UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
Form 10-K
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
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 001-15787
MetLife, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
13-4075851
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $0.01
 
New York Stock Exchange
Floating Rate Non-Cumulative Preferred Stock, Series A, par value $0.01
 
New York Stock Exchange
5.375% Senior Notes
 
Irish Stock Exchange
5.25% Senior Notes
 
Irish Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  ¨ No  þ
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes  þ No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer  ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)  
 
Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨ No  þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant at June 30, 2015 was approximately $62.6 billion . At February 22 , 2016 1,096,666,865   shares of the registrant’s common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference certain information from the registrant’s definitive proxy statement for the Annual Meeting of Shareholders to be held on June 14, 2016 , to be filed by the registrant with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the year ended December 31, 2015 .
 



Table of Contents
 
 
 
 
Page
Part I
Item 1.
 
 
Item 1A.
 
 
Item 1B.
 
 
Item 2.
 
 
Item 3.
 
 
Item 4.
 
 
 
 
 
 
 
Part II
Item 5.
 
 
Item 6.
 
 
Item 7.
 
 
Item 7A.
 
 
Item 8.
 
 
Item 9.
 
 
Item 9A.
 
 
Item 9B.
 
 
 
Part III
Item 10.
 
 
Item 11.
 
 
Item 12.
 
 
Item 13.
 
 
Item 14.
 
 
 
Part IV
Item 15.
 
 
 
 
 
 
 
 
 
 


Table of Contents

As used in this Form 10-K, “MetLife,” the “Company,” “we,” “our” and “us” refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates.
Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, 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 such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial 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.
Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MetLife, Inc., its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual 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 MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission. These factors include: (1) difficult conditions in the global capital markets; (2) 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 our credit facilities, generate fee income and market-related revenue and finance statutory reserve requirements and may require us to pledge collateral or make payments related to declines in value of specified assets, including assets supporting risks ceded to certain of our captive reinsurers or hedging arrangements associated with those risks; (3) exposure to global financial and capital market risks, including as a result of the disruption in Europe and possible withdrawal of one or more countries from the Euro zone; (4) impact of comprehensive financial services regulation reform on us, as a non-bank systemically important financial institution, or otherwise; (5) numerous rulemaking initiatives required or permitted by the Dodd-Frank Wall Street Reform and Consumer Protection Act which may impact how we conduct our business, including those compelling the liquidation of certain financial institutions; (6) regulatory, legislative or tax changes relating to our insurance, international, 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; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from (a) business acquisitions and integrating and managing the growth of such acquired businesses, (b) dispositions of businesses via sale, initial public offering, spin-off or otherwise, (c) entry into joint ventures, or (d) legal entity reorganizations; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (10) investment losses and defaults, and changes to investment valuations; (11) changes in assumptions related to investment valuations, deferred policy acquisition costs, deferred sales inducements, value of business acquired or goodwill; (12) impairments of goodwill and realized losses or market value impairments to illiquid assets; (13) defaults on our mortgage loans; (14) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (15) economic, political, legal, currency and other risks relating to our international operations, including with respect to fluctuations of exchange rates; (16) downgrades in our claims paying ability, financial strength or credit ratings; (17) a deterioration in the experience of the “closed block” established in connection with the reorganization of Metropolitan Life Insurance Company; (18) availability and effectiveness of reinsurance or indemnification arrangements, as well as any default or failure of counterparties to perform; (19) differences between actual claims experience and underwriting and reserving assumptions; (20) ineffectiveness of risk management policies and procedures; (21) catastrophe losses; (22) increasing cost and limited market capacity for statutory life insurance reserve financings; (23) heightened competition, including with respect to pricing, entry of new competitors, consolidation of distributors, the development of new products by new and existing competitors, and for personnel; (24) 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 the adjustment for nonperformance risk; (25) regulatory and other restrictions affecting MetLife, Inc.’s ability to pay dividends and repurchase common stock; (26) MetLife, Inc.’s primary reliance, as a holding company, on dividends from its subsidiaries to meet its free cash flow targets and debt payment obligations and the applicable regulatory restrictions on the ability of the subsidiaries to pay such dividends; (27) the possibility that MetLife, Inc.’s Board of Directors may influence the outcome of stockholder votes through the voting provisions of the MetLife Policyholder Trust; (28) changes in accounting standards, practices and/or policies; (29) increased expenses relating to pension and postretirement benefit plans, as well as health care and other employee benefits; (30) inability to protect our intellectual property rights or claims of infringement of

2

Table of Contents

the intellectual property rights of others; (31) inability to attract and retain sales representatives; (32) provisions of laws and our incorporation documents may delay, deter or prevent takeovers and corporate combinations involving MetLife; (33) 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; (34) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; and (35) other risks and uncertainties described from time to time in MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission.
MetLife, Inc. does not undertake any obligation to publicly correct or update any forward-looking statement if MetLife, Inc. later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures MetLife, Inc. makes on related subjects in reports to the U.S. Securities and Exchange Commission.
Note Regarding Reliance on Statements in Our Contracts
See “Exhibit Index — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Annual Report on Form 10-K.

3

Table of Contents

Part I
Item 1. Business
Index to Business
 
Page

4

Table of Contents

Overview
As used in this Form 10-K, “MetLife,” the “Company,” “we,” “our” and “us” refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates.
We have grown to become a global provider of life insurance, annuities, employee benefits and asset management. Through our subsidiaries and affiliates, we hold leading market positions in the United States, Japan, Latin America, Asia, Europe and the Middle East. Over the past several years, we have grown our core businesses, as well as successfully executed on our growth strategy. This has included completing a number of transactions that have resulted in the acquisition and, in some cases, divestiture of certain businesses while also further strengthening our balance sheet to position MetLife for continued growth.
We are also one of the largest institutional investors in the U.S. with a $508.2 billion general account portfolio invested primarily in investment grade corporate bonds, structured finance securities, mortgage loans and U.S. Treasury and agency securities, as well as real estate and corporate equity, at December 31, 2015 . Over the past several years, we have further diversified and strengthened our general account portfolio.
Our well-recognized brand, leading market positions, competitive and innovative product offerings and financial strength and expertise should help drive future growth and enhance shareholder value, building on a long history of fairness, honesty and integrity. Over the course of the next several years, we will pursue the following objectives to position the Company for continued growth and achieve our vision of being recognized as the leading global life insurance and employee benefits provider:
 
 
Refocus the U.S. businesses
 
 
Shift product mix away from capital intensive products
 
 
Invest in growth initiatives for the voluntary/worksite, accident & health, and direct channels
 
 
Drive margin improvement
 
 
Build the Global Employee Benefits business
 
 
Accelerate our local employee benefits businesses in key markets outside the U.S.
 
 
Grow our global employee benefits businesses through multinational and expatriate solutions

5

Table of Contents

 
 
Grow emerging markets presence
 
 
Accelerate earnings in emerging markets in which we already have a strong presence
 
 
Seek opportunistic mergers and acquisitions to complement our organic growth
 
 
Drive toward Customer Centricity and a global brand
 
 
Further institutionalize customer-centric actions and culture at MetLife
 
 
Grow consideration of and preference for MetLife’s brand in key markets
MetLife is organized into six segments, reflecting three broad geographic regions: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and Europe, the Middle East and Africa (“EMEA”). In addition, the Company reports certain of its results of operations in Corporate & Other. See “— Segments and Corporate & Other” and Note 2 of the Notes to the Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. See also “— Other Key Information” for information on the Company’s announcement of its plan to pursue the separation of a substantial portion of its Retail segment, which is organized into two U.S. businesses, Life & Other and Annuities, as well as certain portions of its Corporate Benefit Funding segment and Corporate & Other (the “Separation”). Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.
In the U.S., we provide a variety of insurance and financial services products, including life, dental, disability, property & casualty, guaranteed interest, stable value and annuities, through both proprietary and independent retail distribution channels, as well as at the workplace.
Outside the U.S., we provide life, medical, dental, credit and other accident & health insurance, as well as annuities, endowment and retirement & savings products to both individuals and groups. We believe these businesses will continue to grow more quickly than our U.S. businesses.
Revenues derived from any customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, 2015 , 2014 and 2013 . Financial information, including revenues, expenses, operating earnings, and total assets by segment, as well as premiums, universal life and investment-type product policy fees and other revenues by major product groups, is provided in Note  2 of the Notes to the Consolidated Financial Statements. Operating revenues and operating earnings are performance measures that are not based on accounting principles generally accepted in the United States of America (“GAAP”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP and Other Financial Disclosures” for definitions of such measures.
For financial information related to revenues, total assets, and goodwill balances by geographic region, see Notes 2 and 11 of the Notes to the Consolidated Financial Statements.

6

Table of Contents

Other Key Information
On January 12, 2016, the Company announced its plan to pursue the Separation. The Company is currently evaluating structural alternatives for the proposed Separation, including a public offering of shares in an independent, publicly traded company, a spin-off, or a sale. The completion of a public offering would depend on, among other things, the U.S. Securities and Exchange Commission (“SEC”) filing and review process, as well as market conditions. Any Separation that might occur will be subject to the satisfaction of various conditions and approvals, including approval of any transaction by the MetLife, Inc. Board of Directors, satisfaction of any applicable requirements of the SEC, and receipt of insurance and other regulatory approvals and other anticipated conditions.
In November 2014, MetLife Insurance Company of Connecticut (“MICC”), a wholly-owned subsidiary of MetLife, Inc., re-domesticated from Connecticut to Delaware, changed its name to MetLife Insurance Company USA and merged with its subsidiary, MetLife Investors USA Insurance Company (“MLI-USA”), and its affiliate, MetLife Investors Insurance Company (“MLIIC”), each a U.S. insurance company that issued variable annuity products in addition to other products, and Exeter Reassurance Company, Ltd. (“Exeter”), a former offshore, captive reinsurance subsidiary of MetLife, Inc. and affiliate of MICC that mainly reinsured guarantees associated with variable annuity products (the “Mergers”). The surviving entity of the Mergers was MetLife Insurance Company USA (“MetLife USA”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Other Key Information — Significant Events” for further information on the Mergers.
In October 2013, MetLife, Inc. completed its acquisition of Administradora de Fondos de Pensiones Provida S.A. (“ProVida”), the largest private pension fund administrator in Chile based on assets under management and number of pension fund contributors. The acquisition of ProVida supports the Company's growth strategy in emerging markets and further strengthens the Company's overall position in Chile. See Note 3 of the Notes to the Consolidated Financial Statements.
Certain international subsidiaries have a fiscal year cutoff of November 30 th . Accordingly, the Company’s consolidated financial statements reflect the assets and liabilities of such subsidiaries as of November 30, 2015 and 2014 and the operating results of such subsidiaries for the years ended November 30, 2015 , 2014 and 2013 . The Company is in the process of converting to calendar year reporting for these subsidiaries. These conversions are expected to be substantially complete in the first quarter of 2016. The impact of the conversions on our financial statements to date has been de minimis and, therefore, has been reported in net income in the quarter of conversion.
Segments and Corporate & Other
Americas
Product Overview
Our businesses in the Americas offer a broad range of protection products and services aimed at serving the financial needs of our customers throughout their lives. These products are sold to individuals and corporations, as well as other institutions, and their respective employees.
Retail
Our Retail segment is organized into two U.S. businesses: Life & Other and Annuities.
Life & Other
Our Life & Other insurance products and services include variable life, universal life, term life and whole life products. Life & Other products and services also include individual disability income products and personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance. Additionally, through broker-dealer affiliates, the Company offers a full range of mutual funds and other securities products.

7

Table of Contents

The major products within Life & Other are as follows:
Variable Life. Variable life products provide insurance coverage through a contract that gives the policyholder flexibility in investment choices and, depending on the product, in premium payments and coverage amounts, with certain guarantees. Most importantly, with variable life products, premiums and account balances can be directed by the policyholder into a variety of separate account investment options or directed to the Company’s general account. In the separate account investment options, the policyholder bears the entire risk of the investment results. We collect specified fees for the management of the investment options. The policyholder’s cash value reflects the investment return of the selected investment options, net of management fees and insurance-related and other charges. In some instances, third-party money management firms manage these investment options. With some products, by maintaining a certain premium level, policyholders may have the advantage of various guarantees that may protect the death benefit from adverse investment experience.
Universal Life. Universal life products provide insurance coverage on the same basis as variable life, except that premiums, and the resulting accumulated balances, are allocated only to the Company’s general account. We credit premiums to an account maintained for the policyholder. Premiums are credited net of specified expenses. Interest is credited to the policyholder’s account at interest rates we determine, subject to specified minimums. Specific charges are made against the policyholder’s account for the cost of insurance protection and for expenses. With some products, by maintaining a certain premium level, policyholders may have the advantage of various guarantees that may protect the death benefit from adverse investment experience.
Term Life. Term life products provide a guaranteed benefit upon the death of the insured for a specified time period in return for the periodic payment of premiums. Specified coverage periods range from one year to 30 years, but in no event are they longer than the period over which premiums are paid. Death benefits may be level over the period or decreasing. Premiums may be guaranteed at a level amount for the coverage period or may be non-level and non-guaranteed. Term insurance products are sometimes referred to as pure protection products, in that there are typically no savings or investment elements. Term contracts expire without value at the end of the coverage period when the insured party is still living.
Whole Life. Whole life products provide a guaranteed benefit upon the death of the insured in return for the periodic payment of a fixed premium over a predetermined period. Premium payments may be required for the entire life of the contract period, to a specified age or period, and may be level or change in accordance with a predetermined schedule. Whole life insurance includes policies that provide a participation feature in the form of dividends. Policyholders may receive dividends in cash or apply them to increase death benefits, increase cash values available upon surrender or reduce the premiums required to maintain the contract in-force. Because the use of dividends is specified by the policyholder, this group of products provides significant flexibility to individuals to tailor the product to suit their specific needs and circumstances, while at the same time providing guaranteed benefits.
Disability. Disability products provide a benefit in the event of the disability of the insured. In most instances, this benefit is in the form of monthly income paid until the insured reaches age 65. In addition to income replacement, the product may be used to provide for the payment of business overhead expenses for disabled business owners or mortgage payment protection.
Property & Casualty. These products include personal lines property & casualty insurance offered to individuals through a variety of retail distribution channels, including independent agents, property & casualty specialists, and the MetLife Premier Client Group.
Auto insurance policies provide coverage for private passenger automobiles, utility automobiles and vans, motorcycles, motor homes, antique or classic automobiles and trailers. We also offer traditional coverage such as liability, uninsured motorist, no fault or personal injury protection, as well as collision and comprehensive insurance.
Homeowners’ insurance policies provide protection for homeowners, renters, condominium owners and residential landlords against losses arising out of damage to dwellings and contents from a wide variety of perils, as well as coverage for liability arising from ownership or occupancy. Other insurance includes personal excess liability (protection against losses in excess of amounts covered by other liability insurance policies), and coverage for recreational vehicles and boat owners. Most of our homeowners’ policies are traditional insurance policies for dwellings, providing protection for loss on a “replacement cost” basis. These policies also provide additional coverage for reasonable, normal living expenses incurred by policyholders that have been displaced from their homes.

8

Table of Contents

Other. Additionally, through our broker-dealer affiliates, we offer a full range of mutual funds and other securities products. The elimination of transactions from activity between the segments within the Americas occurs within Life & Other.
Annuities
Our Annuities business offers a variety of variable and fixed annuities that are primarily sold to individuals and tax-qualified groups in the education, healthcare and not-for-profit sectors.
The major products within Annuities are as follows:
Variable Annuities. Variable annuities provide for both asset accumulation and asset distribution needs. Variable annuities allow the contractholder to make deposits into various investment options in a separate account, as determined by the contractholder. The risks associated with such investment options are borne entirely by the contractholder, except where guaranteed minimum benefits are involved. In certain variable annuity products, contractholders may also choose to allocate all or a portion of their account to the Company’s general account and are credited with interest at rates we determine, subject to specified minimums. In addition, contractholders may also elect certain minimum death benefit and minimum living benefit guarantees for which additional fees are charged and where asset allocation restrictions may apply.
Fixed and Indexed Annuities. Fixed annuities provide for both asset accumulation and asset distribution needs. Fixed annuities do not allow the same investment flexibility provided by variable annuities, but provide guarantees related to the preservation of principal and interest credited. Deposits made into deferred annuity contracts are allocated to the Company’s general account and are credited with interest at rates we determine, subject to specified minimums. Credited interest rates are guaranteed not to change for certain limited periods of time, ranging from one to 10 years. Fixed income annuities provide a guaranteed monthly income for a specified period of years and/or for the life of the annuitant. Additionally, the Company has recently begun issuing indexed annuities which allow the contractholder to participate in returns from equity indices.
Group, Voluntary & Worksite Benefits
We have built a leading position in the U.S. group insurance market through long-standing relationships with many of the largest corporate employers in the U.S.
Our Group, Voluntary & Worksite Benefits insurance products and services include life, dental, group short- and long-term disability, property & casualty, long-term care, accidental death and dismemberment (“AD&D”), critical illness, vision and accident & health coverages, as well as prepaid legal plans. We also sell administrative services-only (“ASO”) arrangements to some employers. Under such ASO arrangements, the employer is at risk, as we have not issued an insurance policy. We pay claims funded by the employer and perform other administrative services on behalf of the employer.
The major products within Group, Voluntary & Worksite Benefits are as follows:
Life. Life insurance products and services include variable life, universal life, and term life products. These are similar to the products offered by the Retail Life & Other business except we offer group insurance products as employer-paid benefits or as voluntary benefits where all or a portion of the premiums are paid by the employee. These life insurance products and services also include employee paid supplemental life and are offered as standard products or may be tailored to meet specific customer needs.
Dental. Dental products provide insurance and ASO arrangements that assist employees, retirees and their families in maintaining oral health while reducing out-of-pocket expenses and providing superior customer service. Dental plans include the Preferred Dentist Program and the Dental Health Maintenance Organization. 
Disability. Disability products provide a benefit in the event of the disability of the insured. In most instances, this benefit is in the form of monthly income paid until the insured reaches age 65.
Property & Casualty. These products include personal lines property & casualty insurance offered directly to employees at their employer’s worksite through a variety of distribution channels, including independent agents, property & casualty specialists and direct marketing. The property & casualty products offered by the Group, Voluntary & Worksite business are the same products offered by the Retail property & casualty business. 
Long-term Care. Long-term care products provide protection against the potentially high costs of long-term care services. They generally pay benefits to insureds who need assistance with activities of daily living or have a cognitive impairment. Although we discontinued the sale of these products in 2010, we continue to support our existing policyholders.

9

Table of Contents

Corporate Benefit Funding
The Corporate Benefit Funding segment provides funding and financing solutions that help institutional customers mitigate and manage liabilities primarily associated with their qualified, nonqualified and welfare employee benefit programs using a spectrum of life and annuity-based insurance and investment products.
The major products within Corporate Benefit Funding are as follows: 
Stable Value Products. We offer general account guaranteed interest contracts, separate account guaranteed interest contracts, and similar products used to support the stable value option of defined contribution plans. We also offer private floating rate funding agreements that are used for money market funds, securities lending cash collateral portfolios and short-term investment funds.
General account guaranteed interest contracts are designed to provide stable value investment options within tax-qualified defined contribution plans. Traditional general account guaranteed interest contracts integrate a general account fixed or determinable fixed maturity investment with a general account guarantee of liquidity at contract value for participant transactions.
Separate account guaranteed interest contracts are available to defined contribution plan sponsors. These contracts integrate market value returns on separate account investments with a general account guarantee of liquidity at contract value to the extent the separate account assets are not sufficient. The contracts do not have a fixed maturity date and are terminable by each party on notice.
Private floating rate funding agreements are generally privately-placed, unregistered investment contracts issued as general account obligations. Interest is credited based on an external index, generally the three-month London Interbank Offered Rate (“LIBOR”). Contracts may contain put provisions (of 90 days or longer) that allow for the contractholder to receive the account balance prior to the stated maturity date.
Pension Risk Transfers. We offer general account and separate account annuity products, generally in connection with the termination of defined benefit pension plans. These risk transfer products include single premium buyouts that allow for full or partial transfers of pension liabilities.
General account annuity products include nonparticipating contracts. Under nonparticipating contracts, group annuity benefits may be purchased for retired and terminated employees or employees covered under terminating or ongoing pension plans. Both immediate and deferred annuities may be purchased by a single premium at issue. There are generally no cash surrender rights, with some exceptions including certain contracts that include liabilities for cash balance pension plans.
Separate account annuity products include both participating and non-participating contracts. Under participating contracts, group annuity benefits are purchased for retired, terminated, or active employees covered under active or terminated pension plans. Both immediate and deferred fixed annuities are purchased with a single premium. Under some contracts, additional annuities may be periodically purchased at then current purchase rates. The assets supporting the guaranteed benefits for each contract are held in a separate account. Some contracts require the contractholder to make periodic payments to cover investment and insurance expenses. The Company fully guarantees benefit payments and is ultimately responsible for all benefit payments. The non-participating contracts have economic features similar to our general account product, but offer the added protection of an insulated separate account. Under U.S. GAAP, these annuity contracts are treated as general account products.
Institutional Income Annuities. These general account contracts are available for purchasing guaranteed payout annuities for employees upon retirement or termination of employment. These annuities can be either life contingent or non-life contingent. These annuities are nonparticipating, do not provide for any loan or cash surrender value and, with few exceptions, do not permit future considerations.
Torts and Settlements. We offer innovative strategies for complex litigation settlements, primarily structured settlement annuities.
Structured settlement annuities are customized annuities designed to serve as an alternative to a lump sum payment in a lawsuit initiated because of personal injury, wrongful death, or a workers’ compensation claim or other claim for damages. Surrenders are generally not allowed, although commutations are permitted in certain circumstances. Guaranteed payments consist of life contingent annuities, term certain annuities and lump sums.
Capital Markets Investment Products. Products we offer include funding agreements, funding agreement-backed notes and funding agreement-backed commercial paper. We also issue funding agreements to receive Federal Home Loan Bank (“FHLB”) advances and through a program with the Federal Agricultural Mortgage Corporation (“Farmer Mac”).

10

Table of Contents

Funding agreement-backed notes are part of a medium term note program, under which funding agreements are issued to a special-purpose trust that issues marketable notes in U.S. dollars or foreign currencies. The proceeds of the issuance of a series of notes are used by the trust to acquire a funding agreement with matching interest and maturity payment terms from the Company. The notes are underwritten and marketed by major investment banks’ broker-dealer operations and are sold to institutional investors.
Funding agreement-backed commercial paper is issued by a special purpose limited liability company which deposits the proceeds under a master funding agreement issued to it by Metropolitan Life Insurance Company (“MLIC”) or MetLife USA. The commercial paper receives the same short-term credit rating as MLIC or MetLife USA and is marketed by major investment banks’ broker-dealer operations. The program allows for funding agreement-backed commercial paper to be issued in U.S. dollars or foreign currencies.
Through the Farmer Mac program, funding agreements have been issued by MLIC to Farmer Mac, as well as to certain special purpose entities (“SPEs”) that have issued debt securities for which payment of interest and principal is secured by such funding agreements, and such debt securities are also guaranteed as to payment of interest and principal by Farmer Mac.
Other Corporate Benefit Funding Products and Services. We offer specialized life insurance products and funding agreements designed specifically to provide solutions for funding postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives.
Latin America
In Latin America, our largest operations are in Mexico and Chile. The Latin America segment includes U.S. direct business, comprised of group and individual products sold through sponsoring organizations, affinity groups and direct to consumer.
The major products within Latin America are as follows: 
Universal Life, Variable Life, Fixed Annuities and Term Life. For a description of these products, see “ Retail.”
ProVida. We offer a savings oriented pension product under a mandatory privatized social security system. See Note 3 of the Notes to the Consolidated Financial Statements.
In addition to other various products discussed within the Americas, Latin America also engages in the following businesses:
Accident & Health Insurance. We offer group and individual major medical, accidental, and supplemental health products, including accidental death and disability, medical reimbursement, hospital indemnity and medical coverage for serious medical conditions.
Administradora de Fondos de Ahorro para el Retiro (“AFORE”). We offer a savings oriented pension product under the mandatory privatized social security system for all non-government employees.
Credit Insurance. We offer credit insurance policies designed to fulfill certain loan obligations in the event of the policyholder’s death.


11

Table of Contents

Operations
In the Americas, we operate in the U.S. and Latin America.
Sales Distribution
In the Americas, excluding Latin America, we market our products and services through various distribution channels. Our retail life, disability and annuities products targeted to individuals are sold via sales forces, comprised of MetLife employees, as well as third-party organizations. Our group and corporate benefit funding products are sold via sales forces primarily comprised of MetLife employees. Personal lines property & casualty insurance products are directly marketed to employees at their employer’s worksite. Personal lines property & casualty insurance products are also marketed and sold to individuals by independent agents, property & casualty specialists through a direct marketing channel, and via sales forces comprised of MetLife employees. MetLife sales employees work with all distribution channels to better reach and service customers, brokers, consultants and other intermediaries. In Latin America, we market our products and services through a multi-distribution strategy which varies by geographic region and stage of market development.
Retail Distribution
Retail products are sold through a diverse set of distribution networks in order to maximize penetration in the market place. These include our MetLife Premier Client Group, third-party organizations and property & casualty specialists.
Our MetLife Premier Client Group targets the middle to upper income consumer market, including the executives of small- to medium-sized companies and small business owners.

12

Table of Contents

We also sell Retail products through various third-party organizations. We distribute products to individuals and small to medium-sized businesses through independent general agencies, financial advisors, consultants, brokerage general agencies and other independent marketing organizations under contractual arrangements with the support of wholesalers. Additionally, wholesalers sell through financial intermediaries, including regional broker-dealers, brokerage firms, financial planners and banks.
We market and sell property & casualty products through independent agents, property & casualty specialists, and the MetLife Premier Client Group. In recent years, we have increased the number of independent agents appointed to sell these products.
Group, Voluntary & Worksite Benefits Distribution
Group, Voluntary & Worksite Benefits distributes its products and services through a sales force that is segmented by the size of the target customer. Marketing representatives sell either directly to corporate and other group customers or through an intermediary, such as a broker or consultant. In addition, voluntary products are sold by specialists. Employers have been emphasizing voluntary products and, as a result, we have increased our focus on communicating and marketing to employees in order to further foster sales of those products.
We are a leading provider of personal lines property & casualty insurance products offered to employees at their employer’s worksite. Marketing representatives market personal lines property & casualty insurance products to employers through a variety of means, including broker referrals and cross-selling to group customers. Once permitted by the employer, MetLife commences marketing efforts to employees, enabling them to purchase coverage and to request payroll deduction over the telephone.
We have entered into several operating joint ventures and other arrangements with third parties to expand the marketing and distribution opportunities of Group, Voluntary & Worksite Benefits products and services. We also sell our group products and services through sponsoring organizations and affinity groups and provide life and dental coverage to certain employees of the U.S. Government.
Corporate Benefit Funding Distribution
Corporate Benefit Funding products and services are distributed through dedicated sales teams and relationship managers. Products may be sold directly to benefit plan sponsors and advisors or through brokers, consultants or other intermediaries. In addition, these sales professionals work with individual, group and global distribution areas to better reach and service customers, brokers, consultants and other intermediaries.
Latin America Distribution
Latin America’s distribution channels include captive agents, direct marketing (“sponsored and direct to customer”), large multinational brokers and small and medium-sized brokers, direct and group sales forces (mostly for group policies without broker intermediation), and worksite marketing. The region has an exclusive and captive agency distribution network also selling a variety of individual life, accident & health, and pension products. In the direct marketing channel, we work with sponsors and telesales representatives selling mainly accident & health and individual life products directly to consumers. We currently work with active brokers with registered sales of group and individual life, accident & health, group medical, dental and pension products.
Asia
Product Overview
Our Asia segment engages in the following businesses:
Life Insurance . We offer both traditional and non-traditional life insurance products, such as whole life, term life, endowments, universal life and variable life products. We offer group life programs in most markets.
Accident & Health Insurance. We offer individual and group personal accident and supplemental health products, including AD&D, hospital indemnity, scheduled medical reimbursement plans, and coverage for serious medical conditions. In addition, we offer individual and group major medical coverage in select markets.
Retirement and Savings Products. We offer both fixed and variable annuity products in select markets, with our largest markets in Japan, Korea and China.
Credit Insurance. We offer credit insurance policies designed to fulfill certain obligations in the event of the policyholder’s death in select markets, including Japan, Australia and Bangladesh.

13

Table of Contents

Operations
We operate throughout Asia, with our largest operation in Japan.
Sales Distribution
Our Asia operations are geographically diverse with developed and emerging markets. We market our products and services through a multi-channel distribution strategy including career agency, bancassurance, direct marketing, brokerage, other third-party distribution and e-commerce.
Japan’s multi-channel distribution strategy consists of captive agents, independent agents, bancassurance, direct marketing and brokers. While face-to-face channels continue to be core to Japan’s business, other channels, including bancassurance and direct marketing, have become a critical part of Japan’s distribution strategy. Our Japan operation has maintained its position in bancassurance due to its strong distribution relationship with Japan’s mega banks, trust banks and various regional banks, as well as with the Japan Post. The direct marketing channel is supported by an industry-leading marketing platform, state-of-the-art call center infrastructure and its own campaign management system. Our direct marketing operations, the largest of which is in Japan, deploy both broadcast marketing approaches (e.g. direct response TV, web-based lead generation) and traditional direct marketing techniques such as inbound and outbound telemarketing.
Outside of Japan, our distribution strategies differ by country but generally utilize a combination of captive agents, bancassurance relationships and direct marketing. Throughout the region, our Asia operation leverages its expertise in direct marketing operations management to conduct its own campaigns and provide those direct marketing capabilities to third-party sponsors. While not a significant part of the region’s overall business, sales of group life and pension business are primarily achieved through independent brokers and an employee sales force.

14

Table of Contents

EMEA
Product Overview
Our EMEA segment engages in the following businesses:
Life Insurance. We offer both traditional and non-traditional life insurance products, such as whole life, term life, endowments and variable life products. We offer group term life programs in most markets.
Accident & Health Insurance. We offer individual and group personal accident and supplemental health products, including AD&D, hospital indemnity, scheduled medical reimbursement plans, and coverage for serious medical conditions. In addition, we offer individual and group major medical coverage in select markets.
Retirement and Savings Products. We offer fixed annuity products and pension products, including group pension programs in select markets. In Poland and Romania, we offer through specialized pension companies a savings oriented pension product under the mandatory privatized social security systems.
Credit Insurance. We offer credit insurance policies designed to fulfill certain obligations in the event of the policyholder’s death.
Operations
We operate in several countries across EMEA, with our largest operations in the Gulf and Poland.

15

Table of Contents

Sales Distribution
Our EMEA operations are geographically diverse with a mix of developed and emerging markets. We hold leading positions in several markets in the Middle East and Central & Eastern Europe, and focus on attractive niche segments in more developed markets. Emerging markets represent a significant part of the region’s overall earnings. Our businesses in EMEA employ a multi-channel distribution strategy, including captive and independent agency, bancassurance and direct-to-consumer.
Corporate & Other
Overview
The Company reports certain of its results of operations in Corporate & Other. Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including external integration costs, internal resource costs for associates committed to acquisitions, enterprise-wide strategic initiative restructuring charges, various start-up businesses (including expatriate benefits insurance and our investment management business through which we offer fee-based investment management services to institutional clients) and certain run-off businesses. Corporate & Other also includes assumed reinsurance of certain variable annuity products from our former operating joint venture in Japan. Under this in-force reinsurance agreement, we reinsure living and death benefit guarantees issued in connection with variable annuity products. Additionally, Corporate & Other includes interest expense related to the majority of the Company’s outstanding debt and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings.
Policyholder Liabilities
We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations when a policy matures or is surrendered, an insured dies or becomes disabled or upon the occurrence of other covered events, or to provide for future annuity payments. Our liabilities for future policy benefits and claims are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. For life insurance and annuity products, we calculate these liabilities based on assumptions and estimates, including estimated premiums to be received over the assumed life of the policy, the timing of the event covered by the insurance policy, the amount of benefits or claims to be paid and the investment returns on the investments we make with the premiums we receive. We establish liabilities for claims and benefits based on assumptions and estimates of losses and liabilities incurred. Amounts for actuarial liabilities are computed and reported in the consolidated financial statements in conformity with GAAP. For more details on policyholder liabilities see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Liability for Future Policy Benefits” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.”
Pursuant to applicable insurance laws and regulations, MetLife, Inc.’s insurance subsidiaries, including affiliated captive reinsurers, establish statutory reserves, reported as liabilities, to meet their obligations on their respective policies. These statutory reserves are established in amounts sufficient to meet policy and contract obligations, when taken together with expected future premiums and interest at assumed rates. Statutory reserves and actuarial liabilities for future policy benefits generally differ based on accounting guidance.
U.S. state insurance laws and regulations require certain MetLife entities to submit to superintendents of insurance, with each annual report, an opinion and memorandum of a “qualified actuary” that the statutory reserves and related actuarial amounts recorded in support of specified policies and contracts, and the assets supporting such statutory reserves and related actuarial amounts, make adequate provision for their statutory liabilities with respect to these obligations. See “— Regulation — U.S. Regulation — Insurance Regulation — Policy and Contract Reserve Adequacy Analysis.”
Insurance regulators in many of the non-U.S. countries in which we operate require certain MetLife entities to prepare a sufficiency analysis of the reserves presented in the locally required regulatory financial statements, and to submit that analysis to the regulatory authorities. See “— Regulation — International Regulation.”

16

Table of Contents

Underwriting and Pricing
Our Global Risk Management Department (“GRM”) contains a dedicated unit, the primary responsibility of which is the development of product pricing standards and independent pricing and underwriting oversight for MetLife’s insurance businesses. Further important controls around management of underwriting and pricing processes include regular experience studies to monitor assumptions against expectations, formal new product approval processes, periodic updates to product profitability studies and the use of reinsurance to manage our exposures, as appropriate. See “— Reinsurance Activity.”
Underwriting
Underwriting generally involves an evaluation of applications by a professional staff of underwriters and actuaries, who determine the type and the amount of insurance risk that we are willing to accept. We employ detailed underwriting policies, guidelines and procedures designed to assist the underwriter to properly assess and quantify such risks before issuing policies to qualified applicants or groups.
Insurance underwriting considers not only an applicant’s medical history, but also other factors such as financial profile, foreign travel, vocations and alcohol, drug and tobacco use. Group underwriting generally evaluates the risk characteristics of each prospective insured group, although with certain voluntary products and for certain coverages, members of a group may be underwritten on an individual basis. We generally perform our own underwriting; however, certain policies are reviewed by intermediaries under guidelines established by us. Generally, we are not obligated to accept any risk or group of risks from, or to issue a policy or group of policies to, any employer or intermediary. Requests for coverage are reviewed on their merits and a policy is not issued unless the particular risk or group has been examined and approved in accordance with our underwriting guidelines.
The underwriting conducted by our remote underwriting offices and intermediaries, as well as our corporate underwriting office, is subject to periodic quality assurance reviews to maintain high standards of underwriting and consistency. Such offices are also subject to periodic external audits by reinsurers with whom we do business.
We have established oversight of the underwriting process that facilitates quality sales and serves the needs of our customers, while supporting our financial strength and business objectives. Our goal is to achieve the underwriting, mortality and morbidity levels reflected in the assumptions in our product pricing. This is accomplished by determining and establishing underwriting policies, guidelines, philosophies and strategies that are competitive and suitable for the customer, the agent and us.
For our property & casualty business, our underwriting function has six principal aspects: evaluating potential voluntary and worksite employer accounts and independent agencies; establishing guidelines for the binding of risks; reviewing coverage bound by agents; underwriting potential insureds, on a case by case basis, presented by agents outside the scope of their binding authority; pursuing information necessary in certain cases to enable issuance of a policy within our guidelines; and ensuring that renewal policies continue to be written at rates commensurate with risk. Subject to very few exceptions, agents in each of the distribution channels have binding authority for risks which fall within our published underwriting guidelines. Risks falling outside the underwriting guidelines may be submitted for approval to the underwriting department; alternatively, agents in such a situation may call the underwriting department to obtain authorization to bind the risk themselves. In most states, we generally have the right within a specified period (usually the first 60 days) to cancel any policy.
We continually review our underwriting guidelines in light of applicable regulations and to ensure that our policies remain competitive and supportive of our marketing strategies and profitability goals.
Pricing
Product pricing reflects our pricing standards, which are consistent for our global businesses. GRM, as well as regional finance and product teams are responsible for pricing and oversight for all of our insurance businesses. Product pricing is based on the expected payout of benefits calculated through the use of assumptions for mortality, morbidity, expenses, persistency and investment returns, as well as certain macroeconomic factors, such as inflation. Investment-oriented products are priced based on various factors, which may include investment return, expenses, persistency and optionality and possible variability of results. For certain products, pricing may include prospective and retrospective experience rating features. Prospective experience rating involves the evaluation of past experience for the purpose of determining future premium rates and we bear all prior year gains and losses. Retrospective experience rating also involves the evaluation of past experience for the purpose of determining the actual cost of providing insurance for the customer; however, the contract includes certain features that allow us to recoup certain losses or distribute certain gains back to the policyholder based on actual prior years’ experience.

17

Table of Contents

Rates for group insurance and voluntary & worksite products (with the exception of property & casualty products) are based on anticipated earnings and expenses for the book of business being underwritten. Renewals are generally reevaluated annually or biannually and are repriced to reflect actual experience on such products. Products offered by Corporate Benefit Funding are priced on demand. Pricing reflects expected investment returns, as well as mortality, longevity and expense assumptions appropriate for each product. This business is generally nonparticipating and illiquid, as policyholders have few or no options or contractual rights to cash values.
Rates for individual life insurance products are highly regulated and generally must be approved by the regulators of the jurisdictions in which the product is sold. Generally, such products are renewed annually and may include pricing terms that are guaranteed for a certain period of time. Individual disability income products are based on anticipated results for the occupation being underwritten. Fixed and variable annuity products are also highly regulated and approved by the respective regulators. Such products generally include penalties for early withdrawals and policyholder benefit elections to tailor the form of the product’s benefits to the needs of the opting policyholder. We periodically reevaluate the costs associated with such options and will periodically adjust pricing levels on our guarantees. Further, from time to time, we may also reevaluate the type and level of guarantee features currently being offered.
For our property & casualty business, our ability to set and change rates is subject to regulatory oversight. Rates for our major lines of property & casualty insurance are based on our proprietary database, rather than relying on rating bureaus. We determine prices in part from a number of variables specific to each risk. The pricing of personal lines insurance products takes into account, among other things, the expected frequency and severity of losses, the costs of providing coverage (including the costs of acquiring policyholders and administering policy benefits and other administrative and overhead costs such as reinsurance), competitive factors and profit considerations. The major pricing variables for personal lines insurance include characteristics of the insured property, such as age, make and model or construction type, as well as characteristics of the insureds, such as driving record and loss experience, and the insured’s personal financial management. As a condition of our license to do business in each state, we, like all other personal lines insurers, are required to write or share the cost of private passenger automobile and homeowners insurance for higher risk individuals who would otherwise be unable to obtain such insurance. This “involuntary” market, also called the “shared market,” is governed by the applicable laws and regulations of each state, and policies written in this market are generally written at rates higher than standard rates and typically afford less coverage.
We continually review our pricing guidelines in light of applicable regulations and to ensure that our policies remain competitive and supportive of our marketing strategies and profitability goals.
Reinsurance Activity
We enter into reinsurance agreements primarily as a purchaser of reinsurance for our various insurance products and also as a provider of reinsurance for some insurance products issued by third parties. We participate in reinsurance activities in order to limit losses, minimize exposure to significant risks, and provide additional capacity for future growth. We enter into various agreements with reinsurers that cover individual risks, group risks or defined blocks of business, primarily on a coinsurance, yearly renewable term, excess or catastrophe excess basis. These reinsurance agreements spread risk and minimize the effect of losses. The extent of each risk retained by us depends on our evaluation of the specific risk, subject, in certain circumstances, to maximum retention limits based on the characteristics of coverages. We also cede first dollar mortality risk under certain contracts. In addition to reinsuring mortality risk, we reinsure other risks, as well as specific coverages. We obtain reinsurance for capital requirement purposes and also when the economic impact of the reinsurance agreement makes it appropriate to do so.
Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse us for the ceded amount in the event a claim is paid. Cessions under reinsurance agreements do not discharge our obligations as the primary insurer. In the event that reinsurers do not meet their obligations under the terms of the reinsurance agreements, reinsurance recoverable balances could become uncollectible.

18

Table of Contents

We reinsure our business through a diversified group of well-capitalized, highly rated reinsurers. We analyze recent trends in arbitration and litigation outcomes in disputes, if any, with our reinsurers. We monitor ratings and evaluate the financial strength of our reinsurers by analyzing their financial statements. In addition, the reinsurance recoverable balance due from each reinsurer is evaluated as part of the overall monitoring process. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. We generally secure large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. Additionally, we enter into reinsurance agreements for risk and capital management purposes with several affiliated captive reinsurers. Captive reinsurers are affiliated insurance companies licensed under specific provisions of insurance law of their respective jurisdictions, such as the Special Purpose Financial Captive law adopted by several states including Vermont and Delaware, and have a very narrow business plan that specifically restricts the majority or all of their activity to reinsuring business from their affiliates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital — Affiliated Captive Reinsurance Transactions.”
Americas - Excluding Latin America
For our Retail Life & Other insurance products, we have historically reinsured the mortality risk primarily on an excess of retention basis or on a quota share basis. We currently reinsure 90% of the mortality risk in excess of $2 million for most products. In addition to reinsuring mortality risk as described above, we reinsure other risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specified characteristics. On a case by case basis, we may retain up to $20 million per life and reinsure 100% of amounts in excess of the amount we retain. We evaluate our reinsurance programs routinely and may increase or decrease our retention at any time.
For our Retail Annuities business, we reinsure a portion of the living and death benefit guarantees issued in connection with our variable annuities. Under these reinsurance agreements, we pay a reinsurance premium generally based on fees associated with the guarantees collected from policyholders, and receive reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.
For our Group, Voluntary & Worksite Benefits segment, we generally retain most of the risk and only cede particular risk on certain client arrangements. The majority of our reinsurance activity within this segment relates to the following client agreements:
Employer sponsored captive programs: through these programs, employers buy a group life insurance policy with the condition that a portion of the risk is reinsured back to a captive insurer sponsored by the client.
Risk-sharing agreements: through these programs, clients require that we reinsure a portion of the risk back to third parties, such as minority-owned reinsurers.
Multinational pooling: through these agreements, employers buy many group insurance policies which are aggregated in a single insurer via reinsurance.
The risks ceded under these agreements are generally quota shares of group life and disability policies. The cessions vary from 50% to 90% of all the risks of the policies.
For our property & casualty business within both the Retail and Group, Voluntary & Worksite Benefits segments, we purchase reinsurance to manage our exposure to large losses (primarily catastrophe losses) and to protect statutory surplus. We cede losses and premiums based upon the exposure of the policies subject to reinsurance. To manage exposure to large property & casualty losses, we purchase property catastrophe, casualty and property per risk excess of loss reinsurance protection.
For our Corporate Benefit Funding segment, we have periodically engaged in reinsurance activities on an opportunistic basis. There were no such transactions during the periods presented.
Latin America, Asia and EMEA
For certain life insurance products, we currently reinsure risks in excess of $5 million to external reinsurers on a yearly renewable term basis. We may also reinsure certain risks with external reinsurers depending upon the nature of the risk and local regulatory requirements.
For selected large corporate clients, we reinsure group employee benefits or credit insurance business with various client-affiliated reinsurance companies, covering policies issued to the employees or customers of the clients. Additionally, we cede and assume risk with other insurance companies when either company requires a business partner with the appropriate local licensing to issue certain types of policies in certain countries. In these cases, the assuming company typically underwrites the risks, develops the products and assumes most or all of the risk.

19

Table of Contents

We also have reinsurance agreements in-force that reinsure a portion of the living and death benefit guarantees issued in connection with variable annuity products. Under these agreements, we pay reinsurance fees associated with the guarantees collected from policyholders, and receive reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.
Corporate & Other
We reinsure through 100% quota share reinsurance agreements certain run-off long-term care and workers’ compensation business written by MetLife USA.
Corporate & Other also has a reinsurance agreement in-force to reinsure the living and death benefit guarantees issued in connection with certain variable annuity products. Under this agreement, we receive reinsurance fees associated with the guarantees collected from policyholders, and provide reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.
Catastrophe Coverage
We have exposure to catastrophes which could contribute to significant fluctuations in our results of operations. We use excess reinsurance agreements, under which the direct writing company reinsures risk in excess of a specific dollar value for each policy within a class of policies, to provide greater diversification of risk and minimize exposure to larger risks. Such excess reinsurance agreements include retention reinsurance agreements and quota share reinsurance agreements. Retention reinsurance agreements provide for a portion of a risk to remain with the direct writing company, and quota share reinsurance agreements provide for the direct writing company to transfer a fixed percentage of all risks of a class of policies. Our life insurance products, particularly group life, subject us to catastrophe risk which we do not reinsure other than through our ongoing mortality reinsurance program which transfers risk at the individual policy level. For the Americas, excluding Latin America, we use excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks. Currently, for Latin America, Asia and EMEA, we purchase catastrophe coverage to insure risks within certain countries deemed by management to be exposed to the greatest catastrophic risks.
Reinsurance Recoverables
For information regarding ceded reinsurance recoverable balances, included in premiums, reinsurance and other receivables in the consolidated balance sheets, see Note 6 of the Notes to the Consolidated Financial Statements.

20

Table of Contents

Regulation
Index to Regulation
 
Page

21

Table of Contents

Overview
In the U.S., our life insurance companies are regulated primarily at the state le vel with some products and services also subject to federal regulation. I n addition, MetLife, Inc. and its U.S. insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. As a non-bank systemically important financial institution (“non-bank SIFI”), MetLife, Inc. is also subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of New York (collectively, with the Federal Reserve Board, the “Federal Reserve”) and the Federal Deposit Insurance Corporation (“FDIC”). Furthermore, some of MetLife’s operations, products and services are subject to consumer protection laws, securities, broker-dealer and investment adviser regulations, environmental and unclaimed property laws and regulations, and to the Employee Retirement Income Security Act of 1974 (“ERISA”). See “ U.S. Regulation.”
Our international insurance operations are principally regulated by insurance regulatory authorities in the jurisdictions in which they are located or operate. In addition, our investment and pension companies outside of the U.S. are subject to oversight by the relevant securities, pension and other authorities of the countries in which the companies operate. Our non-U.S. insurance businesses are also subject to current and developing solvency regimes which impose various capital and other requirements. As a global systemically important insurer (“G-SII”), MetLife, Inc. may also become subject to additional capital requirements. See “ International Regulation.”
U.S. Regulation
Insurance Regulation
State insurance regulation generally aims at supervising and regulating insurers, with the goal of protecting policyholders and ensuring that insurance companies remain solvent. Insurance regulators have increasingly sought information about the potential impact of activities in holding company systems as a whole, and some jurisdictions have adopted laws and regulations enhancing “group-wide” supervision, as supported by the National Association of Insurance Commissioners’ (“NAIC”) Solvency Modernization Initiative. See “— NAIC” for information regarding group-wide supervision.
Each of MetLife’s insurance subsidiaries operating in the United States is licensed and regulated in each U.S. jurisdiction where it conducts insurance business. The extent of such regulation varies, but most jurisdictions have laws and regulations governing the financial aspects and business conduct of insurers. State laws in the U.S. grant insurance regulatory authorities broad administrative powers with respect to, among other things:
licensing companies and agents to transact business;
calculating the value of assets to determine compliance with statutory requirements;
mandating certain insurance benefits;
regulating certain premium rates;
reviewing and approving certain policy forms;
regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements, and identifying and paying to the states benefits and other property that is not claimed by the owners;
regulating advertising;
protecting privacy;
establishing statutory capital and reserve requirements and solvency standards;
specifying the conditions under which a ceding company can take credit for reinsurance in its statutory financial statements (i.e., reduce its reserves by the amount of reserves ceded to a reinsurer);
fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts;
adopting and enforcing suitability standards with respect to the sale of annuities and other insurance products;
approving changes in control of insurance companies;
restricting the payment of dividends and other transactions between affiliates; and
regulating the types, amounts and valuation of investments.

22

Table of Contents

Each insurance subsidiary is required to file reports, generally including detailed annual financial statements, with insurance regulatory authorities in each of the jurisdictions in which it does business, and its operations and accounts are subject to periodic examination by such authorities. These subsidiaries must also file, and in many jurisdictions and in some lines of insurance obtain regulatory approval for, rules, rates and forms relating to the insurance written in the jurisdictions in which they operate.
State and federal insurance and securities regulatory authorities and other state law enforcement agencies and attorneys general from time to time make inquiries regarding compliance by MetLife, Inc. and its insurance subsidiaries with insurance, securities and other laws and regulations regarding the conduct of our insurance and securities businesses. We cooperate with such inquiries and take corrective action when warranted. See Note  21 of the Notes to the Consolidated Financial Statements.
Holding Company Regulation
Insurance holding company laws and regulations vary from jurisdiction to jurisdiction, but generally require a controlled insurance company (insurers that are subsidiaries of insurance holding companies) to register with state regulatory authorities and to file with those authorities certain reports, including information concerning its capital structure, ownership, financial condition, certain intercompany transactions and general business operations. The NAIC adopted revisions to the NAIC Insurance Holding Company System Model Act (“Model Holding Company Act”) and the Insurance Holding Company System Model Regulation (“Regulation”) in December 2010 and December 2014. The Model Holding Company Act and Regulation serve as a basis for action by the states. See “— NAIC” for further information on the Model Holding Company Act and Regulation.
State insurance statutes also typically place restrictions and limitations on the amount of dividends or other distributions payable by insurance company subsidiaries to their parent companies, as well as on transactions between an insurer and its affiliates. Dividends in excess of prescribed limits and transactions above a specified size between an insurer and its affiliates require the approval of the insurance regulator in the insurer’s state of domicile. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — MetLife, Inc. — Liquidity and Capital Sources — Dividends from Subsidiaries.” See also “Dividend Restrictions” in Note 16 of the Notes to the Consolidated Financial Statements for further information regarding such limitations, as well as an amendment to the New York Insurance Law permitting MLIC to pay stockholder dividends to MetLife, Inc. in any calendar year without prior insurance regulatory clearance under one of two alternative formulations during 2016 and going forward.
Federal Initiatives
Although the insurance business in the United States is primarily regulated by the states, federal initiatives often have an impact on our business in a variety of ways. From time to time, federal measures are proposed which may significantly affect the insurance business. These areas include financial services regulation, securities regulation, derivatives regulation, pension regulation, health care regulation, privacy, tort reform legislation and taxation. In addition, various forms of direct and indirect federal regulation of insurance have been proposed from time to time, including proposals for the establishment of an optional federal charter for insurance companies. See “—Health Care Regulation” and “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) effected the most far-reaching overhaul of financial regulation in the U.S. in decades. The full impact of Dodd-Frank on us will depend on the numerous rulemaking initiatives required or permitted by Dodd-Frank and the various studies mandated by Dodd-Frank, many of which remain to be completed.
Dodd-Frank established the Federal Insurance Office (“FIO”) within the Department of the Treasury, which has the authority to participate in the negotiations of international insurance agreements with foreign regulators for the U.S., as well as to collect information about the insurance industry and recommend prudential standards. While not having a general supervisory or regulatory authority over the business of insurance, the director of this office performs various functions with respect to insurance, including serving as a non-voting member of the Financial Stability Oversight Council (“FSOC”) and making recommendations to the FSOC regarding insurers to be designated for more stringent regulation. On December 12, 2013, the FIO issued a report, mandated by Dodd-Frank, which, among other things, urged the states to modernize and promote greater uniformity in insurance regulation. However, the report also discussed potential federal solutions if states failed to modernize and improve regulation and some of the report’s recommendations, for instance, favored a greater federal role in monitoring financial stability and identifying issues or gaps in the regulation of large national and internationally active insurers.

23

Table of Contents

Dodd-Frank also includes provisions that impact the investments and investment activities of MetLife, Inc. and its subsidiaries, including the federal regulation of such activities. Until the various final regulations are promulgated pursuant to Dodd-Frank, and perhaps for some time thereafter, the full impact of Dodd-Frank on such activities will remain unclear. Such provisions and regulations include, but are not limited to, the potential application of enhanced prudential standards and other restrictions, including the regulation of proprietary trading and sponsoring or investing in hedge funds or private equity funds, to non-bank SIFIs, all of which affect MetLife, Inc. as the FSOC has designated it as a non-bank SIFI. See “— Regulation as a Non-Bank SIFI.”
Health Care Regulation
The Patient Protection and Affordable Care Act (“PPACA”), signed into law on March 23, 2010, and The Health Care and Education Reconciliation Act of 2010, signed into law on March 30, 2010 (together, the “Affordable Care Act”), imposes obligations on MetLife as an enterprise, and as a provider of non-medical health insurance benefits and as a purchaser s of certain of these products. In 2014, we became subject to an excise tax called the “health insurer fee,” the cost of which is primarily passed on to group purchasers of certain of our dental and vision insurance products. Additionally, with respect to dental insurance products sold to groups with 50 or fewer employees, we have changed certain of our product offerings in response to the Affordable Care Act. The cost of these product changes will also be reflected in our pricing of such products. The Affordable Care Act and its related regulations have already resulted in increased and unpredictable costs to provide certain products and may have additional adverse effects. See “Risk Factors — Regulatory and Legal Risks — Legislative and Regulatory Activity in Health Care and Other Employee Benefits Could Affect our Profitability as a Provider of Life Insurance, Annuities, and Non-Medical Health Insurance Benefit Products.” It has also harmed our competitive position, as the Affordable Care Act has a disparate impact on our products compared to products offered by our not-for-profit competitors.
On July 14, 2014, the District of Columbia (“DC”) adopted a law that imposes an assessment on health insurers doing business in DC, including those that issue non-medical health-related products that are not subject to regulation under the Affordable Care Act. While the financial impact to the Company of DC’s action will be minimal, if other states decide to successfully adopt this model, there could be an impact on product pricing and sales. Currently 16 states and DC have created their own public healthcare exchanges. One other state (Connecticut) has levied an assessment and other states may also consider levying assessments on both medical and non-medical health insurers to fund their healthcare exchanges. On June 25, 2015, the U.S. Supreme Court, in the King v. Burwell decision, upheld the payment of tax credits to individuals who purchase coverage in states that have a federally facilitated exchange rather than a state exchange. Had the Supreme Court not upheld this payment, it is likely more states would have been compelled to create their own exchanges and possibly assess insurers for the fees of running these exchanges.
The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 also includes certain provisions for defined benefit pension plan funding relief. As part of our Corporate Benefit Funding segment, we offer general account and separate account group annuity products that enable a plan sponsor to transfer these risks, often in connection with the termination of defined benefit pension plans. See “Risk Factors — Regulatory and Legal Risks — Legislative and Regulatory Activity in Health Care and Other Employee Benefits Could Affect our Profitability as a Provider of Life Insurance, Annuities, and Non-Medical Health Insurance Benefit Products” for further information regarding the potential effect of such regulation.
Guaranty Associations and Similar Arrangements
Most of the U.S. jurisdictions in which our insurance subsidiaries are admitted to transact business require life, health and property & casualty insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay certain contractual insurance benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer is engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets.
In the past five years, the aggregate assessments levied against MetLife have not been material. We have established liabilities for guaranty fund assessments that we consider adequate. See Note  21 of the Notes to the Consolidated Financial Statements for additional information on the insolvency assessments.

24

Table of Contents

Insurance Regulatory Examinations and Other Activities
As part of their regulatory oversight process, state insurance departments conduct periodic detailed examinations of the books, records, accounts, and business practices of insurers domiciled in their states. State insurance departments also have the authority to conduct examinations of non-domiciliary insurers that are licensed in their states. Except as otherwise disclosed in Note  21 of the Notes to the Consolidated Financial Statements, during the years ended December 31, 2015 , 2014 and 2013 , MetLife did not receive any material adverse findings resulting from state insurance department examinations of its insurance subsidiaries.
Regulatory authorities in a small number of states, Financial Industry Regulatory Authority (“FINRA”) and, occasionally, the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by MLIC, MetLife USA, New England Life Insurance Company, General American Life Insurance Company (“GALIC”), and broker-dealer, MetLife Securities, Inc. These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. We may continue to resolve investigations in a similar manner.
In addition, claims payment practices by insurance companies have received increased scrutiny from regulators. See Note  21 of the Notes to the Consolidated Financial Statements for further information regarding retained asset accounts and unclaimed property inquiries and related litigation.
We also received an inquiry relating to licensing. See Note 21 of the Notes to the Consolidated Financial Statements for further information regarding the settlement of a licensing matter with the New York State Department of Financial Services (the “Department of Financial Services”) and the District Attorney, New York County, and a related amendment to the New York Insurance Law.
State insurance regulators and the NAIC are also investigating the use of affiliated captive reinsurers and offshore entities to reinsure insurance risks. The NAIC contracted with Rector & Associates to study captives and recommend additional regulation. Rector & Associates issued recommendations in June 2014, modifying its report which was released for comment in late February 2014 (as modified, the “Rector Report”). The Rector Report was adopted by an NAIC task force on June 30, 2014 and by an NAIC executive committee on August 17, 2014. As a result, a number of NAIC working groups have adopted and may continue to adopt additional regulations on captives. It is premature to project the impact, if any, of any such regulations on MetLife.
Like many life insurance companies, we utilize captive reinsurers to satisfy reserve and capital requirements related to universal life and term life insurance policies. Insurance regulators in a few states, including New York and California, have imposed a moratorium on new reinsurance transactions between life insurers domiciled in those states and captive reinsurers. We will continue to evaluate product modifications, pricing structure and alternative means of managing risks, capital and statutory reserves. We expect the discontinued use of captive reinsurance on new reserve financing transactions would not have a material impact on our future consolidated financial results. See “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.” As a result of the Mergers, we no longer cede any U.S. variable annuity guarantee risks to a captive reinsurer. Instead, our reinsured U.S. variable annuity risks that were previously reinsured by captives are now reinsured by MLIC, MetLife USA, or third parties. For more information on our use of captive reinsurers see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital — Affiliated Captive Reinsurance Transactions” and Note 16 of the Notes to the Consolidated Financial Statements.

25

Table of Contents

The International Association of Insurance Supervisors (“IAIS”) has encouraged U.S. insurance supervisors, such as the Department of Financial Services, to establish Supervisory Colleges for U.S.-based insurance groups with international operations, including MetLife, to facilitate cooperation and coordination among the insurance groups’ supervisors and to enhance the member regulators’ understanding of an insurance group’s risk profile. MetLife, Inc. was the subject of Supervisory College meetings in prior years chaired by the Department of Financial Services and attended by MetLife’s key U.S. and international insurance regulators. Because MetLife, Inc. is now supervised as a non-bank SIFI, an April 2015 Supervisory College was co-chaired by the Department of Financial Services and the Federal Reserve Bank of New York and attended by MetLife’s key U.S. and international regulators, including the FDIC, which has joint authority with the Federal Reserve Board over the resolution plan that MetLife will be required to submit. The next meeting is scheduled for June 2016 and will be chaired by the Federal Reserve Bank of New York. See “— Regulation as a Non-Bank SIFI — Enhanced Prudential Standards for Non-Bank SIFIs” below. We have not received any reports or recommendations from the Supervisory College meetings, and we do not expect any outcome of the meetings to have a material adverse effect on our business.
Policy and Contract Reserve Adequacy Analysis
Annually, our U.S. insurance subsidiaries, including affiliated captive reinsurers, are required to conduct an analysis of the adequacy of all statutory reserves. In each case, a qualified actuary must submit an opinion which states that the statutory reserves make adequate provision, according to accepted actuarial standards of practice, for the anticipated cash flows required by the contractual obligations and related expenses of the U.S. insurance subsidiary. The adequacy of the statutory reserves is considered in light of the assets held by the insurer with respect to such reserves and related actuarial items including, but not limited to, the investment earnings on such assets, and the consideration anticipated to be received and retained under the related policies and contracts. The Company may increase reserves in order to submit an opinion without qualification. Since inception of this requirement, our U.S. insurance subsidiaries which are required by their states of domicile to provide these opinions have provided such opinions without qualifications.
NAIC
The NAIC is an organization, the mission of which is to assist state insurance regulatory authorities in serving the public interest and achieving the insurance regulatory goals of its members, the state insurance regulatory officials. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate their regulatory oversight. The NAIC provides standardized insurance industry accounting and reporting guidance through its Accounting Practices and Procedures Manual (the “Manual”). However, statutory accounting principles continue to be established by individual state laws, regulations and permitted practices. Changes to the Manual or modifications by the various state insurance departments may impact the statutory capital and surplus of MetLife, Inc.’s U.S. insurance subsidiaries.
The Model Holding Company Act and Regulation include a new requirement that the ultimate controlling person of a U.S. insurer file an annual enterprise risk report with the lead state of the insurer identifying risks likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole. To date, all of the states where MetLife has domestic insurers have enacted a version of the revised Model Holding Company Act, including the enterprise risk reporting requirement. In December 2014, the NAIC adopted amendments to the Model Holding Company Act that would authorize state insurance commissioners to act as global group-wide supervisors for internationally active insurance groups, as well as other insurers who choose to opt in for the group-wide supervision. The amendments create a selection process for the group-wide supervisor, extend confidentiality protection to communications with the group-wide supervisor, and outline the duties of the group-wide supervisor. To date, a number of jurisdictions have adopted laws and regulations enhancing group-wide supervision.
The NAIC has concluded its “Solvency Modernization Initiative,” which was designed to review the U.S. financial regulatory system and all aspects of financial regulation affecting insurance companies. Though broad in scope, the NAIC’s Solvency Modernization Initiative focused on: (1) capital requirements; (2) corporate governance and risk management; (3) group supervision; (4) statutory accounting and financial reporting; and (5) reinsurance. In furtherance of this initiative, the NAIC adopted the Corporate Governance Annual Filing Model Act and Regulation at its August 2014 meeting. The new model, which requires insurers to make an annual confidential filing regarding their corporate governance policies, is expected to become effective in 2016. In addition, in September 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment Model Act (“ORSA”), which has been enacted by our insurance subsidiaries’ domiciliary states. ORSA requires that insurers maintain a risk management framework and conduct an internal own risk and solvency assessment of the insurer’s material risks in normal and stressed environments. The assessment must be documented in a confidential annual summary report, a copy of which must be made available to regulators as required or upon request. MetLife’s first ORSA summary report was submitted on behalf of the enterprise in December 2015.

26

Table of Contents

In December 2012, the NAIC approved a new valuation manual containing a principles-based approach to life insurance company reserves. Principles-based reserving is designed to better address reserving for products, including the current generation of products for which the current formulaic basis for reserve determination does not work effectively. The principles-based approach will not become effective unless it is enacted into law by a minimum number of state legislatures. Insurance commissioners of certain states (e.g., New York) oppose or do not actively support the principles-based reserve approach.
We cannot predict the capital and reserve impacts or compliance costs, if any, that may result from the above initiatives.
Surplus and Capital; Risk-Based Capital
Insurers are required to maintain their capital and surplus at or above minimum levels. Regulators have discretionary authority, in connection with the continued licensing of our U.S. insurance subsidiaries, to limit or prohibit an insurer’s sales to policyholders if, in their judgment, the regulators determine that such insurer has not maintained the minimum surplus or capital or that the further transaction of business will be hazardous to policyholders. Most of our U.S. insurance subsidiaries are subject to risk-based capital (“RBC”) requirements. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer and is calculated on an annual basis. The major categories of risk involved are asset risk, insurance risk, interest rate risk, market risk and business risk. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC levels. As of the date of the most recent annual statutory financial statements filed with insurance regulators, the total adjusted capital of each of our subsidiaries subject to these requirements was in excess of each of those RBC levels. See “Statutory Equity and Income” in Note 16 of the Notes to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital — Statutory Capital and Dividends.”
While not required by or filed with insurance regulators, we calculate internally defined combined RBC ratios (“Combined RBC Ratios”), which are determined by dividing the sum of total adjusted capital for MetLife, Inc.’s principal U.S. insurance subsidiaries, excluding American Life Insurance Company (“American Life”), by the sum of company action level RBC for such subsidiaries. We calculate Combined RBC Ratios based on NAIC capital and reserving requirements (“NAIC-Based Combined RBC Ratios”). We also calculate Combined RBC Ratios derived from the statutory-basis financial statements as filed with insurance regulators (“Statement-Based Combined RBC Ratios”), which include additional capital requirements as required by the Department of Financial Services for the Company’s New York domiciled insurance subsidiaries.
Our NAIC-Based Combined RBC Ratios were 537% and 437% at December 31, 2015 and 2014, respectively. Our Statement-Based Combined RBC Ratios were 513% and 398% at December 31, 2015 and 2014, respectively. Higher total adjusted capital coupled with lower company action level RBC resulted in an increase of 100 points in the NAIC-Based Combined RBC Ratio at December 31, 2015 as compared to 2014 and contributed to the increase of 115 points in the Statement-Based Combined RBC Ratio at December 31, 2015 as compared to 2014. In addition, the reserve relief from the Department of Financial Services discussed below also contributed to this increase in the Statement-Based Combined RBC Ratio.
Combined statutory net income of MetLife, Inc.’s U.S. insurance subsidiaries, excluding American Life, was $3.2 billion (see Note 16 of the Notes to the Consolidated Financial Statements) and $2.3 billion on a statement-basis and NAIC-basis, respectively, for the year ended December 31, 2015. In both cases, statutory net income was the primary driver of the increase in total adjusted capital. In addition, statutory net income on a statement-basis benefited from the release of asset adequacy reserves at MLIC as discussed below. This was partially offset by an increase in reserves at MetLife USA. Also, on February 24, 2016, MetLife, Inc. paid a cash capital contribution of $1.5 billion to MetLife USA, which is included in MetLife USA statutory capital as of December 31, 2015 and also increased total adjusted capital. This capital contribution was made in contemplation of the proposed Separation. See Note 23 of the Notes to the Consolidated Financial Statements. The additional MetLife USA capital was not required to meet any regulatory solvency or liquidity targets but rather is intended to support the anticipated standalone ratings of the insurance subsidiaries of the new company. This net increase in total adjusted capital was partially offset by dividends to MetLife, Inc. and unrealized investment losses of $2.3 billion and $0.8 billion, respectively, for the year ended December 31, 2015.

27

Table of Contents

Benefits from the shifting of the investment portfolio to asset classes with lower risk charges resulted in lower company action level RBC. This was coupled with lower market risk charges on variable annuity reserves, since in 2015 reserves were increased sufficiently to cover this market risk charge to RBC.
In addition to the aforementioned drivers of the increase in the NAIC-Based Combined RBC Ratio, the increase in the Statement-Based Combined RBC Ratios of 115 points was driven by Department of Financial Services Special Considerations Letters (each, an “SCL”) in 2015 and 2014, which lowered MLIC’s statement-based statutory capital and surplus at December 31, 2015 and 2014 by $0.5 billion and $1.4 billion, respectively, compared to NAIC-based statutory capital and surplus. The 2015 SCL provided meaningful relief to MLIC as compared to the 2014 SCL as it included, among other things, a provision that allowed insurers to seek approval to aggregate the results of their life, annuity and health businesses to satisfy asset adequacy testing requirements. This enabled MLIC to release asset adequacy reserves for long-term care and market value adjusted annuities of $0.7 billion and $0.2 billion, respectively, at December 31, 2015 and to avoid an estimated additional $0.3 billion of reserve strengthening that would have been required at December 31, 2015.
Effective December 31, 2013, the Department of Financial Services discontinued its most recent amendment to Regulation 147 which governed the valuation of life insurance policies. The amendment reflected changes made in 2013 by the NAIC to Actuarial Guideline 38 (which impacts the valuation of universal and variable life policies with secondary guarantees (“ULSG”)). As a result of this action, New York licensed insurers are required to comply with a prior version of the regulation. As of December 31, 2015, statutory reserves on in-force ULSG, net of reinsurance, exceed NAIC requirements by $103 million for MLIC and $26 million for MetLife Reinsurance Company of Vermont (“MRV”). The change in the regulation has a minimal reserve impact on new sales of ULSG products.
We are not aware of any NAIC adoptions that would have a material impact on the RBC of our U.S. insurance subsidiaries.
Regulation of Investments
Each of our U.S. insurance subsidiaries is subject to state laws and regulations that require diversification of our investment portfolios and limit the amount of investments in certain asset categories, such as below investment grade fixed income securities, real estate equity, other equity investments, and derivatives. Failure to comply with these laws and regulations would cause investments exceeding regulatory limitations to be treated as non-admitted assets for purposes of measuring surplus and, in some instances, would require divestiture of such non-qualifying investments. We believe that the investments made by each of MetLife, Inc.’s U.S. insurance subsidiaries complied, in all material respects, with such regulations at December 31, 2015 .
Regulation as a Non-Bank SIFI
On December 18, 2014, the FSOC designated MetLife, Inc. as a non-bank SIFI subject to regulation by the Federal Reserve and to enhanced supervision and prudential standards. See “— Enhanced Prudential Standards for Non-Bank SIFIs.”
On January 13, 2015, MetLife, Inc. filed an action in the U.S. District Court for the District of Columbia asking the court to review and rescind the FSOC’s designation of MetLife, Inc. as a non-bank SIFI. The court held oral argument on the parties’ cross motions for summary judgment on February 10, 2016. On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. See Note 23 of the Notes to the Consolidated Financial Statements. See also “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth — U.S Regulation — Regulation of MetLife, Inc. as a Non-Bank SIFI” regarding the potential impact of the proposed Separation on MetLife, Inc.’s or the new company’s status as a non-bank SIFI.
Regulation of MetLife, Inc. as a non-bank SIFI could materially and adversely affect our business. For example, although the Federal Reserve Board has not yet determined the enhanced capital requirements that will apply to MetLife, those capital requirements may adversely affect our ability to compete with other insurers that are not subject to those requirements, and our ability to issue guarantees could be constrained. In addition, as a non-bank SIFI, MetLife, Inc. needs to obtain Federal Reserve approval before directly or indirectly acquiring, merging or consolidating with a financial company having more than $10 billion of assets or acquiring 5% or more of any voting class of securities of a bank or bank holding company and, depending on the extent of the combined company’s liabilities, is subject to additional restrictions regarding its ability to merge. The Federal Reserve also has the right to require any of our insurance companies, or insurance company affiliates, to take prompt action to correct any financial weaknesses.

28

Table of Contents

Together with other non-bank SIFIs, MetLife, Inc. is subject to a number of Dodd-Frank requirements including responsibility to pay certain assessments and other charges (i) equal to the total expenses the Federal Reserve Board thinks is necessary for its supervision of bank holding companies and savings and loan holding companies with assets of $50 billion or more, and non-bank SIFIs, and (ii) in connection with the Financial Research Fund within the U.S. Department of Treasury that funds the Office of Financial Research, an agency established by Dodd-Frank to improve the quality of financial data available to policymakers and facilitate more robust and sophisticated analysis of the financial system.
Enhanced Prudential Standards for Non-Bank SIFIs
In December 2011, in accordance with Dodd-Frank, the Federal Reserve Board proposed a rule that would have applied a set of prudential standards to non-bank SIFIs, including enhanced RBC requirements, leverage limits, liquidity requirements, single counterparty exposure limits, governance requirements for risk management, stress test requirements, special debt-to-equity limits for certain companies, and early remediation procedures. While the final rule did not apply to non-bank SIFIs, the Federal Reserve Board has indicated that it plans to apply enhanced prudential standards to non-bank SIFIs by rule or order, enabling it to more appropriately tailor the standards to non-bank SIFIs and will provide affected non-bank SIFIs with notice and the opportunity to comment prior to determination of their enhanced prudential standards. Accordingly, the manner in which these proposed standards might apply to MetLife, Inc. remains unclear.
In particular, the Federal Reserve Board has not determined the requirements that will govern the amount and composition of capital that MetLife, Inc. is required to hold. Legislation was signed into law on December 18, 2014 relieving the Federal Reserve Board from certain provisions in Dodd-Frank that it believed constrained its ability to tailor capital rules for insurers that are non-bank SIFIs. See “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth — U.S. Regulation — Regulation of MetLife, Inc. as a Non-Bank SIFI.” On September 30, 2014, the Federal Reserve Board announced that it would begin a quantitative impact study (“QIS”) to evaluate the potential effects of its revised regulatory capital framework on savings and loan holding companies and non-bank financial companies supervised by the Federal Reserve that are substantially engaged in insurance underwriting activity (insurance holding companies). The Federal Reserve Board conducted the QIS in order to enable it to design a capital framework for insurance holding companies it supervises; however, because the QIS was designed prior to the December 18, 2014 statutory change, the Federal Reserve has said the data collected has limitations and that they may seek additional data in the future. MetLife, Inc. voluntarily participated in the QIS.
Stress testing requirements have been implemented, which will, once capital requirements for non-bank SIFIs are determined, require non-bank SIFIs to undergo three stress tests each year: an annual supervisory stress test conducted by the Federal Reserve and two company-run stress tests (an annual test which coincides with the timing of the supervisory stress test, and a mid-cycle test). Companies will be required to take the results of the stress tests into consideration in their annual capital planning and resolution and recovery planning. As a non-bank SIFI, MetLife, Inc.’s competitive position and its ability to pay dividends, repurchase common stock or other securities or engage in other transactions that could affect its capital or need for capital could be adversely affected by any additional capital requirements that might be imposed as a result of the stress testing requirements, as well as enhanced prudential standards, other measures imposed as a result of the enactment of Dodd-Frank and other regulatory initiatives.
Non-bank SIFIs are required to submit a resolution plan setting forth how the company could be resolved under the Bankruptcy Code in the event of material financial distress. Resolution plans have to be resubmitted annually and promptly following any event, occurrence, change in conditions or circumstances, or other change that results in, or could reasonably be foreseen to have, a material effect on the resolution plan. A failure to submit a “credible” resolution plan could result in the imposition of a variety of measures, including additional capital, leverage, or liquidity requirements, and forced divestiture of assets or operations. As a non-bank SIFI, MetLife, Inc. will be required to submit a resolution plan by December 31, 2016, unless the Federal Reserve Board and FDIC require a different due date.
In addition, if it were determined that MetLife, Inc. posed a substantial threat to U.S. financial stability, the applicable federal regulators would have the right to require it to take one or more other mitigating actions to reduce that risk, including limiting its ability to merge with or acquire another company, terminating activities, restricting its ability to offer financial products or requiring it to sell assets or off-balance sheet items to unaffiliated entities. Enhanced standards would also permit, but not require, regulators to establish requirements with respect to contingent capital, enhanced public disclosures and short-term debt limits. These standards are described as being more stringent than those otherwise imposed on bank holding companies; however, the Federal Reserve is permitted to apply them on an institution-by-institution basis, depending on its determination of the institution’s level of risk.

29

Table of Contents

Orderly Liquidation Authority
Under the provisions of Dodd-Frank relating to the resolution or liquidation of certain types of financial institutions, if MetLife, Inc. or another financial institution were to become insolvent or were in danger of defaulting on its obligations, it could be compelled to undergo liquidation with the FDIC as receiver. For this new regime to be applicable, a number of determinations would have to be made, including that a default by the affected company would have serious adverse effects on financial stability in the U.S. While under this new regime an insurance company would be resolved in accordance with state insurance law, if the FDIC were to be appointed as the receiver for another type of company (including an insurance holding company such as MetLife, Inc.), the liquidation of that company would occur under the provisions of the new liquidation authority, and not under the Bankruptcy Code, which ordinarily governs liquidations. The FDIC’s purpose under the liquidation regime is to mitigate the systemic risks the institution’s failure poses, which is different from that of a bankruptcy trustee under the Bankruptcy Code. In such a liquidation, the holders of such company’s debt could in certain respects be treated differently than under the Bankruptcy Code. As required by Dodd-Frank, the FDIC has established rules relating to the priority of creditors’ claims and the potentially dissimilar treatment of similarly situated creditors. These provisions could apply to some financial institutions whose outstanding debt securities we hold in our investment portfolios. Dodd-Frank also provides for the assessment of bank holding companies with assets of $50 billion or more, non-bank SIFIs, and other financial companies with assets of $50 billion or more, to cover the costs of liquidating any financial company subject to the new liquidation authority.
Volcker Rule
Under the Volcker Rule, Dodd-Frank authorizes through rulemaking additional capital requirements and quantitative limits on proprietary trading and sponsoring or investing in funds (hedge funds and private equity funds) that rely on certain exemptions from the Investment Company Act of 1940, as amended (the “Investment Company Act”), by a non-bank SIFI. Regulations defining and governing such requirements and limits on non-bank SIFIs have not been proposed and were not addressed in the final regulations issued on December 10, 2013 implementing the Volcker Rule for insured depository institutions and their affiliates (“Volcker Rule Regulations”). After designation as a non-bank SIFI, a non-bank SIFI will have a two-year period, subject to further extension by the Federal Reserve Board, to conform to any such requirements and limits that may be set forth in final regulations applicable to non-bank SIFIs. Subject to safety and soundness determinations as part of rulemaking that could require additional capital requirements and quantitative limits, Dodd-Frank provides that the exemptions under the Volcker Rule also are available to exempt any additional capital requirements and quantitative limits on non-bank SIFIs. The Volcker Rule Regulations provide an exemption, subject to certain requirements, for trading activities and fund sponsorship and investments by a regulated insurance company and its affiliates solely for the general account or separate account of such insurance company. Until final regulations applicable to non-bank SIFIs have been promulgated, it is unclear whether MetLife, Inc., as a non-bank SIFI, may have to alter any of its future activities to comply.
ERISA Considerations
We provide products and services to certain employee benefit plans that are subject to ERISA or the Internal Revenue Code of 1986, as amended (the “Code”). As such, our activities are subject to the restrictions imposed by ERISA and the Code, including the requirement under ERISA that fiduciaries must perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that fiduciaries may not cause a covered plan to engage in certain prohibited transactions. The applicable provisions of ERISA and the Code are subject to enforcement by the Department of Labor (“DOL”), the Internal Revenue Service and the Pension Benefit Guaranty Corporation.
The prohibited transaction rules of ERISA and the Code generally restrict the provision of investment advice to ERISA plans and participants and Individual Retirement Accounts (“IRAs”) if the investment recommendation results in fees paid to the individual advisor, his or her firm or their affiliates that vary according to the investment recommendation chosen.
The DOL proposed new regulations in April 2015 that would substantially expand the definition of “investment advice” and thereby broaden the circumstances under which MetLife, in providing investment advice with respect to ERISA plans, plan participants or IRAs, could be deemed a fiduciary under ERISA or the Code. Pursuant to the proposal, any communications with plans, plan participants and IRA holders, including the marketing of products, and marketing of investment management or advisory services, could be deemed fiduciary investment advice, thus, causing increased exposure to fiduciary liability. The DOL also proposed amendments to its prohibited transaction exemptions, and proposed a new exemption, that would apply more onerous disclosure and contract requirements to, and increase fiduciary requirements and fiduciary liability exposure in respect of, transactions involving ERISA plans, plan participants and IRAs.

30

Table of Contents

If the new DOL proposals become final, MetLife may find it necessary to change sales representative and/or broker compensation and may limit the assistance or advice they can provide. Sales to middle income investors would be unlikely to generate fees sufficient to offset the increased cost of providing advice under the rules, if adopted as proposed. Under the rules as proposed, MetLife could reduce its risk of exposure to fiduciary liability by electing not to engage in the concurrent manufacturing and distribution of certain products, including individual annuity products. Further, if the proposed rules apply to welfare benefit plans, they will disrupt settled practices in the marketing and sales of welfare benefit plan insurance products.
In addition, the DOL has issued a number of regulations that increase the level of disclosure that must be provided to plan sponsors and participants. The participant disclosure regulations and the regulations which require service providers to disclose fee and other information to plan sponsors took effect in 2012. In John Hancock Mutual Life Insurance Company v. Harris Trust and Savings Bank (1993), the U.S. Supreme Court held that certain assets in excess of amounts necessary to satisfy guaranteed obligations under a participating group annuity general account contract are “plan assets.” Therefore, these assets are subject to certain fiduciary obligations under ERISA, which requires fiduciaries to perform their duties solely in the interest of ERISA plan participants and beneficiaries. On January 5, 2000, the Secretary of Labor issued final regulations indicating, in cases where an insurer has issued a policy backed by the insurer’s general account to or for an employee benefit plan, the extent to which assets of the insurer constitute plan assets for purposes of ERISA and the Code. The regulations apply only with respect to a policy issued by an insurer on or before December 31, 1998 (“Transition Policy”). No person will generally be liable under ERISA or the Code for conduct occurring prior to July 5, 2001, where the basis of a claim is that insurance company general account assets constitute plan assets. An insurer issuing a new policy that is backed by its general account and is issued to or for an employee benefit plan after December 31, 1998 will generally be subject to fiduciary obligations under ERISA, unless the policy is a guaranteed benefit policy.
The regulations indicate the requirements that must be met so that assets supporting a Transition Policy will not be considered plan assets for purposes of ERISA and the Code. These requirements include detailed disclosures to be made to the employee benefits plan and the requirement that the insurer must permit the policyholder to terminate the policy on 90 days’ notice and receive without penalty, at the policyholder’s option, either (i) the unallocated accumulated fund balance (which may be subject to market value adjustment) or (ii) a book value payment of such amount in annual installments with interest. We have taken and continue to take steps designed to ensure compliance with these regulations.
Consumer Protection Laws
Numerous federal and state laws affect MetLife, Inc.’s earnings and activities, including federal and state consumer protection laws. As part of Dodd-Frank, Congress established the Consumer Financial Protection Bureau (“CFPB”) to supervise and regulate institutions that provide certain financial products and services to consumers. Although the consumer financial services subject to the CFPB’s jurisdiction generally exclude insurance business of the kind in which we engage, the CFPB does have authority to regulate non-insurance consumer services we provide.
In August 2013, MetLife Bank, National Association (“MetLife Bank”) merged with and into MetLife Home Loans LLC (“MLHL”), its former subsidiary, with MLHL as the surviving, non-bank entity. The sole purpose of MLHL is to wind-down the limited remaining activities and fulfill remaining obligations and duties of MetLife Bank, some of which subject MLHL to certain federal consumer financial protection laws and certain state laws.

31

Table of Contents

Regulation of Over-the-Counter Derivatives
Dodd-Frank includes a framework of regulation of the over-the-counter (“OTC”) derivatives markets which requires clearing of certain types of transactions currently traded OTC and imposes additional costs, including new reporting and margin requirements, and will likely impose additional regulation on the Company, including new capital requirements. Our costs of risk mitigation are increasing under Dodd-Frank. For example, Dodd-Frank imposes requirements, including the requirement to pledge initial margin (i) for “OTC-cleared” transactions (OTC derivatives that are cleared and settled through central clearing counterparties) entered into after June 10, 2013, and (ii) for “OTC-bilateral” transactions (OTC derivatives that are bilateral contracts between two counterparties) entered into after the phase-in period; these requirements will be applicable to us in 2020 because the Office of the Comptroller of the Currency (the “OCC”), the Federal Reserve Board, FDIC, Farm Credit Administration and Federal Housing Finance Agency (collectively, the “Prudential Regulators”) and the U.S. Commodity Futures Trading Commission (“CFTC”) adopted final margin requirements for non-centrally cleared derivatives during the fourth quarter of 2015, which are broadly consistent with the requirements published by the Bank of International Settlements and International Organization of Securities. These increased margin requirements, combined with increased capital charges for our counterparties and central clearinghouses to hold non-cash collateral, will require increased holdings of cash and highly liquid securities with lower yields causing a reduction in income. Centralized clearing of certain OTC derivatives exposes us to the risk of a default by a clearing member or clearinghouse with respect to our cleared derivative transactions. We use derivatives to mitigate a wide range of risks in connection with our businesses, including the impact of increased benefit exposures from certain of our annuity products that offer guaranteed benefits. We have always been subject to the risk that hedging and other management procedures might prove ineffective in reducing the risks to which insurance policies expose us or that unanticipated policyholder behavior or mortality, combined with adverse market events, could produce economic losses beyond the scope of the risk management techniques employed. Any such losses could be increased by higher costs of writing derivatives (including customized derivatives) and the reduced availability of customized derivatives that might result from the implementation of Dodd-Frank and comparable international derivatives regulations.
Dodd-Frank also expanded the definition of “swap” and mandated the SEC and CFTC (collectively, the “Commissions”) to study whether “stable value contracts” should be treated as swaps. Pursuant to the new definition and the Commissions’ interpretive regulations, products offered by our insurance subsidiaries other than stable value contracts might also be treated as swaps, even though we believe otherwise. Should such products become regulated as swaps, we cannot predict how the rules would be applied to them or the effect on such products’ profitability or attractiveness to our clients.
Securities, Broker-Dealer and Investment Adviser Regulation
Some of our subsidiaries and their activities in offering and selling variable insurance products are subject to extensive regulation under the federal securities laws administered by the SEC. These subsidiaries issue variable annuity contracts and variable life insurance policies through separate accounts that are registered with the SEC as investment companies under the Investment Company Act. Each registered separate account is generally divided into sub-accounts, each of which invests in an underlying mutual fund which is itself a registered investment company under the Investment Company Act. In addition, the variable annuity contracts and variable life insurance policies issued by these registered separate accounts are registered with the SEC under the Securities Act of 1933. Other subsidiaries are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934 (“Exchange Act”), and are members of, and subject to regulation by, FINRA. Further, some of our subsidiaries are registered as investment advisers with the SEC under the Investment Advisers Act of 1940, as amended, and are also registered as investment advisers in various states, as applicable. Certain variable contract separate accounts sponsored by our subsidiaries are exempt from registration, but may be subject to other provisions of the federal securities laws.
Federal and state securities regulatory authorities and FINRA from time to time make inquiries and conduct examinations regarding compliance by MetLife, Inc. and its subsidiaries with securities and other laws and regulations. We cooperate with such inquiries and examinations and take corrective action when warranted.
Federal and state securities laws and regulations are primarily intended to protect investors in the securities markets and generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations. We may also be subject to similar laws and regulations in the foreign countries in which we provide investment advisory services, offer products similar to those described above, or conduct other activities.

32

Table of Contents

Environmental Considerations
As an owner and operator of real property, we are subject to extensive federal, state and local environmental laws and regulations. Inherent in such ownership and operation is also the risk that there may be potential environmental liabilities and costs in connection with any required remediation of such properties. In addition, we hold equity interests in companies that could potentially be subject to environmental liabilities. We routinely have environmental assessments performed with respect to real estate being acquired for investment and real property to be acquired through foreclosure. We cannot provide assurance that unexpected environmental liabilities will not arise. However, based on information currently available to us, we believe that any costs associated with compliance with environmental laws and regulations or any remediation of such properties will not have a material adverse effect on our business, results of operations or financial condition.
Unclaimed Property
We are subject to the laws and regulations of states and other jurisdictions concerning identification, reporting and escheatment of unclaimed or abandoned funds, and are subject to audit and examination for compliance with these requirements. See Note 21 of the Notes of the Consolidated Financial Statements.
International Regulation
Regulation of our insurance operations outside of the U.S. includes minimum capital, solvency and operational requirements. The authority of our international operations to conduct business is subject to licensing requirements, permits and approvals, and these authorizations are subject to modification and revocation. Periodic examinations of insurance company books and records, financial reporting requirements, market conduct examinations and policy filing requirements are among the techniques used by regulators to supervise our non-U.S. insurance businesses. We also have investment and pension companies in certain foreign jurisdictions that provide mutual fund, pension and other financial products and services. Those entities are subject to securities, investment, pension and other laws and regulations. In some jurisdictions, some of our insurance products are considered “securities” under local law and may be subject to local securities regulations and oversight by local securities regulators.
Our international operations are exposed to increased political, legal, financial, operational and other risks. See “Risk Factors — Risks Related to Our Business — Our International Operations Face Political, Legal, Operational and Other Risks, Including Exposure to Local and Regional Economic Conditions, That Could Negatively Affect Those Operations or Our Profitability” and “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.” Changes in the laws and regulations that affect our customers and independent sales intermediaries or their operations also may affect our business relationships with them and their ability to purchase or distribute our products. Such actions may negatively affect our business in these jurisdictions. For example, a new tax on assets in Poland became effective on January 1, 2016. This legislation applies to insurers, banks and branches of foreign banks and insurers. We expect this legislation to have a negative impact on our business in Poland, but we do not expect it to have a material impact on our overall business. In addition, a tax reform bill was enacted in Chile on September 29, 2014 which includes, among other things, a gradual increase in the corporate tax rate from 20% to 27%, with a taxpayer election that limits the corporate tax rate to 25% but eliminates the taxable profits fund, an exemption on taxes on corporate income that is reinvested. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Segment Results and Corporate & Other — EMEA” for a discussion of a write-down of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) associated with our EMEA business and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Segment Results and Corporate & Other — Latin America” for information regarding the impact on our Latin America business of this tax legislation in Chile. Also pending in Chile are changes to its pension system: a bill to create a state-owned pension company was introduced and a Presidential Advisory Committee was created to draft a reform proposal of the pension system. The committee issued a series of recommendations in September 2015, but the reform proposal has not been finalized and may still change further if a bill results from their recommendations. It is premature to predict the impact of such reforms on our pension business in Chile.
Part of our international insurance operations may be subject to assessments, generally based on their proportionate share of business written in the relevant jurisdiction, for certain obligations to policyholders and claimants resulting from the insolvency of insurance companies. See “—Japan.” Annually, many of our international insurance operations are required to conduct an analysis of the sufficiency of all statutory reserves. In most of those cases, a locally qualified actuary must submit an analysis of the likelihood that the reserves make good and sufficient provision for the associated contractual obligations and related expenses of the insurer. Local regulatory and actuarial standards for this vary widely; the required implied certainty of the signing actuary’s opinion varies equally widely.

33

Table of Contents

We expect the scope and extent of regulation outside of the U.S., as well as regulatory oversight, generally, to continue to increase. The regulatory environment in the countries in which we operate and changes in laws could have a material adverse effect on our results of operations.
Solvency Regimes
Solvency II
Our insurance business throughout the European Economic Area (“EEA”) is subject to Solvency II, which consists of two inter-linked directives: Solvency II and Omnibus II. Solvency II was adopted by European authorities in 2009. It codifies and harmonizes regulation for insurance undertakings established in the European Union (“EU”). It provides a framework for new risk management practices, solvency capital standards and disclosure requirements. Omnibus II, amending Solvency II, was adopted in April 2014. It contains provisions that adapt Solvency II to the new supervisory architecture establishing the European Insurance and Occupational Pensions Authority (“EIOPA”) and includes a package of measures to facilitate the provision of insurance products with long-term guarantees. Both directives became effective on January 1, 2016.
Leading up to Solvency II’s effective date, EIOPA published Interim Guidelines aimed at increasing preparedness of both supervisors and insurers. The Interim Guidelines were applicable since January 1, 2014 and included certain reporting and organizational requirements with which we have complied in accordance with the requirements of our local regulators. Leading up to the effective date of both directives in 2016, the European authorities continued to establish supporting rules and guidance that implemented the legislation. Our operations within the EEA are prepared to comply with such requirements.
Other Solvency Regimes
Our insurance business in Mexico will be impacted by Mexico’s insurance law reform, adopted in February 2013. The reform, which became fully effective on January 1, 2016, envisions a Solvency II-type regulatory framework, instituting changes to reserve and capital requirements and corporate governance and fostering greater transparency.
In Chile, the law implementing Solvency II-like regulation is currently in the studies stage. However, the Chilean insurance regulator has already issued two resolutions, one for governance, and the other for risk management and control framework requirements. MetLife Chile has already implemented governance changes and risk policies to comply with these resolutions. In January 2015, the regulator requested an impact study considering the third draft of the regulation for RBC requirements which was submitted in May 2015. In November 2015, the local regulator issued a draft regulation which requires Insurance undertakings to implement a risk appetite framework and produce an “Own Risk and Solvency Assessment.” A fourth impact study will be performed during 2016. The new solvency and supervisory regime is expected to be in force in 2017.
In China, the business of our joint venture (as well as the industry) will be impacted by China Risk Oriented Solvency System (“C-ROSS”), a new risk-based solvency regime. Like Solvency II, C-ROSS focuses on risk management and has three pillars (strengthen quantitative capital requirements, enhance qualitative supervision and establish a governance and market discipline process). China Insurance Regulatory Commission announced on January 26, 2016 that C-ROSS became effective as of January 1, 2016. Beginning in the first quarter of 2016, after one year’s parallel run of both old solvency and C-ROSS calculations, C-ROSS solvency will become the mandated reporting for the industry.
Global Systemically Important Insurers
The IAIS, an association of insurance supervisors and regulators and a member of the Financial Stability Board (“FSB”), and an international entity established to coordinate, develop and promote regulatory, supervisory and other financial sector policies in the interest of financial stability, is participating in the FSB’s initiative to identify and manage global systemically important financial institutions. The IAIS has published a methodology to assess the systemic relevance of global insurers and a framework of policy measures to be applied to G-SIIs and, on this basis, the FSB again so designated MetLife, Inc. The FSB will continue to update the list annually. The IAIS plans to evaluate and, if necessary, update the assessment methodology every three years.

34

Table of Contents

Current standards call for G-SIIs to be subject to higher loss absorbency requirements (“HLA”). Given the absence of a common global base on which to calculate HLA for insurers, the FSB directed the IAIS to develop basic capital requirements (“BCR”). The first version of the IAIS HLA framework was endorsed by the FSB and the G20 in September and November 2015, respectively. This first version applies specified factors to exposures of BCR components with an emphasis on non-traditional and non-insurance activities. G-SIIs will begin reporting BCR and HLA results to their group-wide supervisors as of June 2016 on a confidential basis to allow for refinement of the BCR and HLA until fully adopted and implemented in 2019. The FSB endorsed the first version of HLA, noting that further revision will be necessary before implementation to reflect ongoing work on the G-SII assessment methodology and the definition of non-traditional and non-insurance activity. In November 2015, the IAIS published consultations for stakeholder comment on both topics. MetLife submitted comments in January 2016. The IAIS plans to incorporate any changes to the assessment methodology in the 2016 G-SII assessment update.
In addition, on December 17, 2014, the IAIS released a first exposure draft of a risk-based global insurance capital standard (“ICS”) which will apply to all internationally active insurance groups, including G-SIIs. A second exposure draft is scheduled to be published for comment in June 2016. The IAIS expects to publish an interim version of the ICS by the end of 2019 for implementation by individual jurisdictions with the further goal of reaching an ultimate ICS at some later date.
The FSB and IAIS propose that national authorities consider additional requirements for G-SIIs, which include preparation of a systemic risk management plan, preparation of a recovery and resolution plan, enhanced liquidity planning and management, more intensive supervision, closer coordination among regulators through global supervisory colleges led by a regulator with group-wide supervisory authority, and a policy bias in favor of separation of non-traditional insurance and non-insurance activities from traditional insurance activities. The IAIS proposals would need to be implemented by legislation or regulation in each applicable jurisdiction, and the impact on MetLife, Inc. of such proposals is uncertain.
Japan
Our operations in Japan are subject to regulation and examination by Japan’s Financial Services Agency (“FSA”). Our operations in Japan are required to file with the FSA annual reports for each fiscal year (ending March 31) which include financial statements. These annual reports are not prepared on a U.S. GAAP basis. Similar to the U.S., Japanese law provides that insurers in Japan must maintain specified solvency standards for the protection of policyholders and to support the financial strength of licensed insurers. As of December 31, 2015, the date of our most recent regulatory filing in Japan, the solvency margin ratio of our Japan operations was in excess of four times the 200% solvency margin ratio that would require corrective action. Most Japanese life insurers maintain a solvency margin ratio well in excess of the legally mandated minimum.
A portion of the annual earnings of our Japan operations may be repatriated each year, and may further be distributed to MetLife, Inc. as a dividend. We may determine not to repatriate profits from the Japan operations or to repatriate a reduced amount in order to maintain or improve the solvency margin of the Japan operations or for other reasons. In addition, the FSA may limit or not permit profit repatriations or other transfers of funds to the U.S. if such transfers would be detrimental to the solvency or financial strength of our Japan operations or for other reasons.
Our operations in Japan are subject to assessments to cover obligations to policyholders in the event of insolvency of other insurance companies. Under the Japanese Insurance Business Law, all licensed life insurers in Japan are assessed on an annual basis by the Life Insurance Policyholders Protection Corporation of Japan. These assessments are aggregated across all licensed life insurers in Japan and, in the event of a life insurance company insolvency, are used to satisfy certain obligations to policyholders and claimants of such insolvent company.
Company Ratings
Insurer financial strength ratings represent the opinions of rating agencies, including A.M. Best Company (“A.M. Best”), Fitch Ratings (“Fitch”), Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”), regarding the ability of an insurance company to meet its financial obligations to policyholders and contractholders.
Rating Stability Indicators
Rating agencies use an “outlook statement” of “positive,” “stable,” ‘‘negative’’ or “developing” to indicate a medium- or long-term trend in credit fundamentals which, if continued, may lead to a rating change. A rating may have a “stable” outlook to indicate that the rating is not expected to change; however, a “stable” rating does not preclude a rating agency from changing a rating at any time, without notice. Certain rating agencies assign rating modifiers such as “CreditWatch” or “under review” to indicate their opinion regarding the potential direction of a rating. These ratings modifiers are generally assigned in connection with certain events such as potential mergers, acquisitions, dispositions or material changes in a company’s results, in order for the rating agency to perform its analysis to fully determine the rating implications of the event.

35

Table of Contents

Insurer Financial Strength Ratings
The following insurer financial strength ratings represent each rating agency’s opinion of MetLife, Inc.’s principal insurance subsidiaries’ ability to pay obligations under insurance policies and contracts in accordance with their terms and are not evaluations directed toward the protection of investors in MetLife, Inc.’s securities. Insurer financial strength ratings are not statements of fact nor are they recommendations to purchase, hold or sell any security, contract or policy. Each rating should be evaluated independently of any other rating.
Our insurer financial strength ratings at the date of this filing are indicated in the following table. See “ Rating Agency Actions” below for information relating to the impact on our insurer financial strength ratings of the announcement of the proposed Separation. Additional information about financial strength ratings can be found on the respective websites of the rating agencies.
 
A.M. Best
 
Fitch
 
Moody's
 
S&P
Ratings Structure
“A++ (superior)” to “S (suspended)”
 
“AAA (exceptionally strong)” to “C (distressed)”
 
“Aaa (highest quality)” to “C (lowest rated)”
 
“AAA (extremely strong)” to “SD (Selective Default)” or “D (Default)”
American Life Insurance Company 
NR
 
NR
 
A1
 
AA-
 
 
5th of 21
 
4th of 22
First MetLife Investors Insurance Company 
A+
 
NR 
 
NR 
 
AA-
2nd of 16
 
 
 
4th of 22
General American Life Insurance Company 
A+
 
AA-
 
Aa3
 
A+
2nd of 16
 
4th of 19
 
4th of 21
 
5th of 22
MetLife Insurance Company USA
A+
 
AA-
 
Aa3
 
A+
2nd of 16
 
4th of 19
 
4th of 21
 
5th of 22
Metropolitan Life Insurance Company 
A+
 
AA-
 
Aa3
 
AA-
2nd of 16
 
4th of 19
 
4th of 21
 
4th of 22
MetLife Insurance K.K. (MetLife Japan)
NR 
 
NR 
 
NR 
 
AA-
 
 
 
4th of 22
New England Life Insurance Company 
A+
 
AA-
 
Aa3
 
AA-
2nd of 16
 
4th of 19
 
4th of 21
 
4th of 22
______________
NR = Not rated
See “Risk Factors — Risks Related to Our Business — A Downgrade or a Potential Downgrade in Our Financial Strength or Credit Ratings Could Result in a Loss of Business and Materially Adversely Affect Our Financial Condition and Results of Operations.” See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital — Rating Agencies” for an in depth description of the impact of a ratings downgrade.
Rating Agency Actions
In response to the announcement by MetLife, Inc. on January 12, 2016 of its plan to pursue the Separation, the rating agencies in the table above took the following actions:
On January 14, 2016, A.M. Best placed the insurance financial strength ratings of MetLife, Inc.’s rated primary life/health insurance subsidiaries under review with developing implications.
On January 13, 2016, Fitch placed the insurance financial strength rating for GALIC and MetLife USA on “Rating Watch Negative.” The other ratings remain on stable outlook.
On January 13, 2016, Moody’s placed the insurance financial strength ratings of all of MetLife, Inc.’s rated operating subsidiaries on review for downgrade except American Life which remains on stable outlook .
On January 13, 2016, S&P downgraded the insurance financial strength rating for GALIC and MetLife USA and revised their outlook from “stable” to “negative.” The other ratings remain on stable outlook.
See Note 23 of the Notes to the Consolidated Financial Statements for further details on the proposed Separation.

36

Table of Contents

Competition
We believe that competition faced by our segments is based on a number of factors, including service, product features, scale, price, financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition. We compete globally with a large number of other insurance companies, as well as non-insurance financial services companies, such as banks, broker-dealers and asset managers, for individual consumers, employer and other group customers, as well as agents and other distributors of insurance and investment products. Some of these companies offer a broader array of products, have more competitive pricing or, with respect to other insurance companies, have higher claims paying ability ratings. In the U.S. and Japan, we compete with a large number of domestic and foreign-owned life insurance companies, many of which offer products in categories on which we focus. Elsewhere, we compete with the foreign insurance operations of large U.S. insurers and with global insurance groups and local companies in particular areas in which they are active. Many of our group insurance products are underwritten annually and, accordingly, there is a risk that group purchasers may be able to obtain more favorable terms from competitors rather than renewing coverage with us.
We believe that the continued volatility of the financial markets, its impact on the capital position of many competitors, and subsequent actions by regulators and rating agencies have altered the competitive environment. In particular, we believe that these factors have highlighted financial strength as the most significant differentiator from the perspective of some customers and certain distributors. We believe the Company is well positioned to compete in this environment. In particular, the Company distributes many of its individual products through other financial institutions such as banks and broker-dealers. These distribution partners are currently placing greater emphasis on the financial strength of the company whose products they sell. In addition, the financial market turbulence has highlighted the extent of the risk associated with certain variable annuity products and has led us, along with many companies in our industry, to re-examine the pricing and features of the products offered. The effects of current market conditions may also lead to consolidation in the life insurance industry. Although we cannot predict the ultimate impact of these conditions, we believe that the strongest companies will enjoy a competitive advantage as a result of the current circumstances.
Competition for employees in our industry is intense, and we need to be able to attract and retain the highly skilled people with knowledge of our business and industry experience to support our business. We must attract and retain productive sales representatives to sell our insurance, annuities and investment products. Insurance companies compete for sales representatives with demonstrated ability. We compete with other insurance companies for sales representatives primarily on the basis of our financial position, support services and compensation and product features. See “— Segments and Corporate & Other” for information on sales distribution. In selected global markets, we continue to undertake several initiatives to grow our career agency forces, while continuing to enhance the efficiency and production of our sales representatives. These initiatives may not succeed in attracting and retaining productive agents. Sales of individual insurance, annuities and investment products and our results of operations and financial position could be materially adversely affected if we are unsuccessful in attracting and retaining productive agents.
Numerous aspects of our business are subject to regulation. Legislative and other changes affecting the regulatory environment can affect our competitive position within the life insurance industry and within the broader financial services industry. See “— Regulation.”
Employees
At December 31, 2015 , we had approximately 69,000 employees. We believe that our relations with our employees are satisfactory.

37

Table of Contents

Executive Officers
Set forth below is information regarding the executive officers of MetLife, Inc.:
Name
 
Age
 
Position with MetLife and Business Experience
Steven A. Kandarian
 
63
 
 
Chairman of the Board of MetLife, Inc. (January 2012-present) (Director of MetLife, Inc. since 2011)
 
 
 
 
 
President and Chief Executive Officer (May 2011-present) of MetLife, Inc.
 
 
 
 
 
Executive Vice President and Chief Investment Officer of MetLife, Inc. (April 2005-April 2011)
Ricardo A. Anzaldua
 
62
 
 
Executive Vice President and General Counsel of MetLife, Inc. (December 2012-present)
 
 
 
 
 
The Hartford Financial Services Group, Inc., an insurance and financial services company (February 2007-December 2012)
 
 
 
 
 
 
•Associate general counsel and senior vice president, director of commercial and consumer markets law (October 2010-December 2012)
 
 
 
 
 
 
• Associate general counsel and senior vice president, director of corporate law (February 2007-October 2010); corporate secretary (February 2008-October 2010)
Steven J. Goulart
 
57
 
 
Executive Vice President and Chief Investment Officer of MetLife, Inc. (May 2011-present)
 
 
 
 
 
Head of the Portfolio Management Unit as Senior Managing Director of MLIC (January 2011-April 2011)
 
 
 
 
 
Senior Vice President and Treasurer, MetLife, Inc. (July 2009-April 2011)
John C.R. Hele
 
57
 
 
Executive Vice President and Chief Financial Officer of MetLife, Inc. (September 2012-present)
 
 
 
 
 
Executive vice president, chief financial officer and treasurer, Arch Capital Group Ltd., an insurance and reinsurance company (April 2009-August 2012)
Frans Hijkoop
 
55
 
 
Executive Vice President and Chief Human Resources Officer of MetLife, Inc. (August 2011-present)
 
 
 
 
 
Chief personnel officer and senior vice president of human resources, American Foods division of PepsiCo Inc., a food and beverage company (January 2008-August 2011)
Michel Khalaf
 
52
 
 
President, EMEA of MetLife, Inc. (November 2011-present)
 
 
 
 
 
Executive Vice President of MLIC (January 2011-November 2011)
 
 
 
 
 
Regional President, Middle East, Africa and South Asia, Alico (November 2008-November 2011) (Mr. Khalaf joined MetLife as a result of the acquisition of ALICO)
Esther Lee
 
57
 
 
Executive Vice President and Global Chief Marketing Officer of MetLife, Inc. (January 2015-present)
 
 
 
 
 
Senior Vice President, Brand Marketing, Advertising and Sponsorships of AT&T, Inc., a communications company (August 2011-December 2014)
 
 
 
 
 
Senior Vice President, Brand Marketing and Advertising of AT&T, Inc. (June 2009-July 2011)
Martin J. Lippert
 
56
 
 
Executive Vice President and Head of Global Technology and Operations of MetLife, Inc. (November 2011-present)
 
 
 
 
 
Executive Vice President and Head of Global Technology of MetLife, Inc. (September 2011-November 2011)
Maria R. Morris
 
53
 
 
Executive Vice President and Head of Global Employee Benefits of MetLife, Inc. (November 2011-present)
 
 
 
 
 
Executive Vice President, Global Operations, Integration of MetLife, Inc. (September 2011-November 2011)
 
 
 
 
 
Executive Vice President, Technology and Operations of MetLife, Inc. (January 2008-September 2011)
Christopher G. Townsend
 
47
 
 
President, Asia of MetLife, Inc. (August 2012-present)
 
 
 
 
 
Chief executive officer of the Asia Pacific region, Chartis, a unit of AIG, an insurance and financial services company (January 2010-April 2012)

38

Table of Contents

Trademarks
We have a worldwide trademark portfolio that we consider important in the marketing of our products and services, including, among others, the trademark “MetLife.” We also have the exclusive global license to use the Peanuts ® characters in the area of financial services under an advertising and premium agreement with Peanuts Worldwide, LLC up to December 31, 2019. As a result of the acquisition of American Life and Delaware American Life Insurance Company (“DelAm”) (collectively, “ALICO”), we acquired trademarks of American Life, including the “ALICO” trademark. In addition, as a result of our acquisition of ProVida, we acquired “PROVIDA” and other trademarks. We believe that our rights in our trademarks and under our Peanuts ® characters license are well protected.
Available Information
MetLife files periodic reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at its Headquarters Office, 100 F Street, N.E., Washington D.C. 20549 or by calling the SEC at 1-202-551-8090 or 1-800-SEC-0330 (Office of Investor Education and Advocacy). In addition, the SEC maintains an internet website (www.sec.gov) that contains reports, proxy statements, and other information regarding issuers that file electronically with the SEC, including MetLife, Inc.
MetLife makes available, free of charge, on its website (www.metlife.com) through the Investor Relations web page, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to all those reports, as soon as reasonably practicable after filing (furnishing) such reports to the SEC. MetLife encourages investors to visit the Investor Relations web page from time to time, where it announces additional financial and other information about it to its investors, including in press releases, public conference calls and webcasts. The information found on MetLife’s website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document MetLife files with the SEC, and any references to MetLife’s website are intended to be inactive textual references only.
Item 1A. Risk Factors
Economic Environment and Capital Markets-Related Risks
If Difficult Conditions in the Global Capital Markets and the Economy Generally Persist, They May Materially Adversely Affect Our Business and Results of Operations
Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility and disruptions in financial asset classes or various markets, including global capital markets, can have an adverse effect on us, in part because we have a large investment portfolio and our insurance liabilities are sensitive to changing market factors. Global market factors, including interest rates, credit spreads, equity prices, real estate markets, foreign currency exchange rates, consumer spending, business investment, government spending, the volatility and strength of the capital markets, deflation and inflation, all affect our financial condition, as well as the volume, profitability and results of our business operations, either directly or by virtue of their impact on the business and economic environment generally and on general levels of economic activity, employment and customer behavior specifically. Disruptions in one market or asset class can also spread to other markets or asset classes. Upheavals in the financial markets can also affect our financial condition (including our liquidity and capital levels) as a result of mismatched impacts on the value of our assets and our liabilities. While our diversified business mix and geographically diverse business operations partially mitigate these risks, correlation across regions, countries and global market factors may reduce the benefits of diversification.
At times throughout the past several years, volatile conditions have characterized financial markets. Significant market volatility, and government actions taken in response, may exacerbate some of the risks we face. Weakness in the energy and metals and mining sectors and concerns about the political and/or economic stability of countries in regions outside the EU, including China, Ukraine, Russia, Argentina, Brazil, Japan and the Middle East, as well as Puerto Rico, have contributed to global market volatility. Concerns about global economic conditions, capital markets and the solvency of certain EU member states, their banking systems and the financial institutions that have significant direct or indirect exposure to debt issued by these countries or their respective banking systems, have also been a cause of elevated levels of market volatility. This market volatility has affected the performance of various asset classes at various times, and it could continue until there is an ultimate resolution of these sovereign debt and banking system-related concerns. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Financial and Economic Environment.” Any of these factors could have significant adverse effects on the economy and financial markets generally.

39

Table of Contents

To the extent these uncertain financial market conditions persist, our revenues and net investment income are likely to remain under pressure. Similarly, sustained periods of low interest rates could cause our profit margins to erode. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Impact of a Sustained Low Interest Rate Environment.” Also, in the event of extreme prolonged market events, such as the global credit crisis, we could incur significant capital and/or operating losses due to, among other reasons, losses incurred in our general account and as a result of the impact on us of guarantees, capital maintenance obligations and/or collateral requirements associated with our affiliated reinsurers and other similar arrangements. Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility, which may also increase the cost and limit the availability of the hedging instruments and other protective measures we take to mitigate such risk.
We are a significant writer of variable insurance products and certain other products issued through separate accounts. The account values of these products decrease as a result of declining equity markets. Lower interest rates generally increase account values in the near term, but may result in lower returns in fixed income options in the future. Decreases in account values reduce fees generated by these products, cause the amortization of DAC to accelerate, could increase the level of insurance liabilities we must carry to support such products issued with any associated guarantees and could require us to provide additional funding to our captive reinsurers.
In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our financial and insurance products could be adversely affected. Group insurance, in particular, is affected by higher unemployment rates. In addition, we may experience an elevated incidence of claims and lapses or surrenders of policies. Furthermore, our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. Such adverse changes in the economy could negatively affect our earnings and have a material adverse effect on our business, results of operations and financial condition.
Difficult conditions in the global capital markets and the economy may continue to raise the possibility of legislative, judicial, regulatory and other governmental actions. See “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth,” and “— Risks Related to Our Business — Competitive Factors May Adversely Affect Our Market Share and Profitability” below.
Adverse Global Capital and Credit Market Conditions May Significantly Affect Our Ability to Meet Liquidity Needs, Our Access to Capital and Our Cost of Capital
The global capital and credit markets may be subject to periods of extreme volatility. Disruptions in capital markets could cause our liquidity and credit capacity to be limited.
We need liquidity to pay claims and other operating expenses, interest on our debt and dividends on our capital stock, provide our subsidiaries with cash or collateral, maintain our securities lending activities and replace certain maturing liabilities. Without sufficient liquidity, we could be forced to curtail our operations, and our business and financial results may suffer. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
In the event global capital market or other conditions have an adverse impact on our capital and liquidity, or our stress-testing indicates that such conditions could have such an impact beyond expectations and our current resources do not satisfy our needs or regulatory requirements, we may have to seek additional financing. The availability of additional financing will depend on a variety of factors such as the then current market conditions, regulatory considerations, availability of credit to us and the financial services industry generally, our credit ratings and credit capacity, and the perception of our customers and lenders regarding our long- or short-term financial prospects if we incur large operating or investment losses or if the level of our business activity decreases due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. Our internal sources of liquidity may prove to be insufficient and, in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all.
Our liquidity requirements may change if, among other things, we are required to return significant amounts of cash collateral on short notice under securities lending agreements. See “— Investments-Related Risks — Should the Need Arise, We May Have Difficulty Selling Certain Holdings in Our Investment Portfolio or in Our Securities Lending Program in a Timely Manner and Realizing Full Value Given Their Illiquid Nature” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Securities Lending.”

40

Table of Contents

Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital needed to operate our business, most significantly in our insurance operations. Such market conditions may limit our ability to replace, in a timely manner, maturing liabilities, satisfy regulatory capital requirements, and access the capital necessary to grow our business. See “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.” As a result, we may be forced to delay raising capital, issue different types of securities than we would have otherwise, less effectively deploy such capital, issue shorter tenor securities than we prefer, or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility. Our results of operations, financial condition, cash flows and statutory capital position could be materially adversely affected by disruptions in the financial markets.
We Are Exposed to Significant Global Financial and Capital Markets Risks Which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and May Cause Our Net Investment Income to Vary from Period to Period
We are exposed to significant global financial and capital markets risks, including changes in interest rates, credit spreads, equity, oil and commodity prices, real estate markets, foreign currency exchange rates, market volatility, global economic performance in general, the performance of specific obligors, including governments, included in our investment portfolio and other factors outside our control. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Financial and Economic Environment” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment.”
Interest Rate Risk
Some of our products, principally traditional whole life insurance, fixed annuities and guaranteed interest contracts, expose us to the risk that changes in interest rates will reduce our investment margin or “spread,” or the difference between the amounts that we are required to pay under the contracts in our general account and the rate of return we earn on general account investments intended to support obligations under such contracts. Our spread is a key component of our net income.
In a low interest rate environment, we may be forced to reinvest proceeds from investments that have matured or have been prepaid or sold at lower yields, which will reduce our investment margin. Moreover, borrowers may prepay or redeem the fixed income securities and commercial or agricultural mortgage loans in our investment portfolio with greater frequency in order to borrow at lower market rates, thereby exacerbating this risk. Although lowering interest crediting rates can help offset decreases in spreads on some products, our ability to lower these rates could be limited by competition or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields. As a result, our spread could decrease or potentially become negative. See “ Risks Related to Our Business Guarantees Within Certain of Our Products May Decrease Our Earnings, Increase the Volatility of Our Results, Result in Higher Risk Management Costs and Expose Us to Increased Counterparty Risk.”
Our expectation for future spreads is an important component in the amortization of DAC and VOBA. Significantly lower spreads may cause us to accelerate amortization, thereby reducing net income in the affected reporting period. In addition, during periods of declining interest rates, life insurance and annuity products may be relatively more attractive investments to consumers. This could result in increased premium payments on products with flexible premium features, repayment of policy loans and increased persistency, or a higher percentage of insurance policies remaining in-force from year to year, during a period when our new investments carry lower returns. A decline in market interest rates could also reduce our return on investments that do not support particular policy obligations. During periods of sustained lower interest rates, our reserves for policy liabilities may not be sufficient to meet future policy obligations and may need to be strengthened. Accordingly, declining and sustained lower interest rates may materially affect our results of operations, financial position and cash flows and significantly reduce our profitability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Industry Trends Impact of a Sustained Low Interest Rate Environment.”
As a global insurance company, we are also affected by the monetary policies of the Federal Reserve Board and of central banks around the world. Actions resulting from these policies may have an impact on the pricing levels of risk-bearing investments, and may adversely impact the income we earn on our investments or the level of product sales. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Investments Current Environment.”

41

Table of Contents

Increases in interest rates could also negatively affect our profitability. In periods of rapidly increasing interest rates, we may not be able to replace, in a timely manner, the investments in our general account with higher yielding investments needed to fund the higher crediting rates necessary to keep interest rate sensitive products competitive. We, therefore, may have to accept a lower credit spread and, thus, lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, policy loans, surrenders and withdrawals may tend to increase as policyholders seek investments with higher perceived returns as interest rates rise. This process may result in cash outflows requiring that we sell investments at a time when the prices of those investments are adversely affected by the increase in interest rates, which may result in realized investment losses. Unanticipated withdrawals, terminations and substantial policy amendments may cause us to accelerate the amortization of DAC and VOBA, which reduces net income and may also cause us to accelerate the amortization of negative VOBA, which increases net income. An increase in interest rates could also have a material adverse effect on the value of our investment portfolio, for example, by decreasing the estimated fair values of the fixed income securities that comprise a substantial portion of our investment portfolio. Finally, an increase in interest rates could result in decreased fee income associated with a decline in the value of variable annuity account balances invested in fixed income funds. However, this increase in interest rates would typically cause any guaranteed living benefits to decline in value. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Industry Trends Impact of a Sustained Low Interest Rate Environment.”
We manage interest rate risk as part of our asset and liability management strategies, which include maintaining an investment portfolio with diversified maturities that has a weighted average duration that is approximately equal to the duration of our estimated liability cash flow profile. We also use derivatives to mitigate interest rate risk. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our fixed income investments relative to our interest sensitive liabilities. See “Quantitative and Qualitative Disclosures About Market Risk.”
Credit Spreads
Our exposure to credit spreads primarily relates to market price volatility and cash flow variability associated with changes in such spreads. Market price volatility can make it difficult to value certain of our securities if trading becomes less frequent. In such case, valuations may include assumptions or estimates that may have significant period-to-period changes, which could have a material adverse effect on our results of operations or financial condition. If there is a resumption of significant volatility in the markets, it could cause changes in credit spreads and defaults and a lack of pricing transparency which, individually or in tandem, could have a material adverse effect on our results of operations, financial condition, liquidity or cash flows. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Investments Investment Risks.”
Equity Risk
Our primary exposure to equity risk relates to the potential for lower earnings associated with certain of our businesses where fee income is earned based upon the estimated fair value of the assets under management. Downturns and volatility in equity markets can have a material adverse effect on the revenues and investment returns from our savings and investment products and services. The retail variable annuity business in particular is highly sensitive to equity markets, and a sustained weakness in the equity markets could decrease revenues and earnings with respect to those products. Furthermore, certain of our variable annuity products offer guaranteed benefits which increase our potential benefit exposure should equity markets decline. We use derivatives and reinsurance to mitigate the impact of such increased potential benefit exposures. We are also exposed to interest rate and equity risk based upon the discount rate and expected long-term rate of return assumptions associated with our pension and other postretirement benefit obligations. Sustained declines in long-term interest rates or equity returns likely would have a negative effect on the funded status of these plans.
In addition, we invest a portion of our investments in leveraged buy-out funds, hedge funds and other private equity funds. The amount and timing of net investment income from such funds tends to be uneven as a result of the performance of the underlying investments. The timing of distributions from such funds, which depends on particular events relating to the underlying investments, as well as the funds’ schedules for making distributions and their needs for cash, can be difficult to predict. As a result, the amount of net investment income from these investments can vary substantially from quarter to quarter. Significant volatility could adversely impact returns and net investment income on these alternative investment classes. In addition, the estimated fair value of such investments may be impacted by downturns or volatility in equity markets. See “Quantitative and Qualitative Disclosures About Market Risk.”

42

Table of Contents

Real Estate Risk
Our primary exposure to real estate risk relates to commercial, agricultural and residential real estate. Our exposure to these risks stems from various factors, including the supply and demand of leasable commercial space, creditworthiness of tenants and partners, capital markets volatility and interest rate fluctuations. Although we manage credit risk and market valuation risk for our commercial, agricultural and residential real estate assets through geographic, property type and product type diversification, and asset allocation, general economic conditions in the commercial, agricultural and residential real estate sectors will continue to influence the performance of these investments. These factors, which are beyond our control, could have a material adverse effect on our results of operations, financial condition, liquidity or cash flows.
Obligor-Related Risks
Our investment portfolio contains investments in government bonds issued by certain EU member states and of financial institutions that have significant direct or indirect exposure to debt issued by these countries. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment — Selected Country and Sector Investments.” A number of member states are significantly impacted by the economies of their more influential neighbors and financial troubles of one nation can lead to troubles in others. In particular, a number of large European banks hold significant amounts of sovereign and/or financial institution debt of other European nations and could experience difficulties as a result of defaults or declines in the value of such debt. Concerns regarding these difficulties could disrupt the functioning of the financial markets.
Our investment portfolio also contains investments, primarily in revenue bonds issued under the auspices of U.S. states and municipalities, and a limited amount of general obligation bonds of U.S. states and municipalities (collectively, “State and political subdivision securities”). Various U.S. states and municipalities have faced budget deficits and financial difficulties. The financial difficulties of such U.S. states and municipalities could have an adverse impact on our State and political subdivision securities.
Foreign Currency Exchange Rate Risks
Our primary foreign currency exchange rate risks are described under “ Risks Related to Our Business Fluctuations in Foreign Currency Exchange Rates Could Negatively Affect Our Profitability.” Changes in foreign currency exchange rates can significantly affect our net investment income in any period, and such changes can be substantial. This risk will increase if a country withdraws from the Euro zone. In such case, the national currency to which such a country may revert will likely be devalued and contracts using the Euro will need to be renegotiated. Any such devaluation and its related consequences for our contracts and investments in any such country could be significant and materially adversely affect our operations and earnings in that country. Any operations we may have in any such withdrawing country could also be materially adversely affected by legal or governmental actions related to conversion from the Euro to a national currency. See “Quantitative and Qualitative Disclosures About Market Risk.”
Summary
Significant volatility in the markets could cause changes in interest rates, declines in equity prices, and the strengthening or weakening of foreign currencies against the U.S. dollar which, individually or in tandem, could have a material adverse effect on our results of operations, financial condition, liquidity or cash flows through realized investment losses, impairments, increased valuation allowances and changes in unrealized gain or loss positions.
Regulatory and Legal Risks
Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth
Our insurance operations and brokerage businesses are subject to a wide variety of insurance and other laws and regulations. See “Business — Regulation,” as supplemented by discussions of regulatory developments in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Regulatory Developments.”

43

Table of Contents

U.S. Regulation
Insurance Regulation
State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, can sometimes lead to additional expense for the insurer and, thus, could have a material adverse effect on our financial condition and results of operations. For example, like many life insurance companies, we use captive reinsurers to satisfy reserve and capital requirements related to universal life and term life insurance policies. State insurance regulators and the NAIC are investigating the use of affiliated captive reinsurers and offshore entities to reinsure insurance risks and a few states, including New York and California, have imposed a moratorium on new reinsurance transactions between life insurers domiciled in those states and captive reinsurers. See “Business Regulation U.S. Regulation Insurance Regulation Insurance Regulatory Examinations and Other Activities.” If additional state insurance regulators restrict the use of such captive reinsurers, or if we otherwise are unable to continue to use captive reinsurers in the future, our ability to write certain products and/or our RBC ratios and ability to deploy excess capital, could be adversely affected or we may need to increase prices on those products, which could adversely impact our competitive position and our results of operations. Such restrictions could also affect statutory reserve funding. See “ Risks Related to Our Business Our Statutory Life Insurance Reserve Financings May Be Subject to Cost Increases and New Financings May Be Subject to Limited Market Capacity.”
U.S. Federal Regulation Affecting Insurance
Currently, the U.S. federal government does not directly regulate the business of insurance. However, Dodd-Frank established the FIO within the Department of the Treasury, which has the authority to participate in the negotiations of international insurance agreements with foreign regulators for the U.S., as well as to collect information about the insurance industry and recommend prudential standards. On December 12, 2013, the FIO issued a report, mandated by Dodd-Frank, which, among other things, urged the states to modernize and promote greater uniformity in insurance regulation. The report raised the possibility of a greater role for the federal government if states do not achieve greater uniformity in their laws and regulations. We cannot predict whether any such legislation or regulatory changes will be adopted, or what impact they will have on our business, financial condition or results of operations. See “Business Regulation U.S. Regulation Insurance Regulation Federal Initiatives.”
Federal legislation and administrative policies can significantly and adversely affect insurance companies, including policies regarding financial services regulation, securities regulation, derivatives regulation, pension regulation, health care regulation, privacy, tort reform legislation and taxation. In addition, various forms of direct and indirect federal regulation of insurance have been proposed from time to time, including proposals for the establishment of an optional federal charter for insurance companies.
Regulation of MetLife, Inc. as a Non-Bank SIFI
On December 18, 2014, the FSOC designated MetLife, Inc. as a non-bank SIFI. As a non-bank SIFI, MetLife, Inc. is subject to regulation by the Federal Reserve and to enhanced supervision and prudential standards. Many of the regulatory requirements that will apply to us have not been specified. In particular, the Federal Reserve Board has not determined the requirements that will govern the amount and composition of capital that MetLife, Inc. is required to hold. On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. See Note 23 of the Notes to the Consolidated Financial Statements. No assurance can be given regarding the form that the proposed Separation may take or the specific terms thereof, or that the Separation will in fact occur. Furthermore, t here can be no assurance that the new company that would be created in connection with the Separation will not be designated by the FSOC as a non-bank SIFI or that any actions taken in furtherance of this plan will cause the FSOC to revoke its designation of MetLife, Inc. as a non-bank SIFI.
The Federal Reserve Board has indicated that it plans to apply enhanced prudential standards to non-bank SIFIs by rule or order. Accordingly, the manner in which these proposed standards might apply to MetLife, Inc. remains unclear. Regulation of MetLife, Inc. as a non-bank SIFI could materially and adversely affect our business.
If the Federal Reserve Board requires insurers that are non-bank SIFIs to comply with capital standards or regimes (such as the Basel capital rules that were developed for banks) that do not take into account the insurance business model and the differences between banks and insurers, our business and competitive position could be materially and adversely affected. The capital requirements that apply to us could also constrain our ability to pay dividends, repurchase common stock or other securities or engage in other transactions that could affect our capital. Enhanced capital requirements could adversely affect our ability to compete with other insurers that are not subject to those requirements, and our ability to issue guarantees could be constrained. We could have to raise the price of the products we offer, reduce the amount of risk we take on, or stop offering certain products altogether. Legislation was signed into law on December 18, 2014 relieving the Federal Reserve Board from certain provisions in Dodd-Frank that it believed constrained its ability to tailor capital rules for insurers that are non-bank SIFIs.

44

Table of Contents

MetLife, Inc. may also be subject to additional prudential standards that the Federal Reserve Board may promulgate for non-bank SIFIs which will likely include leverage limits, liquidity requirements, single counterparty exposure limits, governance requirements for risk management, stress test requirements, special debt-to-equity limits for certain companies, and early remediation procedures. In addition, non-bank SIFIs are required to submit a resolution plan setting forth how the company could be resolved under the Bankruptcy Code in the event of material financial distress. The Federal Reserve Board also has the right to require any of MetLife, Inc.’s insurance companies, or insurance company affiliates, to take prompt action to correct any financial weaknesses. In addition, as a result of our designation as a non-bank SIFI, under the Volcker Rule, we could be subject to the imposition by the Federal Reserve Board of additional capital requirements and quantitative limits on certain of our trading and investment activities.
As a non-bank SIFI, we may consider structural and other business alternatives that may be available to us in response to such designation, and we cannot predict the impact that any such alternatives, if implemented, may have on the Company or its security holders. See Note 23 of the Notes to the Consolidated Financial Statements for information on the Company’s announcement of its plan to pursue the Separation.
Together with other non-bank SIFIs and certain other large financial companies, MetLife, Inc. can be assessed under Dodd-Frank for any uncovered costs arising in connection with the resolution of a systemically important financial company. In addition, together with other non-bank SIFIs, MetLife, Inc. must pay certain assessments and other charges to offset certain costs incurred by the Federal Reserve Board in fulfilling its oversight role and in connection with the Financial Research Fund within the U.S. Department of Treasury that funds the Office of Financial Research.
See “Business Regulation U.S. Regulation Regulation as a Non-Bank SIFI” for additional information regarding regulation of MetLife, Inc. as a non-bank SIFI.
ERISA Considerations
We provide products and services to certain employee benefit plans that are subject to ERISA or the Code. As such, our activities are subject to the restrictions imposed by ERISA and the Code, including the requirement under ERISA that fiduciaries must perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that fiduciaries may not cause a covered plan to engage in certain prohibited transactions. The prohibited transaction rules of ERISA and the Code generally restrict the provision of investment advice to ERISA plans and participants and IRAs if the investment recommendation results in fees paid to the individual advisor, his or her firm or their affiliates that vary according to the investment recommendation chosen.
The DOL proposed new regulations in April 2015 that would substantially expand the definition of “investment advice” and thereby broaden the circumstances under which MetLife, in providing investment advice with respect to ERISA plans, plan participants or IRAs, could be deemed a fiduciary under ERISA or the Code. The DOL also proposed amendments to its prohibited transaction exemptions, and proposed a new exemption that would apply more onerous disclosure and contract requirements to, and increase fiduciary requirements and fiduciary liability exposure in respect of, transactions involving ERISA plans, plan participants and IRAs. If the new DOL proposals become final, MetLife may find it necessary to change sales representative and/or broker compensation and may limit the assistance or advice they can provide. See “Business Regulation U.S. Regulation ERISA Considerations.”
We cannot predict what other proposals may be made, what legislation may be introduced or enacted or the impact of any such legislation on our business, results of operations and financial condition.
Mortgage and Foreclosure-Related Exposure s
State and federal regulatory and law enforcement authorities have initiated various inquiries and investigations of alleged irregularities in the foreclosure practices of the residential mortgage servicing industry, mortgage origination and mortgage servicing practices. Although we have reached settlements with some regulators relating to our mortgage servicing activities and Federal Housing Administration loan origination, pending or additional inquiries, investigations or examinations may result in further monetary payments or other measures against us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations Industry Trends Mortgage and Foreclosure-Related Exposures.”

45

Table of Contents

International Regulation
Our international insurance operations are principally regulated by insurance regulatory authorities in the jurisdictions in which they are located or operate. A significant portion of our revenues is generated through operations in foreign jurisdictions, including many countries in early stages of economic and political development. Our international operations may be materially adversely affected by the actions and decisions of foreign authorities and regulators. See “— Risks Related to Our Business — Our International Operations Face Political, Legal, Operational and Other Risks, Including Exposure to Local and Regional Economic Conditions, That Could Negatively Affect Those Operations or Our Profitability.” This may also impact many of our customers and independent sales intermediaries. Changes in the laws and regulations that affect these customers and independent sales intermediaries or their operations also may affect our business relationships with them and their ability to purchase or distribute our products. Accordingly, these changes and actions may negatively affect our business in these jurisdictions. We expect the scope and extent of regulation outside of the U.S., as well as regulatory oversight, generally, to continue to increase. The authority of our international operations to conduct business is subject to licensing requirements, permits and approvals, and these authorizations are subject to modification and revocation. The regulatory environment in the countries in which we operate and changes in laws could have a material adverse effect on our results of operations. See “Business Regulation International Regulation.”
Solvency Regimes
We are subject to Solvency II (adopted in 2009, effective on January 1, 2016) and Omnibus II (amending Solvency II, adopted in 2014, effective on January 1, 2016), two interlinked insurance regulatory directives that provide a framework for new risk management practices, solvency capital standards and disclosure requirements across our business in the European Economic Area, and may be subject to similar solvency regulations in other regions, such as Mexico, Chile and China. See “Business Regulation International Regulation Solvency Regimes.” As requirements are finalized by the regulators, capital requirements might be impacted in a number of jurisdictions. In addition, our legal entity structure throughout Europe may impact our capital requirements, risk management infrastructure and reporting by country.
Global Systemically Important Insurers
In the wake of the financial crisis, national and international authorities have proposed measures intended to increase the intensity of regulation of large financial institutions, requiring greater coordination among regulators and efforts to harmonize regulatory regimes. For example, the IAIS is participating in the FSB’s initiative to identify and manage global systemically important financial institutions. To this end, the IAIS published a methodology to assess the systemic relevance of global insurers and a framework of policy measures to be applied to G-SIIs and, on this basis, the FSB again so designated MetLife, Inc. While the regulatory standards that would apply to G-SIIs are still being developed, they will include enhanced capital standards and supervision and other additional requirements that would not apply to companies that are not G-SIIs. The IAIS proposals would need to be implemented by legislation or regulation in each applicable jurisdiction, and the impact on MetLife, Inc. of such proposals is uncertain. See “Business Regulation International Regulation Global Systemically Important Insurers.
General
From time to time, regulators raise issues during examinations or audits of MetLife, Inc.’s regulated subsidiaries that could, if determined adversely, have a material impact on us. In addition, the interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact, particularly in areas such as accounting or statutory reserve requirements. Compliance with applicable laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations may materially increase our direct and indirect compliance and other expenses of doing business, thus having a material adverse effect on our financial condition and results of operations.
The Dodd-Frank Provisions Compelling the Liquidation of Certain Types of Financial Institutions Could Materially and Adversely Affect MetLife, Inc., as Such a Financial Institution and as an Investor in Other Such Financial Institutions, as well as Our Investors
Under provisions of Dodd-Frank, if MetLife, Inc. or another financial institution were to become insolvent or were in danger of defaulting on its obligations and it was determined that such default would have serious effects on financial stability in the U.S., it could be compelled to undergo liquidation with the FDIC as receiver. While under this new regime an insurance company would be resolved in accordance with state insurance law, if the FDIC were appointed as the receive r for another type of a company (including an insurance holding company such as MetLife, Inc.), liquidation of that company would occur under the provisions of the new liquidation authority, and not under the Bankruptcy Code, which ordinarily governs liquidations. In an FDIC-managed liquidation, holders of a company’s debt could be treated differently than under the Bankruptcy Code and similarly-situated creditors could be treated differently. In particular, unsecured creditors and shareholders are intended to bear the losses of the company being liquidated. These provisions could also apply to financial institutions whose debt securities we hold in our investment portfolio and could adversely affect our position as a creditor and the value of our holdings.

46

Table of Contents

Dodd-Frank also provides for the assessment of charges against certain financial institutions, including non-bank SIFIs and bank holding companies and other financial companies with assets of $50 billion or more, to cover the costs of liquidating any financial company subject to the new liquidation authority. The liquidation authority could increase our funding costs. See “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI — Orderly Liquidation Authority.”
Legislative and Regulatory Activity in Health Care and Other Employee Benefits Could Affect our Profitability as a Provider of Life Insurance, Annuities, and Non-Medical Health Insurance Benefit Prod ucts
The Affordable Care Act may lead to fundamental changes in the way that employers, including us, provide health care benefits and other forms of compensation to their employees and former employees. In addition to imposing obligations on MetLife as an enterprise, the Affordable Care Act also imposes requirements on us as a provider of non-medical health insurance benefits and as a purchaser of certain of these products. See “Business — U.S. Regulation — Insurance Regulation — Health Care Regulation” for information regarding such requirements, including the effect of assessments related to public healthcare exchanges. The Affordable Care Act or other related regulations or regulatory actions may adversely affect our ability to continue to offer certain non-medical health and dental insurance products in the same manner as we do today and may continue to result in increased and unpredictable costs to provide certain products thereby harming our competitive position.
In addition, we employ a substantial number of employees, including sales agents, in the United States to whom we offer employment-related benefits. We also currently provide benefits to certain of our retirees. These benefits are provided under complex plans that are subject to a variety of regulatory requirements. The Affordable Care Act or related regulations or regulatory actions could adversely affect our ability to attract, retain and motivate our associates. They could also result in increased or unpredictable costs to provide employee benefits, and could harm our competitive position if we are subject to fees, penalties, tax provisions or other limitations in the Affordable Care Act and our competitors are not.
The Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 also includes certain provisions for defined benefit pension plan funding relief. These provisions may impact the likelihood and/or timing of corporate plan sponsors terminating their plans and/or engaging in transactions to partially or fully transfer pension obligations to an insurance company. Consequently, this legislation could indirectly affect the mix of our business, with fewer pension risk transfers and more non-guaranteed funding products, and adversely impact our results of operations.
Changes in U.S. Federal, State Securities and State Insurance Laws and Regulations May Affect Our Operations and Our Profitability
Federal and state securities laws and regulations apply to insurance products that are also “securities,” including variable annuity contracts and variable life insurance policies. As a result, some of MetLife, Inc.’s subsidiaries and their activities in offering and selling variable insurance contracts and policies are subject to extensive regulation under these securities laws.
Federal and state securities laws and regulations are primarily intended to ensure the integrity of the financial markets and to protect investors in the securities markets, and to protect investment advisory or brokerage clients. These laws and regulations generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with the securities laws and regulations. A number of changes have recently been proposed or adopted to the laws and regulations that govern the conduct of our variable insurance products business and our distributors. The future impact of recently adopted revisions to laws and regulations, as well as revisions that are still in the proposal stage, on the way we conduct our business and the products we sell is unclear. Such impact could adversely affect our operations and profitability, including increasing the regulatory and compliance burden upon us, resulting in increased costs. See “Business — Regulation — U.S. Regulation — ERISA Considerations” and “Business — Regulation — U.S. Regulation — Securities, Broker-Dealer and Investment Adviser Regulation.” We also may be subject to similar laws and regulations in the foreign countries in which we offer products or conduct other activities similar to those described above. See “Business — Regulation — International Regulation.”
Changes in Tax Laws or Interpretations of Such Laws Could Reduce Our Earnings and Materially Impact Our Operations by Increasing Our Corporate Taxes and Making Some of Our Products Less Attractive to Consumers
Changes in domestic or foreign tax laws or interpretations of such laws could increase our corporate taxes and reduce our earnings. For example, in the third quarter of 2015, MetLife, Inc. recorded a $792 million after-tax charge, or $.70 per share, under accounting guidance for the recognition of tax uncertainties as a result of our consideration of recent decisions of the U.S. Court of Appeals for the Second Circuit upholding the disallowance of foreign tax credits claimed by other corporate entities not affiliated with us (in transactions different from ours), based upon a changed interpretation of the proper method of determining that a transaction has economic substance. Additionally, global budget deficits make it likely that governments’ need for additional revenue will result in future tax proposals that will increase our effective tax rate. However, it remains difficult to predict the timing and effect that future tax law changes could have on our earnings both in the U.S. and in foreign jurisdictions.

47

Table of Contents

Additionally, U.S. tax laws currently afford certain tax treatment to life insurance and annuity products. The Obama Administration and some members of Congress have proposed certain changes to rules applicable to certain of these products and to individual income tax rates in general. Changes in tax laws could make some of our products less attractive to consumers. A shift away from life insurance and annuity contracts and other tax-deferred products by our customers would reduce our income from sales of these products, as well as the asset base upon which we earn investment income and fees, thereby reducing our earnings and potentially affecting the value of our deferred tax assets. Federal budgets have been proposed that would change selected company tax provisions and could adversely impact product affordability and availability. Tax reform proposals have also been made in recent Congresses to modify company tax treatment similar to those in the proposed budgets. These proposals have not advanced.
Litigation and Regulatory Investigations Are Increasingly Common in Our Businesses and May Result in Significant Financial Losses and/or Harm to Our Reputation
We face a significant risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, product design, disclosure, administration, denial or delay of benefits and breaches of fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large and/or indeterminate amounts, including punitive and treble damages. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. Material pending litigation and regulatory matters affecting us and risks to our business presented by these proceedings are discussed in Note 21 of the Notes to the Consolidated Financial Statements. Updates are provided in the notes to our interim condensed consolidated financial statements included in our subsequently filed quarterly reports on Form 10-Q, as well as in Part II, Item 1 (“Legal Proceedings”) of those quarterly reports.
A substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory inquiries or investigations, could harm our reputation, result in material fines or penalties, result in significant legal costs and otherwise have a material adverse effect on our business, financial condition and results of operations. Even if we ultimately prevail in the litigation, regulatory action or investigation, our ability to attract new customers, retain our current customers and recruit and retain employees could be materially and adversely impacted. Regulatory inquiries and litigation may also cause volatility in the price of stocks of companies in our industry.
Current claims, litigation, unasserted claims probable of assertion, investigations and other proceedings against us could have a material adverse effect on our business, financial condition or results of operations. It is also possible that related or unrelated claims, litigation, unasserted claims probable of assertion, investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed or enforcement actions initiated against us. We currently have a market presence in numerous countries and may be subject to additional investigations and lawsuits in these jurisdictions. Increased regulatory scrutiny and any resulting investigations or proceedings in any of the countries where we operate could result in new legal actions and precedents and industry-wide regulations that could adversely affect our business, financial condition and results of operations.
Risks Related to Acquisitions, Dispositions or Other Structural Changes
We Could Face Difficulties, Unforeseen Liabilities, Asset Impairments or Rating Actions Arising from Business Acquisitions or Integrating and Managing Growth of Such Businesses, Dispositions of Businesses, or Legal Entity Reorganizations
We have engaged in dispositions and acquisitions of businesses in the past, and expect to continue to do so in the future. See Note 23 of the Notes to the Consolidated Financial Statements for information regarding MetLife, Inc.’s plan to pursue the Separation. Such activity exposes us to a number of risks arising from (i) potential difficulties achieving projected financial results including the costs and benefits of integration or deconsolidation; (ii) unforeseen liabilities or asset impairments; (iii) the scope and duration of rights to indemnification for losses; (iv) the use of capital which could be used for other purposes; (v) rating agency reactions; (vi) regulatory requirements that could impact our operations or capital requirements; (vii) changes in statutory or U.S. GAAP accounting principles, practices or policies; and (viii) certain other risks specifically arising from activities relating to an initial public offering, spin-off, joint venture or legal entity reorganization, including in connection with the proposed Separation.

48

Table of Contents

The valuation and structure for any transaction reflect our financial projections and other qualitative and quantitative factors. Every transaction exposes us to the risk that actual results may materially differ from what we have projected. Factors that can cause our financial projections to vary materially from ultimate experience include, but are not limited to, macroeconomic, business growth, demographic, policyholder behavior, regulatory and political conditions.
Risks Relating to Acquisitions
Our ability to achieve certain financial benefits we anticipate from any acquisitions of businesses will depend in part upon our ability to successfully integrate such businesses in an efficient and effective manner. We may not be able to integrate such businesses smoothly or successfully, and the process may take longer than expected. The integration of operations and differences in operational culture may require the dedication of significant management resources, which may distract management’s attention from day-to-day business. If we are unable to successfully integrate the operations of such acquired businesses, we may be unable to realize the benefits we expect to achieve as a result of such acquisitions and our business and results of operations may be less than expected.
The success with which we are able to integrate acquired operations will depend on our ability to manage a variety of issues, including the following:
Loss of key personnel or higher than expected employee attrition rates could adversely affect the performance of the acquired business and our ability to integrate it successfully.
Customers of the acquired business may reduce, delay or defer decisions concerning their use of its products and services as a result of the acquisition or uncertainty related to the consummation of the acquisition, including, for example, potential unfamiliarity with the MetLife brand in regions where we did not have a market presence prior to the acquisition.
If the acquired business relies upon independent distributors to distribute its products, these distributors may not continue to generate the same volume of business for us after the acquisition. Independent distributors may reexamine the scope of their relationship with the acquired business or us as a result of the acquisition and decide to curtail or eliminate distribution of our products.
If the acquired business relies on continued distribution access with another party, we are also exposed to the risk of loss of exclusivity or change in access due to regulatory changes.
Integrating acquired operations with our existing operations may require us to coordinate geographically separated organizations, address possible differences in corporate culture and management philosophies, merge financial processes and risk and compliance procedures, combine separate information technology platforms and integrate operations that were previously closely tied to the former parent of the acquired business or other service providers.
In cases where we or an acquired business operates in certain markets through joint ventures, the acquisition may affect the continued success and prospects of the joint venture.
We may incur significant costs in connection with any acquisition and the related integration. The costs and liabilities actually incurred in connection with an acquisition and subsequent integration process may exceed those anticipated
There could be unforeseen liabilities or asset impairments, including goodwill impairments, which arise in connection with the businesses that we may sell or the businesses that we may acquire in the future.
In addition, there may be liabilities or asset impairments that we fail, or are unable, to discover in the course of performing acquisition-related due diligence investigations. Furthermore, even for obligations and liabilities that we do discover during the due diligence process, neither the valuation adjustment nor the contractual protections we negotiate may be sufficient to fully protect us from losses. Although we generally have rights to indemnification for certain losses, our rights are limited by survival periods for bringing claims and limitations on the nature and amount of losses we may recover, and we cannot be certain that indemnification will be, among other things, collectible or sufficient in amount, scope or duration to fully offset any loss we may suffer. For example, we are indemnified under the stock purchase agreement dated as of March 7, 2010, as amended, by and among MetLife, Inc., American International Group, Inc. (“AIG”) and ALICO Holdings, LLC (now AM Holdings, LLC), a subsidiary of AIG, for various tax matters, including U.S. federal income taxes attributable to periods during which the ALICO business was included in AIG’s consolidated federal income tax return. It is possible, however, that any such indemnification may not be fully collectible. The use of our own funds as consideration in any acquisition would consume capital resources, which could affect our capital plan and render those funds unavailable for other corporate purposes. We also may not be able to raise sufficient funds to consummate an acquisition if, for example, we are unable to sell our securities or close related bridge credit facilities.

49

Table of Contents

Risks Relating to Dispositions
We may separate a business through an outright sale, or by alternate means such as a public offering of shares in an independent, publicly traded company or a spin-off, which would also result in a separate, possibly independent and publicly traded, company. See Note 23 of the Notes to the Consolidated Financial Statements for information on the Company’s announcement of its plan to pursue the proposed Separation. Any Separation that might occur will be subject to the satisfaction of various conditions and approvals, including approval of any transaction by the MetLife, Inc. Board of Directors, satisfaction of any applicable requirements of the SEC, and receipt of insurance and other regulatory approvals and other anticipated conditions. No assurance can be given regarding the form that the proposed Separation may take or the specific terms thereof, or that the Separation will in fact occur.
Unanticipated developments could delay, prevent or otherwise adversely affect our ability to effect any disposition transaction. Factors which could affect our ability to consummate such transactions include difficulties in finding buyers and delays or other problems with obtaining required regulatory, tax and other approvals, as well as adverse conditions in the capital and credit markets.
When we dispose of subsidiaries or operations, we may remain liable to the acquiror or to third parties for certain losses or costs arising from the divested business or on other bases. We may also incur a loss on the disposition. In anticipation of any disposition, we may need to restructure our operations, which could disrupt such operations and affect our ability to recruit key personnel needed to operate and grow such business. In addition, the actions of key employees of the business to be divested could adversely affect the success of such disposition as they may be more focused on obtaining employment, or the terms of their employment, than on maximizing the value of the business to be divested. Such restructuring could also adversely affect our internal controls and procedures and impair our relationships with key customers, distributors and suppliers. Any such separation will also decrease the diversification of our sources of revenue and result in a greater percentage of our revenue being derived from non-U.S. sources which may increase our exposure to certain risks. See “— Risks Related to Our Business — Our International Operations Face Political, Legal, Operational and Other Risks, Including Exposure to Local and Regional Economic Conditions, That Could Negatively Affect Those Operations or Our Profitability.”
After any such disposition, shares of our Common Stock will represent an investment in a company different in size and characteristics from the present. These changes may cause some existing shareholders to sell their shares of our Common Stock, which could, if excessive, cause the market price of our Common Stock to decrease. In addition, we may be unable to timely dissolve all contractual relationships with the divested business in the course of the proposed transaction, which may materially adversely affect our ability to realize value from the disposition.
Risks Relating to Joint Ventures
We participate in joint ventures in several countries, including China and India. We may enter into joint ventures with other companies or government enterprises in various other international markets, including joint ventures where we may have a lesser degree of control over the business operations, which may expose us to additional operational, financial, legal or compliance risks. We may be dependent on a joint venture counterparty for capital, product distribution, local market knowledge, or other resources. Limits on our ownership levels under local laws or regulations may increase our dependence on joint venture counterparties and subsequent changes to such laws or regulations may impact how we account for our joint venture ownership interests. See “— Risks Related to Our Business — Our International Operations Face Political, Legal, Operational and Other Risks, Including Exposure to Local and Regional Economic Conditions, That Could Negatively Affect Those Operations or Our Profitability.”
A joint venture may require an investment of considerable management, financial and operational resources to establish sufficient infrastructure such as underwriting, actuarial, risk management, compliance or other processes. If we are unable to effectively cooperate with joint venture counterparties, or any joint venture counterparty fails to meets its obligations under the joint venture arrangement, encounters financial difficulty, or elects to alter, modify or terminate the relationship, we may be unable to exercise management control or influence over these joint venture operations and our ability to achieve our objectives and our results of operations may be negatively impacted.

