MetLife 2011 Annual Report Download - page 187

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
Account balances of contracts with insurance guarantees were invested in separate account asset classes as follows at:
December 31,
2011 2010
(In millions)
Fund Groupings:
Equity ............................................................................ $ 57,750 $ 59,546
Balanced ......................................................................... 52,823 40,199
Bond ............................................................................ 9,838 9,539
Money Market ..................................................................... 1,521 1,584
Specialty .......................................................................... 2,034 2,192
Total ........................................................................... $123,966 $113,060
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.Ona
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 life insurance products within International, 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. For selected large corporate clients, International reinsures 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. International also has reinsurance agreements in force that reinsurea
portion of the living and death benefit guarantees issued in connection with variable annuity products. Under these agreements, the Company pays or
receives reinsurance fees associated with the guarantees collected from policyholders, and pays or 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 run-off LTC and workers’ compensation business written
by MetLife Insurance Company of Connecticut (“MICC”). These businesses have been included within 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 International, 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, 2011 and 2010,
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 $5.6 billion and $5.5 billion of unsecured unaffiliated reinsurance recoverable balances at
December 31, 2011 and 2010, respectively.
MetLife, Inc. 183