METLIFE INC (Form: 10-Q, Received: 05/06/2016 06:05:26)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

Form 10-Q

(Mark One)



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016



¨	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)

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 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

At April 29, 2016 , 1,098,666,690 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

Table of Contents



		Page
Part I — Financial Information
Item 1.	Financial Statements (at March 31, 2016 (Unaudited) and December 31, 2015 and for the Three Months Ended March 31, 2016 and 2015 (Unaudited))	3
	Interim Condensed Consolidated Balance Sheets	3
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Interim Condensed Consolidated Statements of Equity	5
	Interim Condensed Consolidated Statements of Cash Flows	6
	Notes to the Interim Condensed Consolidated Financial Statements:
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	7
	Note 2 — Segment Information	9
	Note 3 — Pending Disposition	15
	Note 4 — Insurance	15
	Note 5 — Closed Block	17
	Note 6 — Investments	18
	Note 7 — Derivatives	32
	Note 8 — Fair Value	46
	Note 9 — Equity	64
	Note 10 — Other Expenses	68
	Note 11 — Employee Benefit Plans	68
	Note 12 — Earnings Per Common Share	69
	Note 13 — Contingencies, Commitments and Guarantees	69
	Note 14 — Subsequent Event	77
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	78
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	150
Item 4.	Controls and Procedures	151

Part II — Other Information
Item 1.	Legal Proceedings	152
Item 1A.	Risk Factors	154
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	158
Item 6.	Exhibits	159

Signatures		160

Exhibit Index		E - 1

Table of Contents

As used in this Form 10 ‑ Q, “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 Quarterly Report on Form 10‑Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words 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 on us of comprehensive financial services regulation reform, including potential regulation of MetLife, Inc. 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; (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 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.

Corporate Information

We announce financial and other information about MetLife to our investors through the MetLife Investor Relations web page at www.metlife.com, as well as U.S. Securities and Exchange Commission filings, press releases, public conference calls and webcasts. MetLife encourages investors to visit the Investor Relations web page from time to time, as information is updated and new information is posted. The information found on our website is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the U.S. Securities and Exchange Commission, and any references to our website are intended to be inactive textual references only.

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 Quarterly Report on Form 10-Q.

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Part I — Financial Information

Item 1. Financial Statements

MetLife, Inc.

Interim Condensed Consolidated Balance Sheets

March 31, 2016 (Unaudited) and December 31, 2015

(In millions, except share and per share data)



	March 31, 2016			December 31, 2015
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $343,412 and $332,964, respectively; includes $3,396 and $4,277, respectively, relating to variable interest entities)	$	371,981		$	351,402
Equity securities available-for-sale, at estimated fair value (cost: $3,010 and $2,997, respectively)	3,374			3,321
Fair value option and trading securities, at estimated fair value (includes $360 and $404, respectively, of actively traded securities; and $10 and $13, respectively, relating to variable interest entities)	14,993			15,024
Mortgage loans (net of valuation allowances of $381 and $318, respectively; includes $169 and $172, respectively, at estimated fair value, relating to variable interest entities; includes $392 and $314, respectively, under the fair value option)	68,651			67,102
Policy loans (includes $0 and $4, respectively, relating to variable interest entities)	11,257			11,258
Real estate and real estate joint ventures (includes $47 and $47, respectively, of real estate held-for-sale)	8,733			8,433
Other limited partnership interests (includes $27 and $27, respectively, relating to variable interest entities)	7,022			7,096
Short-term investments, principally at estimated fair value (includes $0 and $26, respectively, relating to variable interest entities)	11,621			9,299
Other invested assets, principally at estimated fair value (includes $43 and $43, respectively, relating to variable interest entities)	27,095			22,524
Total investments	524,727			495,459
Cash and cash equivalents, principally at estimated fair value (includes $18 and $85, respectively, relating to variable interest entities)	13,290			12,752
Accrued investment income (includes $1 and $23, respectively, relating to variable interest entities)	4,198			3,988
Premiums, reinsurance and other receivables (includes $3 and $21, respectively, relating to variable interest entities)	27,843			22,702
Deferred policy acquisition costs and value of business acquired (includes $0 and $240, respectively, relating to variable interest entities)	23,973			24,130
Current income tax recoverable	125			161
Goodwill	9,729			9,477
Other assets (includes $3 and $148, respectively, relating to variable interest entities)	7,496			7,666
Separate account assets (includes $0 and $1,022, respectively, relating to variable interest entities)	306,047			301,598
Total assets	$	917,428		$	877,933
Liabilities and Equity
Liabilities
Future policy benefits (includes $0 and $716, respectively, relating to variable interest entities)	$	196,967		$	191,879
Policyholder account balances (includes $0 and $21, respectively, relating to variable interest entities)	207,593			202,722
Other policy-related balances (includes $0 and $238, respectively, relating to variable interest entities)	14,435			14,255
Policyholder dividends payable	706			720
Policyholder dividend obligation	2,586			1,783
Payables for collateral under securities loaned and other transactions	41,165			36,871
Short-term debt	100			100
Long-term debt (includes $55 and $63, respectively, at estimated fair value, relating to variable interest entities)	17,915			18,023
Collateral financing arrangements	4,127			4,139
Junior subordinated debt securities	3,168			3,194
Deferred income tax liability	13,776			10,592
Other liabilities (includes $0 and $81, respectively, relating to variable interest entities)	32,878			23,561
Separate account liabilities (includes $0 and $1,022, respectively, relating to variable interest entities)	306,047			301,598
Total liabilities	841,463			809,437
Contingencies, Commitments and Guarantees (Note 13)
Redeemable noncontrolling interests in partially-owned consolidated subsidiaries	—			77
Equity
MetLife, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $2,100 aggregate liquidation preference	—			—
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 1,161,534,632 and 1,159,590,766 shares issued, respectively; 1,098,526,527 and 1,098,028,525 shares outstanding, respectively	12			12
Additional paid-in capital	30,769			30,749
Retained earnings	37,301			35,519
Treasury stock, at cost; 63,008,105 and 61,562,241 shares, respectively	(3,172		)	(3,102		)
Accumulated other comprehensive income (loss)	10,865			4,771
Total MetLife, Inc.’s stockholders’ equity	75,775			67,949
Noncontrolling interests	190			470
Total equity	75,965			68,419
Total liabilities and equity	$	917,428		$	877,933

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months Ended March 31, 2016 and 2015 (Unaudited)

(In millions, except per share data)



	Three Months Ended March 31,
	2016			2015
Revenues
Premiums	$	9,693		$	9,253
Universal life and investment-type product policy fees	2,344			2,394
Net investment income	4,559			5,461
Other revenues	487			495
Net investment gains (losses):
Other-than-temporary impairments on fixed maturity securities	(78		)	(8		)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)	—			(10		)
Other net investment gains (losses)	93			304
Total net investment gains (losses)	15			286
Net derivative gains (losses)	1,335			821
Total revenues	18,433			18,710
Expenses
Policyholder benefits and claims	9,678			9,257
Interest credited to policyholder account balances	1,326			1,995
Policyholder dividends	315			339
Other expenses	4,192			4,060
Total expenses	15,511			15,651
Income (loss) before provision for income tax	2,922			3,059
Provision for income tax expense (benefit)	719			896
Net income (loss)	2,203			2,163
Less: Net income (loss) attributable to noncontrolling interests	2			5
Net income (loss) attributable to MetLife, Inc.	2,201			2,158
Less: Preferred stock dividends	6			30
Net income (loss) available to MetLife, Inc.’s common shareholders	$	2,195		$	2,128
Comprehensive income (loss)	$	8,388		$	3,101
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	93			63
Comprehensive income (loss) attributable to MetLife, Inc.	$	8,295		$	3,038



Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
Basic	$	1.99	$	1.89
Diluted	$	1.98	$	1.87
Cash dividends declared per common share	$	0.375	$	0.350

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2016 and 2015 (Unaudited)

(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, 2015	$	—	$	12	$	30,749	$	35,519		$	(3,102	)	$	4,771	$	67,949		$	470		$	68,419
Treasury stock acquired in connection with share repurchases										(70		)			(70		)				(70		)
Stock-based compensation					20										20						20
Dividends on preferred stock							(6		)						(6		)				(6		)
Dividends on common stock							(413		)						(413		)				(413		)
Change in equity of noncontrolling interests															—			(373		)	(373		)
Net income (loss)							2,201								2,201			2			2,203
Other comprehensive income (loss), net of income tax													6,094		6,094			91			6,185
Balance at March 31, 2016	$	—	$	12	$	30,769	$	37,301		$	(3,172	)	$	10,865	$	75,775		$	190		$	75,965



	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, 2014	$	1	$	12	$	30,543	$	32,020		$	(1,172	)	$	10,649	$	72,053		$	507		$	72,560
Treasury stock acquired in connection with share repurchases										(986		)			(986		)				(986		)
Stock-based compensation					89										89						89
Dividends on preferred stock							(30		)						(30		)				(30		)
Dividends on common stock							(394		)						(394		)				(394		)
Change in equity of noncontrolling interests															—			(26		)	(26		)
Net income (loss)							2,158								2,158			5			2,163
Other comprehensive income (loss), net of income tax													880		880			58			938
Balance at March 31, 2015	$	1	$	12	$	30,632	$	33,754		$	(2,158	)	$	11,529	$	73,770		$	544		$	74,314

__________________


(1)	Net income (loss) attributable to noncontrolling interests did not exclude any gains of redeemable noncontrolling interests in partially-owned consolidated subsidiaries at March 31, 2016 . Net income (loss) attributable to noncontrolling interests excluded gains of redeemable noncontrolling interests in partially-owned consolidated subsidiaries of less than $1 million at March 31, 2015 .

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2016 and 2015 (Unaudited)

(In millions)



	Three Months Ended March 31,
	2016			2015
Net cash provided by (used in) operating activities	$	1,964		$	2,686
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	35,095			35,647
Equity securities	631			58
Mortgage loans	2,857			2,719
Real estate and real estate joint ventures	56			280
Other limited partnership interests	295			279
Purchases of:
Fixed maturity securities	(37,247		)	(33,305		)
Equity securities	(675		)	(107		)
Mortgage loans	(4,413		)	(5,559		)
Real estate and real estate joint ventures	(233		)	(140		)
Other limited partnership interests	(281		)	(275		)
Cash received in connection with freestanding derivatives	1,337			947
Cash paid in connection with freestanding derivatives	(1,173		)	(1,494		)
Cash received under repurchase agreements (Note 6)	—			199
Cash paid under reverse repurchase agreements (Note 6)	—			(199		)
Net change in policy loans	85			(7		)
Net change in short-term investments	(2,302		)	(5,690		)
Net change in other invested assets	252			(167		)
Other, net	(23		)	(86		)
Net cash provided by (used in) investing activities	(5,739		)	(6,900		)
Cash flows from financing activities
Policyholder account balances:
Deposits	19,925			22,463
Withdrawals	(19,310		)	(22,736		)
Net change in payables for collateral under securities loaned and other transactions	4,161			1,985
Long-term debt issued	—			1,492
Long-term debt repaid	(5		)	(7		)
Collateral financing arrangements repaid	(12		)	—
Treasury stock acquired in connection with share repurchases	(70		)	(986		)
Dividends on preferred stock	(6		)	(30		)
Dividends on common stock	(413		)	(394		)
Other, net	(30		)	(64		)
Net cash provided by (used in) financing activities	4,240			1,723
Effect of change in foreign currency exchange rates on cash and cash equivalents balances	73			(190		)
Change in cash and cash equivalents	538			(2,681		)
Cash and cash equivalents, beginning of period	12,752			10,808
Cash and cash equivalents, end of period	$	13,290		$	8,127
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	249		$	214
Income tax	$	125		$	147
Non-cash transactions:
Reduction of fixed maturity securities in connection with a reinsurance transaction	$	224		$	—
Deconsolidation of operating joint venture (Note 6):
Reduction of fixed maturity securities	$	917		$	—
Reduction of noncontrolling interests	$	373		$	—

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

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 on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from estimates.

Consolidation

The accompanying interim condensed 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.

Prior to January 1, 2016, certain international subsidiaries had a fiscal year cutoff of November 30th. Accordingly, the Company’s interim condensed consolidated financial statements reflect the assets and liabilities of such subsidiaries as of November 30, 2015 and the operating results of such subsidiaries for the three months ended February 28, 2015. Effective January 1, 2016, the Company converted its Japan operations to calendar year-end reporting. The elimination of a one-month reporting lag of a subsidiary is considered a change in accounting principle and requires retrospective application. While the Company believes that eliminating the lag in the reporting of its Japan operations was preferable in order to consistently reflect events, economic conditions and global trends in the financial statements, the Company determined that it was impracticable to apply the effects of the lag elimination to financial reporting periods prior to January 1, 2015. The effect of not retroactively applying this change in accounting, however, was not material to the 2015 or 2016 consolidated financial statements. Therefore, the Company reported the cumulative effect of the change in accounting principle in net income for the three months ended March 31, 2016 and did not retrospectively apply the effects of this change to prior periods. See Note 2.

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.

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2016 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2015 consolidated balance sheet data was derived from audited consolidated financial statements included in MetLife, Inc.’s Annual Report on Form 10‑K for the year ended December 31, 2015 (the “2015 Annual Report”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2015 Annual Report.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continue d)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies (continued)

Adoption of New Accounting Pronouncement

Effective January 1, 2016, the Company retrospectively adopted new guidance relating to the consolidation of certain entities. The objective of the new standard is to improve targeted areas of the consolidation guidance and to reduce the number of consolidation models. The new consolidation standard provides guidance on how a reporting entity (i) evaluates whether the entity should consolidate limited partnerships and similar entities, (ii) assesses whether the fees paid to a decision maker or service provider are variable interests in a VIE, and (iii) assesses the variable interests in a VIE held by related parties of the reporting entity. The new guidance also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. The adoption of the new guidance did not impact which entities are consolidated by the Company. The consolidated VIE assets and liabilities and unconsolidated VIE carrying amounts and maximum exposure to loss as of March 31, 2016, disclosed in Note 6, reflect the application of the new guidance.

Future Adoption of New Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on stock compensation (Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-based Payment Accounting . The new guidance is effective for the fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and requires either a modified retrospective, a retrospective or a prospective transition approach depending upon the type of change. Early adoption is permitted in any interim or annual period. The new guidance changes several aspects of the accounting for share-based payment award transactions, including: (a) income tax consequences when awards vest or are settled; (b) classification of awards as either equity or liabilities due to statutory tax withholding requirements; and (c) classification on the statement of cash flows. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases - Topic 842 ). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach which includes a number of optional practical expedients. Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current guidance, leases would be classified as finance or operating leases. However, unlike current guidance, the new guidance will require both types of leases to be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In January 2016, the FASB issued new guidance (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 fair value option (“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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continue d)

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, MetLife, Inc. 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”). 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. A Separation, depending on the specific form, would be subject to the satisfaction of various conditions and approvals, including, among other things, 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.

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, fixed and indexed 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 contracts 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (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 net income (loss). 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. In addition, for the three months ended March 31, 2016, operating revenues and operating expenses exclude the financial impact of converting the Company’s Japan operations to calendar year-end reporting without retrospective application of this change to prior periods and is referred to as lag elimination. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses). Operating expenses also excludes goodwill impairments.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (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 guaranteed minimum income benefits (“GMIBs”) 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 deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;


•	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, integration and other 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 three months ended March 31, 2016 and 2015 . 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (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 net income (loss).

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)



	Operating Results
	Americas
Three Months Ended March 31, 2016	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding		Latin America			Total			Asia			EMEA			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	1,740		$	4,294		$	358	$	691		$	7,083		$	1,658		$	500		$	26		$	9,267		$	426		$	9,693
Universal life and investment-type product policy fees	1,149			185			80		268			1,682			350			95			24			2,151			193			2,344
Net investment income	1,880			447			1,342		257			3,926			618			80			82			4,706			(147		)	4,559
Other revenues	215			131			70		7			423			17			20			27			487			—			487
Net investment gains (losses)	—			—			—		—			—			—			—			—			—			15			15
Net derivative gains (losses)	—			—			—		—			—			—			—			—			—			1,335			1,335
Total revenues	4,984			5,057			1,850		1,223			13,114			2,643			695			159			16,611			1,822			18,433
Expenses
Policyholder benefits and claims and policyholder dividends	2,458			4,034			962		617			8,071			1,236			261			25			9,593			400			9,993
Interest credited to policyholder account balances	522			37			310		80			949			319			29			4			1,301			25			1,326
Capitalization of DAC	(255		)	(36		)	—		(97		)	(388		)	(385		)	(101		)	(2		)	(876		)	(105		)	(981		)
Amortization of DAC and VOBA	373			40			5		73			491			286			102			2			881			114			995
Amortization of negative VOBA	—			—			—		—			—			(64		)	(3		)	—			(67		)	(32		)	(99		)
Interest expense on debt	2			—			2		—			4			—			—			308			312			—			312
Other expenses	1,149			712			120		371			2,352			851			333			174			3,710			255			3,965
Total expenses	4,249			4,787			1,399		1,044			11,479			2,243			621			511			14,854			657			15,511
Provision for income tax expense (benefit)	203			96			156		42			497			95			11			(181		)	422			297			719
Operating earnings	$	532		$	174		$	295	$	137		$	1,138		$	305		$	63		$	(171	)	1,335
Adjustments to:
Total revenues																								1,822
Total expenses																								(657		)
Provision for income tax (expense) benefit																								(297		)
Net income (loss)																								$	2,203					$	2,203

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)



	Operating Results
	Americas
Three Months Ended March 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	$	1,749		$	4,117		$	418		$	699		$	6,983		$	1,752		$	508		$	10		$	9,253		$	—		$	9,253
Universal life and investment-type product policy fees	1,236			188			54			294			1,772			397			102			23			2,294			100			2,394
Net investment income	1,980			478			1,430			218			4,106			684			83			109			4,982			479			5,461
Other revenues	251			113			71			10			445			28			10			20			503			(8		)	495
Net investment gains (losses)	—			—			—			—			—			—			—			—			—			286			286
Net derivative gains (losses)	—			—			—			—			—			—			—			—			—			821			821
Total revenues	5,216			4,896			1,973			1,221			13,306			2,861			703			162			17,032			1,678			18,710
Expenses
Policyholder benefits and claims and policyholder dividends	2,449			3,835			991			581			7,856			1,340			239			12			9,447			149			9,596
Interest credited to policyholder account balances	542			37			293			86			958			337			30			6			1,331			664			1,995
Capitalization of DAC	(247		)	(36		)	(6		)	(111		)	(400		)	(435		)	(133		)	—			(968		)	—			(968		)
Amortization of DAC and VOBA	375			41			5			78			499			326			128			—			953			72			1,025
Amortization of negative VOBA	—			—			—			—			—			(86		)	(4		)	—			(90		)	(10		)	(100		)
Interest expense on debt	(1		)	—			1			—			—			—			—			297			297			1			298
Other expenses	1,176			664			124			425			2,389			904			362			145			3,800			5			3,805
Total expenses	4,294			4,541			1,408			1,059			11,302			2,386			622			460			14,770			881			15,651
Provision for income tax expense (benefit)	269			127			196			31			623			148			11			(188		)	594			302			896
Operating earnings	$	653		$	228		$	369		$	131		$	1,381		$	327		$	70		$	(110	)	1,668
Adjustments to:
Total revenues																									1,678
Total expenses																									(881		)
Provision for income tax (expense) benefit																									(302		)
Net income (loss)																									$	2,163					$	2,163

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:



	March 31, 2016		December 31, 2015
	(In millions)
Retail	$	354,705	$	347,257
Group, Voluntary & Worksite Benefits	49,950		46,476
Corporate Benefit Funding	231,484		225,015
Latin America	68,949		65,266
Asia	122,187		113,895
EMEA	27,720		26,767
Corporate & Other	62,433		53,257
Total	$	917,428	$	877,933

3. Pending Disposition

On February 28, 2016, MetLife, Inc. entered into a purchase agreement with Massachusetts Mutual Life Insurance Company (“MassMutual”) pursuant to which MassMutual will acquire MetLife’s U.S. Retail advisor force and certain assets associated with the MetLife Premier Client Group, including MetLife’s affiliated broker-dealer, MetLife Securities, Inc. (“MSI”), a wholly-owned subsidiary of MetLife, Inc. MassMutual will also assume all of the liabilities that relate to or arise from such assets and that arise or occur at or after the closing of the transactions contemplated by the purchase agreement. In addition, MassMutual will acquire all of the issued and outstanding shares of MSI. The purchase price is approximately $300 million , subject to customary adjustments. The transactions contemplated by the purchase agreement are subject to certain closing conditions, including regulatory approval. The Company recorded certain charges to computer software and employee benefit plans related to the transactions during the three months ended March 31, 2016. See Notes 8 and 11 .

4. Insurance

Guarantees

As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report, the Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”) and the portions of both non-life-contingent guaranteed minimum withdrawal benefits (“GMWBs”) and the GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 7 .

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Insurance (continued)

Information regarding the Company’s guarantee exposure, which includes direct and assumed business, but excludes offsets from hedging or ceded reinsurance, if any, was as follows at:



	March 31, 2016								December 31, 2015
	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)	$	180,216			$	90,785			$	181,413			$	91,240
Separate account value	$	150,726			$	87,235			$	151,901			$	87,841
Net amount at risk (2)	$	10,475	(4	)	$	3,412	(5	)	$	10,339	(4	)	$	2,762	(5	)
Average attained age of contractholders	67 years				66 years				66 years				66 years
Other Annuity Guarantees
Total account value (3)	N/A				$	1,583			N/A				$	1,560
Net amount at risk	N/A				$	425	(6	)	N/A				$	422	(6	)
Average attained age of contractholders	N/A				51 years				N/A				51 years



	March 31, 2016				December 31, 2015
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(In millions)
Universal and Variable Life Contracts (1)
Total account value (3)	$	16,818	$	3,428	$	17,211	$	3,461
Net amount at risk (7)	$	176,200	$	18,718	$	175,958	$	19,047
Average attained age of policyholders	57 years		62 years		57 years		62 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.


(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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. 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.

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.

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:



	March 31, 2016			December 31, 2015
	(In millions)
Closed Block Liabilities
Future policy benefits	$	41,046		$	41,278
Other policy-related balances	270			249
Policyholder dividends payable	484			468
Policyholder dividend obligation	2,586			1,783
Other liabilities	799			380
Total closed block liabilities	45,185			44,158
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	28,739			27,556
Equity securities available-for-sale, at estimated fair value	108			111
Mortgage loans	5,910			6,022
Policy loans	4,561			4,642
Real estate and real estate joint ventures	458			462
Other invested assets	978			1,066
Total investments	40,754			39,859
Cash and cash equivalents	151			236
Accrued investment income	477			474
Premiums, reinsurance and other receivables	321			56
Current income tax recoverable	7			11
Deferred income tax assets	215			234
Total assets designated to the closed block	41,925			40,870
Excess of closed block liabilities over assets designated to the closed block	3,260			3,288
Amounts included in accumulated other comprehensive income (loss) (“AOCI”)
Unrealized investment gains (losses), net of income tax	1,963			1,382
Unrealized gains (losses) on derivatives, net of income tax	63			76
Allocated to policyholder dividend obligation, net of income tax	(1,681		)	(1,159		)
Total amounts included in AOCI	345			299
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,605		$	3,587

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Closed Block (continued)

Information regarding the closed block policyholder dividend obligation was as follows:



	Three Months Ended March 31, 2016		Year Ended December 31, 2015
	(In millions)
Balance, beginning of period	$	1,783	$	3,155
Change in unrealized investment and derivative gains (losses)	803		(1,372		)
Balance, end of period	$	2,586	$	1,783

Information regarding the closed block revenues and expenses was as follows:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Revenues
Premiums	$	417		$	430
Net investment income	480			515
Net investment gains (losses)	(28		)	(1		)
Net derivative gains (losses)	(11		)	25
Total revenues	858			969
Expenses
Policyholder benefits and claims	610			608
Policyholder dividends	245			240
Other expenses	32			37
Total expenses	887			885
Revenues, net of expenses before provision for income tax expense (benefit)	(29		)	84
Provision for income tax expense (benefit)	(11		)	29
Revenues, net of expenses and provision for income tax expense (benefit)	$	(18	)	$	55

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.

6. Investments

Fixed Maturity and Equity Securities Available-for-Sale

Fixed Maturity and Equity Securities Available-for-Sale by Sector

The following table presents the fixed maturity and equity securities available-for-sale (“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 residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”).

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)



	March 31, 2016											December 31, 2015
	Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value
	Cost or Amortized Cost		Gains		Temporary Losses		OTTI Losses			Estimated Fair Value		Cost or Amortized Cost		Gains		Temporary Losses		OTTI Losses			Estimated Fair Value
	(In millions)
Fixed maturity securities
U.S. corporate	$	95,066	$	8,350	$	1,320	$	—		$	102,096	$	96,466	$	6,583	$	2,255	$	—		$	100,794
U.S. government and agency	57,060		7,969		38		—			64,991		56,499		5,373		226		—			61,646
Foreign corporate	56,756		3,612		1,273		4			59,091		56,003		3,019		1,822		2			57,198
Foreign government	48,940		7,848		132		—			56,656		45,451		5,269		221		—			50,499
RMBS	41,940		1,577		414		74			43,029		37,914		1,366		424		59			38,797
State and political subdivision	14,243		2,320		16		8			16,539		13,723		1,795		67		10			15,441
ABS	16,407		121		320		6			16,202		14,498		131		229		6			14,394
CMBS (1)	13,000		470		94		(1		)	13,377		12,410		347		125		(1		)	12,633
Total fixed maturity securities	$	343,412	$	32,267	$	3,607	$	91		$	371,981	$	332,964	$	23,883	$	5,369	$	76		$	351,402
Equity securities
Common stock	$	2,051	$	412	$	48	$	—		$	2,415	$	1,962	$	397	$	107	$	—		$	2,252
Non-redeemable preferred stock	959		69		69		—			959		1,035		85		51		—			1,069
Total equity securities	$	3,010	$	481	$	117	$	—		$	3,374	$	2,997	$	482	$	158	$	—		$	3,321

__________________


(1)	The noncredit loss component of other-than-temporary impairment (“OTTI”) losses for CMBS was in an unrealized gain position of $1 million at both March 31, 2016 and December 31, 2015 , 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 $59 million and $54 million with unrealized gains (losses) of $19 million and $12 million at March 31, 2016 and December 31, 2015 , respectively.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at March 31, 2016 :



	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	$	13,348	$	77,283	$	69,960	$	111,474	$	71,347	$	343,412
Estimated fair value	$	13,428	$	81,212	$	74,104	$	130,629	$	72,608	$	371,981

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.

