MetLife 2012 Annual Report Download

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ANNUAL REPORT
MetLife, Inc. 2012

Table of contents

  • Page 1
    ANNUAL REPORT MetLife, Inc. 2012

  • Page 2
    ... income solutions. But in a period of prolonged low interest rates and potentially higher capital requirements for large life insurance companies, we must achieve the correct balance. From a high-water mark of approximately $28 billion in 2011, MetLife managed its sales of variable annuity products...

  • Page 3
    ...banks and asset managers. We are working hard to make customer centricity a powerful competitive advantage for MetLife across all products and markets. In 2012, we launched a customer empathy initiative with participation by all of our senior leaders. For example, every member of the Executive Group...

  • Page 4
    ... to offer certain guarantees to our customers, reducing their financial security. During 2012, MetLife increased prices and lowered guarantees on products such as variable annuities and universal life insurance with secondary guarantees, primarily due to the impact of low interest rates. This social...

  • Page 5
    ...stop offering certain products altogether. At a time when government social safety nets are under increasing pressure and corporate pensions are disappearing, sound public policy should preserve competitively priced financial protection for consumers. Conclusion MetLife's achievements in 2012 raised...

  • Page 6
    ...on Accounting and Financial Disclosure ...Management's Annual Report on Internal Control Over Financial Reporting ...Attestation Report of the Company's Registered Public Accounting Firm ...Financial Statements and Supplementary Data ...Board of Directors ...Executive Officers ...Contact Information...

  • Page 7
    ... respect to fluctuations of exchange rates; (15) downgrades in our claims paying ability, financial strength or credit ratings; (16) a deterioration in the experience of the "closed block" established in connection with the reorganization of Metropolitan Life Insurance Company; (17) availability and...

  • Page 8
    .... Years Ended December 31, 2012 2011 2010 2009 2008 (In millions, except per share data) Statement of Operations Data (1) Revenues Premiums ...$ 37,975 $ 36,361 $ 27,071 $ 26,157 $ 25,604 Universal life and investment-type product policy fees ...8,556 7,806 6,028 5,197 5,373 Net investment income...

  • Page 9
    ... and financial services products, including life, dental, disability, property & casualty, guaranteed interest, stable value and annuities, through both proprietary and independent retail distribution channels, as well as at the workplace. This business serves approximately 60,000 group customers...

  • Page 10
    ...and traditional direct marketing techniques such as inbound and outbound telemarketing. Revenues derived from any customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the last three years. Financial information, including...

  • Page 11
    ...of Operations Index to Management's Discussion and Analysis of Financial Condition and Results of Operations Page Number Forward-Looking Statements and Other Financial Information ...Executive Summary ...Industry Trends ...Summary of Critical Accounting Estimates ...Economic Capital ...Acquisitions...

  • Page 12
    ... the United States, Japan, Latin America, Asia, Europe and the Middle East. Through its subsidiaries and affiliates, MetLife offers life insurance, annuities, property & casualty insurance, and other financial services to individuals, as well as group insurance and retirement & savings products and...

  • Page 13
    ... property and MetLife's use of the U.S. Social Security Administration's Death Master File to identify potential life insurance claims, as well as the expected acceleration of benefit payments to policyholders under the settlements. The current year also includes a $50 million, net of income...

  • Page 14
    ... and our insurance liabilities are sensitive to changing market factors. Global market factors, including interest rates, credit spreads, equity prices, real estate markets, foreign currency exchange rates, consumer spending, business investment, government spending, the volatility and strength of...

  • Page 15
    ... may prepay or redeem the fixed income securities, commercial or agricultural mortgage loans and mortgage-backed securities in our investment portfolio with greater frequency in order to borrow at lower market rates. Therefore, some of our products expose us to the risk that a reduction in interest...

  • Page 16
    ... of our traditional life insurance business is participating, we can largely offset lower investment returns on assets backing our traditional life products through adjustments to the applicable dividend scale. In our universal life products, we manage interest rate risk through a combination...

  • Page 17
    ...sales practices reviews of several markets or products, including equity-indexed annuities, variable annuities and group products, as well as reviews of the utilization of affiliated captive reinsurers or off-shore entities to reinsure insurance risks. The regulation of the global financial services...

  • Page 18
    ... and risk management programs, reduced for anticipated salvage and subrogation. Future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts are based on estimates of the expected value of benefits in excess of the projected account balance...

  • Page 19
    ... (increase) in amortization. Years Ended December 31, 2012 2011 (In millions) 2010 Investment return ...Separate account balances ...Net investment gain (loss) ...Guaranteed minimum income benefits ...Expense ...In-force/Persistency ...Policyholder dividends and other ...Total ... $(161) 39 (44...

  • Page 20
    ... contributing to the changes to DAC and VOBA amortization in 2011: ‰ The decrease in equity markets during the year lowered separate account balances, which led to a reduction in actual and expected future gross profits on variable universal life contracts and variable deferred annuity contracts...

  • Page 21
    ... reported in net income. Variable annuities with guaranteed minimum benefits may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates...

  • Page 22
    ...points higher than the discount rate used, the fair value of the Retail Life reporting unit would have been less than the carrying value by approximately 1%. In addition, we performed the annual goodwill impairment tests on our other reporting units using a market multiple and/or the discounted cash...

  • Page 23
    ... used in measuring liabilities relating to our employee benefit plans. Income Taxes We provide for federal, state and foreign income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities. Our accounting...

  • Page 24
    ...and expectations for changes within our specific mix of products and business segments. In addition, the general account investment portfolio includes, within fair value option ("FVO") and trading securities, contractholder-directed investments supporting unitlinked variable annuity type liabilities...

  • Page 25
    ... minimum benefit guarantees contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). The Company uses freestanding derivatives to hedge the market risks...

  • Page 26
    ...: Years Ended December 31, 2011 2010 (In millions) Change Non-VA program derivatives Interest rate ...$ 2,536 $ Foreign currency exchange rate ...171 Credit ...173 Equity ...6 Non-VA embedded derivatives ...17 Total non-VA program derivatives ...VA program derivatives Market and other risks in...

  • Page 27
    ... tax, in 2011 from $3.6 billion, net of income tax, in 2010. Reconciliation of income (loss) from continuing operations, net of income tax, to operating earnings available to common shareholders Year Ended December 31, 2012 Group, Voluntary & Worksite Benefits Corporate Benefit Funding Latin America...

