MetLife 2009 Annual Report Download - page 55

Credit Risk. See Note 4 of the Notes to Consolidated Financial Statements for information about how the Company manages credit risk
related to its freestanding derivatives, including the use of master netting agreements and collateral arrangements.
Credit Derivatives. SeeNote4oftheNotestoConsolidatedFinancialStatementsforinformationabouttheestimatedfairvalueand
maximum amount at risk related to the Company’s written credit default swaps.
Embedded Derivatives. The embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair
value hierarchy, are presented as follows:
Asset Host
Contracts Liability Host Contracts
Net Embedded Derivatives Within
December 31, 2009
(In millions)
Quoted prices in active markets for identical assets and liabilities (Level 1) . . . . . . $— —% $ — —%
Significantotherobservableinputs(Level2) ......................... — — (26) (2)
Significantunobservableinputs(Level3)............................ 76 100 1,531 102
Totalestimatedfairvalue...................................... $76 100% $1,505 100%
A rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using
significantunobservable(Level3)inputsisasfollows:
Year Ended
December 31, 2009
(In millions)
Balance,beginningofperiod................................................ $(2,929)
Total realized/unrealized gains (losses) included in:
Earnings .......................................................... 1,602
Othercomprehensiveincome(loss)......................................... 15
Purchases,sales,issuancesandsettlements.................................... (143)
Transferinand/oroutofLevel3 ............................................ —
Balance,endofperiod.................................................... $(1,455)
The valuation of the Company’s guaranteed minimum benefits includes an adjustment for the Company’s own credit. For the years ended
December 31, 2009 and 2008, the Company recognized net investment gains (losses) of ($1,932) million and $2,994 million, respectively, in
connection with this adjustment.
See “ — Summary of Critical Accounting Estimates — Embedded Derivatives” for further information on the estimates and assumptions
that affect the amounts reported above.
Off-Balance Sheet Arrangements
Commitments to Fund Partnership Investments
The Company makes commitments to fund partnership investments in the normal course of business for the purpose of enhancing the
Company’s total return on its investment portfolio. The amounts of these unfunded commitments were $4.1 billion and $4.5 billion at
December 31, 2009 and 2008, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five
years. There are no other obligations or liabilities arising from such arrangements that are reasonably likely to become material.
Mortgage Loan Commitments
The Company has issued interest rate lock commitments on certain residential mortgage loan applications totaling $2.7 billion and
$8.0 billion at December 31, 2009 and 2008, respectively. The Company intends to sell the majority of these originated residential mortgage
loans. Interest rate lock commitments to fund mortgage loans that will be held-for-sale are considered derivatives pursuant to the guidance on
derivatives and hedging, and their estimated fair value and notional amounts are included within interest rate forwards.
The Company also commits to lend funds under certain other mortgage loan commitments that will be held-for-investment. The amounts of
these mortgage loan commitments were $2.2 billion and $2.7 billion at December 31, 2009 and 2008, respectively.
The purpose of the Company’s loan program is to enhance the Company’s total return on its investment portfolio. There are no other
obligations or liabilities arising from such arrangements that are reasonably likely to become material.
Commitments to Fund Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments
The Company commits to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of
these unfunded commitments were $1.3 billion and $1.0 billion at December 31, 2009 and 2008, respectively. There are no other obligations
or liabilities arising from such arrangements that are reasonably likely to become material.
Lease Commitments
The Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment.
The Company’s commitments under such lease agreements are included within the contractual obligations table. See “— Liquidity and
Capital Resources — The Company — Liquidity and Capital Uses — Contractual Obligations.”
Credit Facilities, Committed Facilities and Letters of Credit
The Company maintains committed and unsecured credit facilities and letters of credit with various financial institutions. See “— Liquidity
and Capital Resources — The Company — Liquidity and Capital Sources — Credit and Committed Facilities,” for further descriptions of
such arrangements.
49MetLife, Inc.