Company Quick10K Filing
Quick10K
Metropolitan Life Insurance
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
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
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-02-13 Other Events
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MLIC 2019-03-31
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-2019331xex311.htm
EX-31.2 mlic-2019331xex312.htm
EX-32.1 mlic-2019331xex321.htm
EX-32.2 mlic-2019331xex322.htm

Metropolitan Life Insurance Earnings 2019-03-31

MLIC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 mlic-2019331x10q.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 MARCH 31, 2019
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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
None
N/A
N/A
At May 9, 2019, 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 March 31, 2019 and December 31, 2018 and for the Three Months Ended March 31, 2019 and 2018)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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) difficult economic conditions, including risks relating to interest rates, credit spreads, equity, real estate, obligors and counterparties, and derivatives; (2) adverse global capital and credit market conditions, which may affect our ability to meet liquidity needs and access capital, including through credit facilities; (3) downgrades in our claims paying ability, financial strength or credit ratings; (4) availability and effectiveness of reinsurance, hedging or indemnification arrangements; (5) the impact on us of changes to and implementation of the wide variety of laws and regulations to which we are subject; (6) regulatory, legislative or tax changes relating to our operations that may affect the cost of, or demand for, our products or services; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) investment losses, defaults and volatility; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (10) differences between actual claims experience and underwriting and reserving assumptions; (11) the impact of technological changes on our businesses; (12) catastrophe losses; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements or value of business acquired; (15) exposure to losses related to guarantees in certain products; (16) ineffectiveness of risk management policies and procedures or models; (17) a failure in MetLife’s cybersecurity systems or other information security systems or MetLife’s disaster recovery plans; (18) any failure to protect the confidentiality of client information; (26) changes in accounting standards; (19) MetLife associates taking excessive risks; (20) difficulties in marketing and distributing products through our distribution channels; (21) difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions and dispositions, joint ventures, or other legal entity reorganizations; and (22) 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.
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.

2


Part I — Financial Information
Item 1. Financial Statements
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Balance Sheets
March 31, 2019 and December 31, 2018 (Unaudited)
(In millions, except share and per share data)
 
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $153,883 and $155,175, respectively)
 
$
162,387

 
$
159,073

Equity securities, at estimated fair value
 
817

 
773

Mortgage loans (net of valuation allowances of $295 and $291, respectively; includes $210 and $210, respectively, relating to variable interest entities; includes $276 and $299, respectively, under the fair value option)
 
65,926

 
63,687

Policy loans
 
6,054

 
6,061

Real estate and real estate joint ventures (includes $1,411 and $1,394, respectively, relating to variable interest entities)
 
6,281

 
6,152

Other limited partnership interests
 
4,513

 
4,481

Short-term investments, principally at estimated fair value
 
2,433

 
1,506

Other invested assets (includes $1,135 and $1,130, respectively, of leveraged and direct financing leases and $111 and $113, respectively, relating to variable interest entities)
 
15,496

 
15,690

Total investments
 
263,907

 
257,423

Cash and cash equivalents, principally at estimated fair value (includes $21 and $14, respectively, relating to variable interest entities)
 
5,538

 
6,882

Accrued investment income (includes $1 and $1, respectively, relating to variable interest entities)
 
2,094

 
2,050

Premiums, reinsurance and other receivables (includes $2 and $2, respectively, relating to variable interest entities)
 
22,703

 
21,829

Deferred policy acquisition costs and value of business acquired
 
3,876

 
4,117

Deferred income tax asset
 

 
43

Other assets (includes $2 and $2, respectively, relating to variable interest entities)
 
4,608

 
3,723

Separate account assets
 
117,279

 
110,850

Total assets
 
$
420,005

 
$
406,917

Liabilities and Equity
 
 
 
 
Liabilities
 
 
 
