Company Quick10K Filing
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Metropolitan Life Insurance
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
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MLIC 2018-09-30
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 mlic-2018930xex311.htm
EX-31.2 mlic-2018930xex312.htm
EX-32.1 mlic-2018930xex321.htm
EX-32.2 mlic-2018930xex322.htm

Metropolitan Life Insurance Earnings 2018-09-30

MLIC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 mlic-2018930x10q.htm 10-Q Document
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number: 000-55029
 ________________________________________
Metropolitan Life Insurance Company
(Exact name of registrant as specified in its charter)
New York
 
13-5581829
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
200 Park Avenue, New York, N.Y.
 
10166-0188
(Address of principal executive offices)
 
(Zip Code)
(212) 578-9500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ   No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
þ
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No þ
At November 7, 2018, 494,466,664 shares of the registrant’s common stock, $0.01 par value per share, were outstanding, all of which were owned directly by MetLife, Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.
 
 



Table of Contents
 
 
Page
 
Item 1.
Financial Statements (Unaudited) (at September 30, 2018 and December 31, 2017 and for the Three Months and Nine Months Ended September 30, 2018 and 2017)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 6. 
 
 
 



As used in this Form 10-Q, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10‑Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words and terms such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.
Many factors will be important in determining the results of Metropolitan Life Insurance Company, its subsidiaries and affiliates. Forward-looking statements are based on our assumptions and current expectations, which may be inaccurate, and on the current economic environment, which may change. These statements are not guarantees of future performance. They involve a number of risks and uncertainties that are difficult to predict. Results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in Metropolitan Life Insurance Company’s filings with the U.S. Securities and Exchange Commission. These factors include: (1) adverse effects which may arise in connection with the material weakness in our internal control over financial reporting or our failure to promptly remediate it; (2) difficult conditions in the global capital markets; (3) increased volatility and disruption of the global capital and credit markets, which may affect our ability to meet liquidity needs and access capital, including through credit facilities, generate market-related revenue and finance statutory reserve requirements; (4) exposure to global financial and capital market risks; (5) regulatory, legislative or tax changes relating to our insurance or other operations that may affect the cost of, or demand for, our products or services, or increase the cost or administrative burdens of providing benefits to employees; (6) impact on us of comprehensive financial services regulation reform; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (9) investment losses and changes to investment valuations; (10) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements or value of business acquired; (11) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (12) downgrades in our financial strength or credit ratings, or MetLife, Inc.’s credit ratings; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (15) differences between actual claims experience and underwriting and reserving assumptions; (16) ineffectiveness of MetLife’s risk management policies and procedures; (17) catastrophe losses; (18) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (19) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, dispositions of businesses, entry into joint ventures, or legal entity reorganizations; (20) changes in accounting standards, practices and/or policies; (21) difficulties in marketing and distributing products through our distribution channels; (22) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural catastrophes, including any related impact on the value of our investment portfolio, our disaster recovery systems, cyber- or other information security systems and management continuity planning; (23) any failure to protect the confidentiality of client information; (24) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; (25) the impact of technological changes on our businesses; and (26) other risks and uncertainties described from time to time in Metropolitan Life Insurance Company’s filings with the U.S. Securities and Exchange Commission.
Metropolitan Life Insurance Company does not undertake any obligation to publicly correct or update any forward-looking statement if Metropolitan Life Insurance Company later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures Metropolitan Life Insurance Company makes on related subjects in reports to the U.S. Securities and Exchange Commission.

2


Note Regarding Reliance on Statements in Our Contracts
See “Exhibits — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Quarterly Report on Form 10-Q.

3


Part I — Financial Information
Item 1. Financial Statements
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Balance Sheets
September 30, 2018 and December 31, 2017 (Unaudited)
(In millions, except share and per share data)
 
 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $161,168 and $157,809, respectively)
 
$
165,847

 
$
170,272

Equity securities, at estimated fair value
 
841

 
1,658

Mortgage loans (net of valuation allowances of $287 and $271, respectively; includes $210 and $0, respectively, relating to variable interest entities; includes $323 and $520, respectively, under the fair value option)
 
61,136

 
58,459

Policy loans
 
6,050

 
6,006

Real estate and real estate joint ventures (includes $1,194 and $1,077, respectively, relating to variable interest entities; includes $622 and $25, respectively, of real estate held-for-sale)
 
6,561

 
6,656

Other limited partnership interests
 
4,263

 
3,991

Short-term investments, principally at estimated fair value
 
2,918

 
3,155

Other invested assets (includes $123 and $131, respectively, relating to variable interest entities)
 
