MetLife 2010 Annual Report Download - page 52

December 31, 2010, on such securities for which a noncredit OTTI loss was previously recognized in accumulated other comprehensive
income (loss).
Fixed maturity securities with noncredit OTTI losses in accumulated other comprehensive income (loss) of ($859) million at December 31,
2009, includes ($126) million related to the transition adjustment recorded in 2009 upon the adoption of guidance on the recognition and
presentation of OTTI, ($939) million (($857) million, net of DAC) of noncredit OTTI losses recognized in the year ended December 31, 2009 (as
more fully described in Note 1 of the Notes to the Consolidated Financial Statements), $20 million related to securities sold during the year
ended December 31, 2009 for which a noncredit loss was previously recognized in accumulated other comprehensive income (loss) and
$186 million of subsequent increases in estimated fair value during the year ended December 31, 2009 on such securities for which a
noncredit OTTI loss was previously recognized in accumulated other comprehensive income (loss).
Aging of Gross Unrealized Loss and OTTI Loss for Fixed Maturity and Equity Securities Available-for-Sale
See “Investments— Aging of Gross Unrealized Loss and OTTI Loss for Fixed Maturity and Equity Securities Available-for-Sale” in Note 3 of
the Notes to the Consolidated Financial Statements for the tables that present the cost or amortized cost, gross unrealized loss, including the
portion of OTTI loss on fixed maturity securities recognized in accumulated other comprehensive income (loss) at December 31, 2010, gross
unrealized loss as a percentage of cost or amortized cost and number of securities for fixed maturity and equity securities where the estimated
fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at December 31, 2010 and 2009.
Concentration of Gross Unrealized Loss and OTTI Loss for Fixed Maturity and Equity Securities Available-for-Sale
See “Investments — Concentration of Gross Unrealized Loss and OTTI Loss for Fixed Maturity and Equity Securities Available-for-Sale” in
Note 3 of the Notes to the Consolidated Financial Statements for the tables that present the concentration by sector and industry of the
Company’s gross unrealized losses related to its fixed maturity and equity securities, including the portion of OTTI loss on fixed maturity
securities recognized in accumulated other comprehensive loss of $6.9 billion and $10.8 billion at December 31, 2010 and 2009,
respectively.
Evaluating Temporarily Impaired Available-for-Sale Securities
See “Investments— Fixed Maturity and Equity Securities Available-for-Sale — Evaluating Temporarily Impaired Available-for-Sale Secu-
rities” in Note 3 of the Notes to the Consolidated Financial Statements for a table that presents the Company’s fixed maturity and equity
securities each with a gross unrealized loss of greater than $10 million, the number of securities, total gross unrealized loss and percentage of
total gross unrealized loss at December 31, 2010 and 2009.
Fixed maturity and equity securities, each with a gross unrealized loss greater than $10 million, decreased $2.5 billion during the year
ended December 31, 2010. The cause of the decline in, or improvement in, gross unrealized losses for the year ended December 31, 2010
was primarily attributable to a decrease in interest rates and narrowing of credit spreads. These securities were included in the Company’s
OTTI review process. Based upon the Company’s current evaluation of these securities in accordance with its impairment policy and the
Company’s current intentions and assessments (as applicable to the type of security) about holding, selling, and any requirements to sell
these securities, the Company has concluded that these securities are not other-than-temporarily impaired.
In the Company’s impairment review process, the duration and severity of an unrealized loss position for equity securities is given greater
weight and consideration than for fixed maturity securities. An extended and severe unrealized loss position on a fixed maturity security may
not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company’s evaluation of
recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized cost based on the present value of
the expected future cash flows to be collected. In contrast, for an equity security, greater weight and consideration is given by the Company to
a decline in market value and the likelihood such market value decline will recover.
See “Investments — Fixed Maturity and Equity Securities Available-for-Sale — Evaluating Temporarily Impaired Available-for-Sale Secu-
rities” in Note 3 of the Notes to the Consolidated Financial Statements for a table that presents certain information about the Company’s equity
securities available-for-sale with a gross unrealized loss of 20% or more at December 31, 2010.
In connection with the equity securities impairment review process at December 31, 2010, the Company evaluated its holdings in non-
redeemable preferred stock, particularly those of financial services companies. The Company considered several factors including whether
there has been any deterioration in credit of the issuer and the likelihood of recovery in value of non-redeemable preferred stock with a severe
or an extended unrealized loss. The Company also considered whether any non-redeemable preferred stock with an unrealized loss held by
the Company, regardless of credit rating, have deferred any dividend payments. No such dividend payments had been deferred.
With respect to common stock holdings, the Company considered the duration and severity of the unrealized losses for securities in an
unrealized loss position of 20% or more and the duration of unrealized losses for securities in an unrealized loss position of less than 20% in an
extended unrealized loss position (i.e., for 12 months or greater).
Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash
flows expected to be collected), changes in credit rating, changes in collateral valuation, changes in interest rates and changes in credit
spreads. If economic fundamentals and any of the above factors deteriorate, additional OTTI may be incurred in upcoming quarters.
Net Investment Gains (Losses) Including OTTI Losses Recognized in Earnings
Effective April 1, 2009, the Company adopted guidance on the recognition and presentation of OTTI that amends the methodology to
determine for fixed maturity securities whether an OTTI exists, and for certain fixed maturity securities, changes how OTTI losses that are
charged to earnings are measured. There was no change in the methodology for identification and measurement of OTTI losses charged to
earnings for impaired equity securities.
See “Investments — Fixed Maturity and Equity Securities Available-for-Sale — Net Investment Gains (Losses)” in Note 3 of the Notes to
the Consolidated Financial Statements for a table that presents proceeds from sales or disposals of fixed maturity and equity securities and
the components of fixed maturity and equity securities net investment gains (losses) for the years ended December 31, 2010, 2009 and 2008,
respectively.
Overview of Fixed Maturity and Equity Security OTTI Losses Recognized in Earnings. Impairments of fixed maturity and equity securities
were $484 million, $1.9 billion and $1.7 billion for the years ended December 31, 2010, 2009 and 2008, respectively. Impairments of fixed
maturity securities were $470 million, $1.5 billion and $1.3 billion for the years ended December 31, 2010, 2009 and 2008, respectively.
49MetLife, Inc.