 
Future policy benefits
 
$
125,919

 
$
126,099

Policyholder account balances
 
91,854

 
90,656

Other policy-related balances
 
7,599

 
7,264

Policyholder dividends payable
 
517

 
494

Policyholder dividend obligation
 
1,116

 
428

Payables for collateral under securities loaned and other transactions
 
18,314

 
18,472

Short-term debt
 
128

 
129

Long-term debt (includes $5 and $5, respectively, at estimated fair value, relating to variable interest entities)
 
1,559

 
1,567

Current income tax payable
 
673

 
611

Deferred income tax liability
 
648

 

Other liabilities
 
27,280

 
24,620

Separate account liabilities
 
117,279

 
110,850

Total liabilities
 
392,886

 
381,190

Contingencies, Commitments and Guarantees (Note 13)
 

 

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
 
12,451

 
12,450

Retained earnings
 
7,951

 
9,512

Accumulated other comprehensive income (loss)
 
6,517

 
3,562

Total Metropolitan Life Insurance Company stockholder’s equity
 
26,924

 
25,529

Noncontrolling interests
 
195

 
198

Total equity
 
27,119

 
25,727

Total liabilities and equity
 
$
420,005

 
$
406,917

See accompanying notes to the interim condensed consolidated financial statements.

3


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 Ended March 31, 2019 and 2018 (Unaudited)
(In millions)
 
 
Three Months
Ended
March 31,
 
 
2019
 
2018
Revenues
 
 
 
 
Premiums
 
$
5,052

 
$
4,949

Universal life and investment-type product policy fees
 
503

 
531

Net investment income
 
2,645

 
2,701

Other revenues
 
401

 
401

Net investment gains (losses)
 
(54
)
 
(196
)
Net derivative gains (losses)
 
(310
)
 
60

Total revenues
 
8,237

 
8,446

Expenses
 
 
 
 
Policyholder benefits and claims
 
5,662

 
5,514

Interest credited to policyholder account balances
 
662

 
581

Policyholder dividends
 
257

 
262

Other expenses
 
1,148

 
1,354

Total expenses
 
7,729

 
7,711

Income (loss) before provision for income tax
 
508

 
735

Provision for income tax expense (benefit)
 

 
63

Net income (loss)
 
508

 
672

Less: Net income (loss) attributable to noncontrolling interests
 
1

 
3

Net income (loss) attributable to Metropolitan Life Insurance Company
 
$
507

 
$
669

Comprehensive income (loss)
 
$
3,446

 
$
(1,695
)
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax
 
1

 
3

Comprehensive income (loss) attributable to Metropolitan Life Insurance Company
 
$
3,445

 
$
(1,698
)
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 Equity
For the Three Months Ended March 31, 2019 and 2018 (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, 2018
 
$
5

 
$
12,450

 
$
9,512

 
$
3,562

 
$
25,529

 
$
198

 
$
25,727

Cumulative effects of changes in accounting
principles, net of income tax (Note 1)
 
 
 
 
 
78

 
17

 
95

 
 
 
95

Balance at January, 1 2019
 
5

 
12,450

 
9,590

 
3,579

 
25,624

 
198

 
25,822

Capital contributions from MetLife, Inc.
 

 
1

 

 

 
1

 

 
1

Dividends to MetLife, Inc.
 

 


 
(2,146
)
 

 
(2,146
)
 


 
(2,146
)
Change in equity of noncontrolling interests
 

 


 

 

 

 
(4
)
 
(4
)
Net income (loss)
 

 

 
507

 

 
507

 
1

 
508

Other comprehensive income (loss), net of income tax
 

 

 

 
2,938

 
2,938

 


 
2,938

Balance at March 31, 2019
 
$
5

 
$
12,451

 
$
7,951

 
$
6,517

 
$
26,924

 
$
195

 
$
27,119

 
 
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.
 

 
1

 

 

 
1

 

 
1

Dividends paid to MetLife, Inc.
 