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)



	March 31, 2016								December 31, 2015
	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	$	14,740	$	708	$	5,276	$	612	$	27,526	$	1,629	$	3,762	$	626
U.S. government and agency	1,549		13		500		25		19,628		222		298		4
Foreign corporate	8,960		479		6,210		798		14,447		911		5,251		913
Foreign government	1,996		83		535		49		3,530		166		429		55
RMBS	7,026		234		2,989		254		13,467		287		2,431		196
State and political subdivision	322		4		168		20		1,618		55		168		22
ABS	8,025		188		3,569		138		7,329		124		2,823		111
CMBS	1,697		32		967		61		4,876		81		637		43
Total fixed maturity securities	$	44,315	$	1,741	$	20,214	$	1,957	$	92,421	$	3,475	$	15,799	$	1,970
Equity securities
Common stock	$	168	$	46	$	2	$	2	$	203	$	105	$	20	$	2
Non-redeemable preferred stock	130		9		176		60		79		2		200		49
Total equity securities	$	298	$	55	$	178	$	62	$	282	$	107	$	220	$	51
Total number of securities in an unrealized loss position	3,904				1,837				6,366				1,489

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities

As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired.

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 March 31, 2016 . 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 decreased $1.7 billion during the three months ended March 31, 2016 to $3.7 billion . The decrease in gross unrealized losses for the three months ended March 31, 2016 , was primarily attributable to a decrease in interest rates and, to a lesser extent, the impact of strengthening foreign currencies on non-functional currency denominated fixed maturity securities.

At March 31, 2016 , $472 million of the total $3.7 billion of gross unrealized losses were from 113 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 $472 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, $231 million , or 49% , were related to gross unrealized losses on 55 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Below Investment Grade Fixed Maturity Securities

Of the $472 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, $241 million , or 51% , were related to gross unrealized losses on 58 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 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 decreased $41 million during the three months ended March 31, 2016 to $117 million . Of the $117 million , $47 million were from nine securities with gross unrealized losses of 20% or more of cost for 12 months or greater. Of the $47 million , 64% were rated A or better, and all were from financial services industry investment grade non-redeemable preferred stock.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:



	March 31, 2016					December 31, 2015
	Carrying Value			% of Total		Carrying Value			% of Total
	(In millions)					(In millions)
Mortgage loans
Commercial	$	45,445		66.2	%	$	44,012		65.6	%
Agricultural	13,226			19.3		13,188			19.6
Residential	9,800			14.3		9,734			14.5
Subtotal (1)	68,471			99.8		66,934			99.7
Valuation allowances	(381		)	(0.6	)	(318		)	(0.5	)
Subtotal mortgage loans, net	68,090			99.2		66,616			99.2
Residential — FVO	392			0.6		314			0.5
Commercial mortgage loans held by CSEs — FVO	169			0.2		172			0.3
Total mortgage loans, net	$	68,651		100.0	%	$	67,102		100.0	%

__________________


(1)	Purchases of mortgage loans were $292 million and $1.4 billion for the three months ended March 31, 2016 and 2015 , respectively.

See “— Variable Interest Entities” for discussion of consolidated securitization entities (“CSEs”).

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 8 . The Company elects the FVO for certain mortgage loans and related long-term debt that are managed on a total return basis.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

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:



	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
	(In millions)
March 31, 2016
Commercial	$	161	$	144	$	58	$	56	$	56	$	45,245	$	223	$	142
Agricultural	16		14		1		39		38		13,174		39		51
Residential	—		—		—		176		162		9,638		60		162
Total	$	177	$	158	$	59	$	271	$	256	$	68,057	$	322	$	355
December 31, 2015
Commercial	$	—	$	—	$	—	$	57	$	57	$	43,955	$	217	$	57
Agricultural	49		47		3		22		21		13,120		39		65
Residential	—		—		—		141		131		9,603		59		131
Total	$	49	$	47	$	3	$	220	$	209	$	66,678	$	315	$	253

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $128 million , $60 million and $147 million , respectively, for the three months ended March 31, 2016 ; and $171 million , $63 million and $47 million , respectively, for the three months ended March 31, 2015 .

Valuation Allowance Rollforward by Portfolio Segment

The changes in the valuation allowance, by portfolio segment, were as follows:



	Three Months Ended March 31,
	2016											2015
	Commercial		Agricultural			Residential			Total			Commercial		Agricultural		Residential			Total
	(In millions)
Balance, beginning of period	$	217	$	42		$	59		$	318		$	224	$	39	$	42		$	305
Provision (release)	64		—			4			68			1		—		14			15
Charge-offs, net of recoveries	—		(2		)	(3		)	(5		)	—		—		(5		)	(5		)
Balance, end of period	$	281	$	40		$	60		$	381		$	225	$	39	$	51		$	315

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

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								% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x		Total		% of Total
	(In millions)										(In millions)
March 31, 2016
Loan-to-value ratios
Less than 65%	$	39,658	$	888	$	594	$	41,140	90.5	%	$	42,534	91.0	%
65% to 75%	3,371		106		206		3,683		8.1		3,673		7.8
76% to 80%	89		—		—		89		0.2		93		0.2
Greater than 80%	438		42		53		533		1.2		452		1.0
Total	$	43,556	$	1,036	$	853	$	45,445	100	%	$	46,752	100	%
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	%

Credit Quality of Agricultural Mortgage Loans

The credit quality of agricultural mortgage loans was as follows at:



	March 31, 2016				December 31, 2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(In millions)				(In millions)
Loan-to-value ratios
Less than 65%	$	12,583	95.1	%	$	12,399	94.0	%
65% to 75%	575		4.3		710		5.4
76% to 80%	20		0.2		21		0.2
Greater than 80%	48		0.4		58		0.4
Total	$	13,226	100.0	%	$	13,188	100.0	%

The estimated fair value of agricultural mortgage loans was $13.6 billion and $13.5 billion at March 31, 2016 and December 31, 2015 , respectively.

Credit Quality of Residential Mortgage Loans

The credit quality of residential mortgage loans was as follows at:



	March 31, 2016				December 31, 2015
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(In millions)				(In millions)
Performance indicators
Performing	$	9,483	96.8	%	$	9,408	96.7	%
Nonperforming	317		3.2		326		3.3
Total	$	9,800	100.0	%	$	9,734	100.0	%

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

The estimated fair value of residential mortgage loans was $10.1 billion and $9.9 billion at March 31, 2016 and December 31, 2015 , 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 March 31, 2016 and December 31, 2015 . 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
	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
	(In millions)
Commercial	$	—	$	2	$	—	$	—
Agricultural	127		103		40		46
Residential	317		326		305		318
Total	$	444	$	431	$	345	$	364

Mortgage Loans Modified in a Troubled Debt Restructuring

During both the three months ended March 31, 2016 and 2015 , the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring.

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 $6.0 billion and $7.5 billion at March 31, 2016 and December 31, 2015 , respectively.

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, deferred sales inducements (“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:



	March 31, 2016			December 31, 2015
	(In millions)
Fixed maturity securities	$	28,427		$	18,164
Fixed maturity securities with noncredit OTTI losses included in AOCI	(91		)	(76		)
Total fixed maturity securities	28,336			18,088
Equity securities	447			422
Derivatives	2,723			2,350
Other	359			287
Subtotal	31,865			21,147
Amounts allocated from:
Future policy benefits	(1,415		)	(163		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	2			—
DAC, VOBA and DSI	(1,900		)	(1,273		)
Policyholder dividend obligation	(2,586		)	(1,783		)
Subtotal	(5,899		)	(3,219		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	39			27
Deferred income tax benefit (expense)	(8,825		)	(6,151		)
Net unrealized investment gains (losses)	17,180			11,804
Net unrealized investment gains (losses) attributable to noncontrolling interests	(9		)	(31		)
Net unrealized investment gains (losses) attributable to MetLife, Inc.	$	17,171		$	11,773

The changes in fixed maturity securities with noncredit OTTI losses included in AOCI were as follows:



	Three Months Ended March 31, 2016			Year Ended December 31, 2015
	(In millions)
Balance, beginning of period	$	(76	)	$	(112	)
Noncredit OTTI losses and subsequent changes recognized	(1		)	6
Securities sold with previous noncredit OTTI loss	9			125
Subsequent changes in estimated fair value	(23		)	(95		)
Balance, end of period	$	(91	)	$	(76	)

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

The changes in net unrealized investment gains (losses) were as follows:



	Three Months Ended March 31, 2016
	(In millions)
Balance, beginning of period	$	11,773
Fixed maturity securities on which noncredit OTTI losses have been recognized	(15		)
Unrealized investment gains (losses) during the period	10,733
Unrealized investment gains (losses) relating to:
Future policy benefits	(1,252		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	2
DAC, VOBA and DSI	(627		)
Policyholder dividend obligation	(803		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	12
Deferred income tax benefit (expense)	(2,674		)
Net unrealized investment gains (losses)	17,149
Net unrealized investment gains (losses) attributable to noncontrolling interests	22
Balance, end of period	$	17,171
Change in net unrealized investment gains (losses)	$	5,376
Change in net unrealized investment gains (losses) attributable to noncontrolling interests	22
Change in net unrealized investment gains (losses) attributable to MetLife, Inc.	$	5,398

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 $24.9 billion and $20.9 billion at March 31, 2016 and December 31, 2015 , 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 $29.7 billion and $25.4 billion at March 31, 2016 and December 31, 2015 , respectively.

Securities Lending

Elements of the securities lending program are presented below at:



	March 31, 2016		December 31, 2015
	(In millions)
Securities on loan: (1)
Amortized cost	$	26,599	$	27,223
Estimated fair value	$	30,474	$	29,646
Cash collateral on deposit from counterparties (2)	$	30,986	$	30,197
Security collateral on deposit from counterparties (3)	$	88	$	50
Reinvestment portfolio — estimated fair value	$	31,173	$	30,258

__________________


(1)	Included within fixed maturity securities and short-term investments. At March 31, 2016 , both amortized cost and estimated fair value also included $105 million , at estimated fair value, of securities which are not reflected on the consolidated financial statements.


(2)	Included within payables for collateral under securities loaned and other transactions.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)


(3)	Security collateral on deposit from counterparties may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements.

The cash collateral liability by loaned security type and remaining tenor of the agreements were as follows at:



	March 31, 2016
	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. government and agency	$	8,665	$	10,353	$	9,476	$	28,494	92.0	%
Agency RMBS	12		665		600		1,277		4.1
Foreign government	2		803		—		805		2.6
U.S. corporate	11		387		—		398		1.3
Foreign corporate	—		12		—		12		—
Total	$	8,690	$	12,220	$	10,076	$	30,986	100	%



	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. government 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	%

__________________


(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 March 31, 2016 was $8.5 billion , over 99% of which were U.S. government 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. government and agency, agency RMBS, ABS, U.S. and foreign corporate securities and non-agency RMBS) with 64% invested in U.S. government and agency securities, agency RMBS, short-term investments, or held in cash and cash equivalents. 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Repurchase Agreement Transactions

The Company participates in short-term repurchase agreements and reverse repurchase agreements with unaffiliated financial institutions. Under these agreements, the Company lends fixed maturity securities and contemporaneously borrows other fixed maturity securities (e.g., repurchase and reverse repurchase, respectively). The Company obtains cash collateral in an amount greater than or equal to 95% of the estimated fair value of the securities loaned, and pledges cash collateral in an amount generally equal to 98% of the estimated fair value of the borrowed securities at the inception of the transaction. The Company monitors the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction.

The Company accounted for these transactions as collateralized borrowing and lending. The amount of fixed maturity securities lent and borrowed, at estimated fair value, was $315 million and $305 million , respectively, at March 31, 2016 . There were no such transactions outstanding as of December 31, 2015 . Securities loaned under such transactions may be sold or re-pledged by the transferee. Securities borrowed under such transactions may be re-pledged and are not reflected on the consolidated financial statements. The amount of borrowed securities which were re-pledged was $105 million , at estimated fair value, at March 31, 2016 .

The Company has elected to offset amounts recognized as receivables and payables resulting from these transactions. The gross amounts of the receivables and payables related to these transactions at March 31, 2016 were both $300 million . After the effect of offsetting of $300 million , the net amount presented on the consolidated balance sheet at March 31, 2016 was a liability of less than $1 million . Amounts owed to and due from counterparties may be settled in cash or offset, in accordance with the agreements. Cash inflows and outflows for cash settlements are reported on the consolidated statements of cash flows. At March 31, 2016 , all $300 million of payables from repurchase agreements had a remaining tenor of six months to one year and were loans of U.S. and foreign corporate securities.

See Note 7 for information regarding the estimated fair value of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral.

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:



	March 31, 2016		December 31, 2015
	(In millions)
Invested assets on deposit (regulatory deposits)	$	9,696	$	9,089
Invested assets held in trust (collateral financing arrangements and reinsurance agreements)	10,770		10,443
Invested assets pledged as collateral (1)	25,524		23,145
Total invested assets on deposit, held in trust and pledged as collateral	$	45,990	$	42,677

__________________

(1)

The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Notes 4 and 12 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report), collateral financing arrangements (see Note 13 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report) and derivative transactions (see Note 7 ).

See “— Securities Lending” and “— Repurchase Agreement Transactions” for information regarding securities on loan and Note 5 for information regarding investments designated to the closed block.

Variable Interest Entities

The Company is involved with certain legal entities 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Consolidated VIEs

Creditors or beneficial interest holders of VIEs where the Company is the pr imary 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 re lating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at March 31, 2016 and December 31, 2015 .



	March 31, 2016				December 31, 2015
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
MRSC (collateral financing arrangement (primarily securities)) (1)	$	3,412	$	—	$	3,374	$	—
Operating joint venture (2)	—		—		2,465		2,079
CSEs (assets (primarily loans) and liabilities (primarily debt)) (3)	182		55		186		62
Other investments (4)	76		—		76		—
Total	$	3,670	$	55	$	6,101	$	2,141

__________________


(1)	See Note 13 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report for a description of the MetLife Reinsurance Company of South Carolina (“MRSC”) collateral financing arrangement.

(2)

Following a change in the foreign investment law in India, the Company no longer consolidated its India operating joint venture, effective January 1, 2016. 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 policy-related balances 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 $107 million and $105 million at estimated fair value at March 31, 2016 and December 31, 2015 , 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 $1 million for both the three months ended March 31, 2016 and 2015 .


(4)	Other investments is primarily comprised of other invested assets and other limited partnership interests.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. 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:



	March 31, 2016				December 31, 2015
	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)	$	72,608	$	72,608	$	65,824	$	65,824
U.S. and foreign corporate	3,075		3,075		3,261		3,261
Other limited partnership interests	6,348		10,791		5,186		7,074
Other invested assets	2,160		2,770		1,604		2,161
FVO and trading securities	541		541		586		586
Real estate joint ventures	251		284		65		82
Equity securities AFS:
Common stock	157		157		—		—
Other investments (3)	72		72		71		71
Total	$	85,212	$	90,298	$	76,597	$	79,059

__________________

(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 $170 million and $179 million at March 31, 2016 and December 31, 2015 , 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 13 , 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 both the three months ended March 31, 2016 and 2015 .

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Net Investment Income

The components of net investment income were as follows:



		Three Months Ended March 31,
		2016			2015
	(In millions)
Investment income:
Fixed maturity securities		$	3,654		$	3,541
Equity securities		37			31
FVO and trading securities — Actively traded and FVO general account securities (1)		6			37
Mortgage loans		807			730
Policy loans		149			152
Real estate and real estate joint ventures		157			211
Other limited partnership interests		46			215
Cash, cash equivalents and short-term investments		40			35
Operating joint ventures		12			8
Other		41			122
Subtotal		4,949			5,082
Less: Investment expenses		296			302
Subtotal, net		4,653			4,780
FVO and trading securities — FVO contractholder-directed unit-linked investments (1)		(97		)	677
FVO CSEs — interest income:
Commercial mortgage loans		3			4
Subtotal		(94		)	681
Net investment income		$	4,559		$	5,461

__________________


(1)	Changes in estimated fair value subsequent to purchase for securities still held as of the end of the respective periods included in net investment income were as follows:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Actively traded and FVO general account securities	$	5		$	6
FVO contractholder-directed unit-linked investments	$	(191	)	$	536

See “— Variable Interest Entities” for discussion of CSEs.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

The components of net investment gains (losses) were as follows:



		Three Months Ended March 31,
		2016			2015
	(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		$	—		$	(3	)
Industrial		(71		)	(2		)
Communications		(3		)	—
Total U.S. and foreign corporate securities		(74		)	(5		)
RMBS		(4		)	(13		)
OTTI losses on fixed maturity securities recognized in earnings		(78		)	(18		)
Fixed maturity securities — net gains (losses) on sales and disposals		98			151
Total gains (losses) on fixed maturity securities		20			133
Total gains (losses) on equity securities:
Total OTTI losses recognized — by sector:
Common stock		(51		)	—
OTTI losses on equity securities recognized in earnings		(51		)	—
Equity securities — net gains (losses) on sales and disposals		6			8
Total gains (losses) on equity securities		(45		)	8
Mortgage loans		(64		)	(43		)
Real estate and real estate joint ventures		2			27
Other limited partnership interests		(27		)	16
Other		(18		)	23
Subtotal		(132		)	164
FVO CSEs:
Commercial mortgage loans		1			(3		)
Securities		1			—
Long-term debt — related to commercial mortgage loans		—			1
Non-investment portfolio gains (losses)		145			124
Subtotal		147			122
Total net investment gains (losses)		$	15		$	286

See “— Variable Interest Entities” for discussion of CSEs.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were $79 million and $161 million for the three months ended March 31, 2016 and 2015 , 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Investments (continued)



	Three Months Ended March 31,
	2016			2015			2016			2015
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	31,994		$	30,006		$	59		$	53
Gross investment gains	$	433		$	338		$	11		$	15
Gross investment losses	(335		)	(187		)	(5		)	(7		)
OTTI losses	(78		)	(18		)	(51		)	—
Net investment gains (losses)	$	20		$	133		$	(45	)	$	8

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 other comprehensive income (loss) (“OCI”):



		Three Months Ended March 31,
		2016			2015
	(In millions)
Balance, beginning of period		$	277		$	357
Additions:
Initial impairments — credit loss OTTI on securities not previously impaired		—			2
Additional impairments — credit loss OTTI on securities previously impaired		2			11
Reductions:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI		(9		)	(13		)
Balance, end of period		$	270		$	357

7. Derivatives

Accounting for 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (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.

See Note 8 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.

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

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. government and 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 and nonqualifying 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.

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

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. government and 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”).

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

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 London Interbank Offered Rate (“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.

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:



		March 31, 2016						December 31, 2015
	Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
	Primary Underlying Risk Exposure	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	$	5,491	$	2,596	$	17	$	5,528	$	2,215	$	12
Foreign currency swaps	Foreign currency exchange rate	2,135		66		142		2,154		62		159
Foreign currency forwards	Foreign currency exchange rate	1,485		62		—		1,685		—		52
Subtotal		9,111		2,724		159		9,367		2,277		223
Cash flow hedges
Interest rate swaps	Interest rate	1,945		643		—		2,190		487		—
Interest rate forwards	Interest rate	35		12		—		105		23		—
Foreign currency swaps	Foreign currency exchange rate	25,121		1,461		1,511		23,661		1,303		1,803
Subtotal		27,101		2,116		1,511		25,956		1,813		1,803
Foreign operations hedges
Foreign currency forwards	Foreign currency exchange rate	5,043		2		179		3,916		63		12
Currency options	Foreign currency exchange rate	8,144		41		80		7,569		205		36
Subtotal		13,187		43		259		11,485		268		48
Total qualifying hedges		49,399		4,883		1,929		46,808		4,358		2,074
Derivatives Not Designated or Not Qualifying as Hedging Instruments
Interest rate swaps	Interest rate	80,829		7,277		3,215		89,336		5,111		2,247
Interest rate floors	Interest rate	20,837		386		53		23,837		311		48
Interest rate caps	Interest rate	70,928		70		3		68,928		105		3
Interest rate futures	Interest rate	6,652		21		7		5,808		4		7
Interest rate options	Interest rate	27,590		2,316		2		30,234		1,177		30
Interest rate forwards	Interest rate	43		5		—		43		1		—
Synthetic GICs	Interest rate	3,980		—		—		4,216		—		—
Foreign currency swaps	Foreign currency exchange rate	11,512		768		459		11,081		766		431
Foreign currency forwards	Foreign currency exchange rate	14,539		388		187		11,724		154		220
Currency futures	Foreign currency exchange rate	985		1		1		930		—		—
Currency options	Foreign currency exchange rate	8,016		337		66		9,590		466		189
Credit default swaps — purchased	Credit	2,079		22		22		1,870		28		34
Credit default swaps — written	Credit	10,729		105		11		10,311		78		13
Equity futures	Equity market	11,768		28		15		7,206		63		18
Equity index options	Equity market	53,981		1,924		1,241		55,682		1,542		1,041
Equity variance swaps	Equity market	23,466		208		682		23,437		195		636
TRRs	Equity market	3,913		8		229		3,803		47		58
Total non-designated or nonqualifying derivatives		351,847		13,864		6,193		358,036		10,048		4,975
Total		$	401,246	$	18,747	$	8,122	$	404,844	$	14,406	$	7,049

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. 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 March 31, 2016 and December 31, 2015 . 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:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Freestanding derivatives and hedging gains (losses) (1)	$	2,504		$	848
Embedded derivatives gains (losses)	(1,169		)	(27		)
Total net derivative gains (losses)	$	1,335		$	821

__________________


(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:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Qualifying hedges:
Net investment income	$	57		$	58
Interest credited to policyholder account balances	6			2
Other expenses	(2		)	(3		)
Nonqualifying hedges:
Net investment income	—			(1		)
Net derivative gains (losses)	283			261
Policyholder benefits and claims	5			4
Total	$	349		$	321

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. 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 not qualifying as hedging instruments:



	Net Derivative Gains (Losses)			Net Investment Income (1)			Policyholder Benefits and Claims (2)
	(In millions)
Three Months Ended March 31, 2016
Interest rate derivatives	$	1,972		$	—		$	42
Foreign currency exchange rate derivatives	523			—			(1		)
Credit derivatives — purchased	(5		)	10			—
Credit derivatives — written	(6		)	(9		)	—
Equity derivatives	(47		)	(11		)	32
Total	$	2,437		$	(10	)	$	73
Three Months Ended March 31, 2015
Interest rate derivatives	$	552		$	—		$	11
Foreign currency exchange rate derivatives	669			—			—
Credit derivatives — purchased	(11		)	(1		)	—
Credit derivatives — written	3			1			—
Equity derivatives	(462		)	(4		)	(99		)
Total	$	751		$	(4	)	$	(88	)

__________________


(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.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. 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)
Three Months Ended March 31, 2016
Interest rate swaps:	Fixed maturity securities	$	(8	)	$	7		$	(1	)
	Policyholder liabilities (1)	346			(348		)	(2		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	(1		)	2			1
	Foreign-denominated policyholder account balances (2)	25			(25		)	—
Foreign currency forwards:	Foreign-denominated fixed maturity securities	139			(128		)	11
Total		$	501		$	(492	)	$	9
Three Months Ended March 31, 2015
Interest rate swaps:	Fixed maturity securities	$	(5	)	$	7		$	2
	Policyholder liabilities (1)	197			(198		)	(1		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	10			(8		)	2
	Foreign-denominated policyholder account balances (2)	(249		)	245			(4		)
Foreign currency forwards:	Foreign-denominated fixed maturity securities	(17		)	16			(1		)
Total		$	(64	)	$	62		$	(2	)

__________________


(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 three months ended March 31, 2016 and March 31, 2015 , the component of the change in estimated fair value of derivatives that was excluded from the assessment of hedge effectiveness was ($6) 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.

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 ($4) million and $3 million for the three months ended March 31, 2016 and 2015, respectively.

At both March 31, 2016 and December 31, 2015 , 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 .

At March 31, 2016 and December 31, 2015 , the balance in AOCI associated with cash flow hedges was $2.7 billion and $2.4 billion , respectively.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and comprehensive income (loss) 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)
Three Months Ended March 31, 2016
Interest rate swaps	$	213		$	10		$	3	$	—	$	(1	)
Interest rate forwards	9			2			1		—		—
Foreign currency swaps	474			306			—		1		(2		)
Total	$	696		$	318		$	4	$	1	$	(3	)
Three Months Ended March 31, 2015
Interest rate swaps	$	174		$	5		$	3	$	—	$	3
Interest rate forwards	15			3			1		1		—
Foreign currency swaps	(2		)	(567		)	—		—		4
Total	$	187		$	(559	)	$	4	$	1	$	7

All components of e ach derivative’s gain or loss were included in the assessment of hedge effectiveness.

At March 31, 2016 , ($15) 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.

The following table presents the effects of derivatives in net investment hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:



Derivatives in Net Investment Hedging Relationships (1), (2)	Amount of Gains (Losses) Deferred in AOCI (Effective Portion)
	(In millions)
Three Months Ended March 31, 2016
Foreign currency forwards	$	(231	)
Currency options	(168		)
Total	$	(399	)
Three Months Ended March 31, 2015
Foreign currency forwards	$	111
Currency options	(41		)
Total	$	70

__________________


(1)	During both the three months ended March 31, 2016 and 2015 , 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.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)


(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 March 31, 2016 and December 31, 2015 , the cumulative foreign currency translation gain (loss) recorded in AOCI related to hedges of net investments in foreign operations was $657 million and $1.1 billion , 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 $10.7 billion and $10.3 billion at March 31, 2016 and December 31, 2015 , 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 March 31, 2016 and December 31, 2015 , the Company would have received $94 million and $65 million , respectively, to terminate all of these contracts.

