MetLife 2010 Annual Report Download - page 156

Net
Derivative
Gains (Losses)
Net
Investment
Income(1)
Policyholder
Benefits
and Claims(2) Other Revenues(3) Other Expenses(4)
(In millions)
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 $—
(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.
Credit Derivatives
In connection with synthetically created investment transactions and credit default swaps held in relation to the trading portfolio, the
Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the non-
qualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, generally the
contract will require the Company to pay the counterparty the specified swap notional amount in exchange for the delivery of par quantities of
the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was
$5,089 million and $3,101 million at December 31, 2010 and 2009, respectively. The Company can terminate these contracts at any time
through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At December 31,
2010 and 2009, the Company would have received $62 million and $53 million, respectively, to terminate all of these contracts.
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of
written credit default swaps at December 31, 2010 and 2009:
Rating Agency Designation of Referenced
Credit Obligations (1)
Estimated
Fair
Value of Credit
Default
Swaps
Maximum
Amount
of Future
Payments under
Credit Default
Swaps(2)
Weighted
Average
Years to
Maturity(3)
Estimated
Fair Value
of Credit
Default
Swaps
Maximum
Amount of
Future
Payments under
Credit Default
Swaps(2)
Weighted
Average
Years to
Maturity(3)
2010 2009
December 31,
(In millions)
Aaa/Aa/A
Single name credit default swaps (corporate) . . . $ 5 $ 470 3.8 $ 5 $ 175 4.3
Credit default swaps referencing indices . . . . . . 45 2,928 3.7 46 2,676 3.4
Subtotal........................... 50 3,398 3.7 51 2,851 3.5
Baa
Single name credit default swaps (corporate) . . . 5 735 4.3 2 195 4.8
Credit default swaps referencing indices . . . . . . 7 931 5.0 — 10 5.0
Subtotal........................... 12 1,666 4.7 2 205 4.8
Ba
Single name credit default swaps (corporate) . . . — 25 4.4 — 25 5.0
Credit default swaps referencing indices . . . . . . — — — — — —
Subtotal........................... — 25 4.4 — 25 5.0
B
Single name credit default swaps (corporate) . . . — — — — — —
Credit default swaps referencing indices . . . . . . — — — — 20 5.0
Subtotal........................... — — — — 20 5.0
Total ............................. $62 $5,089 4.1 $53 $3,101 3.6
(1) The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no
rating is available from a rating agency, then an internally developed rating is used.
F-67MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)