 

 
(1,000
)
 

 
(1,000
)
 

 
(1,000
)
Change in equity of noncontrolling interests
 

 


 

 

 

 
59

 
59

Net income (loss)
 

 

 
669

 

 
669

 
3

 
672

Other comprehensive income (loss), net of income tax
 

 

 

 
(2,367
)
 
(2,367
)
 


 
(2,367
)
Balance at March 31, 2018
 
$
5

 
$
14,151

 
$
8,787

 
$
3,985

 
$
26,928

 
$
205

 
$
27,133

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 Cash Flows
For the Three Months Ended March 31, 2019 and 2018 (Unaudited)
(In millions)

 
Three Months
Ended
March 31,
 
2019
 
2018
Net cash provided by (used in) operating activities
$
1,191

 
$
510

Cash flows from investing activities
 
 
 
Sales, maturities and repayments of:
 
 
 
Fixed maturity securities available-for-sale
14,382

 
16,447

Equity securities
47

 
63

Mortgage loans
1,497

 
1,955

Real estate and real estate joint ventures
83

 
125

Other limited partnership interests
158

 
90

Purchases and originations of:
 
 
 
Fixed maturity securities available-for-sale
(12,900
)
 
(12,322
)
Equity securities
(9
)
 
(62
)
Mortgage loans
(3,637
)
 
(3,342
)
Real estate and real estate joint ventures
(278
)
 
(164
)
Other limited partnership interests
(233
)
 
(154
)
Cash received in connection with freestanding derivatives
579

 
919

Cash paid in connection with freestanding derivatives
(575
)
 
(1,316
)
Net change in policy loans
7

 
(3
)
Net change in short-term investments
(954
)
 
(206
)
Net change in other invested assets
9

 
(44
)
Net change in property, equipment and leasehold improvements
(7
)
 
(23
)
Other, net
1

 

Net cash provided by (used in) investing activities
(1,830
)
 
1,963

Cash flows from financing activities
 
 
 
Policyholder account balances:
 
 
 
Deposits
18,826

 
20,232

Withdrawals
(17,928
)
 
(21,647
)
Net change in payables for collateral under securities loaned and other transactions
(158
)
 
(381
)
Long-term debt issued

 
14

Long-term debt repaid
(10
)
 
(32
)
Financing element on certain derivative instruments and other derivative related transactions, net
(30
)
 
(51
)
Dividends paid to MetLife, Inc.
(1,400
)
 
(1,000
)
Other, net
(6
)
 
58

Net cash provided by (used in) financing activities
(706
)
 
(2,807
)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances
1

 

Change in cash and cash equivalents
(1,344
)
 
(334
)
Cash and cash equivalents, beginning of period
6,882

 
5,069

Cash and cash equivalents, end of period
$
5,538

 
$
4,735

Supplemental disclosures of cash flow information
 
 
 
Net cash paid (received) for:
 
 
 
Interest
$
12

 
$
11

Income tax
$
12

 
$
2

Non-cash transactions:
 
 
 
Capital contributions from MetLife, Inc.
$
1

 
$
1

Dividends to MetLife, Inc. declared and unpaid
$
746

 
$

Reclassification of certain equity securities to other invested assets
$

 
$
733


See accompanying notes to the interim condensed consolidated financial statements.

6

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, 2018 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, 2018 (the “2018 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 2018 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 real estate joint ventures and other limited partnership interests (“investee”) 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 in net investment income 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.
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.
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2019 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.
Recent Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. The following tables provide a description of new ASUs issued by the FASB and the impact of the adoption on the Company’s consolidated financial statements.

7

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)

Adoption of New Accounting Pronouncements
Except as noted below, the ASUs adopted by the Company effective January 1, 2019 did not have a material impact on its consolidated financial statements.
Standard
Description
Effective Date and Method of Adoption
Impact on Financial Statements
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, as clarified and amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
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.
January 1, 2019. The Company adopted using a modified retrospective approach.


