MetLife 2008 Annual Report Download - page 171

$12 million, $3 million and $3 million, respectively. There were no hedged forecasted transactions, other than the receipt or payment of
variable interest payments for the years ended December 31, 2008, 2007, and 2006.
The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
2008 2007 2006
Years Ended December 31,
(In millions)
Other comprehensive income (loss) balance at January 1, . . . . . . . . . . . . . . . . . . . . . . . . $(270) $(208) $(142)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash
flowhedges..................................................... 203 (168) 80
Amountsreclassifiedtonetinvestmentgains(losses)............................ 140 96 (158)
Amountsreclassifiedtonetinvestmentincome................................ 9 13 15
Amortizationoftransitionadjustment....................................... 1 (1) (1)
Amountsreclassifiedtootherexpenses .................................... (1) (2) (2)
Other comprehensive income (loss) balance at December 31, . . . . . . . . . . . . . . . . . . . . . . $ 82 $(270) $(208)
At December 31, 2008, $47 million of the deferred net loss on derivatives accumulated in other comprehensive income (loss) is
expected to be reclassified to earnings during the year ending December 31, 2009.
Hedges of Net Investments in Foreign Operations
The Company uses forward exchange contracts, foreign currency swaps, options and non-derivative financial instruments to hedge
portions of its net investments in foreign operations against adverse movements in exchange rates. The Company measures ineffec-
tiveness on the forward exchange contracts based upon the change in forward rates. There was no ineffectiveness recorded for the years
ended December 31, 2008, 2007 and 2006.
The Company’s consolidated statement of stockholders’ equity for the years ended December 31, 2008, 2007 and 2006 include gains
(losses) of $495 million, ($180) million and ($17) million, respectively, related to foreign currency contracts and non-derivative financial
instruments used to hedge its net investments in foreign operations. At December 31, 2008 and 2007, the cumulative foreign currency
translation gain (loss) recorded in accumulated other comprehensive income (loss) related to these hedges was $126 million and
($369) million, respectively. When net investments in foreign operations are sold or substantially liquidated, the amounts in accumulated
other comprehensive income (loss) are reclassified to the consolidated statements of income, while a pro rata portion will be reclassified
upon partial sale of the net investments in foreign operations.
Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging
The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than
hedging: (i) interest rate swaps, purchased caps and floors, and interest rate futures to economically hedge its exposure to interest rates;
(ii) foreign currency forwards, swaps and option contracts to economically hedge its exposure to adverse movements in exchange rates;
(iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, equity index options, interest
rate futures and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) swap spread
locks to economically hedge invested assets against the risk of changes in credit spreads; (vi) financial forwards to buy and sell securities
to economically hedge its exposure to interest rates; (vii) synthetic guaranteed interest contracts; (viii) credit default swaps and total rate of
return swaps to synthetically create investments; (ix) basis swaps to better match the cash flows of assets and related liabilities; (x) credit
default swaps held in relation to trading portfolios; (xi) swaptions to hedge interest rate risk; (xii) inflation swaps to reduce risk generated
from inflation-indexed liabilities; and (xiii) interest rate lock commitments.
The following table presents changes in estimated fair value related to derivatives that do not qualify for hedge accounting:
2008 2007 2006
Years Ended December 31,
(In millions)
Net investment gains (losses), excluding embedded derivatives . . . . . . . . . . . . . . . . . . . . $6,688 $(227) $(686)
Policyholderbenefitsandclaims(1)....................................... 331 7 (33)
Netinvestmentincome(loss)(2)......................................... 240 31 (40)
Otherrevenues(3).................................................. 146 — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,405 $(189) $(759)
(1) Changes in estimated fair value related to economic hedges of liabilities embedded in certain variable annuity products offered by the
Company.
(2) Changes in estimated fair value related to economic hedges of equity method investments in joint ventures that do not qualify for hedge
accounting and changes in estimated fair value related to derivatives held in relation to trading portfolios.
(3) Changes in estimated fair value related to derivatives held inconnectionwiththeCompany’smortgagebankingactivities.
F-48 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)