||||||||||||
Percentage
|
42.8% | 19.4% | 21.6% | 11.4% | 4.8% | % | % | 100.0% | 93.2 | % |
21
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated |
Estimated |
|||||||||||||||
Fair |
% of |
Fair |
% of |
|||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
By collateral type:
|
||||||||||||||||
Credit card loans
|
$ | 7,455 | 56.3 | % | $ | 5,190 | 49.3 | % | ||||||||
Student loans
|
1,758 | 13.3 | 1,085 | 10.3 | ||||||||||||
Automobile loans
|
1,035 | 7.8 | 1,051 | 10.0 | ||||||||||||
Residential mortgage-backed securities backed by
sub-prime
mortgage loans
|
1,027 | 7.7 | 1,142 | 10.9 | ||||||||||||
Other loans
|
1,976 | 14.9 | 2,055 | 19.5 | ||||||||||||
Total
|
$ | 13,251 | 100.0 | % | $ | 10,523 | 100.0 | % | ||||||||
Portion rated Aaa/AAA
|
$ | 9,638 | 72.7 | % | $ | 7,934 | 75.4 | % | ||||||||
Residential mortgage-backed securities backed by
sub-prime
mortgage loans portion that is credit enhanced by
financial guarantor insurers
|
37.6 | % | 37.2 | % | ||||||||||||
Of the 37.6% and 37.2% credit enhanced, the financial guarantor
insurers are rated as follows:
|
||||||||||||||||
By financial guarantor insurers rated Aa
|
16.3 | % | 18.8 | % | ||||||||||||
By financial guarantor insurers rated A
|
7.6 | % | | % | ||||||||||||
By financial guarantor insurers rated Baa
|
| % | 37.3 | % |
September 30, 2009 | December 31, 2008 | |||||||||||||||
Estimated |
Estimated |
|||||||||||||||
Amortized |
Fair |
Amortized |
Fair |
|||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less
|
$ | 6,135 | $ | 6,222 | $ | 5,556 | $ | 5,491 | ||||||||
Due after one year through five years
|
36,746 | 37,421 | 33,604 | 30,884 | ||||||||||||
Due after five years through ten years
|
40,256 | 41,258 | 41,481 | 36,895 | ||||||||||||
Due after ten years
|
65,552 | 66,812 | 58,547 | 55,786 | ||||||||||||
Subtotal
|
148,689 | 151,713 | 139,188 | 129,056 | ||||||||||||
Mortgage-backed and asset-backed securities
|
76,585 | 72,183 | 70,320 | 59,195 | ||||||||||||
Total fixed maturity securities
|
$ | 225,274 | $ | 223,896 | $ | 209,508 | $ | 188,251 | ||||||||
22
23
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Fixed maturity securities that were temporarily impaired
|
$ | (831 | ) | $ | (21,246 | ) | ||
Fixed maturity securities with noncredit OTTI losses in other
comprehensive loss
|
(547 | ) | | |||||
Total fixed maturity securities
|
(1,378 | ) | (21,246 | ) | ||||
Equity securities
|
(232 | ) | (934 | ) | ||||
Derivatives
|
(46 | ) | (2 | ) | ||||
Other
|
79 | 53 | ||||||
Subtotal
|
(1,577 | ) | (22,129 | ) | ||||
Amounts allocated from:
|
||||||||
Insurance liability loss recognition
|
(239 | ) | 42 | |||||
DAC and VOBA on which noncredit OTTI losses have been recognized
|
48 | | ||||||
DAC and VOBA
|
475 | 3,025 | ||||||
Subtotal
|
284 | 3,067 | ||||||
Deferred income tax benefit (expense) on which noncredit OTTI
losses have been recognized
|
172 | | ||||||
Deferred income tax benefit (expense)
|
322 | 6,508 | ||||||
Net unrealized investment gains (losses)
|
(799 | ) | (12,554 | ) | ||||
Net unrealized investment gains (losses) attributable to
noncontrolling interests
|
| (10 | ) | |||||
Net unrealized investment gains (losses) attributable to
MetLife, Inc.