14,213

 
14,911

Total investments
 
261,829

 
265,108

Cash and cash equivalents, principally at estimated fair value (includes $14 and $12, respectively, relating to variable interest entities)
 
5,474

 
5,069

Accrued investment income (includes $1 and $0, respectively, relating to variable interest entities)
 
2,140

 
2,042

Premiums, reinsurance and other receivables (includes $3 and $3, respectively, relating to variable interest entities)
 
22,623

 
22,098

Deferred policy acquisition costs and value of business acquired
 
4,356

 
4,348

Current income tax recoverable
 
148

 
64

Deferred income tax asset
 
151

 

Other assets (includes $2 and $2, respectively, relating to variable interest entities)
 
4,489

 
4,741

Separate account assets
 
117,939

 
130,825

Total assets
 
$
419,149

 
$
434,295

Liabilities and Equity
 
 
 
 
Liabilities
 
 
 
 
Future policy benefits
 
$
125,969

 
$
119,415

Policyholder account balances
 
92,085

 
93,939

Other policy-related balances
 
7,289

 
7,176

Policyholder dividends payable
 
541

 
499

Policyholder dividend obligation
 
456

 
2,121

Payables for collateral under securities loaned and other transactions
 
20,253

 
19,871

Short-term debt
 
131

 
243

Long-term debt (includes $5 and $6, respectively, at estimated fair value, relating to variable interest entities)
 
1,624

 
1,667

Deferred income tax liability
 

 
1,369

Other liabilities (includes $0 and $3, respectively, relating to variable interest entities)
 
27,533

 
27,409

Separate account liabilities
 
117,939

 
130,825

Total liabilities
 
393,820

 
404,534

Contingencies, Commitments and Guarantees (Note 12)
 

 

Equity
 
 
 
 
Metropolitan Life Insurance Company stockholder’s equity:
 
 
 
 
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding
 
5

 
5

Additional paid-in capital
 
14,221

 
14,150

Retained earnings
 
9,179

 
10,035

Accumulated other comprehensive income (loss)
 
1,727

 
5,428

Total Metropolitan Life Insurance Company stockholder’s equity
 
25,132

 
29,618

Noncontrolling interests
 
197

 
143

Total equity
 
25,329

 
29,761

Total liabilities and equity
 
$
419,149

 
$
434,295

See accompanying notes to the interim condensed consolidated financial statements.

4


Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months and Nine Months Ended September 30, 2018 and 2017 (Unaudited)
(In millions)
 
Three Months 
 Ended 
 September 30,
 
Nine Months
Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Revenues
 
 
 
 
 
 
 
Premiums
$
5,925

 
$
6,629

 
$
21,794

 
$
17,597

Universal life and investment-type product policy fees
510

 
556

 
1,570

 
1,706

Net investment income
2,786

 
2,660

 
8,171

 
7,955

Other revenues
401

 
371

 
1,203

 
1,148

Net investment gains (losses)
205

 
96

 
(21
)
 
184

Net derivative gains (losses)
(76
)
 
(26
)
 
289

 
(317
)
Total revenues
9,751

 
10,286

 
33,006

 
28,273

Expenses
 
 
 
 
 
 
 
Policyholder benefits and claims
6,576

 
7,372

 
23,642

 
19,628

Interest credited to policyholder account balances
628

 
567

 
1,821

 
1,660

Policyholder dividends
282

 
267

 
812

 
827

Other expenses
1,361

 
1,205

 
3,992

 
3,808

Total expenses
8,847

 
9,411

 
30,267

 
25,923

Income (loss) before provision for income tax
904

 
875

 
2,739

 
2,350

Provision for income tax expense (benefit)
88

 
167

 
244

 
451

Net income (loss)
816

 
708

 
2,495

 
1,899

Less: Net income (loss) attributable to noncontrolling interests
2

 
5

 
10

 
8

Net income (loss) attributable to Metropolitan Life Insurance Company
$
814

 
$
703

 
$
2,485

 
$
1,891

Comprehensive income (loss)
$
(244
)
 
$
879

 
$
(2,130
)
 
$
3,821

Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax
2

 
5

 
10

 
8

Comprehensive income (loss) attributable to Metropolitan Life Insurance Company
$
(246
)
 
$
874

 
$
(2,140
)
 
$
3,813

See accompanying notes to the interim condensed consolidated financial statements.


5


Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Equity
For the Nine Months Ended September 30, 2018 and 2017 (Unaudited)
(In millions)
 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2017
 
$
5

 
$
14,150

 
$
10,035

 
$
5,428

 
$
29,618

 
$
143

 
$
29,761

Cumulative effects of changes in accounting principles, net of income tax (Note 1)
 
 
 
 
 
(917
)
 
924

 
7

 
 
 
7

Balance at January 1, 2018
 
5

 
14,150

 
9,118

 
6,352

 
29,625

 
143

 
29,768

Capital contributions from MetLife, Inc.
 

