MetLife 2008 Annual Report Download - page 183

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.
Recent experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized losses, has
resulted in a reduction of the policyholder dividend obligation to zero during the year ended December 31, 2008. The reduction of the
policyholder dividend obligation to zero and the Company’s decision to revise the expected policyholder dividend scales, which are based
upon statutory results, has resulted in reduction to both actual and expected cumulative earnings of the closed block. This change in the
timing of the expected cumulative earnings of the closed block combined with a policyholder dividend obligation of zero has resulted in a
reduction in the DAC associated with closed block, which resides outside of the closed block, and a corresponding decrease in the
Company’s net income of $127 million, net of income tax, for the year ended December 31, 2008. Amortization of the closed block DAC
will be based upon actual cumulative earnings rather than expected cumulative earnings of the closed block until such time as the actual
cumulative earnings of the closed block exceed the expected cumulative earnings, at which time the policyholder dividend obligation will
be reestablished. Actual cumulative earnings less than expected cumulative earnings will result in future reductions to DAC and net income
of the Company and increase sensitivity of the Company’s net income to movements in closed block results. See also Note 5 for further
information regarding DAC.
Information regarding the closed block liabilities and assets designated to the closed block is as follows:
2008 2007
December 31,
(In millions)
Closed Block Liabilities
Futurepolicybenefits............................................................. $43,520 $43,362
Otherpolicyholderfunds........................................................... 315 323
Policyholderdividendspayable....................................................... 711 709
Policyholderdividendobligation ...................................................... — 789
Payablesforcollateralundersecuritiesloanedandothertransactions.............................. 2,852 5,610
Otherliabilities ................................................................. 254 290
Totalclosedblockliabilities........................................................ 47,652 51,083
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $27,947 and $29,631,
respectively)................................................................ 26,205 30,481
Equity securities available-for-sale, at estimated fair value (cost: $280 and $1,555, respectively) . . . . . . . . . . . 210 1,875
Mortgageloansonrealestate...................................................... 7,243 7,472
Policyloans.................................................................. 4,426 4,290
Realestateandrealestatejointventuresheld-for-investment.................................. 381 297
Short-terminvestments .......................................................... 52 14
Otherinvestedassets ........................................................... 952 829
Totalinvestments............................................................. 39,469 45,258
Cashandcashequivalents ......................................................... 262 333
Accruedinvestmentincome......................................................... 484 485
Deferredincometaxassets......................................................... 1,632 640
Premiumsandotherreceivables...................................................... 98 151
Totalassetsdesignatedtotheclosedblock............................................. 41,945 46,867
Excessofclosedblockliabilitiesoverassetsdesignatedtotheclosedblock......................... 5,707 4,216
Amounts included in accumulated other comprehensive income (loss):
Unrealized investment gains (losses), net of income tax of ($633) and $424, respectively . . . . . . . . . . . . . . . . (1,174) 751
Unrealized gains (losses) on derivative instruments, net of income tax of ($8) and ($19), respectively . . . . . . . . (15) (33)
Allocated $284, net of income tax, to policyholder dividend obligation at December 31, 2007. . . . . . . . . . . . . — (505)
Totalamountsincludedinaccumulatedothercomprehensiveincome(loss) ........................ (1,189) 213
Maximumfutureearningstoberecognizedfromclosedblockassetsandliabilities ..................... $ 4,518 $ 4,429
F-60 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)