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:



	March 31, 2016					December 31, 2015
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	$	630	2.8	$	6		$	661	2.5
Credit default swaps referencing indices	16		2,137		3.6	6			1,635		3.4
Subtotal	22		2,767		3.4	12			2,296		3.2
Baa
Single name credit default swaps (corporate)	5		1,158		2.4	8			1,349		2.5
Credit default swaps referencing indices	55		6,278		5.1	37			5,863		4.8
Subtotal	60		7,436		4.7	45			7,212		4.4
Ba
Single name credit default swaps (corporate)	—		65		2.1	(2		)	64		2.3
Credit default swaps referencing indices	—		100		0.7	(1		)	100		1.0
Subtotal	—		165		1.3	(3		)	164		1.5
B
Single name credit default swaps (corporate)	—		—		—	—			—		—
Credit default swaps referencing indices	12		361		4.6	11			639		4.9
Subtotal	12		361		4.6	11			639		4.9
Total	$	94	$	10,729	4.3	$	65		$	10,311	4.1

__________________

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)


(1)	The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“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 $10.7 billion and $10.3 billion from the table above were $139 million and $80 million at March 31, 2016 and December 31, 2015 , respectively.

Written credit default swaps held in relation to the trading portfolio amounted to $10 million and $20 million in gross notional amount and $1 million and ($2) million in estimated fair value at March 31, 2016 and December 31, 2015 , 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.

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 8 for a description of the impact of credit risk on the valuation of derivatives.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

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:



	March 31, 2016						December 31, 2015
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (6)	Assets			Liabilities			Assets			Liabilities
	(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)	$	16,578		$	6,345		$	13,017		$	5,848
OTC-cleared (1)	2,403			1,731			1,600			1,217
Exchange-traded	50			23			67			25
Total gross estimated fair value of derivatives (1)	19,031			8,099			14,684			7,090
Amounts offset on the consolidated balance sheets	—			—			—			—
Estimated fair value of derivatives presented on the consolidated balance sheets (1)	19,031			8,099			14,684			7,090
Gross amounts not offset on the consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(5,113		)	(5,113		)	(4,368		)	(4,368		)
OTC-cleared	(1,717		)	(1,717		)	(1,200		)	(1,200		)
Exchange-traded	—			—			(1		)	(1		)
Cash collateral: (3), (4)
OTC-bilateral	(9,215		)	—			(6,140		)	(7		)
OTC-cleared	(671		)	(2		)	(378		)	(10		)
Exchange-traded	—			(19		)	—			(20		)
Securities collateral: (5)
OTC-bilateral	(1,880		)	(1,119		)	(2,078		)	(1,395		)
OTC-cleared	—			—			—			—
Exchange-traded	—			(1		)	—			(3		)
Net amount after application of master netting agreements and collateral	$	435		$	128		$	519		$	86

__________________


(1)	At March 31, 2016 and December 31, 2015 , derivative assets included income or expense accruals reported in accrued investment income or in other liabilities of $284 million and $278 million , respectively, and derivative liabilities included income or expense accruals reported in accrued investment income or in other liabilities of ($23) million and $41 million , respectively.


(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.

(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 March 31, 2016 and December 31, 2015 , the Company received excess cash collateral of $227 million and $89 million , respectively, and provided excess cash collateral of $478 million and $204 million , respectively, which is not included in the table above due to the foregoing limitation.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)

(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 March 31, 2016 , 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 March 31, 2016 and December 31, 2015 , the Company received excess securities collateral with an estimated fair value of $146 million and $100 million , respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2016 and December 31, 2015 , the Company provided excess securities collateral with an estimated fair value of $159 million and $150 million , respectively, for its OTC-bilateral derivatives, and $249 million and $315 million , respectively, for its OTC-cleared derivatives, and $282 million and $224 million , respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.


(6)	See Note 6 for information regarding the Company’s gross and net payables and receivables under repurchase agreement transactions.

The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the party in a net liability position, after considering the effect of netting agreements, to pledge collateral when the estimated fair value of that party’s derivatives reaches a minimum transfer amount. A small number of these arrangements also include credit-contingent provisions that include a threshold above which collateral must be posted. Such agreements 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 MetLife, Inc. and/or the counterparty. In addition, substantially all 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 or financial strength rating, as applicable, 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 MetLife, Inc. would be required to provide if there was a one-notch downgrade in MetLife, Inc.’s senior unsecured debt rating at the reporting date or if the Company’s credit or financial strength rating, as applicable, 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.



	March 31, 2016						December 31, 2015
	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)	$	1,181	$	48	$	1,229	$	1,270	$	207	$	1,477
Estimated Fair Value of Collateral Provided
Fixed maturity securities	$	1,223	$	51	$	1,274	$	1,365	$	174	$	1,539
Cash	$	—	$	—	$	—	$	4	$	4	$	8
Estimated Fair Value of Incremental Collateral Provided Upon
One-notch downgrade in the Company’s credit or financial strength rating, as applicable	$	5	$	—	$	5	$	1	$	—	$	1
Downgrade in the Company’s credit or financial strength rating, as applicable, to a level that triggers full overnight collateralization or termination of the derivative position	$	5	$	—	$	5	$	1	$	—	$	1

__________________

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Derivatives (continued)


(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:



	Balance Sheet Location	March 31, 2016			December 31, 2015
		(In millions)
Net embedded derivatives within asset host contracts
Ceded guaranteed minimum benefits	Premiums, reinsurance and other receivables	$	439		$	356
Funds withheld on assumed reinsurance	Other invested assets	49			35
Options embedded in debt or equity securities	Investments	(202		)	(220		)
Net embedded derivatives within asset host contracts		$	286		$	171
Net embedded derivatives within liability host contracts
Direct guaranteed minimum benefits	Policyholder account balances and Future policy benefits	$	992		$	(20	)
Assumed guaranteed minimum benefits	Policyholder account balances	1,392			965
Funds withheld on ceded reinsurance	Other liabilities	42			(14		)
Other	Policyholder account balances	1			4
Net embedded derivatives within liability host contracts		$	2,427		$	935

The following table presents changes in estimated fair value related to embedded derivatives:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Net derivative gains (losses) (1)	$	(1,169	)	$	(27	)
Policyholder benefits and claims	$	45		$	24

__________________


(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 $359 million and $69 million for the three months ended March 31, 2016 and 2015, respectively.

8. Fair Value

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)



	March 31, 2016
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	95,388	$	6,708	$	102,096
U.S. government and agency	37,984		26,796		211		64,991
Foreign corporate	—		53,007		6,084		59,091
Foreign government	—		55,944		712		56,656
RMBS	3,701		34,327		5,001		43,029
State and political subdivision	—		16,503		36		16,539
ABS	—		15,263		939		16,202
CMBS	—		12,665		712		13,377
Total fixed maturity securities	41,685		309,893		20,403		371,981
Equity securities	1,417		1,288		669		3,374
FVO and trading securities:
Actively traded securities	98		259		3		360
FVO general account securities	610		33		98		741
FVO contractholder-directed unit-linked investments	10,936		2,806		140		13,882
FVO securities held by CSEs	—		2		8		10
Total FVO and trading securities	11,644		3,100		249		14,993
Short-term investments (1)	2,263		8,333		170		10,766
Mortgage loans:
Residential mortgage loans — FVO	—		—		392		392
Commercial mortgage loans held by CSEs — FVO	—		169		—		169
Total mortgage loans	—		169		392		561
Other invested assets:
Other investments	96		54		—		150
Derivative assets: (2)
Interest rate	21		13,288		17		13,326
Foreign currency exchange rate	1		3,087		38		3,126
Credit	—		110		17		127
Equity market	28		1,769		371		2,168
Total derivative assets	50		18,254		443		18,747
Total other invested assets	146		18,308		443		18,897
Net embedded derivatives within asset host contracts (3)	—		—		488		488
Separate account assets (4)	82,055		222,518		1,474		306,047
Total assets	$	139,210	$	563,609	$	24,288	$	727,107
Liabilities
Derivative liabilities: (2)
Interest rate	$	7	$	3,289	$	1	$	3,297
Foreign currency exchange rate	1		2,548		76		2,625
Credit	—		33		—		33
Equity market	15		1,448		704		2,167
Total derivative liabilities	23		7,318		781		8,122
Net embedded derivatives within liability host contracts (3)	—		—		2,427		2,427
Long-term debt of CSEs — FVO	—		43		12		55
Trading liabilities (5)	111		49		—		160
Separate account liabilities (4)	—		87		8		95
Total liabilities	$	134	$	7,497	$	3,228	$	10,859

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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. government 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
Separate account liabilities (4)	—		—		—		—
Total liabilities	$	128	$	6,315	$	1,754	$	8,197

__________________


(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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

(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 within premiums, reinsurance and other receivables and other invested assets 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 March 31, 2016 and December 31, 2015 , debt and equity securities also included embedded derivatives of ($202) million and ($220) 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. Separate account liabilities presented in the tables above represent derivative liabilities.


(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 8% of the total estimated fair value of Level 3 fixed maturity securities at March 31, 2016 .

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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. government 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

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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 and Separate Account Liabilities (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.”

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.”

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

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.

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

______________

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)


(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.

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

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.

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 March 31, 2016 , transfers between Levels 1 and 2 were not significant. For assets and liabilities measured at estimated fair value and still held at December 31, 2015 , transfers between Levels 1 and 2 were $203 million .

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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:



					March 31, 2016				December 31, 2015				Impact of Increase in Input on Estimated Fair Value (2)
	Valuation Techniques		Significant Unobservable Inputs		Range			Weighted Average (1)	Range			Weighted Average (1)	Impact of Increase in Input on Estimated Fair Value (2)
Fixed maturity securities (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Delta spread adjustments (4)	(313)	-	470	(29)	(65)	-	240	39	Decrease
	•	Market pricing	•	Quoted prices (5)	—	-	780	157	—	-	780	156	Increase
	•	Consensus pricing	•	Offered quotes (5)	68	-	121	98	68	-	121	98	Increase
Foreign government	•	Market pricing	•	Quoted prices (5)	94	-	135	105	96	-	135	113	Increase
RMBS	•	Market pricing	•	Quoted prices (5)	5	-	604	93	19	-	292	92	Increase (6)
ABS	•	Market pricing	•	Quoted prices (5)	5	-	112	101	16	-	109	100	Increase (6)
	•	Consensus pricing	•	Offered quotes (5)	92	-	107	100	66	-	105	99	Increase (6)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (7)	272	-	397		307	-	317		Increase (8)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (7)	85	-	342		28	-	381		Increase (8)
			•	Correlation (9)	—	-	—		—	-	—
Credit	•	Present value techniques	•	Credit spreads (10)	97	-	100		98	-	100		Decrease (10)
	•	Consensus pricing	•	Offered quotes (11)
Equity market	•	Present value techniques or option pricing models	•	Volatility (12)	12%	-	35%		15%	-	36%		Increase (8)
			•	Correlation (9)	70%	-	70%		70%	-	70%
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0%	-	0.21%		0%	-	0.21%		Decrease (13)
				Ages 41 - 60	0.01%	-	0.73%		0.01%	-	0.78%		Decrease (13)
				Ages 61 - 115	0.04%	-	100%		0.04%	-	100%		Decrease (13)
			•	Lapse rates:
				Durations 1 - 10	0.25%	-	100%		0.25%	-	100%		Decrease (14)
				Durations 11 - 20	2%	-	100%		2%	-	100%		Decrease (14)
				Durations 21 - 116	2.5%	-	100%		1%	-	100%		Decrease (14)
			•	Utilization rates	0%	-	25%		0%	-	25%		Increase (15)
			•	Withdrawal rates	0%	-	20%		0%	-	20%		(16)
			•	Long-term equity volatilities	8.85%	-	33%		8.79%	-	33%		Increase (17)
			•	Nonperformance risk spread	(0.14)%	-	1.42%		(0.47)%	-	1.31%		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 estimated fair value. For embedded derivatives, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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)	Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.


(9)	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.


(10)	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.


(11)	At both March 31, 2016 and December 31, 2015 , independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.


(12)	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.


(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.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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 and embedded derivatives within funds withheld related to certain ceded and assumed reinsurance, 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.”

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. Government and Agency		Foreign Government			Structured (2)			State and Political Subdivision			Equity Securities			FVO and Trading Securities (3)
	(In millions)
Balance, January 1, 2016	$	12,796		$	—	$	856		$	7,116		$	46		$	432		$	270
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)	(33		)	—		8			31			—			(26		)	8
Total realized/unrealized gains (losses) included in AOCI	510			11		(22		)	(46		)	—			43			—
Purchases (6)	668			—		19			937			—			5			19
Sales (6)	(272		)	—		(17		)	(373		)	—			(1		)	(11		)
Issuances (6)	—			—		—			—			—			—			—
Settlements (6)	—			—		—			—			—			—			—
Transfers into Level 3 (7)	461			200		47			11			—			464			25
Transfers out of Level 3 (7)	(1,338		)	—		(179		)	(1,024		)	(10		)	(248		)	(62		)
Balance, March 31, 2016	$	12,792		$	211	$	712		$	6,652		$	36		$	669		$	249

Balance, January 1, 2015	$	13,432		$	—	$	1,311		$	7,392		$	—		$	345		$	567
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)	(2		)	—		(18		)	8			—			(1		)	(18		)
Total realized/unrealized gains (losses) included in AOCI	(75		)	—		23			(30		)	—			(2		)	—
Purchases (6)	609			—		43			1,450			—			9			113
Sales (6)	(242		)	—		(53		)	(571		)	—			(5		)	(152		)
Issuances (6)	—			—		—			—			—			—			—
Settlements (6)	—			—		—			—			—			—			—
Transfers into Level 3 (7)	221			—		215			8			2			1			39
Transfers out of Level 3 (7)	(214		)	—		(137		)	(615		)	—			(9		)	(28		)
Balance, March 31, 2015	$	13,729		$	—	$	1,384		$	7,642		$	2		$	338		$	521
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2016 (8)	$	(31	)	$	—	$	8		$	30		$	—		$	(26	)	$	8
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2015 (8)	$	6		$	—	$	3		$	13		$	—		$	—		$	(16	)

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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 Accounts (12)			Long-term Debt of CSEs — FVO
	(In millions)
Balance, January 1, 2016	$	291		$	314		$	(411	)	$	(544	)	$	1,704		$	(11	)
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)	1			10			67			(1,111		)	32			(1		)
Total realized/unrealized gains (losses) included in AOCI	2			—			9			(75		)	—			—
Purchases (6)	108			80			8			—			55			—
Sales (6)	(248		)	(5		)	—			—			(201		)	—
Issuances (6)	—			—			(1		)	—			—			—
Settlements (6)	—			(7		)	(10		)	(209		)	—			—
Transfers into Level 3 (7)	18			—			—			—			—			—
Transfers out of Level 3 (7)	(2		)	—			—			—			(124		)	—
Balance, March 31, 2016	$	170		$	392		$	(338	)	$	(1,939	)	$	1,466		$	(12	)

Balance, January 1, 2015	$	336		$	308		$	(300	)	$	430		$	1,922		$	(13	)
Total realized/unrealized gains (losses) included in net income (loss) (4) (5)	1			22			(68		)	51			36			—
Total realized/unrealized gains (losses) included in AOCI	(1		)	—			15			(2		)	—			—
Purchases (6)	1,332			60			—			—			231			—
Sales (6)	(25		)	(49		)	—			—			(127		)	—
Issuances (6)	—			—			—			—			—			—
Settlements (6)	—			(12		)	8			(201		)	(1		)	1
Transfers into Level 3 (7)	—			—			—			—			1			—
Transfers out of Level 3 (7)	(285		)	—			—			—			(6		)	—
Balance, March 31, 2015	$	1,358		$	329		$	(345	)	$	278		$	2,056		$	(12	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2016 (8)	$	1		$	10		$	50		$	(1,114	)	$	—		$	(1	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2015 (8)	$	1		$	22		$	(64	)	$	47		$	—		$	—

__________________


(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.


(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.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)


(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). Separate account assets and liabilities are presented net for the purposes of the rollforward.

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)
	March 31, 2016			December 31, 2015			March 31, 2016			December 31, 2015
	(In millions)
Assets
Unpaid principal balance	$	563		$	436		$	117		$	121
Difference between estimated fair value and unpaid principal balance	(171		)	(122		)	52			51
Carrying value at estimated fair value	$	392		$	314		$	169		$	172
Loans in non-accrual status	$	191		$	122		$	—		$	—
Liabilities
Contractual principal balance							$	66		$	71
Difference between estimated fair value and contractual principal balance							(11		)	(11		)
Carrying value at estimated fair value							$	55		$	60

__________________

(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.

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).

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)



	At March 31,				Three Months Ended March 31,
	2016		2015		2016			2015
	Carrying Value After Measurement				Gains (Losses)
	(In millions)
Mortgage loans (1)	$	99	$	95	$	(58	)	$	4
Other limited partnership interests (2)	$	39	$	22	$	(20	)	$	(11	)
Other assets (3)	$	—	$	—	$	(14	)	$	—

__________________


(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 on the financial statements of the underlying entities including net asset value (“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 March 31, 2016 and 2015 were not significant.


(3)	During the three months ended March 31, 2016, the Company recognized an impairment of computer software in connection with the purchase agreement with MassMutual. See Note 3.

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 tables below are not considered financial instruments subject to this disclosure.

Table of Contents

MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. 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:



	March 31, 2016
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	68,090	$	—	$	—	$	70,490	$	70,490
Policy loans	$	11,257	$	—	$	1,277	$	12,405	$	13,682
Real estate joint ventures	$	33	$	—	$	—	$	102	$	102
Other limited partnership interests	$	495	$	—	$	—	$	584	$	584
Other invested assets	$	507	$	163	$	2	$	342	$	507
Premiums, reinsurance and other receivables	$	5,789	$	—	$	2,615	$	3,274	$	5,889
Other assets	$	242	$	—	$	206	$	69	$	275
Liabilities
Policyholder account balances	$	125,894	$	—	$	—	$	133,714	$	133,714
Long-term debt	$	17,855	$	—	$	19,478	$	—	$	19,478
Collateral financing arrangements	$	4,127	$	—	$	—	$	3,794	$	3,794
Junior subordinated debt securities	$	3,168	$	—	$	3,872	$	—	$	3,872
Other liabilities	$	7,725	$	—	$	7,239	$	489	$	7,728
Separate account liabilities	$	118,520	$	—	$	118,520	$	—	$	118,520



	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

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

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 on 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 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report. 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.

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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Fair Value (continued)

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.

9. Equity

Preferred Stock

Preferred stock authorized, issued and outstanding was as follows at both March 31, 2016 and December 31, 2015:



Series	Shares Authorized	Shares Issued	Shares Outstanding
Floating Rate Non-Cumulative Preferred Stock, Series A	27,600,000	24,000,000	24,000,000
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	—	—
Not designated	160,900,000	—	—
Total	200,000,000	25,500,000	25,500,000

Common Stock

During the three months ended March 31, 2016 and 2015 , MetLife, Inc. repurchased 1,445,864 and 19,893,284 shares through open market purchases for $70 million and $986 million , respectively.

At March 31, 2016 , MetLife, Inc. had no remaining common stock repurchase authorizations. 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.

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Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Equity (continued)

Stock-Based Compensation Plans

Performance Shares and Performance Units

Awards under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan and the MetLife, Inc. 2015 Stock and Incentive Compensation Plan (the “2015 Stock Plan”) were outstanding at March 31, 2016. All awards granted in 2015 or later were granted under the 2015 Stock Plan. There were no outstanding awards to MetLife, Inc. directors, for their service as directors, as of March 31, 2016.

For Performance Share and Performance Unit awards outstanding as of March 31, 2016, any vested Performance Shares and Performance Units 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 MetLife, Inc.’s operating return on equity relative to its business plan. The estimated fair value of Performance Shares and Performance Units will be remeasured each quarter until they become payable.

Payout of 2013 – 2015 Performance Shares and Performance Units

Final Performance Shares are paid in shares of MetLife, Inc. common stock. Final Performance Units are payable in cash equal to the closing price of MetLife, Inc. common stock on a date following the last day of the three-year performance period. The performance factor for the January 1, 2013 – December 31, 2015 performance period was 86.2% . This factor has been applied to the 1,592,650 Performance Shares and 234,787 Performance Units associated with that performance period that vested on December 31, 2015 . As a result, in the first quarter of 2016, MetLife, Inc. issued 1,372,864 shares of its common stock (less withholding for taxes and other items, as applicable), excluding shares that payees choose to defer, and MetLife, Inc. or its affiliates paid the cash value of 202,386 units (less withholding for taxes and other items, as applicable).

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in the balances of each component of AOCI attributable to MetLife, Inc., was as follows:



	Three Months Ended March 31, 2016
	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, beginning of period	$	10,315		$	1,458		$	(4,950	)	$	(2,052	)	$	4,771
OCI before reclassifications	7,670			696			551			—			8,917
Deferred income tax benefit (expense)	(2,549		)	(199		)	117			—			(2,631		)
AOCI before reclassifications, net of income tax	15,436			1,955			(4,282		)	(2,052		)	11,057
Amounts reclassified from AOCI	17			(323		)	—			48			(258		)
Deferred income tax benefit (expense)	(7		)	93			—			(20		)	66
Amounts reclassified from AOCI, net of income tax	10			(230		)	—			28			(192		)
Balance, end of period	$	15,446		$	1,725		$	(4,282	)	$	(2,024	)	$	10,865

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Equity (continued)



	Three Months Ended March 31, 2015
	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, beginning of period	$	15,159		$	1,076		$	(3,303	)	$	(2,283	)	$	10,649
OCI before reclassifications	1,626			187			(670		)	—			1,143
Deferred income tax benefit (expense)	(501		)	(66		)	(13		)	—			(580		)
AOCI before reclassifications, net of income tax	16,284			1,197			(3,986		)	(2,283		)	11,212
Amounts reclassified from AOCI	(113		)	554			—			57			498
Deferred income tax benefit (expense)	35			(196		)	—			(20		)	(181		)
Amounts reclassified from AOCI, net of income tax	(78		)	358			—			37			317
Balance, end of period	$	16,206		$	1,555		$	(3,986	)	$	(2,246	)	$	11,529

__________________


(1)	See Note 6 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. 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
		Three Months Ended March 31,
		2016			2015
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)		$	(33	)	$	139		Net investment gains (losses)
Net unrealized investment gains (losses)		3			40			Net investment income
Net unrealized investment gains (losses)		13			(66		)	Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax		(17		)	113
Income tax (expense) benefit		7			(35		)
Net unrealized investment gains (losses), net of income tax		$	(10	)	$	78
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps		$	10		$	5		Net derivative gains (losses)
Interest rate swaps		3			3			Net investment income
Interest rate forwards		2			3			Net derivative gains (losses)
Interest rate forwards		1			1			Net investment income
Interest rate forwards		—			1			Other expenses
Foreign currency swaps		306			(567		)	Net derivative gains (losses)
Foreign currency swaps		1			—			Other expenses
Gains (losses) on cash flow hedges, before income tax		323			(554		)
Income tax (expense) benefit		(93		)	196
Gains (losses) on cash flow hedges, net of income tax		$	230		$	(358	)

Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)		$	(51	)	$	(58	)
Amortization of prior service (costs) credit		3			1
Amortization of defined benefit plan items, before income tax		(48		)	(57		)
Income tax (expense) benefit		20			20
Amortization of defined benefit plan items, net of income tax		$	(28	)	$	(37	)
Total reclassifications, net of income tax		$	192		$	(317	)

__________________


(1)	These AOCI components are included in the computation of net periodic benefit costs. See Note 11 .

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Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

10. Other Expenses

Information on other expenses was as follows:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Compensation	$	1,310		$	1,291
Pension, postretirement and postemployment benefit costs	140			92
Commissions	1,134			1,157
Volume-related costs	266			242
Capitalization of DAC	(981		)	(968		)
Amortization of DAC and VOBA	995			1,025
Amortization of negative VOBA	(99		)	(100		)
Interest expense on debt	312			298
Premium taxes, licenses and fees	215			173
Professional services	330			330
Rent and related expenses, net of sublease income	97			83
Other	473			437
Total other expenses	$	4,192		$	4,060

11. 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. These subsidiaries also provide certain postemployment benefits and certain postretirement medical and life insurance benefits for U.S. retired employees.

The components of net periodic benefit costs were as follows:



	Three Months Ended March 31,
	2016						2015
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	72		$	2		$	69		$	4
Interest costs	111			21			105			23
Curtailment costs (1)	—			30			—			—
Expected return on plan assets	(127		)	(18		)	(136		)	(20		)
Amortization of net actuarial (gains) losses	49			2			48			10
Amortization of prior service costs (credit)	—			(3		)	—			(1		)
Net periodic benefit costs (credit)	$	105		$	34		$	86		$	16

__________________


(1)	During the three months ended March 31, 2016 , the Company recognized curtailment charges on certain postretirement benefit plans in connection with the purchase agreement with MassMutual. See Note 3 .

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Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. 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:



	Three Months Ended March 31,
	2016		2015
	(In millions, except share and per share data)
Weighted Average Shares
Weighted average common stock outstanding for basic earnings per common share	1,100,836,608		1,125,703,588
Incremental common shares from assumed:
Exercise or issuance of stock-based awards	7,785,089		10,057,530
Weighted average common stock outstanding for diluted earnings per common share	1,108,621,697		1,135,761,118
Net Income (Loss)
Net income (loss)	$	2,203	$	2,163
Less: Net income (loss) attributable to noncontrolling interests	2		5
Less: Preferred stock dividends	6		30
Net income (loss) available to MetLife, Inc.’s common shareholders	$	2,195	$	2,128
Basic	$	1.99	$	1.89
Diluted	$	1.98	$	1.87

13. 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 March 31, 2016 . 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

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 March 31, 2016 , the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $475 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.

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.

As reported in the 2015 Annual Report, MLIC received approximately 3,856 asbestos-related claims in 2015 . During the three months ended March 31, 2016 and 2015 , MLIC received approximately 1,386 and 1,046 new asbestos-related claims, respectively. See Note 21 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report for historical information concerning asbestos claims and MLIC’s increase in its recorded liability at December 31, 2014 . 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

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.

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. Based upon its regular reevaluation of its exposure from asbestos litigation, MLIC has updated its liability analysis for asbestos-related claims through March 31, 2016 .

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 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.

Law Enforcement Inquiry Regarding Mortgage Servicing

MetLife, through its affiliate MetLife Bank, was engaged in the origination, sale and servicing of forward and reverse residential mortgage loans from 2008 to 2013. 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 MetLife Home Loans LLC (“MLHL”), 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 (“HUD”) for reimbursement.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

This inquiry could adversely affect MetLife’s reputation or result in significant fines, penalties, equitable remedies or other enforcement actions. Management believes that the Company’s consolidated financial statements as a whole will not be materially affected by this matter.

