MetLife 2009 Annual Report Download - page 171

Total
Balance
Sheet Assumed Ceded Total, Net of Reinsurance
December 31, 2008
(In millions)
Assets:
Premiumsandotherreceivables.......................... $ 16,973 $ 489 $11,067 $ 5,417
Deferred policy acquisition costs and value of business acquired . . . . . 20,144 61 (79) 20,162
Totalassets...................................... $ 37,117 $ 550 $10,988 $ 25,579
Liabilities:
Futurepolicybenefits................................. $130,555 $1,761 $ (41) $128,835
Policyholder account balances . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,921 1,247 (59) 141,733
Otherpolicyholderfunds............................... 7,762 235 350 7,177
Otherliabilities ..................................... 14,284 309 1,096 12,879
Totalliabilities..................................... $295,522 $3,552 $ 1,346 $290,624
10. Closed Block
On April 7, 2000, (the “Demutualization Date”), MLIC converted from a mutual life insurance company to a stock life insurance company
and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of
Insurance(the“Superintendent”)approvingMLIC’splanofreorganization,asamended(the“Plan”).OntheDemutualizationDate,MLIC
established a closed block for the benefit of holders of certain individual life insurance policies of MLIC. Assets have been allocated to the
closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies
included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including,
but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder
dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such
scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience
assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience.
The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed
block will benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the
closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was
assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less
than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been
continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not
be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be
made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-
force. The expected life of the closed block is over 100 years.
The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to
the Demutualization Date. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders
as additional dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the
demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated
maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings
of the closed block are recognized in income over the period the policies and contracts in the closed block remain in-force. Management
believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to
the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block
are 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 are 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, have
resulted in a policyholder dividend obligation of zero at both December 31, 2009 and 2008. The policyholder dividend obligation of zero and
the Company’s decision to revise the expected policyholder dividend scales, which are based upon statutory results, have resulted in a
reduction to both actual and expected cumulative earnings of the closed block. Amortization of the closed block DAC, which resides outside
of the closed block, 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 adjustments to DAC
and net income of the Company and increase sensitivity of the Company’s net income to movements in closed block results.
F-87MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)