  • Page 28
    Year Ended December 31, 2011 Group, Voluntary & Worksite Benefits Corporate Benefit Funding Latin America Corporate & Other Retail Asia EMEA Total (In millions) Income (loss) from continuing operations, net of income tax ...Less: Net investment gains (losses) ...Less: Net derivative gains (...

  • Page 29
    ... revenues and GAAP expenses to operating expenses Year Ended December 31, 2012 Group, Voluntary & Worksite Benefits Corporate Benefit Funding Latin America Corporate & Other Retail Asia EMEA Total (In millions) Total revenues ...Less: Net investment gains (losses) ...Less: Net derivative gains...

  • Page 30
    ... to unclaimed property and our use of the U.S. Social Security Administration's Death Master File to identify potential life insurance claims, as well as the expected acceleration of benefit payments to policyholders under the settlements. In addition, changes in foreign currency exchange rates had...

  • Page 31
    ... operating earnings by $239 million. In addition, in the third quarter of 2011, we incurred a $117 million charge to increase reserves in connection with our use of the U.S. Social Security Administration's Death Master File, impacting primarily Group, Voluntary & Worksite Benefits. These events...

  • Page 32
    ... of benefit payments to policyholders under a multi-state examination related to unclaimed property. The prior year results included a charge of $28 million, in connection with the Company's use of the U.S. Social Security Administration's Death Master File. On an annual basis, we review and update...

  • Page 33
    ... Years Ended December 31, 2012 2011 (In millions) 2010 OPERATING REVENUES Premiums ...Universal life and investment-type product policy fees ...Net investment income ...Other revenues ...Total operating revenues ...OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends...

  • Page 34
    ..., 2011 results for our life business include a charge taken in the third quarter related to the use of the U.S. Social Security Administration's Death Master File. The impacts of the sustained low interest rate environment also depressed operating earnings. Policy sales in our property & casualty...

  • Page 35
    ... Years Ended December 31, 2012 2011 (In millions) 2010 OPERATING REVENUES Premiums ...Universal life and investment-type product policy fees ...Net investment income ...Other revenues ...Total operating revenues ...OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends...

  • Page 36
    ... used to hedge certain liabilities in our funding agreement business. The Company's use of the U.S. Social Security Administration's Death Master File in connection with our post-retirement benefit business resulted in a charge in the third quarter of the current year of $8 million. Other insurance...

  • Page 37
    .... Asia Years Ended December 31, 2012 2011 (In millions) 2010 OPERATING REVENUES Premiums ...Universal life and investment-type product policy fees ...Net investment income ...Other revenues ...Total operating revenues ...OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends...

  • Page 38
    ...to 2011 across all geographic regions. Retirement sales were generated primarily by strong sales of variable annuity products in western Europe. Accident and health sales increased primarily due to the establishment of a new direct marketing channel in the Middle East. Life insurance sales increased...

  • Page 39
    ... Other Years Ended December 31, 2012 2011 (In millions) 2010 OPERATING REVENUES Premiums ...Universal life and investment-type product policy fees ...Net investment income ...Other revenues ...Total operating revenues ...OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends...

  • Page 40
    ...or loss position of our fixed income investment portfolio and the rates of return we receive on both new funds invested and reinvestment of existing funds. ‰ liquidity risk, relating to the diminished ability to sell certain investments, in times of strained market conditions; ‰ market valuation...

  • Page 41
    ... portfolio of high quality investments with a focus on the higher-rated countries, reducing our holdings through sales of financial services securities during 2010 and 2011 and sales of Europe's perimeter region sovereign debt in 2011, and by purchasing certain single name credit default protection...

  • Page 42
    ... value for these invested asset classes. Excludes FVO contractholder-directed unit-linked investments of $730 million, which support unit-linked variable annuity type liabilities and do not qualify for separate account summary total assets and liabilities. The contractholder, and not the Company...

  • Page 43
    ... settlement payments on derivatives not qualifying for hedge accounting ...Equity method operating joint ventures ...Net investment income on contractholder-directed unit-linked investments - reported within FVO and trading securities ...Divested Businesses ...Incremental net investment income...

  • Page 44
    ...three primary sources of information: market standard internal matrix pricing, market standard internal discounted cash flow techniques, or independent pricing services after we determine their use of available observable market data. For publicly-traded securities, the number of quotations obtained...

  • Page 45
    ... fair value pricing sources are as follows: December 31, 2012 Fixed Maturity Securities (In millions) Equity Securities Level 1: Quoted prices in active markets for identical assets ...$ 27,441 Level 2: Independent pricing source ...Internal matrix pricing or discounted cash flow techniques...

  • Page 46
    ...except for certain structured securities, which are presented as described above: Fixed Maturity Securities - by Sector & Credit Quality Rating NAIC Rating: Rating Agency Designation: 1 Aaa/Aa/A 2 Baa 3 Ba 4 B (In millions) 5 Caa and Lower 6 In or Near Default Total Estimated Fair Value December 31...

  • Page 47
    ...31, 2012 Estimated Fair Value (In millions) % of Total Net Unrealized Gains (Losses) (In millions) Estimated Fair Value (In millions) 2011 % of Total Net Unrealized Gains (Losses) (In millions) By security type: Collateralized mortgage obligations ...Pass-through securities ...Total RMBS ...By risk...

  • Page 48
    ... years benefit from better underwriting, improved credit enhancement levels and higher residential property price appreciation. In 2012, we increased our exposure to sub-prime RMBS by purchasing subprime RMBS at significant discounts to the expected principal recovery value of these securities...

  • Page 49
    ... unit-linked variable annuity type liabilities which do not qualify for presentation as separate account summary total assets and liabilities. These investments are primarily mutual funds and, to a lesser extent, fixed maturity and equity securities, short-term investments and cash and cash...

  • Page 50
    ... included in fixed maturity securities, equity securities and short-term investments, are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is...

  • Page 51
    ...ratio compares a property's net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was...

  • Page 52
    ...estate and real estate joint venture investments by property type are categorized by sector as follows: December 31, 2012 Carrying Value (In millions) % of Total 2011 Carrying Value (In millions) % of Total Office ...Apartment ...Industrial ...Real estate investment funds ...Retail ...Hotel ...Land...

  • Page 53
    ...1.1% and 1.0% of total cash and invested assets, at December 31, 2012 and 2011, respectively. Derivatives Derivatives. We are exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit, and equity market. We use a variety of...

  • Page 54
    ...-party custodian administered repurchase program for the purpose of enhancing the total return on our investment portfolio. We loan certain of our fixed maturity securities to financial institutions and, in exchange, non-cash collateral is put on deposit by the financial institutions on our behalf...