 
73

 

 

 
73

 

 
73

Returns of capital
 

 
(2
)
 


 

 
(2
)
 

 
(2
)
Dividends paid to MetLife, Inc.
 

 


 
(2,424
)
 

 
(2,424
)
 


 
(2,424
)
Change in equity of noncontrolling interests
 

 


 

 

 

 
44

 
44

Net income (loss)
 

 

 
2,485

 

 
2,485

 
10

 
2,495

Other comprehensive income (loss), net of income tax
 

 

 

 
(4,625
)
 
(4,625
)
 


 
(4,625
)
Balance at September 30, 2018
 
$
5

 
$
14,221

 
$
9,179

 
$
1,727

 
$
25,132

 
$
197

 
$
25,329

 
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2016
 
$
5

 
$
14,413

 
$
9,250

 
$
3,119

 
$
26,787

 
$
190

 
$
26,977

Prior period revisions (Note 1)
 
 
 
 
 
(217
)
 
 
 
(217
)
 
 
 
(217
)
Balance at December 31, 2016
 
5

 
14,413

 
9,033

 
3,119

 
26,570

 
190

 
26,760

Capital contributions from MetLife, Inc.
 

 
5

 

 

 
5

 

 
5

Returns of capital
 

 
(20
)
 


 

 
(20
)
 

 
(20
)
Dividends paid to MetLife, Inc.
 

 

 
(2,000
)
 

 
(2,000
)
 

 
(2,000
)
Purchase of operating joint venture interest from an affiliate (Note 5)
 

 
(249
)
 


 

 
(249
)
 

 
(249
)
Change in equity of noncontrolling interests
 

 


 

 

 

 
(19
)
 
(19
)
Net income (loss)
 

 

 
1,891

 

 
1,891

 
8

 
1,899

Other comprehensive income (loss), net of income tax
 

 

 

 
1,922

 
1,922

 


 
1,922

Balance at September 30, 2017
 
$
5

 
$
14,149

 
$
8,924

 
$
5,041

 
$
28,119

 
$
179

 
$
28,298

See accompanying notes to the interim condensed consolidated financial statements.


6

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2018 and 2017 (Unaudited)
(In millions)

 
Nine Months
Ended
September 30,
 
2018
 
2017
Net cash provided by (used in) operating activities
$
6,850

 
$
5,010

Cash flows from investing activities
 
 
 
Sales, maturities and repayments of:
 
 
 
Fixed maturity securities available-for-sale
48,348

 
37,260

Equity securities
112

 
470

Mortgage loans
6,365

 
5,696

Real estate and real estate joint ventures
466

 
673

Other limited partnership interests
355

 
412

Purchases of:
 
 
 
Fixed maturity securities available-for-sale
(48,036
)
 
(40,819
)
Equity securities
(117
)
 
(387
)
Mortgage loans
(8,856
)
 
(7,020
)
Real estate and real estate joint ventures
(321
)
 
(671
)
Other limited partnership interests
(558
)
 
(536
)
Cash received in connection with freestanding derivatives
1,582

 
1,439

Cash paid in connection with freestanding derivatives
(2,179
)
 
(2,259
)
Net change in policy loans
(44
)
 
(40
)
Net change in short-term investments
334

 
78

Net change in other invested assets
328

 
(168
)
Net change in property, equipment and leasehold improvements
185

 
(148
)
Other, net
4

 

Net cash provided by (used in) investing activities
(2,032
)
 
(6,020
)
Cash flows from financing activities
 
 
 
Policyholder account balances:
 
 
 
Deposits
58,488

 
53,149

Withdrawals
(60,701
)
 
(52,610
)
Net change in payables for collateral under securities loaned and other transactions
382

 
1,443

Long-term debt issued
24

 
169

Long-term debt repaid
(49
)
 
(81
)
Financing element on certain derivative instruments and other derivative related transactions, net
(75
)
 
(210
)
Dividends paid to MetLife, Inc.
(2,424
)
 
(2,000
)
Returns of capital

 
(5
)
Return of capital associated with the purchase of operating joint venture interest from an affiliate (Note 5)

 
(249
)
Other, net
(57
)
 
(10
)
Net cash provided by (used in) financing activities
(4,412
)
 
(404
)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances
(1
)
 
23

Change in cash and cash equivalents
405

 
(1,391
)
Cash and cash equivalents, beginning of period
5,069

 
5,714

Cash and cash equivalents, end of period
$
5,474

 
$
4,323

Supplemental disclosures of cash flow information
 
 
 
Net cash paid (received) for:
 
 
 
Interest
$
65

 
$
64

Income tax
$
581

 
$
1,137

Non-cash transactions:
 
 
 
Capital contributions from MetLife, Inc.
$
73

 
$
5

Returns of capital
$

 
$
15

Fixed maturity securities available-for-sale received in connection with pension risk transfer transaction
$
3,016

 
$

Transfer of fixed maturity securities available-for-sale from affiliate
$

 
$
292

See accompanying notes to the interim condensed consolidated financial statements.