50

Table of Contents

Risks Relating to Legal Entity Reorganizations
In addition, we may reorganize or consolidate the legal entities through which we conduct business. For example, in November 2014, the Company completed the Mergers. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Other Key Information — Significant Events.” The implementation of legal entity reorganizations is a complex undertaking and involves a number of risks similar to those outlined above that are present in the case of an acquisition, including additional costs and expenses, information technology-related delays and problems, loss of key personnel and distraction of management. Many aspects of these transactions are subject to regulatory approvals from a number of different jurisdictions. We may not obtain needed regulatory approvals in the timeframe anticipated or at all, which could reduce or prevent us from realizing the anticipated benefits of these transactions. These transactions or the related regulatory approvals may entail modifications of certain aspects of our operations, the composition of certain of our investment portfolios, and/or the cost of our derivatives hedging activities, which could result in additional costs or reduce net investment income. Any of these risks, if realized, could result in a material adverse effect on our business, results of operations or financial condition.
Investments-Related Risks
Should the Need Arise, We May Have Difficulty Selling Certain Holdings in Our Investment Portfolio or in Our Securities Lending Program in a Timely Manner and Realizing Full Value Given Their Illiquid Nature
There may be a limited market for certain investments we hold in our investment portfolio, making them relatively illiquid. These include privately-placed fixed maturity securities, mortgage loans, policy loans, leveraged leases, other limited partnership interests, and real estate equity, such as real estate joint ventures and funds. In recent years, even some of our very high quality investments experienced reduced liquidity during periods of market volatility or disruption. If we were forced to sell certain of our investments during periods of market volatility or disruption, market prices may be lower than our carrying value in such investments. This could result in realized losses which could have a material adverse effect on our net income and financial position.
Similarly, we loan blocks of our securities to third parties (primarily brokerage firms and commercial banks) through our securities lending program, including fixed maturity and equity securities, short-term investments and cash equivalents. Under this program, we obtain collateral, usually cash, at the inception of a loan and typically purchase securities with the cash collateral. Upon the return to us of these loaned securities, we must return to the third party the cash collateral we received. If the cash collateral has been invested in securities, we need to sell the securities. However, in some cases, the maturity of those securities may exceed the term of the related securities on loan and the estimated fair value of the securities we need to sell may fall below the amount of cash received.
If we are required to return significant amounts of cash collateral under our securities lending program or otherwise need significant amounts of cash on short notice and we are forced to sell securities, we may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than we otherwise would have been able to realize under normal market conditions, or both. In the event of a forced sale, accounting guidance requires the recognition of a loss for securities in an unrealized loss position and may require the impairment of other securities based on our ability to hold those securities, which would negatively impact our financial condition. In addition, under stressful capital market and economic conditions, liquidity broadly deteriorates, which may further restrict our ability to sell securities. Furthermore, if we decrease the amount of our securities lending activities over time, the amount of net investment income generated by these activities will also likely decline. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Securities Lending.”

51

Table of Contents

Our Requirements to Pledge Collateral or Make Payments Related to Declines in Estimated Fair Value of Derivatives Transactions or Specified Assets in Connection with OTC-Cleared and OTC-Bilateral Transactions May Adversely Affect Our Liquidity, Expose Us to Central Clearinghouse and Counterparty Credit Risk, and Increase our Costs of Hedging
Substantially all of our derivatives transactions require us to pledge collateral related to any decline in the net estimated fair value of such derivatives transactions executed through a specific broker at a clearinghouse or entered into with a specific counterparty on a bilateral basis. Certain derivatives financing transactions require us to pledge collateral or make payments related to declines in the estimated fair value of the specified assets under certain circumstances to central clearinghouses or our counterparties. The amount of collateral we may be required to pledge and the payments we may be required to make under our derivatives transactions may increase under certain circumstances and will increase as a result of the requirement to pledge initial margin for OTC-cleared transactions entered into after June 10, 2013 and for OTC-bilateral transactions entered into after the phase-in period, which would be applicable to us in 2020 as a result of the adoption by the Prudential Regulators and the CFTC of final margin requirements for non-centrally cleared derivatives. Although the final rules allow us to pledge a broad range of non-cash collateral as initial and variation margin, the Prudential Regulators, CFTC, central clearinghouses and counterparties may restrict or eliminate certain types of previously eligible collateral or charge us to pledge such non-cash collateral, which would increase our costs and could adversely affect the liquidity of our investments and the composition of our investment portfolio. See “Business — Regulation — U.S. Regulation — Regulation of Over-the-Counter Derivatives,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Pledged Collateral,” and Note 9 of the Notes to the Consolidated Financial Statements.
Gross Unrealized Losses on Fixed Maturity and Equity Securities and Defaults, Downgrades or Other Events May Result in Future Impairments to the Carrying Value of Such Securities, Resulting in a Reduction in Our Net Income
Fixed maturity and equity securities classified as available-for-sale (“AFS”) securities are reported at their estimated fair value. Unrealized gains or losses on AFS securities are recognized as a component of other comprehensive income (loss) (“OCI”) and are, therefore, excluded from net income. In recent periods, as a result of low interest rates, the unrealized gains on our fixed maturity securities have far exceeded the unrealized losses. However, if interest rates rise, our unrealized gains would decrease and our unrealized losses would increase, perhaps substantially. The accumulated change in estimated fair value of these AFS securities is recognized in net income when the gain or loss is realized upon the sale of the security or in the event that the decline in estimated fair value is determined to be other-than-temporary and an impairment charge to earnings is taken. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity and Equity Securities AFS.”
The occurrence of a major economic downturn, acts of corporate malfeasance, widening credit risk spreads, or other events that adversely affect the issuers or guarantors of securities or the underlying collateral of structured securities could cause the estimated fair value of our fixed maturity securities portfolio and corresponding earnings to decline and cause the default rate of the fixed maturity securities in our investment portfolio to increase. A ratings downgrade affecting issuers or guarantors of particular securities, or similar trends that could worsen the credit quality of issuers, such as the corporate issuers of securities in our investment portfolio, could also have a similar effect. With economic uncertainty, credit quality of issuers or guarantors could be adversely affected. Similarly, a ratings downgrade affecting a security we hold could indicate the credit quality of that security has deteriorated and could increase the capital we must hold to support that security to maintain our RBC levels. Levels of writedowns or impairments are impacted by intent to sell, or our assessment of the likelihood that we will be required to sell, fixed maturity securities, as well as our intent and ability to hold equity securities which have declined in value until recovery. Realized losses or impairments on these securities may have a material adverse effect on our net income in a particular quarterly or annual period.

52

Table of Contents

Our Valuation of Securities and Investments and the Determination of the Amount of Allowances and Impairments Taken on Our Investments Are Subjective and Include Methodologies, Estimations and Assumptions Which Are Subject to Differing Interpretations and Market Conditions and, if Changed, Could Materially Adversely Affect Our Results of Operations or Financial Condition
Fixed maturity, equity, fair value option (“FVO”) and trading securities, as well as short-term investments that are reported at estimated fair value represent the majority of our total cash and investments. We define fair value generally as the price that would be received to sell an asset or paid to transfer a liability. Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect of the estimated fair value amounts. During periods of market disruption including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities if trading becomes less frequent and/or market data becomes less observable. In addition, in times of financial market disruption, certain asset classes that were in active markets with significant observable data may become illiquid. In those cases, the valuation process includes inputs that are less observable and require more subjectivity and management judgment. Valuations may result in estimated fair values which vary significantly from the amount at which the investments may ultimately be sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within our consolidated financial statements and the period-to-period changes in estimated fair value could vary significantly. Decreases in the estimated fair value of securities we hold may have a material adverse effect on our results of operations or financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments” and Notes 1 and 10 of the Notes to the Consolidated Financial Statements.
The determination of the amount of allowances and impairments varies by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. We reflect any changes in allowances and impairments in earnings as such evaluations are revised. However, historical trends may not be indicative of future impairments or allowances. In addition, any such future impairments or allowances could have a materially adverse effect on our earnings and financial position. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Investment Impairments” an d Note 8 of the Notes to the Consolidated Financial Statements.
Defaults on Our Mortgage Loans and Volatility in Performance May Adversely Affect Our Profitability
Our mortgage loans face default risk and are principally collateralized by commercial, agricultural and residential properties. We establish valuation allowances for estimated impairments, which are based on loan risk characteristics, historical default rates and loss severities, real estate market fundamentals and outlooks, as well as other relevant factors. In addition, substantially all of our mortgage loans held-for-investment have balloon payment maturities. An increase in the default rate of our mortgage loan investments or fluctuations in their performance could have a material adverse effect on our business, results of operations and financial condition.
Further, any geographic or property type concentration of our mortgage loans may have adverse effects on our investment portfolio and consequently on our results of operations or financial condition. While we seek to mitigate this risk by having a broadly diversified portfolio, events or developments that have a negative effect on any particular geographic region or sector may have a greater adverse effect on the investment portfolio to the extent that the portfolio is concentrated. Moreover, our ability to sell assets relating to such particular groups of related assets may be limited if other market participants are seeking to sell at the same time. In addition, legislative proposals that would allow or require modifications to the terms of mortgage loans could be enacted. We cannot predict whether these proposals will be adopted, or what impact, if any, such proposals or, if enacted, such laws, could have on our business or investments. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Mortgage Loans.”

53

Table of Contents

The Defaults or Deteriorating Credit of Other Financial Institutions Could Adversely Affect Us
We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, central clearinghouses, commercial banks, investment banks, hedge funds and investment funds and other financial institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty. In addition, with respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us. We also have exposure to these financial institutions in the form of unsecured debt instruments, non-redeemable and redeemable preferred securities, derivatives, joint venture, hedge fund and equity investments. Further, potential action by governments and regulatory bodies in response to the financial crisis affecting the global banking system and financial markets, such as investment, nationalization, conservatorship, receivership and other intervention, whether under existing legal authority or any new authority that may be created, or lack of action by governments and central banks, as well as deterioration in the banks’ credit standing, could negatively impact these instruments, securities, transactions and investments or limit our ability to trade with them. Any such losses or impairments to the carrying value of these investments or other changes may materially and adversely affect our business and results of operations.
Risks Related to Our Business
Our International Operations Face Political, Legal, Operational and Other Risks, Including Exposure to Local and Regional Economic Conditions, That Could Negatively Affect Those Operations or Our Profitability
Our international operations face political, legal, financial, operational and other risks. These operations may be materially adversely affected by the actions and decisions of foreign authorities and regulators, such as through nationalization or expropriation of assets; the imposition of limits on foreign ownership of local companies which may increase our dependence on joint venture counterparties and/or impact how we account for our joint venture ownership interests; changes in laws (including tax laws and regulations), their application or interpretation; political instability (including any resulting economic or trade sanctions); dividend limitations; price controls; changes in applicable currency; currency exchange controls or other restrictions that prevent us from transferring funds from these operations out of the countries in which they operate or converting local currencies we hold into U.S. dollars or other currencies, as well as other adverse actions by foreign governmental authorities and regulators, such as the retroactive application of new requirements on our current and prior activities or operations and the imposition of regulations limiting our ability to distribute our products. Such actions may negatively affect our business in these jurisdictions and could indirectly affect our business in other jurisdictions as well. Some of our foreign insurance operations are, and are likely to continue to be, in emerging markets where these risks are heightened.
Part of our international insurance operations may be subject to assessments, generally based on their proportionate share of business written in the relevant jurisdiction, for certain obligations to policyholders and claimants resulting from the insolvency of insurance companies. We cannot predict the timing and scope of any assessments that may be made in the future, which may materially affect the results of operations of our international insurance operations in particular quarterly or annual periods. See “Business — Regulation — International Regulation” and “Quantitative and Qualitative Disclosures About Market Risk,” as well as “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.”
We have operations in regions where the legal and political systems and regulatory frameworks are subject to instability and disruptions. For example, instability has increased in many parts of the Middle East, as well as China, Argentina, Ukraine and Russia. Lack of legal certainty and stability in these regions exposes our operations there to increased risk of disruption and to adverse or unpredictable actions by regulators and may make it more difficult for us to enforce our contracts, which may negatively impact our business in these regions.

54

Table of Contents

We have market presence in numerous countries and increased exposure to risks posed by local and regional economic conditions. China, Europe and Japan continue to experience overall sluggish economic performance, with concerns over low inflation. We face substantial exposure to the Japanese economy given our operations there. Unfavorable economic conditions in Japan, as well as in China and Europe, could adversely impact the demand for our products, negatively impact earnings, adversely affect the performance of our investments or result in impairments, all of which could have a material adverse effect on our business, results of operations and financial condition. See “— Economic Environment and Capital Markets-Related Risks — If Difficult Conditions in the Global Capital Markets and the Economy Generally Persist, They May Materially Adversely Affect Our Business and Results of Operations.” Certain EU member states, including Portugal, Ireland, Italy, Greece and Spain (“Europe’s perimeter region”) have been particularly affected by the sluggish economy, resulting in increased national debts and depressed economic activity. We have significant operations and investments in certain of these countries, including Europe’s perimeter region, which could be adversely affected by economic developments such as higher taxes, growing inflation, deflation, decreasing government spending, rising unemployment and currency instability. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment,” “— Fluctuations in Foreign Currency Exchange Rates Could Negatively Affect Our Profitability,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Financial and Economic Environment.”
Furthermore, we rely on local sales forces in these countries and may encounter labor problems resulting from workers’ associations and trade unions in some countries. If our business model is not successful in a particular country, we may lose all or most of our investment in building and training the sales force in that country.
We are continuing to expand our international operations in certain markets where we operate and in selected new markets. This may require considerable management time, as well as start-up expenses for market development before any significant revenues and earnings are generated. The prospects of our business also may be materially and adversely affected if we are not able to manage the growth of such international operations successfully. There can be no assurance that we will be successful in managing such future growth. Further, operations in new foreign markets may achieve low margins or may be unprofitable, and expansion in existing markets may be affected by local political, economic and market conditions. Therefore, as we expand internationally, we may not achieve expected operating margins and our results of operations may be negatively impacted.
Fluctuations in Foreign Currency Exchange Rates Could Negatively Affect Our Profitability
We are exposed to risks associated with fluctuations in foreign currency exchange rates against the U.S. dollar resulting from our holdings of non-U.S. dollar denominated investments, investments in foreign subsidiaries, net income from foreign operations and issuance of non-U.S. dollar denominated instruments, including guaranteed interest contracts and funding agreements. In general, the weakening of foreign currencies versus the U.S. dollar will adversely affect the estimated fair value of our non-U.S. dollar denominated investments, our investments in foreign subsidiaries, and our net income from foreign operations. In addition, from time to time, various emerging market countries have experienced severe economic and financial disruptions, including significant devaluations of their currencies. Our exposure to foreign currency exchange rate risk is exacerbated by our investments in these emerging markets. See “Quantitative and Qualitative Disclosures About Market Risk.”
In addition, certain of our life and annuity products are exposed to foreign exchange rate risk. Payments under these contracts, depending on the circumstances, may be required to be made in different currencies and may not be the legal tender in the country whose law governs the particular product. Changes in exchange rate movements and the imposition of capital controls may also directly impact the liability valuation that may not be entirely hedged. If the currency upon which expected future payments are made strengthens, the liability valuation may increase, which may result in a reduction of net income.
Historically, we have matched substantially all of our foreign currency denominated liabilities in our foreign subsidiaries with investments denominated in their respective foreign currency, which limits the effect of currency exchange rate fluctuations on local operating results; however, fluctuations in such rates affect the translation of these results into our U.S. dollar basis consolidated financial statements. Although we take certain actions to address this risk, including entering into foreign currency derivatives, foreign currency exchange rate fluctuations could materially adversely affect our reported results due to unhedged positions or the failure of hedges to effectively offset the impact of the foreign currency exchange rate fluctuation. Our reported results could also be adversely affected if the economy of one or more of our foreign subsidiaries is determined to be “highly inflationary,” generally defined by a cumulative inflation rate of approximately 100% or more over a three-year period.

55

Table of Contents

We face substantial exposure to risks associated with fluctuations in the yen/U.S. dollar exchange rate because we have substantial operations in Japan and a significant portion of our premiums and investment income in Japan are received in yen. Most claims and expenses associated with our operations in Japan are also paid in yen and we primarily purchase yen-denominated assets to support yen-denominated policy liabilities. These and other yen-denominated financial statement items are, however, translated into U.S. dollars for financial reporting purposes. Accordingly, fluctuations in the yen/U.S. dollar exchange rate can have a significant effect on our reported financial position and results of operations. Our Japan operation does assume some currency exposure by backing a portion of surplus and yen-denominated liabilities with U.S. dollar assets. Although this represents risk to our Japan operation, this activity reduces yen exposure at the enterprise level . Additionally, our Japan operation sells U.S. dollar and Australian dollar life and annuity products to Japanese customers. We may experience elevated levels of early policy terminations when the Japanese yen weakens against these currencies. While the cost of early policy terminations is offset by surrender charges, foreign exchange rate fluctuations will impact both our sales volumes and the amount of business we have in-force.
Due to our significant international operations, during periods when any foreign currency in which we derive our revenues weakens (strengthens), translating amounts expressed in that currency into U.S. dollars causes fewer (more) U.S. dollars to be reported. Any unrealized foreign currency translation adjustments (“FCTA”) are reported in accumulated other comprehensive income (loss) (“AOCI”). The weakening of a foreign currency relative to the U.S. dollar will generally adversely affect the value of investments in U.S. dollar terms and reduce the level of reserves denominated in that currency.
An Inability to Access Our Credit Facilities Could Result in a Reduction in Our Liquidity and Lead to Downgrades in Our Credit and Financial Strength Ratings
We rely on our credit facilities as a potential source of liquidity. The availability of these facilities could be critical to our credit and financial strength ratings and our ability to meet our obligations as they come due in a market when alternative sources of credit are tight. These credit facilities contain certain administrative, reporting, legal and financial covenants, including a requirement to maintain a specified minimum consolidated net worth. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Sources — Global Funding Sources — Credit and Committed Facilities” and Note 12 of the Notes to the Consolidated Financial Statements.
Our right to borrow funds under these facilities is subject to the fulfillment of certain important conditions, including our compliance with all covenants, and our ability to borrow under these facilities is also subject to the continued willingness and ability of the lenders that are parties to the facilities to provide funds. Our failure to comply with the covenants in the credit facilities or fulfill the conditions to borrowings, or the failure of lenders to fund their lending commitments (whether due to insolvency, illiquidity or other reasons) in the amounts provided for under the terms of the facilities, would restrict our ability to access these credit facilities when needed and, consequently, could have a material adverse effect on our financial condition and results of operations.
We May Need to Fund Deficiencies in Our Closed Block; Assets Allocated to the Closed Block Benefit Only the Holders of Closed Block Policies
MLIC’s plan of reorganization, as amended, established in connection with its demutualization (the “Plan of Reorganization”), required that we establish and operate an accounting mechanism, known as a closed block, to ensure that the reasonable dividend expectations of policyholders who own individual participating whole life insurance policies of MLIC in force at the time of the demutualization are met. We allocated assets to the closed block in an amount that will produce cash flows which, together with anticipated revenue from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and tax, and to provide for the continuation of the policyholder dividend scales in effect for 1999, if the experience underlying such scales continues, and for appropriate adjustments in such scales if the experience changes. The closed block assets, the cash flows generated by the closed block assets and the anticipated revenue from the policies included in the closed block may not be sufficient to provide for the benefits guaranteed under these policies. If they are not, we must fund the shortfall. Even if they are sufficient, we may choose, for competitive reasons, to support policyholder dividend payments with our general account funds.
The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. In addition, to the extent that these amounts are greater than the amounts estimated at the time the closed block was funded, dividends payable in respect of the policies included in the closed block may be greater than they would be in the absence of a closed block. Any excess earnings will be available for distribution over time only to closed block policyholders. See Note 7 of the Notes to the Consolidated Financial Statements.

56

Table of Contents

A Downgrade or a Potential Downgrade in Our Financial Strength or Credit Ratings Could Result in a Loss of Business and Materially Adversely Affect Our Financial Condition and Results of Operations
Financial strength ratings are published by various Nationally Recognized Statistical Rating Organizations (“NRSROs”) and similar entities not formally recognized as NRSROs. They indicate the NRSROs’ opinion regarding an insurance company’s ability to meet contractholder and policyholder obligations, and are important to maintaining public confidence in our products and our competitive position. See “Business — Company Ratings” for additional information regarding our financial strength ratings.
Downgrades in our financial strength ratings or changes to our rating outlooks could have a material adverse effect on our financial condition and results of operations in many ways, including:
reducing new sales of insurance products, annuities and other investment products;
adversely affecting our relationships with our sales force and independent sales intermediaries;
materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders;
requiring us to post additional collateral under certain of our financing and derivative transactions;
requiring us to reduce prices for many of our products and services to remain competitive; and
adversely affecting our ability to obtain reinsurance at reasonable prices or at all.
In addition to the financial strength ratings of our insurance subsidiaries, various NRSROs also publish credit ratings for MetLife, Inc. and several of its subsidiaries. Credit ratings indicate the NRSROs’ opinion regarding a debt issuer’s ability to meet the terms of debt obligations in a timely manner and are important factors in our overall funding profile and ability to access certain types of liquidity. Downgrades in our credit ratings or changes to our rating outlooks could have a material adverse effect on our financial condition and results of operations in many ways, including limiting our access to capital markets, potentially increasing the cost of debt, and requiring us to post collateral. See Note 9 of the Notes to the Consolidated Financial Statements for information regarding the impact of a one-notch downgrade with respect to derivative transactions with credit rating downgrade triggers and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Pledged Collateral” for further information on the impact of a one-notch downgrade. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Capital — Rating Agencies.”
In view of the difficulties experienced by many financial institutions as a result of the financial crisis and ensuing global recession, including our competitors in the insurance industry, we believe it is possible that the NRSROs will continue to heighten the level of scrutiny that they apply to insurance companies, will continue to increase the frequency and scope of their credit reviews, will continue to request additional information from the companies that they rate, and may adjust upward the capital and other requirements employed in the models for maintenance of certain ratings levels. Our ratings could be downgraded at any time and without notice by any NRSRO.
Reinsurance May Not Be Available, Affordable or Adequate to Protect Us Against Losses
As part of our overall risk management strategy, we purchase reinsurance for certain risks underwritten by our various business segments. While reinsurance agreements generally bind the reinsurer for the life of the business reinsured at generally fixed pricing, market conditions beyond our control determine the availability and cost of the reinsurance protection for new business. In certain circumstances, the price of reinsurance for business already reinsured may also increase. For example, for some of our group businesses under which the policies and related reinsurance are subject to periodic (typically annual) renewal, prices may increase at any renewal. Also, for most of our traditional life reinsurance agreements, it is common for the reinsurer to have a right to increase reinsurance rates on in-force business if there is a systematic deterioration of mortality in the market as a whole. Any decrease in the amount of reinsurance will increase our risk of loss and any increase in the cost of reinsurance will, absent a decrease in the amount of reinsurance, reduce our earnings. Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which could adversely affect our ability to write future business or result in the assumption of more risk with respect to those policies we issue. See “Business — Reinsurance Activity” and “— If the Counterparties to Our Reinsurance or Indemnification Arrangements or to the Derivatives We Use to Hedge Our Business Risks Default or Fail to Perform, We May Be Exposed to Risks We Had Sought to Mitigate, Which Could Materially Adversely Affect Our Financial Condition and Results of Operations.

57

Table of Contents

If the Counterparties to Our Reinsurance or Indemnification Arrangements or to the Derivatives We Use to Hedge Our Business Risks Default or Fail to Perform, We May Be Exposed to Risks We Had Sought to Mitigate, Which Could Materially Adversely Affect Our Financial Condition and Results of Operations
We use reinsurance, indemnification and derivatives to mitigate our risks in various circumstances. In general, reinsurance, indemnification and derivatives do not relieve us of our direct liability to our policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit risk with respect to our reinsurers, indemnitors, counterparties and central clearinghouses. A reinsurer’s, indemnitor’s, counterparty’s or central clearinghouse’s insolvency, inability or unwillingness to make payments under the terms of reinsurance agreements, indemnity agreements or derivatives agreements with us or inability or unwillingness to return collateral could have a material adverse effect on our financial condition and results of operations, including our liquidity. See “Business — Reinsurance Activity.”
In addition, we use derivatives to hedge various business risks. We enter into a variety of derivatives, including options, forwards, interest rate, credit default and currency swaps with a number of counterparties on a bilateral basis for uncleared OTC derivatives and with clearing brokers and central clearinghouses for OTC-cleared derivatives. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Derivatives.” If our counterparties, clearing brokers or central clearinghouses fail or refuse to honor their obligations under these derivatives, our hedges of the related risk will be ineffective. This risk is more pronounced in light of the stresses suffered by financial institutions over the past few years. Such failure could have a material adverse effect on our financial condition and results of operations.
Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results
Our earnings significantly depend upon the extent to which our actual claims experience is consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Such amounts are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. To the extent that actual claims experience is less favorable than the underlying assumptions we used in establishing such liabilities, we could be required to increase our liabilities.
Due to the nature of the underlying risks and the uncertainty associated with the determination of liabilities for future policy benefits and claims, we cannot determine precisely the amounts which we will ultimately pay to settle our liabilities. Such amounts may vary from the estimated amounts, particularly when those payments may not occur until well into the future. We evaluate our liabilities periodically based on accounting requirements, which change from time to time, the assumptions used to establish the liabilities, as well as our actual experience. If the liabilities originally established for future benefit payments prove inadequate, we must increase them. Such increases could affect earnings negatively and have a material adverse effect on our business, results of operations and financial condition. See “Business — Policyholder Liabilities” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities.”
Catastrophes May Adversely Impact Liabilities for Policyholder Claims and Reinsurance Availability
Our insurance operations are exposed to the risk of catastrophic events. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, hurricanes, earthquakes, tsunamis and man-made catastrophes may produce significant damage or loss of life or property damage in larger areas, especially those that are heavily populated. Claims resulting from catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could materially reduce our profitability or harm our financial condition. In addition, catastrophic events could harm the financial condition of issuers of obligations we hold in our investment portfolio, resulting in impairments to these obligations, and the financial condition of our reinsurers, thereby increasing the probability of default on reinsurance recoveries. Large-scale catastrophes may also reduce the overall level of economic activity in affected countries which could hurt our business and the value of our investments or our ability to write new business. It is possible that increases in the value, caused by the effects of inflation or other factors, and geographic concentration of insured lives or property, could increase the severity of claims we receive from future catastrophic events.

58

Table of Contents

Our life insurance operations are exposed to the risk of catastrophic mortality, such as a pandemic or other event that causes a large number of deaths. Significant influenza pandemics have occurred three times in the last century; however, the likelihood, timing, and severity of a future pandemic cannot be predicted. A significant pandemic could have a major impact on the global economy or the economies of particular countries or regions, including travel, trade, tourism, the health system, food supply, consumption, overall economic output and, eventually, on the financial markets. In addition, a pandemic that affected our employees or the employees of our distributors or of other companies with which we do business could disrupt our business operations. The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread and severity of such a pandemic could have a material impact on the losses experienced by us. In our group insurance operations, a localized event that affects the workplace of one or more of our group insurance customers could cause a significant loss due to mortality or morbidity claims. These events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.
Our property & casualty businesses have experienced, and will likely in the future experience, catastrophe losses that may have a material adverse impact on their business, results of operations and financial condition. Although we make every effort to limit our exposure to catastrophic risks through volatility management and reinsurance programs, these efforts do not eliminate all risk. Catastrophes can be caused by various events, including hurricanes, windstorms, earthquakes, hail, tornadoes, explosions, severe winter weather (including snow, freezing water, ice storms and blizzards), fires and man-made events such as terrorist attacks. Historically, most of our property & casualty catastrophe-related claims have related to homeowners coverages. However, catastrophes may also affect other property & casualty coverages. Due to their nature, we cannot predict the incidence, timing and severity of catastrophes. In addition, changing climate conditions, primarily rising global temperatures, may increase the frequency and severity of natural catastrophes such as hurricanes, tornadoes and floods.
We have hurricane exposure in coastal sections of the northeastern U.S. (including lower New York, New Jersey, Connecticut, Rhode Island and Massachusetts), the south Atlantic states (including Virginia, North Carolina, South Carolina, Georgia and Florida) and the Gulf Coast (including Alabama, Mississippi, Louisiana and Texas). We also have some earthquake exposure, primarily along the New Madrid fault line in the central U.S. and in the Pacific Northwest.
Consistent with industry practice and accounting standards, we establish liabilities for claims arising from a catastrophe only after assessing the probable losses arising from the event. We cannot be certain that the liabilities we have established will be adequate to cover actual claim liabilities. From time to time, states have passed legislation that has the effect of limiting the ability of insurers to manage risk, such as legislation restricting an insurer’s ability to withdraw from catastrophe-prone areas. While we attempt to limit our exposure to acceptable levels, subject to restrictions imposed by insurance regulatory authorities, a catastrophic event or multiple catastrophic events could have a material adverse effect on our business, results of operations and financial condition.
Most of the jurisdictions in which our U.S. insurance subsidiaries are admitted to transact business require life and property & casualty insurers doing business within the jurisdiction to participate in guaranty associations. These associations are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers, who may become impaired, insolvent or fail, for example, following the occurrence of one or more catastrophic events. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer is engaged. In addition, certain states have government owned or controlled organizations providing life and property & casualty insurance to their citizens. The activities of such organizations could also place additional stress on the adequacy of guaranty fund assessments. Many of these organizations also have the power to levy assessments similar to those of the guaranty associations described above. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. See “Business — Regulation — U.S. Regulation — Insurance Regulation — Guaranty Associations and Similar Arrangements” and “Business — Regulation — International Regulation.”
While in the past five years, the aggregate assessments levied against MetLife have not been material, it is possible that a large catastrophic event could render such guaranty funds inadequate and we may be called upon to contribute additional amounts, which may have a material impact on our financial condition or results of operations in a particular period. We have established liabilities for guaranty fund assessments that we consider adequate, but additional liabilities may be necessary. See Note 21 of the Notes to the Consolidated Financial Statements.
Our ability to manage this risk and the profitability of our property & casualty and life insurance businesses depends in part on our ability to obtain catastrophe reinsurance, which may not be available at commercially acceptable rates in the future. See “— Reinsurance May Not Be Available, Affordable or Adequate to Protect Us Against Losses.”

59

Table of Contents

Our Statutory Life Insurance Reserve Financings May Be Subject to Cost Increases and New Financings May Be Subject to Limited Market Capacity
We currently utilize capital markets solutions to finance a portion of our statutory reserve requirements for several products, including, but not limited to, our level premium term li fe subject to the NAIC Model Regulation Valuation of Life Insurance Policies (commonly referred to as XXX), and ULSG subject to NAIC Actuarial Guideline 38 (commonly referred to as AXXX), as well as MLIC’s closed block. While we have financing facilities in place for certain previously written business, certain of these facilities are subject to cost increases upon the occurrence of specified ratings downgrades of MetLife or are subject to periodic re-pricing. Any resulting cost increases could negatively impact our financial results.
Future capacity for these statutory reserve funding structures in the marketplace is not guaranteed. Currently, state insurance regulators and the NAIC are investigating the use of captive reinsurers and offshore entities to reinsure insurance risks. See “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.” Insurance regulators in a few states, including New York and California, have imposed a moratorium on new reinsurance transactions between life insurers domiciled in those states and captive reinsurers. If additional state insurance regulators determine to restrict the use of captive reinsurers for purposes of funding reserve requirements or capacity in the capital markets otherwise becomes unavailable for a prolonged period of time, thereby hindering our ability to obtain funding for these new structures, our ability to write additional business in a cost effective manner may be impacted.
Competitive Factors May Adversely Affect Our Market Share and Profitability
We believe competition amongst insurance companies is based on a number of factors, including service, product features, scale, price, financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition. We compete globally with a large number of other insurance companies, as well as non-insurance financial services companies, such as banks, broker-dealers and asset managers, for individual consumers, employers and other group customers and agents and other distributors of insurance and investment products. Some of these companies offer a broader array of products, have more competitive pricing or, with respect to other insurance companies, have higher claims paying ability ratings. Some may also have greater financial resources with which to compete. In some circumstances, national banks that sell annuity products of life insurers may also have pre-existing customer bases for financial services products. Additionally, many of our group insurance products are underwritten annually. There is a risk that group purchasers may be able to obtain more favorable terms from competitors than they could renewing coverage with us. These competitive pressures may adversely affect the persistency of these and other products, as well as our ability to sell our products in the future. Furthermore, the investment management and securities brokerage businesses have relatively few barriers to entry and continually attract new entrants. See “Business — Competition.”
The insurance industry distributes many of its individual products through other financial institutions such as banks and broker-dealers. An increase in bank and broker-dealer consolidation activity may negatively impact the industry’s sales, and such consolidation could increase competition for access to distributors, result in greater distribution expenses and impair our ability to market insurance products to our current customer base or to expand our customer base. Consolidation of distributors and/or other industry changes may also increase the likelihood that distributors will try to renegotiate the terms of any existing selling agreements to terms less favorable to us.
In addition, since numerous aspects of our business are subject to regulation, legislative and other changes affecting the regulatory environment for our business may have, over time, the effect of supporting or burdening some aspects of the financial services industry more than others. This can affect our competitive position within the life insurance industry and within the broader financial services industry. See “Business — Regulation,” “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth,” and “— Regulatory and Legal Risks — Changes in U.S. Federal, State Securities and State Insurance Laws and Regulations May Affect Our Operations and Our Profitability.”
If Our Business Does Not Perform Well, We May Be Required to Recognize an Impairment of Our Goodwill or Other Long-Lived Assets or to Establish a Valuation Allowance Against the Deferred Income Tax Asset, Which Could Adversely Affect Our Results of Operations or Financial Condition
We perform our goodwill impairment testing using the fair value approach, which requires the use of estimates and judgment, at the “reporting unit” level. A reporting unit is the operating segment or a business one level below the operating segment under certain circumstances.

60

Table of Contents

The estimated fair value of the reporting unit is impacted by the performance of the business, which may be adversely impacted by prolonged market declines. If it is determined that the goodwill has been impaired, we must write down the goodwill by the amount of the impairment, with a corresponding charge to net income. Such writedowns could have an adverse effect on our results of operations or financial position. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Goodwill” and Notes 1 and 11 of the Notes to the Consolidated Financial Statements.
Long-lived assets, including assets such as real estate, also require impairment testing. This testing is done to determine whether changes in circumstances indicate that we will be unable to recover the carrying amount of the asset group. Such writedowns could have a material adverse effect on our results of operations or financial position.
Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Deferred tax assets are assessed periodically by management to determine if they are realizable. Factors in management’s determination include the performance of the business including the ability to generate future taxable income. If, based on available information, it is more likely than not that the deferred income tax asset will not be realized then a valuation allowance must be established with a corresponding charge to net income. Such charges could have a material adverse effect on our results of operations or financial position. In addition, changes in the corporate tax rates could affect the value of our deferred tax assets and may require a write-off of some of those assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Income Taxes.”
If Our Business Does Not Perform Well or if Actual Experience Versus Estimates Used in Valuing and Amortizing DAC, Deferred Sales Inducements (“DSI”) and VOBA Vary Significantly, We May Be Required to Accelerate the Amortization and/or Impair the DAC, DSI and VOBA Which Could Adversely Affect Our Results of Operations or Financial Condition
We incur significant costs in connection with acquiring new and renewal insurance business. Costs that are related directly to the successful acquisition of new and renewal insurance business are deferred and referred to as DAC. Bonus amounts credited to certain policyholders, either immediately upon receiving a deposit or as excess interest credits for a period of time, are deferred and referred to as DSI. VOBA represents the excess of book value over the estimated fair value of acquired insurance, annuity, and investment-type contracts in-force at the acquisition date. The estimated fair value of the acquired liabilities is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns, nonperformance risk adjustment and other factors. DAC, DSI and VOBA related to fixed and variable universal life and deferred annuity contracts are amortized in proportion to actual and expected future gross profits and for most participating contracts in proportion to actual and expected future gross margins. The amount of future gross profit or margin is dependent principally on investment returns in excess of the amounts credited to policyholders, mortality, morbidity, persistency, interest crediting rates, dividends paid to policyholders, expenses to administer the business, creditworthiness of reinsurance counterparties and certain economic variables, such as inflation. Of these factors, we anticipate that investment returns are most likely to impact the rate of amortization of DAC for the aforementioned contracts.
If actual gross profits or margins are less than originally expected, then the amortization of such costs would be accelerated in the period the actual experience is known and would result in a charge to income. Significant or sustained equity market declines could result in an acceleration of amortization of DAC, DSI and VOBA related to variable annuity and variable universal life contracts, resulting in a charge to income. Such adjustments could have a material adverse effect on our results of operations or financial condition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Impact of a Sustained Low Interest Rate Environment” for a discussion of how significantly lower spreads may cause us to accelerate amortization, thereby reducing net income in the affected reporting period.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Deferred Policy Acquisition Costs and Value of Business Acquired” and Note 1 of the Notes to the Consolidated Financial Statements for further consideration of DAC and VOBA.
Guarantees Within Certain of Our Products May Decrease Our Earnings, Increase the Volatility of Our Results, Result in Higher Risk Management Costs and Expose Us to Increased Counterparty Risk
Certain of our variable annuity products include guaranteed benefits, including guaranteed minimum death benefits (“GMDBs”), guaranteed minimum withdrawal benefits (“GMWBs”), guaranteed minimum accumulation benefits (“GMABs”), and guaranteed minimum income benefits (“GMIBs”). These guarantees are designed to protect policyholders against significant downturns in equity markets and interest rates. Any such periods of significant and sustained downturns in equity markets, increased equity volatility, or reduced interest rates could result in an increase in the valuation of our liabilities associated with those products. An increase in these liabilities would result in a decrease in our net income.

61

Table of Contents

We use hedging and other risk management strategies to mitigate the liability exposure and the volatility of net income associated with these liabilities. These strategies involve the use of reinsurance and derivatives, which may not be completely effective. For example, in the event that reinsurers, derivative counterparties or central clearinghouses are unable or unwilling to pay, we remain liable for the guaranteed benefits. See “— If the Counterparties to Our Reinsurance or Indemnification Arrangements or to the Derivatives We Use to Hedge Our Business Risks Default or Fail to Perform, We May Be Exposed to Risks We Had Sought to Mitigate, Which Could Materially Adversely Affect Our Financial Condition and Results of Operations.”
In addition, hedging instruments may not effectively offset the costs of guarantees or may otherwise be insufficient in relation to our obligations. Furthermore, we are subject to the risk that changes in policyholder behavior or mortality, combined with adverse market events, produce economic losses not addressed by the risk management techniques employed. These, individually or collectively, may have a material adverse effect on our results of operations, including net income, financial condition or liquidity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Policyholder Liabilities — Variable Annuity Guarantees” and Note 1 of the Notes to the Consolidated Financial Statements for further consideration of the risks associated with guaranteed benefits.
Capital-Related Risks
Regulatory Restrictions and Uncertainty and Restrictions Under the Terms of Certain of Our Securities May Prevent Us from Repurchasing Our Stock and Paying Dividends at the Level We Wish
The declaration and payment of dividends is subject to the discretion of our Board of Directors, and will depend on our financial condition, results of operations, cash requirements, future prospects, regulatory restrictions on the payment of dividends by MetLife, Inc.’s insurance subsidiaries and other factors deemed relevant by the Board. There is no requirement or assurance that we will declare and pay any dividends. In addition, as a result of MetLife, Inc.’s designation as a non-bank SIFI, we may be subject to restrictions arising from Federal Reserve regulation, including capital planning and stress testing requirements. The capital requirements that will apply to non-bank SIFIs are unclear. Furthermore, if additional capital requirements are imposed on MetLife, Inc. as a G-SII, its ability to pay dividends could be reduced by any such additional capital requirements that might be imposed. See “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.” In addition, our ability to pay dividends on our common stock and repurchase our common stock is subject to restrictions arising from the terms of our preferred stock, junior subordinated debentures and trust securities, so called “dividend stopper” provisions, in situations where we may be experiencing financial stress. For purposes of this discussion, “junior subordinated debentures” are deemed to include MetLife’s Fixed-to-Floating Exchangeable Surplus Trust Securities, which are exchangeable for junior subordinated debentures, and which contain terms with the same substantive effects in this discussion as the terms of MetLife, Inc.’s junior subordinated debentures. In addition, our ability to pay dividends on our preferred stock and interest on our junior subordinated debentures is also restricted by the terms of those securities.
Regulatory Restrictions
The Federal Reserve Board is required under Dodd-Frank to adopt enhanced prudential standards, including heightened capital and stress testing requirements, for non-bank SIFIs. While stress testing requirements have been adopted, they will not be effective until rules relating to capital requirements are implemented. Although the Federal Reserve Board has indicated that it intends to apply enhanced prudential standards to non-bank SIFIs by rule or order, it has not yet done so. Therefore, the manner in which these proposed standards might apply to MetLife, Inc., as a non-bank SIFI, remains unclear. See “Business Regulation U.S. Regulation Regulation as a Non-Bank SIFI.” See also “Business Regulation International Regulation Global Systemically Important Insurers” regarding potential restrictions on MetLife, Inc. as a G-SII. It is possible that these requirements, or any others adopted, could restrict our ability to pay dividends, repurchase our common stock or other securities or engage in other transactions that could affect our capital . Furthermore, as a non-bank SIFI, MetLife, Inc. will be subject to stress testing conducted by the Federal Reserve, and our ability to pay dividends and repurchase our stock will be dependent on demonstrating the robustness of our capital planning and projection processes, as well as our ability to maintain our capital levels above regulatory minimum levels under stress scenarios. In addition, MetLife, Inc. may not be able to pay dividends if it does not receive sufficient funds from its operating subsidiaries, which are themselves subject to separate regulatory restrictions on their ability to pay dividends. See “ As A Holding Company, MetLife, Inc. Depends on the Ability of Its Subsidiaries to Pay Dividends, a Major Component of Holding Company Free Cash Flow.”

62

Table of Contents

“Dividend Stopper” Provisions in Our Preferred Stock and Junior Subordinated Debentures
Certain terms of our preferred stock and our junior subordinated debentures may prevent us from purchasing our common stock or paying dividends on our common stock in certain circumstances. Moreover, MetLife, Inc. is a party to certain replacement capital covenants which limit its ability to eliminate these restrictions through the repayment, redemption or purchase of preferred stock or junior subordinated debentures by requiring MetLife, subject to certain limitations, to receive cash proceeds during a specified period from the sale of specified replacement securities prior to any repayment, redemption or purchase. See Note 14 of the Notes to the Consolidated Financial Statements for a description of such covenants in effect with respect to junior subordinated debentures.
Under our preferred stock, if we have not paid the full dividends on our preferred stock for a dividend period, we may not repurchase or pay dividends on our common stock for that period. Under our junior subordinated debentures, if we have not paid in full the accrued interest through the most recent interest payment date on our junior subordinated debentures, we may not repurchase or pay dividends on our common stock or other capital stock (including the preferred stock), subject to certain exceptions.
Trigger Events for the Restrictions on the Payment of Dividends on Our Preferred Stock and Restrictions on the Payment of Interest on Our Junior Subordinated Debentures
In addition, the preferred stock and the junior subordinated debentures contain provisions that would automatically suspend the payment of preferred stock dividends and junior subordinated debenture interest payments if MetLife, Inc. fails to meet certain tests (“Trigger Events”) at specified times, although in such cases MetLife would be permitted to make the payments if it were able to utilize the “Alternative Payment Mechanism” described below. As a result of the suspension of these payments, the “dividend stopper” provisions would come into effect. A “Trigger Event” would occur if the RBC ratio of MetLife’s largest U.S. insurance subsidiaries in the aggregate (as defined in the applicable instrument) were to be less than 175% of the company action level based on the subsidiaries’ prior year annual financial statements filed (generally around March 1) with state insurance commissioners. A “Trigger Event” would also occur if, at the end of a quarter, consolidated GAAP net income for the four-quarter period ending two quarters before such quarter-end is zero or less and adjusted shareholders’ equity (as defined in the applicable instrument), as of such quarter-end and the end of the quarter two quarters before such quarter-end, declined by 10% or more from its level 10 quarters before such quarter-end. The Trigger Event would continue until there is no longer a Trigger Event at the specified time, and adjusted shareholders’ equity is no longer 10% or more below its level at the beginning of each measurement period described above that is associated with a “Trigger Event.”
In order to use the “Alternative Payment Mechanism” referred to above to declare and pay preferred stock dividends or interest on junior subordinated debentures, MetLife must sell common stock during the 90 days preceding the dividend declaration date or sell common stock or certain kinds of warrants to purchase common stock during the 180 days prior to the interest payment date, make dividend or interest payments not in excess of the net proceeds of these sales, and satisfy other specified conditions.
Dividends on Our Preferred Stock Are Subject to Declaration by Our Board of Directors
In addition to the provisions described above that prevent us from declaring and paying dividends on our preferred stock, dividends on our preferred stock are subject to declaration each quarter by our Board of Directors. If our Board of Directors does not declare dividends on the preferred stock for any quarterly dividend period, the “dividend stopper” provisions in our preferred stock would prevent us from repurchasing or paying dividends on our common stock for that period.
Optional Deferral of Interest on the Junior Subordinated Debentures
The junior subordinated debentures provide that MetLife may, at its option and provided that certain conditions are met, defer payment of interest without giving rise to an event of default for periods of up to 10 years (although after five years MetLife, Inc. would be obligated to use commercially reasonable efforts to sell equity securities to raise proceeds to pay the interest), with no limitation on the number of deferral periods that MetLife, Inc. may begin so long as all accrued and unpaid interest is paid with respect to prior deferral periods. If MetLife, Inc. were to elect to defer payments of interest, the “dividend stopper” provisions in the junior subordinated debentures would thus prevent MetLife, Inc. from repurchasing or paying dividends on its common stock or other capital stock (including the preferred stock) during the period of deferral, subject to exceptions.
See Note 16 of the Notes to the Consolidated Financial Statements for additional information about these restrictions.

63

Table of Contents

As a Holding Company, MetLife, Inc. Depends on the Ability of Its Subsidiaries to Pay Dividends, a Major Component of Holding Company Free Cash Flow
MetLife, Inc. is a holding company for its insurance and financial subsidiaries and does not have any significant operations of its own. Dividends from its subsidiaries and permitted payments to it under its tax sharing agreement with its subsidiaries are its principal sources of cash to meet its obligations and to pay preferred and common stock dividends. If the cash MetLife, Inc. receives from its subsidiaries is insufficient for it to fund its debt service and other holding company obligations, MetLife, Inc. may be required to raise cash through the incurrence of debt, the issuance of additional equity or the sale of assets.
The payment of dividends and other distributions to MetLife, Inc. by its U.S. insurance subsidiaries is regulated by insurance laws and regulations. In general, dividends in excess of prescribed limits require insurance regulatory approval. In addition, insurance regulators may prohibit the payment of dividends or other payments by its insurance subsidiaries to MetLife, Inc. if they determine that the payment could be adverse to our policyholders or contractholders. The payment of dividends and other distributions by insurance companies is also influenced by business conditions and rating agency considerations. See “Business — Regulation — U.S. Regulation — Insurance Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — MetLife, Inc. — Liquidity and Capital Sources — Dividends from Subsidiaries.” See also “— Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth.”
Any payment of interest, dividends, distributions, loans or advances by our foreign subsidiaries and branches to MetLife, Inc. could be subject to taxation, insurance regulatory or other restrictions on dividends or repatriation of earnings under applicable law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdiction in which such foreign subsidiaries operate. See “Business — Regulation — International Regulation” and “— Risks Related to Our Business — Our International Operations Face Political, Legal, Operational and Other Risks, Including Exposure to Local and Regional Economic Conditions, That Could Negatively Affect Those Operations or Our Profitability.”
Dividends from operating subsidiaries are a major component of holding company free cash flow. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP and Other Financial Disclosures.” If MetLife, Inc.’s operating subsidiaries were unable to make expected dividend payments to MetLife, Inc., we may be unable to meet our free cash flow goals and our ability to distribute cash to shareholders could be adversely affected.
Operational Risks
Our Risk Management Policies and Procedures May Leave Us Exposed to Unidentified or Unanticipated Risk, Which Could Negatively Affect Our Business
Our enterprise risk management is designed to mitigate material risks and loss to the Company. We develop and periodically update our risk management policies and procedures to reflect ongoing review of our risks and expect to continue to do so in the future. Nonetheless, our policies and procedures may not be comprehensive and may not identify every risk to which we are exposed. Many of our methods for managing risk and exposures are based upon the use of observed historical market behavior to model or project potential future exposure. Models used by our business are based on assumptions and projections. These models may not operate properly or input and assumptions may be inaccurate. As a result, these methods may not fully predict future exposures, which can be significantly greater than our historical measures indicate. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that is publicly available or otherwise accessible to us. This information may not always be accurate, complete, up-to-date or properly evaluated. In addition, more extensive and perhaps different risk management policies and procedures might have to be implemented under pending regulations. See “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI,” “Business — Regulation — International Regulation — Global Systemically Important Insurers” and “Quantitative and Qualitative Disclosures About Market Risk.”
The Continued Threat of Terrorism and Ongoing Military Actions May Adversely Affect the Value of Our Investment Portfolio and the Level of Claim Losses We Incur
The continued threat of terrorism, both within the U.S. and abroad, ongoing military and other actions and heightened security measures in response to these types of threats may cause significant volatility in global financial markets and result in loss of life, property damage, additional disruptions to commerce and reduced economic activity. The value of assets in our investment portfolio may be adversely affected by declines in the credit and equity markets and reduced economic activity caused by the continued threat of terrorism. Companies in which we maintain investments may suffer losses as a result of financial, commercial or economic disruptions and such disruptions might affect the ability of those companies to pay interest or principal on their securities or mortgage loans. Terrorist actions also could disrupt our operations centers in the U.S. or abroad and result in higher than anticipated claims under our insurance policies. See “— Economic Environment and Capital Markets-Related Risks — If Difficult Conditions in the Global Capital Markets and the Economy Generally Persist, They May Materially Adversely Affect Our Business and Results of Operations.”

64

Table of Contents

The Failure in Cyber- or Other Information Security Systems, as well as the Occurrence of Events Unanticipated in Our Disaster Recovery Systems and Management Continuity Planning, Could Result in a Loss or Disclosure of Confidential Information, Damage to Our Reputation and Impairment of Our Ability to Conduct Business Effectively
Our business is highly dependent upon the effective operation of our computer systems. We rely on these systems throughout our business for a variety of functions, including processing claims and applications, providing information to customers and distributors, performing actuarial analyses and maintaining financial records. We also retain confidential and proprietary information on our computer systems and we rely on sophisticated technologies to maintain the security of that information. Our computer systems have been, and will likely continue to be, subject to computer viruses or other malicious codes, unauthorized access, cyberattacks or other computer-related penetrations. While, to date, MetLife has not experienced a material breach of cybersecurity, administrative and technical controls and other preventive actions we take to reduce the risk of cyber-incidents and protect our information technology may be insufficient to prevent physical and electronic break-ins, cyber-attacks or other security breaches to our computer systems.
In the event of a disaster such as a natural catastrophe, epidemic, industrial accident, blackout, computer virus, terrorist attack, cyberattack or war, unanticipated problems with our disaster recovery systems could have a material adverse impact on our ability to conduct business and on our results of operations and financial position, particularly if those problems affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. In addition, in the event that a significant number of our managers were unavailable following a disaster, our ability to effectively conduct business could be severely compromised. These interruptions also may interfere with our suppliers’ ability to provide goods and services and our employees’ ability to perform their job responsibilities.
The failure of our computer systems and/or our disaster recovery plans for any reason could cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to our customers. Such a failure could harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers and revenues and otherwise adversely affect our business and financial results. Although we conduct due diligence, negotiate contractual provisions and, in many cases, conduct periodic reviews of our vendors, distributors, and other third-parties that provide operational or information technology services to us to confirm compliance with MetLife’s information security standards, the failure of such third-parties’ computer systems and/or their disaster recovery plans for any reason might cause significant interruptions in our operations and result in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to our customers. Such a failure could harm our reputation, subject us to regulatory sanctions and legal claims, lead to a loss of customers and revenues and otherwise adversely affect our business and financial results. While we maintain cyber liability insurance that provides both third-party liability and first party liability coverages, our insurance may not be sufficient to protect us against all losses. MetLife, Inc. and its subsidiaries maintain a primary cybersecurity and privacy liability insurance policy with a limit of $15 million, and have additional coverage for cybersecurity and privacy liability available under blended professional liability excess coverage policies with a total limit of $210 million.
Our Associates May Take Excessive Risks Which Could Negatively Affect Our Financial Condition and Business
As an insurance enterprise, we are in the business of accepting certain risks. The associates who conduct our business, including executive officers and other members of management, sales managers, investment professionals, product managers, sales agents, and other associates, do so in part by making decisions and choices that involve exposing us to risk. These include decisions such as setting underwriting guidelines and standards, product design and pricing, determining what assets to purchase for investment and when to sell them, which business opportunities to pursue, and other decisions. We endeavor, in the design and implementation of our compensation programs and practices, to avoid giving our associates incentives to take excessive risks; however, associates may take such risks regardless of the structure of our compensation programs and practices. Similarly, although we employ controls and procedures designed to monitor associates’ business decisions and prevent us from taking excessive risks, and to prevent employee misconduct, these controls and procedures may not be effective. If our associates take excessive risks, the impact of those risks could harm our reputation and have a material adverse effect on our financial condition and business operations.

65

Table of Contents

General Risks
MetLife, Inc.’s Board of Directors May Influence the Outcome of Stockholder Votes on Many Matters Due to the Voting Provisions of the MetLife Policyholder Trust
Under the Plan, we established the MetLife Policyholder Trust to hold the shares of MetLife, Inc. common stock allocated to eligible policyholders not receiving cash or policy credits under the plan. As of February 22, 2016, the Trust held 170,131,613 shares, or 15.5%, of the outstanding shares of MetLife, Inc. common stock. Because of voting provisions of the Trust and the number of shares held by it, the Trust may affect the outcome of matters brought to a stockholder vote. Except on votes regarding certain fundamental corporate actions described below, the trustee will vote all of the shares of common stock held in the Trust in accordance with the recommendations given by MetLife, Inc.’s Board of Directors to its stockholders or, if the Board gives no such recommendations, as directed by the Board. As a result of the voting provisions of the Trust, the Board of Directors may be able to influence the outcome of votes on matters submitted to a vote of stockholders, excluding certain fundamental corporate actions, so long as the Trust holds a substantial number of shares of common stock.
If the vote relates to fundamental corporate actions specified in the Trust, the trustee will solicit instructions from the Trust beneficiaries and vote all shares held in the Trust in proportion to the instructions it receives. These actions include:
an election or removal of directors in which a stockholder has properly nominated one or more candidates in opposition to a nominee or nominees of MetLife, Inc.’s Board of Directors or a vote on a stockholder’s proposal to oppose a Board nominee for director, remove a director for cause or fill a vacancy caused by the removal of a director by stockholders, subject to certain conditions;
a merger or consolidation, a sale, lease or exchange of all or substantially all of the assets, or a recapitalization or dissolution, of MetLife, Inc., in each case requiring a vote of stockholders under applicable Delaware law;
any transaction that would result in an exchange or conversion of shares of common stock held by the Trust for cash, securities or other property; and
any proposal requiring MetLife, Inc.’s Board of Directors to amend or redeem the rights under MetLife, Inc.’s stockholder rights plan, other than a proposal with respect to which we have received advice of nationally-recognized legal counsel to the effect that the proposal is not a proper subject for stockholder action under Delaware law. MetLife, Inc. does not currently have a stockholder rights plan.
If a vote concerns any of these fundamental corporate actions, the trustee will vote all of the shares of common stock held by the Trust in proportion to the instructions it received, which will give disproportionate weight to the instructions actually given by Trust beneficiaries.
The MetLife Policyholder Trust Agreement provides that we may terminate the Trust once the percentage of outstanding shares held in the Trust falls to 25%. The winding up of the Trust must commence 90 days after we provide the trustee with notice that the percentage of outstanding shares held in the Trust is 10% or less. In connection with any termination of the Trust, all of the shares of common stock then held in the Trust will need to be distributed to the respective Trust beneficiaries, unless we offer to purchase all or a portion of such Trust shares. In connection with the termination of the Trust and such a distribution, we may incur costs related to regulatory filings, mailings to Trust beneficiaries or others, and costs related to an increase in the number of shareholders, which may include increased mailing and proxy solicitation expenses. After such a distribution, the addition of the respective Trust beneficiaries to our shareholder base with full voting rights may have a significant impact on matters brought to a stockholder vote and other aspects of our corporate governance.
Changes in Accounting Standards Issued by the Financial Accounting Standards Board or Other Standard-Setting Bodies May Adversely Affect Our Financial Statements
Our financial statements are subject to the application of GAAP, which is periodically revised and/or expanded. Accordingly, from time to time we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board (the “FASB”). The impact of accounting pronouncements that have been issued but not yet implemented is disclosed in our reports filed with the SEC. See Note 1 of the Notes to the Consolidated Financial Statements. An assessment of proposed standards is not provided as such proposals are subject to change through the exposure process and official positions of the FASB are determined only after extensive due process and deliberations. Therefore, the effects on our financial statements cannot be meaningfully assessed. The required adoption of future accounting standards could have a material adverse effect on our financial condition and results of operations, including on our net income.

66

Table of Contents

Changes in Our Assumptions Regarding the Discount Rate, Expected Rate of Return, Mortality Rates and Expected Increase in Compensation Used for Our Pension and Other Postretirement Benefit Plans May Result in Increased Expenses and Reduce Our Profitability
We determine our pension and other postretirement benefit plan costs based on our best estimates of future plan experience. These assumptions are reviewed regularly and include discount rates, expected rates of return on plan assets, mortality rates, expected increases in compensation levels and expected medical inflation. Changes in these assumptions may result in increased expenses and reduce our profitability. See Note 18 of the Notes to the Consolidated Financial Statements for details on how changes in these assumptions would affect plan costs.
We May Not be Able to Protect Our Intellectual Property and May be Subject to Infringement Claims
We rely on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret laws to establish and protect our intellectual property. Although we endeavor to protect our rights, third parties may infringe or misappropriate our intellectual property. We may have to litigate to enforce and protect our copyrights, trademarks, patents, trade secrets and know-how or to determine their scope, validity or enforceability. This would represent a diversion of resources that may be significant and our efforts may not prove successful. The inability to secure or protect our intellectual property assets could harm our reputation and have a material adverse effect on our business and our ability to compete with other insurers and financial institutions.
In addition, we may be subject to claims by third parties for (i) patent, trademark or copyright infringement, (ii) breach of patent, trademark or copyright license usage rights, or (iii) misappropriation of trade secrets. Any such claims or resulting litigation could result in significant expense and liability for damages. If we were found to have infringed or misappropriated a third-party patent or other intellectual property right, we could in some circumstances be enjoined from providing certain products or services to our customers or from utilizing and benefiting from certain patents, copyrights, trademarks, trade secrets or licenses. Alternatively, we could be required to enter into costly licensing arrangements with third parties or implement a costly alternative. Any of these scenarios could harm our reputation and have a material adverse effect on our business and results of operations.
We May Be Unable to Attract and Retain Sales Representatives for Our Products
We must attract and retain productive sales representatives to sell our insurance, annuities and investment products. Insurers compete for sales representatives with demonstrated ability. In addition, there is competition for representatives with other types of financial services firms, such as independent broker-dealers.
We compete with other financial services companies for sales representatives primarily on the basis of product features, support services, compensation and financial position. We continue to undertake several initiatives to enhance the efficiency and production of our existing sales force. These initiatives may not succeed in attracting and retaining new agents. Sales of individual insurance, annuities and investment products and our results of operations and financial condition could be materially adversely affected if we are unsuccessful in attracting and retaining highly qualified and productive agents. See “Business — Competition.”
State Laws, Federal Laws, Our Certificate of Incorporation and Our By-Laws May Delay, Deter or Prevent Takeovers and Business Combinations that Stockholders Might Consider in Their Best Interests
State laws, federal laws and our certificate of incorporation and by-laws may delay, deter or prevent a takeover attempt that stockholders might consider in their best interests. For instance, such restrictions may prevent stockholders from receiving the benefit from any premium over the market price of MetLife, Inc.’s common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of MetLife, Inc.’s common stock if they are viewed as discouraging takeover attempts in the future.

67

Table of Contents

Any person seeking to acquire a controlling interest in us would face various regulatory obstacles, including:
applicable state insurance laws and regulations may delay or impede a business combination involving us by prohibiting an entity from acquiring control (generally presumed to exist at direct or indirect ownership of 10% or more of voting stock) of an insurance company domiciled in the United States without the prior approval of the domestic insurance regulator. Many foreign jurisdictions in which we operate have similar regulatory approval requirements.
Dodd-Frank provisions that restrict or impede consolidations, mergers and acquisitions by systemically significant firms. See “Business Regulation U.S. Regulation Regulation as a Non-Bank SIFI Enhanced Prudential Standards for Non-Bank SIFIs.”
Provisions of the Investment Company Act that require approval by the contract owners of our variable contracts in order to effectuate a change of control of any affiliated investment adviser to a mutual fund underlying our variable contracts.
FINRA approval requirements for a change of control of any FINRA registered broker-dealer that is a direct or indirect subsidiary of MetLife, Inc.
Provisions of the Delaware General Corporation Law may affect the ability of an “interested stockholder” (the owner of 15% or more of the outstanding voting stock of a corporation) to engage in certain business combinations for a period of three years following the time that the stockholder becomes an “interested stockholder.”
In addition, MetLife, Inc.’s certificate of incorporation and by-laws also contain provisions that may delay, deter or prevent a takeover attempt that stockholders might consider in their best interests or may otherwise adversely affect prevailing market prices for MetLife, Inc.’s common stock. These provisions include: a prohibition on the calling of special meetings or action by written consent by stockholders; and advance notice procedures for the nomination of candidates to the Board of Directors and stockholder proposals to be considered at stockholder meetings.
A majority of the combined voting power of the outstanding shares entitled to vote generally in the election of Directors may amend MetLife, Inc.’s certificate of incorporation or by-laws. This may allow shareholders to change the Company’s corporate governance and, therefore, make it more difficult for the Board of Directors to protect shareholders’ interests, e.g., if they are presented with an acquisition proposal that undervalues the Company.
Item 1B. Unresolved Staff Comments
MetLife has no unresolved comments from the SEC staff regarding its periodic or current reports under the Exchange Act.
Item 2. Properties
We lease 420,000 rentable square feet in an office building in Manhattan, New York. The term of that lease commenced in February 2008 and continues until April 2029. In August 2009, we subleased 32,000 rentable square feet of that space to a subtenant, which has met our standards of review with respect to creditworthiness. We also lease 495,000 rentable square feet at 200 Park Avenue, New York (the “MetLife Building”). The term of this lease commenced in December 2015 and continues until September 2027. We also lease additional space at the MetLife Building, which includes MetLife, Inc.’s boardroom. We have retained rights to existing signage for 20 years with optional renewal periods through 2205. Each of these spaces under lease is occupied by all of our segments, as well as Corporate & Other. The Company plans to consolidate its existing New York City offices to the MetLife Building, in phases, beginning in December 2016.
We lease 425,000 rentable square feet in Charlotte, North Carolina, which is predominantly occupied by the Retail segment, as well as Corporate & Other. The term of that lease commenced in April 2013 and continues until September 2026. We leased an additional 30,000 rentable square feet in Charlotte, North Carolina, the term of which commenced in May 2014 and expired on December 31, 2015. We lease 435,000 rentable square feet in two buildings in Cary, North Carolina, which are occupied by Global Technology & Operations, which supports all of our segments, as well as Corporate & Other. The leases for the two buildings commenced in February 2015 and April 2015, and will both continue until April 2030.
In December 2015, we entered into a sale-leaseback of five properties located in the U.S. with an unrelated third party. We own nine buildings in the U.S. that we use in the operation of our business. These buildings contain 2 million rentable square feet and are located in the following states: Florida, Illinois, Missouri, New York, Oklahoma and Pennsylvania. Our computer center in Rensselaer, New York is not owned in fee but rather is occupied pursuant to a long-term ground lease. In addition to the aforementioned leases in New York and North Carolina, we lease space in 300 other locations throughout the U.S. Including our Long Island City, New York, facility and the lease-backs, these leased facilities consist of 6.5 million rentable square feet. Of these leases, 240 are occupied as sales offices while the balance of the space is utilized for corporate functions supporting business activities. We also own over 95 properties and lease close to 1,000 sites in various locations outside the U.S. We believe that these properties are suitable and adequate for our current and anticipated business operations.

68

Table of Contents

We arrange for property & casualty coverage on our properties, taking into consideration our risk exposures and the cost and availability of commercial coverages, including deductible loss levels. In connection with the renewal of those coverages, we have arranged $500 million of property insurance, including coverage for terrorism, on our real estate portfolio through May 1, 2016, its renewal date.
Item 3. Legal Proceedings
See Note 21 of the Notes to the Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.

69

Table of Contents

Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Issuer Common Equity
MetLife, Inc.’s common stock, par value $0.01 per share, began trading on the New York Stock Exchange (“NYSE”) under the symbol “MET” on April 5, 2000.
The following table presents high and low closing prices for our common stock on the NYSE for the periods indicated:
 
2015
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
Common Stock Price
 
 
 
 
 
 
 
High
$
53.91

 
$
57.70

 
$
57.70

 
$
51.69

Low
$
46.50

 
$
50.25

 
$
46.07

 
$
46.42

 
2014
 
1st Quarter
 
2nd Quarter
 
3rd Quarter
 
4th Quarter
Common Stock Price
 
 
 
 
 
 
 
High
$
54.55

 
$
56.55

 
$
57.22

 
$
56.36

Low
$
47.06

 
$
49.19

 
$
51.08

 
$
47.71

At February 22, 2016, there were 81,298 stockholders of record of our common stock.
The following table presents common stock dividend declaration, record and payment dates, as well as per share and aggregate dividend amounts, for the years ended December 31, 2015 and 2014 :
 
 
 
 
 
 
Dividend
Declaration Date
 
Record Date
 
Payment Date
 
Per Share
 
Aggregate
 
 
 
 
 
 

 
(In millions)
October 27, 2015
 
November 6, 2015
 
December 11, 2015
 
$
0.375

 
$
419

July 7, 2015
 
August 7, 2015
 
September 11, 2015
 
$
0.375

 
420

April 28, 2015
 
May 11, 2015
 
June 12, 2015
 
$
0.375

 
420

January 6, 2015
 
February 6, 2015
 
March 13, 2015
 
$
0.350

 
394

 
 
 
 
 
 
 
 
$
1,653

 
 
 
 
 
 
 
 
 
October 28, 2014
 
November 7, 2014
 
December 12, 2014
 
$
0.350

 
$
398

July 7, 2014
 
August 8, 2014
 
September 12, 2014
 
$
0.350

 
395

April 22, 2014
 
May 9, 2014
 
June 13, 2014
 
$
0.350

 
395

January 6, 2014
 
February 6, 2014
 
March 13, 2014
 
$
0.275

 
311

 
 
 
 
 
 
 
 
$
1,499


70

Table of Contents

The declaration and payment of common stock dividends is subject to the discretion of our Board of Directors, and will depend on MetLife, Inc.’s financial condition, results of operations, cash requirements, future prospects, regulatory restrictions on the payment of dividends by MetLife, Inc.’s insurance subsidiaries and other factors deemed relevant by the Board. The payment of dividends and other distributions by MetLife, Inc. to its security holders may be subject to regulation by the Federal Reserve as a result of MetLife, Inc.’s designation as a non-bank SIFI. See “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI.” Furthermore, if additional capital requirements are imposed on MetLife, Inc. as a G-SII, its ability to pay dividends could be reduced by any such additional capital requirements that might be imposed. See “Business — Regulation — International Regulation — Global Systemically Important Insurers.” The payment of dividends is also subject to restrictions under the terms of our preferred stock and junior subordinated debentures in situations where we may be experiencing financial stress. See “Risk Factors — Capital-Related Risks — Regulatory Restrictions and Uncertainty and Restrictions Under the Terms of Certain of Our Securities May Prevent Us from Repurchasing Our Stock and Paying Dividends at the Level We Wish” and Note 16 of the Notes to the Consolidated Financial Statements. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Dividends” and Note 23 of the Notes to the Consolidated Financial Statements for further information regarding preferred and common stock dividends.
See Item 12 for information about our equity compensation plans.
Issuer Purchases of Equity Securities
Purchases of common stock made by or on behalf of MetLife, Inc. or its affiliates during the quarter ended December 31, 2015 are set forth below:
Period
 
(a) Total Number of Shares Purchased (1)
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
(d) Maximum Number(or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
October 1 - October 31, 2015
 
3,288,239

 
$46.63
 
3,288,239

 
$739,264,822
November 1 - November 30, 2015
 
2,315,355

 
$50.33
 
2,315,355

 
$622,723,711
December 1 - December 31, 2015
 
11,412,612

 
$48.40
 
11,412,581

 
$70,314,247
______________
(1)
During the periods October 1 through October 31, 2015 , November 1 through November 30, 2015 , and December 1 through December 31, 2015 , separate account index funds purchased 0 shares, 0 shares and 31 shares, respectively, of common stock on the open market in nondiscretionary transactions. Except for the foregoing, there were no shares of common stock which were repurchased by MetLife, Inc. other than through a publicly announced plan or program.
(2)
On December 12, 2014, MetLife, Inc. announced that its Board of Directors authorized $1.0 billion of common stock repurchases in addition to previously authorized repurchases and, on September 22, 2015, MetLife, Inc. announced that its Board of Directors authorized additional repurchases of $739 million of its common stock, bringing MetLife, Inc.’s available repurchase authorization under the December 2014 and September 2015 authorizations as of such date to $1.0 billion. In October 2015, MetLife, Inc. completed all repurchases under the December 2014 authorization. At December 31, 2015 , MetLife, Inc. had $70 million remaining under the September 2015 authorization. In January 2016, MetLife, Inc. completed all remaining repurchases under the September 2015 authorization. For more information on common stock repurchases, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Common Stock Repurchases” and Notes 16 and 23 of the Notes to the Consolidated Financial Statements.
Item 6. Selected Financial Data
The following selected financial data has been derived from the Company’s audited consolidated financial statements. The statement of operations data for the years ended December 31, 2015 , 2014 and 2013 , and the balance sheet data at December 31, 2015 and 2014 have been derived from the Company’s audited consolidated financial statements included elsewhere herein. The statement of operations data for the years ended December 31, 2012 and 2011 , and the balance sheet data at December 31, 2013 , 2012 and 2011 have been derived from the Company’s audited consolidated financial statements not included herein. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and related notes included elsewhere herein.

71

Table of Contents

 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(In millions, except per share data)
Statement of Operations Data
 
 
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
38,545

 
$
39,067

 
$
37,674

 
$
37,975

 
$
36,361

Universal life and investment-type product policy fees
 
9,507

 
9,946

 
9,451

 
8,556

 
7,806

Net investment income
 
19,281

 
21,153

 
22,232

 
21,984

 
19,585

Other revenues
 
1,983

 
2,030

 
1,920

 
1,906

 
2,532

Net investment gains (losses)
 
597

 
(197
)
 
161

 
(352
)
 
(867
)
Net derivative gains (losses)
 
38

 
1,317

 
(3,239
)
 
(1,919
)
 
4,824

Total revenues
 
69,951

 
73,316

 
68,199

 
68,150

 
70,241

 
 
 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 

 

Policyholder benefits and claims
 
38,714

 
39,102

 
38,107

 
37,987

 
35,471

Interest credited to policyholder account balances
 
5,610

 
6,943

 
8,179

 
7,729

 
5,603

Policyholder dividends
 
1,388

 
1,376

 
1,259

 
1,369

 
1,446

Goodwill impairment
 

 

 

 
1,868

 

Other expenses
 
16,769

 
17,091

 
16,602

 
17,755

 
18,537

Total expenses
 
62,481

 
64,512

 
64,147

 
66,708

 
61,057

Income (loss) from continuing operations before provision for income tax
 
7,470

 
8,804

 
4,052

 
1,442

 
9,184

Provision for income tax expense (benefit)
 
2,148

 
2,465

 
661

 
128

 
2,793

Income (loss) from continuing operations, net of income tax
 
5,322

 
6,339

 
3,391

 
1,314

 
6,391

Income (loss) from discontinued operations, net of income tax
 

 
(3
)
 
2

 
48

 
24

Net income (loss)
 
5,322

 
6,336

 
3,393

 
1,362

 
6,415

Less: Net income (loss) attributable to noncontrolling interests
 
12

 
27

 
25

 
38

 
(8
)
Net income (loss) attributable to MetLife, Inc.
 
5,310

 
6,309

 
3,368

 
1,324

 
6,423

Less: Preferred stock dividends
 
116

 
122

 
122

 
122

 
122

Preferred stock repurchase premium
 
42

 

 

 

 
146

Net income (loss) available to MetLife, Inc.’s common shareholders
 
$
5,152

 
$
6,187

 
$
3,246

 
$
1,202

 
$
6,155

 
 
 
 
 
 
 
 
 
 
 
EPS Data (1)
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders per common share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
4.61

 
$
5.48

 
$
2.94

 
$
1.08

 
$
5.79

Diluted
 
$
4.57

 
$
5.42

 
$
2.91

 
$
1.08

 
$
5.74

Income (loss) from discontinued operations, net of income tax, per common share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$

 
$

 
$

 
$
0.04

 
$
0.02

Diluted
 
$

 
$

 
$

 
$
0.04

 
$
0.02

Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
4.61

 
$
5.48

 
$
2.94

 
$
1.12

 
$
5.81

Diluted
 
$
4.57

 
$
5.42

 
$
2.91

 
$
1.12

 
$
5.76

Cash dividends declared per common share
 
$
1.475

 
$
1.325

 
$
1.010

 
$
0.740

 
$
0.740


72

Table of Contents

 
 
December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(In millions)
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
Separate account assets
 
$
301,598

 
$
316,994

 
$
317,201

 
$
235,393

 
$
203,023

Total assets
 
$
877,933

 
$
902,337

 
$
885,296

 
$
836,781

 
$
796,226

Policyholder liabilities and other policy-related balances (2)
 
$
411,359

 
$
417,141

 
$
418,487

 
$
438,191

 
$
421,267

Short-term debt
 
$
100

 
$
100

 
$
175

 
$
100

 
$
686

Long-term debt
 
$
18,023

 
$
16,286

 
$
18,653

 
$
19,062

 
$
23,692

Collateral financing arrangements
 
$
4,139

 
$
4,196

 
$
4,196

 
$
4,196

 
$
4,647

Junior subordinated debt securities
 
$
3,194

 
$
3,193

 
$
3,193

 
$
3,192

 
$
3,192

Separate account liabilities
 
$
301,598

 
$
316,994

 
$
317,201

 
$
235,393

 
$
203,023

Accumulated other comprehensive income (loss)
 
$
4,771

 
$
10,649

 
$
5,104

 
$
11,397

 
$
6,083

Total MetLife, Inc.’s stockholders’ equity
 
$
67,949

 
$
72,053

 
$
61,553

 
$
64,453

 
$
57,519

Noncontrolling interests
 
$
470

 
$
507

 
$
543

 
$
384

 
$
370

 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
Other Data (3)
 
 
 
 
 
 
 
 
 
 
Return on MetLife, Inc.’s common stockholders’ equity
 
7.5
%
 
9.4
%
 
5.4
%
 
2.0
%
 
12.2
%
_____________
(1)
For the year ended December 31, 2012, all shares related to the assumed issuance of shares in settlement of the applicable stock purchase contracts relating to previously issued common equity units have been excluded from the calculation of diluted earnings per common share, as these assumed shares are anti-dilutive.
(2)
Policyholder liabilities and other policy-related balances include future policy benefits, policyholder account balances, other policy-related balances, policyholder dividends payable and the policyholder dividend obligation.
(3)
Return on MetLife, Inc.’s common stockholders’ equity is defined as net income (loss) available to MetLife, Inc.’s common shareholders divided by MetLife, Inc.’s average common stockholders’ equity.

73

Table of Contents

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Page

74

Table of Contents

Forward-Looking Statements and Other Financial Information
For purposes of this discussion, “MetLife,” the “Company,” “we,” “our” and “us” refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates. Following this summary is a discussion addressing the consolidated results of operations and financial condition of the Company for the periods indicated. This discussion should be read in conjunction with “Note Regarding Forward-Looking Statements,” “Risk Factors,” “Selected Financial Data,” “Quantitative and Qualitative Disclosures About Market Risk” and the Company’s consolidated financial statements included elsewhere herein.
This 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 such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial 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. Any or all forward-looking statements may turn out to be wrong. Actual results could differ materially from those expressed or implied in the forward-looking statements. See “Note Regarding Forward-Looking Statements.”
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes references to our performance measures, operating earnings and operating earnings available to common shareholders, that are not based on GAAP. Operating earnings is the measure of segment profit or loss we use to evaluate segment performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is our measure of segment performance. Operating earnings is also a measure by which senior management’s and many other employees’ performance is evaluated for the purposes of determining their compensation under applicable compensation plans. See “— Non-GAAP and Other Financial Disclosures” for definitions of these and other measures.

75

Table of Contents

Executive Summary
Overview
MetLife is a global provider of life insurance, annuities, employee benefits and asset management. MetLife is organized into six segments, reflecting three broad geographic regions: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and EMEA. In addition, the Company reports certain of its results of operations in Corporate & Other. See “Business Segments and Corporate & Other” and Note 2 of the Notes to the Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. See also “ — Other Key Information — Significant Events” for information on the Company’s announcement of its plan to pursue the Separation. Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.
Current Year Highlights
Overall sales growth declined from 2014 levels; however, we experienced sales growth across various products within our regions during the year ended December 31, 2015, as compared to 2014. In particular, we had higher sales of retail annuity and accident & health products. A number of factors in 2015, however, offset the benefits of such sales growth, including (i) a tax charge and a related charge for interest on uncertain tax positions recorded under accounting guidance for the recognition of tax uncertainties, (ii) a decline in investment yields as a result of the sustained low interest rate environment and lower returns on other limited partnership interests, (iii) less favorable underwriting results driven by unfavorable claims experience in our property & casualty business, and (iv) a decrease in earnings as a result of our annual review of actuarial assumptions.
The following represents the segments’ contributions to total income (loss) from continuing operations, net of income tax, and total operating earnings for the year ended December 31, 2015:
_________________    
(1) Excludes Corporate & Other.
(2) See “— Results of Operations — Consolidated Results” and “— Non-GAAP and Other Financial Disclosures” for reconciliations and definitions of non-GAAP financial measures.

76

Table of Contents

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Consolidated Results - Highlights
Income (loss) from continuing operations, net of income tax, down $1.0 billion:
 
 
Operating earnings available to common shareholders down $1.1 billion
 
 
Net derivative gains (losses) unfavorable by $1.3 billion ($831 million, net of income tax) driven by unfavorable changes in market and other risks in embedded derivatives, as well as changes in interest rates
 
 
Net investment gains (losses) favorable by $794 million ($516 million, net of income tax) primarily driven by a 2014 loss on the disposition of MetLife Assurance Limited (“MAL”)
 
 
Includes a one-time tax benefit in Japan of $174 million in 2015
 
 
(1) See “— Results of Operations — Consolidated Results” and “— Non-GAAP and Other Financial Disclosures” for reconciliations and definitions of non-GAAP financial measures.
Consolidated Results - Operating Highlights
Operating earnings available to common shareholders down $1.1 billion:
Results of operations impacted by: (i) lower investment yields; (ii) less favorable underwriting; (iii) unfavorable impact from annual reviews of assumptions; (iv) higher net investment income from portfolio growth; and (v) additional items described below.
Our 2015 results also included the following:
 
$557 million tax charge and a $362 million ($235 million, net of income tax) charge for interest on uncertain tax positions r ecorded under accounting guidance for the recognition of tax uncertainties related to the U.S. tax treatment of taxes paid by a wholly-owned United Kingdom (“U.K.”) investment subsidiary of MLIC
 
$183 million of tax benefits related to (i) restructuring in Chile; (ii) a change in tax rate in Japan; (iii) the repatriation of earnings from Japan; and (iv) the devaluation of the peso in Argentina
Our 2014 results also included the following:
 
$104 million, net of income tax, of favorable reserve adjustments related to disability premium waivers in the retail life business
 
$117 million, net of income tax, increase in the litigation reserve related to asbestos
 
Charge of $57 million, net of income tax, related to delayed settlement interest on unclaimed funds held by state governments in the retail life business
 
Charges totaling $57 million, net of income tax, related to a settlement of a licensing matter with the Department of Financial Services and the District Attorney, New York County
 
Net tax charge of $9 million related to: (i) charge related to a tax reform bill in Chile; and (ii) benefit related to the filing of the Company’s U.S. federal tax return
For a more in-depth discussion of our consolidated results, see “— Results of Operations — Consolidated Results” and “— Results of Operations — Consolidated Results — Operating.”

77

Table of Contents

Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Consolidated Results Highlights
Income (loss) from continuing operations, net of income tax, up $2.9 billion:
 
 
Net derivative gains (losses) favorable by $4.6 billion ($3.0 billion, net of income tax) driven by changes in interest rates and foreign currency exchange rates
 
 
Annual assumption reviews related to reserves and DAC favorable by $262 million ($174 million, net of income tax)
 
 
Net investment gains (losses) unfavorable by $358 million ($233 million, net of income tax) primarily driven by a loss on the disposition of MAL
 
 
(1) See “— Results of Operations — Consolidated Results” and “— Non-GAAP and Other Financial Disclosures” for reconciliations and definitions of non-GAAP financial measures.
Consolidated Results - Operating Highlights
Operating earnings available to common shareholders up $299 million:
Results of operations impacted by: (i) higher net investment income from portfolio growth; (ii) higher asset-based fee income; (iii) lower interest credited expense; (iv) unfavorable mortality, morbidity and claims experience; (v) lower investment yields; and (vi) additional items described below.
Fourth quarter 2013 acquisition of ProVida favorable by $166 million, net of income tax (excluding impact of tax reform charge in Chile)
Our 2014 results also included the following:
 
A $58 million non-tax deductible charge related to PPACA
 
Additional items presented in “—Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014 — Consolidated Results — Operating Highlights” above
Our 2013 results also included the following:
 
A $101 million, net of income tax, increase in the litigation reserve related to asbestos
 
A $57 million, net of income tax, reserve strengthening in Australia
For a more in-depth discussion of our consolidated results, see “— Results of Operations — Consolidated Results” and “— Results of Operations — Consolidated Results — Operating.”
Consolidated Company Outlook
As part of an enterprise-wide strategic initiative, we announced that, by 2016, we expected to increase our operating return on common stockholders’ equity (“operating ROE”), excluding AOCI, other than FCTA, driven by higher operating earnings. In 2016, we expect our operating ROE, excluding AOCI other than FCTA, to be approximately 11%.
When making projections, we must rely on the accuracy of our assumptions about future economic and business conditions, which can be affected by known and unknown risks and other uncertainties. Our assumptions have been and will continue to be impacted by (i) MetLife, Inc.’s plan to pursue the Separation, (ii) regulatory uncertainty regarding capital requirements applicable to us, as a non-bank SIFI, which, among other things, impacted the level of our share repurchases, (iii) lower investment margins (primarily in the U.S.) as a result of the sustained low interest rate environment, (iv) lower than anticipated merger and acquisition activity, and (v) the impact on our foreign operations of the strengthening of the U.S. dollar.

78

Table of Contents

We will need to take the above-referenced factors into account when formulating further assumptions. Due to the fact that the Separation is a significant restructuring of our business, we will not be able to further expand our outlook until we have further clarity on the nature of the Separation. The Separation is consistent with our “Accelerating Value” strategic initiative, giving greater weight to our commitments to maximize shareholder value and, subject to Board approval, regulatory constraints and acquisition opportunities, pay out our free cash flow to shareholders.
Other Key Information
Basis of Presentation
Certain international subsidiaries have a fiscal year cutoff of November 30 th . Accordingly, the Company’s consolidated financial statements reflect the assets and liabilities of such subsidiaries as of November 30, 2015 and 2014 and the operating results of such subsidiaries for the years ended November 30, 2015 , 2014 and 2013 . The Company is in the process of converting to calendar year reporting for these subsidiaries. These conversions are expected to be substantially complete in the first quarter of 2016. The impact of the conversions on our financial statements to date has been de minimis and, therefore, has been reported in net income in the quarter of conversion.
Significant Events
On January 12, 2016, the Company announced its plan to pursue the Separation. The Company is currently evaluating structural alternatives for the proposed Separation, including a public offering of shares in an independent, publicly traded company, a spin-off, or a sale. The completion of a public offering would depend on, among other things, the SEC filing and review process, as well as market conditions. Any Separation that might occur will be subject to the satisfaction of various conditions and approvals, including approval of any transaction by the MetLife, Inc. Board of Directors, satisfaction of any applicable requirements of the SEC, and receipt of insurance and other regulatory approvals and other anticipated conditions.
In November 2014, MICC, a wholly-owned subsidiary of MetLife, Inc., re-domesticated from Connecticut to Delaware, changed its name to MetLife Insurance Company USA and merged with its subsidiary, MLI-USA, and its affiliate, MLIIC, each a U.S. insurance company that issued variable annuity products in addition to other products, and Exeter, a former offshore, captive reinsurance subsidiary of MetLife, Inc. and affiliate of MICC that mainly reinsured guarantees associated with variable annuity products. The surviving entity of the Mergers was MetLife USA. The Mergers have provided increased transparency relative to our capital allocation and variable annuity risk management. See “Business — Regulation — U.S. Regulation — Insurance Regulation — Insurance Regulatory Examinations and Other Activities” and “— Liquidity and Capital Resources — The Company — Capital — Affiliated Captive Reinsurance Transactions” for information on our use of captive reinsurers.
In October 2013, MetLife, Inc. completed its acquisition of ProVida, the largest private pension fund administrator in Chile based on assets under management and number of pension fund contributors. The acquisition of ProVida supports the Company's growth strategy in emerging markets and further strengthens the Company's overall position in Chile. See Note 3 of the Notes to the Consolidated Financial Statements.
Industry Trends
We continue to be impacted by the unstable global financial and economic environment that has been affecting the industry.
Financial and Economic Environment
Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility and disruptions in global capital markets, particular markets, or financial asset classes can have an adverse effect on us, in part because we have a large investment portfolio and our insurance liabilities are sensitive to changing market factors. Global market factors, including interest rates, credit spreads, equity, oil and commodity prices, real estate markets, foreign currency exchange rates, consumer spending, business investment, government spending, the volatility and strength of the capital markets, deflation and inflation, all affect the business and economic environment and, ultimately, the amount and profitability of our business. Disruptions in one market or asset class can also spread to other markets or asset classes. Upheavals in the financial markets can also affect our business through their effects on general levels of economic activity, employment and customer behavior. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — We Are Exposed to Significant Global Financial and Capital Markets Risks Which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and May Cause Our Net Investment Income to Vary from Period to Period,” and “Risk Factors — Economic Environment and Capital Markets-Related Risks — If Difficult Conditions in the Global Capital Markets and the Economy Generally Persist, They May Materially Adversely Affect Our Business and Results of Operations.”

79

Table of Contents

Weakness in the energy and metals and mining sectors and concerns about the political and/or economic stability of countries in regions outside the EU, including China, Ukraine, Russia, Argentina, Brazil, Japan and the Middle East, as well as Puerto Rico, have contributed to global market volatility. See “— Investments — Current Environment — Selected Country and Sector Investments.” Concerns about global economic conditions, capital markets and the solvency of certain EU member states and Europe’s perimeter region, their banking systems and the financial institutions that have significant direct or indirect exposure to debt issued by these countries or their respective banking systems, have also been a cause of elevated levels of market volatility. See “— Investments — Current Environment” for information regarding our exposure to obligations of European governments, European private obligors and Europe’s perimeter region. Contributing to such volatility are concerns that such countries could default on their obligations, have to restructure their outstanding debt, or that financial institutions with significant holdings of sovereign or private debt of such countries, including Europe’s perimeter region, could experience financial stress, any of which could have significant adverse effects on the European and global economies and on financial markets, generally. While economic conditions in certain of these countries, including Europe’s perimeter region seem to be stabilizing or improving, there is still concern that any support measures could affect the Euro exchange rate and have uncertain impacts on interest rates and risk markets.
In an effort to further stabilize the European financial crisis, in December 2015, the European Central Bank (“ECB”) extended its quantitative easing program until at least March 2017. These measures have included cutting interest rates to negative levels, providing inexpensive financing facilities designed to incentivize banks to extend loans, buying private sector asset-backed securities and covered bonds and extending its asset purchase program to include €60 billion per month of ECB purchases of local and regional debt, as well as sovereign debt on secondary markets. Such actions are intended to lessen the risk of deflation, lower borrowing costs in the Euro zone and encourage corporations to issue more asset-backed securities.
We face substantial exposure to the Japanese economy given our operations there. Structural weaknesses and debt sustainability have yet to be addressed effectively. Going forward, Japan’s structural and demographic challenges may continue to limit its potential growth unless reforms that boost productivity are put into place. Japan’s high public sector debt levels are mitigated by low refinancing risks and its nominal yields on government debt have remained at a lower level than that of any other developed country. However, frequent changes in government have prevented policy makers from implementing fiscal reform measures to put public finances on a sustainable path. To avert deflation and to achieve sustainable economic growth, the government and the Bank of Japan have implemented a coordinated strategy which includes the imposition of a negative rate on commercial bank deposits, increased government bond purchases at longer maturities and tax reform, including the lowering of the Japanese corporate tax rate by approximately 2% and the delay until 2017 of an increase in the consumption tax to 10%. As a result of the decrease in the corporate tax rate, the Company recorded a one-time benefit of $174 million in the second quarter of 2015, which included an increase in Asia’s operating earnings of $61 million. This tax law change favorably affected our annual effective tax rate for 2015 by approximately 0.3% as compared to 2014.
Impact of a Sustained Low Interest Rate Environment
As a global insurance company, we are affected by the monetary policy of central banks around the world, as well as the monetary policy of the Federal Reserve Board in the United States. The Federal Reserve Board has taken a number of actions in recent years to spur economic activity, including asset purchases and keeping interest rates low. However, in October 2014, the Federal Reserve Board’s Federal Open Market Committee (“FOMC”), citing strength in the economy and substantial improvement in the outlook for labor market conditions, decided to conclude the asset purchase program. In December 2015, the FOMC increased the federal funds rate for the first time in 10 years and held it steady at its January 2016 meeting. Further increases in the federal funds rate in the future may affect interest rates and risk markets in the U.S. and other developed and emerging economies. See “— Financial and Economic Environment” for information regarding accommodative and other policy measures pursued by the ECB and the Bank of Japan. However, we cannot predict with certainty the effect of these programs and policies on interest rates or the impact on the pricing levels of risk-bearing investments at this time. See “— Investments — Current Environment.”
In periods of declining interest rates, we may have to invest insurance cash flows and reinvest the cash flows we received as interest or return of principal on our investments in lower yielding instruments. Moreover, borrowers may prepay or redeem the fixed income securities, commercial, agricultural or residential mortgage loans and mortgage-backed securities in our investment portfolio with greater frequency in order to borrow at lower market rates. Therefore, some of our products expose us to the risk that a reduction in interest rates will reduce the difference between the amounts that we are required to credit on contracts in our general account and the rate of return we are able to earn on investments intended to support obligations under these contracts. This difference between interest earned and interest credited, or margin, is a key metric for the management of, and reporting for, many of our businesses.

80

Table of Contents

Our expectations regarding future margins are an important component impacting the amortization of certain intangible assets such as DAC and VOBA. Significantly lower margins may cause us to accelerate the amortization, thereby reducing net income in the affected reporting period. Additionally, lower margins may also impact the recoverability of intangible assets such as goodwill, require the establishment of additional liabilities or trigger loss recognition events on certain policyholder liabilities. We review this long-term margin assumption, along with other assumptions, as part of our annual assumption review.
Mitigating Actions
The Company continues to be proactive in its investment and interest crediting rate strategies, as well as its product design and product mix. To mitigate the risk of unfavorable consequences from the low interest rate environment in the U.S., the Company applies disciplined asset/liability management (“ALM”) strategies, including the use of derivatives, primarily interest rate swaps, floors and swaptions. A significant portion of these derivatives were entered into prior to the onset of the current low U.S. interest rate environment. In some cases, the Company has entered into offsetting positions as part of its overall ALM strategy and to reduce volatility in net income. Lowering interest crediting rates on some products, or adjusting the dividend scale on traditional products, can help offset decreases in investment margins on some products. Our ability to lower interest crediting rates could be limited by competition, requirements to obtain regulatory approval, or contractual guarantees of minimum rates and may not match the timing or magnitude of changes in asset yields. As a result, our margins could decrease or potentially become negative. We are able to limit or close certain products to new sales in order to manage exposures. Business actions, such as shifting the sales focus to less interest rate sensitive products, can also mitigate this risk. In addition, the Company is well diversified across product, distribution, and geography. Certain of our non-U.S. businesses, reported within our Latin America and EMEA segments, which accounted for approximately 15% of our operating earnings in 2015, are not significantly interest rate or market sensitive; in particular, they do not have any direct sensitivity to U.S. interest rates. The Company’s primary exposure within these segments is insurance risk. We expect our non-U.S. businesses to grow faster than our U.S. businesses and, over time, to become a larger percentage of our total business. As a result of the foregoing, the Company expects to be able to substantially mitigate the negative impact of a sustained low interest rate environment in the U.S. on the Company’s profitability. Based on a near to intermediate term analysis of a sustained lower interest rate environment in the U.S., the Company anticipates operating earnings will continue to increase, although at a slower growth rate.
Low Interest Rate Scenario
In formulating its insurance contract assumptions, the Company uses projections that it makes regarding interest rates. Included in these assumptions is the projection that the 10-year Treasury rate will rise from 2.27% at December 31, 2015 to 4.50% in 11 years, by 2026 and that 10-year yields will reach 2.78%, 3.07% and 3.21% by December 31, 2016, 2017 and 2018, respectively. Also included is the projection that the three-month LIBOR rate will move from 0.61% at December 31, 2015 to 1.32%, 1.81% and 1.76% by December 31, 2016, 2017 and 2018, respectively. However, due to the significant decline in the 10-year U.S. Treasury rate below 2.00% subsequent to December 2015, we have revised the hypothetical low interest rate scenario on our 2016, 2017 and 2018 operating earnings for the total Company, as well as each segment and Corporate & Other, that would be significantly affected by changes in LIBOR and U.S. interest rates, but without the effect of the proposed Separation (described in further detail in Note 23 of the Notes to the Consolidated Financial Statements). The revised low interest rate scenario reflects a decrease in the assumed constant 10-Year U.S. Treasury rate from 2.00% to 1.50% with the corresponding consensus of interest rate views and credit spreads (the “Low Interest Rate Scenario”).
The following summarizes the impact of the Low Interest Rate Scenario. In addition, we have included disclosure on the potential impact on 2016, 2017 and 2018 net income using the same Low Interest Rate Scenario on the mark-to-market of derivative positions that do not qualify as accounting hedges.

81

Table of Contents

Below is a summary of the rates we used for the Low Interest Rate Scenario versus our business plan through 2018. These rates represent the most relevant short-term and long-term rates for our business plan.
 
Years Ended December 31,
 
2015
 
2016
 
2017
 
2018
 
Low Interest Rate Scenario
 
 Business Plan
 
Low Interest Rate Scenario
 
 Business Plan
 
Low Interest Rate Scenario
 
 Business Plan
 
Low Interest Rate Scenario
 
 Business Plan
Three-month LIBOR
0.24%
 
0.61%
 
0.24%
 
1.32%
 
0.24%
 
1.81%
 
0.24%
 
1.76%
10-year U.S. Treasury
1.50%
 
2.27%
 
1.50%
 
2.78%
 
1.50%
 
3.07%
 
1.50%
 
3.21%
The Low Interest Rate Scenario assumes three-month LIBOR to be 0.24% and the 10-year U.S. Treasury rate to be 1.50% at December 31, 2015 and remain constant at those levels until December 31, 2018 . We make similar assumptions for interest rates at other maturities, and hold this interest rate curve constant through December 31, 2018 . In addition, in the Interest Rate Scenario, we assume credit spreads remain constant from December 2015 through the end of 2018 as compared to our business plan which assumes rising credit spreads through 2016 and thereafter remaining constant through the end of 2018 . Further, we also include the impact of low interest rates on our pension and postretirement plan expenses. We allocate this impact across our segments and it is included in the segment discussion below. The discount rate used to value these plans is tied to high quality corporate bond yields. Accordingly, an extended low interest rate environment will result in increased pension and other postretirement benefit liabilities. However, these liabilities are offset by corresponding returns on the fixed income portfolio of pension and other postretirement benefit plan assets resulting in an overall decrease in expense.
Hypothetical Impact to Operating Earnings
Based on the above assumptions, we estimate an unfavorable combined long-term and short-term interest rate impact on our consolidated operating earnings from the Low Interest Rate Scenario of approximately $65 million in 2016 , $210 million 2017 and $375 million in 2018 . Under the Low Interest Rate Scenario, our long-term businesses are negatively impacted by the larger gap between new money yields and the yield on assets rolling off the portfolio. However, there are positive offsets under the Low Interest Rate Scenario as short-term rates are much lower than the business plan rates and the yield curve is steeper than that of the business plan. For example, our securities lending business performs better than our business plan because it is driven by the slope of the yield curve rather than by the level of interest rates. In addition, derivative income is higher primarily due to our receiver swaps where we receive a fixed rate and pay a floating rate.
In addition to its impact on operating earnings, we estimated the effect of the Low Interest Rate Scenario on the mark-to-market of our derivative positions that do not qualify as accounting hedges. We applied the Low Interest Rate Scenario to these derivatives and compared the impact to that from interest rates in our business plan. We hold a significant position in long duration receive-fixed interest rate swaps to hedge reinvestment risk. These swaps are most sensitive to the 30-year and 10-year swap rates and we recognize gains as rates drop and recognize losses as rates rise. This estimated impact on the derivative mark-to-market does not include that of our VA program derivatives as the impact of low interest rates in the freestanding derivatives would be largely offset by the mark-to-market in net derivative gains (losses) for the related embedded derivative.
Hypothetical Impact to Our Mark-to-Market Derivative Positions
Based on these additional assumptions, we estimate the combined long-term and short-term interest rate impact of the Low Interest Rate Scenario on the mark-to-market of our derivative positions that do not qualify as accounting hedges to be an increase in net income of $530 million and $40 million in 2016 and 2017 , respectively, and a decrease in net income of $90 million in 2018 . See “— Results of Operations — Consolidated Results” for information regarding our actual gains and losses on the Company’s non-VA program derivatives due to interest rate changes (U.S. dollar and non-U.S. dollar denominated instruments) which are included in net income.
Segments and Corporate & Other
The following discussion summarizes the impact of the above Low Interest Rate Scenario on the operating earnings of our segments, as well as Corporate & Other. See also “— Policyholder Liabilities — Policyholder Account Balances” for information regarding the account values subject to minimum guaranteed crediting rates.

82

Table of Contents

Retail
Life & Other – Our interest rate sensitive products include traditional life, universal life, and retained asset accounts. Because the majority of our traditional life insurance business is participating, we can largely offset lower investment returns on assets backing our traditional life products through adjustments to the applicable dividend scale. In our universal life products, we manage interest rate risk through a combination of product design features and ALM strategies, including the use of hedges such as interest rate swaps and floors. While we have the ability to lower crediting rates on certain in-force universal life policies to mitigate margin compression, such actions would be partially offset by increases in our liabilities related to policies with secondary guarantees. Our retained asset accounts have minimum interest crediting rate guarantees which range from 0.5% to 4.0%, all of which are currently at their respective minimum interest crediting rates. While we expect to experience margin compression as we reinvest at lower rates, the interest rate derivatives held in this portfolio will partially mitigate this risk.
Annuities – The impact on operating earnings from margin compression is concentrated in our deferred annuities where there are minimum interest rate guarantees. Under the Low Interest Rate Scenario, we assume that a larger percentage of customers will maintain their funds with us to take advantage of the attractive minimum guaranteed crediting rates and we expect to experience margin compression as we reinvest cash flows at lower interest rates. Partially offsetting this margin compression, we assume we will lower crediting rates on contractual reset dates for the portion of business that is not currently at minimum crediting rates. Additionally, we have various derivative positions, primarily interest rate floors, to partially mitigate this risk.
Reinvestment risk is defined for this purpose as the amount of reinvestment in 2016 , 2017 and 2018 that would impact operating earnings due to reinvesting cash flows in the Low Interest Rate Scenario. For the deferred annuities business, $2.1 billion, $2.1 billion, and $0.4 billion in 2016 , 2017 , and 2018 , respectively, of the asset base will be subject to reinvestment risk on an average asset base of $36.7 billion, $37.5 billion and $38.2 billion in 2016 , 2017 and 2018, respectively.
We estimate an unfavorable combined long-term and short-term interest rate impact on the operating earnings of our Retail segment from the Low Interest Rate Scenario of $10 million, $65 million and $165 million in 2016 , 2017 and 2018 , respectively.
Group, Voluntary & Worksite Benefits
Group – In general, most of our group life insurance products in this segment are renewable term insurance and, therefore, have significant repricing flexibility. Interest rate risk arises mainly from minimum interest rate guarantees on retained asset accounts. These accounts have minimum interest crediting rate guarantees which range from 0.5% to 3.0%. All of these account balances are currently at their respective minimum interest crediting rates and we would expect to experience margin compression as we reinvest at lower interest rates. We have used interest rate floors to partially mitigate the risks of a sustained U.S. low interest rate environment. We also have exposure to interest rate risk in this business arising from our group disability policy claim reserves. For these products, lower reinvestment rates cannot be offset by a reduction in liability crediting rates for established claim reserves. Group disability policies are generally renewable term policies. Rates may be adjusted on in-force policies at renewal based on the retrospective experience rating and current interest rate assumptions. We review the discount rate assumptions and other assumptions associated with our long-term disability claim reserves no less frequently than annually. Our most recent review at the end of 2015 resulted in no change to the applicable discount rates.
Voluntary & Worksite – We have exposure to interest rate risk in this business arising mainly from our long-term care policy reserves. For these products, lower reinvestment rates cannot be offset by a reduction in liability crediting rates for established claim reserves. Long-term care policies are guaranteed renewable, and rates may be adjusted on a class basis with regulatory approval to reflect emerging experience. Our long-term care block is closed to new business. The Company makes use of derivative instruments to more closely match asset and liability duration and immunize the portfolio against changes in interest rates. Reinvestment risk is defined for this purpose as the amount of reinvestment in 2016 , 2017 and 2018 that would impact operating earnings due to reinvesting cash flows in the Low Interest Rate Scenario. For the long-term care portfolio, $1.8 billion, $1.7 billion and $1.5 billion of the asset base in 2016 , 2017 and 2018 , respectively, will be subject to reinvestment risk on an average asset base of $10.5 billion, $11.2 billion and $11.8 billion in 2016 , 2017 and 2018 , respectively.
We estimate a favorable combined long-term and short-term interest rate impact on the operating earnings of our Group, Voluntary & Worksite Benefits segment from the Low Interest Rate Scenario of $5 million in 2016 and an unfavorable impact of $10 million and $45 million 2017 and 2018 , respectively.

83

Table of Contents

Corporate Benefit Funding
This segment contains both short and long duration products consisting of capital market products, pension risk transfers, structured settlements, and other benefit funding products. The majority of short duration products are managed on a floating rate basis, which mitigates the impact of the low interest rate environment in the U.S. The long duration products have very predictable cash flows and we have matched these cash flows through our ALM strategies. We also use interest rate swaps to help protect income in this segment against a low interest rate environment in the U.S. Based on the cash flow estimates, only a small component is subject to reinvestment risk. Reinvestment risk is defined for this purpose as the amount of reinvestment in 2016 , 2017 and 2018 that would impact operating earnings due to reinvesting cash flows in the Low Interest Rate Scenario. For the long duration business, $0.6 billion of the asset base in 2016 will be subject to reinvestment risk on an average asset base of $60.6 billion. In 2017 and 2018 , none of the asset base will be subject to reinvestment risk on an average asset base of $63.9 billion and $66.5 billion, respectively.
We estimate an unfavorable combined long-term and short-term interest rate impact on operating earnings on our Corporate Benefit Funding segment from the Low Interest Rate Scenario of $5 million, $30 million and $45 million in 2016 , 2017 and 2018 , respectively.
Asia
Our Asia segment has a portion of its investments in U.S. dollar denominated assets.
Life & Other – Our Japan business offers traditional life insurance and accident & health products. To the extent the Japan life insurance portfolio is U.S. interest rate and LIBOR sensitive and we are unable to lower crediting rates to the customer, operating earnings will decline. We manage interest rate risk on our life products through a combination of product design features and ALM strategies.
Annuities – We sell annuities in Asia which are predominantly single premium products with crediting rates set at the time of issue. This allows us to tightly manage product ALM, cash flows and net spreads, thus maintaining profitability.
We estimate an unfavorable combined long-term and short-term interest rate impact on the operating earnings of our Asia segment from the Low Interest Rate Scenario of $25 million, $50 million and $60 million in 2016 , 2017 and 2018 , respectively.
Corporate & Other
Corporate & Other contains the surplus portfolios for the enterprise, the portfolios used to fund the capital needs of the Company and various reinsurance agreements. The surplus portfolios are subject to reinvestment risk; however, lower net investment income is significantly offset by lower interest expense on both fixed and variable rate debt. Under a lower interest rate environment, fixed rate debt is assumed to be either paid off when it matures or refinanced at a lower interest rate resulting in lower overall interest expense. Variable rate debt is indexed to the three-month LIBOR, which results in lower interest expense incurred.
We estimate an unfavorable combined long-term and short-term interest rate impact on the operating earnings of Corporate & Other from the Low Interest Rate Scenario of $30 million, $55 million and $60 million in 2016 , 2017 and 2018 , respectively.
Competitive Pressures
The life insurance industry remains highly competitive. The product development and product life cycles have shortened in many product segments, leading to more intense competition with respect to product features. Larger companies have the ability to invest in brand equity, product development, technology and risk management, which are among the fundamentals for sustained profitable growth in the life insurance industry. In addition, several of the industry’s products can be quite homogeneous and subject to intense price competition. Sufficient scale, financial strength and financial flexibility are becoming prerequisites for sustainable growth in the life insurance industry. Larger market participants tend to have the capacity to invest in additional distribution capability and the information technology needed to offer the superior customer service demanded by an increasingly sophisticated industry client base. We believe that the continued volatility of the financial markets, its impact on the capital position of many competitors, and subsequent actions by regulators and rating agencies have altered the competitive environment. In particular, we believe that these factors have highlighted financial strength as the most significant differentiator from the perspective of some customers and certain distributors. We believe the Company is well positioned to compete in this environment.

84

Table of Contents

Regulatory Developments
In the U.S., our life insurance companies are regulated primarily at the state level, with some products and services also subject to federal regulation. As life insurers introduce new and often more complex products, regulators refine capital requirements and introduce new reserving standards for the life insurance industry. Regulations recently adopted or currently under review can potentially impact the statutory reserve and capital requirements of the industry. In addition, regulators have undertaken market and sales practices reviews of several markets or products, including equity-indexed annuities, variable annuities and group products, as well as reviews of the utilization of affiliated captive reinsurers and offshore entities to reinsure insurance risks.
The regulation of the global financial services industry has received renewed scrutiny as a result of the disruptions in the financial markets. Significant regulatory reforms have been adopted and additional reforms proposed, and these or other reforms could be implemented. See “Business — Regulation,” “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth,” “Risk Factors — Risks Related to Our Business — Our Statutory Life Insurance Reserve Financings May Be Subject to Cost Increases and New Financings May Be Subject to Limited Market Capacity,” and “Risk Factors — Regulatory and Legal Risks — Changes in U.S. Federal, State Securities and State Insurance Laws and Regulations May Affect Our Operations and Our Profitability.” For example, Dodd-Frank, which was signed by President Obama in July 2010, effected the most far-reaching overhaul of financial regulation in the U.S. in decades. The full impact of Dodd-Frank on us will depend on the numerous rulemaking initiatives required or permitted by Dodd-Frank which are in various stages of implementation, many of which are not likely to be completed for some time.
Mortgage and Foreclosure-Related Exposures
MetLife no longer engages in the origination, sale and servicing of forward and reverse residential mortgage loans. See Note  21 of the Notes to the Consolidated Financial Statements for further information regarding our mortgage and foreclosure-related exposures.
Notwithstanding MetLife Bank’s exit from the origination and servicing businesses, MLHL remains obligated to repurchase loans or compensate for losses upon demand due to alleged defects by MetLife Bank or its predecessor servicers in past servicing of the loans and material representations made in connection with MetLife Bank’s sale of the loans. Reserves for representation and warranty repurchases and indemnifications were $72 million and $85 million at December 31, 2015 and 2014 , respectively. Reserves for estimated future losses due to alleged deficiencies on loans originated and sold, as well as servicing of the loans including servicing acquired, are estimated based on unresolved claims and projected losses under investor servicing contracts where MetLife Bank’s past actions or inactions are likely to result in missing certain stipulated investor timelines. Reserves for servicing defects were $31 million and $38 million at December 31, 2015 and 2014 , respectively. Management is satisfied that adequate provision has been made in the Company’s consolidated financial statements for those representation and warranty obligations that are currently probable and reasonably estimable.
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements. For a discussion of our significant accounting policies, see Note 1 of the Notes to the Consolidated Financial Statements. The most critical estimates include those used in determining:
(i)
liabilities for future policy benefits and the accounting for reinsurance;
(ii)
capitalization and amortization of DAC and the establishment and amortization of VOBA;
(iii)
estimated fair values of investments in the absence of quoted market values;
(iv)
investment impairments;
(v)
estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;
(vi)
measurement of goodwill and related impairment;
(vii)
measurement of employee benefit plan liabilities;
(viii)
measurement of income taxes and the valuation of deferred tax assets; and
(xi)
liabilities for litigation and regulatory matters.

85

Table of Contents

In addition, the application of acquisition accounting requires the use of estimation techniques in determining the estimated fair values of assets acquired and liabilities assumed — the most significant of which relate to aforementioned critical accounting estimates. In applying our accounting policies, we make subjective and complex judgments that frequently require estimates 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 our business and operations. Actual results could differ from these estimates.
Liability for Future Policy Benefits
Generally, future policy benefits are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid, reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, disability incidence, disability terminations, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type and geographical area. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. Utilizing these assumptions, liabilities are established on a block of business basis. If experience is less favorable than assumed, additional liabilities may be established, resulting in a charge to policyholder benefits and claims.
Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest.
Liabilities for unpaid claims are estimated based upon our historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation.
Future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts are based on estimates of the expected value of benefits in excess of the projected account balance, recognizing the excess ratably over the accumulation period based on total expected assessments. Liabilities for ULSG and paid-up guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating the secondary and paid-up guarantee liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical experience of the appropriate underlying equity index, such as the S&P 500 Index.
We regularly review our estimates of liabilities for future policy benefits and compare them with our actual experience. Differences between actual experience and the assumptions used in pricing these policies and guarantees, as well as in the establishment of the related liabilities, result in variances in profit and could result in losses.
See Note 4 of the Notes to the Consolidated Financial Statements for additional information on our liability for future policy benefits.
Reinsurance
Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. We periodically review actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluate the financial strength of counterparties to our reinsurance agreements using criteria similar to that evaluated in our security impairment process. See “— Investment Impairments.” Additionally, for each of our reinsurance agreements, we determine whether the agreement provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. We review all contractual features, including those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. If we determine that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, we record the agreement using the deposit method of accounting.
See Note 6 of the Notes to the Consolidated Financial Statements for additional information on our reinsurance programs.

86

Table of Contents

Deferred Policy Acquisition Costs and Value of Business Acquired
We incur significant costs in connection with acquiring new and renewal insurance business. Costs that relate directly to the successful acquisition or renewal of insurance contracts are deferred as DAC. In addition to commissions, certain direct-response advertising expenses and other direct costs, deferrable costs include the portion of an employee’s total compensation and benefits related to time spent selling, underwriting or processing the issuance of new and renewal insurance business only with respect to actual policies acquired or renewed. We utilize various techniques to estimate the portion of an employee’s time spent on qualifying acquisition activities that result in actual sales, including surveys, interviews, representative time studies and other methods. These estimates include assumptions that are reviewed and updated on a periodic basis or more frequently to reflect significant changes in processes or distribution methods.
VOBA represents the excess of book value over the estimated fair value of acquired insurance, annuity, and investment-type contracts in force at the acquisition date. For certain acquired blocks of business, the estimated fair value of the in-force contract obligations exceeded the book value of assumed in-force insurance policy liabilities, resulting in negative VOBA, which is presented separately from VOBA as an additional insurance liability included in other policy-related balances. The estimated fair value of the acquired liabilities is based on projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns, nonperformance risk adjustment and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business.
Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period, which can result in significant fluctuations in amortization of DAC and VOBA. Our practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. We monitor these events and only change the assumption when our long-term expectation changes. The effect of an increase (decrease) by 100 basis points in the assumed future rate of return is reasonably likely to result in a decrease (increase) in the DAC and VOBA amortization with an offset to our unearned revenue liability which nets to approximately $200 million. We use a mean reversion approach to separate account returns where the mean reversion period is five years with a long-term separate account return after the five-year reversion period is over. The current long-term rate of return assumption for the variable universal life contracts and variable deferred annuity contracts is 7.25%.
We also periodically review other long-term assumptions underlying the projections of estimated gross margins and profits. These assumptions primarily relate to investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency, and expenses to administer business. Assumptions used in the calculation of estimated gross margins and profits which may have significantly changed are updated annually. If the update of assumptions causes expected future gross margins and profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and profits to decrease.
Our most significant assumption updates resulting in a change to expected future gross margins and profits and the amortization of DAC and VOBA are due to revisions to expected future investment returns, expenses, in-force or persistency assumptions and policyholder dividends on participating traditional life contracts, variable and universal life contracts and annuity contracts. We expect these assumptions to be the ones most reasonably likely to cause significant changes in the future. Changes in these assumptions can be offsetting and we are unable to predict their movement or offsetting impact over time.

87

Table of Contents

At December 31, 2015 , 2014 and 2013 , DAC and VOBA for the Company was $24.1 billion, $24.4 billion and $26.7 billion, respectively. Amortization of DAC and VOBA associated with the variable and universal life and the annuity contracts was significantly impacted by movements in equity markets. The following illustrates the effect on DAC and VOBA of changing each of the respective assumptions, as well as updating estimated gross margins or profits with actual gross margins or profits during the years ended December 31, 2015 , 2014 and 2013 . Increases (decreases) in DAC and VOBA balances, as presented below, resulted in a corresponding decrease (increase) in amortization.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
General account investment return
$
(72
)
 
$
(45
)
 
$
(66
)
Separate account investment return
(31
)
 
43

 
157

Net investment gains (losses)/Net derivative gains (losses)
(9
)
 
(42
)
 
195

Guaranteed minimum income benefits
(125
)
 
(63
)
 
337

Expense
(93
)
 
24

 
36

In-force/Persistency
220

 
94

 
72

Policyholder dividends and other
(39
)
 
(74
)
 
8

Total
$
(149
)
 
$
(63
)
 
$
739

The following represent significant items contributing to the changes to DAC and VOBA amortization in 2015 :
Changes in net investment and net derivative gains (losses) resulted in the following changes in DAC and VOBA amortization:
Actual gross profits decreased as a result of an increase in liabilities associated with guarantee obligations on variable annuities, resulting in a decrease of DAC and VOBA amortization of $338 million, excluding the impact from our nonperformance risk and risk margins, which are described below. Mark-to-market changes on the freestanding derivatives hedging such guarantee obligations resulted in an increase in DAC and VOBA amortization of $114 million.
The Company’s nonperformance risk adjustment decreased the valuation of guaranteed liabilities, increased actual gross profits and increased DAC and VOBA amortization by $17 million. This was partially offset by the lower risk margins, which increased the guarantee liability valuations, decreased actual gross profits and decreased DAC and VOBA amortization by $10 million.
The remainder of the impact increased DAC and VOBA amortization by $226 million and was attributable to 2015 investment activities, methodology refinement , and assumption updates.
The change in GMIBs resulted in an increase to DAC amortization of $125 million mostly attributable to hedge gains.
Better than expected persistency and updates in persistency assumptions caused an increase in actual and expected future gross profits resulting in a net decrease in DAC and VOBA amortization of $220 million.

88

Table of Contents

The following represent significant items contributing to the changes to DAC and VOBA amortization in 2014 :
The increase in equity markets during the year increased separate account balances, which led to higher actual and expected future gross profits on variable universal life contracts and variable deferred annuity contracts resulting in a decrease of $43 million in DAC and VOBA amortization.
Changes in net investment gains (losses) resulted in the following changes in DAC and VOBA amortization.
Actual gross profits decreased as a result of an increase in liabilities associated with guarantee obligations on variable annuities, resulting in a decrease of DAC and VOBA amortization of $118 million, excluding the impact from our nonperformance risk and risk margins, which are described below. This decrease in actual gross profits was more than offset by freestanding net derivative gains associated with the hedging of such guarantee obligations, which resulted in an increase in DAC and VOBA amortization of $219 million.
The widening of the Company’s nonperformance risk adjustment decreased the valuation of guaranteed liabilities, increased actual gross profits and increased DAC and VOBA amortization by $44 million. This was more than offset by the higher risk margins, which increased the guarantee liability valuations, decreased actual gross profits and decreased DAC and VOBA amortization by $53 million.
The remainder of the impact of net investment gains (losses), which decreased DAC and VOBA amortization by $50 million, was primarily attributable to 2014 investment activities.
The change in current and future projected GMIBs liability resulted in an increase to DAC amortization of $63 million.
Better than expected persistency and changes in assumptions regarding persistency caused an increase in actual and expected future gross profits resulting in a net decrease in DAC and VOBA amortization of $94 million.
The following represent significant items contributing to the changes to DAC and VOBA amortization in 2013 :
The increase in equity markets during the year increased separate account balances, which led to higher actual and expected future gross profits on variable universal life contracts and variable deferred annuity contracts resulting in a decrease of $157 million in DAC and VOBA amortization.
Changes in net investment gains (losses) resulted in the following changes in DAC and VOBA amortization:
Actual gross profits increased as a result of a decrease in liabilities associated with guarantee obligations on variable annuities, resulting in an increase of DAC and VOBA amortization of $1.1 billion, excluding the impact from our nonperformance risk and risk margins, which are described below. This increase in actual gross profits was more than offset by freestanding derivative losses associated with the hedging of such guarantee obligations, which resulted in a decrease in DAC and VOBA amortization of $1.2 billion.
The tightening of our nonperformance risk adjustment increased the valuation of guarantee liabilities, decreased actual gross profits and decreased DAC and VOBA amortization by $94 million. This was partially offset by lower risk margins, which decreased the guarantee liability valuations, increased actual gross profits and increased DAC and VOBA amortization by $60 million.
The remainder of the impact of net investment gains (losses), which decreased DAC and VOBA amortization by $72 million, was primarily attributable to 2013 investment activities.
The hedging and reinsurance losses associated with the insurance liabilities of the GMIBs decreased actual gross profits and decreased DAC and VOBA amortization by $349 million.
Our DAC and VOBA balance is also impacted by unrealized investment gains (losses) and the amount of amortization which would have been recognized if such gains and losses had been realized. The decrease in unrealized investment gains (losses) increased the DAC and VOBA balance by $638 million in 2015, while the change in unrealized investment gains decreased the DAC and VOBA balance by $702 million and increased the DAC and VOBA balance by $1.3 billion in 2014 and 2013, respectively. See Notes  5 and 8 of the Notes to the Consolidated Financial Statements for information regarding the DAC and VOBA offset to unrealized investment losses.

89

Table of Contents

Estimated Fair Value of Investments
In determining the estimated fair value of our investments, fair values are based on unadjusted quoted prices for identical investments in active markets that are readily and regularly obtainable. When such quoted prices are not available, fair values are based on quoted prices in markets that are not active, quoted prices for similar but not identical investments, or other observable inputs. If these inputs are not available, or observable inputs are not determinable, unobservable inputs and/or adjustments to observable inputs requiring management judgment are used to determine the estimated fair value of investments.
The methodologies, assumptions and inputs utilized are described in Note 10 of the Notes to the Consolidated Financial Statements.
Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. Our ability to sell investments, or the price ultimately realized for investments, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain investments.
Investment Impairments
One of the significant estimates related to AFS securities is our impairment evaluation. The assessment of whether an other-than-temporary impairment (“OTTI”) occurred is based on our case-by-case evaluation of the underlying reasons for the decline in estimated fair value on a security-by-security basis. Our review of each fixed maturity and equity security for OTTI includes an analysis of gross unrealized losses by three categories of severity and/or age of gross unrealized loss. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments. Accordingly, such an unrealized loss position may not impact our evaluation of recoverability of all contractual cash flows or the ability to recover an amount at least equal to its amortized cost based on the present value of the expected future cash flows to be collected. In contrast, for certain equity securities, greater weight and consideration are given to a decline in estimated fair value and the likelihood such estimated fair value decline will recover.
Additionally, we consider a wide range of factors about the security issuer and use our best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in our evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Factors we consider in the OTTI evaluation process are described in Note 8 of the Notes to the Consolidated Financial Statements.
The determination of the amount of allowances and impairments on the remaining invested asset classes is highly subjective and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for additional information relating to our determination of the amount of allowances and impairments.
Derivatives
The determination of the estimated fair value of freestanding derivatives, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. See Note  10 of the Notes to the Consolidated Financial Statements for additional details on significant inputs into the OTC derivative pricing models and credit risk adjustment.

90

Table of Contents

We issue variable annuity products with guaranteed minimum benefits, some of which are embedded derivatives measured at estimated fair value separately from the host variable annuity product, with changes in estimated fair value reported in net derivative gains (losses). The estimated fair values of these embedded derivatives are determined based on the present value of projected future benefits minus the present value of projected future fees. The projections of future benefits and future fees require capital market and actuarial assumptions, including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the guarantees are projected under multiple capital market scenarios using observable risk-free rates. The valuation of these embedded derivatives also includes an adjustment for our nonperformance risk and risk margins for non-capital market inputs. The nonperformance risk adjustment, which is captured as a spread over the risk-free rate in determining the discount rate to discount the cash flows of the liability, is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees.
The table below illustrates the impact that a range of reasonably likely variances in credit spreads would have on our consolidated balance sheet, excluding the effect of income tax, related to the embedded derivative valuation on certain variable annuity products measured at estimated fair value. However, these estimated effects do not take into account potential changes in other variables, such as equity price levels and market volatility, which can also contribute significantly to changes in carrying values. Therefore, the table does not necessarily reflect the ultimate impact on the consolidated financial statement under the credit spread variance scenarios presented below.
In determining the ranges, we have considered current market conditions, as well as the market level of spreads that can reasonably be anticipated over the near term. The ranges do not reflect extreme market conditions such as those experienced during the 2008-2009 financial crisis as we do not consider those to be reasonably likely events in the near future.
 
Changes in Balance Sheet Carrying Value At December 31, 2015
 
Policyholder Account Balances
 
DAC and VOBA
 
(In millions)
100% increase in our credit spread
$
549

 
$
(111
)
As reported
$
946

 
$
(64
)
50% decrease in our credit spread
$
1,165

 
$
(37
)
The accounting for derivatives is complex and interpretations of accounting standards continue to evolve in practice. If it is determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Assessments of hedge effectiveness and measurements of ineffectiveness of hedging relationships are also subject to interpretations and estimations and different interpretations or estimates may have a material effect on the amount reported in net income.
Variable annuities with guaranteed minimum benefits may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates, changes in our nonperformance risk, variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income. If interpretations change, there is a risk that features previously not bifurcated may require bifurcation and reporting at estimated fair value in the consolidated financial statements and respective changes in estimated fair value could materially affect net income.

91

Table of Contents

Additionally, we ceded the risk associated with certain of the variable annuities with guaranteed minimum benefits described in the preceding paragraphs. The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by us with the exception of the input for nonperformance risk that reflects the credit of the reinsurer. Because certain of the direct guarantees do not meet the definition of an embedded derivative and, thus are not accounted for at fair value, significant fluctuations in net income may occur since the change in fair value of the embedded derivative on the ceded risk is being recorded in net income without a corresponding and offsetting change in fair value of the direct guarantee.
See Note 9 of the Notes to the Consolidated Financial Statements for additional information on our derivatives and hedging programs.
Goodwill
Goodwill is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test.
For purposes of goodwill impairment testing, if the carrying value of a reporting unit exceeds its estimated fair value, the implied fair value of the reporting unit goodwill is compared to the carrying value of that goodwill to measure the amount of impairment loss, if any. In such instances, the implied fair value of the goodwill is determined in the same manner as the amount of goodwill that would be determined in a business acquisition. The Company tests goodwill for impairment by either performing a qualitative assessment or a two-step quantitative test. The qualitative assessment is an assessment of historical information and relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company may elect not to perform the qualitative assessment for some or all of its reporting units and instead perform a two-step quantitative impairment test. In performing the two-step quantitative impairment test, the Company may use a market multiple valuation approach and a discounted cash flow valuation approach. For reporting units which are particularly sensitive to market assumptions, the Company may use additional valuation methodologies to estimate the reporting units’ fair values. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting units include projected operating earnings, current book value, the level of economic capital required to support the mix of business, long-term growth rates, comparative market multiples, control premium, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount rate that we believe is appropriate for the respective reporting unit.
During the 2015, 2014 and 2013 annual goodwill impairment tests, we concluded that the fair values of all reporting units were in excess of their carrying values and, therefore, goodwill was not impaired.
We apply significant judgment when determining the estimated fair value of our reporting units and when assessing the relationship of market capitalization to the aggregate estimated fair value of our reporting units. The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of our reporting units could result in goodwill impairments in future periods which could materially adversely affect our results of operations or financial position.
See Note 11 of the Notes to the Consolidated Financial Statements for additional information on our goodwill.
Employee Benefit Plans
Certain subsidiaries of MetLife, Inc. sponsor and/or administer various plans that provide defined benefit pension and other postretirement benefits covering eligible employees and sales representatives. The calculation of the obligations and expenses associated with these plans requires an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases and healthcare cost trend rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates and mortality. In consultation with external actuarial firms, we determine these assumptions based upon a variety of factors such as historical experience of the plan and its assets, currently available market and industry data, and expected benefit payout streams.

92

Table of Contents

We determine the expected rate of return on plan assets based upon an approach that considers inflation, real return, term premium, credit spreads, equity risk premium and capital appreciation, as well as expenses, expected asset manager performance, asset weights and the effect of rebalancing. Given the amount of plan assets as of December 31, 2014 the beginning of the measurement year, if we had assumed an expected rate of return for both our pension and other postretirement benefit plans that was 100 basis points higher or 100 basis points lower than the rates we assumed, the change in our net periodic benefit costs would have been a decrease of $103 million and an increase of $103 million, respectively, in 2015 . This considers only changes in our assumed long-term rate of return given the level and mix of invested assets at the beginning of the year, without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed long-term rate of return.
We determine the discount rates used to value the pension and postretirement obligations, based upon rates commensurate with current yields on high quality corporate bonds. Given our pension and postretirement obligations as of December 31, 2014 , the beginning of the measurement year, if we had assumed a discount rate for both our pension and postretirement benefit plans that was 100 basis points higher or 100 basis points lower than the rates we assumed, the change in our net periodic benefit costs would have been a decrease of $133 million and an increase of $155 million, respectively, in 2015 . This considers only changes in our assumed discount rates without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed discount rate. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company’s consolidated financial statements and liquidity.
See Note 18 of the Notes to the Consolidated Financial Statements for additional discussion of assumptions used in measuring liabilities relating to our employee benefit plans.
Income Taxes
We provide for federal, state and foreign income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities. Our accounting for income taxes represents our best estimate of various events and transactions. Tax laws are often complex and may be subject to differing interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.
In establishing a liability for unrecognized tax benefits, assumptions may be made in determining whether, and to what extent, a tax position may be sustained. Once established, unrecognized tax benefits are adjusted when there is more information available or when events occur requiring a change.
Valuation allowances are established against deferred tax assets when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances. See Note 1 of the Notes to the Consolidated Financial Statements for additional information relating to our determination of such valuation allowances.
We may be required to change our provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change, or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the financial statements in the year these changes occur.
See Notes 1 and 19 of the Notes to the Consolidated Financial Statements for additional information on our income taxes.

93

Table of Contents

Litigation Contingencies
We are a party to a number of legal actions and are involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on our financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities related to certain lawsuits, including our asbestos-related liability, are especially difficult to estimate due to the limitation of available data and uncertainty regarding numerous variables that can affect liability estimates. The data and variables that impact the assumptions used to estimate our asbestos-related liability include the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against us when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts. On a quarterly and annual basis, we review relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in our consolidated financial statements. It is possible that an adverse outcome in certain of our litigation and regulatory investigations, including asbestos-related cases, or the use of different assumptions in the determination of amounts recorded could have a material effect upon our consolidated net income or cash flows in particular quarterly or annual periods.
See Note  21 of the Notes to the Consolidated Financial Statements for additional information regarding our assessment of litigation contingencies.
Economic Capital
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 our business.
Our 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. Economic capital-based risk estimation is an evolving science and industry best practices have emerged and continue to evolve. Areas of evolving industry best practices include stochastic liability valuation techniques, alternative methodologies for the calculation of diversification benefits, and the quantification of appropriate shock levels. 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 our consolidated net investment income, operating earnings or income (loss) from continuing operations, net of income tax.
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.
Acquisitions and Dispositions
In 2014, the life insurance joint venture in Vietnam among MetLife, Inc. (through MetLife Limited), Joint Stock Commercial Bank for Investment & Development of Vietnam and Bank for Investment & Development of Vietnam Insurance Joint Stock Corporation was established. Operations of the joint venture (BIDV MetLife Life Insurance Limited Liability Company) commenced in 2014.
In 2014, MetLife, Inc. and Malaysia’s AMMB Holdings Bhd (“AMMB”) completed the formation of their strategic partnership, in which each holds approximately 50% of both AmMetLife Insurance Berhad and AmMetTakaful Berhad, each of which became parties to exclusive 20-year distribution agreements with AMMB bank affiliates.
See Note 3 of the Notes to the Consolidated Financial Statements for information regarding the Company’s acquisitions and dispositions.

94

Table of Contents

Results of Operations
Consolidated Results
Business Overview. Overall sales declined from 2014 levels; however, sales experience was positive across various products within our regions for the year ended December 31, 2015 as compared to 2014. The introduction of new variable annuity products in late 2014 and early 2015, as well as pricing actions and our continued focus on our enhanced underwriting programs, all contributed to higher sales in our Retail segment. For our Group, Voluntary & Worksite Benefits segment, 2015 sales were slightly higher, as improved sales of voluntary products were largely offset by lower sales of our core group products as a result of increased competition. Despite the decline in funding ratios for defined benefit pension plans of S&P 500 companies, we experienced an increase in sales of pension risk transfers. However, more competitive pricing in the market drove a decrease in structured settlement annuity sales. Total sales for our Latin America segment decreased primarily due to the impact of a large contract in Mexico in 2014. Excluding this contract, sales for the region increased due to organic growth in several countries. Sales in our EMEA segment improved, while sales in our Asia segment declined slightly.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Revenues
 
 
 
 
 
Premiums
$
38,545

 
$
39,067

 
$
37,674

Universal life and investment-type product policy fees
9,507

 
9,946

 
9,451

Net investment income
19,281

 
21,153

 
22,232

Other revenues
1,983

 
2,030

 
1,920

Net investment gains (losses)
597

 
(197
)
 
161

Net derivative gains (losses)
38

 
1,317

 
(3,239
)
Total revenues
69,951

 
73,316

 
68,199

Expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
40,102

 
40,478

 
39,366

Interest credited to policyholder account balances
5,610

 
6,943

 
8,179

Capitalization of DAC
(3,837
)
 
(4,183
)
 
(4,786
)
Amortization of DAC and VOBA
3,936

 
4,132

 
3,550

Amortization of negative VOBA
(361
)
 
(442
)
 
(579
)
Interest expense on debt
1,208

 
1,216

 
1,282

Other expenses
15,823

 
16,368

 
17,135

Total expenses
62,481

 
64,512

 
64,147

Income (loss) from continuing operations before provision for income tax
7,470

 
8,804

 
4,052

Provision for income tax expense (benefit)
2,148

 
2,465

 
661

Income (loss) from continuing operations, net of income tax
5,322

 
6,339

 
3,391

Income (loss) from discontinued operations, net of income tax

 
(3
)
 
2

Net income (loss)
5,322

 
6,336

 
3,393

Less: Net income (loss) attributable to noncontrolling interests
12

 
27

 
25

Net income (loss) attributable to MetLife, Inc.
5,310

 
6,309

 
3,368

Less: Preferred stock dividends
116

 
122

 
122

Preferred stock repurchase premium
42

 

 

Net income (loss) available to MetLife, Inc.’s common shareholders
$
5,152

 
$
6,187

 
$
3,246


95


Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
During the year ended December 31, 2015, income (loss) from continuing operations, before provision for income tax, decreased $1.3 billion ($1.0 billion, net of income tax) from 2014 primarily due to an unfavorable change in operating earnings, driven by the aforementioned tax charge and related charge for interest on uncertain tax positions, and an unfavorable change in net derivative gains (losses), partially offset by a favorable change in net investment gains (losses).
Management of Investment Portfolio and Hedging Market Risks with Derivatives . We manage our investment portfolio using disciplined ALM principles, focusing on cash flow and duration to support our current and future liabilities. Our intent is to match the timing and amount of liability cash outflows with invested assets that have cash inflows of comparable timing and amount, while optimizing risk-adjusted net investment income and risk-adjusted total return. Our investment portfolio is heavily weighted toward fixed income investments, with over 80% of our portfolio invested in fixed maturity securities and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities. We also use derivatives as an integral part of our management of the investment portfolio to hedge certain risks, including changes in interest rates, foreign currency exchange rates, credit spreads and equity market levels. In addition, our general account investment portfolio includes, within FVO and trading securities, contractholder-directed unit-linked investments supporting unit-linked variable annuity type liabilities, which do not qualify as separate account assets. The returns on these contractholder-directed unit-linked investments, which can vary significantly from period to period, include changes in estimated fair value subsequent to purchase, inure to contractholders and are offset in earnings by a corresponding change in policyholder account balances through interest credited to policyholder account balances.
We purchase investments to support our insurance liabilities and not to generate net investment gains and losses. However, net investment gains and losses are incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign currency exchange rates, credit spreads and equity markets; counterparty specific factors such as financial performance, credit rating and collateral valuation; and internal factors such as portfolio rebalancing. Changes in these factors from period to period can significantly impact the levels of both impairments and realized gains and losses on investments sold.
We use freestanding interest rate, equity, credit and currency derivatives to hedge certain invested assets and insurance liabilities. Certain of these hedges are designated and qualify as accounting hedges, which reduce volatility in earnings. For those hedges not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings.
Certain variable annuity products with guaranteed minimum benefits contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). We use freestanding derivatives to hedge the market risks inherent in these variable annuity guarantees. The valuation of these embedded derivatives includes a nonperformance risk adjustment, which is unhedged, and can be a significant driver of net derivative gains (losses) and volatility in earnings, but does not have an economic impact on us.

96


Net Derivative Gains (Losses) . The variable annuity embedded derivatives and associated freestanding derivative hedges are collectively referred to as “VA program derivatives” in the following table. All other derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table. The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:
 
Years Ended December 31,
 
2015
 
2014
 
(In millions)
Non-VA program derivatives
 
 
 
Interest rate
$
171

 
$
927

Foreign currency exchange rate
397

 
(25
)
Credit
10

 
89

Equity
(172
)
 
(62
)
Non-VA embedded derivatives
38

 
(99
)
Total non-VA program derivatives
444

 
830

VA program derivatives
 
 
 
Market risks in embedded derivatives
511

 
31

Nonperformance risk on embedded derivatives
163

 
13

Other risks in embedded derivatives
(951
)
 
(266
)
Total embedded derivatives
(277
)
 
(222
)
Freestanding derivatives hedging embedded derivatives
(129
)
 
709

Total VA program derivatives
(406
)
 
487

Net derivative gains (losses)
$
38

 
$
1,317

The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $386 million ($251 million, net of income tax). This was primarily due to long-term interest rates decreasing less in 2015 than in 2014, unfavorably impacting receive-fixed interest rate swaptions and interest rate swaps primarily hedging long duration liability portfolios.
These unfavorable changes were partially offset by the strengthening of the U.S. dollar relative to other key currencies favorably impacting foreign currency forwards and futures that primarily hedge foreign denominated fixed maturity securities. In addition, a change in the value of the underlying assets favorably impacted non-VA embedded derivatives related to funds withheld on a certain reinsurance agreement. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.
The unfavorable change in net derivative gains (losses) on VA program derivatives was $893 million ($580 million, net of income tax). This was due to an unfavorable change of $685 million ($445 million, net of income tax) in other risks in embedded derivatives and an unfavorable change of $358 million ($233 million, net of income tax) in market risks in embedded derivatives, net of the impact of freestanding derivatives hedging those risks, partially offset by a favorable change of $150 million ($98 million, net of income tax) related to the change in the nonperformance risk adjustment on embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.
The foregoing $685 million ($445 million, net of income tax) unfavorable change in other risks in embedded derivatives reflecte d:
Refinements in the valuation model, which resulted in an unfavorable year over year change in the valuation of the embedded derivatives.
The cross effect of capital markets changes, which resulted in an unfavorable year over year change in the valuation of the embedded derivatives.
A combination of other factors, including reserve changes influenced by benefit features and policyholder behavior, as well as FCTA, which resulted in an unfavorable year over year change in the valuation of embedded derivatives.

97


The foregoing $358 million ($233 million, net of income tax) unfavorable change was comprised of an $838 million ($545 million, net of income tax) unfavorable change in freestanding derivatives hedging market risks in embedded derivatives, which was partially offset by a $480 million ($312 million, net of income tax) favorable change in market risks in embedded derivatives.
The primary changes in market factors are summarized as follows:
Long-term interest rates decreased less in 2015 than in 2014, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased by 3% in 2015 and 31% in 2014.
Key equity index levels decreased in 2015 and increased in 2014, contributing to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the S&P 500 Index decreased by 1% in 2015 and increased by 11% in 2014.
Changes in foreign currency exchange rates contributed to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives related to the assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan. For example, the Japanese yen strengthened against the euro by 10% in 2015 as compared with a weakening of less than 1% against the euro in 2014.
The aforementioned $150 million ($98 million, net of income tax) favorable change in the nonperformance risk adjustment on embedded derivatives was due to a favorable change of $148 million, before income tax, related to changes in our own credit spread and a favorable change of $2 million, before income tax, as a result of changes in capital market inputs, such as long-term interest rates and key equity index levels, on the variable annuity guarantees.
When equity index levels decrease in isolation, the variable annuity guarantees become more valuable to policyholders, which results in an increase in the undiscounted embedded derivative liability. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free rate, thus creating a gain from including an adjustment for nonperformance risk.
When the risk-free interest rate decreases in isolation, discounting the embedded derivative liability produces a higher valuation of the liability than if the risk-free interest rate had remained constant. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free interest rate, thus creating a gain from including an adjustment for nonperformance risk.
When our own credit spread increases in isolation, discounting the embedded derivative liability produces a lower valuation of the liability than if our own credit spread had remained constant. As a result, a gain is created from including an adjustment for nonperformance risk. For each of these primary market drivers, the opposite effect occurs when they move in the opposite direction.
Net Investment Gains (Losses). The favorable change in net investment gains (losses) of $794 million ($516 million, net of income tax) primarily reflects a loss in 2014 on the disposition of MAL and higher net gains on sales of real estate in 2015, partially offset by lower net gains on sales and disposals of fixed maturity securities in 2015. For further information on MAL, see Note 3 of the Notes to the Consolidated Financial Statements.
Actuarial Assumption Review. Results for 2015 include a $313 million ($203 million, net of income tax) charge associated with our annual assumption review related to reserves and DAC, of which a $3 million loss ($2 million, net of income tax) was recognized in net derivative gains (losses). Of the $313 million charge, $60 million ($39 million, net of income tax) was related to DAC and $253 million ($164 million, net of income tax) was associated with reserves.
The $3 million loss recognized in net derivative gains (losses) associated with our annual assumption review was included within the other risks in embedded derivatives caption in the table above.

98


As a result of our annual assumption review, changes were made to economic, policyholder behavior, mortality and other assumptions. The most significant impacts were in the Retail Life and Annuity blocks of business and are summarized as follows:
Changes in economic assumptions resulted in an increase of DAC and reserves, resulting in a net charge of $122 million ($79 million, net of income tax).
Changes in policyholder behavior and mortality assumptions resulted in reserve increases, offset by favorable DAC, resulting in a net charge of $91 million ($59 million, net of income tax).
The remaining updates resulted in an increase in reserves, coupled with unfavorable DAC, resulting in a charge of $100 million ($65 million, net of income tax). The most notable update was related to our projection of closed block results.
Results for 2014 include a $161 million ($105 million, net of income tax) benefit associated with our annual assumption review related to reserves and DAC, of which $137 million ($89 million, net of income tax) was recognized in net derivative gains (losses). Of the $161 million benefit, $82 million ($53 million, net of income tax) was related to DAC and $79 million ($52 million, net of income tax) was associated with reserves.
Taxes . Income tax expense for the year ended December 31, 2015 was $2.1 billion, or 29% of income (loss) from continuing operations before provision for income tax, compared with $2.5 billion, or 28% of income (loss) from continuing operations before provision for income tax, for the year ended December 31, 2014. The Company’s 2015 effective tax rate differs from the U.S. statutory rate of 35% primarily due to non-taxable investment income, tax credits for low income housing, and foreign earnings taxed at lower rates than the U.S. statutory rate. Our 2015 results include one-time tax charges of $681 million, of which $557 million was recorded under accounting guidance for the recognition of tax uncertainties, $88 million was related to foreign exchange-related gains on investments in Argentina and $36 million was the result of a deferred tax liability true-up in Japan. These charges were partially offset by one-time tax benefits of $174 million in Japan related to a change in tax rate, $61 million related to restructuring in Chile, $57 million related to the repatriation of earnings from Japan and $31 million related to the devaluation of the peso in Argentina. The Company’s 2014 effective tax rate was different from the U.S. statutory rate of 35% primarily due to non-taxable investment income, tax credits for low income housing, foreign earnings taxed at lower rates than the U.S. statutory rate, and the tax effects of the MAL divestiture. The 2014 period also includes a $54 million tax charge related to tax reform in Chile, a $45 million tax charge related to the repatriation of earnings from Japan and an $18 million tax charge related to a portion of the aforementioned settlement of a licensing matter which was not deductible for income tax purposes, partially offset by a $32 million one-time tax benefit related to the filing of the Company’s U.S. federal tax return.
Operating Earnings . As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use operating earnings, which does not equate to income (loss) from continuing operations, net of income tax, as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. We believe that the presentation of operating earnings and operating earnings available to common shareholders, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings and operating earnings available to common shareholders should not be viewed as substitutes for income (loss) from continuing operations, net of income tax, and net income (loss) available to MetLife, Inc.’s common shareholders, respectively. Operating earnings available to common shareholders decreased $1.1 billion, net of income tax, to $5.5 billion, net of income tax, for the year ended December 31, 2015 from $6.6 billion, net of income tax, for the year ended December 31, 2014 .
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
During the year ended December 31, 2014, income (loss) from continuing operations, before provision for income tax, increased $4.8 billion ($2.9 billion, net of income tax) from 2013 primarily driven by a favorable change in net derivative gains (losses), partially offset by an unfavorable change in net investment gains (losses). Income (loss) from continuing operations, before provision for income tax also reflects a $262 million ($174 million, net of income tax) favorable change as a result of our annual assumption reviews related to reserves and DAC.

99


Net Derivative Gains (Losses). The variable annuity embedded derivatives and associated freestanding derivative hedges are collectively referred to as “VA program derivatives” in the following table. All other derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table. The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:
 
Years Ended December 31,
 
2014
 
2013
 
(In millions)
Non-VA program derivatives
 
 
 
Interest rate
$
927

 
$
(1,609
)
Foreign currency exchange rate
(25
)
 
(1,225
)
Credit
89

 
187

Equity
(62
)
 
(61
)
Non-VA embedded derivatives
(99
)
 
123

Total non-VA program derivatives
830

 
(2,585
)
VA program derivatives
 
 
 
Market risks in embedded derivatives
31

 
6,101

Nonperformance risk on embedded derivatives
13

 
(952
)
Other risks in embedded derivatives
(266
)
 
(169
)
Total embedded derivatives
(222
)
 
4,980

Freestanding derivatives hedging embedded derivatives
709

 
(5,634
)
Total VA program derivatives
487

 
(654
)
Net derivative gains (losses)
$
1,317

 
$
(3,239
)
The favorable change in net derivative gains (losses) on non-VA program derivatives was $3.4 billion ($2.2 billion, net of income tax). This was primarily due to long-term interest rates decreasing in 2014 and increasing in 2013, favorably impacting receive-fixed interest rate swaps and interest rate swaptions. These freestanding derivatives were primarily hedging long duration liability portfolios. The strengthening of the U.S. dollar relative to other key currencies, as well as the Japanese yen weakening less against the U.S. dollar in 2014 versus 2013, favorably impacted foreign currency swaps and forwards that primarily hedge foreign denominated fixed maturity securities. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.
The favorable change in net derivative gains (losses) on VA program derivatives was $1.1 billion ($742 million, net of income tax). This was due to a favorable change of $965 million ($627 million, net of income tax) related to the change in the nonperformance risk adjustment on embedded derivatives and a favorable change of $273 million ($178 million, net of income tax) on market risks in embedded derivatives, net of the impact of freestanding derivatives hedging those risks, partially offset by an unfavorable change of $97 million ($63 million, net of income tax) on other risks in embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.
The aforementioned $965 million ($627 million, net of income tax) favorable change in the nonperformance risk adjustment was due to a favorable change of $629 million, before income tax, as a result of changes in capital market inputs, such as long-term interest rates and key equity index levels, on the variable annuity guarantees, as well as a favorable change of $336 million, before income tax, related to changes in our own credit spread.
The foregoing $273 million ($178 million, net of income tax) favorable change was comprised of a $6.3 billion ($4.1 billion, net of income tax) favorable change in freestanding derivatives hedging market risks in embedded derivatives, which was largely offset by a $6.1 billion ($3.9 billion, net of income tax) unfavorable change in market risks in embedded derivatives.