  • Page 55
    ... comprised mainly of liabilities for life-contingent income annuities, and liabilities for the variable annuity guaranteed minimum benefits accounted for as insurance. Group, Voluntary & Worksite Benefits. With the exception of our property & casualty products, future policy benefits for our Group...

  • Page 56
    ... Annuities, respectively. Group, Voluntary & Worksite Benefits. PABs in this segment are held for retained asset accounts, universal life policies, the fixed account of variable life insurance policies and specialized life insurance products for benefit programs. PABs are credited interest at a rate...

  • Page 57
    ...policy and with reinsurance. Liabilities for unit-linked-type funds are impacted by changes in the fair value of the associated underlying investments, as the return on assets is generally passed directly to the policyholder. The table below presents the breakdown of account value subject to minimum...

  • Page 58
    ...in product features and terms are in part driven by customer demand but, more importantly, reflect our risk management practices of continuously evaluating the guaranteed benefits and their associated asset-liability matching. The sections below provide further detail by total contract account value...

  • Page 59
    ... of total contract account value, GMIB is our most significant living benefit guarantee. Our primary risk management strategy for our GMIB products is our derivatives hedging program as discussed below. Additionally, we have engaged in certain reinsurance treaties covering some of our GMIB business...

  • Page 60
    ...Officer. The Enterprise Risk Committee is also comprised of members of senior management, including MetLife, Inc.'s Chief Financial Officer, Chief Risk Officer and Chief Investment Officer. Our Board and senior management are directly involved in the development and maintenance of our capital policy...

  • Page 61
    ... ability to obtain reinsurance at reasonable prices or at all. A downgrade in the credit or insurer financial strength ratings of MetLife, Inc. or its subsidiaries would likely (i) impact our ability to generate cash flows from the sale of funding agreements and other capital market products offered...

  • Page 62
    ... exchange rates on cash and cash equivalents balances ...Total sources ...Uses: Net cash used in investing activities ...Net cash used for changes in payables for collateral under securities loaned and other transactions ...Net cash used for changes in bank deposits ...Net cash used for short-term...

  • Page 63
    ...in general corporate credit facilities (see "- Credit and Committed Facilities"). MetLife Funding, a subsidiary of Metropolitan Life Insurance Company ("MLIC"), serves as our centralized finance unit. MetLife Funding raises cash from its commercial paper program and uses the proceeds to extend loans...

  • Page 64
    ..., financial strength and credit ratings, general market conditions, the market price of MetLife, Inc.'s common stock compared to management's assessment of the stock's underlying value and applicable regulatory approvals, as well as other legal and accounting factors. See "Business - U.S. Regulation...

  • Page 65
    ... the years ended December 31, 2012 and 2011, general account surrenders and withdrawals from annuity products were $4.3 billion and $4.1 billion, respectively. In the Corporate Benefit Funding segment, which includes pension closeouts, bank-owned life insurance and other fixed annuity contracts, as...

  • Page 66
    ... withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate for the respective product type. Such estimated cash payments are also presented net of estimated future premiums on policies currently in-force...

  • Page 67
    ... to the Consolidated Financial Statements. Investment Commitments. To enhance the return on our investment portfolio, we commit to lend funds under mortgage loans, bank credit facilities, bridge loans and private corporate bond investments and we commit to fund partnership investments. In the table...

  • Page 68
    ...Inc., as an extraordinary dividend. (6) No dividends were paid to MetLife, Inc. from the ALICO Acquisition Date through December 31, 2010. See Note 3 of the Notes to the Consolidated Financial Statements. (7) During June 2012, MICC distributed shares of an affiliate to its shareholders as an in-kind...

  • Page 69
    ... Risks - As a Holding Company, MetLife, Inc. Depends on the Ability of Its Subsidiaries to Transfer Funds to It to Meet Its Obligations and Pay Dividends" in the 2012 Form 10-K and Note 16 of the Notes to the Consolidated Financial Statements. Short-term Debt. MetLife, Inc. maintains a commercial...

  • Page 70
    ...reinsures the guaranteed living benefits and guaranteed death benefits associated with certain unit-linked annuity contracts issued by MEL. MetLife, Inc. guarantees the obligations of MoRe, under a retrocession agreement with RGARe, pursuant to which MoRe retrocedes certain group term life insurance...

  • Page 71
    ... the Consolidated Financial Statements. MetLife, Inc., in connection with the collateral financing arrangement associated with MetLife Reinsurance Company of South Carolina's ("MRSC") reinsurance of universal life secondary guarantees, committed to the South Carolina Department of Insurance to take...

  • Page 72
    ... are mainly exposed to changes in medium- and long-term interest rates. The interest rate sensitive liabilities for purposes of this disclosure include debt, PABs related to certain investment type contracts, and net embedded derivatives on variable annuities with guaranteed minimum benefits which...

  • Page 73
    ...of loss and the volatility of net income associated with its investments in foreign subsidiaries, foreign currency denominated fixed income investments and the sale of certain insurance products. Equity Market Risk Management. Equity market risk exposure through the issuance of variable annuities is...

  • Page 74
    ...equity variance swaps. ‰ Minimum Interest Rate Guarantees - For certain liability contracts, we provide the contractholder a guaranteed minimum interest rate. These contracts include certain fixed annuities and other insurance liabilities. We purchase interest rate floors to reduce risk associated...

  • Page 75
    ... ...Equity securities ...Fair value option and trading securities ...Mortgage loans: ...Held-for-investment ...Held-for-sale ...Mortgage loans, net ...Policy loans ...Short-term investments ...Other invested assets ...Cash and cash equivalents ...Accrued investment income ...Premiums, reinsurance...

  • Page 76
    (1) Separate account assets and liabilities and contractholder-directed unit-linked investments and associated PABs, which are interest rate sensitive, are not included herein as any interest rate risk is borne by the contractholder. Mortgage loans and long-term debt exclude $2.7 billion and $2.5 ...

  • Page 77
    ... ...Equity securities ...Fair value option and trading securities ...Mortgage loans: ...Held-for-investment ...Held-for-sale ...Mortgage loans, net ...Policy loans ...Short-term investments ...Other invested assets ...Cash and cash equivalents ...Accrued investment income ...Premiums, reinsurance...

  • Page 78
    ... 31, 2011. This change was due to an increase in exchange rate risk relating to fixed maturity securities and equity securities (including FVO and trading securities), mortgage loans, cash and cash equivalents, other invested assets, net embedded derivatives within liability host contracts and PABs...

