MetLife 2010 Annual Report Download - page 189

Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
2010 2009
December 31,
(In millions)
Fund Groupings:
Equity .......................................................... $ 59,546 $48,852
Balanced........................................................ 40,199 31,011
Bond........................................................... 9,539 7,166
MoneyMarket..................................................... 1,584 2,104
Specialty ........................................................ 2,192 1,865
Total.......................................................... $113,060 $90,998
9. Reinsurance
The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional
capacity for future growth.
For its individual life insurance products, the Company has historically reinsured the mortality risk primarily on an excess of retention basis
or a quota share basis. The Company currently reinsures 90% of the mortality risk in excess of $1 million for most products and reinsures up to
90% of the mortality risk for certain other products. In addition to reinsuring mortality risk as described above, the Company reinsures other
risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks
with specified characteristics. On a case by case basis, the Company may retain up to $20 million per life and reinsure 100% of amounts in
excess of the amount the Company retains. The Company evaluates its reinsurance programs routinely and may increase or decrease its
retention at any time.
For other policies within the Insurance Products segment, the Company generally retains most of the risk and only cedes particular risks on
certain client arrangements.
The Company’s Retirement Products segment reinsures a portion of the living and death benefit guarantees issued in connection with its
variable annuities. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with
the guarantees collected from policyholders, and receives reimbursement for benefits paid or accrued in excess of account values, subject to
certain limitations.
The Company’s Corporate Benefit Funding segment periodically engages in reinsurance activities, as considered appropriate. The impact
of these activities on the financial results of this segment has not been significant.
The Company’s Auto & Home segment purchases reinsurance to manage its exposure to large losses (primarily catastrophe losses) and
to protect statutory surplus. The Company cedes to reinsurers a portion of losses and premiums based upon the exposure of the policies
subject to reinsurance. To manage exposure to large property and casualty losses, the Company utilizes property catastrophe, casualty and
property per risk excess of loss agreements.
For its life insurance products within the International segment, the Company reinsures, depending on the product, risks above the
corporate retention limit of up to $5 million to external reinsurers on a yearly renewable term basis. The Company’s international businesses
may also reinsure certain risks with external reinsurers depending upon the nature of the risk and local regulatory requirements. The
Company’s International segment reinsures, for selected large corporate customers, its group employee benefits or credit insurance
business with various client-affiliated reinsurance companies, covering policies issued to the employees or customers of the clients.
Additionally, the Company cedes and assumes risk with other insurance companies when either company requires a business partner with
the appropriate local licensing to issue certain types of policies in certain countries. In these cases, the assuming company typically
underwrites the risks, develops the products and assumes most or all of the risk. The Company’s International segment also has reinsurance
agreements in force that reinsure a portion of the living and death benefit guarantees issued in connection with its variable annuities. Under
these agreements, the Company pays reinsurance fees associated with the guarantees collected from policyholders, and receives
reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.
The Company also reinsures, through 100% quota share reinsurance agreements, certain long-term care and workers’ compensation
business written by MICC. These are run-off businesses which have been included within Banking, Corporate & Other.
The Company has exposure to catastrophes, which could contribute to significant fluctuations in the Company’s results of operations.
The Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize
exposure to larger risks. For its International segment, the Company currently purchases catastrophe coverage to insure risks within certain
countries deemed by management to be exposed to the greatest catastrophic risks.
The Company reinsures its business through a diversified group of well-capitalized, highly rated reinsurers. The Company analyzes recent
trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. The Company monitors ratings and evaluates the financial
strength of its reinsurers by analyzing their financial statements. In addition, the reinsurance recoverable balance due from each reinsurer is
evaluated as part of the overall monitoring process. Recoverability of reinsurance recoverable balances is evaluated based on these
analyses. The Company generally secures large reinsurance recoverable balances with various forms of collateral, including secured trusts,
funds withheld accounts and irrevocable letters of credit. These reinsurance recoverable balances are stated net of allowances for
uncollectible reinsurance, which at December 31, 2010 and 2009, were immaterial.
The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds
withheld accounts and irrevocable letters of credit. The Company had $5.5 billion and $4.4 billion of unsecured unaffiliated reinsurance
recoverable balances at December 31, 2010 and 2009, respectively.
F-100 MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)