MetLife 2011 Annual Report Download - page 63

A rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant
unobservable (Level 3) inputs is as follows:
Year Ended
December 31, 2011
(In millions)
Balance, beginning of period .................................................................. $(2,438)
Total realized/unrealized gains (losses) included in: ...............................................
Earnings .............................................................................. (1,191)
Other comprehensive income (loss) ......................................................... (119)
Purchases, sales, issuances and settlements ................................................... (455)
Transfer into and/or out of Level 3 ............................................................. —
Balance, end of period ....................................................................... $(4,203)
The valuation of guaranteed minimum benefits includes an adjustment for nonperformance risk. Included in net derivative gains (losses) for the year
ended December 31, 2011, were gains (losses) of $1.8 billion in connection with this adjustment.
See “ — Summary of Critical Accounting Estimates — Derivative Financial Instruments” for further information on the estimates and assumptions that
affect the amounts reported above.
Off-Balance Sheet Arrangements
Credit Facilities and Committed Facilities
The Company maintains unsecured credit and committed facilities with various financial institutions. See “— Liquidity and Capital Resources — The
Company — Liquidity and Capital Sources — Credit and Committed Facilities” for further descriptions of such arrangements.
Collateral for Securities Lending and Derivative Financial Instruments
The Company has non-cash collateral for securities lending from counterparties on deposit from customers, which cannot be sold or repledged, and
which has not been recorded on its consolidated balance sheets. The Company participates in a securities lending program in the normal course of
business for the purpose of enhancing the Company’s total return on its investment portfolio. The amount of this collateral was $371 million at estimated
fair value at December 31, 2011. There was no non-cash collateral for securities lending on deposit from customers at December 31, 2010. See “—
Investments — Securities Lending” and “Securities Lending” in Note 1 of the Notes to the Consolidated Financial Statements for discussion of the
Company’s securities lending program and the classification of revenues and expenses and the nature of the secured financing arrangement and
associated liability.
The Company has non-cash collateral from counterparties for derivative financial instruments, which can be sold or repledged subject to certain
constraints, and has not been recorded on its consolidated balance sheets. The Company enters into derivative financial instruments to manage various
risks relating to its ongoing business operations. The amount of this collateral was $2.5 billion and $984 million at December 31, 2011 and 2010,
respectively, which were held in separate custodial accounts and not recorded on the Company’s consolidated balance sheets. See “— Liquidity and
Capital Resources —The Company — Liquidity and Capital Sources — Collateral Financing Arrangements” and “Derivatives” in Note 4 of the Notes to
the Consolidated Financial Statements for information on the earned income on and the gross notional amount, estimated fair value of assets and
liabilities and primary underlying risk exposure of the Company’s derivative financial instruments.
Lease Commitments
The Company, as lessee, has entered into various lease and sublease agreements for office space, information technology and other equipment.
The Company’s commitments under such lease agreements are included within the contractual obligations table. See “— Liquidity and Capital
Resources — The Company — Liquidity and Capital Uses — Contractual Obligations” and Note 16 of the Notes to the Consolidated Financial
Statements.
Guarantees
See “Guarantees” in Note 16 of the Notes to the Consolidated Financial Statements.
Other
Additionally, the Company has the following commitments in the normal course of business for the purpose of enhancing the Company’s total return
on its investment portfolio:
‰Commitments to Fund Partnership Investments;
‰Mortgage Loan Commitments; and
‰Commitments to Fund Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments.
See “Net Investment Income” and “Net Investment Gains (Losses)” in Note 3 of the Notes to the Consolidated Financial Statements for information
on the investment income, investment expense, gains and losses from such investments. See also “Fixed Maturity and Equity Securities Available-for-
Sale,” “Mortgage Loans,” “Real Estate and Real Estate Joint Ventures,” and “Other Limited Partnerships” in Note 3 of the Notes to the Consolidated
Financial Statements for information on our investments in fixed maturity securities, mortgage loans and partnership investments.
Other than the commitments disclosed in Note 16 of the Notes to the Consolidated Financial Statements, there are no other material obligations or
liabilities arising from the commitments to fund partnership investments, mortgage loans, bank credit facilities, bridge loans, and private corporate bond
investments.
See also “— Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Contractual Obligations” for further information on
commitments to fund partnership investments, mortgage loans, bank credit facilities, bridge loans and private corporate bond investments. In addition,
see “Primary Risks Managed by Derivative Financial Instruments and Non-Derivative Financial Instruments” in Note 4 of the Notes to the Consolidated
Financial Statements for further information on interest rate lock commitments.
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