  • Page 79
    ... of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Management has documented and evaluated the effectiveness of the internal control of the Company at December 31, 2012 pertaining to financial reporting in accordance...

  • Page 80
    ...PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of MetLife, Inc.: We have audited the internal control over financial reporting of MetLife, Inc. and subsidiaries (the "Company") as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued...

  • Page 81
    ...Page Number Report of Independent Registered Public Accounting Firm ...Financial Statements at December 31, 2012 and 2011 and for the Years Ended December 31, 2012, 2011 and 2010: Consolidated Balance Sheets ...Consolidated Statements of Operations ...Consolidated Statements of Comprehensive Income...

  • Page 82
    ... standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway...

  • Page 83
    ...Equity Liabilities Future policy benefits ...Policyholder account balances ...Other policy-related balances ...Policyholder dividends payable ...Policyholder dividend obligation ...Payables for collateral under securities loaned and other transactions ...Bank deposits ...Short-term debt ...Long-term...

  • Page 84
    MetLife, Inc. Consolidated Statements of Operations For the Years Ended December 31, 2012, 2011 and 2010 (In millions, except per share data) 2012 2011 2010 Revenues Premiums ...Universal life and investment-type product policy fees ...Net investment income ...Other revenues ...Net investment gains...

  • Page 85
    ...Income For the Years Ended December 31, 2012, 2011 and 2010 (In millions) 2012 2011 2010 Net income (loss) attributable to MetLife, Inc...Net income (loss) attributable to noncontrolling interests (1) ...Net income (loss) (1) ...Other comprehensive income (loss): Unrealized investment gains (losses...

  • Page 86
    ..., Inc. Consolidated Statements of Equity For the Year Ended December 31, 2012 (In millions) Accumulated Other Comprehensive Income (Loss) Net Foreign Defined Total Additional Treasury Unrealized Other-Than- Currency Benefit MetLife, Inc.'s Paid-in Retained Stock Investment Temporary Translation...

  • Page 87
    ... Statements of Equity - (Continued) For the Year Ended December 31, 2011 (In millions) Accumulated Other Comprehensive Income (Loss) Net Foreign Defined Total Convertible Additional Treasury Unrealized Other-Than- Currency Benefit MetLife, Inc.'s Preferred Preferred Common Paid-in Retained Stock...

  • Page 88
    ... stock issuance - newly issued shares related to business acquisition ...Issuance of stock purchase contracts related to common equity units ...Stock-based compensation ...Dividends on preferred stock ...Dividends on common stock ...Change in equity of noncontrolling interests ...Net income (loss...

  • Page 89
    ... of businesses, net ...(Income) loss from equity method investments, net of dividends or distributions ...Interest credited to policyholder account balances ...Interest credited to bank deposits ...Universal life and investment-type product policy fees ...Goodwill impairment ...Change in fair value...

  • Page 90
    ...and non-redeemable noncontrolling interests assumed ...Net assets acquired ...Cash paid, excluding transaction costs of $0, $0 and $88, respectively ...Other purchase price adjustments ...Securities issued ...$ Purchase money mortgage loans on sales of real estate joint ventures ...$ Real estate and...

  • Page 91
    ... and employee benefit programs throughout the United States, Japan, Latin America, Asia, Europe and the Middle East. MetLife offers life insurance, annuities, property & casualty insurance, and other financial services to individuals, as well as group insurance and retirement & savings products and...

  • Page 92
    ... insurance risk. The Company issues directly and assumes through reinsurance certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the benefit base) less withdrawals. These guarantees are accounted...

  • Page 93
    ...annuities, the amount of expected future policy benefit payments. Premiums related to short-duration non-medical health and disability, accident and health, and certain credit insurance contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life...

  • Page 94
    ... issue exists, the Company reviews deferred sales inducements to determine the recoverability of the asset. Value of distribution agreements acquired ("VODA") is reported in other assets and represents the present value of expected future profits associated with the expected future business...

  • Page 95
    ... unit-linked variable annuity type liabilities which do not qualify for presentation and reporting as separate account summary total assets and liabilities. These investments are primarily mutual funds and, to a lesser extent, fixed maturity and equity securities, short-term investments and cash...

  • Page 96
    ... cash surrender value or the death benefit prior to settlement of the insurance policy. Real Estate Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 55 years...

  • Page 97
    ... an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows: Statement of Operations Presentation: Policyholder benefits and claims Net investment income...

  • Page 98
    ... to the present value of projected future guaranteed benefits. Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. Fair Value Certain assets and liabilities are measured at estimated fair value in the Company's consolidated balance...

  • Page 99
    ...a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. Other Accounting Policies Stock-Based Compensation The...

  • Page 100
    ... its consolidated financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value. Policyholder Dividends Policyholder dividends are approved annually by the insurance subsidiaries' boards of...

  • Page 101
    ... range of mutual funds and other securities products. Life & Other products and services also include individual disability income products and personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance. Annuities include...

  • Page 102
    ... other stable value products, income annuities, and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This segment also includes certain products to fund postretirement benefits and company-, bank- or trust-owned life insurance used to...

  • Page 103
    ...income tax. Operating Earnings Americas Group, Voluntary Corporate & Worksite Benefit Benefits Funding Year Ended December 31, 2012 Retail Latin America Total Asia (In millions) EMEA Corporate & Other Total Total Adjustments Consolidated Revenues Premiums ...$ Universal life and investment...

  • Page 104
    ... Earnings Americas Group, Voluntary Corporate & Worksite Benefit Benefits Funding Year Ended December 31, 2011 Retail Latin America Total Asia (In millions) EMEA Corporate & Other Total Total Adjustments Consolidated Revenues Premiums ...$ Universal life and investment-type product policy...

  • Page 105
    ... Group, Voluntary Corporate & Worksite Benefit Latin Benefits Funding America Corporate & Other Total Adjustments Consolidated Retail Total Asia EMEA Total (In millions) Revenues Premiums ...$ 6,491 Universal life and investment-type product policy fees ...3,655 Net investment income ...7,644...

  • Page 106
    ... table presents total premiums, universal life and investment-type product policy fees and other revenues associated with the Company's U.S. and foreign operations: Years Ended December 31, 2012 2011 (In millions) 2010 U.S...Foreign: ...Japan ...Other ...Total ...3. Acquisitions and Dispositions...

