MetLife 2010 Annual Report Download - page 192

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 Demutualization Date
(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.
Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses,
directly impact the policyholder dividend obligation. The policyholder dividend obligation increased to $876 million at December 31, 2010,
from zero at December 31, 2009, as a result of recent unrealized gains in the closed block. Amortization of the closed block DAC, which
resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the
Company’s net income continues to be sensitive to the actual performance of the closed block.
F-103MetLife, Inc.
MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)