MetLife 2005 Annual Report Download - page 100

METLIFE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide
for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate
adjustments in such scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience
assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience.
The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will
benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and
claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was
established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid
to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be
available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make
guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as
long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years.
The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the date
of demutualization. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional
dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the demutualization (adjusted to
eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the
closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income
over the period the policies and contracts in the closed block remain in-force. Management believes that over time the actual cumulative earnings of the
closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block
remains in existence, the actual cumulative earnings of the closed block is greater than the expected cumulative earnings of the closed block, the
Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders
as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected
cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the
closed block is less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However,
the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual
cumulative earnings equal the expected cumulative earnings.
Closed block liabilities and assets designated to the closed block are as follows:
December 31,
2005 2004
(In millions)
Closed Block Liabilities
Future policy benefits **************************************************************************************** $42,759 $42,348
Other policyholder funds ************************************************************************************* 257 258
Policyholder dividends payable ******************************************************************************** 693 690
Policyholder dividend obligation ******************************************************************************** 1,607 2,243
Payables for collateral under securities loaned and other transactions ************************************************ 4,289 4,287
Other liabilities ********************************************************************************************** 200 199
Total closed block liabilities ********************************************************************************* 49,805 50,025
Assets Designated to the Closed Block
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost: $27,892 and $27,757, respectively) ******************** 29,270 29,766
Trading securities, at fair value (cost: $3 and $0, respectively) **************************************************** 3—
Equity securities available-for-sale, at fair value (cost: $1,180 and $898, respectively) ******************************** 1,341 979
Mortgage loans on real estate ******************************************************************************* 7,790 8,165
Policy loans ********************************************************************************************** 4,148 4,067
Short-term investments************************************************************************************* 41 101
Other invested assets************************************************************************************** 477 221
Total investments**************************************************************************************** 43,070 43,299
Cash and cash equivalents *********************************************************************************** 512 325
Accrued investment income*********************************************************************************** 506 511
Deferred income taxes *************************************************************************************** 902 1,002
Premiums and other receivables ******************************************************************************* 270 103
Total assets designated to the closed block ******************************************************************* 45,260 45,240
Excess of closed block liabilities over assets designated to the closed block****************************************** 4,545 4,785
Amounts included in accumulated other comprehensive income (loss):
Net unrealized investment gains, net of deferred income tax of $554 and $752, respectively ************************** 985 1,338
Unrealized derivative gains (losses), net of deferred income tax benefit of ($17) and ($31), respectively ****************** (31) (55)
Allocated to policyholder dividend obligation, net of deferred income tax benefit of ($538) and ($763), respectively ******** (954) (1,356)
Total amounts included in accumulated other comprehensive income (loss) ***************************************** — (73)
Maximum future earnings to be recognized from closed block assets and liabilities************************************* $ 4,545 $ 4,712
MetLife, Inc.
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