100


The primary changes in market factors are summarized as follows:
Long-term interest rates decreased in 2014 and increased in 2013, contributing to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased by 31% in 2014 and increased by 40% in 2013.
Key equity index levels increased less in 2014 than in 2013, contributing to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the S&P 500 increased by 11% in 2014 and increased by 30% in 2013.
Changes in foreign currency exchange rates contributed to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the U.S. dollar strengthened against the Japanese yen by 14% in 2014 as compared with 22% in 2013.
The foregoing $97 million ($63 million, net of income tax) unfavorable change in other risks in embedded derivatives was primarily due to an increase in the risk margin adjustment caused by higher policyholder behavior risks, along with updates to the actuarial assumptions, partially offset by favorable changes in all other risk factors.
Net Investment Gains (Losses). The unfavorable change in net investment gains (losses) of $358 million ($233 million, net of income tax) primarily reflects a 2014 loss on the disposition of MAL, partially offset by 2014 gains on sales of real estate and real estate joint ventures.
Actuarial Assumption Review. Our 2014 results include a $161 million ($105 million, net of income tax) benefit associated with our annual assumption review related to reserves and DAC, of which $137 million ($89 million, net of income tax) was recognized in net derivative gains (losses). Of the $161 million benefit, $82 million ($53 million, net of income tax) was related to DAC and $79 million ($52 million, net of income tax) was associated with reserves.
The $137 million gain recognized in net derivative gains (losses) associated with our annual assumption review was included within the other risks in embedded derivatives caption in the table above.
As a result of our annual assumption review, changes were made to economic, policyholder behavior, mortality and other assumptions. The most significant impacts were in the Retail Life and Annuity blocks of businesses and are summarized as follows:
Changes in economic assumptions resulted in a decrease in reserves, offset by unfavorable DAC, resulting in a net benefit of $229 million ($149 million, net of income tax).
Changes to policyholder behavior and mortality assumptions resulted in reserve increases, offset by favorable DAC, resulting in a net loss of $175 million ($114 million, net of income tax).
The remaining updates resulted in a decrease in reserves, coupled with favorable DAC, resulting in a benefit of $107 million ($70 million, net of income tax). The most notable update was related to our projection of closed block results.
Our 2013 results include a $101 million ($69 million, net of income tax) charge associated with our annual assumption review related to reserves and DAC, of which $138 million ($90 million, net of income tax) was recognized in net derivative gains (losses). Of the $101 million charge, $228 million ($150 million, net of income tax) was related to reserves, offset by $127 million ($81 million, net of income tax) associated with DAC. The $138 million loss recorded in net derivative gains (losses) associated with our annual assumption review was included within the other risks in embedded derivatives caption in the table above.
Divested Businesses. Income (loss) from continuing operations, before provision for income tax, related to the divested businesses, excluding net investment gains (losses) and net derivative gains (losses), improved $156 million to a loss of $13 million in 2014 from a loss of $169 million in 2013. Included in this improvement was a decrease in total revenues of $142 million, before income tax, and a decrease in total expenses of $298 million, before income tax. The divested businesses include certain MetLife Bank businesses and MAL.

101


Taxes. Income tax expense for the year ended December 31, 2014 was $2.5 billion, or 28% of income (loss) from continuing operations before provision for income tax, compared with $661 million, or 16% of income (loss) from continuing operations before provision for income tax, for the year ended December 31, 2013. The Company’s 2014 and 2013 effective tax rates differed from the U.S. statutory rate of 35% primarily due to non-taxable investment income, tax credits for low income housing, and foreign earnings taxed at lower rates than the U.S. statutory rate. The Company’s 2013 effective tax rate also reflected tax benefits in Japan related to the 2012 branch restructuring and the estimated reversal of temporary differences. Our 2014 results include a $38 million tax charge related to a portion of the aforementioned settlement of a licensing matter, and the PPACA fee, both of which were not deductible for income tax purposes, as well as a $54 million tax charge related to tax reform in Chile and a $45 million tax charge related to the repatriation of earnings from Japan. These charges were partially offset by a $32 million one-time tax benefit related to the filing of the Company’s U.S. federal tax return. In addition, in 2013, the Company received an income tax refund from the Japanese tax authority and recorded a $119 million reduction to income tax expense.
Operating Earnings. Operating earnings available to common shareholders increased $299 million, net of income tax, to $6.6 billion, net of income tax, for the year ended December 31, 2014 from $6.3 billion, net of income tax, in 2013.
Reconciliation of income (loss) from continuing operations, net of income tax, to operating earnings available to common shareholders
Year Ended December 31, 2015
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia
 
EMEA
 
Corporate & Other
 
Total
 
(In millions)
Income (loss) from continuing operations, net of income tax
$
1,972

 
$
893

 
$
1,544

 
$
386

 
$
1,807

 
$
288

 
$
(1,568
)
 
$
5,322

Less: Net investment gains (losses)
35

 
(33
)
 
315

 
82

 
501

 
27

 
(330
)
 
597

Less: Net derivative gains (losses)
(159
)
 
177

 
17

 
(135
)
 
67

 
40

 
31

 
38

Less: Other adjustments to continuing operations (1)
(609
)
 
(171
)
 
(91
)
 
(72
)
 
(120
)
 
3

 
(31
)
 
(1,091
)
Less: Provision for income tax (expense) benefit
257

 
9

 
(84
)
 
(62
)
 
(21
)
 
(22
)
 
101

 
178

Operating earnings
$
2,448

 
$
911

 
$
1,387

 
$
573

 
$
1,380

 
$
240

 
(1,339
)
 
5,600

Less: Preferred stock dividends
 
 
 
 
 
 
 
 
 
 
 
 
116

 
116

Operating earnings available to common shareholders
 
 
 
 
 
 
 
 
 
 
 
 
$
(1,455
)
 
$
5,484

Year Ended December 31, 2014
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia
 
EMEA
 
Corporate & Other
 
Total
 
(In millions)
Income (loss) from continuing operations, net of income tax
$
2,744

 
$
1,086

 
$
1,318

 
$
344

 
$
1,200

 
$
330

 
$
(683
)
 
$
6,339

Less: Net investment gains (losses)
(7
)
 
(39
)
 
(432
)
 
30

 
512

 
(17
)
 
(244
)
 
(197
)
Less: Net derivative gains (losses)
564

 
525

 
352

 
(60
)
 
(532
)
 
114

 
354

 
1,317

Less: Other adjustments to continuing operations (1)
(671
)
 
(167
)
 
(112
)
 
(242
)
 
(122
)
 
36

 
(98
)
 
(1,376
)
Less: Provision for income tax (expense) benefit
42

 
(111
)
 
52

 
48

 
35

 
(88
)
 
(65
)
 
(87
)
Operating earnings
$
2,816

 
$
878

 
$
1,458

 
$
568

 
$
1,307

 
$
285

 
(630
)
 
6,682

Less: Preferred stock dividends
 
 
 
 
 
 
 
 
 
 
 
 
122

 
122

Operating earnings available to common shareholders
 
 
 
 
 
 
 
 
 
 
 
 
$
(752
)
 
$
6,560


102


Year Ended December 31, 2013
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
(In millions)
Income (loss) from continuing operations, net of income tax
$
1,586

 
$
383

 
$
1,129

 
$
555

 
$
597

 
$
301

 
$
(1,160
)
 
$
3,391

Less: Net investment gains (losses)
70

 
(21
)
 
(8
)
 
21

 
343

 
(16
)
 
(228
)
 
161

Less: Net derivative gains (losses)
(724
)
 
(676
)
 
(235
)
 
(24
)
 
(1,057
)
 
(6
)
 
(517
)
 
(3,239
)
Less: Other adjustments to continuing operations (1)
(926
)
 
(172
)
 
87

 
166

 
(435
)
 
75

 
(392
)
 
(1,597
)
Less: Provision for income tax (expense) benefit
554

 
304

 
53

 
(71
)
 
487

 
(33
)
 
389

 
1,683

Operating earnings
$
2,612

 
$
948

 
$
1,232

 
$
463

 
$
1,259

 
$
281

 
(412
)
 
6,383

Less: Preferred stock dividends
 
 
 
 
 
 
 
 
 
 
 
 
122

 
122

Operating earnings available to common shareholders
 
 
 
 
 
 
 
 
 
 
 
 
$
(534
)
 
$
6,261

______________
(1)
See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.
Reconciliation of GAAP revenues to operating revenues and GAAP expenses to operating expenses
Year Ended December 31, 2015
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
(In millions)
Total revenues
$
20,765

 
$
19,420

 
$
9,501

 
$
5,055

 
$
11,986

 
$
2,930

 
$
294

 
$
69,951

Less: Net investment gains (losses)
35

 
(33
)
 
315

 
82

 
501

 
27

 
(330
)
 
597

Less: Net derivative gains (losses)
(159
)
 
177

 
17

 
(135
)
 
67

 
40

 
31

 
38

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)
(2
)
 

 

 

 
12

 
(5
)
 

 
5

Less: Other adjustments to revenues (1)
(73
)
 
(171
)
 
(105
)
 
12

 
147

 
21

 
10

 
(159
)
Total operating revenues
$
20,964

 
$
19,447

 
$
9,274

 
$
5,096

 
$
11,259

 
$
2,847

 
$
583

 
$
69,470

Total expenses
$
18,094

 
$
18,037

 
$
7,134

 
$
4,600

 
$
9,701

 
$
2,599

 
$
2,316

 
$
62,481

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)
11

 

 

 

 
9

 
(5
)
 

 
15

Less: Other adjustments to expenses (1)
523

 

 
(14
)
 
84

 
270

 
18

 
41

 
922

Total operating expenses
$
17,560

 
$
18,037

 
$
7,148

 
$
4,516

 
$
9,422

 
$
2,586

 
$
2,275

 
$
61,544

Year Ended December 31, 2014
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia
 
EMEA
 
Corporate & Other
 
Total
 
(In millions)
Total revenues
$
21,777

 
$
19,295

 
$
8,901

 
$
5,554

 
$
12,613

 
$
4,227

 
$
949

 
$
73,316

Less: Net investment gains (losses)
(7
)
 
(39
)
 
(432
)
 
30

 
512

 
(17
)
 
(244
)
 
(197
)
Less: Net derivative gains (losses)
564

 
525

 
352

 
(60
)
 
(532
)
 
114

 
354

 
1,317

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)
(1
)
 

 

 

 
11

 
10

 

 
20

Less: Other adjustments to revenues (1)
(79
)
 
(167
)
 
17

 
42

 
371

 
857

 
55

 
1,096

Total operating revenues
$
21,300

 
$
18,976

 
$
8,964

 
$
5,542

 
$
12,251

 
$
3,263

 
$
784

 
$
71,080

Total expenses
$
17,945

 
$
17,631

 
$
6,864

 
$
5,162

 
$
10,866

 
$
3,780

 
$
2,264

 
$
64,512

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)
26

 

 

 

 
(3
)
 
12

 

 
35

Less: Other adjustments to expenses (1)
565

 

 
129

 
284

 
507

 
819

 
153

 
2,457

Total operating expenses
$
17,354

 
$
17,631

 
$
6,735

 
$
4,878

 
$
10,362

 
$
2,949

 
$
2,111

 
$
62,020


103


Year Ended December 31, 2013
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
(In millions)
Total revenues
$
19,472

 
$
17,320

 
$
8,852

 
$
5,110

 
$
13,232

 
$
3,864

 
$
349

 
$
68,199

Less: Net investment gains (losses)
70

 
(21
)
 
(8
)
 
21

 
343

 
(16
)
 
(228
)
 
161

Less: Net derivative gains (losses)
(724
)
 
(676
)
 
(235
)
 
(24
)
 
(1,057
)
 
(6
)
 
(517
)
 
(3,239
)
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)
(9
)
 

 

 

 
2

 
14

 

 
7

Less: Other adjustments to revenues (1)
(119
)
 
(172
)
 
297

 
84

 
1,386

 
667

 
111

 
2,254

Total operating revenues
$
20,254

 
$
18,189

 
$
8,798

 
$
5,029

 
$
12,558

 
$
3,205

 
$
983

 
$
69,016

Total expenses
$
17,333

 
$
16,761

 
$
7,109

 
$
4,401

 
$
12,557

 
$
3,479

 
$
2,507

 
$
64,147

Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)
(197
)
 

 

 

 
(15
)
 
16

 

 
(196
)
Less: Other adjustments to expenses (1)
995

 

 
210

 
(82
)
 
1,838

 
590

 
503

 
4,054

Total operating expenses
$
16,535

 
$
16,761

 
$
6,899

 
$
4,483

 
$
10,734

 
$
2,873

 
$
2,004

 
$
60,289

______________
(1)
See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.
Consolidated Results — Operating
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
38,548

 
$
39,022

 
$
37,583

Universal life and investment-type product policy fees
9,113

 
9,541

 
9,085

Net investment income
19,789

 
20,484

 
20,394

Other revenues
2,020

 
2,033

 
1,954

Total operating revenues
69,470

 
71,080

 
69,016

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
39,565

 
39,478

 
37,746

Interest credited to policyholder account balances
5,334

 
5,661

 
6,015

Capitalization of DAC
(3,837
)
 
(4,182
)
 
(4,786
)
Amortization of DAC and VOBA
3,802

 
4,027

 
4,083

Amortization of negative VOBA
(326
)
 
(396
)
 
(524
)
Interest expense on debt
1,200

 
1,178

 
1,159

Other expenses
15,806

 
16,254

 
16,596

Total operating expenses
61,544

 
62,020

 
60,289

Provision for income tax expense (benefit)
2,326

 
2,378

 
2,344

Operating earnings
5,600

 
6,682

 
6,383

Less: Preferred stock dividends
116

 
122

 
122

Operating earnings available to common shareholders
$
5,484

 
$
6,560

 
$
6,261

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Overview. The primary drivers of the decrease in operating earnings were lower investment yields, a tax charge and a related charge for interest on uncertain tax positions in 2015, less favorable underwriting results and an unfavorable impact from our annual review of actuarial assumptions, partially offset by higher net investment income from portfolio growth.

104


Foreign Currency . Changes in foreign currency exchange rates had a $303 million negative impact on operating earnings compared to 2014.
Business Growth. We benefited from higher sales and business growth across many of our products. Growth in the investment portfolios of our domestic and Latin America segments generated higher net investment income, which was partially offset by higher surrenders of foreign currency-denominated fixed annuity products in Japan. The changes in business growth discussed above resulted in a $474 million increase in operating earnings.
Market Factors. Market factors, including the sustained low interest rate environment, continued to impact our investment yields. Excluding the impact of inflation-indexed investments in the Latin America segment, investment yields decreased. Investment yields were negatively impacted by the adverse impact of the sustained low interest rate environment on fixed maturity securities and mortgage loans, as well as by lower returns on other limited partnership interests and our securities lending program. These decreases were partially offset by higher income on currency and interest rate derivatives and higher returns on real estate and real estate joint ventures. The changes in market factors discussed above resulted in a $545 million decrease in operating earnings.
Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. A $99 million decrease in underwriting results was primarily due to higher non-catastrophe related claim costs, as well as higher catastrophe-related losses in our property & casualty businesses. On an annual basis, we review and update our long-term assumptions used in our calculations of certain insurance-related liabilities and DAC. These annual updates, which occurred in both 2015 and 2014, resulted in a net operating earnings decrease of $98 million and were primarily related to unfavorable DAC unlockings in our Retail segment. Refinements to DAC and certain insurance-related liabilities that were recorded in both 2015 and 2014 resulted in a net decrease of $6 million in operating earnings. The 2014 refinements include favorable reserve adjustments related to disability premium waivers and a charge related to delayed settlement interest on unclaimed funds held by state governments, all in our retail life business.
Expenses. In 2015, other expenses include the aforementioned $235 million charge for interest on uncertain tax positions. An additional $101 million increase in expenses was primarily the result of higher employee-related costs and an increase in expenses associated with corporate initiatives and projects, primarily in Asia. These increases were partially offset by a $117 million  accrual in 2014 to increase the litigation reserve related to asbestos, as well as 2014 charges totaling $57 million related to the aforementioned settlement of a licensing matter.
Taxes. The Company’s 2015 and 2014 effective tax rates differed from the U.S. statutory rate of 35%, primarily due to non-taxable investment income, tax credits for low income housing, and foreign earnings taxed at lower rates than the U.S. statutory rate. Our results for 2015 include the aforementioned tax charge of $557 million recorded under accounting guidance for the recognition of tax uncertainties, partially offset by a $61 million benefit in Japan related to a tax rate change, a one-time tax benefit of $60 million related to restructuring in Chile, a $31 million tax benefit related to the repatriation of earnings from Japan and a $ 31 million one-time tax benefit related to the devaluation of the peso in Argentina. In 2014, the Company realized a $32 million one-time tax benefit related to the filing of the Company’s U.S. federal tax return. However, this was more than offset by a $41 million one-time tax charge related to tax reform in Chile and an $18 million tax charge related to the aforementioned settlement of a licensing matter which was not deductible for income tax purposes.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Overview. The primary drivers of the increase in operating earnings were higher net investment income from portfolio growth, higher asset-based fee income and a decrease in interest credited expense, partially offset by unfavorable mortality, morbidity and claims experience and the impact of decreasing investment yields on net investment income. Excluding the impact of the aforementioned tax reform charge in Chile, the fourth quarter 2013 acquisition of ProVida increased operating earnings by $166 million.
Foreign Currency. Changes in foreign currency exchange rates had a $127 million negative impact on results compared to 2013.

105


Business Growth. We benefited from strong sales and business growth across many of our products as evidenced by higher asset-based fee income from growth in our businesses abroad. However, we continue to focus on pricing discipline and risk management which resulted in a decrease in sales of our variable annuity products. This decline in sales, in combination with surrenders and withdrawals, resulted in negative net flows, which caused lower average separate account assets and, consequently, lower asset-based fee income in our Retail segment. Excluding the impact of the divested businesses and the acquisition of ProVida, growth in our investment portfolios in the majority of our segments generated higher net investment income. Our property & casualty businesses benefited from an increase in average premium per policy. These positive results were partially offset by an associated increase in DAC amortization. The changes in business growth discussed above resulted in a $432 million increase in operating earnings.
Market Factors. Market factors, including the sustained low interest rate environment, continued to impact our investment yields, as well as our crediting rates. Excluding the results of the divested businesses, the acquisition of ProVida and the impact of inflation-indexed investments in the Latin America segment, investment yields decreased. Certain of our inflation-indexed products are backed by inflation-indexed investments. Changes in inflation cause fluctuations in net investment income with a corresponding fluctuation in policyholder benefits, resulting in a minimal impact to operating earnings. Investment yields were negatively impacted by the adverse impact of the sustained low interest rate environment on fixed maturity securities and mortgage loans yields, lower returns on our hedge funds, as well as increased holdings of lower yielding Japanese government securities in the Japan fixed annuity business. These decreases were partially offset by higher returns on interest rate derivatives, real estate joint ventures and private equity investments. Yields were also favorably impacted by increased sales of foreign currency-denominated fixed annuities in Japan, resulting in an increase in higher yielding foreign currency-denominated fixed maturity securities. The sustained low interest rate environment also resulted in lower interest credited expense as we set interest credited rates lower on both new business and certain in-force business with rate resets that are contractually tied to external indices or contain discretionary rate reset provisions. Our average separate account balances grew with the equity markets driving higher fee income in our annuity business. However, this was partially offset by higher DAC amortization due to the significant prior period equity market increase, as well as higher asset-based commissions and costs associated with our variable annuity GMDBs. The changes in market factors discussed above resulted in a $170 million decrease in operating earnings.
Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Less favorable mortality and morbidity was driven by our Group, Voluntary & Worksite Benefits segment. In addition, in our property & casualty businesses, catastrophe-related losses increased due to severe storm activity in 2014. Non-catastrophe related claim costs also increased as a result of severe winter weather in 2014. Claims experience in our Latin America segment was also unfavorable. The combined impact of mortality, morbidity and claims experience decreased operating earnings by $146 million. The combined impact of the 2014 and 2013 annual assumption updates resulted in a $12 million decrease in operating earnings in 2014 as compared to 2013. In addition to our annual updates, refinements to DAC and certain insurance-related liabilities that were recorded in both years increased operating earnings by $75 million. Such refinements include favorable reserve adjustments in 2014 related to disability premium waivers and a 2014 charge related to delayed settlement interest on unclaimed funds held by state governments, both in our life business within our Retail segment, as well as a write-down of DAC and VOBA in 2013 related to pension reform in Poland within our EMEA segment. Also, our 2013 results include a reserve strengthening in Australia within our Asia segment of $57 million, net of reinsurance.
Expenses. A $112 million decrease in expenses was primarily driven by lower employee-related costs. In addition, our 2014 results include charges totaling $57 million related to the aforementioned settlement of a licensing matter with the Department of Financial Services and the District Attorney, New York County. The PPACA fee reduced operating earnings by $58 million in 2014. We increased our litigation reserves related to asbestos more in 2014 than in 2013 resulting in a $16 million decline in operating earnings.
Taxes. In 2014, the Company realized a $32 million tax benefit related to the filing of the Company’s U.S. federal tax return, as well as additional tax benefits of $36 million related to the separate account dividends received deduction and $58 million primarily related to foreign earnings taxed at rates lower than the U.S. and other tax preference items. However, this was partially offset by a $38 million tax charge related to a portion of the aforementioned settlement of a licensing matter and the PPACA fee, both of which were not deductible for income tax purposes.

106


Segment Results and Corporate & Other
Retail
Business Overview. Retail annuity sales increased 15% as a result of new variable annuity products introduced in late 2014 and early 2015 and higher indexed annuity sales. Life sales increased 17% driven by increases in our term life products (due to pricing actions) and whole life products (as a result of several large cases, as well as a continued focus on our enhanced underwriting programs). A significant portion of our operating earnings is driven by separate account balances. Most directly, these balances determine asset-based fee income but they also impact DAC amortization and asset-based commissions. Separate account balances are driven by sales, movements in the market, surrenders, withdrawals, benefit payments, transfers and policy charges. Separate account balances have declined due to market performance along with the impact of negative net flows, as benefits, surrenders and withdrawals exceeded sales.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
7,228

 
$
7,280

 
$
6,528

Universal life and investment-type product policy fees
4,933

 
5,074

 
4,912

Net investment income
7,814

 
7,887

 
7,796

Other revenues
989

 
1,059

 
1,018

Total operating revenues
20,964

 
21,300

 
20,254

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
9,995

 
9,851

 
9,028

Interest credited to policyholder account balances
2,198

 
2,245

 
2,331

Capitalization of DAC
(1,048
)
 
(969
)
 
(1,309
)
Amortization of DAC and VOBA
1,561

 
1,515

 
1,384

Interest expense on debt
(1
)
 
1

 

Other expenses
4,855

 
4,711

 
5,101

Total operating expenses
17,560

 
17,354

 
16,535

Provision for income tax expense (benefit)
956

 
1,130

 
1,107

Operating earnings
$
2,448

 
$
2,816

 
$
2,612

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Business Growth . A $59 million increase in operating earnings was attributable to business growth. Our life businesses had positive net flows which resulted in higher net investment income. In addition, net investment income increased as a result of a larger invested asset base due to a higher amount of allocated equity as compared to 2014. This favorable impact was partially offset by a related increase in DAC amortization and an increase in interest credited expenses. Declines in broker-dealer revenue also decreased operating earnings. In our property & casualty business, an increase in average premium per policy in both the auto and homeowners businesses improved operating earnings, but was partially offset by a decrease in exposures. In our deferred annuities business, negative net flows decreased average separate account balances and, consequently, lower asset-based fee income, partially offset by lower DAC amortization due to the decrease in our in-force business.

107


Market Factors . A $177 million decrease in operating earnings was attributable to market factors, including equity markets and interest rates. The sustained low interest rate environment resulted in a decline in net investment income on our fixed maturity securities and mortgage loans as proceeds from maturing investments were reinvested at lower yields. This reduction in 2015 income from lower yields was partially offset by a decrease in DAC amortization, as well as lower interest credited expense in our deferred annuities business as a result of declines in average interest credited rates. Lower returns on other limited partnership interests were partially offset by increased prepayment fees and higher returns on real estate and real estate joint ventures. While separate account fund returns were down slightly on a full year basis, the positive returns in the first half of the year drove an increase in our average separate account balances which resulted in a small increase in asset-based fee income, partially offset by higher DAC amortization. In addition, costs associated with our variable annuity GMDBs were lower in 2015.
Underwriting, Actuarial Assumption Review and Other Insurance Adjustments . Less favorable mortality in our universal life business, partially offset by favorable mortality in our traditional life and income annuities businesses resulted in a net decrease of $12 million in operating earnings. In our property & casualty business, non-catastrophe claim costs increased by $24 million as a result of higher severities in our auto and homeowners businesses and higher frequencies in our auto business, partially offset by lower frequencies in our homeowners business. Catastrophe-related losses increased $16 million mainly due to severe winter weather in 2015. Favorable morbidity experience in our individual disability income business resulted in a $5 million increase in operating earnings. On an annual basis, we review and update our long-term assumptions used in our calculations of certain insurance-related liabilities and DAC. These annual updates, which occurred in both 2015 and 2014, resulted in a net operating earnings decrease of $118 million and were primarily related to unfavorable DAC unlockings in the life businesses. Refinements to DAC and certain insurance-related liabilities that were recorded in both 2015 and 2014 resulted in a decrease in operating earnings of $18 million, primarily driven by certain 2014 adjustments in our life business, as well as adjustments in our annuities business. The 2014 refinements include favorable reserve adjustments related to disability premium waivers and a charge related to delayed settlement interest on unclaimed funds held by state governments.
Expenses and Taxes . Operating earnings decreased due to an increase in expenses of $45 million, mainly the result of higher employee-related costs. In 2015, we realized lower tax benefits of $16 million primarily related to the separate account dividends received deduction.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Business Growth. A $156 million increase in operating earnings was attributable to business growth. Our life businesses had positive net flows, despite a decline in universal life sales, which resulted in higher net investment income. This favorable impact was partially offset by increases in DAC amortization and interest credited expenses, as well as lower fees, as 2013 benefited from the first year fees received on the now discontinued lifetime secondary guarantees on our universal life products. In our deferred annuities business, the impact of negative net flows contributed to a decrease in asset-based fee income, partially offset by a reduction in interest credited expenses in the general account. Additionally, costs associated with our variable annuity GMDBs were lower. In our property & casualty business, an increase in average premium per policy in both our auto and homeowners businesses contributed to the increase in operating earnings. In addition, we earned more income on a larger invested asset base, which resulted from a higher amount of allocated equity as compared to 2013.
Market Factors. A $58 million decrease in operating earnings was attributable to market factors, including equity markets and interest rates. Strong equity market performance led to higher asset-based commissions, which were, in part, driven by separate account balances, higher DAC amortization and costs associated with our GMDBs. The more favorable separate account returns in 2013 drove lower DAC amortization in 2013 as compared to 2014 where equity returns were much less favorable. These negative impacts were partially offset by higher asset-based fee income in 2014 due to increased average separate account balances. This positive equity market performance also drove higher net investment income from private equity investments. The sustained low interest rate environment resulted in a decline in net investment income on our fixed maturity securities and mortgage loans as proceeds from maturing investments were reinvested at lower yields. This negative interest rate impact was partially offset by lower interest credited expense as we reduced interest credited rates on contracts with discretionary rate reset provisions, and lower DAC amortization in our life business. Lower returns in our hedge funds also decreased operating earnings and were partially offset by higher income from real estate joint ventures and increased prepayment fees.

108


Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Less favorable mortality experience in our variable and universal life business, primarily driven by three large, unreinsured claims, partially offset by favorable experience in the traditional life and immediate annuities businesses, resulted in a $40 million decrease in operating earnings. In our property & casualty business, non-catastrophe claim costs increased by $8 million as a result of higher frequencies in our auto business offset by lower frequencies in our homeowners business. Catastrophe-related losses increased $5 million as compared to 2013. In addition, favorable morbidity experience in our individual disability income business resulted in a $6 million increase in operating earnings. The combined impact of the 2014 and 2013 annual assumption updates resulted in a net operating earnings decrease of $11 million and were primarily related to unfavorable DAC unlockings in the variable annuity business, partially offset by favorable DAC unlockings in our traditional and universal life businesses. Refinements to DAC and certain insurance-related liabilities that were recorded in 2014 and 2013 resulted in a $7 million increase in operating earnings, which included $104 million of favorable reserve adjustments in 2014 related to disability premium waivers and a 2014 charge of $57 million related to delayed settlement interest on unclaimed funds held by state governments, both in our life business.
Expenses and Taxes. Operating earnings increased due to a decline in expenses of $109 million, mainly the result of lower employee-related costs and the 2013 increase in litigation reserves. In 2014, we realized additional tax benefits of $37 million related to the separate account dividends received deduction and $22 million related to the filing of the Company’s U.S. federal tax return.
Group, Voluntary & Worksite Benefits
Business Overview. Premiums increased for most of our businesses as a result of gradual growth in the U.S. economy, a decrease in the U.S. unemployment rate and low inflation. Our term life, dental, disability and voluntary benefits businesses generated premium growth due to sales and rate actions. In addition, we had strong persistency levels. The dental business also benefited from pricing actions on existing business. Our 2015 sales were slightly higher, as improved sales of voluntary products were largely offset by lower sales of our core group products as a result of increased competition. Although we have discontinued selling our long-term care product, we continue to collect premiums and administer the existing block of business, which contributed to asset growth in the segment.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
16,358

 
$
15,979

 
$
15,250

Universal life and investment-type product policy fees
740

 
716

 
688

Net investment income
1,898

 
1,861

 
1,833

Other revenues
451

 
420

 
418

Total operating revenues
19,447

 
18,976

 
18,189

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
15,170

 
14,897

 
14,227

Interest credited to policyholder account balances
151

 
156

 
155

Capitalization of DAC
(151
)
 
(143
)
 
(141
)
Amortization of DAC and VOBA
164

 
149

 
140

Interest expense on debt

 
1

 
1

Other expenses
2,703

 
2,571

 
2,379

Total operating expenses
18,037

 
17,631

 
16,761

Provision for income tax expense (benefit)
499

 
467

 
480

Operating earnings
$
911

 
$
878

 
$
948

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.

109


Business Growth . A $73 million increase in operating earnings was attributable to business growth. An increase in average premium per policy in both our auto and homeowners businesses improved operating earnings. Growth in premiums, as well as increases in allocated equity resulted in higher average invested assets, improving operating earnings. Consistent with the growth in average invested assets from increased premiums, primarily in our long-term care business, interest credited on long-duration contracts increased. An increase in the annual assessment of the PPACA fee increased other expenses in 2015; however, the impact of the assessment was significantly offset by a related increase in premiums from our dental business. The remaining increase in other operating expenses, mainly the result of growth across the segment, was more than offset by the remaining increase in premiums, fees and other revenues.
Market Factors . The sustained low interest rate environment drove lower investment yields on our fixed maturity securities and mortgage loans. In addition, yields were negatively impacted by a reduction in the size of our securities lending program, as well as lower returns on other limited partnership interests. This was partially offset by higher returns on alternative investments and currency derivatives. Unlike in the Retail and Corporate Benefit Funding segments, in the Group, Voluntary & Worksite Benefits segment, a change in investment yield does not necessarily drive a corresponding change in the rates credited on certain insurance liabilities. The decrease in investment yields was partially offset by the impact of lower crediting rates in 2015, which resulted in a net decrease in operating earnings of $14 million.
Underwriting and Other Insurance Adjustments . In our property & casualty business, catastrophe-related losses increased by $29 million, mainly due to severe winter weather in 2015. In addition, non-catastrophe claim costs increased $37 million, resulting from higher severities in both our auto and homeowners businesses, as well as higher frequencies in our auto business, partially offset by lower frequencies in our homeowners businesses. Further, less favorable development of prior year non-catastrophe losses resulted in a slight decrease to operating earnings. Our life and AD&D businesses experienced favorable mortality in 2015, mainly due to favorable claims experience, which resulted in a $46 million increase in operating earnings. Less favorable reserve development in our dental business was partially offset by favorable morbidity experience in our long-term care and disability businesses and resulted in a $16 million decrease in operating earnings. The favorable claims experience in our long-term care business was due to higher net closures and the impact of lapses on certain insurance liabilities. In our disability business, the favorable claims experience was primarily driven by fewer approvals, a reduction in the average size of claims and higher net closures. Refinements to certain insurance and other liabilities, which were recorded in both 2015 and 2014, resulted in a $17 million increase in operating earnings.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Business Growth. The increase in average premium per policy in both our auto and homeowners businesses improved operating earnings by $42 million. Growth in premiums and deposits in 2014, as well as an increase in allocated equity, partially offset by reductions in other liabilities and policyholder account balances, resulted in an increase in our average invested assets, increasing operating earnings by $51 million. Consistent with the growth in average invested assets from premiums and deposits, primarily in our long-term care business, interest credited on long-duration contracts and policyholder account balances increased by $24 million. The PPACA fee increased other expenses by $58 million in 2014; however, the impact of the assessment was significantly offset by a related increase in premiums in the dental business. The remaining increase in other operating expenses, including higher marketing and sales support costs in our property & casualty business, was partially offset by the remaining increase in premiums, fees and other revenues.
Market Factors. The impact of changes in market factors, including lower yields on our fixed maturity securities and mortgage loans, and decreased income on alternative investments, partially offset by higher returns on our real estate joint ventures and private equity investments, resulted in lower investment yields. The decrease in investment yields, slightly offset by lower crediting rates in 2014, reduced operating earnings by $29 million.

110


Underwriting and Other Insurance Adjustments. Our life business experienced less favorable mortality in 2014, mainly due to an increase in claims severity in the term life business and increased claims incidence in the group universal life business, which resulted in a $48 million decrease in operating earnings. Unfavorable claims experience in our disability business, driven by higher approvals, was partially offset by higher net closures. In addition, increased utilization of services across the channels of our dental business was partially offset by the impact of lapses on certain insurance liabilities, higher net closures in our long-term care business and favorable claims incidence in our AD&D business. Our overall net unfavorable claims experience resulted in a $14 million decrease in operating earnings. The impact of favorable refinements to certain insurance and other liabilities in 2014 resulted in an increase in operating earnings of $27 million. In our property & casualty business, catastrophe-related losses increased by $21 million as compared to 2013, mainly due to severe storm activity in 2014. In addition, severe winter weather in 2014 increased non-catastrophe claim costs by $18 million, which was the result of higher frequencies in both our auto and homeowners businesses, as well as higher severities in our homeowners business, partially offset by lower severities in our auto business. These unfavorable results were partially offset by additional favorable development of prior year non-catastrophe losses, which improved operating earnings by $15 million.
Corporate Benefit Funding
Business Overview. Funding ratios for defined benefit pension plans of S&P 500 companies continued to fall in 2015, limiting their ability to engage in full pension plan buyouts. However, we expect that customers may choose to close out portions of pension plans over time, with the largest volume of business generally occurring near the end of any year. Despite the decline in funding ratios for defined benefit pension plans of S&P 500 companies, higher pension risk transfers resulted in an increase in premiums. In addition, more competitive pricing in the market drove a decrease in structured settlement annuity sales. Changes in premiums for these businesses were almost entirely offset by the related changes in policyholder benefits and claims.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
3,019

 
$
2,768

 
$
2,767

Universal life and investment-type product policy fees
259

 
226

 
247

Net investment income
5,710

 
5,684

 
5,506

Other revenues
286

 
286

 
278

Total operating revenues
9,274

 
8,964

 
8,798

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
5,447

 
5,106

 
5,180

Interest credited to policyholder account balances
1,184

 
1,140

 
1,233

Capitalization of DAC
(19
)
 
(31
)
 
(27
)
Amortization of DAC and VOBA
21

 
19

 
23

Interest expense on debt
3

 
9

 
9

Other expenses
512

 
492

 
481

Total operating expenses
7,148

 
6,735

 
6,899

Provision for income tax expense (benefit)
739

 
771

 
667

Operating earnings
$
1,387

 
$
1,458

 
$
1,232

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Business Growth . The impact of 2015 deposits and funding agreement issuances resulted in higher invested assets, which drove an increase in net investment income, partially offset by the related increase in interest credited expense, and resulted in a $106 million increase in operating earnings. Net funding agreement issuances were higher in 2014 to take advantage of favorable market conditions in advance of scheduled contract maturities.

111


Market Factors . The sustained low interest rate environment drove lower investment yields on mortgage loans and fixed maturity securities, as well as from our securities lending program. In addition, weaker equity markets in 2015 resulted in lower returns on other limited partnership interests. These unfavorable changes were partially offset by higher income on interest rate and currency derivatives, real estate and real estate joint ventures, as well as the favorable impact of a conversion of the securities accounting system. An increase in interest credited expense, resulting from a higher average rate, was driven by the effect of divesting a lower yielding product in early 2014. The combined impact of lower investment returns and higher interest credited expense, resulted in a decrease in operating earnings of $144 million.
Underwriting and Other Insurance Adjustments . Less favorable mortality in our pension risk transfer and structured settlement businesses was partially offset by more favorable mortality from our income annuity and specialized life insurance products, and resulted in a $6 million decrease in operating earnings. The net impact of insurance liability refinements that were recorded in both 2015 and 2014 decreased operating earnings by $20 million.
Expenses . Slightly higher employee-related costs and annual premium tax adjustments were partially offset by lower non-deferrable commissions, driven by a decrease in structured settlement annuity sales in 2015, and decreased operating earnings by $4 million.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Business Growth. The impact of 2014 deposits and funding agreement issuances, as well as increases in allocated equity and other liabilities, resulted in higher invested assets, which drove an increase in net investment income that was partially offset by the related increase in interest credited expense and resulted in a $122 million increase in operating earnings. In addition, strong investment performance and large case sales for our separate account products drove higher average account balances which resulted in an increase in separate account fees of $8 million.
Market Factors. The sustained low interest rate environment impacted our interest credited rates, as well as our investment yields. Many of our funding agreements and guaranteed interest contract liabilities have interest credited rates that are contractually tied to external indices and, as a result, we set lower interest credited rates on new business, as well as on existing business with terms that can fluctuate. The sustained low interest rate environment drove lower investment yields on mortgage loans and fixed maturity securities. In addition, hedge fund income declined. These unfavorable changes were partially offset by the impact of changes in market factors that drove higher income on interest rate derivatives and improved returns on real estate joint ventures. The impact of lower interest credited expense offset by lower investment returns resulted in an increase in operating earnings of $34 million.
Underwriting and Other Insurance Adjustments. Favorable mortality in 2014, primarily in our structured settlements business, resulted in a $24 million increase in operating earnings. The net impact of insurance liability refinements that were recorded in 2014 and 2013 increased operating earnings by $28 million.
Taxes. In 2014, we realized additional tax benefits of $11 million primarily related to the filing of the Company’s U.S. federal tax return.

112


Latin America
Business Overview. Total sales for the region decreased primarily due to the impact of a large contract in Mexico in 2014. Excluding this contract, sales for the region increased due to organic growth in several countries. Total sales of life, accident & health and credit products increased across several countries. Life and accident & health product sales also increased in our U.S. direct business. Sales of retirement products were down as lower sales in Mexico were only partially offset by higher sales in Brazil.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
2,891

 
$
3,039

 
$
2,870

Universal life and investment-type product policy fees
1,116

 
1,239

 
991

Net investment income
1,047

 
1,229

 
1,145

Other revenues
42

 
35

 
23

Total operating revenues
5,096

 
5,542

 
5,029

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
2,625

 
2,786

 
2,487

Interest credited to policyholder account balances
349

 
394

 
417

Capitalization of DAC
(426
)
 
(445
)
 
(452
)
Amortization of DAC and VOBA
303

 
334

 
311

Amortization of negative VOBA
(1
)
 
(1
)
 
(2
)
Other expenses
1,666

 
1,810

 
1,722

Total operating expenses
4,516

 
4,878

 
4,483

Provision for income tax expense (benefit)
7

 
96

 
83

Operating earnings
$
573

 
$
568

 
$
463

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Foreign Currency . The impact of changes in foreign currency exchange rates decreased operating earnings by $111 million for 2015 compared to 2014 mainly due to the weakening of the peso against the U.S. dollar, which included the impact of changes in foreign currency exchange rates related to the one-time tax charge resulting from tax reform in Chile, as discussed further below.
Business Growth . Total sales for the region decreased primarily due to the impact of a large contract in Mexico in 2014. Excluding this large contract, sales increased due to organic growth in several countries, as well as in our U.S. direct business but the resulting increase in premiums was partially offset by related changes in policyholder benefits. An increase in average invested assets, primarily in Chile and Mexico, generated higher net investment income. Growth in our businesses resulted in higher policy fee income, as well as increased marketing costs and commissions, which were partially offset by increased DAC capitalization. The items discussed above were the primary drivers of a $133 million increase in operating earnings.
Market Factors . The net impact of changes in market factors resulted in an $83 million decrease in operating earnings, driven by lower investment yields and higher interest credited expense. Investment yields decreased on fixed income securities in Chile and Mexico and we experienced lower investment returns on alternative investments in Chile.
Underwriting and Other Insurance Adjustments . Unfavorable claims experience in several countries decreased operating earnings by $16 million. Refinements to DAC and other adjustments recorded in both 2015 and 2014 resulted in a $14 million increase in operating earnings.

113


Expenses and Taxes . Effective September 1, 2015, ProVida was merged into MetLife Chile Acquisition Company resulting in a one-time income tax benefit of $60 million in 2015. In the third quarter of 2014, our Chilean businesses, including ProVida, incurred a one-time tax charge of $41 million ($33 million after adjusting for foreign currency fluctuations) as a result of tax reform in Chile. Other tax-related adjustments in both 2015 and 2014 decreased operating earnings by $18 million. These tax-related adjustments include tax charges related to inflation in Chile and Mexico, as well as a 2014 refund claim in Argentina, partially offset by a benefit resulting from the devaluation of the peso in Argentina in both 2015 and 2014. In addition, employee-related costs, which include inflation, were higher across several countries, resulting in an $8 million decrease in operating earnings.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
A tax reform bill was enacted in Chile on September 29, 2014 which includes, among other things, a gradual increase in the corporate tax rate. Our Chilean businesses, including ProVida, incurred a one-time tax charge of $41 million as a result of this legislation. Excluding the aforementioned tax reform, our operating earnings increased by $166 million in 2014 due to the fourth quarter 2013 acquisition of ProVida.
Foreign Currency. The impact of changes in foreign currency exchange rates decreased operating earnings by $57 million compared to 2013.
Business Growth. Latin America experienced organic growth and increased sales of life products in several countries, as well as in our U.S. sponsored direct business. This was partially offset by decreased pension and accident & health sales in Mexico and Brazil. The resulting increase in premiums was partially offset by related changes in policyholder benefits. Growth in our businesses and the impact of inflation drove an increase in average invested assets, which generated higher net investment income and higher policy fee income, partially offset by a corresponding increase in interest credited on certain insurance liabilities and the impact of changes in allocated equity. Increases in marketing costs and commissions resulted in higher operating expenses. Business growth also drove an increase in DAC amortization. The items discussed above were the primary drivers of a $94 million increase in operating earnings.
Market Factors. The net impact of changes in market factors resulted in a $25 million decrease in operating earnings. This decrease was primarily driven by higher interest credited expense, the unfavorable impact of inflation, and lower yields from alternative investments and mortgage loans in Chile, partially offset by higher investment yields on fixed income securities in Chile and Brazil.
Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Unfavorable claims experience, primarily due to increased claims severity and frequency in Mexico, Chile and Brazil, decreased operating earnings by $32 million. The impact of the 2013 annual assumption review resulted in an operating earnings decrease of $7 million. In addition to our annual updates, other refinements to DAC and other adjustments recorded in both 2014 and 2013 resulted in a $13 million decrease in operating earnings.
Expenses and Taxes. Tax-related adjustments in both 2014 and 2013 increased operating earnings by $45 million, excluding the aforementioned tax reform. These tax-related adjustments include 2014 tax benefits related to the devaluation of the peso in Argentina, inflation in Argentina and Chile, and a 2013 tax rate change in Mexico. These increases were partially offset by higher expenses, primarily generated by employee- and information technology-related costs across several countries, which decreased operating earnings by $23 million.

114


Asia
Business Overview. S ales decreased slightly compared to 2014 due to lower group sales in Australia. This was partially offset by growth in our ordinary life and accident & health businesses in Japan.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
6,937

 
$
7,566

 
$
7,801

Universal life and investment-type product policy fees
1,542

 
1,693

 
1,722

Net investment income
2,675

 
2,886

 
2,943

Other revenues
105

 
106

 
92

Total operating revenues
11,259

 
12,251

 
12,558

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
5,275

 
5,724

 
5,755

Interest credited to policyholder account balances
1,309

 
1,544

 
1,690

Capitalization of DAC
(1,720
)
 
(1,914
)
 
(2,143
)
Amortization of DAC and VOBA
1,256

 
1,397

 
1,542

Amortization of negative VOBA
(309
)
 
(364
)
 
(427
)
Other expenses
3,611

 
3,975

 
4,317

Total operating expenses
9,422

 
10,362

 
10,734

Provision for income tax expense (benefit)
457

 
582

 
565

Operating earnings
$
1,380

 
$
1,307

 
$
1,259

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Foreign Currency . The impact of changes in foreign currency exchange rates reduced operating earnings by $126 million for 2015 compared to 2014 as a result of the weakening of the yen against the U.S. dollar. This resulted in significant variances in the financial statement line items.
Business Growth . Asia’s premiums, fees and other revenues increased over the prior year driven by broad based in-force growth across the region, including growth in our ordinary life and accident & health businesses in Japan and Korea, as well as our group insurance business in Australia. Changes in premiums for these businesses were partially offset by related changes in policyholder benefits. During the period, surrenders of foreign currency-denominated fixed annuity products in Japan also contributed to higher fee income. The impact of these surrenders, partially offset by positive net flows in Korea, Bangladesh and India, resulted in lower average invested assets and a decrease in net investment income. In addition, a decrease in interest credited expenses was partially offset by increases in amortization of DAC and VOBA, commissions and variable expenses (net of DAC capitalization), primarily related to the establishment of an agency channel in Hong Kong. The combined impact of the items discussed above improved operating earnings by $61 million.
Market Factors . Investment returns were positively impacted by higher net investment income resulting from the recovery of a previously impaired mortgage loan in Japan, improved operating results from our China joint venture and higher interest rates on fixed maturity securities in Bangladesh. These improved investment returns were partially offset by the impact of lower interest rates on fixed maturity securities in Korea and the impact in Japan of continued growth of lower yielding Japanese government securities. The decrease in returns from Japanese government securities was offset by the favorable impact of increased foreign currency-denominated fixed annuities in Japan driving an increase in higher yielding foreign currency-denominated fixed maturity securities. Higher investment yields, combined with the impact of foreign currency hedges, increased operating earnings by $38 million.
Underwriting and Actuarial Assumption Review . Favorable claims experience, primarily in Japan resulted in a $15 million increase in operating earnings. In addition, on an annual basis, we review and update our long-term assumptions used in our calculations of certain insurance-related liabilities and DAC. This annual update resulted in a net operating earnings increase of $22 million.

115


Expenses and Taxes . Higher expenses, primarily driven by costs associated with corporate initiatives and projects, reduced operating earnings by $32 million. Our 2015 results include one-time tax benefits of $61 million related to a change in tax rates, $12 million for the settlement of an audit and $15 million related to the U.S. taxation of dividends, each related to Japan. In addition, in 2015, Korea received a tax refund of $6 million related to unclaimed surrender value. Our 2014 results include one-time tax benefits of $9 million related to the U.S. taxation of dividends and $4 million resulting from a tax rate change, each related to Japan.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Foreign Currency. The impact of changes in foreign currency exchange rates reduced operating earnings by $52 million for 2014 as compared with 2013 and resulted in significant variances in the financial statement line items. For example, while premiums, fees and other revenues decreased 3% on a reported basis, they increased 3% on a constant currency basis.
Business Growth. Asia’s premiums, fees and other revenues increased over 2013 primarily driven by broad based in-force growth across the region, including in our ordinary life business in Japan and our group insurance business in Australia. Positive net flows in Korea and Japan, combined with growth in our life business in India and Bangladesh, resulted in higher average invested assets and generated an increase in net investment income. Changes in premiums for these businesses were offset by related changes in policyholder benefits. The combined impact of the items discussed above improved operating earnings by $90 million.
Market Factors. Investment returns were negatively affected by the adverse impact of the sustained low interest rate environment on mortgage loans and an increase in lower yielding Japanese government securities, combined with lower returns on our other limited partnership interests and decreased prepayment fee income. These declines in yields were partially offset by the favorable impact of increased sales of foreign currency-denominated fixed annuities resulting in an increase in higher yielding foreign currency-denominated fixed maturity securities in Japan. Declines in yields, combined with the impact of foreign currency hedges, resulted in a $46 million decrease in operating earnings.
Underwriting and Other Insurance Adjustments. Our 2013 results include a strengthening of group and permanent disability claim reserves of $57 million, net of reinsurance, in Australia. In addition, refinements to DAC and certain insurance-related liabilities that were recorded in 2014 and 2013 resulted in a $14 million increase in operating earnings. Our 2014 results for Korea decreased $5 million as a result of unfavorable claims experience, primarily in our life business, and regulatory changes.
Taxes. Our 2014 results include a $9 million tax benefit related to U.S. taxation of dividends from Japan and a $4 million tax benefit resulting from a tax rate change in Japan. Our 2013 results include a $17 million tax benefit in Japan related to the estimated reversal of temporary differences and a one-time tax benefit of $10 million related to the disposal of our interest in a Korean asset management company at the beginning of 2013.

116


EMEA
Business Overview. Sales have increased slightly as 2015 sales growth in Turkey, Italy and Poland was offset by strong 2014 sales in the Gulf.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
2,036

 
$
2,309

 
$
2,297

Universal life and investment-type product policy fees
424

 
466

 
386

Net investment income
326

 
428

 
425

Other revenues
61

 
60

 
97

Total operating revenues
2,847

 
3,263

 
3,205

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
988

 
1,053

 
1,039

Interest credited to policyholder account balances
120

 
148

 
147

Capitalization of DAC
(472
)
 
(680
)
 
(714
)
Amortization of DAC and VOBA
497

 
613

 
683

Amortization of negative VOBA
(16
)
 
(31
)
 
(95
)
Interest expense on debt

 

 
1

Other expenses
1,469

 
1,846

 
1,812

Total operating expenses
2,586

 
2,949

 
2,873

Provision for income tax expense (benefit)
21

 
29

 
51

Operating earnings
$
240

 
$
285

 
$
281

Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Foreign Currency . The impact of changes in foreign currency exchange rates reduced operating earnings by $66 million for 2015 as compared to 2014, primarily driven by the strengthening of the U.S. dollar against the euro, Russian ruble and Polish zloty.
Business Growth . Operating earnings benefited from growth in the Middle East, primarily in the Gulf and Turkey, as well as growth in the U.K., increasing operating earnings by $30 million.
Actuarial Assumption Review. On an annual basis, we review and update our long-term assumptions used in our calculations of certain insurance-related liabilities and DAC. These annual updates, which occurred in both 2015 and 2014, resulted in a net operating earnings decrease of $4 million. In addition, operating earnings increased by $5 million due to a 2014 refinement of DAC in the U.K.
Taxes and Other. The Company had a number of one-time items in both 2015 and 2014, including tax benefits, the conversion of certain of our subsidiaries to calendar year reporting, as well as re-branding and legal expenses. The combined impact of these items decreased operating earnings by $3 million. In addition, our 2014 results included a $7 million one-time benefit related to pension reform in Poland.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Foreign Currency. The impact of changes in foreign currency exchange rates reduced operating earnings by $18 million for 2014 as compared to 2013.

117


Business Growth. An increase in sales over 2013, primarily in the Middle East and central, eastern and southern Europe, was partially offset by the impact of regulatory changes in the U.K. Net investment income increased, driven by an increase in average invested assets from business growth in Egypt, the Persian Gulf and Russia, in addition to a slight increase in yields from the lengthening of the Ireland and Greece shorter-term portfolios into higher yielding longer duration fixed maturity securities. This was partially offset by the impact of changes in allocated equity. Our 2014 results also included certain legal and re-branding expenses, as well as higher corporate overhead expenses, while operating earnings benefited as a result of a review of certain tax liabilities. The combined impact of the items discussed above decreased operating earnings by $16 million.
Actuarial Assumption Review and Other Insurance Adjustments. The combined impact of the 2014 and 2013 annual assumption updates resulted in a net operating earnings increase of $6 million for 2014 as compared to 2013. The amortization, or release, of negative VOBA associated with the conversion of certain policies generally results in an increase in operating earnings. In 2014, the number of policies converted declined and so, relative to 2013, this reduced operating earnings by $11 million. A refinement in DAC in the U.K. resulted in a $5 million decrease to operating earnings and liability refinements in 2013 in Greece decreased operating earnings by $4 million.
Taxes and Other. Our 2013 results were negatively impacted as a result of a $30 million tax charge related to the write-off of a U.K. tax loss carryforward and by a $26 million write-down of DAC and VOBA related to pension reform in Poland. The Company received tax benefits in both years following its decision to permanently reinvest certain foreign earnings outside of the U.S., however, since the 2013 benefit was larger, operating earnings decreased by $18 million. In addition, our 2013 results benefited by $4 million due to a change in the local corporate tax rate in Greece. In 2014, we converted to calendar year reporting for certain of our subsidiaries, which resulted in a $17 million increase to operating earnings.
Corporate & Other
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Operating revenues
 
 
 
 
 
Premiums
$
79

 
$
81

 
$
70

Universal life and investment-type product policy fees
99

 
127

 
139

Net investment income
319

 
509

 
746

Other revenues
86

 
67

 
28

Total operating revenues
583

 
784

 
983

Operating expenses
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
65

 
61

 
30

Interest credited to policyholder account balances
23

 
34

 
42

Capitalization of DAC
(1
)
 

 

Interest expense on debt
1,198

 
1,167

 
1,148

Other expenses
990

 
849

 
784

Total operating expenses
2,275

 
2,111

 
2,004

Provision for income tax expense (benefit)
(353
)
 
(697
)
 
(609
)
Operating earnings
(1,339
)
 
(630
)
 
(412
)
Less: Preferred stock dividends
116

 
122

 
122

Operating earnings available to common shareholders
$
(1,455
)
 
$
(752
)
 
$
(534
)

118


The table below presents operating earnings available to common shareholders by source net of income tax:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Other business activities
$
39

 
$
80

 
$
102

Other net investment income
215

 
337

 
485

Interest expense on debt
(779
)
 
(759
)
 
(747
)
Preferred stock dividends
(116
)
 
(122
)
 
(122
)
Acquisition costs

 
(5
)
 
(18
)
Corporate initiatives and projects
(194
)
 
(183
)
 
(134
)
Incremental tax benefit (expense)
(239
)
 
232

 
251

Other
(381
)
 
(332
)
 
(351
)
Operating earnings available to common shareholders
$
(1,455
)
 
$
(752
)
 
$
(534
)
Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Unless otherwise stated, all amounts discussed below are net of income tax.
Other Business Activities. Operating earnings from other business activities decreased $41 million. This was primarily due to lower operating earnings from start-up operations and from the assumed reinsurance from our former operating joint venture in Japan, reflecting lower fund returns, a reduction in in-force due to surrenders and unfavorable foreign currency impacts.
Other Net Investment Income. A $122 million decrease in other net investment income was driven by an increase in the amount credited to the segments due to growth in the economic capital managed by Corporate & Other on their behalf. This decrease was also impacted by the sustained low interest rate environment, which drove lower investment yields on fixed maturity securities and mortgage loans, as well as lower returns on alternative investments. This was partially offset by increased income from higher average invested assets and improved returns on real estate investments.
Interest Expense on Debt. Interest expense on debt increased by $20 million, mainly due to the issuance of $1.5 billion of senior notes in March 2015 and $1.25 billion of senior notes in November 2015.
Corporate Initiatives and Projects. Expenses associated with corporate initiatives and projects increased by $11 million, primarily due to increased costs associated with enterprise-wide initiatives taken by the Company.
Incremental Tax Benefit (Expense). Corporate & Other benefits from the impact of certain permanent tax differences, including non-taxable investment income and tax credits for investments in low income housing. As a result, our effective tax rate differs from the U.S. statutory rate of 35%. Our 2015 results include the aforementioned tax charge of $557 million, which was recorded under accounting guidance for the recognition of tax uncertainties. Our 2014 results include an $18 million tax charge related to a portion of the settlement of a licensing matter that was not deductible for income tax purposes. In addition, in 2015, we had higher utilization of tax preferenced investments, a benefit related to the timing of certain tax credits and other tax benefits which increased our operating earnings by $68 million over 2014.
Other. Our 2015 results include the aforementioned charge of $235 million for interest on uncertain tax positions, as well as a $20 million charge associated with company use real estate. These increases in expenses were partially offset by a $21 million one-time tax refund received for a favorable outcome on prior year tax audits and a decrease in employee-related costs of $28 million from 2014. Our results for 2014 include a $117 million accrual to increase the litigation reserve related to asbestos and charges totaling $57 million related to the settlement of a licensing matter with the Department of Financial Services and the District Attorney, New York County. This was partially offset by an $18 million increase in operating earnings in 2014 resulting from net adjustments to certain reinsurance assets and liabilities.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Unless otherwise stated, all amounts discussed below are net of income tax.
Other Business Activities. Operating earnings from other business activities decreased by $22 million. Lower operating earnings from the assumed reinsurance from our former operating joint venture in Japan, primarily due to lower returns in 2014, were partially offset by higher operating earnings from start-up operations.

119


Other Net Investment Income. Other net investment income decreased by $148 million. This decrease was driven by an increase in the amount credited to the segments on economic capital managed by Corporate & Other on their behalf, the adverse impact of the sustained low interest rate environment on yields from our fixed maturity securities and lower returns on real estate investments. These decreases were partially offset by improved returns on other limited partnership interests and higher mark-to-market income on residential mortgage loans carried at fair value.
Interest Expense on Debt. Interest expense on debt increased by $12 million, mainly due to the issuance of $1.0 billion of senior notes in April 2014 and the recognition of issuance costs related to the early redemption of senior notes in May 2014.
Acquisition Costs. Acquisition costs decreased by $13 million due to lower internal resource costs for associates committed to certain acquisition activities.
Corporate Initiatives and Projects. Expenses related to corporate initiatives and projects increased by $49 million, primarily due to higher relocation costs, severance and consulting expenses. These expenses include a $16 million decrease in restructuring charges, the majority of which related to severance.
Incremental Tax Benefit. The tax benefit in 2014 included a tax benefit of $16 million related to the timing of certain tax credits. In addition, we incurred a tax charge of $6 million in 2014 and received a tax benefit of $10 million in 2013 related to the filing of the Company’s U.S. federal tax returns. Our results for 2014 also included an $18 million tax charge related to a portion of the aforementioned settlement of a licensing matter that was not deductible for income tax purposes.
Other. Our results for 2014 include charges totaling $57 million related to the settlement of a licensing matter with the Department of Financial Services and the District Attorney, New York County. In addition, we increased our litigation reserves related to asbestos more in 2014 than in 2013 resulting in a $16 million decline in operating earnings. This was partially offset by a $53 million decline in expenses which included decreases in interest on uncertain tax positions, lower corporate overhead expenses and an adjustment on certain reinsurance assets and liabilities. In addition, declines in employee-related costs and lower software amortization totaling $15 million, improved operating earnings.
Effects of Inflation
Management believes that inflation has not had a material effect on the Company’s consolidated results of operations, except insofar as inflation may affect interest rates.
An increase in inflation could affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. Inflation also increases expenses for labor and other materials, potentially putting pressure on profitability if such costs cannot be passed through in our product prices. Inflation could also lead to increased costs for losses and loss adjustment expenses in certain of our businesses, which could require us to adjust our pricing to reflect our expectations for future inflation. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally, and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity, inhibit revenue growth and reduce the number of attractive investment opportunities.

120


Investments
Investment Risks
Our primary investment objective is to optimize, net of income tax, risk-adjusted investment income and risk-adjusted total return while ensuring that assets and liabilities are managed on a cash flow and duration basis. The Investments Department, led by the Chief Investment Officer, manages investment risks using a risk control framework comprised of policies, procedures and limits, as discussed further below. The Investments Risk Committee, chaired by GRM, reviews and monitors investment risk limits and tolerances. We are exposed to the following primary sources of investment risks:
credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest;
interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates. Changes in market interest rates will impact the net unrealized gain or loss position of our fixed income investment portfolio and the rates of return we receive on both new funds invested and reinvestment of existing funds;
liquidity risk, relating to the diminished ability to sell certain investments, in times of strained market conditions;
market valuation risk, relating to the variability in the estimated fair value of investments associated with changes in market factors such as credit spreads. A widening of credit spreads will adversely impact the net unrealized gain (loss) position of the fixed income investment portfolio, will increase losses associated with credit-based non-qualifying derivatives where we assume credit exposure, and, if credit spreads widen significantly or for an extended period of time, will likely result in higher OTTI. Credit spread tightening will reduce net investment income associated with purchases of fixed maturity securities and will favorably impact the net unrealized gain (loss) position of the fixed income investment portfolio;
currency risk, relating to the variability in currency exchange rates for foreign denominated investments. This risk relates to potential decreases in estimated fair value and net investment income resulting from changes in currency exchange rates versus the U.S. dollar. In general, the weakening of foreign currencies versus the U.S. dollar will adversely affect the estimated fair value of our foreign denominated investments; and
real estate risk, relating to commercial, agricultural and residential real estate, and stemming from factors, which include, but are not limited to, market conditions, including the demand and supply of leasable commercial space, creditworthiness of tenants and partners, capital markets volatility and the inherent interest rate movement.
We manage investment risk through in-house fundamental credit analysis of the underlying obligors, issuers, transaction structures and real estate properties. We also manage credit risk, market valuation risk and liquidity risk through industry and issuer diversification and asset allocation. Risk limits to promote diversification by asset sector, avoid concentrations in any single issuer and limit overall aggregate credit exposure as measured by our economic capital framework are approved annually by a committee of directors that oversees our investment portfolio. For real estate assets, we manage credit risk and market valuation risk through geographic, property type and product type diversification and asset allocation. We manage interest rate risk as part of our ALM strategies. These strategies include maintaining an investment portfolio with diversified maturities that has a weighted average duration that is approximately equal to the duration of our estimated liability cash flow profile, and utilizing product design, such as the use of market value adjustment features and surrender charges, to manage interest rate risk. We also manage interest rate risk through proactive monitoring and management of certain non-guaranteed elements of our products, such as the resetting of credited interest and dividend rates for policies that permit such adjustments. In addition to hedging with foreign currency derivatives, we manage currency risk by matching much of our foreign currency liabilities in our foreign subsidiaries with their respective foreign currency assets, thereby reducing our risk to foreign currency exchange rate fluctuation. We also use certain derivatives in the management of credit, interest rate, and equity market risks.
We use purchased credit default swaps to mitigate credit risk in our investment portfolio. Generally, we purchase credit protection by entering into credit default swaps referencing the issuers of specific assets we own. In certain cases, basis risk exists between these credit default swaps and the specific assets we own. For example, we may purchase credit protection on a macro basis to reduce exposure to specific industries or other portfolio concentrations. In such instances, the referenced entities and obligations under the credit default swaps may not be identical to the individual obligors or securities in our investment portfolio. In addition, our purchased credit default swaps may have shorter tenors than the underlying investments they are hedging. However, we dynamically hedge this risk through the rebalancing and rollover of our credit default swaps at their most liquid tenors. We believe that our purchased credit default swaps serve as effective economic hedges of our credit exposure.

121


We generally enter into market standard purchased and written credit default swap contracts. Payout under such contracts is triggered by certain credit events experienced by the referenced entities. For credit default swaps covering North American corporate issuers, credit events typically include bankruptcy and failure to pay on borrowed money. For European corporate issuers, credit events typically also include involuntary restructuring. With respect to credit default contracts on Western European sovereign debt, credit events typically include failure to pay debt obligations, repudiation, moratorium, or involuntary restructuring. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association deems that a credit event has occurred.
Current Environment
The global economy and markets continue to be affected by stress and volatility, which has adversely affected the financial services sector, in particular, and global capital markets. Recently, weakness in the energy and metals and mining sectors and political and/or economic instability of countries and regions outside the EU, including China, Ukraine, Russia, Argentina, Brazil, Japan, the Middle East and Puerto Rico, as well as Europe’s perimeter region and Cyprus, have contributed to global market volatility. As a global insurance company, we are affected by the monetary policy of central banks around the world. See “— Industry Trends — Financial and Economic Environment” for information on actions taken by the ECB and Bank of Japan in recent years to support economic recovery. See also “— Industry Trends — Impact of a Sustained Low Interest Rate Environment” for information regarding the December 2015 action taken by the FOMC to raise the federal funds rate and its January 2016 determination to maintain it. The Federal Reserve may take further actions to influence interest rates in the future, which may have an impact on the pricing levels of risk-bearing investments and may adversely impact the level of product sales.
European Region Investments
Excluding Europe’s perimeter region and Cyprus which are discussed below, our holdings of sovereign debt, corporate debt and perpetual hybrid securities in certain EU member states and other countries in the region that are not members of the EU (collectively, the “European Region”) were concentrated in the U.K., Germany, France, the Netherlands, Poland, Norway and Sweden. The sovereign debt of these countries continues to maintain investment grade credit ratings from all major rating agencies. We maintain general account investments in the European Region to support our insurance operations and related policyholder liabilities in these countries and certain of our non-European Region operations invest in the region for diversification. In the European Region, we have proactively mitigated risk in both direct and indirect exposures by investing in a diversified portfolio of high quality investments with a focus on the higher-rated countries. Sovereign debt issued by countries outside of Europe’s perimeter region and Cyprus comprised $6.8 billion, or 98%, of our European Region sovereign fixed maturity securities, at estimated fair value, at December 31, 2015. The European Region corporate securities (fixed maturity and perpetual hybrid securities classified as non-redeemable preferred stock) are invested in a diversified portfolio of primarily non-financial services securities, which comprised $20.8 billion, or 70%, of European Region total corporate securities, at estimated fair value, at December 31, 2015. Of these European Region sovereign fixed maturity and corporate securities, 92% were investment grade and, for the 8% that were below investment grade, the majority were non-financial services corporate securities at December 31, 2015. European Region financial services corporate securities, at estimated fair value, were $9.0 billion (including $6.4 billion within the banking sector) with 95% invested in investment grade rated corporate securities, at December 31, 2015.
Selected Country and Sector Investments
In recent years, elevated levels of market volatility have affected the performance of various asset classes. Contributing factors include concerns about global economic conditions and capital markets; lower oil prices impacting the energy sector; lower commodity prices impacting the metals and mining sector; country specific volatility due to local economic and/or political concerns, including concerns over the solvency of the EU member states included in Europe’s perimeter region and Cyprus, their banking systems and the financial institutions that have significant direct or indirect exposure to debt issued by these countries or their respective banking systems. While economic conditions in certain of these countries, including Europe’s perimeter region, seem to be stabilizing or improving, greater ECB and International Monetary Fund support, stronger liquidity facilities and gradually improving macroeconomic conditions at the country level have reduced the risk of default on sovereign debt and/or the risk of possible withdrawal of such countries from the Euro zone. See “— Industry Trends — Financial and Economic Environment.”

122


The following table presents, by country, a summary of fixed maturity securities in selected countries. We maintain general account investments in the selected countries to support our insurance operations and related policyholder liabilities in these countries or we have exposure through our global portfolio diversification. The Company has written credit default swaps where the underlying is an index comprised of companies across various sectors in the European Region. At December 31, 2015 , the written credit default swaps exposure to Europe’s perimeter region and Cyprus was $209 million in notional amount and $2 million in estimated fair value. The information below is presented on a country of risk basis (e.g. the country where the issuer primarily conducts business).
 
Selected Country Fixed Maturity Securities at December 31, 2015
 
Sovereign  
 
Financial
Services
 
Non-Financial
Services
 
Total (1)
 
(In millions)
Europe’s perimeter region:
 
 
 
 
 
 
 
Spain
$
55

 
$
225

 
$
467

 
$
747

Italy
52

 
177

 
431

 
660

Ireland
6

 
27

 
85

 
118

Greece

 
2

 

 
2

Portugal

 

 
1

 
1

Total Europe’s perimeter region
113

 
431

 
984

 
1,528

Brazil
315

 
87

 
619

 
1,021

Argentina
367

 
1

 
107

 
475

Russia
345

 
6

 
31

 
382

Puerto Rico (2)
14

 

 
114

 
128

Cyprus
35

 
4

 

 
39

Ukraine
2

 

 

 
2

Total
$
1,191

 
$
529

 
$
1,855

 
$
3,575

Investment grade %
45
%
 
89
%
 
61
%
 
60
%
______________
(1)
The par value and amortized cost of the fixed maturity securities were $3.4 billion and $3.5 billion , respectively, at December 31, 2015 .
(2)
Our exposure to Puerto Rico sovereigns is in the form of political subdivision fixed maturities and is composed completely of revenue bonds. We have no Puerto Rico general obligation bonds.
There has been an increased focus on energy sector investments and metals and mining sector investments as a result of lower energy, oil and commodity prices. Our net exposure to energy sector fixed maturity securities was $12.0 billion (comprised of fixed maturity securities of $11.9 billion at estimated fair value and related net written credit default swaps of $60 million at notional value), of which 86% were investment grade, with unrealized losses of $222 million at December 31, 2015 . Our net exposure to metals and mining sector fixed maturity securities was $2.1 billion (comprised of fixed maturity securities of $2.1 billion at estimated fair value and related net written credit default swaps of $13 million at notional value), of which 82% were investment grade, with unrealized losses of $206 million at December 31, 2015 .
We manage direct and indirect investment exposure in the selected countries, the energy sector and the metals and mining sector through fundamental credit analysis and we continually monitor and adjust our level of investment exposure. We do not expect that our general account investments in these countries, the energy sector or the metals and mining sector will have a material adverse effect on our results of operations or financial condition.

123


Current Environment Summary
All of these factors have had and could continue to have an adverse effect on the financial results of companies in the financial services industry, including MetLife. Such global economic conditions, as well as the global financial markets, continue to impact our net investment income, net investment gains (losses), net derivative gains (losses), level of unrealized gains (losses) within the various asset classes in our investment portfolio, and our level of investment in lower yielding cash equivalents, short-term investments and government securities. See “— Industry Trends” and “Risk Factors — Economic Environment and Capital Markets-Related Risks — We Are Exposed to Significant Global Financial and Capital Markets Risks Which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and May Cause Our Net Investment Income to Vary from Period to Period.”
Investment Portfolio Results
The following yield table presents the yield and investment income (loss) for our investment portfolio for the periods indicated. As described in the footnotes below, this table reflects certain differences from the presentation of net investment income presented in the GAAP consolidated statements of operations. This yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.
 
For the Years Ended December 31,
 
2015
 
2014
 
2013
 
Yield% (1)
 
Amount
 
Yield% (1)
 
Amount
 
Yield% (1)
 
Amount
 
 
 
(In millions)
 
 
 
(In millions)
 
 
 
(In millions)
Fixed maturity securities (2) (3)
4.63

%
$
14,201

 
4.81

%
$
14,946

 
4.84

%
$
15,098

Mortgage loans (3)
4.97

%
3,135

 
5.15

%
2,928

 
5.58

%
3,020

Real estate and real estate joint ventures
4.89

%
488

 
3.67

%
376

 
3.44

%
347

Policy loans
5.23

%
603

 
5.36

%
629

 
5.26

%
620

Equity securities
4.71

%
144

 
4.30

%
133

 
4.44

%
127

Other limited partnerships
8.45

%
669

 
13.01

%
1,033

 
13.35

%
955

Cash and short-term investments
1.04

%
129

 
1.07

%
161

 
0.98

%
168

Other invested assets
 
 
1,053

 
 
 
906

 
 
 
819

Total before investment fees and expenses
4.85

%
20,422

 
5.01

%
21,112

 
5.03

%
21,154

Investment fees and expenses
(0.15
)
 
(633
)
 
(0.13
)
 
(556
)
 
(0.13
)
 
(563
)
Net investment income including divested businesses (4)
4.70

%
19,789

 
4.88

%
20,556

 
4.90

%
20,591

Less: net investment income from divested businesses (4)
 
 

 
 
 
(72
)
 
 
 
(197
)
Net investment income (5)
 
 
$
19,789

 
 
 
$
20,484

 
 
 
$
20,394

______________
(1)
Yields are calculated as investment income as a percent of average quarterly asset carrying values. Investment income excludes recognized gains and losses and reflects GAAP adjustments presented in footnote (5) below. Asset carrying values exclude unrealized gains (losses), collateral received in connection with our securities lending program, freestanding derivative assets, collateral received from derivative counterparties, the effects of consolidating certain variable interest entities (“VIEs”) under GAAP that are treated as consolidated securitization entities (“CSEs”) and contractholder-directed unit-linked investments. A yield is not presented for other invested assets as it is not considered a meaningful measure of performance for this asset class.
(2)
Investment income (loss) includes amounts for FVO and trading securities of $21 million , $103 million and $65 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
(3)
Investment income from fixed maturity securities and mortgage loans includes prepayment fees.

124


(4)
Yield calculations include the net investment income and ending carrying values of the divested businesses. The net investment income adjustment for divested businesses for the years ended December 31, 2014 and 2013 was $72 million and $197 million , respectively. Net investment income included in yield calculations include 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 (“investment hedge adjustments”). Investment hedge adjustments are a reclassification adjustment to net investment income presented in the yield table to the most directly comparable GAAP measure as presented below. The investment hedge adjustments presented below exclude cash settlements of $1 million and $10 million for the years ended December 31, 2014 , and 2013 , respectively. There were no net investment income adjustments for divested businesses or excluded scheduled periodic settlement payments on derivatives for the year ended December 31, 2015 .
(5)
Net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications and adjustments and excludes the effects of consolidating certain VIEs under GAAP that are treated as CSEs and contractholder-directed unit-linked investments. Such reclassifications and adjustments are presented in the table below.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Net investment income — in the above yield table
$
19,789

 
$
20,484

 
$
20,394

Real estate discontinued operations

 
(1
)
 
(9
)
Investment hedge adjustments
(776
)
 
(705
)
 
(643
)
Operating joint venture adjustments
(4
)
 
(1
)
 
(2
)
Contractholder-directed unit-linked investments
264

 
1,266

 
2,172

Divested businesses

 
72

 
197

Incremental net investment income from CSEs
8

 
38

 
123

Net investment income — GAAP consolidated statements of operations
$
19,281

 
$
21,153

 
$
22,232

See “— Results of Operations — Consolidated Results — Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014 ” and “— Results of Operations — Consolidated Results —Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013 ,” for an analysis of the year over year changes in net investment income.

125


Fixed Maturity and Equity Securities AFS
The following table presents fixed maturity and equity securities AFS by type (public or private) and information about perpetual and redeemable securities held at:
 
December 31, 2015
 
December 31, 2014
 
 
Estimated Fair
Value
 
% of
Total
 
Estimated Fair
Value
 
% of
Total
 
 
(In millions)
 
 
 
(In millions)
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
  Publicly-traded
$
302,400

 
86.1
%
$
315,167

 
86.2
%
  Privately-placed
49,002

 
13.9
 
50,258

 
13.8
 
    Total fixed maturity securities
$
351,402

 
100.0
%
$
365,425

 
100.0
%
    Percentage of cash and invested assets
69.1
%
 
 
 
70.7
%
 
 
 
Equity securities
 
 
 
 
 
 
 
 
  Publicly-traded
$
2,184

 
65.8
%
$
2,569

 
70.8
%
  Privately-held
1,137

 
34.2
 
1,062

 
29.2
 
    Total equity securities
$
3,321

 
100.0
%
$
3,631

 
100.0
%
    Percentage of cash and invested assets
0.7
%
 
 
 
0.7
%
 
 
 
Perpetual securities included within fixed maturity and equity securities AFS
$
819

 
 
 
$
1,009

 
 
 
Redeemable preferred stock with a stated maturity included within fixed maturity securities AFS
$
1,216

 
 
 
$
1,265

 
 
 
Perpetual securities are included within fixed maturity and equity securities. Upon acquisition, we classify perpetual securities that have attributes of both debt and equity as fixed maturity securities if the securities have an interest rate step-up feature which, when combined with other qualitative factors, indicates that the securities have more debt-like characteristics; while those with more equity-like characteristics are classified as equity securities. Many of such securities, commonly referred to as “perpetual hybrid securities,” have been issued by non-U.S. financial institutions that are accorded the highest two capital treatment categories by their respective regulatory bodies (i.e. core capital, or “Tier 1 capital” and perpetual deferrable securities, or “Upper Tier 2 capital”).
Redeemable preferred stock with a stated maturity is included within fixed maturity securities. These securities, which are commonly referred to as “capital securities,” primarily have cumulative interest deferral features and are primarily issued by U.S. financial institutions.
In connection with our investment management business, we manage privately-placed and infrastructure fixed maturity securities on behalf of institutional clients, which are unaffiliated investors. These privately-placed and infrastructure fixed maturity securities had an estimated fair value of $6.1 billion and $4.1 billion at December 31, 2015 and 2014 , respectively. These assets are not included in our consolidated financial statements.
Also in connection with our investment management business, we manage index investment portfolios that track the return of standard industry fixed income and equity market indices such as the Barclay’s U.S. Aggregate Bond Index and S&P 500 ®  Index. These assets had an estimated fair value of $26.0 billion and $27.7 billion at December 31, 2015 and 2014 , respectively, and are included within separate account assets in our consolidated financial statements.

126


Valuation of Securities.  We are responsible for the determination of the estimated fair value of our investments. We determine the estimated fair value of publicly-traded securities after considering one of three primary sources of information: quoted market prices in active markets, independent pricing services, or independent broker quotations. We determine the estimated fair value of privately-placed securities after considering one of three primary sources of information: market standard internal matrix pricing, market standard internal discounted cash flow techniques, or independent pricing services (after we determine the independent pricing services’ use of available observable market data). For publicly-traded securities, the number of quotations obtained varies by instrument and depends on the liquidity of the particular instrument. Generally, we obtain prices from multiple pricing services to cover all asset classes and obtain multiple prices for certain securities, but ultimately utilize the price with the highest placement in the fair value hierarchy. Independent pricing services that value these instruments use market standard valuation methodologies based on data about market transactions and inputs from multiple pricing sources that are market observable or can be derived principally from or corroborated by observable market data. See Note 10 of the Notes to the Consolidated Financial Statements for a discussion of the types of market standard valuation methodologies utilized and key assumptions and observable inputs used in applying these standard valuation methodologies. When a price is not available in the active market or through an independent pricing service, management values the security primarily using market standard internal matrix pricing or discounted cash flow techniques, and non-binding quotations from independent brokers who are knowledgeable about these securities. Independent non-binding broker quotations utilize inputs that may be difficult to corroborate with observable market data. As shown in the following section, less than 1% of our fixed maturity securities were valued using non-binding quotations from independent brokers at December 31, 2015 .
Senior management, independent of the trading and investing functions, is responsible for the oversight of control systems and valuation policies, including reviewing and approving new transaction types and markets, for ensuring that observable market prices and market-based parameters are used for valuation, wherever possible, and for determining that valuation adjustments, when applied, are based upon established policies and are applied consistently over time. See Note 10 of the Notes to the Consolidated Financial Statements for further information on our valuation controls and procedures including our formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value.
We have reviewed the significance and observability of inputs used in the valuation methodologies to determine the appropriate fair value hierarchy level for each of our securities. Based on the results of this review and investment class analysis, each instrument is categorized as Level 1, 2 or 3 based on the lowest level significant input to its valuation. See Note 10 of the Notes to the Consolidated Financial Statements for information regarding the valuation techniques and inputs by level within the three level fair value hierarchy by major classes of invested assets.
Fair Value of Fixed Maturity and Equity Securities – AFS 
Fixed maturity and equity securities AFS measured at estimated fair value on a recurring basis and their corresponding fair value pricing sources are as follows:
 
December 31, 2015
 
Fixed Maturity
Securities
 
Equity
Securities
 
(In millions)
 
 
 
(In millions)
 
 
Level 1
 
 
 
 
 
 
 
Quoted prices in active markets for identical assets
$
37,660

 
10.7
%
 
$
1,274

 
38.3
%
Level 2
 
 
 
 
 
 
 
Independent pricing sources
258,271

 
73.5

 
1,470

 
44.3

Internal matrix pricing or discounted cash flow techniques
34,657

 
9.9

 
145

 
4.4

Significant other observable inputs
292,928

 
83.4

 
1,615

 
48.7

Level 3
 
 
 
 
 
 
 
Independent pricing sources
7,122

 
2.0

 
308

 
9.3

Internal matrix pricing or discounted cash flow techniques
12,273

 
3.5

 
109

 
3.3

Independent broker quotations
1,419

 
0.4

 
15

 
0.4

Significant unobservable inputs
20,814

 
5.9

 
432

 
13.0

Total estimated fair value
$
351,402

 
100.0
%
 
$
3,321

 
100.0
%
See Note  10 of the Notes to the Consolidated Financial Statements for the fixed maturity securities and equity securities AFS fair value hierarchy.

127


The composition of fair value pricing sources for and significant changes in Level 3 securities at December 31, 2015 are as follows:
The majority of the Level 3 fixed maturity and equity securities AFS were concentrated in four sectors: U.S. and foreign corporate securities, residential mortgage-backed securities (“RMBS”), and asset-backed securities (“ABS”).
Level 3 fixed maturity securities are priced principally through market standard valuation methodologies, independent pricing services and, to a much lesser extent, independent non-binding broker quotations using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. Level 3 fixed maturity securities consist of less liquid securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies. Level 3 fixed maturity securities include: sub-prime RMBS; certain below investment grade private securities and less liquid investment grade corporate securities (included in U.S. and foreign corporate securities); less liquid ABS and foreign government securities.
During the year ended December 31, 2015 , Level 3 fixed maturity securities decreased by $1.3 billion , or 6% . The decrease was driven by net transfers out of Level 3, partially offset by purchases in excess of sales and a decrease in estimated fair value recognized in OCI.
See Note  10 of the Notes to the Consolidated Financial Statements for a rollforward of the fair value measurements for fixed maturity securities and equity securities AFS measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs; transfers into and/or out of Level 3; and further information about the valuation techniques and inputs by level by major classes of invested assets that affect the amounts reported above.
Fixed Maturity Securities AFS
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for information about fixed maturity securities AFS by sector, contractual maturities and continuous gross unrealized losses.
Fixed Maturity Securities Credit Quality — Ratings 
The Securities Valuation Office of the NAIC evaluates the fixed maturity security investments of insurers for regulatory reporting and capital assessment purposes and assigns securities to one of six credit quality categories called “NAIC designations.” If no designation is available from the NAIC, then, as permitted by the NAIC, an internally developed designation is used. The NAIC designations are generally similar to the credit quality ratings of the NRSRO for fixed maturity securities, except for certain structured securities as described below. Rating agency ratings are based on availability of applicable ratings from rating agencies on the NAIC credit rating provider list, including Moody’s, S&P, Fitch, Dominion Bond Rating Service, A.M. Best, Kroll Bond Rating Agency, Egan Jones Ratings Company and Morningstar, Inc. (“Morningstar”). If no rating is available from a rating agency, then an internally developed rating is used.
The NAIC has adopted revised methodologies for certain structured securities comprised of non-agency RMBS, commercial mortgage-backed securities (“CMBS”) and ABS. The NAIC’s objective with the revised methodologies for these structured securities was to increase the accuracy in assessing expected losses, and to use the improved assessment to determine a more appropriate capital requirement for such structured securities. The revised methodologies reduce regulatory reliance on rating agencies and allow for greater regulatory input into the assumptions used to estimate expected losses from structured securities. We apply the revised NAIC methodologies to structured securities held by MetLife, Inc.’s insurance subsidiaries that maintain the NAIC statutory basis of accounting. The NAIC’s present methodology is to evaluate structured securities held by insurers using the revised NAIC methodologies on an annual basis. If MetLife, Inc.’s insurance subsidiaries acquire structured securities that have not been previously evaluated by the NAIC, but are expected to be evaluated by the NAIC in the upcoming annual review, an internally developed designation is used until a final designation becomes available.

128


The following table presents total fixed maturity securities by NRSRO rating and the equivalent designations of the NAIC, except for certain structured securities, which are presented using the revised NAIC methodologies as described above, as well as the percentage, based on estimated fair value that each designation is comprised of at:
 
 
 
 
December 31,
 
 
 
 
 
2015
 
 
2014
 
NAIC
Designation
 
NRSRO Rating
 
Amortized
Cost
 
Unrealized
Gain (Loss)
 
Estimated
Fair
Value
 
% of
Total
 
 
Amortized
Cost
 
Unrealized
Gain (Loss)
 
Estimated
Fair
Value
 
% of
Total
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
1
 
Aaa/Aa/A
 
$
234,176

 
$
16,627

 
$
250,803

 
71.4
%
 
$
233,246

 
$
23,837

 
$
257,083

 
70.4
%
2
 
Baa
 
77,313

 
2,210

 
79,523

 
22.6
 
 
76,754

 
6,654

 
83,408

 
22.8
 
 
 
Subtotal investment grade
 
311,489

 
18,837

 
330,326

 
94.0
 
 
310,000

 
30,491

 
340,491

 
93.2
 
3
 
Ba
 
15,314

 
(172
)
 
15,142

 
4.3
 
 
14,967

 
178

 
15,145

 
4.1
 
4
 
B
 
5,083

 
(244
)
 
4,839

 
1.4
 
 
8,481

 
(96
)
 
8,385

 
2.3
 
5
 
Caa and lower
 
1,036

 
5

 
1,041

 
0.3
 
 
1,296

 
44

 
1,340

 
0.4
 
6
 
In or near default
 
42

 
12

 
54

 
 
 
36

 
28

 
64

 
 
 
 
Subtotal below investment grade
 
21,475

 
(399
)
 
21,076

 
6.0
 
 
24,780

 
154

 
24,934

 
6.8
 
 
 
Total fixed maturity securities
 
$
332,964

 
$
18,438

 
$
351,402

 
100.0
%
 
$
334,780

 
$
30,645

 
$
365,425

 
100.0
%

129


The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO rating and the equivalent designations of the NAIC, except for certain structured securities, which are presented using the NAIC methodologies as described above:
 
Fixed Maturity Securities — by Sector & Credit Quality Rating
NAIC Designation:
1
 
2
 
3
 
4
 
5
 
6
 
Total
Estimated
Fair Value
NRSRO Rating:
Aaa/Aa/A
 
Baa
 
Ba
 
B
 
Caa and
Lower
 
In or Near
Default
 
 
(In millions)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate
$
43,448

 
$
44,158

 
$
9,163

 
$
3,532

 
$
493

 
$

 
$
100,794

U.S. Treasury and agency
61,646

 

 

 

 

 

 
61,646

Foreign corporate
23,368

 
29,362

 
3,621

 
732

 
114

 
1

 
57,198

Foreign government
43,911

 
4,098

 
1,730

 
395

 
326

 
39

 
50,499

RMBS
37,394

 
560

 
579

 
177

 
78

 
9

 
38,797

State and political subdivision
14,818

 
599

 
10

 

 
14

 

 
15,441

ABS
13,646

 
702

 
24

 
3

 
14

 
5

 
14,394

CMBS
12,572

 
44

 
15

 

 
2

 

 
12,633

Total fixed maturity securities
$
250,803

 
$
79,523

 
$
15,142

 
$
4,839

 
$
1,041

 
$
54

 
$
351,402

Percentage of total
71.4
%
 
22.6
%
 
4.3
%
 
1.4
%
 
0.3
%
 
%
 
100.0
%
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate
$
46,043

 
$
44,174

 
$
9,627

 
$
5,602

 
$
497

 
$
11

 
$
105,954

U.S. Treasury and agency
61,516

 

 

 

 

 

 
61,516

Foreign corporate
25,368

 
31,084

 
3,775

 
1,358

 
89

 
1

 
61,675

Foreign government
44,837

 
5,763

 
744

 
863

 
418

 
41

 
52,666

RMBS
37,156

 
1,049

 
766

 
551

 
318

 
6

 
39,846

State and political subdivision
14,656

 
501

 
30

 

 

 

 
15,187

ABS
13,383

 
807

 
37

 
2

 
15

 
5

 
14,249

CMBS
14,124

 
30

 
166

 
9

 
3

 

 
14,332

Total fixed maturity securities
$
257,083

 
$
83,408

 
$
15,145

 
$
8,385

 
$
1,340

 
$
64

 
$
365,425

Percentage of total
70.4
%
 
22.8
%
 
4.1
%
 
2.3
%
 
0.4
%
 
%
 
100.0
%

130


U.S. and Foreign Corporate Fixed Maturity Securities
We maintain a diversified portfolio of corporate fixed maturity securities across industries and issuers. This portfolio does not have any exposure to any single issuer in excess of 1% of total investments and the top ten holdings comprise 2% of total investments at both December 31, 2015 and 2014 . The tables below present our U.S. and foreign corporate securities holdings at:
 
December 31,
 
2015
 
2014
 
Estimated
Fair
Value
 
% of
Total
 
Estimated
Fair
Value
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Corporate fixed maturity securities — by sector:
 
 
 
 
 
 
 
Foreign corporate (1)
$
57,198

 
36.2
%
 
$
61,675

 
36.8
%
U.S. corporate fixed maturity securities — by industry:
 
 
 
 
 
 
 
Consumer
27,715

 
17.5

 
27,808

 
16.6

Industrial
25,861

 
16.4

 
27,221

 
16.2

Utility
18,591

 
11.8

 
20,029

 
12.0

Finance
18,239

 
11.5

 
18,688

 
11.1

Communications
6,802

 
4.3

 
8,071

 
4.8

Other
3,586

 
2.3

 
4,137

 
2.5

Total
$
157,992

 
100.0
%
 
$
167,629

 
100.0
%
______________
(1)
Includes both U.S. dollar and foreign denominated securities.
Structured Securities
We held $65.8 billion and $68.4 billion of structured securities, at estimated fair value, at December 31, 2015 and 2014 , respectively, as presented in the RMBS, ABS and CMBS sections below.

131


RMBS
The table below presents our RMBS holdings at:
 
December 31,
 
2015
 
2014
 
Estimated
Fair
Value
 
% of
Total
 
Net
Unrealized
Gains (Losses)
 
Estimated
Fair
Value
 
% of
Total
 
Net
Unrealized
Gains (Losses)
 
(In millions)
 
 
 
(In millions)
 
(In millions)
 
 
 
(In millions)
By security type:
 
 
 
 
 
 
 
 
 
 
 
Collateralized mortgage obligations
$
20,604

 
53.1
%
 
$
578

 
$
20,269

 
50.9
%
 
$
1,083

Pass-through securities
18,193

 
46.9

 
305

 
19,577

 
49.1

 
699

Total RMBS
$
38,797

 
100.0
%
 
$
883

 
$
39,846

 
100.0
%
 
$
1,782

By risk profile:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
26,214

 
67.6
%
 
$
763

 
$
26,818

 
67.3
%
 
$
1,469

Prime
1,960

 
5.1

 
41

 
2,648

 
6.6

 
68

Alt-A
5,990

 
15.4

 
(18
)
 
5,540

 
13.9

 
85

Sub-prime
4,633

 
11.9

 
97

 
4,840

 
12.2

 
160

Total RMBS
$
38,797

 
100.0
%
 
$
883

 
$
39,846

 
100.0
%
 
$
1,782

Ratings profile:
 
 
 
 
 
 
 
 
 
 
 
Rated Aaa/AAA
$
26,809

 
69.1
%
 
 
 
$
27,362

 
68.7
%
 
 
Designated NAIC 1
$
37,394

 
96.4
%
 
 
 
$
37,156

 
93.2
%
 
 
Collateralized mortgage obligations are structured by dividing the cash flows of mortgages into separate pools or tranches of risk that create multiple classes of bonds with varying maturities and priority of payments. Pass-through mortgage-backed securities are secured by a mortgage or collection of mortgages. The monthly mortgage payments from homeowners pass from the originating bank through an intermediary, such as a government agency or investment bank, which collects the payments and, for a fee, remits or passes these payments through to the holders of the pass-through securities.
The majority of our RMBS holdings were rated Aaa/AAA by Moody’s, S&P or Fitch; and were designated NAIC 1 by the NAIC at December 31, 2015 and 2014 . Agency RMBS were guaranteed or otherwise supported by Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or Government National Mortgage Association. Non-agency RMBS include prime, alternative residential mortgage loans (“Alt-A”) and sub-prime RMBS. Prime residential mortgage lending includes the origination of residential mortgage loans to the most creditworthy borrowers with high quality credit profiles. Alt-A is a classification of mortgage loans where the risk profile of the borrower falls between prime and sub-prime. Sub-prime mortgage lending is the origination of residential mortgage loans to borrowers with weak credit profiles.
Included within prime and Alt-A RMBS are re-securitization of real estate mortgage investment conduit (“Re-REMIC”) securities. Re-REMIC RMBS involve the pooling of previous issues of prime and Alt-A RMBS and restructuring the combined pools to create new senior and subordinated securities. The credit enhancement on the senior tranches is improved through the re-securitization.
Historically, we have managed our exposure to sub-prime RMBS holdings by: acquiring older vintage year securities that benefit from better underwriting, improved credit enhancement and higher levels of residential property price appreciation; reducing our overall exposure; stress testing the portfolio with severe loss assumptions; and closely monitoring the performance of the portfolio. Since 2012, we have increased our exposure by purchasing sub-prime RMBS at significant discounts to the expected principal recovery value of these securities. The estimated fair value of our sub-prime RMBS holdings purchased since 2012 was $4.0 billion and $3.9 billion at December 31, 2015 and 2014 , respectively, with unrealized gains (losses) of $74 million and $130 million at December 31, 2015 and 2014 , respectively.

132


ABS 
Our ABS are diversified both by collateral type and by issuer. The following table presents our ABS holdings at:
 
December 31,
 
2015
 
2014
 
Estimated
Fair
Value
 
% of
Total
 
Net
Unrealized
Gains (Losses)
 
Estimated
Fair
Value
 
% of
Total
 
Net
Unrealized
Gains (Losses)
 
(In millions)
 
 
 
(In millions)
 
(In millions)
 
 
 
(In millions)
By collateral type:
 
 
 
 
 
 
 
 
 
 
 
Collateralized obligations
$
7,698

 
53.5
%
 
$
(144
)
 
$
5,262

 
36.9
%
 
$
(46
)
Foreign residential loans
1,365

 
9.5

 
32

 
2,146

 
15.1

 
63

Student loans
1,284

 
8.9

 
(30
)
 
1,997

 
14.0

 
42

Automobile loans
1,153

 
8.0

 

 
1,625

 
11.4

 
10

Credit card loans
831

 
5.8

 
27

 
1,195

 
8.4

 
44

Other loans
2,063

 
14.3

 
11

 
2,024

 
14.2

 
15

Total
$
14,394

 
100.0
%
 
$
(104
)
 
$
14,249

 
100.0
%
 
$
128

Ratings profile:
 
 
 
 
 
 
 
 
 
 
 
Rated Aaa/AAA
$
7,510

 
52.2
%
 
 
 
$
7,950

 
55.8
%
 
 
Designated NAIC 1
$
13,646

 
94.8
%
 
 
 
$
13,383

 
93.9
%
 
 
CMBS
Our CMBS holdings are diversified by vintage year. The following tables present our CMBS holdings by rating agency rating and by vintage year at:
 
December 31, 2015
 
Aaa
 
Aa
 
A
 
Baa
 
Below
Investment
Grade
 
Total
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
(In millions)
2003 - 2005
$
187

 
$
198

 
$
95

 
$
101

 
$
33

 
$
35

 
$
47

 
$
48

 
$
10

 
$
10

 
$
372

 
$
392

2006
1,061

 
1,070

 
79

 
79

 
76

 
77

 
50

 
56

 

 

 
1,266

 
1,282

2007
477

 
486

 
144

 
145

 
84

 
87

 

 

 
123

 
125

 
828

 
843

2008 - 2010
5

 
5

 

 

 
13

 
13

 

 

 

 

 
18

 
18

2011
560

 
593

 
23

 
24

 
63

 
64

 

 

 

 

 
646

 
681

2012
506

 
534

 
368

 
376

 
500

 
513

 
8

 
9

 
1

 
1

 
1,383

 
1,433

2013
989

 
1,036

 
696

 
735

 
893

 
925

 
12

 
10

 

 

 
2,590

 
2,706

2014
854

 
859

 
939

 
937

 
453

 
459

 
1

 
1

 

 

 
2,247

 
2,256

2015
2,258

 
2,227

 
445

 
436

 
325

 
327

 
32

 
32

 

 

 
3,060

 
3,022

Total
$
6,897

 
$
7,008

 
$
2,789

 
$
2,833

 
$
2,440

 
$
2,500

 
$
150

 
$
156

 
$
134

 
$
136

 
$
12,410

 
$
12,633

Ratings
Distribution
 
 
55.5
%
 
 
 
22.4
%
 
 
 
19.8
%
 
 
 
1.2
%
 
 
 
1.1
%
 
 
 
100.0
%

133


 
December 31, 2014
 
Aaa
 
Aa
 
A
 
Baa
 
Below
Investment
Grade
 
Total
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
(In millions)
2003 - 2004
$
251

 
$
258

 
$
25

 
$
27

 
$
54

 
$
56

 
$
40

 
$
40

 
$
17

 
$
17

 
$
387

 
$
398

2005
2,278

 
2,300

 
412

 
426

 
243

 
253

 
111

 
115

 
9

 
13

 
3,053

 
3,107

2006
1,983

 
2,056

 
103

 
106

 
107

 
110

 
66

 
73

 

 

 
2,259

 
2,345

2007
694

 
720

 
64

 
67

 
195

 
205

 
41

 
43

 
129

 
131

 
1,123

 
1,166

2008 - 2010
5

 
5

 

 

 
25

 
25

 

 

 

 

 
30

 
30

2011
561

 
603

 
23

 
24

 
63

 
65

 

 

 
4

 
4

 
651

 
696

2012
467

 
559

 
245

 
255

 
842

 
866

 

 

 
3

 
3

 
1,557

 
1,683

2013
802

 
854

 
467

 
505

 
1,330

 
1,393

 
13

 
11

 

 

 
2,612

 
2,763

2014
466

 
480

 
883

 
900

 
652

 
677

 
13

 
14

 
76

 
73

 
2,090

 
2,144

Total
$
7,507

 
$
7,835

 
$
2,222

 
$
2,310

 
$
3,511

 
$
3,650

 
$
284

 
$
296

 
$
238

 
$
241

 
$
13,762

 
$
14,332

Ratings Distribution
 
 
54.7
%
 
 
 
16.1
%
 
 
 
25.5
%
 
 
 
2.0
%
 
 
 
1.7
%
 
 
 
100.0
%
The tables above reflect rating agency ratings assigned by NRSROs, including Moody’s, S&P, Fitch and Morningstar. CMBS designated NAIC 1 were 99.5% and 98.5% of total CMBS at December 31, 2015 and 2014 , respectively.
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities
See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for information about the evaluation of fixed maturity securities and equity securities AFS for OTTI and evaluation of temporarily impaired AFS securities.
OTTI Losses on Fixed Maturity and Equity Securities AFS Recognized in Earnings
See Note  8 of the Notes to the Consolidated Financial Statements for information about OTTI losses and gross gains and gross losses on AFS securities sold.
Overview of Fixed Maturity and Equity Security OTTI Losses Recognized in Earnings
Impairments of fixed maturity and equity securities were $130 million , $96 million and $192 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. Impairments of fixed maturity securities were $90 million , $60 million and $166 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. Impairments of equity securities were $40 million , $36 million and $26 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Credit-related impairments of fixed maturity securities were $90 million , $60 million and $147 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Explanations of changes in fixed maturity and equity securities impairments are as follows:
Year Ended December 31, 2015 Compared with the Year Ended December 31, 2014
Overall OTTI losses recognized in earnings on fixed maturity and equity securities were $130 million for the year ended December 31, 2015 as compared to $96 million for the year ended December 31, 2014 . The most significant increases were in U.S. and foreign corporate securities, which comprised $54 million for the year ended December 31, 2015 , as compared to $9 million for the year ended December 31, 2014 . An increase of $45 million in OTTI losses on U.S. and foreign corporate securities reflected the impact of weakening foreign currencies on non-functional currency denominated fixed maturity securities and lower oil prices impacting the energy sector . The $45 million increase in OTTI losses on U.S. and foreign corporate securities was concentrated in the utility and consumer services industries.
Year Ended December 31, 2014 Compared with the Year Ended December 31, 2013
Overall OTTI losses recognized in earnings on fixed maturity and equity securities were $96 million for the year ended December 31, 2014 as compared to $192 million for the year ended December 31, 2013 . The most significant decreases were in U.S. and foreign corporate securities and RMBS, which comprised $40 million for the year ended December 31, 2014 , as compared to $154 million for the year ended December 31, 2013 . A decrease of $65 million in OTTI losses on U.S. and foreign corporate securities and a $49 million decrease in OTTI losses on RMBS reflected improving economic fundamentals. The $65 million decrease in OTTI losses on U.S. and foreign corporate securities was concentrated in the utility and financial services industries.

134


Future Impairments
Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), and changes in credit ratings, collateral valuation, interest rates and credit spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.
FVO and Trading Securities
FVO and trading securities are primarily comprised of securities for which the FVO has been elected (“FVO Securities”). FVO Securities include certain fixed maturity and equity securities held-for-investment by the general account to support ALM strategies for certain insurance products and investments in certain separate accounts; securities held by CSEs; and trading securities, as further described in Note 1 of the Notes to the Consolidated Financial Statements. FVO and trading securities were $15.0 billion and $16.7 billion at estimated fair value, or 3.0% and 3.2% of total cash and invested assets, at December 31, 2015 and 2014 , respectively. See Note 10 of the Notes to the Consolidated Financial Statements for the FVO and trading securities fair value hierarchy and a rollforward of the fair value measurements for FVO and trading securities measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
Securities Lending
We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, which is obtained at the inception of a loan and maintained at a level greater than or equal to 100% for the duration of the loan. We monitor the estimated fair value of the securities loaned on a daily basis with additional collateral obtained as necessary throughout the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. We are liable to return to our counterparties the cash collateral under our control. Security collateral on deposit from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the consolidated financial statements. These transactions are treated as financing arrangements and the associated cash collateral liability is recorded at the amount of the cash received.
See “— Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Securities Lending” and Note  8 of the Notes to the Consolidated Financial Statements for information regarding our securities lending program.
Mortgage Loans
Our mortgage loans are principally collateralized by commercial, agricultural and residential properties. Mortgage loans and the related valuation allowances are summarized as follows at:
 
December 31,
 
2015
 
2014
 
Recorded
Investment
 
% of
Total
 
Valuation
Allowance
 
% of
Recorded
Investment
 
Recorded
Investment
 
% of
Total
 
Valuation
Allowance
 
% of
Recorded
Investment
 
(Dollars in millions)
 
(Dollars in millions)
Commercial
$
44,012

 
65.8
%
 
$
217

 
0.5
%
 
$
41,088

 
68.7
%
 
$
224

 
0.5
%
Agricultural
13,188

 
19.7

 
42

 
0.3
%
 
12,378

 
20.7

 
39

 
0.3
%
Residential
9,734

 
14.5

 
59

 
0.6
%
 
6,369

 
10.6

 
42

 
0.7
%
Total
$
66,934

 
100.0
%
 
$
318

 
0.5
%
 
$
59,835

 
100.0
%
 
$
305

 
0.5
%
The information presented in the tables herein exclude mortgage loans where we elected the FVO. Such amounts are presented in Note  8 of the Notes to the Consolidated Financial Statements.
We originated $12.8 billion and $11.1 billion of commercial mortgage loans during the years ended December 31, 2015 and 2014 , respectively. We originated $3.2 billion and $3.5 billion of agricultural mortgage loans during the years ended December 31, 2015 and 2014 , respectively. While we originate some residential mortgage loans, we purchased a substantial amount of our residential mortgage loans on the secondary market during the years ended December 31, 2015 and 2014 . See Note  8 of the Notes to the Consolidated Financial Statements for further information on mortgage loan purchases.

135


We diversify our mortgage loan portfolio by both geographic region and property type to reduce the risk of concentration. Of our commercial and agricultural mortgage loan portfolios, 85% are collateralized by properties located in the U.S., with the remaining 15% collateralized by properties located outside the U.S., at December 31, 2015 . The carrying value of our commercial and agricultural mortgage loans located in California, New York and Texas were 19% , 12% and 8% , respectively, of total mortgage loans at December 31, 2015 . Additionally, we manage risk when originating commercial and agricultural mortgage loans by generally lending up to 75% of the estimated fair value of the underlying real estate collateral.
We manage our residential mortgage loan portfolio in a similar manner to reduce risk of concentration, with 91% collateralized by properties located in the U.S., and the remaining 9% collateralized by properties located outside the U.S., at December 31, 2015 . The carrying value of our residential mortgage loans located in California, Florida, and New York were 35% , 7% , and 6% , respectively.
In connection with our investment management business, we manage commercial mortgage loans on behalf of institutional clients, which are unaffiliated investors. These commercial mortgage loans had an estimated fair value of $2.0 billion and $1.2 billion at December 31, 2015 and 2014 , respectively. These assets are not included in our consolidated financial statements.
Commercial Mortgage Loans by Geographic Region and Property Type . Commercial mortgage loans are the largest component of the mortgage loan invested asset class, as such loans represented over 65% of total mortgage loans at both December 31, 2015 and 2014 . The tables below present the diversification across geographic regions and property types of commercial mortgage loans:
 
December 31,
 
2015
 
2014
 
Amount
 
% of
Total
 
Amount
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Region
 
 
 
 
 
 
 
Pacific
$
9,583

 
21.8
%
 
$
8,620

 
21.0
%
Middle Atlantic
8,154

 
18.5

 
7,689

 
18.7

International
7,889

 
17.9

 
7,251

 
17.7

South Atlantic
6,127

 
13.9

 
6,384

 
15.5

West South Central
4,311

 
9.8

 
3,990

 
9.7

East North Central
2,346

 
5.3

 
2,430

 
5.9

New England
1,367

 
3.1

 
1,155

 
2.8

Mountain
1,117

 
2.5

 
932

 
2.3

West North Central
520

 
1.2

 
140

 
0.3

East South Central
512

 
1.2

 
424

 
1.0

Multi-Region and Other
2,086

 
4.8

 
2,073

 
5.1

Total recorded investment
44,012

 
100.0
%
 
41,088

 
100.0
%
Less: valuation allowances
217

 
 
 
224

 
 
Carrying value, net of valuation allowances
$
43,795

 
 
 
$
40,864

 
 
Property Type
 
 
 
 
 
 
 
Office
$
21,525

 
48.9
%
 
$
21,400

 
52.1
%
Retail
10,466

 
23.8

 
9,389

 
22.9

Apartment
5,171

 
11.7

 
3,786

 
9.2

Hotel
4,396

 
10.0

 
4,196

 
10.2

Industrial
2,334

 
5.3

 
2,133

 
5.2

Other
120

 
0.3

 
184

 
0.4

Total recorded investment
44,012

 
100.0
%
 
41,088

 
100.0
%
Less: valuation allowances
217

 
 
 
224

 
 
Carrying value, net of valuation allowances
$
43,795

 
 
 
$
40,864

 
 
______________

136


Mortgage Loan Credit Quality - Monitoring Process.  We monitor our mortgage loan investments on an ongoing basis, including a review of loans that are current, past due, restructured and under foreclosure. See Note  8 of the Notes to the Consolidated Financial Statements for tables that present mortgage loans by credit quality indicator, past due and nonaccrual mortgage loans, as well as impaired mortgage loans. See “— Real Estate and Real Estate Joint Ventures” for real estate acquired through foreclosure.
We review our commercial mortgage loans on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios, including reviews on a geographic and sector basis. We review our residential mortgage loans on an ongoing basis. See Note 8 of the Notes to the Consolidated Financial Statements for information on our evaluation of residential mortgage loans and related valuation allowance methodology.
Loan-to-value ratios and debt service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. For our commercial mortgage loans, our average loan-to-value ratio was 52% at both December 31, 2015 and 2014 , and our average debt service coverage ratio was 2.6x at both December 31, 2015 and 2014 . The debt service coverage ratio, as well as the values utilized in calculating the ratio, is updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan portfolio. For our agricultural mortgage loans, our average loan-to-value ratio was 43% and 44% at December 31, 2015 and 2014 , respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated.
Mortgage Loan Valuation Allowances. Our valuation allowances are established both on a loan specific basis for those loans considered impaired where a property specific or market specific risk has been identified that could likely result in a future loss, as well as for pools of loans with similar risk characteristics where a property specific or market specific risk has not been identified, but for which we expect to incur a loss. Accordingly, a valuation allowance is provided to absorb these estimated probable credit losses.
The determination of the amount of valuation allowances is based upon our periodic evaluation and assessment of known and inherent risks associated with our loan portfolios. Such evaluations and assessments are based upon several factors, including our experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations and assessments are revised as conditions change and new information becomes available, which can cause the valuation allowances to increase or decrease over time as such evaluations are revised. Negative credit migration, including an actual or expected increase in the level of problem loans, will result in an increase in the valuation allowance. Positive credit migration, including an actual or expected decrease in the level of problem loans, will result in a decrease in the valuation allowance.
See Notes 1 , 8 and 10 of the Notes to the Consolidated Financial Statements for information about how valuation allowances are established and monitored, activity in and balances of the valuation allowance, and the estimated fair value of impaired mortgage loans and related impairments included within net investment gains (losses) as of and for the years ended December 31, 2015 , 2014 and 2013 .
Real Estate and Real Estate Joint Ventures
We diversify our real estate investments by both geographic region and property type to reduce risk of concentration. Of our real estate investments, 77% were located in the United States, with the remaining 23% located outside the United States, at December 31, 2015 . The carrying value of our real estate investments located in Japan, California and DC were 19% , 17% and 8% , respectively, of total real estate investments at December 31, 2015 .

137


Real estate investments by type consisted of the following at:
 
December 31,
 
2015
 
2014
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Traditional
$
7,859

 
93.2
%
 
$
9,386

 
89.2
%
Real estate joint ventures and funds
482

 
5.7

 
647

 
6.2

Subtotal
8,341

 
98.9

 
10,033

 
95.4

Foreclosed (commercial, agricultural and residential)
45

 
0.5

 
320

 
3.0

Real estate held-for-investment
8,386

 
99.4

 
10,353

 
98.4

Real estate held-for-sale
47

 
0.6

 
172

 
1.6

Total real estate and real estate joint ventures
$
8,433

 
100.0
%
 
$
10,525

 
100.0
%
We classify within traditional real estate our investment in income-producing real estate, which is comprised of wholly-owned real estate and joint ventures with interests in single property income-producing real estate. The estimated fair value of the traditional and held-for-sale real estate investment portfolios was $12.4 billion and $13.3 billion at December 31, 2015 and 2014 , respectively. We classify within real estate joint ventures and funds, our investments in joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the operation of income-producing properties, as well as our investments in real estate private equity funds. From time to time, if we intend to retain an interest in the property, we transfer investments from these joint ventures to traditional real estate after the completed property commences operations.
In connection with our investment management business, we manage real estate investments on behalf of institutional clients, which are unaffiliated investors. These real estate investments had an estimated fair value of $3.8 billion and $2.8 billion at December 31, 2015 and 2014 , respectively. These assets are not included in our consolidated financial statements.
Real estate and real estate joint venture investments by property type are categorized by sector as follows at:
 
December 31,
 
2015
 
2014
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Office
$
3,265

 
38.7
%
 
$
5,574

 
53.0
%
Apartment
1,662

 
19.7

 
1,684

 
16.0

Retail
1,032

 
12.2

 
782

 
7.4

Real estate investment funds
683

 
8.1

 
351

 
3.3

Hotel
544

 
6.5

 
554

 
5.3

Industrial
483

 
5.7

 
614

 
5.8

Land
348

 
4.1

 
432

 
4.1

Agriculture
32

 
0.4

 
37

 
0.4

Other
384

 
4.6

 
497

 
4.7

Total real estate and real estate joint ventures
$
8,433

 
100.0
%
 
$
10,525

 
100.0
%
The Company's authorized equity investment in real estate property was $1.0 billion and $1.7 billion for the years ended December 31, 2015 and 2014 , respectively.
Impairments recognized on real estate and real estate joint ventures were $93 million , $20 million and $10 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. Depreciation expense on real estate investments was $162 million , $199 million and $179 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. Real estate investments are net of accumulated depreciation of $1.2 billion at both December 31, 2015 and 2014 .

138


Other Limited Partnership Interests
Other limited partnership interests are comprised of private equity funds and hedge funds. The carrying value of other limited partnership interests was $7.1 billion and $8.1 billion at December 31, 2015 and 2014 , respectively, which included $1.9 billion and $2.4 billion of hedge funds, at December 31, 2015 and 2014 , respectively.
Other Invested Assets
The following table presents the carrying value of our other invested assets by type:
 
 
December 31,
 
 
2015
 
2014
 
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 
 
 
(In millions)
 
 
 
(In millions)
 
 
 
Freestanding derivatives with positive estimated fair values
$
14,406

 
64.0
%
 
$
13,452

 
63.2
%
 
Tax credit and renewable energy partnerships
3,145

 
13.9

 
2,752

 
12.9

 
Leveraged leases, net of non-recourse debt
1,712

 
7.6

 
1,785

 
8.4

 
Direct financing leases
1,076

 
4.8

 
1,119

 
5.3

 
Funds withheld
771

 
3.4

 
763

 
3.6

 
Operating joint ventures
605

 
2.7

 
513

 
2.4

 
Other
809

 
3.6

 
899

 
4.2

 
Total
$
22,524

 
100.0
%
 
$
21,283

 
100.0
%
Leveraged lease impairments were $41 million , $80 million and $26 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
See Notes 8 and 9 of the Notes to the Consolidated Financial Statements for information regarding tax credit partnerships, leveraged and direct financing leases and freestanding derivatives with positive estimated fair values, respectively. See Note 1 of the Notes to the Consolidated Financial Statements for further information about tax credit and renewable energy partnerships, funds withheld and operating joint ventures.
Our private placement unit originated $9.7 billion and $8.3 billion of private investments, comprised primarily of certain privately placed fixed maturity securities and tax credit and renewable energy partnerships, during the years ended December 31, 2015 and 2014 , respectively. The carrying value of such private investments included within our consolidated balance sheets was $49.8 billion at both December 31, 2015 and 2014 . In addition, we originated $0 and $94 million of private lease investments during the years ended December 31, 2015 and 2014 , respectively. The carrying value of such private lease investments included within our consolidated balance sheets was $2.0 billion and $2.1 billion at December 31, 2015 and 2014 , respectively.
Short-term Investments and Cash Equivalents
The carrying value of short-term investments, which approximates estimated fair value, was $9.3 billion and $8.6 billion , or 1.8% and 1.7% of total cash and invested assets, at December 31, 2015 and 2014 , respectively. The carrying value of cash equivalents, which approximates estimated fair value, was $7.5 billion and $4.5 billion , or 1.5% and 0.9% of total cash and invested assets, at December 31, 2015 and 2014 , respectively.
Derivatives
Derivative Risks
We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. We use a variety of strategies to manage these risks, including the use of derivatives. See Note  9 of the Notes to the Consolidated Financial Statements for: 
A comprehensive description of the nature of our derivatives, including the strategies for which derivatives are used in managing various risks.
Information about the gross notional amount, estimated fair value, and primary underlying risk exposure of our derivatives by type of hedge designation, excluding embedded derivatives held at December 31, 2015 and 2014 .
The statement of operations effects of derivatives in net investments in foreign operations, cash flow, fair value, or nonqualifying hedge relationships for the years ended December 31, 2015 , 2014 and 2013 .

139


See “Quantitative and Qualitative Disclosures About Market Risk — Management of Market Risk Exposures — Hedging Activities” for more information about our use of derivatives by major hedge program.
Fair Value Hierarchy
See Note  10 of the Notes to the Consolidated Financial Statements for derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy.
The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income.
Derivatives categorized as Level 3 at December 31, 2015 include: interest rate forwards with maturities which extend beyond the observable portion of the yield curve; foreign currency swaps and forwards with certain unobservable inputs, including the unobservable portion of the yield curve; credit default swaps priced using unobservable credit spreads, or that are priced through independent broker quotations; equity variance swaps with unobservable volatility inputs; and equity index options with unobservable correlation inputs. At December 31, 2015 , less than 1% of the estimated fair value of our derivatives was priced through independent broker quotations.
See Note  10 of the Notes to the Consolidated Financial Statements for a rollforward of the fair value measurements for derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
The gain (loss) on Level 3 derivatives primarily relates to certain purchased equity index options that are valued using models dependent on an unobservable market correlation input, equity variance swaps that are valued using observable equity volatility data plus an unobservable equity variance spread and foreign currency swaps and forwards that are valued using an unobservable portion of the swap yield curve. Other significant inputs, which are observable, include equity index levels, equity volatility and the swap yield curve. We validate the reasonableness of these inputs by valuing the positions using internal models and comparing the results to broker quotations.
The gain (loss) on Level 3 derivatives, percentage of gain (loss) attributable to observable and unobservable inputs, and the primary drivers of observable gain (loss) are summarized as follows:
 
 
Year Ended December 31, 2015
Gain (loss) recognized in net income (loss)
 
($223) million
Percentage of gain (loss) attributable to observable inputs
 
26%
Primary drivers of observable gain (loss)
 
Strengthening of U.S. dollar versus foreign currencies on receive foreign, pay-U.S. dollar forwards and swaps; increases in equity index levels; and increases in short-term interest rates.
Percentage of gain (loss) attributable to unobservable inputs
 
74%
See “— Summary of Critical Accounting Estimates — Derivatives” for further information on the estimates and assumptions that affect derivatives.
Credit Risk
See Note  9 of the Notes to the Consolidated Financial Statements for information about how we manage credit risk related to derivatives and for the estimated fair value of our net derivative assets and net derivative liabilities after the application of master netting agreements and collateral.
Our policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives in the consolidated balance sheets, and does not affect our legal right of offset.

140


Credit Derivatives
The following table presents the gross notional amount and estimated fair value of credit default swaps at:
 
 
December 31,
 
 
2015
 
2014
Credit Default Swaps
 
Gross
Notional
Amount
 
Estimated
Fair Value
 
Gross
Notional
Amount
 
Estimated
Fair Value
 
 
(In millions)
Purchased (1)
 
$
1,870

 
$
(6
)
 
$
2,830

 
$
(26
)
Written (2)
 
10,311

 
65

 
10,527

 
175

Total
 
$
12,181

 
$
59

 
$
13,357

 
$
149

__________________
(1)
The gross notional amount and estimated fair value for purchased credit default swaps in the trading portfolio were $175 million and ($2) million, respectively, at December 31, 2015 and $250 million and ($6) million, respectively, at December 31, 2014 .
(2)
The gross notional amount and estimated fair value for written credit default swaps in the trading portfolio were $20 million and ($2) million, respectively, at December 31, 2015 and $15 million and $1 million, respectively, at December 31, 2014 .
The following table presents the gross gains, gross losses and net gain (losses) recognized in income for credit default swaps as follows: 
 
 
Years Ended December 31,
 
 
2015
 
2014
Credit Default Swaps
 
Gross
Gains 
(1)
 
Gross
Losses 
(1)
 
Net
Gains
(Losses)
 
Gross
Gains 
(1)
 
Gross
Losses 
(1)
 
Net
Gains
(Losses)
 
 
(In millions)
Purchased (2), (4)
 
$
32

 
$
(28
)
 
$
4

 
$
30

 
$
(42
)
 
$
(12
)
Written (3), (4)
 
29

 
(112
)
 
(83
)
 
65

 
(44
)
 
21

Total
 
$
61

 
$
(140
)
 
$
(79
)
 
$
95

 
$
(86
)
 
$
9

__________________
(1)
Gains (losses) are reported in net derivative gains (losses), except for gains (losses) on the trading portfolio, which are reported in net investment income.
(2)
The gross gains and gross (losses) for purchased credit default swaps in the trading portfolio were $8 million and ($11) million, respectively, for the year ended December 31, 2015 and $5 million and ($5) million, respectively, for the year ended December 31, 2014 .
(3)
The gross gains and gross (losses) for written credit default swaps in the trading portfolio were $3 million and ($3) million, respectively, for the year ended December 31, 2015 and were not significant for the year ended December 31, 2014 .
(4)
Gains (losses) do not include earned income (expense) on credit default swaps.
The favorable change in net gains (losses) on purchased credit default swaps of $16 million was due to certain credit spreads widening in the current period compared to the prior period on credit default swaps hedging certain bonds. The unfavorable change in net gains (losses) on written credit default swaps of ($104) million was due to certain credit spreads widening in the current period compared to the prior on certain credit default swaps used as replications.

141


The maximum amount at risk related to our written credit default swaps is equal to the corresponding gross notional amount. In a replication transaction, we pair an asset on our balance sheet with a written credit default swap to synthetically replicate a corporate bond, a core asset holding of life insurance companies. Replications are entered into in accordance with the guidelines approved by insurance regulators and are an important tool in managing the overall corporate credit risk within the Company. In order to match our long-dated insurance liabilities, we will seek to buy long-dated corporate bonds. In some instances, these may not be readily available in the market, or they may be issued by corporations to which we already have significant corporate credit exposure. For example, by purchasing Treasury bonds (or other high-quality assets) and associating them with written credit default swaps on the desired corporate credit name, we, at times, can replicate the desired bond exposures and meet our ALM needs. In addition, given the shorter tenor of the credit default swaps (generally five-year tenors) versus a long-dated corporate bond, we have more flexibility in managing our credit exposures.
Embedded Derivatives
See Note  10 of the Notes to the Consolidated Financial Statements for information about embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy.
See Note  10 of the Notes to the Consolidated Financial Statements for a rollforward of the fair value measurements for net embedded derivatives measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs.
See Note  9 of the Notes to the Consolidated Financial Statements for information about the nonperformance risk adjustment included in the valuation of guaranteed minimum benefits accounted for as embedded derivatives.
See “— Summary of Critical Accounting Estimates — Derivatives” for further information on the estimates and assumptions that affect embedded derivatives.
Off-Balance Sheet Arrangements
Credit and Committed Facilities
We maintain an unsecured credit facility, as well as committed facilities with various financial institutions. See “— Liquidity and Capital Resources — The Company — Liquidity and Capital Sources — Global Funding Sources — Credit and Committed Facilities” for further descriptions of such arrangements. For the classification of expenses on such credit and committed facilities and the nature of the associated liability for letters of credit issued and drawdowns on these credit and committed facilities, see Note 12 of the Notes to the Consolidated Financial Statements.
Collateral for Securities Lending, Repurchase Programs and Derivatives
We participate in a securities lending program in the normal course of business for the purpose of enhancing the total return on our investment portfolio. Periodically we receive non-cash collateral for securities lending from counterparties on deposit from customers, which cannot be sold or re-pledged, and which has not been recorded on our consolidated balance sheets. The amount of this collateral was $50 million and $83 million at estimated fair value at December 31, 2015 and 2014 , respectively. See Notes 1 and 8 of the Notes to the Consolidated Financial Statements, as well as “— Investments — Securities Lending” for discussion of our securities lending program, the classification of revenues and expenses, and the nature of the secured financing arrangement and associated liability.
We also participate in third-party custodian administered repurchase programs for the purpose of enhancing the total return on our investment portfolio. We loan certain of our fixed maturity securities to financial institutions and, in exchange, non-cash collateral is put on deposit by the financial institutions on our behalf with third-party custodians. The estimated fair value of securities loaned in connection with these transactions was $738 million and $642 million at December 31, 2015 and December 31, 2014 , respectively. Non-cash collateral on deposit with third-party custodians on our behalf was $781 million and $682 million at December 31, 2015 and December 31, 2014 , respectively, which cannot be sold or re-pledged, and which has not been recorded on our consolidated balance sheets.
We enter into derivatives to manage various risks relating to our ongoing business operations. We have non-cash collateral from counterparties for derivatives, which can be sold or re-pledged subject to certain constraints, and which has not been recorded on our consolidated balance sheets. The amount of this non-cash collateral was $2.2 billion and $4.2 billion at December 31, 2015 and 2014 , respectively. In certain instances, cash collateral pledged to the Company as initial margin for OTC-bilateral derivatives is held in separate custodial accounts and is not recorded on the Company’s balance sheet because the account title is in the name of the counterparty (but segregated for the benefit of the Company). The amount of this cash collateral was $0 million and $263 million at December 31, 2015 and 2014, respectively. See “— Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Pledged Collateral” and “Derivatives” in Note 9 of the Notes to the Consolidated Financial Statements for information regarding the earned income on and the gross notional amount, estimated fair value of assets and liabilities and primary underlying risk exposure of our derivatives.

142


Lease Commitments
As lessee, we have entered into various lease and sublease agreements for office space, information technology and other equipment. Our commitments under such lease agreements are included within the contractual obligations table. See “— Liquidity and Capital Resources — The Company — Contractual Obligations” and Note 21 of the Notes to the Consolidated Financial Statements.
Guarantees
See “Guarantees” in Note 21 of the Notes to the Consolidated Financial Statements.
Other
Additionally, we enter into commitments in the normal course of business for the purpose of enhancing the total return on our investment portfolio: mortgage loan commitments and commitments to fund partnerships, bank credit facilities, bridge loans and private corporate bond investments. See “Net Investment Income” and “Net Investment Gains (Losses)” in Note 8 of the Notes to the Consolidated Financial Statements for information on the investment income, investment expense, gains and losses from such investments. See also “— Investments — Fixed Maturity and Equity Securities AFS” and “— Investments — Mortgage Loans” for information on our investments in fixed maturity securities and mortgage loans. See “— Investments — Real Estate and Real Estate Joint Ventures” and “— Investments — Other Limited Partnership Interests” for information on our partnership investments.
Other than the commitments disclosed in Note 21 of the Notes to the Consolidated Financial Statements, there are no other material obligations or liabilities arising from the commitments to fund mortgage loans, partnerships, bank credit facilities, bridge loans, and private corporate bond investments. For further information on commitments to fund partnership investments, mortgage loans, bank credit facilities, bridge loans and private corporate bond investments. See “— Liquidity and Capital Resources — The Company — Contractual Obligations.”
Insolvency Assessments
See Note  21 of the Notes to the Consolidated Financial Statements.
Policyholder Liabilities
We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations or to provide for future annuity payments. Amounts for actuarial liabilities are computed and reported in the consolidated financial statements in conformity with GAAP. For more details on Policyholder Liabilities, see “— Summary of Critical Accounting Estimates.”
Due to the nature of the underlying risks and the uncertainty associated with the determination of actuarial liabilities, we cannot precisely determine the amounts that will ultimately be paid with respect to these actuarial liabilities, and the ultimate amounts may vary from the estimated amounts, particularly when payments may not occur until well into the future.
We periodically review our estimates of actuarial liabilities for future benefits and compare them with our actual experience. We revise estimates, to the extent permitted or required under GAAP, if we determine that future expected experience differs from assumptions used in the development of actuarial liabilities. We charge or credit changes in our liabilities to expenses in the period the liabilities are established or re-estimated. If the liabilities originally established for future benefit payments prove inadequate, we must increase them. Such an increase could adversely affect our earnings and have a material adverse effect on our business, results of operations and financial condition.
We have experienced, and will likely in the future experience, catastrophe losses and possibly acts of terrorism, as well as turbulent financial markets that may have an adverse impact on our business, results of operations, and financial condition. Due to their nature, we cannot predict the incidence, timing, severity or amount of losses from catastrophes and acts of terrorism, but we make broad use of catastrophic and non-catastrophic reinsurance to manage risk from these perils.
Insurance regulators in many of the non-U.S. countries in which we operate require certain MetLife entities to prepare a sufficiency analysis of the reserves presented in the locally required regulatory financial statements, and to submit that analysis to the regulatory authorities.
See “Business — Regulation — U.S. Regulation — Insurance Regulation — Policy and Contract Reserve Adequacy Analysis” and “Business — Regulation — International Regulation” for further information.

143


Future Policy Benefits
We establish liabilities for amounts payable under insurance policies. See Notes  1 and 4 of the Notes to the Consolidated Financial Statements, “— Industry Trends — Impact of a Sustained Low Interest Rate Environment — Low Interest Rate Scenario” and “— Variable Annuity Guarantees.” A discussion of future policy benefits by segment (as well as Corporate & Other) follows.
Retail
Future policy benefits for the life business are comprised mainly of liabilities for traditional life and for universal and variable life insurance contracts. In order to manage risk, we have often reinsured a portion of the mortality risk on life insurance policies. The reinsurance programs are routinely evaluated and this may result in increases or decreases to existing coverage. We have entered into various derivative positions, primarily interest rate swaps and swaptions, to mitigate the risk that investment of premiums received and reinvestment of maturing assets over the life of the policy will be at rates below those assumed in the original pricing of these contracts. For our property & casualty business, future policy benefits include unearned premium reserves and liabilities for unpaid claims and claim expenses and represent the amount estimated for claims that have been reported but not settled and claims incurred but not reported. For the annuities business, future policy benefits are comprised mainly of liabilities for life-contingent income annuities, and liabilities for the variable annuity guaranteed minimum benefits accounted for as insurance.
Group, Voluntary & Worksite Benefits
With the exception of our property & casualty business, future policy benefits for our Group and Voluntary & Worksite businesses are comprised mainly of liabilities for disabled lives under disability waiver of premium policy provisions, liabilities for survivor income benefit insurance, long-term care policies, active life policies and premium stabilization and other contingency liabilities held under life insurance contracts. The components of future policy benefits for the property & casualty products offered by the Voluntary & Worksite and Retail property & casualty businesses are the same. Liabilities for unpaid claims are estimated based upon assumptions such as rates of claim frequencies, levels of severities, inflation, judicial trends, legislative changes or regulatory decisions. Assumptions are based upon our historical experience and analyses of historical development patterns of the relationship of loss adjustment expenses to losses for each line of business, and we consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation.
Corporate Benefit Funding
Liabilities for this segment are primarily related to payout annuities, including pension risk transfers, structured settlement annuities and institutional income annuities. There is no interest rate crediting flexibility on these liabilities. As a result, a sustained low interest rate environment could negatively impact earnings; however, we mitigate our risks by applying various ALM strategies, including the use of various derivative positions, primarily interest rate floors and interest rate swaps, to mitigate the risks associated with such a scenario.
Latin America
Future policy benefits for this segment are held primarily for immediate annuities in Chile, Argentina and Mexico and traditional life contracts mainly in Brazil and Mexico. There are also liabilities held for total return pass-through provisions included in certain universal life and savings products in Mexico. Factors impacting these liabilities include sustained periods of lower yields than rates established at policy issuance, lower than expected asset reinvestment rates, and mortality and lapses different than expected. We mitigate our risks by applying various ALM strategies.
Asia
Future policy benefits for this segment are held primarily for traditional life, endowment, annuity and accident & health contracts. They are also held for total return pass-through provisions included in certain universal life and savings products. They include certain liabilities for variable annuity and variable life guarantees of minimum death benefits, and longevity guarantees. Factors impacting these liabilities include sustained periods of lower yields than rates established at policy issuance, lower than expected asset reinvestment rates, market volatility, actual lapses resulting in lower than expected income, and actual mortality or morbidity resulting in higher than expected benefit payments. We mitigate our risks by applying various ALM strategies.

144


EMEA
Future policy benefits for this segment include unearned premium reserves for group life and credit insurance contracts. Future policy benefits are also held for traditional life, endowment and annuity contracts with significant mortality risk and accident & health contracts. Factors impacting these liabilities include lower than expected asset reinvestment rates, market volatility, actual lapses resulting in lower than expected income, and actual mortality or morbidity resulting in higher than expected benefit payments. We mitigate our risks by having premiums which are adjustable or cancellable in some cases, and by applying various ALM strategies.
Corporate & Other
Future policy benefits primarily include liabilities for certain run-off long-term care and workers’ compensation business written by MetLife USA. Additionally, future policy benefits include liabilities for variable annuity guaranteed minimum benefits assumed from a former operating joint venture in Japan that are accounted for as insurance.
Policyholder Account Balances
Policyholder account balances are generally equal to the account value, which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender. See “— Industry Trends — Impact of a Sustained Low Interest Rate Environment — Low Interest Rate Scenario” and “— Variable Annuity Guarantees.” See also Notes  1 and 4 of the Notes to the Consolidated Financial Statements for additional information. A discussion of policyholder account balances by segment (as well as Corporate & Other) follows.
Retail
Life & Other policyholder account balances are held for retained asset accounts, universal life policies and the fixed account of variable life insurance policies. For Annuities, policyholder account balances are held for fixed deferred annuities, the fixed account portion of variable annuities, and non-life contingent income annuities. Interest is credited to the policyholder’s account at interest rates we determine which are influenced by current market rates, subject to specified minimums. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees present in most of these policyholder account balances. We have various derivative positions, primarily interest rate floors, to partially mitigate the risks associated with such a scenario. Additionally, policyholder account balances are held for variable annuity guaranteed minimum living benefits that are accounted for as embedded derivatives.
The table below presents the breakdown of account value subject to minimum guaranteed crediting rates for Retail:
 
December 31, 2015
Guaranteed Minimum Crediting Rate
Account
Value (1)
 
Account Value at Guarantee (1)
 
(In millions)
Life & Other
 
 
 
Greater than 0% but less than 2%
$
94

 
$
94

Equal to 2% but less than 4%
$
12,471

 
$
5,298

Equal to or greater than 4%
$
10,551

 
$
6,251

Annuities
 
 
 
Greater than 0% but less than 2%
$
3,429

 
$
2,932

Equal to 2% but less than 4%
$
30,786

 
$
27,047

Equal to or greater than 4%
$
2,342

 
$
2,302

______________
(1)
These amounts are not adjusted for policy loans.
As a result of acquisitions, we establish additional liabilities known as excess interest reserves for policies with credited rates in excess of market rates as of the applicable acquisition dates. At December 31, 2015 , excess interest reserves were $110 million and $328 million for Life & Other and Annuities, respectively.

145


Group, Voluntary & Worksite Benefits
Policyholder account balances in this segment are held for retained asset accounts, universal life policies, the fixed account of variable life insurance policies and specialized life insurance products for benefit programs. Policyholder account balances are credited interest at a rate we determine, which are influenced by current market rates. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees present in most of these policyholder account balances. We have various derivative positions, primarily interest rate floors, to partially mitigate the risks associated with such a scenario.
The table below presents the breakdown of account value subject to minimum guaranteed crediting rates for Group, Voluntary & Worksite Benefits:
 
December 31, 2015
Guaranteed Minimum Crediting Rate
Account
Value (1)
 
Account
Value at Guarantee (1)
 
(In millions)
Greater than 0% but less than 2%
$
4,845

 
$
4,841

Equal to 2% but less than 4%
$
2,018

 
$
1,987

Equal to or greater than 4%
$
683

 
$
656

______________
(1)
These amounts are not adjusted for policy loans.
Corporate Benefit Funding
Policyholder account balances in this segment are comprised of funding agreements. Interest crediting rates vary by type of contract, and can be fixed or variable. Variable interest crediting rates are generally tied to an external index, most commonly (1-month or 3-month) LIBOR. We are exposed to interest rate risks, as well as foreign currency exchange rate risk, when guaranteeing payment of interest and return of principal at the contractual maturity date. We may invest in floating rate assets or enter into receive-floating interest rate swaps, also tied to external indices, as well as caps, to mitigate the impact of changes in market interest rates. We also mitigate our risks by applying various ALM strategies and seek to hedge all foreign currency exchange rate risk through the use of foreign currency hedges, including cross currency swaps.
Latin America
Policyholder account balances in this segment are held largely for investment-type products and universal life products in Mexico and Chile, and deferred annuities in Brazil. Some of the deferred annuities in Brazil are unit-linked-type funds that do not meet the GAAP definition of separate accounts. The rest of the deferred annuities have minimum credited rate guarantees, and these liabilities and the universal life liabilities are generally impacted by sustained periods of low interest rates. Liabilities for unit-linked-type funds are impacted by changes in the fair value of the associated investments, as the return on assets is generally passed directly to the policyholder.
Asia
Policyholder account balances in this segment are held largely for fixed income retirement and savings plans, fixed deferred annuities, interest sensitive whole life products, universal life and, to a lesser degree, liability amounts for unit-linked-type funds that do not meet the GAAP definition of separate accounts. Also included are certain liabilities for retirement and savings products sold in certain countries in Asia that generally are sold with minimum credited rate guarantees. Liabilities for guarantees on certain variable annuities in Asia are accounted for as embedded derivatives and recorded at estimated fair value and are also included within policyholder account balances. These liabilities are generally impacted by sustained periods of low interest rates, where there are interest rate guarantees. We mitigate our risks by applying various ALM strategies and with reinsurance. Liabilities for unit-linked-type funds are impacted by changes in the fair value of the associated underlying investments, as the return on assets is generally passed directly to the policyholder.

146


The table below presents the breakdown of account value subject to minimum guaranteed crediting rates for Asia:
 
December 31, 2015
Guaranteed Minimum Crediting Rate (1)
Account
Value (2)
 
Account
Value at
Guarantee (2)
 
(In millions)
Annuities
 
 
 
Greater than 0% but less than 2%
$
19,059

 
$
3,093

Equal to 2% but less than 4%
$
1,043

 
$
224

Equal to or greater than 4%
$
1

 
$
1

Life & Other
 
 
 
Greater than 0% but less than 2%
$
6,296

 
$
5,960

Equal to 2% but less than 4%
$
17,972

 
$
8,039

Equal to or greater than 4%
$
268

 
$

______________
(1)
Excludes negative VOBA liabilities of $1.2 billion at December 31, 2015 , primarily held in Japan. These liabilities were established in instances where the estimated fair value of contract obligations exceeded the book value of assumed insurance policy liabilities associated with the acquisition of ALICO. These negative liabilities were established primarily for decreased market interest rates subsequent to the issuance of the policy contracts.
(2)
These amounts are not adjusted for policy loans.
EMEA
Policyholder account balances in this segment are held mostly for universal life, deferred annuity, pension products, and unit-linked-type funds that do not meet the GAAP definition of separate accounts. They are also held for endowment products without significant mortality risk. Where there are interest rate guarantees, these liabilities are generally impacted by sustained periods of low interest rates. We mitigate our risks by applying various ALM strategies. Liabilities for unit-linked-type funds are impacted by changes in the fair value of the associated investments, as the return on assets is generally passed directly to the policyholder.
Corporate & Other
Policyholder account balances in Corporate & Other are held for variable annuity guaranteed minimum benefits assumed from a former operating joint venture in Japan that are accounted for as embedded derivatives.
Variable Annuity Guarantees
We issue, directly and through assumed business, certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the benefit base) less withdrawals. In some cases, the benefit base may be increased by additional deposits, bonus amounts, accruals or optional market value resets. See Notes 1 and 4 of the Notes to the Consolidated Financial Statements for additional information.
Certain guarantees, including portions thereof, have insurance liabilities established that are included in future policy benefits. Guarantees accounted for in this manner include GMDBs, the life-contingent portion of certain GMWBs, and the non-life contingent portions of both GMWBs and GMIBs that require annuitization. These liabilities are accrued over the life of the contract in proportion to actual and future expected policy assessments based on the level of guaranteed minimum benefits generated using multiple scenarios of separate account returns. The scenarios are based on best estimate assumptions consistent with those used to amortize DAC. When current estimates of future benefits exceed those previously projected or when current estimates of future assessments are lower than those previously projected, liabilities will increase, resulting in a current period charge to net income. The opposite result occurs when the current estimates of future benefits are lower than those previously projected or when current estimates of future assessments exceed those previously projected. At each reporting period, we update the actual amount of business remaining in-force, which impacts expected future assessments and the projection of estimated future benefits resulting in a current period charge or increase to earnings.

147


Certain guarantees, including portions thereof, accounted for as embedded derivatives, are recorded at estimated fair value and included in policyholder account balances. Guarantees accounted for as embedded derivatives include GMABs, and the non-life contingent portions of both GMWBs and GMIBs that do not require annuitization. The estimated fair values of guarantees accounted for as embedded derivatives are determined based on the present value of projected future benefits minus the present value of projected future fees. The projections of future benefits and future fees require capital market and actuarial assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used to project the cash flows from the guarantees under multiple capital market scenarios to determine an economic liability. The reported estimated fair value is then determined by taking the present value of these risk-free generated cash flows using a discount rate that incorporates a spread over the risk-free rate to reflect our nonperformance risk and adding a risk margin. For more information on the determination of estimated fair value, see Note 10 of the Notes to the Consolidated Financial Statements.
The table below contains the carrying value for guarantees at:

 
Future Policy
Benefits
 
Policyholder
Account Balances
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
(In millions)
Americas
 
 
 
 
 
 
 
GMDB
$
937

 
$
710

 
$

 
$

GMIB
2,410

 
1,993

 
(507
)
 
(1,278
)
GMAB

 

 
9

 
2

GMWB
127

 
104

 
338

 
38

Asia
 
 
 
 
 
 
 
GMDB
25

 
29

 

 

GMAB

 

 
37

 
22

GMWB
89

 
91

 
151

 
129

EMEA
 
 
 
 
 
 
 
GMDB
2

 
2

 

 

GMAB

 

 
16

 
23

GMWB
8

 
26

 
(63
)
 
(61
)
Corporate & Other
 
 
 
 
 
 
 
GMDB
13

 
17

 

 

GMAB

 

 
13

 
23

GMWB
104

 
74

 
951

 
949

Total
$
3,715

 
$
3,046

 
$
945

 
$
(153
)
The carrying amounts for guarantees included in policyholder account balances above include nonperformance risk adjustments of $462 million and $299 million at December 31, 2015 and 2014 , respectively. These nonperformance risk adjustments represent the impact of including a credit spread when discounting the underlying risk neutral cash flows to determine the estimated fair values. The nonperformance risk adjustment does not have an economic impact on us as it cannot be monetized given the nature of these policyholder liabilities. The change in valuation arising from the nonperformance risk adjustment is not hedged.
The carrying values of these guarantees can change significantly during periods of sizable and sustained shifts in equity market performance, equity volatility, interest rates or foreign currency exchange rates. Carrying values are also impacted by our assumptions around mortality, separate account returns and policyholder behavior, including lapse rates.

148


As discussed below, we use a combination of product design, hedging strategies, reinsurance, and other risk management actions to mitigate the risks related to these benefits. Within each type of guarantee, there is a range of product offerings reflecting the changing nature of these products over time. Changes in product features and terms are in part driven by customer demand but, more importantly, reflect our risk management practices of continuously evaluating the guaranteed benefits and their associated asset-liability matching. Recently, we have been diversifying the concentration of income benefits in the portfolio of the Company’s Retail Annuities business by focusing on withdrawal benefits, variable annuities without living benefits and index-linked annuities. To this end, the GMIBs will not be available for new purchases after February 19, 2016.
The sections below provide further detail by total account value for certain of our most popular guarantees. Total account values include amounts not reported in the consolidated balance sheets from assumed business, contractholder-directed investments which do not qualify for presentation as separate account assets, and amounts included in our general account. The total account values and the net amounts at risk include direct and assumed business, but exclude offsets from hedging or ceded reinsurance, if any.
GMDBs
We offer a range of GMDBs to our contractholders. The table below presents GMDBs, by benefit type, at December 31, 2015 :
 
Total Account Value (1)
 
Americas
 
Asia & EMEA
 
Corporate
& Other
 
(In millions)
Return of premium or five to seven year step-up
$
100,518

 
$
9,916

 
$
10,715

Annual step-up
27,796

 

 

Roll-up and step-up combination
36,539

 

 

Total
$
164,853

 
$
9,916

 
$
10,715

______________
(1)
Total account value excludes $2.1billion for contracts with no GMDBs. Further, many of our annuity contracts offer more than one type of guarantee such that GMDB amounts listed above are not mutually exclusive to the amounts in the living benefit guarantees table below.
Based on total account value, less than 39% of our GMDBs included enhanced death benefits such as the annual step-up or roll-up and step-up combination products. We expect the above GMDB risk profile to be relatively consistent for the foreseeable future.
Living Benefit Guarantees
The table below presents our living benefit guarantees based on total account values at December 31, 2015 :
 
Total Account Value (1)
 
Americas
 
Asia & EMEA
 
Corporate
& Other
 
(In millions)
GMIB
$
90,292

 
$

 
$

GMWB - non-life contingent (2)
5,704

 
2,647

 
2,319

GMWB - life-contingent
22,144

 
4,524

 
7,416

GMAB
675

 
1,376

 
980

 
$
118,815

 
$
8,547

 
$
10,715

______________
(1)
Total account value excludes $48.1 billion for contracts with no living benefit guarantees. Further, many of our annuity contracts offer more than one type of guarantee such that living benefit guarantee amounts listed above are not mutually exclusive of the amounts in the GMDBs table above.
(2)
The Asia and EMEA segments include the non-life contingent portion of the GMWB total account value of $948 million with a guarantee at annuitization.

149


In terms of total account value, GMIBs are our most significant living benefit guarantee. Our primary risk management strategy for our GMIB products is our derivatives hedging program as discussed below. Additionally, we have engaged in certain reinsurance agreements covering some of our GMIB business. As part of our overall risk management approach for living benefit guarantees, we continually monitor the reinsurance markets for the right opportunity to purchase additional coverage for our GMIB business.
The table below presents our GMIB associated total account values, by their guaranteed payout basis, at December 31, 2015 :
 
Total
Account Value
 
(In millions)
7-year setback, 2.5% interest rate
$
32,382

7-year setback, 1.5% interest rate
5,632

10-year setback, 1.5% interest rate
18,340

10-year mortality projection, 10-year setback, 1.0% interest rate
29,751

10-year mortality projection, 10-year setback, 0.5% interest rate
4,187

 
$
90,292

The annuitization interest rates on GMIBs have been decreased from 2.5% to 0.5% over time, partially in response to the low interest rate environment, accompanied by an increase in the setback period from seven years to 10 years and the more recent introduction of a 10-year mortality projection.
Additionally, 33% of the $90.3 billion of GMIB total account value has been invested in managed volatility funds as of December 31, 2015 . These funds seek to manage volatility by adjusting the fund holdings within certain guidelines based on capital market movements. Such activity reduces the overall risk of the underlying funds while maintaining their growth opportunities. These risk mitigation techniques translate to a reduction or elimination of the need for us to manage the funds’ volatility through hedging or reinsurance.
Our GMIB products typically have a waiting period of 10 years to be eligible for annuitization. As of December 31, 2015 , only 15% of our contracts with GMIBs were eligible for annuitization. The remaining contracts are not eligible for annuitization for an average of six years.
Once eligible for annuitization, contractholders would only be expected to annuitize if their contracts were in-the-money. We calculate in-the-moneyness with respect to GMIBs consistent with net amount at risk as discussed in Note 4 of the Notes to the Consolidated Financial Statements, by comparing the contractholders’ income benefits based on total account values and current annuity rates versus the guaranteed income benefits. The net amount at risk was $2,762 million at December 31, 2015 , of which $2,619 million was related to GMIB guarantees. For those contracts with GMIB, the table below presents details of contracts that are in-the-money and out-of-the money at December 31, 2015 :
 
In-the-Moneyness
 
Total 
Account Value
 
% of Total
 
 
 
(In millions)
 
 
In-the-money
30% +
 
$
2,460

 
3
%
 
20% to 30%
 
1,970

 
2
%
 
10% to 20%
 
3,722

 
4
%
 
0% to 10%
 
6,180

 
7
%
 
 
 
14,332

 
 
Out-of-the-money
-10% to 0%
 
12,662

 
14
%
 
-20% to 10%
 
11,540

 
13
%
 
-20% +
 
51,758

 
57
%
 
 
 
75,960

 
 
Total GMIBs
 
 
$
90,292

 
 

150


Derivatives Hedging Variable Annuity Guarantees
Our risk mitigating hedging strategy uses various OTC and exchange traded derivatives. The table below presents the gross notional amount, estimated fair value and primary underlying risk exposure of the derivatives hedging our variable annuity guarantees:
 
 
 
 
December 31,
 
 
 
 
2015
 
2014
Primary Underlying Risk Exposure
 
 
 
Gross Notional
 
Estimated Fair Value
 
Gross Notional
 
Estimated Fair Value
 
Instrument Type
 
Amount
 
Assets
 
Liabilities
 
Amount
 
Assets
 
Liabilities
 
 
 
 
(In millions)
Interest rate
 
Interest rate swaps
 
$
23,430

 
$
2,056

 
$
966

 
$
22,794

 
$
1,881

 
$
834

 
 
Interest rate futures
 
3,915

 
4

 
5

 
2,707

 
3

 
9

 
 
Interest rate options
 
24,923

 
994

 
7

 
36,510

 
908

 
26

Foreign currency exchange rate
 
Foreign currency forwards
 
2,305

 
29

 
7

 
2,241

 
1

 
137

 
 
Foreign currency futures
 
135

 

 

 
522

 
2

 

Equity market
 
Equity futures
 
7,104

 
61

 
18

 
6,065

 
65

 
2

 
 
Equity options
 
54,113

 
1,541

 
1,041

 
37,427

 
1,422

 
1,035

 
 
Variance swaps
 
23,437

 
195

 
636

 
24,598

 
196

 
639

 
 
Total rate of return swaps
 
3,803

 
47

 
58

 
3,297

 
22

 
101

 
 
Total
 
$
143,165

 
$
4,927

 
$
2,738

 
$
136,161

 
$
4,500

 
$
2,783

The change in estimated fair values of our derivatives is recorded in policyholder benefits and claims if they are hedging guarantees included in future policy benefits, and in net derivative gains (losses) if they are hedging guarantees included in policyholder account balances.
Our hedging strategy involves the significant use of static longer-term derivative instruments to avoid the need to execute transactions during periods of market disruption or higher volatility. We continually monitor the capital markets for opportunities to adjust our liability coverage, as appropriate. Futures are also used to dynamically adjust the daily coverage levels as markets and liability exposures fluctuate.
We remain liable for the guaranteed benefits in the event that reinsurers or derivative counterparties are unable or unwilling to pay. Certain of our reinsurance agreements and most derivative positions are collateralized and derivatives positions are subject to master netting agreements, both of which significantly reduce the exposure to counterparty risk. In addition, we are subject to the risk that hedging and other risk management actions prove ineffective or that unanticipated policyholder behavior or mortality, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed.
Liquidity and Capital Resources
Overview
Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility and disruptions in global capital markets, particular markets, or financial asset classes can have an adverse effect on us, in part because we have a large investment portfolio and our insurance liabilities are sensitive to changing market factors. The global markets and economy continue to experience volatility that may affect our financing costs and market interest for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, see “— Industry Trends” and “— Investments — Current Environment.”
Liquidity Management
Based upon the strength of our franchise, diversification of our businesses, strong financial fundamentals and the substantial funding sources available to us as described herein, we continue to believe we have access to ample liquidity to meet business requirements under current market conditions and reasonably possible stress scenarios. We continuously monitor and adjust our liquidity and capital plans for MetLife, Inc. and its subsidiaries in light of market conditions, as well as changing needs and opportunities.