|
$ | (799 | ) | $ | (12,564 | ) | ||
24
Nine Months |
||||
Ended |
||||
September 30, 2009 | ||||
(In millions) | ||||
Balance, end of prior period
|
$ | (12,564 | ) | |
Cumulative effect of change in accounting principle, net of
income tax
|
(76 | ) | ||
Fixed maturity securities on which noncredit OTTI losses have
been recognized
|
(421 | ) | ||
Unrealized investment gains (losses) during the period
|
21,099 | |||
Unrealized investment gains (losses) relating to:
|
||||
Insurance liability gain (loss) recognition
|
(281 | ) | ||
DAC and VOBA on which noncredit OTTI losses have been recognized
|
38 | |||
DAC and VOBA
|
(2,550 | ) | ||
Deferred income tax benefit (expense) on which noncredit OTTI
losses have been recognized
|
132 | |||
Deferred income tax benefit (expense)
|
(6,186 | ) | ||
Net unrealized investment gains (losses)
|
(809 | ) | ||
Net unrealized investment gains (losses) attributable to
noncontrolling interests
|
10 | |||
Balance, end of period
|
$ | (799 | ) | |
Change in net unrealized investment gains (losses)
|
$ | 11,755 | ||
Change in net unrealized investment gains (losses) attributable
to noncontrolling interests
|
10 | |||
Change in net unrealized investment gains (losses) attributable
to MetLife, Inc.s common shareholders
|
$ | 11,765 | ||
25
September 30, 2009 | ||||||||||||||||||||||||
Equal to or Greater |
||||||||||||||||||||||||
Less than 12 Months | than 12 Months | Total | ||||||||||||||||||||||
Estimated |
Gross |
Estimated |
Gross |
Estimated |
Gross |
|||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
U.S. corporate securities
|
$ | 3,948 | $ | 398 | $ | 20,536 | $ | 2,751 | $ | 24,484 | $ | 3,149 | ||||||||||||
Residential mortgage-backed securities
|
2,587 | 264 | 9,463 | 2,995 | 12,050 | 3,259 | ||||||||||||||||||
Foreign corporate securities
|
2,323 | 194 | 8,400 | 1,226 | 10,723 | 1,420 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities
|
7,265 | 282 | 2 | | 7,267 | 282 | ||||||||||||||||||
Commercial mortgage-backed securities
|
1,208 | 19 | 6,991 | 1,242 | 8,199 | 1,261 | ||||||||||||||||||
Asset-backed securities
|
652 | 152 | 6,655 | 1,498 | 7,307 | 1,650 | ||||||||||||||||||
Foreign government securities
|
1,366 | 45 | 539 | 88 | 1,905 | 133 | ||||||||||||||||||
State and political subdivision securities
|
184 | 28 | 1,894 | 256 | 2,078 | 284 | ||||||||||||||||||
Other fixed maturity securities
|
8 | 2 | | | 8 | 2 | ||||||||||||||||||
Total fixed maturity securities
|
$ | 19,541 | $ | 1,384 | $ | 54,480 | $ | 10,056 | $ | 74,021 | $ | 11,440 | ||||||||||||
Common stock
|
195 | 30 | 10 | 1 | 205 | 31 | ||||||||||||||||||
Non-redeemable preferred stock
|
173 | 65 | 924 | 302 | 1,097 | 367 | ||||||||||||||||||
Total equity securities
|
$ | 368 | $ | 95 | $ | 934 | $ | 303 | $ | 1,302 | $ | 398 | ||||||||||||
Total number of securities in an unrealized loss position
|
1,453 | 3,821 | ||||||||||||||||||||||
26
December 31, 2008 | ||||||||||||||||||||||||
Equal to or Greater |
||||||||||||||||||||||||
Less than 12 Months | than 12 Months | Total | ||||||||||||||||||||||
Estimated |
Gross |
Estimated |
Gross |
Estimated |
Gross |
|||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
U.S. corporate securities
|
$ | 30,076 | $ | 4,479 | $ | 18,011 | $ | 5,423 | $ | 48,087 | $ | 9,902 | ||||||||||||
Residential mortgage-backed securities
|
10,032 | 2,711 | 4,572 | 2,009 | 14,604 | 4,720 | ||||||||||||||||||
Foreign corporate securities
|
15,634 | 3,157 | 6,609 | 2,527 | 22,243 | 5,684 | ||||||||||||||||||
U.S. Treasury, agency and government guaranteed securities
|
106 | 1 | | | 106 | 1 | ||||||||||||||||||
Commercial mortgage-backed securities
|
9,259 | 1,665 | 3,093 | 1,788 | 12,352 | 3,453 | ||||||||||||||||||
Asset-backed securities
|
6,412 | 1,325 | 3,777 | 2,414 | 10,189 | 3,739 | ||||||||||||||||||
Foreign government securities
|
2,030 | 316 | 403 | 61 | 2,433 | 377 | ||||||||||||||||||
State and political subdivision securities
|
2,035 | 405 | 948 | 537 | 2,983 | 942 | ||||||||||||||||||
Other fixed maturity securities
|
20 | 3 | 2 | | 22 | 3 | ||||||||||||||||||
Total fixed maturity securities
|
$ | 75,604 | $ | 14,062 | $ | 37,415 | $ | 14,759 | $ | 113,019 | $ | 28,821 | ||||||||||||
Equity securities
|
$ | 727 | $ | 306 | $ | 978 | $ | 672 | $ | 1,705 | $ | 978 | ||||||||||||
Total number of securities in an unrealized loss position
|
9,066 | 3,539 | ||||||||||||||||||||||
September 30, 2009 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than |
20% or |
Less than |