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 .

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 Insurance Company USA, New England Life Insurance Company (“NELICO”), General American Life Insurance Company (“GALIC”), and 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.

Sale and Replacement of Variable Annuities and FINRA Letter of Acceptance, Waiver and Consent

MSI has entered into a Letter of Acceptance, Waiver and Consent with FINRA (hereinafter, the “Letter”). In the Letter, FINRA stated that, from 2009 through 2014, MSI violated certain National Association of Securities Dealers and FINRA rules in connection with sales and replacements of variable annuities and certain riders on such annuities. MSI was censured and will pay a $20 million fine and an additional $5 million to reimburse customers. MSI has accrued this amount.

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 (the “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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

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 Securities Exchange Act of 1934 (“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.

Total Control Accounts Litigation

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 retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“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 Insurance Company (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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

Intoccia v. Metropolitan Life Insurance Company (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.

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 Company, 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. On March 23, 2016, the intermediate appellate court affirmed the trial court’s order.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

MetLife, Inc. v. Financial Stability Oversight Council (D. D.C., January 13, 2015)

MetLife, Inc. filed this action in U.S. District Court for the District of Columbia (“D.C. District Court”) seeking to overturn the Financial Stability Oversight Council’s (“FSOC”) designation of MetLife, Inc. as a non-bank systemically important financial institution (“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 D.C. District Court issued a decision on March 30, 2016 granting, in part, MetLife, Inc.’s cross motion for summary judgment and rescinding the FSOC’s designation of MetLife, Inc. as a non-bank SIFI. On April 8, 2016, the FSOC filed a notice of appeal of the D.C. District Court’s order.

Voshall v. Metropolitan Life Insurance Company (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 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. On April 12, 2016, the court granted MLIC’s motion to dismiss.

Lau v. Metropolitan Life Insurance Company (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.

Newman v. Metropolitan Life Insurance Company (N.D. Ill., filed March 23, 2016)

Plaintiff filed this putative class action alleging causes of action for breach of contract, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, based on MLIC’s class-wide increase in premiums charged for long-term care insurance policies with one of two policy features. Plaintiff alleges a class consisting of: (i) herself and all persons over age 65 who selected a Reduced Pay at Age 65 feature and whose premium rates were increased after age 65; and/or (ii) all persons who purchased a 5% Automatic Compound Inflation Protection Rider and whose premiums paid for the rider were increased. Plaintiff asserts that premiums could not be increased for these class members and/or that marketing material with respect to these two features was misleading as to MLIC’s right to increase premiums. Plaintiff seeks unspecified compensatory, statutory and punitive damages as well as recessionary and injunctive relief. The Company intends to defend this action vigorously.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. Contingencies, Commitments and Guarantees (continued)

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

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $4.0 billion and $4.4 billion at March 31, 2016 and December 31, 2015 , 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 $6.8 billion and $7.1 billion at March 31, 2016 and December 31, 2015 , 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 $223 million , with a cumulative maximum of $721 million , 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.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

13. 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 at both March 31, 2016 and December 31, 2015 , for indemnities, guarantees and commitments.

14. Subsequent Event

Common Stock Dividend

On April 26, 2016, the MetLife, Inc. Board of Directors declared a second quarter 2016 common stock dividend of $0.400 per share payable on June 13, 2016 to shareholders of record as of May 9, 2016. The Company estimates that the aggregate dividend payment will be $441 million .

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Item 2. 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
Forward-Looking Statements and Other Financial Information	79
Executive Summary	79
Industry Trends	83
Summary of Critical Accounting Estimates	90
Economic Capital	90
Acquisitions and Dispositions	91
Results of Operations	92
Investments	109
Derivatives	124
Off-Balance Sheet Arrangements	127
Policyholder Liabilities	128
Liquidity and Capital Resources	136
Adoption of New Accounting Pronouncements	147
Future Adoption of New Accounting Pronouncements	147
Non-GAAP and Other Financial Disclosures	147
Subsequent Events	149

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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 MetLife, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, “Quantitative and Qualitative Disclosures About Market Risk” and the Company’s interim condensed 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 accounting principles generally accepted in the United States of America (“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.

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 Europe, the Middle East and Africa (“EMEA”). In addition, the Company reports certain of its results of operations in Corporate & Other. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. See also “— Other Key Information — Significant Events” for information on MetLife, Inc.’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.

Current Period Highlights

During the three months ended March 31, 2016, overall sales growth declined as compared to the three months ended March 31, 2015; however, we experienced sales growth across various products within our segments. In particular, we had higher sales of retail annuity, dental and group life products. A decline in investment yields as a result of volatile equity markets and the sustained low interest rate environment more than offset the benefits of such sales growth.

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The following represents the segments’ contributions to total net income (loss) and total operating earnings for the three months ended March 31, 2016:

__________________


(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.

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Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015



			Consolidated Results - Highlights
			Net income (loss) up $40 million:

			•	Net derivative gains (losses) favorable by $514 million ($334 million, net of income tax) driven by changes in interest rates and a favorable change on the nonperformance risk adjustment in embedded derivatives

			•	Operating earnings available to common shareholders down $309 million

			•	Net investment gains (losses) unfavorable by $271 million ($176 million, net of income tax) primarily driven by higher impairments and lower gains

			•	Current period includes the financial impact of converting the Company’s Japan operations to calendar year-end reporting without retrospective application of this change to prior periods

(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 $309 million:
•	Results of operations impacted by lower investment yields, partially offset by higher net investment income from portfolio growth.
•	Our results for the three months ended March 31, 2016 also included the following:
	•	tax benefit in Japan of $25 million related to a change in tax rates, which includes a one-time benefit of $20 million that pertains to prior periods
	•	tax charge in Chile of $12 million as a result of tax reform legislation, which includes a one-time charge of $10 million that pertains to prior periods

For a more in-depth discussion of our consolidated results, see “— Results of Operations — Consolidated Results” and “— Results of Operations — Consolidated Results — Operating.”

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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 accumulated other comprehensive income (“AOCI”) other than foreign currency translation adjustments (“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 that would have been applicable to us as a result of the Financial Stability Oversight Council’s (“FSOC”) former designation of MetLife, Inc. as a non-bank systemically important financial institution (“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. See “ — Other Key Information — Significant Events” for information regarding the determination by the U.S. District Court for the District of Columbia (“D.C. District Court”) on March 30, 2016 to rescind the FSOC’s designation of MetLife, Inc. as a non-bank SIFI.

We will need to take the above-referenced factors into account when formulating further assumptions. Due to the fact that the proposed 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 proposed 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

Significant Events

On March 30, 2016, the D.C. District Court ordered that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded. On April 8, 2016, the FSOC filed a notice of appeal of the D.C. District Court’s order. On December 18, 2014, the FSOC had designated MetLife, Inc. as a non-bank SIFI 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 (the “FDIC”), as well as to enhanced supervision and prudential standards. On January 13, 2015, MetLife, Inc. had filed an action in the D.C. District Court asking the Court to review and rescind the FSOC’s designation. If the FSOC prevails on appeal or designates MetLife, Inc. as systemically important as part of its ongoing review of non-bank financial companies, MetLife, Inc. could once again be subject to regulation as a non-bank SIFI. See “— Industry Trends — Regulatory Developments — U.S. Regulation — Potential Regulation as a Non-Bank SIFI” and Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements.

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On February 28, 2016, MetLife, Inc. entered into a purchase agreement with Massachusetts Mutual Life Insurance Company (“MassMutual”) pursuant to which MassMutual will acquire MetLife’s U.S. Retail advisor force and certain assets associated with the MetLife Premier Client Group, including MetLife’s affiliated broker-dealer, MetLife Securities, Inc. (“MSI”), a wholly-owned subsidiary of MetLife, Inc. MassMutual will also assume all of the liabilities that relate to or arise from such assets and that arise or occur at or after the closing of the transactions contemplated by the purchase agreement. In addition, MassMutual will acquire all of the issued and outstanding shares of MSI. As part of the transactions, MetLife, Inc. and MassMutual have also agreed to enter into a product development agreement under which MetLife’s U.S. Retail business will be the exclusive developer of certain annuity products to be issued by MassMutual. The transactions contemplated by the purchase agreement are subject to certain closing conditions, including regulatory approval. See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements for further information.

On January 12, 2016, MetLife, Inc. 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. A Separation, depending on the specific form, would be subject to the satisfaction of various conditions and approvals, including, among other things, 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.

Industry Trends

The following information on industry trends should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends” in Part II, Item 7, of the 2015 Annual Report.

We continue to be impacted by the unstable global financial and economic environment that has been affecting the industry.

Financial and Economic Environment

Weakness in the energy and metals and mining sectors and concerns about the political and/or economic stability of countries in regions outside the European Union (“EU”), including China, Ukraine, Russia, Argentina, Brazil, Japan, Jordan and Lebanon, 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, including Portugal, Ireland, Italy, Greece and Spain (“ 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, including those made by the European Central Bank (“ECB”) to lessen the risk of deflation, lower borrowing costs in the Euro zone and encourage corporations to issue more asset-backed securities, could affect the Euro exchange rate and have uncertain impacts on interest rates and risk markets. 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” in the 2015 Annual Report.

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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.

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 December 2015, the Federal Reserve Board’s Federal Open Market Committee (“FOMC”) increased the federal funds rate for the first time in 10 years and has held it steady since then. 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.

Our expectations regarding future margins are an important component impacting the amortization of certain intangible assets such as deferred policy acquisition costs (“DAC”) and value of business acquired (“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.

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.

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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. In addition, MetLife, Inc. and its U.S. insurance subsidiaries are subject to regulation under the insurance holding company laws of various U.S. jurisdictions. 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”). If MetLife, Inc. were re-designated as a non-bank SIFI, it could also be subject to regulation by the Federal Reserve and the FDIC. See “ — U.S. Regulation” below, as well as “Business — Regulation — U.S. 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” included in the 2015 Annual Report, as amended or supplemented 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” and similarly named sections under the caption “Risk Factors.”

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” below, as well as “Business — Regulation — International Regulation” included in the 2015 Annual Report, as amended or supplemented 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.”

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U.S. Regulation

Insurance Regulation

Insurance Regulatory Examinations and Other Activities

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 Metropolitan Life Insurance Company (“MLIC”), MetLife Insurance Company USA (“MetLife USA”), New England Life Insurance Company, General American Life Insurance Company , and broker-dealer, MSI. These investigations have focused on the conduct of particular financial services representatives, the sale of unregistered or unsuitable products, the misuse of client assets, and sales and replacements of variable annuities and certain riders on such annuities. 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 receive, and may resolve, further investigations and actions on these matters in a similar manner. See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements.

The International Association of Insurance Supervisors (“IAIS”) has encouraged U.S. insurance supervisors, such as the New York State Department of Financial Services (“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. was 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 any resolution plan that MetLife, Inc. may be required to submit. See “— Potential Regulation as a Non-Bank SIFI — Enhanced Prudential Standards for Non-Bank SIFIs” below. The next meeting is scheduled for September 2016 and will be chaired by the Department of Financial Services. 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.

NAIC

In December 2012, the National Association of Insurance Commissioners (“NAIC”) approved a new valuation manual containing a principle-based approach to life insurance company reserves. Principle-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. We anticipate that the principle-based approach will become effective on January 1, 2017 since it has been enacted into law by the required number of state legislatures. Insurance commissioners of certain states (e.g., New York) oppose or do not actively support the principle-based reserve approach.

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.

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The DOL issued new regulations on April 6, 2016 with an effective date for most provisions of April 10, 2017. These rules substantially expand the definition of “investment advice” and thereby broaden the circumstances under which MetLife or its representatives, in providing investment advice with respect to ERISA plans, plan participants or IRAs, will be deemed a fiduciary under ERISA or the Code. Pursuant to the final rule, certain 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 issued amendments to certain of its prohibited transaction exemptions, and issued a new exemption, that applies 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. We are currently studying the impact of these developments on MetLife’s business.

Potential Regulation 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 may 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. would need 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, would be subject to additional restrictions regarding its ability to merge. The Federal Reserve would also have the right to require any of our insurance companies, or insurance company affiliates, to take prompt action to correct any financial weaknesses.

Together with other non-bank SIFIs, MetLife, Inc. would be subject to a number of Dodd-Frank Wall Street Reform and Consumer Protection Act (“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 risk-based capital (“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., were it to be re-designated as a non-bank SIFI, 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., were it to be re-designated as a non-bank SIFI, would be 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 — Potential Regulation of MetLife, Inc. as a Non-Bank SIFI.”

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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. If re-designated 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. If re-designated as a non-bank SIFI, MetLife, Inc. would be required to comply with the requirements applicable to non-bank SIFIs, including the submission of a resolution plan.

In addition, if MetLife, Inc. were re-designated as a non-bank SIFI and 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.

International Regulation

Solvency Regimes

Other Solvency Regimes

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. A fourth impact study will be performed during 2016. On March 31, 2016, the local regulator issued a final regulation which requires insurance companies to implement a risk appetite framework and produce an “Own Risk and Solvency Assessment.” The first such report must be submitted to the local regulator no later than September 30, 2017. The new solvency and supervisory regime is expected to be in force in 2017.

In July 2015, the Superintendence of Private Insurance, the Brazilian insurance regulator (“SUSEP”), issued a regulation establishing (i) a framework for minimum capital requirements based on risk and (ii) criteria for investment activities in insurance companies. In November 2015, SUSEP issued an additional regulation requiring insurance companies operating in Brazil to adopt a formal risk management function by the end of 2016 and to implement a formal enterprise risk management framework in 2017.

Global Systemically Important Insurers

The IAIS, an association of insurance supervisors and regulators and a member of the Financial Stability Board (“FSB”), 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. 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. in 2015. The IAIS/FSB process is separate from the U.S. FSOC designation process and MetLife, Inc. remains a G-SII in spite of the rescission of its U.S. non-bank SIFI designation on March 30, 2016. The FSB will continue to update its list annually. Every three years, the IAIS evaluates whether updates to its assessment methodology are necessary.

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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. We received a request for the data necessary for the IAIS to perform its assessment on April 19, 2016. Responses are due by June 1, 2016.

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 July 2016. The IAIS expects to publish a draft of an interim version of the ICS in 2017 for further consultation and refinement by the end of 2019, the target for implementation by individual jurisdictions. The date by which the ICS will be finalized has not yet been specified. The IAIS intends to request confidential reporting to supervisors as of the release of the interim draft of the ICS.

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 that targets non-traditional insurance and non-insurance activities as transmitters of systemic risk to the financial system. The IAIS proposals would need to be implemented at the consolidated group level by legislation or regulation in each applicable jurisdiction. As MetLife, Inc. is no longer a U.S. non-bank SIFI and, therefore, has no consolidated group regulator, the impact on MetLife, Inc. of such proposals is uncertain.

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 included in the 2015 Annual Report for further information regarding our mortgage and foreclosure-related exposures.

Notwithstanding MetLife Bank, National Association’s (“MetLife Bank”) exit from the origination and servicing businesses, MetLife Home Loans LLC 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 $71 million and $72 million at March 31, 2016 and December 31, 2015, 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 at both March 31, 2016 and December 31, 2015. Management is satisfied that adequate provision has been made in the Company’s interim condensed consolidated financial statements for those representation and warranty obligations that are currently probable and reasonably estimable.

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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 on the Interim Condensed 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


(ix)	liabilities for litigation and regulatory matters.

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.

The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

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.

As a result of the proposed Separation, during the first quarter of 2016, the Company re-tested goodwill for impairment using estimated revised carrying amounts of Retail Life & Other and Corporate Benefit Funding reporting units. The Company concluded that the fair values of these reporting units were in excess of their carrying value and, therefore, goodwill was not impaired. See “— Executive Summary — Other Key Information — Significant Events” for additional information on the proposed Separation.

Economic Capital

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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 net income (loss).

Acquisitions and Dispositions

See “— Executive Summary — Other Key Information — Significant Events” and Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements for information on the proposed Separation and the purchase agreement with MassMutual.

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Results of Operations

Consolidated Results

Business Overview. Overall sales declined from prior period levels; however, sales experience was positive across various products within our segments for the three months ended March 31, 2016, as compared to the three months ended March 31, 2015. In our Retail segment, higher sales were driven by indexed annuity products. For our Group, Voluntary & Worksite Benefits segment, sales for the current period were higher as a result of improved sales of both voluntary and core group products. With the continued decline in funding ratios for defined benefit pension plans of S&P 500 companies, we experienced a decrease in sales of pension risk transfers, and more competitive pricing in the market drove a decrease in structured settlement annuity sales in our Corporate Benefit Funding segment. Total sales for our Latin America segment were flat. For our EMEA segment, sales in the Middle East improved, while sales in our Asia segment declined, primarily due to management actions taken to improve value creation .



	Three Months Ended March 31,
	2016			2015
	(In millions)
Revenues
Premiums	$	9,693		$	9,253
Universal life and investment-type product policy fees	2,344			2,394
Net investment income	4,559			5,461
Other revenues	487			495
Net investment gains (losses)	15			286
Net derivative gains (losses)	1,335			821
Total revenues	18,433			18,710
Expenses
Policyholder benefits and claims and policyholder dividends	9,993			9,596
Interest credited to policyholder account balances	1,326			1,995
Capitalization of DAC	(981		)	(968		)
Amortization of DAC and VOBA	995			1,025
Amortization of negative VOBA	(99		)	(100		)
Interest expense on debt	312			298
Other expenses	3,965			3,805
Total expenses	15,511			15,651
Income (loss) before provision for income tax	2,922			3,059
Provision for income tax expense (benefit)	719			896
Net income (loss)	2,203			2,163
Less: Net income (loss) attributable to noncontrolling interests	2			5
Net income (loss) attributable to MetLife, Inc.	2,201			2,158
Less: Preferred stock dividends	6			30
Net income (loss) available to MetLife, Inc.’s common shareholders	$	2,195		$	2,128

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

During the three months ended March 31, 2016, income (loss) before provision for income tax decreased $137 million (increased $40 million, net of income tax) from the prior period primarily driven by unfavorable changes in operating earnings and net investment gains (losses), partially offset by a favorable change in net derivative gains (losses). In addition, in the current period, income (loss) before provision for income tax includes the financial impact of converting the Company’s Japan operations to calendar year-end reporting without retrospective application of this change to prior periods.

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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.

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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:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Non-VA program derivatives
Interest rate	$	1,078		$	446
Foreign currency exchange rate	202			376
Credit	15			14
Equity	(50		)	(50		)
Non-VA embedded derivatives	(53		)	(45		)
Total non-VA program derivatives	1,192			741
VA program derivatives
Market risks in embedded derivatives	(1,336		)	(12		)
Nonperformance risk adjustment on embedded derivatives	359			69
Other risks in embedded derivatives	(139		)	(39		)
Total embedded derivatives	(1,116		)	18
Freestanding derivatives hedging embedded derivatives	1,259			62
Total VA program derivatives	143			80
Net derivative gains (losses)	$	1,335		$	821

The favorable change in net derivative gains (losses) on non-VA program derivatives was $451 million ($293 million, net of income tax). This was primarily due to long-term interest rates decreasing more in the current period than in the prior period, favorably impacting receive-fixed interest rate swaps and interest rate swaptions primarily hedging long duration liability portfolios.

This favorable change was partially offset by the weakening of the U.S. dollar relative to other key currencies unfavorably impacting foreign currency swaps 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 $63 million ($41 million, net of income tax). This was due to a favorable change of $290 million ($189 million, net of income tax) related to the change in the nonperformance risk adjustment on embedded derivatives, partially offset by an unfavorable change of $127 million ($83 million, net of income tax) in market risks in embedded derivatives, net of the impact of freestanding derivatives hedging those risks and an unfavorable change of $100 million ($65 million, net of income tax) in 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 $290 million ($189 million, net of income tax) favorable change in the nonperformance risk adjustment on embedded derivatives was due to a favorable change of $184 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 and a favorable change of $106 million, before income tax, related to changes in our own credit spread.

The foregoing $127 million ($83 million, net of income tax) unfavorable change was comprised of a $1.3 billion ($861 million, net of income tax) unfavorable change in market risks in embedded derivatives, which was partially offset by a $1.2 billion ($778 million, net of income tax) favorable change in freestanding derivatives hedging market risks in embedded derivatives.

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The primary changes in market factors are summarized as follows:


•	Long-term interest rates decreased more in the current period than in the prior period, 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 18% in the current period and 12% in the prior period.


•	Key equity index levels decreased in the current period and increased in the prior period, contributing to a favorable change in our freestanding derivatives and an unfavorable change in our embedded derivatives. For example, the Russell 2000 Index decreased by 2% in the current period and increased by 4% in the prior period.

•

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 British pound by 9% in the current period and 5% in the prior period.

The foregoing $100 million ($65 million, net of income tax) unfavorable change in other risks in embedded derivatives reflected:


•	An increase in the risk margin adjustment, measuring policyholder behavior risks, which was also affected by market and interest rate changes,


•	In-force changes and the mismatch of fund performance between actual and modeled funds, and


•	A combination of other factors, including reserve changes influenced by benefit features and policyholder behavior, as well as FCTA.

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 unfavorable change in net investment gains (losses) of $271 million ($176 million, net of income tax) primarily reflects higher impairments on fixed maturity securities, equity securities and mortgage loans combined with lower net gains on sales and disposals of fixed maturity securities in the current period.

Divested Businesses and Lag Elimination. Income (loss) before provision for income tax related to the divested businesses and lag elimination, excluding net investment gains (losses) and net derivative gains (losses), improved $56 million ($37 million, net of income tax) to $57 million ($42 million, net of income tax) in the current period from $1 million ($5 million, net of income tax) in the prior period. Included in this improvement was an increase in total revenues of $661 million, before income tax, and an increase in total expenses of $605 million, before income tax. The current period includes the financial impact of converting the Company’s Japan operations to calendar year- end reporting without retrospective application of this change to prior periods, as well as expenses and charges associated with the purchase agreement with MassMututal and the proposed Separation .

Taxes. Income tax expense for the three months ended March 31, 2016 was $719 million, or 25% of income (loss) before provision for income tax, compared with $896 million, or 29% of income (loss) before provision for income tax, for the three months ended March 31, 2015. The Company’s current period 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 current period results include a one-time tax benefit of $110 million in Japan and one-time tax charge of $19 million in Chile, both related to changes in tax rates. The Company’s prior period 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.

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Operating Earnings . As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use operating earnings, which does not equate to net income (loss) 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 net income (loss) and net income (loss) available to MetLife, Inc.’s common shareholders, respectively. Operating earnings available to common shareholders decreased $309 million, net of income tax, to $1.3 billion, net of income tax, for the three months ended March 31, 2016 from $1.6 billion, net of income tax, for the three months ended March 31, 2015.

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Reconciliation of net income (loss) to operating earnings available to common shareholders

Three Months Ended March 31, 2016



	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Asia			EMEA			Corporate & Other			Total
	(In millions)
Net income (loss)	$	428		$	309		$	241		$	128		$	863		$	74		$	160		$	2,203
Less: Net investment gains (losses)	(117		)	(39		)	(93		)	(22		)	223			8			55			15
Less: Net derivative gains (losses)	(11		)	291			85			84			411			(1		)	476			1,335
Less: Other adjustments to net income (1)	(32		)	(45		)	(75		)	(50		)	67			18			(68		)	(185		)
Less: Provision for income tax (expense) benefit	56			(72		)	29			(21		)	(143		)	(14		)	(132		)	(297		)
Operating earnings	$	532		$	174		$	295		$	137		$	305		$	63		(171		)	1,335
Less: Preferred stock dividends																			6			6
Operating earnings available to common shareholders																			$	(177	)	$	1,329

Three Months Ended March 31, 2015



	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Asia			EMEA			Corporate & Other			Total
	(In millions)
Net income (loss)	$	776		$	336		$	529		$	118		$	348		$	67		$	(11	)	$	2,163
Less: Net investment gains (losses)	68			3			205			(2		)	68			3			(59		)	286
Less: Net derivative gains (losses)	313			205			80			(21		)	18			1			225			821
Less: Other adjustments to net income (1)	(192		)	(42		)	(39		)	5			(55		)	19			(6		)	(310		)
Less: Provision for income tax (expense) benefit	(66		)	(58		)	(86		)	5			(10		)	(26		)	(61		)	(302		)
Operating earnings	$	653		$	228		$	369		$	131		$	327		$	70		(110		)	1,668
Less: Preferred stock dividends																			30			30
Operating earnings available to common shareholders																			$	(140	)	$	1,638

__________________


(1)	See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

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Reconciliation of GAAP revenues to operating revenues and GAAP expenses to operating expenses

Three Months Ended March 31, 2016



	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Asia		EMEA			Corporate & Other			Total
	(In millions)
Total revenues	$	4,842		$	5,264		$	1,796		$	1,301		$	3,756	$	790		$	684		$	18,433
Less: Net investment gains (losses)	(117		)	(39		)	(93		)	(22		)	223		8			55			15
Less: Net derivative gains (losses)	(11		)	291			85			84			411		(1		)	476			1,335
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			—			—			—			25		—			—			25
Less: Other adjustments to revenues (1)	(14		)	(45		)	(46		)	16			454		88			(6		)	447
Total operating revenues	$	4,984		$	5,057		$	1,850		$	1,223		$	2,643	$	695		$	159		$	16,611
Total expenses	$	4,267		$	4,787		$	1,428		$	1,110		$	2,655	$	691		$	573		$	15,511
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	(34		)	—			—			—			40		—			—			6
Less: Other adjustments to expenses (1)	52			—			29			66			372		70			62			651
Total operating expenses	$	4,249		$	4,787		$	1,399		$	1,044		$	2,243	$	621		$	511		$	14,854

Three Months Ended March 31, 2015



	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Asia		EMEA			Corporate & Other			Total
	(In millions)
Total revenues	$	5,563		$	5,062		$	2,231		$	1,212		$	3,074	$	1,236		$	332		$	18,710
Less: Net investment gains (losses)	68			3			205			(2		)	68		3			(59		)	286
Less: Net derivative gains (losses)	313			205			80			(21		)	18		1			225			821
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	—			—			—			—			6		(2		)	—			4
Less: Other adjustments to revenues (1)	(34		)	(42		)	(27		)	14			121		531			4			567
Total operating revenues	$	5,216		$	4,896		$	1,973		$	1,221		$	2,861	$	703		$	162		$	17,032
Total expenses	$	4,452		$	4,541		$	1,420		$	1,068		$	2,568	$	1,132		$	470		$	15,651
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	85			—			—			—			12		(2		)	—			95
Less: Other adjustments to expenses (1)	73			—			12			9			170		512			10			786
Total operating expenses	$	4,294		$	4,541		$	1,408		$	1,059		$	2,386	$	622		$	460		$	14,770

__________________


(1)	See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

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Consolidated Results — Operating



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	9,267		$	9,253
Universal life and investment-type product policy fees	2,151			2,294
Net investment income	4,706			4,982
Other revenues	487			503
Total operating revenues	16,611			17,032
Operating expenses
Policyholder benefits and claims and policyholder dividends	9,593			9,447
Interest credited to policyholder account balances	1,301			1,331
Capitalization of DAC	(876		)	(968		)
Amortization of DAC and VOBA	881			953
Amortization of negative VOBA	(67		)	(90		)
Interest expense on debt	312			297
Other expenses	3,710			3,800
Total operating expenses	14,854			14,770
Provision for income tax expense (benefit)	422			594
Operating earnings	1,335			1,668
Less: Preferred stock dividends	6			30
Operating earnings available to common shareholders	$	1,329		$	1,638

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

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, partially offset by higher net investment income from portfolio growth.

