MetLife 2009 Annual Report Download - page 142

(1) During the year-ended December 31, 2009, the Company substantially liquidated, through assumption reinsurance (see Note 2), the
portion of its Canadian operations that was being hedged in a net investment hedging relationship. As a result, the Company reclassified
losses of $133 million from accumulated other comprehensive loss into earnings. During the years ended December 31, 2008 and 2007,
there were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of
gains or losses from accumulated other comprehensive loss into earnings.
(2) There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations.
At December 31, 2009 and 2008, the cumulative foreign currency translation gain (loss) recorded in accumulated other comprehensive
loss related to hedges of net investments in foreign operations was ($40) million and $126 million, respectively.
Non-Qualifying Derivatives and Derivatives for Purposes Other Than Hedging
The Company enters into the following derivatives that do not qualify for hedge accounting or for purposes other than hedging: (i) interest
rate swaps, implied volatility swaps, caps and floors and interest rate futures to economically hedge its exposure to interest rates; (ii) foreign
currency forwards, swaps and option contracts to economically hedge its exposure to adverse movements in exchange rates; (iii) credit
default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, equity index options, interest rate futures,
TRRs and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) swap spreadlocks to
economically hedge invested assets against the risk of changes in credit spreads; (vi) interest rate forwards to buy and sell securities to
economically hedge its exposure to interest rates; (vii) credit default swaps and TRRs to synthetically create investments; (viii) basis swaps to
better match the cash flows of assets and related liabilities; (ix) credit default swaps held in relation to trading portfolios; (x) swaptions to
hedge interest rate risk; (xi) inflation swaps to reduce risk generated from inflation-indexed liabilities; (xii) covered call options for income
generation; (xiii) interest rate lock commitments; (xiv) synthetic GICs and (xv) equity options to economically hedge certain invested assets
against adverse changes in equity indices.
The following table presents the amount and location of gains (losses) recognized in income for derivatives that are not designated or
qualifying as hedging instruments:
Net
Investment
Gains (Losses)
Net
Investment
Income(1)
Policyholder
Benefits
and Claims(2) Other Revenues(3) Other Expenses(4)
(In millions)
For the Year Ended December 31, 2009:
Interest rate swaps . . . . . . . . . . . . . . . . . . . . $(1,700) $ (5) $ (13) $(161) $—
Interestratefloors..................... (907) — — — —
Interestratecaps ..................... 33 — — — —
Interestratefutures .................... (366) 2 — — —
Equityfutures........................ (681) (38) (363) — —
Foreigncurrencyswaps ................. (405) — — — —
Foreigncurrencyforwards................ (102) (24) — — —
Currencyoptions...................... (36) (1) — — (3)
Equityoptions........................ (1,713) (68) — — —
Interestrateoptions.................... (379) — — — —
Interestrateforwards................... (7) — — (4) —
Varianceswaps....................... (276) (13) — — —
Swapspreadlocks..................... (38) — — — —
Creditdefaultswaps ................... (243) (11) — — —
Totalrateofreturnswaps ................ 63 — — — —
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(6,757) $(158) $(376) $(165) $ (3)
For the Year Ended December 31, 2008 . . . . $ 6,688 $ 240 $ 331 $ 146 $—
For the Year Ended December 31, 2007 . . . . $ (227) $ 31 $ 7 $ — $—
(1) Changes in estimated fair value related to economic hedges of equity method investments in joint ventures, and changes in estimated fair
value related to derivatives held in relation to trading portfolios.
(2) Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
(3) Changes in estimated fair value related to derivatives held inconnectionwiththeCompany’smortgagebankingactivities.
(4) Changes in estimated fair value related to economic hedges of foreign currency exposure associated with the Company’s international
subsidiaries.
F-58 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)