MetLife 2010 Annual Report Download - page 153

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains
(losses). The following table represents the amount of such net derivative gains (losses) recognized for the years ended December 31, 2010,
2009 and 2008:
Derivatives in Fair Value
Hedging Relationships Hedged Items in Fair Value Hedging Relationships
Net Derivative
Gains (Losses)
Recognized
for Derivatives
Net Derivative Gains
(Losses) Recognized
for Hedged Items
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)
(In millions)
For the Year Ended December 31, 2010:
Interestrateswaps: Fixedmaturitysecurities...................... $ (14) $ 16 $ 2
Policyholderaccountbalances(1)................ 140 (142) (2)
Foreign currency
swaps: Foreign-denominated fixed maturity securities . . . . . . . . 14 (14) —
Foreign-denominated policyholder account balances(2). . 9 (20) (11)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 149 $(160) $(11)
For the Year Ended December 31, 2009:
Interestrateswaps: Fixedmaturitysecurities...................... $ 49 $ (42) $ 7
Policyholderaccountbalances(1)................ (963) 951 (12)
Foreign currency
swaps: Foreign-denominated fixed maturity securities . . . . . . . . (13) 10 (3)
Foreign-denominated policyholder account balances(2). . 462 (449) 13
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(465) $ 470 $ 5
For the Year Ended December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . $ 245 $(248) $ (3)
(1) Fixed rate liabilities
(2) Fixed rate or floating rate liabilities
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging:
(i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilitiesto
fixed rate liabilities; (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated
investments and liabilities; (iv) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments;
(v) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments; and (vi) interest rate swaps and
interest rate forwards to hedge forecasted fixed-rate borrowings.
For the years ended December 31, 2010 and 2009, the Company recognized $1 million and ($3) million, respectively, of net derivative
gains (losses) which represented the ineffective portion of all cash flow hedges. For the year ended December 31, 2008, the Company did not
recognize any net derivative gains (losses) which represented the ineffective portion of all cash flow hedges. All components of each
derivative’s gain or loss were included in the assessment of hedge effectiveness. In certain instances, the Company discontinued cash flow
hedge accounting because the forecasted transactions did not occur on the anticipated date or within two months of that date. The net
amounts reclassified into net derivative gains (losses) for the years ended December 31, 2010, 2009 and 2008 related to such discontinued
cash flow hedges were gains (losses) of $9 million, ($7) million and ($12) million, respectively. At December 31, 2010 and 2009, the maximum
length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed
seven years and five years, respectively. There were no hedged forecasted transactions, other than the receipt or payment of variable interest
payments, for the year ended December 31, 2008.
The following table presents the components of accumulated other comprehensive income (loss), before income tax, related to cash flow
hedges:
2010 2009 2008
Years Ended December 31,
(In millions)
Accumulated other comprehensive income (loss), balance at January 1, . . . . . . . . . . . . . . . $(76) $ 82 $(270)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash
flowhedges .................................................... (51) (221) 203
Amountsreclassifiedtonetderivativegains(losses)............................ 65 54 140
Amountsreclassifiedtonetinvestmentincome............................... 4 8 9
Amountsreclassifiedtootherexpenses.................................... (1) 3 (1)
Amortizationoftransitionadjustment...................................... — (2) 1
Accumulated other comprehensive income (loss), balance at December 31, . . . . . . . . . . . . $(59) $ (76) $ 82
F-64 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)