20% or |
Less than |
20% or |
|||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities:
|
||||||||||||||||||||||||
Less than six months
|
$ | 13,065 | $ | 1,879 | $ | 389 | $ | 540 | 1,030 | 144 | ||||||||||||||
Six months or greater but less than nine months
|
2,679 | 1,983 | 157 | 640 | 326 | 111 | ||||||||||||||||||
Nine months or greater but less than twelve months
|
3,539 | 6,288 | 228 | 2,116 | 359 | 372 | ||||||||||||||||||
Twelve months or greater
|
45,870 | 10,158 | 3,276 | 4,094 | 3,066 | 666 | ||||||||||||||||||
Total
|
$ | 65,153 | $ | 20,308 | $ | 4,050 | $ | 7,390 | ||||||||||||||||
Percentage of cost or amortized cost
|
6 | % | 36 | % | ||||||||||||||||||||
Equity Securities:
|
||||||||||||||||||||||||
Less than six months
|
$ | 44 | $ | 46 | $ | 2 | $ | 13 | 127 | 31 | ||||||||||||||
Six months or greater but less than nine months
|
32 | 113 | 6 | 45 | 8 | 7 | ||||||||||||||||||
Nine months or greater but less than twelve months
|
229 | 132 | 29 | 43 | 23 | 16 | ||||||||||||||||||
Twelve months or greater
|
393 | 711 | 48 | 212 | 69 | 25 | ||||||||||||||||||
Total
|
$ | 698 | $ | 1,002 | $ | 85 | $ | 313 | ||||||||||||||||
Percentage of cost
|
12 | % | 31 | % | ||||||||||||||||||||
27
December 31, 2008 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than |
20% or |
Less than |
20% or |
Less than |
20% or |
|||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Fixed Maturity Securities:
|
||||||||||||||||||||||||
Less than six months
|
$ | 32,658 | $ | 48,114 | $ | 2,358 | $ | 17,191 | 4,566 | 2,827 | ||||||||||||||
Six months or greater but less than nine months
|
14,975 | 2,180 | 1,313 | 1,109 | 1,314 | 157 | ||||||||||||||||||
Nine months or greater but less than twelve months
|
16,372 | 3,700 | 1,830 | 2,072 | 934 | 260 | ||||||||||||||||||
Twelve months or greater
|
23,191 | 650 | 2,533 | 415 | 1,809 | 102 | ||||||||||||||||||
Total
|
$ | 87,196 | $ | 54,644 | $ | 8,034 | $ | 20,787 | ||||||||||||||||
Percentage of cost or amortized cost
|
9 | % | 38 | % | ||||||||||||||||||||
Equity Securities:
|
||||||||||||||||||||||||
Less than six months
|
$ | 386 | $ | 1,190 | $ | 58 | $ | 519 | 351 | 551 | ||||||||||||||
Six months or greater but less than nine months
|
33 | 413 | 6 | 190 | 8 | 32 | ||||||||||||||||||
Nine months or greater but less than twelve months
|
3 | 487 | | 194 | 5 | 15 | ||||||||||||||||||
Twelve months or greater
|
171 | | 11 | | 20 | | ||||||||||||||||||
Total
|
$ | 593 | $ | 2,090 | $ | 75 | $ | 903 | ||||||||||||||||
Percentage of cost
|
13 | % | 43 | % | ||||||||||||||||||||
September 30, 2009 | December 31, 2008 | |||||||
Sector:
|
||||||||
U.S. corporate securities
|
27 | % | 33 | % | ||||
Residential mortgage-backed securities
|
27 | 16 | ||||||
Asset-backed securities
|
14 | 13 | ||||||
Foreign corporate securities
|
12 | 19 | ||||||
Commercial mortgage-backed securities
|
11 | 11 | ||||||
State and political subdivision securities
|
2 | 3 | ||||||
Foreign government securities
|
1 | 1 | ||||||
Other
|
6 | 4 | ||||||
Total
|
100 | % | 100 | % | ||||
Industry:
|
||||||||
Mortgage-backed
|
38 | % | 27 | % | ||||
Finance
|
25 | 24 | ||||||
Asset-backed
|
14 | 13 | ||||||
Consumer
|
5 | 11 | ||||||
Utility
|
3 | 8 | ||||||
Communications
|
2 | 5 | ||||||
Industrial
|
2 | 4 | ||||||
Foreign government
|
1 | 1 | ||||||
Other
|
10 | 7 | ||||||
Total
|
100 | % | 100 | % | ||||
28
September 30, 2009 | December 31, 2008 | |||||||
Fixed Maturity |
Equity |
Fixed Maturity |
Equity |
|||||
Securities | Securities | Securities | Securities | |||||
(In millions, except number of securities) | ||||||||
Number of securities
|
260 | 15 | 699 | 33 | ||||
Total gross unrealized loss
|
$5,341 | $248 | $14,485 | $699 | ||||
Percentage of gross unrealized loss
|
47% | 62% | 50% | 71% |
September 30, 2009 | ||||||||||||||||||||||||||||||||
Non-Redeemable Preferred Stock | ||||||||||||||||||||||||||||||||
All Types of |
||||||||||||||||||||||||||||||||
All Equity |
Non-Redeemable |
Investment Grade | ||||||||||||||||||||||||||||||
Securities | Preferred Stock | All Industries | Financial Services Industry | |||||||||||||||||||||||||||||
Gross |
Gross |
% of All |
Gross |
% of All |
Gross |
% A |
||||||||||||||||||||||||||
Unrealized |
Unrealized |
Equity |
Unrealized |
Non-Redeemable |
Unrealized |
% of All |
Rated or |
|||||||||||||||||||||||||
Loss | Loss | Securities | Loss | Preferred Stock | Loss | Industries | Better | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Less than six months