151


Short-term Liquidity
We maintain a substantial short-term liquidity position, which was $11.1 billion and $14.0 billion at December 31, 2015 and 2014 , respectively. Short-term liquidity includes cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed including: (i) amounts related to cash collateral received under our securities lending program; (ii) amounts related to cash collateral received from counterparties in connection with derivatives; and (iii) cash held in the closed block.
Liquid Assets
An integral part of our liquidity management includes managing our level of liquid assets, which was $229.4 billion and $237.4 billion at December 31, 2015 and 2014 , respectively. Liquid assets include cash and cash equivalents, short-term investments and publicly-traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include: (i) amounts related to cash collateral received under our securities lending program; (ii) amounts related to cash collateral received from counterparties in connection with derivatives; (iii) cash and investments held in the closed block, in regulatory custodial accounts or on deposit with regulatory agencies; (iv) investments held in trust in support of collateral financing arrangements; and (v) investments pledged in support of funding agreements, derivatives and short sale agreements.
Capital Management
We have established several senior management committees as part of our capital management process. These committees, including the Capital Management Committee and the Enterprise Risk Committee (“ERC”), regularly review actual and projected capital levels (under a variety of scenarios including stress scenarios) and our annual capital plan in accordance with our capital policy. The Capital Management Committee is comprised of members of senior management, including MetLife, Inc.’s Chief Financial Officer, Treasurer and Chief Risk Officer (“CRO”). The ERC is also comprised of members of senior management, including MetLife, Inc.’s Chief Financial Officer, CRO and Chief Investment Officer.
Our Board and senior management are directly involved in the development and maintenance of our capital policy. The capital policy sets forth, among other things, minimum and target capital levels and the governance of the capital management process. All capital actions, including proposed changes to the annual capital plan, capital targets or capital policy, are reviewed by the Finance and Risk Committee of the Board prior to obtaining full Board approval. The Board approves the capital policy and the annual capital plan and authorizes capital actions, as required.
See “Risk Factors — Capital-Related Risks — Regulatory Restrictions and Uncertainty and Restrictions Under the Terms of Certain of Our Securities May Prevent Us from Repurchasing Our Stock and Paying Dividends at the Level We Wish” and Note 16 of the Notes to the Consolidated Financial Statements for information regarding restrictions on payment of dividends and stock repurchases. See also “— The Company — Liquidity and Capital Uses — Common Stock Repurchases” for information regarding MetLife, Inc.’s common stock repurchase authorizations.
The Company
Liquidity
Liquidity refers to a company’s ability to generate adequate amounts of cash to meet its needs. We determine our liquidity needs based on a rolling 12-month forecast by portfolio of invested assets which we monitor daily. We adjust the asset mix and asset maturities based on this rolling 12-month forecast. To support this forecast, we conduct cash flow and stress testing, which include various scenarios of the potential risk of early contractholder and policyholder withdrawal. We include provisions limiting withdrawal rights on many of our products, including general account pension products sold to employee benefit plan sponsors. Certain of these provisions prevent the customer from making withdrawals prior to the maturity date of the product. In the event of significant cash requirements beyond anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternatives include cash flows from operations, sales of liquid assets, global funding sources and various credit facilities.

152


Under certain stressful market and economic conditions, our access to liquidity may deteriorate, or the cost to access liquidity may increase. If we require significant amounts of cash on short notice in excess of anticipated cash requirements or if we are required to post or return cash collateral in connection with derivatives or our securities lending program, we may have difficulty selling investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both. In addition, in the event of such forced sale, accounting guidance requires the recognition of a loss for certain securities in an unrealized loss position and may require the impairment of other securities if there is a need to sell such securities, which may negatively impact our financial condition. See “Risk Factors — Investment-Related Risks — Should the Need Arise, We May Have Difficulty Selling Certain Holdings in Our Investment Portfolio or in Our Securities Lending Program in a Timely Manner and Realizing Full Value Given Their Illiquid Nature.”
In extreme circumstances, all general account assets within a particular legal entity — other than those which may have been pledged to a specific purpose — are available to fund obligations of the general account of that legal entity.
Capital
We manage our capital position to maintain our financial strength and credit ratings. Our capital position is supported by our ability to generate strong cash flows within our operating companies and borrow funds at competitive rates, as well as by our demonstrated ability to raise additional capital to meet operating and growth needs despite adverse market and economic conditions.
Rating Agencies
Rating agencies assign insurer financial strength ratings to MetLife, Inc.’s domestic life insurance subsidiaries and credit ratings to MetLife, Inc. and certain of its subsidiaries. Financial strength ratings represent the opinion of rating agencies regarding the ability of an insurance company to pay obligations under insurance policies and contracts in accordance with their terms. Credit ratings indicate the rating agency’s opinion regarding a debt issuer’s ability to meet the terms of debt obligations in a timely manner. They are important factors in our overall funding profile and ability to access certain types of liquidity. The level and composition of regulatory capital at the subsidiary level and our equity capital are among the many factors considered in determining our insurer financial strength ratings and credit ratings. Each agency has its own capital adequacy evaluation methodology, and assessments are generally based on a combination of factors. In addition to heightening the level of scrutiny that they apply to insurance companies, rating agencies have increased and may continue to increase the frequency and scope of their credit reviews, may request additional information from the companies that they rate and may adjust upward the capital and other requirements employed in the rating agency models for maintenance of certain ratings levels. See “Business — Company Ratings” for further information on our insurer financial strength ratings.
Downgrades in our insurer financial strength ratings could have a material adverse effect on our financial condition and results of operations in many ways, including:
reducing new sales of insurance products, annuities and investment products;
adversely affecting our relationships with our sales force and independent sales intermediaries;
materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders;
requiring us to post additional collateral under certain of our financing and derivative transactions;
requiring us to reduce prices for our products and services to remain competitive; and
adversely affecting our ability to obtain reinsurance at reasonable prices or at all.
A downgrade in the credit ratings or insurer financial strength ratings of MetLife, Inc. or its subsidiaries would likely impact us in the following ways, including:
impact our ability to generate cash flows from the sale of funding agreements and other capital market products offered by our Corporate Benefit Funding segment;
impact the cost and availability of financing for MetLife, Inc. and its subsidiaries; and
result in additional collateral requirements or other required payments under certain agreements, which are eligible to be satisfied in cash or by posting investments held by the subsidiaries subject to the agreements. See “— Liquidity and Capital Uses — Pledged Collateral.”

153


Statutory Capital and Dividends
Our U.S. insurance subsidiaries have statutory surplus well above levels to meet current regulatory requirements.
RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to identify companies that merit regulatory action. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. These rules apply to most of our U.S. insurance subsidiaries. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC levels. At the date of the most recent annual statutory financial statements filed with insurance regulators, the total adjusted capital of each of these subsidiaries subject to these requirements was in excess of each of those RBC levels.
As a Delaware corporation, American Life is subject to Delaware law; however, because it does not conduct insurance business in Delaware or any other domestic state, it is exempt from RBC requirements under Delaware law. American Life’s operations are also regulated by applicable authorities of the countries in which it operates and is subject to capital and solvency requirements in those countries.
The amount of dividends that our insurance subsidiaries can pay to MetLife, Inc. or to other parent entities is constrained by the amount of surplus we hold to maintain our ratings and provides an additional margin for risk protection and investment in our businesses. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions to MetLife, Inc. and other parent entities by their respective insurance subsidiaries is governed by insurance laws and regulations. See “Business — Regulation — U.S. Regulation — Insurance Regulation,” “Business — Regulation — International Regulation,” “— MetLife, Inc. — Liquidity and Capital Sources — Dividends from Subsidiaries” and Note  16 of the Notes to the Consolidated Financial Statements.
Affiliated Captive Reinsurance Transactions
Various subsidiaries of MetLife, Inc. cede specific policy classes, including term and universal life insurance, participating whole life insurance, long-term disability insurance, group life insurance and other business to various wholly-owned captive reinsurers. The reinsurance activities among these affiliated companies are eliminated within our consolidated results of operations. The statutory reserves of such affiliated captive reinsurers are supported by a combination of funds withheld assets, investment assets and letters of credit issued by unaffiliated financial institutions. MetLife, Inc. has committed to maintain the surplus of several of the domestic affiliated captive reinsurers, as well as provided guarantees of the reinsurers’ and other affiliated international insurance entities’ repayment obligations on the letters of credit. MetLife, Inc. has also provided guarantees of these reinsurers’ repayment obligations on derivative and certain reinsurance agreements entered into by these reinsurers. See “— MetLife, Inc. — Liquidity and Capital Uses — Support Agreements” for further details on certain of these guarantees. Various subsidiaries of MetLife, Inc. enter into reinsurance agreements with affiliated captive reinsurers for risk and capital management purposes, as well as to manage statutory reserve requirements related to universal life and term life insurance policies and other business.
The NAIC continues to review insurance companies’ use of affiliated captive reinsurers and off-shore entities. The New York Department of Financial Services continues to have a moratorium on new reserve financing transactions involving captive insurers. We are not aware of any states other than New York and California implementing such a moratorium. While such a moratorium would not impact our existing reinsurance agreements with captive reinsurers, a moratorium placed on the use of captives for new reserve financing transactions could impact our ability to write certain products and/or impact our RBC ratios and ability to deploy excess capital in the future. This could result in our need to increase prices, modify product features or limit the availability of those products to our customers. While this affects insurers across the industry, it could adversely impact our competitive position and our results of operations in the future. We continue to evaluate product modifications, pricing structure and alternative means of managing risks, capital and statutory reserves and we expect the discontinued use of captive reinsurance on new reserve financing transactions would not have a material impact on our future consolidated financial results.

154


Our variable annuity guaranteed minimum benefit risk and certain other risks were previously ceded to an affiliated captive reinsurer. In November 2014, this captive reinsurer merged with and into MetLife USA as part of the Mergers, further reducing the Company’s exposure to and use of captive reinsurers. See “— Executive Summary — Other Key Information — Significant Events” for further information on the Mergers. See also “Risk Factors — Regulatory and Legal Risks — Our Insurance and Brokerage Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth — U.S. Regulation — Insurance Regulation” and Note 6 of the Notes to the Consolidated Financial Statements for further information on our reinsurance activities.
Summary of the Company’s Primary Sources and Uses of Liquidity and Capital
Our primary sources and uses of liquidity and capital are summarized as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Sources:
 
 
 
 
 
Operating activities, net
$
14,129

 
$
16,376

 
$
16,131

Changes in policyholder account balances, net

 
1,483

 

Changes in payables for collateral under securities loaned and other transactions, net
1,544

 
5,031

 

Short-term debt issuances, net

 

 
75

Long-term debt issued
3,893

 
1,000

 
1,372

Cash received in connection with redeemable noncontrolling interests

 

 
774

Common stock issued, net of issuance costs

 
1,000

 
1,000

Preferred stock issued, net of issuance costs
1,483

 

 

Other, net
198

 

 

Total sources
21,247

 
24,890

 
19,352

Uses:
 
 
 
 
 
Investing activities, net
10,398

 
15,055

 
15,165

Changes in policyholder account balances, net
1,717

 

 
5,681

Changes in payables for collateral under securities loaned and other transactions, net

 

 
3,276

Short-term debt repayments, net

 
75

 

Long-term debt repaid
1,438

 
2,862

 
1,746

Collateral financing arrangements repaid
57

 

 

Treasury stock acquired in connection with share repurchases
1,930

 
1,000

 

Repurchase of preferred stock
1,460

 

 

Preferred stock repurchase premium
42

 

 

Dividends on preferred stock
116

 
122

 
122

Dividends on common stock
1,653

 
1,499

 
1,119

Other, net

 
700

 
184

Effect of change in foreign currency exchange rates on cash and cash equivalents
492

 
354

 
212

Total uses
19,303

 
21,667

 
27,505

Net increase (decrease) in cash and cash equivalents
$
1,944

 
$
3,223

 
$
(8,153
)
Cash Flows from Operations
The principal cash inflows from our insurance activities come from insurance premiums, net investment income, annuity considerations and deposit funds. The principal cash outflows relate to various life insurance, property & casualty, annuity and pension products, operating expenses and income tax, as well as interest expense. A primary liquidity concern with respect to these cash flows is the risk of early contractholder and policyholder withdrawal.

155


Cash Flows from Investments
The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments and settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments, issuances of policy loans and settlements of freestanding derivatives. Additional cash outflows relate to purchases of businesses. We typically have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process. The primary liquidity concerns with respect to these cash flows are the risk of default by debtors and market disruption.
Cash Flows from Financing
The principal cash inflows from our financing activities come from issuances of debt and other securities, deposits of funds associated with policyholder account balances and lending of securities. The principal cash outflows come from repayments of debt, payments of dividends on and repurchases of MetLife, Inc.’s securities, withdrawals associated with policyholder account balances and the return of securities on loan. The primary liquidity concerns with respect to these cash flows are market disruption and the risk of early contractholder and policyholder withdrawal.
Liquidity and Capital Sources
In addition to the general description of liquidity and capital sources in “— Summary of the Company’s Primary Sources and Uses of Liquidity and Capital,” the following additional information is provided regarding our primary sources of liquidity and capital:
Global Funding Sources
Liquidity is provided by a variety of global funding sources, including funding agreements, credit facilities and commercial paper. Capital is provided by a variety of global funding sources, including short-term and long-term debt, collateral financing arrangements, junior subordinated debt securities, preferred securities, equity securities and equity-linked securities. The diversity of our global funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. Our primary global funding sources include:
Preferred Stock
In June 2015, MetLife, Inc. issued 1,500,000 shares of 5.25% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (the “Series C preferred stock”), with a $0.01 par value per share and a liquidation preference of $1,000 per share, for aggregate proceeds of $1.5 billion. See Note 16 of the Notes to the Consolidated Financial Statements for further information .
Common Stock
In October 2014 and September 2013, MetLife, Inc. issued 22,907,960 new shares and 22,679,955 new shares, respectively, of its common stock, each for $1.0 billion, in connection with the remarketing of senior debt securities and settlement of stock purchase contracts. See “— Remarketing of Senior Debt Securities and Settlement of Stock Purchase Contracts.”
Commercial Paper, Reported in Short-term Debt
MetLife, Inc. and MetLife Funding, Inc. (“MetLife Funding”) each have a commercial paper program that is supported by the $4.0 billion general corporate credit facility (see “— Credit and Committed Facilities”). MetLife Funding raises cash from its commercial paper program and uses the proceeds to extend loans through MetLife Credit Corp., another subsidiary of MLIC, to affiliates in order to enhance the financial flexibility and liquidity of these companies.
Federal Home Loan Bank Funding Agreements, Reported in Policyholder Account Balances
Certain of our domestic insurance subsidiaries are members of a regional FHLB. During the years ended December 31, 2015 , 2014 and 2013 , we issued $21.6 billion, $13.9 billion and $11.5 billion, respectively, and repaid $21.1 billion, $14.0 billion and $11.8 billion, respectively, under funding agreements with certain regional FHLBs. At December 31, 2015 and 2014 , total obligations outstanding under these funding agreements were $15.5 billion and $15.0 billion, respectively. See Note  4 of the Notes to the Consolidated Financial Statements.

156


Special Purpose Entity Funding Agreements, Reported in Policyholder Account Balances
We issue fixed and floating rate funding agreements which are denominated in either U.S. dollars or foreign currencies, to certain SPEs that have issued either debt securities or commercial paper for which payment of interest and principal is secured by such funding agreements. During the years ended December 31, 2015 , 2014 and 2013 , we issued $48.1 billion, $48.9 billion and $37.7 billion, respectively, and repaid $49.9 billion, $45.6 billion and $36.8 billion, respectively, under such funding agreements. At December 31, 2015 and 2014 , total obligations outstanding under these funding agreements were $31.6 billion and $33.9 billion, respectively. See Note  4 of the Notes to the Consolidated Financial Statements.
Federal Agricultural Mortgage Corporation Funding Agreements, Reported in Policyholder Account Balances
We have issued funding agreements to Farmer Mac, as well as to certain SPEs that have issued debt securities for which payment of interest and principal is secured by such funding agreements, and such debt securities are also guaranteed as to payment of interest and principal by Farmer Mac. The obligations under all such funding agreements are secured by a pledge of certain eligible agricultural real estate mortgage loans. During the years ended December 31, 2015 and 2014 , we issued $50 million and $200 million, respectively, and repaid $250 million and $200 million, respectively, under such funding agreements. During the year ended December 31, 2013 , there were no issuances or repayments under such funding agreements. At December 31, 2015 and 2014 , total obligations outstanding under these funding agreements were $2.6 billion and $2.8 billion, respectively. See Note 4 of the Notes to the Consolidated Financial Statements.
Debt Issuances and Other Borrowings
See Note 12 of the Notes to the Consolidated Financial Statements for further information on the following issuances of debt and other borrowings: 
In December 2015, MetLife Private Equity Holdings, LLC (“MPEH”), a wholly-owned indirect investment subsidiary of MLIC, borrowed $350 million under term loans that mature in December 2020 (see “Other Notes” in Note 12 of the Notes to the Consolidated Financial Statements for further information);
In November 2015, MetLife, Inc. issued $1.3 billion of senior notes for general corporate purposes, which include repayment of certain senior notes upon their maturity in 2016;
In March 2015, MetLife, Inc. issued $1.5 billion of senior notes for general corporate purposes, which included repayment of certain senior notes upon their maturity in 2015;
In April 2014, MetLife, Inc. issued $1.0 billion of senior notes for general corporate purposes, which included repayment of certain senior notes upon their maturity in 2014 and the redemption of certain senior notes due in 2033; and
In November 2013, MetLife, Inc. issued $1.0 billion of senior notes for general corporate purposes, which included repayment of certain senior notes upon their maturity in 2014.
Remarketing of Senior Debt Securities and Settlement of Stock Purchase Contracts
In each of October 2014 and September 2013, MetLife, Inc. closed the successful remarketings of $1.0 billion of senior debt securities underlying common equity units issued in November 2010 in connection with the acquisition of ALICO. MetLife, Inc. did not receive any proceeds from the remarketings. Most common equity unit holders used the remarketing proceeds to settle their payment obligations under the applicable stock purchase contracts. The subsequent settlement of the stock purchase contracts provided proceeds to MetLife, Inc. of $1.0 billion in each of October 2014 and September 2013 in exchange for newly issued shares of MetLife, Inc.’s common stock as described in “— Common Stock” above.
See Note  15 of the Notes to the Consolidated Financial Statements.
Credit and Committed Facilities
At December 31, 2015 , we maintained a $4.0 billion unsecured credit facility and certain committed facilities aggregating $11.9 billion. When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements.
The unsecured credit facility is used for general corporate purposes, to support the borrowers’ commercial paper programs and for the issuance of letters of credit. At December 31, 2015 , we had outstanding $484 million in letters of credit and no drawdowns against this facility. Remaining availability was $3.5 billion at December 31, 2015 .

157


The committed facilities are used for collateral for certain of our affiliated reinsurance liabilities. At December 31, 2015 , $6.6 billion in letters of credit and $2.8 billion in aggregate drawdowns under collateral financing arrangements were outstanding. Remaining availability was $2.4 billion at December 31, 2015 .
See Note  12 of the Notes to the Consolidated Financial Statements for further information about these facilities.
We have no reason to believe that our lending counterparties will be unable to fulfill their respective contractual obligations under these facilities. As commitments associated with letters of credit and financing arrangements may expire unused, these amounts do not necessarily reflect our actual future cash funding requirements.
Outstanding Debt Under Global Funding Sources
The following table summarizes our outstanding debt at:
 
December 31,
 
2015
 
2014
 
(In millions)
Short-term debt
$
100

 
$
100

Long-term debt (1), (2)
$
17,963

 
$
16,135

Collateral financing arrangements (3)
$
4,139

 
$
4,196

Junior subordinated debt securities (3)
$
3,194

 
$
3,193

______________
(1)
Excludes $60 million and $151 million at December 31, 2015 and 2014 , respectively, of long-term debt relating to CSEs — FVO (see Note 8 of the Notes to the Consolidated Financial Statements). For more information regarding long-term debt, see Note 12 of the Notes to the Consolidated Financial Statements.
(2)
Includes $408 million and $59 million of non-recourse debt at December 31, 2015 and 2014 , respectively, for which creditors have no access, subject to customary exceptions, to the general assets of the Company other than recourse to certain investment subsidiaries.
(3)
For information regarding collateral financing arrangements and junior subordinated debt securities, see Notes 13 and 14 of the Notes to the Consolidated Financial Statements, respectively.
Debt and Facility Covenants
Certain of our debt instruments and committed facilities, as well as our unsecured credit facility, contain various administrative, reporting, legal and financial covenants. We believe we were in compliance with all such covenants at December 31, 2015 .
Dispositions
Cash proceeds from dispositions during the years ended December 31, 2015 , 2014 and 2013 were $0, $759 million and $407 million, respectively. During the year ended December 31, 2013, the sale of MetLife Bank’s depository business resulted in cash outflows of $6.4 billion as a result of the buyer’s assumption of the bank deposits liability in exchange for our cash payment.
See Note  3 of the Notes to the Consolidated Financial Statements for additional information.
Liquidity and Capital Uses
In addition to the general description of liquidity and capital uses in “— Summary of the Company’s Primary Sources and Uses of Liquidity and Capital” and “— Contractual Obligations,” the following additional information is provided regarding our primary uses of liquidity and capital:

158


Preferred Stock Repurchase
In June 2015, MetLife, Inc. conducted a tender offer for up to 59,850,000 of its 60,000,000 shares of the 6.50% Non-Cumulative Preferred Stock, Series B (“Series B preferred stock”), at a purchase price of $25 per share, plus an amount equal to accrued, unpaid and undeclared dividends from, and including, June 15, 2015 to, but excluding, June 29, 2015, the settlement date of the tender offer. In June 2015, MetLife, Inc. also delivered a notice of redemption to the holders of the Series B preferred stock, pursuant to which it would redeem any Series B preferred stock not purchased by it in the tender offer at a redemption price of $25 per share, without any payment for accrued, unpaid and undeclared dividends on the Series B preferred stock from, and including, June 15, 2015 to, but excluding Ju ly 1, 2015, the redemption date. On June 29, 2015, MetLife, Inc. repurchased and canceled 37,192,413 shares of Series B preferred stock in the tender offer for $932 million in cash. On July 1, 2015, MetLife, Inc. redeemed and canceled the remaining 22,807,587 shares of Series B preferred stock not tendered in the tender offer for an aggregate redemption price of $570 million in cash. In connection with the tender offer and redemption, MetLife, Inc. recognized a preferred stock repurchase premium of $42 million (calculated as the difference between the carrying value of the Series B preferred stock and the total amount paid by MetLife, Inc. to the holders of the Series B preferred stock in connection with the tender offer and redemption), which was reflected as a reduction to retained earnings on the consolidated balance sheet. See Note 16 of the Notes to the Consolidated Financial Statements.
Common Stock Repurchases
In August 2014, MetLife, Inc. completed the remaining $261 million in common stock repurchases under a $1.0 billion authorization by the Board of Directors announced on January 15, 2008. In January 2015, MetLife, Inc. completed $1.0 billion of common stock repurchases pursuant to a Board of Directors authorization announced on April 22, 2008. On December 12, 2014, MetLife, Inc. announced that its Board of Directors authorized $1.0 billion of common stock repurchases in addition to previously authorized purchases, and on September 22, 2015, MetLife, Inc. announced that its Board of Directors authorized additional repurchases of $739 million of its common stock, bringing MetLife, Inc.’s remaining available repurchase authorizations to $1.0 billion as of September 22, 2015. In October 2015, MetLife, Inc. completed all remaining repurchases under the $1.0 billion authorization announced by the Board of Directors on December 12, 2014. At December 31, 2015 , MetLife, Inc. had $70 million remaining under the September 2015 common stock repurchase authorization. MetLife, Inc. subsequently completed all repurchases under this authorization in January 2016. Under these authorizations, MetLife, Inc. may purchase its common stock from the MetLife Policyholder Trust, in the open market (including pursuant to the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act) and in privately negotiated transactions.
During the years ended December 31, 2015 and 2014 , MetLife, Inc. repurchased 39,491,991 and 18,876,363 shares of common stock in the open market for $ 1.9 billion and $1.0 billion, respectively. MetLife, Inc. did not repurchase any shares of common stock during the year ended December 31, 2013 . In 2016 , through January 7, 2016 , MetLife, Inc. repurchased 1,445,864 shares of its common stock in the open market for $70 million completing the September 2015 authorization.
Common stock repurchases are dependent upon several factors, including our capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of MetLife, Inc.’s common stock compared to management’s assessment of the stock’s underlying value and applicable regulatory approvals, as well as other legal and accounting factors. See “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI,” “Business — Regulation — International Regulation — Global Systemically Important Insurers,” “Risk Factors — Capital-Related Risks — Regulatory Restrictions and Uncertainty and Restrictions Under the Terms of Certain of Our Securities May Prevent Us from Repurchasing Our Stock and Paying Dividends at the Level We Wish” and Note 16 of the Notes to the Consolidated Financial Statements.
Dividends
During the years ended December 31, 2015 , 2014 and 2013 , MetLife, Inc. paid dividends on its common stock of $1.7 billion , $1.5 billion and $1.1 billion , respectively. During the years ended December 31, 2015 , 2014 and 2013 , MetLife, Inc. paid dividends on its preferred stock of $116 million , $122 million , and $122 million , respectively. See Note  16 of the Notes to the Consolidated Financial Statements for information regarding the calculation and timing of these dividend payments.

159


The declaration and payment of common stock dividends is subject to the discretion of our Board of Directors, and will depend on MetLife, Inc.’s financial condition, results of operations, cash requirements, future prospects, regulatory restrictions on the payment of dividends by MetLife, Inc.’s insurance subsidiaries and other factors deemed relevant by the Board. On January 6, 2016 , the MetLife, Inc. Board of Directors declared a first quarter 2016 common stock dividend of $0.375  per share payable on March 14, 2016 to shareholders of record as of February 5, 2016 . The Company estimates the aggregate dividend payment will be $413 million .
Preferre d stock dividends are paid quarterly in accordance with the terms of MetLife, Inc.’s Floating Rate Non-Cumulative Preferred Stock, Series A and, ending with the June 15, 2015 payment date for the Series B preferred stock. D ividends are paid semi-annually on MetLife, Inc.’s Series C preferred stock commencing December 15, 2015 and ending on June 15, 2020, and thereafter are paid quarterly.
The payment of dividends and other distributions by MetLife, Inc. to its security holders may be subject to regulation by the Federal Reserve as a result of MetLife, Inc.’s designation as a non-bank SIFI. See “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI.” In addition, if additional capital requirements are imposed on MetLife, Inc. as a G-SII, its ability to pay dividends could be reduced by any such additional capital requirements that might be imposed. See “Business — Regulation — International Regulation — Global Systemically Important Insurers.” The payment of dividends is also subject to restrictions under the terms of our preferred stock and junior subordinated debentures in situations where we may be experiencing financial stress. See “Risk Factors — Capital-Related Risks — Regulatory Restrictions and Uncertainty and Restrictions Under the Terms of Certain of Our Securities May Prevent Us from Repurchasing Our Stock and Paying Dividends at the Level We Wish” and Note  16 of the Notes to the Consolidated Financial Statements.
Debt Repayments
See Notes 12 and 13 of the Notes to the Consolidated Financial Statements for further information on long-term and short-term debt and collateral financing arrangements, respectively, including:
In June 2015, MetLife, Inc. repaid at maturity its $1.0 billion 5.0% senior notes;
In 2015, following regulatory approval, MetLife Reinsurance Company of Charleston (“MRC”), a wholly-owned subsidiary of MetLife, Inc., repurchased and canceled $57 million in aggregate principal amount of its surplus notes;
In June and February 2014, MetLife, Inc. repaid at maturity its $350 million and $1.0 billion senior notes, respectively;
In May 2014, MetLife, Inc. redeemed $200 million aggregate principal amount of its 5.875% senior notes due in November 2033 at par; and
In November and August 2013, MetLife, Inc. repaid at maturity its $500 million and $250 million senior notes, respectively.
Debt Repurchases
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, and applicable regulatory, legal and accounting factors. Whether or not to repurchase any debt and the size and timing of any such repurchases will be determined at our discretion.
Support Agreements
MetLife, Inc. and several of its subsidiaries (each, an “Obligor”) are parties to various capital support commitments and guarantees with subsidiaries. Under these arrangements, each Obligor, with respect to the applicable entity, has agreed to cause such entity to meet specified capital and surplus levels or has guaranteed certain contractual obligations. We anticipate that in the event that these arrangements place demands upon us, there will be sufficient liquidity and capital to enable us to meet anticipated demands. See “— MetLife, Inc. — Liquidity and Capital Uses — Support Agreements.”

160


Insurance Liabilities
Liabilities arising from our insurance activities primarily relate to benefit payments under various life insurance, property & casualty, annuity and group pension products, as well as payments for policy surrenders, withdrawals and loans. For annuity or deposit type products, surrender or lapse behavior differs somewhat by segment. In the Retail segment, which includes individual annuities, lapses and surrenders tend to occur in the normal course of business. During the years ended December 31, 2015 and 2014 , general account surrenders and withdrawals from annuity products were $3.8 billion and $4.5 billion, respectively. In the Corporate Benefit Funding segment, which includes pension risk transfers, bank-owned life insurance and other fixed annuity contracts, as well as funding agreements and other capital market products, most of the products offered have fixed maturities or fairly predictable surrenders or withdrawals. With regard to the Corporate Benefit Funding segment liabilities that provide customers with limited rights to accelerate payments, as of December 31, 2015 , there were no funding agreements and other capital market products that could be put back to the Company.
Pledged Collateral
We pledge collateral to, and have collateral pledged to us by, counterparties in connection with our derivatives. At December 31, 2015 and 2014 , we were obligated to return cash collateral pledged to the Company of $ 6.6 billion and $4.6 billion , respectively. At December 31, 2015 and 2014 , we had pledged cash collateral of $241 million and $391 million , respectively. With respect to OTC-bilateral derivatives in a net liability position that have credit contingent provisions, a one-notch downgrade in the Company’s credit rating would have required $1 million of additional collateral be provided to our counterparties as of December 31, 2015 . See Note  9 of the Notes to the Consolidated Financial Statements for additional information about collateral pledged to us, collateral we pledge and derivatives subject to credit contingent provisions.
We pledged collateral and have had collateral pledged to us, and may be required from time to time to pledge additional collateral or be entitled to have additional collateral pledged to us, in connection with collateral financing arrangements related to the reinsurance of closed block and ULSG liabilities. See Note  13 of the Notes to the Consolidated Financial Statements.
We pledged collateral from time to time in connection with funding agreements. See Note 4 of the Notes to the Consolidated Financial Statements.
Securities Lending
We participate in a securities lending program whereby securities are loaned to third parties, primarily brokerage firms and commercial banks. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to us. Under our securities lending program, we were liable for cash collateral under our control of $30.2 billion and $30.8 billion at December 31, 2015 and 2014 , respectively. Of these amounts, $10.1 billion and $10.7 billion at December 31, 2015 and 2014 , respectively, were on open, meaning that the related loaned security could be returned to us on the next business day requiring the immediate return of cash collateral we hold. The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2015 was $9.9 billion , over 99% of which were U.S. Treasury and agency securities which, if put to us, could be immediately sold to satisfy the cash requirements to immediately return the cash collateral. See Note 8 of the Notes to the Consolidated Financial Statements.
Litigation
Putative or certified class action litigation and other litigation, and claims and assessments against us, in addition to those discussed elsewhere herein and those otherwise provided for in the consolidated financial statements, have arisen in the course of our business, including, but not limited to, in connection with our activities as an insurer, employer, investor, investment advisor, taxpayer and, formerly, a mortgage lending bank. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning our compliance with applicable insurance and other laws and regulations. See Note  21 of the Notes to the Consolidated Financial Statements.

161


We establish liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For material matters where a loss is believed to be reasonably possible but not probable, no accrual is made but we disclose the nature of the contingency and an aggregate estimate of the reasonably possible range of loss in excess of amounts accrued, when such an estimate can be made. It is not possible to predict or determine the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to herein, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations, it is possible that an adverse outcome in certain cases could have a material adverse effect upon our financial position, based on information currently known by us, in our opinion, the outcome of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on our consolidated net income or cash flows in particular quarterly or annual periods.
Acquisitions
Cash outflows for acquisitions and investments in strategic partnerships during the years ended December 31, 2015 , 2014 and 2013 were $0, $277 million and $1.9 billion, respectively. See Note  3 of the Notes to the Consolidated Financial Statements for further information regarding acquisitions.
Contractual Obligations
The following table summarizes our major contractual obligations at December 31, 2015 :
 
Total
 
One Year
or Less
 
More than
One Year to
Three Years
 
More than
Three Years
to Five Years
 
More than Five Years
 
(In millions)
Insurance liabilities
$
376,995

 
$
23,088

 
$
20,349

 
$
20,203

 
$
313,355

Policyholder account balances
286,125

 
28,278

 
33,094

 
21,612

 
203,141

Payables for collateral under securities loaned and other transactions
36,871

 
36,871

 

 

 

Debt
43,768

 
2,604

 
4,384

 
4,019

 
32,761

Investment commitments
11,444

 
11,231

 
100

 
113

 

Operating leases
2,027

 
321

 
475

 
357

 
874

Other
18,281

 
17,810

 
22

 
11

 
438

Total
$
775,511

 
$
120,203

 
$
58,424

 
$
46,315

 
$
550,569

Insurance Liabilities
Insurance liabilities include future policy benefits, other policy-related balances, policyholder dividends payable and the policyholder dividend obligation, which are all reported on the consolidated balance sheet and are more fully described in Notes 1 and 4 of the Notes to the Consolidated Financial Statements. The amounts presented reflect future estimated cash payments and (i) are based on mortality, morbidity, lapse and other assumptions comparable with our experience and expectations of future payment patterns; and (ii) consider future premium receipts on current policies in-force. All estimated cash payments presented are undiscounted as to interest, net of estimated future premiums on in-force policies and gross of any reinsurance recoverable. Payment of amounts related to policyholder dividends left on deposit are projected based on assumptions of policyholder withdrawal activity. Because the exact timing and amount of the ultimate policyholder dividend obligation is subject to significant uncertainty and the amount of the policyholder dividend obligation is based upon a long-term projection of the performance of the closed block, we have reflected the obligation at the amount of the liability, if any, presented in the consolidated balance sheet in the more than five years category. Additionally, the more than five years category includes estimated payments due for periods extending for more than 100 years.
The sum of the estimated cash flows shown for all years of $377.0 billion exceeds the liability amounts of $208.6 billion included on the consolidated balance sheet principally due to (i) the time value of money, which accounts for a substantial portion of the difference; and (ii) differences in assumptions, most significantly mortality, between the date the liabilities were initially established and the current date; and are partially offset by liabilities related to accounting conventions, or which are not contractually due, which are excluded.

162


Actual cash payments may differ significantly from the liabilities as presented in the consolidated balance sheets and the estimated cash payments as presented due to differences between actual experience and the assumptions used in the establishment of these liabilities and the estimation of these cash payments.
For the majority of our insurance operations, estimated contractual obligations for future policy benefits and policyholder account balances, as presented, are derived from the annual asset adequacy analysis used to develop actuarial opinions of statutory reserve adequacy for state regulatory purposes. These cash flows are materially representative of the cash flows under GAAP. See “— Policyholder Account Balances.”
Policyholder Account Balances
See Notes  1 and 4 of the Notes to the Consolidated Financial Statements for a description of the components of policyholder account balances. See “— Insurance Liabilities” regarding the source and uncertainties associated with the estimation of the contractual obligations related to future policy benefits and policyholder account balances.
Amounts presented represent the estimated cash payments undiscounted as to interest and including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate for the respective product type. Such estimated cash payments are also presented net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. For obligations denominated in foreign currencies, cash payments have been estimated using current spot foreign currency rates.
The sum of the estimated cash flows shown for all years of $286.1 billion exceeds the liability amount of $202.7 billion included on the consolidated balance sheets principally due to (i) the time value of money, which accounts for a substantial portion of the difference; (ii) differences in assumptions, between the date the liabilities were initially established and the current date; and (iii) liabilities related to accounting conventions, or which are not contractually due, which are excluded.
Payables for Collateral Under Securities Loaned and Other Transactions
We have accepted cash collateral in connection with securities lending and derivatives. As the securities lending transactions expire within the next year and the timing of the return of the derivatives collateral is uncertain, the return of the collateral has been included in the one year or less category in the table. We also held non-cash collateral, which is not reflected as a liability in the consolidated balance sheet of $2.2 billion at December 31, 2015 .
Debt
Amounts presented for debt include short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities, the total of which differs from the total of the corresponding amounts presented on the consolidated balance sheet due to the following: (i) the amounts presented herein do not include premiums or discounts upon issuance or purchase accounting fair value adjustments; (ii) the amounts presented herein include future interest on such obligations for the period from January 1, 2016 through maturity; and (iii) the amounts presented herein do not include $60 million at December 31, 2015 of long-term debt relating to CSEs — FVO as such debt does not represent our contractual obligation. Future interest on variable rate debt was computed using prevailing rates at December 31, 2015 and, as such, does not consider the impact of future rate movements. Future interest on fixed rate debt was computed using the stated rate on the obligations for the period from January 1, 2016 through maturity, except with respect to junior subordinated debt which was computed using the stated rates through the scheduled redemption dates as it is our expectation that such obligations will be redeemed at that time. Inclusion of interest payments on junior subordinated debt securities through the final maturity dates would increase the contractual obligation by $7.7 billion. Pursuant to collateral financing arrangements, MetLife, Inc. may be required to deliver cash or pledge collateral to the respective unaffiliated financial institutions. See Note 13 of the Notes to the Consolidated Financial Statements.
Investment Commitments
To enhance the return on our investment portfolio, we commit to lend funds under mortgage loans, bank credit facilities, bridge loans and private corporate bond investments and we commit to fund partnership investments. In the table, the timing of the funding of mortgage loans and private corporate bond investments is based on the expiration dates of the corresponding commitments. As it relates to commitments to fund partnerships and bank credit facilities, we anticipate that these amounts could be invested any time over the next five years; however, as the timing of the fulfillment of the obligation cannot be predicted, such obligations are generally presented in the one year or less category. Commitments to fund bridge loans are short-term obligations and, as a result, are presented in the one year or less category. See Note  21 of the Notes to the Consolidated Financial Statements and “— Off-Balance Sheet Arrangements.”

163


Operating Leases
As a lessee, we have various operating leases, primarily for office space. Contractual provisions exist that could increase or accelerate those lease obligations presented, including various leases with early buyouts and/or escalation clauses. However, the impact of any such transactions would not be material to our financial position or results of operations. See Note  21 of the Notes to the Consolidated Financial Statements.
Other
Other obligations presented are principally comprised of amounts due under reinsurance agreements, payables related to securities purchased but not yet settled, securities sold short, accrued interest on debt obligations, estimated fair value of derivative obligations, deferred compensation arrangements, guaranty liabilities, and accruals and accounts payable due under contractual obligations, which are all reported in other liabilities on the consolidated balance sheets. If the timing of any of these other obligations is sufficiently uncertain, the amounts are included within the one year or less category. Items reported in other liabilities on the consolidated balance sheets that were excluded from the table represent accounting conventions or are not liabilities due under contractual obligations. Unrecognized tax benefits and related accrued interest totaling $2.0 billion was excluded as the timing of payment cannot be reliably determined.
Separate account liabilities are excluded as they are fully funded by cash flows from the corresponding separate account assets and are set equal to the estimated fair value of separate account assets.
We also enter into agreements to purchase goods and services in the normal course of business; however, such amounts are excluded as these purchase obligations were not material to our consolidated results of operations or financial position at December 31, 2015 .
Additionally, we have agreements in place for services we conduct, generally at cost, between subsidiaries relating to insurance, reinsurance, loans and capitalization. Intercompany transactions have been eliminated in consolidation. Intercompany transactions among insurance subsidiaries and affiliates have been approved by the appropriate insurance regulators as required.

164


MetLife, Inc.
Liquidity and Capital Management
Liquidity and capital are managed to preserve stable, reliable and cost-effective sources of cash to meet all current and future financial obligations and are provided by a variety of sources, including a portfolio of liquid assets, a diversified mix of short- and long-term funding sources from the wholesale financial markets and the ability to borrow through credit and committed facilities. Liquidity is monitored through the use of internal liquidity risk metrics, including the composition and level of the liquid asset portfolio, timing differences in short-term cash flow obligations, access to the financial markets for capital and debt transactions and exposure to contingent draws on MetLife, Inc.’s liquidity. MetLife, Inc. is an active participant in the global financial markets through which it obtains a significant amount of funding. These markets, which serve as cost-effective sources of funds, are critical components of MetLife, Inc.’s liquidity and capital management. Decisions to access these markets are based upon relative costs, prospective views of balance sheet growth and a targeted liquidity profile and capital structure. A disruption in the financial markets could limit MetLife, Inc.’s access to liquidity.
MetLife, Inc.’s ability to maintain regular access to competitively priced wholesale funds is fostered by its current credit ratings from the major credit rating agencies. We view our capital ratios, credit quality, stable and diverse earnings streams, diversity of liquidity sources and our liquidity monitoring procedures as critical to retaining such credit ratings. See “— The Company — Capital — Rating Agencies.”
Liquidity
For a summary of MetLife, Inc.’s liquidity, see “— The Company — Liquidity.”
Capital
For a summary of MetLife, Inc.’s capital, see “— The Company — Capital.” For further information regarding potential capital restrictions and limitations on MetLife, Inc. as a non-bank SIFI and G-SII, see “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI” and “Business — Regulation — International Regulation — Global Systemically Important Insurers.” See also “— The Company — Liquidity and Capital Uses — Common Stock Repurchases” and “— The Company — Liquidity and Capital Uses — Preferred Stock Repurchase” for information regarding MetLife, Inc.’s common and preferred stock repurchases, respectively.
Liquid Assets
At December 31, 2015 and 2014 , MetLife, Inc. and other MetLife holding companies had $6.4 billion and $6.1 billion, respectively, in liquid assets. Of these amounts, $5.3 billion and $5.4 billion were held by MetLife, Inc. and $1.1 billion and $681 million were held by other MetLife holding companies at December 31, 2015 and 2014 , respectively. Liquid assets include cash and cash equivalents, short-term investments and publicly-traded securities excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include: (i) amounts related to cash collateral received from counterparties in connection with derivatives; (ii) investments held in trust in support of collateral financing arrangements; and (iii) investments pledged in support of derivatives.
Liquid assets held in non-U.S. holding companies are generated in part through dividends from non-U.S. insurance operations. Such dividends are subject to local insurance regulatory requirements, as discussed in “— Liquidity and Capital Sources — Dividends from Subsidiaries.” The cumulative earnings of certain active non-U.S. operations have been reinvested indefinitely in such non-U.S. operations, as described in Note 19 of the Notes to the Consolidated Financial Statements. Under current tax laws, should we repatriate such earnings, we may be subject to additional U.S. income taxes and foreign withholding taxes.
MetLife, Inc. and Other MetLife Holding Companies Sources and Uses of Liquid Assets and Sources and Uses of Liquid Assets included in Free Cash Flow
MetLife, Inc.’s sources and uses of liquid assets, as well as sources and uses of liquid assets included in free cash flow are summarized as follows.

165


 
 
Year Ended December 31, 2015
 
Year Ended December 31, 2014
 
Year Ended December 31, 2013
 
 
Sources and Uses of Liquid Assets
 
Sources and Uses of Liquid Assets Included in Free Cash Flow
 
Sources and Uses of Liquid Assets
 
Sources and Uses of Liquid Assets Included in Free Cash Flow
 
Sources and Uses of Liquid Assets
 
Sources and Uses of Liquid Assets Included in Free Cash Flow
 
 
(In millions)
MetLife, Inc. (Parent Company Only)
 
 
 
 
 
 
 
 
 
 
 
 
Sources:
 
 
 
 
 
 
 
 
 
 
 
 
Dividends and returns of capital from subsidiaries (1)
 
$
2,340

 
$
2,340

 
$
2,388

 
$
2,388

 
$
3,301

 
$
3,301

Long-term debt issued (2)
 
2,739

 
1,750

 
1,000

 
445

 
994

 

Common stock issued, net of issuance costs
 

 

 
1,000

 

 
1,000

 

Repayments on and (issuances of) loans to subsidiaries and related interest, net (3)
 
383

 
383

 
597

 
597

 

 

Proceeds from stock-based compensation and exercise of stock options
 
122

 
122

 
156

 
156

 
202

 
202

Other, net (4)
 
652

 
673

 
1,177

 
1,177

 

 

Total sources
 
6,236

 
5,268

 
6,318

 
4,763

 
5,497

 
3,503

Uses:
 
 
 
 
 
 
 
 
 
 
 
 
Capital contributions to subsidiaries (5)
 
667

 
667

 
1,262

 
1,011

 
748

 
598

Long-term debt repaid - unaffiliated
 
1,000

 

 
1,550

 

 
750

 

Interest paid on debt and financing arrangements - unaffiliated
 
965

 
965

 
968

 
968

 
946

 
946

Dividends on common stock
 
1,653

 

 
1,499

 

 
1,119

 

Treasury stock acquired in connection with share repurchases
 
1,930

 

 
1,000

 

 

 

Purchase of preferred stock and preferred stock repurchase premium, net of proceeds from preferred stock issuance
 
19

 

 

 

 

 

Dividends on preferred stock
 
116

 
116

 
122

 
122

 
122

 
122

Issuances of and (repayments on) loans to subsidiaries and related interest, net (3) (5)
 

 

 

 

 
1,223

 
(319
)
Other, net (4)
 

 

 

 

 
79

 
54

Total uses
 
6,350

 
1,748

 
6,401

 
2,101

 
4,987

 
1,401

Net increase (decrease) in liquid assets, MetLife, Inc. (Parent Company Only)
 
(114
)
 
 
 
(83
)
 
 
 
510

 
 
Liquid assets, beginning of year
 
5,403

 
 
 
5,486

 
 
 
4,976

 
 
Liquid assets, end of year
 
$
5,289

 
 
 
$
5,403

 
 
 
$
5,486

 
 
Free Cash Flow, MetLife, Inc. (Parent Company Only) (6)
 
 
 
3,520

 
 
 
2,662

 
 
 
2,102

Net cash provided by operating activities, MetLife, Inc. (Parent Company Only) (6)
 
$
1,606

 
 
 
$
2,615

 
 
 
$
1,865

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other MetLife Holding Companies
 
 
 
 
 
 
 
 
 
 
 
 
Sources:
 
 
 
 
 
 
 
 
 
 
 
 
Dividends and returns of capital from subsidiaries
 
$
1,354

 
$
1,354

 
$
1,339

 
$
1,339

 
$
822

 
$
822

Capital contributions from MetLife, Inc.
 
150

 
150

 

 

 
403

 
403

Total sources
 
1,504

 
1,504

 
1,339

 
1,339

 
1,225

 
1,225

Uses:
 
 
 
 
 
 
 
 
 
 
 
 
Capital contributions to subsidiaries
 
27

 
27

 
48

 
48

 
201

 
201

Repayments on and (issuance of) loans to subsidiaries and affiliates and related interest, net
 
510

 
510

 
458

 
458

 
705

 
305

Other, net
 
506

 
506

 
605

 
605

 
585

 
585

Total uses
 
1,043

 
1,043

 
1,111

 
1,111

 
1,491

 
1,091

Net increase (decrease) in liquid assets, Other MetLife Holding Companies
 
461

 


 
228

 
 
 
(266
)
 
 
Liquid assets, beginning of year
 
681

 


 
453

 
 
 
719

 
 
Liquid assets, end of year
 
$
1,142

 
 
 
$
681

 
 
 
$
453

 
 
Free Cash Flow, Other MetLife Holding Companies (6)
 
 
 
461

 
 
 
228

 
 
 
134

Net increase (decrease) in liquid assets, All Holding Companies
 
$
347

 
 
 
$
145

 
 
 
$
244

 
 
Free Cash Flow, All Holding Companies (6)
 
 
 
$
3,981

 
 
 
$
2,890

 
 
 
$
2,236

______________
(1)
All dividends and returns of capital to MetLife, Inc. were from operating subsidiaries and none were from other MetLife holding companies during the years ended December 31, 2015 , 2014 and 2013 .

166


(2)
Included in free cash flow is the portion of long-term debt issued that represents incremental debt to be at or below target leverage ratios.
(3)
See MetLife, Inc. (Parent Company Only) Condensed Statements of Cash Flows included in Schedule II of the Financial Statement Schedules for the source of liquid assets from receipts on loans to subsidiaries (excluding interest) and for the use of liquid assets for the issuances of loans to subsidiaries (excluding interest).
(4)
Other, net includes $171 million, $862 million and $69 million of net receipts by MetLife, Inc. to and from subsidiaries under a tax sharing agreement and tax payments to tax agencies during the years ended December 31, 2015 , 2014 and 2013 , respectively.
(5)
Amounts to fund business acquisitions and strategic insurance partnerships were $0, $251 million and $150 million (included in capital contributions to subsidiaries) and $0, $0 and $1.5 billion (included in issuances of and (repayments on) loans to subsidiaries and related interest, net) during the years ended December 31, 2015 , 2014 and 2013 , respectively.
(6)
See “— Non-GAAP and Other Financial Disclosures” for the reconciliation of net cash provided by operating activities of MetLife, Inc. to free cash flow of all holding companies.
The primary sources of MetLife, Inc.’s liquid assets are dividends and returns of capital from subsidiaries, long-term debt issued, common stock issued, and net receipts from subsidiaries under a tax sharing agreement. MetLife, Inc.’s insurance subsidiaries are subject to regulatory restrictions on the payment of dividends imposed by the regulators of their respective domiciles. See “— Liquidity and Capital Sources — Dividends from Subsidiaries.”
The primary uses of MetLife, Inc.’s liquid assets are principal and interest payments on long-term debt, dividends on or repurchases of common and preferred stock, capital contributions to subsidiaries, funding of business acquisitions, income taxes and operating expenses. MetLife, Inc. is party to various capital support commitments and guarantees with certain of its subsidiaries. See “— Liquidity and Capital Uses — Support Agreements.”
In addition, MetLife, Inc. issues loans to subsidiaries or subsidiaries issue loans to MetLife, Inc. Accordingly, changes in MetLife, Inc. liquid assets include issuances of loans to subsidiaries, proceeds of loans from subsidiaries and the related repayment of principal and payment of interest on such loans. See “— Liquidity and Capital Sources — Debt Issuances and Other Borrowings — Issuances of Affiliated Long-term Debt” and “— Liquidity and Capital Uses — Affiliated Capital Transactions.”
Sources and Uses of Liquid Assets of Other MetLife Holding Companies
The primary sources of liquid assets of other MetLife holding companies are dividends, returns of capital and remittances from their subsidiaries and branches, principally non-U.S. insurance companies; capital contributions received; receipts of principal and interest on loans to subsidiaries and affiliates and borrowings from subsidiaries and affiliates. MetLife, Inc.’s non-U.S. operations are subject to regulatory restrictions on the payment of dividends imposed by local regulators. See “— Liquidity and Capital Sources — Dividends from Subsidiaries.”
The primary uses of liquid assets of other MetLife holding companies are capital contributions paid to their subsidiaries and branches, principally non-U.S. insurance companies; loans to subsidiaries and affiliates; principal and interest paid on loans from subsidiaries and affiliates; and the following items, which are reported within other, net: dividends and returns of capital; business acquisitions; and operating expenses. Uses of liquid assets of other MetLife holding companies included $0, $0 and $400 million to fund business acquisitions during the years ended December 31, 2015 , 2014 , and 2013 , respectively.
Liquidity and Capital Sources
In addition to the description of liquidity and capital sources in “— The Company — Summary of the Company’s Primary Sources and Uses of Liquidity and Capital” and “— The Company — Liquidity and Capital Sources,” the following additional information is provided regarding MetLife, Inc.’s primary sources of liquidity and capital.

167


Dividends from Subsidiaries
MetLife, Inc. relies, in part, on dividends from its subsidiaries to meet its cash requirements. MetLife, Inc.’s insurance subsidiaries are subject to regulatory restrictions on the payment of dividends imposed by the regulators of their respective domiciles. The dividend limitation for U.S. insurance subsidiaries is generally based on the surplus to policyholders at the end of the immediately preceding calendar year and statutory net gain from operations for the immediately preceding calendar year. Statutory accounting practices, as prescribed by insurance regulators of various states in which we conduct business, differ in certain respects from accounting principles used in financial statements prepared in conformity with GAAP. The significant differences relate to the treatment of DAC, certain deferred income tax, required investment liabilities, statutory reserve calculation assumptions, goodwill and surplus notes.
The table below sets forth the dividends permitted to be paid by MetLife, Inc.’s primary insurance subsidiaries without insurance regulatory approval and the respective dividends paid:
 
 
2016
 
2015
 
2014
 
2013
Company
 
Permitted without Approval (1)
 
Paid (2)
 
 
Permitted without Approval (3)
 
Paid (2)
 
 
Permitted without Approval (3)
 
Paid (2)
 
 
Permitted without Approval (3)
 
 
(In millions)
Metropolitan Life Insurance Company (4)
 
$
3,753

 
$
1,489

 
 
$
1,200

 
$
821

(5)
 
$
1,163

 
$
1,428

 
 
$
1,428

American Life Insurance Company
 
$

 
$

 
 
$

 
$

 
 
$

 
$


 
$
523

MetLife Insurance Company USA
 
$
586

 
$
500

 
 
$
3,056

 
$
155

(6)
 
$
1,013

 
$
1,000

(7)
 
$
1,330

Metropolitan Property and Casualty Insurance Company
 
$
130

 
$
235

 
 
$
239

 
$
200

 
 
$
218

 
$
100

 
 
$
74

Metropolitan Tower Life Insurance Company
 
$
70

 
$
102

 
 
$
102

 
$
73


 
$
73

 
$
109

(8)
 
$
77

MetLife Investors Insurance Company (6)
 
N/A

 
N/A

 
 
N/A

 
N/A

 
 
$
120

 
$
129

 
 
$
129

______________
(1)
Reflects dividend amounts that may be paid during 2016 without prior regulatory approval. However, because dividend tests may be based on dividends previously paid over rolling 12-month periods, if paid before a specified date during 2016 , some or all of such dividends may require regulatory approval.
(2)
Reflects all amounts paid, including those requiring regulatory approval.
(3)
Reflects dividend amounts that could have been paid during the relevant year without prior regulatory approval.
(4)
The New York Insurance Law was amended, permitting MLIC to pay dividends without prior regulatory approval under one of two alternative formulations beginning in 2016. See Note 16 of the Notes to the Consolidated Financial Statements. The dividend amount that MLIC may pay during 2016 under the new formulation is reflected in the table above.
(5)
During December 2014, MLIC distributed shares of an affiliate to MetLife, Inc. as an in-kind dividend of $113 million.
(6)
See “Business — Overview — Other Key Information” for discussion of the Mergers. MetLife Investors Insurance Company was one of the companies that was merged into MetLife USA in connection with the Mergers. Prior to the Mergers, Exeter paid dividends of $155 million on its preferred stock. In August 2014, MICC redeemed for $1.4 billion and retired 4,595,317 shares of its common stock owned by MetLife Investors Group, LLC (“MLIG”). Following the redemption, in August 2014, MLIG paid a dividend of $1.4 billion to MetLife, Inc. See “— Liquidity and Capital Uses — Affiliated Capital Transactions.” MetLife USA did not pay dividends in 2014.
(7)
During the year ended December 31, 2013, MICC paid dividends of $1.0 billion.
(8)
During October 2013, Metropolitan Tower Life Insurance Company (“MTL”) distributed shares of an affiliate to MetLife, Inc. as an in-kind dividend of $32 million. Also during October 2013, MTL paid a dividend to MetLife, Inc. in the amount of $77 million in cash, which represented its dividend capacity without regulatory approval at December 31, 2013. Regulatory approval for these dividends was obtained due to the amount and timing of the payments.

168


In addition to the amounts presented in the table above, for the years ended December 31, 2015 , 2014 and 2013 , cash dividends in the aggregate amount of $9 million, $17 million and $0, respectively, were paid to MetLife, Inc. by certain of its other subsidiaries. Additionally, for the years ended December 31, 2015 , 2014 and 2013 , MetLife, Inc. received cash of $5 million, $0 and $267 million, respectively, representing returns of capital from certain subsidiaries.
The dividend capacity of our non-U.S. operations is subject to similar restrictions established by the local regulators. The non-U.S. regulatory regimes also commonly limit the dividend payments to the parent to a portion of the prior year’s statutory income, as determined by the local accounting principles. The regulators of our non-U.S. operations, including the FSA, may also limit or not permit profit repatriations or other transfers of funds to the U.S. if such transfers are deemed to be detrimental to the solvency or financial strength of the non-U.S. operations, or for other reasons. Most of the non-U.S. subsidiaries are second tier subsidiaries which are owned by various non-U.S. holding companies. The capital and rating considerations applicable to the first tier subsidiaries may also impact the dividend flow into MetLife, Inc.
We actively manage target and excess capital levels and dividend flows on a proactive basis and forecast local capital positions as part of the financial planning cycle. The dividend capacity of certain U.S. and non-U.S. subsidiaries is also subject to business targets in excess of the minimum capital necessary to maintain the desired rating or level of financial strength in the relevant market. We cannot provide assurance that MetLife, Inc.’s subsidiaries will have statutory earnings to support payment of dividends to MetLife, Inc. in an amount sufficient to fund its cash requirements and pay cash dividends and that the applicable regulators will not disapprove any dividends that such subsidiaries must submit for approval. See “Risk Factors — Capital-Related Risks — As a Holding Company, MetLife, Inc. Depends on the Ability of Its Subsidiaries to Pay Dividends, a Major Component of Holding Company Free Cash Flow” and Note  16 of the Notes to the Consolidated Financial Statements.
Short-term Debt
MetLife, Inc. maintains a commercial paper program, the proceeds of which can be used to finance the general liquidity needs of MetLife, Inc. and its subsidiaries. MetLife, Inc. had no short-term debt outstanding at both December 31, 2015 and 2014 .
Preferred Stock
For information on MetLife, Inc.’s preferred stock, see “— The Company — Liquidity and Capital Sources — Global Funding Sources — Preferred Stock.”
Debt Issuances and Other Borrowings
For information on MetLife, Inc.’s unaffiliated debt issuances and other borrowings, see “— The Company — Liquidity and Capital Sources — Global Funding Sources — Debt Issuances and Other Borrowings.”
Issuances of Affiliated Long-term Debt
In June 2014, a $500 million senior note payable to MLIC matured and, subsequently, MetLife, Inc. issued a new $500 million senior note to MLIC. The note matures in June 2019 and bears interest at a fixed rate of 3.54%, payable semi-annually.
In December 2013, MetLife, Inc. issued a $350 million senior note to MetLife Reinsurance Company of Delaware (“MRD”) due December 2033. The senior note bears interest at a fixed rate of 5.10%, payable semi-annually. MRD issued a $350 million surplus note to MetLife, Inc. in exchange for the senior note.
Collateral Financing Arrangements and Junior Subordinated Debt Securities
For information on MetLife, Inc.’s collateral financing arrangements and junior subordinated debt securities, see Notes  13 and 14 of the Notes to the Consolidated Financial Statements, respectively.
Credit and Committed Facilities
See “— The Company — Liquidity and Capital Sources — Global Funding Sources — Credit and Committed Facilities” for information about MetLife, Inc.’s unsecured credit facility.
MetLife, Inc. maintains a committed facility with a capacity of $425 million. At December 31, 2015 , MetLife, Inc. had outstanding $425 million in letters of credit and no drawdowns against this facility. Remaining availability was $0 at December 31, 2015 . In addition, MetLife, Inc. is a party and/or guarantor to committed facilities of certain of its subsidiaries, which aggregated $11.4 billion at December 31, 2015 . The committed facilities are used as collateral for certain of the Company’s affiliated reinsurance liabilities.

169


See “— The Company — Liquidity and Capital Sources — Global Funding Sources — Credit and Committed Facilities,” as well as Note  12 of the Notes to the Consolidated Financial Statements, for further information regarding these facilities.
Long-term Debt Outstanding
The following table summarizes the outstanding long-term debt of MetLife, Inc. at:
 
December 31,
 
2015
 
2014
 
(In millions)
Long-term debt — unaffiliated
$
16,994

 
$
15,317

Long-term debt — affiliated
$
3,314

 
$
3,600

Collateral financing arrangements
$
2,797

 
$
2,797

Junior subordinated debt securities
$
1,748

 
$
1,748

Debt and Facility Covenants
Certain of MetLife, Inc.’s debt instruments and committed facilities, as well as its credit facility, contain various administrative, reporting, legal and financial covenants. MetLife, Inc. believes it was in compliance with all such covenants at December 31, 2015 .
Dispositions
Cash proceeds from dispositions during the years ended December 31, 2015 , 2014 and 2013 were $0, $7 million, and $17 million, respectively. See Note  3 of the Notes to the Consolidated Financial Statements.
Liquidity and Capital Uses
The primary uses of liquidity of MetLife, Inc. include debt service, cash dividends on common and preferred stock, capital contributions to subsidiaries, common and preferred stock repurchases, payment of general operating expenses and acquisitions. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our investment portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable MetLife, Inc. to make payments on debt, pay cash dividends on its common and preferred stock, contribute capital to its subsidiaries, repurchase its common and preferred stock, pay all general operating expenses and meet its cash needs.
In addition to the description of liquidity and capital uses in “— The Company — Liquidity and Capital Uses” and “— The Company — Contractual Obligations,” the following additional information is provided regarding MetLife, Inc.’s primary uses of liquidity and capital:
Affiliated Capital Transactions
During the years ended December 31, 2015 , 2014 and 2013 , MetLife, Inc. invested an aggregate of $88 million, $1.8 billion and $934 million, respectively, in various subsidiaries.
MetLife, Inc. lends funds, as necessary, to its subsidiaries and affiliates, some of which are regulated, to meet their capital requirements. MetLife, Inc. had loans to subsidiaries outstanding of $1.2 billion and $1.7 billion at December 31, 2015 and 2014 , respectively.
In May 2015, American Life issued a $150 million short-term note to MetLife, Inc. which was repaid in June 2015. The short-term note bore interest at six-month LIBOR plus 1.00%.
In April 2015, American Life issued a $150 million short-term note to MetLife, Inc. which was repaid in May 2015. The short-term note bore interest at six-month LIBOR plus 0.875%.
In December 2014, MetLife, Inc. entered into a five-year agreement with MetLife Reinsurance Company of Bermuda, Ltd. (“MrB”), a Bermuda insurance affiliate and an indirect, wholly-owned subsidiary of MetLife, Inc., to lend up to $500 million to MrB on a revolving basis. There were no loans outstanding at December 31, 2015 and 2014 .
In December 2014, American Life issued a $100 million surplus note to MetLife, Inc. The surplus note bears interest at a fixed rate of 3.17%, payable semi-annually and matures in June 2020.

170


In August 2014, MICC paid to MLIG $1.4 billion to redeem and retire its common stock owned by MLIG; as a result, all of the outstanding shares of common stock of MICC were directly held by MetLife, Inc. Following the redemption, in August 2014, MLIG paid a dividend of $1.4 billion to MetLife, Inc., and MetLife, Inc. made a capital contribution to MICC of $231 million.
In August 2014, American Life issued a $120 million short-term note to MetLife, Inc. which was repaid in December 2014. In February 2014, American Life issued a $150 million short-term note to MetLife, Inc. which was repaid in June 2014. Both short-term notes bore interest at six-month LIBOR plus 0.875%.
In December 2013, MRD issued a $350 million surplus note to MetLife, Inc. due December 2033. The surplus note bears interest at a fixed rate of 6.00%, payable semi-annually. MetLife, Inc. issued a $350 million senior note to MRD in exchange for the surplus note.
In July 2013, MetLife Ireland Treasury Limited (“MITL”) borrowed the Chilean peso equivalent of $1.5 billion from MetLife, Inc., which was due July 2023. The loan bore interest at a fixed rate of 8.5%, payable annually. In December, September and June 2015, MITL made loan payments of the Chilean peso equivalent of $77 million, $153 million and $231 million, respectively. In December 2014 and June 2014, MITL made loan payments of the Chilean peso equivalent of $493 million and $69 million, respectively. In December 2013, MITL made a loan payment of the Chilean peso equivalent of $245 million. At December 31, 2015, the loan was fully paid.
In April 2013, MetLife Bank’s Board of Directors, with prior approval of the OCC, approved the reduction of its permanent capital by $550 million through a purchase of its $300 million of outstanding preferred stock held by MetLife, Inc. and a return of capital of $250 million to MetLife, Inc. In May 2013, MetLife, Inc. received $550 million in cash to settle these transactions.
In January 2013, MetLife Bank both drew down and repaid $400 million under an 18-month agreement with MetLife, Inc., which bore interest at a rate of three-month LIBOR plus 1.75%. On October 29, 2013, MetLife, Inc. and MLHL agreed to terminate the agreement. There were no loans outstanding at such date.
Debt Repayments
For information on MetLife, Inc.’s debt repayments, see “— The Company — Liquidity and Capital Uses — Debt Repayments.” MetLife, Inc. intends to repay or refinance, in whole or in part, all the debt that is due in 2016 .
Repayments of Affiliated Long-term Debt
In December 2015, MetLife, Inc. repaid $286 million of affiliated long-term debt to MetLife Exchange Trust I, at maturity, in exchange for a return of capital. The long-term note bore interest at three-month LIBOR plus 0.7%.
Maturities of Senior Notes
The following table summarizes MetLife, Inc.’s outstanding senior notes by year of maturity through 2020 and 2021 to 2046, excluding any premium or discount, at December 31, 2015 :
Year of Maturity
 
Principal
 
Interest Rate
 
 
(In millions)
 
 
2016
 
$
1,250

 
6.75%
2016
 
$
250

 
7.44%
2017
 
$
500

 
1.76%
2017
 
$
500

 
1.90%
2018
 
$
1,035

 
6.82%
2019
 
$
1,035

 
7.72%
2019
 
$
500

 
3.54%
2019
 
$
250

 
3.57%
2020
 
$
590

 
5.25%
2021 - 2046
 
$
14,215

 
Ranging from 3.00% - 6.50%

171


Support Agreements
MetLife, Inc. is party to various capital support commitments and guarantees with certain of its subsidiaries. Under these arrangements, MetLife, Inc. has agreed to cause each such entity to meet specified capital and surplus levels or has guaranteed certain contractual obligations. See “— The Company — Liquidity and Capital Uses — Support Agreements.”
MetLife, Inc., in connection with MRD’s reinsurance of certain universal life and term life risks, entered into capital maintenance agreements pursuant to which MetLife, Inc. agreed, without limitation as to amount, to cause the first and second protected cells of MRD to maintain total adjusted capital equal to or greater than 200% of each such protected cell’s company action level RBC, as defined in state insurance statutes. In addition, MetLife, Inc. entered into an agreement with the Delaware Department of Insurance to increase such capital maintenance threshold to 300% of each such protected cell’s company action level RBC, in the event of specified downgrades in the senior unsecured debt ratings of MetLife, Inc.
MetLife, Inc. guarantees the obligations of its subsidiary, DelAm, under a stop loss reinsurance agreement with RGA Reinsurance (Barbados) Inc. (“RGARe”), pursuant to which RGARe retrocedes to DelAm a portion of the whole life medical insurance business that RGARe assumed from American Life on behalf of its Japan operations. Also, MetLife, Inc. guarantees the obligations of its subsidiary, Missouri Reinsurance, Inc. (“MoRe”), under a retrocession agreement with RGARe, pursuant to which MoRe retrocedes certain group term life insurance liabilities (which retrocession was terminated effective as of January, 2016) and a portion of the closed block liabilities associated with industrial life and ordinary life insurance policies that it assumed from MLIC.
MetLife, Inc. guarantees the obligations of MrB, a Bermuda insurance affiliate and an indirect, wholly-owned subsidiary of MetLife, Inc. under a reinsurance agreement with Mitsui Sumitomo Primary Life Insurance Co., Ltd. (“Mitsui”), a former affiliate that is now an unaffiliated third party, under which MrB reinsures certain variable annuity business written by Mitsui.
MetLife, Inc. guarantees the obligations of MrB in an aggregate amount up to $1.0 billion, under a reinsurance agreement with MetLife Europe Limited (“MEL”), under which MrB reinsured the guaranteed living benefits and guaranteed death benefits associated with certain unit-linked annuity contracts issued by MEL.
MetLife, Inc., in connection with MRV’s reinsurance of certain universal life and term life insurance risks, committed to the Vermont Department of Banking, Insurance, Securities and Health Care Administration to take necessary action to cause the three protected cells of MRV to maintain total adjusted capital in an amount that is equal to or greater than 200% of each such protected cell’s authorized control level RBC, as defined in Vermont state insurance statutes. See Note  12 of the Notes to the Consolidated Financial Statements.
MetLife, Inc., in connection with the collateral financing arrangement associated with MRC’s reinsurance of a portion of the liabilities associated with the closed block, committed to the South Carolina Department of Insurance to make capital contributions, if necessary, to MRC so that MRC may at all times maintain its total adjusted capital in an amount that is equal to or greater than 200% of the company action level RBC, as defined in South Carolina state insurance statutes as in effect on the date of determination or December 31, 2007, whichever calculation produces the greater capital requirement, or as otherwise required by the South Carolina Department of Insurance. See Note  13 of the Notes to the Consolidated Financial Statements.
MetLife, Inc., in connection with the collateral financing arrangement associated with MetLife Reinsurance Company of South Carolina’s (“MRSC”) reinsurance of ULSG, committed to the South Carolina Department of Insurance to take necessary action to cause MRSC to maintain the greater of capital and surplus of $250,000 or total adjusted capital in an amount that is equal to or greater than 100% of authorized control level RBC, as defined in South Carolina state insurance statutes. See Note  13 of the Notes to the Consolidated Financial Statements.
MetLife, Inc. has a net worth maintenance agreement with its insurance subsidiary, First MetLife Investors Insurance Company (“First MetLife”). Under this agreement, as amended, MetLife, Inc. agreed, without limitation as to the amount, to cause First MetLife to have capital and surplus of $10 million, total adjusted capital in an amount that is equal to or greater than 150% of the company action level RBC, as defined by applicable state insurance statutes, and liquidity necessary to enable it to meet its current obligations on a timely basis.

172


MetLife, Inc. guarantees obligations arising from derivatives of the following subsidiaries: MrB, MetLife International Holdings, LLC and MetLife Worldwide Holdings, LLC. These subsidiaries are exposed to various risks relating to their ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. These subsidiaries use a variety of strategies to manage these risks, including the use of derivatives. Further, all of the subsidiaries’ derivatives are subject to industry standard netting agreements and collateral agreements that limit the unsecured portion of any open derivative position. On a net counterparty basis at December 31, 2015 and 2014 , derivative transactions with positive mark-to-market values (in-the-money) were $583 million and $499 million, respectively, and derivative transactions with negative mark-to-market values (out-of-the-money) were $32 million and $102 million, respectively. To secure the obligations represented by the out of-the-money transactions, the subsidiaries had provided collateral to their counterparties with an estimated fair value of $32 million and $96 million at December 31, 2015 and 2014 , respectively. Accordingly, unsecured derivative liabilities guaranteed by MetLife, Inc. were $0 and $6 million at December 31, 2015 and 2014 , respectively.
MetLife, Inc. also guarantees the obligations of certain of its subsidiaries under committed facilities with third-party banks. See Note  12 of the Notes to the Consolidated Financial Statements.
Acquisitions
During the years ended December 31, 2015 , 2014 and 2013 , there were no cash outflows from MetLife, Inc. for acquisitions. See Note  3 of the Notes to the Consolidated Financial Statements for information regarding the Company’s acquisitions.
Adoption of New Accounting Pronouncements
See Note 1 of the Notes to the Consolidated Financial Statements.
Future Adoption of New Accounting Pronouncements
See Note 1 of the Notes to the Consolidated Financial Statements.
Non-GAAP and Other Financial Disclosures
In this report, the Company presents certain measures of its performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business. The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:
Comparable GAAP financial measures:
(i)
operating revenues
(i)
GAAP revenues
(ii)
operating expenses
(ii)
GAAP expenses
(iii)
operating earnings
(iii)
income (loss) from continuing operations, net of income tax
(iv)
operating earnings available to common shareholders
(iv)
net income (loss) available to MetLife, Inc.’s common shareholders
(v)
free cash flow of all holding companies
(v)
MetLife, Inc.’s net cash provided by operating activities
Reconciliations of these measures to the most directly comparable GAAP measures are included below and in “— Results of Operations.”
Our definitions of the various non-GAAP and other financial measures discussed in this report may differ from those used by other companies:
Operating earnings is the measure of segment profit or loss we use to evaluate segment performance and allocate resources. Consistent with GAAP accounting guidance for segment reporting, operating earnings is our measure of segment performance. Operating earnings is also a measure by which senior management’s and many other employees’ performance is evaluated for the purposes of determining their compensation under applicable compensation plans.
Operating earnings is defined as operating revenues less operating expenses, both net of income tax. Operating earnings available to common shareholders is defined as operating earnings less preferred stock dividends.

173


Operating revenues and operating expenses exclude results of discontinued operations and other businesses that have been or will be sold or exited by MetLife and are referred to as divested businesses. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses). Operating expenses also excludes goodwill impairments.
The following additional adjustments are made to GAAP revenues, in the line items indicated, in calculating operating 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 GMIB fees (“GMIB Fees”);
Net investment income: (i) includes amounts for investment hedge adjustments, (ii) includes income from discontinued real estate operations, (iii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iv) excludes certain amounts related to contractholder-directed unit-linked investments, and (v) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
Other revenues are adjusted for settlements of foreign currency earnings hedges.
The following additional adjustments are made to GAAP expenses, in the line items indicated, in calculating operating 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) inflation-indexed benefit adjustments associated with contracts backed by inflation-indexed investments and amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets and other pass through adjustments (also known as asymmetrical and non-economic accounting for insurance contracts), (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 and excludes amounts related to net investment income earned on contractholder-directed unit-linked investments;
Amortization of DAC and 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;
Amortization of negative VOBA excludes amounts related to 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) implementation of new insurance regulatory requirements, and (iii) acquisition and integration costs.
Operating earnings also excludes the recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance. In addition to the tax impact of the adjustments mentioned above, provision for income tax expense (benefit) also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.

174


The following additional information is relevant to an understanding of our performance results:
We sometimes refer to sales activity for various products. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.
The impact of changes in our foreign currency exchange rates is calculated using the average foreign currency exchange rates for the current period and is applied to each of the comparable periods.
Operating ROE is defined as operating earnings available to common shareholders, divided by average GAAP common stockholders’ equity.
Operating ROE, excluding AOCI other than FCTA, is defined as operating earnings available to common shareholders divided by average GAAP common stockholders’ equity, excluding AOCI other than FCTA.
Allocated equity is defined as the portion of MetLife, Inc.’s common stockholders’ equity that management allocates to each of its segments and sub-segments based on local capital requirements and economic capital. See “— Economic Capital.” Allocated equity excludes the impact of AOCI, other than FCTA.
The Company uses a measure of free cash flow to facilitate an understanding of its ability to generate cash for reinvestment into its businesses or use in discretionary capital actions. The Company defines free cash flow as the sum of cash available at MetLife’s holding companies from dividends from operating subsidiaries, expenses and other net flows of the holding companies, and net contributions from debt to be at or below target leverage ratios. This measure of free cash flow is prior to discretionary capital deployment, including common stock dividends and repurchases, debt reduction and mergers and acquisitions. Free cash flow should not be viewed as a substitute for net cash provided by (used in) operating activities calculated in accordance with GAAP. The free cash flow ratio is typically expressed as a percentage of annual operating earnings available to common shareholders. A reconciliation of net cash provided by operating activities of MetLife, Inc. to free cash flow of all holding companies for the years ended December 31, 2015, 2014 and 2013 is provided below.

175


Reconciliation of Net Cash Provided by Operating Activities of MetLife, Inc. to Free Cash Flow of All Holding Companies
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
MetLife, Inc. (parent company only) net cash provided by operating activities
$
1,606

 
$
2,615

 
$
1,865

Adjustments from net cash provided by operating activities to free cash flow:


 


 

Add: Incremental debt to be at or below target leverage ratios
1,750

 
445

 

Add: Capital contributions to subsidiaries
(667
)
 
(1,011
)
 
(598
)
Add: Returns of capital from subsidiaries
5

 

 
567

Add: Repayments on and (issuances of) loans to subsidiaries, net
461

 
462

 
245

Add: Investment portfolio changes and other, net
365

 
151

 
23

MetLife, Inc. (parent company only) free cash flow
3,520

 
2,662

 
2,102

Other MetLife holding companies:
 
 
 
 
 
Add: Dividends and returns of capital from subsidiaries
1,354

 
1,339

 
822

Add: Capital contributions from MetLife, Inc.
150

 

 
403

Add: Capital contributions to subsidiaries
(27
)
 
(48
)
 
(201
)
Add: Repayments on and (issuances of) loans to subsidiaries, net
(510
)
 
(458
)
 
(305
)
Add: Other expenses
(729
)
 
(637
)
 
(567
)
Add: Investment portfolio changes and other, net
223

 
32

 
(18
)
Total other MetLife holding companies free cash flow
461

 
228

 
134

Free cash flow of all holding companies
$
3,981

 
$
2,890

 
$
2,236

 
 
 
 
 
 
Ratio of free cash flow to operating earnings available to common shareholders:
 
 
 
 
 
Free cash flow of all holding companies
$
3,981

 
$
2,890

 
$
2,236

Consolidated operating earnings available to common shareholders (1)
$
5,484

 
$
6,560

 
$
6,261

Ratio of free cash flow of all holding companies to consolidated operating
   earnings available to common shareholders (1)
73
%
 
44
%
 
36
%
Ratio of net cash provided by operating activities to consolidated net income (loss) available to MetLife, Inc.'s common shareholders:
 
 
 
 
 
MetLife, Inc. (parent company only) net cash provided by operating activities
$
1,606

 
$
2,615

 
$
1,865

Consolidated net income (loss) available to MetLife, Inc.’s common
   shareholders (2)
$
5,152

 
$
6,187

 
$
3,246

Ratio of net cash provided by operating activities (parent company only) to
   consolidated net income (loss) available to MetLife, Inc.'s common
   shareholders (2) (3)
31
%
 
42
%
 
57
%
______________
(1) Consolidated operating earnings available to common shareholders for 2015 includes a non-cash charge of $792 million, net of income tax, related to an uncertain tax position. Excluding this charge from the denominator of the ratio, the adjusted free cash flow ratio would be 63%. See “Risk Factors — Regulatory and Legal Risks — Changes in Tax Laws or Interpretations of Such Laws Could Reduce Our Earnings and Materially Impact Our Operations by Increasing Our Corporate Taxes and Making Some of Our Products Less Attractive to Consumers” for additional information on this non-cash charge.
(2) Consolidated net income (loss) available to MetLife, Inc.'s common shareholders for 2015 includes a non-cash charge of $792 million, net of income tax, related to an uncertain tax position. Excluding this charge from the denominator of the ratio, this ratio, as adjusted, would be 27%.
(3) Including the free cash flow of other MetLife, Inc. holding companies of $461 million, $228 million and $134 million for the years ended December 31, 2015, 2014 and 2013, respectively, in the numerator of the ratio, this ratio, as adjusted, would be 40%, 46% and 62%, respectively.

176


Finally, in this discussion, we also provide forward-looking guidance on an operating, or non-GAAP, basis. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is not accessible on a forward-looking basis because we believe it is not possible to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a significant impact on GAAP net income.
Subsequent Events
See Note 23 of the Notes to the Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Risk Management
We have developed an integrated process for managing risk, which we conduct through multiple Board and senior management committees (financial and non-financial) within the GRM, ALM Unit, Treasury Department and Investments Department. The risk committee structure is designed to provide a consolidated enterprise-wide assessment and management of risk. The ERC is responsible for reviewing all material risks to the enterprise and deciding on actions, if necessary, in the event risks exceed desired tolerances, taking into consideration industry best practices and the current environment to resolve or mitigate those risks. Additional committees at the MetLife, Inc. and subsidiary insurance company level that manage capital and risk positions, approve ALM strategies and establish corporate business standards, report to the ERC.
Global Risk Management
Independent from the lines of business, the centralized GRM, led by the CRO, collaborates and coordinates across all committees to ensure that all material risks are properly identified, measured, aggregated and reported across the Company. The CRO reports to the CEO and is primarily responsible for maintaining and communicating the Company’s enterprise risk policies and for monitoring and analyzing all material risks.
GRM considers and monitors a full range of risks against the Company’s solvency, liquidity, earnings, business operations and reputation. GRM’s primary responsibilities consist of:
implementing a corporate risk framework, which outlines our enterprise approach for managing risk;
developing policies and procedures for managing, measuring, monitoring and controlling those risks identified in the corporate risk framework;
establishing appropriate corporate risk tolerance levels;
deploying capital on an economic basis;
recommending capital allocations on an economic capital basis; and
reporting to (i) the Finance and Risk Committee of MetLife, Inc.’s Board of Directors; (ii) the Investment Committee of MetLife, Inc.’s Board of Directors; and (iii) the financial and non-financial senior management committees on various aspects of risk.
Asset/Liability Management
We actively manage our assets using an approach that balances quality, diversification, asset/liability matching, liquidity, concentration and investment return. The goals of the investment process are to optimize, net of income tax, risk-adjusted investment income and risk-adjusted total return while ensuring that the assets and liabilities are reasonably managed on a cash flow and duration basis. The ALM process is the shared responsibility of the ALM Unit, GRM, the Portfolio Management Unit, and the senior members of the business segments and is governed by the ALM Committees. The ALM Committees’ duties include reviewing and approving target portfolios, establishing investment guidelines and limits and providing oversight of the ALM process on a periodic basis. The directives of the ALM Committees are carried out and monitored through ALM Working Groups which are set up to manage by product type. Generally, our ALM Steering Committee oversees the activities of the underlying ALM Committees. The ALM Steering Committee reports to the ERC.
We establish target asset portfolios for each major insurance product, which represent the investment strategies used to profitably fund our liabilities within acceptable levels of risk. The ALM Working Groups monitor these strategies through regular review of portfolio metrics, such as effective duration, yield curve sensitivity, convexity, liquidity, asset sector concentration and credit quality.

177


Market Risk Exposures
We regularly analyze our exposure to interest rate, equity market price and foreign currency exchange rate risks. As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are materially exposed to changes in interest rates, foreign currency exchange rates and changes in the equity markets. We have exposure to market risk through our insurance operations and investment activities. For purposes of this disclosure, “market risk” is defined as the risk of loss resulting from changes in interest rates, foreign currency exchange rates and equity markets.
Interest Rates
Our exposure to interest rate changes results most significantly from our holdings of fixed maturity securities, as well as our interest rate sensitive liabilities. The fixed maturity securities include U.S. and foreign government bonds, securities issued by government agencies, corporate bonds, mortgage-backed securities and ABS, all of which are mainly exposed to changes in medium- and long-term interest rates. The interest rate sensitive liabilities for purposes of this disclosure include debt, policyholder account balances related to certain investment type contracts, and net embedded derivatives on variable annuities with guaranteed minimum benefits which have the same type of interest rate exposure (medium- and long-term interest rates) as fixed maturity securities. We employ product design, pricing and ALM strategies to reduce the potential effects of interest rate movements. Product design and pricing strategies include the use of surrender charges or restrictions on withdrawals in some products and the ability to reset crediting rates for certain products. ALM strategies include the use of derivatives and duration mismatch limits. See “Risk Factors — Economic Environment and Capital Markets-Related Risks — We Are Exposed to Significant Global Financial and Capital Markets Risks Which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and May Cause Our Net Investment Income to Vary from Period to Period.”
Foreign Currency Exchange Rates
Our exposure to fluctuations in foreign currency exchange rates against the U.S. dollar results from our holdings in non-U.S. dollar denominated fixed maturity and equity securities, mortgage loans, and certain liabilities, as well as through our investments in foreign subsidiaries. The principal currencies that create foreign currency exchange rate risk in our investment portfolios and liabilities are the Euro, the Japanese yen and the British pound. Selectively, we use U.S. dollar assets to support certain long duration foreign currency liabilities. Through our investments in foreign subsidiaries and joint ventures, we are primarily exposed to the Japanese yen, the Euro, the Polish zloty, the Australian dollar, the Mexican peso, the Chilean peso and the Korean won. In addition to hedging with foreign currency swaps, forwards and options, local surplus in some countries is held entirely or in part in U.S. dollar assets which further minimizes exposure to foreign currency exchange rate fluctuation risk. We have matched much of our foreign currency liabilities in our foreign subsidiaries with their respective foreign currency assets, thereby reducing our risk to foreign currency exchange rate fluctuation. See “Risk Factors — Risks Related to Our Business — Fluctuations in Foreign Currency Exchange Rates Could Negatively Affect Our Profitability.”
Equity Market
Along with investments in equity securities, we have exposure to equity market risk through certain liabilities that involve long-term guarantees on equity performance such as net embedded derivatives on variable annuities with guaranteed minimum benefits and certain policyholder account balances. We manage this risk on an integrated basis with other risks through our ALM strategies, including the dynamic hedging of certain variable annuity guarantee benefits, as well as reinsurance, in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. We also manage equity market risk exposure in our investment portfolio through the use of derivatives. Equity exposures associated with other limited partnership interests are excluded from this discussion as they are not considered financial instruments under GAAP.
Management of Market Risk Exposures
We use a variety of strategies to manage interest rate, foreign currency exchange rate and equity market risk, including the use of derivatives.

178


Interest Rate Risk Management
To manage interest rate risk, we analyze interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivatives. These projections involve evaluating the potential gain or loss on most of our in-force business under various increasing and decreasing interest rate environments. The Department of Financial Services regulations require that we perform some of these analyses annually as part of our review of the sufficiency of our regulatory reserves. For several of our legal entities, we maintain segmented operating and surplus asset portfolios for the purpose of ALM and the allocation of investment income to product lines. For each segment, invested assets greater than or equal to the GAAP liabilities and any non-invested assets allocated to the segment are maintained, with any excess allocated to Corporate & Other. The business segments may reflect differences in legal entity, statutory line of business and any product market characteristic which may drive a distinct investment strategy with respect to duration, liquidity or credit quality of the invested assets. Certain smaller entities make use of unsegmented general accounts for which the investment strategy reflects the aggregate characteristics of liabilities in those entities. We measure relative sensitivities of the value of our assets and liabilities to changes in key assumptions utilizing internal models. These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding lapse, mortality and interest crediting rates. In addition, these models include asset cash flow projections reflecting interest payments, sinking fund payments, principal payments, bond calls, mortgage loan prepayments and defaults.
Common industry metrics, such as duration and convexity, are also used to measure the relative sensitivity of assets and liability values to changes in interest rates. In computing the duration of liabilities, consideration is given to all policyholder guarantees and to how we intend to set indeterminate policy elements such as interest credits or dividends. Each asset portfolio has a duration target based on the liability duration and the investment objectives of that portfolio. Where a liability cash flow may exceed the maturity of available assets, as is the case with certain retirement and group products, we may support such liabilities with equity investments, derivatives or interest rate curve mismatch strategies.
Foreign Currency Exchange Rate Risk Management
We assume foreign currency exchange rate risk primarily in three ways: investments in foreign subsidiaries, purchases of foreign currency denominated investments and the sale of certain insurance products.
The GRM’s Foreign Exchange Committee, in coordination with the Treasury Department, is responsible for managing our exposure to investments in foreign subsidiaries. Exposure limits are established by the Treasury Department and monitored by GRM. The Investments Department manages such exposure.
The Investments Department is responsible for managing the exposure to foreign currency denominated investments. Exposure limits to unhedged foreign currency investments are incorporated into the standing authorizations granted to management by the Board of Directors and are reported to the Board of Directors on a periodic basis.
Management of each of the Company’s segments, with oversight from the Foreign Exchange Committee, is responsible for establishing limits and managing any foreign currency exchange rate exposure caused by the sale or issuance of insurance products.
We use foreign currency swaps, forwards and options to mitigate the liability exposure, risk of loss and financial statement volatility associated with our investments in foreign subsidiaries, foreign currency denominated fixed income investments and the sale of certain insurance products.
Equity Market Risk Management
The issuance of variable annuities exposes us to market risk. This risk is managed by our ALM Unit in partnership with the Investments Department. Equity market risk is also assumed through our investment in equity securities and is managed by our Investments Department. We use derivatives to mitigate our equity exposure both in certain liability guarantees such as variable annuities with guaranteed minimum benefit and equity securities. These derivatives include exchange-traded equity futures, equity index options contracts and equity variance swaps. We also employ reinsurance to manage these exposures.

179


Hedging Activities
We use derivative contracts primarily to hedge a wide range of risks including interest rate risk, foreign currency exchange rate risk, and equity market risk. Derivative hedges are designed to reduce risk on an economic basis while considering their impact on accounting results and GAAP and statutory capital. Our derivative hedge programs vary depending on the type of risk being hedged. Some hedge programs are asset or liability specific while others are portfolio hedges that reduce risk related to a group of liabilities or assets. Our use of derivatives by major hedge programs is as follows:
Risks Related to Living Guarantee Benefits — We use a wide range of derivative contracts to mitigate the risk associated with variable annuity living guarantee benefits. These derivatives include equity and interest rate futures, interest rate swaps, currency futures/forwards, equity indexed options and interest rate option contracts and equity variance swaps.
Minimum Interest Rate Guarantees — For certain liability contracts, we provide the contractholder a guaranteed minimum interest rate. These contracts include certain fixed annuities and other insurance liabilities. We purchase interest rate floors to reduce risk associated with these liability guarantees.
Reinvestment Risk in Long Duration Liability Contracts — Derivatives are used to hedge interest rate risk related to certain long duration liability contracts. Hedges include interest rate swaps and swaptions.
Foreign Currency Exchange Rate Risk — We use currency swaps, forwards and options to hedge foreign currency exchange rate risk. These hedges primarily swap foreign currency denominated bonds, investments in foreign subsidiaries or equity market exposures to U.S. dollars.
General ALM Hedging Strategies — In the ordinary course of managing our asset/liability risks, we use interest rate futures, interest rate swaps, interest rate caps, interest rate floors and inflation swaps. These hedges are designed to reduce interest rate risk or inflation risk related to the existing assets or liabilities or related to expected future cash flows.
Risk Measurement: Sensitivity Analysis
We measure market risk related to our market sensitive assets and liabilities based on changes in interest rates, equity market prices and foreign currency exchange rates utilizing a sensitivity analysis. This analysis estimates the potential changes in estimated fair value based on a hypothetical 10% change (increase or decrease) in interest rates, equity market prices and foreign currency exchange rates. We believe that a 10% change (increase or decrease) in these market rates and prices is reasonably possible in the near term. In performing the analysis summarized below, we used market rates at December 31, 2015 . The sensitivity analysis separately calculates each of our market risk exposures (interest rate, equity market and foreign currency exchange rate) relating to our trading and non-trading assets and liabilities. We modeled the impact of changes in market rates and prices on the estimated fair values of our market sensitive assets and liabilities as follows:
the net present values of our interest rate sensitive exposures resulting from a 10% change (increase or decrease) in interest rates;
the U.S. dollar equivalent estimated fair values of our foreign currency exposures due to a 10% change (increase or decrease) in foreign currency exchange rates; and
the estimated fair value of our equity positions due to a 10% change (increase or decrease) in equity market prices.
The sensitivity analysis is an estimate and should not be viewed as predictive of our future financial performance. We cannot ensure that our actual losses in any particular period will not exceed the amounts indicated in the table below. Limitations related to this sensitivity analysis include:
the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis, including the impact of prepayment rates on mortgage loans;
for the derivatives that qualify as hedges, the impact on reported earnings may be materially different from the change in market values;
the analysis excludes liabilities pursuant to insurance contracts and real estate holdings; and
the model assumes that the composition of assets and liabilities remains unchanged throughout the period.
Accordingly, we use such models as tools and not as substitutes for the experience and judgment of our management. Based on our analysis of the impact of a 10% change (increase or decrease) in market rates and prices, we have determined that such a change could have a material adverse effect on the estimated fair value of certain assets and liabilities from interest rate, foreign currency exchange rate and equity market exposures.

180


The table below illustrates the potential loss in estimated fair value for each market risk exposure of our market sensitive assets and liabilities at:
 
December 31, 2015
 
(In millions)
Non-trading:
 
Interest rate risk
$
5,833

Foreign currency exchange rate risk
$
5,663

Equity market risk
$
19

Trading:
 
Interest rate risk
$
2


181


The table below provides additional detail regarding the potential loss in estimated fair value of our trading and non-trading interest sensitive financial instruments by type of asset or liability at:
 
December 31, 2015
 
Notional
Amount
 
Estimated
Fair
Value (1)
 
Assuming a
10% Increase
in the Yield
Curve
 
(In millions)
Assets
 
 
 
 
 
Fixed maturity securities
 
 
$
351,402

 
$
(5,728
)
Equity securities
 
 
$
3,321

 

Fair value option and trading securities:
 
 
 
 
 
Actively traded securities
 
 
$
404

 
(5
)
Fair value option general account securities
 
 
627

 
(5
)
Total fair value option and trading securities
 
 
$
1,031

 
(10
)
Mortgage loans
 
 
$
68,539

 
(476
)
Policy loans
 
 
$
13,351

 
(140
)
Short-term investments
 
 
$
9,299

 
(12
)
Other invested assets
 
 
$
699

 

Cash and cash equivalents
 
 
$
12,752

 

Accrued investment income
 
 
$
3,988

 

Premiums, reinsurance and other receivables
 
 
$
2,905

 
(161
)
Other assets
 
 
$
267

 
(4
)
Net embedded derivatives within asset host contracts (2)
 
 
$
391

 
(20
)
Total assets
 
 
 
 
$
(6,551
)
Liabilities (3)
 
 
 
 
 
Policyholder account balances
 
 
$
125,061

 
$
547

Payables for collateral under securities loaned and other transactions
 
 
$
36,871

 

Short-term debt
 
 
$
100

 

Long-term debt
 
 
$
19,360

 
389

Collateral financing arrangements
 
 
$
3,899

 

Junior subordinated debt securities
 
 
$
4,029

 
105

Other liabilities:
 
 
 
 
 
Trading liabilities
 
 
$
153

 
3

Other
 
 
$
2,250

 
133

Net embedded derivatives within liability host contracts (2)
 
 
$
935

 
470

Total liabilities
 
 
 
 
$
1,647

Derivative Instruments
 
 
 
 
 
Interest rate swaps
$
97,054

 
$
5,554

 
$
(637
)
Interest rate floors
$
23,837

 
$
263

 
(24
)
Interest rate caps
$
68,928

 
$
102

 
35

Interest rate futures
$
5,808

 
$
(3
)
 
(14
)
Interest rate options
$
30,234

 
$
1,147

 
(205
)
Interest rate forwards
$
148

 
$
24

 
(7
)
Synthetic GICs
$
4,216

 
$

 

Foreign currency swaps
$
36,896

 
$
(262
)
 
(22
)
Foreign currency forwards
$
17,325

 
$
(67
)
 
(8
)
Currency futures
$
930

 
$

 

Currency options
$
17,159

 
$
446

 
(14
)
Credit default swaps
$
12,181

 
$
59

 

Equity futures
$
7,206

 
$
45

 
(1
)
Equity index options
$
55,682

 
$
501

 
(36
)
Equity variance swaps
$
23,437

 
$
(441
)
 
2

Total rate of return swaps
$
3,803

 
$
(11
)
 

Total derivative instruments
 
 
 
 
$
(931
)
Net Change
 
 
 
 
$
(5,835
)
_____________

182


(1)
Separate account assets and liabilities and contractholder-directed unit-linked investments and associated policyholder account balances, which are interest rate sensitive, are not included herein as any interest rate risk is borne by the contractholder. Mortgage loans, FVO and trading securities and long-term debt exclude $ 172 million , $ 12 million and $ 60 million , respectively, related to CSEs. See Note 8 of the Notes to the Consolidated Financial Statements for information regarding CSEs.
(2)
Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract.
(3)
Excludes $ 206.1 billion of liabilities, at carrying value, pursuant to insurance contracts reported within future policy benefits and other policy-related balances. These liabilities would economically offset a significant portion of the net change in fair value of our financial instruments resulting from a 10% increase in the yield curve.
Interest rate risk increased by $601 million, or 11%, to $5.8 billion at December 31, 2015 from $5.2 billion at December 31, 2014 . This change was primarily due to an increase of $809 million due to increases in interest rates across the U.S. Treasury curve coupled with changes in durations. This increase was partially offset by a decrease in the asset base of $232 million.

183


The table below provides additional detail regarding the potential loss in estimated fair value of our portfolio due to a 10% change in foreign currency exchange rates by type of asset or liability at:
 
December 31, 2015
 
Notional
Amount
 
Estimated
Fair
Value (1)
 
Assuming a
10% Increase
in the Foreign
Exchange Rate
 
(In millions)
Assets
 
 
 
 
 
Fixed maturity securities
 
 
$
351,402

 
$
(7,879
)
Equity securities
 
 
$
3,321

 
(95
)
Fair value option and trading securities:
 
 
 
 
 
Actively traded securities
 
 
$
404

 

Fair value option general account securities
 
 
627

 
(63
)
Total fair value option and trading securities
 
 
$
1,031

 
(63
)
Mortgage loans
 
 
$
68,539

 
(703
)
Policy loans
 
 
$
13,351

 
(144
)
Short-term investments
 
 
$
9,299

 
(95
)
Other invested assets
 
 
$
699

 
(75
)
Cash and cash equivalents
 
 
$
12,752

 
(441
)
Accrued investment income
 
 
$
3,988

 
(82
)
Premiums, reinsurance and other receivables
 
 
$
2,905

 
(62
)
Other assets
 
 
$
267

 
(6
)
Net embedded derivatives within asset host contracts (2)
 
 
$
391

 
(12
)
Total assets
 
 
 
 
$
(9,657
)
Liabilities (3)
 
 
 
 
 
Policyholder account balances
 
 
$
125,061

 
$
3,258

Payables for collateral under securities loaned and other transactions
 
 
$
36,871

 
101

Long-term debt
 
 
$
19,360

 
127

Other liabilities
 
 
$
2,403

 
13

Net embedded derivatives within liability host contracts (2)
 
 
$
935

 
111

Total liabilities
 
 
 
 
$
3,610

Derivative Instruments
 
 
 
 
 
Interest rate swaps
$
97,054

 
$
5,554

 
$
(35
)
Interest rate floors
$
23,837

 
$
263

 

Interest rate caps
$
68,928

 
$
102

 

Interest rate futures
$
5,808

 
$
(3
)
 
(1
)
Interest rate options
$
30,234

 
$
1,147

 
(46
)
Interest rate forwards
$
148

 
$
24

 

Synthetic GICs
$
4,216

 
$

 

Foreign currency swaps
$
36,896

 
$
(262
)
 
362

Foreign currency forwards
$
17,325

 
$
(67
)
 
(188
)
Currency futures
$
930

 
$

 
(91
)
Currency options
$
17,159

 
$
446

 
399

Credit default swaps
$
12,181

 
$
59

 
(2
)
Equity futures
$
7,206

 
$
45

 
(1
)
Equity index options
$
55,682

 
$
501

 
(14
)
Equity variance swaps
$
23,437

 
$
(441
)
 
1

Total rate of return swaps
$
3,803

 
$
(11
)
 

Total derivative instruments
 
 
 
 
$
384

Net Change
 
 
 
 
$
(5,663
)
______________

184


(1)
Does not necessarily represent those financial instruments solely subject to foreign currency exchange rate risk. Separate account assets and liabilities and contractholder-directed unit-linked investments and associated policyholder account balances, which are foreign currency exchange rate sensitive, are not included herein as any foreign currency exchange rate risk is borne by the contractholder. Mortgage loans, FVO and trading securities and long-term debt exclude $ 172 million , $ 12 million and $ 60 million , respectively, related to CSEs. See Note 8 of the Notes to Consolidated Financial Statements for information regarding CSEs.
(2)
Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract.
(3)
Excludes $ 206.1 billion of liabilities, at carrying value, pursuant to insurance contracts reported within future policy benefits and other policy-related balances. These liabilities would economically offset a significant portion of the net change in fair value of our financial instruments resulting from a 10% increase in foreign currency exchange rates.
Foreign currency exchange rate risk decreased by $93 million, or 2%, to $5.7 billion at December 31, 2015 from $5.8 billion at December 31, 2014 . This change was primarily due to a net decrease in exchange risk relating to policyholder account balances, fixed maturity securities and the use of derivatives by the Company.
The table below provides additional detail regarding the potential loss in estimated fair value of our portfolio due to a 10% change in equity by type of asset or liability at:
 
December 31, 2015
 
Notional
Amount
 
Estimated
Fair
Value (1)
 
Assuming a
10% Increase
in Equity
Prices
 
(In millions)
Assets
 
 
 
 
 
Equity securities
 
 
$
3,321

 
$
332

Net embedded derivatives within asset host contracts (2)
 
 
$
391

 
(20
)
Total assets
 
 
 
 
312

Liabilities
 
 
 
 
 
Policyholder account balances
 
 
$
125,061

 

Net embedded derivatives within liability host contracts (2)
 
 
$
935

 
979

Total liabilities
 
 
 
 
$
979

Derivative Instruments
 
 
 
 
 
Interest rate swaps
$
97,054

 
$
5,554

 
$

Interest rate floors
$
23,837

 
$
263

 

Interest rate caps
$
68,928

 
$
102

 

Interest rate futures
$
5,808

 
$
(3
)
 

Interest rate options
$
30,234

 
$
1,147

 

Interest rate forwards
$
148

 
$
24

 

Synthetic GICs
$
4,216

 
$

 

Foreign currency swaps
$
36,896

 
$
(262
)
 

Foreign currency forwards
$
17,325

 
$
(67
)
 

Currency futures
$
930

 
$

 

Currency options
$
17,159

 
$
446

 

Credit default swaps
$
12,181

 
$
59

 

Equity futures
$
7,206

 
$
45

 
(687
)
Equity index options
$
55,682

 
$
501

 
(258
)
Equity variance swaps
$
23,437

 
$
(441
)
 
15

Total rate of return swaps
$
3,803

 
$
(11
)
 
(380
)
Total derivative instruments
 
 
 
 
$
(1,310
)
Net Change
 
 
 
 
$
(19
)
______________
(1)
Does not necessarily represent those financial instruments solely subject to equity price risk. Additionally, separate account assets and liabilities and contractholder-directed unit-linked investments and associated policyholder account balances, which are equity market sensitive, are not included herein as any equity market risk is borne by the contractholder.
(2)
Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract.

185


Equity price risk decreased by $59 million to $19 million at December 31, 2015 from $78 million at December 31, 2014 . This decrease was primarily due to the impact of embedded derivatives offset by the use of derivatives by the Company.

186


Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements, Notes and Schedules
 
Page
Financial Statements at December 31, 2015 and 2014 and for the Years Ended December 31, 2015, 2014 and 2013:
 
 
Financial Statement Schedules at December 31, 2015 and 2014 and for the Years Ended December 31, 2015, 2014 and 2013:
 

187

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
MetLife, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of MetLife, Inc. and subsidiaries (the “Company”) as of December 31, 2015 and 2014 , and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2015 . Our audits also included the financial statement schedules listed in the Index to Consolidated Financial Statements, Notes and Schedules. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MetLife, Inc. and subsidiaries as of December 31, 2015 and 2014 , and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 , in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015 , based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report, dated February 24, 2016 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New York, New York
February 24, 2016

188


MetLife, Inc.
Consolidated Balance Sheets
December 31, 2015 and 2014
(In millions, except share and per share data)
 
 
2015
 
2014
Assets
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $332,964 and $334,780, respectively; includes $4,277 and $4,266, respectively, relating to variable interest entities)
 
$
351,402

 
$
365,425

Equity securities available-for-sale, at estimated fair value (cost: $2,997 and $3,076, respectively)
 
3,321

 
3,631

Fair value option and trading securities, at estimated fair value (includes $404 and $704, respectively, of actively traded securities; and $13 and $60, respectively, relating to variable interest entities)
 
15,024

 
16,689

Mortgage loans (net of valuation allowances of $318 and $305, respectively; includes $172 and $280, respectively, at estimated fair value, relating to variable interest entities; includes $314 and $308, respectively, under the fair value option)
 
67,102

 
60,118

Policy loans (includes $4 and $3, respectively, relating to variable interest entities)
 
11,258

 
11,618

Real estate and real estate joint ventures (includes $0 and $8, respectively, relating to variable interest entities; includes $47 and $172, respectively, of real estate held-for-sale)
 
8,433

 
10,525

Other limited partnership interests (includes $27 and $34, respectively, relating to variable interest entities)
 
7,096

 
8,085

Short-term investments, principally at estimated fair value (includes $26 and $20, respectively, relating to variable interest entities)
 
9,299

 
8,621

Other invested assets, principally at estimated fair value (includes $43 and $56, respectively, relating to variable interest entities)
 
22,524

 
21,283

Total investments
 
495,459

 
505,995

Cash and cash equivalents, principally at estimated fair value (includes $85 and $57, respectively, relating to variable interest entities)
 
12,752

 
10,808

Accrued investment income (includes $23 and $21, respectively, relating to variable interest entities)
 
3,988

 
4,120

Premiums, reinsurance and other receivables (includes $21 and $21, respectively, relating to variable interest entities)
 
22,702

 
22,244

Deferred policy acquisition costs and value of business acquired (includes $240 and $235, respectively, relating to variable interest entities)
 
24,130

 
24,442

Current income tax recoverable
 
161

 

Goodwill
 
9,477

 
9,872

Other assets (includes $148 and $134, respectively, relating to variable interest entities)
 
7,666

 
7,862

Separate account assets (includes $1,022 and $1,128, respectively, relating to variable interest entities)
 
301,598

 
316,994

Total assets
 
$
877,933

 
$
902,337

Liabilities and Equity
 
 
 
 
Liabilities
 
 
 
 
Future policy benefits (includes $716 and $579, respectively, relating to variable interest entities)
 
$
191,879

 
$
189,586

Policyholder account balances (includes $21 and $33, respectively, relating to variable interest entities)
 
202,722

 
209,294

Other policy-related balances (includes $238 and $198, respectively, relating to variable interest entities)
 
14,255

 
14,422

Policyholder dividends payable
 
720

 
684

Policyholder dividend obligation
 
1,783

 
3,155

Payables for collateral under securities loaned and other transactions
 
36,871

 
35,326

Short-term debt
 
100

 
100

Long-term debt (includes $63 and $151, respectively, at estimated fair value, relating to variable interest entities)
 
18,023

 
16,286

Collateral financing arrangements
 
4,139

 
4,196

Junior subordinated debt securities
 
3,194

 
3,193

Current income tax payable
 

 
184

Deferred income tax liability
 
10,592

 
11,821

Other liabilities (includes $81 and $80, respectively, relating to variable interest entities)
 
23,561

 
24,437

Separate account liabilities (includes $1,022 and $1,128, respectively, relating to variable interest entities)
 
301,598

 
316,994

Total liabilities
 
809,437

 
829,678

Contingencies, Commitments and Guarantees (Note 21)
 

 

Redeemable noncontrolling interests in partially owned consolidated subsidiaries
 
77

 
99

Equity
 
 
 
 
MetLife, Inc.’s stockholders’ equity:
 
 
 
 
Preferred stock, par value $0.01 per share; $2,100 aggregate liquidation preference
 

 
1

Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 1,159,590,766 and 1,153,998,144 shares issued, respectively; 1,098,028,525 and 1,131,927,894 shares outstanding, respectively
 
12

 
12

Additional paid-in capital
 
30,749

 
30,543

Retained earnings
 
35,519

 
32,020

Treasury stock, at cost; 61,562,241 and 22,070,250 shares, respectively
 
(3,102
)
 
(1,172
)
Accumulated other comprehensive income (loss)
 
4,771

 
10,649

Total MetLife, Inc.’s stockholders’ equity
 
67,949

 
72,053

Noncontrolling interests
 
470

 
507

Total equity
 
68,419

 
72,560

Total liabilities and equity
 
$
877,933

 
$
902,337

See accompanying notes to the consolidated financial statements.

189

MetLife, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2015, 2014 and 2013
(In millions, except per share data)

 
 
2015
 
2014
 
2013
Revenues
 
 
 
 
 
 
Premiums
 
$
38,545

 
$
39,067

 
$
37,674

Universal life and investment-type product policy fees
 
9,507

 
9,946

 
9,451

Net investment income
 
19,281

 
21,153

 
22,232

Other revenues
 
1,983

 
2,030

 
1,920

Net investment gains (losses):
 
 
 
 
 
 
Other-than-temporary impairments on fixed maturity securities
 
(84
)
 
(43
)
 
(106
)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)
 
(6
)
 
(17
)
 
(60
)
Other net investment gains (losses)
 
687

 
(137
)
 
327

Total net investment gains (losses)
 
597

 
(197
)
 
161

Net derivative gains (losses)
 
38

 
1,317

 
(3,239
)
Total revenues
 
69,951

 
73,316

 
68,199

Expenses
 
 
 
 
 
 
Policyholder benefits and claims
 
38,714

 
39,102

 
38,107

Interest credited to policyholder account balances
 
5,610

 
6,943

 
8,179

Policyholder dividends
 
1,388

 
1,376

 
1,259

Other expenses
 
16,769

 
17,091

 
16,602

Total expenses
 
62,481

 
64,512

 
64,147

Income (loss) from continuing operations before provision for income tax
 
7,470

 
8,804

 
4,052

Provision for income tax expense (benefit)
 
2,148

 
2,465

 
661

Income (loss) from continuing operations, net of income tax
 
5,322

 
6,339

 
3,391

Income (loss) from discontinued operations, net of income tax
 

 
(3
)
 
2

Net income (loss)
 
5,322

 
6,336

 
3,393

Less: Net income (loss) attributable to noncontrolling interests
 
12

 
27

 
25

Net income (loss) attributable to MetLife, Inc.
 
5,310

 
6,309

 
3,368

Less: Preferred stock dividends
 
116

 
122

 
122

Preferred stock repurchase premium
 
42

 

 

Net income (loss) available to MetLife, Inc.’s common shareholders
 
$
5,152

 
$
6,187

 
$
3,246

Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders per common share:
 
 
 
 
 
 
Basic
 
$
4.61

 
$
5.48

 
$
2.94

Diluted
 
$
4.57

 
$
5.42

 
$
2.91

Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
 
 
 
 
 
 
Basic
 
$
4.61

 
$
5.48

 
$
2.94

Diluted
 
$
4.57

 
$
5.42

 
$
2.91

Cash dividends declared per common share
 
$
1.475

 
$
1.325

 
$
1.010

See accompanying notes to the consolidated financial statements.

190

MetLife, Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2015, 2014 and 2013
(In millions)


 
2015
 
2014
 
2013
Net income (loss) (1)
$
5,322

 
$
6,336

 
$
3,393

Other comprehensive income (loss):
 
 
 
 
 
Unrealized investment gains (losses), net of related offsets
(7,443
)
 
10,103

 
(8,086
)
Unrealized gains (losses) on derivatives
589

 
1,386

 
(899
)
Foreign currency translation adjustments
(1,624
)
 
(1,444
)
 
(975
)
Defined benefit plans adjustment
354

 
(970
)
 
1,292

Other comprehensive income (loss), before income tax
(8,124
)
 
9,075

 
(8,668
)
Income tax (expense) benefit related to items of other comprehensive income (loss)
2,266

 
(3,528
)
 
2,329

Other comprehensive income (loss), net of income tax
(5,858
)
 
5,547

 
(6,339
)
Comprehensive income (loss)
(536
)
 
11,883

 
(2,946
)
Less: Comprehensive income (loss) attributable to noncontrolling interest, net of income tax
32

 
29

 
(21
)
Comprehensive income (loss) attributable to MetLife, Inc.
$
(568
)
 
$
11,854

 
$
(2,925
)
_______________
(1)
Net income (loss) attributable to noncontrolling interests excludes losses of redeemable noncontrolling interests of less than $1 million  for the year ended December 31, 2015 . Net income (loss) attributable to noncontrolling interests excludes gains of redeemable noncontrolling interests of less than $1 million for each of the years ended December 31, 2014 and 2013 .
See accompanying notes to the consolidated financial statements.

191


MetLife, Inc.
Consolidated Statements of Equity
For the Years Ended December 31, 2015 , 2014 and 2013
(In millions)
 
 
Preferred
Stock
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Treasury
Stock
at Cost
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
MetLife, Inc.’s
Stockholders’
Equity
 
Noncontrolling
Interests (1)
 
Total
Equity
Balance at December 31, 2012
 
$
1

 
$
11

 
$
28,011

 
$
25,205

 
$
(172
)
 
$
11,397

 
$
64,453

 
$
384

 
$
64,837

Common stock issuance
 
 
 
 
 
1,000

 
 
 
 
 
 
 
1,000

 
 
 
1,000

Stock-based compensation
 
 
 
 
 
305

 
 
 
 
 
 
 
305

 
 
 
305

Dividends on preferred stock
 
 
 
 
 
 
 
(122
)
 
 
 
 
 
(122
)
 
 
 
(122
)
Dividends on common stock
 
 
 
 
 
 
 
(1,119
)
 
 
 
 
 
(1,119
)
 
 
 
(1,119
)
Change in equity of noncontrolling interests
 
 
 
 
 
(39
)
 
 
 
 
 
 
 
(39
)
 
180

 
141

Net income (loss)
 
 
 
 
 
 
 
3,368

 
 
 
 
 
3,368

 
25

 
3,393

Other comprehensive income (loss), net of income tax
 
 
 
 
 
 
 
 
 
 
 
(6,293
)
 
(6,293
)
 
(46
)
 
(6,339
)
Balance at December 31, 2013
 
1

 
11

 
29,277

 
27,332

 
(172
)
 
5,104

 
61,553

 
543

 
62,096

Treasury stock acquired in connection with share repurchases
 
 
 
 
 
 
 
 
 
(1,000
)
 
 
 
(1,000
)
 
 
 
(1,000
)
Common stock issuance
 
 
 
1

 
999

 
 
 
 
 
 
 
1,000

 
 
 
1,000

Stock-based compensation
 
 
 
 
 
267

 
 
 
 
 
 
 
267

 
 
 
267

Dividends on preferred stock
 
 
 
 
 
 
 
(122
)
 
 
 
 
 
(122
)
 
 
 
(122
)
Dividends on common stock
 
 
 
 
 
 
 
(1,499
)
 
 
 
 
 
(1,499
)
 
 
 
(1,499
)
Change in equity of noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(65
)
 
(65
)
Net income (loss)
 
 
 
 
 
 
 
6,309

 
 
 
 
 
6,309

 
27

 
6,336

Other comprehensive income (loss), net of income tax
 
 
 
 
 
 
 
 
 
 
 
5,545

 
5,545

 
2

 
5,547

Balance at December 31, 2014
 
1

 
12

 
30,543

 
32,020

 
(1,172
)
 
10,649

 
72,053

 
507

 
72,560

Repurchase of preferred stock
 
(1
)
 
 
 
(1,459
)
 
 
 
 
 
 
 
(1,460
)
 
 
 
(1,460
)
Preferred stock repurchase premium
 
 
 
 
 
 
 
(42
)
 
 
 
 
 
(42
)
 
 
 
(42
)
Preferred stock issuance
 
 
 
 
 
1,483

 
 
 
 
 
 
 
1,483

 
 
 
1,483

Treasury stock acquired in connection with share repurchases
 
 
 
 
 
 
 
 
 
(1,930
)
 
 
 
(1,930
)
 
 
 
(1,930
)
Stock-based compensation
 
 
 
 
 
182

 
 
 
 
 
 
 
182

 
 
 
182

Dividends on preferred stock
 
 
 
 
 
 
 
(116
)
 
 
 
 
 
(116
)
 
 
 
(116
)
Dividends on common stock
 
 
 
 
 
 
 
(1,653
)
 
 
 
 
 
(1,653
)
 
 
 
(1,653
)
Change in equity of noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(69
)
 
(69
)
Net income (loss)
 
 
 
 
 
 
 
5,310

 
 
 
 
 
5,310

 
12

 
5,322

Other comprehensive income (loss), net of income tax
 
 
 
 
 
 
 
 
 
 
 
(5,878
)
 
(5,878
)
 
20

 
(5,858
)
Balance at December 31, 2015
 
$

 
$
12

 
$
30,749

 
$
35,519

 
$
(3,102
)
 
$
4,771

 
$
67,949

 
$
470

 
$
68,419

______________
(1)
Net income (loss) attributable to noncontrolling interests excludes losses of redeemable noncontrolling interests of less than $1 million for the year ended December 31, 2015. Net income (loss) attributable to noncontrolling interests excludes gains of redeemable noncontrolling interests of less than $1 million for each of the years ended December 31, 2014 and 2013.
See accompanying notes to the consolidated financial statements.

192


MetLife, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2015 , 2014 and 2013
(In millions)
 
2015
 
2014
 
2013
Cash flows from operating activities
 
 
 
 
 
Net income (loss)
$
5,322

 
$
6,336

 
$
3,393

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
 
Depreciation and amortization expenses
693

 
713

 
714

Amortization of premiums and accretion of discounts associated with investments, net
(1,141
)
 
(611
)
 
(167
)
(Gains) losses on investments and from sales of businesses, net
(597
)
 
202

 
(155
)
(Gains) losses on derivatives, net
1,451

 
(21
)
 
5,122

(Income) loss from equity method investments, net of dividends or distributions
481

 
327

 
99

Interest credited to policyholder account balances
5,610

 
6,943

 
8,179

Universal life and investment-type product policy fees
(9,507
)
 
(9,946
)
 
(9,451
)
Change in fair value option and trading securities
784

 
(739
)
 
(1,433
)
Change in residential mortgage loans held-for-sale, net

 

 
373

Change in accrued investment income
138

 
207

 
293

Change in premiums, reinsurance and other receivables
(837
)
 
(650
)
 
(582
)
Change in deferred policy acquisition costs and value of business acquired, net
491

 
1,134

 
(920
)
Change in income tax
825

 
2,075

 
871

Change in other assets
2,752

 
2,573

 
1,767

Change in insurance-related liabilities and policy-related balances
6,366

 
5,847

 
6,897

Change in other liabilities
1,134

 
1,885

 
1,008

Other, net
164

 
101

 
123

Net cash provided by (used in) operating activities
14,129

 
16,376

 
16,131

Cash flows from investing activities
 
 
 
 
 
Sales, maturities and repayments of:
 
 
 
 
 
Fixed maturity securities
146,732

 
118,526

 
117,523

Equity securities
1,117

 
490

 
725

Mortgage loans
12,647

 
14,128

 
12,881

Real estate and real estate joint ventures
3,256

 
1,012

 
356

Other limited partnership interests
1,827

 
823

 
807

Purchases of:
 
 
 
 
 
Fixed maturity securities
(148,799
)
 
(130,197
)
 
(117,826
)
Equity securities
(996
)
 
(530
)
 
(943
)
Mortgage loans
(20,449
)
 
(17,464
)
 
(14,677
)
Real estate and real estate joint ventures
(1,298
)
 
(2,282
)
 
(1,880
)
Other limited partnership interests
(1,429
)
 
(1,764
)
 
(1,356
)
Cash received in connection with freestanding derivatives
2,690

 
1,760

 
1,567

Cash paid in connection with freestanding derivatives
(4,211
)
 
(4,003
)
 
(6,710
)
Cash received under repurchase agreements
199

 

 

Cash paid under repurchase agreements
(199
)
 

 

Cash received under reverse repurchase agreements
199

 

 

Cash paid under reverse repurchase agreements
(199
)
 

 

Sales of businesses, net of cash and cash equivalents disposed of $0, $323 and $14, respectively

 
436

 
393

Sale of bank deposits

 

 
(6,395
)
Purchases of businesses, net of cash and cash equivalents acquired of $0, $0 and $20, respectively

 

 
(1,840
)
Purchases of investments in insurance joint ventures

 
(277
)
 

Net change in policy loans
287

 
(27
)
 
(112
)
Net change in short-term investments
(777
)
 
5,167

 
2,955

Net change in other invested assets
(936
)
 
(512
)
 
(547
)
Other, net
(59
)
 
(341
)
 
(86
)
Net cash provided by (used in) investing activities
$
(10,398
)
 
$
(15,055
)
 
$
(15,165
)
See accompanying notes to the consolidated financial statements.

193


MetLife, Inc.
Consolidated Statements of Cash Flows — (continued)
For the Years Ended December 31, 2015 , 2014 and 2013
(In millions)
 
2015
 
2014
 
2013
Cash flows from financing activities
 
 
 
 
 
Policyholder account balances:
 
 
 
 
 
Deposits
$
92,904

 
$
89,520

 
$
79,193

Withdrawals
(94,621
)
 
(88,037
)
 
(84,874
)
Net change in payables for collateral under securities loaned and other transactions
1,544

 
5,031

 
(3,276
)
Net change in short-term debt

 
(75
)
 
75

Long-term debt issued
3,893

 
1,000

 
1,372

Long-term debt repaid
(1,438
)
 
(2,862
)
 
(1,746
)
Collateral financing arrangements repaid
(57
)
 

 

Cash received in connection with redeemable noncontrolling interests

 

 
774

Common stock issued, net of issuance costs

 
1,000

 
1,000

Treasury stock acquired in connection with share repurchases
(1,930
)
 
(1,000
)
 

Preferred stock issued, net of issuance costs
1,483

 

 

Repurchase of preferred stock
(1,460
)
 

 

Preferred stock repurchase premium
(42
)
 

 

Dividends on preferred stock
(116
)
 
(122
)
 
(122
)
Dividends on common stock
(1,653
)
 
(1,499
)
 
(1,119
)
Other, net
198

 
(700
)
 
(184
)
Net cash provided by (used in) financing activities
(1,295
)
 
2,256

 
(8,907
)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances
(492
)
 
(354
)
 
(212
)
Change in cash and cash equivalents
1,944

 
3,223

 
(8,153
)
Cash and cash equivalents, beginning of year
10,808

 
7,585

 
15,738

Cash and cash equivalents, end of year
$
12,752

 
$
10,808

 
$
7,585

Supplemental disclosures of cash flow information:
 
 
 
 
 
Net cash paid (received) for:
 
 
 
 
 
Interest
$
1,178

 
$
1,213

 
$
1,270

Income tax
$
1,127

 
$
748

 
$
677

Non-cash transactions:
 
 
 
 
 
Business acquisitions:
 
 
 
 
 
Assets acquired
$

 
$

 
$
2,988

Liabilities assumed

 

 
(972
)
Noncontrolling interests assumed

 

 
(176
)
Cash paid, excluding transaction costs of $0, $0 and $17, respectively
$

 
$

 
$
1,840

Fixed maturity securities received in connection with pension risk transfer transactions
$
903

 
$

 
$

Deconsolidation of real estate investment vehicles:
 
 
 
 
 
Reduction of redeemable noncontrolling interests
$

 
$
774

 
$

Reduction of long-term debt
$
571

 
$
413

 
$

Reduction of real estate and real estate joint ventures
$
688

 
$
1,132

 
$

See accompanying notes to the consolidated financial statements.


194

MetLife, Inc.
Notes to the Consolidated Financial Statements

1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
“MetLife” and the “Company” refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates. MetLife is a global provider of life insurance, annuities, employee benefits and asset management. MetLife is organized into six segments: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and Europe, the Middle East and Africa (“EMEA”).
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 in the 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 estimates.
Consolidation
The accompanying consolidated financial statements include the accounts of MetLife, Inc. 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.
Certain international subsidiaries have a fiscal year cutoff of November 30th. Accordingly, the Company’s consolidated financial statements reflect the assets and liabilities of such subsidiaries as of November 30, 2015 and 2014 and the operating results of such subsidiaries for the years ended November 30, 2015 , 2014 and 2013 .
Discontinued Operations
The results of operations of a component of the Company that has either been disposed of or is classified as held-for-sale are reported in discontinued operations if certain criteria are met. Effective January 1, 2014, the Company adopted new guidance regarding reporting of discontinued operations for disposals or classifications as held-for-sale that have not been previously reported in the consolidated financial statements. A disposal of a component is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results. See “— Adoption of New Accounting Pronouncements.”
Separate Accounts
Separate accounts are established in conformity with insurance laws. Generally, the assets of the separate accounts cannot be used to settle the liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if:
such separate accounts are legally recognized;
assets supporting the contract liabilities are legally insulated from the Company’s general account liabilities;
investments are directed by the contractholder; and
all investment performance, net of contract fees and assessments, is passed through to the contractholder.
The Company reports separate account assets at their fair value which is based on the estimated fair values of the underlying assets comprising the individual separate account portfolios. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within the same line in the statements of operations. Separate accounts credited with a contractual investment return are combined on a line-by-line basis with the Company’s general account assets, liabilities, revenues and expenses and the accounting for these investments is consistent with the methodologies described herein for similar financial instruments held within the general account. Unit-linked separate account investments that are directed by contractholders but do not meet one or more of the other above criteria are included in fair value option (“FVO”) and trading securities.

195

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company’s revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Such fees are included in universal life and investment-type product policy fees in the statements of operations.
Reclassifications
Certain amounts in the prior years’ consolidated financial statements and related footnotes thereto have been reclassified to conform with the current year presentation as discussed throughout the Notes to the Consolidated Financial Statements.
Summary of Significant Accounting Policies
The following are the Company’s significant accounting policies with references to notes providing additional information on such policies and critical accounting estimates relating to such policies.
Accounting Policy
Note
Insurance
4
Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles
5
Reinsurance
6
Investments
8
Derivatives
9
Fair Value
10
Goodwill
11
Employee Benefit Plans
18
Income Tax
19
Litigation Contingencies
21
Insurance
Future Policy Benefit Liabilities and Policyholder Account Balances
The Company establishes liabilities for amounts payable under insurance policies. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, disability incidence, disability terminations, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type and geographical area. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. Utilizing these assumptions, liabilities are established on a block of business basis. For long duration insurance contracts, assumptions such as mortality, morbidity and interest rates are “locked in” upon the issuance of new business. However, significant adverse changes in experience on such contracts may require the establishment of premium deficiency reserves. Such reserves are determined based on the then current assumptions and do not include a provision for adverse deviation.
Premium deficiency reserves may also be established for short duration contracts to provide for expected future losses. These reserves are based on actuarial estimates of the amount of loss inherent in that period, including losses incurred for which claims have not been reported. The provisions for unreported claims are calculated using studies that measure the historical length of time between the incurred date of a claim and its eventual reporting to the Company. Anticipated investment income is considered in the calculation of premium deficiency losses for short duration contracts.

196

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Liabilities for universal and variable life policies with secondary guarantees (“ULSG”) and paid-up guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating the secondary and paid-up guarantee liabilities are consistent with those used for amortizing deferred policy acquisition costs (“DAC”), and are thus subject to the same variability and risk as further discussed herein. The assumptions of investment performance and volatility for variable products are consistent with historical experience of appropriate underlying equity indices, such as the Standard & Poor’s Ratings Services (“S&P”) 500 Index. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios.
The Company regularly reviews its estimates of liabilities for future policy benefits and compares them with its actual experience. Differences result in changes to the liability balances with related charges or credits to benefit expenses in the period in which the changes occur.
Policyholder account balances relate to contract or contract features where the Company has no significant insurance risk.
The Company issues directly and assumes through reinsurance certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the benefit base) less withdrawals. These guarantees are accounted for as insurance liabilities or as embedded derivatives depending on how and when the benefit is paid. Specifically, a guarantee is accounted for as an embedded derivative if a guarantee is paid without requiring (i) the occurrence of specific insurable event, or (ii) the policyholder to annuitize. Alternatively, a guarantee is accounted for as an insurance liability if the guarantee is paid only upon either (i) the occurrence of a specific insurable event, or (ii) annuitization. In certain cases, a guarantee may have elements of both an insurance liability and an embedded derivative and in such cases the guarantee is split and accounted for under both models.
Guarantees accounted for as insurance liabilities in future policy benefits include guaranteed minimum death benefits (“GMDBs”), the portion of guaranteed minimum income benefits (“GMIBs”) that require annuitization, and the life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”).
Guarantees accounted for as embedded derivatives in policyholder account balances include the non life-contingent portion of GMWBs, guaranteed minimum accumulation benefits (“GMABs”) and the portion of GMIBs that do not require annuitization. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.
Other Policy-Related Balances
Other policy-related balances include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid, policyholder dividends left on deposit and negative value of business acquired.
The liability for policy and contract claims generally relates to incurred but not reported death, disability, long-term care and dental claims, as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company’s estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from analyses of historical patterns of claims by business line. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made.
The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product’s estimated gross profits and margins, similar to DAC as discussed further herein. Such amortization is recorded in universal life and investment-type product policy fees.
The Company accounts for the prepayment of premiums on its individual life, group life and health contracts as premiums received in advance and applies the cash received to premiums when due.
See “— Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles” for a discussion of negative value of business acquired.

197

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Recognition of Insurance Revenues and Deposits
Premiums related to traditional life, annuity contracts with life contingencies, long-duration accident & health, and credit insurance policies are recognized as revenues when due from policyholders. Policyholder benefits and expenses are provided to recognize profits over the estimated lives of the insurance policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into earnings in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments.
Premiums related to short-duration non-medical health and disability, accident & health, and certain credit insurance contracts are recognized on a pro rata basis over the applicable contract term.
Deposits related to universal life-type and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of fees for mortality, policy administration and surrender charges and are recorded in universal life and investment-type product policy fees in the period in which services are provided. Amounts that are charged to earnings include interest credited and benefit claims incurred in excess of related policyholder account balances.
Premiums related to property & casualty contracts are recognized as revenue on a pro rata basis over the applicable contract term. Unearned premiums, representing the portion of premium written related to the unexpired coverage, are also included in future policy benefits.
Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance.
Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles
The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that are related directly to the successful acquisition or renewal of insurance contracts are capitalized as DAC. Such costs include:
incremental direct costs of contract acquisition, such as commissions;
the portion of an employee’s total compensation and benefits related to time spent selling, underwriting or processing the issuance of new and renewal insurance business only with respect to actual policies acquired or renewed;
other essential direct costs that would not have been incurred had a policy not been acquired or renewed; and
the costs of direct-response advertising, the primary purpose of which is to elicit sales to customers who could be shown to have responded specifically to the advertising and that results in probable future benefits.
All other acquisition-related costs, including those related to general advertising and solicitation, market research, agent training, product development, unsuccessful sales and underwriting efforts, as well as all indirect costs, are expensed as incurred.
Value of business acquired (“VOBA”) is an intangible asset resulting from a business combination that represents the excess of book value over the estimated fair value of acquired insurance, annuity, and investment-type contracts in-force at the acquisition date. The estimated fair value of the acquired liabilities is based on projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns, nonperformance risk adjustment and other factors. Actual experience on the purchased business may vary from these projections.

198

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

DAC and VOBA are amortized as follows:
Products:
In proportion to the following over estimated lives of the contracts:
Nonparticipating and non-dividend-paying traditional contracts:
 
Actual and expected future gross premiums.
 
Term insurance
 
 
 
Nonparticipating whole life insurance
 
 
 
Traditional group life insurance
 
 
 
Non-medical health insurance
 
 
 
Accident & health insurance
 
 
Participating, dividend-paying traditional contracts
 
Actual and expected future gross margins.
Fixed and variable universal life contracts
 
Actual and expected future gross profits.
Fixed and variable deferred annuity contracts
 
 
Credit insurance contracts
 
Actual and future earned premiums.
Property & casualty insurance contracts
 
 
Other short-duration contracts
 
 
See Note 5 for additional information on DAC and VOBA amortization. Amortization of DAC and VOBA is included in other expenses.
The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes.
The Company generally has two different types of sales inducements which are included in other assets: (i) the policyholder receives a bonus whereby the policyholder’s initial account balance is increased by an amount equal to a specified percentage of the customer’s deposit; and (ii) the policyholder receives a higher interest rate using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. The amortization of sales inducements is included in policyholder benefits and claims. Each year, or more frequently if circumstances indicate a potential recoverability issue exists, the Company reviews deferred sales inducements (“DSI”) to determine the recoverability of the asset.
Value of distribution agreements acquired (“VODA”) is reported in other assets and represents the present value of expected future profits associated with the expected future business derived from the distribution agreements acquired as part of a business combination. Value of customer relationships acquired (“VOCRA”) is also reported in other assets and represents the present value of the expected future profits associated with the expected future business acquired through existing customers of the acquired company or business. The VODA and VOCRA associated with past business combinations are amortized over useful lives ranging from 10 to 40 years and such amortization is included in other expenses. Each year, or more frequently if circumstances indicate a possible impairment exists, the Company reviews VODA and VOCRA to determine whether the asset is impaired.
For certain acquired blocks of business, the estimated fair value of the in-force contract obligations exceeded the book value of assumed in-force insurance policy liabilities, resulting in negative VOBA, which is presented separately from VOBA as an additional insurance liability. The fair value of the in-force contract obligations is based on projections by each block of business. Negative VOBA is amortized over the policy period in proportion to the approximate consumption of losses included in the liability usually expressed in terms of insurance in-force or account value. Such amortization is recorded as a contra-expense in other expenses.
Reinsurance
For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Cessions under reinsurance agreements do not discharge the Company’s obligations as the primary insurer. The Company reviews all contractual features, including those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims.

199

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid (received), and the liabilities ceded (assumed) related to the underlying contracts is considered the net cost of reinsurance at the inception of the reinsurance agreement. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid (received) on the reinsurance of in-force blocks, as well as amounts paid (received) related to new business, are recorded as ceded (assumed) premiums; and ceded (assumed) premiums, reinsurance and other receivables (future policy benefits) are established.
For prospective reinsurance of short-duration contracts that meet the criteria for reinsurance accounting, amounts paid (received) are recorded as ceded (assumed) premiums and ceded (assumed) unearned premiums. Unearned premiums are reflected as a component of premiums, reinsurance and other receivables (future policy benefits). Such amounts are amortized through earned premiums over the remaining contract period in proportion to the amount of insurance protection provided. For retroactive reinsurance of short-duration contracts that meet the criteria of reinsurance accounting, amounts paid (received) in excess of the related insurance liabilities ceded (assumed) are recognized immediately as a loss and are reported in the appropriate line item within the statement of operations. Any gain on such retroactive agreement is deferred and is amortized as part of DAC, primarily using the recovery method.
Amounts currently recoverable under reinsurance agreements are included in premiums, reinsurance and other receivables and amounts currently payable are included in other liabilities. Assets and liabilities relating to reinsurance agreements with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance agreement. In the event that reinsurers do not meet their obligations to the Company under the terms of the reinsurance agreements, reinsurance recoverable balances could become uncollectible. In such instances, reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance.
Premiums, fees and policyholder benefits and claims include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Amounts received from reinsurers for policy administration are reported in other revenues. With respect to GMIBs, a portion of the directly written GMIBs are accounted for as insurance liabilities, but the associated reinsurance agreements contain embedded derivatives. These embedded derivatives are included in premiums, reinsurance and other receivables with changes in estimated fair value reported in policyholder benefits and claims.
If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in other liabilities and deposits made are included within premiums, reinsurance and other receivables. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenues or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenues or other expenses, as appropriate.
Investments
Net Investment Income and Net Investment Gains (Losses)
Income from investments is reported within net investment income, unless otherwise stated herein. Gains and losses on sales of investments, impairment losses and changes in valuation allowances are reported within net investment gains (losses), unless otherwise stated herein.
Fixed Maturity and Equity Securities
The majority of the Company’s fixed maturity and equity securities are classified as available-for-sale (“AFS”) and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income (loss) (“OCI”), net of policy-related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales are determined on a specific identification basis.
Interest income and prepayment fees are recognized when earned. Interest income is recognized using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recognized when declared.

200

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The Company periodically evaluates fixed maturity and equity securities for impairment. The assessment of whether impairments have occurred is based on management’s case-by-case evaluation of the underlying reasons for the decline in estimated fair value, as well as an analysis of the gross unrealized losses by severity and/or age as described in Note 8 “— Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities.”
For fixed maturity securities in an unrealized loss position, an other-than-temporary impairment (“OTTI”) is recognized in earnings when it is anticipated that the amortized cost will not be recovered. When either: (i) the Company has the intent to sell the security; or (ii) it is more likely than not that the Company will be required to sell the security before recovery, the OTTI recognized in earnings is the entire difference between the security’s amortized cost and estimated fair value. If neither of these conditions exists, the difference between the amortized cost of the security and the present value of projected future cash flows expected to be collected is recognized as an OTTI in earnings (“credit loss”). If the estimated fair value is less than the present value of projected future cash flows expected to be collected, this portion of OTTI related to other-than-credit factors (“noncredit loss”) is recorded in OCI.
With respect to equity securities, the Company considers in its OTTI analysis its intent and ability to hold a particular equity security for a period of time sufficient to allow for the recovery of its estimated fair value to an amount equal to or greater than cost. If a sale decision is made for an equity security and recovery to an amount at least equal to cost prior to the sale is not expected, the security will be deemed to be other-than-temporarily impaired in the period that the sale decision was made and an OTTI loss will be recorded in earnings. The OTTI loss recognized is the entire difference between the security’s cost and its estimated fair value.
FVO and Trading Securities
FVO and trading securities are stated at estimated fair value and include investments for which the FVO has been elected (“FVO Securities”) and investments that are actively purchased and sold (“Actively traded securities”). FVO Securities include:
fixed maturity and equity securities held-for-investment by the general account to support asset and liability management strategies for certain insurance products and investments in certain separate accounts (“FVO general account securities”); and
contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify for presentation and reporting as separate account summary total assets and liabilities. These investments are primarily mutual funds and, to a lesser extent, fixed maturity and equity securities, short-term investments and cash and cash equivalents. The investment returns on these investments inure to contractholders and are offset by a corresponding change in Policyholder account balances through interest credited to policyholder account balances (“FVO contractholder-directed unit-linked investments”).
Actively traded securities principally include fixed maturity securities and short sale agreement liabilities, which are included in other liabilities.
Changes in estimated fair value of these securities are included in net investment income, except for certain securities included in FVO Securities where changes are included in net investment gains (losses).
Mortgage Loans
The Company disaggregates its mortgage loan investments into three portfolio segments: commercial, agricultural and residential. The accounting policies that are applicable to all portfolio segments are presented below and the accounting policies related to each of the portfolio segments are included in Note 8.
Mortgage Loans Held-For-Investment
Mortgage loans held-for-investment are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, and are net of valuation allowances. Interest income and prepayment fees are recognized when earned. Interest income is recognized using an effective yield method giving effect to amortization of premiums and accretion of discounts.

201

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Also included in mortgage loans held-for-investment are commercial mortgage loans held by consolidated securitization entities (“CSEs”) and residential mortgage loans for which the FVO was elected, which are stated at estimated fair value. Changes in estimated fair value are recognized in net investment gains (losses) for commercial mortgage loans held by CSEs — FVO, and net investment income for residential mortgage loans — FVO.
Mortgage Loans Held-For-Sale
Mortgage loans held-for-sale that were previously designated as held-for-investment and mortgage loans originated with the intent to sell for which FVO was not elected, are stated at the lower of amortized cost or estimated fair value.
Policy Loans
Policy loans are stated at unpaid principal balances. Interest income is recorded as earned using the contractual interest rate. Generally, accrued interest is capitalized on the policy’s anniversary date. Valuation allowances are not established for policy loans, as they are fully collateralized by the cash surrender value of the underlying insurance policies. Any unpaid principal and accrued interest is deducted from the cash surrender value or the death benefit prior to settlement of the insurance policy.
Real Estate
Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful life of the asset (typically 20 to 55 years ). Rental income is recognized on a straight-line basis over the term of the respective leases. The Company periodically reviews its real estate held-for-investment for impairment and tests for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable and exceeds its estimated fair value. Properties whose carrying values are greater than their undiscounted cash flows are written down to their estimated fair value, which is generally computed using the present value of expected future cash flows discounted at a rate commensurate with the underlying risks.
Real estate for which the Company commits to a plan to sell within one year and actively markets in its current condition for a reasonable price in comparison to its estimated fair value is classified as held-for-sale. Real estate held-for-sale is stated at the lower of depreciated cost or estimated fair value less expected disposition costs and is not depreciated.
Real Estate Joint Ventures and Other Limited Partnership Interests
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, but does not have a controlling financial interest. 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.
The Company uses the cost method of accounting for investments in which it has virtually no influence over the investee’s operations. The Company recognizes distributions on cost method investments as earned or received. Because of the nature and structure of these cost method investments, they do not meet the characteristics of an equity security in accordance with applicable accounting standards.
The Company routinely evaluates its equity method and cost method investments for impairment. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. The Company considers its cost method investments for impairment when the carrying value of such investments exceeds the net asset value (“NAV”). The Company takes into consideration the severity and duration of this excess when determining whether the cost method investment is impaired.
Short-term Investments
Short-term investments include securities and other investments with remaining maturities of one year or less, but greater than three months, at the time of purchase and are stated at estimated fair value or amortized cost, which approximates estimated fair value.

202

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Other Invested Assets
Other invested assets consist principally of the following:
Freestanding derivatives with positive estimated fair values which are described in “— Derivatives” below.
Tax credit and renewable energy partnerships which derive a significant source of investment return in the form of income tax credits or other tax incentives. Where tax credits are guaranteed by a creditworthy third party, the investment is accounted for under the effective yield method. Otherwise, the investment is accounted for under the equity method.
Leveraged leases which are recorded net of non-recourse debt. Income is recognized by applying the leveraged lease’s estimated rate of return to the net investment in the lease. The Company regularly reviews residual values for impairment.
Direct financing leases gross investment is equal to the minimum lease payments plus the unguaranteed residual value.  Income is recorded by applying the pre-tax internal rate of return to the investment balance. The Company regularly reviews lease receivables for impairment. Certain direct financing leases are linked to inflation.
Funds withheld represent a receivable for amounts contractually withheld by ceding companies in accordance with reinsurance agreements. The Company recognizes interest on funds withheld at rates defined by the terms of the agreement which may be contractually specified or directly related to the underlying investments.
Investments in operating joint ventures that engage in insurance underwriting activities are accounted for under the equity method.
Securities Lending Program
Securities lending transactions, whereby blocks of securities are loaned to third parties, primarily brokerage firms and commercial banks, are treated as financing arrangements and the associated liability is recorded at the amount of cash received. The Company obtains collateral at the inception of the loan, usually cash, in an amount generally equal to 102% of the estimated fair value of the securities loaned, and maintains it at a level greater than or equal to 100% for the duration of the loan. Securities loaned under such transactions may be sold or re-pledged by the transferee. The Company is liable to return to the counterparties the cash collateral received. Security collateral on deposit from counterparties in connection with securities lending transactions may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the Company’s financial statements. The Company monitors the estimated fair value of the securities loaned on a daily basis and additional collateral is obtained as necessary throughout the duration of the loan. Income and expenses associated with securities lending transactions are reported as investment income and investment expense, respectively, within net investment income.
Derivatives
Freestanding Derivatives
Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.
Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivatives carrying value in other invested assets or other liabilities.

203

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows:
Statement of Operations Presentation:
Derivative:
Policyholder benefits and claims
Economic hedges of variable annuity guarantees included in future policy benefits
Net investment income
Economic hedges of equity method investments in joint ventures
 
All derivatives held in relation to trading portfolios
 
Derivatives held within contractholder-directed unit-linked investments
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:
Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.
Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).
Net investment in a foreign operation hedge - effectiveness in OCI, consistent with the translation adjustment for the hedged net investment in the foreign operation; ineffectiveness in net derivative gains (losses).
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item. Accruals on derivatives in net investment hedges are recognized in OCI.
In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.
When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.

204

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).
In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).
Embedded Derivatives
The Company sells variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;
the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and
a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses), except for those in policyholder benefits and claims related to ceded reinsurance of GMIB. If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.
Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In most cases, the exit price and the transaction (or entry) price will be the same at initial recognition.
Subsequent to initial recognition, fair values are based on unadjusted quoted prices for identical assets or liabilities in active markets that are readily and regularly obtainable. When such quoted prices are not available, fair values are based on quoted prices in markets that are not active, quoted prices for similar but not identical assets or liabilities, or other observable inputs. If these inputs are not available, or observable inputs are not determinable, unobservable inputs and/or adjustments to observable inputs requiring management judgment are used to determine the estimated fair value of assets and liabilities.
Goodwill
Goodwill represents the future economic benefits arising from net assets acquired in a business combination that are not individually identified and recognized. Goodwill is calculated as the excess of cost over the estimated fair value of such net assets acquired, is not amortized, and is tested for impairment based on a fair value approach at least annually or more frequently if events or circumstances indicate that there may be justification for conducting an interim test. The Company performs its annual goodwill impairment testing during the third quarter of each year based upon data as of the close of the second quarter. Goodwill associated with a business acquisition is not tested for impairment during the year the business is acquired unless there is a significant identified impairment event.