  • Page 107
    ... 1, 2010 (the "ALICO Acquisition Date"), MetLife, Inc. acquired all of the issued and outstanding capital stock of American Life Insurance Company ("American Life") from AM Holdings LLC (formerly known as ALICO Holdings LLC) ("AM Holdings"), a subsidiary of American International Group, Inc. ("AIG...

  • Page 108
    ...financial information of MetLife and ALICO, reflecting the results of operations of MetLife and ALICO for 2010. The historical financial information has been adjusted to give effect to the pro forma events that are directly attributable to the ALICO Acquisition and factually supportable and expected...

  • Page 109
    ... gross life insurance premiums for the years ended December 31, 2012, 2011 and 2010, respectively. PABs are equal to: (i) policy account values, which consist of an accumulation of gross premium payments and investment performance; (ii) credited interest, ranging from 1% to 13% for domestic business...

  • Page 110
    ... to surrender the contract for cash and a higher rate if the contractholder elects to annuitize ("two tier annuities"). These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Additionally, the Company issues universal and variable life contracts where...

  • Page 111
    MetLife, Inc. Notes to the Consolidated Financial Statements - (Continued) Annuity Contracts GMDB GMIB Universal and Variable Life Contracts Secondary Guarantees (In millions) Paid-Up Guarantees Total Direct and Assumed Balance at January 1, 2010 ...Acquisitions ...Incurred guaranteed benefits ......

  • Page 112
    ... surrender the contract for cash and a higher rate if the contractholder elects to annuitize. Universal and Variable Life Contracts Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims...

  • Page 113
    ... to property and casualty, group accident and non-medical health policies and contracts, which are reported in future policy benefits and other policy-related balances, was as follows: Years Ended December 31, 2012 2011 (In millions) 2010 Balance at January 1, ...Less: Reinsurance recoverables...

  • Page 114
    ... investment risk, and separate accounts for which the Company contractually guarantees either a minimum return or account value to the policyholder which totaled $49.5 billion and $44.2 billion at December 31, 2012 and 2011, respectively. The latter category consisted primarily of funding agreements...

  • Page 115
    ... to investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross margins and profits which may have significantly changed. If the update of...

  • Page 116
    ... Notes to the Consolidated Financial Statements - (Continued) December 31, 2012 2011 (In millions) Retail ...Group, Voluntary & Worksite Benefits ...Corporate Benefit Funding ...Latin America ...Asia ...EMEA ...Corporate & Other ...Total ...Information regarding other policy-related intangibles was...

  • Page 117
    ...living and death benefit guarantees issued in connection with variable annuity products. Under these agreements, the Company pays reinsurance fees associated with the guarantees collected from policyholders, and receives reimbursement for benefits paid or accrued in excess of account values, subject...

  • Page 118
    ...: Years Ended December 31, 2012 2011 (In millions) 2010 Premiums: Direct premiums ...$ 38,719 $ 37,185 $ 27,596 Reinsurance assumed ...1,488 1,484 1,377 Reinsurance ceded ...(2,232) (2,308) (1,902) Net premiums ...$ 37,975 $ 36,361 $ 27,071 Universal life and investment-type product policy fees...

  • Page 119
    ... funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years. The Company uses...

  • Page 120
    ... estimated fair value ...Equity securities available-for-sale, at estimated fair value ...Mortgage loans ...Policy loans ...Real estate and real estate joint ventures ...Other invested assets ...Total investments ...Cash and cash equivalents ...Accrued investment income ...Premiums, reinsurance and...

  • Page 121
    ... sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times...

  • Page 122
    ...fixed maturity securities with an estimated fair value of $85 million and $62 million with unrealized gains (losses) of $11 million and ($19) million at December 31, 2012 and 2011, respectively. Methodology for Amortization of Discount or Premium on Structured Securities Amortization of the discount...

  • Page 123
    ... assessing the unique features that apply to certain structured securities including, but not limited to: the quality of underlying collateral, expected prepayment speeds; current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular...

  • Page 124
    ... purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows. Current Period...

  • Page 125
    ... Statements - (Continued) Mortgage Loans Mortgage Loans Held-for-Investment and Held-for-Sale by Portfolio Segment Mortgage loans are summarized as follows at: December 31, 2012 Carrying Value % of Total 2011 Carrying Value % of Total (In millions) Mortgage loans held-for-investment: Commercial...

  • Page 126
    ...defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available. Commercial and Agricultural Mortgage Loan Portfolio Segments The Company typically uses several years of historical...

  • Page 127
    ... and Interest Accrual Status of Mortgage Loans The Company has a high quality, well performing, mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both December 31, 2012 and 2011. The Company defines delinquent mortgage loans consistent with industry practice, when...

  • Page 128
    ... principal balance is generally prior to any charge-offs. Interest income recognized is primarily cash basis income. The average recorded investment for commercial, agricultural and residential mortgage loans was $192 million, $284 million, $16 million, respectively, for the year ended December 31...

  • Page 129
    ... investment gains (losses), included in AOCI, were as follows: Years Ended December 31, 2012 2011 (In millions) 2010 Fixed maturity securities ...Fixed maturity securities with noncredit OTTI losses in accumulated other comprehensive income (loss) ...Total fixed maturity securities ...Equity...

  • Page 130
    ... 31, 2012 and 2011, respectively. The changes in net unrealized investment gains (losses) were as follows: Years Ended December 31, 2012 2011 (In millions) 2010 Balance, beginning of period ...Cumulative effect of change in accounting principles, net of income tax ...Fixed maturity securities on...

  • Page 131
    ..., fixed maturity and equity securities, and FVO and trading securities, and at carrying value for mortgage loans. December 31, 2012 2011 (In millions) Invested assets on deposit (regulatory deposits) ...Invested assets held in trust (collateral financing arrangements and reinsurance agreements...

  • Page 132
    ... 2012 2011 2012 2011 Fixed Maturity Securities (In millions) Mortgage Loans Contractually required payments (including interest) ...Cash flows expected to be collected (1) ...Fair value of investments acquired ...(1) Represents undiscounted principal and interest cash flow expectations, at the date...

  • Page 133
    ... commercial mortgage loans held-for-investment and long-term debt, respectively, and to a lesser extent include FVO and trading securities, accrued investment income, cash and cash equivalents, premiums, reinsurance and other receivables and other liabilities. The Company's exposure was limited...

  • Page 134
    ... fair value subsequent to purchase for securities still held as of the end of the respective years included in net investment income were: Years Ended December 31, 2012 2011 (In millions) 2010 Actively Traded Securities and FVO general account securities ...FVO contractholder-directed unit-linked...