|
$ | 13 | $ | 9 | 69 | % | $ | 1 | 11 | % | $ | 1 | 100 | % | 100 | % | ||||||||||||||||
More than six months and less than twelve months
|
88 | 88 | 100 | % | 57 | 65 | % | 51 | 89 | % | 88 | % | ||||||||||||||||||||
Twelve months or greater
|
212 | 212 | 100 | % | 212 | 100 | % | 212 | 100 | % | 61 | % | ||||||||||||||||||||
All equity securities with gross unrealized loss of 20% or more
|
$ | 313 | $ | 309 | 99 | % | $ | 270 | 87 | % | $ | 264 | 98 | % | 66 | % | ||||||||||||||||
29
30
Three Months |
Nine Months |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Total losses on fixed maturity securities:
|
||||||||||||||||
Total OTTI losses recognized
|
$ | (650 | ) | $ | (748 | ) | $ | (1,769 | ) | $ | (961 | ) | ||||
Less: Noncredit portion of OTTI losses transferred to and
recognized in other comprehensive loss
|
245 | | 479 | | ||||||||||||
Net OTTI losses on fixed maturity securities recognized in
earnings
|
(405 | ) | (748 | ) | (1,290 | ) | (961 | ) | ||||||||
Fixed maturity securities net gains (losses) on
sales and disposals
|
(50 | ) | (170 | ) | (152 | ) | (466 | ) | ||||||||
Total losses on fixed maturity securities
|
(455 | ) | (918 | ) | (1,442 | ) | (1,427 | ) | ||||||||
Other net investment gains (losses):
|
||||||||||||||||
Equity securities
|
(53 | ) | (181 | ) | (430 | ) | (191 | ) | ||||||||
Mortgage and consumer loans
|
(129 | ) | 26 | (400 | ) | (36 | ) | |||||||||
Real estate and real estate joint ventures
|
(70 | ) | 1 | (163 | ) | 3 | ||||||||||
Other limited partnership interests
|
(12 | ) | (16 | ) | (356 | ) | (31 | ) | ||||||||
Freestanding derivatives
|
(821 | ) | 1,451 | (5,508 | ) | 1,093 | ||||||||||
Embedded derivatives
|
(586 | ) | 31 | 1,424 | (29 | ) | ||||||||||
Other
|
(13 | ) | 352 | 1 | 277 | |||||||||||
Total net investment gains (losses)
|
$ | (2,139 | ) | $ | 746 | $ | (6,874 | ) | $ | (341 | ) | |||||
Fixed Maturity Securities | Equity Securities | |||||||||||||||||||||||||||||||
Three Months |
Nine Months |
Three Months |
Nine Months |
|||||||||||||||||||||||||||||
Ended |
Ended |
Ended |
Ended |
|||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Proceeds
|
$ | 11,041 | $ | 15,441 | $ | 30,392 | $ | 42,250 | $ | 334 | $ | 1,396 | $ | 587 | $ | 2,026 | ||||||||||||||||
Gross investment gains
|
228 | 279 | 773 | 569 | 41 | 265 | 61 | 412 | ||||||||||||||||||||||||
Gross investment losses
|
(278 | ) | (449 | ) | (925 | ) | (1,035 | ) | (58 | ) | (167 | ) | (125 | ) | (207 | ) | ||||||||||||||||
Total OTTI losses recognized in earnings:
|
||||||||||||||||||||||||||||||||
Credit-related
|
(223 | ) | (593 | ) | (966 | ) | (803 | ) | | | | | ||||||||||||||||||||
Other (1)
|
(182 | ) | (155 | ) | (324 | ) | (158 | ) | (36 | ) | (279 | ) | (366 | ) | (396 | ) | ||||||||||||||||
Total OTTI losses recognized in earnings
|
(405 | ) | (748 | ) | (1,290 | ) | (961 | ) | (36 | ) | (279 | ) | (366 | ) | (396 | ) | ||||||||||||||||
Net investment gains (losses)
|
$ | (455 | ) | $ | (918 | ) | $ | (1,442 | ) | $ | (1,427 | ) | $ | (53 | ) | $ | (181 | ) | $ | (430 | ) | $ | (191 | ) | ||||||||
31
(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 fair value. |
| Three Months Ended September 30, 2009 compared to the Three Months Ended September 30, 2008 In the third quarter of 2008, the stress experienced in the global financial markets, caused several financial institutions to enter bankruptcy, enter FDIC receivership or receive significant government capital infusions. The Company incurred fixed maturity and equity securities impairments of $562 million ($482 million on fixed maturity security holdings and $80 million on equity security holdings) related to security holdings on three such financial institutions in the third quarter of 2008. In addition, the Company incurred fixed maturity security impairments of $155 million in the third quarter of 2008 on securities the Company either lacked the intent to hold, or due to extensive credit spread widening, the Company was uncertain of its intent to hold these securities for a period of time sufficient to allow for recovery of the market value decline. Accordingly, impairments on the Companys financial services industry holdings, and total impairments across all sectors, were higher in the third quarter of 2008 than the third quarter of 2009 as presented in the tables below. | |