205

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The impairment test is performed at the reporting unit level, which is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. For purposes of goodwill impairment testing, if the carrying value of a reporting unit exceeds its estimated fair value, there may be an indication of impairment. In such instances, the implied fair value of the goodwill is determined in the same manner as the amount of goodwill that would be determined in a business combination. The excess of the carrying value of goodwill over the implied fair value of goodwill would be recognized as an impairment and recorded as a charge against net income.
On an ongoing basis, the Company evaluates potential triggering events that may affect the estimated fair value of the Company’s reporting units to assess whether any goodwill impairment exists. Deteriorating or adverse market conditions for certain reporting units may have a significant impact on the estimated fair value of these reporting units and could result in future impairments of goodwill.
Employee Benefit Plans
Certain subsidiaries of MetLife, Inc. sponsor and/or administer various plans that provide defined benefit pension and other postretirement benefits covering eligible employees and sales representatives. Measurement dates used for all of the subsidiaries’ defined benefit pension and other postretirement benefit plans correspond with the fiscal year ends of sponsoring subsidiaries, which are December 31 for U.S. and most non-U.S. subsidiaries and November 30 for certain non-U.S. subsidiaries.
The Company recognizes the funded status of each of its defined pension and postretirement benefit plans, measured as the difference between the fair value of plan assets and the benefit obligation, which is the projected benefit obligation (“PBO”) for pension benefits and the accumulated postretirement benefit obligation (“APBO”) for other postretirement benefits in other assets or other liabilities.
Actuarial gains and losses result from differences between the actual experience and the assumed experience on plan assets or PBO during a particular period and are recorded in accumulated OCI (“AOCI”). To the extent such gains and losses exceed 10% of the greater of the PBO or the estimated fair value of plan assets, the excess is amortized into net periodic benefit costs over the average projected future service years of the active employees. In addition, prior service costs (credit) are recognized in AOCI at the time of the amendment and then amortized to net periodic benefit costs over the average projected future service years of the active employees affected by the change.
Net periodic benefit costs are determined using management estimates and actuarial assumptions and are comprised of service cost, interest cost, settlement and curtailment costs, expected return on plan assets, amortization of net actuarial (gains) losses, and amortization of prior service costs (credit). Fair value is used to determine the expected return on plan assets.
The subsidiaries also sponsor defined contribution plans for substantially all U.S. employees under which a portion of employee contributions is matched. Applicable matching contributions are made each payroll period. Accordingly, the Company recognizes compensation cost for current matching contributions. As all contributions are transferred currently as earned to the defined contribution plans, no liability for matching contributions is recognized in the balance sheets.
Income Tax
MetLife, Inc. and its includable life insurance and non-life insurance subsidiaries file a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the “Code”). Non-includable subsidiaries file either separate individual corporate tax returns or separate consolidated tax returns.
The Company’s accounting for income taxes represents management’s best estimate of various events and transactions.
Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse.

206

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances. When making such determination the Company considers many factors, including:
the nature, frequency, and amount of cumulative financial reporting income and losses in recent years;
the jurisdiction in which the deferred tax asset was generated;
the length of time that carryforward can be utilized in the various taxing jurisdiction;
future taxable income exclusive of reversing temporary differences and carryforwards;
future reversals of existing taxable temporary differences;
taxable income in prior carryback years; and
tax planning strategies.
The Company may be required to change its provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, the effect of changes in tax laws, tax regulations, or interpretations of such laws or regulations, is recognized in net income tax expense (benefit) in the period of change.
The Company determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made.
The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax expense.
Litigation Contingencies
The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company’s financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Except as otherwise disclosed in Note  21 , legal costs are recognized as incurred. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company’s financial statements.
Other Accounting Policies
Stock-Based Compensation
The Company grants certain employees and directors stock-based compensation awards under various plans that are subject to specific vesting conditions. With the exception of performance shares granted in 2015, 2014 and 2013 which are re-measured quarterly, the cost of all stock-based transactions is measured at fair value at grant date and recognized over the period during which a grantee is required to provide services in exchange for the award. Although the terms of the Company’s stock-based plans do not accelerate vesting upon retirement, or the attainment of retirement eligibility, the requisite service period subsequent to attaining such eligibility is considered non-substantive. Accordingly, the Company recognizes compensation expense related to stock-based awards over the shorter of the requisite service period or the period to attainment of retirement eligibility. An estimation of future forfeitures of stock-based awards is incorporated into the determination of compensation expense when recognizing expense over the requisite service period.
Cash and Cash Equivalents
The Company considers all highly liquid securities and other investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents are stated at amortized cost, which approximates estimated fair value.

207

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Property, Equipment, Leasehold Improvements and Computer Software
Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using the straight-line method over the estimated useful lives of the assets, as appropriate. The estimated life is generally 40 years for company occupied real estate property, from one to 25 years for leasehold improvements, and from three to seven years for all other property and equipment. The cost basis of the property, equipment and leasehold improvements was $2.0 billion at both December 31, 2015 and 2014 . Accumulated depreciation and amortization of property, equipment and leasehold improvements was $1.1 billion and $1.0 billion at December 31, 2015 and 2014 , respectively. Related depreciation and amortization expense was $216 million , $182 million and $183 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as certain internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a four -year period using the straight-line method. The cost basis of computer software was $2.2 billion and $1.9 billion at December 31, 2015 and 2014 , respectively. Accumulated amortization of capitalized software was $1.5 billion and $1.3 billion at December 31, 2015 and 2014 , respectively. Related amortization expense was $212 million , $212 million and $216 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Other Revenues
Other revenues include, in addition to items described elsewhere herein, advisory fees, broker-dealer commissions and fees, administrative service fees, and changes in account value relating to corporate-owned life insurance (“COLI”). Such fees and commissions are recognized in the period in which services are performed. Under certain COLI contracts, if the Company reports certain unlikely adverse results in its financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value.
Policyholder Dividends
Policyholder dividends are approved annually by the insurance subsidiaries’ boards of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management’s judgment as to the appropriate level of statutory surplus to be retained by the insurance subsidiaries.
Foreign Currency
Assets, liabilities and operations of foreign affiliates and subsidiaries are recorded based on the functional currency of each entity. The determination of the functional currency is made based on the appropriate economic and management indicators. For most of the Company’s foreign operations, the local currency is the functional currency. For certain other foreign operations, such as Japan, the local currency and one or more other currencies qualify as functional currencies. Assets and liabilities of foreign affiliates and subsidiaries are translated from the functional currency to U.S. dollars at the exchange rates in effect at each year-end and revenues and expenses are translated at the average exchange rates during the year. The resulting translation adjustments are charged or credited directly to OCI, net of applicable taxes. Gains and losses from foreign currency transactions, including the effect of re-measurement of monetary assets and liabilities to the appropriate functional currency, are reported as part of net investment gains (losses) in the period in which they occur.
Earnings Per Common Share
Basic earnings per common share are computed based on the weighted average number of common shares, or their equivalent, outstanding during the period. The difference between the number of shares assumed issued and number of shares assumed purchased represents the dilutive shares. Diluted earnings per common share include the dilutive effect of the assumed: (i) exercise or issuance of stock-based awards using the treasury stock method; (ii) settlement of stock purchase contracts underlying common equity units using the treasury stock method; and (iii) settlement of accelerated common stock repurchase contracts. Under the treasury stock method, exercise or issuance of stock-based awards and settlement of stock purchase contracts underlying common equity units is assumed to occur with the proceeds used to purchase common stock at the average market price for the period.

208

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Adoption of New Accounting Pronouncements
Effective November 18, 2014, the Company adopted new guidance on when, if ever, the cost of acquiring an entity should be used to establish a new accounting basis (“pushdown”) in the acquired entity’s separate financial statements. The guidance provides an acquired entity and its subsidiaries with an irrevocable option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. If a reporting entity elects to apply pushdown accounting, its stand-alone financial statements would reflect the acquirer’s new basis in the acquired entity’s assets and liabilities. The election to apply pushdown accounting should be determined by an acquired entity for each individual change-in-control event in which an acquirer obtains control of the acquired entity; however, an entity that does not elect to apply pushdown accounting in the period of a change-in-control can later elect to retrospectively apply pushdown accounting to the most recent change-in-control transaction as a change in accounting principle. The new guidance did not have a material impact on the consolidated financial statements upon adoption.
Effective January 1, 2014, the Company adopted new guidance regarding reporting of discontinued operations and disclosures of disposals of components of an entity. The guidance increases the threshold for a disposal to qualify as a discontinued operation, expands the disclosures for discontinued operations and requires new disclosures for certain disposals that do not meet the definition of a discontinued operation. Disposals must now represent a strategic shift that has or will have a major effect on the entity’s operations and financial results to qualify as discontinued operations.
Effective January 1, 2014, the Company adopted new guidance regarding the presentation of an unrecognized tax benefit. The new guidance requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. However, when the carryforwards are not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax position or the applicable tax law does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit will be presented in the financial statements as a liability and will not be combined with the related deferred tax asset. The adoption was prospectively applied and resulted in a reduction to other liabilities and a corresponding increase to deferred income tax liability in the amount of $277 million .
Effective January 1, 2014, the Company adopted new guidance on other expenses. The objective of this standard is to address how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. The amendments in this standard specify that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using the straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. In accordance with the adoption of the new accounting pronouncement on January 1, 2014, the Company recorded $57 million in other liabilities, and a corresponding deferred cost, in other assets.
Effective July 17, 2013, the Company adopted guidance regarding derivatives that permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to the United States Treasury and London Interbank Offered Rate (“LIBOR”). Also, this new guidance removes the restriction on using different benchmark rates for similar hedges. The new guidance did not have a material impact on the consolidated financial statements upon adoption.
Effective January 1, 2013, the Company adopted guidance regarding comprehensive income that requires an entity to provide information about the amounts reclassified out of AOCI by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The adoption was prospectively applied and resulted in additional disclosures in Note 16.

209

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Effective January 1, 2013, the Company adopted guidance regarding balance sheet offsetting disclosures which requires an entity to disclose information about offsetting and related arrangements for derivatives, including bifurcated embedded derivatives, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions, to enable users of its financial statements to understand the effects of those arrangements on its financial position. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The adoption was retrospectively applied and resulted in additional disclosures related to derivatives in Note 9.
Future Adoption of New Accounting Pronouncements
In January 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance (Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ) on the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the instrument-specific credit risk provision. The new 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 FVO that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments.  The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In May 2015, the FASB issued new guidance on short-duration insurance contracts (ASU 2015-09, Financial Services - Insurance (Topic 944): Disclosures about Short-Duration Contracts ). The amendments in this new guidance are effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. The new guidance should be applied retrospectively by providing comparative disclosures for each period presented, except for those requirements that apply only to the current period. The new guidance requires insurance entities to provide users of financial statements with more transparent information about initial claim estimates and subsequent adjustments to these estimates, including information on: (i) reconciling from the claim development table to the balance sheet liability, (ii) methodologies and judgments in estimating claims, and (iii) the timing, and frequency of claims. The adoption will not have an impact on the Company’s consolidated financial statements other than expanded disclosures in Note 4.
In May 2015, the FASB issued new guidance on fair value measurement (ASU 2015‑07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share ( or Its Equivalent ) ), effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years and which should be applied retrospectively to all periods presented. Earlier application is permitted. The amendments in this ASU remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using NAV per share (or its equivalent) practical expedient. In addition, the amendments remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the NAV per share practical expedient. The adoption of this new guidance will not have a material impact on the Company’s consolidated financial statements.
In April 2015, the FASB issued new guidance on accounting for fees paid in a cloud computing arrangement (ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement ), effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of the new guidance is permitted and an entity can elect to adopt the guidance either: (1) prospectively to all arrangements entered into or materially modified after the effective date; or (2) retrospectively. The new guidance provides that all software licenses included in cloud computing arrangements be accounted for consistent with other licenses of intangible assets. However, if a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract, the accounting for which did not change. The adoption of this new guidance will not have a material impact on the Company’s consolidated financial statements.
In February 2015, the FASB issued certain amendments to the consolidation analysis to improve consolidation guidance for legal entities (ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ), effective for fiscal years beginning after December 15, 2015 and interim periods within those years and early adoption is permitted. The new standard is intended to improve targeted areas of the consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. The amendments in this ASU affect the consolidation evaluation for reporting organizations. In addition, the amendments in this ASU simplify and improve current GAAP by reducing the number of consolidation models. The adoption of this new guidance will not have a material impact on the Company’s consolidated financial statements.

210

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

In May 2014, the FASB issued a comprehensive new revenue recognition standard (ASU 2014‑09, Revenue from Contracts with Customers (Topic 606) ), effective for fiscal years beginning after December 15, 2016 and interim periods within those years and should be applied retrospectively. In August 2015, the FASB amended the guidance to defer the effective date by one year, effective for the fiscal years beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The new guidance will supersede nearly all existing revenue recognition guidance under GAAP; however, it will not impact the accounting for insurance contracts, leases, financial instruments and guarantees. For those contracts that are impacted by the new guidance, the guidance will require 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 Company is currently evaluating the impact of this guidance on its consolidated financial statements.
2. Segment Information
MetLife is organized into six segments, reflecting three broad geographic regions: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and EMEA. In addition, the Company reports certain of its results of operations in Corporate & Other.
On January 12, 2016, the Company announced its plan to pursue the separation of a substantial portion of its Retail segment, which is organized into two U.S. businesses, Life & Other and Annuities, as well as certain portions of its Corporate Benefit Funding segment and Corporate & Other (the “Separation”). See Note 23.
Americas
The Americas consists of the following segments:
Retail
The Retail segment offers a broad range of protection products and services and a variety of annuities to individuals and employees of corporations and other institutions, and is organized into two U.S. businesses: Life & Other and Annuities. Life & Other insurance products and services include variable life, universal life, term life and whole life products. Additionally, through broker-dealer affiliates, the Company offers a full range of mutual funds and other securities products. Life & Other products and services also include individual disability income products and personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance. Annuities includes a variety of variable and fixed annuities which provide for both asset accumulation and asset distribution needs.
Group, Voluntary & Worksite Benefits
The Group, Voluntary & Worksite Benefits segment offers a broad range of protection products and services to individuals and corporations, as well as other institutions and their respective employees. Group, Voluntary & Worksite Benefits insurance products and services include life, dental, group short- and long-term disability and accidental death and dismemberment (“AD&D”) coverages. In addition, the Group, Voluntary & Worksite Benefits segment offers property & casualty insurance, including private passenger automobile, homeowners and personal excess liability, which is offered to employees on a voluntary basis, long-term care, critical illness, vision and accident & health coverages, as well as prepaid legal plans.
Corporate Benefit Funding
The Corporate Benefit Funding segment offers a broad range of annuity and investment products, including guaranteed interest products and other stable value products, income annuities and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This segment also includes structured settlements and certain products to fund postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives.

211

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
2. Segment Information (continued)

Latin America
The Latin America segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include life insurance, accident & health insurance, group medical, dental, credit insurance, endowment and retirement & savings products written in Latin America. The Latin America segment also includes U.S. direct business, comprised of group and individual products sold through sponsoring organizations, affinity groups and direct to consumer. Products included are life, dental, group short- and long-term disability, AD&D coverages, property & casualty and other accident & health coverages, as well as non-insurance products such as identity protection.
Asia
The Asia segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include whole life, term life, variable life, universal life, accident & health insurance, fixed and variable annuities, credit insurance and endowment products.
EMEA
The EMEA segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include life insurance, accident & health insurance, credit insurance, annuities, endowment and retirement & savings products.
Corporate & Other
Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including external integration costs, internal resource costs for associates committed to acquisitions, enterprise-wide strategic initiative restructuring charges, various start-up businesses (including expatriate benefits insurance and the investment management business through which the Company offers fee-based investment management services to institutional clients) and certain run-off businesses. Corporate & Other also includes assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan. Under this in-force reinsurance agreement, the Company reinsures living and death benefit guarantees issued in connection with variable annuity products. Additionally, Corporate & Other includes interest expense related to the majority of the Company’s outstanding debt and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings.
Financial Measures and Segment Accounting Policies
Operating earnings is the measure of segment profit or loss the Company uses to evaluate segment performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is the Company’s measure of segment performance and is reported below. Operating earnings should not be viewed as a substitute for income (loss) from continuing operations, net of income tax. The Company believes the presentation of operating 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.
Operating earnings is defined as operating revenues less operating expenses, both net of income tax.
Operating revenues and operating expenses exclude results of discontinued operations and other businesses that have been or will be sold or exited by MetLife and are referred to as divested businesses. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses). Operating expenses also excludes goodwill impairments.

212

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
2. Segment Information (continued)

The following additional adjustments are made to GAAP revenues, in the line items indicated, in calculating operating 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 GMIB fees (“GMIB Fees”);
Net investment income: (i) includes investment hedge adjustments which represent 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) includes income from discontinued real estate operations, (iii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iv) excludes certain amounts related to contractholder-directed unit-linked investments and (v) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
Other revenues are adjusted for settlements of foreign currency earnings hedges.
The following additional adjustments are made to GAAP expenses, in the line items indicated, in calculating operating 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) inflation-indexed benefit adjustments associated with contracts backed by inflation-indexed investments and 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 and excludes amounts related to net investment income earned on contractholder-directed unit-linked investments;
Amortization of DAC and 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;
Amortization of negative VOBA excludes amounts related to 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) implementation of new insurance regulatory requirements and (iii) acquisition and integration costs.
Operating earnings also excludes the recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance. In addition to the tax impact of the adjustments mentioned above, 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 years ended December 31, 2015 , 2014 and 2013 and at December 31, 2015 and 2014 . The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operating 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 the Company’s business.

213

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
2. Segment Information (continued)

The Company’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. The Company’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, operating earnings or income (loss) from continuing operations, net of income tax.
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.
 
 
Operating Results
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2015
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Total
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
7,228

 
$
16,358

 
$
3,019

 
$
2,891

 
$
29,496

 
$
6,937

 
$
2,036

 
$
79

 
$
38,548

 
$
(3
)
 
$
38,545

Universal life and investment-type product policy fees
 
4,933

 
740

 
259

 
1,116

 
7,048

 
1,542

 
424

 
99

 
9,113

 
394

 
9,507

Net investment income
 
7,814

 
1,898

 
5,710

 
1,047

 
16,469

 
2,675

 
326

 
319

 
19,789

 
(508
)
 
19,281

Other revenues
 
989

 
451

 
286

 
42

 
1,768

 
105

 
61

 
86

 
2,020

 
(37
)
 
1,983

Net investment gains (losses)
 

 

 

 

 

 

 

 

 

 
597

 
597

Net derivative gains (losses)
 

 

 

 

 

 

 

 

 

 
38

 
38

Total revenues
 
20,964

 
19,447

 
9,274

 
5,096

 
54,781

 
11,259

 
2,847

 
583

 
69,470

 
481

 
69,951

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
9,995

 
15,170

 
5,447

 
2,625

 
33,237

 
5,275

 
988

 
65

 
39,565

 
537

 
40,102

Interest credited to policyholder account balances
 
2,198

 
151

 
1,184

 
349

 
3,882

 
1,309

 
120

 
23

 
5,334

 
276

 
5,610

Capitalization of DAC
 
(1,048
)
 
(151
)
 
(19
)
 
(426
)
 
(1,644
)
 
(1,720
)
 
(472
)
 
(1
)
 
(3,837
)
 

 
(3,837
)
Amortization of DAC and VOBA
 
1,561

 
164

 
21

 
303

 
2,049

 
1,256

 
497

 

 
3,802

 
134

 
3,936

Amortization of negative VOBA
 

 

 

 
(1
)
 
(1
)
 
(309
)
 
(16
)
 

 
(326
)
 
(35
)
 
(361
)
Interest expense on debt
 
(1
)
 

 
3

 

 
2

 

 

 
1,198

 
1,200

 
8

 
1,208

Other expenses
 
4,855

 
2,703

 
512

 
1,666

 
9,736

 
3,611

 
1,469

 
990

 
15,806

 
17

 
15,823

Total expenses
 
17,560

 
18,037

 
7,148

 
4,516

 
47,261

 
9,422

 
2,586

 
2,275

 
61,544

 
937

 
62,481

Provision for income tax expense (benefit)
 
956

 
499

 
739

 
7

 
2,201

 
457

 
21

 
(353
)
 
2,326

 
(178
)
 
2,148

Operating earnings
 
$
2,448

 
$
911

 
$
1,387

 
$
573

 
$
5,319

 
$
1,380

 
$
240

 
$
(1,339
)
 
5,600

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
481

 
 
 
 
Total expenses
 
(937
)
 
 
 
 
Provision for income tax (expense) benefit
 
178

 
 
 
 
Income (loss) from continuing operations, net of income tax
 
$
5,322

 
 
 
$
5,322


214

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
2. Segment Information (continued)

At December 31, 2015
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia (1)
 
EMEA
 
Corporate
& Other
 
Total
 
 
(In millions)
Total assets
 
$
347,257

 
$
46,476

 
$
225,015

 
$
65,266

 
$
113,895

 
$
26,767

 
$
53,257

 
$
877,933

Separate account assets
 
$
159,782

 
$
638

 
$
82,157

 
$
46,061

 
$
8,964

 
$
3,996

 
$

 
$
301,598

Separate account liabilities
 
$
159,782

 
$
638

 
$
82,157

 
$
46,061

 
$
8,964

 
$
3,996

 
$

 
$
301,598

______________
(1)
Total assets includes $90.0 billion of assets from the Japan operations which represents 10% of total consolidated assets.
 
 
Operating Results
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2014
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Total
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
7,280

 
$
15,979

 
$
2,768

 
$
3,039

 
$
29,066

 
$
7,566

 
$
2,309

 
$
81

 
$
39,022

 
$
45

 
$
39,067

Universal life and investment-type product policy fees
 
5,074

 
716

 
226

 
1,239

 
7,255

 
1,693

 
466

 
127

 
9,541

 
405

 
9,946

Net investment income
 
7,887

 
1,861

 
5,684

 
1,229

 
16,661

 
2,886

 
428

 
509

 
20,484

 
669

 
21,153

Other revenues
 
1,059

 
420

 
286

 
35

 
1,800

 
106

 
60

 
67

 
2,033

 
(3
)
 
2,030

Net investment gains (losses)
 

 

 

 

 

 

 

 

 

 
(197
)
 
(197
)
Net derivative gains (losses)
 

 

 

 

 

 

 

 

 

 
1,317

 
1,317

Total revenues
 
21,300

 
18,976

 
8,964

 
5,542

 
54,782

 
12,251

 
3,263

 
784

 
71,080

 
2,236

 
73,316

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
9,851

 
14,897

 
5,106

 
2,786

 
32,640

 
5,724

 
1,053

 
61

 
39,478

 
1,000

 
40,478

Interest credited to policyholder account balances
 
2,245

 
156

 
1,140

 
394

 
3,935

 
1,544

 
148

 
34

 
5,661

 
1,282

 
6,943

Capitalization of DAC
 
(969
)
 
(143
)
 
(31
)
 
(445
)
 
(1,588
)
 
(1,914
)
 
(680
)
 

 
(4,182
)
 
(1
)
 
(4,183
)
Amortization of DAC and VOBA
 
1,515

 
149

 
19

 
334

 
2,017

 
1,397

 
613

 

 
4,027

 
105

 
4,132

Amortization of negative VOBA
 

 

 

 
(1
)
 
(1
)
 
(364
)
 
(31
)
 

 
(396
)
 
(46
)
 
(442
)
Interest expense on debt
 
1

 
1

 
9

 

 
11

 

 

 
1,167

 
1,178

 
38

 
1,216

Other expenses
 
4,711

 
2,571

 
492

 
1,810

 
9,584

 
3,975

 
1,846

 
849

 
16,254

 
114

 
16,368

Total expenses
 
17,354

 
17,631

 
6,735

 
4,878

 
46,598

 
10,362

 
2,949

 
2,111

 
62,020

 
2,492

 
64,512

Provision for income tax expense (benefit)
 
1,130

 
467

 
771

 
96

 
2,464

 
582

 
29

 
(697
)
 
2,378

 
87

 
2,465

Operating earnings
 
$
2,816

 
$
878

 
$
1,458

 
$
568

 
$
5,720

 
$
1,307

 
$
285

 
$
(630
)
 
6,682




 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
2,236

 
 
 
 
Total expenses
 
(2,492
)
 
 
 
 
Provision for income tax (expense) benefit
 
(87
)
 
 
 
 
Income (loss) from continuing operations, net of income tax
 
$
6,339

 
 
 
$
6,339

At December 31, 2014
 
Retail
 
Group,
Voluntary
& Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia (1)
 
EMEA
 
Corporate
& Other
 
Total
 
 
(In millions)
Total assets
 
$
359,188

 
$
46,483

 
$
228,543

 
$
72,259

 
$
117,894

 
$
29,217

 
$
48,753

 
$
902,337

Separate account assets
 
$
171,726

 
$
669

 
$
81,150

 
$
50,301

 
$
9,078

 
$
4,070

 
$

 
$
316,994

Separate account liabilities
 
$
171,726

 
$
669

 
$
81,150

 
$
50,301

 
$
9,078

 
$
4,070

 
$

 
$
316,994

______________
(1)
Total assets includes $95.0 billion of assets from the Japan operations which represents 11% of total consolidated assets.

215

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
2. Segment Information (continued)

 
 
Operating Results
 
 
 
 
 
 
Americas
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2013
 
Retail
 
Group,
Voluntary
& Worksite Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Total
 
Asia
 
EMEA
 
Corporate
& Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
6,528

 
$
15,250

 
$
2,767

 
$
2,870

 
$
27,415

 
$
7,801

 
$
2,297

 
$
70

 
$
37,583

 
$
91

 
$
37,674

Universal life and investment-type product policy fees
 
4,912

 
688

 
247

 
991

 
6,838

 
1,722

 
386

 
139

 
9,085

 
366

 
9,451

Net investment income
 
7,796

 
1,833

 
5,506

 
1,145

 
16,280

 
2,943

 
425

 
746

 
20,394

 
1,838

 
22,232

Other revenues
 
1,018

 
418

 
278

 
23

 
1,737

 
92

 
97

 
28

 
1,954

 
(34
)
 
1,920

Net investment gains (losses)
 

 

 

 

 

 

 

 

 

 
161

 
161

Net derivative gains (losses)
 

 

 

 

 

 

 

 

 

 
(3,239
)
 
(3,239
)
Total revenues
 
20,254

 
18,189

 
8,798

 
5,029

 
52,270

 
12,558

 
3,205

 
983

 
69,016

 
(817
)
 
68,199

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
9,028

 
14,227

 
5,180

 
2,487

 
30,922

 
5,755

 
1,039

 
30

 
37,746

 
1,620

 
39,366

Interest credited to policyholder account balances
 
2,331

 
155

 
1,233

 
417

 
4,136

 
1,690

 
147

 
42

 
6,015

 
2,164

 
8,179

Capitalization of DAC
 
(1,309
)
 
(141
)
 
(27
)
 
(452
)
 
(1,929
)
 
(2,143
)
 
(714
)
 

 
(4,786
)
 

 
(4,786
)
Amortization of DAC and VOBA
 
1,384

 
140

 
23

 
311

 
1,858

 
1,542

 
683

 

 
4,083

 
(533
)
 
3,550

Amortization of negative VOBA
 

 

 

 
(2
)
 
(2
)
 
(427
)
 
(95
)
 

 
(524
)
 
(55
)
 
(579
)
Interest expense on debt
 

 
1

 
9

 

 
10

 

 
1

 
1,148

 
1,159

 
123

 
1,282

Other expenses
 
5,101

 
2,379

 
481

 
1,722

 
9,683

 
4,317

 
1,812

 
784

 
16,596

 
539

 
17,135

Total expenses
 
16,535

 
16,761

 
6,899

 
4,483

 
44,678

 
10,734

 
2,873

 
2,004

 
60,289

 
3,858

 
64,147

Provision for income tax expense (benefit)
 
1,107

 
480

 
667

 
83

 
2,337

 
565

 
51

 
(609
)
 
2,344

 
(1,683
)
 
661

Operating earnings
 
$
2,612

 
$
948

 
$
1,232

 
$
463

 
$
5,255

 
$
1,259

 
$
281

 
$
(412
)
 
6,383

 
 
 
 
Adjustments to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
(817
)
 
 
 
 
Total expenses
 
(3,858
)
 
 
 
 
Provision for income tax (expense) benefit
 
1,683

 
 
 
 
Income (loss) from continuing operations, net of income tax
 
$
3,391

 
 
 
$
3,391

The following table presents total premiums, universal life and investment-type product policy fees and other revenues by major product groups of the Company’s segments, as well as Corporate & Other:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Life insurance
$
23,037

 
$
23,483

 
$
23,189

Accident & health insurance
13,090

 
13,336

 
13,214

Annuities
9,653

 
9,984

 
8,987

Property & casualty insurance
3,504

 
3,524

 
3,270

Non-insurance
751

 
716

 
385

Total
$
50,035

 
$
51,043

 
$
49,045



216

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
2. Segment Information (continued)

The following table presents total premiums, universal life and investment-type product policy fees and other revenues associated with the Company’s U.S. and foreign operations:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
U.S.
$
35,042

 
$
34,536

 
$
32,529

Foreign:
 
 
 
 
 
Japan
6,264

 
6,917

 
7,373

Other
8,729

 
9,590

 
9,143

Total
$
50,035

 
$
51,043

 
$
49,045

Revenues derived from any customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the years ended December 31, 2015 , 2014 and 2013 .
3. Acquisitions and Dispositions
2014 Disposition
In May 2014, the Company completed the sale of its wholly-owned subsidiary, MetLife Assurance Limited (“MAL”), for $702 million ( £418 million ) in net cash consideration. As a result of the sale, a loss of $633 million ( $442 million , net of income tax), was recorded for the year ended December 31, 2014 , which includes a reduction to goodwill of $60 million ( $51 million , net of income tax), as well as $77 million ( $50 million , net of income tax) related to net investments in foreign operation hedges. The loss is reflected within net investment gains (losses) on the consolidated statements of operations and comprehensive income (loss). Compared to the expected loss at the time of the sales agreement, the actual loss on the sale was increased by net income from MAL of $77 million for the year ended December 31, 2014 . MAL’s results of operations are included in continuing operations. They were historically included in the Corporate Benefit Funding segment.
2013 Acquisition
In October 2013, MetLife completed the acquisition of Administradora de Fondos de Pensiones Provida S.A. (“ProVida”) , the largest private pension fund administrator in Chile based on assets under management and number of pension fund contributors. The acquisition of ProVida supports the Company's growth strategy in emerging markets and further strengthens the Company's overall position in Chile. Revenues and net income of $100 million and $42 million , respectively, resulting from the acquisition of ProVida since the acquisition date, were included in the consolidated statement of operations within the Latin America segment for the year ended December 31, 2013.

217

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

4. Insurance
Insurance Liabilities
Insurance liabilities are comprised of future policy benefits, policyholder account balances and other policy-related balances. Information regarding insurance liabilities by segment, as well as Corporate & Other, was as follows at:
 
December 31,
 
2015
 
2014
 
(In millions)
Retail
$
140,085

 
$
136,778

Group, Voluntary & Worksite Benefits
31,245

 
30,328

Corporate Benefit Funding
112,208

 
115,440

Latin America
14,335

 
15,596

Asia
83,510

 
86,483

EMEA
19,009

 
20,520

Corporate & Other
8,464

 
8,157

Total
$
408,856

 
$
413,302

Future policy benefits are measured as follows:
Product Type:
Measurement Assumptions:
Participating life
Aggregate of (i) net level premium reserves for death and endowment policy benefits (calculated based upon the non-forfeiture interest rate, ranging from 3% to 7% for domestic business and 1% to 11% for international business and mortality rates guaranteed in calculating the cash surrender values described in such contracts); and (ii) the liability for terminal dividends for domestic business.
Nonparticipating life
Aggregate of the present value of expected future benefit payments and related expenses less the present value of expected future net premiums. Assumptions as to mortality and persistency are based upon the Company’s experience when the basis of the liability is established. Interest rate assumptions for the aggregate future policy benefit liabilities range from 2% to 11% for domestic business and less than 1% to 13% for international business.
I ndividual and group
traditional fixed annuities
after annuitization
Present value of expected future payments. Interest rate assumptions used in establishing such liabilities range from 2% to 11% for domestic business and less than 1% to 12% for international business.
Non-medical health
insurance
The net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rate assumptions used in establishing such liabilities range from 4% to 7% (primarily related to domestic business).
Disabled lives
Present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rate assumptions used in establishing such liabilities range from 2% to 8% for domestic business and 1% to 9% for international business.
Property & casualty
insurance
The amount estimated for claims that have been reported but not settled and claims incurred but not reported are based upon the Company’s historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation.
Participating business represented 4% and 5% of the Company’s life insurance in-force at December 31, 2015 and 2014 , respectively. Participating policies represented 19% , 18% and 19% of gross traditional life insurance premiums for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Policyholder account balances are equal to: (i) policy account values, which consist of an accumulation of gross premium payments and investment performance; (ii) credited interest, ranging from less than 1% to 13% for domestic business and 0% to 15% for international business, less expenses, mortality charges and withdrawals; and (iii) fair value adjustments relating to business combinations.

218

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
4. Insurance (continued)

Guarantees
The Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. GMABs and the portions of both non-life-contingent GMWBs and GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 9 . Guarantees accounted for as insurance liabilities include:
Guarantee:
 
Measurement Assumptions:
GMDBs
A return of purchase payment upon death even if the account value is reduced to zero.
 
Present value of expected death benefits in excess of the projected account balance recognizing the excess ratably over the accumulation period based on the present value of total expected assessments.
 
An enhanced death benefit may be available for an additional fee.
 
Assumptions are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk.
 
 
 
 
Investment performance and volatility assumptions are consistent with the historical experience of the appropriate underlying equity index, such as the S&P 500 Index.
 
 
 
 
Benefit assumptions are based on the average benefits payable over a range of scenarios.
GMIBs
After a specified period of time determined at the time of issuance of the variable annuity contract, a minimum accumulation of purchase payments, even if the account value is reduced to zero, that can be annuitized to receive a monthly income stream that is not less than a specified amount.
 
Present value of expected income benefits in excess of the projected account balance at any future date of annuitization and recognizing the excess ratably over the accumulation period based on present value of total expected assessments.
 
Certain contracts also provide for a guaranteed lump sum return of purchase premium in lieu of the annuitization benefit.
 
Assumptions are consistent with those used for estimating GMDB liabilities.
 
 
 
 
Calculation incorporates an assumption for the percentage of the potential annuitizations that may be elected by the contractholder.
GMWBs
A return of purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that cumulative withdrawals in a contract year do not exceed a certain limit.
 
Expected value of the life contingent payments and expected assessments using assumptions consistent with those used for estimating the GMDB liabilities.
 
Certain contracts include guaranteed withdrawals that are life contingent.
 
 
 
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.

219

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
4. Insurance (continued)

Information regarding the liabilities for guarantees (excluding base policy liabilities and embedded derivatives) relating to annuity and universal and variable life contracts was as follows:
 
Annuity Contracts
 
Universal and Variable
Life Contracts
 
 
 
GMDBs
 
GMIBs
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
Total
 
(In millions)
Direct and Assumed
 
 
 
 
 
 
 
 
 
Balance at January 1, 2013
$
567

 
$
1,635

 
$
4,785

 
$
246

 
$
7,233

Incurred guaranteed benefits (1)
200

 
229

 
(64
)
 
20

 
385

Paid guaranteed benefits
(82
)
 
(13
)
 
(23
)
 

 
(118
)
Balance at December 31, 2013
685

 
1,851

 
4,698

 
266

 
7,500

Incurred guaranteed benefits (1)
310

 
262

 
411

 
22

 
1,005

Paid guaranteed benefits
(59
)
 

 
(17
)
 

 
(76
)
Balance at December 31, 2014
936

 
2,113

 
5,092

 
288

 
8,429

Incurred guaranteed benefits (1)
319

 
417

 
452

 
18

 
1,206

Paid guaranteed benefits
(48
)
 
(1
)
 
(28
)
 

 
(77
)
Balance at December 31, 2015
$
1,207

 
$
2,529

 
$
5,516

 
$
306

 
$
9,558

Ceded
 
 
 
 
 
 
 
 

Balance at January 1, 2013
$
56

 
$
9

 
$
753

 
$
173

 
$
991

Incurred guaranteed benefits
(5
)
 

 
175

 
14

 
184

Paid guaranteed benefits
(10
)
 
(2
)
 

 

 
(12
)
Balance at December 31, 2013
41

 
7

 
928

 
187

 
1,163

Incurred guaranteed benefits
9

 

 
134

 
15

 
158

Paid guaranteed benefits
(12
)
 

 

 

 
(12
)
Balance at December 31, 2014
38

 
7

 
1,062

 
202

 
1,309

Incurred guaranteed benefits
32

 

 
195

 
13

 
240

Paid guaranteed benefits
(36
)
 

 

 

 
(36
)
Balance at December 31, 2015
$
34

 
$
7

 
$
1,257

 
$
215

 
$
1,513

Net
 
 
 
 
 
 
 
 

Balance at January 1, 2013
$
511

 
$
1,626

 
$
4,032

 
$
73

 
$
6,242

Incurred guaranteed benefits
205

 
229

 
(239
)
 
6

 
201

Paid guaranteed benefits
(72
)
 
(11
)
 
(23
)
 

 
(106
)
Balance at December 31, 2013
644

 
1,844

 
3,770

 
79

 
6,337

Incurred guaranteed benefits
301

 
262

 
277

 
7

 
847

Paid guaranteed benefits
(47
)
 

 
(17
)
 

 
(64
)
Balance at December 31, 2014
898

 
2,106

 
4,030

 
86

 
7,120

Incurred guaranteed benefits
287

 
417

 
257

 
5

 
966

Paid guaranteed benefits
(12
)
 
(1
)
 
(28
)
 

 
(41
)
Balance at December 31, 2015
$
1,173

 
$
2,522

 
$
4,259

 
$
91

 
$
8,045

______________
(1)
Secondary guarantees include the effects of foreign currency translation of ($80) million , ($343) million and ($597) million at December 31, 2015 , 2014 and 2013 , respectively.

220

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
4. Insurance (continued)

Information regarding the Company’s guarantee exposure was as follows at:
 
 
December 31,
 
 
 
2015
 
2014
 
 
 
In the
Event of Death
 
At
Annuitization
 
In the
Event of Death
 
At
Annuitization
 
 
 
(In millions)
 
Annuity Contracts (1)
 
 
 
 
 
 
 
 
 
Variable Annuity Guarantees
 
 
 
 
 
 
 
 
 
Total account value (2), (3)
 
$
181,413

 
$
91,240

 
$
196,595

 
$
99,000

 
Separate account value
 
$
151,901

 
$
87,841

 
$
163,566

 
$
95,963

 
Net amount at risk (2)
 
$
10,339

(4)
$
2,762

(5)

$
4,230

(4)
$
1,770

(5)
Average attained age of contractholders
 
66 years

 
66 years

 
65 years

 
65 years

 
Other Annuity Guarantees
 
 
 
 
 
 
 
 
 
Total account value (3)
 
N/A

 
$
1,560

 
N/A

 
$
1,040

 
Net amount at risk
 
N/A

 
$
422

(6
)
N/A

 
$
340

(6)
Average attained age of contractholders
 
N/A

 
51 years

 
N/A

 
50 years

 
 
 
December 31,
 
 
2015
 
2014
 
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
 
(In millions)
Universal and Variable Life Contracts (1)
 
 
 
 
 
 
 
 
Total account value (3)
 
$
17,211

 
$
3,461

 
$
16,875

 
$
3,587

Net amount at risk (7)
 
$
175,958

 
$
19,047

 
$
180,069

 
$
20,344

Average attained age of policyholders
 
57 years

 
62 years

 
56 years

 
61 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 amounts, which are not reported on the consolidated balance sheets, from assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan.
(3)
Includes the contractholder’s investments in the general account and separate account, if applicable.
(4)
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.
(5)
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.
(6)
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.

221

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
4. Insurance (continued)

(7)
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.
Account balances of contracts with guarantees were invested in separate account asset classes as follows at:
 
 
December 31,
 
 
2015
 
2014
 
 
(In millions)
Fund Groupings:
 
 
 
 
Balanced
 
$
79,473

 
$
87,667

Equity
 
69,973

 
71,742

Bond
 
11,783

 
11,416

Money Market
 
1,233

 
1,024

Total
 
$
162,462

 
$
171,849

Obligations Under Funding Agreements
The Company issues fixed and floating rate funding agreements, which are denominated in either U.S. dollars or foreign currencies, to certain special purpose entities (“SPEs”) that have issued either debt securities or commercial paper for which payment of interest and principal is secured by such funding agreements. During the years ended December 31, 2015 , 2014 and 2013 , the Company issued $48.1 billion , $48.9 billion and $37.7 billion , respectively, and repaid $49.9 billion , $45.6 billion and $36.8 billion , respectively, of such funding agreements. At December 31, 2015 and 2014 , liabilities for funding agreements outstanding, which are included in policyholder account balances, were $31.6 billion and $33.9 billion , respectively.
Certain of the Company’s subsidiaries are members of regional banks in the Federal Home Loan Bank (“FHLB”) system (“FHLBanks”). Holdings of common stock of FHLBanks, included in equity securities, were as follows at:
 
 
December 31,
 
 
2015
 
2014
 
 
(In millions)
FHLB of NY
 
$
666

 
$
661

FHLB of Des Moines
 
$
44

 
$
66

FHLB of Boston
 
$
36

 
$
55

FHLB of Pittsburgh
 
$
96

 
$
35


222

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
4. Insurance (continued)

Such subsidiaries have also entered into funding agreements with FHLBanks and the Federal Agricultural Mortgage Corporation, a federally chartered instrumentality of the U.S. (“Farmer Mac”). The liability for such funding agreements is included in policyholder account balances. Information related to such funding agreements was as follows at:
 
 
Liability
 
Collateral
 
 
 
December 31,
 
 
 
2015
 
2014
 
2015
 
 
2014
 
 
 
(In millions)
 
FHLB of NY (1)
 
$
12,570

 
$
12,570

 
$
14,085

(2)
 
$
15,255

(2)
Farmer Mac (3)
 
$
2,550

 
$
2,750

 
$
2,643

 
 
$
3,162

 
FHLB of Des Moines (1)
 
$
845

 
$
1,405

 
$
999

(2)
 
$
1,688

(2)
FHLB of Boston (1)
 
$
250

 
$
575

 
$
311

(2)
 
$
666

(2)
FHLB of Pittsburgh (1)
 
$
1,820

 
$
435

 
$
2,112

(2)
 
$
1,367

(2)
______________
(1)
Represents funding agreements issued to the applicable FHLBank in exchange for cash and for which such FHLBank has been granted a lien on certain assets, some of which are in the custody of such FHLBank, including residential mortgage-backed securities (“RMBS”), to collateralize obligations under advances evidenced by funding agreements. The Company is permitted to withdraw any portion of the collateral in the custody of such FHLBank as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of default by the Company, such FHLBank’s recovery on the collateral is limited to the amount of the Company’s liability to such FHLBank.
(2)
Advances are collateralized by mortgage-backed securities. The amount of collateral presented is at estimated fair value.
(3)
Represents funding agreements issued to certain SPEs that have issued debt securities for which payment of interest and principal is secured by such funding agreements, and such debt securities are also guaranteed as to payment of interest and principal by Farmer Mac. The obligations under these funding agreements are secured by a pledge of certain eligible agricultural real estate mortgage loans and may, under certain circumstances, be secured by other qualified collateral. The amount of collateral presented is at carrying value.

223

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
4. Insurance (continued)

Liabilities for Unpaid Claims and Claim Expenses
Information regarding the liabilities for unpaid claims and claim expenses relating to property & casualty, group accident and non-medical health policies and contracts, which are reported in future policy benefits and other policy-related balances, was as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Balance at January 1,
$
11,036

 
$
10,630

 
$
10,436

Less: Reinsurance recoverables
1,876

 
1,661

 
1,581

Net balance at January 1,
9,160

 
8,969

 
8,855

Incurred related to:
 
 
 
 
 
Current year
9,639

 
9,358

 
8,660

Prior years (1)
(78
)
 
(70
)
 
(86
)
Total incurred
9,561

 
9,288

 
8,574

Paid related to:
 
 
 
 
 
Current year
(6,788
)
 
(6,714
)
 
(6,083
)
Prior years
(2,587
)
 
(2,383
)
 
(2,377
)
Total paid
(9,375
)
 
(9,097
)
 
(8,460
)
Net balance at December 31,
9,346

 
9,160

 
8,969

Add: Reinsurance recoverables
2,042

 
1,876

 
1,661

Balance at December 31,
$
11,388

 
$
11,036

 
$
10,630

______________
(1)
During 2015 , 2014 and 2013 , as a result of changes in estimates of insured events in the respective prior year, claims and claim adjustment expenses associated with prior years decreased due to a reduction in prior year automobile bodily injury and homeowners’ severity. In addition, 2013 included improved loss ratios for non-medical health claim liabilities.
Separate Accounts
Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $244.6 billion and $261.3 billion at December 31, 2015 and 2014 , respectively, for which the policyholder assumes all investment risk, and separate accounts for which the Company contractually guarantees either a minimum return or account value to the policyholder which totaled $57.0 billion and $55.7 billion at December 31, 2015 and 2014 , respectively. The latter category consisted primarily of guaranteed interest contracts. The average interest rate credited on these contracts was 2.37% and 2.25% at December 31, 2015 and 2014 , respectively.
For the years ended December 31, 2015 , 2014 and 2013 , there were no investment gains (losses) on transfers of assets from the general account to the separate accounts.

224

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles
See Note 1 for a description of capitalized acquisition costs.
Nonparticipating and Non-Dividend-Paying Traditional Contracts
The Company amortizes DAC and VOBA related to these contracts (term insurance, nonparticipating whole life insurance, traditional group life insurance, non-medical health insurance, and accident & health insurance) over the appropriate premium paying period in proportion to the actual and expected future gross premiums that were set at contract issue. The expected premiums are based upon the premium requirement of each policy and assumptions for mortality, morbidity, persistency and investment returns at policy issuance, or policy acquisition (as it relates to VOBA), include provisions for adverse deviation, and are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes.
Participating, Dividend-Paying Traditional Contracts
The Company amortizes DAC and VOBA related to these contracts over the estimated lives of the contracts in proportion to actual and expected future gross margins. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The future gross margins are dependent principally on investment returns, policyholder dividend scales, mortality, persistency, expenses to administer the business, creditworthiness of reinsurance counterparties and certain economic variables, such as inflation. For participating contracts within the closed block (dividend-paying traditional contracts) future gross margins are also dependent upon changes in the policyholder dividend obligation. See Note 7 . Of these factors, the Company anticipates that investment returns, expenses, persistency and other factor changes, as well as policyholder dividend scales, are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross margins with the actual gross margins for that period. When the actual gross margins change from previously estimated gross margins, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross margins exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross margins are below the previously estimated gross margins. Each reporting period, the Company also updates the actual amount of business in-force, which impacts expected future gross margins. When expected future gross margins are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross margins are above the previously estimated expected future gross margins. Each period, the Company also reviews the estimated gross margins for each block of business to determine the recoverability of DAC and VOBA balances.
Fixed and Variable Universal Life Contracts and Fixed and Variable Deferred Annuity Contracts
The Company amortizes DAC and VOBA related to these contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties, the effect of any hedges used and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits. Each period, the Company also reviews the estimated gross profits for each block of business to determine the recoverability of DAC and VOBA balances.
Credit Insurance, Property & Casualty Insurance and Other Short-Duration Contracts
The Company amortizes DAC for these contracts, which is primarily composed of commissions and certain underwriting expenses, in proportion to actual and future earned premium over the applicable contract term.

225

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles (continued)

Factors Impacting Amortization
Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period, which can result in significant fluctuations in amortization of DAC and VOBA. Returns that are higher than the Company’s long-term expectation produce higher account balances, which increases the Company’s future fee expectations and decreases future benefit payment expectations on minimum death and living benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company’s long-term expectation. The Company’s practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these events and only changes the assumption when its long-term expectation changes.
The Company also periodically reviews other long-term assumptions underlying the projections of estimated gross margins and profits. These assumptions primarily relate to investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross margins and profits which may have significantly changed. If the update of assumptions causes expected future gross margins and profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and profits to decrease.
Periodically, the Company modifies product benefits, features, rights or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If such modification, referred to as an internal replacement, substantially changes the contract, the associated DAC or VOBA is written off immediately through income and any new deferrable costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC or VOBA amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed.
Amortization of DAC and VOBA is attributed to net investment gains (losses) and net derivative gains (losses), and to other expenses for the amount of gross margins or profits originating from transactions other than investment gains and losses. Unrealized investment gains and losses represent the amount of DAC and VOBA that would have been amortized if such gains and losses had been recognized.

226

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles (continued)

Information regarding DAC and VOBA was as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
DAC
 
 
 
 
 
Balance at January 1,
$
18,984

 
$
19,774

 
$
17,150

Capitalizations
3,837

 
4,183

 
4,786

Amortization related to:
 
 
 
 
 
Net investment gains (losses) and net derivative gains (losses)
11

 
(39
)
 
192

Other expenses
(3,354
)
 
(3,372
)
 
(2,812
)
Total amortization
(3,343
)
 
(3,411
)
 
(2,620
)
Unrealized investment gains (losses)
539

 
(676
)
 
924

Effect of foreign currency translation and other
(552
)
 
(886
)
 
(466
)
Balance at December 31,
19,465

 
18,984

 
19,774

VOBA
 
 
 
 
 
Balance at January 1,
5,458

 
6,932

 
7,611

Acquisitions (1)

 

 
947

Amortization related to:
 
 
 
 
 
Net investment gains (losses) and net derivative gains (losses)
(20
)
 
(1
)
 
3

Other expenses
(573
)
 
(720
)
 
(933
)
Total amortization
(593
)
 
(721
)
 
(930
)
Unrealized investment gains (losses)
99

 
(26
)
 
358

Effect of foreign currency translation and other
(299
)
 
(727
)
 
(1,054
)
Balance at December 31,
4,665

 
5,458

 
6,932

Total DAC and VOBA
 
 
 
 
 
Balance at December 31,
$
24,130

 
$
24,442

 
$
26,706

______________
(1)
See Note 3 for a description of acquisitions.
Information regarding total DAC and VOBA by segment, as well as Corporate & Other, was as follows at:
 
December 31,
 
2015
 
2014
 
(In millions)
Retail
$
11,850

 
$
11,963

Group, Voluntary & Worksite Benefits
365

 
377

Corporate Benefit Funding
111

 
111

Latin America
1,880

 
2,063

Asia
8,374

 
8,217

EMEA
1,532

 
1,709

Corporate & Other
18

 
2

Total
$
24,130

 
$
24,442


227

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
5. Deferred Policy Acquisition Costs, Value of Business Acquired and Other Intangibles (continued)

Information regarding other intangibles was as follows:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(In millions)
DSI
 
 
 
 
 
 
Balance at January 1,
 
$
810

 
$
950

 
$
930

Capitalization
 
31

 
56

 
58

Amortization
 
(106
)
 
(130
)
 
(36
)
Unrealized investment gains (losses)
 
39

 
(64
)
 

Effect of foreign currency translation
 

 
(2
)
 
(2
)
Balance at December 31,
 
$
774

 
$
810

 
$
950

VODA and VOCRA
 
 
 
 
 
 
Balance at January 1,
 
$
847

 
$
975

 
$
1,108

Amortization
 
(75
)
 
(82
)
 
(84
)
Effect of foreign currency translation
 
(53
)
 
(46
)
 
(49
)
Balance at December 31,
 
$
719

 
$
847

 
$
975

Accumulated amortization
 
$
575

 
$
500

 
$
418

Negative VOBA
 
 
 
 
 
 
Balance at January 1,
 
$
1,596

 
$
2,162

 
$
2,916

Amortization
 
(361
)
 
(442
)
 
(579
)
Effect of foreign currency translation and other
 
(42
)
 
(124
)
 
(175
)
Balance at December 31,
 
$
1,193

 
$
1,596

 
$
2,162

Accumulated amortization
 
$
2,765

 
$
2,404

 
$
1,962

The estimated future amortization expense (credit) to be reported in other expenses for the next five years is as follows:
 
VOBA
 
VODA and VOCRA
 
Negative VOBA
 
(In millions)
2016
$
506

 
$
65

 
$
(249
)
2017
$
429

 
$
62

 
$
(139
)
2018
$
382

 
$
58

 
$
(58
)
2019
$
341

 
$
53

 
$
(38
)
2020
$
299

 
$
49

 
$
(38
)
6. Reinsurance
The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by third parties. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.
Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed in Note  8 .

228

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
6. Reinsurance (continued)

Americas — Excluding Latin America
For its Retail Life & Other insurance products, the Company has historically reinsured the mortality risk primarily on an excess of retention basis or on a quota share basis. The Company currently reinsures 90% of the mortality risk in excess of $2 million for most products. In addition to reinsuring mortality risk as described above, the Company reinsures other risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specified characteristics. On a case by case basis, the Company may retain up to $20 million per life and reinsure 100% of amounts in excess of the amount the Company retains. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time.
The Company’s Retail Annuities business reinsures a portion of the living and death benefit guarantees issued in connection with its variable annuities. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with the guarantees collected from policyholders, and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations. The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.
For certain policies within the Group, Voluntary & Worksite Benefits segment, the Company generally retains most of the risk and only cedes particular risks on certain client arrangements. The majority of the Company’s reinsurance activity within this segment relates to client agreements for employer sponsored captive programs, risk-sharing agreements and multinational pooling.
The Company, through its property & casualty business within the Retail and Group, Voluntary & Worksite Benefits segments, purchases reinsurance to manage its exposure to large losses (primarily catastrophe losses) and to protect statutory surplus. The Company cedes to reinsurers losses and premiums based upon the exposure of the policies subject to reinsurance. To manage exposure to large property & casualty losses, the Company purchases property catastrophe, casualty and property per risk excess of loss reinsurance protection.
The Company’s Corporate Benefit Funding segment has periodically engaged in reinsurance activities, on an opportunistic basis. The impact of these activities on the financial results of this segment has not been significant and there were no additional transactions during the periods presented.
Latin America, Asia and EMEA
For certain life insurance products, the Company currently reinsures risks in excess of $5 million to external reinsurers on a yearly renewable term basis. The Company may also reinsure certain risks with external reinsurers depending upon the nature of the risk and local regulatory requirements. For selected large corporate clients, the Company reinsures group employee benefits or credit insurance business with various client-affiliated reinsurance companies, covering policies issued to the employees or customers of the clients. Additionally, the Company cedes and assumes risk with other insurance companies when either company requires a business partner with the appropriate local licensing to issue certain types of policies in certain countries. In these cases, the assuming company typically underwrites the risks, develops the products and assumes most or all of the risk. The Company also has reinsurance agreements in force that reinsure a portion of the living and death benefit guarantees issued in connection with variable annuity products. Under these agreements, the Company pays reinsurance fees associated with the guarantees collected from policyholders, and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.
Corporate & Other
The Company also reinsures, through 100% quota share reinsurance agreements, certain run-off long-term care and workers’ compensation business written by MetLife Insurance Company USA (“MetLife USA”).
Corporate & Other also has a reinsurance agreement, whereby it assumes the living and death benefit guarantees issued in connection with certain variable annuity products. Under this agreement, the Company receives reinsurance fees associated with the guarantees collected from policyholders, and provides reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.

229

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
6. Reinsurance (continued)

Catastrophe Coverage
The Company has exposure to catastrophes which could contribute to significant fluctuations in the Company’s results of operations. In the Americas, excluding Latin America, the Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks. Currently, for Latin America, Asia and EMEA, the Company purchases catastrophe coverage to insure risks within certain countries deemed by management to be exposed to the greatest catastrophic risks.
Reinsurance Recoverables
The Company reinsures its business through a diversified group of well-capitalized reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. The Company monitors ratings and evaluates the financial strength of its reinsurers by analyzing their financial statements. In addition, the reinsurance recoverable balance due from each reinsurer is evaluated as part of the overall monitoring process. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. The Company generally secures large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. These reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, which at December 31, 2015 and 2014 , were not significant.
The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. The Company had $6.1 billion and $5.9 billion of unsecured reinsurance recoverable balances at December 31, 2015 and 2014 , respectively.
At December 31, 2015 , the Company had $15.3 billion of net ceded reinsurance recoverables. Of this total, $10.8 billion , or 71% , were with the Company’s five largest ceded reinsurers, including $2.3 billion of net ceded reinsurance recoverables which were unsecured. At December 31, 2014 , the Company had $14.9 billion of net ceded reinsurance recoverables. Of this total, $10.8 billion , or 73% , were with the Company’s five largest ceded reinsurers, including $2.6 billion of net ceded reinsurance recoverables which were unsecured.
The Company has reinsured with an unaffiliated third-party reinsurer, 59.25% of the closed block through a modified coinsurance agreement. The Company accounts for this agreement under the deposit method of accounting. The Company, having the right of offset, has offset the modified coinsurance deposit with the deposit recoverable.

230

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
6. Reinsurance (continued)

The amounts in the consolidated statements of operations include the impact of reinsurance. Information regarding the significant effects of reinsurance was as follows:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(In millions)
Premiums
 
 
 
 
 
 
Direct premiums
 
$
39,516

 
$
40,049

 
$
38,476

Reinsurance assumed
 
1,454

 
1,472

 
1,472

Reinsurance ceded
 
(2,425
)
 
(2,454
)
 
(2,274
)
Net premiums
 
$
38,545

 
$
39,067

 
$
37,674

Universal life and investment-type product policy fees
 
 
 
 
 
 
Direct universal life and investment-type product policy fees
 
$
10,424

 
$
10,768

 
$
10,197

Reinsurance assumed
 
105

 
126

 
139

Reinsurance ceded
 
(1,022
)
 
(948
)
 
(885
)
Net universal life and investment-type product policy fees
 
$
9,507

 
$
9,946

 
$
9,451

Policyholder benefits and claims
 
 
 
 
 
 
Direct policyholder benefits and claims
 
$
41,233

 
$
41,573

 
$
40,211

Reinsurance assumed
 
1,023

 
962

 
1,047

Reinsurance ceded
 
(3,542
)
 
(3,433
)
 
(3,151
)
Net policyholder benefits and claims
 
$
38,714

 
$
39,102

 
$
38,107

Other expenses
 
 
 
 
 
 
Direct other expenses
 
$
16,968

 
$
17,334

 
$
16,712

Reinsurance assumed
 
130

 
165

 
147

Reinsurance ceded
 
(329
)
 
(408
)
 
(257
)
Net other expenses
 
$
16,769

 
$
17,091

 
$
16,602

The amounts in the consolidated balance sheets include the impact of reinsurance. Information regarding the significant effects of reinsurance was as follows at:
 
December 31,
 
2015
 
2014
 
Direct
 
Assumed
 
Ceded
 
Total
Balance
Sheet
 
Direct
 
Assumed
 
Ceded
 
Total
Balance
Sheet
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums, reinsurance and other receivables
$
6,044

 
$
555

 
$
16,103

 
$
22,702

 
$
6,111

 
$
491

 
$
15,642

 
$
22,244

Deferred policy acquisition costs and value of business acquired
24,490

 
120

 
(480
)
 
24,130

 
24,807

 
112

 
(477
)
 
24,442

Total assets
$
30,534

 
$
675

 
$
15,623

 
$
46,832

 
$
30,918

 
$
603

 
$
15,165

 
$
46,686

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future policy benefits
$
189,817

 
$
2,062

 
$

 
$
191,879

 
$
187,562

 
$
2,024

 
$

 
$
189,586

Policyholder account balances
201,748

 
975

 
(1
)
 
202,722

 
208,307

 
989

 
(2
)
 
209,294

Other policy-related balances
13,939

 
310

 
6

 
14,255

 
14,131

 
285

 
6

 
14,422

Other liabilities
19,800

 
472

 
3,289

 
23,561

 
20,752

 
481

 
3,204

 
24,437

Total liabilities
$
425,304

 
$
3,819

 
$
3,294

 
$
432,417

 
$
430,752

 
$
3,779

 
$
3,208

 
$
437,739


231

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
6. Reinsurance (continued)

Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on reinsurance were $2.3 billion at both December 31, 2015 and 2014 . The deposit liabilities on reinsurance were $33 million and $35 million at December 31, 2015 and 2014 , respectively.
7. Closed Block
On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company (“MLIC”) 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 MLIC’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, MLIC established a closed block for the benefit of holders of certain individual life insurance policies of MLIC. Assets have been allocated to the closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience.
The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years.
The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the Demutualization Date. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the Demutualization Date (adjusted to eliminate the impact of related amounts in AOCI) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income over the period the policies and contracts in the closed block remain in-force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block are greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block are less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings.
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.

232

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
7. Closed Block (continued)

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:
 
 
December 31,
 
 
2015
 
2014
 
 
(In millions)
Closed Block Liabilities
 
 
 
 
Future policy benefits
 
$
41,278

 
$
41,667

Other policy-related balances
 
249

 
265

Policyholder dividends payable
 
468

 
461

Policyholder dividend obligation
 
1,783

 
3,155

Current income tax payable
 

 
1

Other liabilities
 
380

 
646

Total closed block liabilities
 
44,158

 
46,195

Assets Designated to the Closed Block
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value
 
27,556

 
29,199

Equity securities available-for-sale, at estimated fair value
 
111

 
91

Mortgage loans
 
6,022

 
6,076

Policy loans
 
4,642

 
4,646

Real estate and real estate joint ventures
 
462

 
666

Other invested assets
 
1,066

 
1,065

Total investments
 
39,859

 
41,743

Cash and cash equivalents
 
236

 
227

Accrued investment income
 
474

 
477

Premiums, reinsurance and other receivables
 
56

 
67

Current income tax recoverable
 
11

 

Deferred income tax assets
 
234

 
289

Total assets designated to the closed block
 
40,870

 
42,803

Excess of closed block liabilities over assets designated to the closed block
 
3,288

 
3,392

Amounts included in AOCI:
 
 
 
 
Unrealized investment gains (losses), net of income tax
 
1,382

 
2,291

Unrealized gains (losses) on derivatives, net of income tax
 
76

 
28

Allocated to policyholder dividend obligation, net of income tax
 
(1,159
)
 
(2,051
)
Total amounts included in AOCI
 
299

 
268

Maximum future earnings to be recognized from closed block assets and liabilities
 
$
3,587

 
$
3,660

Information regarding the closed block policyholder dividend obligation was as follows:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(In millions)
Balance at January 1,
 
$
3,155

 
$
1,771

 
$
3,828

Change in unrealized investment and derivative gains (losses)
 
(1,372
)
 
1,384

 
(2,057
)
Balance at December 31,
 
$
1,783

 
$
3,155

 
$
1,771


233

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
7. Closed Block (continued)

Information regarding the closed block revenues and expenses was as follows:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(In millions)
Revenues
 
 
 
 
 
 
Premiums
 
$
1,850

 
$
1,918

 
$
1,987

Net investment income
 
1,982

 
2,093

 
2,130

Net investment gains (losses)
 
(23
)
 
7

 
25

Net derivative gains (losses)
 
27

 
20

 
(6
)
Total revenues
 
3,836

 
4,038

 
4,136

Expenses
 
 
 
 
 
 
Policyholder benefits and claims
 
2,564

 
2,598

 
2,702

Policyholder dividends
 
1,015

 
988

 
979

Other expenses
 
143

 
155

 
165

Total expenses
 
3,722

 
3,741

 
3,846

Revenues, net of expenses before provision for income tax expense (benefit)
 
114

 
297

 
290

Provision for income tax expense (benefit)
 
41

 
104

 
101

Revenues, net of expenses and provision for income tax expense (benefit)
 
$
73

 
$
193

 
$
189

MLIC 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. MLIC also charges the closed block for expenses of maintaining the policies included in the closed block.
8. Investments
See Note  10 for information about the fair value hierarchy for investments and the related valuation methodologies.
Investment Risks and Uncertainties
Investments are exposed to the following primary sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the consolidated financial statements.
The determination of valuation allowances and impairments is highly subjective and is based upon periodic evaluations and assessments of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
The recognition of income on certain investments (e.g. structured securities, including mortgage-backed securities, asset-backed securities (“ABS”), certain structured investment transactions and FVO and trading securities) is dependent upon certain factors such as prepayments and defaults, and changes in such factors could result in changes in amounts to be earned.
Fixed Maturity and Equity Securities AFS
Fixed Maturity and Equity Securities AFS by Sector
The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including RMBS, ABS and commercial mortgage-backed securities (“CMBS”).

234

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

 
December 31, 2015
 
December 31, 2014
 
Cost or
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair
Value
 
Cost or
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair
Value
 
 
Gains
 
Temporary
Losses
 
OTTI
Losses
 
Gains
 
Temporary
Losses
 
OTTI
Losses
 
 
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate
$
96,466

 
$
6,583

 
$
2,255

 
$

 
$
100,794

 
$
96,235

 
$
10,343

 
$
624

 
$

 
$
105,954

U.S. Treasury and agency
56,499

 
5,373

 
226

 

 
61,646

 
54,654

 
6,892

 
30

 

 
61,516

Foreign corporate
56,003

 
3,019

 
1,822

 
2

 
57,198

 
57,695

 
4,651

 
664

 
7

 
61,675

Foreign government
45,451

 
5,269

 
221

 

 
50,499

 
47,327

 
5,500

 
161

 

 
52,666

RMBS
37,914

 
1,366

 
424

 
59

 
38,797

 
38,064

 
2,102

 
214

 
106

 
39,846

State and political subdivision
13,723

 
1,795

 
67

 
10

 
15,441

 
12,922

 
2,291

 
26

 

 
15,187

ABS
14,498

 
131

 
229

 
6

 
14,394

 
14,121

 
240

 
112

 

 
14,249

CMBS (1)
12,410

 
347

 
125

 
(1
)
 
12,633

 
13,762

 
615

 
46

 
(1
)
 
14,332

Total fixed maturity securities
$
332,964

 
$
23,883

 
$
5,369

 
$
76

 
$
351,402

 
$
334,780

 
$
32,634

 
$
1,877

 
$
112

 
$
365,425

Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
$
1,962

 
$
397

 
$
107

 
$

 
$
2,252

 
$
1,990

 
$
554

 
$
28

 
$

 
$
2,516

Non-redeemable preferred stock
1,035

 
85

 
51

 

 
1,069

 
1,086

 
68

 
39

 

 
1,115

Total equity securities
$
2,997

 
$
482

 
$
158

 
$

 
$
3,321

 
$
3,076

 
$
622

 
$
67

 
$

 
$
3,631

______________
(1)
The noncredit loss component of OTTI losses for CMBS was in an unrealized gain position of $1 million at both December 31, 2015 and 2014 , 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 with an estimated fair value of $54 million and $64 million with unrealized gains (losses) of $12 million and $28 million at December 31, 2015 and 2014 , respectively.
Methodology for Amortization of Premium and Accretion of Discount on Structured Securities
Amortization of premium and accretion of discount on structured securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and ABS are estimated using inputs obtained from third-party specialists and based on management’s knowledge of the current market. For credit-sensitive mortgage-backed and ABS and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and ABS, the effective yield is recalculated on a retrospective basis.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at December 31, 2015 :
 
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
 
(In millions)
Amortized cost
$
13,109

 
$
74,554

 
$
71,590

 
$
108,889

 
$
64,822

 
$
332,964

Estimated fair value
$
13,130

 
$
77,398

 
$
74,364

 
$
120,686

 
$
65,824

 
$
351,402

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

235

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity 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.
 
December 31, 2015
 
December 31, 2014
 
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
 
(In millions, except number of securities)
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate
$
27,526

 
$
1,629

 
$
3,762

 
$
626

 
$
11,389

 
$
331

 
$
4,658

 
$
293

U.S. Treasury and agency
19,628

 
222

 
298

 
4

 
8,927

 
12

 
1,314

 
18

Foreign corporate
14,447

 
911

 
5,251

 
913

 
9,410

 
505

 
2,074

 
166

Foreign government
3,530

 
166

 
429

 
55

 
1,085

 
80

 
630

 
81

RMBS
13,467

 
287

 
2,431

 
196

 
4,180

 
92

 
2,534

 
228

State and political subdivision
1,618

 
55

 
168

 
22

 
83

 
1

 
297

 
25

ABS
7,329

 
124

 
2,823

 
111

 
4,456

 
57

 
1,440

 
55

CMBS
4,876

 
81

 
637

 
43

 
1,268

 
23

 
934

 
22

Total fixed maturity securities
$
92,421

 
$
3,475

 
$
15,799

 
$
1,970

 
$
40,798

 
$
1,101

 
$
13,881

 
$
888

Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
$
203

 
$
105

 
$
20

 
$
2

 
$
111

 
$
28

 
$
1

 
$

Non-redeemable preferred stock
79

 
2

 
200

 
49

 
67

 
2

 
192

 
37

Total equity securities
$
282

 
$
107

 
$
220

 
$
51

 
$
178

 
$
30

 
$
193

 
$
37

Total number of securities in an
unrealized loss position
6,366

 
 
 
1,489

 
 
 
3,153

 
 
 
1,435

 
 
Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities
Evaluation and Measurement Methodologies
Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below cost or amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophic loss or has exhausted natural resources; (vi) with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to structured securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; (viii) the potential for impairments due to weakening of foreign currencies on non-functional currency denominated fixed maturity securities that are near maturity; and (ix) other subjective factors, including concentrations and information obtained from regulators and rating agencies.

236

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

The methodology and significant inputs used to determine the amount of credit loss on fixed maturity securities are as follows:
The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security prior to impairment.
When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall impairment evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s best estimates of likely scenario-based outcomes after giving consideration to a variety of variables that include, but are not limited to: payment terms of the security; the likelihood that the issuer can service the interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies.
Additional considerations are made when assessing the unique features that apply to certain structured securities including, but not limited to: the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, and the payment priority within the tranche structure of the security.
When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, the estimated fair value is considered the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process as described above, as well as any private and public sector programs to restructure such securities.
With respect to securities that have attributes of debt and equity (perpetual hybrid securities), consideration is given in the OTTI analysis as to whether there has been any deterioration in the credit of the issuer and the likelihood of recovery in value of the securities that are in a severe and extended unrealized loss position. Consideration is also given as to whether any perpetual hybrid securities, with an unrealized loss, regardless of credit rating, have deferred any dividend payments. When an OTTI loss has occurred, the OTTI loss is the entire difference between the perpetual hybrid security’s cost and its estimated fair value with a corresponding charge to earnings.
The cost or amortized cost of fixed maturity and equity securities is adjusted for OTTI in the period in which the determination is made. The Company does not change the revised cost basis for subsequent recoveries in value.
In periods subsequent to the recognition of OTTI on a fixed maturity security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows.
Current Period Evaluation
Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at December 31, 2015 . Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.
Gross unrealized losses on fixed maturity securities increased $3.4 billion during the year ended December 31, 2015 to $5.4 billion . The increase in gross unrealized losses for the year ended December 31, 2015 , was primarily attributable to widening credit spreads, an increase in interest rates and, to a lesser extent, the impact of weakening foreign currencies on non-functional currency denominated fixed maturity securities.

237

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

At December 31, 2015 , $364 million of the total $5.4 billion of gross unrealized losses were from 69 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.
Investment Grade Fixed Maturity Securities
Of the $364 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $242 million , or 66% , were related to gross unrealized losses on 36 investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.
Below Investment Grade Fixed Maturity Securities
Of the $364 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $122 million , or 34% , were related to gross unrealized losses on 33 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily utility and industrial securities) and non-agency RMBS (primarily alternative residential mortgage loans) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainties including concerns over lower oil prices in the energy sector and valuations of residential real estate supporting non-agency RMBS. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers and evaluates non-agency RMBS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security.
Equity Securities
Gross unrealized losses on equity securities increased $91 million during the year ended December 31, 2015 to $158 million . Of the $158 million , $36 million were from 12 securities with gross unrealized losses of 20% or more of cost for 12 months or greater. Of the $36 million , 64% were rated A or better, and all were from financial services industry investment grade non-redeemable preferred stock securities.
Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
 
December 31,
 
2015
 
2014
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Mortgage loans
 
 
 
 
 
 
 
Commercial
$
44,012

 
65.6
 %
 
$
41,088

 
68.3
 %
Agricultural
13,188

 
19.6

 
12,378

 
20.6

Residential
9,734

 
14.5

 
6,369

 
10.6

Subtotal (1)
66,934

 
99.7

 
59,835

 
99.5

Valuation allowances
(318
)
 
(0.5
)
 
(305
)
 
(0.5
)
Subtotal mortgage loans, net
66,616

 
99.2

 
59,530

 
99.0

Residential — FVO
314

 
0.5

 
308

 
0.5

Commercial mortgage loans held by CSEs — FVO
172

 
0.3

 
280

 
0.5

Total mortgage loans, net
$
67,102

 
100.0
 %
 
$
60,118

 
100.0
 %
______________
(1)
Purchases of mortgage loans were $4.2 billion and $4.7 billion for the years ended December 31, 2015 and 2014 , respectively.
See “— Variable Interest Entities” for discussion of CSEs.

238

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

I nformation on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on residential — FVO and commercial mortgage loans held by CSEs — FVO is presented in Note 10 . The Company elects the FVO for certain mortgage loans and related long-term debt that are managed on a total return basis.
Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment
Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at and for the years ended:
 
Evaluated Individually for Credit Losses
 
Evaluated Collectively for Credit Losses
 
Impaired Loans
 
Impaired Loans with a Valuation Allowance
 
Impaired Loans without a Valuation Allowance
 
 
 
 
 
 
 
 
 
Unpaid Principal Balance
 
Recorded Investment
 
Valuation
Allowances
 
Unpaid Principal Balance
 
Recorded
Investment
 
Recorded
Investment
 
Valuation
Allowances
 
Carrying
Value
 
Average
Recorded
Investment
 
(In millions)
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$

 
$

 
$

 
$
57

 
$
57

 
$
43,955

 
$
217

 
$
57

 
$
127

Agricultural
49

 
47

 
3

 
22

 
21

 
13,120

 
39

 
65

 
63

Residential

 

 

 
141

 
131

 
9,603

 
59

 
131

 
84

Total
$
49

 
$
47

 
$
3

 
$
220

 
$
209

 
$
66,678

 
$
315

 
$
253

 
$
274

December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
75

 
$
75

 
$
24

 
$
101

 
$
100

 
$
40,913

 
$
200

 
$
151

 
$
359

Agricultural
51

 
48

 
2

 
14

 
13

 
12,317

 
37

 
59

 
80

Residential

 

 

 
40

 
37

 
6,332

 
42

 
37

 
19

Total
$
126

 
$
123

 
$
26

 
$
155

 
$
150

 
$
59,562

 
$
279

 
$
247

 
$
458

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $526 million , $153 million and $14 million , respectively, for the year ended December 31, 2013 .
Valuation Allowance Rollforward by Portfolio Segment
The changes in the valuation allowance, by portfolio segment, were as follows:
 
Commercial
 
Agricultural
 
Residential
 
Total
 
(In millions)
Balance at January 1, 2013
$
293

 
$
52

 
$
2

 
$
347

Provision (release)
(35
)
 
4

 
18

 
(13
)
Charge-offs, net of recoveries

 
(12
)
 

 
(12
)
Balance at December 31, 2013
258

 
44

 
20

 
322

Provision (release)
(11
)
 
(4
)
 
27

 
12

Charge-offs, net of recoveries
(23
)
 
(1
)
 
(5
)
 
(29
)
Balance at December 31, 2014
224

 
39

 
42

 
305

Provision (release)
12

 
3

 
33

 
48

Charge-offs, net of recoveries
(19
)
 

 
(16
)
 
(35
)
Balance at December 31, 2015
$
217

 
$
42

 
$
59

 
$
318


239

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Valuation Allowance Methodology
Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available.
Commercial and Agricultural Mortgage Loan Portfolio Segments
The Company typically uses several years of historical experience in establishing non-specific valuation allowances which captures multiple economic cycles. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, and recent loss and recovery trend experience as compared to historical loss and recovery experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. On a quarterly basis, management incorporates the impact of these current market events and conditions on historical experience in determining the non-specific valuation allowance established for commercial and agricultural mortgage loans.
All commercial mortgage loans are reviewed on an ongoing basis which may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. All agricultural mortgage loans are monitored on an ongoing basis. The monitoring process for agricultural mortgage loans is generally similar to the commercial mortgage loan monitoring process, with a focus on higher risk loans, including reviews on a geographic and property-type basis. Higher risk loans are reviewed individually on an ongoing basis for potential credit loss and specific valuation allowances are established using the methodology described above. Quarterly, the remaining loans are reviewed on a pool basis by aggregating groups of loans that have similar risk characteristics for potential credit loss, and non-specific valuation allowances are established as described above using inputs that are unique to each segment of the loan portfolio.
For commercial mortgage loans, the primary credit quality indicator is the debt service coverage ratio, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. The Company also reviews the loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio and the values utilized in calculating the ratio are updated annually on a rolling basis, with a portion of the portfolio updated each quarter. In addition, the loan-to-value ratio is routinely updated for all but the lowest risk loans as part of the Company’s ongoing review of its commercial mortgage loan portfolio.
For agricultural mortgage loans, the Company’s primary credit quality indicator is the loan-to-value ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated.

240

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Residential Mortgage Loan Portfolio Segment
The Company’s residential mortgage loan portfolio is comprised primarily of closed end, amortizing residential mortgage loans. For evaluations of residential mortgage loans, the key inputs of expected frequency and expected loss reflect current market conditions, with expected frequency adjusted, when appropriate, for differences from market conditions and the Company’s historical experience. In contrast to the commercial and agricultural mortgage loan portfolios, residential mortgage loans are smaller-balance homogeneous loans that are collectively evaluated for impairment. Non-specific valuation allowances are established using the evaluation framework described above for pools of loans with similar risk characteristics from inputs that are unique to the residential segment of the loan portfolio. Loan specific valuation allowances are only established on residential mortgage loans when they have been restructured and are established using the methodology described above for all loan portfolio segments.
For residential mortgage loans, the Company’s primary credit quality indicator is whether the loan is performing or nonperforming. The Company generally defines nonperforming residential mortgage loans as those that are 60 or more days past due and/or in non-accrual status which is assessed monthly. Generally, nonperforming residential mortgage loans have a higher risk of experiencing a credit loss.
Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans was as follows at:
 
Recorded Investment
 
Estimated
Fair
Value
 
% of
Total
 
Debt Service Coverage Ratios
 
Total
 
% of
Total
 
 
> 1.20x
 
1.00x - 1.20x
 
< 1.00x
 
 
(In millions)
 
 
 
(In millions)
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan-to-value ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 65%
$
38,163

 
$
1,063

 
$
544

 
$
39,770

 
90.4
%
 
$
40,921

 
90.7
%
65% to 75%
3,270

 
138

 
76

 
3,484

 
7.9

 
3,451

 
7.7

76% to 80%

 

 

 

 

 

 

Greater than 80%
381

 
140

 
237

 
758

 
1.7

 
732

 
1.6

Total
$
41,814

 
$
1,341

 
$
857

 
$
44,012

 
100.0
%
 
$
45,104

 
100.0
%
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan-to-value ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 65%
$
33,933

 
$
1,105

 
$
1,101

 
$
36,139

 
88.0
%
 
$
38,166

 
88.4
%
65% to 75%
3,306

 
405

 
87

 
3,798

 
9.2

 
3,873

 
9.0

76% to 80%
130

 

 
15

 
145

 
0.4

 
153

 
0.3

Greater than 80%
562

 
281

 
163

 
1,006

 
2.4

 
987

 
2.3

Total
$
37,931

 
$
1,791

 
$
1,366

 
$
41,088

 
100.0
%
 
$
43,179

 
100.0
%

241

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans was as follows at:
 
December 31,
 
2015
 
2014
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Loan-to-value ratios
 
 
 
 
 
 
 
Less than 65%
$
12,399

 
94.0
%
 
$
11,743

 
94.9
%
65% to 75%
710

 
5.4

 
533

 
4.3

76% to 80%
21

 
0.2

 
17

 
0.1

Greater than 80%
58

 
0.4

 
85

 
0.7

Total
$
13,188

 
100.0
%
 
$
12,378

 
100.0
%
The estimated fair value of agricultural mortgage loans was $13.5 billion and $12.8 billion at December 31, 2015 and 2014 , respectively.
Credit Quality of Residential Mortgage Loans
The credit quality of residential mortgage loans was as follows at:
 
December 31,
 
2015
 
2014
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Performance indicators
 
 
 
 
 
 
 
Performing
$
9,408

 
96.7
%
 
$
6,196

 
97.3
%
Nonperforming
326

 
3.3

 
173

 
2.7

Total
$
9,734

 
100.0
%
 
$
6,369

 
100.0
%
The estimated fair value of residential mortgage loans was $9.9 billion and $6.6 billion at December 31, 2015 and 2014 , respectively.
Past Due and Interest Accrual Status of Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both December 31, 2015 and 2014 . The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and accrual status of mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:
 
Past Due
 
Nonaccrual Status
 
December 31, 2015
 
December 31, 2014
 
December 31, 2015
 
December 31, 2014
 
(In millions)
Commercial
$
2

 
$
10

 
$

 
$
75

Agricultural
103

 
1

 
46

 
41

Residential
326

 
173

 
318

 
163

Total
$
431

 
$
184

 
$
364

 
$
279


242

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Mortgage Loans Modified in a Troubled Debt Restructuring
For a small portion of the mortgage loan portfolio, classified as troubled debt restructurings, concessions are granted related to borrowers experiencing financial difficulties. Generally, the types of concessions include: reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current market interest rates, and/or a reduction of accrued interest. The amount, timing and extent of the concession granted is considered in determining any impairment or changes in the specific valuation allowance. During the years ended December 31, 2015 and 2014 , the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring.
Other Invested Assets
Other invested assets is comprised primarily of freestanding derivatives with positive estimated fair values (see Note  9 ), tax credit and renewable energy partnerships, and leveraged and direct financing leases.
Tax Credit Partnerships
The carrying value of tax credit partnerships was $1.6 billion at both December 31, 2015 and 2014. Losses from tax credit partnerships included within net investment income were $164 million , $149 million , and $139 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Leveraged and Direct Financing Leases
Investment in leveraged and direct financing leases consisted of the following at:
 
December 31,
 
2015
 
2014
 
Leveraged Leases
 
Direct Financing Leases
 
Leveraged Leases
 
Direct Financing Leases
 
(In millions)
Rental receivables, net
$
1,329

 
$
1,508

 
$
1,414

 
$
1,750

Estimated residual values
1,076

 
80

 
1,148

 
145

Subtotal
2,405

 
1,588

 
2,562

 
1,895

Unearned income
(693
)
 
(512
)
 
(777
)
 
(776
)
Investment in leases, net of non-recourse debt
$
1,712

 
$
1,076

 
$
1,785

 
$
1,119

Rental receivables are generally due in periodic installments. The payment periods for leveraged leases generally range from one to 15 years but in certain circumstances can be over 30 years, while the payment periods for direct financing leases range from one to 30 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. The Company generally defines nonperforming rental receivables as those that are 90 days or more past due. At December 31, 2015 and 2014 , all leveraged lease receivables were performing and over 99% of direct financing rental receivables were performing.
The deferred income tax liability related to leveraged leases was $1.5 billion at both December 31, 2015 and 2014 .
The components of income from investments in leveraged and direct financing leases, excluding net investment gains (losses), were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
Leveraged Leases
 
Direct Financing Leases
 
Leveraged Leases
 
Direct Financing Leases
 
Leveraged Leases
 
Direct Financing Leases
 
(In millions)
Income from investment in leases
$
62

 
$
82

 
$
66

 
$
72

 
$
82

 
$
75

Less: Income tax expense on leases
22

 
29

 
23

 
25

 
29

 
26

Investment income after income tax
$
40

 
$
53

 
$
43

 
$
47

 
$
53

 
$
49


243

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Cash Equivalents
The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $7.5 billion and $4.5 billion at December 31, 2015 and 2014 , respectively.
Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, DSI, future policy benefits and the policyholder dividend obligation, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.
The components of net unrealized investment gains (losses), included in AOCI, were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Fixed maturity securities
$
18,164

 
$
30,367

 
$
16,672

Fixed maturity securities with noncredit OTTI losses in AOCI
(76
)
 
(112
)
 
(218
)
Total fixed maturity securities
18,088

 
30,255

 
16,454

Equity securities
422

 
608

 
390

Derivatives
2,350

 
1,761

 
375

Other
287

 
149

 
(73
)
Subtotal
21,147

 
32,773

 
17,146

Amounts allocated from:
 
 
 
 
 
Future policy benefits
(163
)
 
(2,886
)
 
(898
)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI

 
(4
)
 
6

DAC, VOBA and DSI
(1,273
)
 
(1,946
)
 
(1,190
)
Policyholder dividend obligation
(1,783
)
 
(3,155
)
 
(1,771
)
Subtotal
(3,219
)
 
(7,991
)
 
(3,853
)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI
27

 
42

 
73

Deferred income tax benefit (expense)
(6,151
)
 
(8,556
)
 
(4,956
)
Net unrealized investment gains (losses)
11,804

 
16,268

 
8,410

Net unrealized investment gains (losses) attributable to noncontrolling interests
(31
)
 
(33
)
 
4

Net unrealized investment gains (losses) attributable to MetLife, Inc.
$
11,773

 
$
16,235

 
$
8,414

The changes in fixed maturity securities with noncredit OTTI losses included in AOCI were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
(In millions)
Balance at January 1,
$
(112
)
 
$
(218
)
Noncredit OTTI losses and subsequent changes recognized
6

 
17

Securities sold with previous noncredit OTTI loss
125

 
53

Subsequent changes in estimated fair value
(95
)
 
36

Balance at December 31,
$
(76
)
 
$
(112
)

244

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

The changes in net unrealized investment gains (losses) were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Balance at January 1,
$
16,235

 
$
8,414

 
$
14,419

Fixed maturity securities on which noncredit OTTI losses have been recognized
36

 
106

 
143

Unrealized investment gains (losses) during the year
(11,662
)
 
15,521

 
(17,618
)
Unrealized investment gains (losses) relating to:
 
 
 
 
 
Future policy benefits
2,723

 
(1,988
)
 
5,151

DAC and VOBA related to noncredit OTTI losses recognized in AOCI
4

 
(10
)
 
(13
)
DAC, VOBA and DSI
673

 
(756
)
 
1,295

Policyholder dividend obligation
1,372

 
(1,384
)
 
2,057

Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI
(15
)
 
(31
)
 
(46
)
Deferred income tax benefit (expense)
2,405

 
(3,600
)
 
3,017

Net unrealized investment gains (losses)
11,771

 
16,272

 
8,405

Net unrealized investment gains (losses) attributable to noncontrolling interests
2

 
(37
)
 
9

Balance at December 31,
$
11,773

 
$
16,235

 
$
8,414

Change in net unrealized investment gains (losses)
$
(4,464
)
 
$
7,858

 
$
(6,014
)
Change in net unrealized investment gains (losses) attributable to noncontrolling interests
2

 
(37
)
 
9

Change in net unrealized investment gains (losses) attributable to MetLife, Inc.
$
(4,462
)
 
$
7,821

 
$
(6,005
)
Concentrations of Credit Risk
Investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, were in fixed income securities of the Japanese government and its agencies with an estimated fair value of $20.9 billion and $20.3 billion at December 31, 2015 and 2014 , respectively. The Company’s investment in fixed maturity and equity securities to counterparties that primarily conduct business in Japan, including Japan government and agency fixed maturity securities, was $25.4 billion and $25.5 billion at December 31, 2015 and 2014 , respectively.
Securities Lending
Elements of the securities lending program are presented below at:
 
December 31,
 
2015
 
2014
 
(In millions)
Securities on loan: (1)
 
 
 
Amortized cost
$
27,223

 
$
26,989

Estimated fair value
$
29,646

 
$
30,269

Cash collateral on deposit from counterparties (2)
$
30,197

 
$
30,826

Security collateral on deposit from counterparties (3)
$
50

 
$
83

Reinvestment portfolio — estimated fair value
$
30,258

 
$
31,314

______________
(1)
Included within fixed maturity securities and short-term investments.
(2)
Included within payables for collateral under securities loaned and other transactions.
(3)
Security collateral on deposit from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected in the consolidated financial statements.

245

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:
 
December 31, 2015
 
Remaining Tenor of Securities Lending Agreements
 
 
 
 
 
Open (1)
 
1 Month or Less
 
1 to 6 Months
 
Total
 
% of Total
 
(In millions)
 
 
 
 
Cash collateral liability by loaned security type
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
10,116

 
$
11,157

 
$
5,986

 
$
27,259

 
90.3
%
Agency RMBS

 
951

 
600

 
1,551

 
5.1

Foreign government
2

 
510

 
486

 
998

 
3.3

U.S. corporate
9

 
380

 

 
389

 
1.3

Foreign corporate

 

 

 

 

Total
$
10,127

 
$
12,998

 
$
7,072

 
$
30,197

 
100.0
%
 
December 31, 2014
 
Remaining Tenor of Securities Lending Agreements
 
 
 
 
Open (1)
 
1 Month or Less
 
1 to 6 Months
 
Total
 
% of Total
 
(In millions)
 
 
Cash collateral liability by loaned security type
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
$
10,371

 
$
10,423

 
$
5,239

 
$
26,033

 
84.5
%
Agency RMBS

 
482

 
2,572

 
3,054

 
9.9

Foreign government
30

 
1,034

 
81

 
1,145

 
3.7

U.S. corporate
125

 
182

 

 
307

 
1.0

Foreign corporate
175

 
112

 

 
287

 
0.9

Total
$
10,701

 
$
12,233

 
$
7,892

 
$
30,826

 
100.0
%
__________________
(1)
The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.
If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2015 was $9.9 billion , over 99% of which were U.S. Treasury and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including U.S. Treasury and agency, agency RMBS, ABS, U.S. corporate securities, non-agency RMBS and foreign corporate securities) with 60% invested in U.S. Treasury and agency securities, agency RMBS, cash equivalents, short-term investments or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

246

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value at:
 
December 31,
 
2015
 
2014
 
(In millions)
Invested assets on deposit (regulatory deposits)
$
9,089

 
$
9,437

Invested assets held in trust (collateral financing arrangements and reinsurance agreements)
10,443

 
10,069

Invested assets pledged as collateral (1)
23,145

 
25,996

Total invested assets on deposit, held in trust and pledged as collateral
$
42,677

 
$
45,502

______________
(1)
The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Notes  4 and  12 ), collateral financing arrangements (see Note  13 ) and derivative transactions (see Note  9 ).
See “— Securities Lending” for information regarding securities on loan and Note  7 for information regarding investments designated to the closed block.
Purchased Credit Impaired Investments
Investments acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired (“PCI”) investments. For each investment, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. If, subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI or the recognition of mortgage loan valuation allowances.
The Company’s PCI investments, by invested asset class, were as follows at:
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
Fixed Maturity Securities
 
Mortgage Loans
 
(In millions)
Outstanding principal and interest balance (1)
$
6,410

 
$
5,287

 
$
148

 
$
239

Carrying value (2)
$
4,883

 
$
4,170

 
$
129

 
$
132

______________
(1)
Represents the contractually required payments, which is the sum of contractual principal, whether or not currently due, and accrued interest.
(2)
Estimated fair value plus accrued interest for fixed maturity securities and amortized cost, plus accrued interest, less any valuation allowances, for mortgage loans.

247

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

The following table presents information about PCI investments acquired during the periods indicated:
 
Years Ended December 31,
 
2015
 
2014
 
2015
 
2014
 
Fixed Maturity Securities
 
Mortgage Loans
 
(In millions)
Contractually required payments (including interest)
$
2,220

 
$
947

 
$

 
$

Cash flows expected to be collected (1)
$
1,951

 
$
745

 
$

 
$

Fair value of investments acquired
$
1,439

 
$
503

 
$

 
$

______________
(1)
Represents undiscounted principal and interest cash flow expectations, at the date of acquisition.
The following table presents activity for the accretable yield on PCI investments:
 
Years Ended December 31,
 
2015
 
2014
 
2015
 
2014
 
Fixed Maturity Securities
 
Mortgage Loans
 
(In millions)
Accretable yield, January 1,
$
2,143

 
$
2,746

 
$
48

 
$
74

Investments purchased
512

 
242

 

 

Accretion recognized in earnings
(325
)
 
(244
)
 
(56
)
 
(22
)
Disposals
(56
)
 
(60
)
 

 

Reclassification (to) from nonaccretable difference
(74
)
 
(541
)
 
29

 
(4
)
Accretable yield, December 31,
$
2,200

 
$
2,143

 
$
21

 
$
48

Collectively Significant Equity Method Investments
The Company holds investments in real estate joint ventures, real estate funds and other limited partnership interests consisting of leveraged buy-out funds, hedge funds, private equity funds, joint ventures and other funds. The portion of these investments accounted for under the equity method had a carrying value of $14.6 billion at December 31, 2015 . The Company’s maximum exposure to loss related to these equity method investments is limited to the carrying value of these investments plus unfunded commitments of $5.2 billion at December 31, 2015 . Except for certain real estate joint ventures, the Company’s investments in real estate funds and other limited partnership interests are generally of a passive nature in that the Company does not participate in the management of the entities.
As described in Note  1 , the Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. Aggregate net investment income from these equity method investments exceeded 10% of the Company’s consolidated pre-tax income (loss) from continuing operations for only one of the three most recent annual periods: 2013 . The Company is providing the following aggregated summarized financial data for such equity method investments, for the most recent annual periods, in order to provide comparative information. This aggregated summarized financial data does not represent the Company’s proportionate share of the assets, liabilities, or earnings of such entities.
The aggregated summarized financial data presented below reflects the latest available financial information and is as of, and for, the years ended December 31, 2015 , 2014 and 2013 . Aggregate total assets of these entities totaled $447.5 billion and $385.7 billion at December 31, 2015 and 2014 , respectively. Aggregate total liabilities of these entities totaled $72.0 billion and $39.5 billion at December 31, 2015 and 2014 , respectively. Aggregate net income (loss) of these entities totaled $25.8 billion , $34.9 billion and $26.3 billion for the years ended December 31, 2015 , 2014 and 2013 , respectively. Aggregate net income (loss) from the underlying entities in which the Company invests is primarily comprised of investment income, including recurring investment income and realized and unrealized investment gains (losses).

248

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Variable Interest Entities
The Company has invested in certain structured transactions (including CSEs), formed trusts to invest proceeds from certain collateral financing arrangements and has insurance operations that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity.
The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. The Company generally uses a qualitative approach to determine whether it is the primary beneficiary. However, for VIEs that are investment companies or apply measurement principles consistent with those utilized by investment companies, the primary beneficiary is based on a risks and rewards model and is defined as the entity that will absorb a majority of a VIE’s expected losses, receive a majority of a VIE’s expected residual returns if no single entity absorbs a majority of expected losses, or both. The Company reassesses its involvement with VIEs on a quarterly basis. The use of different methodologies, assumptions and inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the consolidated financial statements.
Consolidated VIEs
Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.
The following table presents the total assets and total liabilities relating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at December 31, 2015 and 2014 .
 
December 31,
 
2015
 
2014
 
Total
Assets
 
Total
Liabilities
 
Total
Assets
 
Total
Liabilities
 
(In millions)
MRSC (collateral financing arrangement (primarily securities)) (1)
$
3,374

 
$

 
$
3,471

 
$

Operating joint venture (2)
2,465

 
2,079

 
2,405

 
1,999

CSEs (assets (primarily loans) and liabilities (primarily debt)) (3)
186

 
62

 
297

 
155

Other investments (4)
76

 

 
150

 
15

Total
$
6,101

 
$
2,141

 
$
6,323

 
$
2,169

______________
(1)
See Note 13 for a description of the MetLife Reinsurance Company of South Carolina (“MRSC”) collateral financing arrangement.
(2)
Assets of the operating joint venture are primarily fixed maturity securities and separate account assets. Liabilities of the operating joint venture are primarily future policy benefits, other policyholder funds and separate account liabilities.
(3)
The Company consolidates entities that are structured as CMBS and as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise. The Company’s exposure was limited to that of its remaining investment in these entities of $105 million and $123 million at estimated fair value at December 31, 2015 and 2014 , respectively. The long-term debt bears interest primarily at fixed rates ranging from 2.25% to 5.57% , payable primarily on a monthly basis. Interest expense related to these obligations, included in other expenses, was $8 million , $38 million and $122 million for the years ended December 31, 2015 , 2014 and 2013 respectively.
(4)
Other investments is comprised of other invested assets, other limited partnerships interests, FVO and trading securities, and real estate joint ventures.

249

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Unconsolidated VIEs
The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:
 
December 31,
 
2015
 
2014
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
(In millions)
Fixed maturity securities AFS:
 
 
 
 
 
 
 
Structured securities (RMBS, ABS and CMBS) (2)
$
65,824

 
$
65,824

 
$
68,427

 
$
68,427

U.S. and foreign corporate
3,261

 
3,261

 
3,829

 
3,829

Other limited partnership interests
5,186

 
7,074

 
6,250

 
8,402

Other invested assets
1,604

 
2,161

 
1,720

 
2,050

FVO and trading securities
586

 
586

 
565

 
565

Real estate joint ventures
65

 
82

 
100

 
125

Other investments (3)
71

 
71

 
92

 
92

Total
$
76,597

 
$
79,059

 
$
80,983

 
$
83,490

______________
(1)
The maximum exposure to loss relating to fixed maturity securities AFS, FVO and trading securities and equity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests, mortgage loans and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $179 million and $212 million at December 31, 2015 and 2014 , respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.
(2)
For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset-backed securities issued by trusts that do not have substantial equity.
(3)
Other investments is comprised of mortgage loans and non-redeemable preferred stock.
As described in Note  21 , the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during the years ended December 31, 2015 , 2014 and 2013 .

250

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Net Investment Income
The components of net investment income were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Investment income:
 
 
 
 
 
Fixed maturity securities
$
14,235

 
$
14,868

 
$
15,071

Equity securities
144

 
133

 
127

FVO and trading securities — Actively traded and FVO general account securities (1)
21

 
103

 
65

Mortgage loans
3,136

 
2,928

 
3,020

Policy loans
603

 
629

 
620

Real estate and real estate joint ventures
981

 
951

 
909

Other limited partnership interests
669

 
1,033

 
955

Cash, cash equivalents and short-term investments
148

 
168

 
181

Operating joint ventures
25

 
10

 
10

Other
248

 
192

 
165

Subtotal
20,210

 
21,015

 
21,123

Less: Investment expenses
1,209

 
1,178

 
1,198

Subtotal, net
19,001

 
19,837

 
19,925

FVO and trading securities — FVO contractholder-directed unit-linked investments (1)
264

 
1,266

 
2,172

FVO CSEs — interest income:
 
 
 
 
 
Commercial mortgage loans
16

 
49

 
132

Securities

 
1

 
3

Subtotal
280

 
1,316

 
2,307

Net investment income
$
19,281

 
$
21,153

 
$
22,232

______________
(1)
Changes in estimated fair value subsequent to purchase for securities still held as of the end of the respective years included in net investment income were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Actively traded and FVO general account securities
$
(23
)
 
$
(3
)
 
$
18

FVO contractholder-directed unit-linked investments
$
(433
)
 
$
645

 
$
1,579

See “— Variable Interest Entities” for discussion of CSEs.
FVO Securities include certain fixed maturity and equity securities held-for-investment by the general account to support asset and liability management strategies for certain insurance products and investments in certain separate accounts; securities held by CSEs; and trading securities, as further described in Note 1.

251

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Total gains (losses) on fixed maturity securities:
 
 
 
 
 
Total OTTI losses recognized — by sector and industry:
 
 
 
 
 
U.S. and foreign corporate securities — by industry:
 
 
 
 
 
Consumer
$
(28
)
 
$
(7
)
 
$
(11
)
Utility
(21
)
 

 
(48
)
Industrial
(5
)
 

 

Transportation

 
(2
)
 
(3
)
Finance

 

 
(10
)
Communications

 

 
(2
)
Total U.S. and foreign corporate securities
(54
)
 
(9
)
 
(74
)
RMBS
(30
)
 
(31
)
 
(80
)
CMBS

 
(13
)
 
(12
)
ABS

 
(7
)
 

State and political subdivision
(6
)
 

 

OTTI losses on fixed maturity securities recognized in earnings
(90
)
 
(60
)
 
(166
)
Fixed maturity securities — net gains (losses) on sales and disposals
204

 
598

 
561

Total gains (losses) on fixed maturity securities
114

 
538

 
395

Total gains (losses) on equity securities:
 
 
 
 
 
Total OTTI losses recognized — by sector:
 
 
 
 
 
Common stock
(39
)
 
(13
)
 
(6
)
Non-redeemable preferred stock
(1
)
 
(23
)
 
(20
)
OTTI losses on equity securities recognized in earnings
(40
)
 
(36
)
 
(26
)
Equity securities — net gains (losses) on sales and disposals
61

 
101

 
31

Total gains (losses) on equity securities
21

 
65

 
5

FVO and trading securities — FVO general account securities

 
9

 
15

Mortgage loans
(105
)
 
(36
)
 
22

Real estate and real estate joint ventures
531

 
222

 
(19
)
Other limited partnership interests
(67
)
 
(78
)
 
(48
)
Other
(6
)
 
(110
)
 
22

Subtotal
488

 
610

 
392

FVO CSEs:
 
 
 
 
 
Commercial mortgage loans
(7
)
 
(13
)
 
(52
)
Securities

 

 
2

Long-term debt — related to commercial mortgage loans
4

 
19

 
85

Long-term debt — related to securities

 
(1
)
 
(2
)
Non-investment portfolio gains (losses) (1)
112

 
(812
)
 
(264
)
Subtotal
109

 
(807
)
 
(231
)
Total net investment gains (losses)
$
597

 
$
(197
)
 
$
161

______________

252

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
8. Investments (continued)

(1)
Non-investment portfolio gains (losses) for the year ended December 31, 2014 includes a loss of $633 million related to the disposition of MAL as more fully described in Note 3 .
See “— Variable Interest Entities” for discussion of CSEs.
Gains (losses) from foreign currency transactions included within net investment gains (losses) were $46 million , ($183) million and $171 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Sales or Disposals and Impairments of Fixed Maturity and Equity Securities
Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below.
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
Fixed Maturity Securities
 
Equity Securities
 
(In millions)
Proceeds
$
115,395

 
$
82,075

 
$
76,070

 
$
358

 
$
544

 
$
746

Gross investment gains
$
1,262

 
$
1,165

 
$
1,326

 
$
99

 
$
112

 
$
56

Gross investment losses
(1,058
)
 
(567
)
 
(765
)
 
(38
)
 
(11
)
 
(25
)
OTTI losses
(90
)
 
(60
)
 
(166
)
 
(40
)
 
(36
)
 
(26
)
Net investment gains (losses)
$
114

 
$
538

 
$
395

 
$
21

 
$
65

 
$
5

Credit Loss Rollforward
The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in OCI:
 
Years Ended December 31,
 
2015
 
2014
 
(In millions)
Balance at January 1,
$
357

 
$
378

Additions:
 
 
 
Initial impairments — credit loss OTTI on securities not previously impaired
20

 
2

Additional impairments — credit loss OTTI on securities previously impaired
26

 
25

Reductions:
 
 
 
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI
(124
)
 
(40
)
Securities impaired to net present value of expected future cash flows

 
(7
)
Increase in cash flows — accretion of previous credit loss OTTI
(2
)
 
(1
)
Balance at December 31,
$
277

 
$
357

9. Derivatives
Accounting for Derivatives
See Note  1 for a description of the Company’s accounting policies for derivatives and Note  10 for information about the fair value hierarchy for derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.

253

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash market.
Interest Rate Derivatives
The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, caps, floors, swaptions, futures and forwards.
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.
The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. Treasury, agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.
The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in nonqualifying hedging relationships.
In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures in nonqualifying hedging relationships.
Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.
The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow hedging relationships.
Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency exchange rate derivatives, including foreign currency swaps, foreign currency forwards, currency options and exchange-traded currency futures, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. The Company also uses foreign currency derivatives to hedge the foreign currency exchange rate risk associated with certain of its net investments in foreign operations.

254

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in fair value, net investment in foreign operations and nonqualifying hedging relationships.
The Company enters into currency options that give it the right, but not the obligation, to sell the foreign currency amount in exchange for a functional currency amount within a limited time at a contracted price. The contracts may also be net settled in cash, based on differentials in the foreign currency exchange rate and the strike price. The Company uses currency options to hedge against the foreign currency exposure inherent in certain of its variable annuity products. The Company also uses currency options as an economic hedge of foreign currency exposure related to the Company’s international subsidiaries. The Company utilizes currency options in net investment in foreign operations and nonqualifying hedging relationships.
To a lesser extent, the Company uses exchange-traded currency futures to hedge currency mismatches between assets and liabilities, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded currency futures in nonqualifying hedging relationships.
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations, repudiation, moratorium, involuntary restructuring or governmental intervention. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. Treasury securities, agency securities or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.
The Company also enters into certain purchased and written credit default swaps held in relation to trading portfolios for the purpose of generating profits on short-term differences in price. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and total rate of return swaps (“TRRs”).

255

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.
In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
TRRs are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses TRRs to hedge its equity market guarantees in certain of its insurance products. TRRs can be used as hedges or to synthetically create investments. The Company utilizes TRRs in nonqualifying hedging relationships.

256

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

Primary Risks Managed by Derivatives
The following table presents the gross notional amount, estimated fair value and primary underlying risk exposure of the Company’s derivatives, excluding embedded derivatives, held at:
 
Primary Underlying Risk Exposure
 
December 31,
 
2015
 
2014
 
 
 
Estimated Fair Value
 
 
 
Estimated Fair Value
 
Gross
Notional
Amount
 
Assets
 
Liabilities
 
Gross
Notional
Amount
 
Assets
 
Liabilities
 
 
 
(In millions)
Derivatives Designated as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
$
5,528

 
$
2,215

 
$
12

 
$
6,044

 
$
2,064

 
$
21

Foreign currency swaps
Foreign currency exchange rate
 
2,154

 
62

 
159

 
2,708

 
65

 
100

Foreign currency forwards
Foreign currency exchange rate
 
1,685

 

 
52

 
2,335

 

 
291

Subtotal
 
9,367

 
2,277

 
223

 
11,087

 
2,129

 
412

Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
2,190

 
487

 

 
2,560

 
528

 

Interest rate forwards
Interest rate
 
105

 
23

 

 
225

 
63

 

Foreign currency swaps
Foreign currency exchange rate
 
23,661

 
1,303

 
1,803

 
18,325

 
563

 
930

Subtotal
 
25,956

 
1,813

 
1,803

 
21,110

 
1,154

 
930

Foreign operations hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency forwards
Foreign currency exchange rate
 
3,916

 
63

 
12

 
4,097

 
295

 
11

Currency options
Foreign currency exchange rate
 
7,569

 
205

 
36

 
6,419

 
415

 

Subtotal
 
11,485

 
268

 
48

 
10,516

 
710

 
11

Total qualifying hedges
 
46,808

 
4,358

 
2,074

 
42,713

 
3,993

 
1,353

Derivatives Not Designated or Not Qualifying as Hedging Instruments
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Interest rate
 
89,336

 
5,111

 
2,247

 
93,266

 
4,570

 
2,051

Interest rate floors
Interest rate
 
23,837

 
311

 
48

 
55,645

 
440

 
199

Interest rate caps
Interest rate
 
68,928

 
105

 
3

 
49,128

 
145

 
1

Interest rate futures
Interest rate
 
5,808

 
4

 
7

 
2,707

 
4

 
9

Interest rate options
Interest rate
 
30,234

 
1,177

 
30

 
48,078

 
1,241

 
75

Interest rate forwards
Interest rate
 
43

 
1

 

 

 

 

Synthetic GICs
Interest rate
 
4,216

 

 

 
4,298

 

 

Foreign currency swaps
Foreign currency exchange rate
 
11,081

 
766

 
431

 
11,041

 
447

 
385

Foreign currency forwards
Foreign currency exchange rate
 
11,724

 
154

 
220

 
13,206

 
127

 
791

Currency futures
Foreign currency exchange rate
 
930

 

 

 
522

 
2

 

Currency options
Foreign currency exchange rate
 
9,590

 
466

 
189

 
8,324

 
585

 
340

Credit default swaps — purchased
Credit
 
1,870

 
28

 
34

 
2,830

 
8

 
34

Credit default swaps — written
Credit
 
10,311

 
78

 
13

 
10,527

 
181

 
6

Equity futures
Equity market
 
7,206

 
63

 
18

 
6,073

 
65

 
2

Equity index options
Equity market
 
55,682

 
1,542

 
1,041

 
39,345

 
1,426

 
1,036

Equity variance swaps
Equity market
 
23,437

 
195

 
636

 
24,598

 
196

 
639

TRRs
Equity market
 
3,803

 
47

 
58

 
3,297

 
22

 
101

Total non-designated or nonqualifying derivatives
 
358,036

 
10,048

 
4,975

 
372,885

 
9,459

 
5,669

Total
 
$
404,844

 
$
14,406

 
$
7,049

 
$
415,598

 
$
13,452

 
$
7,022


257

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both December 31, 2015 and 2014 . The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps that are used to synthetically create credit investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.
Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Freestanding derivatives and hedging gains (losses) (1)
$
277

 
$
1,638

 
$
(8,343
)
Embedded derivatives gains (losses)
(239
)
 
(321
)
 
5,104

Total net derivative gains (losses)
$
38

 
$
1,317

 
$
(3,239
)
______________
(1)
Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
The following table presents earned income on derivatives:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Qualifying hedges:
 
 
 
 
 
Net investment income
$
219

 
$
158

 
$
135

Interest credited to policyholder account balances
25

 
101

 
150

Other expenses
(6
)
 
(3
)
 
(6
)
Nonqualifying hedges:
 
 
 
 
 
Net investment income
(5
)
 
(4
)
 
(6
)
Net derivative gains (losses)
1,024

 
828

 
328

Policyholder benefits and claims
16

 
40

 
(292
)
Total
$
1,273

 
$
1,120

 
$
309


258

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 
(In millions)
Year Ended December 31, 2015
 
 
 
 
 
Interest rate derivatives
$
(421
)
 
$

 
$
5

Foreign currency exchange rate derivatives
547

 

 

Credit derivatives — purchased
7

 
(3
)
 

Credit derivatives — written
(83
)
 

 

Equity derivatives
(816
)
 
(14
)
 
(25
)
Total
$
(766
)
 
$
(17
)
 
$
(20
)
Year Ended December 31, 2014
 
 
 
 
 
Interest rate derivatives
$
1,545

 
$

 
$
42

Foreign currency exchange rate derivatives
(344
)
 

 

Credit derivatives — purchased
(12
)
 

 

Credit derivatives — written
21

 

 

Equity derivatives
(634
)
 
(18
)
 
(288
)
Total
$
576

 
$
(18
)
 
$
(246
)
Year Ended December 31, 2013
 
 
 
 
 
Interest rate derivatives
$
(3,458
)
 
$

 
$
(27
)
Foreign currency exchange rate derivatives
(1,716
)
 

 

Credit derivatives — purchased
(21
)
 
(14
)
 

Credit derivatives — written
130

 
1

 

Equity derivatives
(3,663
)
 
(25
)
 
(727
)
Total
$
(8,728
)
 
$
(38
)
 
$
(754
)
______________
(1)
Changes in estimated fair value related to economic hedges of equity method investments in joint ventures, derivatives held in relation to trading portfolios and derivatives held within contractholder-directed unit-linked investments.
(2)
Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities; and (iii) foreign currency forwards to hedge the foreign currency fair value exposure of foreign currency denominated investments.

259

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)
 
 
 
 
(In millions)
Year Ended December 31, 2015
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
5

 
$

 
$
5

 
 
Policyholder liabilities (1)
 
(2
)
 
(8
)
 
(10
)
Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
15

 
(7
)
 
8

 
 
Foreign-denominated policyholder account balances (2)
 
(240
)
 
232

 
(8
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
(75
)
 
68

 
(7
)
Total
 
$
(297
)
 
$
285

 
$
(12
)
Year Ended December 31, 2014
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
5

 
$
(1
)
 
$
4

 
 
Policyholder liabilities (1)
 
681

 
(667
)
 
14

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
13

 
(11
)
 
2

 
 
Foreign-denominated policyholder account balances (2)
 
(283
)
 
270

 
(13
)
Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
(359
)
 
330

 
(29
)
Total
 
$
57

 
$
(79
)
 
$
(22
)
Year Ended December 31, 2013
 
 
 
 
 
 
Interest rate swaps:
 
Fixed maturity securities
 
$
42

 
$
(43
)
 
$
(1
)
 
 
Policyholder liabilities (1)
 
(830
)
 
835

 
5

Foreign currency swaps:
 
Foreign-denominated fixed maturity securities
 
13

 
(12
)
 
1

 
 
Foreign-denominated policyholder account balances (2)
 
(97
)
 
110

 
13

Foreign currency forwards:
 
Foreign-denominated fixed maturity securities
 
(109
)
 
102

 
(7
)
Total
 
$
(981
)
 
$
992

 
$
11

______________
(1)
Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)
Fixed rate or floating rate liabilities.
For the Company’s foreign currency forwards, the change in the estimated fair value of the derivative related to the changes in the difference between the spot price and the forward price is excluded from the assessment of hedge effectiveness. For all other derivatives, all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For the years ended December 31, 2015 , 2014 and 2013 , the component of the change in estimated fair value of derivatives that was excluded from the assessment of hedge effectiveness was ($11) million , $3 million and ($2) million , respectively.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments; and (v) interest rate swaps and interest rate forwards to hedge forecasted fixed-rate borrowings.

260

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). These amounts were $11 million , ($15) million and ($1) million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
At December 31, 2015 and 2014 , the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed five years and six years, respectively.
At December 31, 2015 and 2014 , the balance in AOCI associated with cash flow hedges was $2.4 billion and $1.8 billion , respectively.
The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships
 
Amount of Gains
(Losses)Deferred in
AOCI on Derivatives
 
Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)
 
Amount and Location
of Gains (Losses)Recognized in Income
(Loss) on Derivatives
 
 
(Effective Portion)
 
(Effective Portion)
 
(Ineffective Portion)
 
 
 
 
Net Derivative
Gains (Losses)
 
Net Investment
Income
 
Other
Expenses
 
 Net Derivative
Gains (Losses)
 
 
(In millions)
Year Ended December 31, 2015
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
91

 
$
85

 
$
12

 
$

 
$
3

Interest rate forwards
 
(1
)
 
6

 
5

 
2

 

Foreign currency swaps
 
(109
)
 
(720
)
 
(1
)
 
1

 
9

Credit forwards
 

 
1

 
1

 

 

Total
 
$
(19
)
 
$
(628
)
 
$
17

 
$
3

 
$
12

Year Ended December 31, 2014
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
722

 
$
42

 
$
9

 
$

 
$
3

Interest rate forwards
 
86

 
(7
)
 
4

 
2

 

Foreign currency swaps
 
(139
)
 
(768
)
 
(2
)
 
2

 
1

Credit forwards
 

 

 
1

 

 

Total
 
$
669

 
$
(733
)
 
$
12

 
$
4

 
$
4

Year Ended December 31, 2013
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
(635
)
 
$
20

 
$
8

 
$

 
$
(3
)
Interest rate forwards
 
(59
)
 
10

 
3

 
(1
)
 
1

Foreign currency swaps
 
(165
)
 
(3
)
 
(3
)
 
1

 
3

Credit forwards
 
(4
)
 

 
1

 

 

Total
 
$
(863
)
 
$
27

 
$
9

 
$

 
$
1

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At December 31, 2015 , $50 million of deferred net gains (losses) on derivatives in AOCI was expected to be reclassified to earnings within the next 12 months.
Hedges of Net Investments in Foreign Operations
The Company uses foreign currency exchange rate derivatives, which may include foreign currency forwards and currency options, to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness on these derivatives based upon the change in forward rates.
When net investments in foreign operations are sold or substantially liquidated, the amounts in AOCI are reclassified to the statement of operations.

261

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

The following table presents the effects of derivatives in net investment hedging relationships on the consolidated statements of operations and the consolidated statements of equity:
Derivatives in Net Investment
Hedging Relationships (1), (2)
 
Amount of Gains (Losses) Deferred in 
AOCI (Effective Portion)
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
 
(In millions)
Foreign currency forwards
 
$
255

 
$
407

 
$
69

Currency options
 
(138
)
 
222

 
262

Total
 
$
117

 
$
629

 
$
331

______________
(1)
During the years ended December 31, 2015 and 2013 , there were no sales or substantial liquidations of net investments in foreign operations that would have required the reclassification of gains or losses from AOCI into earnings. In May 2014, the Company sold its interest in MAL, which was a hedged item in a net investment hedging relationship. See Note 3. As a result, during the year ended December 31, 2014 , the Company released losses of $77 million from AOCI into earnings upon the sale.
(2)
There was no ineffectiveness recognized for the Company’s hedges of net investments in foreign operations. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At December 31, 2015 and 2014 , the cumulative foreign currency translation gain (loss) recorded in AOCI related to hedges of net investments in foreign operations was $1.1 billion and $940 million , respectively.
Credit Derivatives
In connection with synthetically created credit investment transactions and credit default swaps held in relation to the trading portfolio, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $10.3 billion and $10.5 billion at December 31, 2015 and 2014 , respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At December 31, 2015 and 2014 , the Company would have received $65 million and $175 million , respectively, to terminate all of these contracts.

262

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
 
 
December 31,
 
 
2015
 
2014
Rating Agency Designation of Referenced
Credit Obligations (1)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
Estimated
Fair Value
of Credit
Default
Swaps
 
Maximum
Amount of Future
Payments under
Credit Default
Swaps
 
Weighted
Average
Years to
Maturity (2)
 
 
(In millions)
 
 
 
(In millions)
 
 
Aaa/Aa/A
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
$
6

 
$
661

 
2.5

 
$
10

 
$
677

 
2.4

Credit default swaps referencing indices
 
6

 
1,635

 
3.4

 
10

 
1,700

 
2.6

Subtotal
 
12

 
2,296

 
3.2

 
20

 
2,377

 
2.6

Baa
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
8

 
1,349

 
2.5

 
23

 
1,591

 
2.8

Credit default swaps referencing indices
 
37

 
5,863

 
4.8

 
94

 
5,774

 
4.7

Subtotal
 
45

 
7,212

 
4.4

 
117

 
7,365

 
4.3

Ba
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 
(2
)
 
64

 
2.3

 

 
60

 
3.0

Credit default swaps referencing indices
 
(1
)
 
100

 
1.0

 
(1
)
 
100

 
2.0

Subtotal
 
(3
)
 
164

 
1.5

 
(1
)
 
160

 
2.4

B
 
 
 
 
 
 
 
 
 
 
 
 
Single name credit default swaps (corporate)
 

 

 

 

 

 

Credit default swaps referencing indices
 
11

 
639

 
4.9

 
39

 
625

 
4.9

Subtotal
 
11

 
639

 
4.9

 
39

 
625

 
4.9

Total
 
$
65

 
$
10,311

 
4.1

 
$
175

 
$
10,527

 
3.9

______________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), S&P and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)
The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amounts of potential future recoveries available to offset the $10.3 billion and $10.5 billion from the table above were $80 million and $75 million at December 31, 2015 and 2014 , respectively.
Written credit default swaps held in relation to the trading portfolio amounted to $20 million and $15 million in gross notional amount and ($2) million and $1 million in estimated fair value at December 31, 2015 and 2014 , respectively.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

263

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.
The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.
See Note  10 for a description of the impact of credit risk on the valuation of derivatives.
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
 
 
December 31,
 
 
2015
 
2014
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
 
(In millions)
Gross estimated fair value of derivatives:
 
 
 
 
 
 
 
 
OTC-bilateral (1)
 
$
13,017

 
$
5,848

 
$
12,256

 
$
6,017

OTC-cleared (1)
 
1,600

 
1,217

 
1,380

 
1,054

Exchange-traded
 
67

 
25

 
71

 
11

Total gross estimated fair value of derivatives (1)
 
14,684

 
7,090

 
13,707

 
7,082

Amounts offset on the consolidated balance sheets
 

 

 

 

Estimated fair value of derivatives presented on the consolidated balance sheets (1)
 
14,684

 
7,090

 
13,707

 
7,082

Gross amounts not offset on the consolidated balance sheets:
 
 
 
 
 
 
 
 
Gross estimated fair value of derivatives: (2)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(4,368
)
 
(4,368
)
 
(4,082
)
 
(4,082
)
OTC-cleared
 
(1,200
)
 
(1,200
)
 
(989
)
 
(989
)
Exchange-traded
 
(1
)
 
(1
)
 
(5
)
 
(5
)
Cash collateral: (3), (4)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(6,140
)
 
(7
)
 
(4,153
)
 
(133
)
OTC-cleared
 
(378
)
 
(10
)
 
(386
)
 
(62
)
Exchange-traded
 

 
(20
)
 

 
(4
)
Securities collateral: (5)
 
 
 
 
 
 
 
 
OTC-bilateral
 
(2,078
)
 
(1,395
)
 
(3,768
)
 
(1,700
)
OTC-cleared
 

 

 

 
(3
)
Exchange-traded
 

 
(3
)
 

 
(2
)
Net amount after application of master netting agreements and collateral
 
$
519

 
$
86

 
$
324

 
$
102

______________
(1)
At December 31, 2015 and 2014 , derivative assets included income or expense accruals reported in accrued investment income or in other liabilities of $278 million and $255 million , respectively, and derivative liabilities included income or expense accruals reported in accrued investment income or in other liabilities of $41 million  and $60 million , respectively.

264

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

(2)
Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)
Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet. In certain instances, cash collateral pledged to the Company as initial margin for OTC-bilateral derivatives is held in separate custodial accounts and is not recorded on the Company’s balance sheet because the account title is in the name of the counterparty (but segregated for the benefit of the Company). The amount of this off-balance sheet collateral was $0 and $263 million at December 31, 2015 and 2014 , respectively.
(4)
The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At December 31, 2015 and 2014 , the Company received excess cash collateral of $89 million and $87 million (including $0 and $36 million off-balance sheet cash collateral held in separate custodial accounts), respectively, and provided excess cash collateral of $204 million  and $192 million , respectively, which is not included in the table above due to the foregoing limitation.
(5)
Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at December 31, 2015 none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At December 31, 2015 and 2014 , the Company received excess securities collateral with an estimated fair value of $100 million  and $395 million , respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At December 31, 2015 and 2014 , the Company provided excess securities collateral with an estimated fair value of $150 million  and $117 million , respectively, for its OTC-bilateral derivatives, $315 million  and $199 million , respectively, for its OTC-cleared derivatives, and $224 million  and $245 million , respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the estimated fair value of that counterparty’s derivatives reaches a pre-determined threshold. Certain of these arrangements also include credit-contingent provisions that provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the credit ratings of the Company and/or the counterparty. In addition, certain of the Company’s netting agreements for derivatives contain provisions that require both the Company and the counterparty to maintain a specific investment grade credit rating from each of Moody’s and S&P. If a party’s credit ratings were to fall below that specific investment grade credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.
The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that are in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that the Company would be required to provide if there was a one notch downgrade in the Company’s credit rating at the reporting date or if the Company’s credit rating sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.

265

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

 
 
December 31,
 
 
2015
 
2014
 
 
Derivatives Subject to Credit-Contingent Provisions
 
Derivatives Not Subject to Credit-Contingent Provisions
 
Total
 
Derivatives Subject to Credit-Contingent Provisions
 
Derivatives Not Subject to Credit-Contingent Provisions
 
Total
 
 
(In millions)
Estimated fair value of derivatives in a net liability position (1)
 
$
1,270

 
$
207

 
$
1,477

 
$
1,832

 
$
84

 
$
1,916

Estimated Fair Value of Collateral Provided
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
$
1,365

 
$
174

 
$
1,539

 
$
1,750

 
$
65

 
$
1,815

Cash
 
$
4

 
$
4

 
$
8

 
$
131

 
$
2

 
$
133

Fair Value of Incremental Collateral Provided Upon
 
 
 
 
 
 
 
 
 
 
 
 
One notch downgrade in the company's credit rating
 
$
1

 
$

 
$
1

 
$
5

 
$

 
$
5

Downgrade in the company's credit rating to a level that triggers full overnight collateralization or termination of the derivative position
 
$
1

 
$

 
$
1

 
$
7

 
$

 
$
7

______________
(1)
After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; ceded reinsurance of guaranteed minimum benefits related to certain GMIBs; assumed reinsurance of guaranteed minimum benefits related to GMWBs and GMABs; funding agreements with equity or bond indexed crediting rates; funds withheld on assumed and ceded reinsurance; fixed annuities with equity-indexed returns; and certain debt and equity securities.
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
 
 
 
 
December 31,
 
 
Balance Sheet Location
 
2015
 
2014
 
 
 
 
(In millions)
Net embedded derivatives within asset host contracts:
 
 
 
 
 
 
Ceded guaranteed minimum benefits
 
Premiums, reinsurance and other receivables
 
$
356

 
$
324

Funds withheld on assumed reinsurance
 
Other invested assets
 
35

 
53

Options embedded in debt or equity securities
 
Investments
 
(220
)
 
(217
)
Net embedded derivatives within asset host contracts
 
$
171

 
$
160

Net embedded derivatives within liability host contracts:
 
 
 
 
Direct guaranteed minimum benefits
 
Policyholder account balances
 and Future policy benefits
 
$
(20
)
 
$
(1,126
)
Assumed guaranteed minimum benefits
 
Policyholder account balances
 
965

 
973

Funds withheld on ceded reinsurance
 
Other liabilities
 
(14
)
 
83

Other
 
Policyholder account balances
 
4

 
24

Net embedded derivatives within liability host contracts
 
$
935

 
$
(46
)

266

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
9. Derivatives (continued)

The following table presents changes in estimated fair value related to embedded derivatives:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(In millions)
Net derivative gains (losses) (1)
 
$
(239
)
 
$
(321
)
 
$
5,104

Policyholder benefits and claims
 
$
21

 
$
87

 
$
(139
)
______________
(1)
The valuation of guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were $163 million , $13 million and ($952) million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
10. Fair Value
When developing estimated fair values, the Company considers three broad valuation techniques: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The Company determines the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs, giving priority to observable inputs. The Company categorizes its assets and liabilities measured at estimated fair value into a three-level hierarchy, based on the significant input with the lowest level in its valuation. The input levels are as follows: 
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities.
Level 2
Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. These inputs can include quoted prices for similar assets or liabilities other than quoted prices in Level 1, quoted prices in markets that are not active, or other significant inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
Unobservable inputs that are supported by little or no market activity and are significant to the determination of estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.
Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company’s ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities.
Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below.

267

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

 
 
December 31, 2015
 
 
Fair Value Hierarchy
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total Estimated
Fair Value
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
U.S. corporate
 
$

 
$
93,758

 
$
7,036

 
$
100,794

U.S. Treasury and agency
 
37,660

 
23,986

 

 
61,646

Foreign corporate
 

 
51,438

 
5,760

 
57,198

Foreign government
 

 
49,643

 
856

 
50,499

RMBS
 

 
34,088

 
4,709

 
38,797

State and political subdivision
 

 
15,395

 
46

 
15,441

ABS
 

 
12,731

 
1,663

 
14,394

CMBS
 

 
11,889

 
744

 
12,633

Total fixed maturity securities
 
37,660

 
292,928

 
20,814

 
351,402

Equity securities
 
1,274

 
1,615

 
432

 
3,321

FVO and trading securities:
 
 
 
 
 
 
 
 
Actively traded securities
 

 
400

 
4

 
404

FVO general account securities
 
506

 
32

 
89

 
627

FVO contractholder-directed unit-linked investments
 
10,829

 
2,985

 
167

 
13,981

FVO securities held by CSEs
 

 
2

 
10

 
12

Total FVO and trading securities
 
11,335

 
3,419

 
270

 
15,024

Short-term investments (1)
 
2,543

 
5,985

 
291

 
8,819

Mortgage loans:
 
 
 
 
 
 
 
 
Residential mortgage loans — FVO
 

 

 
314

 
314

Commercial mortgage loans held by CSEs — FVO
 

 
172

 

 
172

Total mortgage loans
 

 
172

 
314

 
486

Other invested assets:
 
 
 
 
 
 
 
 
Other investments
 
109

 
53

 

 
162

Derivative assets: (2)
 
 
 
 
 
 
 
 
Interest rate
 
4

 
9,405

 
25

 
9,434

Foreign currency exchange rate
 

 
3,003

 
16

 
3,019

Credit
 

 
99

 
7

 
106

Equity market
 
63

 
1,435

 
349

 
1,847

Total derivative assets
 
67

 
13,942

 
397

 
14,406

Total other invested assets
 
176

 
13,995

 
397

 
14,568

Net embedded derivatives within asset host contracts (3)
 

 

 
391

 
391

Separate account assets (4)
 
77,080

 
222,814

 
1,704

 
301,598

Total assets
 
$
130,068

 
$
540,928

 
$
24,613

 
$
695,609

Liabilities
 
 
 
 
 
 
 
 
Derivative liabilities: (2)
 
 
 
 
 
 
 
 
Interest rate
 
$
7

 
$
2,340

 
$

 
$
2,347

Foreign currency exchange rate
 

 
2,754

 
148

 
2,902

Credit
 

 
45

 
2

 
47

Equity market
 
18

 
1,077

 
658

 
1,753

Total derivative liabilities
 
25

 
6,216

 
808

 
7,049

Net embedded derivatives within liability host contracts (3)
 

 

 
935

 
935

Long-term debt of CSEs — FVO
 

 
49

 
11

 
60

Trading liabilities (5)
 
103

 
50

 

 
153

Total liabilities
 
$
128

 
$
6,315

 
$
1,754

 
$
8,197


268

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

 
 
December 31, 2014
 
 
Fair Value Hierarchy
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total Estimated
Fair Value
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
U.S. corporate
 
$

 
$
99,012

 
$
6,942

 
$
105,954

U.S. Treasury and agency
 
36,879

 
24,637

 

 
61,516

Foreign corporate
 

 
55,185

 
6,490

 
61,675

Foreign government
 

 
51,355

 
1,311

 
52,666

RMBS
 

 
35,463

 
4,383

 
39,846

State and political subdivision
 

 
15,187

 

 
15,187

ABS
 

 
12,005

 
2,244

 
14,249

CMBS
 

 
13,567

 
765

 
14,332

Total fixed maturity securities
 
36,879

 
306,411

 
22,135

 
365,425

Equity securities
 
1,558

 
1,728

 
345

 
3,631

FVO and trading securities:
 
 
 
 
 
 
 
 
Actively traded securities
 
22

 
627

 
5

 
654

FVO general account securities
 
552

 
57

 
95

 
704

FVO contractholder-directed unit-linked investments
 
11,064

 
3,797

 
455

 
15,316

FVO securities held by CSEs
 

 
3

 
12

 
15

Total FVO and trading securities
 
11,638

 
4,484

 
567

 
16,689

Short-term investments (1)
 
2,104

 
5,223

 
336

 
7,663

Mortgage loans:
 
 
 
 
 
 
 
 
Residential mortgage loans — FVO
 

 

 
308

 
308

Commercial mortgage loans held by CSEs — FVO
 

 
280

 

 
280

Total mortgage loans
 

 
280

 
308

 
588

Other invested assets:
 
 
 
 
 
 
 
 
Other investments
 
203

 
61

 

 
264

Derivative assets: (2)
 
 
 
 
 
 
 
 
Interest rate
 
4

 
8,988

 
63

 
9,055

Foreign currency exchange rate
 
2

 
2,472

 
25

 
2,499

Credit
 

 
175

 
14

 
189

Equity market
 
65

 
1,287

 
357

 
1,709

Total derivative assets
 
71

 
12,922

 
459

 
13,452

Total other invested assets
 
274

 
12,983

 
459

 
13,716

Net embedded derivatives within asset host contracts (3)
 

 

 
377

 
377

Separate account assets (4)
 
83,533

 
231,539

 
1,922

 
316,994

Total assets
 
$
135,986

 
$
562,648

 
$
26,449

 
$
725,083

Liabilities
 
 
 
 
 
 
 
 
Derivative liabilities: (2)
 
 
 
 
 
 
 
 
Interest rate
 
$
9

 
$
2,347

 
$

 
$
2,356

Foreign currency exchange rate
 

 
2,755

 
93

 
2,848

Credit
 

 
38

 
2

 
40

Equity market
 
2

 
1,112

 
664

 
1,778

Total derivative liabilities
 
11

 
6,252

 
759

 
7,022

Net embedded derivatives within liability host contracts (3)
 

 
7

 
(53
)
 
(46
)
Long-term debt of CSEs — FVO
 

 
138

 
13

 
151

Trading liabilities (5)
 
215

 
24

 

 
239

Total liabilities
 
$
226

 
$
6,421

 
$
719

 
$
7,366

______________

269

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

(1)
Short-term investments as presented in the tables above differ from the amounts presented on the consolidated balance sheets because certain short-term investments are not measured at estimated fair value on a recurring basis.
(2)
Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(3)
Net embedded derivatives within asset host contracts are presented primarily within premiums, reinsurance and other receivables on the consolidated balance sheets. Net embedded derivatives within liability host contracts are presented within policyholder account balances, future policy benefits and other liabilities on the consolidated balance sheets. At December 31, 2015 and 2014 , debt and equity securities also included embedded derivatives of ($220) million and ($217) million , respectively.
(4)
Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets.
(5)
Trading liabilities are presented within other liabilities on the consolidated balance sheets.
The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy.
Investments
Valuation Controls and Procedures
On behalf of the Company’s Chief Investment Officer and Chief Financial Officer, a pricing and valuation committee that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a quarterly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. This committee also provides oversight of the selection of independent third party pricing providers and the controls and procedures to evaluate third party pricing. Periodically, the Chief Accounting Officer reports to the Audit Committee of MetLife, Inc.’s Board of Directors regarding compliance with fair value accounting standards.
The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and 7% of the total estimated fair value of Level 3 fixed maturity securities at December 31, 2015.

270

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained, or an internally developed valuation is prepared. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and nonperformance risks, compared with pricing received from the independent pricing services, did not produce material differences in the estimated fair values for the majority of the portfolio; accordingly, overrides were not material. This is, in part, because internal estimates of liquidity and nonperformance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used.
Securities, Short-term Investments, Other Investments, Long-term Debt of CSEs — FVO and Trading Liabilities
When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment.
When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances.
The estimated fair value of investments in certain separate accounts included in FVO contractholder-directed unit-linked investments, FVO securities held by CSEs, other investments, long-term debt of CSEs — FVO and trading liabilities is determined on a basis consistent with the methodologies described herein for securities.
The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.

271

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Instrument
 
Level 2
Observable Inputs

Level 3
Unobservable Inputs

Fixed Maturity Securities
U.S. corporate and Foreign corporate securities
 
Valuation Techniques: Principally the market and income approaches.
Valuation Techniques: Principally the market approach.
 
Key Inputs:
Key Inputs:
 
quoted prices in markets that are not active
illiquidity premium
 
benchmark yields; spreads off benchmark yields; new issuances; issuer rating
delta spread adjustments to reflect specific credit-related issues
 
trades of identical or comparable securities; duration
credit spreads
 
Privately-placed securities are valued using the additional key inputs:
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
 
 
market yield curve; call provisions
 
 
 
observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer

independent non-binding broker quotations
 
 
delta spread adjustments to reflect specific credit-related issues
 
 
U.S. Treasury and agency, Foreign government and State and political subdivision securities
 
Valuation Techniques: Principally the market approach.
Valuation Techniques: Principally the market approach.
 
Key Inputs:
Key Inputs:
 
quoted prices in markets that are not active
independent non-binding broker quotations
 
benchmark U.S. Treasury yield or other yields
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
 
the spread off the U.S. Treasury yield curve for the identical security
 
 
issuer ratings and issuer spreads; broker-dealer quotes
credit spreads
 
comparable securities that are actively traded
 
 
Structured securities comprised of RMBS, ABS and CMBS
 
Valuation Techniques: Principally the market and income approaches.
Valuation Techniques: Principally the market and income approaches.
 
Key Inputs:
Key Inputs:
 
quoted prices in markets that are not active
credit spreads
 
spreads for actively traded securities; spreads off benchmark yields
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
 
expected prepayment speeds and volumes
 
 
current and forecasted loss severity; ratings; geographic region
independent non-binding broker quotations
 
weighted average coupon and weighted average maturity
 
 
 
average delinquency rates; debt-service coverage ratios
 
 
 
issuance-specific information, including, but not limited to:
 
 
 
 
collateral type; structure of the security; vintage of the loans
 
 
 
 
payment terms of the underlying assets
 
 
 
 
payment priority within the tranche; deal performance
 
 

272

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Equity Securities
 
Valuation Techniques: Principally the market approach.
Valuation Techniques: Principally the market and income approaches.
 
Key Input:
Key Inputs:
 
quoted prices in markets that are not considered active
credit ratings; issuance structures
 
 
 
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
 
 
 
independent non-binding broker quotations
FVO and trading securities, Short-term investments, and Other invested assets
 
Contractholder-directed unit-linked investments include mutual fund interests without readily determinable fair values given prices are not published publicly. Valuation of these mutual funds is based upon quoted prices or reported NAV provided by the fund managers, which were based on observable inputs.
FVO and trading securities and short-term investments are of a similar nature and class to the fixed maturity and equity securities described above; accordingly, the valuation techniques and unobservable inputs used in their valuation are also similar to those described above.
 
All other investments are of a similar nature and class to the fixed maturity and equity securities described above; accordingly, the valuation techniques and observable inputs used in their valuation are also similar to those described above.
 
 
Mortgage Loans — FVO
Commercial mortgage loans held by CSEs — FVO
 
Valuation Techniques: Principally the market approach.
N/A
 
Key Input:
 
 
 
quoted securitization market price determined principally by independent pricing services using observable inputs
 
 
Residential mortgage loans — FVO
 
N/A
Valuation Techniques: Principally the market approach, including matrix pricing or other similar techniques.
 
 
 
 
Key Inputs: Inputs that are unobservable or cannot be derived principally from, or corroborated by, observable market data
Separate Account Assets (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
 
Key Input:
N/A
 
quoted prices or reported NAV provided by the fund managers
 
 
Other limited partnership interests
 

N/A
Valuation Techniques: Valued giving consideration to the underlying holdings of the partnerships and by applying a premium or discount, if appropriate.
 
 
 
Key Inputs:
 
 
 
liquidity; bid/ask spreads; performance record of the fund manager
 
 
 
other relevant variables that may impact the exit value of the particular partnership interest
______________
(1)
Estimated fair value equals carrying value, based on the value of the underlying assets, including: mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. Fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents are similar in nature to the instruments described under “— Securities, Short-term Investments, Other Investments, Long-term Debt of CSEs — FVO and Trading Liabilities” and “— Derivatives—Freestanding Derivatives Valuation Techniques and Key Inputs.”

273

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Derivatives
The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments.”
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Freestanding Derivatives Valuation Techniques and Key Inputs
Level 2
This level includes all types of derivatives utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivatives with unobservable inputs as described in Level 3.
Level 3
These valuation methodologies generally use the same inputs as described in the corresponding sections for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.

274

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. Key inputs are as follows:
Instrument
 
Interest Rate
 
Foreign Currency
Exchange Rate
 
Credit
 
Equity Market
Inputs common to Level 2 and Level 3 by instrument type
swap yield curve
swap yield curve
swap yield curve
swap yield curve
basis curves
basis curves
credit curves
spot equity index levels
interest rate volatility (1)
currency spot rates
recovery rates
dividend yield curves
 
 
 
cross currency basis curves
 
 
equity volatility (1)
 
 
 
currency volatility (1)
 
 
 
 
Level 3
swap yield curve (2)
swap yield curve (2)
swap yield curve (2)
dividend yield curves (2)
 
basis curves (2)
basis curves (2)
credit curves (2)
equity volatility (1), (2)
 
interest rate volatility (1), (2)
cross currency basis curves (2)
credit spreads
correlation between model inputs (1)
 
 
 
currency correlation
repurchase rates
 
 
 
 
 
currency volatility (1)
independent non-binding broker quotations
 
 
______________
(1)
Option-based only.
(2)
Extrapolation beyond the observable limits of the curve(s).
Embedded Derivatives
Embedded derivatives principally include certain direct, assumed and ceded variable annuity guarantees, equity or bond indexed crediting rates within certain funding agreements and annuity contracts, and those related to funds withheld on ceded reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.
The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances and future policy benefits on the consolidated balance sheets.
The Company’s actuarial department calculates the fair value of these embedded derivatives, which are estimated as the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates.
Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.
The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc.

275

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income.
The Company ceded the risk associated with certain of the GMIBs previously described. These reinsurance agreements contain embedded derivatives which are included within premiums, reinsurance and other receivables on the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses) or policyholder benefits and claims depending on the statement of operations classification of the direct risk. The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.
The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as previously described in “— Investments — Securities, Short-term Investments, Other Investments, Long-term Debt of CSEs — FVO and Trading Liabilities.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities on the consolidated balance sheets with changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.
The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including a nonperformance risk adjustment. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within policyholder account balances with changes in estimated fair value recorded in net derivative gains (losses). Changes in equity and bond indices, interest rates and the Company’s credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.
The Company issues certain annuity contracts which allow the policyholder to participate in returns from equity indices. These equity indexed features are embedded derivatives which are measured at estimated fair value separately from the host fixed annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The estimated fair value of the embedded equity indexed derivatives, based on the present value of future equity returns to the policyholder using actuarial and present value assumptions including expectations concerning policyholder behavior, is calculated by the Company’s actuarial department. The calculation is based on in-force business and uses standard capital market techniques, such as Black-Scholes, to calculate the value of the portion of the embedded derivative for which the terms are set. The portion of the embedded derivative covering the period beyond where terms are set is calculated as the present value of amounts expected to be spent to provide equity indexed returns in those periods. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.

276

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Embedded Derivatives Within Asset and Liability Host Contracts
Level 3 Valuation Techniques and Key Inputs:
Direct and assumed guaranteed minimum benefits
These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curve, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curve and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin.
Reinsurance ceded on certain guaranteed minimum benefits
These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in “— Direct and assumed guaranteed minimum benefits” and also include counterparty credit spreads.
Transfers between Levels
Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into or out of any level are assumed to occur at the beginning of the period.
Transfers between Levels 1 and 2:
For assets and liabilities measured at estimated fair value and still held at December 31, 2015 and 2014 , transfers between Levels 1 and 2 were $203 million and $160 million , respectively.
Transfers into or out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

277

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
 
 
 
 
 
 
 
December 31, 2015
 
December 31, 2014
 
Impact of
Increase in Input
on Estimated
Fair Value (2)
 
Valuation Techniques
 
Significant
Unobservable Inputs
 
Range
 
Weighted
Average (1)
 
Range
 
Weighted
Average (1)
 
Fixed maturity securities (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate and foreign corporate
Matrix pricing
 
Delta spread adjustments (4)
 
(65)
-
240
 
39
 
(40)
-
240
 
46
 
Decrease
 
Market pricing
 
Quoted prices (5)
 
-
780
 
156
 
-
750
 
151
 
Increase
 
Consensus pricing
 
Offered quotes (5)
 
68
-
121
 
98
 
31
-
126
 
99
 
Increase
Foreign government
Market pricing
 
Quoted prices (5)
 
96
-
135
 
113
 
92
-
189
 
106
 
Increase
RMBS
Market pricing
 
Quoted prices (5)
 
19
-
292
 
92
 
22
-
120
 
97
 
Increase (6)
ABS
Market pricing
 
Quoted prices (5)
 
16
-
109
 
100
 
15
-
110
 
100
 
Increase (6)
 
Consensus pricing
 
Offered quotes (5)
 
66
-
105
 
99
 
56
-
106
 
102
 
Increase (6)
Derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
Present value techniques
 
Swap yield (7)
 
307
-
317
 
 
 
278
-
297
 
 
 
Increase (12)
Foreign currency exchange rate
Present value techniques
 
Swap yield (7)
 
28
-
381
 
 
 
62
-
2,430
 
 
 
Increase (12)
 
 
 
 
Correlation (8)
 
-
 
 
 
40%
-
55%
 
 
 
 
Credit
Present value techniques
 
Credit spreads (9)
 
98
-
100
 
 
 
98
-
100
 
 
 
Decrease (9)
 
Consensus pricing
 
Offered quotes (10)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity market
Present value techniques or option pricing models
 
Volatility (11)
 
15%
-
36%
 
 
 
15%
-
27%
 
 
 
Increase (12)
 
 
 
 
Correlation (8)
 
70%
-
70%
 
 
 
70%
-
70%
 
 
 
 
Embedded derivatives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct and assumed guaranteed minimum benefits
Option pricing techniques
 
Mortality rates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ages 0 - 40
 
0%
-
0.21%
 
 
 
0%
-
0.28%
 
 
 
Decrease (13)
 
 
 
 
 
Ages 41 - 60
 
0.01%
-
0.78%
 
 
 
0.04%
-
0.88%
 
 
 
Decrease (13)
 
 
 
 
 
Ages 61 - 115
 
0.04%
-
100%
 
 
 
0.26%
-
100%
 
 
 
Decrease (13)
 
 
 
 
Lapse rates:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Durations 1 - 10
 
0.25%
-
100%
 
 
 
0.50%
-
100%
 
 
 
Decrease (14)
 
 
 
 
 
Durations 11 - 20
 
2%
-
100%
 
 
 
2%
-
100%
 
 
 
Decrease (14)
 
 
 
 
 
Durations 21 - 116
 
1%
-
100%
 
 
 
2%
-
100%
 
 
 
Decrease (14)
 
 
 
 
Utilization rates
 
0%
-
25%
 
 
 
20%
-
50%
 
 
 
Increase (15)
 
 
 
 
Withdrawal rates
 
0%
-
20%
 
 
 
0%
-
20%
 
 
 
(16)
 
 
 
 
Long-term equity volatilities
 
8.79%
-
33%
 
 
 
7.30%
-
33%
 
 
 
Increase (17)
 
 
 
 
Nonperformance risk spread
 
(0.47)%
-
1.31%
 
 
 
(0.35)%
-
0.81%
 
 
 
Decrease (18)
______________
(1)
The weighted average for fixed maturity securities is determined based on the estimated fair value of the securities.
(2)
The impact of a decrease in input would have the opposite impact on the estimated fair value. For embedded derivatives, changes are based on liability positions.
(3)
Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations.
(4)
Range and weighted average are presented in basis points.
(5)
Range and weighted average are presented in accordance with the market convention for fixed maturity securities of dollars per hundred dollars of par.

278

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

(6)
Changes in the assumptions used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.
(7)
Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curve is utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
(8)
Ranges represent the different correlation factors utilized as components within the valuation methodology. Presenting a range of correlation factors is more representative of the unobservable input used in the valuation. Increases (decreases) in correlation in isolation will increase (decrease) the significance of the change in valuations.
(9)
Represents the risk quoted in basis points of a credit default event on the underlying instrument. Credit derivatives with significant unobservable inputs are primarily comprised of written credit default swaps.
(10)
At both December 31, 2015 and 2014 , independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.
(11)
Ranges represent the underlying equity volatility quoted in percentage points. Since this valuation methodology uses a range of inputs across multiple volatility surfaces to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
(12)
Changes are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.
(13)
Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(14)
Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(15)
The utilization rate assumption estimates the percentage of contract holders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(16)
The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(17)
Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(18)
Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

279

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3, including those within separate account assets, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The residential mortgage loans — FVO and long-term debt of CSEs — FVO are valued using independent non-binding broker quotations and internal models including matrix pricing and discounted cash flow methodologies using current interest rates. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table. The valuation techniques and significant unobservable inputs used in the fair value measurement for the more significant assets measured at estimated fair value on a nonrecurring basis and determined using significant unobservable inputs (Level 3) are summarized in “— Nonrecurring Fair Value Measurements.”