Foreign Currency. Changes in foreign currency exchange rates had a $ 37 million negative impact on operating earnings for the first quarter of 2016 compared to the prior period.

Business Growth. We benefited from higher sales and business growth across many of our products. Growth in the investment portfolios of our Retail, Asia and Latin America segments generated higher net investment income. The changes in business growth discussed above resulted in a $ 168 million increase in operating earnings.

Market Factors. Market factors, including volatile equity markets and sustained low interest rates, 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 by lower returns on other limited partnership interests and alternative investments. Additionally, lower investment earnings on our securities lending program resulted from the impact of the sustained low interest rate environment on fixed maturity securities and a flatter yield curve, as margins correlate more to the slope of the yield curve rather than the absolute level of interest rates. These decreases were partially offset by higher income on interest rate and currency derivatives. In our Retail segment, d eclines in our average separate account balances resulted in decreases in asset-based fee income and higher DAC amortization. The changes in market factors discussed above resulted in a $ 410 million decrease in operating earnings.

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Underwriting and Other Insurance Adjustments . Underwriting experience was mixed and resulted in a $ 9 million increase in operating earnings as favorable mortality, primarily in our Retail and Group, Voluntary & Worksite Benefits segments, was almost entirely offset by unfavorable morbidity in our Group, Voluntary & Worksite Benefits segment, higher non-catastrophe claim costs, less favorable development of prior year non-catastrophe losses and higher catastrophe losses, all in our property & casualty businesses. Refinements to certain insurance and other liabilities, which were recorded in both periods, resulted in a $ 17 million decrease in operating earnings, primarily in our Group, Voluntary & Worksite Benefits segment.

Expenses and Taxes. The current period included a $ 21 million decrease in operating earnings resulting from net adjustments to certain reinsurance assets and liabilities. In addition, a $ 13 million increase in expenses was primarily driven by project costs in Japan and costs associated with corporate initiatives and projects. The Company’s current and prior period 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 current period includes a one-time tax benefit of $ 25 million in Japan and one-time tax charge of $ 12 million in Chile, both related to changes in tax rates. The $ 25 million benefit includes a one-time benefit of $20 million that pertains to prior periods; the $ 12 million tax charge includes a one-time charge of $10 million that pertains to prior periods. In addition, the current period includes a charge of $ 18 million related primarily to lower utilization of tax preferenced items.

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Segment Results and Corporate & Other

Retail

Business Overview. Retail annuity sales increased 14% mainly as a result of higher indexed annuity sales. Life sales decreased 5% driven by declines in whole life, due to several large cases in the prior period, and term, partially offset by universal life, due to large cases in the current period. 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. While net flows are still negative, we are seeing improvements in surrenders and withdrawals, as well as increases in sales.



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	1,740		$	1,749
Universal life and investment-type product policy fees	1,149			1,236
Net investment income	1,880			1,980
Other revenues	215			251
Total operating revenues	4,984			5,216
Operating expenses
Policyholder benefits and claims and policyholder dividends	2,458			2,449
Interest credited to policyholder account balances	522			542
Capitalization of DAC	(255		)	(247		)
Amortization of DAC and VOBA	373			375
Interest expense on debt	2			(1		)
Other expenses	1,149			1,176
Total operating expenses	4,249			4,294
Provision for income tax expense (benefit)	203			269
Operating earnings	$	532		$	653

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. A $60 million increase in operating earnings was attributable to business growth. Our life businesses had positive net flows which resulted in higher net investment income. Operating earnings also increased due to slightly higher fees, as average account balances grew. These increases were partially offset by increases in interest credited expenses. In our deferred annuities business, DAC amortization declined due to decreases in our in-force business.

Market Factors. A $191 million decrease in operating earnings was attributable to market factors, including volatile equity markets and sustained low 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 income from lower yields was partially offset by 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 and alternative investments, in addition to lower income on interest rate derivatives, also decreased operating earnings. Declines in our average separate account balances resulted in decreases in asset-based fee income and higher DAC amortization. In addition, costs associated with our variable annuity guaranteed minimum death benefits (“GMDBs”) were higher in the current period.

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Underwriting. F avorable mortality in our traditional life business, partially offset by unfavorable mortality in our universal life and income annuities businesses resulted in a net increase of $45 million in operating earnings. In our property & casualty business, catastrophe-related losses increased $11 million, mainly due to severe storm activity. Non-catastrophe claim costs increased by $8 million as a result of higher severities in our auto and homeowners businesses and higher frequencies in our homeowners business, partially offset by lower frequencies in our auto business. Further, less favorable development of prior year non-catastrophe losses resulted in a $13 million decrease in operating earnings. Favorable morbidity experience in our individual disability income business resulted in a $6 million increase in operating earnings.

Group, Voluntary & Worksite Benefits

Business Overview . Premiums increased for many of our businesses as a result of a steadily improving and stabilizing U.S. labor market. Our dental and vision businesses generated premium growth due to sales and rate actions. In addition, we had strong persistency levels. New sales and increased enrollment in our voluntary businesses also furthered premium growth. However, c urrent period premium growth in our life businesses was almost entirely offset by the impact of a large single premium buyout transaction in the prior period. In addition, t he impact of experience adjustments on our term life participating contracts increased premiums; however, changes in premiums for these contracts were almost entirely offset by the related changes in policyholder benefits. Current period sales were up in both our voluntary and core group products. 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.



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	4,294		$	4,117
Universal life and investment-type product policy fees	185			188
Net investment income	447			478
Other revenues	131			113
Total operating revenues	5,057			4,896
Operating expenses
Policyholder benefits and claims and policyholder dividends	4,034			3,835
Interest credited to policyholder account balances	37			37
Capitalization of DAC	(36		)	(36		)
Amortization of DAC and VOBA	40			41
Other expenses	712			664
Total operating expenses	4,787			4,541
Provision for income tax expense (benefit)	96			127
Operating earnings	$	174		$	228

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. An increase in average premium per policy in both our auto and homeowners businesses improved operating earnings. Growth in premiums, partially offset by a decrease in allocated equity, resulted in higher average invested assets, improving operating earnings. However, 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. In addition, an increase in other operating expenses, mainly the result of growth across the segment, was only partially offset by the remaining increase in premiums, fees and other revenues. The combined impact of the items discussed above decreased operating earnings by $7 million.

Market Factors. Investment yields decreased as a result of lower returns on alternative investments and hedge funds. In addition, the sustained low interest rate environment drove lower investment yields on our fixed maturity securities, which were partially offset by higher income on interest rate derivatives. The decrease in investment yields was slightly offset by the impact of lower crediting rates in the current period, which resulted in a net decrease in operating earnings of $22 million.

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Underwriting and Other Insurance Adjustments. Less favorable reserve development and higher utilization in our dental business, coupled with unfavorable claims experience in our long-term care business, resulted in a $44 million decrease in operating earnings. Our life and accidental death and dismemberment businesses experienced favorable mortality in the current period, mainly due to favorable claims experience, which resulted in a $48 million increase in operating earnings. Refinements to certain insurance and other liabilities, which were recorded in both periods, resulted in a $20 million decrease in operating earnings. In our property & casualty business, non-catastrophe claim costs increased by $9 million, resulting from higher severities in our auto business and higher frequencies in our homeowners business, which were partially offset by lower severities in our homeowners business and lower frequencies in our auto business. A slight decline in catastrophe-related losses was offset by less favorable development of prior year non-catastrophe losses.

Corporate Benefit Funding

Business Overview. Funding ratios for defined benefit pension plans of Standard & Poor’s Ratings Services (“S&P”) 500 companies continued to fall in 2016, 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. Lower pension risk transfers resulted in a decrease in premiums from the prior period. 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.



	Three Months Ended March 31,
	2016		2015
	(In millions)
Operating revenues
Premiums	$	358	$	418
Universal life and investment-type product policy fees	80		54
Net investment income	1,342		1,430
Other revenues	70		71
Total operating revenues	1,850		1,973
Operating expenses
Policyholder benefits and claims and policyholder dividends	962		991
Interest credited to policyholder account balances	310		293
Capitalization of DAC	—		(6		)
Amortization of DAC and VOBA	5		5
Interest expense on debt	2		1
Other expenses	120		124
Total operating expenses	1,399		1,408
Provision for income tax expense (benefit)	156		196
Operating earnings	$	295	$	369

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Business Growth. The impact of lower deposits and funding agreement repayments in the current period were more than offset by increases in allocated equity and resulted in higher invested assets, which drove an increase in net investment income. This was mostly offset by the related increase in interest credited expense and resulted in a slight increase in operating earnings. Net funding agreement issuances were lower in the current period due to temporary restrictions associated with the proposed Separation.

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Market Factors. A $73 million decrease in operating earnings was attributable to market factors, including volatile equity markets and sustained low interest rates. Investment yields decreased as a result of lower returns on other limited partnership interests and alternative investments. Additionally, lower investment earnings on our securities lending program resulted from the impact of the sustained low interest rate environment on fixed maturity securities and a flatter yield curve, as margins correlate more to the slope of the yield curve rather than the absolute level of interest rates. These unfavorable changes were partially offset by higher income on interest rate derivatives. Certain of our funding agreements and guaranteed interest contract liabilities have interest credited rates that are contractually tied to current market rates, specifically the 3-month London Interbank Offered Rate (“LIBOR”) and, as a result, a higher average interest credited rate drove an increase in interest credited expense.

Underwriting. Less favorable mortality from our pension risk transfer business and specialized life insurance products was partially offset by more favorable mortality from our income annuity and structured settlement businesses, and resulted in a $4 million decrease in operating earnings.

Latin America

Business Overview. Total sales for the region were flat in the current period as compared to the prior period. Organic growth drove increased sales of life and accident and health products in several countries; however, this was offset by decreased life sales in U.S. direct business and lower retirement product sales in Mexico and Brazil.



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	691		$	699
Universal life and investment-type product policy fees	268			294
Net investment income	257			218
Other revenues	7			10
Total operating revenues	1,223			1,221
Operating expenses
Policyholder benefits and claims and policyholder dividends	617			581
Interest credited to policyholder account balances	80			86
Capitalization of DAC	(97		)	(111		)
Amortization of DAC and VOBA	73			78
Other expenses	371			425
Total operating expenses	1,044			1,059
Provision for income tax expense (benefit)	42			31
Operating earnings	$	137		$	131

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

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 $27 million for the first quarter of 2016 compared to the prior period mainly due to the weakening of the Mexican and Chilean pesos against the U.S. dollar.

Business Growth . Latin America experienced business growth across several lines of business within Mexico and Argentina, as well as growth in the ProVida pension business. This business growth resulted in increased premiums and policy fee income which was partially offset by related changes in policyholder benefits. Positive net flows, primarily from Chile and Mexico, resulted in an increase in average invested assets and generated higher net investment income. This was partially offset by a corresponding increase in interest credited expense on certain insurance liabilities. Business growth also drove an increase in operating expenses and DAC amortization. The sum of the items discussed above resulted in a $31 million increase in operating earnings.

Market Factors . Changes in market factors had offsetting impacts to operating earnings. Higher interest credited expense was offset by a lower crediting rate on allocated equity in the current period. Improved investment yields on fixed income securities in Mexico and Argentin a were offset by lower returns on alternative investments in Chile.

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Underwriting and Other Insurance Adjustments . Favorable underwriting experience and refinements to certain insurance liabilities in both the current and prior periods each resulted in increases to operating earnings which totaled $5 million.

Taxes . In the first quarter of 2016, our Chilean businesses, including ProVida, incurred a tax charge of $12 million as a result of tax reform legislation in Chile; this amount includes a one-time charge of $10 million that pertains to prior periods. This was partially offset by other tax-related adjustments which resulted in a net increase in operating earnings of $9 million and were mainly driven by a 2016 tax benefit related to the devaluation of the peso in Argentina.

Asia

Business Overview. Sales decreased compared to the prior period primarily due to management actions taken to improve value creation in the region. In addition, group sales in Australia were higher in the prior period. In Japan, an increase in annuity sales was almost entirely offset by a decrease in accident and health sales. We have also seen a successful shift in sales to foreign currency life products from yen life products in Japan.



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	1,658		$	1,752
Universal life and investment-type product policy fees	350			397
Net investment income	618			684
Other revenues	17			28
Total operating revenues	2,643			2,861
Operating expenses
Policyholder benefits and claims and policyholder dividends	1,236			1,340
Interest credited to policyholder account balances	319			337
Capitalization of DAC	(385		)	(435		)
Amortization of DAC and VOBA	286			326
Amortization of negative VOBA	(64		)	(86		)
Other expenses	851			904
Total operating expenses	2,243			2,386
Provision for income tax expense (benefit)	95			148
Operating earnings	$	305		$	327

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Following a change in the foreign investment law in India, the Company no longer consolidated its India operating joint venture, effective January 1, 2016. While this change in accounting does affect the comparability of the financial statement line items, it did not have a significant impact on operating earnings and, therefore, is not discussed below.

Foreign Currency . The impact of changes in foreign currency exchange rates reduced operating earnings by $5 million for the first quarter of 2016 compared to the prior period as a result of the weakening of the Korean won against the U.S. dollar.

Business Growth. Asia’s premiums, fees and other revenues decreased from the prior period mainly driven by lower fixed annuity surrenders in the current period and the discontinuation of single premium products in our accident and health business in Japan in the third quarter of 2015. Positive net flows in Japan and Korea resulted in higher average invested assets and an increase in net investment income. Changes in premiums for these businesses were partially offset by related changes in policyholder benefits. The combined impact of the items discussed above improved operating earnings by $22 million.

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Market Factors. Investment returns were unfavorably impacted by lower interest rates on fixed maturity securities in Japan, lower returns on other limited partnership interests in Japan and the impact of continued growth of lower yielding Japanese government securities. The decreases in investment returns were partially 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. Lower investment yields, combined with the impact of foreign currency hedges, decreased operating earnings by $57 million.

Underwriting. Favorable claims experience in Australia, which was partially offset by lower fixed annuity surrender gains in Japan, increased operating earnings by $6 million.

Expenses and Taxes . Higher expenses, primarily driven by project costs in Japan and costs associated with corporate initiatives and projects, reduced operating earnings by $23 million. Current period results include a $25 million tax benefit related to a change in the corporate tax rate in Japan which includes a one-time benefit of $20 million that pertains to prior periods.

EMEA

Business Overview. Sales have increased due to growth in Turkey, Egypt and the Gulf, partially offset by strong prior period sales in Poland.



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	500		$	508
Universal life and investment-type product policy fees	95			102
Net investment income	80			83
Other revenues	20			10
Total operating revenues	695			703
Operating expenses
Policyholder benefits and claims and policyholder dividends	261			239
Interest credited to policyholder account balances	29			30
Capitalization of DAC	(101		)	(133		)
Amortization of DAC and VOBA	102			128
Amortization of negative VOBA	(3		)	(4		)
Other expenses	333			362
Total operating expenses	621			622
Provision for income tax expense (benefit)	11			11
Operating earnings	$	63		$	70

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

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 $5 million for the first quarter of 2016 compared to the prior period, primarily driven by the strengthening of the U.S. dollar against the Turkish lira, British pound, Russian ruble and Polish zloty.

Business Growth . Operating earnings benefited from business growth in the Middle East, primarily in Turkey, as well as in the United Kingdom (“U.K.”), increasing operating earnings by $10 million.

Underwriting . Unfavorable underwriting experience, primarily in our employee benefits business, resulted in an operating earnings decrease of $10 million.

Taxes and Other . Our prior period results benefited from a $3 million tax benefit in Poland, as well as a $2 million increase to operating earnings as a result of the conversion to calendar year reporting for certain of our subsidiaries. Our current period operating earnings included a $3 million benefit following the cancellation of a distribution agreement with one of our bancassurance partners.

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Corporate & Other



	Three Months Ended March 31,
	2016			2015
	(In millions)
Operating revenues
Premiums	$	26		$	10
Universal life and investment-type product policy fees	24			23
Net investment income	82			109
Other revenues	27			20
Total operating revenues	159			162
Operating expenses
Policyholder benefits and claims and policyholder dividends	25			12
Interest credited to policyholder account balances	4			6
Capitalization of DAC	(2		)	—
Amortization of DAC and VOBA	2			—
Interest expense on debt	308			297
Other expenses	174			145
Total operating expenses	511			460
Provision for income tax expense (benefit)	(181		)	(188		)
Operating earnings	(171		)	(110		)
Less: Preferred stock dividends	6			30
Operating earnings available to common shareholders	$	(177	)	$	(140	)

The table below presents operating earnings available to common shareholders by source, net of income tax:



	Three Months Ended March 31,
	2016			2015
	(In millions)
Other business activities	$	8		$	12
Other net investment income	53			71
Interest expense on debt	(200		)	(193		)
Preferred stock dividends	(6		)	(30		)
Corporate initiatives and projects	(28		)	(39		)
Incremental tax benefit	58			84
Other	(62		)	(45		)
Operating earnings available to common shareholders	$	(177	)	$	(140	)

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Unless otherwise stated, all amounts discussed below are net of income tax.

Other Net Investment Income. An $18 million decrease in other net investment income was driven by the sustained low interest rate environment, which drove lower investment yields on fixed maturity securities, as well as lower returns on alternative investments. This was partially offset by increased income from higher invested assets and higher income from currency and interest rate derivatives.

Interest Expense on Debt. Interest expense on debt increased by $7 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.

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Preferred Stock Dividends. Preferred stock dividends decreased by $24 million due to the repurchase of MetLife, Inc.’s 6.50% Non-Cumulative Preferred Stock, Series B (the “Series B preferred stock”), which dividends were paid quarterly. 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”), which dividends were paid semi-annually commencing December 15, 2015 and ending on June 15, 2020, and paid quarterly thereafter.

Corporate Initiatives and Projects. Expenses associated with corporate initiatives and projects decreased by $11 million, primarily due to decreased costs associated with enterprise-wide initiatives taken by the Company.

Incremental Tax Benefit. Corporate & Other benefits from the impact of certain permanent tax preferenced items, 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%. The $26 million decrease in tax benefit is mainly due to lower utilization of tax preferenced items.

Other. The current period included a $21 million decrease in operating earnings resulting from net adjustments to certain reinsurance assets and liabilities, which was partially offset by a $5 million decrease in employee-related costs.

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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 Global Risk Management Department, 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 other-than-temporary impairment (“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 commercial 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 Asset/Liability Management (“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.

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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, Jordan, Lebanon 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. The ECB has adopted an array of stimulus measures, including an expanded asset purchase program and a negative rate on bank deposits, which are intended to lessen the risk of a prolonged period of deflation and support economic recovery in the Euro zone. See “— Industry Trends — Financial and Economic Environment” for further information on such measures, as well as for information regarding actions taken by Japan’s central government and the Bank of Japan to boost inflation expectations and achieve sustainable economic growth in Japan. 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 subsequent determinations 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. 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. At March 31, 2016 , our exposure to fixed maturity securities and perpetual hybrid securities classified as non-redeemable preferred stock in the European Region totaled $38.9 billion , at estimated fair value, of which $8.8 billion was in sovereign fixed maturity securities. See Also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment — European Region Investments” included in the 2015 Annual Report for further information.

Selected Country and Sector Investments

Recent country specific volatility due to local economic and/or political concerns, as well as recent weakness in certain sectors, has affected the performance of certain of our investments.

We have exposure to such volatility, as we maintain general account investments in Europe’s perimeter region and Cyprus, and also in Brazil, Argentina, Russia, Puerto Rico, Jordan, Lebanon and Ukraine, to support our insurance operations and related policyholder liabilities in these countries; we also have exposure through our global portfolio diversification. Our exposure to sovereign fixed maturity securities and total fixed maturity securities of Europe’s perimeter region and Cyprus totaled $220 million and $1.7 billion, at estimated fair value, respectively, at March 31, 2016. Our exposure to both sovereign fixed maturity securities and total fixed maturity securities of Greece was less than $1 million and $1 million, respectively, at estimated fair value, at March 31, 2016. Our exposure to sovereign fixed maturity securities and total fixed maturity securities of Brazil, Argentina, Russia, Puerto Rico, Jordan, Lebanon and Ukraine totaled $1.2 billion and $2.0 billion, at estimated fair value, respectively, at March 31, 2016. Our exposure to Puerto Rico political subdivision fixed maturities is in the form of revenue securities and we have no general obligation securities See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Current Environment — Selected Country and Sector Investments” included in the 2015 Annual Report for further information by country.

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There has been an increased focus on energy sector 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 $9.9 billion (comprised of fixed maturity securities of $9.8 billion at estimated fair value and related net written credit default swaps of $35 million at notional value), of which 85% were investment grade, with unrealized losses of $39 million at March 31, 2016 . Our net exposure to metals and mining sector fixed maturity securities was $2.0 billion (comprised of fixed maturity securities of $2.0 billion at estimated fair value and related net written credit default swaps of $26 million at notional value), of which 73% were investment grade, with unrealized losses of $25 million at March 31, 2016 .

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.

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,” as well as “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” included in the 2015 Annual Report.

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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 Three Months Ended March 31,
	2016						2015
	Yield % (1)			Amount			Yield % (1)			Amount
				(In millions)						(In millions)
Fixed maturity securities (2),(3)	4.43		%	$	3,628		4.64		%	$	3,569
Mortgage loans (3)	4.68		%	807			4.80		%	730
Real estate and real estate joint ventures	3.39		%	76			3.10		%	81
Policy loans	5.19		%	149			5.24		%	152
Equity securities	5.02		%	37			4.01		%	31
Other limited partnerships	2.71		%	46			10.62		%	215
Cash and short-term investments	0.99		%	25			1.00		%	33
Other invested assets				271						327
Total before investment fees and expenses	4.55		%	5,039			4.89		%	5,138
Investment fees and expenses	(0.16	)		(167		)	(0.15	)		(156		)
Net investment income including divested businesses and lag elimination (4), (5)	4.39		%	4,872			4.74		%	4,982
Less: net investment income from divested businesses and lag elimination (4), (5)				(166		)				—
Net investment income (5)				$	4,706					$	4,982

__________________

(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 fair value option (‘FVO”) and trading securities of $6 million and $37 million for the three months ended March 31, 2016 and 2015 , respectively.


(3)	Investment income from fixed maturity securities and mortgage loans includes prepayment fees.

(4)

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.

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(5)	Net investment income presented in the yield table varies from the most directly comparable GAAP measure due to certain reclassifications and excludes the effects of consolidating certain VIEs under GAAP that are treated as CSEs and contractholder-directed unit-linked investments. Such reclassifications are presented in the table below.



	Three Months Ended March 31,
	2016			2015
	(In millions)
Net investment income — in the above yield table	$	4,706		$	4,982
Investment hedge adjustments	(221		)	(200		)
Operating joint venture adjustments	5			677
Divested businesses and lag elimination (1)	166			—
Contractholder-directed unit-linked investments	(97		)	1
Incremental net investment income from CSEs	—			1
Net investment income — GAAP consolidated statements of operations	$	4,559		$	5,461

__________________


(1)	The amount of $166 million for the three months ended March 31, 2016, relates to the impact of converting the Company’s Japan operations to calendar year-end reporting. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information.

See “— Results of Operations — Consolidated Results — Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015 ” for an analysis of the period over period changes in net investment income.

Fixed Maturity and Equity Securities AFS

The following table presents fixed maturity and equity securities available-for-sale (“AFS”) by type (public or private) and information about perpetual and redeemable securities held at:



	March 31, 2016					December 31, 2015
	Estimated Fair Value			% of Total		Estimated Fair Value			% of Total
	(In millions)					(In millions)
Fixed maturity securities
Publicly-traded	$	321,268		86.4	%	$	302,400		86.1	%
Privately-placed	50,713			13.6		49,002			13.9
Total fixed maturity securities	$	371,981		100.0	%	$	351,402		100.0	%
Percentage of cash and invested assets	69.1		%			69.1		%
Equity securities
Publicly-traded	$	2,218		65.7	%	$	2,184		65.8	%
Privately-held	1,156			34.3		1,137			34.2
Total equity securities	$	3,374		100.0	%	$	3,321		100.0	%
Percentage of cash and invested assets	0.6		%			0.7		%
Perpetual securities included within fixed maturity and equity securities AFS	$	662				$	819
Redeemable preferred stock with a stated maturity included within fixed maturity securities AFS	$	900				$	1,216

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”).

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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 $6.6 billion and $6.1 billion at March 31, 2016 and December 31, 2015 , respectively. These assets are not included in our interim condensed 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 $26.5 billion and $26.0 billion at March 31, 2016 and December 31, 2015 , respectively, and are included within separate account assets in our interim condensed consolidated financial statements.

See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity and Equity Securities AFS — Valuation of Securities” included in the 2015 Annual Report for further information on the processes used to value securities and the related controls.