| Nine Months Ended September 30, 2009 compared to the Nine Months Ended September 30, 2008 Conversely, impairments for the nine months ended September 2009 were higher than for the nine months ended September 2008, due to increased fixed maturity security impairments across several industry sectors as presented in the tables below, and not as a result of a concentration in the financial services industry sector. Impairments across these several industry sectors increased due to financial restructurings, bankruptcy filings, ratings downgrades, or difficult operating environments of the issuers. |
32
Three Months |
Nine Months |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
U.S. and foreign corporate securities:
|
||||||||||||||||
Finance
|
$ | 241 | $ | 491 | $ | 429 | $ | 605 | ||||||||
Communications
|
29 | 32 | 232 | 49 | ||||||||||||
Consumer
|
42 | 12 | 206 | 60 | ||||||||||||
Utility
|
8 | 1 | 84 | 2 | ||||||||||||
Industrial
|
7 | | 27 | | ||||||||||||
Other
|
| 177 | 26 | 182 | ||||||||||||
Total U.S. and foreign corporate securities
|
327 | 713 | 1,004 | 898 | ||||||||||||
Residential mortgage-backed securities
|
40 | | 118 | | ||||||||||||
Asset-backed securities
|
17 | 35 | 111 | 63 | ||||||||||||
Commercial mortgage-backed securities
|
20 | | 56 | | ||||||||||||
Foreign government securities
|
1 | | 1 | | ||||||||||||
Total
|
$ | 405 | $ | 748 | $ | 1,290 | $ | 961 | ||||||||
Three Months |
Nine Months |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Sector:
|
||||||||||||||||
Non-redeemable preferred stock
|
$ | 34 | $ | 270 | $ | 314 | $ | 308 | ||||||||
Common stock (1)
|
2 | 9 | 52 | 88 | ||||||||||||
Total
|
$ | 36 | $ | 279 | $ | 366 | $ | 396 | ||||||||
Industry:
|
||||||||||||||||
Financial services industry:
|
||||||||||||||||
Perpetual hybrid securities (2)
|
$ | 34 | $ | 84 | $ | 294 | $ | 86 | ||||||||
Common and remaining non-redeemable preferred stock
|
| 191 | 30 | 245 | ||||||||||||
Total financial services industry
|
34 | 275 | 324 | 331 | ||||||||||||
Other
|
2 | 4 | 42 | 65 | ||||||||||||
Total
|
$ | 36 | $ | 279 | $ | 366 | $ | 396 | ||||||||
(1) | With respect to common stock holdings, the Company considered the duration and severity of the securities in an unrealized loss position of 20% or more; and the duration of the securities in an unrealized loss position of 20% or less in an extended unrealized loss position (i.e., 12 months or greater) in determining the other-than-temporary impairment charge for such securities. |
33
(2) | Impairment due to a deterioration in the credit rating of the issuer to below investment grade and due to a severe and extended unrealized loss position. |
Three Months |
Nine Months |
|||||||
Ended |
Ended |
|||||||
September 30, 2009 | September 30, 2009 | |||||||
(In millions) | ||||||||
Balance, beginning of period
|
$ | 380 | $ | | ||||
Credit loss component of OTTI loss not reclassified to other
comprehensive loss in the cumulative effect transition adjustment
|
| 230 | ||||||
Additions:
|
||||||||
Initial impairments credit loss OTTI recognized on
securities not previously impaired
|
53 | 205 | ||||||
Additional impairments credit loss OTTI recognized
on securities previously impaired
|
50 | 55 | ||||||
Reductions:
|
||||||||
Due to sales (or maturities, pay downs or prepayments) during
the period of securities previously credit loss OTTI impaired
|
(15 | ) | (22 | ) | ||||
Balance, end of period
|
$ | 468 | $ | 468 | ||||
34
Three Months |
Nine Months |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securities
|
$ | 2,955 | $ | 3,446 | $ | 8,709 | $ | 10,424 | ||||||||
Equity securities
|
37 | 47 | 130 | 197 | ||||||||||||
Trading securities (1)
|
163 | (95 | ) | 310 | (137 | ) | ||||||||||
Mortgage and consumer loans
|
677 | 712 | 2,055 | 2,109 | ||||||||||||
Policy loans
|
163 | 148 | 481 | 447 | ||||||||||||
Real estate and real estate joint ventures (2)
|
(25 | ) | 141 | (184 | ) | 519 | ||||||||||
Other limited partnership interests (3)
|
128 | (62 | ) | (53 | ) | 141 | ||||||||||
Cash, cash equivalents and short-term investments
|
27 | 101 | 109 | 313 | ||||||||||||
International joint ventures (4)
|
(16 | ) | 21 | (86 | ) | 16 | ||||||||||
Other
|
37 | 83 | 156 | 230 | ||||||||||||
Total investment income
|
4,146 | 4,542 | 11,627 | 14,259 | ||||||||||||
Less: Investment expenses
|
223 | 495 | 713 | 1,598 | ||||||||||||
Net investment income
|
$ | 3,923 | $ | 4,047 | $ | 10,914 | $ | 12,661 | ||||||||