280

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
 
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
 
Fixed Maturity Securities
 
 
 
 
 
 
Corporate (1)
 
U.S.
Treasury
and Agency 
 
Foreign
Government
 
Structured (2)
 
State and
Political
Subdivision
 
Equity
Securities
 
FVO and
Trading
Securities (3
)
 
 
(In millions)
Balance, January 1, 2014
 
$
13,852

 
$
62

 
$
2,235

 
$
8,139

 
$
10

 
$
572

 
$
644

Total realized/unrealized gains (losses) included in net income (loss) (4) (5)
 
13

 

 
61

 
14

 

 
17

 
8

Total realized/unrealized gains (losses) included in AOCI
 
353

 

 
(110
)
 
69

 

 
(80
)
 

Purchases (6)
 
2,928

 

 
363

 
3,704

 

 
30

 
302

Sales (6)
 
(1,808
)
 

 
(273
)
 
(2,016
)
 

 
(101
)
 
(484
)
Issuances (6)
 

 

 

 

 

 

 

Settlements (6)
 

 

 

 

 

 

 

Transfers into Level 3 (7)
 
526

 

 
253

 
149

 

 
7

 
147

Transfers out of Level 3 (7)
 
(2,432
)
 
(62
)
 
(1,218
)
 
(2,667
)
 
(10
)
 
(100
)
 
(50
)
Balance, December 31, 2014
 
13,432

 

 
1,311

 
7,392

 

 
345

 
567

Total realized/unrealized gains (losses) included in net income (loss) (4) (5)
 
69

 

 
13

 
124

 

 
22

 
(30
)
Total realized/unrealized gains (losses) included in AOCI
 
(761
)
 

 
(25
)
 
(91
)
 

 
(64
)
 

Purchases (6)
 
2,556

 

 
212

 
3,167

 
46

 
128

 
51

Sales (6)
 
(1,425
)
 

 
(45
)
 
(1,585
)
 

 
(96
)
 
(127
)
Issuances (6)
 

 

 

 

 

 

 

Settlements (6)
 

 

 

 

 

 

 

Transfers into Level 3 (7)
 
918

 

 
7

 
66

 

 
107

 
56

Transfers out of Level 3 (7)
 
(1,993
)
 

 
(617
)
 
(1,957
)
 

 
(10
)
 
(247
)
Balance, December 31, 2015
 
$
12,796

 
$

 
$
856

 
$
7,116

 
$
46

 
$
432

 
$
270

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at December 31, 2013: (8)
 
$
(26
)
 
$

 
$
9

 
$
25

 
$

 
$
(23
)
 
$
4

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at December 31, 2014: (8)
 
$
13

 
$

 
$
12

 
$
39

 
$

 
$
(5
)
 
$
(7
)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at December 31, 2015: (8)
 
$
24

 
$

 
$
12

 
$
125

 
$

 
$
(1
)
 
$
(27
)
Gains (Losses) Data for the year ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)
 
$
(45
)
 
$

 
$
17

 
$
32

 
$

 
$
(6
)
 
$
4

Total realized/unrealized gains (losses) included in AOCI
 
$
(169
)
 
$
(3
)
 
$
(84
)
 
$
40

 
$
(1
)
 
$
100

 
$


281

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

 
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
 
Short-term
Investments
 
Mortgage
Loans (9)
 
Net
Derivatives (10)
 
Net Embedded
Derivatives (11)
 
Separate
Account
Assets (12)
 
Long-term
Debt of
CSEs — FVO
 
 
(In millions)
Balance, January 1, 2014
 
$
254

 
$
338

 
$
(286
)
 
$
1,258

 
$
1,465

 
$
(28
)
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)
 
1

 
20

 
(83
)
 
(173
)
 
103

 
(1
)
Total realized/unrealized gains (losses) included in AOCI
 

 

 
101

 
191

 

 

Purchases (6)
 
335

 
124

 
7

 

 
657

 

Sales (6)
 
(236
)
 
(120
)
 

 

 
(459
)
 

Issuances (6)
 

 

 
(4
)
 

 
81

 

Settlements (6)
 

 
(54
)
 
(35
)
 
(846
)
 
(28
)
 
16

Transfers into Level 3 (7)
 

 

 

 

 
147

 

Transfers out of Level 3 (7)
 
(18
)
 

 

 

 
(44
)
 

Balance, December 31, 2014
 
336

 
308

 
(300
)
 
430

 
1,922

 
(13
)
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)
 
1

 
20

 
(223
)
 
(159
)
 
8

 

Total realized/unrealized gains (losses) included in AOCI
 
(1
)
 

 

 
2

 

 

Purchases (6)
 
292

 
136

 
24

 

 
572

 

Sales (6)
 
(27
)
 
(121
)
 

 

 
(527
)
 

Issuances (6)
 

 

 

 

 
98

 

Settlements (6)
 

 
(29
)
 
88

 
(817
)
 
(60
)
 
2

Transfers into Level 3 (7)
 

 

 

 

 
1

 

Transfers out of Level 3 (7)
 
(310
)
 

 

 

 
(310
)
 

Balance, December 31, 2015
 
$
291

 
$
314

 
$
(411
)
 
$
(544
)
 
$
1,704

 
$
(11
)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at December 31, 2013: (8)
 
$
2

 
$
1

 
$
(508
)
 
$
4,887

 
$

 
$

Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at December 31, 2014: (8)
 
$
1

 
$
20

 
$
(67
)
 
$
(173
)
 
$

 
$
(1
)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at December 31, 2015: (8)
 
$

 
$
20

 
$
(234
)
 
$
(176
)
 
$

 
$

Gains (Losses) Data for the year ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)
 
$
(20
)
 
$
1

 
$
(537
)
 
$
4,902

 
$
35

 
$
(2
)
Total realized/unrealized gains (losses) included in AOCI
 
$
17

 
$

 
$
(103
)
 
$
300

 
$

 
$

______________
(1)
Comprised of U.S. and foreign corporate securities.
(2)
Comprised of RMBS, ABS, and CMBS.
(3)
Comprised of Actively traded securities, FVO general account securities, FVO contractholder-directed unit-linked investments and FVO securities held by CSEs.
(4)
Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses), while changes in estimated fair value of residential mortgage loans — FVO are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income for net derivatives and net embedded derivatives are reported in net derivatives gains (losses).
(5)
Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

282

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

(6)
Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(7)
Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(8)
Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(9)
Comprised of residential mortgage loans — FVO.
(10)
Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(11)
Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(12)
Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income. For the purpose of this disclosure, these changes are presented within net investment gains (losses).
Fair Value Option
The following table presents information for certain assets and liabilities accounted for under the FVO. These assets and liabilities were initially measured at fair value.
 
 
Residential Mortgage
Loans — FVO
 
Certain Assets
and Liabilities
of CSEs — FVO (1)
 
 
December 31,
 
December 31,
 
 
2015
 
2014
 
2015
 
2014
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
Unpaid principal balance
 
$
436

 
$
436

 
$
121

 
$
223

Difference between estimated fair value and unpaid principal balance
 
(122
)
 
(128
)
 
51

 
57

Carrying value at estimated fair value
 
$
314

 
$
308

 
$
172

 
$
280

Loans in non-accrual status
 
$
122

 
$
125

 
$

 
$

Liabilities
 
 
 
 
 
 
 
 
Contractual principal balance
 
 
 
 
 
$
71

 
$
159

Difference between estimated fair value and contractual principal balance
 
 
 
 
 
(11
)
 
(8
)
Carrying value at estimated fair value
 
 
 
 
 
$
60

 
$
151

______________
(1)
These assets and liabilities are comprised of commercial mortgage loans and long-term debt. Changes in estimated fair value on these assets and liabilities and gains or losses on sales of these assets are recognized in net investment gains (losses). Interest income on commercial mortgage loans held by CSEs — FVO is recognized in net investment income. Interest expense from long-term debt of CSEs — FVO is recognized in other expenses.


283

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Nonrecurring Fair Value Measurements
The following table presents information for assets measured at estimated fair value on a nonrecurring basis during the periods and still held at the reporting dates (for example, when there is evidence of impairment). The estimated fair values for these assets were determined using significant unobservable inputs (Level 3).
 
At December 31,
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
Carrying Value After Measurement
 
Gains (Losses)
 
(In millions)
Mortgage loans: (1)
$
44

 
$
97

 
$
214

 
$
(1
)
 
$
2

 
$
20

Other limited partnership interests (2)
$
59

 
$
147

 
$
77

 
$
(32
)
 
$
(76
)
 
$
(46
)
______________
(1)
Estimated fair values for impaired mortgage loans are based on independent broker quotations or valuation models using unobservable inputs or, if the loans are in foreclosure or are otherwise determined to be collateral dependent, are based on the estimated fair value of the underlying collateral or the present value of the expected future cash flows.
(2)
For these cost method investments, estimated fair value is determined from information provided in the financial statements of the underlying entities including NAV data. These investments include private equity and debt funds that typically invest primarily in various strategies including domestic and international leveraged buyout funds; power, energy, timber and infrastructure development funds; venture capital funds; and below investment grade debt and mezzanine debt funds. Distributions will be generated from investment gains, from operating income from the underlying investments of the funds and from liquidation of the underlying assets of the funds. It is estimated that the underlying assets of the funds will be liquidated over the next two to 10 years . Unfunded commitments for these investments at both December 31, 2015 and 2014 were not significant.
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the table below are not considered financial instruments subject to this disclosure.

284

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
 
 
December 31, 2015
 
 
 
 
Fair Value Hierarchy
 
 
 
 
Carrying
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair Value
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
Mortgage loans
 
$
66,616

 
$

 
$

 
$
68,539

 
$
68,539

Policy loans
 
$
11,258

 
$

 
$
1,279

 
$
12,072

 
$
13,351

Real estate joint ventures
 
$
35

 
$

 
$

 
$
104

 
$
104

Other limited partnership interests
 
$
524

 
$

 
$

 
$
615

 
$
615

Other invested assets
 
$
537

 
$
155

 
$
2

 
$
380

 
$
537

Premiums, reinsurance and other receivables
 
$
2,822

 
$

 
$
484

 
$
2,421

 
$
2,905

Other assets
 
$
235

 
$

 
$
207

 
$
60

 
$
267

Liabilities
 
 
 
 
 
 
 
 
 
 
Policyholder account balances
 
$
125,040

 
$

 
$

 
$
130,125

 
$
130,125

Long-term debt
 
$
17,954

 
$

 
$
19,360

 
$

 
$
19,360

Collateral financing arrangements
 
$
4,139

 
$

 
$

 
$
3,899

 
$
3,899

Junior subordinated debt securities
 
$
3,194

 
$

 
$
4,029

 
$

 
$
4,029

Other liabilities
 
$
2,249

 
$

 
$
865

 
$
1,385

 
$
2,250

Separate account liabilities
 
$
112,119

 
$

 
$
112,119

 
$

 
$
112,119

 
 
December 31, 2014
 
 
 
 
Fair Value Hierarchy
 
 
 
 
Carrying
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair Value
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
Mortgage loans
 
$
59,530

 
$

 
$

 
$
62,554

 
$
62,554

Policy loans
 
$
11,618

 
$

 
$
1,647

 
$
12,287

 
$
13,934

Real estate joint ventures
 
$
67

 
$

 
$

 
$
139

 
$
139

Other limited partnership interests
 
$
704

 
$

 
$

 
$
906

 
$
906

Other invested assets
 
$
562

 
$
172

 
$
70

 
$
320

 
$
562

Premiums, reinsurance and other receivables
 
$
3,070

 
$

 
$
713

 
$
2,444

 
$
3,157

Other assets
 
$
251

 
$

 
$
175

 
$
68

 
$
243

Liabilities
 
 
 
 
 
 
 
 
 
 
Policyholder account balances
 
$
134,219

 
$

 
$

 
$
139,359

 
$
139,359

Long-term debt
 
$
16,128

 
$

 
$
18,357

 
$

 
$
18,357

Collateral financing arrangements
 
$
4,196

 
$

 
$

 
$
3,961

 
$
3,961

Junior subordinated debt securities
 
$
3,193

 
$

 
$
4,173

 
$

 
$
4,173

Other liabilities
 
$
2,544

 
$

 
$
1,223

 
$
1,323

 
$
2,546

Separate account liabilities
 
$
116,665

 
$

 
$
116,665

 
$

 
$
116,665


285

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:
Mortgage Loans
The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans.
Policy Loans
Policy loans with fixed interest rates are classified within Level 3. The estimated fair values for these loans are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk, as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. Policy loans with variable interest rates are classified within Level 2 and the estimated fair value approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates.
Real Estate Joint Ventures and Other Limited Partnership Interests
The estimated fair values of these cost method investments are generally based on the Company’s share of the NAV as provided in the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments.
Other Invested Assets
These other invested assets are principally comprised of various interest-bearing assets held in foreign subsidiaries and certain amounts due under contractual indemnifications. For the various interest-bearing assets held in foreign subsidiaries, the Company evaluates the specific facts and circumstances of each instrument to determine the appropriate estimated fair values. These estimated fair values were not materially different from the recognized carrying values.
Premiums, Reinsurance and Other Receivables
Premiums, reinsurance and other receivables are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivatives and amounts receivable for securities sold but not yet settled.
Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been classified as Level 3. The valuation is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty.
The amounts on deposit for derivative settlements, classified within Level 2, essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value.
Other Assets
These other assets are principally comprised of a receivable for cash paid to an unaffiliated financial institution under the MetLife Reinsurance Company of Charleston (“MRC”) collateral financing arrangement described in Note 13 . The estimated fair value of the receivable for the cash paid to the unaffiliated financial institution under the MRC collateral financing arrangement is determined by discounting the expected future cash flows using a discount rate that reflects the credit rating of the unaffiliated financial institution.

286

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
10. Fair Value (continued)

Policyholder Account Balances
These policyholder account balances include investment contracts which primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts (“TCA”). The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability.
Long-term Debt, Collateral Financing Arrangements and Junior Subordinated Debt Securities
The estimated fair values of long-term debt, collateral financing arrangements and junior subordinated debt securities are principally determined using market standard valuation methodologies.
Valuations of instruments classified as Level 2 are based primarily on quoted prices in markets that are not active or using matrix pricing that use standard market observable inputs such as quoted prices in markets that are not active and observable yields and spreads in the market. Instruments valued using discounted cash flow methodologies use standard market observable inputs including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues.
Valuations of instruments classified as Level 3 are based primarily on discounted cash flow methodologies that utilize unobservable discount rates that can vary significantly based upon the specific terms of each individual arrangement. The determination of estimated fair values of collateral financing arrangements incorporates valuations obtained from the counterparties to the arrangements, as part of the collateral management process.
Other Liabilities
Other liabilities consist primarily of interest payable, amounts due for securities purchased but not yet settled, and funds withheld amounts payable, which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For such payables, the estimated fair value is determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty.
Separate Account Liabilities
Separate account liabilities represent those balances due to policyholders under contracts that are classified as investment contracts.
Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding.
Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section “— Recurring Fair Value Measurements,” the value of those assets approximates the estimated fair value of the related separate account liabilities. The valuation techniques and inputs for separate account liabilities are similar to those described for separate account assets.

287

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

11. Goodwill
Goodwill is the excess of cost over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. The goodwill impairment process requires a comparison of the estimated fair value of a reporting unit to its carrying value. The Company tests goodwill for impairment by either performing a qualitative assessment or a two-step quantitative test. The qualitative assessment is an assessment of historical information and relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The Company may elect not to perform the qualitative assessment for some or all of its reporting units and perform a two-step quantitative impairment test. In performing the two-step quantitative impairment test, the Company may use a market multiple valuation approach and a discounted cash flow valuation approach. For reporting units which are particularly sensitive to market assumptions, the Company may use additional valuation methodologies to estimate the reporting units’ fair values.
The market multiple valuation approach utilizes market multiples of companies with similar businesses and the projected operating earnings of the reporting unit. The discounted cash flow valuation approach requires judgments about revenues, operating earnings projections, capital market assumptions and discount rates. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting units include projected operating earnings, current book value, the level of economic capital required to support the mix of business, long-term growth rates, comparative market multiples, control premium, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount rate that the Company believes is appropriate for the respective reporting unit.
When testing goodwill for impairment, the Company also considers its market capitalization in relation to the aggregate estimated fair value of its reporting units. The Company applies significant judgment when determining the estimated fair value of the Company’s reporting units and when assessing the relationship of market capitalization to the aggregate estimated fair value of its reporting units.
The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company’s reporting units could result in goodwill impairments in future periods which could materially adversely affect the Company’s results of operations or financial position.
For the 2015 annual goodwill impairment tests, the Company utilized the qualitative assessment for four of its six reporting units and determined it was not more likely than not that the fair value of any of the reporting units tested using the qualitative assessment was less than its carrying amount and, therefore no further testing was needed for these reporting units. The Company prepared a quantitative impairment test for Retail and EMEA, using both the market multiple and discounted cash flow valuation approaches. The Company determined that the fair values of these reporting units were in excess of their carrying values and, therefore goodwill was not impaired.

288

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
11. Goodwill (continued)

Information regarding goodwill by segment, as well as Corporate & Other, was as follows:
 
Retail
 
Group,
Voluntary
&Worksite
Benefits
 
Corporate
Benefit
Funding
 
Latin
America
 
Asia (1)
 
EMEA
 
Corporate
& Other (2)
 
Total
 
(In millions)
Balance at January 1, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
3,125

 
$
138

 
$
900

 
$
527

 
$
5,387

 
$
1,339

 
$
470

 
$
11,886

Accumulated impairment
(1,692
)
 

 

 

 

 

 
(241
)
 
(1,933
)
Total goodwill, net
1,433

 
138

 
900

 
527

 
5,387

 
1,339

 
229

 
9,953

Acquisitions (3)

 

 

 
1,140

 

 
1

 

 
1,141

Dispositions

 

 

 

 

 
(8
)
 

 
(8
)
Reduction of goodwill (4)

 

 

 

 

 

 
(65
)
 
(65
)
Reduction of accumulated impairment (4)

 

 

 

 

 

 
65

 
65

Effect of foreign currency translation and other

 

 

 
(79
)
 
(489
)
 
24

 

 
(544
)
Balance at December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
3,125

 
138

 
900

 
1,588

 
4,898

 
1,356

 
405

 
12,410

Accumulated impairment
(1,692
)
 

 

 

 

 

 
(176
)
 
(1,868
)
Total goodwill, net
1,433

 
138

 
900

 
1,588

 
4,898

 
1,356

 
229

 
10,542

Dispositions (5)

 

 
(60
)
 

 
(3
)
 
(7
)
 

 
(70
)
Effect of foreign currency translation and other

 

 

 
(203
)
 
(280
)
 
(117
)
 

 
(600
)
Balance at December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
3,125

 
138

 
840

 
1,385

 
4,615

 
1,232

 
405

 
11,740

Accumulated impairment
(1,692
)
 

 

 

 

 

 
(176
)
 
(1,868
)
Total goodwill, net
1,433

 
138

 
840

 
1,385

 
4,615

 
1,232

 
229

 
9,872

Effect of foreign currency translation and other

 

 

 
(199
)
 
(107
)
 
(89
)
 

 
(395
)
Balance at December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
3,125

 
138

 
840

 
1,186

 
4,508

 
1,143

 
405

 
11,345

Accumulated impairment
(1,692
)
 

 

 

 

 

 
(176
)
 
(1,868
)
Total goodwill, net
$
1,433

 
$
138

 
$
840

 
$
1,186

 
$
4,508

 
$
1,143

 
$
229

 
$
9,477

______________
(1)
Includes goodwill of $4.3 billion , $4.4 billion and $4.7 billion from the Japan operations at December 31, 2015, 2014 and 2013, respectively.
(2)
For purposes of goodwill impairment testing in 2015, the balance of $229 million , of net goodwill in Corporate & Other at December 31, 2014 did not change. This balance resulted from goodwill acquired as part of the 2005 Travelers acquisition and was allocated to business units of the Retail; Group, Voluntary & Worksite Benefits; and Corporate Benefit Funding segments in the amounts of $34 million , $9 million and $186 million , respectively.
(3)
See Note 3 for a discussion of the acquisition of ProVida, which is included in the Latin America segment.
(4)
In connection with exiting the businesses of MetLife Bank, National Association (“MetLife Bank”), goodwill and the related accumulated impairment were reduced by $65 million for the year ended December 31, 2013 .
(5)
In connection with the sale of MAL, goodwill in the Corporate Benefit Funding reporting unit was reduced by $60 million during the year ended December 31, 2014. See Note 3. This goodwill was allocated to MAL based on the relative fair values of MAL and the remaining portion of the Corporate Benefit Funding reporting unit.

289

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

12. Long-term and Short-term Debt
Long-term and short-term debt outstanding was as follows:
 
Interest Rates (1)
 
Maturity
 
December 31,
 
Range
 
Weighted
Average
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
(In millions)
Senior notes
1.76%
-
7.72%
 
5.10%
 
2016
-
2046
 
$
16,994

 
$
15,317

Surplus notes
7.63%
-
7.88%
 
7.80%
 
2024
-
2025
 
502

 
701

Other notes
1.36%
-
8.00%
 
4.07%
 
2016
-
2030
 
458

 
110

Capital lease obligations
 
 
 
 
 
 
 
 
 
 
9

 
7

Total long-term debt (2)
 
 
 
 
 
 
 
 
 
 
17,963

 
16,135

Total short-term debt
 
 
 
 
 
 
 
 
 
 
100

 
100

Total
 
 
 
 
 
 
 
 
 
 
$
18,063

 
$
16,235

______________
(1)
Range of interest rates and weighted average interest rates are for the year ended December 31, 2015 .
(2)
Excludes $60 million and $151 million of long-term debt relating to CSEs — FVO at December 31, 2015 and 2014 , respectively. See Note  10 .
The aggregate maturities of long-term debt at December 31, 2015 for the next five years and thereafter are $1.3 billion in 2016, $1.0 billion in 2017, $1.0 billion in 2018, $1.0 billion in 2019, $940 million in 2020 and $12.7 billion thereafter.
Capital lease obligations are collateralized and rank highest in priority, followed by unsecured senior debt which consists of senior notes and other notes, followed by subordinated debt which consists of junior subordinated debt securities (see Note  14 ). Payments of interest and principal on the Company’s surplus notes, which are subordinate to all other obligations at the operating company level and are senior to obligations at MetLife, Inc., may be made only with the prior approval of the insurance department of the state of domicile. Collateral financing arrangements (see Note  13 ) are supported by either surplus notes of subsidiaries or financing arrangements with MetLife, Inc. and, accordingly, have priority consistent with other such obligations.
Certain of the Company’s debt instruments and committed facilities, as well as its credit facility, contain various administrative, reporting, legal and financial covenants. The Company believes it was in compliance with all such covenants at December 31, 2015 .
Senior Notes — Senior Debt Securities Underlying Common Equity Units
In November 2010, in connection with the financing of the acquisition of American Life Insurance Company (“American Life”) and Delaware American Life Insurance Company (“DelAm”), (collectively “ALICO”), MetLife, Inc. issued to ALICO Holdings LLC (now AM Holdings LLC (“AM Holdings”)) $3.0 billion (estimated fair value of $3.0 billion ) of three series of debt securities (the “Series C Debt Securities,” the “Series D Debt Securities,” and the “Series E Debt Securities,” collectively, the “Debt Securities”), which constituted a part of the common equity units more fully described in Note  15 .
In October 2014 and September 2013, MetLife, Inc. closed the successful remarketing of senior debt securities underlying the common equity units. The Series E Debt Securities were remarketed in September and October 2014 as 1.903% Series E senior debt securities Tranche 1 due December 2017 and 4.721% Series E senior debt securities Tranche 2 due December 2044 . The Series D Debt Securities were remarketed in September 2013 as 4.368% senior debt securities due September 2023 . The Series C Debt Securities were previously remarketed in 2012. MetLife, Inc. did not receive any proceeds from the remarketings.
Senior Notes — Other Issuances and Repayment
In November 2015, MetLife, Inc. issued $500 million of senior notes due in November 2025 which bear interest at a fixed rate of 3.60% , payable semi-annually. Also in November 2015, MetLife, Inc. issued $750 million of senior notes due in May 2046 which bear interest at a fixed rate of 4.60% , payable semi-annually. In connection with the issuances, MetLife, Inc. incurred $10 million of related costs which have been capitalized and included in other assets. These costs are being amortized over the terms of the senior notes.

290

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
12. Long-term and Short-term Debt (continued)

In March 2015, MetLife, Inc. issued $500 million of senior notes due in March 2025 which bear interest at a fixed rate of 3.00% , payable semi-annually. Also in March 2015, MetLife, Inc. issued $1.0 billion of senior notes due in March 2045 which bear interest at a fixed rate of 4.05% , payable semi-annually. In connection with the issuances, MetLife, Inc. incurred $12 million of related costs which have been capitalized and included in other assets. These costs are being amortized over the terms of the senior notes.
In May 2014, MetLife, Inc. redeemed $200 million aggregate principal amount of its 5.875% senior notes due November 2033 at par.
In April 2014, MetLife, Inc. issued $1.0 billion of senior notes due April 2024 which bear interest at a fixed rate of 3.60% , payable semi-annually. In connection with the issuance, MetLife, Inc. incurred $5 million of related costs which have been capitalized and included in other assets. These costs are being amortized over the term of the senior notes.
In November 2013, MetLife, Inc. issued $1.0 billion of senior notes due in November 2043 . The senior notes bear interest at a fixed rate of 4.875% , payable semi-annually. In connection with the issuance, MetLife, Inc. incurred $10 million of costs which have been capitalized and included in other assets. These costs are being amortized over the term of the senior notes.
Other Notes
In December 2015, MetLife Private Equity Holdings, LLC (“MPEH”), a wholly-owned indirect investment subsidiary of MLIC, entered into a five-year credit agreement (the “MPEH Credit Agreement”) and borrowed $350 million under term loans that mature in December 2020 . The loans bear interest at a variable rate of three-month LIBOR plus 3.70% , payable quarterly. In connection with the borrowing, $6 million of costs were incurred which have been capitalized and included in other assets. These costs are being amortized over the term of the loans. Additionally, the MPEH Credit Agreement provides for MPEH to borrow up to $100 million on a revolving basis at a variable rate of three-month LIBOR plus 3.70% , payable quarterly. There were no revolving loans outstanding under the MPEH Credit Agreement at December 31, 2015. Term loans and revolving loans borrowed under the MPEH Credit Agreement are non-recourse to MLIC and MetLife, Inc.
Short-term Debt
Short-term debt with maturities of one year or less was as follows:
 
December 31,
 
2015
 
2014
 
(In millions)
Commercial paper
$
100

 
$
100

Average daily balance
$
100

 
$
109

Average days outstanding
68 days

 
69 days

During the years ended December 31, 2015 , 2014 and 2013 , the weighted average interest rate on short-term debt was 0.15% , 0.10% and 0.12% , respectively.
Interest Expense
Interest expense related to long-term and short-term debt included in other expenses was $894 million , $874 million and $854 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. Such amounts do not include interest expense on long-term debt related to CSEs — FVO, collateral financing arrangements, or junior subordinated debt securities. See Notes  8 13 and  14 .
Credit and Committed Facilities
At December 31, 2015 , the Company maintained a $4.0 billion unsecured credit facility and certain committed facilities aggregating $11.9 billion . When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements.

291

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
12. Long-term and Short-term Debt (continued)

Credit Facilities
The Company’s unsecured credit facility is used for general corporate purposes, to support the borrowers’ commercial paper programs and for the issuance of letters of credit. Total fees associated with this credit facility was $13 million , $12 million and $24 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, and was included in other expenses. Information on the credit facility at December 31, 2015 was as follows:
Borrower(s)
 
Expiration
 
Maximum Capacity
 
Letters of
Credit
Issued
 
Drawdowns
 
 Unused Commitments
 
 
 
 
(In millions)
MetLife, Inc. and MetLife Funding, Inc.
 
May 2019
 
$
4,000

 
$
484

 
$

 
$
3,516

All borrowings under this unsecured credit facility must be repaid by May 30, 2019 , except that letters of credit outstanding on that date may remain outstanding until no later than May 30, 2020.
Committed Facilities
The committed facilities are used for collateral for certain of the Company’s affiliated reinsurance liabilities. Total fees associated with these committed facilities were $90 million , $95 million and $103 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, and were included in other expenses. Information on these committed facilities at December 31, 2015 was as follows:
Account Party/Borrower(s)
 
Expiration
 
Maximum Capacity
 
Letters of
Credit
Issued
 
Drawdowns
 
Unused
Commitments
 
 
 
 
(In millions)
MetLife, Inc. and Missouri Reinsurance, Inc.
 
June 2016 (1)
 
$
210

 
$
210

 
$

 
$

MetLife, Inc.
 
June 2018 (2)
 
425

 
425

 

 

MetLife Reinsurance Company of Vermont and MetLife, Inc.
 
December 2024 (3),(4)
 
575

 
465

 

 
110

MetLife Reinsurance Company of South Carolina and MetLife, Inc.
 
June 2037 (5)
 
3,500

 

 
2,797

 
703

MetLife Reinsurance Company of Vermont and MetLife, Inc.
 
December 2037 (3), (6)
 
2,896

 
2,159

 

 
737

MetLife Reinsurance Company of Vermont and MetLife, Inc.
 
September 2038 (7)
 
4,250

 
3,357

 

 
893

Total
 
 
 
$
11,856

 
$
6,616

 
$
2,797

 
$
2,443

______________
(1)
Capacity at December 31, 2015 of $210 million decreases in March 2016 and June 2016 to $200 million and $0 , respectively.
(2)
Capacity at December 31, 2015 of $425 million decreases in June 2017, March 2018 and June 2018 to $395 million , $200 million and $0 , respectively.
(3)
MetLife, Inc. is a guarantor under the applicable facility.
(4)
Capacity at December 31, 2015 of $575 million decreases periodically commencing in December 2022 to $515 million in July 2024 and decreases to $0 upon maturity in December 2024.
(5)
Capacity of $3.5 billion through maturity in June 2037, after which it is reduced to $0 . The drawdown on this facility is associated with a collateral financing arrangement described more fully in Note  13 .
(6)
Capacity at December 31, 2015 of $2.3 billion increases periodically to a maximum of $2.9 billion in 2024, decreases periodically commencing in 2025 to $2.0 billion in 2037, and decreases to $0 upon maturity in December 2037. Unused commitment of $737 million is based on maximum capacity.

292

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
12. Long-term and Short-term Debt (continued)

(7)
Capacity at December 31, 2015 of $4.3 billion decreases periodically commencing in April 2028 to $3.1 billion in September 2038, and decreases to $0 upon maturity in September 2038. Unused commitment of $893 million is based on maximum capacity. MetLife Reinsurance Company of Vermont is responsible only for reimbursement obligations relating to $2.9 billion of the $3.4 billion of letters of credit outstanding as of December 31, 2015 . MetLife, Inc. is responsible only for reimbursement obligations relating to the remaining letters of credit outstanding as of such date.
In addition to the above committed facilities, see also “— Other Notes” for information about the undrawn line of credit facility in the amount of $100 million .
13. Collateral Financing Arrangements
Associated with the Closed Block
Information related to the collateral financing arrangement associated with the closed block was as follows at:
 
December 31,
 
2015
 
2014
 
(In millions)
Surplus notes outstanding (1)
$
1,342

 
$
1,399

Receivable from unaffiliated financial institution (1)
$
174

 
$
182

Pledged collateral (2)
$
67

 
$
53

Assets held in trust (2)
$
1,181

 
$
1,214

______________
(1)
Carrying value.
(2)
Estimated fair value.
Interest expense on the collateral financing arrangement was $20 million , $19 million and $20 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, which is included in other expenses.
In December 2007, MLIC reinsured a portion of its closed block liabilities to MRC, a wholly-owned subsidiary of MetLife, Inc. In connection with this transaction, MRC issued, to investors placed by an unaffiliated financial institution, $2.5 billion in aggregate principal amount of 35 -year surplus notes to provide statutory reserve support for the assumed closed block liabilities. Interest on the surplus notes accrues at an annual rate of three-month LIBOR plus 0.55% , payable quarterly. The ability of MRC to make interest and principal payments on the surplus notes is contingent upon South Carolina regulatory approval.
Simultaneously with the issuance of the surplus notes, MetLife, Inc. entered into an agreement with the unaffiliated financial institution, under which MetLife, Inc. is entitled to the interest paid by MRC on the surplus notes of three-month LIBOR plus 0.55% in exchange for the payment of three-month LIBOR plus 1.12% , payable quarterly on such amount as adjusted, as described below. MetLife, Inc. may also be required to pledge collateral or make payments to the unaffiliated financial institution related to any decline in the estimated fair value of the surplus notes. Any such payments are accounted for as a receivable and included in other assets on the Company’s consolidated balance sheets and do not reduce the principal amount outstanding of the surplus notes. Such payments, however, reduce the amount of interest payments due from MetLife, Inc. under the agreement. Any payment received from the unaffiliated financial institution reduces the receivable by an amount equal to such payment and also increases the amount of interest payments due from MetLife, Inc. under the agreement. In addition, the unaffiliated financial institution may be required to pledge collateral to MetLife, Inc. related to any increase in the estimated fair value of the surplus notes. MetLife, Inc. may also be required to make a payment to the unaffiliated financial institution in connection with any early termination of this agreement.
During 2015, following regulatory approval, MRC repurchased $57 million in aggregate principal amount of the surplus notes. Cumulatively, since December 2007, MRC repurchased $1.2 billion in aggregate principal amount of the surplus notes. Payments made by the Company in 2015 associated with the repurchases were exclusive of accrued interest on the surplus notes. In connection with the repurchases, the Company received payments in the aggregate amount of $8 million from the unaffiliated financial institution, which reduced the amount receivable from the unaffiliated financial institution by $8 million . No other payments were made by MetLife, Inc. or received from the unaffiliated financial institution during 2015 , 2014 and 2013 , related to an increase or decrease in the estimated fair value of the surplus notes.

293

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
13. Collateral Financing Arrangements (continued)

A majority of the proceeds from the offering of the surplus notes was placed in a trust, which is consolidated by the Company, to support MRC’s statutory obligations associated with the assumed closed block liabilities. During the years ended December 31, 2015 and 2014, MRC transferred $30 million and $467 million , respectively, out of the trust to its general account. No such transfers were made during the year ended December 31, 2013 . The assets are principally invested in fixed maturity securities and are presented as such within the Company’s consolidated balance sheets, with the related income included within net investment income in the Company’s consolidated statements of operations.
Associated with Secondary Guarantees
Information related to the collateral financing arrangement associated with secondary guarantees was as follows at:
 
December 31,
 
2015
 
2014
 
(In millions)
Liability outstanding (1)
$
2,797

 
$
2,797

Assets held in trust (2)
$
3,374

 
$
3,471

______________
(1)
Carrying value.
(2)
Estimated fair value.
Interest expense on the collateral financing arrangement was $28 million , $27 million and $28 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, which is included in other expenses.
In May 2007, MetLife, Inc. and MRSC, a wholly-owned subsidiary of MetLife, Inc., entered into a 30 -year collateral financing arrangement with an unaffiliated financial institution that provides up to $3.5 billion of statutory reserve support for MRSC associated with reinsurance obligations under intercompany reinsurance agreements. Such statutory reserves are associated with ULSG and are required under U.S. Valuation of Life Policies Model Regulation (commonly referred to as Regulation A-XXX). Proceeds from the collateral financing arrangement were placed in trusts to support MRSC’s statutory obligations associated with the reinsurance of secondary guarantees. The trusts are VIEs which are consolidated by the Company. The unaffiliated financial institution is entitled to the return on the investment portfolio held by the trusts. The assets are principally invested in fixed maturity securities and are presented as such within the Company’s balance sheets, with the related income included within net investment income in the Company’s statements of operations. The collateral financing arrangement may be extended by agreement of MetLife, Inc. and the unaffiliated financial institution on each anniversary of the closing.
In connection with the collateral financing arrangement, MetLife, Inc. entered into an agreement with the same unaffiliated financial institution under which MetLife, Inc. is entitled to the return on the investment portfolio held by the trusts established in connection with this collateral financing arrangement in exchange for the payment of a stated rate of return to the unaffiliated financial institution of three-month LIBOR plus 0.70% , payable quarterly. MetLife, Inc. may also be required to make payments to the unaffiliated financial institution, for deposit into the trusts, related to any decline in the estimated fair value of the assets held by the trusts, as well as amounts outstanding upon maturity or early termination of the collateral financing arrangement. During 2015 , 2014 and 2013 , no payments were made or received by MetLife, Inc. Cumulatively, since May 2007, MetLife, Inc. has contributed a total of $680 million as a result of declines in the estimated fair value of the assets in the trusts, all of which was deposited into the trusts.
In addition, MetLife, Inc. may be required to pledge collateral to the unaffiliated financial institution under this agreement. At both December 31, 2015 and 2014 , MetLife, Inc. had pledged no collateral under this agreement.

294

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

14. Junior Subordinated Debt Securities
Outstanding Junior Subordinated Debt Securities
Outstanding junior subordinated debt securities, and exchangeable surplus trust securities which MetLife, Inc. will exchange for junior subordinated debt securities prior to redemption or repayment, were as follows:

 

 

 

 

 

 

 
Carrying Value at December 31,
Issuer
 
Issue Date
 
Face Value
 
Interest Rate (1)
 
Scheduled
Redemption
Date
 
Interest Rate
Subsequent to
Scheduled
Redemption
Date (2)
 
Final
Maturity
 
2015
 
2014
 
 
 
(In millions)
 
 
 
 
 
 
 
 
(In millions)
MetLife, Inc.
 
July 2009
 
$
500

 
10.750
%
 
August 2039
 
LIBOR + 7.548%
 
August 2069
 
$
500

 
$
500

MetLife Capital Trust X (3)
 
April 2008
 
$
750

 
9.250
%
 
April 2038
 
LIBOR + 5.540%
 
April 2068
 
750

 
750

MetLife Capital Trust IV (3)
 
December 2007
 
$
700

 
7.875
%
 
December 2037
 
LIBOR + 3.960%
 
December 2067
 
696

 
695

MetLife, Inc.
 
December 2006
 
$
1,250

 
6.400
%
 
December 2036
 
LIBOR + 2.205%
 
December 2066
 
1,248

 
1,248

 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
3,194

 
$
3,193

______________
(1)
Prior to the scheduled redemption date, interest is payable semiannually in arrears.
(2)
In the event the securities are not redeemed on or before the scheduled redemption date, interest will accrue after such date at an annual rate of three-month LIBOR plus the indicated margin, payable quarterly in arrears.
(3)
MetLife Capital Trust X and MetLife Capital Trust IV are VIEs which are consolidated in the financial statements of the Company. The securities issued by these entities are exchangeable surplus trust securities, which will be exchanged for a like amount of MetLife, Inc.’s junior subordinated debt securities on the scheduled redemption date; mandatorily under certain circumstances, and at any time upon MetLife, Inc. exercising its option to redeem the securities.
In connection with each of the securities described above, MetLife, Inc. may redeem or may cause the redemption of the securities (i) in whole or in part, at any time on or after the date five years prior to the scheduled redemption date at their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption, or (ii) in certain circumstances, in whole or in part, prior to the date five years prior to the scheduled redemption date at their principal amount plus accrued and unpaid interest to, but excluding, the date of redemption or, if greater, a make-whole price. MetLife, Inc. also has the right to, and in certain circumstances the requirement to, defer interest payments on the securities for a period up to 10 years . Interest compounds during such periods of deferral. If interest is deferred for more than five consecutive years, MetLife, Inc. is required to use proceeds from the sale of its common stock or warrants on common stock to satisfy this interest payment obligation. In connection with each of the securities described above, MetLife, Inc. entered into a separate replacement capital covenant (“RCC”). As part of each RCC, MetLife, Inc. agreed that it will not repay, redeem, or purchase the securities on or before a date 10 years prior to the final maturity date of each issuance, unless, subject to certain limitations, it has received cash proceeds during a specified period from the sale of specified replacement securities. Each RCC will terminate upon the occurrence of certain events, including an acceleration of the applicable securities due to the occurrence of an event of default. The RCCs are not intended for the benefit of holders of the securities and may not be enforced by them. Rather, each RCC is for the benefit of the holders of a designated series of MetLife, Inc.’s other indebtedness (the “Covered Debt”). Initially, the Covered Debt for each of the securities described above was MetLife, Inc.’s 5.700%  senior notes due 2035  (the “Senior Notes”). As a result of the issuance of MetLife, Inc.’s 10.750%  Fixed-to-Floating Rate Junior Subordinated Debentures due 2069  (the “10.750% JSDs”), the 10.750% JSDs became the Covered Debt with respect to, and in accordance with, the terms of the RCC relating to MetLife, Inc.’s 6.40%  Fixed-to-Floating Rate Junior Subordinated Debentures due 2066 . The Senior Notes continue to be the Covered Debt with respect to, and in accordance with, the terms of the RCCs relating to each of MetLife Capital Trust IV’s 7.875% Fixed-to-Floating Rate Exchangeable Surplus Trust Securities, MetLife Capital Trust X’s  9.250% Fixed-to-Floating Rate Exchangeable Surplus Trust Securities and the 10.750% JSDs. MetLife, Inc. also entered into a replacement capital obligation which will commence during the six month period prior to the scheduled redemption date of each of the securities described above and under which MetLife, Inc. must use reasonable commercial efforts to raise replacement capital to permit repayment of the securities through the issuance of certain qualifying capital securities.
Interest expense on outstanding junior subordinated debt securities was $258 million for each of the years ended December 31, 2015 , 2014 and 2013 , which is included in other expenses.

295

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

15. Common Equity Units
In connection with the financing of the acquisition of ALICO in November 2010 , MetLife, Inc. issued to AM Holdings 40.0 million common equity units with an aggregate stated amount at issuance of $3.0 billion and an estimated fair value of $3.2 billion . Each common equity unit had an initial stated amount of $75  per unit and initially consisted of: (i) three purchase contracts (the Series C Purchase Contracts, the Series D Purchase Contracts and the Series E Purchase Contracts and, together, the “Purchase Contracts”), obligating the holder to purchase, on a subsequent settlement date, a variable number of shares of MetLife, Inc. common stock, par value $0.01  per share, for a purchase price of $25  ( $75 in the aggregate); and (ii) a 1/40 undivided beneficial ownership interest in each of three series of Debt Securities issued by MetLife, Inc., each series of Debt Securities having an aggregate principal amount of $1.0 billion . On March 8, 2011, AM Holdings sold, in a public offering, all the common equity units it received as consideration from MetLife in connection with the acquisition of ALICO.
As discussed in Note 12, in October 2014, September 2013 and October 2012, MetLife, Inc. closed the successful remarketings of senior debt securities underlying the common equity units. Most holders of the common equity units used the remarketing proceeds to settle their payment obligations under the applicable Purchase Contracts. The subsequent settlement of the Purchase Contracts provided proceeds to MetLife, Inc. of $1.0 billion in each of October 2014, September 2013 and October 2012 in exchange for shares of MetLife, Inc.’s common stock. See Note 16.
16. Equity
Preferred Stock
Preferred stock authorized, issued and outstanding was as follows at:


December 31, 2015

December 31, 2014
Series

Shares
Authorized

Shares
Issued

Shares
Outstanding

Shares
Authorized
 
Shares
Issued
 
Shares
Outstanding
Floating Rate Non-Cumulative Preferred Stock, Series A

27,600,000

 
24,000,000

 
24,000,000

 
27,600,000

 
24,000,000

 
24,000,000

6.50% Non-Cumulative Preferred Stock, Series B (1)


 

 

 
69,000,000

 
60,000,000

 
60,000,000

5.25% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C

1,500,000

 
1,500,000

 
1,500,000

 

 

 

Series A Junior Participating Preferred Stock

10,000,000

 

 

 
10,000,000

 

 

Not designated (1)

160,900,000

 

 

 
93,400,000

 

 

Total

200,000,000


25,500,000


25,500,000


200,000,000

 
84,000,000

 
84,000,000

__________________
(1)
As discussed below, MetLife, Inc. repurchased or redeemed and canceled the 6.50% Non-Cumulative Preferred Stock, Series B (the “Series B preferred stock”) in 2015. On November 3, 2015, MetLife, Inc. filed a Certificate of Elimination (the “Certificate of Elimination”) of 6.50% Non-Cumulative Preferred Stock, Series B with the Secretary of State of the State of Delaware to eliminate all references to the Series B preferred stock in MetLife, Inc.’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), including the related Certificate of Designations. As a result of the filing of the Certificate of Elimination, MetLife, Inc.’s Certificate of Incorporation was amended to eliminate all references therein to the Series B preferred stock, and the shares that were designated to such series were returned to the status of authorized but unissued shares of preferred stock, par value $0.01 per share, of MetLife, Inc., without designation as to series.
In June 2015, MetLife, Inc. issued 1,500,000  shares of 5.25% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C (the "Series C preferred stock"), with a $0.01 par value per share and a liquidation preference of $1,000  per share, for aggregate proceeds of $1.5 billion . In connection with the offering of the Series C preferred stock, MetLife, Inc. incurred $17 million of issuance costs which have been recorded as a reduction of additional paid-in capital.

296

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

In June 2015, MetLife, Inc. conducted a tender offer for up to 59,850,000 of its 60,000,000 shares of Series B preferred stock, liquidation preference $25  per share, at a purchase price of $25  per share, plus an amount equal to accrued, unpaid and undeclared dividends from, and including, June 15, 2015 to, but excluding, June 29, 2015, the settlement date of the tender offer. In June 2015, MetLife, Inc. also delivered a notice of redemption to the holders of the Series B preferred stock, pursuant to which it would redeem any shares of Series B preferred stock not purchased by it in the tender offer at a redemption price of $25  per share, without any payment for accrued, unpaid and undeclared dividends on the Series B preferred stock from, and including, June 15, 2015 to, but excluding, July 1, 2015, the redemption date. On June 29, 2015, MetLife, Inc. repurchased and canceled 37,192,413 shares of Series B preferred stock in the tender offer for $932 million in cash. On July 1, 2015, MetLife, Inc. redeemed and canceled the remaining 22,807,587 shares of Series B preferred stock not tendered in the tender offer for an aggregate redemption price of $570 million in cash. In connection with the tender offer and redemption, MetLife, Inc. recognized a preferred stock repurchase premium of $42 million (calculated as the difference between the carrying value of the Series B preferred stock and the total amount paid by MetLife, Inc. to the holders of the Series B preferred stock in connection with the tender offer and redemption), which was reflected as a reduction to retained earnings on the consolidated balance sheet.
The outstanding preferred stock ranks senior to MetLife, Inc.’s common stock with respect to the payment of dividends and distributions upon liquidation, dissolution or winding-up. Holders of the outstanding preferred stock are entitled to receive dividend payments only when, as and if declared by MetLife, Inc.’s Board of Directors or a duly authorized committee of the Board. Dividends on the preferred stock are not cumulative or mandatory. Accordingly, if dividends are not declared on the preferred stock of the applicable series for any dividend period, then any accrued dividends for that dividend period will cease to accrue and be payable. If a dividend is not declared before the dividend payment date for any such dividend period, MetLife, Inc. will have no obligation to pay dividends accrued for such dividend period whether or not dividends are declared for any future period. No dividends may be paid or declared on MetLife, Inc.’s common stock (or any other securities ranking junior to the preferred stock) and MetLife, Inc. may not purchase, redeem, or otherwise acquire its common stock (or other such junior stock) unless the full dividends for the latest completed dividend period on all outstanding shares of preferred stock, and any parity stock, have been declared and paid or provided for. If dividends are declared on MetLife, Inc.’s Floating Rate Non-Cumulative Preferred Stock, Series A (the “Series A preferred stock”), they will be payable quarterly, in arrears, at an annual rate of the greater of: (i) 1.00% above three-month LIBOR on the related LIBOR determination date; or (ii) 4.00% . If dividends are declared on the Series C preferred stock for any dividend period, they are calculated on a non-cumulative basis at a fixed rate per annum of 5.25% from the date of original issue to, but excluding, June 15, 2020, and will be calculated at a floating rate per annum equal to three-month LIBOR plus 3.575% on the related LIBOR determination date from and after June 15, 2020. Dividends on the Series C preferred stock for any dividend period are payable, if declared, semi-annually in arrears on the 15th day of June and December of each year commencing on December 15, 2015 and ending on June 15, 2020, and thereafter quarterly in arrears on the 15th day of September, December, March and June of each year. Information on payments of dividends on the Series B preferred stock is set forth in the table below.
MetLife, Inc. is prohibited from declaring dividends on the outstanding preferred stock if it fails to meet specified capital adequacy, net income and stockholders’ equity levels. Beginning on January 1, 2019, MetLife, Inc. will no longer be subject to such limitations with respect to the Series C preferred stock. See “— Dividend Restrictions — MetLife, Inc.”
Holders of the preferred stock do not have voting rights except in certain circumstances, including where the dividends have not been paid for an equivalent of six or more dividend payment periods whether or not those periods are consecutive. Under such circumstances, the holders of the preferred stock have certain voting rights with respect to members of the Board of Directors of MetLife, Inc.
The preferred stock is not subject to any mandatory redemption, sinking fund, retirement fund, purchase fund or similar provisions. The Series A preferred stock is redeemable at MetLife, Inc.’s option in whole or in part, at a redemption price of $25  per share of preferred stock, plus declared and unpaid dividends. MetLife, Inc. may, at its option, redeem the Series C preferred stock, (i) in whole but not in part, at any time prior to June 15, 2020, within 90 days after the occurrence of a “regulatory capital event,” and (ii) in whole or in part, from time to time, on or after June 15, 2020, in each case, at a redemption price equal to $1,000 per Series C preferred share, plus an amount equal to any dividends per share that have accrued but not been declared and paid for the then-current dividend period to, but excluding, such redemption date. A “regulatory capital event” could occur as a result of a change or proposed change in capital adequacy rules (or the interpretation or application thereof) that would apply to MetLife, Inc. from rules (or the interpretation or application thereof) in effect with respect to bank holding companies as of June 1, 2015 that would create a more than insubstantial risk, as determined by MetLife, Inc., that the Series C preferred stock would not be treated as “Tier 1 Capital” or as capital with attributes similar to those of Tier 1 Capital.

297

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

In December 2008, MetLife, Inc. entered into an RCC related to the Series A and Series B preferred stock and, in June 2015, MetLife, Inc. entered into an RCC related to the Series C preferred stock. As part of each such RCC, MetLife, Inc. agreed that it will not repay, redeem or purchase the preferred stock on or before December 31, 2018, unless, subject to certain limitations, it has received proceeds during a specified period from the sale of specified replacement securities. The repurchase and redemption of Series B preferred stock as described above was in compliance with the terms of the applicable RCC. The RCC is, in each case, for the benefit of the holders of the related covered debt, which is currently MetLife, Inc.’s 10.750% JSDs. The RCC will terminate upon the occurrence of certain events, including the date on which MetLife, Inc. has no series of outstanding eligible debt securities.
Information on the declaration, record and payment dates, as well as per share and aggregate dividend amounts, for the Series A, Series B and Series C preferred stock was as follows:
 
 
 
 
 
 
Dividend
Declaration Date
 
Record Date
 
Payment Date
 
Series A
Per Share
 
Series A
Aggregate
 
Series B
Per Share
 
Series B
Aggregate
 
Series C
Per Share
 
Series C
Aggregate
 
 
 
 
 
 
(In millions, except per share data)
November 16, 2015
 
November 30, 2015
 
December 15, 2015
 
$
0.253

 
$
6

 
$

 
$

 
$
28.292

 
$
43

August 17, 2015
 
August 31, 2015
 
September 15, 2015
 
$
0.256

 
6

 
$

 

 
$

 

May 15, 2015
 
May 31, 2015
 
June 15, 2015
 
$
0.256

 
7

 
$
0.406

 
24

 
$

 

March 5, 2015
 
February 28, 2015
 
March 16, 2015
 
$
0.250

 
6

 
$
0.406

 
24

 
$

 

 
 
 
 
 
 
 
 
$
25

 
 
 
$
48

 
 
 
$
43

November 17, 2014
 
November 30, 2014
 
December 15, 2014
 
$
0.253

 
$
7

 
$
0.406

 
$
24

 
$

 
$

August 15, 2014
 
August 31, 2014
 
September 15, 2014
 
$
0.256

 
6

 
$
0.406

 
24

 
$

 

May 15, 2014
 
May 31, 2014
 
June 16, 2014
 
$
0.256

 
7

 
$
0.406

 
24

 
$

 

March 5, 2014
 
February 28, 2014
 
March 17, 2014
 
$
0.250

 
6

 
$
0.406

 
24

 
$

 

 
 
 
 
 
 
 
 
$
26

 
 
 
$
96

 
 
 
$

November 15, 2013
 
November 30, 2013
 
December 16, 2013
 
$
0.253

 
$
7

 
$
0.406

 
$
24

 
$

 
$

August 15, 2013
 
August 31, 2013
 
September 16, 2013
 
$
0.256

 
6

 
$
0.406

 
24

 
$

 

May 15, 2013
 
May 31, 2013
 
June 17, 2013
 
$
0.256

 
7

 
$
0.406

 
24

 
$

 

March 5, 2013
 
February 28, 2013
 
March 15, 2013
 
$
0.250

 
6

 
$
0.406

 
24

 
$

 

 
 
 
 
 
 
 
 
$
26

 
 
 
$
96

 
 
 
$

See Note  23 for information on subsequent preferred stock dividends declared.
Common Stock
Issuances
In October 2014 and September 2013, MetLife, Inc. issued 22,907,960 new shares and 22,679,955  new shares, respectively, of its common stock, each for $1.0 billion . The issuances were made in connection with the settlement of stock purchase contracts. See Note  15 .
During the years ended December 31, 2015 , 2014 and 2013 , 5,592,622 new shares, 5,866,160 new shares and 7,663,446  new shares of common stock were issued for $216 million , $220 million and $250 million , respectively, in connection with stock option exercises and other stock-based awards. There were no shares of common stock issued from treasury stock during any of the years ended December 31, 2015 , 2014 and 2013 .
Repurchase Authorizations
On December 12, 2014, MetLife, Inc. announced that its Board of Directors authorized $1.0 billion of common stock repurchases in addition to previously authorized repurchases and on September 22, 2015, MetLife, Inc. announced that its Board of Directors authorized additional repurchases of $739 million of its common stock, bringing MetLife, Inc.’s available repurchase authorization under the December 2014 and September 2015 authorizations as of such date to $1.0 billion .

298

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

During the years ended December 31, 2015 and 2014, MetLife, Inc. repurchased 39,491,991 shares and 18,876,363 shares under these repurchase authorizations for $1.9 billion and $1.0 billion , respectively. No shares of common stock were repurchased during the year ended December 31, 2013. At December 31, 2015 , MetLife, Inc. had $70 million remaining under its common stock repurchase authorizations. See Note  23 for information on subsequent common stock repurchases.
Under these authorizations, MetLife, Inc. may purchase its common stock from the MetLife Policyholder Trust, in the open market (including pursuant to the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934 (“Exchange Act”)), and in privately negotiated transactions. Common stock repurchases are dependent upon several factors, including the Company’s capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of MetLife, Inc.’s common stock compared to management’s assessment of the stock’s underlying value and applicable regulatory approvals, as well as other legal and accounting factors.
Dividends
The table below presents declaration, record and payment dates, as well as per share and aggregate dividend amounts, for common stock:
 
 
 
 
 
 
Dividend
Declaration Date
 
 Record Date
 
 Payment Date
 
Per Share
 
Aggregate
 
 
 
 
 
 
(In millions, except per share data)
October 27, 2015
 
November 6, 2015
 
December 11, 2015
 
$
0.375

 
$
419

July 7, 2015
 
August 7, 2015
 
September 11, 2015
 
$
0.375

 
420

April 28, 2015
 
May 11, 2015
 
June 12, 2015
 
$
0.375

 
420

January 6, 2015
 
February 6, 2015
 
March 13, 2015
 
$
0.350

 
394

 
 
 
 
 
 
 
 
$
1,653

October 28, 2014
 
November 7, 2014
 
December 12, 2014
 
$
0.350

 
$
398

July 7, 2014
 
August 8, 2014
 
September 12, 2014
 
$
0.350

 
395

April 22, 2014
 
May 9, 2014
 
June 13, 2014
 
$
0.350

 
395

January 6, 2014
 
February 6, 2014
 
March 13, 2014
 
$
0.275

 
311

 
 
 
 
 
 
 
 
$
1,499

October 22, 2013
 
November 8, 2013
 
December 13, 2013
 
$
0.275

 
$
311

June 25, 2013
 
August 9, 2013
 
September 13, 2013
 
$
0.275

 
303

April 23, 2013
 
May 9, 2013
 
June 13, 2013
 
$
0.275

 
302

January 4, 2013
 
February 6, 2013
 
March 13, 2013
 
$
0.185

 
203

 
 
 
 
 
 
 
 
$
1,119

See Note  23 for information on subsequent common stock dividends declared.
The funding of the cash dividends and operating expenses of MetLife, Inc. is primarily provided by cash dividends from MetLife, Inc.’s insurance subsidiaries. The statutory capital and surplus, or net assets, of MetLife, Inc.’s insurance subsidiaries are subject to regulatory restrictions except to the extent that dividends are allowed to be paid in a given year without prior regulatory approval. Dividends exceeding these limitations can generally be made subject to regulatory approval. The nature and amount of these dividend restrictions, as well as the statutory capital and surplus of MetLife, Inc.’s U.S. insurance subsidiaries, are disclosed in “— Statutory Equity and Income” and “— Dividend Restrictions — Insurance Operations.” MetLife, Inc.’s principal non-U.S. insurance operations are branches or subsidiaries of American Life, a U.S. insurance subsidiary of the Company. In addition, the payment of dividends by MetLife, Inc. to its shareholders is also subject to restrictions. See “— Dividend Restrictions — MetLife, Inc.”

299

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Stock-Based Compensation Plans
Description of Plans for Employees and Agents — General Terms
Under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan (the “2005 Stock Plan”) and the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “2015 Stock Plan”), awards granted to employees and agents may be in the form of Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Shares or Performance Share Units, Cash-Based Awards and Stock-Based Awards (each, as applicable, as defined in the 2005 Stock Plan and 2015 Stock Plan with reference to shares of MetLife, Inc. common stock (“Shares”)). Awards under the 2005 Stock Plan and 2015 Stock Plan were outstanding at December 31, 2015 . All awards in 2015 were granted under the 2015 Stock Plan.
Awards settled in Shares (and Stock Option exercises, if any) under the 2005 Stock Plan or 2015 Stock Plan settled in Shares are satisfied through the issuance of Shares held in treasury by MetLife, Inc. or by the issuance of new Shares. Awards that are payable in Shares and have become due may, in some circumstances, be deferred for issuance at a later date (“Deferred Shares”). 
The aggregate number of Shares authorized for issuance under the 2015 Stock Plan at December 31, 2015 was equal to:
11,750,000  Shares, plus ;
Shares available but not utilized under the 2005 Stock Plan, when the 2015 Stock Plan became effective ( 18,023,959  Shares at January 1, 2015), plus;
Shares utilized under the 2005 Stock Plan or 2015 Stock Plan that are or were recovered since the 2015 Stock Plan became effective on January 1, 2015 due to: (i) termination of the award by expiration, forfeiture, cancellation, lapse, or otherwise without the issuance of Shares; (ii) settlement of the award in cash either in lieu of Shares or otherwise; (iii) exchange of the award for awards not involving Shares; (iv) payment of the exercise price of a Stock Option, or the tax withholding requirements with respect to an award, satisfied by tendering Shares to MetLife, Inc. (by either actual delivery or by attestation); (v) satisfaction of tax withholding requirements with respect to an award satisfied by MetLife, Inc. withholding Shares otherwise issuable; and (vi) the payout of the 2012-2014 Performance Shares in 2015 at a performance factor of 101% rather than the maximum performance factor of 175% ( 4,475,737 Shares), less;
Shares covered by awards granted under the 2015 Stock Plan since it became effective on January 1, 2015, including Performance Shares assuming future payout at maximum performance factor, and Shares covered by imputed reinvested dividends credited in 2015 on Deferred Shares owed to employees or agents ( 4,380,101 Shares).
If a Share-settled Stock Appreciation Right were to be granted under the 2015 Stock Plan and were to be exercised, only the number of Shares issued, net of the Shares tendered, if any, would be deemed delivered for purposes of determining the maximum number of Shares available for issuance under the 2015 Stock Plan.
Each Share issued under the 2005 Stock Plan in connection with a Stock Option reduces the number of Shares remaining for issuance under that plan by one , and each Share issued under the 2005 Stock Plan in connection with awards other than Stock Options reduces the number of Shares remaining for issuance under that plan by 1.179  Shares (the “2005 Stock Plan Share Award Ratio”). For this purpose, any Shares issued pursuant to any Share-settled Stock Appreciation Rights that had been granted under the 2005 Stock Plan would have had (or have) the same effect as Shares issued pursuant to Stock Options. However, no Share-settled Stock Appreciation Rights were granted under the 2005 Stock Plan. Shares related to awards under the 2005 Stock Plan that are recovered, and therefore authorized for issuance under the 2015 Stock Plan, are recovered with consideration of the 2005 Stock Plan Share Award Ratio.
Each Share that will or may be issued under the 2015 Stock Plan reduces the number of Shares remaining for issuance under that plan by one.
Compensation expense related to awards under the 2005 Stock Plan or 2015 Stock Plan is recognized based on the number of awards expected to vest, which represents the awards granted less expected forfeitures over the life of the award, as estimated at the date of grant. Unless a material deviation from the assumed forfeiture rate is observed during the term in which the awards are expensed, any adjustment necessary to reflect differences in actual experience is recognized in the period the award becomes payable or exercisable.

300

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Compensation expense related to awards under the 2005 Stock Plan is principally related to the issuance of Stock Options, Performance Shares and Restricted Stock Units. Under the 2015 Stock Plan, compensation expense principally relates to Stock Options, Unit Options, Performance Shares, Performance Units, Restricted Stock Units and Restricted Units. The majority of the awards granted each year under the 2005 Stock Plan and 2015 Stock Plan were made in the first quarter of each year.
Deferred Shares payable to employees or agents relate to awards under the 2005 Stock Plan, 2015 Stock Plan, or earlier applicable plans equaled 1,765,120 Shares at December 31, 2015
Certain stock-based awards provide solely for cash settlement based in whole or in part on the price of Shares or changes in the price of Shares (“Phantom Stock-Based Awards”). Such awards have been made under the MetLife, Inc. International Unit Option Incentive Plan, the MetLife International Performance Unit Incentive Plan, and the MetLife International Restricted Unit Incentive Plan prior to 2015, and under the 2015 Stock Plan in 2015.
Description of Plans for Non-Management Director — General Terms
Under the MetLife, Inc. 2005 Non-Management Director Stock Compensation Plan (the “2005 Director Stock Plan”) and MetLife, Inc. 2015 Non-Management Director Stock Compensation Plan (the “2015 Director Stock Plan”), awards granted may be in the form of nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, or Stock-Based Awards (each, as applicable, as defined in the 2005 Director Stock Plan and 2015 Director Stock Plan with reference to Shares) to non-management Directors of MetLife, Inc. The only awards made under the 2005 Director Stock Plan and 2015 Director Stock Plan through December 31, 2015 vested immediately, thus, no awards under the 2005 Director Stock Plan or 2015 Director Stock Plan remained outstanding at December 31, 2015 .
Awards settled in Shares (and Stock Option exercises, if any) under the 2015 Director Stock Plan are satisfied through the issuance of Shares held in treasury by MetLife, Inc. or by the issuance of new Shares.
The aggregate number of Shares authorized for issuance under the 2015 Director Stock Plan at December 31, 2015 was equal to:
Shares available but not utilized under the 2005 Director Stock Plan when the 2015 Director Stock Plan became effective ( 1,642,208 Shares at January 1, 2015), less;
Shares covered by awards granted under the 2015 Director Stock Plan since it became effective and Shares covered by imputed reinvested dividends credited in 2015 on Deferred Shares owed to Directors ( 33,684 Shares).
Any Shares utilized under the 2005 Director Stock Plan or 2015 Director Stock Plan that were to be recovered due to (i) termination of the award by expiration, forfeiture, cancellation, lapse, or otherwise without the issuance of Shares; (ii) settlement of the award in cash either in lieu of Shares or otherwise; (iii) exchange of the award for awards not involving Shares; and (iv) payment of the exercise price of a Stock Option, or the tax withholding requirements with respect to an award, satisfied by tendering Shares to MetLife, Inc. (by either actual delivery or by attestation) would be available for issuance under the 2015 Director Stock Plan. In addition, if a Share-settled Stock Appreciation Right were to be granted under the 2015 Director Stock Plan, and was exercised, only the number of Shares issued, net of the Shares tendered, if any, would be deemed delivered for purposes of determining the maximum number of Shares available for issuance under the 2015 Director Stock Plan.
Each Share that will or may be issued under the 2015 Director Stock Plan reduces the number of Shares remaining for issuance under that plan by one.
Compensation expense related to awards under the 2015 Director Stock Plan is recognized based on the number of Shares awarded. The only awards made under the 2005 Director Stock Plan and under the 2015 Director Stock Plan through December 31, 2015 were Stock-Based Awards that vested immediately. The majority of the awards granted in 2015 under the 2015 Director Stock Plan were made in the second quarter of 2015 .
Deferred Shares payable to Directors relate to awards under the 2005 Director Stock Plan, 2015 Director Stock Plan, or earlier applicable plans equaled 166,102 Shares at December 31, 2015 .

301

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Compensation Expense Related to Stock-Based Compensation
The components of compensation expense related to stock-based compensation includes compensation expense related to Phantom Stock-Based Awards, and excludes the insignificant compensation expense related to the 2015 Director Stock Plan. Those components were:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Stock Options and Unit Options
$
14

 
$
29

 
$
39

Performance Shares and Units (1)
65

 
111

 
91

Restricted Stock Units and Restricted Units
75

 
52

 
45

Total compensation expense
$
154

 
$
192

 
$
175

Income tax benefit
$
54

 
$
67

 
$
61

______________
(1)
Performance Shares expected to vest and the related compensation expenses may be further adjusted by the performance factor most likely to be achieved, as estimated by management, at the end of the performance period.
The following table presents the total unrecognized compensation expense related to stock-based compensation and the expected weighted average period over which these expenses will be recognized at:
 
December 31, 2015
 
Expense
 
Weighted Average
Period
 
(In millions)
 
(Years)
Stock Options
$
7

 
1.58
Performance Shares
$
30

 
1.59
Restricted Stock Units
$
50

 
1.71
Equity Awards
Stock Options
Stock Options are the contingent right of award holders to purchase Shares at a stated price for a limited time. All Stock Options have an exercise price equal to the closing price of a Share reported on the New York Stock Exchange on the date of grant, and have a maximum term of 10 years. The vast majority of Stock Options granted has become or will become exercisable at a rate of one-third of each award on each of the first three anniversaries of the grant date. Other Stock Options have become or will become exercisable on the third anniversary of the grant date. Vesting is subject to continued service, except for employees who meet specified age and service criteria and in certain other limited circumstances.

302

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

A summary of the activity related to Stock Options was as follows:
 
Shares
Under
Option
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value (1)
 
 
 
 
 
(Years)
 
(In millions)
Outstanding at January 1, 2015
26,078,927

 
$
43.63

 
4.67
 
$
312

Granted
669,944

 
$
51.39

 
 
 
 
Exercised
(3,149,247
)
 
$
38.61

 
 
 
 
Expired
(64,921
)
 
$
55.68

 
 
 
 
Forfeited
(27,939
)
 
$
40.47

 
 
 
 
Outstanding at December 31, 2015
23,506,764

 
$
44.50

 
4.09
 
$
166

Vested and expected to vest at December 31, 2015
23,308,860

 
$
44.50

 
4.06
 
$
165

Exercisable at December 31, 2015
21,839,121

 
$
44.29

 
3.77
 
$
161

______________
(1)
The aggregate intrinsic value was computed using the closing Share price on December 31, 2015 of $48.21 and December 31, 2014 of $54.09 , as applicable.
The fair value of Stock Options is estimated on the date of grant using a binomial lattice model. Significant assumptions used in the Company’s binomial lattice model are further described below. The assumptions include: expected volatility of the price of Shares; risk-free rate of return; dividend yield on Shares; exercise multiple; and the post-vesting termination rate.
Expected volatility is based upon an analysis of historical prices of Shares and call options on Shares traded on the open market. The Company uses a weighted-average of the implied volatility for publicly-traded call options with the longest remaining maturity nearest to the money as of each valuation date and the historical volatility, calculated using monthly closing prices of Shares. The Company chose a monthly measurement interval for historical volatility as this interval reflects the Company’s view that employee option exercise decisions are based on longer-term trends in the price of the underlying Shares rather than on daily price movements.
The binomial lattice model used by the Company incorporates different risk-free rates based on the imputed forward rates for U.S. Treasury Strips for each year over the contractual term of the option. The table below presents the full range of rates that were used for options granted during the respective periods.
Dividend yield is determined based on historical dividend distributions compared to the price of the underlying Shares as of the valuation date and held constant over the life of the Stock Option.
The binomial lattice model used by the Company incorporates the contractual term of the Stock Options. The model also factors in expected exercise behavior and a post-vesting termination rate, or the rate at which vested options are exercised or expire prematurely due to termination of employment. From these factors, the model derives an expected life of the Stock Option. The exercise behavior in the model is a multiple that reflects the ratio of exercise price to the strike price of the Stock Option at which holders are expected to exercise. The exercise multiple is derived from actual historical exercise activity. The post-vesting termination rate is determined from actual historical exercise experience and expiration activity under the Incentive Plans.

303

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

The following table presents the weighted average assumptions, with the exception of risk-free rate, which is expressed as a range, used to determine the fair value of Stock Options issued:
 
Years Ended December 31,
 
2015
 
2014
 
2013
Dividend yield
2.72%
 
2.18%
 
2.13%
Risk-free rate of return
0.20%-3.04%
 
0.12%-5.07%
 
0.16%-3.89%
Expected volatility
32.56%
 
33.26%
 
32.98%
Exercise multiple
1.44
 
1.45
 
1.51
Post-vesting termination rate
2.73%
 
2.93%
 
3.16%
Contractual term (years)
10

 
10

 
10

Expected life (years)
7

 
6

 
7

Weighted average exercise price of stock options granted
$
51.39

 
$
50.53

 
$
35.96

Weighted average fair value of stock options granted
$
13.29

 
$
13.84

 
$
9.88

The following table presents a summary of Stock Option exercise activity:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Total intrinsic value of stock options exercised
$
44

 
$
67

 
$
79

Cash received from exercise of stock options
$
121

 
$
156

 
$
202

Income tax benefit realized from stock options exercised
$
15

 
$
24

 
$
28

Performance Shares
Performance Shares are units that, if they vest, are multiplied by a performance factor to produce a number of final Performance Shares which are payable in Shares. Performance Shares are accounted for as equity awards. They are not credited with dividend-equivalents for actual dividends paid on Shares during the performance period. Performance Share awards normally vest in their entirety at the end of the three-year performance period. Vesting is subject to continued service, except for employees who meet specified age and in certain other limited circumstances.
For awards granted prior to the January 1, 2013 –  December 31, 2015 performance period, vested Performance Shares are multiplied by a performance factor of 0% to 200% based on MetLife, Inc.’s adjusted income, total shareholder return, and performance in change in annual net operating earnings and total shareholder return compared to the performance of its competitors, each measured with respect to the applicable three-year performance period or portions thereof. The estimated fair value of Performance Shares is based upon the closing price of a Share on the date of grant, reduced by the present value of estimated dividends to be paid on that stock during the performance period. The performance factor for the January 1, 2012 – December 31, 2014 performance period was 101% .
For awards granted for the January 1, 2013 –  December 31, 2015 and later performance periods in progress through December 31, 2015 , the vested Performance Shares will be multiplied by a performance factor of 0% to 175% . Assuming that MetLife, Inc. has met threshold performance goals related to its adjusted income or total shareholder return, the MetLife, Inc. Compensation Committee will determine the performance factor in its discretion. In doing so, the Compensation Committee may consider MetLife, Inc.’s total shareholder return relative to the performance of its competitors and operating return on MetLife, Inc.’s common stockholder’s equity relative to its financial plan. The estimated fair value of Performance Shares will be remeasured each quarter until they become payable.

304

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Restricted Stock Units
Restricted Stock Units are units that, if they vest, are payable in an equal number of Shares. Restricted Stock Units are accounted for as equity awards. They are not credited with dividend-equivalents for dividends paid on Shares. Accordingly, the estimated fair value of Restricted Stock Units is based upon the closing price of Shares on the date of grant, reduced by the present value of estimated dividends to be paid on that stock.
The vast majority of Restricted Stock Units normally vest in thirds on the first three anniversaries of their grant date. Other Restricted Stock Units normally vest in their entirety on the third anniversary of their grant date. Vesting is subject to continued service, except for employees who meet specified age and service criteria and in certain other limited circumstances.
The following table presents a summary of Performance Share and Restricted Stock Unit activity:
 
Performance Shares
 
Restricted Stock Units
 
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2015
4,511,514

 
$
44.85

 
3,504,230

 
$
38.48

Granted
1,213,901

 
$
43.53

 
1,532,272

 
$
46.71

Forfeited
(61,458
)
 
$
44.08

 
(97,496
)
 
$
42.75

Payable (1)
(1,756,783
)
 
$
35.33

 
(1,860,047
)
 
$
36.73

Outstanding at December 31, 2015
3,907,174

 
$
44.08

 
3,078,959

 
$
43.50

Vested and expected to vest at December 31, 2015
3,748,479

 
$
44.09

 
2,771,063

 
$
43.50

______________
(1)
Includes both Shares paid and Deferred Shares for later payment.
Performance Share amounts above represent aggregate initial target awards and do not reflect potential increases or decreases resulting from the performance factor determined after the end of the respective performance periods. At December 31, 2015 , the three year performance period for the 2013 Performance Share grants was completed, but the performance factor had not yet been calculated. Included in the immediately preceding table are 1,592,641 outstanding Performance Shares to which the 2013 – 2015 performance factor will be applied.
Liability Awards (Phantom Stock-Based Awards)
Certain MetLife international subsidiaries have a liability for Phantom Stock-Based Awards in the form of Unit Options, Restricted Units, and/or Performance Units. These Share-based cash settled awards are recorded as liabilities until payout is made. Unlike Share-settled awards, which have a fixed grant-date fair value, the fair value of unsettled or unvested liability awards is remeasured at the end of each reporting period based on the change in fair value of one Share. The liability and corresponding expense are adjusted accordingly until the award is settled.
Unit Options
Each Unit Option is the contingent right of the holder to receive a cash payment equal to the closing price of a Share on the surrender date, less the closing price on the grant date, if the difference is greater than zero. The vast majority of Unit Options has become or will become eligible for surrender at a rate of one-third of each award on each of the first three anniversaries of the grant date. Other Unit Options have become or will become eligible for surrender on the third anniversary of the grant date. Vesting is subject to continued service, except for employees who meet specified age and service criteria and in certain other limited circumstances.

305

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Restricted Units
Restricted Units are units that, if they vest, are payable in cash equal to the closing price of a Share on the last day of the restriction period. The vast majority of Restricted Units normally vest in their entirety on the third anniversary of their grant date. Vesting is subject to continued service, except for employees meet specified age and service criteria and in certain other limited circumstances. Restricted Units are accounted for as liability awards. They are not credited with dividend-equivalents for actual dividends paid on Shares during the performance period.
Performance Units
Performance Units are units that, if they vest, are multiplied by a performance factor to produce a number of final Performance Units which are payable in cash equal to the closing price of a Share on a date following the last day of the three-year performance period. The performance factor for the Performance Units for any given period is determined on the identical basis as the performance factor for Performance Shares for the same performance period. Performance Units are accounted for as liability awards. They are not credited with dividend-equivalents for actual dividends paid on Shares during the performance period. Accordingly, the estimated fair value of Performance Units is based upon the closing price of a Share on the date of grant, reduced by the present value of estimated dividends to be paid on that stock during the performance period.
See “— Equity Awards — Performance Shares” for a discussion of the Performance Shares vesting period and award calculation, which is also used for Performance Units.
The following table presents a summary of Liability Awards activity:
 
Unit
Options
 
Restricted
Units
 
Performance
Units
Outstanding at January 1, 2015
1,106,996

 
800,040

 
593,923

Granted
17,183

 
405,747

 
211,473

Exercised
(107,141
)
 

 

Forfeited
(41,509
)
 
(209,357
)
 
(63,062
)
Paid

 
(334,538
)
 
(131,062
)
Outstanding at December 31, 2015
975,529

 
661,892

 
611,272

Vested and expected to vest at December 31, 2015
877,976

 
595,703

 
550,145

Statutory Equity and Income
The states of domicile of MetLife, Inc .’s U.S. insurance subsidiaries impose risk-based capital (“RBC”) requirements that were developed by the National Association of Insurance Commissioners (“NAIC”). American Life does not write business in Delaware or any other domestic state and, as such, is exempt from RBC requirements by Delaware law. Regulatory compliance is determined by a ratio of a company’s total adjusted capital, calculated in the manner prescribed by the NAIC (“TAC”) to its authorized control level RBC, calculated in the manner prescribed by the NAIC (“ACL RBC”), based on the statutory-based filed financial statements. Companies below specific trigger levels or ratios are classified by their respective levels, each of which requires specified corrective action. The minimum level of TAC before corrective action commences is twice ACL RBC (“Company Action Level RBC”). While not required by or filed with insurance regulators, the Company also calculates an internally defined combined RBC ratio (“Statement-Based Combined RBC Ratio”), which is determined by dividing the sum of TAC for MetLife, Inc. ’s principal U.S. insurance subsidiaries, excluding American Life, by the sum of Company Action Level RBC for such subsidiaries. The Company’s Statement-Based Combined RBC Ratio was in excess of 390% at both December 31, 2015 and December 31, 2014. In addition, all non-exempted U.S. insurance subsidiaries individually exceeded Company Action Level RBC for all periods presented.

306

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

MetLife, Inc. ’s foreign insurance operations are regulated by applicable authorities of the countries in which each entity operates and are subject to minimum capital and solvency requirements in those countries before corrective action commences. At December 31, 2015 and 2014 , the adjusted capital of American Life’s insurance subsidiary in Japan, the Company’s largest foreign insurance operation, was in excess of four times the 200% solvency margin ratio that would require corrective action. Excluding Japan, the aggregate required capital and surplus of the Company’s other foreign insurance operations was $2.8 billion and the aggregate actual regulatory capital and surplus of such operations was $7.1 billion as of the date of the most recent required capital adequacy calculation for each jurisdiction. Each of those other foreign insurance operations exceeded minimum capital and solvency requirements of their respective countries for all periods presented.
MetLife, Inc.’s insurance subsidiaries prepare statutory-basis financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile or applicable foreign jurisdiction. The NAIC has adopted the Codification of Statutory Accounting Principles (“Statutory Codification”). Statutory Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the effect of Statutory Codification on the statutory capital and surplus of MetLife, Inc. ’s U.S. insurance subsidiaries.
Statutory accounting principles differ from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt and valuing securities on a different basis.
In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant assets not admitted by the Company are net deferred income tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within three years. Further, statutory accounting principles do not give recognition to purchase accounting adjustments.
MetLife, Inc.’s U.S. insurance subsidiaries have no material state prescribed accounting practices, except as described below.
New York has adopted certain prescribed accounting practices, primarily consisting of the continuous Commissioners’ Annuity Reserve Valuation Method, which impacts deferred annuities, and the New York Special Consideration Letter, which mandates certain assumptions in asset adequacy testing. The collective impact of these prescribed accounting practices decreased the statutory capital and surplus of MLIC for the years ended December 31, 2015 and 2014 by an amount of $1.2 billion and $2.3 billion , respectively, in excess of the amount of the decrease had capital and surplus been measured under NAIC guidance.
American Life calculates its policyholder reserves on insurance written in each foreign jurisdiction in accordance with the reserve standards required by such jurisdiction. American Life is not required to quantify the impact to its statutory capital and surplus as a result of applying this prescribed practice to its branch operations. Additionally, American Life’s insurance subsidiaries are valued based on each respective subsidiary’s underlying local statutory equity, adjusted in a manner consistent with the reporting prescribed for its branch operations. This valuation basis resulted in lower statutory capital and surplus of $1.8 billion and $2.8 billion for the years ended December 31, 2015 and 2014 , respectively, than if the insurance subsidiaries were valued under NAIC guidance.
The Delaware Department of Insurance approved two statutory accounting permitted practices for MetLife Insurance Company USA (“MetLife USA”). For December 31, 2013, MetLife USA applied a U.S. GAAP reserving methodology for certain foreign blocks of business held by Exeter Reassurance Company, Ltd. (“Exeter”) prior to the merger s into MetLife USA of certain of its affiliates, including Exeter, and a subsidiary . These blocks of business were recaptured by the counterparties prior to these mergers and are, therefore, not included in MetLife USA’s statutory reserves as of December 31, 2014. In addition, the Delaware Department of Insurance granted permission for MetLife USA not to calculate, record or disclose the effect of this permitted practice on statutory surplus and net income f or the year ended December 31, 2013 .
The tables below present amounts from MetLife, Inc. ’s U.S. insurance subsidiaries, which are derived from the statutory–basis financial statements as filed with the insurance regulators.

307

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Statutory net income (loss) was as follows:
 
 
 
 
Years Ended December 31,
Company
 
State of Domicile
 
2015
 
2014
 
2013
 
 
 
 
(In millions)
Metropolitan Life Insurance Company
 
New York
 
$
3,703

 
$
1,487

 
$
369

American Life Insurance Company
 
Delaware
 
$
335

 
$
(36
)
 
$
631

MetLife Insurance Company USA
 
Delaware
 
$
(1,022
)
 
$
1,543

 
$
3,358

Metropolitan Property and Casualty Insurance Company
 
Rhode Island
 
$
204

 
$
291

 
$
282

Metropolitan Tower Life Insurance Company
 
Delaware
 
$
(42
)
 
$
51

 
$
52

Other
 
Various
 
$
381

 
$
454

 
$
161

Statutory capital and surplus was as follows at:
 
 
December 31,
Company
 
2015
 
2014
 
 
(In millions)
Metropolitan Life Insurance Company
 
$
14,485

 
$
12,008

American Life Insurance Company
 
$
6,115

 
$
3,362

MetLife Insurance Company USA
 
$
5,942

 
$
6,042

Metropolitan Property and Casualty Insurance Company
 
$
2,335

 
$
2,388

Metropolitan Tower Life Insurance Company
 
$
710

 
$
767

Other
 
$
417

 
$
399

The Company’s domestic captive life reinsurance subsidiaries, which reinsure risks including the closed block, level premium term life and ULSG assumed from other MetLife subsidiaries, have no state prescribed accounting practices, except for MetLife Reinsurance Company of Vermont (“MRV”) and MetLife Reinsurance Company of Delaware (“MRD”). MRV, with the explicit permission of the Commissioner of Insurance of the State of Vermont, has included, as admitted assets, the value of letters of credit serving as collateral for reinsurance credit taken by various affiliated cedants, in connection with reinsurance agreements entered into between MRV and the various affiliated cedants, which resulted in higher statutory capital and surplus of $6.0 billion for both the years ended December 31, 2015 and 2014 . MRV’s RBC would have triggered a regulatory event without the use of the state prescribed practice. MRD, with the explicit permission of the Commissioner of Insurance of the State of Delaware, has included, as admitted assets, the value of letters of credit issued to MRD, which resulted in higher statutory capital and surplus of $200 million and $75 million for the years ended December 31, 2015 and 2014 , respectively. MRD’s RBC would not have triggered a regulatory event without the use of the state prescribed practice. The combined statutory net income (loss) of MetLife, Inc. ’s domestic captive life reinsurance subsidiaries was ($336) million , ($320) million and ($612) million for the years ended December 2015 , 2014 and 2013 , respectively, and the combined statutory capital and surplus, including the aforementioned prescribed practice, was $5.0 billion and $5.2 billion at December 31, 2015 and 2014 , respectively.

308

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Dividend Restrictions
Insurance Operations
The table below sets forth the dividends permitted to be paid by MetLife, Inc.’s primary insurance subsidiaries without insurance regulatory approval and dividends paid:
 
 
2016
 
2015
 
2014
Company
 
Permitted Without
Approval (1)
 
Paid (2)
 
Paid (2)
 
 
(In millions)
Metropolitan Life Insurance Company (3)
 
$
3,753

 
$
1,489


 
$
821

(4)
American Life Insurance Company
 
$

 
$

 
 
$

 
MetLife Insurance Company USA
 
$
586

 
$
500


 
$
155

(5)
Metropolitan Property and Casualty Insurance Company
 
$
130

 
$
235


 
$
200

 
Metropolitan Tower Life Insurance Company
 
$
70

 
$
102

 
 
$
73


______________
(1)
Reflects dividend amounts that may be paid during 2016 without prior regulatory approval. However, because dividend tests may be based on dividends previously paid over rolling 12-month periods, if paid before a specified date during 2016, some or all of such dividends may require regulatory approval.
(2)
Reflects all amounts paid, including those requiring regulatory approval.
(3)
As discussed below, the New York Insurance Law was amended, permitting MLIC to pay dividends without prior regulatory approval under one of two alternative formulations beginning in 2016. The dividend amount that MLIC may pay during 2016 under the new formulation is reflected in the table above.
(4)
During December 2014, MLIC distributed shares of an affiliate to MetLife, Inc. as an in-kind dividend of $113 million .
(5)
Prior to the mergers into MetLife USA of certain of its affiliates and a subsidiary, Exeter paid dividends of $155 million on its preferred stock. In August 2014, MetLife Insurance Company of Connecticut redeemed for $1.4 billion and retired 4,595,317 shares of its common stock owned by MetLife Investors Group LLC (“MLIG”). Following the redemption, in August 2014, MLIG paid a dividend of $1.4 billion to MetLife, Inc. In November 2014, MetLife Insurance Company of Connecticut changed its name to MetLife Insurance Company USA. MetLife USA did not pay dividends in 2014.
Effective for dividends paid during 2016 and going forward, the New York Insurance Law was amended permitting MLIC, without prior insurance regulatory clearance, to pay stockholder dividends to MetLife, Inc. in any calendar year based on either of two standards. Under one standard, MLIC is permitted, without prior insurance regulatory clearance, to pay dividends out of earned surplus (defined as positive “unassigned funds (surplus)” excluding 85% of the change in net unrealized capital gains or losses (less capital gains tax), for the immediately preceding calendar year), in an amount up to the greater of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains), not to exceed 30% of surplus to policyholders as of the end of the immediately preceding calendar year. In addition, under this standard, MLIC may not, without prior insurance regulatory clearance, pay any dividends in any calendar year immediately following a calendar year for which its net gain from operations, excluding realized capital gains, was negative. Under the second standard, if dividends are paid out of other than earned surplus, MLIC may, without prior insurance regulatory clearance, pay an amount up to the lesser of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). In addition, MLIC will be permitted to pay a dividend to MetLife, Inc. in excess of the amounts allowed under both standards only if it files notice of its intention to declare such a dividend and the amount thereof with the New York Superintendent of Financial Services (the “Superintendent”) and the Superintendent either approves the distribution of the dividend or does not disapprove the dividend within 30 days of its filing. Under New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders.

309

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Under Delaware Insurance Code, each of American Life, MetLife USA and Metropolitan Tower Life Insurance Company (“MTL”) is permitted, without prior insurance regulatory clearance, to pay a stockholder dividend to MetLife, Inc. as long as the amount of the dividend, when aggregated with all other dividends in the preceding 12 months, does not exceed the greater of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) its net statutory gain from operations for the immediately preceding calendar year (excluding realized capital gains). Each of American Life, MetLife USA, and MTL will be permitted to pay a dividend to MetLife, Inc. in excess of the greater of such two amounts only if it files notice of the declaration of such a dividend and the amount thereof with the Delaware Commissioner of Insurance (the “Delaware Commissioner”) and the Delaware Commissioner either approves the distribution of the dividend or does not disapprove the distribution within 30 days of its filing. In addition, any dividend that exceeds earned surplus (defined as “unassigned funds (surplus)”) as of the immediately preceding calendar year requires insurance regulatory approval. Under Delaware Insurance Code, the Delaware Commissioner has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders.
Under the Rhode Island Insurance Code, Metropolitan Property and Casualty Insurance Company (“MPC”) is permitted, without prior insurance regulatory clearance, to pay a stockholder dividend to MetLife, Inc. as long as the aggregate amount of all such dividends in any 12 month period does not exceed the lesser of: (i) 10% of its surplus to policyholders as of the end of the immediately preceding calendar year, or (ii) net income, not including realized capital gains, for the immediately preceding calendar year, not including pro rata distributions of MPC’s own securities. In determining whether a dividend is extraordinary, MPC may include carry forward net income from the previous two calendar years, excluding realized capital gains less dividends paid in the second and immediately preceding calendar years. MPC will be permitted to pay a dividend to MetLife, Inc. in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Rhode Island Commissioner of Insurance (the “Rhode Island Commissioner”) and the Rhode Island Commissioner either approves the distribution of the dividend or does not disapprove the distribution within 30 days of its filing. Under the Rhode Island Insurance Code, the Rhode Island Commissioner has broad discretion in determining whether the financial condition of a stock property and casualty insurance company would support the payment of such dividends to its stockholders.
MetLife, Inc.
In addition to regulatory restrictions on the payment of dividends by its insurance subsidiaries to MetLife, Inc., the payment of dividends by MetLife, Inc. to its stockholders is also subject to restrictions. The declaration and payment of dividends is subject to the discretion of MetLife, Inc.’s Board of Directors, and will depend on its financial condition, results of operations, cash requirements, future prospects and other factors deemed relevant by the Board. In addition, the payment of dividends on MetLife, Inc.’s common stock, and MetLife, Inc.’s ability to repurchase its common stock, may be subject to restrictions described below arising out of (i) regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of New York (collectively, with the Federal Reserve Board, the “Federal Reserve”) as a result of the designation of MetLife, Inc. by the Financial Stability Oversight Council (“FSOC”) as a non-bank systemically important financial institution (“non-bank SIFI”), and (ii) restrictions under the terms of MetLife, Inc.’s preferred stock, and junior subordinated debentures in situations where MetLife, Inc. may be experiencing financial stress, as described below. For purposes of this discussion, “junior subordinated debentures” are deemed to include MetLife, Inc.’s Fixed-to-Floating Rate Exchangeable Surplus Trust Securities, which are exchangeable at the option of MetLife, Inc., or in the future upon the occurrence of certain events, for junior subordinated debentures, and which contain terms with the same substantive effects described in this discussion as the terms in MetLife’s junior subordinated debentures.
Regulatory Restriction s. On December 18, 2014, the FSOC designated MetLife, Inc. as a non-bank SIFI subject to regulation by the Federal Reserve and to enhanced supervision and prudential standards. On January 13, 2015, MetLife, Inc. filed an action in the U.S. District Court for the District of Columbia asking the court to review and rescind the FSOC’s designation of MetLife, Inc. as a non-bank SIFI. The court held oral argument on the parties’ cross motions for summary judgment on February 10, 2016. On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. See Note 23. The proposed Separation has no impact on MetLife, Inc.’s current status as a non-bank SIFI.

310

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

The Federal Reserve Board is required under Dodd-Frank to adopt enhanced prudential standards, including heightened capital and stress testing requirements, for non-bank SIFIs. Under such stress testing requirements, MetLife, Inc.’s ability to pay dividends and repurchase stock will be dependent on demonstrating the robustness of its capital planning and projection processes, as well as its ability to maintain the Company’s capital levels above regulatory minimum levels under stress scenarios. While these stress testing requirements have been adopted, they will not be effective until rules relating to capital requirements are implemented. Although the Federal Reserve Board has indicated that it intends to apply enhanced prudential standards to non-bank SIFIs by rule or order, it has not yet done so. Therefore, the manner in which these proposed standards might apply to MetLife, Inc. remains unclear. Enhanced prudential and capital standards imposed on MetLife, Inc. as a non-bank SIFI could adversely affect its ability to pay dividends to its stockholders, as well as repurchase its common stock or other securities or engage in other transactions that could affect its capital. In addition, MetLife, Inc. may not be able to pay dividends if it does not receive sufficient funds from its operating subsidiaries, which are themselves subject to separate regulatory restrictions on their ability to pay dividends. See “─ Dividend Restrictions.”
MetLife, Inc. has also been designated as a global systemically important insurer by the Financial Stability Board. As such, it could be subject to enhanced capital standards and supervision and other additional requirements that would not apply to companies that are not so designated. These policy proposals would need to be implemented by legislation or regulation in each applicable jurisdiction, and the impact on MetLife, Inc. is uncertain.
“Dividend Stopper” Provisions in the Preferred Stock and Junior Subordinated Debentures . Certain terms of MetLife, Inc.’s preferred stock and junior subordinated debentures (sometimes referred to as “dividend stoppers”) may prevent it from repurchasing its common or preferred stock or paying dividends on its common or preferred stock in certain circumstances. Dividends on the preferred stock are not cumulative. If a dividend is not declared before the dividend payment date, MetLife, Inc. has no obligation to pay dividends accrued for that dividend period whether or not dividends are declared and paid in future periods. No dividends may, however, be paid or declared on MetLife, Inc.’s common stock — or any other securities ranking junior to the preferred stock — unless the full dividends for the latest completed dividend period on all preferred stock, and any parity stock, have been declared and paid or provided for. Under the junior subordinated debentures, if MetLife, Inc. has not paid in full the accrued interest on its junior subordinated debentures through the most recent interest payment date, it may not repurchase or pay dividends on its common stock or other capital stock (including the preferred stock), subject to certain exceptions. The junior subordinated debentures provide that MetLife may, at its option and provided that certain conditions are met, defer payment of interest without giving rise to an event of default for periods of up to 10 years (although after five years MetLife, Inc. would be obligated to use commercially reasonable efforts to sell equity securities to raise proceeds to pay the interest), with no limitation on the number of deferral periods that MetLife, Inc. may begin, so long as all accrued and unpaid interest is paid with respect to prior deferral periods. If MetLife, Inc. were to elect to defer payments of interest, the “dividend stopper” provisions in the junior subordinated debentures would thus prevent MetLife, Inc. from repurchasing or paying dividends on its common stock or other capital stock (including the preferred stock) during the period of deferral, subject to exceptions.
In addition, the preferred stock and the junior subordinated debentures contain provisions that would automatically suspend the payment of preferred stock dividends and junior subordinated debenture interest payments if MetLife, Inc. fails to meet certain risk based capital ratio, net income and stockholders’ equity tests at specified times. In such cases, however, MetLife would be permitted to make the payments if it were able to utilize a prescribed alternative payment mechanism. As a result of the suspension of these payments, the “dividend stopper” provisions would come into effect.
MetLife, Inc. is a party to certain RCCs which limit its ability to eliminate these restrictions through the repayment, redemption or purchase of preferred stock or junior subordinated debentures by requiring MetLife, Inc., subject to certain limitations, to receive cash proceeds during a specified period from the sale of specified replacement securities prior to any such repayment, redemption or purchase. See “— Preferred Stock” for a description of such covenants in effect with respect to the preferred stock, and Note 14 for a description of such covenants in effect with respect to junior subordinated debentures.

311

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI attributable to MetLife, Inc., was as follows:
 
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized Gains
(Losses) on
Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 
Total
 
(In millions)
Balance at December 31, 2012
$
13,588

 
$
831

 
$
(533
)
 
$
(2,489
)
 
$
11,397

OCI before reclassifications
(8,487
)
 
(937
)
 
(937
)
 
1,078

 
(9,283
)
Deferred income tax benefit (expense)
2,807

 
312

 
(189
)
 
(379
)
 
2,551

AOCI before reclassifications, net of income tax
7,908

 
206

 
(1,659
)
 
(1,790
)
 
4,665

Amounts reclassified from AOCI
411

 
36

 

 
214

 
661

Deferred income tax benefit (expense)
(136
)
 
(11
)
 

 
(75
)
 
(222
)
Amounts reclassified from AOCI, net of income tax
275

 
25

 

 
139

 
439

Balance at December 31, 2013
8,183

 
231

 
(1,659
)
 
(1,651
)
 
5,104

OCI before reclassifications
11,197

 
669

 
(1,492
)
 
(1,150
)
 
9,224

Deferred income tax benefit (expense)
(3,419
)
 
(261
)
 
(208
)
 
401

 
(3,487
)
AOCI before reclassifications, net of income tax
15,961

 
639

 
(3,359
)
 
(2,400
)
 
10,841

Amounts reclassified from AOCI
(811
)
 
717

 
77

 
180

 
163

Deferred income tax benefit (expense)
249

 
(280
)
 
(27
)
 
(63
)
 
(121
)
Amounts reclassified from AOCI, net of income tax
(562
)
 
437

 
50

 
117

 
42

Sale of subsidiary (2)
(320
)
 

 
6

 

 
(314
)
Deferred income tax benefit (expense)
80

 

 

 

 
80

Sale of subsidiary, net of income tax
(240
)
 

 
6

 

 
(234
)
Balance at December 31, 2014
15,159

 
1,076

 
(3,303
)
 
(2,283
)
 
10,649

OCI before reclassifications
(7,218
)
 
(19
)
 
(1,646
)
 
125

 
(8,758
)
Deferred income tax benefit (expense)
2,519

 
6

 
(1
)
 
(43
)
 
2,481

AOCI before reclassifications, net of income tax
10,460

 
1,063

 
(4,950
)
 
(2,201
)
 
4,372

Amounts reclassified from AOCI
(223
)
 
608

 

 
229

 
614

Deferred income tax benefit (expense)
78

 
(213
)
 

 
(80
)
 
(215
)
Amounts reclassified from AOCI, net of income tax
(145
)
 
395

 

 
149

 
399

Balance at December 31, 2015
$
10,315

 
$
1,458

 
$
(4,950
)
 
$
(2,052
)
 
$
4,771

__________________
(1)
See Note 8 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.
(2)
See Note 3.

312

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
16. Equity (continued)

Information regarding amounts reclassified out of each component of AOCI was as follows:
AOCI Components
 
Amounts Reclassified from AOCI
 
Consolidated Statement of Operations
and Comprehensive Income (Loss)
Locations
 
 
Years Ended December 31,
 
 
 
 
2015
 
2014
 
2013
 
 
 
 
(In millions)
 
 
Net unrealized investment gains (losses):
 
 
 
 
 
 
 
 
Net unrealized investment gains (losses)
 
$
129

 
$
603

 
$
344

 
Net investment gains (losses)
Net unrealized investment gains (losses)
 
49

 
67

 
93

 
Net investment income
Net unrealized investment gains (losses)
 
45

 
141

 
(26
)
 
Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax
 
223

 
811

 
411

 
 
Income tax (expense) benefit
 
(78
)
 
(249
)
 
(136
)
 
 
Net unrealized investment gains (losses), net of income tax
 
$
145

 
$
562

 
$
275

 
 
Unrealized gains (losses) on derivatives - cash flow hedges:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
85

 
$
42

 
$
20

 
Net derivative gains (losses)
Interest rate swaps
 
12

 
9

 
8

 
Net investment income
Interest rate swaps
 

 

 

 
Other expenses
Interest rate forwards
 
6

 
(7
)
 
10

 
Net derivative gains (losses)
Interest rate forwards
 
5

 
4

 
3

 
Net investment income
Interest rate forwards
 
2

 
2

 
(1
)
 
Other expenses
Foreign currency swaps
 
(720
)
 
(768
)
 
(3
)
 
Net derivative gains (losses)
Foreign currency swaps
 
(1
)
 
(2
)
 
(3
)
 
Net investment income
Foreign currency swaps
 
1

 
2

 
1

 
Other expenses
Credit forwards
 
1

 

 

 
Net derivative gains (losses)
Credit forwards
 
1

 
1

 
1

 
Net investment income
Gains (losses) on cash flow hedges, before income tax
 
(608
)
 
(717
)
 
36

 
 
Income tax (expense) benefit
 
213

 
280

 
(11
)
 
 
Gains (losses) on cash flow hedges, net of income tax
 
$
(395
)
 
$
(437
)
 
$
25

 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
$

 
$
(77
)
 
$

 
Net investment gains (losses)
Income tax (expense) benefit
 

 
27

 

 
 
Foreign currency translation adjustment, net of income tax
 
$

 
$
(50
)
 
$

 
 
Defined benefit plans adjustment: (1)
 
 
 
 
 
 
 
 
Amortization of net actuarial gains (losses)
 
$
(233
)
 
$
(180
)
 
$
283

 
 
Amortization of prior service (costs) credit
 
4

 

 
(69
)
 
 
Amortization of defined benefit plan items, before income tax
 
(229
)
 
(180
)
 
214

 
 
Income tax (expense) benefit
 
80

 
63

 
(75
)
 
 
Amortization of defined benefit plan items, net of income tax
 
$
(149
)
 
$
(117
)
 
$
139

 
 
Total reclassifications, net of income tax
 
$
(399
)
 
$
(42
)
 
$
439

 
 
__________________
(1)
These AOCI components are included in the computation of net periodic benefit costs. See Note 18.

313

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

17. Other Expenses
Information on other expenses was as follows:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
(In millions)
Compensation
 
$
4,938

 
$
4,894

 
$
5,108

Pension, postretirement and postemployment benefit costs
 
400

 
473

 
488

Commissions
 
4,517

 
5,153

 
5,428

Volume-related costs
 
1,002

 
859

 
842

Capitalization of DAC
 
(3,837
)
 
(4,183
)
 
(4,786
)
Amortization of DAC and VOBA
 
3,936

 
4,132

 
3,550

Amortization of negative VOBA
 
(361
)
 
(442
)
 
(579
)
Interest expense on debt
 
1,208

 
1,216

 
1,282

Premium taxes, licenses and fees
 
766

 
801

 
658

Professional services
 
1,511

 
1,457

 
1,454

Rent and related expenses, net of sublease income
 
328

 
361

 
376

Other (1)
 
2,361

 
2,370

 
2,781

Total other expenses
 
$
16,769

 
$
17,091

 
$
16,602

__________________
(1)
See Note 19 for information on the charge related to income tax for the year ended December 31, 2015 and the Japan income tax refund for the year ended December 31, 2013.
Capitalization of DAC and Amortization of DAC and VOBA
See Note 5 for additional information on DAC and VOBA including impacts of capitalization and amortization. See also Note 7 for a description of the DAC amortization impact associated with the closed block.
Interest Expense on Debt
See Notes  12 13 , and 14 for attribution of interest expense by debt issuance. Interest expense on debt includes interest expense related to CSEs. See Note 8 .
Restructuring Charges
The Company commenced an enterprise-wide strategic initiative in 2012. This global strategy focuses on leveraging the Company’s scale to improve the value it provides to customers and shareholders in order to reduce costs, enhance revenues, achieve efficiencies and reinvest in its technology, platforms and functionality to improve its current operations and develop new capabilities.

314

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
17. Other Expenses (continued)

These restructuring charges are included in other expenses. As the expenses relate to an enterprise-wide initiative, they are reported in Corporate & Other. Information regarding restructuring charges was as follows:
 
 
Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
Severance
 
Lease and
Asset
Impairment
 
Total
 
Severance
 
Lease and
Asset
Impairment
 
Total
 
Severance
 
Lease and
Asset
Impairment
 
Total

 
(In millions)
Balance at January 1,
 
$
31

 
$
6

 
$
37

 
$
40

 
$
6

 
$
46

 
$
23

 
$

 
$
23

Restructuring charges
 
60

 
4

 
64

 
83

 
8

 
91

 
99

 
16

 
115

Cash payments
 
(73
)
 
(6
)
 
(79
)
 
(92
)
 
(8
)
 
(100
)
 
(82
)
 
(10
)
 
(92
)
Balance at December 31,
 
$
18

 
$
4

 
$
22

 
$
31

 
$
6

 
$
37

 
$
40

 
$
6

 
$
46

Total restructuring charges incurred since inception of initiative
 
$
383

 
$
46

 
$
429

 
$
323

 
$
42

 
$
365

 
$
240

 
$
34

 
$
274

Management estimates the range for further restructuring charges including severance, as well as lease and asset impairments, through the year ending December 31, 2016 to be $5 million to $10 million .
18. Employee Benefit Plans
Pension and Other Postretirement Benefit Plans
Certain subsidiaries of MetLife, Inc. sponsor and/or administer various U.S. qualified and nonqualified defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. U.S. pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits that are primarily based upon years of credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. The U.S. nonqualified pension plans provide supplemental benefits in excess of limits applicable to a qualified plan. The non-U.S. pension plans generally provide benefits based upon either years of credited service and earnings preceding-retirement or points earned on job grades and other factors in years of service.
These subsidiaries also provide certain postemployment benefits and certain postretirement medical and life insurance benefits for U.S. retired employees. Employees of these subsidiaries who were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for one of the subsidiaries may become eligible for these other postretirement benefits, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total costs of postretirement medical benefits. Employees hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits.

315

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

The benefit obligations, funded status and net periodic benefit costs related to these pension and other postretirement benefits were comprised of the following:
 
December 31, 2015
 
December 31, 2014
 
Pension Benefits
 
Other Postretirement Benefits
 
Pension Benefits
 
Other Postretirement Benefits
 
U.S.
Plans
 
Non-U.S. Plans
 
Total
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
(In millions)
Benefit obligations
$
9,759

 
$
747

 
$
10,506

 
$
1,895

 
$
29

 
$
1,924

 
$
10,262

 
$
739

 
$
11,001

 
$
2,110

 
$
35

 
$
2,145

Estimated fair value of plan assets
8,490

 
261

 
8,751

 
1,373

 
9

 
1,382

 
8,750

 
253

 
9,003

 
1,426

 
10

 
1,436

Over (under) funded status
$
(1,269
)
 
$
(486
)
 
$
(1,755
)
 
$
(522
)
 
$
(20
)
 
$
(542
)
 
$
(1,512
)
 
$
(486
)
 
$
(1,998
)
 
$
(684
)
 
$
(25
)
 
$
(709
)
Net periodic benefit costs
$
273

 
$
73

 
$
346

 
$
63

 
$
6

 
$
69

 
$
346

 
$
79

 
$
425

 
$
43

 
$
5

 
$
48


316

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

Obligations and Funded Status
 
December 31,
 
2015
 
2014
 
Pension
Benefits (1)
 
Other
Postretirement
Benefits
 
Pension
Benefits (1)
 
Other
Postretirement
Benefits
 
(In millions)
Change in benefit obligations
 
 
 
 
 
 
 
Benefit obligations at January 1,
$
11,001

 
$
2,145

 
$
9,335

 
$
1,875

Service costs
276

 
17

 
262

 
16

Interest costs
423

 
90

 
456

 
94

Plan participants’ contributions

 
30

 

 
30

Net actuarial (gains) losses
(627
)
 
(235
)
 
1,607

 
264

Acquisition, divestitures, settlements and curtailments
(4
)
 
(2
)
 
(18
)
 
(5
)
Change in benefits

 
(7
)
 
(4
)
 
(9
)
Benefits paid
(531
)
 
(109
)
 
(536
)
 
(116
)
Effect of foreign currency translation
(32
)
 
(5
)
 
(101
)
 
(4
)
Benefit obligations at December 31,
10,506

 
1,924

 
11,001

 
2,145

Change in plan assets
 
 
 
 
 
 
 
Estimated fair value of plan assets at January 1,
9,003

 
1,436

 
8,024

 
1,366

Actual return on plan assets
(127
)
 
4

 
1,108

 
112

Acquisition, divestitures and settlements
(3
)
 
(4
)
 
(10
)
 

Plan participants’ contributions

 
30

 

 
30

Employer contributions
424

 
26

 
450

 
44

Benefits paid
(531
)
 
(109
)
 
(536
)
 
(116
)
Effect of foreign currency translation
(15
)
 
(1
)
 
(33
)
 

Estimated fair value of plan assets at December 31,
8,751

 
1,382

 
9,003

 
1,436

Over (under) funded status at December 31,
$
(1,755
)
 
$
(542
)
 
$
(1,998
)
 
$
(709
)
Amounts recognized in the consolidated balance sheets
 
 
 
 
 
 
 
Other assets
$
5

 
$
1

 
$
7

 
$
1

Other liabilities
(1,760
)
 
(543
)
 
(2,005
)
 
(710
)
Net amount recognized
$
(1,755
)
 
$
(542
)
 
$
(1,998
)
 
$
(709
)
AOCI
 
 
 
 
 
 
 
Net actuarial (gains) losses
$
2,945

 
$
222

 
$
3,093

 
$
425

Prior service costs (credit)

 
(14
)
 
(1
)
 
(10
)
AOCI, before income tax
$
2,945

 
$
208

 
$
3,092

 
$
415

Accumulated benefit obligation
$
10,082

 
N/A

 
$
10,355

 
N/A

_____________
(1)
Includes nonqualified unfunded plans, for which the aggregate PBO was $1.1 billion and $1.3 billion at December 31, 2015 and 2014 , respectively.

317

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

Information for pension plans with PBOs in excess of plan assets and accumulated benefit obligations (“ABO”) in excess of plan assets was as follows at:
 
December 31,
 
2015
 
2014
 
2015
 
2014
 
PBO Exceeds Estimated Fair Value
of Plan Assets
 
ABO Exceeds Estimated Fair Value
of Plan Assets
 
(In millions)
Projected benefit obligations
$
10,437

 
$
10,944

 
$
2,476

 
$
2,615

Accumulated benefit obligations
$
10,052

 
$
10,304

 
$
2,340

 
$
2,362

Estimated fair value of plan assets
$
8,715

 
$
8,931

 
$
839

 
$
853

Net Periodic Benefit Costs
The components of net periodic benefit costs and other changes in plan assets and benefit obligations recognized in OCI were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
Pension Benefits
 
Other Postretirement Benefits
 
Pension Benefits
 
Other Postretirement Benefits
 
Pension Benefits
 
Other Postretirement Benefits
 
(In millions)
Net periodic benefit costs
 
 
 
 
 
 
 
 
 
 
 
Service costs
$
276

 
$
17

 
$
262

 
$
16

 
$
303

 
$
22

Interest costs
423

 
90

 
456

 
94

 
403

 
94

Settlement and curtailment costs
(1
)
 
3

 
19

 
4

 
(2
)
 
1

Expected return on plan assets
(542
)
 
(80
)
 
(482
)
 
(76
)
 
(489
)
 
(76
)
Amortization of net actuarial (gains) losses
191

 
42

 
169

 
11

 
228

 
55

Amortization of prior service costs (credit)
(1
)
 
(3
)
 
1

 
(1
)
 
6

 
(75
)
Total net periodic benefit costs (credit)
346

 
69

 
425

 
48

 
449

 
21

Other changes in plan assets and benefit obligations recognized in OCI
 
 
 
 
 
 
 
 
 
 
 
Net actuarial (gains) losses
43

 
(161
)
 
960

 
223

 
(544
)
 
(532
)
Prior service costs (credit)

 
(7
)
 
(20
)
 
(13
)
 

 

Amortization of net actuarial (gains) losses
(191
)
 
(42
)
 
(169
)
 
(11
)
 
(228
)
 
(57
)
Amortization of prior service (costs) credit
1

 
3

 
(1
)
 
1

 
(6
)
 
75

Total recognized in OCI
(147
)
 
(207
)
 
770

 
200

 
(778
)
 
(514
)
Total recognized in net periodic benefit costs and OCI
$
199

 
$
(138
)
 
$
1,195

 
$
248

 
$
(329
)
 
$
(493
)
The estimated net actuarial (gains) losses and prior service costs (credit) for the defined benefit pension plans and other postretirement benefit plans that will be amortized from AOCI into net periodic benefit costs over the next year are $193 million and ($1) million , and $13 million and ($7) million , respectively.

318

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

Assumptions
Assumptions used in determining benefit obligations for the U.S. plans were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
December 31, 2015
 
 
 
 
 
Weighted average discount rate
4.50%
 
4.60%
Rate of compensation increase
2.25
%
-
8.50%
 
N/A
December 31, 2014
 
 
 
 
 
Weighted average discount rate
4.10%
 
4.10%
Rate of compensation increase
2.25
%
-
8.50%
 
N/A
Assumptions used in determining net periodic benefit costs for the U.S. Plans were as follows:
 
Pension Benefits
 
Other Postretirement Benefits
Year Ended December 31, 2015
 
 
 
 
 
Weighted average discount rate
4.10%
 
4.10%
Weighted average expected rate of return on plan assets
6.25%
 
5.70%
Rate of compensation increase
2.25
%
-
8.50%
 
N/A
Year Ended December 31, 2014
 
 
 
 
 
Weighted average discount rate
5.15%
 
5.15%
Weighted average expected rate of return on plan assets
6.25%
 
5.70%
Rate of compensation increase
3.50
%
-
7.50%
 
N/A
Year Ended December 31, 2013
 
 
 
 
 
Weighted average discount rate
4.20%
 
4.20%
Weighted average expected rate of return on plan assets
6.25%
 
5.76%
Rate of compensation increase
3.50
%
-
7.50%
 
N/A
The weighted average discount rate for the U.S. plans is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of high quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate PBO when due.
The weighted average expected rate of return on plan assets for the U.S. plans is based on anticipated performance of the various asset sectors in which the plans invest, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the long-term expectations on the performance of the markets. While the precise expected rate of return derived using this approach will fluctuate from year to year, the policy is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate.
The weighted average expected rate of return on plan assets for use in that plan’s valuation in 2016 is currently anticipated to be 6.00% for U.S. pension benefits and 5.52% for U.S. other postretirement benefits.
The assumed healthcare costs trend rates used in measuring the APBO and net periodic benefit costs were as follows:
 
December 31,
 
2015
 
2014

Before
Age 65
 
Age 65 and
older
 
Before
Age 65
 
Age 65 and
older
Following year
6.3
%
 
10.3
%
 
6.4
%
 
6.4
%
Ultimate rate to which cost increase is assumed to decline
4.2
%
 
4.6
%
 
4.4
%
 
4.7
%
Year in which the ultimate trend rate is reached
2086
 
2091
 
2094
 
2089

319

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

Assumed healthcare costs trend rates may have a significant effect on the amounts reported for healthcare plans. A 1% change in assumed healthcare costs trend rates would have the following effects on the U.S. Plans as of December 31, 2015 :
 
One Percent
Increase
 
One Percent
Decrease
 
(In millions)
Effect on total of service and interest costs components
$
15

 
$
(12
)
Effect of accumulated postretirement benefit obligations
$
253

 
$
(207
)
As of December 31, 2014 , the improved mortality rate assumption used for all U.S. pension and postretirement benefit plans is the RP-2000 healthy mortality table projected generationally using 175% of Scale AA. The mortality rate assumption was revised based upon the results of a comprehensive study of MetLife’s demographic experience and reflects the current best estimate of expected mortality rates for MetLife’s participant population. Prior to December 31, 2014 , the mortality rate assumption used to value the benefit obligations and net periodic benefit cost for these plans was the RP-2000 healthy mortality table projected generationally using 100% of Scale AA. 
Plan Assets
Certain U.S. subsidiaries provide employees with benefits under various Employee Retirement Income Security Act of 1974 (“ERISA”) benefit plans. These include qualified pension plans, postretirement medical plans and certain retiree life insurance coverage. The assets of these U.S. subsidiaries’ qualified pension plans are held in an insurance group annuity contract, and the vast majority of the assets of the postretirement medical plan and backing the retiree life coverage are held in a trust which largely utilizes insurance contracts to hold the assets. All of these contracts are issued by the Company’s insurance affiliates, and the assets under the contracts are held in insurance separate accounts that have been established by the Company. The underlying assets of the separate accounts are principally comprised of cash and cash equivalents, short-term investments, fixed maturity and equity securities, derivatives, real estate, private equity investments and hedge fund investments.
The insurance contract provider engages investment management firms (“Managers”) to serve as sub-advisors for the separate accounts based on the specific investment needs and requests identified by the plan fiduciary. These Managers have portfolio management discretion over the purchasing and selling of securities and other investment assets pursuant to the respective investment management agreements and guidelines established for each insurance separate account. The assets of the qualified pension plans and postretirement medical plans (the “Invested Plans”) are well diversified across multiple asset categories and across a number of different Managers, with the intent of minimizing risk concentrations within any given asset category or with any of the given Managers.
The Invested Plans, other than those held in participant directed investment accounts, are managed in accordance with investment policies consistent with the longer-term nature of related benefit obligations and within prudent risk parameters. Specifically, investment policies are oriented toward (i) maximizing the Invested Plan’s funded status; (ii) minimizing the volatility of the Invested Plan’s funded status; (iii) generating asset returns that exceed liability increases; and (iv) targeting rates of return in excess of a custom benchmark and industry standards over appropriate reference time periods. These goals are expected to be met through identifying appropriate and diversified asset classes and allocations, ensuring adequate liquidity to pay benefits and expenses when due and controlling the costs of administering and managing the Invested Plan’s investments. Independent investment consultants are periodically used to evaluate the investment risk of Invested Plan’s assets relative to liabilities, analyze the economic and portfolio impact of various asset allocations and management strategies and to recommend asset allocations.
Derivative contracts may be used to reduce investment risk, to manage duration and to replicate the risk/return profile of an asset or asset class. Derivatives may not be used to leverage a portfolio in any manner, such as to magnify exposure to an asset, asset class, interest rates or any other financial variable. Derivatives are also prohibited for use in creating exposures to securities, currencies, indices or any other financial variable that is otherwise restricted.

320

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

The table below summarizes the actual weighted average allocation of the estimated fair value of total plan assets by asset class at December 31 for the years indicated and the approved target allocation by major asset class at December 31, 2015 for the Invested Plans:
 
 
December 31,
 
 
2015
 
2014
 
 
U.S. Pension Benefits
 
U.S. Other Postretirement Benefits
 
U.S. Pension Benefits
 
U.S. Other Postretirement Benefits
 
 
Target
 
Actual
Allocation
 
Target
 
Actual
Allocation
 
Actual
Allocation
 
Actual
Allocation
Asset Class
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities
 
80
%
 
71
%
 
76
%
 
73
%
 
69
%
 
71
%
Equity securities
 
10
%
 
14
%
 
24
%
 
25
%
 
15
%
 
27
%
Alternative securities (1)
 
10
%
 
15
%
 
%
 
2
%
 
16
%
 
2
%
Total assets
 
 
 
100
%
 
 
 
100
%
 
100
%
 
100
%
______________
(1)
Alternative securities primarily include derivative assets, money market securities, short-term investments and other investments. U.S. other postretirement benefits do not include postretirement life’s target and actual allocation of plan assets that are all in short-term investments.
Estimated Fair Value
The pension and other postretirement benefit plan assets are categorized into a three-level fair value hierarchy, as described in Note 10 , based upon the significant input with the lowest level in its valuation. The Level 2 asset category includes certain separate accounts that are primarily invested in liquid and readily marketable securities. The estimated fair value of such separate accounts is based upon reported NAV provided by fund managers and this value represents the amount at which transfers into and out of the respective separate account are effected. These separate accounts provide reasonable levels of price transparency and can be corroborated through observable market data. Directly held investments are primarily invested in U.S. and foreign government and corporate securities. The Level 3 asset category includes separate accounts that are invested in assets that provide little or no price transparency due to the infrequency with which the underlying assets trade and generally require additional time to liquidate in an orderly manner. Accordingly, the values for separate accounts invested in these alternative asset classes are based on inputs that cannot be readily derived from or corroborated by observable market data.

321

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

The pension and other postretirement plan assets measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy are summarized as follows:
 
December 31, 2015
 
Pension Benefits
 
Other Postretirement Benefits
 
Fair Value Hierarchy
 
 
 
Fair Value Hierarchy
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
$

 
$
2,979

 
$
78

 
$
3,057

 
$
18

 
$
281

 
$
1

 
$
300

U.S. government bonds
994

 
493

 

 
1,487

 
193

 
12

 

 
205

Foreign bonds

 
764

 
17

 
781

 

 
69

 

 
69

Federal agencies

 
228

 

 
228

 

 
34

 

 
34

Municipals

 
302

 

 
302

 

 
56

 

 
56

Other (1)

 
354

 
7

 
361

 

 
47

 

 
47

Total fixed maturity securities
994


5,120


102


6,216


211


499


1


711

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock - domestic
751

 
24

 

 
775

 
126

 

 

 
126

Common stock - foreign
378

 
61

 

 
439

 
111

 

 

 
111

Total equity securities
1,129


85




1,214


237






237

Other investments
32

 
84

 
723

 
839

 

 

 

 

Short-term investments
10

 
309

 

 
319

 
1

 
431

 

 
432

Money market securities
9

 
49

 

 
58

 

 

 

 

Derivative assets
26

 
3

 
76

 
105

 
2

 

 

 
2

Total assets
$
2,200


$
5,650


$
901


$
8,751


$
451


$
930


$
1


$
1,382


322

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

 
December 31, 2014
 
Pension Benefits
 
Other Postretirement Benefits
 
Fair Value Hierarchy
 
 
 
Fair Value Hierarchy
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total
Estimated
Fair
Value
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
$

 
$
2,704

 
$
80

 
$
2,784

 
$
42

 
$
244

 
$
3

 
$
289

U.S. government bonds
1,605

 
223

 

 
1,828

 
169

 
12

 

 
181

Foreign bonds

 
808

 
17

 
825

 

 
78

 

 
78

Federal agencies

 
254

 

 
254

 

 
35

 

 
35

Municipals

 
270

 

 
270

 

 
74

 

 
74

Other (1)

 
188

 
8

 
196

 

 
63

 

 
63

Total fixed maturity securities
1,605


4,447


105


6,157


211


506


3


720

Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock - domestic
951

 

 

 
951

 
188

 

 

 
188

Common stock - foreign
394

 
57

 

 
451

 
80

 

 

 
80

Total equity securities
1,345


57




1,402


268






268

Other investments
34

 
24

 
745

 
803

 

 

 

 

Short-term investments
189

 
276

 

 
465

 
14

 
433

 

 
447

Money market securities
29

 
56

 

 
85

 

 

 

 

Derivative assets
11

 
7

 
73

 
91

 

 
1

 

 
1

Total assets
$
3,213


$
4,867


$
923


$
9,003


$
493


$
940


$
3


$
1,436

______________
(1)
Other primarily includes mortgage-backed securities, collateralized mortgage obligations and ABS.

323

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

A rollforward of all pension and other postretirement benefit plan assets measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs was as follows:
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
Pension Benefits
 
Fixed Maturity Securities:
 
Equity Securities:
 
 
 
Corporate
 
Foreign Bonds
 
Other (1)
 
Common Stock - Domestic
 
Other Investments
 
Derivative Assets
 
(In millions)
Balance, January 1, 2014
$
59

 
$
11

 
$
19

 
$
148

 
$
602

 
$
37

Realized gains (losses)
3

 

 

 

 
(13
)
 
(16
)
Unrealized gains (losses)

 

 

 

 
112

 
18

Purchases, sales, issuances and settlements, net
11

 
6

 
(2
)
 

 
(104
)
 
34

Transfers into and/or out of Level 3
7

 

 
(9
)
 
(148
)
 
148

 

Balance, December 31, 2014
$
80

 
$
17

 
$
8

 
$

 
$
745

 
$
73

Realized gains (losses)
1

 

 

 

 

 
(11
)
Unrealized gains (losses)
(4
)
 
(1
)
 
2

 

 
55

 
(9
)
Purchases, sales, issuances and settlements, net
8

 
2

 
(1
)
 

 
(77
)
 
23

Transfers into and/or out of Level 3
(7
)
 
(1
)
 
(2
)
 

 

 

Balance, December 31, 2015
$
78

 
$
17

 
$
7

 
$

 
$
723

 
$
76

______________
(1)
Other includes ABS and collateralized mortgage obligations.
Other postretirement benefit plan assets measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs were not significant for the years ended December 31, 2015 and 2014.
Expected Future Contributions and Benefit Payments
It is the subsidiaries’ practice to make contributions to the U.S. qualified pension plan to comply with minimum funding requirements of ERISA. In accordance with such practice, no contributions are required for 2016 . The subsidiaries expect to make discretionary contributions to the qualified pension plan of $300 million in 2016 . For information on employer contributions, see “— Obligations and Funded Status.”
Benefit payments due under the U.S. nonqualified pension plans are primarily funded from the subsidiaries’ general assets as they become due under the provision of the plans, therefore benefit payments equal employer contributions. The U.S. subsidiaries expect to make contributions of $65 million to fund the benefit payments in 2016 .
Postretirement benefits are either: (i) not vested under law; (ii) a non-funded obligation of the subsidiaries; or (iii) both. Current regulations do not require funding for these benefits. The subsidiaries use their general assets, net of participant’s contributions, to pay postretirement medical claims as they come due. As permitted under the terms of the governing trust document, the subsidiaries may be reimbursed from plan assets for postretirement medical claims paid from their general assets. The U.S. subsidiaries expect to make contributions of $50 million towards benefit obligations in 2016 to pay postretirement medical claims.

324

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
18. Employee Benefit Plans (continued)

Gross benefit payments for the next 10 years, which reflect expected future service where appropriate, are expected to be as follows:
 
Pension Benefits
 
Other Postretirement Benefits
 
(In millions)
2016
$
545

 
$
86

2017
$
570

 
$
87

2018
$
582

 
$
90

2019
$
606

 
$
92

2020
$
627

 
$
95

2021-2025
$
3,463

 
$
508

Additional Information
As previously discussed, most of the assets of the U.S. pension benefit plans are held in a group annuity contract issued by the subsidiaries while some of the assets of the U.S. postretirement benefit plans are held in a trust which largely utilizes life insurance contracts issued by the subsidiaries to hold such assets. Total revenues from these contracts recognized in the consolidated statements of operations were $55 million , $50 million and $49 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, and included policy charges and net investment income from investments backing the contracts and administrative fees. Total investment income (loss), including realized and unrealized gains (losses), credited to the account balances was ($130) million , $1.2 billion and $20 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. The terms of these contracts are consistent in all material respects with those the subsidiaries offer to unaffiliated parties that are similarly situated.
Defined Contribution Plans
Certain subsidiaries sponsor defined contribution plans under which a portion of employee contributions are matched. These subsidiaries contributed $80 million , $77 million and $93 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.

325

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

19. Income Tax
The provision for income tax from continuing operations was as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Current:
 
 
 
 
 
Federal
$
584

 
$
(56
)
 
$
85

State and local
10

 
9

 
2

Foreign
556

 
779

 
422

Subtotal
1,150

 
732

 
509

Deferred:
 
 
 
 
 
Federal
701

 
1,597

 
(250
)
State and local

 
(1
)
 
(11
)
Foreign
297

 
137

 
413

Subtotal
998

 
1,733

 
152

Provision for income tax expense (benefit)
$
2,148

 
$
2,465

 
$
661

 
The Company’s income (loss) from continuing operations before income tax expense (benefit) from domestic and foreign operations were as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Income (loss) from continuing operations:
 
 
 
 
 
Domestic
$
3,743

 
$
6,043

 
$
1,186

Foreign
3,727

 
2,761

 
2,866

Total
$
7,470

 
$
8,804

 
$
4,052


326

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
19. Income Tax (continued)

The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations was as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Tax provision at U.S. statutory rate
$
2,615

 
$
3,081

 
$
1,418

Tax effect of:
 
 
 
 
 
Dividend received deduction
(216
)
 
(204
)
 
(166
)
Tax-exempt income
(73
)
 
(92
)
 
(96
)
Prior year tax (1)
555

 
21

 
75

Low income housing tax credits
(225
)
 
(209
)
 
(194
)
Other tax credits
(80
)
 
(77
)
 
(54
)
Foreign tax rate differential (2),(3),(4)
(465
)
 
(118
)
 
(340
)
Change in valuation allowance
5

 
(3
)
 
30

Deferred tax effects of branch conversions

 

 
4

Other, net
32

 
66

 
(16
)
Provision for income tax expense (benefit)
$
2,148

 
$
2,465

 
$
661

______________
(1)
As discussed further below, prior year tax includes a $557 million non-cash charge related to an uncertain tax position.
(2)
For the year ended December 31, 2015, foreign tax rate differential includes one-time tax benefits of $174 million related to a Japan tax rate change, $61 million related to restructuring in Chile, $57 million related to the repatriation of earnings from Japan, $41 million related to certain non-portfolio net investment gains that were non-taxable and $31 million related to the devaluation of the peso in Argentina. These benefits were partially offset by one-time charges of $88 million related to the impact of foreign exchange on investment gains in Argentina and $36 million as a result of a deferred tax liability true-up in Japan.
(3)
For the year ended December 31, 2014, foreign tax rate differential includes a one-time tax charge of $54 million related to tax reform in Chile and $45 million related to the repatriation of earnings from Japan, partially offset by a one-time tax benefit of $13 million related to the change in repatriation assumption for foreign earnings of the United Arab Emirates (“UAE”).
(4)
For the year ended December 31, 2013, foreign tax rate differential includes one-time tax benefits of $119 million related to the receipt of a Japan tax refund, $69 million related to the estimated reversal of Japan temporary differences, and $65 million related to the change in repatriation assumptions for foreign earnings of certain European operations.

327

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
19. Income Tax (continued)

Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following at:
 
December 31,
 
2015
 
2014
 
(In millions)
Deferred income tax assets:
 
 
 
Policyholder liabilities and receivables
$
1,734

 
$
3,022

Net operating loss carryforwards
1,229

 
1,293

Employee benefits
1,094

 
1,068

Capital loss carryforwards
9

 
26

Tax credit carryforwards
1,264

 
1,733

Litigation-related and government mandated
260

 
315

Other
858

 
831

Total gross deferred income tax assets
6,448

 
8,288

Less: Valuation allowance
203

 
224

Total net deferred income tax assets
6,245

 
8,064

Deferred income tax liabilities:
 
 
 
Investments, including derivatives
4,469

 
4,554

Intangibles
1,606

 
1,877

Net unrealized investment gains
5,639

 
7,971

DAC
5,000

 
5,153

Other
123

 
330

Total deferred income tax liabilities
16,837

 
19,885

Net deferred income tax asset (liability)
$
(10,592
)
 
$
(11,821
)
The Company also has recorded a valuation allowance charge of $5 million related to certain state and foreign net operating loss carryforwards. In addition, a $21 million reduction was related to foreign currency movement and a $5 million reduction was recorded as a balance sheet reclassification with other deferred tax assets. The valuation allowance reflects management’s assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign and state net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable.

328

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
19. Income Tax (continued)

The following table sets forth the domestic, state, and foreign net operating loss carryforwards and the domestic capital loss carryforwards for tax purposes at December 31, 2015 .
 
Net Operating Loss Carryforwards
 
Capital Loss Carryforwards
 
Domestic
 
State
 
Foreign
 
Domestic
 
(In millions)
Expiration
 
 
 
 
 
 
 
2016-2020
$

 
$
31

 
$
140

 
$
27

2021-2025

 
52

 
24

 

2026-2030
1,096

 
41

 

 

2031-2035
2,107

 
12

 

 

Indefinite

 

 
668

 

 
$
3,203

 
$
136

 
$
832

 
$
27

The following table sets forth the general business credits, foreign tax credits, and other credit carryforwards for tax purposes at December 31, 2015.
 
Tax Credit Carryforwards
 
General Business Credits
 
Foreign Tax Credits
 
Other
 
(In millions)
Expiration
 
 
 
 
 
2016-2020
$

 
$

 
$

2021-2025

 
570

 

2026-2030
104

 

 

2031-2035
529

 

 

Indefinite

 

 
342

 
$
633

 
$
570

 
$
342

In December 2012, the Tokyo District Court ruled in favor of the Japan branch of American Life in a tax case related to the deduction of unrealized foreign exchange losses on certain securities held by American Life prior to its acquisition by MetLife. During the first quarter of 2013, American Life received a refund of ¥16 billion ( $176 million ) related to income tax, interest and penalties. Under the indemnification provisions of the stock purchase agreement dated March 7, 2010, as amended, by and among MetLife, Inc., American International Group, Inc. (“AIG”) and AM Holdings, MetLife, Inc. has remitted the refund to AIG, net of certain amounts it can retain as a counter claim. The receipt of the refund, net of obligations to AIG with related foreign currency exchange impact and corresponding U.S. tax effects, resulted in a net charge of $16 million in the consolidated statements of operations for the year ended December 31, 2013, which was comprised of a $154 million  charge included in other expenses, a $19 million gain included in other net investment gains (losses) and a $119 million benefit included in provision for income tax expense (benefit).
The Company has not provided U.S. deferred taxes on cumulative earnings of certain non-U.S. affiliates that have been reinvested indefinitely. These earnings relate to ongoing operations and have been reinvested in active non-U.S. business operations. The Company does not intend to repatriate these earnings to fund U.S. operations. Deferred taxes are provided for earnings of non-U.S. affiliates when the Company plans to remit those earnings. At December 31, 2015, the Company had not made a provision for U.S. taxes on approximately $4.9 billion  of the excess of the amount for financial reporting over the tax bases of investments in foreign subsidiaries that are essentially permanent in duration. It is not practicable to estimate the amount of deferred tax liability related to investments in these foreign subsidiaries.

329

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
19. Income Tax (continued)

The Company considers the earnings of Japan and the Middle East (excluding the UAE and Turkey) to be available for repatriation. Earnings from the remaining foreign countries are considered to be permanently reinvested. In 2014 and 2013, the Company changed its repatriation assumptions related to the UAE and certain of its European operations, respectively, and now considers these foreign earnings to be permanently reinvested.
The Company files income tax returns with the U.S. federal government and various state and local jurisdictions, as well as foreign jurisdictions. The Company is under continuous examination by the Internal Revenue Service (“IRS”) and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction and subsidiary. The Company is no longer subject to U.S. federal, state, or local income tax examinations for years prior to 2007, except for i) 2000 through 2002 where the IRS disallowance relates to certain tax credits claimed - in April 2015, the Company received a Statutory Notice of Deficiency (the “Notice”) and paid the tax thereon in September 2015 (see additional details below); and ii) 2003 through 2006, where the IRS disallowance related predominantly to certain tax credits claimed and the Company is engaged with IRS Appeals. Management believes it has established adequate tax liabilities and final resolution for the years 2000 through 2006 is not expected to have a material impact on the Company’s consolidated financial statements. In material foreign jurisdictions, the Company is no longer subject to income tax examination for years prior to 2009.
The Company recorded a non-cash charge to net income of $792 million , net of tax, during the third quarter of 2015. The charge was related to an uncertain tax position and was comprised of a $557 million charge included in provision for income tax expense (benefit) and a $362 million ( $235 million , net of tax) charge included in other expenses. This charge is the result of the Company’s consideration of recent decisions of the U.S. Court of Appeals for the Second Circuit upholding the disallowance of foreign tax credits claimed by other corporate entities not affiliated with the Company. The Company’s action relates to tax years from 2000 to 2009, during which MLIC held non-U.S. investments in support of its life insurance business through a United Kingdom investment subsidiary that was structured as a joint venture at the time.
There has been no change in the Company’s position on the disallowance of its foreign tax credits by the IRS. The Company continues to contest the disallowance of these foreign tax credits by the IRS as management believes the facts strongly support the Company’s position. The Company will defend its position vigorously and does not expect any additional charges related to this matter.
Also related to the aforementioned foreign tax credit matter, on April 9, 2015, the IRS issued the Notice to the Company. The Notice asserted that the Company owes additional taxes and interest for 2000 through 2002 primarily due to the disallowance of foreign tax credits. The transactions that are the subject of the Notice continue through 2009, and it is likely that the IRS will seek to challenge these later periods. On September 18, 2015, the Company paid the assessed tax and interest of $444 million for 2000 through 2002 and will subsequently file a claim for a refund. On November 19, 2015, $9 million of this amount was refunded from the IRS as an overpayment of interest.
The Company’s liability for unrecognized tax benefits may increase or decrease in the next 12 months. A reasonable estimate of the increase or decrease cannot be made at this time. However, the Company continues to believe that the ultimate resolution of the pending issues will not result in a material change to its consolidated financial statements, although the resolution of income tax matters could impact the Company’s effective tax rate for a particular future period.

330

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
19. Income Tax (continued)

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Balance at January 1,
$
779

 
$
774

 
$
708

Additions for tax positions of prior years (1)
579

 
74

 
117

Reductions for tax positions of prior years
(24
)
 
(88
)
 
(37
)
Additions for tax positions of current year
28

 
23

 
39

Reductions for tax positions of current year
(1
)
 

 
(1
)
Settlements with tax authorities
(38
)
 
(4
)
 
(52
)
Balance at December 31,
$
1,323

 
$
779

 
$
774

Unrecognized tax benefits that, if recognized would impact the effective rate
$
1,268

 
$
690

 
$
661

______________
(1) The significant increase in 2015 is related to the non-cash charge discussed above.
The Company classifies interest accrued related to unrecognized tax benefits in interest expense, included within other expenses, while penalties are included in income tax expense.
Interest was as follows:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Interest recognized in the consolidated statements of operations (1)
$
388

 
$
26

 
$
20

 
 
 
 
 
 
 
 
 
December 31,
 
 
 
2015
 
2014
 
 
 
(In millions)
Interest included in other liabilities in the consolidated balance sheets (1)
 
 
$
671

 
$
283

______________
(1) The significant increase in 2015 is related to the non-cash charge discussed above.
The Company had insignificant penalties for the years ended December 31, 2015 , 2014 and 2013 .
The U.S. Treasury Department and the IRS have indicated that they intend to address through regulations the methodology to be followed in determining the dividends received deduction (“DRD”), related to variable life insurance and annuity contracts. The DRD reduces the amount of dividend income subject to tax and is a significant component of the difference between the actual tax expense and expected amount determined using the federal statutory tax rate of 35% . Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown at this time. For the years ended December 31, 2015 , 2014 , and 2013 , the Company recognized an income tax benefit of $220 million , $234 million and $164 million , respectively, related to the separate account DRD. The 2015 benefit included a benefit of $12 million related to a true-up of the 2014 tax return. The 2014 and 2013 benefit included a benefit of $38 million and $6 million related to a true-up of the 2013 and 2012 tax returns, respectively .

331

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

20. Earnings Per Common Share
The following table presents the weighted average shares used in calculating basic earnings per common share and those used in calculating diluted earnings per common share for each income category presented below:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions, except share and per share data)
Weighted Average Shares
 
 
 
 
 
Weighted average common stock outstanding for basic earnings per common share
1,117,775,843

 
1,128,671,410

 
1,105,579,693

Incremental common shares from assumed:
 
 
 
 
 
Stock purchase contracts underlying common equity units (1)

 
2,928,570

 
1,164,018

Exercise or issuance of stock-based awards
10,567,542

 
10,863,468

 
9,458,999

Weighted average common stock outstanding for diluted earnings per common share
1,128,343,385

 
1,142,463,448

 
1,116,202,710

Income (Loss) from Continuing Operations
 
 
 
 
 
Income (loss) from continuing operations, net of income tax
$
5,322

 
$
6,339

 
$
3,391

Less: Income (loss) from continuing operations, net of income tax, attributable to noncontrolling interests
12

 
27

 
25

Less: Preferred stock dividends
116

 
122

 
122

Preferred stock repurchase premium
42

 

 

Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders
$
5,152

 
$
6,190

 
$
3,244

Basic
$
4.61

 
$
5.48

 
$
2.94

Diluted
$
4.57

 
$
5.42

 
$
2.91

Income (Loss) from Discontinued Operations
 
 
 
 
 
Income (loss) from discontinued operations, net of income tax
$

 
$
(3
)
 
$
2

Less: Income (loss) from discontinued operations, net of income tax, attributable to noncontrolling interests

 

 

Income (loss) from discontinued operations, net of income tax, available to MetLife, Inc.’s common shareholders
$

 
$
(3
)
 
$
2

Basic
$

 
$

 
$

Diluted
$

 
$

 
$

Net Income (Loss)
 
 
 
 
 
Net income (loss)
$
5,322

 
$
6,336

 
$
3,393

Less: Net income (loss) attributable to noncontrolling interests
12

 
27

 
25

Less: Preferred stock dividends
116

 
122

 
122

Preferred stock repurchase premium
42

 

 

Net income (loss) available to MetLife, Inc.’s common shareholders
$
5,152

 
$
6,187

 
$
3,246

Basic
$
4.61

 
$
5.48

 
$
2.94

Diluted
$
4.57

 
$
5.42

 
$
2.91

______________
(1)
See Note 15 for a description of the Company’s common equity units.

332

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

21. Contingencies, Commitments and Guarantees
Contingencies
Litigation
The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.
The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at December 31, 2015 . While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.
Matters as to Which an Estimate Can Be Made
For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. As of December 31, 2015 , the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $460 million .
Matters as to Which an Estimate Cannot Be Made
For other matters disclosed below, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

333

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

Asbestos-Related Claims
MLIC is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. MLIC has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has MLIC issued liability or workers’ compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of MLIC’s employees during the period from the 1920’s through approximately the 1950’s and allege that MLIC learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. MLIC believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against MLIC. MLIC employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances.
Claims asserted against MLIC have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. MLIC’s defenses (beyond denial of certain factual allegations) include that: (i) MLIC owed no duty to the plaintiffs — it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs did not rely on any actions of MLIC; (iii) MLIC’s conduct was not the cause of the plaintiffs’ injuries; (iv) plaintiffs’ exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against MLIC, while other trial courts have denied MLIC’s motions. There can be no assurance that MLIC will receive favorable decisions on motions in the future. While most cases brought to date have settled, MLIC intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials.
The approximate total number of asbestos personal injury claims pending against MLIC as of the dates indicated, the approximate number of new claims during the years ended on those dates and the approximate total settlement payments made to resolve asbestos personal injury claims at or during those years are set forth in the following table:
 
December 31,
 
2015
 
2014
 
2013
 
(In millions, except number of claims)
Asbestos personal injury claims at year end
67,787

 
68,460

 
67,983

Number of new claims during the year
3,856

 
4,636

 
5,898

Settlement payments during the year (1)
$
56.1

 
$
46.0

 
$
37.0

______________
(1)
Settlement payments represent payments made by MLIC during the year in connection with settlements made in that year and in prior years. Amounts do not include MLIC’s attorneys’ fees and expenses.
The number of asbestos cases that may be brought, the aggregate amount of any liability that MLIC may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.
The ability of MLIC to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against MLIC when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.

334

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.
The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. MLIC’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against MLIC, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against MLIC, but which MLIC believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying MLIC’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.
MLIC reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. As previously disclosed, in 2014, MLIC increased its recorded liability for asbestos-related claims to $690 million . Based upon its regular reevaluation of its exposure from asbestos litigation, MLIC has updated its liability analysis for asbestos-related claims through December 31, 2015.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission (“SEC”); federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”), as well as from local and national regulators and government authorities in countries outside the United States where MetLife conducts business. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.
Mortgage Regulatory and Law Enforcement Authorities’ Inquiries
MetLife, through its affiliate, MetLife Bank, was engaged in the origination, sale and servicing of forward and reverse residential mortgage loans since 2008. In 2012, MetLife Bank exited the business of originating residential mortgage loans. In 2012 and 2013, MetLife Bank sold its residential mortgage servicing portfolios, and in 2013 wound down its mortgage servicing business. In August 2013, MetLife Bank merged with and into MetLife Home Loans LLC (“MLHL”), its former subsidiary, with MLHL as the surviving non-bank entity.
In May 2013, MetLife Bank received a subpoena from the U.S. Department of Justice requiring production of documents relating to MetLife Bank’s payment of certain foreclosure-related expenses to law firms and business entities affiliated with law firms and relating to MetLife Bank’s supervision of such payments, including expenses submitted to the Federal National Mortgage Association, the Federal Home Loan Mortgage Corp. and the U.S. Department of Housing and Urban Development for reimbursement. It is possible that various state or federal regulatory and law enforcement authorities may seek monetary penalties from MLHL relating to foreclosure practices.
The inquiry referred to above could adversely affect MetLife’s reputation or result in significant fines, penalties, equitable remedies or other enforcement actions, and result in significant legal costs in responding to governmental investigations or other litigation. Exiting the MetLife Bank businesses may not protect MetLife from inquiries and investigations relating to residential mortgage servicing and foreclosure activities, or any fines, penalties, equitable remedies or enforcement actions that may result, the costs of responding to any such governmental investigations, or other litigation. Management believes that the Company’s consolidated financial statements as a whole will not be materially affected by these regulatory matters.

335

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida
In July 2010, the Environmental Protection Agency (“EPA”) advised MLIC that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted MLIC (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. The EPA is requesting payment of an amount under $1 million from MLIC and such third party for past costs and an additional amount for future environmental testing costs at the Chemform Site. In September 2012, the EPA, MLIC and the third party executed an Administrative Order on Consent under which MLIC and the third party have agreed to be responsible for certain environmental testing at the Chemform Site. The Company estimates that its costs for the environmental testing will not exceed $100,000 . The September 2012 Administrative Order on Consent does not resolve the EPA’s claim for past clean-up costs. The EPA may seek additional costs if the environmental testing identifies issues. The Company estimates that the aggregate cost to resolve this matter will not exceed $1 million .
New York Licensing Inquiry
The Company entered into a consent order with the Department of Financial Services to resolve its inquiry into whether American Life and DelAm conducted business in New York without a license and whether representatives acting on behalf of those companies solicited, sold or negotiated insurance products in New York without a license. The Company entered into a deferred prosecution agreement with the District Attorney, New York County, regarding the same conduct. Pursuant to these agreements, in the first quarter of 2014, the Company paid $50 million to the Department of Financial Services and $10 million to the District Attorney, New York County. The Department of Financial Services consent order allowed certain activities in New York related to American Life and other entities to continue through June 30, 2015. On July 2, 2015, New York Insurance Law Section 2117 was amended to allow certain activities to take place in New York that relate to a policy or contract of group life, group annuity, or group accident and health insurance where the policyholder or proposed policyholder is a multinational entity resident outside the United States. The Company is continuing to cooperate with the New York State Office of the Attorney General Taxpayer Protection Bureau as to its inquiry concerning American Life’s and DelAm’s New York State tax filings.
Sales Practices Regulatory Matters
Regulatory authorities in a number of states and FINRA, and occasionally the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by MLIC, MetLife USA, New England Life Insurance Company (“NELICO”) and General American Life Insurance Company (“GALIC”), and broker-dealer, MetLife Securities, Inc. (“MSI”). These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for these sales practices-related investigations or inquiries.
FINRA Investigation of Sale and Replacement of Variable Annuities
On September 25, 2015, FINRA served notice that it will recommend disciplinary action against MetLife, Inc.’s affiliated broker-dealer, MSI, in connection with potential violations of FINRA rules regarding alleged misrepresentations, suitability, and supervision in connection with sales and replacements of variable annuities and certain riders on such annuities. FINRA staff has indicated they will seek a significant fine. The Company is cooperating in this investigation. The Company has included what it believes to be the probable and estimable amount of such loss in the Company’s consolidated financial statements, and has included amounts for potential additional liability in excess of that accrued in the aggregate estimate of reasonably possible loss provided above.