  • Page 135
    ... on equity securities recognized in earnings ...Equity securities - net gains (losses) on sales and disposals ...Total gains (losses) on equity securities ...FVO and trading securities - FVO general account securities - changes in estimated fair value subsequent to consolidation ...Mortgage loans...

  • Page 136
    ..., the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages...

  • Page 137
    ... used by the Company to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract...

  • Page 138
    ... to equity market risk, including equity index options, variance swaps, exchange-traded equity futures and total rate of return swaps ("TRRs"). Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To...

  • Page 139
    ... ...Foreign currency exchange rate ...Currency options ...Foreign currency exchange rate ...Credit default swaps ...Credit ...Equity futures ...Equity market ...Equity options ...Equity market ...Variance swaps ...Equity market ...Total rate of return swaps ...Equity market ...Total non-designated...

  • Page 140
    ...directed unitlinked investments. (2) Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits. (3) Changes in estimated fair value related to derivatives held in connection with the Company's mortgage banking activities. (4) Changes...

  • Page 141
    ...- Total ...(1) Fixed rate liabilities reported in PABs or future policy benefits. (2) Fixed rate or floating rate liabilities. $ 149 $ (160) For the Company's foreign currency forwards, the change in the fair value of the derivative related to the changes in the difference between the spot price...

  • Page 142
    ... December 31, 2012, ($6) million of deferred net gains (losses) on derivatives in accumulated other comprehensive income (loss) was expected to be reclassified to earnings within the next 12 months. Hedges of Net Investments in Foreign Operations The Company uses foreign exchange derivatives, which...

  • Page 143
    ... 31, 2012 and 2011, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At December 31, 2012 and 2011, the Company would have received $74 million and paid $41...

  • Page 144
    ... Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits...

  • Page 145
    ... Sheet Location 2012 2011 (In millions) Net embedded derivatives within asset host contracts: Ceded guaranteed minimum benefits ...Funds withheld on assumed reinsurance ...Options embedded in debt or equity securities ...Other ...Premiums, reinsurance and other receivables Other invested assets...

  • Page 146
    ... stock ...Total equity securities ...FVO and trading securities: Actively Traded Securities ...FVO general account securities ...FVO contractholder-directed unit-linked investments ...FVO securities held by CSEs ...Total FVO and trading securities ...Short-term investments (1) ...Mortgage loans...

  • Page 147
    ... stock ...Total equity securities ...FVO and trading securities: Actively Traded Securities ...FVO general account securities ...FVO contractholder-directed unit-linked investments ...FVO securities held by CSEs ...Total FVO and trading securities ...Short-term investments (1) ...Mortgage loans...

  • Page 148
    ... and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a monthly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices...

  • Page 149
    ...-directed unit-linked investments reported within FVO and trading securities include mutual fund interests without readily determinable fair values given prices are not published publicly. Valuation of these mutual funds is based upon quoted prices or reported NAVs provided by the fund managers...

  • Page 150
    .... The Company uses the quoted securitization market price of the obligations of the CSEs to determine the estimated fair value of these commercial loan portfolios. These market prices are determined principally by independent pricing services using observable inputs. Mortgage Loans Held-For-Sale...

  • Page 151
    ..., foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in "- Investments." The significant...

  • Page 152
    ... publicly available information relating to spreads in the secondary market for MetLife, Inc.'s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance...

  • Page 153
    ... risk margin. Reinsurance Ceded on Certain Guaranteed Minimum Benefits These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in "- Direct...

  • Page 154
    ...: Direct and assumed guaranteed minimum benefits • Option pricing techniques • Mortality rates: Ages 0 - 40 Ages 41 - 60 Ages 61 - 115 • Lapse rates: Durations 1 - 10 Durations 11 - 20 Durations 21 - 116 Utilization rates (4) Withdrawal rates Long-term equity volatilities Nonperformance risk...

  • Page 155
    ... Consolidated Financial Statements - (Continued) quotations and internal models such as discounted cash flow methodologies using current interest rates. MSRs are valued using discounted cash flow methodologies using inputs such as discount rates, loan prepayments and servicing costs. The long-term...

  • Page 156
    ...Year Ended December 31, 2012: Balance, January 1, ...$ 6,784 Total realized/unrealized gains (losses) included in: ...Net income (loss): (1), (2) ...Net investment income ...14 Net investment gains (losses) ...4 Net derivative gains (losses) ...- Other revenues ...- Policyholder benefits and claims...

  • Page 157
    ...: FVO General Account Securities FVO Contractholderdirected Unit-linked Investments Common Stock Actively Traded Securities Short-term Investments Mortgage Loans Heldfor-sale MSRs (6) (In millions) Year Ended December 31, 2012: Balance, January 1, ...$ Total realized/unrealized gains (losses...

  • Page 158
    ... Reverse Mortgage Loans Interest Rate Foreign Currency Exchange Rate Credit Equity Market Net Embedded Derivatives (8) (In millions) Separate Account Assets (9) Long-term Debt of CSEs Year Ended December 31, 2012: Balance, January 1, ...$ Total realized/unrealized gains (losses) included...

  • Page 159
    ... Year Ended December 31, 2011: Balance, January 1, ...$ 7,149 Total realized/unrealized gains (losses) included in: Net income (loss): (1), (2) ...Net investment income ...11 Net investment gains (losses) ...17 Net derivative gains (losses) ...- Other revenues ...- Policyholder benefits and claims...

  • Page 160
    ...: FVO General Account Securities FVO Contractholderdirected Unit-linked Investments (In millions) Common Stock Actively Traded Securities Short-term Investments Mortgage Loans Heldfor-sale MSRs (6) Year Ended December 31, 2011: Balance, January 1, ...$ Total realized/unrealized gains (losses...

  • Page 161
    ...Reverse Mortgage Loans Interest Rate Foreign Currency Exchange Rate Credit Equity Market Net Embedded Derivatives (8) (In millions) Separate Account Assets (9) Long-term Debt of CSEs Year Ended December 31, 2011: Balance, January 1, ...$ (86) Total realized/unrealized gains (losses) included...

  • Page 162
    ... Total realized/unrealized gains (losses) included in: Net income (loss): (1), (2) Net investment income ...Net investment gains (losses) ...Net derivative gains (losses) ...Other revenues ...Policyholder benefits and claims ...Other expenses ...Other comprehensive income (loss) ...Purchases, sales...