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:



	March 31, 2016
	Fixed Maturity Securities				Equity Securities
	(In millions)				(In millions)
Level 1
Quoted prices in active markets for identical assets	$	41,685	11.2	%	$	1,417	42.0	%
Level 2
Independent pricing sources	273,847		73.6		1,143		33.9
Internal matrix pricing or discounted cash flow techniques	36,046		9.7		145		4.3
Significant other observable inputs	309,893		83.3		1,288		38.2
Level 3
Independent pricing sources	6,849		1.9		527		15.6
Internal matrix pricing or discounted cash flow techniques	11,931		3.2		123		3.6
Independent broker quotations	1,623		0.4		19		0.6
Significant unobservable inputs	20,403		5.5		669		19.8
Total estimated fair value	$	371,981	100.0	%	$	3,374	100.0	%

See Note 8 of the Notes to the Interim Condensed Consolidated Financial Statements for the fixed maturity securities and equity securities AFS fair value hierarchy.

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The composition of fair value pricing sources for and significant changes in Level 3 securities at March 31, 2016 are as follows:


•	The majority of the Level 3 fixed maturity and equity securities AFS were concentrated in three sectors: U.S. and foreign corporate securities and residential mortgage-backed securities (“RMBS”).

•

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 collateralized obligation asset-backed securities (“ABS”); and foreign government securities.


•	During the three months ended March 31, 2016 , Level 3 fixed maturity securities decreased by $411 million , or 2% . The decrease was driven by net transfers out of Level 3, partially offset by purchases in excess of sales and an increase in estimated fair value recognized in other comprehensive income (loss).

See Note 8 of the Notes to the Interim Condensed 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. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Estimated Fair Value of Investments” included in the 2015 Annual Report for further information on the estimates and assumptions that affect the amounts reported above.

Fixed Maturity Securities AFS

See Note 6 of the Notes to the Interim Condensed 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

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity and Equity Securities AFS — Fixed Maturity Securities Credit Quality — Ratings” included in the 2015 Annual Report for a discussion of the credit quality ratings assigned by rating agencies and credit quality designations assigned by and methodologies used by the Securities Valuation Office of the NAIC for fixed maturity securities.

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.

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The following table presents total fixed maturity securities by Nationally Recognized Statistical Rating Organizations (“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:



		March 31, 2016									December 31, 2015
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	$	245,787	$	24,508		$	270,295	72.7	%	$	234,176	$	16,627		$	250,803	71.4	%
2	Baa	75,931		4,151			80,082		21.5		77,313		2,210			79,523		22.6
	Subtotal investment grade	321,718		28,659			350,377		94.2		311,489		18,837			330,326		94.0
3	Ba	15,091		197			15,288		4.1		15,314		(172		)	15,142		4.3
4	B	5,338		(217		)	5,121		1.4		5,083		(244		)	4,839		1.4
5	Caa and lower	1,225		(89		)	1,136		0.3		1,036		5			1,041		0.3
6	In or near default	40		19			59		—		42		12			54		—
	Subtotal below investment grade	21,694		(90		)	21,604		5.8		21,475		(399		)	21,076		6.0
	Total fixed maturity securities	$	343,412	$	28,569		$	371,981	100.0	%	$	332,964	$	18,438		$	351,402	100.0	%

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			Total Estimated Fair Value
	(In millions)
March 31, 2016
U.S. corporate	$	44,911		$	43,965		$	8,980		$	3,623		$	616		$	1		$	102,096
U.S. government and agency	64,504			487			—			—			—			—			64,991
Foreign corporate	24,649			29,871			3,648			807			115			1			59,091
Foreign government	50,155			3,763			2,005			452			230			51			56,656
RMBS	41,471			633			529			236			155			5			43,029
State and political subdivision	15,826			636			60			—			17			—			16,539
ABS	15,429			716			51			3			2			1			16,202
CMBS	13,350			11			15			—			1			—			13,377
Total fixed maturity securities	$	270,295		$	80,082		$	15,288		$	5,121		$	1,136		$	59		$	371,981
Percentage of total	72.7		%	21.5		%	4.1		%	1.4		%	0.3		%	—		%	100.0		%

December 31, 2015
U.S. corporate	$	43,448		$	44,158		$	9,163		$	3,532		$	493		$	—		$	100,794
U.S. government 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		%

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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 March 31, 2016 and December 31, 2015 . The tables below present our U.S. and foreign corporate securities holdings at:



	March 31, 2016				December 31, 2015
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	(In millions)				(In millions)
U.S. and foreign (1) corporate fixed maturity securities — by industry:
Industrial	$	48,505	30.1	%	$	44,710	28.3	%
Consumer	36,775		22.8		37,317		23.6
Finance	34,235		21.2		33,050		20.9
Utility	25,057		15.6		27,770		17.6
Communications	13,826		8.6		11,559		7.3
Other	2,789		1.7		3,586		2.3
Total	$	161,187	100.0	%	$	157,992	100.0	%

__________________


(1)	Includes both U.S. dollar and foreign denominated securities.

Structured Securities

We held $72.6 billion and $65.8 billion of structured securities, at estimated fair value, at March 31, 2016 and December 31, 2015 , respectively, as presented in the RMBS, ABS and CMBS sections below.

RMBS

The table below presents our RMBS holdings at:



	March 31, 2016							December 31, 2015
	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	$	21,654	50.3	%	$	577		$	20,604	53.1	%	$	578
Pass-through securities	21,375		49.7		512			18,193		46.9		305
Total RMBS	$	43,029	100.0	%	$	1,089		$	38,797	100.0	%	$	883
By risk profile:
Agency	$	30,246	70.3	%	$	1,110		$	26,214	67.6	%	$	763
Prime	1,986		4.6		32			1,960		5.1		41
Alt-A	5,812		13.5		(94		)	5,990		15.4		(18		)
Sub-prime	4,985		11.6		41			4,633		11.9		97
Total RMBS	$	43,029	100.0	%	$	1,089		$	38,797	100.0	%	$	883
Ratings profile:
Rated Aaa/AAA	$	30,741	71.4	%				$	26,809	69.1	%
Designated NAIC 1	$	41,471	96.4	%				$	37,394	96.4	%

See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity and Equity Securities AFS — Structured Securities — RMBS” included in the 2015 Annual Report for further information about collateralized mortgage obligations and pass-through mortgage-backed securities, as well as agency, prime, alternative residential mortgage loan and sub-prime RMBS.

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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 $4.4 billion and $4.0 billion with unrealized gains (losses) of $25 million and $74 million at March 31, 2016 and December 31, 2015 , respectively.

ABS

Our ABS are diversified both by collateral type and by issuer. The following table presents our ABS holdings at:



	March 31, 2016							December 31, 2015
	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	$	8,130	50.2	%	$	(216	)	$	7,698	53.5	%	$	(144	)
Foreign residential loans	1,531		9.4		42			1,365		9.5		32
Student loans	1,241		7.7		(43		)	1,284		8.9		(30		)
Automobile loans	1,606		9.9		(2		)	1,153		8.0		—
Credit card loans	1,679		10.4		17			831		5.8		27
Other loans	2,015		12.4		(3		)	2,063		14.3		11
Total	$	16,202	100.0	%	$	(205	)	$	14,394	100.0	%	$	(104	)
Ratings profile:
Rated Aaa/AAA	$	9,337	57.6	%				$	7,510	52.2	%
Designated NAIC 1	$	15,429	95.2	%				$	13,646	94.8	%

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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:



	March 31, 2016
	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	$	166	$	180		$	33	$	34		$	29	$	31		$	43	$	43		$	14	$	14		$	285	$	302
2006	581		588			81		80			53		54			39		41			—		—			754		763
2007	473		482			131		132			84		86			—		—			123		124			811		824
2008 - 2010	5		5			—		—			13		13			—		—			—		—			18		18
2011	496		533			23		24			63		65			—		—			—		—			582		622
2012	487		523			372		386			487		502			8		9			1		1			1,355		1,421
2013	1,108		1,175			814		870			660		638			12		10			—		—			2,594		2,693
2014	986		1,010			993		1,013			295		288			—		—			—		—			2,274		2,311
2015	2,652		2,720			464		469			317		320			9		9			—		—			3,442		3,518
2016	848		867			20		21			15		15			2		2			—		—			885		905
Total	$	7,802	$	8,083		$	2,931	$	3,029		$	2,016	$	2,012		$	113	$	114		$	138	$	139		$	13,000	$	13,377
Ratings Distribution			60.4		%			22.7		%			15.0		%			0.9		%			1.0		%			100.0		%

	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		%

The tables above reflect rating agency ratings assigned by NRSROs including Moody’s Investors Service, S&P, Fitch Ratings and Morningstar, Inc. CMBS designated NAIC 1 were 99.8% and 99.5% of total CMBS at March 31, 2016 and December 31, 2015 , respectively.

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities

See Note 6 of the Notes to the Interim Condensed 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 6 of the Notes to the Interim Condensed Consolidated Financial Statements for information about OTTI losses and gross gains and gross losses on AFS securities sold.

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Overview of Fixed Maturity and Equity Security OTTI Losses Recognized in Earnings

Impairments of fixed maturity and equity securities were $129 million and $18 million for the three months ended March 31, 2016 and 2015 , respectively. Impairments of fixed maturity securities were $78 million and $18 million for the three months ended March 31, 2016 and 2015 , respectively. Impairments of equity securities were $51 million and less than $1 million for the three months ended March 31, 2016 and 2015 , respectively.

Credit-related impairments of fixed maturity securities were $71 million and $18 million for the three months ended March 31, 2016 and 2015 , respectively.

Explanations of changes in fixed maturity and equity securities impairments are as follows:

Three Months Ended March 31, 2016 Compared with the Three Months Ended March 31, 2015

Overall OTTI losses recognized in earnings on fixed maturity and equity securities were $129 million for the three months ended March 31, 2016 , as compared to $18 million for the three months ended March 31, 2015. The most significant increases in OTTI losses were in U.S. and foreign corporate securities and common stock, which comprised $125 million for the three months ended March 31, 2016, as compared to $5 million for the three months ended March 31, 2015. An increase of $69 million in OTTI losses on U.S. and foreign corporate securities was concentrated in the industrial services industry and reflected the impact of lower oil prices on the energy sector and weakening foreign currencies on non-functional currency denominated fixed maturity securities. The increase in OTTI losses on common stock was $51 million for the three months ended March 31, 2016 , as compared to the three months ended March 31, 2015 , and was also concentrated in the industrial services industry and reflected the impact of lower oil prices on the energy sector.

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. FVO Securities are primarily comprised of contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify for presentation 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 the contractholder and are offset by a corresponding change in policyholder account balances through interest credited to policyholder account balances. FVO Securities also include securities held by CSEs. We have a trading securities portfolio, principally invested in fixed maturity securities, to support investment strategies that involve the active and frequent purchase and sale of actively traded securities and the execution of short sale agreements. FVO and trading securities were $15.0 billion and $15.0 billion at estimated fair value, or 2.8% and 3.0% of total cash and invested assets, at March 31, 2016 and December 31, 2015 , respectively. See Note 8 of the Notes to the Interim Condensed 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 6 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding our securities lending program.

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Repurchase Agreement Transactions

We participate in short-term repurchase and reverse repurchase agreement transactions whereby fixed maturity securities are loaned to, and contemporaneously other fixed maturity securities are borrowed from, unaffiliated financial institutions. We obtain cash collateral in an amount greater than or equal to 95% of the estimated fair value of the securities loaned, and pledge cash collateral in an amount generally equal to 98% of the estimated fair value of the borrowed securities at the inception of the transaction. We monitor the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction. Securities loaned under such transactions may be sold or re-pledged by the transferee. Securities borrowed under such transactions may be re-pledged, and are not reflected in the consolidated financial statements. These transactions are treated as collateralized borrowing and lending and the Company has elected to offset amounts recognized as receivables and payables resulting from these transactions.

See Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding our repurchase and reverse repurchase agreement transactions.

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:



	March 31, 2016										December 31, 2015
		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		$	45,445	66.4	%	$	281	0.6	%		$	44,012	65.8	%	$	217	0.5	%
Agricultural		13,226		19.3		40		0.3	%		13,188		19.7		42		0.3	%
Residential		9,800		14.3		60		0.6	%		9,734		14.5		59		0.6	%
Total		$	68,471	100.0	%	$	381	0.6	%		$	66,934	100.0	%	$	318	0.5	%

The information presented in the tables herein exclude mortgage loans where we elected the FVO. Such amounts are presented in Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements.

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 March 31, 2016 . 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 March 31, 2016 . 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., as of March 31, 2016 . The carrying value of our residential mortgage loans located in California, Florida, and New York were 35% , 7% , and 6% , respectively, of total mortgage loans at March 31, 2016.

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 $2.3 billion and $2.0 billion at March 31, 2016 and December 31, 2015 , respectively. These assets are not included in our interim condensed consolidated financial statements.

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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 March 31, 2016 and December 31, 2015 . The tables below present the diversification across geographic regions and property types of commercial mortgage loans:



	March 31, 2016				December 31, 2015
	Amount		% of Total		Amount		% of Total
	(In millions)				(In millions)
Region
Pacific	$	10,360	22.8	%	$	9,583	21.8	%
Middle Atlantic	8,072		17.8		8,154		18.5
International	8,264		18.2		7,889		17.9
South Atlantic	6,167		13.6		6,127		13.9
West South Central	4,190		9.2		4,311		9.8
East North Central	2,217		4.9		2,346		5.3
New England	1,581		3.5		1,367		3.1
Mountain	1,297		2.8		1,117		2.5
West North Central	511		1.1		520		1.2
East South Central	630		1.4		512		1.2
Multi-Region and Other	2,156		4.7		2,086		4.8
Total recorded investment	45,445		100.0	%	44,012		100.0	%
Less: valuation allowances	281				217
Carrying value, net of valuation allowances	$	45,164			$	43,795
Property Type
Office	$	22,037	48.5	%	$	21,525	48.9	%
Retail	10,793		23.7		10,466		23.8
Apartment	5,651		12.4		5,171		11.7
Hotel	4,633		10.2		4,396		10.0
Industrial	2,214		4.9		2,334		5.3
Other	117		0.3		120		0.3
Total recorded investment	45,445		100.0	%	44,012		100.0	%
Less: valuation allowances	281				217
Carrying value, net of valuation allowances	$	45,164			$	43,795

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 6 of the Notes to the Interim Condensed 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 also review our residential mortgage loans on an ongoing basis. See Note 8 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report for information on our evaluation of residential mortgage loans and related valuation allowance methodology.

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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 March 31, 2016 and December 31, 2015 , and our average debt service coverage ratio was 2.7x and 2.6x at March 31, 2016 and December 31, 2015 , respectively. Our 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. Our 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% at both March 31, 2016 and December 31, 2015 . 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 with 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 6 and 8 of the Notes to the Interim Condensed 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 three months ended March 31, 2016 and 2015 .

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, 76% were located in the U.S., with the remaining 24% located outside the U.S., at March 31, 2016 . The carrying value of our real estate investments located in Japan, California and District of Columbia were 21% , 16% and 8% , respectively, of total real estate investments at March 31, 2016 .

Real estate investments by type consisted of the following at:



	March 31, 2016				December 31, 2015
	Carrying Value		% of Total		Carrying Value		% of Total
	(In millions)				(In millions)
Traditional	$	8,220	94.1	%	$	7,859	93.2	%
Real estate joint ventures and funds	418		4.8		482		5.7
Subtotal	8,638		98.9		8,341		98.9
Foreclosed (commercial, agricultural and residential)	48		0.6		45		0.5
Real estate held-for-investment	8,686		99.5		8,386		99.4
Real estate held-for-sale	47		0.5		47		0.6
Total real estate and real estate joint ventures	$	8,733	100.0	%	$	8,433	100.0	%

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See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Real Estate and Real Estate Joint Ventures” included in the 2015 Annual Report for a discussion of the types of investments reported within traditional real estate and real estate joint ventures and funds. The estimated fair value of the traditional and held-for-sale real estate investment portfolios was $12.8 billion and $12.4 billion at March 31, 2016 and December 31, 2015 , respectively.

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 $3.9 billion and $3.8 billion at March 31, 2016 and December 31, 2015 , respectively. These assets are not included in our interim condensed consolidated financial statements.

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 $7.0 billion and $7.1 billion at March 31, 2016 and December 31, 2015 , respectively, which included $1.8 billion and $1.9 billion of hedge funds, at March 31, 2016 and December 31, 2015 , respectively.

Other Invested Assets

The following table presents the carrying value of our other invested assets by type:



	March 31, 2016				December 31, 2015
	Carrying Value		% of Total		Carrying Value		% of Total
	(In millions)				(In millions)
Freestanding derivatives with positive estimated fair values	$	18,747	69.2	%	$	14,406	64.0	%
Tax credit and renewable energy partnerships	3,116		11.5		3,145		13.9
Leveraged leases, net of non-recourse debt	1,702		6.3		1,712		7.6
Direct financing leases	1,131		4.2		1,076		4.8
Funds withheld	786		2.9		771		3.4
Operating joint ventures	774		2.8		605		2.7
Other	839		3.1		809		3.6
Total	$	27,095	100.0	%	$	22,524	100.0	%

Short-term Investments and Cash Equivalents

The carrying value of short-term investments, which approximates estimated fair value, was $11.6 billion and $9.3 billion , or 2.2% and 1.8% of total cash and invested assets, at March 31, 2016 and December 31, 2015 , respectively. The carrying value of cash equivalents, which approximates estimated fair value, was $6.0 billion and $7.5 billion , or 1.1% and 1.5% of total cash and invested assets, at March 31, 2016 and December 31, 2015 , 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 7 of the Notes to the Interim Condensed 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 March 31, 2016 and December 31, 2015 .


•	The statement of operations effects of derivatives in net investments in foreign operations, cash flow, fair value, or nonqualifying hedge relationships for the three months ended March 31, 2016 and 2015 .

See “Quantitative and Qualitative Disclosures About Market Risk — Management of Market Risk Exposures — Hedging Activities” included in the 2015 Annual Report for more information about our use of derivatives by major hedge program.

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Fair Value Hierarchy

See Note 8 of the Notes to the Interim Condensed 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 March 31, 2016 include: interest rate forwards with maturities which extend beyond the observable portion of the yield curve; interest rate options with certain unobservable inputs including the unobservable 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 March 31, 2016 , less than 1% of the estimated fair value of our derivatives was priced through independent broker quotations.

See Note 8 of the Notes to the Interim Condensed 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:



		Three Months Ended March 31, 2016
Gain (loss) recognized in net income (loss)		$67 million
Percentage of gain (loss) attributable to observable inputs		(33)%
Primary drivers of observable gain (loss)		Weakening of the U.S. dollar versus foreign currencies on receive inflation-linked foreign currency, pay U.S. dollar forwards and swaps; decreases in certain equity volatility levels; and decreases in certain equity index levels.
Percentage of gain (loss) attributable to unobservable inputs		133%

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Derivatives” included in the 2015 Annual Report for further information on the estimates and assumptions that affect derivatives.

Credit Risk

See Note 7 of the Notes to the Interim Condensed 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.

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Credit Derivatives

The following table presents the gross notional amount and estimated fair value of credit default swaps at:



	March 31, 2016				December 31, 2015
Credit Default Swaps	Gross Notional Amount		Estimated Fair Value		Gross Notional Amount		Estimated Fair Value
	(In millions)
Purchased (1)	$	2,079	$	—	$	1,870	$	(6	)
Written (2)	10,729		94		10,311		65
Total	$	12,808	$	94	$	12,181	$	59

__________________


(1)	The gross notional amount and estimated fair value for purchased credit default swaps in the trading portfolio were $195 million and ($2) million, respectively, at March 31, 2016 and $175 million and ($2) million, respectively, at December 31, 2015 .


(2)	The gross notional amount and estimated fair value for written credit default swaps in the trading portfolio were $10 million and $1 million, respectively, at March 31, 2016 and $20 million and ($2) million, respectively, at December 31, 2015 .

The following table presents the gross gains, gross losses and net gain (losses) recognized in income for credit default swaps as follows:



	Three Months Ended March 31,
	2016								2015
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)	$	27	$	(22	)	$	5		$	9	$	(21	)	$	(12	)
Written (3), (4)	25		(40		)	(15		)	19		(15		)	4
Total	$	52	$	(62	)	$	(10	)	$	28	$	(36	)	$	(8	)

__________________


(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 $12 million and ($2) million, respectively, for the three months ended March 31, 2016 and $1 million and ($2) million, respectively, for the three months ended March 31, 2015 .


(3)	The gross gains and gross (losses) for written credit default swaps in the trading portfolio were $2 million and ($11) million, respectively, for the three months ended March 31, 2016 and $1 million and $0, respectively, for the three months ended March 31, 2015 .


(4)	Gains (losses) do not include earned income (expense) on credit default swaps.

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.

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Embedded Derivatives

See Note 8 of the Notes to the Interim Condensed 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 8 of the Notes to the Interim Condensed 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 7 of the Notes to the Interim Condensed Consolidated Financial Statements for information about the nonperformance risk adjustment included in the valuation of guaranteed minimum benefits accounted for as embedded derivatives.

Off-Balance Sheet Arrangements

Credit and Committed Facilities

We maintain an unsecured credit facility and certain 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 included in the 2015 Annual Report.

Collateral for Securities Lending, Repurchase Agreement Transactions, Third-Party Custodian Administered Repurchase Program 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, which cannot be sold or re-pledged, and which has not been recorded on our consolidated balance sheets. The amount of this collateral was $88 million and $50 million at estimated fair value at March 31, 2016 and December 31, 2015 , respectively. See Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements and “— Investments — Securities Lending,” as well as “Summary of Significant Accounting Policies — Investments — Securities Lending Program” in Note 1 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report 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 participate in repurchase and reverse repurchase agreement transactions. In connection with these transactions, we obtain fixed maturity securities as collateral from unaffiliated financial institutions, which can be re-pledged, and which have not been recorded on our consolidated balance sheets. The amount of these securities and the amount which were re-pledged was $305 million and $105 million , respectively, at estimated fair value at March 31, 2016 . We had no such securities as of December 31, 2015 . See “— Investments — Repurchase Agreement Transactions” and Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements for discussion of our repurchase and reverse repurchase agreements, and the classification of the associated net receivable/payable and expense.

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 $548 million and $738 million at March 31, 2016 and December 31, 2015 , respectively. Non-cash collateral on deposit with third-party custodians on our behalf was $579 million and $781 million at March 31, 2016 and December 31, 2015 , 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 $ 2.0 billion and $ 2.2 billion at March 31, 2016 and December 31, 2015 , respectively. See “— Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — Pledged Collateral” and Note 7 of the Notes to the Interim Condensed 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.

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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 included in the 2015 Annual Report.

Guarantees

See “Guarantees” in Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements.

Other

Additionally, we make mortgage loan commitments and commitments to fund partnerships, bank credit facilities, bridge loans and private corporate bond investments in the normal course of business for the purpose of enhancing the total return on our investment portfolio. Other than these investment-related commitments which are disclosed in Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements, there are no other material obligations or liabilities arising from these investment- related commitments. For further information on these investment-related commitments see “— Liquidity and Capital Resources — The Company — Contractual Obligations.” See “Net Investment Income” and “Net Investment Gains (Losses)” in Note 6 of the Notes to the Interim Condensed 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,” “— Investments — Mortgage Loans,” “— Investments — Real Estate and Real Estate Joint Ventures” and “— Investments — Other Limited Partnership Interests” for information on our investments in fixed maturity and equity securities, mortgage loans and partnerships.

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 interim condensed 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” included in the 2015 Annual Report.

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” included in the 2015 Annual Report.

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 included in the 2015 Annual Report for additional information. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Impact of a Sustained Low Interest Rate Environment — Low Interest Rate Scenario” included in the 2015 Annual Report and “— Variable Annuity Guarantees.” A discussion of future policy benefits by segment (as well as Corporate & Other) follows.

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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.

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.

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Corporate & Other

Future policy benefits primarily include liabilities for certain run-off long-term care and workers’ compensation business written by MetLife Insurance Company 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Impact of a Sustained Low Interest Rate Environment — Low Interest Rate Scenario” included in the 2015 Annual Report and “— Variable Annuity Guarantees.” See also Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report 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:



	March 31, 2016
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%	$	12,657	$	5,423
Equal to or greater than 4%	$	10,529	$	6,425
Annuities
Greater than 0% but less than 2%	$	3,534	$	2,997
Equal to 2% but less than 4%	$	30,612	$	27,325
Equal to or greater than 4%	$	2,299	$	2,260

__________________

(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 March 31, 2016 , excess interest reserves were $108 million and $326 million for Life & Other and Annuities, respectively.

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.

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The table below presents the breakdown of account value subject to minimum guaranteed crediting rates for Group, Voluntary & Worksite Benefits:



	March 31, 2016
Guaranteed Minimum Crediting Rate	Account Value (1)		Account Value at Guarantee (1)
	(In millions)
Greater than 0% but less than 2%	$	4,889	$	4,881
Equal to 2% but less than 4%	$	1,976	$	1,976
Equal to or greater than 4%	$	689	$	662

__________________


(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.

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The table below presents the breakdown of account value subject to minimum guaranteed crediting rates for Asia:



	March 31, 2016
Guaranteed Minimum Crediting Rate (1)	Account Value (2)		Account Value at Guarantee (2)
	(In millions)
Annuities
Greater than 0% but less than 2%	$	20,406	$	3,083
Equal to 2% but less than 4%	$	1,079	$	450
Equal to or greater than 4%	$	1	$	1
Life & Other
Greater than 0% but less than 2%	$	7,297	$	6,321
Equal to 2% but less than 4%	$	18,832	$	8,429
Equal to or greater than 4%	$	268	$	—

__________________

(1)

Excludes negative VOBA liabilities of $1.1 billion at March 31, 2016 , 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 American Life and Delaware American Life Insurance Company (collectively, “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 included in the 2015 Annual Report, as well as Note 4 of the Interim Condensed 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 guaranteed minimum withdrawal benefit (“GMWBs”), and the non-life contingent portions of both GMWBs and guaranteed minimum income benefit (“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.

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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 guaranteed minimum accumulation benefits (“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 8 of the Notes to the Interim Condensed Consolidated Financial Statements.