336

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

Unclaimed Property Litigation
West Virginia Lawsuits
On September 20, 2012, the West Virginia Treasurer filed an action against MLIC in West Virginia state court (West Virginia ex rel. John D. Perdue v. Metropolitan Life Insurance Company, Circuit Court of Putnam County, Civil Action No. 12-C-295) alleging that MLIC violated the West Virginia Uniform Unclaimed Property Act, seeking to compel compliance with the Act, and seeking payment of unclaimed property, interest, and penalties. On November 14, 2012, November 21, 2012, December 28, 2012, and January 9, 2013, the Treasurer filed substantially identical suits against MetLife Investors USA, NELICO, MetLife Insurance Company of Connecticut and GALIC, respectively. On June 16, 2015, the West Virginia Supreme Court of Appeals reversed the Circuit Court’s order that had granted defendants’ motions to dismiss the actions and remanded them to the Circuit Court for further proceedings. The defendants intend to defend these actions vigorously.
City of Westland Police and Fire Retirement System v. MetLife, Inc., et. al. (S.D.N.Y., filed January 12, 2012)
Seeking to represent a class of persons who purchased MetLife, Inc. common shares between February 2, 2010, and October 6, 2011, the plaintiff filed a second amended complaint alleging that MetLife, Inc. and several current and former directors and executive officers of MetLife, Inc. violated the Securities Act of 1933 (“Securities Act”), as well as the Exchange Act and Rule 10b-5 promulgated thereunder by issuing, or causing MetLife, Inc. to issue, materially false and misleading statements concerning MetLife, Inc.’s potential liability for millions of dollars in insurance benefits that should have been paid to beneficiaries or escheated to the states. Plaintiff seeks unspecified compensatory damages and other relief. On September 11, 2015, the court issued an order dismissing all claims under the Exchange Act and Rule 10b-5, and dismissing all claims under the Securities Act except for those based on alleged misrepresentations of mortality ratios. Following the court’s September 11, 2015 order, the plaintiff filed a third amended complaint that supplemented the factual allegations of the second amended complaint. The defendants intend to continue to defend this action vigorously.
City of Birmingham Retirement and Relief System v. MetLife, Inc., et al. (Circuit Court of Jefferson County Alabama, filed July 5, 2012)
Seeking to represent a class of persons who purchased MetLife, Inc. common equity units in or traceable to a public offering in March 2011, the plaintiff filed an action alleging that MetLife, Inc., certain current and former directors and executive officers of MetLife, Inc., and various underwriters violated several provisions of the Securities Act related to the filing of the registration statement by issuing, or causing MetLife, Inc. to issue, materially false and misleading statements and/or omissions concerning MetLife, Inc.’s potential liability for millions of dollars in insurance benefits that should have been paid to beneficiaries or escheated to the states. Plaintiff seeks unspecified compensatory damages and other relief. On March 31, 2015, a federal court granted plaintiff’s motion to remand this action to state court. On October 14, 2015, the state court denied the defendants’ motion to dismiss the complaint. The defendants intend to defend this action vigorously.
Derivative Actions
Seeking to sue derivatively on behalf of MetLife, Inc., two shareholders commenced separate actions against members of the MetLife, Inc. Board of Directors, alleging that they breached their fiduciary and other duties to the Company. Plaintiffs alleged that the defendants failed to ensure that the Company complied with state unclaimed property laws and to ensure that the Company accurately reported its earnings. Plaintiffs alleged that because of the defendants’ breaches of duty, MetLife, Inc. had incurred damage to its reputation and had suffered other unspecified damages. The two actions (Mallon v. Kandarian, et al. (S.D.N.Y., filed March 28, 2012) and Martino v. Kandarian, et al. (S.D.N.Y., filed April 19, 2012)) were consolidated. On December 25, 2015, the court granted the defendants’ motion to dismiss the consolidated action, holding that the action is moot.
Total Control Accounts Litigation
MLIC is a defendant in a lawsuit related to its use of retained asset accounts, known as TCA, as a settlement option for death benefits.

337

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)
Plaintiff filed this putative class action lawsuit on behalf of all persons for whom MLIC established a TCA to pay death benefits under an ERISA plan. The action alleges that MLIC’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates MLIC’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that MLIC realized on accounts owned by members of the putative class. The court denied MLIC’s motion to dismiss the complaint. The Company intends to defend this action vigorously.
Reinsurance Litigation
Robainas, et al. v. Metropolitan Life Ins. Co. (S.D.N.Y., December 16, 2014)
Plaintiffs filed this putative class action lawsuit on behalf of themselves and all persons and entities who, directly or indirectly, purchased, renewed or paid premiums on life insurance policies issued by MLIC from 2009 through 2014 (the “Policies”). Two similar actions were subsequently filed, Yale v. Metropolitan Life Ins. Co. (S.D.N.Y., January 12, 2015) and International Association of Machinists and Aerospace Workers District Lodge 15 v. Metropolitan Life Ins. Co. (E.D.N.Y., February 2, 2015) . Both of these actions were consolidated with the Robainas action. The consolidated complaint alleges that MLIC inadequately disclosed in its statutory annual statements that certain reinsurance transactions with affiliated reinsurance companies were collateralized using “contractual parental guarantees,” and thereby allegedly misrepresented its financial condition and the adequacy of its reserves. The lawsuit sought recovery under Section 4226 of the New York Insurance Law of a statutory penalty in the amount of the premiums paid for the Policies. On October 9, 2015, the court granted MLIC’s motion to dismiss the consolidated complaint, finding that plaintiffs lacked Article III standing because they did not allege any concrete injury as a result of the alleged conduct. Plaintiffs appealed this decision to the Second Circuit Court of Appeals.
Intoccia v. Metropolitan Life Ins. Co. (S.D.N.Y., April 20, 2015)
Plaintiffs filed this putative class action on behalf of themselves and all persons and entities who, directly or indirectly, purchased, renewed or paid premiums for Guaranteed Benefits Insurance Riders attached to variable annuity contracts with MLIC from 2009 through 2015 (the “Annuities”). The court consolidated Weilert v. Metropolitan Life Ins. Co. (S.D.N.Y., April 30, 2015) with the Intoccia case, and the consolidated, amended complaint alleges that MLIC inadequately disclosed in its statutory annual statements that certain reinsurance transactions with affiliated reinsurance companies were collateralized using “contractual parental guarantees,” and thereby allegedly misrepresented its financial condition and the adequacy of its reserves. The lawsuits seek recovery under Section 4226 of the New York Insurance Law of a statutory penalty in the amount of the premiums paid for Guaranteed Benefits Insurance Riders attached to the Annuities. The Court granted MLIC’s motion to dismiss, adopting the reasoning of the Robainas decision. Plaintiffs appealed this decision to the Second Circuit Court of Appeals.
Other Litigation
McGuire v. Metropolitan Life Insurance Company (E.D. Mich., filed February 22, 2012)
This lawsuit was filed by the fiduciary for the Union Carbide Employees’ Pension Plan and alleges that MLIC, which issued annuity contracts to fund some of the benefits the Plan provides, engaged in transactions that ERISA prohibits and violated duties under ERISA and federal common law by determining that no dividends were payable with respect to the contracts from and after 1999. On August 8, 2014, the court denied the parties’ motions for summary judgment. The court has set a June 6, 2016 trial date.

338

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

Sun Life Assurance Company of Canada Indemnity Claim
In 2006, Sun Life Assurance Company of Canada (“Sun Life”), as successor to the purchaser of MLIC’s Canadian operations, filed a lawsuit in Toronto, seeking a declaration that MLIC remains liable for “market conduct claims” related to certain individual life insurance policies sold by MLIC and that were transferred to Sun Life. Sun Life had asked that the court require MLIC to indemnify Sun Life for these claims pursuant to indemnity provisions in the sale agreement for the sale of MLIC’s Canadian operations entered into in June of 1998. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted MLIC’s motion for summary judgment. Both parties appealed but subsequently agreed to withdraw the appeal and consider the indemnity claim through arbitration. In September 2010, Sun Life notified MLIC that a purported class action lawsuit was filed against Sun Life in Toronto, Fehr v. Sun Life Assurance Co. (Super. Ct., Ontario, September 2010), alleging sales practices claims regarding the same individual policies sold by MLIC and transferred to Sun Life. An amended class action complaint in that case was served on Sun Life in May 2013, again without naming MLIC as a party. On August 30, 2011, Sun Life notified MLIC that a purported class action lawsuit was filed against Sun Life in Vancouver, Alamwala v. Sun Life Assurance Co. (Sup. Ct., British Columbia, August 2011), alleging sales practices claims regarding certain of the same policies sold by MLIC and transferred to Sun Life. Sun Life contends that MLIC is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. These sales practices cases against Sun Life are ongoing and the Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation.
Fauley v. Metropolitan Life Insurance Co., et al. (Circuit Court of the 19th Judicial Circuit, Lake County, Ill., July 3, 2014).
Plaintiffs filed this lawsuit against defendants, including MLIC and a former MetLife financial services representative, alleging that the defendants sent unsolicited fax advertisements to plaintiff and others in violation of the Telephone Consumer Protection Act, as amended by the Junk Fax Prevention Act, 47 U.S.C. § 227. The court issued a final order certifying a nationwide settlement class and approving a settlement under which MLIC has agreed to pay up to $23 million to resolve claims as to fax ads sent between August 23, 2008 and August 7, 2014. Objectors to the settlement have appealed the approval order.
MetLife, Inc. v. Financial Stability Oversight Council (D. D.C., January 13, 2015).
MetLife, Inc. filed this action in federal court seeking to overturn the FSOC’s designation of MetLife, Inc. as a non-bank SIFI. The suit is brought under the section of the Dodd-Frank Wall Street Reform and Consumer Protection Act providing that a company designated as a non-bank SIFI may petition the federal courts for review, and seeks an order requiring that the final determination be rescinded. The court held oral argument on the parties’ cross motions for summary judgment on February 10, 2016.
Voshall v. Metropolitan Life Ins. Co. (Superior Court of the State of California, County of Los Angeles, April 8, 2015)
Plaintiff filed this putative class action lawsuit on behalf of himself and all persons covered under a long-term group disability income insurance policy issued by MLIC to public entities in California between April 8, 2011 and April 8, 2015. Plaintiff alleges that MLIC improperly reduced benefits by including cost of living adjustments and employee paid contributions in the employer retirement benefits and other income that reduces the benefit payable under such policies. Plaintiff asserts causes of action for declaratory relief, violation of the California Business & Professions Code, breach of contract and breach of the implied covenant of good faith and fair dealing. The Company intends to defend this action vigorously.
Martin v. Metropolitan Life Insurance Company, (Superior Court of the State of California, County of Contra Costa, filed December 17, 2015)
Plaintiffs filed this this putative class action lawsuit on behalf of themselves and all California persons who have been charged compound interest by MLIC in life insurance policy and/or premium loan balances within the last four years. Plaintiffs allege that MLIC has engaged in a pattern and practice of charging compound interest on life insurance policy and premium loans without the borrower authorizing such compounding, and that this constitutes an unlawful business practice under California law. Plaintiff asserts causes of action for declaratory relief, violation of California’s Unfair Competition Law and Usury Law, and unjust enrichment. Plaintiff seeks declaratory and injunctive relief, restitution of interest, and damages in an unspecified amount. The Company intends to defend this action vigorously.

339

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

Lau v. Metropolitan Life Insurance Co. (S.D.N.Y. filed, December 3, 2015)
This putative class action lawsuit was filed by a single defined contribution plan participant on behalf of all ERISA plans whose assets were invested in MetLife’s “Group Annuity Contract Stable Value Funds” within the past six years. The suit alleges breaches of fiduciary duty under ERISA and challenges the “spread” with respect to the stable value fund group annuity products sold to retirement plans. The allegations focus on the methodology MetLife uses to establish and reset the crediting rate, the terms under which plan participants are permitted to transfer funds from a stable value option to another investment option, the procedures followed if an employer terminates a contract, and the level of disclosure provided. Plaintiff seeks declaratory and injunctive relief, as well as damages in an unspecified amount. The Company intends to defend this action vigorously.
Sales Practices Claims
Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds, other products or the misuse of client assets. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys’ fees. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.
Summary
Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, mortgage lending bank, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Commitments
Leases
The Company, as lessee, has entered into various lease and sublease agreements for office space, information technology, aircrafts, automobiles, and other equipment. Future minimum gross rental payments relating to these lease arrangements are as follows:
 
 
Amount
 
 
(In millions)
2016
 
$
321

2017
 
251

2018
 
224

2019
 
185

2020
 
172

Thereafter
 
874

Total
 
$
2,027


340

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

Total minimum rentals to be received in the future under non-cancelable subleases were $97 million as of December 31, 2015 . Operating lease expense was $364 million , $347 million and $372 million for the years ended December 31, 2015 , 2014 and 2013 , respectively.
Insolvency Assessments
Most of the jurisdictions in which the Company is admitted to transact business require insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. In addition, Japan has established the Life Insurance Policyholders Protection Corporation of Japan as a contingency to protect policyholders against the insolvency of life insurance companies in Japan through assessments to companies licensed to provide life insurance.
Assets and liabilities held for insolvency assessments were as follows:
 
December 31,
 
2015
 
2014
 
(In millions)
Other Assets:
 
 
 
Premium tax offset for future discounted and undiscounted assessments
$
45

 
$
50

Premium tax offsets currently available for paid assessments
64

 
84

 
$
109

 
$
134

Other Liabilities:
 
 
 
Insolvency assessments
$
65

 
$
73


Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $4.4 billion and $4.0 billion at December 31, 2015 and 2014 , respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $7.1 billion and $5.3 billion at December 31, 2015 and 2014 , respectively.
Guarantees
In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $800 million , with a cumulative maximum of $1.5 billion , while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

341

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)
21. Contingencies, Commitments and Guarantees (continued)

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
The Company has also minimum fund yield requirements on certain international pension funds in accordance with local laws. Since these guarantees are not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future.
The Company’s recorded liabilities were $8 million and $4 million at December 31, 2015 and 2014 , respectively, for indemnities, guarantees and commitments.

342

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

22. Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for 2015 and 2014 are summarized in the table below:
 
Three Months Ended
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
(In millions, except per share data)
2015
 
 
 
 
 
 
 
Total revenues
$
18,710

 
$
16,166

 
$
18,031

 
$
17,044

Total expenses
$
15,651

 
$
15,053

 
$
15,868

 
$
15,909

Income (loss) from continuing operations, net of income tax
$
2,163

 
$
1,119

 
$
1,198

 
$
842

Income (loss) from discontinued operations, net of income tax
$

 
$

 
$

 
$

Net income (loss)
$
2,163

 
$
1,119

 
$
1,198

 
$
842

Less: Net income (loss) attributable to noncontrolling interests
$
5

 
$
4

 
$
(5
)
 
$
8

Net income (loss) attributable to MetLife, Inc.
$
2,158

 
$
1,115

 
$
1,203

 
$
834

Less: Preferred stock dividends
$
30

 
$
31

 
$
6

 
$
49

Preferred stock repurchase premium
$

 
$
42

 
$

 
$

Net income (loss) available to MetLife, Inc.’s common shareholders
$
2,128

 
$
1,042

 
$
1,197

 
$
785

Basic earnings per common share
 
 
 
 
 
 
 
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders
$
1.89

 
$
0.93

 
$
1.07

 
$
0.71

Income (loss) from discontinued operations, net of income tax, attributable to MetLife, Inc.
$

 
$

 
$

 
$

Net income (loss) attributable to MetLife, Inc.
$
1.92

 
$
1.00

 
$
1.08

 
$
0.75

Net income (loss) available to MetLife, Inc.’s common shareholders
$
1.89

 
$
0.93

 
$
1.07

 
$
0.71

Diluted earnings per common share
 
 
 
 
 
 
 
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders
$
1.87

 
$
0.92

 
$
1.06

 
$
0.70

Income (loss) from discontinued operations, net of income tax, attributable to MetLife, Inc.
$

 
$

 
$

 
$

Net income (loss) attributable to MetLife, Inc.
$
1.90

 
$
0.99

 
$
1.06

 
$
0.74

Net income (loss) available to MetLife, Inc.’s common shareholders
$
1.87

 
$
0.92

 
$
1.06

 
$
0.70

2014
 
 
 
 
 
 
 
Total revenues
$
17,085

 
$
18,266

 
$
18,846

 
$
19,119

Total expenses
$
15,259

 
$
16,316

 
$
15,894

 
$
17,043

Income (loss) from continuing operations, net of income tax
$
1,342

 
$
1,376

 
$
2,094

 
$
1,527

Income (loss) from discontinued operations, net of income tax
$
(3
)
 
$

 
$

 
$

Net income (loss)
$
1,339

 
$
1,376

 
$
2,094

 
$
1,527

Less: Net income (loss) attributable to noncontrolling interests
$
11

 
$
10

 
$

 
$
6

Net income (loss) attributable to MetLife, Inc.
$
1,328

 
$
1,366

 
$
2,094

 
$
1,521

Less: Preferred stock dividends
$
30

 
$
31

 
$
30

 
$
31

Net income (loss) available to MetLife, Inc.’s common shareholders
$
1,298

 
$
1,335

 
$
2,064

 
$
1,490

Basic earnings per common share
 
 
 
 
 
 
 
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders
$
1.15

 
$
1.18

 
$
1.83

 
$
1.31

Income (loss) from discontinued operations, net of income tax, attributable to MetLife, Inc.
$

 
$

 
$

 
$

Net income (loss) attributable to MetLife, Inc.
$
1.18

 
$
1.21

 
$
1.86

 
$
1.34

Net income (loss) available to MetLife, Inc.’s common shareholders
$
1.15

 
$
1.18

 
$
1.83

 
$
1.31

Diluted earnings per common share
 
 
 
 
 
 
 
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders
$
1.14

 
$
1.17

 
$
1.81

 
$
1.30

Income (loss) from discontinued operations, net of income tax, attributable to MetLife, Inc.
$

 
$

 
$

 
$

Net income (loss) attributable to MetLife, Inc.
$
1.16

 
$
1.20

 
$
1.84

 
$
1.33

Net income (loss) available to MetLife, Inc.’s common shareholders
$
1.14

 
$
1.17

 
$
1.81

 
$
1.30


343

MetLife, Inc.
Notes to the Consolidated Financial Statements — (continued)

23. Subsequent Events
Common Stock Repurchases
In 2016, through January 7, 2016 , MetLife, Inc. repurchased 1,445,864 shares of its common stock in the open market for $70 million completing the September 2015 authorization.
Dividends
Preferred Stock
On February 19, 2016 , MetLife, Inc. announced a first quarter 2016 dividend of $0.253 per share, for a total of $6 million , on its Series A preferred stock, subject to the final confirmation that it has met the financial tests specified in the certificate of designation for the Series A preferred stock, which the Company anticipates will be made and announced on or about March 7, 2016 . The dividend will be payable March 15, 2016 to shareholders of record as of February 29, 2016 .
Common Stock
On January 6, 2016 , the MetLife, Inc. Board of Directors declared a first quarter 2016 common stock dividend of $0.375 per share payable on March 14, 2016 to shareholders of record as of February 5, 2016 . The Company estimates that the aggregate dividend payment will be $413 million .
The Separation
On January 12, 2016, the Company announced its plan to pursue the Separation. The Company is currently evaluating structural alternatives for the proposed Separation, including a public offering of shares in an independent, publicly traded company, a spin-off, or a sale. The completion of a public offering would depend on, among other things, the U.S. Securities and Exchange Commission filing and review process, as well as market conditions. Any Separation that might occur will be subject to the satisfaction of various conditions and approvals, including approval of any transaction by the MetLife, Inc. Board of Directors, satisfaction of any applicable requirements of the SEC, and receipt of insurance and other regulatory approvals and other anticipated conditions.

344


MetLife, Inc.
Schedule I
Consolidated Summary of Investments —
Other Than Investments in Related Parties
December 31, 2015
(In millions)
Types of Investments
Cost or
Amortized Cost (1)
 
Estimated Fair Value
 
Amount at
Which Shown on
Balance Sheet
Fixed maturity securities:
 
 
 
 
 
Bonds:
 
 
 
 
 
U.S. Treasury and agency securities
$
56,499

 
$
61,646

 
$
61,646

Foreign government securities
45,451

 
50,499

 
50,499

Public utilities
17,789

 
19,029

 
19,029

State and political subdivision securities
13,723

 
15,441

 
15,441

All other corporate bonds
133,194

 
137,379

 
137,379

Total bonds
266,656

 
283,994

 
283,994

Mortgage-backed and asset-backed securities
64,822

 
65,824

 
65,824

Redeemable preferred stock
1,486

 
1,584

 
1,584

Total fixed maturity securities
332,964

 
351,402

 
351,402

Fair value option and trading securities
14,569

 
15,024

 
15,024

Equity securities:
 
 
 
 
 
Common stock:
 
 
 
 
 
Industrial, miscellaneous and all other
1,713

 
1,988

 
1,988

Public utilities
199

 
181

 
181

Banks, trust and insurance companies
50

 
83

 
83

Non-redeemable preferred stock
1,035

 
1,069

 
1,069

Total equity securities
2,997

 
3,321

 
3,321

Mortgage loans held-for-investment
67,102

 
 
 
67,102

Policy loans
11,258

 
 
 
11,258

Real estate and real estate joint ventures
8,388

 
 
 
8,388

Real estate acquired in satisfaction of debt
45

 
 
 
45

Other limited partnership interests
7,096

 
 
 
7,096

Short-term investments
9,299

 
 
 
9,299

Other invested assets
22,524

 
 
 
22,524

Total investments
$
476,242

 
 
 
$
495,459

______________
(1)
The Company’s FVO and trading securities portfolio is mainly comprised of fixed maturity and equity securities, including mutual funds and, to a lesser extent, short-term investments and cash and cash equivalents. Cost or amortized cost for fixed maturity securities and mortgage loans held-for-investment represents original cost reduced by repayments, valuation allowances and impairments from other-than-temporary declines in estimated fair value that are charged to earnings and adjusted for amortization of premiums or accretion of discounts; for equity securities, cost represents original cost reduced by impairments from other-than-temporary declines in estimated fair value; for real estate, cost represents original cost reduced by impairments and adjusted for valuation allowances and depreciation; for real estate joint ventures and other limited partnership interests, cost represents original cost reduced for impairments or original cost adjusted for equity in earnings and distributions.

345


MetLife, Inc.
Schedule II
Condensed Financial Information
(Parent Company Only)
December 31, 2015 and 2014
(In millions, except share and per share data)
 
2015
 
2014
Condensed Balance Sheets
 
 
 
Assets
 
 
 
Investments:
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $5,023 and $5,037, respectively)
$
5,028

 
$
5,088

Short-term investments, principally at estimated fair value
268

 
378

Other invested assets, at estimated fair value
830

 
1,336

Total investments
6,126

 
6,802

Cash and cash equivalents
421

 
443

Accrued investment income
76

 
46

Investment in subsidiaries
85,977

 
88,152

Loans to subsidiaries
1,200

 
1,709

Other assets
1,177

 
1,406

Total assets
$
94,977

 
$
98,558

Liabilities and Stockholders’ Equity
 
 
 
Liabilities
 
 
 
Payables for collateral under derivatives transactions
$
227

 
$
349

Long-term debt — unaffiliated
16,994

 
15,317

Long-term debt — affiliated
3,314

 
3,600

Collateral financing arrangements
2,797

 
2,797

Junior subordinated debt securities
1,748

 
1,748

Payables to subsidiaries
147

 
459

Other liabilities
1,801

 
2,235

Total liabilities
27,028

 
26,505

Stockholders’ Equity
 
 
 
Preferred stock, par value $0.01 per share; $2,100 aggregate liquidation preference

 
1

Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 1,159,590,766 and 1,153,998,144 shares issued, respectively; 1,098,028,525 and 1,131,927,894 shares outstanding, respectively
12

 
12

Additional paid-in capital
30,749

 
30,543

Retained earnings
35,519

 
32,020

Treasury stock, at cost; 61,562,241 and 22,070,250 shares, respectively
(3,102
)
 
(1,172
)
Accumulated other comprehensive income (loss)
4,771

 
10,649

Total stockholders’ equity
67,949

 
72,053

Total liabilities and stockholders’ equity
$
94,977

 
$
98,558

See accompanying notes to the condensed financial information.

346


MetLife, Inc.
Schedule II
Condensed Financial Information — (continued)
(Parent Company Only)
For the Years Ended December 31, 2015 , 2014 and 2013
(In millions)
 
2015
 
2014
 
2013
Condensed Statements of Operations
 
 
 
 
 
Revenues
 
 
 
 
 
Equity in earnings of subsidiaries
$
5,985

 
$
6,907

 
$
4,163

Net investment income
170

 
371

 
304

Other revenues
124

 
128

 
155

Net investment gains (losses)
12

 
(287
)
 
(80
)
Net derivative gains (losses)
(7
)
 
165

 
(99
)
Total revenues
6,284

 
7,284

 
4,443

Expenses
 
 
 
 
 
Interest expense
1,171

 
1,151

 
1,122

Other expenses
180

 
197

 
373

Total expenses
1,351

 
1,348

 
1,495

Income (loss) before provision for income tax
4,933

 
5,936

 
2,948

Provision for income tax expense (benefit)
(377
)
 
(373
)
 
(420
)
Net income (loss)
5,310

 
6,309

 
3,368

Less: Preferred stock dividends
116

 
122

 
122

Preferred stock repurchase premium
42

 

 

Net income (loss) available to common shareholders
$
5,152

 
$
6,187

 
$
3,246

Comprehensive income (loss)
$
(568
)
 
$
11,854

 
$
(2,925
)
See accompanying notes to the condensed financial information.


347


MetLife, Inc.
Schedule II
Condensed Financial Information — (continued)
(Parent Company Only)
For the Years Ended December 31, 2015 , 2014 and 2013
(In millions)
 
2015
 
2014
 
2013
Condensed Statements of Cash Flows
 
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
Net income (loss)
$
5,310

 
$
6,309

 
$
3,368

Earnings of subsidiaries
(5,985
)
 
(6,907
)
 
(4,163
)
Dividends from subsidiaries
2,335

 
2,388

 
2,734

Other, net
(54
)
 
825

 
(74
)
Net cash provided by (used in) operating activities
1,606


2,615


1,865

Cash flows from investing activities
 
 
 
 
 
Sales of fixed maturity securities
7,952

 
6,611

 
5,108

Purchases of fixed maturity securities
(7,957
)
 
(7,181
)
 
(4,795
)
Sales of equity securities

 

 
13

Cash received in connection with freestanding derivatives
930

 
438

 
424

Cash paid in connection with freestanding derivatives
(510
)
 
(281
)
 
(465
)
Sales of businesses

 
7

 
17

Expense paid on behalf of subsidiaries
(40
)
 
(54
)
 
(85
)
Receipts on loans to subsidiaries
761

 
832

 
645

Issuances of loans to subsidiaries
(300
)
 
(370
)
 
(1,942
)
Redemption of preferred stock of subsidiary

 

 
300

Returns of capital from subsidiaries
5

 

 
267

Capital contributions to subsidiaries
(667
)
 
(1,262
)
 
(748
)
Net change in short-term investments
110

 
182

 
(265
)
Other, net
2

 
101

 
(49
)
Net cash provided by (used in) investing activities
286


(977
)

(1,575
)
Cash flows from financing activities
 
 
 
 
 
Net change in payables for collateral under derivative transactions
(122
)
 
264

 
85

Long-term debt issued
2,739

 
1,000

 
994

Long-term debt repaid
(1,000
)
 
(1,550
)
 
(750
)
Common stock issued, net of issuance costs

 
1,000

 
1,000

Treasury stock acquired in connection with share repurchases
(1,930
)
 
(1,000
)
 

Preferred stock issued, net of issuance costs
1,483

 

 

Repurchase of preferred stock
(1,460
)
 

 

Preferred stock repurchase premium
(42
)
 

 

Dividends on preferred stock
(116
)
 
(122
)
 
(122
)
Dividends on common stock
(1,653
)
 
(1,499
)
 
(1,119
)
Other, net
187

 
64

 
82

Net cash provided by (used in) financing activities
(1,914
)

(1,843
)

170

Change in cash and cash equivalents
(22
)

(205
)

460

Cash and cash equivalents, beginning of year
443

 
648

 
188

Cash and cash equivalents, end of year
$
421


$
443


$
648


348


MetLife, Inc.
Schedule II
Condensed Financial Information — (continued)
(Parent Company Only)
For the Years Ended December 31, 2015 , 2014 and 2013
(In millions)
 
2015
 
2014
 
2013
Supplemental disclosures of cash flow information
 
 
 
 
 
Net cash paid (received) for:
 
 
 
 
 
Interest
$
1,133

 
$
1,138

 
$
1,100

Income tax
 
 
 
 
 
Amounts paid to (received from) subsidiaries, net
$
(226
)
 
$
(1,247
)
 
$
69

Income tax paid (received) by MetLife, Inc., net
55

 
385

 

Total income tax, net
$
(171
)
 
$
(862
)
 
$
69

Non-cash transactions:
 
 
 
 
 
Dividends from subsidiaries
$

 
$
81

 
$
32

Returns of capital from subsidiaries
$
4,284

 
$
6,308

 
$

Capital contributions to subsidiaries
$
4,120

 
$
6,388

 
$
121

Payables to subsidiaries for future capital contributions
$
120

 
$
445

 
$

Issuance of long-term debt to subsidiary
$

 
$

 
$
350

Issuance of loan to subsidiary
$

 
$

 
$
350

Allocation of interest expense to subsidiary
$
28

 
$
27

 
$
28

Allocation of interest income to subsidiary
$
57

 
$
65

 
$
68



349


MetLife, Inc.
Schedule II
Notes to the Condensed Financial Information
(Parent Company Only)

1. Basis of Presentation
The condensed financial information of MetLife, Inc. (the “Parent Company”) should be read in conjunction with the consolidated financial statements of MetLife, Inc. and its subsidiaries and the notes thereto (the “Consolidated Financial Statements”). These condensed unconsolidated financial statements reflect the results of operations, financial position and cash flows for MetLife, Inc. Investments in subsidiaries are accounted for using the equity method of accounting.
The preparation of these condensed unconsolidated financial statements in conformity with GAAP requires management to adopt accounting policies and make certain estimates and assumptions. The most important of these estimates and assumptions relate to the fair value measurements, the accounting for goodwill and identifiable intangible assets and the provision for potential losses that may arise from litigation and regulatory proceedings and tax audits, which may affect the amounts reported in the condensed unconsolidated financial statements and accompanying notes. Actual results could differ from these estimates.
2. Investment in Subsidiaries
In December 2015, MetLife, Inc. accrued $50 million , $45 million and $25 million in capital contributions payable to the following captive reinsurers: MRV, MRD and MRSC, respectively, which were included in payables to subsidiaries at December 31, 2015. The payables were settled for cash in February 2016. See Note 6.
In December 2014, MetLife, Inc. accrued $350 million and $95 million in capital contributions payable to MRV and MRD, respectively, which were included in payables to subsidiaries at December 31, 2014. The payables were settled for cash in February 2015.
In 2014, in connection with the mergers into MetLife USA of certain of its affiliates and a subsidiary, MetLife, Inc. recorded $5.7 billion in non-cash returns of capital from subsidiaries, including $2.0 billion of Exeter’s preferred stock, and correspondingly recorded $5.7 billion of non-cash capital contributions to subsidiaries. In November 2014, upon the consummation of the mergers, the $2.0 billion of outstanding preferred stock of Exeter was canceled. Consequently, MetLife, Inc.’s preferred capital stock investment was added to its common capital stock investment in MetLife USA.
3. Loans to Subsidiaries
MetLife, Inc. lends funds, as necessary, to its subsidiaries, some of which are regulated, to meet their capital requirements. Payments of interest and principal on surplus notes of regulated subsidiaries, which are subordinate to all other obligations of the issuing company, may be made only with the prior approval of the insurance department of the state of domicile.
In May 2015, American Life issued a $150 million short-term note to MetLife, Inc. which was repaid in June 2015. The short-term note bore interest at six-month LIBOR plus 1.00% .
In April 2015, American Life issued a $150 million short-term note to MetLife, Inc. which was repaid in May 2015. The short-term note bore interest at six-month LIBOR plus 0.875% .
In December 2014, American Life issued a $100 million surplus note to MetLife, Inc. The surplus note bears interest at a fixed rate of 3.17% , payable semi-annually and matures in June 2020 .
In August 2014, American Life issued a $120 million short-term note to MetLife, Inc. which was repaid in December 2014. In February 2014, American Life issued a $150 million short-term note to MetLife, Inc. which was repaid in June 2014. Both short-term notes bore interest at six-month LIBOR plus 0.875% .
In December 2013, MRD issued a $350 million surplus note to MetLife, Inc. due December 2033 . The surplus note bears interest at a fixed rate of 6.00% , payable semi-annually. MetLife, Inc. issued a $350 million senior note to MRD in exchange for the surplus note (see Note 4).

350

MetLife, Inc.
Schedule II
Notes to the Condensed Financial Information — (continued)
(Parent Company Only)

In July 2013, MetLife Ireland Treasury Limited (“MITL”) borrowed the Chilean peso equivalent of $1.5 billion from MetLife, Inc., which was due July 2023 . The loan bore interest at a fixed rate of 8.5% , payable annually. In December, September and June 2015, MITL made loan payments of the Chilean peso equivalent of $77 million , $153 million and $231 million , respectively. In December 2014 and June 2014, MITL made loan payments of the Chilean peso equivalent of $493 million and $69 million , respectively. In December 2013, MITL made a loan payment of the Chilean peso equivalent of $245 million . At December 31, 2015 , the loan was fully paid.
In January 2013, MetLife Bank both drew down and repaid $400 million under an 18-month agreement with MetLife, Inc., which bore interest at a rate of three-month LIBOR plus 1.75% . On October 29, 2013, MetLife, Inc. and MLHL agreed to terminate the agreement. There were no loans outstanding at such date.
Interest income earned on loans to subsidiaries of $91 million , $155 million and $103 million for the years ended December 31, 2015 , 2014 and 2013 , respectively, is included in net investment income.
4. Long-term Debt
Long-term debt outstanding was as follows:
 
Interest Rates (1)
 
 
 
December 31,
 
Range
 
Weighted
Average
 
Maturity
 
2015
 
2014
 
 
 
 
 
 
 
(In millions)
Senior notes — unaffiliated
1.76% - 7.72%
 
5.10%
 
 2016 - 2046
 
$
16,994

 
$
15,317

Senior notes — affiliated
3.54% - 7.44%
 
4.98%
 
2016 - 2033
 
3,100

 
3,100

Other affiliated debt
0.96% - 1.03%
 
0.99%
 
2016
 
214

 
500

Total
 
 
 
 
 
 
$
20,308

 
$
18,917

______________
(1)
Range of interest rates and weighted average interest rates are for the year ended December 31, 2015 .
See Note  12 of the Notes to the Consolidated Financial Statements for information about the issuances of senior notes - unaffiliated.
The aggregate maturities of long-term debt at December 31, 2015 for the next five years and thereafter are $1.7 billion in 2016, $1.0 billion in 2017, $1.0 billion in 2018, $1.8 billion in 2019, $587 million in 2020 and $14.2 billion thereafter.
Other Affiliated Debt
In December 2015, MetLife, Inc. repaid $286 million of affiliated long-term debt to MetLife Exchange Trust I, at maturity, in exchange for a return of capital. The long-term note bore interest at three-month LIBOR plus 0.7% .
Senior Notes – Affiliated
In June 2014, a $500 million senior note payable to MLIC matured and, subsequently, MetLife, Inc. issued a new $500 million senior note to MLIC. This note matures in June 2019 and bears interest at a fixed rate of 3.54% , payable semi-annually.
In December 2013, MetLife, Inc. issued a $350 million senior note to MRD due December 2033 . The senior note bears interest at a fixed rate of 5.10% , payable semi-annually. MRD issued a $350 million surplus note to MetLife, Inc. in exchange for the senior note.

351

MetLife, Inc.
Schedule II
Notes to the Condensed Financial Information — (continued)
(Parent Company Only)
4. Long-term Debt (continued)

Interest Expense
Interest expense was comprised of the following:
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
(In millions)
Long-term debt — unaffiliated
$
833

 
$
809

 
$
790

Long-term debt — affiliated
168

 
173

 
163

Collateral financing arrangements
36

 
35

 
35

Junior subordinated debt securities
134

 
134

 
134

Total
$
1,171

 
$
1,151

 
$
1,122

See Notes 13 and 14 of the Notes to the Consolidated Financial Statements for information about the collateral financing arrangements and junior subordinated debt securities.
5. Support Agreements
MetLife, Inc. is party to various capital support commitments and guarantees with certain of its subsidiaries. Under these arrangements, MetLife, Inc. has agreed to cause each such entity to meet specified capital and surplus levels or has guaranteed certain contractual obligations.
MetLife, Inc., in connection with MRD’s reinsurance of certain universal life and term life risks, entered into capital maintenance agreements pursuant to which MetLife, Inc. agreed, without limitation as to amount, to cause the first and second protected cells of MRD to maintain total adjusted capital equal to or greater than 200% of each such protected cell’s company action level RBC, as defined in state insurance statutes. In addition, MetLife, Inc. entered into an agreement with the Delaware Department of Insurance to increase such capital maintenance threshold to 300% of each such protected cell’s company action level RBC, in the event of specified downgrades in the senior unsecured debt ratings of MetLife, Inc.
MetLife, Inc. guarantees the obligations of its subsidiary, DelAm, under a stop loss reinsurance agreement with RGA Reinsurance (Barbados) Inc. (“RGARe”), pursuant to which RGARe retrocedes to DelAm a portion of the whole life medical insurance business that RGARe assumed from American Life on behalf of its Japan operations. Also, MetLife, Inc. guarantees the obligations of its subsidiary, Missouri Reinsurance, Inc. (“MoRe”), under a retrocession agreement with RGARe, pursuant to which MoRe retrocedes certain group term life insurance liabilities (which retrocession was terminated effective as of January, 2016) and a portion of the closed block liabilities associated with industrial life and ordinary life insurance policies that it assumed from MLIC.
MetLife, Inc. guarantees the obligations of MetLife Reinsurance Company of Bermuda, Ltd. (“MrB”), a Bermuda insurance affiliate and an indirect, wholly-owned subsidiary of MetLife, Inc. under a reinsurance agreement with Mitsui Sumitomo Primary Life Insurance Co., Ltd. (“Mitsui”), a former affiliate that is now an unaffiliated third party, under which MrB reinsures certain variable annuity business written by Mitsui.
MetLife, Inc. guarantees the obligations of MrB in an aggregate amount up to $1.0 billion , under a reinsurance agreement with MetLife Europe Limited (“MEL”), under which MrB reinsured the guaranteed living benefits and guaranteed death benefits associated with certain unit-linked annuity contracts issued by MEL.
MetLife, Inc., in connection with MRV’s reinsurance of certain universal life and term life insurance risks, committed to the Vermont Department of Banking, Insurance, Securities and Health Care Administration to take necessary action to cause the three protected cells of MRV to maintain total adjusted capital in an amount that is equal to or greater than 200% of each such protected cell’s authorized control level RBC, as defined in Vermont state insurance statutes. See Note  12 of the Notes to the Consolidated Financial Statements.

352

MetLife, Inc.
Schedule II
Notes to the Condensed Financial Information — (continued)
(Parent Company Only)
5. Support Agreements (continued)

MetLife, Inc., in connection with the collateral financing arrangement associated with MRC’s reinsurance of a portion of the liabilities associated with the closed block, committed to the South Carolina Department of Insurance to make capital contributions, if necessary, to MRC so that MRC may at all times maintain its total adjusted capital in an amount that is equal to or greater than 200% of the company action level RBC, as defined in South Carolina state insurance statutes as in effect on the date of determination or December 31, 2007, whichever calculation produces the greater capital requirement, or as otherwise required by the South Carolina Department of Insurance. See Note  13 of the Notes to the Consolidated Financial Statements.
MetLife, Inc., in connection with the collateral financing arrangement associated with MRSC’s reinsurance of ULSG, committed to the South Carolina Department of Insurance to take necessary action to cause MRSC to maintain the greater of capital and surplus of $250,000 or total adjusted capital in an amount that is equal to or greater than 100% of authorized control level RBC, as defined in South Carolina state insurance statutes. See Note  13 of the Notes to the Consolidated Financial Statements.
MetLife, Inc. has a net worth maintenance agreement with its insurance subsidiary, First MetLife Investors Insurance Company (“First MetLife”). Under this agreement, as amended, MetLife, Inc. agreed, without limitation as to the amount, to cause First MetLife to have capital and surplus of $10 million , total adjusted capital in an amount that is equal to or greater than 150% of the company action level RBC, as defined by applicable state insurance statutes, and liquidity necessary to enable it to meet its current obligations on a timely basis.
MetLife, Inc. guarantees obligations arising from derivatives of the following subsidiaries: MrB, MetLife International Holdings, LLC and MetLife Worldwide Holdings, LLC. These subsidiaries are exposed to various risks relating to their ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. These subsidiaries use a variety of strategies to manage these risks, including the use of derivatives. Further, all of the subsidiaries’ derivatives are subject to industry standard netting agreements and collateral agreements that limit the unsecured portion of any open derivative position. On a net counterparty basis at December 31, 2015 and 2014 , derivative transactions with positive mark-to-market values (in-the-money) were $583 million and $499 million , respectively, and derivative transactions with negative mark-to-market values (out-of-the-money) were $32 million and $102 million , respectively. To secure the obligations represented by the out of-the-money transactions, the subsidiaries had provided collateral to their counterparties with an estimated fair value of $32 million and $96 million at December 31, 2015 and 2014 , respectively. Accordingly, unsecured derivative liabilities guaranteed by MetLife, Inc. were $0 and $6 million at December 31, 2015 and 2014 , respectively.
MetLife, Inc. also guarantees the obligations of certain of its subsidiaries under committed facilities with third-party banks. See Note  12 of the Notes to the Consolidated Financial Statements.
6. Subsequent Events
On February 16, 2016, MetLife, Inc. paid, in cash, capital contributions of $50 million , $45 million and $25 million to the following captive reinsurers: MRV, MRD and MRSC respectively, which were accrued at December 31, 2015 (see Note 2). On February 24, 2016, MetLife, Inc., paid in cash, a capital contribution of $1.5 billion to MetLife, USA.

353


MetLife, Inc.
Schedule III
Consolidated Supplementary Insurance Information
December 31, 2015 , 2014 and 2013
(In millions)
Segment
 
DAC
and
VOBA
 
Future Policy Benefits,
Other Policy-Related
Balances and
Policyholder Dividend
Obligation
 
Policyholder
Account
Balances
 
Policyholder
Dividends
Payable
 
Unearned 
Premiums (1), (2)
 
Unearned
Revenue (1)
2015
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
$
11,850

 
$
78,626

 
$
63,242

 
$
625

 
$
917

 
$
734

Group, Voluntary & Worksite Benefits
 
365

 
23,052

 
8,193

 

 
1,027

 

Corporate Benefit Funding
 
111

 
50,044

 
62,164

 

 

 
46

Latin America
 
1,880

 
8,455

 
5,880

 

 
549

 
597

Asia
 
8,374

 
34,416

 
49,094

 
88

 
1,859

 
974

EMEA
 
1,532

 
5,837

 
13,172

 
7

 
60

 
336

Corporate & Other
 
18

 
7,487

 
977

 

 
9

 

Total
 
$
24,130

 
$
207,917

 
$
202,722

 
$
720

 
$
4,421

 
$
2,687

2014
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
$
11,963

 
$
77,614

 
$
62,319

 
$
615

 
$
923

 
$
774

Group, Voluntary & Worksite Benefits
 
377

 
22,023

 
8,305

 

 
1,023

 

Corporate Benefit Funding
 
111

 
50,935

 
64,505

 

 

 
42

Latin America
 
2,063

 
9,171

 
6,425

 

 
551

 
651

Asia
 
8,217

 
33,711

 
52,772

 
61

 
1,711

 
924

EMEA
 
1,709

 
6,514

 
14,006

 
8

 
54

 
313

Corporate & Other
 
2

 
7,195

 
962

 

 
10

 

Total
 
$
24,442

 
$
207,163

 
$
209,294

 
$
684

 
$
4,272

 
$
2,704

2013
 
 
 
 
 
 
 
 
 
 
 
 
Retail
 
$
12,882

 
$
73,942

 
$
62,733

 
$
601

 
$
918

 
$
860

Group, Voluntary & Worksite Benefits
 
382

 
20,946

 
8,575

 

 
886

 

Corporate Benefit Funding
 
99

 
50,548

 
62,043

 

 

 
32

Latin America
 
2,227

 
9,050

 
7,177

 

 
499

 
678

Asia
 
9,077

 
35,863

 
57,203

 
65

 
1,895

 
1,035

EMEA
 
2,039

 
7,704

 
13,953

 
9

 
196

 
260

Corporate & Other
 

 
6,874

 
1,201

 

 
9

 

Total
 
$
26,706

 
$
204,927

 
$
212,885

 
$
675

 
$
4,403

 
$
2,865

______________
(1)
Amounts are included within the future policy benefits, other policy-related balances and policyholder dividend obligation column.
(2)
Includes premiums received in advance.

354


MetLife, Inc.
Schedule III
Consolidated Supplementary Insurance Information — (continued)
December 31, 2015 , 2014 and 2013
(In millions)
Segment
 
Premiums and
Universal Life
and Investment-Type
Product Policy Fees
 
Net
Investment
Income
 
Policyholder
Benefits and
Claims and
Interest Credited
to Policyholder
Account Balances
 
Amortization of
DAC and
VOBA
Charged to
Other
Expenses
 
Other
Operating
Expenses (1)
2015
 
 
 
 
 
 
 
 
 
 
Retail
 
$
12,541

 
$
7,359

 
$
11,302

 
$
1,691

 
$
5,101

Group, Voluntary & Worksite Benefits
 
17,098

 
1,727

 
15,320

 
164

 
2,553

Corporate Benefit Funding
 
3,278

 
5,605

 
6,617

 
21

 
496

Latin America
 
4,011

 
1,055

 
3,070

 
303

 
1,227

Asia
 
8,491

 
2,859

 
6,817

 
1,265

 
1,619

EMEA
 
2,455

 
347

 
1,109

 
492

 
998

Corporate & Other
 
178

 
329

 
89

 

 
2,227

Total
 
$
48,052

 
$
19,281

 
$
44,324

 
$
3,936

 
$
14,221

2014
 
 
 
 
 
 
 
 
 
 
Retail
 
$
12,731

 
$
7,430

 
$
11,329

 
$
1,610

 
$
5,006

Group, Voluntary & Worksite Benefits
 
16,695

 
1,694

 
15,053

 
149

 
2,429

Corporate Benefit Funding
 
2,996

 
5,698

 
6,357

 
19

 
488

Latin America
 
4,281

 
1,268

 
3,482

 
334

 
1,346

Asia
 
9,270

 
3,279

 
7,748

 
1,394

 
1,724

EMEA
 
2,832

 
1,238

 
1,978

 
626

 
1,176

Corporate & Other
 
208

 
546

 
98

 

 
2,166

Total
 
$
49,013

 
$
21,153

 
$
46,045

 
$
4,132

 
$
14,335

2013
 
 
 
 
 
 
 
 
 
 
Retail
 
$
11,783

 
$
7,325

 
$
11,460

 
$
850

 
$
5,023

Group, Voluntary & Worksite Benefits
 
15,938

 
1,661

 
14,381

 
140

 
2,240

Corporate Benefit Funding
 
3,106

 
5,711

 
6,604

 
23

 
482

Latin America
 
3,866

 
1,224

 
2,826

 
311

 
1,264

Asia
 
9,525

 
4,363

 
9,200

 
1,527

 
1,830

EMEA
 
2,698

 
1,091

 
1,743

 
699

 
1,037

Corporate & Other
 
209

 
857

 
72

 

 
2,435

Total
 
$
47,125

 
$
22,232

 
$
46,286

 
$
3,550

 
$
14,311

______________
(1)
Includes other expenses and policyholder dividends, excluding amortization of DAC and VOBA charged to other expenses.

355


MetLife, Inc.
Schedule IV
Consolidated Reinsurance
December 31, 2015 , 2014 and 2013
(In millions)
 
 
Gross Amount
 
Ceded
 
Assumed
 
Net Amount
 
% Amount Assumed to Net
2015
 
 
 
 
 
 
 
 
 
 
Life insurance in-force
 
$
4,718,278

 
$
751,199

 
$
602,213

 
$
4,569,292

 
13.2
%
Insurance premium
 
 
 
 
 
 
 

 
 
Life insurance (1)
 
$
23,308

 
$
1,964

 
$
1,221

 
$
22,565

 
5.4
%
Accident & health insurance
 
12,695

 
385

 
220

 
12,530

 
1.8
%
Property & casualty insurance
 
3,513

 
76

 
13

 
3,450

 
0.4
%
Total insurance premium
 
$
39,516

 
$
2,425

 
$
1,454

 
$
38,545

 
3.8
%
2014
 
 
 
 
 
 
 

 
 
Life insurance in-force
 
$
4,572,115

 
$
719,154

 
$
649,032

 
$
4,501,993

 
14.4
%
Insurance premium
 
 
 
 
 
 
 

 
 
Life insurance (1)
 
$
23,575

 
$
2,034

 
$
1,224

 
$
22,765

 
5.4
%
Accident & health insurance
 
13,015

 
340

 
239

 
12,914

 
1.9
%
Property & casualty insurance
 
3,459

 
80

 
9

 
3,388

 
0.3
%
Total insurance premium
 
$
40,049

 
$
2,454

 
$
1,472

 
$
39,067

 
3.8
%
2013
 
 
 
 
 
 
 

 
 
Life insurance in-force
 
$
4,517,797

 
$
763,754

 
$
607,591

 
$
4,361,634

 
13.9
%
Insurance premium
 
 
 
 
 
 
 

 
 
Life insurance (1)
 
$
22,206

 
$
1,862

 
$
1,269

 
$
21,613

 
5.9
%
Accident & health insurance
 
12,957

 
333

 
196

 
12,820

 
1.5
%
Property & casualty insurance
 
3,313

 
79

 
7

 
3,241

 
0.2
%
Total insurance premium
 
$
38,476

 
$
2,274

 
$
1,472

 
$
37,674

 
3.9
%
______________
(1)
Includes annuities with life contingencies.

356


Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.
There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Management of MetLife, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with GAAP.
Management has documented and evaluated the effectiveness of the internal control of the Company at December 31, 2015 pertaining to financial reporting in accordance with the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In the opinion of management, MetLife, Inc. maintained effective internal control over financial reporting at December 31, 2015 .
Deloitte & Touche LLP, an independent registered public accounting firm, has audited the consolidated financial statements and consolidated financial statement schedules included in the Annual Report on Form 10-K for the year ended December 31, 2015 . The Report of the Independent Registered Public Accounting Firm on their audit of the consolidated financial statements and consolidated financial statement schedules is included on page 358.
Report of the Company’s Registered Public Accounting Firm
The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has issued their report on their audit of the effectiveness of internal control over financial reporting which is set forth below.

357

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MetLife, Inc.
New York, New York
We have audited the internal control over financial reporting of MetLife, Inc. and subsidiaries (the “Company”) as of December 31, 2015 , based on criteria established in Internal Control — Integrated Framework ( 2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2015 , of the Company and our report dated February 24, 2016 expressed an unqualified opinion on those consolidated financial statements and financial statement schedules.

/s/ DELOITTE & TOUCHE LLP
New York, New York
February 24, 2016

358

Table of Contents

Item 9B. Other Information
None.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
The information called for by this Item pertaining to Directors is incorporated herein by reference to the sections entitled “Proposal 1 — Election of Directors For a One-Year Term Ending at the 2017 Annual Meeting of Shareholders,” “Corporate Governance — Board and Committee Information” and “Security Ownership of Directors and Executive Officers — Section 16(a) Beneficial Ownership Reporting Compliance” in MetLife, Inc.’s definitive proxy statement for the Annual Meeting of Shareholders to be held on June 14, 2016 , to be filed by MetLife, Inc. with the SEC pursuant to Regulation 14A within 120 days after the year ended December 31, 2015 (the “2016 Proxy Statement”).
The information called for by this Item pertaining to Executive Officers appears in “Business — Executive Officers” in this Annual Report on Form 10-K and “Security Ownership of Directors and Executive Officers — Section 16(a) Beneficial Ownership Reporting Compliance” in the 2016 Proxy Statement.
The Company has adopted the MetLife Financial Management Code of Professional Conduct (the “Financial Management Code”), a “code of ethics” as defined under the rules of the SEC, that applies to MetLife, Inc.’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and all professionals in finance and finance-related departments. In addition, the Company has adopted the Directors’ Code of Business Conduct and Ethics (the “Directors’ Code”) which applies to all members of MetLife, Inc.’s Board of Directors, including the Chief Executive Officer, and the Code of Conduct (together with the Financial Management Code and the Directors’ Code, collectively, the “Ethics Codes”), which applies to all employees of the Company, including MetLife, Inc.’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Ethics Codes are available on the Company’s website at http://www.metlife.com/about/corporate-profile/corporate-governance/corporate-conduct/index.html. The Company intends to satisfy its disclosure obligations under Item 5.05 of Form 8-K by posting information about amendments to, or waivers from a provision of, the Ethics Codes that apply to MetLife, Inc.’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer on the Company’s website at the address given above.
Item 11. Executive Compensation
The information called for by this Item is incorporated herein by reference to the sections entitled “Corporate Governance — Board and Committee Information,” “Corporate Governance — Director Compensation in 2015 ,” “Compensation Committee Report,” “Compensation Discussion and Analysis,” “Summary Compensation Table,” “Grants of Plan-Based Awards in 2015 ,” “Outstanding Equity Awards at 2015 Fiscal Year-End,” “Option Exercises and Stock Vested in 2015 ,” “Pension Benefits at 2015 Fiscal Year-End,” “Nonqualified Deferred Compensation at 2015 Fiscal Year-End” and “Potential Payments upon Termination or Change-in-Control at 2015 Fiscal Year-End” in the 2016 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information called for by this Item pertaining to ownership of shares of MetLife, Inc.’s common stock (“Shares”) is incorporated herein by reference to the sections entitled “Security Ownership of Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners” in the 2016 Proxy Statement.

359

Table of Contents

The following table provides information, at December 31, 2015 , regarding MetLife, Inc.’s equity compensation plans:
Equity Compensation Plan Information at December 31, 2015
 
 
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (2)
 
Weighted-average Exercise Price of Outstanding Options, Warrants and Rights (3)
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))(4)
Plan Category
 
(a)
 
(b)
 
(c)
Equity compensation plans approved by security holders (1)
 
35,354,500

 
$
44.50

 
31,478,119

Equity compensation plans not approved by security holders
 
None

 

 
None

Total
 
35,354,500

 
$
44.50

 
31,478,119

______________
(1)
Includes the MetLife, Inc. 2005 Stock and Incentive Compensation Plan (the “2005 Stock Plan”), the MetLife, Inc. 2005 Non-Management Director Stock Compensation Plan (the “2005 Director Stock Plan”), the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “2015 Stock Plan”), and the MetLife, Inc. 2015 Non-Management Director Stock Compensation Plan (the “2015 Director Stock Plan”), which were approved by MetLife, Inc. security holders.
(2)
Column (a) reflects the following items outstanding as of December 31, 2015 :
Stock Options
23,506,764

Restricted Stock Units
3,078,959

Performance Shares (assuming future payout at maximum performance factor)
6,837,555

Deferred Shares
1,931,222

Shares that will or may be issued
35,354,500

Stock Options, Restricted Stock Units, and Performance Shares were awarded under the 2005 Stock Plan and 2015 Stock Plan.
The maximum performance factor for Performance Shares granted in 2013, 2014, and 2015 was 175%. The number of Performance Shares outstanding as of December 31, 2015 at target (100%) performance factor was 3,907,174.
Deferred Shares are Shares that are covered by awards that have become payable under any plan, but the issuance of which has been deferred.
For a general description of how the number of Shares paid out on account of Performance Shares and Restricted Stock Units is determined, and the vesting periods applicable to Performance Shares and Restricted Stock Units, see Note  16 of the Notes to the Consolidated Financial Statements.
(3)
Column (b) reflects the weighted average exercise price of all Stock Options under any plan that, as of December 31, 2015 , had been granted but not forfeited, expired, or exercised. Performance Shares, Restricted Stock Units, and Deferred Shares are not included in determining the weighted average in column (b) because they have no exercise price.

360

Table of Contents

(4)
Column (c) reflects the following items outstanding as of December 31, 2015 :
Shares authorized for issuance under the 2015 Stock Plan at its effective date, January 1, 2015    
11,750,000

Shares remaining authorized for issuance under the 2005 Stock Plan that were not covered by awards, including shares previously covered by awards but once again available due to forfeiture of awards, as of January 1, 2015, the effective date of the 2015 Stock Plan
18,023,959

Shares authorized for issuance under the 2015 Director Stock Plan as of January 1, 2015, the effective date of the 2015 Director Stock Plan (equals shares remaining authorized for issuance under the 2005 Director Stock Plan that were not covered by awards, including shares previously covered by awards but once again available due to forfeiture of awards)
1,642,208

Shares utilized under the 2005 Stock Plan or 2015 Stock Plan that were recovered from January 1, 2015 through December 31, 2015 due to (i) termination of the award by expiration, forfeiture, cancellation, lapse, or otherwise without the issuance of Shares; (ii) settlement of the award in cash either in lieu of Shares or otherwise; (iii) exchange of the award for awards not involving Shares; (iv) payment of the exercise price of a Stock Option, or the tax withholding requirements with respect to an award, satisfied by tendering Shares to MetLife, Inc. (by either actual delivery or by attestation); (v) satisfaction of tax withholding requirements with respect to an award satisfied by MetLife, Inc. withholding Shares otherwise issuable; and (vi) payout of the 2012-2014 Performance Shares in 2015 at a performance factor of 101% rather than the maximum performance factor of 175%
4,475,737

Less: Shares covered by awards granted under the 2015 Stock Plan and 2015 Director Stock Plan since each became effective on January 1, 2015, including Performance Shares assuming future payout at maximum performance factor, and Shares covered by imputed reinvested dividends credited in 2015 on Deferred Shares  
(4,413,785
)
Shares remaining available for future issuance under the 2015 Stock Plan and 2015 Director Stock Plan
31,478,119

Each Share that will or may be issued in connection with awards granted under the MetLife, Inc. 2005 Stock Plan other than Stock Options or Stock Appreciation Rights (such as Shares payable on account of Performance Shares or Restricted Stock Units) reduces the number of Shares remaining for issuance under that plan, or a successor plan, by 1.179. Each Share that will or may be issued in connection with a Stock Option or Stock Appreciation Right granted under the 2005 Stock and Incentive Plan reduces the number of Shares remaining for issuance under the 2005 Stock and Incentive Plan, or a successor plan, by 1.0.
Each Share that will or may be issued under the 2005 Director Stock Plan, 2015 Stock Plan or 2015 Director Stock Plan reduces the number of Shares remaining for issuance under that plan by one.
Under both the 2015 Stock Plan and the 2015 Director Stock Plan, in the event of a corporate event or transaction (including, but not limited to, a change in the Shares or the capitalization of MetLife) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of MetLife, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of MetLife, or any similar corporate event or transaction, the appropriate committee of the Board of Directors of MetLife, in order to prevent dilution or enlargement of participants’ rights under the applicable plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under that plan and shall adjust the number and kind of Shares subject to outstanding awards. Any Shares related to awards under either plan which: (i) terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of Shares; (ii) are settled in cash either in lieu of Shares or otherwise; or (iii) are exchanged with the appropriate committee’s permission for awards not involving Shares, are available again for grant under the applicable plan. If the option price of any Stock Option granted under either plan or the tax withholding requirements with respect to any award granted under either plan is satisfied by tendering Shares to MetLife (by either actual delivery or by attestation), or if a Stock Appreciation Right is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for issuance under that plan. The maximum number of Shares available for issuance under either plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock or Restricted Stock Units.
For a description of the kinds of awards that may be made under the 2005 Stock and Incentive Plan, 2005 Director Stock Plan, 2015 Stock Plan, and 2015 Director Stock Plan, see Note  16 of the Notes to the Consolidated Financial Statements.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information called for by this Item is incorporated herein by reference to the sections entitled “Corporate Governance — Procedures for Reviewing Related Person Transactions,” “Corporate Governance — Related Person Transactions” and “Corporate Governance — Board and Committee Information — Composition and Independence of the Board of Directors” in the 2016 Proxy Statement.

361

Table of Contents

Item 14. Principal Accountant Fees and Services
The information called for by this item is incorporated herein by reference to the section entitled “Proposal 3 — Ratification of Appointment of the Independent Auditor” in the 2016 Proxy Statement.
Part IV
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this report:
1. Financial Statements
The financial statements are listed in the Index to Consolidated Financial Statements, Notes and Schedules on page 187.
2. Financial Statement Schedules
The financial statement schedules are listed in the Index to Consolidated Financial Statements, Notes and Schedules on page 187.
3. Exhibits
The exhibits are listed in the Exhibit Index which begins on page E-1.


362

Table of Contents

Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
February 24, 2016
METLIFE, INC.
 
 
 
By
 
/s/ Steven A. Kandarian
 
 
Name: Steven A. Kandarian
 
 
Title: Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
 
Title
 
Date
 
 
 
 
 
 
 
 
 
 
/s/ Cheryl W. Grisé
 
Director
 
February 24, 2016
Cheryl W. Grisé
 
 
 
 
 
 
 
 
 
 
 
Director
 
 
Carlos M. Gutierrez
 
 
 
 
 
 
 
 
 
/s/ R. Glenn Hubbard
 
Director
 
February 24, 2016
R. Glenn Hubbard
 
 
 
 
 
 
 
 
 
/s/ Alfred F. Kelly, Jr.
 
Director
 
February 24, 2016
Alfred F. Kelly, Jr.
 
 
 
 
 
 
 
 
 
/s/ Edward J. Kelly, III
 
Director
 
February 24, 2016
Edward J. Kelly, III
 
 
 
 
 
 
 
 
 
/s/ William E. Kennard
 
Director
 
February 24, 2016
 William E. Kennard
 
 
 
 
 
 
 
 
 
/s/ James M. Kilts
 
Director
 
February 24, 2016
James M. Kilts
 
 
 
 
 
 
 
 
 
/s/ Catherine R. Kinney
 
Director
 
February 24, 2016
Catherine R. Kinney
 
 
 
 
 
 
 
 
 
/s/ Denise M. Morrison
 
Director
 
February 24, 2016
Denise M. Morrison
 
 
 
 
 
 
 
 
 
/s/ Kenton J. Sicchitano
 
Director
 
February 24, 2016
Kenton J. Sicchitano
 
 
 
 
 
 
 
 
 
/s/ Lulu C. Wang
 
Director
 
February 24, 2016
Lulu C. Wang
 
 
 
 

363

Table of Contents

Signature
 
Title
 
Date
 
 
 
 
 
/s/ Steven A. Kandarian
 
Chairman of the Board, President and
 
February 24, 2016
Steven A. Kandarian
 
Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ John C. R. Hele
 
Executive Vice President and
 
February 24, 2016
John C. R. Hele
 
Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
 
 
 
/s/ Peter M. Carlson
 
Executive Vice President and
 
February 24, 2016
Peter M. Carlson
 
Chief Accounting Officer
(Principal Accounting Officer)
 
 

364

Table of Contents

Exhibit Index
(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about MetLife, Inc., its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about MetLife, Inc., its subsidiaries and affiliates may be found elsewhere in this Annual Report on Form 10-K and MetLife, Inc.’s other public filings, which are available without charge through the SEC’s website at www.sec.gov.)
Exhibit No.
 
Description
 
 
 
2.1
 
Plan of Reorganization. (Incorporated by reference to Exhibit 2.1 to MetLife, Inc.'s Registration Statement on Form S-1 (No. 333-91517) (the "S-1 Registration Statement")).
 
 
 
2.2
 
Amendment to Plan of Reorganization, dated as of March 9, 2000. (Incorporated by reference to Exhibit 2.2 to the S-1 Registration Statement).
 
 
 
3.1
 
Amended and Restated Certificate of Incorporation of MetLife, Inc. (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the "2011 Annual Report")).
 
 
 
3.2
 
Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of MetLife, Inc., filed with the Secretary of State of Delaware on April 7, 2000. (Incorporated by reference to Exhibit 3.2 to the 2011 Annual Report).
 
 
 
3.3
 
Certificate of Designations of Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc., filed with the Secretary of State of Delaware on June 10, 2005. (Incorporated by reference to Exhibit 3.3 to the 2011 Annual Report).
 
 
 
3.4
 
Certificate of Amendment of Amended and Restated Certificate of Incorporation of MetLife, Inc., dated April 29, 2011. (Incorporated by reference to Exhibit 3.6 to the 2011 Annual Report).
 
 
 
3.5
 
Certificate of Retirement of Series B Contingent Convertible Junior Participating Non-Cumulative Perpetual Preferred Stock of MetLife, Inc., filed with the Secretary of State of Delaware on November 5, 2013. (Incorporated by reference to Exhibit 3.6 to MetLife, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013).
 
 
 
3.6
 
Certificate of Amendment of Amended and Restated Certificate of Incorporation of MetLife, Inc., dated April 29, 2015. (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.'s Current Report on Form 8-K dated April 30, 2015).
 
 
 
3.7
 
Certificate of Designations of 5.250% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C, of MetLife, Inc., filed with the Secretary of State of Delaware on May 28, 2015. (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.’s Current Report on Form 8‑K dated May 28, 2015).
 
 
 
3.8
 
Certificate of Elimination of 6.500% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc., filed with the Secretary of State of Delaware on November 3, 2015. (Incorporated by reference to Exhibit 3.7 to MetLife, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).*
 
 
 
3.9
 
Amended and Restated By-Laws of MetLife, Inc., effective April 29, 2015. (Incorporated by reference to Exhibit 3.2 to MetLife, Inc.'s Current Report on Form 8-K dated April 30, 2015).
 
 
 
4.1
 
Form of Certificate for Common Stock, par value $0.01 per share. (Incorporated by reference to Exhibit 4.1 to the S-1 Registration Statement).
 
 
 
4.2
 
Certificate of Designations of Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc., filed with the Secretary of State of Delaware on June 10, 2005. (See Exhibit 3.3 above).
 
 
 
4.3
 
Form of Stock Certificate, Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc. (Incorporated by reference to Exhibit 99.6 to MetLife, Inc.'s Registration Statement on Form 8-A filed on June 10, 2005).
 
 
 
4.4
 
Certificate of Designations of 5.250% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C, of MetLife, Inc., filed with the Secretary of State of Delaware on May 28, 2015. (See Exhibit 3.7 above).
 
 
 
4.5
 
Form of Stock Certificate, 5.250% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series C, of MetLife, Inc. (Incorporated by reference to Exhibit 4.2 to MetLife, Inc.'s Current Report on Form 8-K dated May 28, 2015).
 
 
 
 
 
Certain instruments defining the rights of holders of long-term debt of MetLife, Inc. and its consolidated subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. MetLife, Inc. hereby agrees to furnish to the Securities and Exchange Commission, upon request, copies of such instruments.

E-1

Table of Contents

Exhibit No.
 
Description
 
 
 
10.1
 
MetLife Executive Severance Plan (as amended and restated, effective June 14, 2010). (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the "2014 Annual Report")). *
 
 
 
10.2
 
Separation Agreement, Waiver and General Release, dated August 17, 2009, between Lisa M. Weber and MetLife Group, Inc. (Incorporated by reference to Exhibit 10.2 to the 2014 Annual Report).*
 
 
 
10.3
 
Agreement between MetLife, Inc. and William J. Mullaney, which became final on December 24, 2011. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.'s Current Report on Form 8-K dated December 29, 2011).*
 
 
 
10.4
 
Offer Letter, dated March 25, 2009, between American Life Insurance Company and Michel Khalaf. (Incorporated by reference to Exhibit 10.11 to the 2011 Annual Report).*
 
 
 
10.5
 
Adjustment of certain compensation items for Michel Khalaf, effective July 1, 2012. (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).*
 
 
 
10.6
 
Employment Agreement between Christopher G. Townsend and MetLife Asia Pacific Limited, dated May 11, 2012. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.'s Current Report on Form 8-K dated May 16, 2012 (the "May 16, 2012 Form 8-K")).*
 
 
 
10.7
 
Settlement Agreement and General Release, dated April 2, 2014, between MetLife Group, Inc. and Beth Hirschhorn. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014)*
 
 
 
10.8
 
Sign-On Letter, dated December 9, 2014, from MetLife, Inc. to Esther Lee. (Incorporated by reference to Exhibit 10.17 to the 2014 Annual Report).*
 
 
 
10.9
 
Letter Agreement dated June 11, 2015 between MetLife, Inc. and Christopher Townsend. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report on Form 8-K dated June 15, 2015). *
 
 
 
10.10
 
Tax Equalization Agreement dated June 10, 2015 between MetLife, Inc. and Michel Khalaf. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).*
 
 
 
10.11
 
Separation Agreement, Waiver and General Release, dated July 30, 2015, between MetLife Group, Inc. and William J. Wheeler. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).*

 
 
 
10.12
 
Agreement to Protect Corporate Property executed by William J. Wheeler on June 21, 2001. (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015).*
 
 
 
10.13
 
Agreement to Protect Corporate Property, dated January 1, 2015, executed by Esther S. Lee.*
 
 
 
10.14
 
Form of Agreement to Protect Corporate Property executed by Steven A. Kandarian, Steven J. Goulart, and Maria M. Morris.*
 
 
 
10.15
 
Form of Agreement to Protect Corporate Property executed by Ricardo A. Anzaldua, John C. R. Hele, Frans Hijkoop, Michele A. Khalaf, and Martine J. Lippert.*
 
 
 
10.16
 
MetLife, Inc. 2000 Directors Stock Plan, as amended and restated March 28, 2000. (Incorporated by reference to Exhibit 10.8 to the S-1 Registration Statement).*
 
 
 
10.17
 
MetLife, Inc. 2000 Directors Stock Plan, as amended, effective February 8, 2002. (Incorporated by reference to Exhibit 10.20 to the 2012 Annual Report).*
 
 
 
10.18
 
MetLife, Inc. 2005 Stock and Incentive Compensation Plan, effective April 15, 2005 (the "2005 SIC Plan"). (Incorporated by reference to Exhibit 10.24 to the 2014 Annual Report).*
 
 
 
10.19
 
Form of Management Stock Option Agreement under the 2005 SIC Plan (effective as of April 25, 2007). (Incorporated by reference to Exhibit 10.24 to the 2012 Annual Report). *
 
 
 
10.20
 
Amendment to Stock Option Agreements under the 2005 SIC Plan (effective as of April 25, 2007). (Incorporated by reference to Exhibit 10.25 to the 2012 Annual Report).*
 
 
 
10.21
 
Form of Management Stock Option Agreement under the 2005 SIC Plan (effective December 15, 2009). (Incorporated by reference to Exhibit 10.28 to the 2014 Annual Report).*
 
 
 
10.22
 
Form of Management Stock Option Agreement under the 2005 SIC Plan. (Incorporated by reference to Exhibit 10.29 to the 2014 Annual Report).*
 
 
 
10.23
 
Form of Stock Option Agreement under the 2005 SIC Plan (effective February 11, 2013). (Incorporated by reference to Exhibit 10.9 to MetLife, Inc.'s Current Report on Form 8-K dated February 15, 2013 (the "February 15, 2013 Form 8-K")).*
 
 
 
10.24
 
Form of Stock Option Agreement (Three-Year "Cliff" Exercisability) under the 2005 SIC Plan (effective February 11, 2013). (Incorporated by reference to Exhibit 10.10 to the February 15, 2013 Form 8-K).*
 
 
 
10.25
 
Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 11, 2007). (Incorporated by reference to Exhibit 10.30 to the 2012 Annual Report).*
 
 
 
10.26
 
Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 15, 2009). (Incorporated by reference to Exhibit 10.33 to the 2014 Annual Report).*
 
 
 
10.27
 
Form of Restricted Stock Unit Agreement (effective February 11, 2013). (Incorporated by reference to Exhibit 10.4 to the February 15, 2013 Form 8-K).*

E-2

Table of Contents

Exhibit No.
 
Description
 
 
 
10.28
 
Form of Restricted Stock Unit Agreement (Three-Year "Cliff" Period of Restriction; No Code 162(m) Goals) (effective February 11, 2013). (Incorporated by reference to Exhibit 10.5 to the February 15, 2013 Form 8-K).*
 
 
 
10.29
 
Form of Management Performance Share Agreement under the 2005 SIC Plan (effective December 14, 2010).*
 
 
 
10.30
 
Form of Performance Share Agreement (effective February 11, 2013). (Incorporated by reference to Exhibit 10.1 to the February 15, 2013 Form 8-K).*
 
 
 
10.31
 
MetLife International Performance Unit Incentive Plan (as amended and restated effective February 11, 2013). (Incorporated by reference to Exhibit 10.2 to the February 15, 2013 Form 8-K).*
 
 
 
10.32
 
Form of Performance Unit Agreement (effective February 11, 2013). (Incorporated by reference to Exhibit 10.3 to the February 15, 2013 Form 8-K).*
 
 
 
10.33
 
MetLife International Unit Option Incentive Plan, dated July 21, 2011 (as amended and restated effective February 23, 2011). (Incorporated by reference to Exhibit 10.48 to the 2011 Annual Report).*
 
 
 
10.34
 
Form of Unit Option Agreement under the MetLife International Unit Option Incentive Plan (effective February 23, 2011). (Incorporated by reference to Exhibit 10.49 to the 2011 Annual Report).*
 
 
 
10.35
 
MetLife International Unit Option Incentive Plan (as amended and restated December 3, 2012). (Incorporated by reference to Exhibit 10.11 to the February 15, 2013 Form 8-K).*
 
 
 
10.36
 
Form of Unit Option Agreement (effective February 11, 2013). (Incorporated by reference to Exhibit 10.12 to the February 15, 2013 Form 8-K).*
 
 
 
10.37
 
Form of Unit Option Agreement (Three-Year "Cliff" Exercisability) (effective February 11, 2013). (Incorporated by reference to Exhibit 10.13 to the February 15, 2013 Form 8-K).*
 
 
 
10.38
 
MetLife International Restricted Unit Incentive Plan (as amended and restated effective February 11, 2013). (Incorporated by reference to Exhibit 10.6 to the February 15, 2013 Form 8-K).*
 
 
 
10.39
 
Form of Restricted Unit Agreement (effective February 11, 2013). (Incorporated by reference to Exhibit 10.7 to the February 15, 2013 Form 8-K).*
 
 
 
10.40
 
Form of Restricted Unit Agreement (Three-Year "Cliff" Period of Restriction; No Code 162(m) Goals) (effective February 11, 2013). (Incorporated by reference to Exhibit 10.8 to the February 15, 2013 Form 8-K).*
 
 
 
10.41
 
MetLife Policyholder Trust Agreement. (Incorporated by reference to Exhibit 10.12 to the S-1 Registration Statement).
 
 
 
10.42
 
Amendment to MetLife Policyholder Trust Agreement. (Incorporated by reference to Exhibit 10.62 to the 2012 Annual Report).
 
 
 
10.43
 
Five-Year Credit Agreement, dated as of May 30, 2014, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and the other parties signatory thereto, amending and restating (i) the Five-Year Credit Agreement, dated as of August 12, 2011, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and the other parties signatory thereto and (ii) the Five-Year Credit Agreement dated as of September 13, 2012 among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and the other parties signatory thereto. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report on Form 8-K dated June 4, 2014).
 
 
 
10.44
 
Resolutions of the MetLife, Inc. Board of Directors (adopted February 9, 2015) regarding the selection of performance measures for 2015 awards under the AVIP.*
 
 
 
10.45
 
Resolutions of the MetLife, Inc., Board of Directors (adopted September 13, 2011) regarding non-management director compensation. (Incorporated by reference to Exhibit 10.4 to the Third Quarter 2011 10-Q).*
 
 
 
10.46
 
Metropolitan Life Auxiliary Savings and Investment Plan (as amended and restated, effective January 1, 2008). (Incorporated by reference to Exhibit 10.72 to the 2012 Annual Report).*
 
 
 
10.47
 
Amendment 1 to the Metropolitan Life Auxiliary Savings and Investment Plan (as amended and restated, effective January 1, 2008). (Incorporated by reference to Exhibit 10.74 to the 2014 Annual Report).*
 
 
 
10.48
 
Amendment Number 2 to the Metropolitan Life Auxiliary Savings and Investment Plan (Amended and Restated Effective January 1, 2008).*
 
 
 
10.49
 
Amendment Number 3 to the Metropolitan Life Auxiliary Savings and Investment Plan (Amended and Restated Effective January 1, 2008). (Incorporated by reference to Exhibit 10.75 to the 2012 Annual Report).*
 
 
 
10.50
 
Amendment Number 4 to the Metropolitan Life Auxiliary Savings and Investment Plan (Amended and Restated Effective January 1, 2008). (Incorporated by reference to Exhibit 10.77 to the 2013 Annual Report).*
 
 
 
10.51
 
MetLife Deferred Compensation Plan for Officers, as amended and restated, effective November 1, 2003. (Incorporated by reference to Exhibit 10.78 to the 2013 Annual Report).*
 
 
 
10.52
 
Amendment Number One to the MetLife Deferred Compensation Plan for Officers (as amended and restated as of November 1, 2003), dated May 4, 2005.*
 
 
 
10.53
 
Amendment Number Two to the MetLife Deferred Compensation Plan for Officers (as amended and restated as of November 1, 2003, effective December 14, 2005).*
 
 
 
10.54
 
Amendment Number Three to the MetLife Deferred Compensation Plan for Officers (as amended and restated as of November 1, 2003, effective February 26, 2007). (Incorporated by reference to Exhibit 10.66 to the 2011 Annual Report).*
 
 
 

E-3

Table of Contents

Exhibit No.
 
Description
 
 
 
10.55
 
MetLife Leadership Deferred Compensation Plan, dated November 2, 2006 (as amended and restated, effective with respect to salary and cash incentive compensation, January 1, 2005, and with respect to stock compensation, April 15, 2005). (Incorporated by reference to Exhibit 10.67 to the 2011 Annual Report).*
 
 
 
10.56
 
Amendment Number One to the MetLife Leadership Deferred Compensation Plan, dated December 13, 2007 (effective as of December 31, 2007). (Incorporated by reference to Exhibit 10.81 to the 2012 Annual Report).*
 
 
 
10.57
 
Amendment Number Two to the MetLife Leadership Deferred Compensation Plan, dated December 11, 2008 (effective December 31, 2008). (Incorporated by reference to Exhibit 10.84 to the 2013 Annual Report).*
 
 
 
10.58
 
Amendment Number Three to the MetLife Leadership Deferred Compensation Plan, dated December 11, 2009 (effective January 1, 2010). (Incorporated by reference to Exhibit 10.85 to the 2014 Annual Report).*
 
 
 
10.59
 
Amendment Number Four to the MetLife Leadership Deferred Compensation Plan, dated December 11, 2009 (effective December 31, 2009). (Incorporated by reference to Exhibit 10.86 to the 2014 Annual Report).*
 
 
 
10.60
 
Amendment Number Five to the MetLife Leadership Deferred Compensation Plan, dated December 11, 2009 (effective January 1, 2011).*
 
 
 
10.61
 
Amendment Number Nine to the MetLife Leadership Deferred Compensation Plan, dated December 30, 2014 (effective January 1, 2015). (Incorporated by reference to Exhibit 10.88 to the 2014 Annual Report).*
 
 
 
10.62
 
MetLife Deferred Compensation Plan for Outside Directors (effective December 9, 2003). (Incorporated by reference to Exhibit 10.88 to the 2013 Annual Report).*
 
 
 
10.63
 
Amendment Number One to the MetLife Deferred Compensation Plan for Outside Directors (as amended and restated as of December 9, 2003, effective February 26, 2007). (Incorporated by reference to Exhibit 10.74 to the 2011 Annual Report).*
 
 
 
10.64
 
MetLife Non-Management Director Deferred Compensation Plan, dated December 19, 2012 (as amended and restated, effective January 1, 2005).*
 
 
 
10.65
 
MetLife, Inc. Director Indemnity Plan (dated and effective July 22, 2008). (Incorporated by reference to Exhibit 10.94 to the 2013 Annual Report).*
 
 
 
10.66
 
MetLife Auxiliary Pension Plan, dated August 7, 2006 (as amended and restated, effective June 30, 2006). (Incorporated by reference to Exhibit 10.80 to the 2011 Annual Report).*
 
 
 
10.67
 
MetLife Auxiliary Pension Plan, dated December 21, 2006 (amending and restating Part I thereof, effective January 1, 2007). (Incorporated by reference to Exhibit 10.81 to the 2011 Annual Report).*
 
 
 
10.68
 
MetLife Auxiliary Pension Plan, dated December 21, 2007 (amending and restating Part I thereof, effective January 1, 2008). (Incorporated by reference to Exhibit 10.95 to the 2012 Annual Report).*
 
 
 
10.69
 
Amendment #1 to the MetLife Auxiliary Pension Plan (as amended and restated, effective January 1, 2008), dated October 24, 2008 (effective October 1, 2008). (Incorporated by reference to Exhibit 10.98 to the 2013 Annual Report).*
 
 
 
10.70
 
Amendment Number Two to the MetLife Auxiliary Pension Plan (as amended and restated, effective January 1, 2008), dated December 12, 2008 (effective December 31, 2008). (Incorporated by reference to Exhibit 10.99 to the 2013 Annual Report).*
 
 
 
10.71
 
Amendment Number Three to the MetLife Auxiliary Pension Plan (as amended and restated, effective January 1, 2008) dated March 25, 2009 (effective January 1, 2009).*
 
 
 
10.72
 
Amendment Number Four to the MetLife Auxiliary Pension Plan (as amended and restated, effective January 1, 2008), dated December 16, 2009 (effective January 1, 2010). (Incorporated by reference to Exhibit 10.102 to the 2014 Annual Report). *
 
 
 
10.73
 
Amendment Number Five to the MetLife Auxiliary Pension Plan (as amended and restated, effective January 1, 2008) dated December 21, 2010 (effective January 1, 2010).*
 
 
 
10.74
 
Amendment Number Six to the MetLife Auxiliary Pension Plan (as amended and restated, effective January 1, 2008) dated December 20, 2012 (effective January 1, 2012). (Incorporated by reference to Exhibit 10.101 to the 2012 Annual Report).*
 
 
 
10.75
 
Alico Overseas Pension Plan, dated January 2009. (Incorporated by reference to Exhibit 10.88 to the 2011 Annual Report).*
 
 
 
10.76
 
Amendment Number One to the Alico Overseas Pension Plan (effective November 1, 2010), dated December 20, 2010. (Incorporated by reference to Exhibit 10.89 to the 2011 Annual Report).*
 
 
 
10.77
 
Amendment Number Two to the Alico Overseas Pension Plan (effective as of November 1, 2010), dated December 13, 2011. (Incorporated by reference to Exhibit 10.90 to the 2011 Annual Report).*
 
 
 
10.78
 
Amendment Number Three to the Alico Overseas Pension Plan, dated May 1, 2012 (effective January 1, 2012). (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.'s Current Report on Form 8-K dated May 4, 2012).*
 
 
 
10.79
 
Member's Explanatory Handbook for the Metropolitan Life Insurance Company of Hong Kong Limited Healthcare Plan (2014).*
 
 
 
10.80
 
MetLife Plan for Transition Assistance for Officers, dated April 21, 2014 (as amended and restated, effective April 1, 2014 (the "MPTA")). (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014).*
 
 
 
10.81
 
Amendment Number One to the MPTA, dated December 30, 2014 (effective January 1, 2015). (Incorporated by reference to Exhibit 10.111 to the 2014 Annual Report).*

E-4

Table of Contents

Exhibit No.
 
Description
 
 
 
10.82
 
MetLife, Inc. 2015 Non-Management Director Stock Compensation Plan, effective January 1, 2015. (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198141).*
 
 
 
10.83
 
MetLife, Inc. 2015 Stock and Incentive Plan, effective January 1, 2015 (the “2015 SIC Plan”). (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198145)).*
 
 
 
10.84
 
Form of Performance Share Agreement under the 2015 SIC Plan. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report on Form 8-K dated December 11, 2014 (the “December 11, 2014 Form 8-K”).*
 
 
 
10.85
 
Form of Performance Unit Agreement under the 2015 SIC Plan. (Incorporated by reference to Exhibit 10.2 to the December 11, 2014 Form 8-K).*
 
 
 
10.86
 
Form of Restricted Stock Unit Agreement (Ratable Period of Restriction Ends in Thirds; Code Section 162(m) Goals) under the 2015 SIC Plan (Incorporated by reference to Exhibit 10.3 to the December 11, 2014 Form 8-K).*
 
 
 
10.87
 
Form of Restricted Stock Unit Agreement (Three-Year “Cliff” Period of Restriction; No Code Section 162(m) Goals) (Incorporated by reference to Exhibit 10.4 to the December 11, 2014 Form 8-K).*
 
 
 
10.88
 
Form of Restricted Unit Agreement (Ratable Period of Restriction Ends in Thirds; Code Section 162(m) Goals) (Incorporated by reference to Exhibit 10.5 to the December 11, 2014 Form 8-K).*
 
 
 
10.89
 
Form of Restricted Unit Agreement (Three-Year “Cliff” Period of Restriction; No Code Section 162(m) Goals) (Incorporated by reference to Exhibit 10.6 to the December 11, 2014 Form 8-K).*
 
 
 
10.90
 
Form of Stock Option Agreement (Ratable Exercisability in Thirds) (Incorporated by reference to Exhibit 10.7 to the December 11, 2014 Form 8-K).*
 
 
 
10.91
 
Form of Stock Option Agreement (Three-Year “Cliff” Exercisability) (Incorporated by reference to Exhibit 10.8 to the December 11, 2014 Form 8-K).*
 
 
 
10.92
 
Form of Unit Option Agreement (Ratable Exercisability in Thirds) (Incorporated by reference to Exhibit 10.9 to the December 11, 2014 Form 8-K).*
 
 
 
10.93
 
Form of Unit Option Agreement (Three-Year “Cliff” Exercisability) (Incorporated by reference to Exhibit 10.10 to the December 11, 2014 Form 8-K).*
 
 
 
10.94
 
MetLife Annual Variable Incentive Plan (effective as amended and restated January 1, 2015) (Incorporated by reference to Exhibit 10.11 to the December 11, 2014 Form 8-K).*
 
 
 
10.95
 
Form of Performance Share Agreement under the 2015 SIC Plan, effective January 1, 2016.*
 
 
 
10.96
 
Form of Performance Unit Agreement under the 2015 SIC Plan, effective January 1, 2016.*
 
 
 
10.97
 
Form of Restricted Stock Unit Agreement (Ratable Period of Restriction Ends in Thirds; Code Section 162(m) Goals) under the 2015 SIC Plan, effective January 1, 2016.*
 
 
 
10.98
 
Form of Restricted Stock Unit Agreement (Three-Year “Cliff” Period of Restriction; No Code Section 162(m) Goals), effective January 1, 2016.*
 
 
 
10.99
 
Form of Restricted Unit Agreement (Ratable Period of Restriction Ends in Thirds; Code Section 162(m) Goals), effective January 1, 2016.*
 
 
 
10.100
 
Form of Restricted Unit Agreement (Three-Year “Cliff” Period of Restriction; No Code Section 162(m) Goals), effective January 1, 2016.*
 
 
 
10.101
 
Form of Stock Option Agreement (Ratable Exercisability in Thirds), effective January 1, 2016.*
 
 
 
10.102
 
Form of Stock Option Agreement (Three-Year “Cliff” Exercisability), effective January 1, 2016.*
 
 
 
10.103
 
Form of Unit Option Agreement (Ratable Exercisability in Thirds), effective January 1, 2016.*
 
 
 
10.104
 
Form of Unit Option Agreement (Three-Year “Cliff” Exercisability), effective January 1, 2016.*
 
 
 
10.105
 
Award Agreement Supplement, effective January 1, 2016.*
 
 
 
10.106
 
MetLife Individual Distribution Sales Deferred Compensation Plan, effective January 1, 2010. (Incorporated by reference to Exhibit 4.1 to MetLife, Inc. ’s Registration Statement on Form S-8 (No. 333-198143)).*
 
 
 
10.107
 
Amendment Number One to the MetLife Individual Distribution Sales Deferred Compensation Plan, effective January 1, 2010. (Incorporated by reference to Exhibit 4.2 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198143)).*
 
 
 
10.108
 
Amendment Number Two to the MetLife Individual Distribution Sales Deferred Compensation Plan, effective January 1, 2010. (Incorporated by reference to Exhibit 4.3 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198143)).*
 
 
 

E-5

Table of Contents

Exhibit No.
 
Description
 
 
 
10.109
 
Amendment Number Three to the MetLife Individual Distribution Sales Deferred Compensation Plan, effective January 1, 2013. (Incorporated by reference to Exhibit 4.4 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198143)).*
 
 
 
10.110
 
Amendment Number Four to the MetLife Individual Distribution Sales Deferred Compensation Plan, effective January 1, 2014. (Incorporated by reference to Exhibit 4.5 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198143)).*
 
 
 
10.111
 
Amendment Number Five to the MetLife Individual Distribution Sales Deferred Compensation Plan, effective June 1, 2014. (Incorporated by reference to Exhibit 4.6 to MetLife, Inc.’s Registration Statement on Form S-8 (No. 333-198143)).*
 
 
 
12.1
 
Statement re: Computation of Ratios of Earnings to Fixed Charges.
 
 
 
21.1
 
Subsidiaries of the Registrant.
 
 
 
23.1
 
Consent of Deloitte & Touche LLP.
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.1
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
32.2
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 101.INS
 
XBRL Instance Document.
 
 
 
 101.SCH
 
XBRL Taxonomy Extension Schema Document.
 
 
 
 101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
 
 101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
 
 
 
 101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
 
 
 
 101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
 
______________
* Indicates management contracts or compensatory plans or arrangements.

E-6

Exhibit 10.13

MetLife ®  
Agreement to Protect Corporate Property
All of the protections described in this Agreement apply to MetLife, Inc., its past, present and future affiliates and each of their successors and assigns (collectively, "MetLife" or "the Company"). This Agreement is presented to me in anticipation of my becoming employed by MetLife. In the event that I do not actually become employed with MetLife, this Agreement will be of no force and effect. In consideration of my employment with MetLife, the new and updated access that I will be given to MetLife's intellectual property, MetLife's Confidential Information and MetLife's Proprietary Property (as defined below), and the specialized training and resources regarding MetLife's business, customers and practices that MetLife will provide to me, and intending to be legally bound, I agree as follows:
1.
Duty of Loyalty : I understand and agree that during the course of my employment with MetLife, I owe a duty of loyalty to the Company, which prohibits me from engaging in any act or omission that is adverse to the interests of the Company, except as permitted by law or required by legal process. This prohibition includes but is not limited to interfering with MetLife's business or trying to disrupt MetLife's business or operations, including such conduct as engaging in any activity that interferes with the performance of my duties during my employment, interferes with the duties of other MetLife employees, statutory employees or independent contractors, diverts any business, customers or employees away from MetLife, is reasonably deemed by MetLife to be harmful to the business, reputation or goodwill of MetLife, is in violation of this Agreement, is otherwise contrary to the interests of MetLife, and/or is recognized by any applicable statute, regulation or common law as constituting a breach of the duty of loyalty to my employer.
2.
Confidential Information and Proprietary Property : "Confidential Information" means, without limitation, all information and data provided or made available to me by MetLife, or used by me in the course of performing my duties as an employee of MetLife, that is non-public and/or proprietary, including without limitation all information related to (a) MetLife's employees, customers, and third-party contractors; and (b) MetLife's operations, business plans, pricing, financial information, methods, processes, code, data, lists (including customer lists), inventions, improvements, know-how, business methods, processes, techniques, apparatus, statistics, programs, research, development, information technology, network designs, passwords, sign-on codes, and usage data. Notwithstanding the foregoing, Confidential Information excludes information that is generally known or disclosed to the industry through no breach of this Agreement by me or other wrongful act or omission by me or any other person. "Proprietary Property" means, without limitation, property (whether tangible or intangible) owned by or licensed to MetLife, including all MetLife Intellectual Property (as defined below), all premises, proprietary equipment, supplies and other material provided or made available to me by MetLife, or used by me in the course of performing my duties as an employee of MetLife. All Confidential Information and Proprietary Property shall be and remain the sole and exclusive information and/or property of MetLife, as applicable.
3.
Proprietary Rights : I agree that any invention, modification, discovery, design, development, improvement, process, program, work of authorship, document, formula, data, technique, knowhow, trade secret or intellectual property right whatsoever or any interest therein (whether or not protectable under patent, copyright, trademark or similar statutes) made, invented or conceived by me (alone or jointly with others) during my employment with MetLife and for six (6) months thereafter that: (a) relate to the business of MetLife or any customer of or supplier to MetLife or any of the products or services being developed, marketed, distributed or sold by MetLife or which may be used in relation therewith; or (b) results from tasks assigned to me by MetLife or work performed by me for MetLife; or (c) results from the use of Confidential Information and/or Proprietary Property, shall be considered the sole and exclusive property of



MetLife and its assigns ("MetLife Intellectual Property"). The only exception to the preceding shall be in the event that an officer at least at the level of a Senior Vice President in charge of my department agrees to some other arrangement in writing. I agree to inform MetLife promptly and fully of all MetLife Intellectual Property made or conceived by me or jointly with others. I further agree that any copyrightable works falling within the definition of MetLife Intellectual Property shall be considered "Works Made for Hire," as defined by U.S. Copyright laws, and shall be owned by and for the express benefit of MetLife. To the extent that any MetLife Intellectual Property does not automatically, by operation of law, constitute a "Work Made for Hire," I irrevocably transfer and assign to MetLife (or, to the extent not transferable, waive) all right, title and interest in and to that MetLife Intellectual Property for all forms and media, whether or not now existing, throughout the world, including, without limitation, any right to collect for past damages for the infringement or unauthorized use of such MetLife Intellectual Property. I waive, to the fullest extent permitted by law, all of my "moral rights" (i.e., accreditation rights to visual works such as videos, images, graphics, etc.) with respect to MetLife Intellectual Property assigned or transferred to MetLife. Promptly, upon the request of MetLife and at MetLife's expense, I will, during the course of my employment and thereafter, provide cooperation and assistance to MetLife in the preparation, prosecution, perfection and defense of any MetLife Intellectual Property.
4.
Protection and Non-Assignment of MetLife Property : I will maintain adequate and current records of all Confidential Information and Proprietary Property (including MetLife Intellectual Property) created by me or provided to me. I further agree that during my employment and after the termination of my employment, I will not disclose to any third party Confidential Information or Proprietary Property, except as authorized by MetLife, and I will comply with MetLife's policies regarding record keeping, non-disclosure, safe-keeping and retention of Confidential Information and/or Proprietary Property (including MetLife Intellectual Property). I represent and warrant that I am not a party to any contract relating to the granting or assignment to any party (other than MetLife) of any interest in MetLife Intellectual Property, Confidential Information and/or Proprietary Property except insofar as copies of such contracts, if any, have been supplied to and accepted by MetLife. I further represent and warrant that the Confidential Information and Proprietary Property created by me and MetLife's use of such Confidential Information and Proprietary Property, does not and will not violate, infringe or misappropriate any intellectual property and/or confidential information rights of any third party or the laws or regulations of any governmental or judicial authority.
5. Non-Interference: For 18 months following the termination of my employment with MetLife for any reason, I will not, directly or indirectly divert business away from MetLife or seek to have any MetLife customer, person or organization reduce, lapse or terminate any financial products or services obtained from or through MetLife, in such circumstances where I serviced, contacted, solicited or sold to such customer, person or organization, or supervised any MetLife employee in connection with such customer, person or organization during the course of my employment with MetLife, or for whom I possess or have possessed any Confidential Information MetLife Proprietary Property regarding MetLife's services to such customer, person or organization.
6.
Non-Solicitation : For 18 months following the termination of my employment with MetLife for any reason, I will not, directly or indirectly induce, divert, recruit, encourage or attempt to influence anyone in the employ of MetLife (hereinafter "Employee"), or who is a party to a Senior Partner Contract (055 Contract), any New England Financial Agent Contract or Retired Agent Contract (hereinafter "Independent Contractor") to reduce, lapse or terminate his or her employment and/or business relationship with MetLife. For example, I will not inform an Employee or Independent Contractor of a job opportunity with me or any other company or entity, or suggest that any person or entity contact an Employee or Independent Contractor to discuss or mention such a job opportunity. I also will not interview an Employee or Independent Contractor for a job, or offer,

2
2013 ATPCP


authorize, approve or agree to hire an Employee or Independent Contractor for any job opportunity with me or any other company.
7.
Non-Disparagement : I will not make statements that damage, disparage or otherwise diminish the reputation and business practices of MetLife and its affiliated entities, and its and their current and/or former officers, agents, directors and employees. This includes statements made verbally, in writing or electronically. The only exception is if I am compelled by a court of law or I am otherwise permitted or authorized to do this pursuant to legal or administrative process.
8.
Agreement is Reasonable and Necessary to Protect MetLife's Legitimate Business Interests : I acknowledge and agree that: (1) the restrictions set forth in this Agreement are reasonable and necessary for the protection of MetLife's legitimate business interests in the intensely competitive insurance, securities, advisory services, retail banking and financial services industries, including without limitation MetLife's longstanding relationships with customers, and are reasonable and necessary to protect MetLife's Intellectual Property, Confidential Information and Proprietary Property (including MetLife Intellectual Property), in which MetLife has invested significant time and money; and (2) but for my employment by MetLife, I would not have access to such Confidential Information and/or Proprietary Property.
9.
Presentation of Agreement to Subsequent Employers : For a period of 18 months following the termination of my employment with MetLife for any reason, I will present a copy of this agreement to each of my subsequent employers or affiliations, and I will inform MetLife promptly of the identity of any such employers or affiliations. I hereby authorize MetLife to present a copy of this Agreement to such employers or affiliations.
10.
Return of Property : Upon the termination of my employment with MetLife for any reason or at any other time requested by MetLife, I shall immediately deliver to MetLife or its designee all MetLife Confidential Information and/or MetLife Proprietary Property (including MetLife Intellectual Property), and all copies thereof in whatever format stored, in my possession, custody or control including, but not limited to any computing device provided to or used by me during the course of my employment with MetLife, including, desk top or laptop computers, mobile devices, USBs, disks, drives, memory devices, telephones, personal digital assistants, or other electronic media. I understand that MetLife will return any computing devices purchased by me or a third party on my behalf after wiping the computing devices clean of all MetLife software and information.
11.
Geographic Scope : I acknowledge that the business of MetLife is conducted in all states and in certain foreign countries and that the employees of MetLife and its affiliated entities are working to further the interests of MetLife in those states and foreign countries. I also acknowledge that the Confidential Information or Proprietary Property (including MetLife Intellectual Property) I obtain in the course of my employment involves and affects MetLife's activities in all states and in those foreign countries in which it conducts its business. Therefore, it is not appropriate or feasible for MetLife to establish geographic limitations on the restrictions to which I am now agreeing. Accordingly, I agree to abide by these restrictions in all states and in those foreign countries in which MetLife is conducting business at the time that my employment terminates, or in any state or foreign countries where MetLife is planning to conduct business and I was or am in possession of any MetLife Intellectual Property, Confidential Information and/or Proprietary Property relating to such plans.
12.
Injunctive Relief and Attorney's Fees : I acknowledge that if I violate any provision of this Agreement, MetLife will suffer irreparable harm. Therefore, in addition to any other rights or remedies of MetLife, MetLife will have the right to obtain an injunction without posting a bond enjoining any such violation. If MetLife succeeds in any lawsuit or proceeding against me brought to enforce this Agreement, or to establish damages sustained by MetLife as a result of my

3
2013 ATPCP


violation of this Agreement, I will reimburse MetLife's attorney's fees and costs, as these may be fixed by the court in which MetLife sues me or brings a proceeding against me.
13.
Tolling Provision : In the event that I violate any of the post-employment restrictions of this Agreement, the eighteen (18) month time period of the post-employment restrictions set forth in Sections 5, 6, and/or 9 above shall be extended for a period of time equal to the time between the start of the eighteen (18) month period and the date of the last violation. Such extension does not in any way operate to limit the types of remedies available to MetLife to address any violation of this Agreement.
14.
Entire Agreement, Severability and No Waiver : This document is the entire agreement between me and MetLife with respect to the contents contained herein. No previous promises or agreements, oral or written, including any prior Agreements to Protect Corporate Property with MetLife, will remain in effect. I further agree that my signature on any subsequent agreement with MetLife shall not impair the enforcement of these provisions, unless such subsequent agreement is in writing and expressly identifies this Agreement. If any provision of this Agreement is invalidated in any jurisdiction either by statute or by a court, it is the parties' intention that such provision will be deemed modified to comply with the law or deemed stricken from this Agreement, if that is necessary to comply with the law. If any provision is stricken for this reason, however, the remainder of this Agreement remains in effect. This Agreement cannot be waived by MetLife unless agreed to in writing by an officer of MetLife at least at the level of a Senior Vice President. Failure to strictly enforce any provision of this Agreement shall not operate as a waiver of such provision or release either party from its obligation to perform strictly in accordance with such provision.
I have carefully read this Agreement and I understand it. I acknowledge that I have been given a copy of this Agreement.
Signature: _ /s/ Esther S. Lee ______
Print Name: __ Esther S. Lee______
Employee ID #: __ [redacted]______
Dept: __ Global Brand & Marketing__
Date: __ 1/12/15________________

4
2013 ATPCP

Exhibit 10.14
Agreement to Protect Corporate Property
In consideration of my receipt of stock options from Metropolitan Life Insurance Company ("MetLife"), I agree to the following:
1.
All equipment, documents, and all information and other property that belongs to MetLife that I receive or develop in the course of my employment by MetLife, remain the property and information of MetLife. The products of all of my efforts in the course of my employment belong exclusively to MetLife and, unless the officer in charge of my department agrees to some other arrangement in writing, I will not retain any rights in any such work product. I agree to return all property and information immediately and without keeping any copies when my employment terminates for any reason.
2.
For 18 months following the termination of my employment with MetLife for any reason:
A.
I will not interfere in MetLife's business or try to disrupt MetLife's business. This includes things I might do through my own efforts, or indirectly through the efforts of others, and I will not use any MetLife information or property to assist others. This includes diverting business away from MetLife or seeking to have any MetLife customer reduce or terminate any insurance obtained from or through MetLife.
B.
I will not solicit any employee of MetLife or its affiliated entities ("Employee") to become employed, associated or contracted by or with me or any entity in which I am an employee, owner or investor ("Other Company"). I will not solicit any Employee to become employed, associated or contracted with an organization providing services to me or any Other Company. For example, I will not inform an Employee of a job opportunity with me or any Other Company, or suggest that any person or entity contact an Employee to discuss or mention such a job opportunity. I also will not interview an Employee for a job, or offer, authorize, approve or agree to hire an Employee for any job opportunity with me or any Other Company.
C.
I will not make statements that damage, disparage or otherwise diminish the reputation and business practices of MetLife and its affiliated entities, and its and their officers, directors and employees. This includes statements made verbally, in writing or electronically. The only exception is if I am compelled by a court of law or I am otherwise authorized to do this pursuant to legal or administrative process.
D.
I authorize MetLife to present a copy of this agreement to each of my subsequent employers.
3.
I acknowledge that the business of MetLife is conducted all states and in certain foreign countries and that the employees of MetLife and its affiliated entities are working to further the interests of MetLife in those states and foreign countries. I also acknowledge that the property and information I obtain in the course of my employment involves and affects MetLife's activities in all states and in those foreign countries in which it conducts its business. Therefore, it is not appropriate or feasible for MetLife to establish geographic limitations on the restrictions to which I am now agreeing. Accordingly, I agree to abide by these restrictions in all states and in those foreign countries in which MetLife is or has plans to conduct business at the time that my employment terminates.
4.
I acknowledge that, if I violate any provision of this Agreement, MetLife will suffer irreparable harm. Therefore, in addition to any other rights or remedies of MetLife, MetLife will have the right to obtain an injunction enjoining any such violation. If MetLife succeeds in any lawsuit or proceeding against me brought to enforce this Agreement, or to establish damages sustained by MetLife as a result of my



violation of this Agreement, I will reimburse MetLife's attorney's fees and costs, as these may be fixed by the court in which MetLife sues me or brings a proceeding against me.
5.
If any provision of this Agreement is invalidated in any jurisdiction either by statute or by a court, that provision will be deemed modified to comply with the law or deemed stricken from this Agreement, if that is necessary to comply with the law. If any provision is stricken for this reason, however, the remainder of this Agreement remains in effect.
I have carefully read this Agreement and I understand it. I acknowledge that I have been given copy of this Agreement.
Signature: ___________________
Dept: ___________________
Name: ___________________
Date: ___________________
Witness: ___________________
Name & Title: ___________________


Exhibit 10.15

MetLife ®  
Agreement to Protect Corporate Property
All of the protections described in this Agreement apply to MetLife, Inc. and its past, present and future affiliates and each of their successors and assigns (collectively, "MetLife" or "the Company"). This Agreement is presented to me in anticipation of my becoming employed by MetLife. In the event that I do not actually become employed with MetLife, this Agreement will be of no force and effect. In consideration of my employment with MetLife, the new and updated access that I will be given to MetLife’s Intellectual Property and/or Confidential Information as defined below, and the specialized training and resources regarding MetLife’s business, customers and practices that MetLife will provide to me, and intending to be legally bound, I agree as follows:
1.
Duty of Loyalty : I understand and agree that during the course of my employment with MetLife, I owe a duty of loyalty to the Company, which prohibits me from engaging in any act or omission that is adverse to the interests of the Company, except as permitted by law or required by legal process. This prohibition includes but is not limited to interfering with MetLife's business or trying to disrupt MetLife's business, including such conduct as engaging in any activity that interferes with the performance of my duties during my employment, interferes with the duties of other MetLife employees, statutory employees or independent contractors, diverts any business, customers or employees away from MetLife, is reasonably deemed by MetLife to be harmful to the business, reputation or goodwill· of MetLife, is in violation of this Agreement, is otherwise contrary to the interests of MetLife, and/or is recognized by any applicable statute, regulation or common law as constituting a breach of the duty of loyalty to my employer.
2.
Confidential and Proprietary Information : "Confidential and Proprietary Information" means, without limitation, all confidential and proprietary equipment, material, business processes, records, supplies, manuals, rate books, forms, files, notes, letters, lists, and any other documentation, property and/or information, in any form or medium, provided to me by MetLife or developed, created, used or obtained by me in the course of performing my duties as an employee of MetLife, pertaining to the business of MetLife, its employees, or pertaining to any of its customers or prospective customers, and all related product plans, client strategies, ideas, formulas, inventions (whether or not patentable), improvements, know-how, business methods, processes, techniques, drawings, specifications, notes, business and sales plans and employee, customer and supplier lists and similar information. Notwithstanding the foregoing, Confidential and Proprietary Information excludes information that is generally known or disclosed to the industry through no breach of this Agreement by me or other wrongful act or omission by me or any other person. All Confidential and Proprietary Information shall be and remain the sole and exclusive property and information of MetLife.
3.
Proprietary Rights : I agree that all intellectual property made or conceived by me during the term of my employment with MetLife by me alone, or, jointly with others, that is governed and protected by laws and regulations related to patents, trade secrets, copyrights, trademarks, trade dress, trade names, internet domain names, business processes, including, all precursory, duplicative or derivative materials in creation of such intellectual property belongs exclusively to MetLife ("Intellectual Property"), and, unless an officer at least at the level of a Senior Vice President in charge of my department agrees to some other arrangement in writing, I will not retain any rights in any such lntellectual Property and its related MetLife Confidential and Proprietary Information. I agree to inform MetLife promptly and fully of all MetLife Intellectual Property made or conceived by me or jointly with others. I further agree that any copyrightable works falling within the definition of MetLife Intellectual Property and/or Confidential and Proprietary Information are "works made for hire," the complete ownership of which belongs to

1



MetLife. ·To the extent that any MetLife Intellectual Property and/or Confidential and Proprietary Information does not automatically, by operation of law, constitute a "work made for hire," I irrevocably transfer and assign to MetLife (or, to the extent not transferable, waive) all right, title and interest in and to that MetLife Intellectual Property for all forms and media, whether or not now existing, throughout the world, including, without limitation, any right to collect for past damages for the infringement or unauthorized use of such MetLife Intellectual Property and/or Confidential and Proprietary Information. I waive, to the fullest extent permitted by law, all of my "moral rights" (i.e., accreditation rights to visual works such as videos, images, graphics, etc.) with respect to MetLife intellectual Property and/or Confidential and Proprietary Information assigned or transferred to MetLife. Promptly, upon the request of MetLife and at MetLife’s expense, I will, during the course of my employment and thereafter, provide cooperation and assistance to MetLife in the preparation, prosecution, perfection ·and defense of any MetLife Intellectual Property.
4.
Protection and Non-Assignment of MetLife Property : I will maintain adequate and current records of all MetLife Intellectual Property and/or Cpnfidential and Proprietary Information. I further agree that during my employment and after the termination of my employment, I will not disclose to any third party MetLife Intellectual Property and/or Confidential and Proprietary Information, except as authorized by MetLife, and I will comply with MetLife’s policies regarding record keeping, non-disclosure, safe-keeping and retention of MetLife Intellectual Property and/or Confidential and Proprietary lnformation. I represent and warrant that I am not a party to any contract relating to the granting or assignment to any party (other than MetLife) of any interest in Intellectual Property and/or Confidential and Proprietary lnformation conceived, developed, made or reduced to·practice by me except insofar as copies of such contracts, if any, have been supplied to MetLife. I further represent and warrant that the MetLife lntellectual Property and/or Confidential and Proprietary information created by me and MetLife’s use of such MetLife Intellectual Property and/or Confidential and Proprietary Information, does not and will not violate, infringe or misappropriate any intellectual property and/or confidential information rights of any third party or the laws or regulations of any governmental or judicial authority.
5.
Non-lnterference : For 18 months following the termination of my employment with MetLife for any reason, I will not, directly or indirectly divert business away from MetLife or seek to have any MetLife customer, person or organization reduce, lapse or terminate any financial products or services obtained from or through MetLife, in such circumstances· where I serviced, contacted, solicited or sold to such customer, person or organization, or supervised any MetLife employee in connection ·with such customer, person or organization during the course of my employment with MetLife, or for whom I possess or have possessed any Confidential and Proprietary lnformation regarding MetLife’s services to such customer, person or organization.
6.
Non-Solicitation : For 18 months following the termination of my employment with MetLife for any reason, I will not, directly or indirectly induce, divert, recruit, encourage or attempt to influence anyone in the employ of MetLife (hereinafter "Employee"), or who is a party to a Senior Partner Contract (055 Contract), any New England Financial Agent Contract or Retired Agent Contract (hereinafter ''lndependent Contractor") to reduce, lapse or terminate his or her employment and/or business relationship with MetLife. For example, I will not inform an Employee or Independent Contractor of a job opportunity with me or any other company or entity, or suggest that any· person or entity contact an Employee or Independent Contractor to discuss or mention such a job opportunity. I also will not interview an Employee or Independent Contractor for a job, or offer, authorize, approve or agree to hire an Employee or Independent Contractor for any job opportunity with me or any other· company.

2




7.
Non-Disparagement : I will not make statements that damage, disparage or otherwise diminish the reputation and business practices of MetLife and its affiliated entities, and its and their current and/or former officers, agents, directors and employees. This includes statements made verbally, in writing or electronically. The only exception is if I am compelled by a court of law or I am otherwise authorized to do this pursuant to legal or administrative process.
8.
Agreement is Reasonable and Necessary to Protect MetLife's Legitimate Business Interests : I acknowledge and agree that: (1) the restrictions set forth in this Agreement are reasonable and necessary for the protection of MetLife's legitimate business interests in the intensely competitive insurance, securities, advisory services, retail banking and financial services industries, including without limitation MetLife's longstanding relationships with customers, and are reasonable and necessary to protect MetLife's Intellectual Property and/or Confidential and Proprietary Information, in which MetLife has invested significant time and money; and (2) but for my employment by MetLife, I would not have access to the Intellectual Property and/or Confidential and Proprietary Information identified above.
9.
Presentation of Agreement to Subsequent Employers : For a period of 18 months following the termination of my employment with MetLife for any reason, I will present a copy of this agreement to each of my subsequent employers or affiliations, and I will inform MetLife promptly of the identity of any such employers or affiliations. I hereby authorize MetLife to present a copy of this Agreement to such employers or affiliations.
10.
Return of Property : Upon the termination of my employment with MetLife for any reason or at any other time requested by MetLife, I shall immediately deliver to MetLife or its designee all MetLife Confidential and Proprietary Information, Intellectual Property, and all copies thereof in whatever format stored, in my possession, custody or control, as well as any other property and information of MetLife including, but not limited to any computing device provided to or used by me during the course of my employment with MetLife, including, but not limited to, computer, disks, drives, memory sticks, telephones, personal digital assistants, or other electronic media, including any leased, borrowed or purchased laptop computer, even if I purchased the computing devices. I understand that MetLife will return any computing devices I purchased after wiping the computing devices clean of all MetLife software and information.
11.
Geographic Scope : I acknowledge that the business of MetLife is conducted in all states and in certain foreign countries and that the employees of MetLife and its affiliated entities are working to further the interests of MetLife in those states and foreign countries. I also acknowledge that the MetLife Intellectual Property and/or Confidential Information I obtain in the course of my employment involves and affects MetLife's activities in all states and in those foreign countries in which it conducts its business. Therefore, it is not appropriate or feasible for MetLife to establish geographic limitations on the restrictions to which I am now agreeing. Accordingly, I agree to abide by these restrictions in all states and in those foreign countries in which MetLife is conducting business at the time that my employment terminates, or in any state or foreign countries where MetLife is planning to conduct business and I was or am in possession of any Intellectual Property and/or Confidential and Proprietary Information relating to such plans.
12.
Injunctive Relief and Attorney's Fees : I acknowledge that, if I violate any provision of this Agreement, MetLife will suffer irreparable harm. Therefore, in addition to any other rights or remedies of MetLife, MetLife will have the right to obtain an injunction without posting a bond enjoining any such violation. If MetLife succeeds in any lawsuit or proceeding against me brought to enforce this Agreement, or to establish damages sustained by MetLife as a result of my violation of this Agreement, I will reimburse MetLife's attorney's fees and costs, as these may be fixed by the court in which MetLife sues me or brings a proceeding against me.

3




13.
Tolling Provision : In the event that I violate any of the post-employment restrictions of this Agreement, the eighteen (18) month time period of the post-employment restrictions set forth in Sections 5, 6, and/or 9 above shall be extended for a period of time equal to the time between the start of the eighteen (18) month period and the date of the last violation. Such extension does not in any way operate to limit the types of remedies available to MetLife to address any violation of this Agreement.
14.
Entire Agreement, Severability, and No Waiver : This document is the entire agreement between me and MetLife with respect to the contents contained herein. No previous promises or agreements, oral or written, including any prior Agreements to Protect Corporate Property, will remain in effect. I further agree that my signature on any subsequent agreement with MetLife shall not impair the enforcement of these provisions, unless such subsequent agreement is in writing and expressly identifies this Agreement. If any provision of this Agreement is invalidated in any jurisdiction either by statute or by a court, it is the parties' intention that such provision will be deemed modified to comply with the law or deemed stricken from this Agreement, if that is necessary to comply with the law. If any provision is stricken for this reason, however, the remainder of this Agreement remains in effect. This Agreement cannot be waived by MetLife unless agreed to in writing by an officer of MetLife. Failure to strictly enforce any provision of this Agreement shall not operate as a waiver of such provision or release either party from its obligation to perform strictly in accordance with such provision. While you are required to return your original signature below to MetLife, you acknowledge and agree that a facsimile of your signature shall be deemed to be binding upon you, unless prohibited by law.
I have carefully read this Agreement and I understand it. I acknowledge that I have been given a copy of this Agreement.
Signature: _________________
Print Name: _________________
Employee ID #: _________________
Dept: _________________
Date: _________________

4


Exhibit 10.29
MANAGEMENT PERFORMANCE SHARE AGREEMENT
     MetLife, Inc. confirms that, on [grant date] (the “Grant Date”), it granted you, [name] , [number] Performance Shares (your “Performance Shares”). Your Performance Shares are subject to the terms and conditions of this Management Performance Share Agreement (this “Agreement”) and the MetLife, Inc. 2005 Stock and Incentive Compensation Plan (the “Plan”).
      1.  Standard Performance Terms .
     (a) The terms of this Section 1 shall be referred to as the “Standard Performance Terms” and will apply to your Performance Shares except in so far as Sections 2 (Change of Status) or 3 (Change of Control) apply.
     (b) The Performance Period for your Performance Shares will begin on [date] , [year] and end on the December 31 immediately preceding the third anniversary of the beginning of the Performance Period. After the conclusion of the Performance Period, the Committee shall certify in writing the number of Performance Shares payable in accordance with this Section 1 (your “Final Performance Shares”), and your Final Performance Shares will be due and payable in Shares at the time specified in Section 8.
     (c) If the Committee determines in writing that the Company met one or more of the Section 162(m) Goals, then you will be eligible for a payment of up to 200% of your Performance Shares. The “Section 162(m) Goals” shall be the following:
     (1) Positive Company income from continuing operations before provision for income tax, excluding net investment gains (losses) (determined in accordance with Section 3(a) of Article 7.04 of SEC Regulation S-X), which includes total net investment gains (losses) and net derivatives gains (losses), as presented in the financial statements in the Company’s Annual Report on Form 10-K for the calendar year preceding the beginning of the Performance Period (“Adjusted Income”), for the Performance Period.
     (2) Positive Adjusted Income for the third calendar year of the Performance Period.
     (3) Positive Company Proportionate Total Shareholder Return for the Performance Period, as defined for the Company in Section 1(d)(2).
     (4) Positive Company Proportionate Total Shareholder Return for the third calendar year of the Performance Period, as defined for the Company in Section 1(d)(2) with respect to the third calendar year of the Performance Period.
     (d) If, under Section 1(c), you are eligible for a payment, the Committee will determine your Final Performance Shares by multiplying your Performance Shares by the “Performance Factor.” The Performance Factor means a percentage (from zero to 200%) which is the sum of two other percentages (each from zero to 100%), described in (1) and (2) below, multiplied by the factor determined by (3) below, if applicable.
     (1) The first percentage will be based on the Company’s average percentile performance with respect to Change in Annual Net Operating Income Available to Common Shareholders Per Share during the Performance Period relative to the other companies in the Index, determined in the following manner:
     (a) First, the Net Operating Income Available to Common Shareholders Per Share will be determined for the Company and for each of the other companies in the Index, for each calendar year of the Performance Period and the calendar immediately preceding the first calendar year of the Performance Period. For this purpose, “Net Operating Income Available to Common Shareholders Per Share” for each calendar year will have the meaning of that term, or its substantial equivalent, defined in or derived from the Company’s quarterly financial supplement for the fourth quarter of the prior year filed with or furnished to the United States Securities and Exchange Commission.
     (b) Second, the Change in Annual Net Operating Income Available to Common Shareholders Per Share will be determined for the Company and for each of the other companies in the Index for each calendar year of the Performance Period. For this purpose, “Change in Annual Net Operating Income Available to Common Shareholders Per Share” means Net Operating Income Available to Common Shareholders Per Share for each calendar year of the Performance Period divided by Net Operating Income Available to Common Shareholders Per Share in the immediately preceding calendar year.
     (c) Third, the Company’s Change in Annual Net Operating Income Available to Common Shareholders Per Share for each calendar year of the Performance Period will be compared to the Change in Annual Net Operating Income Available to Common Shareholders Per Share for each of the other companies in the Index for the same calendar year to determine the percentage of the other companies in the Index whose performance was less than that of the Company, rounded down to the nearest whole number percentile appearing on the left-hand column of Table 1 of Schedule A to this Agreement (Company performance greater than every other company in the Index being deemed



to be performance in the ninety-ninth percentile), producing the Company’s percentile performance relative to the other companies in the Index.
     (d) Fourth, a percentage for each calendar year of the Performance Period will be determined using the percentile determined under Section 1(d)(1)(c) and the corresponding percentage on the right-hand column of Table 1 of Schedule A to this Agreement.
     (e) Finally, the three percentages referenced in Section (1)(d)(1)(d) will be averaged.
     (2) The second percentage will be based on the Company’s performance with respect to Proportionate Total Shareholder Return during the Performance Period as a percentage of that of the Index, determined according to Table 2 of Schedule A to this Agreement, determined in the following manner:
     (a) First, the Initial Closing Price of the Company and the Index will each be determined. For this purpose, “Initial Closing Price” means, in the case of the Company the average Closing Price, and in the case of the Index the value of the Index, in each case for the twenty (20) trading days prior to the first day of the Performance Period.
     (b) Second, the Final Closing Price of the Company and the Index will each be determined. For this purpose, “Final Closing Price” means, in the case of the Company the average Closing Price, and in the case of the Index the value of the Index, in each case for the twenty (20) trading days prior to and including the final day of the Performance Period.
     (c) Third, the Total Shareholder Return of the Company and the Index will each be determined, and expressed as a percentage. For this purpose, “Total Shareholder Return” means the change (plus or minus) from the Initial Closing Price to the Final Closing Price, plus (in the case of the Company) dividends (if any) actually paid on Shares on a reinvested basis from the first day of the Performance Period to and including the last day of the Performance Period.
     (d) Fourth, the Proportionate Total Shareholder Return of the Company and the Index will each be determined. For this purpose, “Proportionate Total Shareholder Return” means Total Shareholder Return divided by Initial Closing Price.
     (e) Fifth, the Proportionate Total Shareholder Return of the Index will be subtracted from the Company’s Proportionate Total Shareholder Return, and the result rounded up or down to the nearest percentage appearing on the left-hand column of Table 2 of Schedule A to this Agreement (any result precisely halfway between two percentages being rounded up to the next highest percentage).
     (f) Finally, a percentage will be determined using the result produced under Section 1(d)(2)(e) and the corresponding percentage on the right-hand column of Table 2 of Schedule A to this Agreement.
     (3) If the Total Shareholder Return of the Company, as determined under Section (1)(d)(2)(c), is zero percent or less, then the sum of the percentages described under Sections (1)(d)(1) and (1)(d)(2) will be multiplied by a factor of seventy-five hundredths (0.75) and rounded up or down to the nearest whole percentage (any result precisely halfway between two percentages being rounded up to the next highest percentage) to determine the Performance Factor.
     (e) For purposes of Section 1(d)(1), the companies in the Index refers to each company, other than the Company and other than Berkshire Hathaway Inc. (and any company that the Committee determines in its discretion is a successor to Berkshire Hathaway Inc.), that:
     (1) does not adopt International Financial Reporting Standards with respect to a reporting period earlier than the reporting period with respect to which the Company does so,
     (2) has publicly reported its earnings in conformity with accounting principles generally accepted in the United States of America for each of the two calendar years being compared under Section 1(d)(1)(b); and  
     (3) is included in the Standard & Poor’s Insurance Index derived from Fortune 500 companies for the entirety of the second of the two calendar years being compared under Section 1(d)(1)(b).
     (f) For purposes of Section 1(d)(2), the Index refers to the Standard & Poor’s Insurance Index derived from Fortune 500 companies, excluding Berkshire Hathaway Inc. (and any company that the Committee determines in its discretion is a successor to Berkshire Hathaway Inc.), including any weighting of the stock of the companies included in that index that is applied by Standard & Poor’s, from time to time.
      2.  Change of Status . For purposes of this Section 2, your transfer between the Company and an Affiliate, or among Affiliates, will not be a termination of employment. In the event of a Change of Control, any applicable terms of Section 3 (Change of Control) will supersede the terms of this Section 2.
     (a)  Long-Term Disability . In the event you qualify for long-term disability benefits under a plan or arrangement offered by the Company or an Affiliate for its Employees, the Standard Performance Terms will continue to apply to your Performance Shares. Once this provision applies, no other change of status described in this Section 2 (except



the provision regarding termination for Cause) will affect your Performance Shares, even if you subsequently return to active service or your employment with the Company or an Affiliate terminates other than for Cause.
     (b)  Death . In the event that your employment with the Company or an Affiliate terminates due to your death, your Performance Shares will be due and payable in Shares (or cash at a value equal to the Closing Price on the date of your death, if so determined by the Committee). Any payment will be made at the time specified in Section 8.
     (c)  Retirement . If your employment with the Company or an Affiliate terminates (other than for Cause) on after your early retirement date or normal retirement date (in each case determined under any ERISA qualified pension plan offered by the Company or an Affiliate in which you participate) (“Retirement”), the Standard Performance Terms will continue to apply to your Performance Shares.
     (d)  Bridge Eligibility . If your employment with the Company or an Affiliate terminates (other than for Cause) with bridge eligibility for retirement-related medical benefits (determined under an ERISA qualified benefit plan offered by the Company or an Affiliate in which you participate, if any) (“Bridge Eligibility”), and your separation agreement (offered to you under the severance program offered by the Company or an Affiliate to its Employees) becomes final, the Standard Performance Terms will continue to apply to your Performance Shares.
     (e)  Termination for Cause . In the event that your employment with the Company or an Affiliate terminates for Cause, your Performance Shares will be forfeited immediately.
     (f)  Other Termination of Employment . Unless the Committee determines otherwise, if no other provision in this Section 2 regarding change of status applies, including, for example, your voluntary termination of employment, your termination without Retirement or Bridge Eligibility, or your termination by the Company or an Affiliate without Cause, your Performance Shares will be forfeited immediately unless you are offered a separation agreement by the Company or an Affiliate under a severance program. To the extent your separation agreement becomes final, your Prorated Performance Shares will be due and payable to you. Any payment will be made at the time specified in Section 8. The number of your “Prorated Performance Shares” will be determined by dividing the number of calendar months in the Performance Period that have ended as of the end of the month of the termination of your employment by thirty-six (36), multiplying the result by the number of your Performance Shares, and rounding to the nearest whole number, and, if you were an Insider or an “executive officer” of the Company under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, at any time during the Performance Period, further multiplying the result by the lesser of 100% or the Performance Factor; provided, however , that if the date of the termination of your employment is prior to the first anniversary of the beginning of the Performance Period, then the number of your Prorated Performance Shares shall be zero (0). Payment for each of your Prorated Performance Shares will be made in cash at a value equal to the Closing Price on the Grant Date, and shall be rounded to the nearest one-hundred dollars ($100.00); provided, however , that if you were an Insider or an “executive officer” of the Company under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, at any time during the Performance Period, payment for each of your Prorated Performance Shares will be made in cash at a value equal to the lesser of the Closing Price on the Grant Date or the Closing Price on the date the Committee determines the Performance Factor, and shall be rounded to the nearest one-hundred dollars ($100.00). If your separation agreement does not become final, your Performance Shares will be forfeited.
      3.  Change of Control .
     (a) Except as provided in Section 3(b), and unless otherwise prohibited under law or by applicable rules of a national security exchange, if a Change of Control occurs, your Performance Shares will be due and payable in the form of cash equal to the number of your Performance Shares multiplied by the Change of Control Price. Any payment will be made at the time specified in Section 8.
     (b) The terms of Section 3(a) will not apply to your Performance Shares if the Committee reasonably determines in good faith, prior to the Change of Control, that you have been granted an Alternative Award for your Performance Shares pursuant to Section 15.2 of the Plan. Any such Alternative Award shall not accelerate the timing of payment or otherwise violate Code Section 409A.
      4.  Nontransferability of Awards . Except as provided in Section 5 or as otherwise permitted by the Committee, you may not sell, transfer, pledge, assign or otherwise alienate or hypothecate any of your Performance Shares, and all rights with respect to your Performance Shares are exercisable during your lifetime only by you.
      5.  Beneficiary Designation . You may name any beneficiary or beneficiaries (who may be named contingently or successively) who may then exercise any right under this Agreement in the event of your death. Each beneficiary designation for such purpose will revoke all such prior designations. Beneficiary designations must be properly completed on a form prescribed by the Committee and must be filed with the Company during your lifetime. If you



have not designated a beneficiary, your rights under this Agreement will pass to and may be exercised by your estate.
      6.  Tax Withholding . The Company will withhold from payment made under this Agreement an amount sufficient to satisfy the minimum statutory Federal, state, and local tax withholding requirements relating to payment on account of your Performance Shares.  
      7.  Adjustments . The Committee will make appropriate adjustments in the terms and conditions of your Performance Shares in recognition of unusual or nonrecurring events affecting the Company or its financial statements (such as a Common Stock dividend, Common Stock split, recapitalization, payment of an extraordinary dividend, merger, consolidation, combination, spin-off, distribution of assets to stockholders other than ordinary cash dividends, exchange of shares, or other similar corporate change), or in recognition of changes to applicable laws, regulations, or accounting principles, to prevent unintended dilution or enlargement of the potential benefits of your Performance Shares. The Committee’s determinations in this regard will be conclusive.
      8.  Timing of Payment .
     (a) This Agreement is intended to comply with Code Section 409A and shall be interpreted accordingly. If Shares are to be paid to you, you will receive evidence of ownership of those Shares.
     (b) If payment is due and payable under Section 2(b), it will be made upon your death.
     (c) If payment is due and payable under Section 2(f), it will be made six (6) months after the termination of your employment (or six (6) months after your “separation from service” under Code Section 409A, if that is a different date); provided, however , that if you were an Insider or an “executive officer” of the Company under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, at any time during the Performance Period, payment will be made in the calendar year after the end of the Performance Period but in no event earlier than six (6) months after the termination of your employment (or six months after your “separation from service” under Code Section 409A, if that is a different date).
     (d) If payment is due and payable under Section 3(a), and the Change of Control that causes payment to be due and payable is a “change of control” as defined under Code Section 409A, such sum shall be paid to you within thirty (30) days of the Change of Control. If payment is due and payable under Section 3(a), and the Change of Control that causes payment to be due and payable is not a “change of control” as defined under Code Section 409A, such sum shall be paid to you at the time determined under Section 8(e).
     (e) If payment is due and payable under the Standard Performance Terms and you have chosen to defer payment under an applicable deferred compensation plan offered by the Company or an Affiliate, payment will be made at the time determined under that plan. If payment is due and payable under the Standard Performance Terms and you have not chosen to defer payment under an applicable deferred compensation plan offered by the Company or an Affiliate, payment will be made in the calendar year after the end of the Performance Period.
      9.  Closing Price . For purpose of this Agreement, “Closing Price” will mean the closing price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), or in the event that there are no Share transactions reported on such tape or other system on the applicable date, the closing price on the immediately preceding date on which Share transactions were reported. Closing Price shall constitute “Fair Market Value” under the Plan for all purposes related to your Performance Shares.
      10.  No Guarantee of Employment . This Agreement is not a contract of employment and it is not a guarantee of employment for life or any period of time. Nothing in this Agreement interferes with or limits in any way the right of the Company or an Affiliate to terminate your employment at any time. This Agreement does not give you any right to continue in the employ of the Company or an Affiliate.
      11.  Governing Law; Choice of Forum . This Agreement will be construed in accordance with and governed by the laws of the State of Delaware, regardless of the law that might be applied under principles of conflict of laws. Any action to enforce this Agreement or any action otherwise regarding this Agreement must be brought in a court in the State of New York, to which jurisdiction the Company and you consent.
      12.  Miscellaneous . For purposes of this Agreement, “Committee” includes any direct or indirect delegate of the Committee as defined in the Plan and (unless otherwise indicated) the word “Section” refers to a Section in this Agreement. Any other capitalized word used in this Agreement and not defined in this Agreement, including each form of that word, is defined in the Plan. Any determination or interpretation by the Committee pursuant to this Agreement will be final and conclusive. In the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan control. This Agreement and the Plan represent the entire agreement between you and the Company, and you and all Affiliates, regarding your Performance Shares. No promises, terms, or agreements



of any kind regarding your Performance Shares that are not set forth, or referred to, in this Agreement or in the Plan are part of this Agreement. In the event any provision of this Agreement is held illegal or invalid, the rest of this Agreement will remain enforceable. If you are an Employee of an Affiliate, your Performance Shares are being provided to you by the Company on behalf of that Affiliate, and the value of your Performance Shares will be considered a compensation obligation of that Affiliate. Your Performance Shares are not Shares and do not give you the rights of a holder of Shares. You will not be credited with additional Performance Shares on account of any dividend paid on Shares. The issuance of Shares or payment of cash pursuant to your Performance Shares is subject to all applicable laws, rules and regulations, and to any approvals by any governmental agencies or national securities exchanges as may be required. No Shares will be issued or no cash will be paid if that issuance or payment would result in a violation of applicable law, including the federal securities laws and any applicable state or foreign securities laws. Your Performance Shares are subject to the Company’s performance-based compensation recoupment policy (which currently covers only officers or officer-equivalent employees of the Company and its Affiliates) in effect from time to time.

      13.  Amendments . The Committee has the exclusive right to amend this Agreement as long as the amendment does not adversely affect any of your previously-granted Awards in any material way (without your written consent) and is otherwise consistent with the Plan. The Company will give written notice to you (or, in the event of your death, to your beneficiary or estate) of any amendment as promptly as practicable after its adoption.  
      14.  Agreement to Protect Corporate Property . If you have not previously executed an Agreement to Protect Corporate Property (“Property Agreement”), the grant of your Performance Shares is subject to your execution of the Property Agreement provided to you by the Company with respect to this Agreement, and if you do not return a signed copy of the Property Agreement then this Agreement and the Performance Shares granted to you will be void. The Company may in its sole discretion allow an extension of time for you to return your signed Property Agreement.




     IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement, and you have executed this Agreement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
METLIFE, INC.
 
 
 
EMPLOYEE
 
 
 
 
 
 
 
 
 
 
 
By:
 
C. Robert Henrikson
 
 
 
[name]
 
 
 
 
 
Name
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chairman of the Board,
 
 
 
 
 
 
 
 
President, and Chief Executive Officer
 
 
 
 
 
 
 
 
 
Title
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Signature
 
 
 
 
Signature
 
 
 
 
 
 
 
 
Date:                                                             
 
 




Schedule A
to Management Performance Share Agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 1
 
Table 2
Company Change in Annual
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income
 
First Percentage (Averaged
 
Index Proportionate Total
 
 
Available to Common
 
For Each Year of
 
Shareholder Return
 
 
Shareholders Percentile
 
Performance Period) For
 
subtracted from Company
 
Second Percentage For
Relative to Other Companies
 
Purposes of Determining
 
Proportionate Total
 
Purposes of Determining
in the Index
 
Performance Factor *
 
Shareholder Return
 
Performance Factor*
 
 
 
0-24
 
 
 
0
 
 
-26.0% or less
 
 
0
 
 
 
 
25
 
 
 
25
 
 
 
-25.0
%
 
 
25
 
 
 
 
26
 
 
 
26
 
 
 
-24.0
%
 
 
26
 
 
 
 
27
 
 
 
27
 
 
 
-23.0
%
 
 
27
 
 
 
 
28
 
 
 
28
 
 
 
-22.0
%
 
 
28
 
 
 
 
29
 
 
 
29
 
 
 
-21.0
%
 
 
29
 
 
 
 
30
 
 
 
30
 
 
 
-20.0
%
 
 
30
 
 
 
 
31
 
 
 
31
 
 
 
-19.0
%
 
 
31
 
 
 
 
32
 
 
 
32
 
 
 
-18.0
%
 
 
32
 
 
 
 
33
 
 
 
33
 
 
 
-17.0
%
 
 
33
 
 
 
 
34
 
 
 
34
 
 
 
-16.0
%
 
 
34
 
 
 
 
35
 
 
 
35
 
 
 
-15.0
%
 
 
35
 
 
 
 
36
 
 
 
36
 
 
 
-14.0
%
 
 
36
 
 
 
 
37
 
 
 
37
 
 
 
-13.0
%
 
 
37
 
 
 
 
38
 
 
 
38
 
 
 
-12.0
%
 
 
38
 
 
 
 
39
 
 
 
39
 
 
 
-11.0
%
 
 
39
 
 
 
 
40
 
 
 
40
 
 
 
-10.0
%
 
 
40
 
 
 
 
41
 
 
 
41
 
 
 
-9.0
%
 
 
41
 
 
 
 
42
 
 
 
42
 
 
 
-8.0
%
 
 
42
 
 
 
 
43
 
 
 
43
 
 
 
-7.0
%
 
 
43
 



 
 
 
44
 
 
 
44
 
 
 
-6.0
%
 
 
44
 
 
 
 
45
 
 
 
45
 
 
 
-5.0
%
 
 
45
 
 
 
 
46
 
 
 
46
 
 
 
-4.0
%
 
 
46
 
 
 
 
47
 
 
 
47
 
 
 
-3.0
%
 
 
47
 
 
 
 
48
 
 
 
48
 
 
 
-2.0
%
 
 
48
 
 
 
 
49
 
 
 
49
 
 
 
-1.0
%
 
 
49
 
 
 
 
50
 
 
 
50
 
 
 
0.0
%
 
 
50
 
 
 
 
51
 
 
 
52
 
 
 
1.2
%
 
 
52
 
 
 
 
52
 
 
 
54
 
 
 
2.4
%
 
 
54
 
 
 
 
53
 
 
 
56
 
 
 
3.6
%
 
 
56
 
 
 
 
54
 
 
 
58
 
 
 
4.8
%
 
 
58
 
 
 
 
55
 
 
 
60
 
 
 
6.0
%
 
 
60
 
 
 
 
56
 
 
 
62
 
 
 
7.2
%
 
 
62
 
 
 
 
57
 
 
 
64
 
 
 
8.4
%
 
 
64
 
 
 
 
58
 
 
 
66
 
 
 
9.6
%
 
 
66
 
 
 
 
59
 
 
 
68
 
 
 
10.8
%
 
 
68
 
 
 
 
60
 
 
 
70
 
 
 
12.0
%
 
 
70
 
 
 
 
61
 
 
 
72
 
 
 
13.2
%
 
 
72
 
 
 
 
62
 
 
 
74
 
 
 
14.4
%
 
 
74
 
 
 
 
63
 
 
 
76
 
 
 
15.6
%
 
 
76
 
 
 
 
64
 
 
 
78
 
 
 
16.8
%
 
 
78
 
 
 
 
65
 
 
 
80
 
 
 
18.0
%
 
 
80
 
 
 
 
66
 
 
 
82
 
 
 
19.2
%
 
 
82
 
 
 
 
67
 
 
 
84
 
 
 
20.4
%
 
 
84
 
 
 
 
68
 
 
 
86
 
 
 
21.6
%
 
 
86
 
 
 
 
69
 
 
 
88
 
 
 
22.8
%
 
 
88
 



 
 
 
70
 
 
 
90
 
 
 
24.0
%
 
 
90
 
 
 
 
71
 
 
 
92
 
 
 
25.2
%
 
 
92
 
 
 
 
72
 
 
 
94
 
 
 
26.4
%
 
 
94
 
 
 
 
73
 
 
 
96
 
 
 
27.6
%
 
 
96
 
 
 
 
74
 
 
 
98
 
 
 
28.8
%
 
 
98
 
 
 
 
75-99
 
 
 
100
 
 
30.0% or greater
 
 
100
 
 
 
 
 
*
 
First percentage is determined for each calendar year of the Performance Period and averaged, and added to second percentage. The total is multiplied by 0.75 if the Total Shareholder Return of the Company is zero percent or less, and then multiplied by the number of Performance Shares granted to determine the number of Final Performance Shares. See Section 1 of this Agreement.



Exhibit 10.44
MetLife, Inc.  
_____________________________

Board of Directors



February 9, 2015

2015 Annual Variable Incentive Plan (AVIP) – Goals and Method for Determining Amount Available for 2015 AVIP Awards and Section 162(m) Goals


Resolved:

(1)
That the Annual Variable Incentive Plan (“AVIP”) awards for 2015 performance shall constitute Cash-Based Awards under the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Stock and Incentive Plan”);
(2)
That the measures to be used to determine performance results of MetLife, Inc. (the “Company”) for establishing the amount to be available for payment of awards under AVIP for 2015 performance (the “2015 Available Amount”) are approved in all respects substantially in the form described in the materials presented to the Committee and filed with the records of the meeting, subject to Committee discretion to increase or decrease and otherwise determine the 2015 Available Amount and subject, with respect to the eligibility of the Chief Executive Officer of the Company and each other member of the Company’s Executive Group for an AVIP award for 2015, to the Company meeting the Section 162(m) Goals as described elsewhere in these resolutions;
(3)
That the 2015 Section 162(m) Goals shall be the following:
(a)
Positive Company income from continuing operations before provision for income tax, excluding net investment gains (losses) (determined in accordance with Section 3(a) of Article 7.04 of SEC Regulation S-X), which includes total net investment gains (losses) and net derivatives gains (losses), measured for 2015.
(b)
Positive Company Total Shareholder Return for the Performance Period. “Total Shareholder Return” means the change (plus or minus) from the Initial Closing Price to the Final Closing Price, plus dividends (if any) actually paid on shares of MetLife, Inc. common stock on a reinvested basis during the Performance Period. “Initial Closing Price” means the average Closing Price for the twenty (20) trading days prior to the first day of the Performance Period. “Final Closing Price” means, in the case of the





Company the average Closing Price for the twenty (20) trading days prior to and including the final day of the Performance Period. “Closing Price” means the closing price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), or in the event that there are no Share transactions reported on such tape or other system on the applicable date, the closing price on the immediately preceding date on which Share transactions were reported. “Shares” means shares of MetLife, Inc. common stock. The “Performance Period” refers to 2015.
(4)
That the Chief Executive Officer of the Company (“CEO”) and each other member of the Company’s Executive Group shall be eligible for an AVIP award for 2015 of $10 million (or the maximum aggregate amount that may be awarded or credited with respect to cash-based awards to a participant in a single year under the Stock and Incentive Compensation Plan, if lower) if any one or more of the 2015 Section 162(m) Goals is met; provided, however , that the Committee shall retain the ability, in its discretion, to reduce the amount of the award payable (including reducing the amount payable to zero) based on such factors or considerations that the Committee shall deem appropriate, including but not limited to the amounts that would have been payable to the CEO or other member of the Company’s Executive Group, respectively, under the methodology applicable to other employees under AVIP;
(5)
That if the Company does not meet any of the 2015 Section 162(m) Goals, neither the CEO nor any of the other members of the Company’s Executive Group shall be eligible for any AVIP award for 2015 and
(6)
That the officers of the Company (the “Officers”) be and hereby are authorized, in the name and on behalf of the Company, to (a) take or cause to be taken any and all such further actions and to prepare, execute and deliver or cause to be prepared, executed and delivered, and where necessary or appropriate, file or cause to be filed with the appropriate governmental authorities, all such other instruments and documents, including but not limited to all certificates, contracts, bonds, agreements, documents, instruments, receipts or other papers, (b) incur and pay or cause to be paid all fees and expenses and (c) engage such persons, in each case as such Officer shall in that Officer’s judgment determine to be necessary or appropriate to carry out fully the intent and purposes of the foregoing resolutions and each of the transactions contemplated thereby.





Exhibit 10.48
AMENDMENT NUMBER 2 TO THE
METROPOLITAN LIFE AUXILIARY
SAVINGS AND INVESTMENT PLAN
(Amended and Restated Effective January 1, 2008)
1. Section 2.1 of the Plan is hereby amended as follows:
“2.1 ‘Administrative Participant’ means any Participant in the Plan who is not classified by the Company as a Commissioned Participant.”
2. There is hereby added to the end of Section 4.9 a new subsection to be known as subsection (c). Subsection (c) shall provide as follows:
     “(c) Effect of Rehire As Administrative Participant . In the event that an Administrative Participant has experienced a Termination of Employment and is later rehired by the Company, his or her rights with respect to any election made under this Section shall be determined as follows:
     (1) If such Participant made an election under subsection (b) of this Section prior to his or her Termination of Employment, whether or not payments under this Plan in accordance with such election had commenced prior to the date of his or her reemployment by the Company, then payments will commence when scheduled in accordance with the terms of such Participant’s election or continue if such payments have already commenced. Upon such Participant’s reemployment any Company Contributions allocated to such Participant’s Account under this Plan will be included as part of future payments under such election. Following the distribution of the final payment in accordance with such Participant’s election, such Participant’s election of the time and form of distribution will be governed solely by subsection (a), unless such Participant makes a subsequent election in accordance with subsection (b). Any Company Contributions allocated to the Participant’s Account following the distribution of the final payment in accordance with the Participant’s election shall be retained in such Participant’s Account until such Participant’s subsequent Termination of Employment, at which time distribution of such Participant’s Account shall commence, either in accordance with subsection (a) or subsection (b).
     (2) If such Participant has not made an election in accordance with subsection (b) at the time of his or her Termination of Employment, then she or he will receive his or her Account under this Plan in the Default Mode of Payment at the Default Commencement Date, notwithstanding the fact that such Participant is reemployed by the Company prior to the Default Commencement Date. If Company Contributions are allocated to such Participant’s Account following the date of his or her Termination of Employment, but prior to the Default Commencement Date, such Contributions will be included in the Default Mode of Payment. Once such Participant has received a final distribution of his or her Account under subsection (a), any Company Contributions which are allocated to such Participant’s Account following his or her final payment shall then be distributed following his or her subsequent Termination of Employment in accordance with subsection (a), unless such Participant makes an election in accordance with subsection (b).”
3. Section 8.2(b) of the Plan is hereby amended as follows:
     “(b) Limitations of Time for Submitting Claims and Suits Challenging Denial of Claims . No suit to recover benefits under this Plan or to allege that the Plan was not administered in accordance with its terms and/or ERISA shall be brought more than six months following the expiration of the claims and review procedures described in subsection (a). If a Participant has received or has commenced to receive a distribution from the Plan, no claim for benefits under the Plan’s claims and review procedures described in subsection (a) shall be made regarding the calculation of the amount of the benefits more than six months following the date on which the Participant received or commenced to receive such distribution”
4. This Amendment shall become effective on January 1, 2010.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed in its name and behalf this 21 st day of December, 2010, by its officer thereunto duly authorized.



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metropolitan Life Insurance Company
 
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Andrew J. Bernstein
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
ATTEST:
 
 
 
 
 
/s/ Candice Martin
 
 
 



EXHIBIT 10.52

AMENDMENT NUMBER ONE TO THE METLIFE DEFERRED
COMPENSATION PLAN FOR OFFICERS
(As amended and restated as of November 1, 2003)

WHEREAS, the MetLife Deferred Compensation Plan for Officers, as last amended and restated November 1, 2003 (the "PLAN"), was adopted to permit certain eligible employees voluntarily to defer the payment of certain types of compensation;

WHEREAS, certain other nonqualified deferred compensation arrangements have been entered into with employees who are eligible to participate in the Plan, which arrangements either expressly or implicitly incorporate aspects of the Plan, and/or are otherwise administered, in whole or in part, in a manner consistent with the administration of the Plan;

WHEREAS, to facilitate the administration of such other arrangements, it has been recommended that such arrangements be incorporated into the Plan (cognizant of the need to preserve the differences from the Plan terms mandated by such arrangements, including, but not limited to, in order to avoid subjecting the amounts deferred under such arrangements and the Plan to the additional taxes imposed under Section 409A of the Internal Revenue Code of 1986, as amended);

WHEREAS, pursuant to Section 20 of the Plan, the Plan Administrator has reserved the right to amend the Plan;

NOW, THEREFORE, the Plan is hereby amended in the manner set forth below:

1. Section 2 is amended to add a new Section 2.7 at the end thereof, to read as follows:

2.7. The Plan Administrator may permit other non-qualified deferred compensation arrangements between an Eligible Associate and any MetLife Company or an affiliate of any MetLife Company, whether or not elective, to be administered under and treated as part of the Plan. The Plan Administrator shall establish a separate Alternative Compensation Account for an Eligible Associate who is party to a non-qualified deferred compensation arrangement treated as part of the Plan. Unless otherwise specified herein, on Annex I or by the Plan Administrator in writing, the general provisions of the Plan shall apply to any such Alternative Compensation Account, including without limitation, those provisions related to (i) the value of the Alternative Contribution Account (including the Investment Tracking of such Account), (ii) the timing, number and form of payments from such Account and (iii) the designation of any beneficiary(ies) to receive payment from such Account upon the death of the Participant. Notwithstanding the immediately preceding sentence, unless otherwise provided by the terms of the applicable non-qualified deferred compensation arrangement as in effect on October 3, 2004, no distribution shall be made from any Alternative Contribution Account pursuant to Section 12, 13 or 14 of the Plan.

2. Section 10 is amended to add a new Section 10.3.11 at the end of Section 10.3 thereof, to read as follows:

10.3.11. Notwithstanding anything in this Section 10.3 to the contrary, payment in respect of any Alternative Compensation Account shall not be accelerated from the date payment would have been made under the corresponding nonqualified deferred compensation arrangement, as identified on Annex I or as otherwise specified in writing by the Plan Administrator.




3. Section 21 is amended to new Sections 21.2 and 21.3 thereto, to read as follows, and to appropriately renumber all other sections thereof to reflect the addition of such Section:

21.2 "Alternative Compensation Account" means a record-keeping account established for the benefit of an Eligible Associate in which is credited such amounts of compensation as are deferred under the nonqualified deferred compensation arrangement to which such Account relates.

21.3 "Annex I" means the schedule established by the Plan Administrator, as the same may be amended by the Plan Administrator at any time and from time to time, on which is specified the terms of any non-qualified deferred compensation arrangement that is to be administered as part of the Plan that deviate from the general terms of the Plan. Annex I, as in effect from time to time, is expressly incorporated herein by reference and made a part hereof.