7

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of insurance, annuities, employee benefits and asset management and is organized into two segments: U.S. and MetLife Holdings. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2017 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2017 Annual Report.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Metropolitan Life Insurance Company and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany accounts and transactions have been eliminated.
The Company uses the equity method of accounting for equity securities when it has significant influence or at least 20% interest and for real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. Subsequent to the adoption of guidance relating to the recognition and measurement of financial instruments on January 1, 2018, the Company accounts for interests in unconsolidated entities that are not accounted for under the equity method, at estimated fair value. Such investments were previously accounted for under the cost method of accounting. See “Adoption of New Accounting Pronouncements.”
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2018 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.
Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.
Revisions
As discussed in Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report, the Company made adjustments for group annuity reserves for which amounts previously reported have been immaterially restated. In addition, the Company has corrected other unrelated immaterial errors which were previously recorded in the periods the Company identified them.

8

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The impact of the revisions is shown in the tables below:
 
 
Three Months 
 Ended 
 September 30,
 
Nine Months
Ended
September 30,
 
 
2017
Interim Condensed Consolidated Statements of Operations
 and Comprehensive Income (Loss)
 
As
Previously
Reported
 
Revisions
 
As
Revised
 
As
Previously
Reported
 
Revisions
 
As
Revised
 
 
(In millions)
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims
 
$
7,317

 
$
55

 
$
7,372

 
$
19,561

 
$
67

 
$
19,628

Total expenses
 
$
9,356

 
$
55

 
$
9,411

 
$
25,856

 
$
67

 
$
25,923

Income (loss) before provision for income tax
 
$
930

 
$
(55
)
 
$
875

 
$
2,417

 
$
(67
)
 
$
2,350

Provision for income tax expense (benefit)
 
$
187

 
$
(20
)
 
$
167

 
$
475

 
$
(24
)
 
$
451

Net income (loss)
 
$
743

 
$
(35
)
 
$
708

 
$
1,942

 
$
(43
)
 
$
1,899

Net income (loss) attributable to Metropolitan Life Insurance Company
 
$
738

 
$
(35
)
 
$
703

 
$
1,934

 
$
(43
)
 
$
1,891

Comprehensive income (loss)
 
$
914

 
$
(35
)
 
$
879

 
$
3,864

 
$
(43
)
 
$
3,821

Comprehensive income (loss) attributable to Metropolitan Life Insurance Company
 
$
909

 
$
(35
)
 
$
874

 
$
3,856

 
$
(43
)
 
$
3,813

Interim Condensed Consolidated Statements of Equity
 
As
Previously
Reported
 
Revisions
 
As
Revised
 
 
(In millions)
Retained Earnings
 
 
 
 
 
 
Balance at December 31, 2016
 
$
9,250

 
$
(217
)
 
$
9,033

Net income (loss)
 
$
1,934

 
$
(43
)
 
$
1,891

Balance at September 30, 2017
 
$
9,184

 
$
(260
)
 
$
8,924

Total Metropolitan Life Insurance Company Stockholder’s Equity
 
 
 
 
 
 
Balance at December 31, 2016
 
$
26,787

 
$
(217
)
 
$
26,570

Balance at September 30, 2017
 
$
28,379

 
$
(260
)
 
$
28,119

Total Equity
 
 
 
 
 
 
Balance at December 31, 2016
 
$
26,977

 
$
(217
)
 
$
26,760

Balance at September 30, 2017
 
$
28,558

 
$
(260
)
 
$
28,298

Adoption of New Accounting Pronouncements
Effective January 1, 2018, the Company early adopted guidance relating to income taxes. The new guidance was applied in the period of adoption. Current GAAP guidance requires that the effect of a change in tax laws or rates on deferred tax liabilities or assets to be included in income from continuing operations in the reporting period that includes the enactment date, even if the related income tax effects were originally charged or credited directly to accumulated other comprehensive income (“AOCI”). The Company’s accounting policy for the release of stranded tax effects in AOCI is on an aggregate portfolio basis. The new guidance allows a reclassification of AOCI to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). Due to U.S. Tax Reform and the change in corporate tax rates, at December 22, 2017, the Company reported stranded tax effects in AOCI related to unrealized gains and losses on available-for-sale (“AFS”) securities, cumulative foreign translation adjustments and deferred costs on pension benefit plans. With the adoption of the guidance, the Company released these stranded tax effects in AOCI resulting in a decrease to retained earnings as of January 1, 2018 of $1.0 billion with a corresponding increase to AOCI.

