MetLife 2008 Annual Report Download - page 71

with the disposition of real estate property and other investment transactions. The Company’s recorded liabilities were $6 million at both
December 31, 2008 and 2007 for indemnities, guarantees and commitments.
In connection with synthetically created investment transactions, the Company writes credit default swap obligations that generally
require payment of principal outstanding due in exchange for the referenced credit obligation. If a credit event, as defined by the contract,
occurs the Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $1.9 billion at
December 31, 2008. However, the Company believes that any actual future losses will be significantly lower than this amount. Additionally,
the Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then
current estimated fair value of the credit default swaps. As of December 31, 2008, the Company would have paid $37 million to terminate
all of these contracts.
Other Commitments
MetLife Insurance Company of Connecticut is a member of the Federal Home Loan Bank of Boston (the “FHLB of Boston”) and holds
$70 million of common stock of the FHLB of Boston at both December 31, 2008 and 2007, which is included in equity securities. MICC has
also entered into funding agreements with the FHLB of Boston whereby MICC has issued such funding agreements in exchange for cash
and for which the FHLB of Boston has been granted a blanket lien on certain MICC assets, including residential mortgage-backed
securities, to collateralize MICC’s obligations under the funding agreements. MICC maintains control over these pledged assets, and may
use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default and the remaining qualified
collateral is sufficient to satisfy the collateral maintenance level. Upon any event of default by MICC, the FHLB of Boston’s recovery on the
collateral is limited to the amount of MICC’s liability to the FHLB of Boston. The amount of the Company’s liability for funding agreements
with the FHLB of Boston was $526 million and $726 million at December 31, 2008 and 2007, respectively, which is included in policyholder
account balances. In addition, at December 31, 2008, MICC had advances of $300 million from the FHLB of Boston with original maturities
of less than one year and therefore, such advances are included in short-term debt. These advances and the advances on these funding
agreements are collateralized by mortgage-backed securities with estimated fair values of $1.3 billion and $901 million at December 31,
2008 and 2007, respectively.
Metropolitan Life Insurance Company is a member of the FHLB of NY and holds $830 million and $339 million of common stock of the
FHLB of NY at December 31, 2008 and 2007, respectively, which is included in equity securities. MLIC has also entered into funding
agreements with the FHLB of NY whereby MLIC has issued such funding agreements in exchange for cash and for which the FHLB of NY
has been granted a lien on certain MLIC assets, including residential mortgage-backed securities to collateralize MLIC’s obligations under
the funding agreements. MLIC maintains control over these pledged assets, and may use, commingle, encumber or dispose of any portion
of the collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance
level. Upon any event of default by MLIC, the FHLB of NY’s recovery on the collateral is limited to the amount of MLIC’s liability to the FHLB
of NY. The amount of the Company’s liability for funding agreements with the FHLB of NY was $15.2 billion and $4.6 billion at December 31,
2008 and 2007, respectively, which is included in policyholder account balances. The advances on these agreements are collateralized by
mortgage-backed securities with estimated fair values of $17.8 billion and $4.8 billion at December 31, 2008 and 2007, respectively.
MetLife Bank is a member of the FHLB of NY and holds $89 million and $64 million of common stock of the FHLB of NY at December 31,
2008 and 2007, respectively, which is included in equity securities. MetLife Bank has also entered into repurchase agreements with the
FHLB of NY whereby MetLife Bank has issued repurchase agreements in exchange for cash and for which the FHLB of NY has been
granted a blanket lien on MetLife Bank’s residential mortgages and mortgage-backed securities to collateralize MetLife Bank’s obligations
under the repurchase agreements. MetLife Bank maintains control over these pledged assets, and may use, commingle, encumber or
dispose of any portion of the collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the
collateral maintenance level. The repurchase agreements and the related security agreement represented by this blanket lien provide that
upon any event of default by MetLife Bank, the FHLB of NY’s recovery is limited to the amount of MetLife Bank’s liability under the
outstanding repurchase agreements. The amount of the Company’s liability for repurchase agreements with the FHLB of NY was
$1.8 billion and $1.2 billion at December 31, 2008 and 2007, respectively, which is included in long-term debt and short-term debt
depending on the original tenor of the advance. The advances on these repurchase agreements are collateralized by residential mortgage-
backed securities and residential mortgage loans with estimated fair values of $3.1 billion and $1.3 billion at December 31, 2008 and
2007, respectively.
Collateral for Securities Lending
The Company has non-cash collateral for securities lending on deposit from customers, which cannot be sold or repledged, and which
has not been recorded on its consolidated balance sheets. The amount of this collateral was $279 million and $40 million at December 31,
2008 and 2007, respectively.
Goodwill
Goodwill is the excess of cost over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested for impairment
at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may
be justification for conducting an interim test. Impairment testing is performed using the fair value approach, which requires the use of
estimates and judgment, at the “reporting unit” level. A reporting unit is the operating segment or a business one level below the operating
segment, if discrete financial information is prepared and regularly reviewed by management at that level.
Information regarding changes in goodwill is as follows:
2008 2007 2006
December 31,
(In millions)
Balanceatbeginningoftheperiod,..................................... $4,814 $4,801 $4,701
Acquisitions(1).................................................. 256 2 93
Other,net(2) ................................................... (62) 11 7
Balanceattheendoftheperiod ...................................... $5,008 $4,814 $4,801
68 MetLife, Inc.