The adoption of the guidance resulted in a $18 million, net of income tax, increase to accumulated other comprehensive income (loss) (“AOCI”) with a corresponding decrease to retained earnings due to the reclassification of hedge ineffectiveness for cash flow hedging relationships existing as of January 1, 2019. The Company has included the expanded disclosures within Note 6.
ASU 2016-02, Leases (Topic 842), as clarified and amended by ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements, and ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors
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 also requires new qualitative and quantitative disclosures. In July 2018, two amendments to the new guidance were issued. The amendments provide the option to adopt the new guidance prospectively without adjusting comparative periods. Also, the amendments provide lessors with a practical expedient not to separate lease and non-lease components for certain operating leases. In December 2018, an amendment was issued to clarify lessor accounting relating to taxes, certain lessor’s costs and variable payments related to both lease and non-lease components.

January 1, 2019. The Company adopted using a modified retrospective approach.

The Company elected the package of practical expedients allowed under the transition guidance. This allowed the Company to carry forward its historical lease classification. In addition, the Company elected all other practical expedients that were allowed under the new guidance and were applicable, including the practical expedient to combine lease and non-lease components into one lease component for certain real estate leases.


The adoption of this guidance resulted in the recording of additional net right-of-use (“ROU”) assets and lease liabilities of approximately $818 million and $902 million, respectively, as of January 1, 2019. The reduction of the ROU assets was a result of adjustments for prepaid/deferred rent, unamortized initial direct costs and impairment of certain ROU assets based on the net present value of the remaining minimum lease payments and sublease revenues. In addition, retained earnings increased by $95 million, net of income tax, as a result of the recognition of deferred gains on previous sale leaseback transactions. The guidance did not have a material impact on the Company’s consolidated net income and cash flows. The Company has included expanded disclosures on the consolidated balance sheets and in Notes 5 and 8.


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)

Future Adoption of New Accounting Pronouncements
ASUs not listed below were assessed and either determined to be not applicable or are not expected to have a material impact on the Company’s consolidated financial statements. ASUs issued but not yet adopted as of March 31, 2019 that are currently being assessed and may or may not have a material impact on the Company’s consolidated financial statements are summarized in the table below.
Standard
Description
Effective Date and Method of Adoption
Impact on Financial Statements
ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
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 an asset and which costs to expense as incurred. Implementation costs that are capitalized under the new guidance are required to be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use.

January 1, 2020. 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 Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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 removes certain disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant for employers that sponsor defined benefit pension or other postretirement plans.

December 31, 2020, to be applied on a retrospective basis to all periods presented (with early adoption permitted).
The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
The new 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 under certain circumstances, providing the option to disclose certain other quantitative information with respect to significant unobservable inputs in lieu of a weighted average.

January 1, 2020. Amendments related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively.
As of December 31, 2018, the Company early adopted the provisions of the guidance that removed the requirements relating to transfers between fair value hierarchy levels and certain disclosures about valuation processes for Level 3 fair value measurements. The Company will adopt the remainder of the new guidance at the effective date, and is currently evaluating the impact of those changes on its consolidated financial statements.

ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts
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.
January 1, 2021, to be applied retrospectively to January 1, 2019 (with early adoption permitted).
The Company has started 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 its consolidated financial statements.


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)

Standard
Description
Effective Date and Method of Adoption
Impact on Financial Statements
ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the 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.

January 1, 2020, to 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 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.

ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as clarified and amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
This new guidance 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. In November 2018, the FASB issued ASU 2018-19, clarifying that receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. 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.

January 1, 2020. For substantially all financial assets, the ASU is to 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 is to be applied prospectively.
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.