9

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Effective January 1, 2018, the Company retrospectively adopted guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement to present the other components of net periodic benefit cost must be disclosed. In addition, the guidance allows only the service cost component to be eligible for capitalization when applicable. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to de-recognition of nonfinancial assets. The new guidance clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” The new guidance also adds guidance for partial sales of nonfinancial assets. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2018, the Company retrospectively adopted guidance relating to restricted cash. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to tax accounting for intra-entity transfers of assets. Prior guidance prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2018, the Company retrospectively adopted guidance relating to cash flow statement presentation. The new guidance addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to recognition and measurement of financial instruments. The guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Effective January 1, 2018, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. Additionally, there will no longer be a requirement to assess equity securities for embedded derivatives requiring bifurcation. The adoption of this guidance resulted in a $101 million, net of income tax, increase to retained earnings largely offset by a decrease to AOCI that was primarily attributable to $925 million of equity securities previously classified and measured as equity securities AFS. The Company has included the required disclosures related to equity securities within Note 5.
Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to revenue recognition. The new guidance supersedes nearly all existing revenue recognition guidance under U.S. GAAP. However, it does not impact the accounting for insurance and investment contracts within the scope of Accounting Standards Codification Topic 944, Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

10

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

For the three months and nine months ended September 30, 2018, the Company identified $196 million and $598 million, respectively, of revenue streams within the scope of the guidance that are all included within other revenues on the interim condensed consolidated statements of operations and comprehensive income (loss). Such amounts primarily consisted of: (i) prepaid legal plans and administrative-only contracts within the U.S. segment of $120 million and $375 million for the three months and nine months ended September 30, 2018, respectively, and (ii) distribution and administrative services fees within the MetLife Holdings segment of $56 million and $169 million for the three months and nine months ended September 30, 2018, respectively.
Substantially all of the revenue from these services is recognized over time as the applicable services are provided or are made available to the customers and control is transferred continuously. The consideration received for these services is variable and constrained to the amount not probable of a significant revenue reversal.
Other
Effective January 16, 2018, the London Clearing House (“LCH”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives, for which the LCH serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $2 million, gross derivative liabilities by $182 million, accrued investment income by $4 million and collateral receivables recorded within premiums, reinsurance and other receivables by $176 million.
Future Adoption of New Accounting Pronouncements
In October 2018, the Financial Accounting Standards Board (“FASB”) issued new guidance regarding derivatives (Accounting Standards Update (“ASU”) 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied prospectively for qualifying new or redesignated hedging relationships entered into after January 1, 2019. The amendments permit the use of the overnight index swap rate based on the Secured Overnight Financing Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2018, the FASB issued new guidance on implementation costs in a cloud computing arrangement that is a service contract (ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The new guidance can be applied either prospectively to eligible costs incurred on or after the guidance is first applied, or retrospectively to all periods presented. The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2018, the FASB issued new guidance on defined benefit pension or other postretirement plans (ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans). The new guidance is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The new guidance should be applied on a retrospective basis to all periods presented. The new guidance modifies and clarifies certain disclosure requirements. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In August 2018, the FASB issued new guidance on fair value measurement (ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The guidance modifies the disclosure requirements on fair value by removing some requirements, modifying others, adding changes in unrealized gains and losses included in other comprehensive income (loss) (“OCI”) for recurring Level 3 fair value measurements, and providing the option to disclose certain other quantitative information with respect to significant unobservable inputs in lieu of a weighted average. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

11

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In August 2018, the FASB issued new guidance on long-duration insurance contracts (ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts). The new guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years, with required retrospective application to January 1, 2019. Early adoption is permitted. The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of deferred policy acquisition costs (“DAC”) for virtually all long-duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures. The Company has just begun its implementation efforts and is currently evaluating the impact of the new guidance. Given the nature and extent of the required changes to a significant portion of the Company’s operations, the adoption of this standard is expected to have a material impact on the consolidated financial statements.
In August 2017, the FASB issued new guidance on hedging activities (ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings. Early adoption is permitted. The new guidance simplifies the application of hedge accounting in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in their financial statements. Upon the adoption of ASU 2017-12, the Company will make certain changes to its assessment of hedge effectiveness for fair value hedging relationships, and the Company will also reclassify hedge ineffectiveness for cash flow hedging relationships existing as of the adoption date, which was previously recorded to earnings, to AOCI. The estimated impact of adoption is a decrease to retained earnings of approximately $100 million to $250 million.
In March 2017, the FASB issued new guidance on purchased callable debt securities (ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company does not expect the adoption to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for a description of the two-step test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company expects the adoption of this new guidance will reduce the complexity involved with the evaluation of goodwill for impairment. The impact of the new guidance will depend on the outcomes of future goodwill impairment tests.