(1) | Net investment income from trading securities includes interest and dividends earned on trading securities in addition to the net realized gains (losses) and subsequent changes in estimated fair value recognized on trading securities and the short sale agreement liabilities. During the three months and nine months ended September 30, 2008, unfavorable changes in estimated fair value of trading securities, due to volatility in the equity and credit markets, were in excess of interest and dividends earned and net realized gains (losses) on securities sold. The changes in estimated fair value included in net investment income on trading securities are presented in the trading securities section below. | |
(2) | Net investment income from wholly-owned real estate was more than offset by losses incurred on real estate joint ventures. Net investment income from real estate joint ventures within the real estate and real estate joint ventures caption represents distributions for investments accounted for under the cost method and equity in earnings for investments accounted for under the equity method. Overall, for the three months and nine months ended September 30, 2009, the net amount recognized were losses of $25 million and $184 million, respectively, resulting primarily from declining property valuations on certain investment funds that carry their real estate at estimated fair value and operating losses incurred on properties that were developed for sale by development joint ventures. The commercial real estate properties underlying these investment funds have experienced declines in estimated fair value driven by capital market factors and deteriorating market conditions, which has led to declining property valuations, while the development joint ventures have experienced fewer property sales due to declining real estate market fundamentals and decreased availability of lending to finance these types of transactions. | |
(3) | Net investment income from other limited partnership interests, including hedge funds, represents distributions from other limited partnership interests accounted for under the cost method and equity in earnings from other limited partnership interests accounted for under the equity method. Overall for the nine months ended September 30, 2009, the net amount recognized was a loss of $53 million, resulting principally from losses on equity method investments. Such earnings and losses recognized for other limited partnership interests are impacted by volatility in the equity and credit markets. |
35
(4) | Amounts are presented net of changes in estimated fair value of derivatives related to economic hedges of these equity method investments that do not qualify for hedge accounting of $1 million and ($115) million for the three months and nine months ended September 30, 2009, respectively, and $33 million and $41 million for the three months and nine months ended September 30, 2008, respectively. The increase in losses on the international joint ventures was driven by these derivatives, which moved from gains in the prior year to losses in the current year. The losses were primarily attributable to losses on equity derivatives (used to hedge embedded derivative risk) due to improving equity markets in the current period, as well as losses on foreign currency derivatives due to the U.S. Dollar weakening against several major foreign currencies. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Securities on loan:
|
||||||||
Cost or amortized cost
|
$ | 19,790 | $ | 20,791 | ||||
Estimated fair value
|
$ | 20,556 | $ | 22,885 | ||||
Aging of cash collateral liability:
|
||||||||
Open (1)
|
$ | 2,473 | $ | 5,118 | ||||
Less than thirty days
|
9,091 | 14,711 | ||||||
Greater than thirty days to sixty days
|
5,222 | 3,471 | ||||||
Greater than sixty days to ninety days
|
1,659 | | ||||||
Greater than ninety days
|
2,606 | | ||||||
Total cash collateral liability
|
$ | 21,051 | $ | 23,300 | ||||
Security collateral on deposit from counterparties
|
$ | 40 | $ | 279 | ||||
Reinvestment portfolio estimated fair value
|
$ | 20,150 | $ | 19,509 | ||||
(1) | Open terms meaning that the related loaned security could be returned to the Company on the next business day requiring the Company to immediately return the cash collateral. |
36
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Assets on deposit:
|
||||||||
Regulatory agencies (1)
|
$ | 1,397 | $ | 1,282 | ||||
Assets held in trust:
|
||||||||
Collateral financing arrangements (2)
|
5,887 | 4,754 | ||||||
Reinsurance arrangements (3)
|
1,537 | 1,714 | ||||||
Assets pledged as collateral:
|
||||||||
Debt and funding agreements FHLB of NY (4)
|
