MetLife 2008 Annual Report Download - page 182

Information regarding ceded reinsurance recoverable balances, included in premiums and other receivables is as follows:
2008 2007
December 31,
(In millions)
Futurepolicybenefitrecoverables ........................................... $ 8,258 $6,842
Depositrecoverables.................................................... 2,258 2,616
Claimrecoverables..................................................... 319 271
Allotherrecoverables ................................................... 232 48
Total............................................................. $11,067 $9,777
Reinsurance recoverable balances are stated net of allowances for uncollectible balances, which are immaterial. The Company
evaluates the financial strength of the Company’s reinsurers by monitoring their ratings and analyzing their financial statements. The
Company also analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. Recoverability of
reinsurance recoverable balances are evaluated based on these analyses.
Included in the reinsurance recoverables are, $1.2 billion at both December 31, 2008 and 2007 related to reinsurance of long-term
GICs and structured settlement lump sum contracts accounted for as a financing transaction; $3.9 billion and $3.4 billion at December 31,
2008 and 2007, respectively, related to reinsurance recoverable on the run-off of long-term care business originally written by MICC;
$1.1 billion and $1.2 billion at December 31, 2008 and 2007, respectively, related to reinsurance recoverable on the run-off of workers
compensation business originally written by MICC; and $0.6 billion and $1.1 billion at December 31, 2008 and 2007, respectively, related
to the reinsurance of investment-type contracts held by small market defined benefit contribution plans.
The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds
withheld accounts and irrevocable letters of credit. At December 31, 2008, the Company has $5,489 million of reinsurance recoverable
balances secured by funds held in trust as collateral, $524 million of reinsurance recoverable balances secured by funds withheld
accounts and $286 million of reinsurance recoverable balances secured through irrevocable letters of credit issued by various financial
institutions.
At December 31, 2008, $7,651 million, or 69%, of the Company’s total reinsurance recoverable balances were due from its five largest
reinsurers. Of these reinsurance recoverable balances, $5,194 million were secured by funds held in trust as collateral and $209 million
were secured through irrevocable letters of credit issued by various financial institutions.
Reinsurance balances payable, included in other liabilities, were $1,405 million and $571 million at December 31, 2008 and 2007,
respectively.
9. Closed Block
On April 7, 2000, (the “Demutualization Date”), MLIC converted from a mutual life insurance company to a stock life insurance company
and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of
Insurance(the“Superintendent”)approvingMLIC’splanofreorganization,asamended(the“Plan”).OntheDemutualizationDate,MLIC
established a closed block for the benefit of holders of certain individual life insurance policies of MLIC. Assets have been allocated to the
closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies
included in the closed block, are reasonably expected to be sufficient to support obligations 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 Demutualization Date. 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
F-59MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)