MetLife 2008 Annual Report Download - page 228

the consolidated balance sheet in the same manner described above for similar instruments that are classified within captions of other
major investment classes.
Other Invested Assets — Other invested assets in the consolidated balance sheet is principally comprised of freestanding derivatives
with positive estimated fair values, leveraged leases, investments in tax credit partnerships, joint venture investments, mortgage servicing
rights, investment in a funding agreement, funds withheld at interest and various interest-bearing assets held in foreign subsidiaries.
Leveraged leases and investments in tax credit partnerships and joint ventures, which are accounted for under the equity method, are not
financial instruments subject to fair value disclosure. Accordingly, they have been excluded from the preceding table.
The estimated fair value of derivatives — with positive and negative estimated fair values — is described in the respectively labeled
section which follows.
Although mortgage servicing rights are not financial instruments, the Company has included them in the preceding table as a result of its
election to carry mortgage servicing rights at fair value pursuant to SFAS No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, as amended by SFAS No. 156, Accounting for Servicing of Financial Assets.Assalesof
mortgage servicing rights tend to occur in private transactions where the precise terms and conditions of the sales are typically not readily
available, observable market valuations are limited. As such, the Company relies primarily on a discounted cash flow model to estimate the
fair value of the mortgage servicing rights. The model requires inputs such as type of loan (fixed vs. variable and agency vs. other), age of
loan, loan interest rates and current market interest rates that are generally observable. The model also requires the use of unobservable
inputs including assumptions regarding estimates of discount rates, loan pre-payment, and servicing costs.
The fair value of the investment in a funding agreement is estimated discounting the expected future cash flows using current market
rates and the credit risk of the note issuer.
For funds withheld at interest and the various interest-bearing assets held in foreign subsidiaries, the Company evaluates the specific
facts and circumstances of each instrument to determine the appropriate estimated fair values. These estimated fair values were not
materially different from the recognized carrying values.
Cash and Cash Equivalents — Due to the short-term maturities of cash and cash equivalents, the Company believes there is minimal
risk of material changes in interest rates or credit of the issuer such that estimated fair value generally approximates carrying value. In light
of recent market conditions, cash and cash equivalent instruments have been monitored to ensure there is sufficient demand and
maintenance of issuer credit quality, or sufficient solvency in the case of depository institutions, and the Company has determined
additional adjustment is not required.
Accrued Investment Income — Due to the short-term until settlement of accrued investment income, the Company believes there is
minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of
recent market conditions, the Company has monitored the credit quality of the issuers and has determined additional adjustment is not
required.
Premiums and Other Receivables — Premiums and other receivables in the consolidated balance sheet is principally comprised of
premiums due and unpaid for insurance contracts, amounts recoverable under reinsurance contracts, amounts on deposit with financial
institutions to facilitate daily settlements related to certain derivative positions, amounts receivable for securities sold but not yet settled,
fees and general operating receivables, and embedded derivatives related to the ceded reinsurance of certain variable annuity riders.
Premiums receivable and those amounts recoverable under reinsurance treaties determined to transfer sufficient risk are not financial
instruments subject to disclosure and thus have been excluded from the amounts presented in the preceding table. Amounts recoverable
under ceded reinsurance contracts which the Company has determined do not transfer sufficient risk such that they are accounted for
using the deposit method of accounting have been included in the preceding table with the estimated fair value determined as the present
valueofexpectedfuturecashflowsundertherelatedcontractsdiscounted using an interest rate determined to reflect the appropriate
credit standing of the assuming counterparty.
The amounts on deposit for derivative settlements essentially represent the equivalent of demand deposit balances such that the
estimated fair value approximates carrying value. In light of recent market conditions, the Company has monitored the solvency position of
the financial institutions and has determined additional adjustments are not required.
Embedded derivatives recognized in connection with ceded reinsurance of certain variable annuity riders are included in this caption in
the consolidated financial statements but excluded from this caption in the preceding table as they are separately presented.
Other Assets — Other assets in the consolidated balance sheet is principally comprised of prepaid expenses, amounts held under
corporate owned life insurance, fixed assets, capitalized software, deferred sales inducements, VODA, VOCRA, and a receivable for cash
collateral pledged under the MRC collateral financing arrangement as described in Note 11. With the exception of the receivable for
collateral pledged, other assets are not considered financial instruments subject to disclosure. Accordingly, the amount presented in the
preceding table represent the receivable for collateral pledged for which the estimated fair value was determined by discounting the
expected future cash flows using a discount rate that reflects the credit of the financial institution.
Separate Account Assets — Separate account assets are carried at estimated fair value and reported as a summarized total on the
consolidated balance sheet in accordance with Statement of Position (“SOP”) 03-1, Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration Contracts and for Separate Accounts (“SOP 03-1”). The estimated fair values of separate account
assets are based on the estimated fair value of the underlying assets owned by the separate account. Assets within the Company’s
F-105MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)