20,213 | 20,880 | ||||||
Debt and funding agreements FHLB of Boston (4)
|
424 | 1,284 | ||||||
Funding agreements Farmer MAC (5)
|
2,872 | 2,875 | ||||||
Federal Reserve Bank of New York (6)
|
2,456 | 1,577 | ||||||
Collateral financing arrangements Holding
Company (7)
|
76 | 316 | ||||||
Derivative transactions (8)
|
1,563 | 1,744 | ||||||
Short sale agreements (9)
|
473 | 346 | ||||||
Other
|
| 180 | ||||||
Total assets on deposit, held in trust and pledged as collateral
|
$ | 36,898 | $ | 36,952 | ||||
(1) | The Company had investment assets on deposit with regulatory agencies consisting primarily of fixed maturity and equity securities. | |
(2) | The Company held in trust cash and securities, primarily fixed maturity and equity securities, to satisfy collateral requirements. The Company has also pledged certain fixed maturity securities in support of the collateral financing arrangements described in Note 10. | |
(3) | The Company has pledged certain investments, primarily fixed maturity securities, in connection with certain reinsurance transactions. | |
(4) | The Company has pledged fixed maturity securities and mortgage loans in support of its debt and funding agreements with the Federal Home Loan Bank of New York (FHLB of NY) and has pledged fixed maturity securities to the Federal Home Loan Bank of Boston (FHLB of Boston). The nature of these Federal Home Loan Bank arrangements is described in Note 7 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. | |
(5) | The Company has pledged certain agricultural real estate mortgage loans in connection with funding agreements with the Federal Agricultural Mortgage Corporation (Farmer MAC). The nature of the Farmer MAC arrangements is described in Note 7 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report. |
37
(6) | The Company has pledged qualifying mortgage loans and fixed maturity securities in connection with collateralized borrowings from the Federal Reserve Bank of New Yorks Term Auction Facility. The nature of the Federal Reserve Bank of New York arrangements is described in Note 9. | |
(7) | The Holding Company has pledged certain collateral in support of the collateral financing arrangements described in Note 10. | |
(8) | Certain of the Companys invested assets are pledged as collateral for various derivative transactions as described in Note 4. | |
(9) | Certain of the Companys trading securities and cash and cash equivalents are pledged to secure liabilities associated with short sale agreements in the trading securities portfolio as described in the following section. |
September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Trading securities at estimated fair value
|
$ | 1,970 | $ | 946 | ||||
Short sale agreement liabilities (included in other liabilities)
|
$ | 143 | $ | 57 | ||||
Investments pledged to secure short sale agreement liabilities
|
$ | 473 | $ | 346 |
Three Months |
Nine Months |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In millions) | ||||||||||||||||
Net investment income (1)
|
$ | 163 | $ | (95 | ) | $ | 310 | $ | (137 | ) | ||||||
Changes in estimated fair value included in net investment income
|
$ | 101 | $ | (105 | ) | $ | 242 | $ | (149 | ) |
(1) | Includes interest and dividends earned on trading securities, in addition to the net realized gains (losses) and subsequent changes in estimated fair value, recognized on the trading securities and the related short sale agreement liabilities. |
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Carrying Value | ||||
(In millions) | ||||
Fair value, beginning of period
|
$ | 191 | ||
Acquisition of mortgage servicing rights
|
117 | |||
Origination of mortgage servicing rights
|
427 | |||
Reduction due to loan payments
|
(85 | ) | ||
Changes in estimated fair value due to:
|
||||
Changes in valuation model inputs or assumptions
|
70 | |||
Fair value, end of period
|
$ | 720 | ||
September 30, 2009 | December 31, 2008 | |||||||||||||||
Total |
Total |
Total |
Total |
|||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(In millions) | ||||||||||||||||
MRSC collateral financing arrangement (1)
|
$ | 3,159 | $ | | $ | 2,361 | $ | | ||||||||
Real estate joint ventures (2)
|
21 | 15 | 26 | 15 | ||||||||||||
Other limited partnership interests (3)
|
359 | 87 | 20 | 3 | ||||||||||||
Other invested assets (4)
|
29 | 2 | 10 | 3 | ||||||||||||
Total
|
$ | 3,568 | $ | 104 | $ | 2,417 | $ | 21 | ||||||||
