MetLife 2011 Annual Report Download - page 174

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
Assets and Liabilities Held by CSEs
The Company has elected the FVO for the following assets and liabilities held by CSEs: commercial mortgage loans, securities and long-term debt.
Information on the estimated fair value of the securities classified as trading and other securities is presented in Note 3. The following table presents
these commercial mortgage loans carried under the FVO at:
December 31,
2011 2010
(In millions)
Unpaid principal balance ................................................................... $3,019 $6,636
Excess of estimated fair value over unpaid principal balance ........................................ 119 204
Carrying value at estimated fair value ........................................................ $3,138 $6,840
The following table presents the long-term debt carried under the FVO related to both the commercial mortgage loans and securities classified as
trading and other securities at:
December 31,
2011 2010
(In millions)
Contractual principal balance ................................................................ $2,954 $6,619
Excess of estimated fair value over contractual principal balance ..................................... 114 201
Carrying value at estimated fair value ........................................................ $3,068 $6,820
Interest income on both commercial mortgage loans and securities classified as trading and other securities held by CSEs is recorded in net
investment income. Interest expense on long-term debt of CSEs is recorded in other expenses. Gains and losses from initial measurement, subsequent
changes in estimated fair value and gains or losses on sales of both the commercial mortgage loans and long-term debt are recognized in net
investment gains (losses). See Note 3.
Non-Recurring Fair Value Measurements
Certain assets are measured at estimated fair value on a non-recurring basis and are not included in the tables presented above. The amounts
below relate to certain investments measured at estimated fair value during the period and still held at the reporting dates.
Years Ended December 31,
2011 2010 2009
Carrying
Value Prior to
Measurement
Estimated
Fair
Value After
Measurement
Net
Investment
Gains
(Losses)
Carrying
Value Prior to
Measurement
Estimated
Fair
Value After
Measurement
Net
Investment
Gains
(Losses)
Carrying
Value Prior to
Measurement
Estimated
Fair
Value After
Measurement
Net
Investment
Gains
(Losses)
(In millions)
Mortgage loans:(1)
Held-for-investment .............. $166 $151 $(15) $179 $164 $(15) $294 $202 $ (92)
Held-for-sale ................... 61 58 (3) 35 33 (2) 9 8 (1)
Mortgage loans, net ........... $227 $209 $(18) $214 $197 $(17) $303 $210 $ (93)
Other limited partnership interests(2) . . . $ 18 $ 13 $ (5) $ 35 $ 23 $(12) $915 $561 $(354)
Real estate joint ventures(3) ......... $ — $ — $— $ 33 $ 8 $(25) $175 $ 93 $ (82)
Goodwill(4) ...................... $ 65 $ — $(65) $ — $ — $ — $ — $ — $ —
(1) Mortgage loans — The impaired mortgage loans presented above were written down to their estimated fair values at the date the impairments were
recognized and are reported as losses above. Subsequent improvements in estimated fair value on previously impaired loans recorded through a
reduction in the previously established valuation allowance are reported as gains above. Estimated fair values for impaired mortgage loans are based
on observable market prices or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, on the estimated fair value of
the underlying collateral, or the present value of the expected future cash flows. Impairments to estimated fair value and decreases in previous
impairments from subsequent improvements in estimated fair value represent non-recurring fair value measurements that have been categorized as
Level 3 due to the lack of price transparency inherent in the limited markets for such mortgage loans.
(2) Other limited partnership interests — The impaired investments presented above were accounted for using the cost method. Impairments on these
cost method investments were recognized at estimated fair value determined from information provided in the financial statements of the underlying
entities in the period in which the impairment was incurred. These impairments to estimated fair value represent non-recurring fair value
measurements that have been classified as Level 3 due to the limited activity and price transparency inherent in the market for such investments.
This category includes several private equity and debt funds that typically invest primarily in a diversified pool of investments using certain investment
strategies including domestic and international leveraged buyout funds; power, energy, timber and infrastructure development funds; venture capital
funds; and below investment grade debt and mezzanine debt funds. The estimated fair values of these investments have been determined using the
NAV of the Company’s ownership interest in the partners’ capital. Distributions from these investments will be generated from investment gains, from
operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the
underlying assets of the funds will be liquidated over the next two to 10 years. Unfunded commitments for these investments were $4 million and
$34 million at December 31, 2011 and 2010, respectively.
170 MetLife, Inc.