MetLife 2013 Annual Report Download - page 154

MetLife, Inc.
Notes to the Consolidated Financial Statements — (Continued)
9. Derivatives (continued)
zero) in the event of downgrades in the credit ratings of the Company and/or the counterparty. In addition, certain of the Company’s netting agreements
for derivatives contain provisions that require both the Company and the counterparty to maintain a specific investment grade credit rating from eachof
Moody’s and S&P. If a party’s credit ratings were to fall below that specific investment grade credit rating, that party would be in violation of these
provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such
party’s reasonable valuation of the derivatives.
The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that are in a net liability position after considering the
effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the
incremental collateral that the Company would be required to provide if there was a one notch downgrade in the Company’s credit rating at the reporting
date or if the Company’s credit rating sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position
at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
Estimated Fair Value of
Collateral Provided: Fair Value of Incremental Collateral Provided Upon:
Estimated
Fair Value of
Derivatives in Net
Liability Position (1) Fixed Maturity Securities Cash
One Notch
Downgrade in
the Company’s
Credit Rating
Downgrade in the
Company’s Credit Rating
to a Level that Triggers
Full Overnight
Collateralization or
Termination of
the Derivative Position
(In millions)
December 31, 2013:
Derivatives subject to credit-contingent provisions ................... $1,674 $1,530 $— $27 $34
Derivatives not subject to credit-contingent provisions ................ 20 — 3 — —
Total ..................................................... $1,694 $1,530 $ 3 $27 $34
December 31, 2012:
Derivatives subject to credit-contingent provisions ................... $ 771 $ 775 $— $35 $73
Derivatives not subject to credit-contingent provisions ................ 79 100 1 — —
Total ..................................................... $ 850 $ 875 $ 1 $35 $73
(1) After taking into consideration the existence of netting agreements.
Embedded Derivatives
The 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, including GMWBs, GMABs and certain GMIBs; ceded reinsurance of guaranteed minimum benefits related to certain GMIBs; assumed
reinsurance of guaranteed minimum benefits related to GMWBs and GMABs; funding agreements with equity or bond indexed crediting rates; funds
withheld on assumed and ceded reinsurance; and certain debt and equity securities.
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated
from their host contracts at:
December 31,
Balance Sheet Location 2013 2012
(In millions)
Net embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefits .................... Premiums, reinsurance and other receivables $ 247 $ 439
Funds withheld on assumed reinsurance ................. Other invested assets 38 66
Options embedded in debt or equity securities ............. Investments (145) (88)
Other ............................................. Other invested assets — 1
Net embedded derivatives within asset host contracts ........................................................ $ 140 $ 418
Net embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits ..................... PABs $(2,296) $ 923
Assumed guaranteed minimum benefits .................. PABs 1,262 2,582
Funds withheld on ceded reinsurance ................... Other liabilities 60 162
Other ............................................. PABs 5 17
Net embedded derivatives within liability host contracts ........................................................ $ (969) $3,684
146 MetLife, Inc.