(1) | See Note 10 for a description of the MetLife Reinsurance Company of South Carolina (MRSC) collateral financing arrangement. At September 30, 2009 and December 31, 2008, these assets are presented at estimated fair value and consist of the following: |
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September 30, 2009 | December 31, 2008 | |||||||
(In millions) | ||||||||
Fixed maturity securities
available-for-sale:
|
||||||||
U.S. corporate securities
|
$ | 1,069 | $ | 948 | ||||
Asset-backed securities
|
857 | 409 | ||||||
Residential mortgage-backed securities
|
658 | 561 | ||||||
Commercial mortgage-backed securities
|
345 | 98 | ||||||
U.S. Treasury, agency and government guaranteed securities
|
100 | | ||||||
Foreign corporate securities
|
100 | 95 | ||||||
State and political subdivision securities
|
21 | 21 | ||||||
Foreign government securities
|
5 | 5 | ||||||
Cash and cash equivalents (including cash held in trust of less
than $1 million and $60 million, respectively)
|
4 | 224 | ||||||
Total
|
$ | 3,159 | $ | 2,361 | ||||
(2) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Upon consolidation, the assets and liabilities are reflected at the VIEs carrying amounts. At September 30, 2009 and December 31, 2008, the assets consisted of $16 million and $20 million, respectively, of real estate and real estate joint ventures held-for-investment, $4 million and $5 million, respectively, of cash and cash equivalents and $1 million and $1 million, respectively, of other assets. At both September 30, 2009 and December 31, 2008, liabilities consisted of $15 million of other liabilities. | |
(3) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. Upon consolidation, the assets and liabilities are reflected at the VIEs carrying amounts. At September 30, 2009, the assets consisted of $228 million of other limited partnership interests, $104 million of other invested assets, $12 million of cash and cash equivalents, and $15 million of other assets. At December 31, 2008, the assets of $20 million were included within other limited partnership interests. At September 30, 2009, liabilities of $75 million and $12 million were included within long-term debt and other liabilities, respectively, and at December 31, 2008, liabilities of $3 million were included within other liabilities. | |
(4) | Other invested assets include tax-credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. Upon consolidation, the assets and liabilities are reflected at the VIEs carrying amounts. At September 30, 2009 and December 31, 2008, the assets of $29 million and $10 million, respectively, were included within other invested assets. At September 30, 2009 and December 31, 2008, the liabilities consisted of $1 million and $2 million, respectively, of long-term debt and $1 million and $1 million, respectively, of other liabilities. |
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September 30, 2009 | December 31, 2008 | |||||||||||||||
Maximum |
Maximum |
|||||||||||||||
Carrying |
Exposure |
Carrying |
Exposure |
|||||||||||||
Amount (1) | to Loss (2) | Amount (1) | to Loss (2) | |||||||||||||
(In millions) | ||||||||||||||||
Fixed maturity securities
available-for-sale:
|
||||||||||||||||
Foreign corporate securities
|
$ | 1,212 | $ | 1,212 | $ | 1,080 | $ | 1,080 | ||||||||
U.S. corporate securities
|
1,090 | 1,090 | 992 | 992 | ||||||||||||
Real estate joint ventures
|
31 | 31 | 32 | 32 | ||||||||||||
Other limited partnership interests
|
2,350 | 2,667 | 3,496 | 4,004 | ||||||||||||
Other invested assets
|
388 | 225 | 318 | 108 | ||||||||||||
Total
|
$ | 5,071 | $ | 5,225 | $ | 5,918 | $ | 6,216 | ||||||||
(1) | See Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for further discussion of the Companys accounting policies with respect to the basis for determining carrying value of these investments. | |
(2) | The maximum exposure to loss relating to the fixed maturity securities available-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the real estate joint ventures and other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Companys return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by tax credits guaranteed by third parties of $237 million and $278 million at September 30, 2009 and December 31, 2008, respectively. |
4. | Derivative Financial Instruments |
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September 30, 2009 | December 31, 2008 | |||||||||||||||||||||||||
Current Market |
Current Market |
|||||||||||||||||||||||||
Primary Underlying |
Notional |
or Fair Value (1) |
Notional |
&n |