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 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 life and annuity-based insurance and investment products, including stable value and pension risk transfer products, institutional income annuities, tort settlements, and capital markets investment products, as well as solutions for funding postretirement benefits and company-, bank- or trust-owned life insurance.
MetLife Holdings
The MetLife Holdings segment consists of operations relating to products and businesses, previously included in MLIC’s former retail business, that the Company no longer actively markets, such as variable, universal, term and whole life insurance, variable, fixed and index-linked annuities and long-term care insurance.

10

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)

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, the Company’s ancillary international operations, and 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).
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) under GAAP.

11

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 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: (i) noncontrolling interests, (ii) acquisition, integration and other costs, and (iii) 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 ended March 31, 2019 and 2018. 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.
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.

12

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 March 31, 2019
 
U.S.
 
MetLife
Holdings
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
4,302

 
$
750

 
$

 
$
5,052

 
$

 
$
5,052

Universal life and investment-type product policy fees
 
264

 
217

 

 
481

 
22

 
503

Net investment income
 
1,638

 
1,139

 
(57
)
 
2,720

 
(75
)
 
2,645

Other revenues
 
204

 
63

 
134

 
401

 

 
401

Net investment gains (losses)
 

 

 

 

 
(54
)
 
(54
)
Net derivative gains (losses)
 

 

 

 

 
(310
)
 
(310
)
Total revenues
 
6,408

 
2,169

 
77

 
8,654

 
(417
)
 
8,237

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
4,438

 
1,398

 

 
5,836

 
83

 
5,919

Interest credited to policyholder account balances
 
487

 
178

 

 
665

 
(3
)
 
662

Capitalization of DAC
 
(15
)
 
3

 

 
(12
)
 

 
(12
)
Amortization of DAC and VOBA
 
14

 
47

 

 
61

 
(42
)
 
19

Interest expense on debt
 
3

 
2

 
22

 
27

 

 
27

Other expenses
 
723

 
200

 
191

 
1,114

 

 
1,114

Total expenses
 
5,650

 
1,828

 
213

 
7,691

 
38

 
7,729

Provision for income tax expense (benefit)
 
157

 
67

 
(128
)
 
96

 
(96
)
 

Adjusted earnings
 
$
601

 
$
274

 
$
(8
)
 
867

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
(417
)
 
 
 
 
Total expenses
 
 
 
 
 
 
 
(38
)
 
 
 
 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
96

 
 
 
 
Net income (loss)
 
$
508

 
 
 
$
508

Three Months Ended March 31, 2018
 
U.S.
 
MetLife
Holdings
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
4,177

 
$
773

 
$
(1
)
 
$
4,949

 
$

 
$
4,949

Universal life and investment-type product policy fees
 
253

 
255

 

 
508

 
23

 
531

Net investment income
 
1,593

 
1,204

 
(4
)
 
2,793

 
(92
)
 
2,701

Other revenues
 
196

 
66

 
139

 
401

 

 
401

Net investment gains (losses)
 

 

 

 

 
(196
)
 
(196
)
Net derivative gains (losses)
 

 

 

 

 
60

 
60

Total revenues
 
6,219

 
2,298

 
134

 
8,651

 
(205
)
 
8,446

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
4,411

 
1,374

 
(11
)
 
5,774

 
2

 
5,776

Interest credited to policyholder account balances
 
394

 
188

 

 
582

 
(1
)
 
581

Capitalization of DAC
 
(12
)
 
2

 

 
(10
)
 

 
(10
)
Amortization of DAC and VOBA
 
17

 
77

 

 
94

 
(6
)
 
88

Interest expense on debt
 
3

 
2

 
21

 
26

 

 
26

Other expenses
 
719

 
255

 
278

 
1,252

 
(2
)
 
1,250

Total expenses
 
5,532

 
1,898

 
288

 
7,718

 
(7
)
 
7,711

Provision for income tax expense (benefit)
 
147

 
77

 
(119
)
 
105

 
(42
)
 
63

Adjusted earnings
 
$
540

 
$
323

 
$
(35
)
 
828

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
(205
)
 
 
 
 
Total expenses
 
 
 
