MetLife 2007 Annual Report Download - page 128

Net Unrealized Investment Gains (Losses)
The components of net unrealized investment gains (losses), included in accumulated other comprehensive income, are as follows:
2007 2006 2005
Years Ended December 31,
(In millions)
Fixedmaturitysecurities ............................................... $3,378 $5,075 $6,132
Equitysecurities .................................................... 157 541 247
Derivatives........................................................ (270) (208) (142)
Minorityinterest..................................................... (150) (159) (171)
Other ........................................................... 3 9 (102)
Subtotal........................................................ 3,118 5,258 5,964
Amounts allocated from:
Insuranceliabilitylossrecognition........................................ (608) (1,149) (1,410)
DACandVOBA ................................................... (327) (189) (79)
Policyholderdividendobligation......................................... (789) (1,062) (1,492)
Subtotal....................................................... (1,724) (2,400) (2,981)
Deferredincometax.................................................. (423) (994) (1,041)
Subtotal........................................................ (2,147) (3,394) (4,022)
Netunrealizedinvestmentgains(losses)..................................... $ 971 $1,864 $1,942
The changes in net unrealized investment gains (losses) are as follows:
2007 2006 2005
Years Ended December 31,
(In millions)
Balance,January1, .................................................. $1,864 $1,942 $2,994
Unrealizedinvestmentgains(losses)duringtheyear ............................. (2,140) (706) (3,372)
Unrealizedinvestmentgainsofsubsidiariesatthedateofsale....................... — — 15
Unrealized investment gains (losses) relating to:
Insuranceliabilitygain(loss)recognition.................................... 541 261 581
DACandVOBA.................................................... (138) (110) 462
Policyholderdividendobligation ......................................... 273 430 627
Deferredincometax................................................. 571 47 635
Balance,December31,................................................ $ 971 $1,864 $1,942
Netchangeinunrealizedinvestmentgains(losses) .............................. $ (893) $ (78) $(1,052)
Trading Securities
The Company has a trading securities portfolio to support investment strategies that involve the active and frequent purchase and sale
of securities, the execution of short sale agreements and asset and liability matching strategies for certain insurance products. Trading
securities and short sale agreement liabilities are recorded at fair value with subsequent changes in fair value recognized in net investment
income related to fixed maturity securities.
At December 31, 2007 and 2006, trading securities were $779 million and $759 million, respectively, and liabilities associated with the
short sale agreements in the trading securities portfolio, which were included in other liabilities, were $107 million and $387 million,
respectively. The Company had pledged $407 million and $614 million of its assets, primarily consisting of trading securities, as collateral
to secure the liabilities associated with the short sale agreements in the trading securities portfolio at December 31, 2007 and 2006,
respectively.
During the years ended December 31, 2007, 2006 and 2005, interest and dividends earned on trading securities in addition to the net
realized and unrealized gains (losses) recognized on the trading securities and the related short sale agreement liabilities included within
net investment income totaled $50 million, $71 million and $14 million, respectively. Included within unrealized gains (losses) on such
trading securities and short sale agreement liabilities, are changes in fair value of ($4) million, $26 million and less than $1 million for the
years ended December 31, 2007, 2006 and 2005, respectively.
As part of the acquisition of Travelers on July 1, 2005, the Company acquired Travelers’ investment in Tribeca Citigroup Investments
Ltd. (“Tribeca”). Tribeca was a feeder fund investment structure whereby the feeder fund invests substantially all of its assets in the master
fund, Tribeca Global Convertible Instruments Ltd. The primary investment objective of the master fund is to achieve enhanced risk-adjusted
return by investing in domestic and foreign equities and equity-related securities utilizing such strategies as convertible securities arbitrage.
At December 31, 2005, MetLife was the majority owner of the feeder fund and consolidated the fund within its consolidated financial
statements. Net investment income related to the trading activities of Tribeca, which included interest and dividends earned on trading
securities in addition to the net realized and unrealized gains (losses), was $12 million and $6 million for the six months ended June 30,
2006 and the year ended December 31, 2005, respectively.
F-32 MetLife, Inc.
MetLife, Inc.
Notes to Consolidated Financial Statements — (Continued)