MetLife 2007 Annual Report Download - page 176

December 31, 2006
Notional
Amount Carrying Value Estimated Fair Value
(In millions)
Assets:
Fixedmaturitysecurities ........................................... $241,928 $241,928
Tradingsecurities................................................ $ 759 $ 759
Equitysecurities................................................. $ 5,094 $ 5,094
Mortgageandconsumerloans ....................................... $ 42,239 $ 42,451
Policyloans ................................................... $ 10,228 $ 10,228
Short-terminvestments............................................ $ 2,709 $ 2,709
Cashandcashequivalents ......................................... $ 7,107 $ 7,107
Accruedinvestmentincome......................................... $ 3,347 $ 3,347
Mortgageloancommitments......................................... $4,022 $ — $ 4
Commitments to fund bank credit facilities, bridge loans and private corporate bond
investments.................................................. $1,908 $ — $ —
Liabilities:
Policyholderaccountbalances ....................................... $112,438 $108,318
Short-termdebt................................................. $ 1,449 $ 1,449
Long-termdebt................................................. $ 9,129 $ 9,299
Collateralfinancingarrangements ..................................... $ 850 $ 850
Juniorsubordinateddebtsecurities.................................... $ 3,780 $ 3,759
Sharessubjecttomandatoryredemption................................. $ 278 $ 357
Payables for collateral under securities loaned and other transactions. . . . . . . . . . . . . . . . . . . . . $ 45,846 $ 45,846
The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows:
Fixed Maturity Securities, Trading Securities and Equity Securities
The fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or
estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed
maturity securities, fair values are estimated using present value or valuation techniques. The determination of fair values is based on:
(i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the
circumstances. The fair value estimates based on available market information and judgments about financial instruments, including
estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors
considered in estimating fair value include; coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit
rating, industry sector of the issuer, and quoted market prices of comparable securities.
Mortgage and Consumer Loans, Mortgage Loan Commitments and Commitments to Fund Bank Credit Facilities,
Bridge Loans, and Private Corporate Bond Investments
Fair values for mortgage and consumer loans are estimated by discounting expected future cash flows, using current interest rates for
similar loans with similar credit risk. For mortgage loan commitments and commitments to fund bank credit facilities, bridge loans, and
private corporate bond investments the estimated fair value is the net premium or discount of the commitments.
Policy Loans
The carrying values for policy loans approximate fair value.
Cash and Cash Equivalents and Short-term Investments
The carrying values for cash and cash equivalents and short-term investments approximate fair values due to the short-term maturities
of these instruments.
Accrued Investment Income
The carrying value for accrued investment income approximates fair value.
Policyholder Account Balances
The fair value of policyholder account balances which have final contractual maturities are estimated by discounting expected future
cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the
agreements being valued. The fair value of policyholder account balances without final contractual maturities are assumed to equal their
current net surrender value.
Short-term and Long-term Debt, Collateral Financing Arrangements, Junior Subordinated Debt Securities and Shares
Subject to Mandatory Redemption
The fair values of short-term and long-term debt, collateral financing arrangements, junior subordinated debt securities,and shares
subject to mandatory redemption are determined by discounting expected future cash flows using risk rates currently available for debt with
similar terms and remaining maturities.
Payables for Collateral Under Securities Loaned and Other Transactions
The carrying value for payables for collateral under securities loaned and other transactions approximate fair value.
F-80 MetLife, Inc.
MetLife, Inc.
Notes to Consolidated Financial Statements — (Continued)