 
 
 
 
7

 
 
 
 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
42

 
 
 
 
Net income (loss)
 
$
672

 
 
 
$
672


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 (continued)

The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
 
March 31, 2019
 
December 31, 2018
 
(In millions)
U.S.
$
242,926

 
$
233,998

MetLife Holdings
152,773

 
147,498

Corporate & Other
24,306

 
25,421

Total
$
420,005

 
$
406,917

Revenues derived from one U.S. segment customer were $763 million and $818 million for the three months ended March 31, 2019 and 2018, respectively, which represented 13% and 14%, respectively, of consolidated premiums, universal life and investment-type product policy fees and other revenues. 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 ended March 31, 2019 and 2018.
3. Insurance
Guarantees
As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report, the Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and certain non-life contingent portions of GMIBs 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.
Information regarding the Company’s guarantee exposure, which includes direct business, but excludes offsets from hedging or reinsurance, if any, was as follows at:
 
 
March 31, 2019
 
December 31, 2018
 
 
In the
Event of Death
 
At
Annuitization
 
In the
Event of Death
 
At
Annuitization
 
 
(Dollars in millions)
 
Annuity Contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Variable Annuity Guarantees:
 
 
 
 
 
 
 
 
 
 
 
 
Total account value (1), (2)
 
$
49,822

 
 
$
21,827

 
 
$
47,393

 
 
$
20,692

 
Separate account value (1)
 
$
39,904

 
 
$
20,996

 
 
$
37,342

 
 
$
19,839

 
Net amount at risk
 
$
1,429

(3
)
 
$
350

(4
)
 
$
2,433

(3
)
 
$
418

(4
)
Average attained age of contractholders
 
68 years

 
 
66 years

 
 
67 years

 
 
65 years

 
Other Annuity Guarantees:
 
 
 
 
 
 
 
 
 
 
 
 
Total account value (1), (2)
 
N/A

 
 
$
144

 
 
N/A

 
 
$
144

 
Net amount at risk
 
N/A

 
 
$
84

(5
)
 
N/A

 
 
$
85

(5
)
Average attained age of contractholders
 
N/A

 
 
53 years

 
 
N/A

 
 
53 years

 

14

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

 
March 31, 2019
 
December 31, 2018
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
(Dollars in millions)
Universal and Variable Life Contracts:
 
 
 
 
 
 
 
Total account value (1), (2)
$
4,682

 
$
927

 
$
4,614

 
$
937

Net amount at risk (6)
$
44,035

 
$
6,189

 
$
44,596

 
$
6,290

Average attained age of policyholders
56 years

 
63 years

 
55 years

 
63 years

__________________
(1)
The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.
(2)
Includes the contractholder’s investments in the general account and separate account, if applicable.
(3)
Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.
(4)
Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved.
(5)
Defined as either the excess of the upper tier, adjusted for a profit margin, less the lower tier, as of the balance sheet date or the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. These amounts represent the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date.
(6)
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 were filed on all contracts on the balance sheet date.

15

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

Liabilities for Unpaid Claims and Claim Expenses
Rollforward of Claims and Claim Adjustment Expenses
Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:


Three Months
Ended
March 31,


2019

2018


(In millions)
Balance, beginning of period

$
12,590

 
$
12,090

Less: Reinsurance recoverables

1,497

 
1,401

Net balance, beginning of period

11,093

 
10,689

Incurred related to:

 
 
 
Current period

4,295

 
4,469

Prior periods (1)

87

 
(161
)
Total incurred

4,382

 
4,308

Paid related to:

 
 
 
Current period

(1,931
)
 
(2,044
)
Prior periods

(2,201
)
 
(2,138
)
Total paid

(4,132
)
 
(4,182
)
Net balance, end of period

11,343

 
10,815

Add: Reinsurance recoverables

1,537

 
1,414

Balance, end of period (included in future policy benefits and other policy-related balances)

$
12,880

 
$
12,229

__________________
(1)
For the three months ended March 31, 2019, claims and claim adjustment expenses associated with prior periods increased due to events incurred in prior periods but reported in the current period. For the three months ended March 31, 2018, claims and claim adjustment expenses associated with prior periods decreased due to favorable claims experience in the current period.
4. Closed Block
On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance approving Metropolitan Life Insurance Company’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company.
Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company’s net income continues to be sensitive to the actual performance of the closed block.
Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item.

