MetLife 2008 Annual Report Download - page 234

A rollforward of all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable
(Level 3) inputs for year ended December 31, 2008 is as follows:
Balance,
December 31,
2007
Impact of
SFAS 157 and
SFAS 159
Adoption(1)
Balance,
Beginning
of Period Earnings(2, 3)
Other
Comprehensive
Income (Loss)
Purchases,
Sales,
Issuances and
Settlements(4)
Transfer In
and/or Out
of Level 3(5)
Balance,
End of
Period
Total Realized/Unrealized
Gains (Losses) included in:
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(In millions)
Fixed maturity securities . . . . . . . . . . $23,326 $ (8) $23,318 $ (881) $(6,272) $(596) $1,839 $17,408
Equity securities . . . . . . . . . . . . . . . 2,371 — 2,371 (197) (478) (288) (29) 1,379
Tradingsecurities.............. 183 8 191 (26) — 18 (8) 175
Short-term investments . . . . . . . . . . 179 — 179 — — (79) — 100
Mortgage and consumer loans . . . . . — — — 4 — 171 2 177
Net derivatives(6) . . . . . . . . . . . . . . 789 (1) 788 1,729 — 29 1 2,547
Mortgage servicing rights(7),(8) . . . . . — — — (149) — 340 — 191
Separate account assets(9) . . . . . . . 1,464 — 1,464 (129) — 90 333 1,758
Net embedded derivatives(10) . . . . . . (278) 24 (254) (2,500) (81) (94) — (2,929)
(1) Impact of SFAS 157 adoption represents the amount recognized in earnings as a change in estimate upon the adoption of SFAS 157
associated with Level 3 financial instruments held at January 1, 2008. The net impact of adoption on Level 3 assets and liabilities
presented in the table above was a $23 million increase to net assets. Such amount was also impacted by an increase to DAC of
$17 million. The impact of adoption of SFAS 157 on RGA — not reflected in the table above as a result of the reflection of RGA in
discontinued operations — was a net increase of $2 million (i.e., a decrease in Level 3 net embedded derivative liabilities of $17 million
offset by a DAC decrease of $15 million) for a total impact of $42 million on Level 3 assets and liabilities. This impact of $42 million along
with a $12 million reduction in the estimated fair value of Level 2 freestanding derivatives, results in a total net impact of adoption of
SFAS 157 of $30 million as described in Note 1.
(2) Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains/
losses. Impairments are included within net investment gains (losses) which is reported within the earnings caption of total gains/losses.
Lapses associated with embedded derivatives are included with the earnings caption of total gains/losses.
(3) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(4) The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances)
and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items
purchased/issued and sold/settled in the same period are excluded from the rollforward. For embedded derivatives, attributed fees are
included within this caption along with settlements, if any.
(5) Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers in (out) of Level 3 occurred
at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward.
(6) Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(7) The additions and reductions (due to loan payments) affecting mortgage servicing rights were $350 million and ($10) million respectively,
for the year ended December 31, 2008.
(8) The changes in estimated fair value due to changes in valuation model inputs or assumptions, and other changes in estimated fair value
affecting mortgage servicing rights were ($149) million and $0, respectively, for the year ended December 31, 2008.
(9) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose
liability is reflected within separate account liabilities.
(10) Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(11) Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging
activities, could differ materially.
F-111MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)