  • Page 163
    ...: FVO General Account Securities FVO Contractholderdirected Unit-linked Investments (In millions) Common Stock Actively Traded Securities Short-term Investments Mortgage Loans Heldfor-sale MSRs (6) Year Ended December 31, 2010: Balance, January 1, ...$ Total realized/unrealized gains (losses...

  • Page 164
    ... 48 - - - - (1) Amortization of premium/discount is included within net investment income. Impairments charged to net income (loss) on securities and certain mortgage loans are included in net investment gains (losses) while changes in the estimated fair value of certain mortgage loans and MSRs are...

  • Page 165
    ... commercial mortgage loans and long-term debt held by CSEs. Gains and losses from initial measurement, subsequent changes in estimated fair value and gains or losses on sales of these assets and liabilities are recognized in net investment gains (losses). Interest income on commercial mortgage loans...

  • Page 166
    ... Mortgage loans: Held-for-investment ...Held-for-sale ...Mortgage loans, net ...Policy loans ...Real estate joint ventures ...Other limited partnership interests ...Other invested assets ...Premiums, reinsurance and other receivables ...Other assets ...Liabilities: PABs ...Bank deposits ...Long-term...

  • Page 167
    ...: Mortgage Loans Mortgage loans held-for-investment For commercial and agricultural mortgage loans, the estimated fair value was primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk. For...

  • Page 168
    ... guaranteed annuities, fixed term payout annuities and total control accounts. The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates...

  • Page 169
    ... market multiples, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount rate that the Company believes is appropriate for the respective reporting unit...

  • Page 170
    ... to the Retail Annuities reporting unit was impaired in the third quarter of 2012. (3) Goodwill associated with the ALICO Acquisition was allocated among the Company's segments in the first quarter of 2011. (4) As of November 1, 2011, American Life's current and deferred income taxes were affected...

  • Page 171
    ... from the Federal Home Loan Bank of New York MetLife Bank has been a member of the FHLB of NY and, in connection with such membership, entered into advances agreements with the FHLB of NY under which MetLife Bank received cash advances, which were reflected in long-term debt or short-term debt...

  • Page 172
    ... to the Consolidated Financial Statements - (Continued) Short-term Debt Short-term debt with maturities of one year or less was as follows: December 31, 2012 2011 (In millions) Commercial paper ...MetLife Bank, N.A. - Advances agreements with the FHLB of NY ...Total short-term debt ... $ $ 100...

  • Page 173
    ... MRC's statutory obligations associated with the assumed closed block liabilities. At December 31, 2012 and 2011, the estimated fair value of assets held in trust by the Company was $1.6 billion and $2.0 billion, respectively. The assets are principally invested in fixed maturity securities and are...

  • Page 174
    ...MRSC's statutory obligations associated with the reinsurance of secondary guarantees. The trusts are VIEs which are consolidated by the Company. The unaffiliated financial institution is entitled to the return on the investment portfolio held by the trusts. At December 31, 2012 and 2011, the Company...

  • Page 175
    ... 8, 2011, AM Holdings sold, in a public offering, all the common equity units it received as consideration from MetLife in connection with the ALICO Acquisition. The common equity units are listed on the New York Stock Exchange ("NYSE"). Purchase Contracts Settlement of the Purchase Contracts of...

  • Page 176
    ..., at an annual fixed rate of 6.50%. Accordingly, in the event that dividends are not declared on the preferred stock for payment on any dividend payment date, then those dividends will cease to accrue and be payable. If a dividend is not declared before the dividend payment date, MetLife, Inc. has...

  • Page 177
    ... several factors, including the Company's capital position, its liquidity, its financial strength and credit ratings, general market conditions and the market price of MetLife, Inc.'s common stock compared to management's assessment of the stock's underlying value and applicable regulatory approvals...

  • Page 178
    ... American Life, a U.S. insurance subsidiary of the Company. In addition, the payment of dividends by MetLife, Inc. to its shareholders is also subject to restrictions. See "- Dividend Restrictions - MetLife, Inc." Stock-Based Compensation Plans Description of Plans for Employees and Agents - General...

  • Page 179
    ... money as of each valuation date and the historical volatility, calculated using monthly closing prices of Shares. The Company chose a monthly measurement interval for historical volatility as it believes this better depicts the nature of employee option exercise decisions being based on longer-term...

  • Page 180
    ...a range, used to determine the fair value of Stock Options issued: Years Ended December 31, 2012 2011 2010 Dividend yield ...Risk-free rate of return ...Expected volatility ...Exercise multiple ...Post-vesting termination rate ...Contractual term (years) ...Expected life (years) ...Weighted average...

  • Page 181
    ...a number of final Performance Units which are payable in cash equal to the closing price of a Share on a date following the last day of the three-year performance period. Performance Units are accounted for as liability awards, but are not credited with dividend-equivalents for actual dividends paid...

  • Page 182
    ...financial statements as filed with the insurance regulators. Statutory net income (loss) was as follows: Years Ended December 31, Company State of Domicile 2012 2011 (In millions) 2010 Metropolitan Life Insurance Company ...American Life Insurance Company ...MetLife Insurance Company of Connecticut...

  • Page 183
    ... dividends paid: 2013 Company Permitted w/o Approval (1) Paid (2) 2012 Permitted w/o Approval (3) (In millions) Paid (2) 2011 Permitted w/o Approval (3) Metropolitan Life Insurance Company ...American Life Insurance Company ...MetLife Insurance Company of Connecticut ...Metropolitan Property...

  • Page 184
    ... the last filed annual statutory statement requires insurance regulatory approval. Under Connecticut State Insurance Law, the Connecticut Commissioner has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to...

  • Page 185
    ... as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year: Years Ended December 31, 2012 2011 (In millions) 2010 Holding gains (losses) on investments arising during the year ...Income tax effect of holding...

  • Page 186
    ... of ALICO's operations, management initiated restructuring plans focused on increasing productivity and improving the efficiency of the Company's operations. The restructuring program has been finalized and the remaining payments associated with the restructuring program are expected to be completed...

  • Page 187
    ...credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually based upon the average annual rate...

  • Page 188
    MetLife, Inc. Notes to the Consolidated Financial Statements - (Continued) Obligations and Funded Status Pension Benefits U.S. Plans (1) 2012 2011 Non-U.S. Plans December 31, 2012 2011 2012 2011 2012 2011 (In millions) Other Postretirement Benefits U.S. Plans Non-U.S. Plans Change in benefit ...