16

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

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:
 
 
March 31, 2019
 
December 31, 2018
 
 
(In millions)
Closed Block Liabilities
 
 
 
 
Future policy benefits
 
$
39,727

 
$
40,032

Other policy-related balances
 
422

 
317

Policyholder dividends payable
 
453

 
431

Policyholder dividend obligation
 
1,116

 
428

Deferred income tax liability
 
36

 
28

Other liabilities
 
200

 
328

Total closed block liabilities
 
41,954

 
41,564

Assets Designated to the Closed Block
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value
 
25,616

 
25,354

Equity securities, at estimated fair value
 
63

 
61

Contractholder-directed equity securities and fair value option securities, at estimated fair value
 
47

 
43

Mortgage loans
 
6,994

 
6,778

Policy loans
 
4,505

 
4,527

Real estate and real estate joint ventures
 
556

 
544

Other invested assets
 
592

 
643

Total investments
 
38,373

 
37,950

Accrued investment income
 
451

 
443

Premiums, reinsurance and other receivables
 
70

 
83

Current income tax recoverable
 
71

 
69

Total assets designated to the closed block
 
38,965

 
38,545

Excess of closed block liabilities over assets designated to the closed block
 
2,989

 
3,019

Amounts included in AOCI:
 
 
 
 
Unrealized investment gains (losses), net of income tax
 
1,675

 
1,089

Unrealized gains (losses) on derivatives, net of income tax
 
74

 
86

Allocated to policyholder dividend obligation, net of income tax
 
(882
)
 
(338
)
Total amounts included in AOCI
 
867

 
837

Maximum future earnings to be recognized from closed block assets and liabilities
 
$
3,856

 
$
3,856

Information regarding the closed block policyholder dividend obligation was as follows:
 
 
Three Months
Ended
March 31, 2019
 
Year 
 Ended 
 December 31, 2018
 
 
(In millions)
Balance, beginning of period
 
$
428

 
$
2,121

Change in unrealized investment and derivative gains (losses)
 
688

 
(1,693
)
Balance, end of period
 
$
1,116

 
$
428


17

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

Information regarding the closed block revenues and expenses was as follows:
 
 
Three Months
Ended
March 31,
 
 
2019
 
2018
 
 
(In millions)
Revenues
 
 
 
 
Premiums
 
$
367

 
$
387

Net investment income
 
428

 
444

Net investment gains (losses)
 
(1
)
 
(29
)
Net derivative gains (losses)
 
3

 
(3
)
Total revenues
 
797

 
799

Expenses
 
 
 
 
Policyholder benefits and claims
 
539

 
571

Policyholder dividends
 
228

 
244

Other expenses
 
29

 
29

Total expenses
 
796

 
844

Revenues, net of expenses before provision for income tax expense (benefit)
 
1

 
(45
)
Provision for income tax expense (benefit)
 

 
(10
)
Revenues, net of expenses and provision for income tax expense (benefit)
 
$
1

 
$
(35
)
Metropolitan Life Insurance Company charges the closed block with federal income taxes, state and local premium taxes and other state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan of Reorganization. Metropolitan Life Insurance Company also charges the closed block for expenses of maintaining the policies included in the closed block.