12

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For substantially all financial assets, the ASU should be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings. For previously impaired debt securities and certain debt securities acquired with evidence of credit quality deterioration since origination, the new guidance should be applied prospectively. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other-than-temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and is currently assessing the accounting and reporting system changes that will be required to comply with the new guidance. The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases (Topic 842)). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, amending certain aspects of the new leases standard. Also in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides lessors with a practical expedient not to separate lease and non-lease components for certain operating leases and with an additional transition method.
The Company will adopt the new guidance under ASU 2016-02 and related amendments on January 1, 2019 and expects to elect certain practical expedients permitted under the transition guidance. In addition, the Company expects to elect the transition option, which allows the Company to use the modified retrospective transition method and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption but does not require restatement of prior periods. The Company has developed an integrated implementation plan and formed a multi-functional working group with a project governance structure to address any resource, system, data and process gaps related to the implementation of the new standard. The Company is currently in the process of integrating a lease accounting technology solution and developing updated reporting processes and internal controls to facilitate compliance with the new guidance.
While the Company is in the process of evaluating the impact of this guidance on its consolidated financial statements, the Company believes the most significant changes relate to (i) the recognition of new right of use assets and lease liabilities on the consolidated balance sheet for real estate operating leases; and (ii) the recognition of deferred gains associated with previous sale-leaseback transactions as a cumulative effect adjustment to retained earnings. On adoption, the Company expects to recognize additional operating liabilities, with corresponding right of use assets of the same amount adjusted for prepaid/deferred rent, unamortized initial direct costs and potential impairment of right of use assets based on the present value of the remaining minimum rental payments. These assets and liabilities are expected to represent less than 1% of the Company’s total assets and total liabilities, and the Company does not expect the adoption to have a material impact on its consolidated financial statements.

13

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information
The Company is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other.
U.S.
The U.S. segment offers a broad range of protection products and services aimed at serving the financial needs of customers throughout their lives. These products are sold to corporations and their respective employees, other institutions and their respective members, as well as individuals. The U.S. segment is organized into two businesses: Group Benefits and Retirement and Income Solutions (“RIS”).
The Group Benefits business offers insurance products and services which include life, dental, group short- and long-term disability, individual disability, accidental death and dismemberment, vision and accident & health coverages, as well as prepaid legal plans. This business also sells administrative services-only arrangements to some employers.
The RIS business offers a broad range of annuity and investment products, including stable value and pension risk transfer products, institutional income annuities, tort settlements, capital market investment products, as well as postretirement benefits and company-, bank- or trust-owned life insurance.
MetLife Holdings
The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company, such as variable, universal, term and whole life insurance, variable, fixed and index-linked annuities and long-term care insurance.
Corporate & Other
Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including enterprise-wide strategic initiative restructuring charges and various start-up businesses. Additionally, Corporate & Other includes run-off businesses such as the direct to consumer portion of the U.S. Direct business. Corporate & Other also includes the Company’s ancillary international operations, interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to affiliated reinsurance and intersegment loans, which bear interest rates commensurate with related borrowings.
Financial Measures and Segment Accounting Policies
Adjusted earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings is also the Company’s GAAP measure of segment performance and is reported below. Adjusted earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of adjusted earnings as the Company measures it for management purposes enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business.
Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax.
The financial measures of adjusted revenues and adjusted expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. Adjusted revenues also excludes net investment gains (losses) and net derivative gains (losses).

14

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

The following additional adjustments are made to revenues, in the line items indicated, in calculating adjusted revenues:
Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB fees”); and
Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnership interests that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in estimated fair value is recognized in net investment gains (losses) for GAAP.
The following additional adjustments are made to expenses, in the line items indicated, in calculating adjusted expenses:
Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and other pass-through adjustments, (iii) benefits and hedging costs related to GMIBs (“GMIB costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market value adjustments”);
Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;
Amortization of DAC and value of business acquired (“VOBA”) excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB fees and GMIB costs and (iii) Market value adjustments;
Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
Other expenses excludes costs related to noncontrolling interests and goodwill impairments.
The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.
Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months and nine months ended September 30, 2018 and 2017. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for adjusted earnings adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below.
Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in MetLife’s and the Company’s business.
MetLife’s economic capital model, coupled with considerations of local capital requirements, aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required economic capital shock factors to a specific confidence level and time horizon while applying an industry standard method for the inclusion of diversification benefits among risk types. MetLife’s management is responsible for the ongoing production and enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards.
Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, net income (loss) or adjusted earnings.

