MetLife 2013 Annual Report Download - page 148

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
9. Derivatives (continued)
Primary Risks Managed by Derivatives
The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company’s derivatives,
excluding embedded derivatives, held at:
Primary Underlying Risk Exposure
December 31,
2013 2012
Notional
Amount
Estimated Fair Value Notional
Amount
Estimated Fair Value
Assets Liabilities Assets Liabilities
(In millions)
Derivatives Designated as Hedging Instruments
Fair value hedges:
Interest rate swaps ................ Interest rate ................... $ 6,419 $1,282 $ 78 $ 5,397 $ 1,921 $ 90
Foreign currency swaps ............ Foreign currency exchange rate . . . 2,713 252 135 3,187 332 85
Foreign currency forwards .......... Foreign currency exchange rate . . . 2,935 — 77 — — —
Subtotal ..................................................... 12,067 1,534 290 8,584 2,253 175
Cash flow hedges:
Interest rate swaps ................ Interest rate ................... 3,121 83 141 3,642 705 —
Interest rate forwards .............. Interest rate ................... 450 7 7 675 139 —
Foreign currency swaps ............ Foreign currency exchange rate . . . 12,452 401 660 9,038 219 355
Subtotal ..................................................... 16,023 491 808 13,355 1,063 355
Foreign operations hedges:
Foreign currency forwards .......... Foreign currency exchange rate . . . 3,182 82 47 2,552 43 61
Currency options ................. Foreign currency exchange rate . . . 7,362 318 — 4,375 43 3
Subtotal ..................................................... 10,544 400 47 6,927 86 64
Total qualifying hedges ........................................ 38,634 2,425 1,145 28,866 3,402 594
Derivatives Not Designated or Not Qualifying as Hedging Instruments
Interest rate swaps .................. Interest rate ................... 107,354 3,330 1,767 83,250 5,201 2,043
Interest rate floors ................... Interest rate ................... 63,064 451 346 56,246 1,174 837
Interest rate caps ................... Interest rate ................... 39,460 177 — 49,465 74 —
Interest rate futures .................. Interest rate ................... 6,011 9 9 11,684 1 38
Interest rate options ................. Interest rate ................... 40,978 255 243 16,328 640 60
Synthetic GICs ..................... Interest rate ................... 4,409 — — 4,162 — —
Foreign currency swaps .............. Foreign currency exchange rate . . . 9,307 133 684 8,208 199 736
Foreign currency forwards ............ Foreign currency exchange rate . . . 11,311 69 359 9,202 26 288
Currency futures .................... Foreign currency exchange rate . . . 1,316 1 1 1,408 4 —
Currency options ................... Foreign currency exchange rate . . . 2,265 53 48 129 1 —
Credit default swaps—purchased ...... Credit ....................... 3,725 7 51 3,674 11 34
Credit default swaps—written ......... Credit ....................... 9,055 166 1 8,879 79 5
Equity futures ...................... Equity market ................. 5,157 1 43 7,008 14 132
Equity options ...................... Equity market ................. 37,411 1,344 1,068 22,920 2,825 356
Variance swaps .................... Equity market ................. 21,636 174 577 19,830 122 310
TRRs ............................ Equity market ................. 3,802 — 179 3,092 4 103
Total non-designated or non-qualifying derivatives ....................... 366,261 6,170 5,376 305,485 10,375 4,942
Total ........................................................ $404,895 $8,595 $6,521 $334,351 $13,777 $5,536
Based on notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging
relationship at both December 31, 2013 and 2012. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the
Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules;
(ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting
because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that
economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded
derivatives are already recorded in net income; and (iv) written credit default swaps that are used to synthetically create credit investments and that do
not qualify for hedge accounting because they do not involve a hedging relationship. For these non-qualified derivatives, changes in market factors can
lead to the recognition of fair value changes in the consolidated statement of operations without an offsetting gain or loss recognized in earnings for the
item being hedged.
140 MetLife, Inc.