  • Page 189
    ... (losses) and amortization of any prior service cost (credit). The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend rates, as...

  • Page 190
    ... ...- Expected return on plan assets ...(484) Amortization of net actuarial (gains) losses ...195 Amortization of prior service costs (credit) ...6 Total net periodic benefit costs (credit) ...Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss): Net...

  • Page 191
    ... block approach that considers historical returns, current market conditions, asset volatility and the expectations for future market returns. While the assessment of the expected rate of return is long-term and not expected to change annually, significant changes in investment strategy or economic...

  • Page 192
    ...separate accounts are principally comprised of cash and cash equivalents, short-term investments, fixed maturity and equity securities, derivatives, real estate, private equity investments and hedge fund investments. The insurance contract provider engages investment management firms ("Managers") to...

  • Page 193
    ... from alternative securities into fixed maturity securities to conform to the current year presentation. (2) Equity securities primarily include common stock of U.S. companies. (3) Alternative securities primarily include derivative assets, money market securities, short-term investments, and...

  • Page 194
    ...Other (1) ...Total fixed maturity securities ...Equity securities: Common stock - domestic ...Common stock - foreign ...Total equity securities ...Other investments ...Short-term investments ...Money market securities ...Derivative assets ...Other receivables ...Securities receivable ...Total assets...

  • Page 195
    MetLife, Inc. Notes to the Consolidated Financial Statements - (Continued) Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Other Postretirement Benefits Fixed Maturity Securities: Corporate Municipals (In millions) Other (1) Derivative Assets Year Ended December 31, 2012: ...

  • Page 196
    ... are comprised of short-term investments, equity and fixed maturity securities, real estate and hedge fund investments. The assets of the non-U.S. pension plans, other than those held in participant directed investment accounts, are managed in accordance with investment policies consistent with the...

  • Page 197
    ...) both. Current regulations do not require funding for these benefits. The Subsidiaries use their general assets, net of participant's contributions, to pay postretirement medical claims as they come due in lieu of utilizing any plan assets. The U.S. Subsidiaries expect to make contributions of $78...

  • Page 198
    ...for the years ended December 31, 2012, 2011 and 2010, respectively, and included policy charges and net investment income from investments backing the contracts and administrative fees. Total investment income (loss), including realized and unrealized gains (losses), credited to the account balances...

  • Page 199
    MetLife, Inc. Notes to the Consolidated Financial Statements - (Continued) The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations was as follows: Years Ended December 31, 2012 2011 (In millions) 2010 Tax ...

  • Page 200
    ... Life's foreign branches and filing of the income tax return. See Note 23. In accordance with the Closing Agreement, during 2012, the Company completed certain aspects of its plan to transfer foreign branch assets to various MetLife foreign subsidiaries: ‰ The Company transferred the business...

  • Page 201
    ... ("DRD"), related to variable life insurance and annuity contracts. The DRD reduces the amount of dividend income subject to tax and is a significant component of the difference between the actual tax expense and expected amount determined using the federal statutory tax rate of 35%. Any regulations...

  • Page 202
    ...: Years Ended December 31, 2012 2011 2010 (In millions, except share and per share data) Weighted Average Shares: Weighted average common stock outstanding for basic earnings per common share (1) ...Incremental common shares from assumed: ...Stock purchase contracts underlying common equity units...

  • Page 203
    ... dates and the approximate total settlement payments made to resolve asbestos personal injury claims at or during those years are set forth in the following table: December 31, 2012 2011 2010 (In millions, except number of claims) Asbestos personal injury claims at year end ...Number of new claims...

  • Page 204
    ... Office of Inspector General for the U.S. Department of Housing and Urban Development regarding Federal Housing Administration ("FHA") insured loans. In June and September 2012, MetLife Bank received two Civil Investigative Demands that the U.S. Department of Justice issued as part of a False Claims...

  • Page 205
    ...payments were due under two settlement agreements, known as "Administrative Orders on Consent," that New England Mutual Life Insurance Company ("New England Mutual") signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the "Chemform Site"). The EPA originally contacted...

  • Page 206
    ... Life Insurance Company (D. Nev., filed November 3, 2011) These putative class action lawsuits, which have been consolidated, raise breach of contract claims arising from MLIC's use of the TCA to pay life insurance benefits under the Federal Employees' Group Life Insurance ("FEGLI") program...

  • Page 207
    ... have begun discovery. Sales Practices Claims Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. Some of the current cases seek...

  • Page 208
    ... Financial Statements - (Continued) Italy Fund Redemption Suspension Complaints and Litigation As a result of suspension of withdrawals and diminution in value in certain funds offered within certain unit-linked policies sold by the Italian branch of Alico Life International, Ltd. ("ALIL"), a number...

  • Page 209
    ...commits to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $1.2 billion and $1.4 billion at December 31, 2012 and 2011, respectively. Guarantees In the normal course of its business, the Company has provided...

  • Page 210
    ...: Preferred stock dividends ...Preferred stock redemption premium ...Net income (loss) available to MetLife, Inc.'s common shareholders ...Basic earnings per common share: Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.'s common shareholders ...Income (loss...

  • Page 211
    ... de Fondos de Pensiones Provida S.A. ("Provida"), the largest private pension fund administrator in Chile by assets under management and number of contributors. Under the terms of the agreement, MetLife will conduct a public cash tender offer for all of the outstanding shares of Provida, and the...

  • Page 212
    ...Member, Finance and Risk Committee Member, Investment Committee of Metropolitan Life Insurance Company Executive Vice President and Head of Global Employee Benefits CHRISTOPHER G. TOWNSEND President, Asia WILLIAM J. WHEELER Retired President and Co-Chief Operating Officer, New York Stock Exchange...

  • Page 213
    ...." The Annual Report on Form 10-K may also be accessed at http://investor.metlife.com by selecting "Financial Information," "SEC Filings," "MetLife, Inc. - View SEC Filings" as well as at the website of the U.S. Securities and Exchange Commission at www.sec.gov. Dividend Information and Common Stock...

  • Page 214
    CUMULATIVE TOTAL RETURN Based upon an initial investment of $100 on December 31, 2007 with dividends reinvested $150 $100 $50 $0 31-Dec-07 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 31-Dec-12 MetLife Inc. Source: Capital IQ S&P 500 S&P 500 Insurance S&P 500 Financials 208 MetLife, Inc.

  • Page 215
    MetLife, Inc. 200 Park Avenue New York, NY 10166-0188 www.metlife.com © 2013 Peanuts Worldwide LLC