15

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.
Three Months Ended September 30, 2018
 
U.S.
 
MetLife
Holdings
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
5,125

 
$
783

 
$
17

 
$
5,925

 
$

 
$
5,925

Universal life and investment-type product policy fees
 
248

 
239

 

 
487

 
23

 
510

Net investment income
 
1,707

 
1,218

 
(53
)
 
2,872

 
(86
)
 
2,786

Other revenues
 
189

 
66

 
146

 
401

 

 
401

Net investment gains (losses)
 

 

 

 

 
205

 
205

Net derivative gains (losses)
 

 

 

 

 
(76
)
 
(76
)
Total revenues
 
7,269

 
2,306

 
110

 
9,685

 
66

 
9,751

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
5,227

 
1,500

 
12

 
6,739

 
119

 
6,858

Interest credited to policyholder account balances
 
443

 
187

 

 
630

 
(2
)
 
628

Capitalization of DAC
 
(8
)
 
1

 

 
(7
)
 

 
(7
)
Amortization of DAC and VOBA
 
27

 
(2
)
 

 
25

 
79

 
104

Interest expense on debt
 
3

 
2

 
22

 
27

 

 
27

Other expenses
 
700

 
254

 
285

 
1,239

 
(2
)
 
1,237

Total expenses
 
6,392

 
1,942

 
319

 
8,653

 
194

 
8,847

Provision for income tax expense (benefit)
 
187

 
70

 
(142
)
 
115

 
(27
)
 
88

Adjusted earnings
 
$
690

 
$
294

 
$
(67
)
 
917

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
66

 
 
 
 
Total expenses
 
 
 
 
 
 
 
(194
)
 
 
 
 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
27

 
 
 
 
Net income (loss)
 
$
816

 
 
 
$
816


16

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

Three Months Ended September 30, 2017
 
U.S.
 
MetLife
Holdings
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
5,820

 
$
806

 
$
3

 
$
6,629

 
$

 
$
6,629

Universal life and investment-type product policy fees
 
245

 
286

 

 
531

 
25

 
556

Net investment income
 
1,554

 
1,228

 
(39
)
 
2,743

 
(83
)
 
2,660

Other revenues
 
191

 
36

 
144

 
371

 

 
371

Net investment gains (losses)
 

 

 

 

 
96

 
96

Net derivative gains (losses)
 

 

 

 

 
(26
)
 
(26
)
Total revenues
 
7,810

 
2,356

 
108

 
10,274

 
12

 
10,286

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
6,018

 
1,491

 

 
7,509

 
130

 
7,639

Interest credited to policyholder account balances
 
373

 
195

 

 
568

 
(1
)
 
567

Capitalization of DAC
 
(15
)
 
(2
)
 

 
(17
)
 

 
(17
)
Amortization of DAC and VOBA
 
15

 
(79
)
 

 
(64
)
 
21

 
(43
)
Interest expense on debt
 
3

 
2

 
21

 
26

 

 
26

Other expenses
 
681

 
291

 
272

 
1,244

 
(5
)
 
1,239

Total expenses
 
7,075

 
1,898

 
293

 
9,266

 
145

 
9,411

Provision for income tax expense (benefit)
 
257

 
146

 
(190
)
 
213

 
(46
)
 
167

Adjusted earnings
 
$
478

 
$
312

 
$
5

 
795

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
12

 
 
 
 
Total expenses
 
 
 
 
 
 
 
(145
)
 
 
 
 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
46

 
 
 
 
Net income (loss)
 
$
708

 
 
 
$
708


17

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

Nine Months Ended September 30, 2018
 
U.S.
 