4. Section 21 is further amended to add a new second sentence to
Section 21.11 (as renumbered pursuant to item 3 of this Amendment), "Deferred Compensation Account", to read as follows:

To the extent the context so requires, the term Deferred Compensation Account, as applied to any Participant, shall also include any Alternative Compensation Account established for the benefit of such Participant.

5. Section 21 is further amended to add a new second sentence at the end of Section 21.23 (as renumbered pursuant to item 3 of this Amendment), "Participant", to read as follows:

To the extent that the context so requires, the term Participant shall also include any Eligible Associate for whose benefit an Alternative Compensation Account has been established under the Plan.

6. The Plan is further amended to add at the end thereof of a new Annex I, as is attached hereto, which is incorporated herein by reference and made a part hereof.

7. Except as otherwise expressly provided herein, the Plan shall continue in full force and affect, without amendment. For the avoidance of doubt, nothing in this amendment shall, or shall be construed to, amend or modify any provision or term of the Plan with respect to amounts otherwise credited thereunder immediately prior to the execution of this Amendment.

IN WITNESS WHEREOF, the amendment to the MetLife Deferred Compensation Plan has been executed by the Plan Administrator thereof, on this 4th day of May, 2005.



PLAN ADMINISTRATOR

/s/ Graham Cox
__________________________

                                       




NAME OF ELIGIBLE ASSOCIATE
EFFECTIVE DATE OF ARRANGEMENT AND INITIAL DEFERRED AMOUNT
INVESTMENT TRACKING, IF DIFFERENT FROM PLAN
TIMING OF DISTRIBUTIONS
FROM ALTERNATIVE COMPENSATION ACCOUNT

Robert Benmosche
July 20, 1995 (Sign-on bonus subject to 5 year vesting condition)
Investment tracking to be based solely on interest rate credited under MetLife SIP Fixed Income Fund (as referenced in Section 6.2 of the Plan) at time of deferral

Lump sum distribution upon retirement from service as an employee of the MetLife Companies
 
$
400,000

 
 
Robert Benmosche
April 1, 1996 (elective deferral of portion of future 1996 monthly salary)
Investment tracking to be based solely on interest rate credited under MetLife SIP Fixed Income Fund (as referenced in Section 6.2 of the Plan) at time of deferral
10 approximately equal annual installments (adjusted for interest accrued) commencing in June, 2009
 
$12,000 per month (aggregate deferral of $108,000)

 
 
Robert Benmosche
January 1, 1997 (elective deferral of portion of future 1997 monthly salary)
Investment tracking to be based solely on interest rate credited under MetLife SIP Fixed Income Fund (as referenced in Section 6.2 of the Plan) at time of deferral
10 approximately equal annual installments (adjusted for interest accrued) commencing in June, 2009
 
$22,000 per month (aggregate deferral of $264,000)

 
 
Lisa Weber
February 4, 1998 (Sign-on bonus subject to 5 year vesting condition)
N/A -- Investment Tracking in accordance with terms of the Plan
In five annual installments commencing upon termination of service as an employee of the MetLife Companies
 
$750,000
 
 

  


EXHIBIT 10.53


AMENDMENT NUMBER TWO TO
THE METLIFE DEFERRED COMPENSATION PLAN FOR OFFICERS
(AS AMENDED AND RESTATED AS OF NOVEMBER 1, 2003) (THE "PLAN")

The Plan is hereby amended in the manner set forth below:

1. The final sentence of Section 8 is amended to read as follows:

Notwithstanding the foregoing, no Matching Contributions shall be credited in favor of a Participant during the suspension of such Participant's deferrals pursuant to Section 4.6 of this Plan, no Matching Contributions shall be credited in favor of a Participant to the extent such Matching Contributions would not have been vested under SIP as of December 31, 2004, and such Matching Contributions that would vest after December 31, 2004 shall be credited as provided under the MetLife Leadership Deferred Compensation Plan and not under this Plan.

2. This Amendment will be effective immediately upon execution.

3. Except as otherwise expressly provided herein, the Plan (including any amendments thereto) shall continue in full force and effect without amendment.

IN WITNESS WHEREOF, this amendment is approved.

PLAN ADMINISTRATOR


/s/ Margery Brittain
------------------------------------------------------


Date: 12/14/05
----------------------------

Witness: /s/ Rose Alston
------------------------------------------------------





Exhibit 10.60
AMENDMENT NUMBER FIVE TO THE
METLIFE LEADERSHIP DEFERRED COMPENSATION PLAN
(As amended and restated with respect to salary and Cash Incentive Compensation January 1,
2005, and with respect to Stock Compensation April 15, 2005)
     The MetLife Leadership Deferred Compensation Plan is hereby amended, effective January 1, 2011, as follows:
1. Section 8 is hereby amended to read as follows:
“8.
 
Matching Contribution . If a Participant has a valid deferral election to make contributions to SIP or the MetLife Bank 401(k) Plan throughout a calendar year, the Participant’s Matching Contribution Account shall be credited with the amount of Matching Contribution (if any) with which the Participant’s SIP or MetLife Bank 401(k) Plan account would have been credited under the terms and provisions of such plan without application of certain Tax Code limitations under Code sections 415 and 401(a)(17) with respect to compensation deferred into this Plan. Notwithstanding the foregoing, no Matching Contributions shall be credited in favor of a Participant during the suspension of such Participant’s deferrals pursuant to Section 4.7 of this Plan. A Participant’s Matching Contribution Account shall vest or be forfeited to the same extent, and on the same vesting schedule, that such Matching Contributions would have vested or been forfeited under the terms of SIP, notwithstanding any accelerated vesting under the SIP for individuals who transfer to MetLife Bank.”
2. Section 22.11, “Eligible Associate”, is hereby amended by adding new subsection (d) as follows:
 
 
 
“(d) an individual to whom an offer of employment in compensation grades 120 through 123 has been made, who is selected by the Plan Administrator for eligibility and has been so notified.”
3. Section 22.24, “Officer”, is hereby amended to read as follows:
 
“22.24.
 
“Officer” shall mean each individual who is employed by a MetLife Company paid from the United States in United States currency and whose compensation is in an officer or officer-equivalent grades level, each as determined by the Plan Administrator in its discretion. For eligibility to defer compensation, grade levels 32 and 120 through 123 are included in this definition.”
4. Section 22.29, “Qualifying Employee”, subsection (a) is hereby amended to read as follows:
 
 
 
(a) classified in compensation grade 090, 112 through 119 or 152 through 161 and who earned annual total cash compensation (without regard to benefitability under the terms of SIP), for the twelve (12) months immediately preceding October 1 of the year prior to the year subject to the Deferral Election or in such twelve (12) month period otherwise designated by the Plan Administrator, in excess of the compensation limit under Section 401(a)(17) of the Code (as indexed annually for inflation) for the year the deferral election is filed;”
IN WITNESS WHEREOF, the Plan Administrator has caused this Amendment to be adopted this 16 th day of December, 2010.
 
 
 
 
 
 
 
 
 
 
 
 
PLAN ADMINISTRATOR
 
 
 
 
 
 
 
 
 
/s/ Andrew J. Bernstein
 
 
 
 
 
Andrew J. Bernstein
 
 
ATTEST:

/s/ Candice Martin        


Amendment Number Five to The MetLife Leadership Deferred Compensation Plan

Exhibit 10.64

 


















The MetLife Non-Management Director
Deferred Compensation Plan




























Program Description and Plan Document
November 2012







Important Notices
This Program Description provides an overview of the MetLife Non-Management Director Deferred Compensation Plan (the "Plan"). It is also the official plan document that legally governs the Plan. This Plan document will govern in every respect and instance, and replaces and supersedes prior Plan documents.
This Program Description may be updated from time to time to implement changes in the Plan. Fund performance data will be updated periodically. These updates will constitute part of the Prospectus distributed with respect to the Plan.
The Plan Administrator may amend, alter or terminate the Plan in accordance with its terms at any time and for any reason.
The Plan was effective on January 1, 2005, and the Plan will continue in effect until it is amended, suspended, or terminated according to its terms.
This Plan was designed to replace the MetLife Deferred Compensation Plan for Outside Directors and Article VII of the MetLife, Inc. 2000 Directors Stock Plan, respectively, beginning with 2005 compensation deferrals; earlier deferrals will remain governed by the earlier plans.
MetLife, Inc. will have the obligation to pay amounts deferred under the Plan. MetLife, Inc.'s obligations are registered under the Securities Act of 1933, as amended. Since this is an unfunded plan, your rights or claims against assets or property are no greater than those of a general unsecured creditor of MetLife, Inc.
Your deferrals may gain or lose value over time; see "Investment Tracking For Your Deferred Cash Accounts" and "MetLife Deferred Stock Accounts" below. Shares of MetLife, Inc. common stock paid under the Plan may be shares of treasury common stock, authorized but unissued common stock, or shares obtained on the open market.
This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933, as amended.
The date of this document is November 2012.

Page 2





MetLife Non-Management Director Deferred Compensation Plan
Plan At-a-Glance

Purpose
To provide eligible directors with the opportunity to defer their cash and MetLife Stock compensation, thereby deferring payment of federal and most state income taxes on such compensation.
Eligibility
Directors of MetLife, Inc. who are not employees of MetLife, Inc. or any of its affiliates.
Election Options
Deferral amount
Investment tracking funds (for cash deferrals)
Distribution date
Number of distribution payments
Enrollment Period for
Incumbent Directors
Eligible Directors will be notified of the opportunity for enrollment each calendar year in the calendar year before deferrals begin.

Beginning with the elections for retainer fees paid.in 2013, deferral elections will be considered "Evergreen Elections," and will continue to be effective for all subsequent years, unless changed during a future enrollment period.
Enrollment Period for
New Directors
Newly-appointed directors may make a deferral election for fees paid in the calendar year in which they are elected, but must generally do so by the earlier of:
the day before the first Directors meeting after appointment or,
the 30 th  day after appointment.
Investment Tracking
The value of your deferred cash compensation accounts will fluctuate daily based on the performance of the investment tracking funds and indices you select. Your investment tracking elections will carry over from year to year unless or until changed.
Investment Tracking
Fund Changes
Limited to a total of six times per year for future deferrals and existing account balances.
Changes in Amounts
Deferred
Elections are irrevocable for the calendar year immediately following the election period.
. Elections that relate to amounts already deferred can only be modified if you qualify for a hardship exception.
Form of Distribution
Your deferred cash compensation will be paid in cash at the end of the deferral period. Your deferred compensation of MetLife Stock will be paid in the form of such stock, with imputed reinvested dividends, at the end of the deferral period.
Distribution:
-      Number
-      Timing


-      Hardship


Lump-sum payment or up to 15 annual installments.
Beginning upon earlier of 60 days after termination of service as a director or on a designated future date.
Immediate lump-sum payment (availability strictly limited).
Changes to Distribution Date and/or Number of Payments
You may change the distribution date to a date at least five years later than the date you originally selected, and/or change the number of payments. Your change will only be effective if you submit your request no later than one year before the distribution date you originally selected and remain an active Director for at least 6 years from the date your changes are submitted.
Taxes
Deferred compensation is taxable as ordinary income at the time of distribution. Rollover to an  IRA,   qualified plan or nonqualified plan is not permitted.
Beneficiary
Upon your death, any existing account balances will be paid to your designated beneficiary or beneficiaries in a lump sum.
Plan Funding
The Plan.is a nonqualified, unfunded plan Your accounts are maintained for recordkeeping purposes only.


Page 3




MetLife Non-Management Director Deferred Compensation Plan

The MetLife Non-Management Director Deferred Compensation Plan (the "Plan") allows eligible directors to defer receiving a portion of their retainer fees paid in cash or shares of MetLife, Inc. common stock ("MetLife Stock") for services in 2005 and thereafter, thereby deferring payment of federal and most state income taxes until a later date when the deferred payments are received. Participation in the Plan is completely voluntary.

The Plan is a nonqualified plan that is unfunded and subject to the risks described in this document. Amounts credited to an account are solely for recordkeeping purposes. The Plan is not subject to protection under the Employee Retirement Income Security Act of 1974 (ERISA), and is not a qualified plan under Internal Revenue Code Section 401(a).

Eligibility
Members of the Board of Directors of MetLife, Inc. (the "Board") who are not employees of MetLife, Inc. or any of its affiliates ("Non-Management Directors") are eligible to participate. In this Program Description, "you" refers to a director who is eligible to participate in the Plan.

Making a Deferral Election
Incumbent Directors - Prior to the calendar year in which retainer fees will be paid to you for services you provide as a Non-Management Director, the Plan Administrator may offer you the opportunity to defer all or a portion of the retainer fees paid as compensation for such services. Elections to defer cash retainer fees and/or stock retainer fees paid in 2013 will carry over from year to year. You will be notified of your current elections during the enrollment period, prior to the beginning of each calendar year and will have the opportunity to change your
election at that time. If you do not change your elections during the enrollment period, then at the end of the enrollment period, your elections will become irrevocable and will continue to apply to the retainer fees paid to you in the subsequent calendar year.

New Directors - In general, you may defer all or a portion of your retainer fees for services in the calendar year you are appointed to the Board by submitting a deferral election offered to you by the Plan Administrator by the earlier of :

•    the day before the first Directors meeting following your appointment or,
•    the thirtieth (30 th ) day after your appointment.

If a Directors meeting occurs before the thirtieth (30 th ) day after your appointment and before you have filed a deferral election, then, at the discretion of the Plan Administrator, you may defer a prorated portion of your fees. The proration will be determined according to the number of scheduled meetings for the year of your appointment. You must submit your deferral election no later than the thirtieth (30 th ) day after your appointment.

All Directors - To defer your cash retainer fees, you need to complete the deferral election form offered to you by the Plan Administrator specifying:

The percentage of your cash retainer fees you want deferred into a Deferred Cash Account (if you choose to defer any of your cash fees, your deferral for the immediately subsequent calendar year must equal at least $1 0,000);


Page 4




•     The investment tracking funds that will be used to adjust the value of that Deferred Cash
Account; and
A future distribution date and number of payments for that Deferred Cash Account (paid in cash).

To defer your MetLife Stock retainer fees, you need to complete a deferral election form specifying:

•     The percentage of your MetLife Stock retainer fees you want deferred into a MetLife
Deferred Stock Account; and
The future distribution date and number of payments for your MetLife Deferred Stock Account.

Your deferral election form must be submitted during the enrollment period. If you submit an election form that does not specify when payment is to be made, payment will be made upon the termination of your service as a Non-Management Director. If you submit an election form that does not specify the number of installments in which payment should be made, payment will be made in a single lump sum.

Before making your elections, you may wish to consult a tax or personal financial advisor regarding all of the ramifications of deferral of compensation.
All deferrals are subject to the terms of this Plan.
Income Taxes
Deferred compensation is not subject to current taxation under federal and most state
income tax laws at the time it is deferred. However, income and self-employment taxes
will be due at the time payment is made. Consult your financial advisor with any questions regarding how and when you should make payment of your tax obligations arising from payments under the Plan. Note that amounts paid under the Plan may not be rolled-over into an IRA, qualified plan or another nonqualified plan.

Neither MetLife, Inc. nor any of its affiliates will be entitled to claim a tax deduction for any compensation (plus earnings) the payment of which is deferred under the terms of this Plan until the taxable period in which the payments are includible in the taxable income of a participant. The deduction can be claimed only in the amount that such income is included in such participant's income.

Deferral Amounts
If you choose to defer any of your cash retainer fees, your deferral for the immediately subsequent calendar year must be at least $10,000.

Once you elect your deferral amount, you may not change it for the year immediately subsequent to the election, unless the Plan Administrator determines that you qualify for hardship treatment. The Plan Administrator may suspend deferrals in cases of extreme hardship as provided in the Plan. See "Hardship Exceptions," below. Changes for later periods, to the extent covered by the election, may be allowed by the Plan Administrator, subject to Legal Deferral Requirements.


Page 5




Deferred Compensation Accounts
If you defer any or all of your cash retainer fees, a Deferred Cash Account in your name for that year's deferrals will be established for recordkeeping purposes. If you defer any of your MetLife Stock retainer fees, a MetLife Deferred Stock Account in your name for that year's deferrals will be established for recordkeeping purposes. You will receive account statements annually.

Your accounts will be credited effective on the date on which your retainer fees would have been paid had you not elected to defer receipt of such retainer fees.

Investment Tracking For Your Deferred Cash Accounts
Investment tracking funds are used as a device for adjusting the value of your Deferred Cash Accounts, from the time contributions are made until the time payments are made from your Deferred Cash Accounts, based on fund performance.

Each investment tracking fund reflects the investment returns of the actual fund or index, including any management fees and/or other expenses that apply to the actual fund. Returns are measured each day the relevant stock exchange is open. Your account will fluctuate based on the fund's performance (gains or losses) in effect "mirroring" the performance of the specified fund or index, determined on a Total Return basis. "Total Return" reflects the change (plus or minus) in price or value, plus dividends (if any) on a reinvested basis. Your deferred cash account will not actually be invested in the funds. If the aggregate performance of the funds mirrored by the investment tracking funds you choose is positive, the value of your account will increase; if it is negative, the value of your account will decrease.

You may change your investment tracking funds- either with regard to future deferrals or your existing account- at any time during the year by accessing the Plan's website or by calling the participant service center. However, you may make no more than six changes per calendar year. For this purpose, all changes submitted on the same day will count as a single change. You can elect to track your account against one or more of the investment tracking funds, and fund allocations must be made in multiples of 5%. If you have provided your e­ mail address, you will receive confirmation of your changes shortly after they are made.

Under MetLife's Insider Trading Policy, active Directors are required to obtain pre-clearance from the MetLife Corporate Secretary before transferring funds into or out of the MetLife Common Stock Fund or changing the percentage of future deferred fees that will be allocated to the MetLife Common Stock Fund.

Detailed information about the available investment tracking funds will be provided to you. This will include descriptions and historic performance. The Plan Administrator may change, eliminate or replace any investment tracking fund or index at any time. When the Plan Administrator has determined to make a change, you will be informed and you will be given an opportunity to change your investment tracking selections to the extent they are affected by the change.


Page 6




MetLife Deferred Stock Accounts
Your MetLife Deferred Stock Accounts will reflect the number of shares of MetLife Stock you deferred, plus imputed reinvested dividends (on the same basis as such dividends are paid on actual shares of MetLife Stock).

The value of your MetLife Deferred Stock Account will depend on the price of MetLife Stock, which is affected by market conditions and other factors, such as declared dividends. As a result, the value of your MetLife Deferred Stock Account is anticipated to have a relatively high risk profile.

Your MetLife Deferred Stock Accounts will be appropriately adjusted (as determined by the Governance Committee of the Board, or its successor) in the event of any MetLife Stock dividend, MetLife Stock split, recapitalization (including, but not limited, to the payment of an extraordinary dividend), merger, consolidation, combination, or spin-off affecting MetLife, Inc. capitalization, distribution of MetLife, Inc. assets to holders of MetLife Stock (other than ordinary cash dividends), exchange of shares, or other similar corporate change.

The performance of MetLife Deferred Stock Account will be identical to that of the MetLife Common Stock Fund, and is labeled the "MetLife Deferred Shares Fund" in the "Total Return Historic Fund & Index Performance by Calendar Year" chart.

Distribution Dates
For each of your Deferred Cash Accounts and your MetLife Deferred Stock Accounts, you may choose to have your distributions begin either (1) on a specific date no less than three years after the year of deferral, or (2) upon the termination of your service as a Non­ Management Director of MetLife, Inc. (the date of your termination of service will be determined in accordance with Legal Deferral Requirements). If you choose to receive your account on a specific date, your account will be paid to you on the earlier of (a) the date you selected, or (b) on the date of the termination of your service as a director.

Once you have designated a distribution date, you cannot change it except as described below under "Changing the Distribution Date and/or Number of Payments."

Number of Payments
You may elect to receive each of your account balances in either a lump-sum payment or up to 15 annual installments. For each of your Deferred Cash Accounts, each annual installment will be a fraction of the account's cash value with one being the numerator and the number of payments remaining being the denominator. For each of your MetLife Deferred Stock Accounts, each annual installment will be a fraction of the number of shares of MetLife Stock represented in the account, with one being the numerator and the number of payments remaining being the denominator and disregarding any fraction of a share until the last installment. For example, if you elect to receive 10 annual payments, the first payment is equal to 1/10 th of the account; the second payment is equal to 1/9 th of the account; and so on until final payment is made. For purposes of Legal Deferral Requirements, any payment option selected under this plan will be considered to be a single payment form of benefit.


Page 7




Form of Payments
All payments from your Deferred Cash Accounts (including portions allocated to the MetLife Common Stock investment tracking fund) will be made in cash. All payments from your MetLife Deferred Stock Account will be made in MetLife Stock, except that fractional shares will be paid in cash at the Closing Price of MetLife Stock on the date of payment.*

Changing the Distribution Date and/or Number of Payments
For each of your Deterred Cash Account and your MetLife Deferred Stock Account for a given year, you may make changes only once on the form offered to you by the Plan Administrator, at which time you may change either or both:

1. the date you previously elected to receive payment of your deferred compensation to a date at least five (5) years later than your original election; and/or
2. the number of payments you have chosen to receive (your change may increase or decrease the number of payments and must also delay payment for at least five (5) years from the original date elected).

You must make all changes to any particular account at the same time; and your changes will only become effective if you submit them no later than one year before the original date you had selected for payment and remain an active Director for at least another 6 years from the date your changes are submitted. Otherwise, such changes will not become effective. All changes will be effective to the extent consistent with Legal Deferral Requirements.

Please note that elections for deferred payments on a fixed date will only be honored if you are still providing services as a Director as of the date that your deferred amounts become payable under your election. All deterred amounts whose payment election dates have not been reached as of the date that you are no longer providing services as a Director are paid as soon as administratively practical after your service as a Director ends. This is true even for re-deferral elections made in accordance with the procedures described above.

Payment to Beneficiaries
If you die before your distributions begin or are completed, the balance in your accounts will be paid as a single lump sum to your beneficiary. If you have not designated a beneficiary, or your beneficiary (or beneficiaries) die(s) before you do, the balance in your accounts will be paid to your estate.

You may designate an individual, entity, trustee, or your estate as your beneficiary, and you may change your beneficiary at any time. Each beneficiary designation will apply to all of your deferrals under the Plan, and will supersede your previous beneficiary designations. Unless or until you submit a new beneficiary designation form, your last beneficiary designation (if any) under the MetLife Deferred Compensation Plan for Outside Directors

__________________
' "Closing Price" means the closing price of a share of MetLife Stock as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of shares of MetLife Stock are quoted at the relevant time) on such date. In the event that there are no transactions of MetLife Stock reported on such tape (or such other system) on such date, Closing Price shall mean the closing price on the immediately preceding date on which MetLife Stock transactions were so reported.


Page 8




(or, if you have not designated a beneficiary under that plan, the beneficiary you have designated under the MetLife, Inc. 2000 Directors Stock Plan, if any) will apply under this Plan.

You may update or designate your beneficiary(ies) during each enrollment period. If you wish to change your beneficiary designations during the year you may do so by accessing the Plan recordkeeper's website or by calling the Participant Service Center.

Loans
No loans may be taken from your accounts.

Hardship Exceptions
In cases of extreme hardship, and consistent with Legal Deferral Requirements for deferral of income taxation, the Plan Administrator may suspend deferrals or make payments to you, reducing the value of your account. However, the total amount suspended and advanced cannot exceed the amount required to satisfy the financial consequences of the hardship and tax withholding requirements.

Unfunded, Unsecured Obligations of MetLife, Inc.
Deferrals under the Plan are unfunded and unsecured obligations of MetLife, Inc. Your rights are those of a general unsecured creditor of MetLife, Inc. The Plan is intended to be designed and administered in complete accordance with Legal Deferral Requirements, but in no event will MetLife, Inc., any affiliate, or the Plan be liable for any taxes, penalties, or other losses on account of the Plan or its administration failing to comply with Legal Deferral Requirements. The total amount of deferrals under the Plan will depend on participant elections. There are no fees charged to you for participation in the Plan.

Assignment
No assignment, hypothecation, or pledge of the right to receive the payment of amounts deferred or any other rights under the Plan may be made. The Plan does not provide for the creation of a lien on any account.

Qualified Domestic Relations Orders ("QDROs")
Deferred compensation will be distributed or attached to the extent required by a QDRO.

Plan Administrator
The Plan is administered by a Plan Administrator who may establish, amend or rescind rules and regulations relating to the Plan. The Plan Administrator of this Plan is also the Plan Administrator of the Metropolitan Life Retirement Plan for U.S. Employees. The Plan Administrator acts through an individual who is an employee of an affiliate of MetLife, Inc. and an officer of one or more affiliates of MetLife, Inc. The Employee Benefits Committee of the Metropolitan Life Insurance Company appoints the Plan Administrator of the Retirement Plan, who serves until such time as the Committee appoints a new Plan Administrator.

To the extent consistent with law, including Legal Deferral Requirements, the Plan Administrator may amend, modify, suspend, or terminate the Plan at any time and for any reason. The Plan Administrator may not amend, modify or terminate the Plan in a way that will reduce the amount that has been accrued in your deferred compensation account prior to the effective date of the amendment, modification or termination.


Page 9




The determinations and interpretations of the Plan made by the Plan Administrator shall be final, binding, and conclusive for all purposes under the Plan. The Plan Administrator may prescribe forms for participants to take action authorized or allowed under the Plan and may appoint agents and consult legal counsel and other professionals to assist in administration of the Plan. The Plan Administrator may, in his or her discretion, adjust the value of a deferred compensation account on a basis other than as prescribed in deferral or reallocation elections, including but not limited to the use of investment tracking funds other than those selected by the participant. The Plan Administrator will administer any claims under the Plan by following Section 503 of ERISA, any applicable regulations, and any other procedures the Plan Administrator adopts.

The Plan Administrator may reject or reform a deferral election on any lawful basis, and may conform any provision of the Plan to Legal Deferral Requirements. Where consistent with such requirements, the Plan Administrator may pay deferred compensation regardless of the participant's election for payment at another time.

Additional Information
Additional information about the Plan will be provided to you from time to time. To the extent that information is part of a prospectus for the Plan, it will include a notice to that effect.


Page 10




IN WITNESS WHEREOF, this MetLife Non-Management Director Deferred
Compensation Plan, as amended and restated effective January 1, 2005, is approved.




PLAN ADMINISTRATOR




/s/ Andrew J. Bernstein            
Andrew J. Bernstein


Date: 12/19/2012

Witness: /s/ Danielle Hodorowski    














Page 11


Exhibit 10.71
AMENDMENT NUMBER THREE TO THE
METLIFE AUXILIARY PENSION PLAN
(As amended and restated effective January 1, 2008)
              The MetLife Auxiliary Pension Plan is hereby amended, effective January 1, 2009, as follows:
 
 
 
 
 
1.
 
Part I, Article 4, Section 4.2 is hereby amended by adding the following after the final paragraph:
 
 
 
 
 
“Notwithstanding the provisions of (a) above, Final Average Compensation that can be taken into account to determine each Participant’s benefit under this Plan cannot exceed $4.6 million.”
 
 
 
 
 
2.
 
Part I, Article 4, Section 4.6 is hereby amended by adding the following after the final paragraph:
 
 
 
 
 
“Notwithstanding any other provisions of this Section 4.6, Final Average Compensation that can be taken into account to determine each Participant’s benefit under this Plan cannot exceed $4.6 million.”
 
 
 
 
 
          IN WITNESS WHEREOF, the Company has caused this Amendment to be adopted in its name and behalf this 25 th  day of March, 2009, by its officer thereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
METROPOLITAN LIFE INSURANCE COMPANY
 
 
 
 
 
 
 
 
 
 
 
By:
 
/s/ Margery Brittain
 
 
 
 
 
 
 
 
 
 
 
 
 
Margery Brittain, Plan Administrator
 
 
 
 
 
 
 
ATTEST:
 
 
 
 
 
 
 
 
 
 
 
 
 
/s/  Bonita Haskins
 
 
 
 
 
 
 



Exhibit 10.73
AMENDMENT NUMBER FIVE TO THE
METLIFE AUXILIARY PENSION PLAN
(As amended and restated effective January 1, 2008)
     The MetLife Auxiliary Pension Plan is hereby amended, effective January 1, 2010, as follows:
1. Part I, Article 4, Section 4.6, the first paragraph of subsection (b) shall be amended to read as follows:
“(b)
 
The annual variable incentive component (“AVIC”) of the Participant’s Final Average Compensation representing the MetLife Annual Variable Incentive Plan or successor annual cash bonus plan or program shall have the same meaning given to this term under the Retirement Plan. However, this component of Final Average Compensation will be determined using the average of the Participant’s highest 5 annual variable incentives (not necessarily consecutive) with respect to the 10 annual variable incentives preceding such Participant’s date of Retirement or termination (including any projected payment(s) to be made beyond the Participant’s date of Retirement or termination calculated as provided immediately below).”
2. Part I, Article 4, Section 4.6, the second paragraph of subsection (b) through the end of subsection (b) shall be amended to read as follows:
“The AVIC, as set forth in subsection (b) immediately above, projected to be made beyond the Participant’s date of Retirement or termination will be deemed equal to the result of the following calculation, as determined by the Plan Administrator in its sole discretion:
 
(i)
 
the highest of the last 3 annual variable incentives paid while the Participant was in active Company service multiplied by
 
 
 
 
 
(ii)
 
a fraction, the numerator of which is the number of months (or part thereof) that the Participant was actively employed in the calendar year(s) for which the annual variable incentive would be payable and the denominator of which is 12.
 
 
 
 
 
(iii)
 
If the fraction determined under (ii) immediately above, is less than 1, then, the fractional amount determined under (ii) shall replace an equivalent fractional amount in the lowest of the 5 highest annual variable incentives used in (b) above. This replacement shall occur only if the fractional amount determined under (ii) is greater than the fractional amount it is replacing in the lowest of the 5 highest annual variable incentives.
Notwithstanding (b)(i), (ii) and (iii), if a specific amount of annual variable incentive was already approved under its respective plan, prior to the Participant’s date of Retirement or termination, such amount shall be used instead of the deemed estimate, and such amount shall also be taken into account in determining the highest of the Participant’s last 3 annual variable incentives with regard to any annual variable incentive payable for the Participant’s year of Retirement or termination.
If, at the time of Retirement or termination, fewer than 5 annual variable incentives have been made to a Participant, then the annual variable incentive component of Final Average Compensation shall be the average of all annual variable incentives actually made to the Participant and the projected payment (described above) for the year of Retirement or termination.
For an eligible Participant who is a Commissioned Employee Final Average Compensation will be the amount described in appropriate provisions of the Retirement Plan.
Notwithstanding any other provisions of this Section 4.6, Final Average Compensation that can be taken into account to determine each Participant’s benefit under this Plan cannot exceed $4.6 million.”




     IN WITNESS WHEREOF, the Company has caused this Amendment to be adopted in its name and behalf this 21 st day of December, 2010, by its officer thereunto duly authorized.
 
 
 
 
 
 
METROPOLITAN LIFE INSURANCE COMPANY
 
 
By:
/s/ Andrew J. Bernstein
 
 
 
 
 
 
 
Andrew J. Bernstein, Plan Administrator
 
 

 
 
 
 
 
 
ATTEST:
 
 
 
 
 
/s/ Candice Martin
 
 
 


Exhibit 10.79


METROPOLITAN LIFE INSURANCE COMPANY OF
HONG KONG LIMITED
 
HEALTHCARE PLAN
 
MEMBER’S EXPLANATORY HANDBOOK
 
 
 
 
 
 
 
 
 
 
Prepared by:
2014











Contents
Page
Foreword
 
1. General Information
2
2. Healthcare Benefits
4
3. Direct Settlement of Medical Expenses
6
4. Reimbursement of Medical Expenses
8
5. Emergency Assistance
13
6. Exclusions
15
Appendix


Prior Agreement Application – Hospitalization


Prior Agreement Application – Series of Procedures / Medical Prosthetic Devices


Prior Agreement Application – Dental Treatments


2


FOREWORD


This booklet summarises the Care & Health Corporate Healthcare Plan
(the Plan), which consists of four major components covering:
medical expenses arising from sickness or injury;
maternity related expenses;
dental expenses;
emergency assistance, including evacuation and repatriation.

The Plan is insured by the AXA China Region Insurance Company Limited (the insurer) based in Hong Kong and the claims are administered by a dedicated division of GMC Services (GMC) based in Singapore. The emergency assistance programme is supported by International SOS (ISOS), a specialist in this field.

In Hong Kong, Jardine Lloyd Thompson Limited (JLT) is an appointed distributor and co-ordinator. Their contact details are as follows:-

Jardine Lloyd Thompson Limited
5 th Floor, Cityplaza Four
12 Taikoo Wan Road, Taikoo Shing
Island East, Hong Kong
Telephone 2864 5527 or 2864 5390
Facsimile 2529 5333

Whilst every effort has been made to ensure accuracy of this document, it must be clearly understood that, should there be any discrepancy between this booklet and the provisions of the Insurer’s policy wording, then the latter shall prevail.


3


1.
GENERAL INFORMATION
1.1
Coverage
The Plan covers medical treatment provided by registered medical practitioners and medical practices that are recognized by the World Health Organisation. Chinese Herbalist and Bonesetters who are Registered Chinese medicine practitioners under the Chinese Medicine Ordinance of the Hong Kong SAR or duly qualified practitioner of Chinese Medicine registered as such under the laws of the country you receive such treatment are also covered.

The Plan provides 24-hour worldwide coverage and gives you the flexibility to choose in which country within your geographical zone , hospital and clinic to have your treatment. Medical expenses resulting from an accident or unforeseeable illness occurring during travel in excluded countries (if applicable) are covered. In respect of hospitalisation, you must follow the procedures set out in section 2.2. The emergency assistance coverage is only applicable to overseas trips that do not exceed 90 days per trip.

1.2
Enrolment
You are required to submit the following details for each person to be covered:-
a)
full name;
b)
date of birth;
c)
sex;
d)
nationality;
e)
employee’s bank details, i.e. bank name, bank address, account number, account holder’s name, swift code and currency (for reimbursement of claims);
f)
employee’s personal correspondence address;
g)
employee’s email address

4




Unless the total number of employees covered in your group is greater than 10, each employee member is required to complete a health declaration form (details of each eligible dependant will also need to be declared in the same form), which is then submitted to the Insurer for assessment. Cover will not commence until the application has been accepted by the Insurer. Depending on an individual’s medical history, acceptance may include additional exclusions.
Each member will receive a Plan membership card which lists out important contact and membership numbers. You should, therefore, carry this card at all times in case you suddenly require medical treatment. These cards must be returned to Jardine Lloyd Thompson Limited (JLT) when you leave service. If you should lose a card, you must report it to JLT at the earliest opportunity. There will be a charge for a replacement card.
1.3
Dependant's Coverage
Provided it has been agreed with your employer, the Plan will cover your spouse and any unmarried children from birth up to the age of 20 years or 25 if they are still in full-time education (proof of full-time education will be required for those over the age of 20).

After you have joined the Plan, it is your responsibility to notify JLT (via your employer) of any additional eligible dependants.

1.4
Maximum Insured Age
You must be under the age of 65 when you first join the Plan. Once a member, cover is renewable until the age of 64.

5



1.5
Termination of Benefits
All expenses incurred after one of the following will not be covered:-
a)
cessation of membership in the Plan;
b)
the termination of your employment;
c)
the eve of your 65th birthday;
d)
the termination of the insurance policy by your employer;
e)
in respect of a dependent child, the eve of his/her 21 st birthday or 26 th birthday if still in full-time education.


6


2.
HEALTHCARE BENEFITS
2.1
Outpatient Benefits
Subject to the policy exclusions (see section 6.1) and claim procedures, all reasonable and customary outpatient medical expenses will be covered by the Plan without cash limits. However, all eligible outpatient medical expenses shall be reimbursed on a 90% basis .

2.2
Hospitalisation Benefits
Subject to the policy exclusions (see section 6.1), all reasonable and customary hospitalisation expenses will be covered up to the amounts which are commensurate with a standard private room . Additional charges resulting from the use of a deluxe or VIP room will, however, not be covered.

Hospitalisation must be for at least 24 hours. If confinement is less than 24 hours, treatment and services provided will be deemed as outpatient, unless surgery has been involved. You should also note that an admission to hospital which is primarily for diagnostic scanning, X-ray examination, physical therapy and the like will also be deemed as outpatient treatment.

For a child under the age of 12, the Plan will also cover the cost (up to US$40 per day for a maximum of 30 days per year) of an additional bed for an accompanying parent.

2.3
Ambulance Costs
Reimbursement of ambulance costs is subject to a maximum of US$300 per year per person.

7



2.4
Maternity Benefit
Subject only to the policy exclusions, all maternity related expenses incurred after 9 months’ membership (waived if your membership group consists of more than 10 employees) will be covered by the Plan up to a limit of US$12,000 per pregnancy.

In addition, up to three fertility treatments (per lifetime under the Plan) by way of in vitro fertilisation or artificial insemination will be covered at US$750 per fertilisation/ insemination. “ Prior Agreement” from the Insurer is required (see section 4.1).

All eligible expenses shall be reimbursed on a 90% basis .
2.5
Dental Benefits
Dental prostheses and orthodontic expenses incurred after 6 months’ membership (waived if your membership group consists of more than 10 employees) will be reimbursed at a rate of 90% by the Plan up to the following cash limits:-
a)
General treatment (consultations, conservative care, surgery, routine care, cleaning, fillings, extractions, etc) - up to US$1,500 per person per year.
b)
Dental prosthesis (crowns, pinned teeth, inlays, on lays, fixed or removable dentures, implants, except temporary) - limited to US$700 per tooth (up to an annual maximum of US$3,500 per person). “ Prior Agreement” from the Insurer is required (see section 4.1).
c)
Orthodontics (for children only) - up to US$1,800 per year for a maximum of 2 years. Treatment must be before the child’s 16th birthday and “ Prior Agreement” from the Insurer is required (see section 4.1).

8


2.6
Other Prostheses
After 6 months’ membership (waived if your membership group consists of more than 10 employees), medical prostheses (hearing aids, orthopedic prostheses, non-orthopedic prostheses) and durable medical equipment are covered at a rate of 90% up to a maximum of US$4,200 per year. “ Prior Agreement” from the Insurer is required (see section 4.1).

9


3.
DIRECT SETTLEMENT OF MEDICAL EXPENSES

3.1
Outpatient
GMC has a designated global network of clinics that will bill GMC directly for general and specialist consultations. These are listed on the GMC website – www. henner.com and marked with . To access to this facility, you (as the employee member) need to download a “Direct Settlement document” from the said website by following these procedures:-
a)
Connect to w ww.henner.com and go to “My Personal Space”.

b)
Identify yourself by entering your GMC number (as it appears on your GMC Card) and password (which will be your date of birth for the first time login – dd/mm/yyyy).

c)
Click “GMC” logo on the right and enter country and city of your choice under “CSU & Healthcare Network Contact”.

d)
Download GMC Direct Settlement document which can be folded into a more convenient size for carriage.

e)
If your dependants are also covered, their names will appear on the document. You may download additional documents for your covered dependants to use.

f)
Each document carries a six-month validity period from the issuance date, but you can download a new document before the expiry of the old document.

On arrival at one of the participating clinics, simply present the practitioner with your valid downloaded Direct Settlement document as well as your GMC Card. The benefit section of your direct settlement document lists all the services included. For services rendered that are not listed, but are covered under your policy, you will need to pay for the service and claim reimbursement afterwards.

Since outpatient is set at 90% reimbursement, you are responsible to pay 10% co-payment for each visit at network clinics.

10


3.2
Hospitalisation – Planned Admission
For any planned confinement, including for childbirth, you must notify the Insurer by asking your attending doctor to promptly complete and return a ‘ Prior Agreement Application - Hospitalisation ’. This should be done at least 10 days before your admission date. This procedure enables the insurer to assess whether the charges to be incurred are within the reasonable and customary range. At the same time, GMC will arrange for the hospital to send bills directly to the Insurer for settlement.

A photocopy of the enclosed specimen form can be used. The completed form should be faxed to GMC on Singapore (65) 6849 4092 during office hours. For assistance, you may contact JLT on Hong Kong (852) 2864 5527 or 2864 5390 (facsimile Hong Kong (852) 2529 5333)


3.3
Hospitalisation – Emergency Admission
If you are being admitted in an emergency and it is to a designated hospital marked with on the list in the GMC website, the hospital will bill GMC directly if you are able to show the hospital your downloaded Direct Settlement document as detailed in Section 3.1.

However, if the emergency admission is to any other hospital, you should notify the Insurer as soon as possible and before you are discharged by calling one of the appropriate contact numbers on the back of your GMC Card and. If the length of your stay turns out to be too short to give sufficient time for GMC to arrange a direct settlement, you will need to settle the bill upon discharge and claim reimbursement afterwards by following the procedures set out in Section 4.3. For reference, the emergency contact numbers that appear on the back of your GMC Card are as follows:-
Hospitalisation in Asia Pacific
Hong Kong: (852) 800 96 5656 or
Singapore: (65) 6887 2488
Hospitalisation in the USA and Canada
Toll free: 1 866 936 1225 or From outside the USA and Canada: +1 305 459 4856
Elsewhere in the World
Singapore: (65) 6887 2488

11


4.
REIMBURSEMENT OF MEDICAL EXPENSES

The need to make a reimbursement claim should only arise in two situations. One is for outpatient expenses when the direct settlement facility cannot be or has not been used and the other is for emergency hospital admissions when the Direct Settlement document has not been used.

A claim for reimbursement must be made within 12 months of incurring the expense. Beyond this period, a claim will be rejected. Unlike most insurance claims, there is no claim form to complete. The documents needed to support the different types of medical claims are listed below. You should consider accumulating small claims before submitting them in batches for reimbursement.


Claiming online:

Members are allowed to submit claims online with a maximum limit of US$500 per invoice. The procedures are set out below:

a)
Follow the login procedures set out in Section 3.1.

b)
By    clicking    on    “Create”,    you    are    able    to    submit    claims    for reimbursement online.


12


c)
The screenshot below will appear for you to complete the claim form and attach any supporting documents.




d)
Fill in each of the tabs: Member Information, Invoice Details, Attach Supporting Documents and Submit Request.

e)
You are required to keep all original claims documents for 2 years from the date of submission of the claim as the insurer reserve the right to request for verification.

f)
Medical care which requires prior approval (see Section 4.1) is not to be processed under the online system . For claims larger than US$500 per invoice, originals are still required to be sent to the insurer.

13


Claiming through submission of original documents:

Claims under US$500 per invoice and not requiring prior approval, can still be submitted with the original documents if you wish, and claims over US$500 per invoice or requiring prior approval must be submitted. The claims should be sent to:

GMC Services
20 Cecil Street
#05-05 Equity Plaza
Singapore 049705
Telephone: (65) 6887 2488
Facsimile: (65) 6849 4092
Email: g mcg.ug32@henner.com

Be sure to retain a copy of all documentation which you submit.

Claims reimbursement will be credited into your bank account. A settlement statement detailing the expenses incurred and amount reimbursed will be sent directly to your email address.

The Insurer reserves the right to request further supporting information if the documents submitted prove to be insufficient.


14



4.1
Prior Agreement
You MUST seek ‘Prior Agreement’ from the Insurer for

Protracted forms of medical treatment, which requires more than one session, such as Physiotherapy, Chiropractors, Chemotherapy, Radiotherapy, Dialysis, Electrotherapy, Kinesitherapy, Speech Therapy, Nursing Care or Psychiatric Treatment, etc
Fertility treatment
Dental prosthesis and orthodontic treatment
Medical prostheses and durable medical equipment
This is a necessary procedure which also helps you to ensure that charges to be incurred will be within the reasonable and customary range. It must be noted that failure to comply with this requirement will result in your claim being rejected.
The attending doctor/specialist must complete the appropriate ‘ Prior Agreement Application – Series of Procedures / Medical Prosthetic ’ or ‘ Prior Agreement Application – Dental Treatments ’ form (a photocopy of the enclosed specimen can be used) together with a medical prescription detailing the diagnosis, treatments planned and cost breakdown.

The completed form and medical prescription should be faxed to GMC on Singapore (65) 6849 4082 during office hours. Once processed, you will receive by email an approval letter. A copy of this letter must accompany your claim for reimbursement of the related expenses.

In planning your treatment around the “Prior Agreement” you should, where practicable, allow at least 15 days for the Insurer to give its response. However, the Insurer will permit the completed form to be submitted after the commencement of treatment when urgent treatment is required. For assistance, you may contact JLT on Hong Kong (852) 2864 5527 or (852) 2864 5390 (facsimile Hong Kong (852) 2529 5333).

15



4.2
Outpatient Expenses (including Pre and Post Natal)
a)
Always obtain an original official receipt from your doctor/hospital for the expenses incurred.

b)
The receipt must include the following information:
Date of consultation
Full name of the patient (as shown on the GMC Card)
Breakdown of charges incurred
Diagnosis/disability

You should write on the back of the receipt (a) the name of your company, (b) name of the patient and (c) the patient’s ‘Identification Number’ as it appears on patient’s GMC Card or attach a photocopy of the patient’s card.

c)
No claim form is required. Simply submit the original receipt, making sure the information set out in (b) above is complete.

16


4.3
Hospitalisation Expenses
a)
Always obtain an original official receipt, discharge summary and medical report from your doctor/hospital for the expenses incurred.

b)
The receipt must include the following information:-
Date of admission, discharge and (if applicable) surgery
Full name of the patient (as shown on the GMC Card)
Breakdown of charges incurred
Diagnosis/disability

You should write on the back of the receipt (a) the name of your company, (b) name of the patient and (c) the patient’s ‘Identification Number’ as it appears on patient’s GMC Card or attach a photocopy of the patient’s card.

c)
No claim form is required. Simply submit the original discharge summary and receipt, making sure the information set out in (b) above is complete.

17


5.
EMERGENCY ASSISTANCE

Whenever emergency assistance is required, necessitated by accident or illness occurring when you are residing outside your home country (the country of your declared nationality) or when you are travelling outside your country of employment, you should call (65) 6887 2488 which shown on your GMC Card.

Cover is provided by International SOS (ISOS), a specialist organisation in this field. You should take note that when transportation costs are involved, tickets must be arranged by ISOS for it to be covered by the Plan. At the same time, you are required to surrender any unused portion of a prepaid ticket. Any transportation which involves air travel will be on economy class unless it is deemed medically inappropriate.

5.1
Telephone Medical Advice
ISOS will arrange to provide medical advice to you over the telephone.

5.2
Emergency Medical Evacuation for reasons of Health
Once notified, ISOS will arrange the necessary contacts between their medical team, the local doctor and the family doctor, if appropriate.

When deemed necessary and approved by ISOS’ medical department, having taken full account of your condition, ISOS will arrange and pay for the expense of transporting you by the most appropriate means to the nearest hospital most appropriate for your condition.

5.3
Return to Country of Employment
If an emergency medical evacuation takes you to a third country, ISOS will arrange and pay the cost of economy class airfare by scheduled flight for returning you to your country of employment or home country.

18


5.4
Return of Unaccompanied Children
ISOS will arrange and pay the cost of the return home to the country of employment or the home country (or to the home of a member of your family) of your children under 18 years of age travelling with you, if you cannot take care of them because of injury or sickness during the trip.
5.5
Compassionate Visit
If you are hospitalised for over seven days outside your country of employment or home country without an adult companion, ISOS will supply and pay a round-trip ticket economy class air fare by scheduled flight for one of your family members to visit you.

5.6
Return of Bodily Remains
In the event of death, ISOS will pay the cost of transporting the mortal remains from the place of death to the deceased’s home country. The cost of the coffin is limited to US$1,900.

5.7
Transmission of Urgent Messages
ISOS will transmit your urgent messages to your family members in the event of evacuation/hospitalisation.
5.8
Advance of Bail
When you are in a foreign country, ISOS will advance bail to you up to US$13,600. This sum is only an advance and so, you are required to repay the total amount within 45 days after receipt of an ISOS invoice.

This coverage does not apply to any situation resulting from traffic or narcotic offences or from your participation in any political demonstration.

5.9
Lawyer’s Fees
ISOS will reimburse you for lawyer’s fees up to US$1,700 if proceedings are taken against you for involuntary violation of the laws of a foreign country.


19


6.
EXCLUSIONS
6.1
For the whole Plan
The following are not covered by the Plan:-
a)
Additional expenses that are a consequence of using a deluxe or VIP room.
b)
Treatment by any person other than a registered medical practitioner; medical practices that are not recognized by the World Health Organisation.
c)
Non-medicinal everyday-use products such as absorbent cotton, alcohol, sun creams, toothpaste, bandages, shampoo, etc.
d)
Stays in convalescent homes, rest homes (or similar facilities), establishments for alcoholics or drug addicts (or related facilities) during the first two years of membership. After two years membership cover will be limited to 30 days per person per year.
e)
Expenses relating to health comfort items (e.g. orthopaedic shoes, inhalators, massage devices, sun lamps, heating pads, etc.)
f)
Stays in geriatric facilities under partial or permanent supervision.
g)
Care that presents no direct medical necessity for the treatment of illness, especially cosmetic procedures and the results thereof.
h)
Preventive medical care and health check-ups.
i)
Treatments for mental disorders such as nervous disorders or mental illness, psychoanalysis, psychotherapy.
j)
Thermal cures and spa
k)
Occupational rehabilitation.
l)
Non-medical expenses such as for telephone calls, alcoholic beverages and guests’ meals.
m)
Expenses resulting from intentional acts including suicide and self inflicted injuries; war, riots, brawls, acts of terrorism in which you have played an active role; sports practised as a professional activity; deliberate exposure of extreme danger.

20


6.2
Additional Exclusions applicable to Emergency Assistance Benefits (as defined in Section 5):-
a)
Any repatriation or emergency transportation or other expenses not approved in writing by ISOS and/or under the auspices of ISOS.
b)
Any expenses incurred against medical advice or when the condition is not serious.
c)
Medical examinations or surgical procedures scheduled prior to the request for assistance and not of an emergency nature or intended to protect life or prevent substantial worsening of the condition.
d)
Injuries or illnesses due to the practice of hazardous sports such as microlight flying, hang-gliding, paragliding, mountain climbing, rock climbing, contact sports and martial arts, caving, sledge, skiing, ski jumping, bobsleighing, bungee-jumping, gliding, rafting or the operation of personal watercraft.
e)
Injuries or illnesses directly or indirectly arising from civil or foreign war, insurrections, riots, rebellions or popular uprising, whenever the member is in breach of existing laws by taking part although cases of legitimate self-defence and assistance to persons in danger are covered.
f)
Self-inflicted injuries or illnesses including suicide, attempted suicide and self-mutilation.
g)
Injures or illnesses resulting from or occurring in conjunction with competitive sports other than those in which the member participates purely as an amateur.
h)
Flying unless as a passenger in an aircraft that has a valid flying certificate and is flown by a licensed pilot.
i)
Injuries or illnesses incurred prior to the effective date of coverage and not declared to the Insurer.
j)
Participation in brawls, other than in self-defence or to the rescue of a third party.
k)
Injuries or illnesses resulting directly or indirectly from radioactivity.


21


Appendix I
G M C
 
 
 
 
gestion
 
GMC Services - 20 Cecil Street, #05-05 Equity Plaza, Singapore #049705
Département International
 
Tél : +65 6887 2488
E-mail : g mcg.ug32@henner.com
Fax : +65 6849 4092
 
PRIOR AGREEMENT APPLICATION – HOSPITALIZATION

 
Hospitalization may be refunded by GMC International only if they are the subject of a prior agreement of our Medical Board, on the basis of this document, which must be completed by the Physician and sent by post or fax to:

GMC Services - 20 Cecil Street, #05-05 Equity Plaza, Singapore #049705 or Fax: +65 6849 4092

This form must be sent no later than 10 days prior to the date of hospitalisation. In the event of a medically justified emergency, this form must be sent within 3 days following admission.
The Medical Board's agreement to the hospitalization will authorise issuance of an undertaking to reimburse, which will be sent directly to the designated institution. The Medical Board will notify the patient in the event of a refusal.

Insured person’s surname and first name:
 
GMC ID No.:
 
 
 
 
Patient's surname and first name:
 
Date of birth:
 
Sex:
 
 
 
 
 
 
TO BE COMPLETED BY THE ATTENDING PRACTITIONER
 
Proposed place of hospitalization (name of institution, address, telephone, fax, e-mail):
 
Attending physician (name, address, telephone, fax):
 
Reason for the hospitalization / Clinical symptoms presented / Precise medical diagnosis:
 
Nature of the proposed intervention and treatment programme:
 
Nature of any additional examination to be carried out:
 

Length of stay:
Date of admission:
 
For a stay of:
 
Is it an extension of stay (y/n)?
 
 
 
 
 
Detailed estimated cost of the hospitalization:
Hospital charges:
 
Physicians' fees:
 
Other cost elements:
 
 
 
 
 
Physician’s seal and signature:
 
Patient’s signature:

Date:
 
 
 
For medical information +65 6887 2488
 
I hereby authorize my Physician to send to GMC International’s medical consultant all the medical information required for making a decision on my case.

22


Appendix II
G M C
 
 
 
 
gestion
 
GMC Services - 20 Cecil Street, #05-05 Equity Plaza, Singapore #049705
Département International
 
Tél : +65 6887 2488
E-mail : g mcg.ug32@henner.com
Fax : +65 6849 4092

 
PRIOR AGREEMENT APPLICATION – SERIES OF PROCEDURES / MEDICAL PROSTHETIC DEVICES
 
Subscribing Company (see membership card):
 
GMC ID No. (see membership card):
 
 
 
 
Patient's surname and first name:
 
Date of birth:
 
Sex:
 
 
 
 
 
 
TO BE COMPLETED BY THE ATTENDING PRACTITIONER
 
The following procedures are subject to this prior agreement application:
Type 1 treatments:
Chemotherapy, dialysis, electrotherapy, physiotherapy, radiotherapy, kinesitherapy, speech therapy, orthoptics, nursing care
Type 2 treatments:
Psychiatric or psychotherapeutic treatments (may be refunded only if treatments given by a physician)
Medical prosthetic devices:
Hearing aids, orthotic insoles, neck brace
 
TYPE 1 TREATMENTS
 
Pathology presented:
 
 
 
 
 
Nature of procedures:
 
Number of employees:
 
Total cost:
 
 
 
 
 
 
TYPE 2 TREATMENTS
 
Description of the clinical symptoms:
 
 
 
 
 
Diagnosis:
 
 
 
 
 
 
Medical history:
 
 
Family history:
 
 
 
 
Patient's personality:
 
 
 
 
 
 
Type of therapy considered:
 
 
 
 
 
Behavioural contract:
 
Purpose of the therapy with expected results:
 
 
 
Total number of sessions:
 
Frequency of sessions:
 
Cost of each session:
 
 
 
 
 




23


 
MEDICAL PROSTHETIC DEVICES
 
Diagnosis:
 
 
 
Pathology presented:
 
Cost:
 
 
 
Devices required:
 
 
 
Physician’s seal and signature:
 
Patient’s signature:

Date:
 
 
 
For medical information +65 6887 2488
 
I hereby authorise my Physician to send to GMC International’s medical consultant all the medical information required for making a decision on my case.

24


Appendix III
G M C
 
 
 
 
gestion
 
GMC Services - 20 Cecil Street, #05-05 Equity Plaza, Singapore #049705

Département International
 
Tél : +65 6887 2488
E-mail : gmcg.ug32@henner.com
Fax : +65 6849 4092
 
PRIOR AGREEMENT APPLICATION – DENTAL TREATMENTS
 
For dental treatment which is subject to prior agreement, the patient and attending dentist must complete this form and return it no later than 15 days prior to the scheduled start date of the treatment by post or fax to:
GMC Services - 20 Cecil Street, #05-05 Equity Plaza, Singapore #049705 or Fax: +65 6849 4092

Subscribing Company (see membership card):
 
GMC ID No. (see membership card):
 
 
 
 
Patient's surname and first name:
 
Date of birth:
 
Sex:
 
 
 
 
 
Note!
The documents that must be submitted with this form are written in italic below.
In all cases (orthodontics / dental prostheses / periodontics / implantology,
a detailed cost estimate of the entire treatment MUST be included.
 
TO BE COMPLETED BY THE ATTENDING PRACTITIONER
 
ORTHODONTICS
If the application pertains to a mixed dentition intervention:

 
 
 
 
Does it concern a proscia rehabilitation (y/n)?

 
 
Does it concern an early and interceptive orthodontic apparatus (y/n)?

 
Anticipated duration of the mixed dentition treatment (months):

 
 
 
If the therapeutic plan involves final dentition, indicate all of the following values:
If the Ricketts analysis is used,
 
If the Tweed analysis is used,
complete items R1-R2-R3-R4 + 5 to 11
 
complete items T1-T2-T3-T4 + 5 to 11
R1. Facial angle in degrees
 
 
T1. FMIA in degrees:
 
R2. HFI in degrees:
 
 
T2. IMPA in degrees:
 
R3. Convexity in millimetres:

 
 
T3. ANB in degrees:
 
R4. DDM in millimetres:

 
 
T4. Total DDM:
 
5. Molar dental class with gap measured in millimetres:
 
 
6. Supra-occlusion or infra-occlusion measured in millimetres:
 
 
7. Dental arch contraction or dental arch expansion in relation to the number of teeth concerned:
 
No anomaly:
 
Isolated anomaly of a tooth:
 
Multiple anomalies
 
 
Pathology of at least an entire area:
8. Lower incisor angle / NaPog in degrees:
 
9. Angle 11/41 or 21/31 in degrees:
 
10. Free margin distance 11/41 or 21/31 in millimetres:
 
11. Anticipated duration of the final dentition treatment (in months):
 

25


 
 
 
 
 
DENTAL PROSTHESES
Return this application and include the following documents and information:
Dental panoramic radiograph of more than 3 teeth and alveolar retrusion or RVG images after endodontic treatment or resumption of treatment
Devitalised tooth (teeth n°)
 
 
Vital tooth (teeth n°)
 
PERIODONTICS
Return this application and include the following documents and information:
Alveolar retrusion assessment (status) + Number of dental quadrants/area concerned + Diagnosis + Treatment plan
IMPLANTOLOGY
Return this application and include the following documents and information:
Dental panoramic radiograph + Implant area (number of teeth to be replaced by implants) +
Report including available bone height in implant area + Possible contraindications
Physician’s seal and signature:
 
Patient’s signature:

Date:
 
 
 
For medical information +65 6887 2488
 
I hereby authorize my Physician to send to GMC International’s medical consultant all the medical information required for making a decision on my case.

26

Exhibit 10.95
PERFORMANCE SHARE AGREEMENT
MetLife, Inc. confirms that, on [grant date ] (the “Grant Date”), it granted you, [name] , [number] Performance Shares (your “Performance Shares”). Your Performance Shares are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Performance Share Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Performance Shares under some circumstances.
Standard Terms .
(a) These terms are the “Standard Terms” and will apply to your Performance Shares except in so far as Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”) apply. If Shares are paid to you, you will receive evidence of ownership of those Shares.
(b) The Performance Period for your Performance Shares will begin on January 1, [year] and end on the December 31 immediately preceding the third anniversary of the beginning of the Performance Period. After the conclusion of the Performance Period, the Committee shall certify in writing the number of Performance Shares payable in accordance with these Standard Terms (your “Final Performance Shares”), and your Final Performance Shares will be due and payable in Shares at the time specified in Section S-8 (“Timing of Payment”).
(c) If the Committee determines in writing that the Company met one or more of the Section 162(m) Goals, then you will be eligible for a payment of up to 175% of your Performance Shares. Notwithstanding any other terms of this Agreement, your payment may not exceed this amount.
(d) If, under Section (c) of these Standard Terms, you are eligible for a payment, the Committee will determine your Final Performance Shares by multiplying your Performance Shares by the “Final Performance Factor.” The Final Performance Factor means a percentage (from zero to 175%) determined by the Committee in its discretion. In exercising its discretion, the Committee may consider the average of two performance factors (each from zero to 175%), described in (1) and (2) below, subject to the cap determined by (3) below, if applicable, or such other considerations as it finds appropriate.
(1) The first performance factor will be based on the Company’s annual performance during the Performance Period with respect to Operating Return on Equity compared to its three-year business plan, as determined by the Committee in its discretion. In exercising its discretion, the Committee may refer to the guidelines in Performance Factor Appendix 1 to this Agreement, or such other considerations as it finds appropriate.

1



(2) The second performance factor will be based on the Company’s performance with respect to Total Shareholder Return during the Performance Period compared to the Company’s peer companies, as determined by the Committee in its discretion. In exercising its discretion, the Committee may refer to the list of peer companies and guidelines in Performance Factor Appendix 2 to this Agreement, or such other considerations as it finds appropriate.
(3) In determining the Final Performance Factor in its discretion, the Committee may consider whether the Company’s Total Shareholder Return for the Performance Period is zero or less, and if so may, in its discretion, choose to set the Final Performance Factor at the lesser of (a) the average of the percentages determined under Sections (d)(1) and (2) of these Standard Terms; or (b) 100%.
IN WITNESS WHEREOF, MetLife, Inc. has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.

2




Performance Factor Appendix 1
to Performance Share Agreement
Operating Return on Equity Performance Factor Guidelines
 
Below Threshold
Threshold
Between Threshold and Target
Target
Between Target and Maximum
Maximum
Above Maximum
Performance Result
0% - 79%
80%
81% - 99%
100%
101% - 119%
120%
121% +
Performance Factor
0%
25%
For each 1% the performance result is above 80%, add 3.75% to the threshold performance factor of 25%.
100%
For each 1% the performance result is above 100%, add 3.75% to the target performance factor of 100%.
175%
175%

Guideline Examples
Performance Result
Performance Factor
79%
0
%
80%
25
%
85%
43.75
%
90%
62.50
%
95%
81.25
%
100%
100
%
110%
137.50
%
115%
156.25
%
120%
175
%
125%
175
%


Performance Factor Appendix 2
to Performance Share Agreement
Total Shareholder Return Peer Companies
Aegon NV
 
Legal & General Group
Aflac Inc.
 
Lincoln National Corp.
AIA Group
 
Manulife Financial Corp.
Allianz SE
 
Ping An Insurance Group
Allstate Corp
 
Principal Financial Grp Inc.
American International Group
 
Prudential Financial Inc.
Assicurazioni Generali SPA
 
Prudential PLC
Aviva PLC
 
Travelers Cos. Inc.
AXA
 
Unum Group
Dai-Ichi Life Insurance Co. Ltd.
 
Zurich Financial Services
Hartford Financial Services
 
 

Total Shareholder Return Performance Factor Guidelines
 
Below Threshold
Threshold
Between Threshold and Target
Target
Between Target and Maximum
Maximum
Above Maximum
Performance Result
0 - 24th %tile
25th %tile
26th - 49th %tile
50th %tile
51st -87.4th %tile
87.5th %tile
87.6th -99th %tile
Performance Factor
0%
25%
For each %tile the performance result is above the 25th %tile, add 3% to the threshold performance factor of 25%.
100%
For each %tile the performance result is above the 50th %tile, add 2% to the target performance factor of 100%.
175%
175%

Guideline Examples
Performance Result
Performance Factor
24th %tile
0
%
25th %tile
25
%
30th %tile
40
%
40th %tile
70
%
50th %tile
100
%
60th %tile
120
%
70th %tile
140
%
80th %tile
160
%
87.5th %tile
175
%
99th %tile
175
%


3



Exhibit 10.96
PERFORMANCE UNIT AGREEMENT
[Global Affiliate] (the “Global Affiliate”) confirms that, on [grant date ] (the “Grant Date”), you [name] were granted [number] Performance Units (your “Performance Units”), and approves and ratifies such grant. Your Performance Units are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Performance Unit Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Performance Units under some circumstances. Any payment due under this Agreement may be made by any one or more Affiliates (the “Paying Affiliate”).
Standard Terms .
(a) These terms are the “Standard Terms” and will apply to your Performance Units except in so far as Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”) apply.
(b) The Performance Period for your Performance Units will begin on January 1, [year] and end on the December 31 immediately preceding the third anniversary of the beginning of the Performance Period. After the conclusion of the Performance Period, the Committee shall certify in writing the number of Performance Units payable in accordance with these Standard Terms (your “Final Performance Units”), and your Final Performance Units will be due and payable in cash equal to the Closing Price on the date the Committee determines your Final Performance Units. Your Final Performance Units will be due and payable at the time specified in Section S-8 (“Timing of Payment”).
(c) If the Committee determines in writing that the Company met one or more of the Section 162(m) Goals, then you will be eligible for a payment of up to 175% of your Performance Units. Notwithstanding any other terms of this Agreement, your payment may not exceed this amount.
(d) If, under Section (c) of these Standard Terms, you are eligible for a payment, the Committee will determine your Final Performance Units by multiplying your Performance Units by the “Final Performance Factor.” The Final Performance Factor means a percentage (from zero to 175%) determined by the Committee in its discretion. In exercising its discretion, the Committee may consider the average of two performance factors (each from zero to 175%), described in (1) and (2) below, subject to the cap determined by (3) below, if applicable, or such other considerations as it finds appropriate.
(1) The first performance factor will be based on the Company’s annual performance during the Performance Period with respect to Operating Return on Equity compared to its three-year business plan, as determined by the Committee in its discretion. In exercising its discretion, the Committee may refer to the guidelines in

1



Performance Factor Appendix 1 to this Agreement, or such other considerations as it finds appropriate.
(2) The second performance factor will be based on the Company’s performance with respect to Total Shareholder Return during the Performance Period compared to the Company’s peer companies, as determined by the Committee in its discretion. In exercising its discretion, the Committee may refer to the list of peer companies and guidelines in Performance Factor Appendix 2 to this Agreement, or such other considerations as it finds appropriate.
(3) In determining the Final Performance Factor in its discretion, the Committee may consider whether the Company’s Total Shareholder Return for the Performance Period is zero or less, and if so may, in its discretion, choose to set the Final Performance Factor at the lesser of (a) the average of the percentages determined under Sections (d)(1) and (2) of these Standard Terms; or (b) 100%.
IN WITNESS WHEREOF, the Global Affiliate has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.

2




Performance Factor Appendix 1
to Performance Unit Agreement
Operating Return on Equity Performance Factor Guidelines
 
Below Threshold
Threshold
Between Threshold and Target
Target
Between Target and Maximum
Maximum
Above Maximum
Performance Result
0% - 79%
80%
81% - 99%
100%
101% - 119%
120%
121% +
Performance Factor
0%
25%
For each 1% the performance result is above 80%, add 3.75% to the threshold performance factor of 25%.
100%
For each 1% the performance result is above 100%, add 3.75% to the target performance factor of 100%.
175%
175%

Guideline Examples
Performance Result
Performance Factor
79%
0
%
80%
25
%
85%
43.75
%
90%
62.50
%
95%
81.25
%
100%
100
%
110%
137.50
%
115%
156.25
%
120%
175
%
125%
175
%


Performance Factor Appendix 2
to Performance Unit Agreement
Total Shareholder Return Peer Companies
Aegon NV
 
Legal & General Group
Aflac Inc.
 
Lincoln National Corp.
AIA Group
 
Manulife Financial Corp.
Allianz SE
 
Ping An Insurance Group
Allstate Corp
 
Principal Financial Grp Inc.
American International Group
 
Prudential Financial Inc.
Assicurazioni Generali SPA
 
Prudential PLC
Aviva PLC
 
Travelers Cos. Inc.
AXA
 
Unum Group
Dai-Ichi Life Insurance Co. Ltd.
 
Zurich Financial Services
Hartford Financial Services
 
 

Total Shareholder Return Performance Factor Guidelines
 
Below Threshold
Threshold
Between Threshold and Target
Target
Between Target and Maximum
Maximum
Above Maximum
Performance Result
0 - 24th %tile
25th %tile
26th - 49th %tile
50th %tile
51st -87.4th %tile
87.5th %tile
87.6th -99th %tile
Performance Factor
0%
25%
For each %tile the performance result is above the 25th %tile, add 3% to the threshold performance factor of 25%.
100%
For each %tile the performance result is above the 50th %tile, add 2% to the target performance factor of 100%.
175%
175%

Guideline Examples
Performance Result
Performance Factor
24th %tile
0
%
25th %tile
25
%
30th %tile
40
%
40th %tile
70
%
50th %tile
100
%
60th %tile
120
%
70th %tile
140
%
80th %tile
160
%
87.5th %tile
175
%
99th %tile
175
%


3



Exhibit 10.97
RESTRICTED STOCK UNIT AGREEMENT
(Ratable Period of Restriction Ends in Thirds; Code 162(m) Goals)
MetLife, Inc. confirms that, on [grant date] (the “Grant Date”), it granted you, [name] , [number] Restricted Stock Units. Your Restricted Stock Units are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Restricted Stock Unit Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Restricted Stock Units under some circumstances.
Standard Terms .
(a) These terms are the “Standard Terms” and will apply to your Restricted Stock Units except in so far as Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”) apply. If Shares are paid to you, you will receive evidence of ownership of those Shares.
(b) The Period of Restriction for your Restricted Stock Units will end in stages on the first business day in March on or following each of the first three anniversaries of the Grant Date. Each portion of your Restricted Stock Units subject to a different Period of Restriction shall be referred to as a “Unit Tranche” and during its Period of Restriction as an “Outstanding Unit Tranche.” The Period of Restriction for one-third (1/3) of your Restricted Stock Units (rounding down to the nearest whole number of Restricted Stock Units, the “First Unit Tranche”) will begin on the Grant Date and end on the first business day in March on or following the first anniversary of the Grant Date. The Period of Restriction for one-third (1/3) of your Restricted Stock Units (rounding down to the nearest whole number of Restricted Stock Units, the “Second Unit Tranche”) will begin on the Grant Date and end on the first business day in March on or following the second anniversary of the Grant Date. The Period of Restriction for each of your Restricted Stock Units not included in either the First or the Second Unit Tranches (the “Third Unit Tranche”) will begin on the Grant Date and end on the first business day in March on or following the third anniversary of the Grant Date.
(c) Each Unit Tranche will be due and payable in the form of Shares after the conclusion of the Period of Restriction applicable to that Unit Tranche, at the time specified in Section S-8 (“Timing of Payment”), only if the Committee determines in writing that the Company met one or more of the Code Section 162(m) Goals.
IN WITNESS WHEREOF, MetLife, Inc. has caused this Agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.



Exhibit 10.98
RESTRICTED STOCK UNIT AGREEMENT
(Three-Year “Cliff” Period of Restriction; No Code 162(m) Goals)
MetLife, Inc. confirms that, on [grant date] (the “Grant Date”), it granted you, [name] , [number] Restricted Stock Units. Your Restricted Stock Units are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Restricted Stock Unit Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Restricted Stock Units under some circumstances.
Standard Terms .
(a) These terms are the “Standard Terms” and will apply to your Restricted Stock Units except in so far as Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”) apply. If Shares are paid to you, you will receive evidence of ownership of those Shares.
(b) The Period of Restriction for your Restricted Stock Units will begin on the Grant Date and end on the third anniversary of the Grant Date. Each of your Restricted Stock Units will be due and payable in the form of Shares after the conclusion of the Period of Restriction, at the time specified in Section S-8 (“Timing of Payment”).
IN WITNESS WHEREOF, MetLife, Inc. has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.




Exhibit 10.99
RESTRICTED UNIT AGREEMENT
(Ratable Period of Restriction Ends in Thirds; Code 162(m) Goals)
[Global Affiliate] (the “Global Affiliate”) confirms that, on [grant date] (the “Grant Date”), you [name] were granted [number] Restricted Units. Your Restricted Units are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Restricted Unit Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Restricted Units under some circumstances. Any payment due under this Agreement may be made by any one or more Affiliates (the “Paying Affiliate”).
Standard Terms .
(a) These terms are the “Standard Terms” and will apply to your Restricted Units except in so far as Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”) apply.
(b) The Period of Restriction for your Restricted Units will end in stages on the first business day in March on or following each of the first three anniversaries of the Grant Date. Each portion of your Restricted Units subject to a different Period of Restriction shall be referred to as a “Unit Tranche” and during its Period of Restriction as an Outstanding Unit Tranche.” The Period of Restriction for one-third (1/3) of your Restricted Units (rounding down to the nearest whole number of Restricted Units, the “First Unit Tranche”) will begin on the Grant Date and end on the first business day in March on or following the first anniversary of the Grant Date. The Period of Restriction for one-third (1/3) of your Restricted Units (rounding down to the nearest whole number of Restricted Units, the “Second Unit Tranche”) will begin on the Grant Date and end on the first business day in March on or following the second anniversary of the Grant Date. The Period of Restriction for each of your Restricted Units not included in either the First or the Second Unit Tranches (the “Third Unit Tranche”) will begin on the Grant Date and end on the first business day in March on or following the third anniversary of the Grant Date.
(c) Each Unit Tranche will be due and payable in cash equal to the Closing Price on the last day of the Period of Restriction applicable to that Unit Tranche, at the time specified in Section S-8 (“Timing of Payment”) after the conclusion of the Period of Restriction applicable to that Unit Tranche, only if the Committee determines in writing that the Company met one or more of the Section 162(m) Goals.
IN WITNESS WHEREOF, the Global Affiliate has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.





Exhibit 10.100
RESTRICTED UNIT AGREEMENT
(Three-Year “Cliff” Period of Restriction; No Code 162(m) Goals)
[Global Affiliate] (the “Global Affiliate”) confirms that, on [grant date] (the “Grant Date”), you [name] were granted [number] Restricted Units. Your Restricted Units are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Restricted Unit Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Restricted Units under some circumstances. Any payment due under this Agreement may be made by any one or more Affiliates (the “Paying Affiliate”).
Standard Terms .
(a) These terms are the “Standard Terms” and will apply to your Restricted Units except in so far as Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”) apply.
(b) The Period of Restriction for your Restricted Units will begin on the Grant Date and end on the third anniversary of the Grant Date. Each of your Restricted Units will be due and payable in cash equal to the Closing Price on the last day of the Period of Restriction. Your Restricted Units will be due and payable at the time specified in Section S-8 (“Timing of Payment”).
IN WITNESS WHEREOF, the Global Affiliate has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.




Exhibit 10.101
STOCK OPTION AGREEMENT
(Ratable Exercisability in Thirds)
MetLife, Inc. confirms that, on [grant date] (the “Grant Date”), it granted you, [name] , [number] Stock Options (your “Stock Options”). Your Stock Options are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Stock Option Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Stock Options under some circumstances.
Standard Terms .
(a) Each Stock Option entitles you to purchase one Share for $ [closing price on date of grant] per Share, the Closing Price on the Grant Date (the “Exercise Price”).
(b) Except as provided in Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”), one-third (1/3) of your Stock Options will become exercisable on each of the first, second and third anniversaries of the Grant Date, and you may exercise your Stock Options until the close of business on [day prior to the tenth (10 th ) anniversary of the Grant Date] (the “Standard Terms”). Neither this date, nor any other deadline for exercise of your Stock Options under this Agreement, will be extended regardless of whether you are unable to exercise your Stock Options on that date because it is not a business day, due to trading limitations, or otherwise.
(c) You may exercise any of your Stock Options that have become exercisable by notifying the Company, using procedures that the Committee will establish for this purpose, and paying for the Shares at the time you exercise your Stock Options. You may exercise your Stock Options only if the price of Shares is greater than the Exercise Price. Any exercisable Stock Options that you fail to exercise within the applicable period for exercise will be forfeited.
(d) You must exercise your Stock Options in accordance with the Company’s insider trading policy and any applicable pre-trading clearance procedures. Your exercise of Stock Options or sale of Shares may be prohibited at certain times, or delayed, due to Share trading volume limitations imposed by the Company. The issuance of Shares pursuant to your Stock Options is subject to all applicable laws, rules and regulations, and to any approvals by any governmental agencies or national securities exchanges as may be required. No Shares will be issued upon exercise of any of your Stock Options if that issuance or exercise would result in a violation of applicable law, including the federal securities laws and any applicable state or foreign securities laws.
(e) You may pay the Exercise Price in a form specified by the Committee. The value paid must have a value as of the date tendered that is at least equal to the Exercise Price, using a valuation method determined by the Committee.
(f) The number of Shares issuable upon exercise of your Stock Options shall be reduced to the nearest whole Share. If you retain some or all of the Shares after you exercise your Stock Options, you will receive evidence of ownership of those Shares.




IN WITNESS WHEREOF, MetLife, Inc. has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.

2




Exhibit 10.102
STOCK OPTION AGREEMENT
(Three-Year “Cliff” Exercisability)
MetLife, Inc. confirms that, on [grant date] (the “Grant Date”), it granted you, [name] , [number] Stock Options (your “Stock Options”). Your Stock Options are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Stock Option Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”). Please note that the Supplement includes terms for forfeiture of your Stock Options under some circumstances.
Standard Terms .
(a) Each Stock Option entitles you to purchase one Share for $ [closing price on date of grant] per Share, the Closing Price on the Grant Date (the “Exercise Price”).
(b) Except as provided in Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”), each of your Stock Options will become exercisable on the third anniversary of the Grant Date, and you may exercise your Stock Options until the close of business on [day prior to the tenth (10 th ) anniversary of the Grant Date] (the “Standard Terms”). Neither this date, nor any other deadline for exercise of your Stock Options under this Agreement, will be extended regardless of whether you are unable to exercise your Stock Options on that date because it is not a business day, due to trading limitations, or otherwise.
(c) You may exercise any of your Stock Options that have become exercisable by notifying the Company, using procedures that the Committee will establish for this purpose, and paying for the Shares at the time you exercise your Stock Options. You may exercise your Stock Options only if the price of Shares is greater than the Exercise Price. Any exercisable Stock Options that you fail to exercise within the applicable period for exercise will be forfeited.
(d) You must exercise your Stock Options in accordance with the Company’s insider trading policy and any applicable pre-trading clearance procedures. Your exercise of Stock Options or sale of Shares may be prohibited at certain times, or delayed, due to Share trading volume limitations imposed by the Company. The issuance of Shares pursuant to your Stock Options is subject to all applicable laws, rules and regulations, and to any approvals by any governmental agencies or national securities exchanges as may be required. No Shares will be issued upon exercise of any of your Stock Options if that issuance or exercise would result in a violation of applicable law, including the federal securities laws and any applicable state or foreign securities laws.
(e) You may pay the Exercise Price in a form specified by the Committee. The value paid must have a value as of the date tendered that is at least equal to the Exercise Price, using a valuation method determined by the Committee.
(f) The number of Shares issuable upon exercise of your Stock Options shall be reduced to the nearest whole Share. If you retain some or all of the Shares after you exercise your Stock Options, you will receive evidence of ownership of those Shares.
IN WITNESS WHEREOF, MetLife, Inc. has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.



Exhibit 10.103
UNIT OPTION AGREEMENT
(Ratable Exercisability in Thirds)
[Global Affiliate] (the “Global Affiliate”) confirms that, on [grant date] (the “Grant Date”), you [name] were granted [number] Unit Options (your “Unit Options”). Your Unit Options are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Unit Option Agreement (this “Agreement”), which includes the Award Agreement Supplement (the “Supplement”), as a form of Stock Appreciation Rights. Please note that the Supplement includes terms for forfeiture of your Unit Options under some circumstances. Any payment due under this Agreement may be made by any one or more Affiliates (the “Paying Affiliate”).
Standard Terms .
(a) Each Unit Option entitles you, upon exercise, to receive a cash payment equal to the Market Price of a Share less the Closing Price on the Grant Date (the “Exercise Price”), which was $ [closing price on date of grant] . For this purpose, “Market Price” means, unless otherwise prescribed by the Committee:
(1) if you exercise the Unit Option during the trading hours of the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), the price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other quotation system).
(2) if you exercise the Unit Option at any other time, the opening price of a Share at the beginning of the next trading hours of the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), the price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other quotation system).
(b) Except as provided in Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”), one-third (1/3) of your Unit Options will become exercisable on each of the first, second and third anniversaries of the Grant Date, and you may exercise your Unit Options until the close of business on [day prior to the tenth (10 th ) anniversary of the Grant Date] (the “Standard Terms”). Neither this date, nor any other deadline for exercise of your Unit Options under this Agreement, will be extended regardless of whether you are unable to exercise your Unit Options on that date because it is not a business day, due to trading limitations, or otherwise.
(c) You may exercise any of your Unit Options that have become exercisable by notifying the Company, using procedures that the Committee will establish for this purpose. You may exercise your Unit Options only if the Market Price of Shares is greater than the Exercise Price. Any exercisable Unit Options that you fail to exercise within the applicable period for exercise will be forfeited.




(d) You must exercise your Unit Options in accordance with the Company’s insider trading policy and any applicable pre-trading clearance procedures. Payment pursuant to your Unit Options is subject to all applicable laws, rules and regulations, and to any approvals by any governmental agencies or national securities exchanges as may be required. No payment will be made upon exercise of any of your Unit Options if that issuance or exercise would result in a violation of applicable law, including the federal securities laws and any applicable state or foreign securities laws.
IN WITNESS WHEREOF, the Global Affiliate has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.


2




Exhibit 10.104
UNIT OPTION AGREEMENT
(Three-Year “Cliff” Exercisability)
[Global Affiliate] (the “Global Affiliate”) confirms that, on [grant date] (the “Grant Date”), you [name] were granted [number] Unit Options (your “Unit Options”). Your Unit Options are subject to the terms and conditions of the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”) and this Unit Option Agreement (this “Agreement”) , which includes the Award Agreement Supplement (the “Supplement”), as a form of Stock Appreciation Rights. Please note that the Supplement includes terms for forfeiture of your Unit Options under some circumstances. Any payment due under this Agreement may be made by any one or more Affiliates (the “Paying Affiliate”).
Standard Terms .
(a) Each Unit Option entitles you, upon exercise, to receive a cash payment equal to the Market Price of a Share less the Closing Price on the Grant Date (the “Exercise Price”), which was $ [closing price on date of grant] . For this purpose, “Market Price” means, unless otherwise prescribed by the Committee:
(1) if you exercise the Unit Option during the trading hours of the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), the price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other quotation system).
(2) if you exercise the Unit Option at any other time, the opening price of a Share at the beginning of the next trading hours of the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), the price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other quotation system).
(b) Except as provided in Sections S-2 (“Change of Status”), S-3 (“Change of Control”), or S-16 (“Restrictive Covenants”), each of your Unit Options will become exercisable on the third anniversary of the Grant Date, and you may exercise your Unit Options until the close of business on [day prior to the tenth (10 th ) anniversary of the Grant Date] (the “Standard Terms”). Neither this date, nor any other deadline for exercise of your Unit Options under this Agreement, will be extended regardless of whether you are unable to exercise your Unit Options on that date because it is not a business day, due to trading limitations, or otherwise.
(c) You may exercise any of your Unit Options that have become exercisable by notifying the Company, using procedures that the Committee will establish for this purpose. You may exercise your Unit Options only if the Market Price of Shares is greater than the Exercise Price. Any exercisable Unit Options that you fail to exercise within the applicable period for exercise will be forfeited.




(d) You must exercise your Unit Options in accordance with the Company’s insider trading policy and any applicable pre-trading clearance procedures. Payment pursuant to your Unit Options is subject to all applicable laws, rules and regulations, and to any approvals by any governmental agencies or national securities exchanges as may be required. No payment will be made upon exercise of any of your Unit Options if that issuance or exercise would result in a violation of applicable law, including the federal securities laws and any applicable state or foreign securities laws.
IN WITNESS WHEREOF, the Global Affiliate has caused this agreement to be offered to you, and you have accepted this Agreement by the electronic means made available to you.

2




Exhibit 10.105
AWARD AGREEMENT SUPPLEMENT
This Award Agreement Supplement (this “Supplement”) provides terms that are part of your Award Agreement (the “Agreement”) under the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “Plan”). In this Supplement, “Award” refers to the Performance Shares, Restricted Stock Units, Stock Options, Performance Units, Restricted Units, or Unit Options that are the subject of the Award Agreement.
S-1. Code Section 162(m) Goals . To the extent the terms of your Award require the Committee to determine in writing that the Company met one or more of the Code Section 162(m) Goals:
(a) for Restricted Stock Units or Restricted Units divided into Unit Tranches, the “Code Section 162(m) Goals shall be attainment of either or both of:
(1) Positive Company Adjusted Income for the calendar year immediately preceding the end of the Period of Restriction; or
(2) Positive Company Total Shareholder Return for the calendar year immediately preceding the end of the Period of Restriction.
(b) for Performance Shares or Performance Units, the “Code Section 162(m) Goals” shall be the attainment of any one or more of:
(1) Positive Company Adjusted Income for the Performance Period.
(2) Positive Company Adjusted Income for the third calendar year of the Performance Period.
(3) Positive Company Total Shareholder Return for the Performance Period.
(4) Positive Company Total Shareholder Return for the third calendar year of the Performance Period.
(c) For purposes of this Section S-1, the following definitions shall apply:
(1) “Adjusted Income” means income from continuing operations before provision for income tax, excluding net investment gains (losses) (determined in accordance with Section 3(a) of Article 7.04 of SEC Regulation S-X), which includes total net investment gains (losses) and net derivatives gains (losses).
(2) “Total Shareholder Return” means the change (plus or minus) from the Initial Closing Price to the Final Closing Price, plus dividends (if any) actually paid on Shares on a reinvested basis during the applicable period. “Initial Closing Price” means the average Closing Price (as defined in Section S-9, “Closing Price”) for the twenty (20) trading days prior to the first day of the applicable period. “Final Closing Price” means the average Closing Price (as




defined in Section S-9, “Closing Price”) for the twenty (20) trading days prior to and including the final day of the applicable period.
S-2. Change of Status .
(a) The terms of this Section S-2 describe how various events affect your Covered Award, subject to Sections 2 (“Non-Disparagement”), 3 (“Violation of Agreement to Protect”), and 4 (“Restrictions Applicable to Insiders and Section 16 Officers”). “Covered Award” shall refer to:
(1) your unexercised Stock Options or Unit Options;
(2) your Restricted Stock Units or Restricted Units during their Period of Restriction (Outstanding Unit Tranches during their Period of Restriction, in case of Restricted Stock Units or Restricted Units divided into Unit Tranches); or
(3) your Performance Shares or Performance Units during their Performance Period.
(b) For purposes of this Section S-2, your transfer between the Company and an Affiliate, or among Affiliates, will not be a termination of employment, but any other termination of employment with the Company or any of its Affiliates (including the end of your employer’s status as an Affiliate) will be a termination of employment. The terms of this Section S-2 shall apply as provided, except as otherwise determined by the Committee. Any payment will be made at the time specified in Section S-8 (“Timing of Payment”).
(c) Long-Term Disability . In the event you qualify for long-term disability benefits under a plan or arrangement offered by the Company or an Affiliate for its Employees, or under another plan or arrangement designated for this purpose by the Committee, then (subject to Section S-2(h), “Forfeiture Under Conditions Potentially Covered by Code Section 457A”) the Standard Terms will continue to apply to your Covered Award. Once this Section S-2(c) applies, then none of Section S-2(d) (“Death”), Section S-2(e) (“Post-Employment Award Continuation”), or Section S-2(g) (“Other Termination of Employment”) will apply to your Covered Award, even if you subsequently return to active service. Section 2(f) (“Termination for Cause”) will continue to apply to your Covered Award, and will supersede the terms of this Section 2(c).
(d) Death . In the event that your employment with the Company or an Affiliate terminates due to your death:
(1) all of your Stock Options or Unit Options in your Covered Award will be immediately exercisable and will remain exercisable through the end of the period provided by the Standard Terms; or
(2) any other Covered Award payable in Shares under the Standard Terms will be due and payable in the form of Shares (or cash at a value equal to the number of Shares otherwise payable under the Covered Award multiplied by Closing Price on the date of your death, if so determined by the Committee), without multiplication by any Final Performance

2





Factor that might be applicable under the Standard Terms (in the case of Performance Shares or Performance Units).
(3) any other Covered Award payable in cash under the Standard Terms will be due and payable in cash at a value equal to the number of units in the Covered Award multiplied by the Closing Price on the date of your death.
(e) Post-Employment Award Continuation .
(1) If your employment with the Company or an Affiliate terminates (other than for Cause) on or after your Rule of 65 Date, as defined below, then (subject to Section S-2(h), “Forfeiture Under Conditions Potentially Covered by Code Section 457A”), the Standard Terms will continue to apply to your Covered Award.
(2) For this purpose:
(a) the “Rule of 65 Date” means the date that the sum of your total completed years of age plus total Service is equal to or greater than sixty-five (65), so long as your Service (as defined below) is equal to or greater than five (5); and
(b) “Service” means the aggregate number of completed years of employment with the Company and its Affiliates (solely during your employer’s status as an Affiliate), as conclusively determined by the Company without regard to any later determinations or findings regarding your employment status by any third party.
(f) Termination for Cause . In the event that your employment with the Company or an Affiliate terminates for Cause, your Covered Award will be forfeited immediately.
(g) Other Termination of Employment . If none of Sections S-2(c) (“Long Term Disability”), (d) (“Death”), (e) (“Post-Employment Award Continuation”), or (f) (“Termination for Cause”) applies, then:
(1) your Stock Options or Unit Options in your Covered Award that are exercisable as of your date of termination will remain exercisable until the close of business on the thirtieth (30 th ) day after the date of the termination of your employment or until they would expire under the Standard Terms, whichever period is shorter, and all of your Stock Options or Unit Options in your Covered Award that are not exercisable at the date of termination of your employment will be forfeited immediately upon your termination of employment;
(2) your Outstanding Unit Tranches in your Covered Award will be forfeited immediately upon your termination of employment;
(3) your Restricted Stock Units or your Restricted Units in your Covered Award (except where your Restricted Stock Units or Restricted Units are divided into Outstanding Unit Tranches) will be forfeited immediately upon your termination of employment unless you are offered a separation agreement by the Company or an Affiliate under a severance program. To the extent your separation agreement becomes final by March 15 of the calendar year after the separation agreement is offered to you, your Prorated Units will be due and payable to you. The

3





number of your “Prorated Units” will be determined by dividing the number of calendar months, beginning with the month of the Grant Date, that have ended as of the end of the month of the termination of your employment by thirty-six (36), multiplying the result by the number of your Restricted Stock Units or Restricted Units, and rounding to the nearest whole number; provided, however , that if the date of the termination of your employment is prior to the first anniversary of the Grant Date, then the number of your Prorated Units shall be zero (0). Payment for each of your Prorated Units will be made in cash at a value equal to the Closing Price on the Grant Date, and shall be rounded to the nearest one-hundred U.S. dollars (U.S.$100.00). If your separation agreement does not become final, the Restricted Stock Units or Restricted Units in your Covered Award will be forfeited; or
(4) your Performance Shares or Performance Units in your Covered Award will be forfeited immediately upon your termination of employment, unless you are offered a separation agreement by the Company or an Affiliate under a severance program. To the extent your separation agreement becomes final by March 15 of the calendar year after the separation agreement is offered to you, your Prorated Performance Shares/Units will be due and payable to you. The number of your “Prorated Performance Shares/Units” will be determined by dividing the number of calendar months in the Performance Period that have ended as of the end of the month of the termination of your employment by thirty-six (36), multiplying the result by the number of Performance Shares or Performance Units in your Covered Award, and rounding to the nearest whole number, and, if you were an Insider or an “officer” as defined for purposes of Section 16 of the Exchange Act (a “Section 16 Officer”) at any time during the Performance Period, further multiplying the result by the lesser of 100% or the Performance Factor; provided, however , that if the date of the termination of your employment is prior to the first anniversary of the beginning of the Performance Period, then the number of your Prorated Performance Shares/Units shall be zero (0). Payment for each of your Prorated Performance Shares/Units will be made in cash at a value equal to the Closing Price on the Grant Date, and shall be rounded to the nearest one-hundred dollars ($100.00); provided, however , that if you were an Insider or a Section 16 Officer at any time during the Performance Period, payment for each of your Prorated Performance Shares/Units will be made in cash at a value equal to the lesser of the Closing Price on the Grant Date or the Closing Price on the date the Committee determines the Performance Factor, and shall be rounded to the nearest one-hundred dollars ($100.00). If your separation agreement does not become final, the Performance Shares or Performance Units in your Covered Award will be forfeited.
(h) Forfeiture Under Conditions Potentially Covered by Code Section 457A.
(1) Unless the Committee determines otherwise, this Section S-2(h) will apply to the extent that:
(a) the provisions of Section S-2(c) (“Long Term Disability”), Section S-2(e) (“Post-Employment Award Continuation”) or, if you were an Insider or Section 16 Officer during the Performance Period, Section 2(g)(4) apply to your Covered Award;
(b) the Company determines that you provided services to the Company or an Affiliate through an entity that would be deemed to be a “nonqualified entity” under Code

4





Section 457A for any portion of the 457A Basis Period, as defined below (such portion of the Basis Period is the “457A Covered Period”); and
(c) the Company determines that Code Section 457A potentially applies to your Covered Award.
(2) To the extent that this Section S-2(h) applies to your Covered Award:
(a) the pro rata portion of your Covered Award represented by the 457A Covered Period as a portion of the 457A Basis Period (the “457A Portion”) will be forfeited upon your termination of employment, unless the Company or an Affiliate offers you the opportunity to certify that you were not, during any portion of the 457A Basis Period, subject to income tax by the United States of America (the “United States”) and you so certify; and
(b) your Covered Award, other than the 457A Portion, will be subject to Section S-2(c) (“Long Term Disability”), Section S-2(e) (“Post-Employment Award Continuation”), or Section 2(g)(4) as otherwise applicable.
(3) For this purpose, the “457A Basis Period” shall refer to:
(a) the period between the Grant Date and the date your Stock Options or Unit Options became exercisable;
(b) the Period of Restriction for an Outstanding Unit Tranche;
(c) the Period of Restriction for your Restricted Stock Units or Restricted Units (except where your Restricted Stock Units or Restricted Units are divided into Outstanding Unit Tranches); or
(d) the Performance Period for your Performance Shares or Performance Units.
S-3. Change of Control .
(a) The terms of this Section S-3 describe how a Change of Control will affect your Covered Award, as defined in Section S-2(a)(1). If a Change of Control occurs prior to any of the events described in Section S-2, or subsequent to the events described in Section 2(c) (“Long Term Disability”) and Section 2(e) (“Post-Employment Award Continuation”), this Section S-3 will supersede the terms of Section S-2. If any of the events described in the provisions of Section S-2(d) (“Death”), Section S-2(f) (“Termination for Cause”, or Section S-2(g) (“Other Employment Termination”) occurs prior to a Change of Control, the applicable terms of Section S-2 will supersede the terms of this Section S-3.
(b)(1) Except as provided in Section S-3(c), and unless otherwise prohibited under law or by applicable rules of a national security exchange, if a Change of Control occurs:
(a) all of your Stock Options or Unit Options in your Covered Award will be immediately exercisable and will remain exercisable through the end of the period provided by the Standard Terms, unless the Committee elects to redeem your Stock Options or Unit Options

5





for a cash payment equal to the Change of Control Price less the Exercise Price, multiplied by the number of exercisable Stock Options or Unit Options that you have not yet exercised; and
(b) any other Covered Award will be due and payable in the form of cash at a value equal to the number of Shares or units in the Covered Award multiplied by the Change of Control Price without multiplication by any Final Performance Factor that might be applicable under the Standard Terms (in the case of Performance Shares or Performance Units).
(2) The terms of Section S-2(h) (“Forfeiture Under Conditions Potentially Covered by Code Section 457A”), except for Section S-2(h)(2)(b), shall apply to your Stock Options or Unit Options in your Covered Award, or to any payment made under this Section S-3(b), provided, however , that the Company or an Affiliate shall offer you the opportunity to certify as described in Section S-2(h)(2)(a).
(c) The terms of Section S-3(b) will not apply to your Covered Award if the Committee reasonably determines in good faith, prior to the Change of Control, that you have been granted an Alternative Award for your Covered Award pursuant to Section 15.2 of the Plan. Any such Alternative Award shall not accelerate the timing of payment or otherwise violate Code Section 409A, and shall substantially replicate the terms of Section S-2(h) (“Forfeiture Under Conditions Potentially Covered by Code Section 457A”), except for Section S-2(h)(2)(b), provided, however , that the Company or an Affiliate shall be required to offer you the opportunity to certify as described in Section S-2(h)(2)(a).
S-4. Nontransferability of Award . Except as provided in Section S-5 or as otherwise permitted by the Committee, you may not sell, transfer, pledge, assign or otherwise alienate or hypothecate any of your Award, and all rights with respect to your Award are exercisable during your lifetime only by you.
S-5. Payment to Estate or Beneficiary Designation .
(a) For Awards that are Performance Units, Restricted Units, or Unit Options, your rights under this Agreement will pass to and may be exercised after your death by your estate, and any payments remaining unpaid at your death will be paid to your estate, in each case except as otherwise required by law.
(b) For Awards that are Performance Shares, Restricted Stock Units, or Stock Options, to the extent permitted by the Committee, you may name one or more beneficiary or beneficiaries who may then exercise any right under this Agreement in the event of your death. Each beneficiary designation for such purpose will revoke all such prior designations. Beneficiary designations must be properly completed on a form prescribed by the Committee and must be filed with the Company during your lifetime. If you have not designated a beneficiary, your rights under this Agreement will pass to and may be exercised by your estate.
S-6. Tax Withholding . The Company or an Affiliate may withhold amounts it determines are necessary to satisfy tax withhold responsibilities by withholding amounts from payment made under this Agreement, or from other payments due to you to the extent permissible under law, in an amount sufficient to satisfy the minimum statutory United States,

6





state, local or other applicable tax withholding requirements. The Company will defer payment of cash or the issuance of Shares, as applicable, until this requirement is satisfied. To the extent Shares are payable to you under your Award, the Company may satisfy this requirement by withholding Shares otherwise issuable based on a value per Share determined by the Company in its discretion.
S-7. Adjustments . The Committee will make appropriate adjustments in the terms and conditions of your Award as provided in Section 4.2 of the Plan, and may make adjustments in the terms and conditions of your Award as provided in Section 16.2 of the Plan. The Committee’s determinations in this regard will be conclusive.
S-8. Timing of Payment .
(a) To the extent applicable, this Agreement is intended to comply with Code Section 409A and shall be interpreted accordingly.
(b) For Awards that are Stock Options, Shares will be paid to you upon your exercise of any of your Stock Options, except that where Section S-3(b)(1)(a)(2) applies the Company will pay you cash upon the redemption of the Stock Options.
(c) For Awards that are Unit Options, cash will be paid to you upon your exercise of any of your Unit Options, except that where Section S-3(b)(1)(a)(2) applies the Company will pay you cash upon the redemption of the Stock Options.
(d) For Awards other than Stock Options or Unit Options:
(1) If payment is due and payable for Awards that are Restricted Stock Units or Restricted Units (including Unit Tranches) under the Standard Terms, payment will be made by March 15 of the calendar year after the expiration of the applicable Period of Restriction. If payment is due and payable for Awards that are Performance Shares or Performance Units, payment will be made in the calendar year after the end of the Performance Period. In each case, however, if you were given the opportunity to defer payment under an applicable deferred compensation plan offered by the Company or an Affiliate, and chose to defer payment, then payment will be made at the time determined under that plan.
(2) If payment is due and payable under the terms of Section S-2(d) (“Death,”), it will be made upon your death.
(3) If payment is due and payable under the terms of Section S-2(g) (“Other Termination of Employment”), it will be made six (6) months after the termination of your employment (or, to the extent Code Section 409A applies to your Award, six (6) months after your “separation from service” under Code Section 409A, if that is a different date) provided, however , that for Awards that are Performance Shares or Performance Units and you were an Insider or Section 16 Officer at any time during the Performance Period, payment will be made in the calendar year after the end of the Performance Period but in no event earlier than six (6) months after the termination of your employment (or six months after your “separation from service” under Code Section 409A, if that is a different date).

7





(4) If payment is due and payable under Section S-3(b)(1)(b):
(a) if the Change of Control that causes payment to be due and payable is a “change of control” as defined under Code Section 409A, such sum shall be paid to you within thirty (30) days after the Change of Control; or
(b) if the Change of Control that causes payment to be due and payable is not a “change of control” as defined under Code Section 409A, such sum shall be paid to you at the time determined under Section S-8(d)(1) on the same basis as if the Standard Terms applied.
S-9. Closing Price. For purposes of this Agreement, Closing Price will mean the closing price of a Share as reported in the principal consolidated transaction reporting system for the New York Stock Exchange (or on such other recognized quotation system on which the trading prices of the Shares are quoted at the relevant time), or in the event that there are no Share transactions reported on such tape or other system on the applicable date, the closing price on the immediately preceding date on which Share transactions were reported. Closing Price shall constitute “Fair Market Value” under the Plan for all purposes related to your Award.
S-10. No Guarantee of Employment . This Agreement is not a contract of employment and it is not a guarantee of employment for life or any period of time. Nothing in this Agreement interferes with or limits in any way the right of the Company or an Affiliate to terminate your employment at any time. This Agreement does not give you any right to continue in the employ of the Company or an Affiliate.
S-11. Governing Law; Choice of Forum . This Agreement will be construed in accordance with and governed by the laws of the State of Delaware, regardless of the law that might be applied under principles of conflict of laws. Except as otherwise provided in the Company’s Certificate of Incorporation or By-Laws, any action to enforce this Agreement or any action otherwise regarding this Agreement must be brought in a court in the State of New York, to which jurisdiction the Company and you consent.
S-12. Miscellaneous .
(a) For purposes of this Agreement, “Committee” includes any direct or indirect delegate of the Committee as defined in the Plan and (unless otherwise indicated) the word “Section” refers to a Section in this Agreement. Any other capitalized word used in this Agreement and not defined in this Agreement, including each form of that word, is defined in the Plan.
(b) Any determination or interpretation by the Committee pursuant to this Agreement will be final and conclusive. In the event of a conflict between any term of this Agreement and the terms of the Plan, the terms of the Plan control. This Agreement and the Plan represent the entire agreement between you and the Company, and you and all Affiliates, regarding your Award. No promises, terms, or agreements of any kind regarding your Award that are not set forth, or referred to, in this Agreement or in the Plan are part of this Agreement. In the event any provision of this Agreement is held illegal or invalid, the rest of this Agreement will remain enforceable.

8





(c) Your Award is not Shares and do not give you the rights of a holder of Shares. You will not be credited with anything additional with respect to your Award on account of any dividend paid on Shares.
(d) The Committee may, in its discretion, settle an Award otherwise payable in Shares instead in the form of cash, to the extent settlement in Shares is prohibited by law or would require you or the Company to obtain the approval of any governmental and/or regulatory body. The Committee may, in its discretion, require you at any time to immediately sell Shares you acquire under this Agreement, in which case, the Company shall have the authority to issue sales instructions in relation to such Shares on your behalf. If the Committee determines that applicable law requires that you receive fewer Shares or a lesser amount of cash than that otherwise determined under this terms of this Agreement, you will receive that number of Shares or amount of cash the Committee determines is due under applicable law. No Shares will be issued or no cash will be paid if that issuance or payment would result in a violation of applicable law, including United States securities laws and any other applicable securities laws.
(e) The issuance of Shares or payment of cash pursuant to your Award is subject to all applicable laws, rules and regulations, and to any approvals by any governmental agencies or national securities exchanges as may be required. The Company’s grant of the Award to you is not intended to be a public offering of securities outside the United States, and the Company has not submitted any registration statement, prospectus, or other securities filing with authorities outside the United States, except where required by law. Your Award has not been, and will not be, reviewed by or registered with any securities authorities outside the United States, including but not limited to the securities authorities of Argentina. In accordance with Circular 99 of 2001, from Chile’s Superintendent of Securities, the grant of the Award hereunder is not intended to be a public offering of securities in Chile but instead is intended to be a private placement. As this is a private placement in Chile, the Company has not submitted any registration statement, prospectus or other filings with the local securities authorities, and the Plan is not subject to the supervision of any securities authorities in Chile. This Agreement and all other materials pertaining to your Award have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to this offer. If you have any doubts about any of the contents of the materials pertaining to your Award, you should obtain independent professional investment advice.
(f) You agree to repatriate all payments under this Agreement or cash attributable to Shares you acquire under this Agreement to the extent required under any applicable legal requirements, such as foreign exchange rules and regulations in your country of residence or country of employment.
(g) Your Award is subject to the Company’s performance-based compensation recoupment policy in effect from time to time.
(h) Regardless of any action the Company or any Affiliate takes with respect to any or all tax withholding (including social insurance contributions and payment on account obligations, if any), you acknowledge that the ultimate liability for all such taxes is and remains your responsibility (or that of your beneficiary or estate) and that neither the Company nor any

9





Affiliate makes any representations or undertakings regarding the treatment of any tax withholding in connection with any aspect of any of your Award, including the grant or payment on account of the Award, and that neither the Company nor any Affiliate commits to structure the terms of the grant of or any aspect of any Award to reduce or eliminate your (or you estate’s or any heir’s) liability for such tax. You agree to take any and all actions as may be required to comply with your personal tax obligations.
(i) If you are resident and/or employed in a country that is a member of the European Union, this Agreement is intended to comply with the provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Equal Treatment Rules”). To the extent that a court or tribunal of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, in whole or in part, under the Equal Treatment Rules, the Committee, in its sole discretion, shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law.
(j) You agree that this Agreement and any other documents related to the Plan or your Award are to be presented to you in English, except where prohibited by law. If any such document is translated into a language other than English, the English version will control, to the extent permitted by applicable law.
(k) The collection, processing and transfer of your personal data (collectively “Data Handling”) is necessary for the Company’s administration of the Plan, this Agreement and your Award, and such Data Handling shall be done consistent with applicable law, the data privacy consents, if any, signed by you, the terms of your employment contract (if any) and/or your local company’s governing policies with respect to data privacy.
(l) In accepting this Agreement, you acknowledge, to the extent allowed by law, that:
(1) the Plan and this Agreement are each established voluntarily by the Company, and that each is discretionary in nature and may be modified, suspended or terminated at any time, as provided in the Plan and this Agreement, respectively, and such change or the end of your participation in the Plan shall not constitute a change or impairment of the terms and conditions of your employment or give rise to any liability to you;
(2) the grant of your Award is voluntary and occasional and does not create any contractual or other right to receive future grants of Awards, or benefits in lieu of an Award, even if Awards have been granted repeatedly in the past;
(3) all decisions with respect to future Award grants, if any, will be at the discretion of the Committee, including, but not limited to, the timing of any grants, the number of units or Shares in any Award, and vesting provisions;
(4) your participation in the Plan is voluntary;
(5) the Award is an extraordinary item which is outside the terms and conditions of your employment and the scope of your employment contract, if any;

10





(6) the Award is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;
(7) the Award grant will not be interpreted to form an employment contract or relationship with any Affiliate or the Company, and you are not an employee of the Company;
(8) the future Closing Price of Shares is unknown and cannot be predicted with certainty;
(9) to the fullest extent permitted by law, no claim or entitlement to compensation or damages arises from termination of the Award or diminution in value of the Award and you irrevocably release the Company and each Affiliate from any such claim that may arise; and
(10) in the event of the termination of your employment, neither your eligibility, nor any right to receive Awards, nor any period within which payment may be made on account of your Award, if any, will be extended beyond the period specified under this Agreement by any notice period mandated under law ( e.g. , active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of the termination of your employment, your right to payment on account of your Award, if any, will not be extended by any notice period mandated under law; and
(11) you have been granted your Award as a consequence of the commercial relationship between the Company and the Affiliate that employs you, and the Affiliate that employs you is your sole employer.
(m) The Company may impose other requirements as a condition of your Award, to the extent the Committee determines, in its discretion, that such other requirements are necessary or advisable in order to comply with law or facilitate the operation or administration of this Agreement, your Award, or the Plan. To the extent the Company determines in its discretion that you are required to execute any document or undertaking for this purpose, you agree to do so.
S-13. Additional Terms Applicable to Phantom Stock-Based Awards .
(a) For purposes of this Section S-13, “Phantom Stock-Based Award” refers to an Award that is Performance Units, Restricted Units, or Unit Options that are the subject of the Award Agreement.
(b) You acknowledge that, subject to the terms of Section S-13(e) of this Agreement, the obligation to make each payment related to a Phantom Stock-Based Award due under this Agreement, if any, shall be the obligation of the Global Affiliate. The obligation to make payments related to a Phantom Stock-Based Award under this Agreement shall be unfunded and unsecured. In no event shall the Company be obligated to make payments due under this Agreement related to a Phantom Stock-Based Award. The Global Affiliate and you agree and acknowledge that, to the extent consistent with applicable law, neither the Phantom Stock-Based Award, this Agreement, the Plan nor any rights, obligations, terms and conditions set forth

11





therein or in connection therewith, constitute securities, negotiable instruments, or derivatives instruments or transactions.
(b) Payments pursuant to Section S-3 (“Change of Control”) related to a Phantom Stock-Based Award will be made in your then-current payroll currency (or another currency of your choosing) at a reasonable U.S. currency exchange rate chosen in good faith by the Committee or the Paying Affiliate. Otherwise, any payment due to you related to a Phantom Stock-Based Award will be made in your then-current payroll currency (or other currency of the Committee’s or Paying Affiliate’s choosing) at a United States currency exchange rate determined by the Committee or the Paying Affiliate in the discretion of the Committee or the Paying Affiliate.
(c) To the extent any separate or additional consideration related to a Phantom Stock-Based Award is necessary under applicable law to effectuate the parties’ intentions to be bound by the terms of this Agreement, you agree to pay US$1.00 (One Dollar 00/100 currency of the United States) to the Global Affiliate, which shall not be refundable to you.
(d) Notwithstanding anything in this Agreement to the contrary, the Committee may, at any time prior to a payment related to a Phantom Stock-Based Award, in its sole discretion, find that the Company or an Affiliate has made an award to you intended to substitute for the Phantom Stock-Based Award (including but not limited to a contingent right to acquire Shares), and that such substitute award is subject to such material terms and conditions that are no less favorable to you than the material terms and conditions governing your Phantom Stock-Based Award and that provide for the same timing for payment as apply to your Phantom Stock-Based Award. Upon such a finding, the Committee may, in its sole discretion, cancel your Phantom Stock-Based Award in light of that substitute award without additional compensation to you.
S-14. Amendments . The Committee has the exclusive right to amend this Agreement as long as the amendment does not adversely affect any of your previously-granted Awards in any material way (without your written consent) and is otherwise consistent with the Plan. The Company will give written notice to you (or, in the event of your death, to your beneficiary or estate) of any amendment as promptly as practicable after its adoption.
S-15. Execution of U.S. Agreement to Protect Corporate Property .
(a) The terms of this Section S-15 apply to Awards that are Performance Shares, Restricted Stock Units, and Stock Options.
(b) If you have not previously executed an Agreement to Protect Corporate Property with the Company or an Affiliate (a “Property Agreement”) in a form acceptable to the Company (determined by the Committee in its discretion), the grant of your Award is subject to your execution of the Property Agreement provided to you by the Company with respect to this Agreement. If the Company does not receive your executed Property Agreement within sixty (60) days after you receive it, then this Agreement and the Award granted to you will be void. The Committee may, in its discretion, allow an extension of time for you to return your signed Property Agreement.

12





S-16. Restrictive Covenants .
(a) The terms of this Section S-16 shall apply notwithstanding any other terms of this Agreement, other than Section S-3 (“Change of Control”), to the contrary. If a Change of Control occurs prior to any “finding” described in this Section S-16, any applicable terms of Section S-3 (“Change of Control”) will supersede the terms of this Section S-16. Notwithstanding the terms of Section S-11 (“Governing Law; Choice of Forum”) to the contrary, this Section S-16 will be construed in accordance with and governed by the laws of the State of New York, regardless of the law that might be applied under principles of conflict of laws.
(b) Non-Disparagement . Your Award shall be forfeited if the Committee finds that you have, at any time after your employment ends and before your Award is paid to you (in the case of Performance Shares, Performance Units, Restricted Stock Units, or Restricted Units) or exercised by you (in the case of Stock Options or Unit Options), made statements that damage, disparage, or otherwise diminish the reputation or business of the Company, any of its Affiliates, or of any their respective employees, officers, directors, products, or services, with the exception of truthful statements that are compelled by law or otherwise authorized pursuant to legal or administrative processes.
(c) Violation of Agreement to Protect Corporate Property . Your Award shall be forfeited if the Committee finds that you have, at any time before your Award is paid to you (in the case of Performance Shares, Performance Units, Restricted Stock Units, or Restricted Units) or exercised by you (in the case of Stock Options or Unit Options), violated any of the terms of any Property Agreement.
(d) Restrictions Applicable to Insiders and Section 16 Officers .
(1) The terms of this Section S-16(c) shall apply if you are an Insider or an “officer” as defined for purposes of Section 16 of the Exchange Act at any time during the Performance Period (in the case of Performance Shares or Performance Units) or Period of Restriction (in the case of Restricted Stock Units or Restricted Units), or at any time prior to your exercise of each of your Stock Options or Unit Options, notwithstanding any other terms of this Agreement, other than Section S-3 (“Change of Control”), to the contrary.
(2) If the Committee reasonably finds that, at any time during the Performance Period (in the case of Performance Shares or Performance Units) or Period of Restriction (in the case of Restricted Stock Units or Restricted Units), or at any time prior to your exercise of each of your Stock Options or Unit Options, whether during your employment with the Company and its Affiliates or thereafter, you directly or indirectly owned any interest in, managed, controlled, participated in, consulted with, or rendered services, as an officer, director, employee, partner, member, consultant, independent contractor or agent, to any person or entities currently engaged in business activities which compete (or will compete based on the anticipated plans of the Company or an Affiliate at the time of your employment termination) with the business of the Company or an Affiliate in the United States, United Arab Emirates, Hong Kong (Special Administrative Region of the People’s Republic of China), Argentina, United Kingdom and/or in any other country in which the Company or an Affiliate conducts business or has plans to conduct business during your employment or as of the date your employment terminated, then, to

13





the maximum extent permissible by law, your Award and any payments otherwise due under your separation agreement under Section S-2(g) (“Other Termination of Employment”) will be immediately forfeit.
S-17. Deadline to Accept . If you wish to accept the terms of this Agreement you must do so by the electronic means made available to you within sixty (60) days after receiving this Agreement. The Committee may, in its sole discretion, extend the time within which you may accept this Agreement.

14





Exhibit 12.1

MetLife, Inc.
Ratio of Earnings to Fixed Charges
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
(In millions, except ratios)
Income (loss) from continuing operations before provision for income tax
$
7,470

 
$
8,804

  
$
4,052

  
$
1,442

  
$
9,184

Less: Undistributed income (loss) from equity investees
620

 
669

  
587

  
377

  
180

Adjusted earnings before fixed charges
$
6,850

  
$
8,135

  
$
3,465

  
$
1,065

  
$
9,004

Add: Fixed charges
 
 
 
 
 
 
 
 
 
Interest and debt issue costs (1)
1,585

 
1,257

  
1,352

  
1,389

  
1,666

Estimated interest component of rent expense
25

 
28

  
32

  
28

  
34

Interest credited to bank deposits

  

 
2

  
78

  
95

Interest credited to policyholder account balances
5,610

 
6,943

  
8,179

  
7,729

  
5,603

Total fixed charges
$
7,220

  
$
8,228

  
$
9,565

  
$
9,224

  
$
7,398

Preferred stock dividends (2)
221

 
169

  
146

  
134

  
385

Total fixed charges and preferred stock dividends
$
7,441

  
$
8,397

  
$
9,711

  
$
9,358

  
$
7,783

Total earnings and fixed charges
$
14,070

  
$
16,363

  
$
13,030

  
$
10,289

  
$
16,402

Ratio of earnings to fixed charges
1.95

  
1.99

  
1.36

  
1.12

  
2.22

Total earnings, including fixed charges and preferred stock dividends
$
14,291

  
$
16,532

  
$
13,176

  
$
10,423

  
$
16,787

Ratio of earnings to fixed charges and preferred stock dividends
1.92

  
1.97

  
1.36

  
1.11

  
2.16

__________________________________________
(1)
Interest costs include $8 million, $38 million, $122 million, $163 million and $324 million related to variable interest entities for the years ended December 2015, 2014, 2013, 2012 and 2011, respectively. Excluding these costs would have no effect on both the ratio of earnings to fixed charges and the ratio of earnings to fixed charges and preferred stock dividends for each of the years ended December 31, 2015 and 2014, and would not have a significant effect on such ratios for each of the years ended December 31, 2013, 2012 and 2011.
(2)
For the year ended December 31, 2015, preferred stock dividends includes the repurchase premium of $59 million associated with the repurchased and canceled 6.50% non-cumulative Series B preferred stock. For the year ended December 31, 2011, preferred stock dividends includes the repurchase premium of $211 million associated with the convertible preferred stock repurchased and canceled in March 2011.

1

Exhibit 21.1
METLIFE, INC.
As of 12/31/2015

    
Wholly-Owned Active Subsidiaries 1  

1.      23 RD  STREET INVESTMENTS, INC. (DE)
2.    85 BROAD STREET MEZZANINE LLC (DE)
3.    334 MADISON EURO INVESTMENTS, INC. (DE)
4.    465 N. PARK DRIVE, LLC (DE)
5.    500 GRANT STREET ASSOCIATES LIMITED PARTNERSHIP (CT)
6.    500 GRANT STREET GP LLC (DE)
7.    1075 PEACHTREE, LLC (DE)
8.    1320 GP LLC (DE)
9.    1320 OWNER LP (DE)
10.    1320 VENTURE LLC (DE)
11.    1900 MCKINNEY PROPERTIES, LP (DE)
12.    10420 MCKINLEY PARTNERS, LP (DE)
13.    10700 WILSHIRE, LLC (DE)
14.    AFP GENESIS ADMINISTRADORA DE FONDOS Y FIDECOMISOS S.A. (ECUADOR)
15.    AGENVITA S.R.L.(ITALY)
16.    ALICO EUROPEAN HOLDINGS LIMITED (IRELAND)
17.    ALICO FUNDS CENTRAL EUROPE SPRAV. SPOL., A.S.(SLOVAKIA)
18.    ALICO HELLAS SINGLE MEMBER LIMITED LIABILITY COMPANY (GREECE)
19.    ALICO MANAGEMENT SERVICES LIMITED (UK)
20.    ALICO OPERATIONS, LLC. (DE)
21.    ALPHA PROPERTIES, INC. (US)
22.    ALTERNATIVE FUEL I, LLC (DE)
23.    AMERICAN LIFE INSURANCE COMPANY (DE)
24.    AMERICAN LIFE INSURANCE COMPANY (CY) LIMITED (CYPRUS)
25.    ARDREY KELL TOWNHOMES, LLC (DE)
26.    ASHTON JUDICIARY SQUARE, LLC (DE)
27.    ASHTON SOUTHEND GP, LLC (DE)
28.    BEST MARKET S.A. (ARGENTINA)
29.    BETA PROPERTIES, INC. (DE)
30.    BORDERLAND INVESTMENT LIMITED (DE)
31.    BOULEVARD RESIDENTIAL, LLC (DE)
______________
1 Does not include real estate joint ventures and partnerships of which MetLife, Inc. and/or its subsidiaries is an investment partner.







32.      BUFORD LOGISTICS CENTER, LLC (DE)
33.    CC HOLDCO MANAGER, LLC (DE)
34.    CHESTNUT FLATS WIND, LLC (DE)
35.    CITYPOINT HOLDINGS II LIMITED (UK)
36.    COMMUNICATION ONE KABUSHIKI KAISHA (JAPAN)
37.    COMPANIA INVERSORA METLIFE S.A. (ARGENTINA)
38.    CONVENT STATION EURO INVESTMENTS FOUR COMPANY (UK)
39.    CORPORATE REAL ESTATE HOLDINGS, LLC (DE)
40.    CORRIGAN TLP LLC (DE)
41.    COVA LIFE MANAGEMENT COMPANY (DE)
42.    DANIEL/METLIFE MIDTOWN LIMITED LIABILITY COMPANY (DE)
43.    DELAWARE AMERICAN LIFE INSURANCE COMPANY (DE)
44.    DELTA PROPERTIES JAPAN, INC. (DE)
45.    ECONOMY FIRE & CASUALTY COMPANY (IL)
46.    ECONOMY PREFERRED INSURANCE COMPANY (IL)
47.    ECONOMY PREMIER ASSURANCE COMPANY (IL)
48.    EL CONQUISTADOR MAH II LLC (DE)
49.    ENTERPRISE GENERAL INSURANCE AGENCY, INC. (DE)
50.    ENTRECAP REAL ESTATE II LLC (DE)
51.    EPSILON PROPERTIES JAPAN, INC. (DE)
52.    EURO CL INVESTMENTS, LLC (DE)
53.    EURO TI INVESTMENTS LLC (DE)
54.    EURO TL INVESTMENTS LLC (DE)
55.    EXCELENCIA OPERATIVA Y TECNOLOGICA, S.A de C.V. (MEXICO)
56.    FEDERAL FLOOD CERTIFICATION LLC (TX)
57.    FIRST HUNGARIAN- AMERICAN INSURANCE AGENCY LIMITED (HUNGARY)
58.    FIRST METLIFE INVESTORS INSURANCE COMPANY (NY)
59.    FUNDACION METLIFE MEXICO, A.C. (MEXICO)
60.    GALIC HOLDINGS LLC (DE)
61.    GENERAL AMERICAN LIFE INSURANCE COMPANY (MO)
62.    GLOBALMKT S.A. (URUGUAY)
63.    GLOBAL PROPERTIES, INC. (DE)
64.    GREATER SANDHILL I, LLC (DE)
65.    GREENWICH STREET INVESTMENTS, L.L.C. (DE)
66.    GREENWICH STREET INVESTMENTS, L.P. (DE)
67.    HASKELL EAST VILLAGE, LLC (DE)
68.    HEADLAND PROPERTIES ASSOCIATES (CA)
69.    HEADLAND-PACIFIC PALISADES, LLC (CA)
70.    HOUSING FUND MANAGER, LLC (DE)
71.    HPZ ASSETS LLC (DE)
72.    HYATT LEGAL PLANS OF FLORIDA, INC. (FL)
73.    HYATT LEGAL PLANS, INC. (DE)
74.    INTERNATIONAL INVESTMENT HOLDING COMPANY LIMITED (RUSSIA)
75.    INTERNATIONAL TECHNICAL AND ADVISORY SERVICES LIMITED (DE)
76.    INVERSIONES METLIFE HOLDCO DOS LIMITADA (CHILE)





77.      INVERSIONES METLIFE HOLDCO TRES LIMITADA (CHILE)
78.    IRIS PROPERTIES, INC. (DE)
79.    JOINT STOCK COMPANY METLIFE INSURANCE COMPANY (RUSSIA)
80.    KAPPA PROPERTIES JAPAN, INC. (DE)
81.    LAR VIVIENDA XVII, S. DE R.L. DE C.V. (MEXICO)
82.    LEGAGROUP S.A. (CHILE)
83.    LEGAL CHILE S.A. (CHILE)
84.    LHC HOLDINGS (US) LLC (DE)
85.    LHCW HOLDINGS (US) LLC (DE)
86.    LHCW HOTEL HOLDING LLC (DE)
87.    LHCW HOTEL HOLDING (2002) LLC (DE)
88.    LHCW HOTEL OPERATING COMPANY (2002) LLC (DE)
89.    LONG ISLAND SOLAR FARM LLC (DE)
90.    MANSELL OFFICE LLC (DE)
91.    MANSELL RETAIL LLC (DE)
92.    MARKETPLACE RESIDENCES, LLC (DE)
93.    MCMIF HOLDCO I, LLC (DE)
94.    MCP VOA HOLDINGS, LLC (DE)
95.    MCP VOA I & III, LLC (DE)
96.    MCP VOA II, LLC (DE)
97.    MCPP OWNERS, LLC (DE)
98.    MET0 SIEFORE, S.A. de C.V. (MEXICO)
99.    MET1 SIEFORE, S.A. de C.V. (MEXICO)
100.    MET2 SIEFORE, S.A. de C.V. (MEXICO)
101.    MET3 SIEFORE BASICA, S.A. de C.V. (MEXICO)
102.    MET4 SIEFORE, S.A. de C.V. (MEXICO)
103.    META SIEFORE ADICIONAL, S.A. de C.V. (MEXICO)
104.    MET CANADA SOLAR ULC (CANADA)
105.    METLIFE 425 MKT MEMBER, LLC (DE)
106.    METLIFE 555 12th MEMBER, LLC (DE)
107.    METLIFE 1007 STEWART, LLC (DE)
108.    METLIFE 1201 TAB MEMBER, LLC (DE)
109.    METLIFE ADMINISTRADORA DE FUNDOS MULTIPATROCINADOS LTDA. (BRAZIL)
110.    METLIFE ADVISERS, LLC (MA)
111.    METLIFE AFORE, S.A. DE C.V. (MEXICO)
112.    METLIFE AKCIONARSKO DRUSTVO za ZIVOTNO OSIGURANJE U LIKVIDACI JI (SERBIA)
113.    METLIFE ALTERNATIVE GP, LLC (DE)
114.    METLIFE ASIA HOLDING COMPANY PTE. LTD. (SINGAPORE)
115.    METLIFE ASIA LIMITED (HONG KONG)
116.    METLIFE ASSET MANAGEMENT CORP. (JAPAN)
117.    METLIFE ASSOCIATES LLC (DE)
118.    METLIFE AUTO & HOME INSURANCE AGENCY, INC. (RI)
119.    METLIFE CABO HILTON MEMBER, LLC (DE)
120.    METLIFE CAMINO RAMON MEMBER, LLC (DE)





121.    METLIFE CANADIAN PROPERTY VENTURES LLC (NY)
122.    METLIFE CAPITAL CREDIT L.P. (DE)
123.    METLIFE CAPITAL TRUST IV (DE)
124.    METLIFE CAPITAL TRUST X (DE)
125.    METLIFE CAPITAL, LIMITED PARTNERSHIP (DE)
126.    METLIFE CB W/A, LLC (DE)
127.    METLIFE CC MEMBER, LLC (DE)
128.    METLIFE CHILE ADMINISTRADORA DE MUTUOS HIPOTECARIOS S.A. (CHILE)
129.    METLIFE CHILE INVERSIONES LIMITADA (CHILE)
130.    METLIFE CHILE SEGUROS DE VIDA S.A. (CHILE)
131.    METLIFE CHILE SEGUROS GENERALES S.A. (CHILE)
132.    METLIFE COLOMBIA SEGUROS de VIDA S.A. (COLOMBIA)
133.    METLIFE CONSUMER SERVICES, INC. (DE)
134.    METLIFE COMMERCIAL MORTGAGE INCOME FUND GP, LLC (DE)
135.    METLIFE CORE PROPERTY FUND GP, LLC (DE)
136.    METLIFE CREDIT CORP.(DE)
137.    METLIFE EMEKLILIK DE HAYAT A.S. (TURKEY)
138.    METLIFE EU HOLDING COMPANY LIMITED (IRELAND)
139.    METLIFE EUROPE INSURANCE LIMITED (IRELAND)
140.    METLIFE EUROPE LIMITED (IRELAND)
141.    METLIFE EUROPE SERVICES LIMITED (IRELAND)
142.    METLIFE EUROPEAN HOLDINGS, LLC. (DE)
143.    METLIFE EXCHANGE TRUST I (DE)
144.    METLIFE FM HOTEL MEMBER, LLC (DE)
145.    METLIFE FUNDING, INC. (DE)
146.    METLIFE GENERAL INSURANCE LIMITED (AUSTRALIA)
147.    METLIFE GLOBAL BENEFITS, LTD. (CAYMAN ISLANDS)
148.    METLIFE GLOBAL HOLDING COMPANY I GmbH (SWISS I) (SWITZERLAND)
149.    METLIFE GLOBAL HOLDING COMPANY II GmbH (SWISS II) (SWITZERLAND)
150.    METLIFE GLOBAL HOLDINGS CORPORATION S.A. De C.V.(MEXICO)
151.    METLIFE GLOBAL OPERATIONS SUPPORT CENTER PRIVATE LIMITED(INDIA)
152.    METLIFE GLOBAL, INC. (DE)
153.    METLIFE GREENSTONE SOUTHEAST VENTURES, LLC (DE)
154.    METLIFE GROUP, INC. (NY)
155.    METLIFE HCMJV 1 GP, LLC (DE)
156.    METLIFE HCMJV LP, LLC (DE)
157.    METLIFE HEALTH PLANS, INC. (DE)
158.    METLIFE HOLDINGS, INC. (DE)
159.    METLIFE HOLDINGS (CYPRUS) LIMITED (CYPRUS)
160.    METLIFE HOME LOANS LLC (DE)
161.    METLIFE INNOVATION CENTRE PTE. LTD. (SINGAPORE)
162.    METLIFE INSURANCE AND INVESTMENT TRUST (AUSTRALIA)
163.    METLIFE INSURANCE COMPANY USA (DE)
164.    METLIFE INSURANCE K.K. (JAPAN)
165.    METLIFE INSURANCE LIMITED (AUSTRALIA)





166.      METLIFE INSURANCE LIMITED (UNITED KINGDOM)
167.    METLIFE INTERNATIONAL HF PARTNERS, LP (CAYMAN ISLANDS)
168.    METLIFE INTERNATIONAL HOLDINGS, LLC (DE)
169.    METLIFE INTERNATIONAL LIMITED, LLC (DE)
170.    METLIFE INTERNATIONAL PE FUND I, LP (CAYMAN ISLANDS)
171.    METLIFE INTERNATIONAL PE FUND II, LP (CAYMAN ISLANDS)
172.    METLIFE INTERNATIONAL PE FUND III, LP (CAYMAN ISLANDS)
173.    METLIFE INVESTMENT ADVISORS, LLC (DE)
174.    METLIFE INVESTMENTS ASIA LIMITED (HONG KONG)
175.    METLIFE INVESTMENTS LIMITED (UNITED KINGDOM)
176.    METLIFE INVESTMENT MANAGEMENT LIMITED (UNITED KINGDOM)
177.    METLIFE INVESTMENTS PTY LIMITED (AUSTRALIA)
178.    METLIFE INVESTORS DISTRIBUTION COMPANY (MO)
179.    METLIFE INVESTORS GROUP, LLC (DE)
180.    METLIFE IRELAND HOLDINGS ONE LIMITED (IRELAND)
181.    METLIFE IRELAND TREASURY LIMITED (IRELAND)
182.    METLIFE LATIN AMERICA ASESORIAS E INVERSIONES LIMITADA (CHILE)
183.    METLIFE LHH MEMBER, LLC (DE)
184.    METLIFE LIFE INSURANCE S.A. (GREECE)
185.    METLIFE LIMITED (HONG KONG)
186.    METLIFE LIMITED (UNITED KINGDOM)
187.    METLIFE LOAN ASSET MANAGEMENT LLC (DE)
188.    METLIFE MALL VENTURES LIMITED PARTNERSHIP (DE)
189.    METLIFE MAS, S.A. DE C.V. (MEXICO)
190.    METLIFE MEXICO S.A. (MEXICO)
191.    METLIFE MEXICO SERVICIOS, S.A. DE C.V. (MEXICO)
192.    METLIFE OFC MEMBER, LLC (DE)
193.    METLIFE OBS MEMBER, LLC (DE)
194.    METLIFE PARK TOWER MEMBER, LLC (DE)
195.    METLIFE PENSIONES MEXICO S.A. (MEXICO)
196.    METLIFE PENSION TRUSTEES LIMITED (UK)
197.    METLIFE PLANOS ODONTOLOGICOS LTDA. (BRAZIL)
198.    METLIFE POWSZECHNE TOWARTZYSTWO EMERYTALNE S.A. (POLAND)
199.    METLIFE PRIVATE EQUITY HOLDINGS, LLC (DE)
200.    METLIFE PROPERTIES VENTURES, LLC (DE)
201.    METLIFE PROPERTY VENTURES CANADA ULC (CANADA)
202.    METLIFE RC SF MEMBER, LLC (DE)
203.    METLIFE REINSURANCE COMPANY OF BERMUDA LTD. (BERMUDA)
204.    METLIFE REINSURANCE COMPANY OF CHARLESTON (SC)
205.    METLIFE REINSURANCE COMPANY OF DELAWARE (DE)
206.    METLIFE REINSURANCE COMPANY OF SOUTH CAROLINA (SC)
207.    METLIFE REINSURANCE COMPANY OF VERMONT (VT)
208.    METLIFE RENEWABLES HOLDING, LLC (DE)
209.    METLIFE RETIREMENT SERVICES LLC (NJ)
210.    METLIFE SAENGMYOUNG INSURANCE COMPANY LTD. (SOUTH KOREA)- (also known as MetLife Insurance Company of Korea Limited)





211.      METLIFE SECURITIES, INC. (DE)
212.    METLIFE SEGUROS DE RETIRO S.A. (ARGENTINA)
213.    METLIFE SEGUROS S.A. (URUGUAY)
214.    METLIFE SEGUROS S.A. (ARGENTINA)
215.    METLIFE SERVICES AND SOLUTIONS, LLC (DE)
216.    METLIFE SERVICES EAST PRIVATE LIMITED (INDIA)
217.    METLIFE SERVICES EEIG (IRELAND)
218.    METLIFE SERVICES EOOD (BULGARIA)
219.    METLIFE SERVICES, SOCIEDAD LIMITADA (SPAIN)
220.    METLIFE SERVICES SP Z.O.O (POLAND)
221.    METLIFE SERVICIOS S.A. (ARGENTINA)
222.    METLIFE SLOVAKIA S.R.O.(SLOVAKIA)
223.    METLIFE SOLUTIONS PTE. LTD. (SINGAPORE)
224.    METLIFE SOLUTIONS S.A.S. (FRANCE)
225.    METLIFE SP HOLDINGS, LLC (DE)
226.    METLIFE STANDBY I, LLC (DE)
227.    METLIFE THR INVESTOR, LLC (DE)
228.    METLIFE TOWARZYSTWO FUNDUSZY INWESTYCYJNYCH S.A. (POLAND)
229.    METLIFE TOWARZYSTWO UBEZPIECZEN NA ZYCIE I REASEKURACJI S.A. (POLAND)
230.    METLIFE TOWER RESOURCES GROUP, INC. (DE)
231.    METLIFE TREAT TOWERS MEMBER, LLC (DE)
232.    METLIFE USA ASSIGNMENT COMPANY (CT
233.    METLIFE WORLDWIDE HOLDINGS, LLC (DE)
234.    METROPOLITAN CASUALTY INSURANCE COMPANY (RI)
235.    METROPOLITAN CONNECTICUT PROPERTIES VENTURES, LLC (DE)
236.    METROPOLITAN DIRECT PROPERTY AND CASUALTY INSURANCE COMPANY (RI)
237.    METROPOLITAN GENERAL INSURANCE COMPANY (RI)
238.    METROPOLITAN GLOBAL MANAGEMENT, LLC. (DE/ IRELAND)
239.    METROPOLITAN GROUP PROPERTY AND CASUALTY INSURANCE COMPANY (RI)
240.    METROPOLITAN LIFE ASIGURARI S.A. (ROMANIA)
241.    METROPOLITAN LIFE INSURANCE COMPANY (NY)
242.    METROPOLITAN LIFE INSURANCE COMPANY OF HONG KONG LIMITED (HONG KONG)
243.    METROPOLITAN LIFE SEGUROS E PREVIDÊNCIA PRIVADA S.A. (BRAZIL)
244.    METROPOLITAN LIFE SOCIETATE de ADMINISTRARE a UNUI FOND de PENSII ADMINISTRAT PRIVAT S.A. (ROMANIA)
245.    METROPOLITAN LIFE TRAINING & CONSULTING S.R.L. (ROMANIA)
246.    METROPOLITAN LLOYDS, INC. (TX)
247.    METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY (RI)
248.    METROPOLITAN TOWER LIFE INSURANCE COMPANY (DE)
249.    METROPOLITAN TOWER REALTY COMPANY, INC. (DE)
250.    MEX DF PROPERTIES, LLC (DE)
251.    MIDTOWN HEIGHTS, LLC (DE)
252.    MIM PROPERTY MANAGEMENT, LLC (DE)





253.    MISSOURI REINSURANCE, INC. (CAYMAN ISLANDS)
254.    ML 1065 HOTEL, LLC (DE)
255.    ML-AI METLIFE MEMBER 1, LLC (DE)
256.    ML-AI METLIFE MEMBER 2, LLC (DE)
257.    MLA COMERCIAL, S.A. DE C.V. (MEXICO)
258.    MLA SERVICIOS, S.A. DE C.V. (MEXICO)
259.    ML BRIDGESIDE APARTMENTS LLC (DE)
260.    ML CAPACITACION COMERCIAL S.A. DE C.V. (MEXICO)
261.    ML DOLPHIN GP, LLC (DE)
262.    ML DOLPHIN MEZZ, LLC (DE)
263.    ML MILILANI MEMBER, LLC (DE)
264.    ML NEW RIVER VILLAGE III, LLC (DE)
265.    ML NORTH BRAND MEMBER, LLC (DE)
266.    ML SOUTHMORE, LLC (DE)
267.    MLGP LAKESIDE, LLC (DE)
268.    MLIC ASSET HOLDINGS II LLC (DE)
269.    MLIC ASSET HOLDINGS LLC (DE)
270.    MLIC CB HOLDINGS LLC (DE)
271.    ML SWAN GP, LLC (DE)
272.    ML SWAN MEZZ, LLC (DE)
273.    ML TERRACES, LLC (DE)
274.    MM GLOBAL OPERATIONS SUPPORT CENTER, S.A. DE C.V. (MEXICO)
275.    MSV IRVINE PROPERTY, LLC (DE)
276.    MTC FUND I, LLC (DE)
277.    MTC FUND II, LLC (DE)
278.    MTC FUND III, LLC (DE)
279.    MTL LEASING, LLC (DE)
280.    NATILOPORTEM HOLDINGS, LLC (DE)
281.    NEW ENGLAND LIFE INSURANCE COMPANY (MA)
282.    NEWBURY INSURANCE COMPANY, LIMITED (DE)
283.    OCONEE GOLF COMPANY, LLC (DE)
284.    OCONEE HOTEL COMPANY, LLC (DE)
285.    OCONEE LAND COMPANY, LLC (DE)
286.    OCONEE LAND DEVELOPMENT COMPANY, LLC (DE)
287.    OCONEE MARINA COMPANY, LLC (DE)
288.    OMI MLIC INVESTMENTS LIMITED (CAYMAN ISLANDS)
289.    ONE FINANCIAL PLACE CORPORATION (DE)
290.    PARA-MET PLAZA ASSOCIATES (FL)
291.    PARK TOWER JV MEMBER, LLC (DE)
292.    PARK TOWER REIT, INC. (DE)
293.    PARK TWENTY THREE INVESTMENTS COMPANY (UNITED KINGDOM)
294.    PJSC METLIFE (UKRAINE)
295.    PLAZA DRIVE PROPERTIES LLC (DE)
296.    PREFCO DIX-HUIT LLC (CT)
297.    PREFCO FOURTEEN LIMITED PARTNERSHIP (CT)
298.    PREFCO IX REALTY LLC (CT)





299.      PREFCO TEN LIMITED PARTNERSHIP (CT)
300.    PREFCO TWENTY LIMITED PARTNERSHIP (CT)
301.    PREFCO VINGT LLC (CT)
302.    PREFCO X HOLDINGS LLC (CT)
303.    PREFCO XIV HOLDINGS LLC (CT)
304.    PROVIDA INTERNACIONAL S.A. (CHILE)
305.    RIVERWAY RESIDENTIAL, LP (DE)
306.    SAFEGUARD HEALTH PLANS, INC. (CA)
307.    SAFEGUARD HEALTH PLANS, INC. (FL)
308.    SAFEGUARD HEALTH PLANS, INC. (NV)
309.    SAFEGUARD HEALTH PLANS, INC. (TX)
310.    SAFEGUARD HEATLH ENTERPRISES, INC. (DE)
311.    SAFEHEALTH LIFE INSURANCE COMPANY (CA)
312.    SANDPIPER COVE ASSOCIATES, LLC (DE)
313.    SANDPIPER COVE ASSOCIATES II, LLC
314.    ST. JAMES FLEET INVESTMENTS TWO LIMITED (CAYMAN ISLANDS)
315.    TEN PARK SPC (CAYMAN ISLANDS)
316.    THE BUILDING AT 575 FIFTH AVENUE MEZZANINE LLC (DE)
317.    THE BUILDING AT 575 FIFTH RETAIL HOLDING LLC (DE)
318.    THE BUILDING AT 575 FIFTH RETAIL OWNER (DE)
319.    THE DIRECT CALL CENTRE PTY LIMITED (AUSTRALIA)
320.    THE PROSPECT COMPANY (DE)
321.    THE WORTHINGTON SERIES TRUST (DE)
322.    TIC EUROPEAN REAL ESTATE LP, LLC (DE)
323.    TLA HOLDINGS II LLC (DE)
324.    TLA HOLDINGS III LLC (DE)
325.    TLA HOLDINGS LLC (DE)
326.    TRAL & CO. (CT)
327.    TRANSMOUNTAIN LAND & LIVESTOCK COMPANY (MT)
328.    TREMONT PARTNERS, LP (DE)
329.    VIRIDIAN MIRACLE MILE, LLC (DE)
330.    WFP 1000 HOLDING COMPANY GP, LLC (DE)
331.    WHITE OAK ROYALTY COMPANY (OK)
332.    ZAO MASTER D (RUSSIA)






METLIFE, INC.
As of 12/31/2015

Companies of which MetLife, Inc. directly or indirectly has actual ownership (for its own account) of 10% through 99% of the total outstanding voting stock 2  

 
333.      AFP PROVIDA S.A. (CHILE) 94.7%
334.    ALICO PROPERTIES, INC. (DE) 51%
335.    AMMETLIFE INSURANCE BERHAD (MALAYSIA) 50.000001%
336.    AMMETLIFE TAKAFUL BERHAD (MALAYSIA) 49.999999%
337.    BIDV METLIFE LIFE INSURANCE LIMITED LIABILITY COMPANY (VIETNAM) 60%
338.    HELLENIC ALICO LIFE INSURANCE COMPANY, Ltd. (CYPRUS) 27.5%
339.    HMS MASTER LIMITED PARTNERSHIP (DE) 60%
340.    HMS SOUTHPARK RESIDENTIAL LLC (DE) 60%
341.    MAXIS GBN S.A.S. (FRANCE) 50%
342.    MCP 7 RIVERWAY, LLC (DE) 20%
343.    MCP 60 11TH STREET MEMBER, LLC (DE) 20%
344.    MCP 100 CONGRESS, LLC (DE) 20%
345.    MCP 3040 POST OAK, LLC (DE) 20%
346.    MCP 550 WEST WASHINGTON, LLC (DE) 20%
347.    MCP 1900 MCKINNEY, LLC (DE) 20%
348.    MCP 4600 SOUTH SYRACUSE, LLC (DE) 20%
349.    MCP 9020 MURPHY ROAD, LLC (DE) 20%
350.    MCP ASHTON SOUTH END, LLC (DE) 20%
351.    MCP BUFORD LOGISTICS CENTER 2 MEMBER, LLC (DE) 20%
352.    MCP DMCBP PHASE II VENTURE, LLC (DE) 20%
353.    MCP DENVER PAVILIONS MEMEBR, LLC (DE)20%
354.    MCP ENV CHICAGO, LLC (DE) 20%
355.    MCP FIFE ENTERPRISE MEMBER, LLC (DE) 20%
356.    MCP HIGHLAND PARK LENDER, LLC (DE) 20%
357.    MCPF ACQUISITION, LLC (DE) 20%
358.    MCP LODGE AT LAKECREST, LLC (DE) 20%
359.    MCP MAGNOLIA PARK MEMBER, LLC (DE) 20%
360.    MCP MAIN STREET VILLAGE, LLC (DE) 20%
361.    MCP ONE WESTSIDE, LLC (DE) 20%
362.    MCP PARAGON POINT, LLC (DE) 20%
363.    MCP PLAZA AT LEGACY, LLC (DE) 20%
______________
2 Does not include real estate joint ventures and partnerships of which MetLife, Inc. and/or its subsidiaries is an investment partner.






364.      MCP PROPERTY MANAGEMENT, LLC (DE) 20%
365.    MCP SOCAL INDUSTRIAL – ANAHEIM, LLC (DE) 20%
366.    MCP SOCAL INDUSTRIAL – BERNADO, LLC (DE) 20%
367.    MCP SOCAL INDUSTRIAL – CANYON, LLC (DE) 20%
368.    MCP SOCAL INDUSTRIAL – CONCOURSE, LLC (DE) 20%
369.    MCP SOCAL INDUSTRIAL – FULLERTON, LLC (DE) 20%
370.    MCP SOCAL INDUSTRIAL – KELLWOOD, LLC (DE) 20%
371.    MCP SOCAL INDUSTRIAL – LAX, LLC (DE) 20%
372.    MCP SOCAL INDUSTRIAL – LOKER, LLC (DE) 20%
373.    MCP SOCAL INDUSTRIAL – ONTARIO, LLC (DE) 20%
374.    MCP SOCAL INDUSTRIAL – REDONDO, LLC (DE) 20%
375.    MCP SOCAL INDUSTRIAL – SPRINGDALE, LLC (DE) 20%
376.    MCP THE PALMS AT DORAL, LLC (DE) 20%
377.    MCP TRIMBLE CAMPUS, LLC (DE) 20%
378.    MCP WATERFORD ATRIUM, LLC (DE) 20%
379.    METLIFE AMERICAN INTERNATIONAL GROUP AND ARAB NATIONAL BANK COOPERATIVE INSURANCE COMPANY (SAUDI ARABIA) 30%
380.    METLIFE CORE PROPERTY FUND, LP (DE)
381.    METLIFE CORE PROPERTY HOLDINGS, LLC (DE)
382.    METLIFE CORE PROPERTY REIT, LLC (DE)
383.    METLIFE MUTUAL FUND S.A. (GREECE) 90%
384.    METROPOLITAN LLOYDS INSURANCE COMPANY OF TEXAS (TX)
385.    PHARAONIC AMERICAN LIFE INSURANCE COMPANY (EGYPT) 84.125%
386.    PNB METLIFE INDIA INSURANCE COMPANY LIMITED (INDIA) (26%)
387.    SINO-US UNITED METLIFE INSURANCE CO., LTD. (CHINA) 50%
388.    UBB-METLIFE ZHIVOTOZASTRAHOVATELNO DRUJESTVO A.D. (BULGARIA) 40%







Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-192366, 333-192366-01, 333-192366-02, 333-192366-03, 333-192366-04 and 333-192366-05 on Form S-3 and 333-198145, 333-198143, 333-198141, 333-170879, 333-162927, 333-162926, 333-148024, 333-139384, 333-139383, 333-139382, 333-139380, 333-121344, 333-121343, 333-121342, 333-102306, 333-101291, 333-59134 and 333-37108 on Form S-8 of our reports dated February 24, 2016, relating to the consolidated financial statements and financial statement schedules of MetLife, Inc. and subsidiaries (the “Company”) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2015.


/s/ DELOITTE & TOUCHE LLP
New York, New York
February 24, 2016









Exhibit 31.1
CERTIFICATIONS
I, Steven A. Kandarian, certify that:
1. I have reviewed this annual report on Form 10-K of MetLife, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 24, 2016
 
/s/ Steven A. Kandarian
 
Steven A. Kandarian
 
Chairman of the Board, President and
Chief Executive Officer






Exhibit 31.2
CERTIFICATIONS
I, John C. R. Hele, certify that:
1. I have reviewed this annual report on Form 10-K of MetLife, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 24, 2016
 
/s/ John C. R. Hele
 
John C. R. Hele
 
Executive Vice President and
 
Chief Financial Officer






Exhibit 32.1
SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED
STATES CODE
I, Steven A. Kandarian, certify that (i) MetLife, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of MetLife, Inc.
Date: February 24, 2016
 
/s/ Steven A. Kandarian
 
Steven A. Kandarian
 
Chairman of the Board, President and
Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to MetLife, Inc. and will be retained by MetLife, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.




Exhibit 32.2
SECTION 906 CERTIFICATION
CERTIFICATION PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED
STATES CODE
I, John C. R. Hele, certify that (i) MetLife, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of MetLife, Inc.
Date: February 24, 2016
 
/s/ John C. R. Hele
 
John C. R. Hele
 
Executive Vice President and
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to MetLife, Inc. and will be retained by MetLife, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.