The table below contains the carrying value for guarantees at:



	Future Policy Benefits				Policyholder Account Balances
	March 31, 2016		December 31, 2015		March 31, 2016			December 31, 2015
	(In millions)
Americas
GMDB	$	967	$	937	$	—		$	—
GMIB	2,544		2,410		39			(507		)
GMAB	—		—		21			9
GMWB	132		127		669			338
Asia
GMDB	26		25		—			—
GMAB	—		—		44			37
GMWB	92		89		214			151
EMEA
GMDB	2		2		—			—
GMAB	—		—		21			16
GMWB	8		8		(17		)	(63		)
Corporate & Other
GMDB	10		13		—			—
GMAB	—		—		28			13
GMWB	129		104		1,365			951
Total	$	3,910	$	3,715	$	2,384		$	945

The carrying amounts for guarantees included in policyholder account balances above include nonperformance risk adjustments of $821 million and $462 million at March 31, 2016 and December 31, 2015 , 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.

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 were no longer available for new purchases after February 19, 2016.

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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 March 31, 2016 :



	Total Account Value (1)
	Americas		Asia & EMEA		Corporate & Other
	(In millions)
Return of premium or five to seven year step-up	$	100,092	$	9,525	$	10,708
Annual step-up	27,264		—		—
Roll-up and step-up combination	36,516		—		—
Total	$	163,872	$	9,525	$	10,708

__________________


(1)	Total account value excludes $2.1 billion 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 March 31, 2016 :



	Total Account Value (1)
	Americas		Asia & EMEA		Corporate & Other
	(In millions)
GMIB	$	89,753	$	—	$	—
GMWB - non-life contingent (2)	5,537		2,627		2,270
GMWB - life-contingent	22,475		4,383		7,480
GMAB	713		1,380		958
	$	118,478	$	8,390	$	10,708

__________________


(1)	Total account value excludes $47.5 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 $1,032 million with a guarantee at annuitization.

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.

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The table below presents our GMIB associated total account values, by their guaranteed payout basis, at March 31, 2016 :



	Total Account Value
	(In millions)
7-year setback, 2.5% interest rate	$	32,024
7-year setback, 1.5% interest rate	5,317
10-year setback, 1.5% interest rate	17,957
10-year mortality projection, 10-year setback, 1.0% interest rate	30,268
10-year mortality projection, 10-year setback, 0.5% interest rate	4,187
	$	89,753

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 introduction of a 10-year mortality projection.

Additionally, 33% of the $89.8 billion of GMIB total account value has been invested in managed volatility funds as of March 31, 2016 . 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 March 31, 2016 , only 16% 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 Interim Condensed 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 $3,412 million at March 31, 2016 , of which $3,237 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 March 31, 2016 :



	In-the- Moneyness	Total Account Value		% of Total
		(In millions)
In-the-money	30% +	$	3,165	3	%
	20% to 30%	2,460		3	%
	10% to 20%	4,276		5	%
	0% to 10%	6,940		8	%
		16,841
Out-of-the-money	-10% to 0%	14,348		16	%
	-20% to -10%	7,573		8	%
	-20% +	50,991		57	%
		72,912
Total GMIBs		$	89,753

Derivatives Hedging Variable Annuity Guarantees

Our risk mitigating hedging strategy uses various over-the-counter 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:

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	Instrument Type	March 31, 2016						December 31, 2015
Primary Underlying Risk Exposure		Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
Primary Underlying Risk Exposure		Gross Notional Amount		Assets		Liabilities		Gross Notional Amount		Assets		Liabilities
		(In millions)
Interest rate	Interest rate swaps	$	24,363	$	2,962	$	1,372	$	23,430	$	2,056	$	966
	Interest rate futures	6,027		21		6		3,915		4		5
	Interest rate options	24,923		2,026		—		24,923		994		7
Foreign currency exchange rate	Foreign currency forwards	2,694		63		14		2,305		29		7
	Foreign currency futures	143		1		—		135		—		—
Equity market	Equity futures	11,639		27		15		7,104		61		18
	Equity options	51,388		1,903		1,235		54,113		1,541		1,041
	Variance swaps	23,466		208		682		23,437		195		636
	Total rate of return swaps	3,913		8		229		3,803		47		58
	Total	$	148,556	$	7,219	$	3,553	$	143,165	$	4,927	$	2,738

The change in estimated fair values of our derivatives is recorded in policyholder benefits and claims if such derivatives are hedging guarantees included in future policy benefits, and in net derivative gains (losses) if such derivatives 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.

Short-term Liquidity

We maintain a substantial short-term liquidity position, which was $11.7 billion and $11.1 billion at March 31, 2016 and December 31, 2015 , 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.

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Liquid Assets

An integral part of our liquidity management includes managing our level of liquid assets, which was $239.1 billion and $229.4 billion at March 31, 2016 and December 31, 2015 , 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 included in the 2015 Annual Report 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. 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.

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.

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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:



	Three Months Ended March 31,
	2016		2015
	(In millions)
Sources:
Operating activities, net	$	1,964	$	2,686
Changes in policyholder account balances, net	615		—
Changes in payables for collateral under securities loaned and other transactions, net	4,161		1,985
Long-term debt issued	—		1,492
Effect of change in foreign currency exchange rates on cash and cash equivalents	73		—
Total sources	6,813		6,163
Uses:
Investing activities, net	5,739		6,900
Changes in policyholder account balances, net	—		273
Long-term debt repaid	5		7
Collateral financing arrangements repaid	12		—
Treasury stock acquired in connection with share repurchases	70		986
Dividends on preferred stock	6		30
Dividends on common stock	413		394
Other, net	30		64
Effect of change in foreign currency exchange rates on cash and cash equivalents	—		190
Total uses	6,275		8,844
Net increase (decrease) in cash and cash equivalents	$	538	$	(2,681	)

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.

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.

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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:

Common Stock

During the three months ended March 31, 2016 and 2015 , MetLife, Inc. issued 1,943,866 and 2,313,275 new shares of its common stock for $78 million and $77 million , respectively, to satisfy various stock option exercises and other stock-based awards.

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 Federal Home Loan Bank (“FHLB”). During the three months ended March 31, 2016 and 2015 , we issued $2.5 billion and $4.0 billion, respectively, and repaid $2.5 billion and $3.5 billion, respectively, under funding agreements with certain regional FHLBs. At both March 31, 2016 and December 31, 2015 , total obligations outstanding under these funding agreements were $15.5 billion. See Note 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

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 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 three months ended March 31, 2016 and 2015 , we issued $10.3 billion and $12.9 billion, respectively, and repaid $11.2 billion and $12.3 billion, respectively, under such funding agreements. At March 31, 2016 and December 31, 2015 , total obligations outstanding under these funding agreements were $31.4 billion and $31.6 billion, respectively. See Note 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

Federal Agricultural Mortgage Corporation Funding Agreements, Reported in Policyholder Account Balances

We have issued funding agreements to the Federal Agricultural Mortgage Corporation (“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 three months ended March 31, 2016 and 2015 , we issued $500 million and $0, respectively, and repaid $500 million and $0, respectively, under such funding agreements. At both March 31, 2016 and December 31, 2015 , total obligations outstanding under these funding agreements were $2.6 billion. See Note 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

Credit and Committed Facilities

At March 31, 2016 , we maintained a $4.0 billion unsecured credit facility and certain committed facilities aggregating $11.8 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 March 31, 2016 , we had outstanding $567 million in letters of credit and no drawdowns against this facility. Remaining availability was $3.4 billion at March 31, 2016 .

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The committed facilities are used for collateral for certain of our affiliated reinsurance liabilities. At March 31, 2016 , $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 March 31, 2016 .

See Note 12 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report 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:



	March 31, 2016		December 31, 2015 (1)
	(In millions)
Short-term debt	$	100	$	100
Long-term debt (2), (3)	$	17,860	$	17,889
Collateral financing arrangements	$	4,127	$	4,139
Junior subordinated debt securities	$	3,168	$	3,168

__________________


(1)	Net of $100 million of debt issuance costs, which were reported in other assets at December 31, 2015.


(2)	Excludes $55 million and $60 million at March 31, 2016 and December 31, 2015 , respectively, of long-term debt relating to CSEs — FVO (see Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements). For more information regarding long-term debt, s ee Note 12 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.


(3)	Includes $403 million of non-recourse debt at both March 31, 2016 and December 31, 2015 , for which creditors have no access, subject to customary exceptions, to the general assets of the Company other than recourse to certain investment subsidiaries.

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 applicable covenants at March 31, 2016 .

Dispositions

There were no cash proceeds from dispositions during either of the three months ended March 31, 2016 or 2015 .

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,” the following additional information is provided regarding our primary uses of liquidity and capital:

Common Stock Repurchases

Utilizing existing authorizations from the MetLife, Inc. Board of Directors, 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. See “Unregistered Sales of Equity Securities and Use of Proceeds — Issuer Purchases of Equity Securities.”

During the three months ended March 31, 2016 and 2015 , MetLife, Inc. repurchased 1,445,864 shares and 19,893,284 shares of common stock in the open market purchases for $70 million and $986 million, respectively.

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At March 31, 2016 , MetLife, Inc. had no remaining common stock repurchase authorizations. 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 “ — Industry Trends — Regulatory Developments — U.S. Regulation — Potential Regulation as a Non-Bank SIFI ” and “— Industry Trends — Regulatory Developments — International Regulation — Global Systemically Important Insurers.” See also “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 o f the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

Preferred Stock Dividends

Information on the declaration, record and payment dates, as well as per share and aggregate dividend amounts, for MetLife, Inc.’s preferred stock was as follows for the three months ended March 31, 2016 and 2015 :



Declaration Date	Record Date	Payment Date	Preferred Stock 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)
March 7, 2016	February 29, 2016	March 15, 2016	$	0.253	$	6	$	—	$	—	$	—	$	—

March 5, 2015	February 28, 2015	March 16, 2015	$	0.250	$	6	$	0.406	$	24	$	—	$	—

Preferred 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. Dividends 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.

Common Stock Dividends

Information on the declaration, record and payment dates, as well as per share and aggregate dividend amounts, for MetLife, Inc.’s common stock was as follows for the three months ended March 31, 2016 and 2015 :

Declaration Date

Record Date

Payment Date

Common Stock Dividend

Per Share

Aggregate

(In millions, except per share data)

January 6, 2016

February 5, 2016

March 14, 2016

0.375

413

January 6, 2015

February 6, 2015

March 13, 2015

0.350

394

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. See Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding a common stock dividend declared subsequent to March 31, 2016.

Dividend Restrictions

If MetLife, Inc. were re-designated as a non-bank SIFI, the payment of dividends and other distributions by MetLife, Inc. to its security holders may be subject to regulation by the Federal Reserve. See “— Industry Trends — Regulatory Developments —U.S. Regulation — Potential 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 “— Industry Trends — Regulatory Developments — 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

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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 included in the 2015 Annual Report.

Debt Repayments

In March 2016, following regulatory approval, MetLife Reinsurance Company of Charleston, a wholly-owned subsidiary of MetLife, Inc., repurchased and canceled $12 million in aggregate principal amount of its surplus notes, which were reported in collateral financing arrangements on the consolidated balance sheets.

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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — MetLife, Inc. — Liquidity and Capital Uses — Support Agreements” included in the 2015 Annual Report.

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 three months ended March 31, 2016 and 2015 , general account surrenders and withdrawals from annuity products were $1.0 billion and $946 million, 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, at March 31, 2016 there were no funding agreements or 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 March 31, 2016 and December 31, 2015 , we had received cash collateral of $10.1 billion and $6.6 billion, respectively. At March 31, 2016 and December 31, 2015 , we had pledged cash collateral of $499 million and $241 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 or financial strength rating, as applicable, would have required $5 million of additional collateral be provided to our counterparties as of March 31, 2016 . See Note 7 of the Notes to the Interim Condensed 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 universal life secondary guarantee liabilities.

We pledged collateral from time to time in connection with funding agreements. See Note 4 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

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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 $31.0 billion and $30.2 billion at March 31, 2016 and December 31, 2015 , respectively. Of these amounts, $8.7 billion and $10.1 billion at March 31, 2016 and December 31, 2015 , 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 March 31, 2016 was $8.5 billion , over 99% of which were U.S. government 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 6 of the Notes to the Interim Condensed 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 13 of the Notes to the Interim Condensed Consolidated Financial Statements.

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

There were no acquisitions during either of the three months ended March 31, 2016 or 2015 .

Contractual Obligations

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Contractual Obligations” included in the 2015 Annual Report for additional information regarding the Company’s contractual obligations.

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.

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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.

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” included in the 2015 Annual Report, as amended or supplemented by discussions of regulatory developments in “ — Industry Trends — Regulatory Developments — U.S. Regulation — Potential Regulation as a Non-Bank SIFI,” as well as “— Industry Trends — Regulatory Developments — International Regulation — Global Systemically Important Insurers.” See also “— The Company — Liquidity and Capital Uses — Common Stock Repurchases” for information regarding MetLife, Inc.’s common stock repurchases.

Liquid Assets

At March 31, 2016 and December 31, 2015 , MetLife, Inc. and other MetLife holding companies had $5.3 billion and $6.4 billion, respectively, in liquid assets. Of these amounts, $4.4 billion and $5.3 billion were held by MetLife, Inc. and $988 million and $1.1 billion were held by other MetLife holding companies, at March 31, 2016 and December 31, 2015 , 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 included in the 2015 Annual Report. Under current tax laws, should we repatriate such earnings, we may be subject to additional U.S. income taxes and foreign withholding taxes.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — MetLife, Inc. — Liquid Assets” included in the 2015 Annual Report for additional information on the sources and uses of liquid assets for MetLife, Inc. and other MetLife holding companies.

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:

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.

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The table below sets forth the dividends permitted to be paid in 2016 by MetLife, Inc.’s primary insurance subsidiaries without insurance regulatory approval and the respective dividends paid during the three months ended March 31, 2016 :



	2016
Company	Paid		Permitted w/o Approval (1)
	(In millions)
Metropolitan Life Insurance Company	$	1,500	$	3,753
American Life Insurance Company	$	—	$	—
MetLife Insurance Company USA	$	—	$	586
Metropolitan Property and Casualty Insurance Company	$	—	$	233	(2	)
Metropolitan Tower Life Insurance Company	$	—	$	70

__________________


(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 revised interpretation of statutory dividend limits from amount reported in the 2015 Annual Report.

In addition to the amounts presented in the table above, for the three months ended March 31, 2016 , MetLife, Inc. received cash of $70 million from certain of its other subsidiaries, of which $20 million represented a dividend and $50 million represented a return of capital.

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 Japan’s Financial Services Agency, 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” included in the 2015 Annual Report and Note 16 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

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 either March 31, 2016 or December 31, 2015 .

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 March 31, 2016 , MetLife, Inc. had outstanding $425 million in letters of credit and no drawdowns against this facility. In addition, MetLife, Inc. is a party and/or guarantor to committed facilities of certain of its subsidiaries, which aggregated $11.4 billion at March 31, 2016 . The committed facilities are used as collateral for certain of the Company’s affiliated reinsurance liabilities.

See “— The Company — Liquidity and Capital Sources — Global Funding Sources — Credit and Committed Facilities” for further information regarding these facilities.

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Long-term Debt Outstanding

The following table summarizes the outstanding long-term debt of MetLife, Inc. at:



	March 31, 2016		December 31, 2015 (1)
	(In millions)
Long-term debt — unaffiliated	$	16,901	$	16,927
Long-term debt — affiliated	$	3,304	$	3,314
Collateral financing arrangements	$	2,797	$	2,797
Junior subordinated debt securities	$	1,733	$	1,733

__________________


(1)	Net of $82 million of debt issuance costs, which were reported in other assets at December 31, 2015.

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 applicable covenants at March 31, 2016 .

Dispositions

There were no cash proceeds from dispositions during either of the three months ended March 31, 2016 or 2015 .

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,” the following additional information is provided regarding MetLife, Inc.’s primary uses of liquidity and capital:

Affiliated Capital Transactions

During the three months ended March 31, 2016 and 2015 , MetLife, Inc. invested an aggregate of $1.5 billion and $173 million, respectively, in various subsidiaries. The investment in the first quarter of 2016 included a cash capital contribution of $1.5 billion to MetLife USA.

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 at both March 31, 2016 and December 31, 2015 .

In April 2016, American Life issued a $140 million short-term note to MetLife, Inc. The short-term note bears interest at six-month LIBOR plus 1.00% and matures in July 2016.

Repayments of Affiliated Long-term Debt

In March 2016, MetLife, Inc. repaid $10 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 0.70%.

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.”

Acquisitions

There were no acquisitions by MetLife, Inc. during either of the three months ended March 31, 2016 or 2015 .

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Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

Future Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed 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)	net income (loss)
(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

See “— Results of Operations” for reconciliations of these measures to the most directly comparable GAAP measures.

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 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.

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.

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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, integration and other costs.

The following additional information is relevant to an understanding of our performance results:


•	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 (“Constant Currency Basis”).


•	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. Further, sales statistics for our Latin America, Asia and EMEA segments are on a Constant Currency Basis.


•	Operating ROE - operating earnings available to common shareholders, divided by average GAAP common stockholders’ equity.


•	Operating ROE, excluding AOCI other than FCTA - operating earnings available to common shareholders divided by average GAAP common stockholders’ equity, excluding AOCI other than FCTA.


•	Allocated equity - 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.

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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 14 of the Notes to the Interim Condensed Consolidated Financial Statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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. We use a variety of strategies to manage interest rate, foreign currency exchange rate and equity market risk, including the use of derivatives. A description of our market risk exposures may be found under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A, of the 2015 Annual Report. There have been no material changes to our market risk exposures from the market risk exposures previously disclosed in the 2015 Annual Report.

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Item 4. 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 March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

The following should be read in conjunction with (i) Part I, Item 3, of the 2015 Annual Report; and (ii) Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements in Part I of this report.

Asbestos-Related Claims

As reported in the 2015 Annual Report, MLIC received approximately 3,856 asbestos-related claims in 2015. During the three months ended March 31, 2016 and 2015, MLIC received approximately 1,386 and 1,046 new asbestos-related claims, respectively. See Note 21 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report for historical information concerning asbestos claims and MLIC’s increase in its recorded liability at December 31, 2014. 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.

Regulatory Matters

Sale and Replacement of Variable Annuities and FINRA Letter of Acceptance, Waiver and Consent

Other Litigation

Fauley v. Metropolitan Life Insurance Company, et al. (Circuit Court of the 19th Judicial Circuit, Lake County, Ill., July 3, 2014)

MetLife, Inc. v. Financial Stability Oversight Council (D. D.C., January 13, 2015)

MetLife, Inc. filed this action in D.C. District Court seeking to overturn the FSOC’s designation of MetLife, Inc. as a non-bank SIFI. The suit is brought under the section of Dodd-Frank 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 D.C. District Court issued a decision on March 30, 2016 granting, in part, MetLife, Inc.’s cross motion for summary judgment, and rescinding the FSOC’s designation of MetLife, Inc. as a non-bank SIFI. On April 8, 2016, the FSOC filed a notice of appeal of the D.C. District Court’s order.

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Martin v. Metropolitan Life Insurance Company, (Superior Court of the State of California, County of Contra Costa, filed December 17, 2015)

Newman v. Metropolitan Life Insurance Company (N.D. Ill., filed March 23, 2016)

Summary

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Item 1A. Risk Factors

The following should be read in conjunction with, and supplements and amends, the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the 2015 Annual Report. Other than as described in this Item 1A, there have been no other material changes to our risk factors from the risk factors previously disclosed in the 2015 Annual Report.

Regulatory and Legal Risks

The following updates and replaces the similarly named sections of the risk factor entitled “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” included in the 2015 Annual Report. There have been no material changes to other sections of such risk factor. These sections include: “U.S. Regulation — Insurance Regulation,” “U.S. Regulation — U.S. Federal Regulation Affecting Insurance,” “International Regulation — Solvency Regimes,” and “General” within such risk factor included in the 2015 Annual Report.

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” included in the 2015 Annual Report, as amended or supplemented by discussions of regulatory developments elsewhere herein and 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,” and as further amended or supplemented below.

U.S. Regulation

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 issued new regulations on April 6, 2016 with an effective date for most provisions of April 10, 2017. These rules substantially expand the definition of “investment advice” and thereby broaden the circumstances under which MetLife or its representatives, in providing investment advice with respect to ERISA plans, plan participants or IRAs, will be deemed a fiduciary under ERISA or the Code. The DOL also issued amendments to certain of its prohibited transaction exemptions, and issued a new exemption that applies 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. We are currently studying the impact of these developments on MetLife’s business. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Regulatory Developments — U.S. Regulation — ERISA Considerations,” as well as “Business — Regulation — U.S. Regulation — ERISA Considerations” included in the 2015 Annual Report.

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.

Potential Regulation of MetLife, Inc. as a Non-Bank SIFI

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If the FSOC prevails on appeal or designates MetLife, Inc. as systemically important as part of its ongoing review of non-bank financial companies, MetLife, Inc. could once again be subject to regulation as a non-bank SIFI. However, many of the regulatory requirements that would apply to us if we were again so designated 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 non-bank SIFIs would be required to hold. 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 MetLife, Inc. were re-designated as a non-bank SIFI, our business and competitive position could be materially and adversely affected by any requirement of the Federal Reserve Board requiring 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. The capital requirements that would 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.

If re-designated as a non-bank SIFI, 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, if re-designated as a non-bank SIFI, MetLife, Inc. will be required to comply with the requirements applicable to non-bank SIFIs, including the submission of 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 would also have 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, 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. Non-bank SIFIs and certain other large financial companies can be assessed under Dodd-Frank for any uncovered costs arising in connection with the resolution of a systemically important financial company. In addition, non-bank SIFIs 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.

On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Other Key Information — Significant Events.” There 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, although such a company would be separately evaluated by the FSOC and may not meet a necessary threshold to advance to possible designation, or that any actions taken in furtherance of this plan will affect any decision the FSOC may make to re-designate MetLife, Inc. as a non-bank SIFI. We may consider further structural and other business alternatives that may be available to us in response to any re-designation of MetLife as a non-bank SIFI, and we cannot predict the impact that any such alternatives, if implemented, may have on the Company or its security holders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Regulatory Developments — U.S. Regulation — Potential Regulation as a Non-Bank SIFI,” as well as “Business — Regulation — U.S. Regulation — Regulation as a Non-Bank SIFI” included in the 2015 Annual Report, for additional information regarding potential regulation of MetLife, Inc. as a non-bank SIFI.

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International Regulation

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. in 2015. 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 at the consolidated group level by legislation or regulation in each applicable jurisdiction. As MetLife, Inc. is no longer a U.S. non-bank SIFI and, therefore, has no consolidated group regulator, the impact on MetLife, Inc. of such proposals is uncertain. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Regulatory Developments — International Regulation — Global Systemically Important Insurers,” as well as “Business — Regulation — International Regulation — Global Systemically Important Insurers” included in the 2015 Annual Report.

Risks Related to Acquisitions, Dispositions or Other Structural Changes

The following updates and replaces the similarly named sections of the risk factor entitled “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” included in the 2015 Annual Report. There have been no material changes to other sections of such risk factor. These sections include: “Risks Relating to Acquisitions,” “Risks Relating to Joint Ventures,” and “Risks Relating to Legal Entity Reorganizations,” within such risk factor included in the 2015 Annual Report.

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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Other Key Information — Significant Events” and Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding MetLife, Inc.’s announcement of its plan to pursue the Separation and its entry into a purchase agreement with MassMutual. 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.

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 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 “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Other Key Information — Significant Events” and Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements for information on MetLife, Inc.’s announcement of its plan to pursue the Separation and its entry into a purchase agreement with MassMutual. A Separation , depending on the specific form, would be subject to the satisfaction of various conditions and approvals, including , among other things, 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. The transactions contemplated by the purchase agreement with MassMutual are also subject to certain closing conditions, including regulatory approval.

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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. 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.” Any such separation would also affect the dividends available to be paid to MetLife, Inc. by the subsidiaries that are part of such separation. Furthermore, 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. Such restructuring could also adversely affect our internal controls and procedures and impair our relationships with key customers, distributors and suppliers. An interruption or significant change in certain key relationships could materially affect our ability to market our products and could have a material adverse effect on our business, operating results and financial condition. A distributor has elected to suspend and other distributors may elect to suspend, alter, reduce or terminate their distribution relationships with us for various reasons, including uncertainty related to the proposed Separation, changes in our distribution strategy, adverse developments in our business, adverse rating agency actions or concerns about market-related risks. 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.

Risks Related to Our Business

The following updates and replaces the similarly named sections of the risk factor entitled “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” included in the 2015 Annual Report. There have been no material changes to other sections of such risk factor.

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

The U.K. has announced a referendum on its membership in the EU to be held in June 2016. If the referendum results in the withdrawal of the U.K. from the EU, the medium term impacts on our business both within the U.K. and the EU are uncertain. A vote to leave would trigger an extended negotiation period between the U.K. and the EU on the U.K.'s future trading relationship with the EU. In the meantime, the U.K. remains a member of the EU with unchanged rights to access the single EU market in goods and services. Our business model relies on certain rights to operate cross-border insurance operations which may be eliminated or modified after the period of negotiation between the U.K. and EU is completed. Currency volatility in both the U.K. and wider EU would likely increase, impacting our businesses in those markets. Operating expenses within our businesses could increase in the event of a U.K. withdrawal.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Purchases of common stock made by or on behalf of MetLife, Inc. or its affiliates during the quarter ended March 31, 2016 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)
January 1 — January 31, 2016	1,445,864	$	48.63	1,445,864	$	—
February 1 — February 29, 2016	—	$	—	—	$	—
March 1 — March 31, 2016	—	$	—	—	$	—

__________________

(1)

During the periods January 1 through January 31, 2016, February 1 through February 29, 2016 and March 1 through March 31, 2016 , separate account index funds purchased 0 shares, 0 shares and 0 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. In January 2016, MetLife, Inc. completed all remaining repurchases under the September 2015 authorization. At March 31, 2016 , MetLife, Inc. had no remaining authorizations. Under these authorizations, MetLife, Inc. may have purchased 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. 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 “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” included in the 2015 Annual Report, as well as Note 16 of the Notes to the Consolidated Financial Statements included in the 2015 Annual Report.

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Item 6. Exhibits

(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q and MetLife, Inc.’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)



Exhibit No.		Description
4.1		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.
10.1		Purchase Agreement by and among MetLife, Inc. and Massachusetts Mutual Life Insurance Company, dated as of February 28, 2016.
18.1		Letter from Deloitte & Touche LLP, dated May 5, 2016, regarding change in accounting principles.
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.