18

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

5. Investments
Fixed Maturity Securities Available-for-Sale
Fixed Maturity Securities Available-for-Sale by Sector
The following table presents the fixed maturity securities available-for-sale (“AFS”) by sector. U.S. corporate and foreign corporate sectors include redeemable preferred stock. Residential mortgage-backed securities (“RMBS”) includes Agency, prime, alternative and sub-prime mortgage-backed securities. Asset-backed securities (“ABS”) includes securities collateralized by corporate loans and consumer loans. Municipals includes taxable and tax-exempt revenue bonds, and to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) primarily includes securities collateralized by multiple properties. RMBS, ABS and CMBS are collectively “Structured Securities.”
 
March 31, 2019
 
December 31, 2018
 
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair
Value
 
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair
Value
 

Gains
 
Temporary
Losses
 
OTTI
Losses (1)
 

Gains
 
Temporary
Losses
 
OTTI
Losses (1)
 
 
(In millions)
U.S. corporate
$
52,163

 
$
3,548

 
$
536

 
$

 
$
55,175

 
$
53,927

 
$
2,440

 
$
1,565

 
$

 
$
54,802

U.S. government and agency
27,587

 
2,846

 
177

 

 
30,256

 
28,139

 
2,388

 
366

 

 
30,161

Foreign corporate
27,441

 
1,180

 
817

 

 
27,804

 
26,592

 
674

 
1,303

 

 
25,963

RMBS
22,372

 
974

 
164

 
(29
)
 
23,211

 
22,186

 
831

 
305

 
(25
)
 
22,737

ABS
8,650

 
40

 
59

 

 
8,631

 
8,599

 
40

 
112

 

 
8,527

Municipals
6,073

 
1,129

 
8

 

 
7,194

 
6,070

 
907

 
30

 

 
6,947

CMBS
5,475

 
114

 
29

 

 
5,560

 
5,471

 
48

 
75

 

 
5,444

Foreign government
4,122

 
491

 
57

 

 
4,556

 
4,191

 
408

 
107

 

 
4,492

Total fixed maturity securities AFS
$
153,883


$
10,322


$
1,847


$
(29
)

$
162,387


$
155,175


$
7,736


$
3,863


$
(25
)

$
159,073

__________________
(1)
Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”
The Company held non-income producing fixed maturity securities AFS with an estimated fair value of $24 million and $14 million, and unrealized gains (losses) of less than $1 million and ($1) million at March 31, 2019 and December 31, 2018, respectively.
Maturities of Fixed Maturity Securities AFS
The amortized cost and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at March 31, 2019:
 
Due in One
Year or Less
 
Due After
 One Year
Through
Five Years
 
Due After
Five Years
Through Ten
Years
 
Due After Ten Years
 
Structured
Securities
 
Total Fixed
Maturity
Securities AFS
 
(In millions)
Amortized cost
$
8,873

 
$
26,920

 
$
27,372

 
$
54,221

 
$
36,497

 
$
153,883

Estimated fair value
$
8,798

 
$
27,323

 
$
28,363

 
$
60,501

 
$
37,402

 
$
162,387

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities AFS not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

19

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

Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:
 
March 31, 2019
 
December 31, 2018
 
Less than 12 Months
 
Equal to or Greater
than 12 Months
 
Less than 12 Months
 
Equal to or Greater
than 12 Months
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Losses
 
(Dollars in millions)
U.S. corporate
$
7,164

 
$
210

 
$
5,883

 
$
326

 
$
23,398

 
$
1,176

 
$
3,043

 
$
389

U.S. government and agency
2,089

 
3

 
6,363

 
174

 
4,322

 
29

 
7,948

 
337

Foreign corporate
5,762

 
428

 
3,581

 
389

 
12,911

 
893

 
2,138

 
410

RMBS
1,196

 
25

 
6,440

 
110

 
5,611

 
107

 
4,482

 
173

ABS
4,844

 
48

 
598

 
11

 
5,958

 
105

 
223

 
7

Municipals
75

 
3

 
191

 
5

 
675

 
22

 
94

 
8

CMBS
1,148