MetLife
Holdings
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
19,425

 
$
2,351

 
$
18

 
$
21,794

 
$

 
$
21,794

Universal life and investment-type product policy fees
 
758

 
742

 

 
1,500

 
70

 
1,570

Net investment income
 
4,945

 
3,599

 
(95
)
 
8,449

 
(278
)
 
8,171

Other revenues
 
581

 
199

 
423

 
1,203

 

 
1,203

Net investment gains (losses)
 

 

 

 

 
(21
)
 
(21
)
Net derivative gains (losses)
 

 

 

 

 
289

 
289

Total revenues
 
25,709

 
6,891

 
346

 
32,946

 
60

 
33,006

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
19,970

 
4,331

 
3

 
24,304

 
150

 
24,454

Interest credited to policyholder account balances
 
1,262

 
562

 

 
1,824

 
(3
)
 
1,821

Capitalization of DAC
 
(30
)
 
4

 

 
(26
)
 

 
(26
)
Amortization of DAC and VOBA
 
59

 
149

 

 
208

 
63

 
271

Interest expense on debt
 
9

 
6

 
66

 
81

 

 
81

Other expenses
 
2,124

 
754

 
797

 
3,675

 
(9
)
 
3,666

Total expenses
 
23,394

 
5,806

 
866

 
30,066

 
201

 
30,267

Provision for income tax expense (benefit)
 
493

 
208

 
(425
)
 
276

 
(32
)
 
244

Adjusted earnings
 
$
1,822

 
$
877

 
$
(95
)
 
2,604

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
60

 
 
 
 
Total expenses
 
 
 
 
 
 
 
(201
)
 
 
 
 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
32

 
 
 
 
Net income (loss)
 
$
2,495

 
 
 
$
2,495

Nine Months Ended September 30, 2017
 
U.S.
 
MetLife
Holdings
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
15,055

 
$
2,530

 
$
12

 
$
17,597

 
$

 
$
17,597

Universal life and investment-type product policy fees
 
757

 
876

 

 
1,633

 
73

 
1,706

Net investment income
 
4,646

 
3,711

 
(103
)
 
8,254

 
(299
)
 
7,955

Other revenues
 
581

 
126

 
441

 
1,148

 

 
1,148

Net investment gains (losses)
 

 

 

 

 
184

 
184

Net derivative gains (losses)
 

 

 

 

 
(317
)
 
(317
)
Total revenues
 
21,039

 
7,243

 
350

 
28,632

 
(359
)
 
28,273

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
15,773

 
4,432

 
3

 
20,208

 
247

 
20,455

Interest credited to policyholder account balances
 
1,076

 
587

 

 
1,663

 
(3
)
 
1,660

Capitalization of DAC
 
(42
)
 
(15
)
 

 
(57
)
 

 
(57
)
Amortization of DAC and VOBA
 
44

 
165

 

 
209

 
(85
)
 
124

Interest expense on debt
 
8

 
6

 
65

 
79

 

 
79

Other expenses
 
2,044

 
895

 
735

 
3,674

 
(12
)
 
3,662

Total expenses
 
18,903

 
6,070

 
803

 
25,776

 
147

 
25,923

Provision for income tax expense (benefit)
 
745

 
368

 
(485
)
 
628

 
(177
)
 
451

Adjusted earnings
 
$
1,391

 
$
805

 
$
32

 
2,228

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
(359
)
 
 
 
 
Total expenses
 
 
 
 
 
 
 
(147
)
 
 
 
 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
177

 
 
 
 
Net income (loss)
 
$
1,899

 
 
 
$
1,899


18

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
 
September 30, 2018
 
December 31, 2017
 
(In millions)
U.S.
$
238,102

 
$
245,750

MetLife Holdings
154,371

 
163,397

Corporate & Other
26,676

 
25,148

Total
$
419,149

 
$
434,295

Revenues derived from two U.S. segment customers exceeded 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues. Revenues derived from the first U.S. segment customer were $6.0 billion for the nine months ended September 30, 2018, which represented 24% of consolidated premiums, universal life and investment-type product policy fees and other revenues. The revenue was from a single premium received for a pension risk transfer. Revenues derived from the second U.S. customer were $730 million and $2.4 billion for the three months and nine months ended September 30, 2018, respectively, which represented 11% and 10%, of consolidated premiums, universal life and investment-type product policy fees and other revenues, respectively. Revenues derived from the second U.S. customer were $685 million and $2.1 billion for the three months and nine months ended September 30, 2017, respectively, which represented 9% and 10%, of consolidated premiums, universal life and investment-type product policy fees and other revenues, respectively. Revenues derived from any other customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the three months and nine months ended September 30, 2018 and 2017.
3. Insurance
Guarantees
As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report, the Company issues variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 6.
The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.

19

Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

Information regarding the Company’s guarantee exposure, which includes direct business, but excludes offsets from hedging or reinsurance, if any, was as follows at:
 
 
September 30, 2018
 
December 31, 2017
 
 
In the
Event of Death
 
At
Annuitization
 
In the
Event of Death
 
At
Annuitization
 
 
(Dollars in millions)
 
Annuity Contracts: