MetLife 2011 Annual Report Download - page 76

Excess interest reserves representing purchase accounting adjustments of $381 million, as well as $4.3 billion relating to embedded derivatives,
have been excluded from amounts presented in the table above as they represent accounting conventions and not contractual obligations.
Amounts presented in the table above represent the estimated cash payments to be made to policyholders undiscounted as to interest and
including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial withdrawals; policy lapses;
surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate to the respective product
type. Such estimated cash payments are also presented net of estimated future premiums on policies currently in-force and gross of any reinsurance
recoverable. For obligations denominated in foreign currencies, cash payments have been estimated using current spot rates.
The sum of the estimated cash flows shown for all years in the table of $295.3 billion exceeds the liability amount of $217.7 billion included on the
consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in
assumptions between the date the liabilities were initially established and the current date. See the comments under “— Future policy benefits” above
regarding the source and uncertainties associated with the estimation of the contractual obligations related to future policyholder benefits and PABs.
Other policyholder liabilities — Other policyholder liabilities are comprised of other policy-related balances, policyholder dividends payable and the
policyholder dividend obligation. Amounts included in the table above related to these balances are as follows:
a. Other policy-related balances includes liabilities for incurred but not reported claims and claims payable on group term life, long-term disability,
LTC and dental; policyholder dividends left on deposit and policyholder dividends due and unpaid related primarily to traditional life and group life
and health; and premiums received in advance. Liabilities related to unearned revenue and negative VOBA of $2.3 billion and $3.6 billion,
respectively, have been excluded from the cash payments presented in the table above because they reflect accounting conventions and not
contractual obligations. With the exception of policyholder dividends left on deposit, and those items excluded as noted in the preceding
sentence, the contractual obligation presented in the table above related to other policy-related balances is equal to the liability reflected in the
consolidated balance sheet. Such amounts are reported in the one year or less category due to the short-term nature of the liabilities.
Contractual obligations on policyholder dividends left on deposit are projected based on assumptions of policyholder withdrawal activity.
b. Policyholder dividends payable consists of liabilities related to dividends payable in the following calendar year on participating policies. As such,
the contractual obligation related to policyholder dividends payable is presented in the table above in the one year or less category at the amount
of the liability presented in the consolidated balance sheet.
c. The nature of the policyholder dividend obligation is described in Note 10 of the Notes to the Consolidated Financial Statements. Because the
exact timing and amount of the ultimate policyholder dividend obligation is subject to significant uncertainty and the amount of the policyholder
dividend obligation is based upon a long-term projection of the performance of the closed block, we have reflected the obligation at the amount
of the liability, if any, presented in the consolidated balance sheet in the more than five years category. This was presented to reflect the long-
duration of the liability and the uncertainty of the ultimate cash payment.
Payables for collateral under securities loaned and other transactions — The Company has accepted cash collateral in connection with securities
lending and derivative transactions. As the securities lending transactions expire within the next year or the timing of the return of the collateral is
uncertain, the return of the collateral has been included in the one year or less category in the table above. The Company also holds non-cash collateral,
which is not reflected as a liability in the consolidated balance sheet, of $2.9 billion at December 31, 2011.
Bank deposits — Bank deposits of $10.6 billion exceed the amount on the balance sheet of $10.5 billion due to the inclusion of estimated interest
payments. Liquid deposits, including demand deposit accounts, money market accounts and savings accounts, are assumed to mature at carrying
value within one year. Certificates of deposit are assumed to pay all interest and principal at maturity.
Short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities — Amounts presented in the table above
for short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities differ from the balances presented on the
consolidated balance sheet, as the amounts presented in the table above do not include premiums or discounts upon issuance or purchase
accounting fair value adjustments. The amounts presented above also include future interest on such obligations as described below.
Short-term debt consists of borrowings with original maturities of one year or less carrying fixed interest rates. The contractual obligation for short-
term debt presented in the table above represents the principal amounts due upon maturity plus the related future interest for the period from January 1,
2012 through maturity.
Long-term debt bears interest at fixed and variable interest rates through their respective maturity dates. Future interest on fixed rate debt was
computed using the stated rate on the obligations for the period from January 1, 2012 through maturity. Future interest on variable rate debt was
computed using prevailing rates at December 31, 2011 and, as such, does not consider the impact of future rate movements. Long-term debt also
includes payments under capital lease obligations of $1 million, $6 million, $2 million and $28 million, in the one year or less, more than one year to
three years, more than three years to five years and more than five years categories, respectively. Long-term debt presented in the table above excludes
$3.1 billion at December 31, 2011 of long-term debt relating to CSEs.
Collateral financing arrangements bear interest at fixed and variable interest rates through their respective maturity dates. Future interest on fixed rate
debt was computed using the stated rate on the obligations for the period from January 1, 2012 through maturity. Future interest on variable rate debt
was computed using prevailing rates at December 31, 2011 and, as such, does not consider the impact of future rate movements. Pursuant to these
collateral financing arrangements, MetLife, Inc. may be required to deliver cash or pledge collateral to the respective unaffiliated financial institutions. See
“— The Company — Liquidity and Capital Sources — Collateral Financing Arrangements.”
Junior subordinated debt securities bear interest at fixed interest rates through their respective redemption dates. Future interest was computed
using the stated rates on the obligations for the period from January 1, 2012 through the scheduled redemption dates, as it is the Company’s
expectation that the debt will be redeemed at that time. Inclusion of interest payments on junior subordinated debt through the final maturity dates would
increase the contractual obligation by $7.7 billion.
Commitments to lend funds — The Company commits to lend funds under mortgage loans, partnerships, bank credit facilities, bridge loans and
private corporate bond investments. In the table above, the timing of the funding of mortgage loans and private corporate bond investments is based on
the expiration dates of the corresponding commitments. As it relates to commitments to lend funds to partnerships and under bank credit facilities, the
Company anticipates that these amounts could be invested any time over the next five years; however, as the timing of the fulfillment of the obligation
cannot be predicted, such obligations are presented in the one year or less category in the table above. Commitments to fund bridge loans are short-
term obligations and, as a result, are presented in the one year or less category in the table above. See Note 16 of the Notes to the Consolidated
Financial Statements and “— Off-Balance Sheet Arrangements.”
72 MetLife, Inc.