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Signatures

Pursuant to the requirements 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.



METLIFE, INC.

By:		/s/ Peter M. Carlson
		Name: Peter M. Carlson Title: Executive Vice President and Chief Accounting Officer (Authorized Signatory and Principal Accounting Officer)

Date: May 5, 2016

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Exhibit Index



Exhibit No.		Description
4.1		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.
10.1		Purchase Agreement by and among MetLife, Inc. and Massachusetts Mutual Life Insurance Company, dated as of February 28, 2016.
18.1		Letter from Deloitte & Touche LLP, dated May 5, 2016, regarding change in accounting principles.
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.

E - 1

Exhibit 10.1

Execution Version

PURCHASE AGREEMENT

by and among

MetLife, Inc.

AND

Massachusetts Mutual Life Insurance Company

Dated as of February 28, 2016

Table of Contents



				Page
SECTION 1.		DEFINITIONS		2

SECTION 2.		PURCHASE AND SALE OF SECURITIES AND PURCHASED PROPERTY		18

	Section 2.1.		Closing Date Transactions	18
	Section 2.2.		Post-Closing Adjustment	19
	Section 2.3.		Dispute and Payment Procedures	20
	Section 2.4.		Closing	21
	Section 2.5.		Transactions to Be Effected at the Closing	21
	Section 2.6.		Procedures for Assets Not Transferable	23
	Section 2.7.		No Withholding for the Seller	23

SECTION 3.		REPRESENTATIONS AND WARRANTIES OF THE SELLER		23

	Section 3.1.		Organization, Authority and Enforceability	24
	Section 3.2.		Noncontravention	25
	Section 3.3.		Title to Shares	26
	Section 3.4.		Title to Purchased Property	26
	Section 3.5.		Capitalization	26
	Section 3.6.		Legal Proceedings	26
	Section 3.7.		Brokers	27
	Section 3.8.		Broker-Dealer and Insurance Matters	27
	Section 3.9.		Investment Adviser Matters	29
	Section 3.10.		GDC	31
	Section 3.11.		Financial Statements	31
	Section 3.12.		Absence of Certain Changes or Events	32
	Section 3.13.		Sufficiency of Assets	32
	Section 3.14.		Compliance with Laws; Permits; Filings	32
	Section 3.15.		Material Contracts	33
	Section 3.16.		Taxes	34
	Section 3.17.		Tax Matters	35
	Section 3.18.		Intellectual Property	35
	Section 3.19.		Insurance	36
	Section 3.20.		Affiliate Transactions	37
	Section 3.21.		Real Property	37
	Section 3.22.		Assigned Contracts	37
	Section 3.23.		Leases	38
	Section 3.24.		Employees and Benefit Matters	39
	Section 3.25.		Exclusive Representations and Warranties	40

Section 4.		[RESERVED.]		41

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Section 5.		[RESERVED.]		41

Section 6.		REPRESENTATIONS AND WARRANTIES OF THE BUYER.		41

	Section 6.1.		Organization, Authority and Enforceability	41
	Section 6.2.		Noncontravention	41
	Section 6.3.		Legal Proceedings	42
	Section 6.4.		Financial Capability	42
	Section 6.5.		No Distribution	42
	Section 6.6.		Investigation	42
	Section 6.7.		No Reliance	43
	Section 6.8.		Brokers	43
	Section 6.9.		Exclusive Representations and Warranties	43

Section 7.		COVENANTS		43

	Section 7.1.		Access to Information	43
	Section 7.2.		Conduct of the Business Pending the Closing	46
	Section 7.3.		Government Filings	48
	Section 7.4.		Publicity	49
	Section 7.5.		Expenses	49
	Section 7.6.		Further Actions	49
	Section 7.7.		Restrictive Covenants	50
	Section 7.8.		Advisory Client Consents	52
	Section 7.9.		Termination of or Release From Intercompany Contracts	53
	Section 7.10.		Bulk Transfer Laws	53
	Section 7.11.		Assignment or Enforcement of Certain Agreements	53
	Section 7.12.		[Reserved]	54
	Section 7.13.		Ancillary Agreements	54
	Section 7.14.		Use of Seller Names	54
	Section 7.15.		IP Transfer Covenant	55
	Section 7.16.		Conversion Assistance	55
	Section 7.17.		Product Development	55
	Section 7.18.		Crump Relationship	57
	Section 7.19.		Lease Consents	57
	Section 7.20.		Separation and Migration Cooperation	58
	Section 7.21.		Sufficiency Representation Remedy	59
	Section 7.22.		Additional Acquired Assets and Liabilities	59
	Section 7.23.		Assumed Loans	60
	Section 7.24.		Margin Payments	60
	Section 7.25.		Retained Leases	60

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Section 8.		TAX MATTERS		61

	Section 8.1.		Preparation and Filing of Tax Return	61
	Section 8.2.		Cooperation in Preparing and Filing Tax Returns, Participating in Tax Contests, and Other Tax Matters	62
	Section 8.3.		Allocation of Certain Taxes	63
	Section 8.4.		Transfer Taxes	64
	Section 8.5.		Termination of Tax Sharing Agreements	64
	Section 8.6.		Refunds	64
	Section 8.7.		Allocation Under Section 1060 of the Code	65
	Section 8.8.		Section 338(h)(10) Election	65

Section 9.		INDEMNIFICATION		66

	Section 9.1.		Survival	66
	Section 9.2.		Indemnification by the Seller	67
	Section 9.3.		Indemnification by the Buyer	68
	Section 9.4.		Indemnification Procedure for Third Party Claims	69
	Section 9.5.		Indemnification Procedures for Non-Third Party Claims	70
	Section 9.6.		Calculation of Indemnity Payments; Mitigation	70
	Section 9.7.		Characterization of Indemnification Payments	71
	Section 9.8.		Assignment of Claims	71
	Section 9.9.		Retained Claims	71
	Section 9.10.		Materiality	72

Section 10.		EMPLOYMENT MATTERS		72

	Section 10.1.		Employee Matters	72
	Section 10.2.		Indemnification and Insurance	78

Section 11.		CLOSING CONDITIONS		80

	Section 11.1.		The Buyer’s Conditions to Closing	80
	Section 11.2.		The Seller’s Conditions to Closing	81
	Section 11.3.		Mutual Conditions to Closing	81

Section 12.		TERMINATION		82

	Section 12.1.		Grounds for Termination	82
	Section 12.2.		Effect of Termination	83

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Section 13.		MISCELLANEOUS		83

	Section 13.1.		Notices	83
	Section 13.2.		Severability	85
	Section 13.3.		Counterparts	85
	Section 13.4.		Entire Agreement; No Third Party Beneficiaries	85
	Section 13.5.		Governing Law	85
	Section 13.6.		Consent to Jurisdiction; Waiver of Jury Trial	85
	Section 13.7.		Right to Specific Performance	86
	Section 13.8.		Assignment	86
	Section 13.9.		Entity Transfer	87
	Section 13.10.		Headings	87
	Section 13.11.		Construction	87
	Section 13.12.		Amendments and Waivers	87
	Section 13.13.		Exhibits, Annexes and Schedules	88

EXHIBITS

Exhibit A: Term Sheet for Distribution Agreement

Exhibit B: Term Sheet for PlanSmart Services Agreement

Exhibit C: Term Sheet for Transition Services Agreement

Exhibit D: Term Sheet for Product Development and Distribution Agreement

Exhibit E-1: Form of MetLife USA Side Letter

Exhibit E-2: Form of Parent Entity Side Letter

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PURCHASE AGREEMENT

PURCHASE AGREEMENT, dated as of February 28, 2016 (this “ Agreement ”), by and among MetLife, Inc., a corporation organized under the laws of Delaware (the “ Seller ”), and Massachusetts Mutual Life Insurance Company, a company organized under the laws of Massachusetts (the “ Buyer ”). Each of the Seller and the Buyer is referred to herein individually as a “ Party ” and collectively as the “ Parties .”

W I T N E S S E T H:

WHEREAS, the Seller is engaged in the Business (as defined herein) through MetLife Securities, Inc., a Delaware corporation (the “ Company ”), and certain affiliates of the Seller; and

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Seller desires to sell the Business to the Buyer, and the Buyer desires to purchase the Business from the Seller; and

WHEREAS, the Seller is the owner of all of the issued and outstanding Shares (as defined herein) of the Company; and

WHEREAS, certain affiliates of the Seller own the Purchased Property (as defined herein) and are subject to the obligations of the Assumed Liabilities (as defined herein) or are otherwise involved in the Business, but solely to the extent involved in the Business (any such affiliate a “ Relevant Affiliate ” and all such affiliates, collectively, the “ Relevant Affiliates ”); and

WHEREAS, in connection with the sale of the Business, (i) the Seller wishes to sell to the Buyer, and the Buyer wishes to purchase from the Seller, the Shares and (ii) the Seller wishes to cause its applicable Relevant Affiliates to sell and assign to the Buyer, and the Buyer wishes to purchase and assume from the applicable Relevant Affiliates, the rights and obligations of the Relevant Affiliates to the Purchased Property and the Assumed Liabilities (each as defined herein), subject in each case to the terms and conditions set forth in this Agreement; and

WHEREAS, in connection with the sale of the Business, the Parties wish to enter into a distribution agreement, subject to the terms and conditions substantially as set forth in Exhibit A hereto; and

WHEREAS, in connection with the sale of the Business, the Parties wish to enter into a services agreement in connection with PlanSmart to allow certain Adviser Representatives to have ongoing access to the Seller’s and certain of its affiliates group clients under the PlanSmart programs, subject to the terms and conditions substantially as set forth in Exhibit B hereto; and

WHEREAS, in connection with the sale of the Business, the Parties wish to enter into a transition services agreement at the Closing, subject to the terms and conditions substantially as set forth in Exhibit C hereto; and

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WHEREAS, in connection with the sale of the Business, the Parties wish to enter into a product development and distribution agreement, subject to the terms and conditions substantially as set forth in Exhibit D hereto; and

WHEREAS, in connection with the sale of the Business, the Parties wish to negotiate in good faith to facilitate the transfer and extension for two years following the Closing Date of the relationship with Crump Life Insurance Services, Inc.

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

Section 1. DEFINITIONS . As used in this Agreement, the following terms shall have the following meanings:

“ 403(b) Adviser Representative ” means (a) as of the date hereof, each of the individuals whose names are set forth on Section 1.1(a) of the Disclosure Schedule, and (b) as of any other date following the date hereof, each employee of the Seller and its Affiliates whose primary responsibility is the provision of brokerage and investment services to customers of the 403(b) Business and that is designated as an “adviser representative” by the Seller, the Company or any of their respective Affiliates and whose names are set forth on Section 1.1(a) of the Disclosure Schedule (with such Disclosure Schedule to be updated by the Seller in the ordinary course of business consistent with this definition).

“ 403(b) Business ” means the business of cross-selling into Seller’s or its Affiliates’ small case 403(b) retirement plans.

“ 403(b) Transferred Adviser Representatives ” has the meaning set forth in Section 10.1(a)(iii).

“ Account Transfer Notice ” has the meaning set forth in Section 7.8(a) .

“ Account Transfer Objection Period ” has the meaning set forth in Section 7.8(a) .

“ Acquired Assets and Liabilities ” mean, collectively, the Purchased Property and Assumed Liabilities.

“ Additional Amount ” has the meaning set forth in Section 1.1(b)(1) of the Disclosure Schedule.

“ Additional Financial Schedule ” means that certain schedule setting forth an estimate of the expenses related to the Business previously delivered by the Seller to the Buyer and attached to Section 1.1(b)(2) of the Disclosure Schedule.

“ Administration Agreement ” has the meaning set forth in Section 7.17(a).

“ Adviser Loan ” means each loan or other extension of credit made by the Seller or any Affiliate thereof to an Adviser Representative or 403(b) Adviser Representative (including any

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commitment to make such loan or other extension of credit) in connection with his or her employment with the Seller or any of its Affiliates, including such Adviser Loans as set forth on Section 1.1(b)(3) of the Disclosure Schedule, which Schedule sets forth the borrowing party, lending party and principal amount outstanding under such loan or other extension of credit, which such schedule may be updated by the Seller in its sole discretion up to the Closing Date.

“ Adviser Representative ” means (a) as of the date hereof, each of the individuals whose names are set forth on Section 1.1(c) of the Disclosure Schedule, and (b) as of any other date following the date hereof, each employee of the Seller and its Affiliates whose primary responsibility is the provision of brokerage and investment services to customers of the Business and that is designated as an “adviser representative” by the Seller, the Company or any of their respective Affiliates and whose names are set forth on Section 1.1(c) of the Disclosure Schedule (with such Disclosure Schedule to be updated by the Seller in the ordinary course of business). Solely for purposes of the definition of “Aggregate 2015 FY GDC,” the term “Adviser Representative” shall include any Person employed by the Company, the Seller or any of the Relevant Affiliates as of December 31, 2015 whose primary responsibility at such time was the provision of brokerage and investment services to customers of the Business and that was, at such time, designated as an “adviser representative” by the Company, the Seller or any of their respective Affiliates, as applicable.

“ Advisers Act ” means the Investment Advisers Act of 1940, as amended.

“ Advisory Client ” means a Client that has entered into an Advisory Client Agreement.

“Advisory Client Agreement” means each investment advisory agreement pursuant to which the Company provides investment advisory services to clients of the Business.

“ Affiliate ” of any Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. For purposes of this definition, “control” of a Person means the power to, directly or indirectly, direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other ownership interests, by Contract or otherwise, including, with respect to a corporation, partnership or limited liability company, the direct or indirect ownership of more than fifty percent (50%) of the voting securities of such corporation or the voting interest of such partnership or limited liability company. Notwithstanding anything herein to the contrary, for purposes of Section 10.1 only (other than Section 10.1(d) ), the PEO shall be deemed to be an Affiliate of Buyer.

“ Affiliated Group ” means any affiliated, combined, consolidated, unitary or similar group of which the Company is or was a member on or prior to the Closing Date.

“ Affirmative Consent Client ” has the meaning set forth in Section 7.8(c) .

“ Aggregate 2015 FY GDC ” means $721,000,000.00. For the avoidance of doubt, this amount is equal to the sum of the GDC for the 12-month period ended December 31, 2015 of all

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of the Adviser Representatives (excluding the 403b Adviser Representatives) on December 31, 2015, which is a component of GDC listed on Section 3.10 of the Disclosure Schedule.

“ Agreement ” has the meaning set forth in the preamble to this Agreement.

“ Allocation ” has the meaning set forth in Section 8.7 .

“ Ancillary Agreements ” means all agreements, instruments and documents being or to be executed and delivered in connection with this Agreement pursuant to the terms hereof, including the Distribution Agreement, the PlanSmart Services Agreement, the Intellectual Property License Agreement and the Transition Services Agreement.

“ Applicable Survival Period ” has the meaning set forth in Section 9.1(c) .

“ Assigned Contracts ” has the meaning set forth in Section 5.5(a) .

“ Associated Person ” has the meaning set forth in Section 3(a)(18) of the Exchange Act and/or the meaning set forth in Section 202(a)(17) of the Advisers Act.

“ Assumed Deferred Compensation Plans ” means the MetLife Retail Deferred Compensation Plan and MetLife California Retail Deferred Compensation Plan.

“ Assumed Liabilities ” has the meaning set forth in Section 2.1(e) .

“ Assumed Loan ” means (i) each Adviser Loan with a Transferred Adviser Representative, Transferred Broker or 403(b) Transferred Adviser Representative listed on Section 1.1(b)(3) of the Disclosure Schedule, and (ii) each Adviser Loan with a Transferred Adviser Representative, Transferred Broker or 403(b) Transferred Adviser Representative that is awarded by the Seller or any of its Affiliates from and after the date of this Agreement and on or prior to the Closing Date (each, a “ Post-Signing Assumed Loan ”).

“Assumed Plan” means the Assumed Deferred Compensation Plans and each Plan that is listed on Section 1.1(d) of the Disclosure Schedule.

“ Balance Sheet ” and “ Balance Sheets ” have the meanings set forth in Section 3.11(a) .

“ Balance Sheet Date ” has the meaning set forth in Section 3.11(a) .

“ Broker ” means (a) as of the date hereof, each of the individuals whose names are set forth on Section 1.1(e) of the Disclosure Schedule, and (b) each Adviser Representative that retires on or prior to the Closing Date and who continues after retirement to provide insurance brokerage and investment services to customers pursuant to a brokerage or similar agreement with the Company, the Seller or any of their respective Affiliates, who shall be listed on Section 1.1(e) of the Disclosure Schedule by the Seller (as updated in the ordinary course of business), upon such retirement. Solely for purposes of the definition of “Aggregate 2015 FY GDC,” the term “Broker” shall include any Person employed by the Company, the Seller or any of the Relevant Affiliates as of December 31, 2015 whose primary responsibility at such time was the

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provision of insurance brokerage and investment services to customers of the Business and that was, at such time, designated as an “adviser representative” by the Company, the Seller or any of their respective Affiliates, as applicable.

“ Business ” means the MetLife Premier Client Group, the Seller’s and its Affiliates’ national distribution sales force whose Adviser Representatives offer a broad based product portfolio primarily to retail clients, but excluding the business with respect to the 403(b) Adviser Representatives that do not become 403(b) Transferred Adviser Representatives.

“ Business Associate ” means each Adviser Representative, each Broker and each Dedicated Employee.

“ Business Day ” means any day, other than a Saturday, Sunday or other day on which banks located in the State of New York are authorized or required to close.

“ Buyer ” has the meaning set forth in the preamble to this Agreement.

“ Buyer Benefit Plans ” has the meaning set forth in Section 10.1(f) .

“ Buyer Disclosure Schedule ” has the meaning set forth in the preamble to Section 6 .

“ Buyer Fundamental Representations ” has the meaning set forth in Section 9.1(a) .

“ Buyer Indemnitees ” has the meaning set forth in Section 9.2(a) .

“ Buyer Products ” has the meaning set forth in Section 7.17(c) .

“ Calculation Principles ” means the calculation inputs and methods employed by the Seller in connection with the creation of the Additional Financial Schedule, as set forth on Section 1.1(b)(5) of the Disclosure Schedule.

“ Cap ” has the meaning set forth in Section 9.2(b) .

“ Captive Agency Force ” means a proprietary agent or broker sales force directly employed or engaged by, or exclusively tied to, an insurance company that primarily sells to individual retail clients life insurance or annuity products and is primarily compensated through commission payments under a commission payment structure substantially similar to the commission structure employed by the Buyer and its Affiliates as in effect on the date hereof.

“Client” means any purchaser of an insurance policy purchased through or serviced by an Adviser Representative or Broker, any person who has entered into a customer account agreement with the Company for brokerage services or any person who has entered into an Advisory Client Agreement with the Company.

“ Closing ” has the meaning set forth in Section 2.4 .

“ Closing Date ” has the meaning set forth in Section 2.4 .

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“ Closing GDC Amount ” means an amount equal to the sum of (i) the sum of the GDC for the 12-month period ended December 31, 2015 of each Adviser Representative who becomes a Transferred Adviser Representative or a Transferred Broker, and (ii) the Transferred New Hire GDC.

“ Closing Statement ” has the meaning set forth in Section 2.1(b)(ii) .

“ COBRA ” has the meaning set forth in Section 10.1(n) .

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Company ” has the meaning set forth in the recitals to this Agreement.

“ Company Broker-Dealer Filings ” has the meaning set forth in Section 3.8(d) .

“ Company Closing Net Worth ” means the net worth of the Company as of the Closing, determined in accordance with U.S. GAAP and the methodology set forth on Section 1.1(b)(6) of the Disclosure Schedule, which such Schedule sets forth the calculation of the net worth of the Company as of January 31, 2016.

“ Company Intellectual Property ” means all Intellectual Property that is either (i) owned by the Company, or (ii) owned by the Seller and is used exclusively in, and is material to, the businesses of the Company.

“ Company Investment Adviser Filings ” has the meaning set forth in Section 3.9(c) .

“ Company Net Worth Closing Adjustment ” means an amount (whether positive or negative) equal to the result of (i) the Estimated Company Closing Net Worth, and minus (ii) $250,000, which is the amount of capital required to meet the Company’s regulatory capital obligations.

“ Confidentiality Agreement ” has the meaning set forth in Section 13.4 .

“ Consent ” means any consent, approval, or authorization from, or notice to, any third party (excluding any Governmental Entity).

“ Consequential Damages ” has the meaning set forth in Section 9.6(d) .

“ Consulting Agreement ” means that certain consulting agreement identified on Section 1.1(i) of the Disclosure Schedule.

“ Contract ” means any written contract, lease, license, indenture, undertaking or other agreement that is legally binding.

“ Covered Losses ” has the meaning set forth in Section 9.2(b) .

“ Current E&O Policies ” means the existing errors and omissions liability insurance or any renewals or replacements thereof maintained as of the Closing Date by or on behalf of the Company.

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“ Customer Data ” means all data or information that is related to the customers of the Business for which the Advisor Representatives continue their business with Buyer after the Closing Date and is obtained, processed or stored by or on behalf of the Seller or the Relevant Affiliates and used or maintained primarily in connection with the Business.

“ D&O Indemnified Party ” has the meaning set forth in Section 10.2(a) .

“ Dedicated Employee ” means (a) as of the date hereof, each employee of the Seller or any of its Affiliates listed by title or function on Section 1.1(f) of the Disclosure Schedule (such schedule to be updated by the Seller within five (5) Business Days following the date hereof to include names of such employees) (the “ Corporate Dedicated Employees ”) and each other employee of the Seller or any of its Affiliates whose primary responsibility is the provision of firm support services, shared support services or broker-dealer services in respect of the Business (but not the 403(b) Business) (each of whom will be listed on Section 1.1(f) of the Disclosure Schedule within five (5) Business Days following the date hereof), and (b) as of any other date following the date hereof, each Corporate Dedicated Employee who remains employed by the Seller and its Affiliates as of such date and each other employee of the Seller or any of its Affiliates who remains employed by the Seller and its Affiliates as of such date and whose primary responsibility is the provision of firm support, shared support or broker-dealer services in respect of the Business (but not the 403(b) Business) and whose name is set forth on Section 1.1(f) of the Disclosure Schedule (with such Disclosure Schedule to be updated by the Seller consistent with the definition of a Dedicated Employee in the ordinary course of business).

“ Deductible ” has the meaning set forth in Section 9.2(b) .

“ Disclosure Schedule ” has the meaning set forth in the preamble to Section 3 .

“ Disputed Amounts ” has the meaning set forth in Section 2.3(a) .

“ Distribution Agreement ” means the Distribution Agreement, to be negotiated by the Parties in good faith in accordance with the terms and conditions set forth in Exhibit A and executed on or prior to the Closing Date.

“ Dollars ” or “ $ ” means the lawful currency of the United States.

“ E&O Tail Coverage ” has the meaning set forth in Section 10.2(d) .

“ Equity Securities ” means (a) capital stock, partnership or membership interests or units (whether general or limited), and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity or a right to control such entity (an “ Equity Interest ”), (b) subscriptions, calls, warrants, options, purchase rights or commitments relating to, or entitling any Person to acquire, any Equity Interest, (c) stock appreciation, phantom stock, equity participation or similar rights and (d) securities convertible into or exercisable or exchangeable for shares of Equity Interests.

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“ Estimated Company Closing Net Worth ” has the meaning set forth in Section 2.1(b)(ii) .

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ ERISA Affiliate ” means each entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code that includes or included the Seller.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Liabilities ” has the meaning set forth in Section 2.1(f) .

“ Filing ” has the meaning set forth in Section 3.2(b) .

“ Financial Statements ” has the meaning set forth in Section 3.11(a) .

“ FINRA ” means the Financial Industry Regulatory Authority.

“ FINRA Approval ” has the meaning set forth in Section 7.3(b)(i) .

“ Form ADV ” has the meaning set forth in Section 3.9(c) .

“ Form BD ” has the meaning set forth in Section 3.8(d) .

“ GAAP ” means generally accepted accounting principles in the United States.

“ GDC ” means the aggregate compensable sales commissions (including any trails), compensable dealer concessions and compensable investment advisory fees generated by the Adviser Representatives or Brokers, in each case on behalf of the Company, the Seller or any of their respective Affiliates and consistent with past practices, as a result of the sale or servicing of financial and insurance products and/or the provision of investment advisory services in connection with the Business.

“ GDC Closing Statement ” has the meaning set forth in Section 2.1(b)(i) .

“ Governmental Entity ” means any federal, state, local, domestic or foreign agency, court, tribunal, administrative body, arbitration panel, department or other legislative, judicial, governmental, quasi-governmental entity or Self-Regulatory Organization with competent jurisdiction.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Income Tax Return ” means any Tax Return relating to a Tax on or measured by, in whole or in part, net income or a franchise Tax imposed in lieu of a Tax imposed on net income.

“ Indebtedness ” means any of the following: (a) any indebtedness for borrowed money; (b) any obligations evidenced by bonds, debentures, notes or other similar instruments; (c) any

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obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current liabilities; and (d) any guaranty of any of the foregoing.

“ Indemnitee ” means any Person that is entitled to indemnification pursuant to the provisions of this Agreement.

“ Indemnitor ” means any Party from which a Person is entitled to indemnification pursuant to the provisions of this Agreement.

“ Indemnity Cap ” has the meaning set forth in Section 9.2(b) .

“ Independent Expert ” has the meaning set forth in Section 2.3(b) .

“ Intellectual Property ” means all (a) patents and patent applications, (b) trademarks, trademark and service mark applications and registrations, trade dress, logos and trade names, (c) copyrights, and copyrightable works, together with all applications, registrations and renewals therefor, (d) trade secrets, know-how, and other confidential and proprietary information including confidential or proprietary data contained in databases, confidential or proprietary customer lists, and (e) domain names.

“ Intellectual Property License Agreement ” means the Intellectual Property License Agreement to be entered into on the Closing Date, if necessary, between the Seller and/or any applicable Relevant Affiliate and the Buyer for certain software that is the Seller’s or such Relevant Affiliate’s Intellectual Property.

“ Intercompany Contract ” means any Contract between the Seller or any of its Affiliates, on the one hand, and any other Affiliate of Seller, on the other hand, primarily relating to the Business or to which the Company is a counterparty, but in all cases excluding any Ancillary Agreement.

“ Interim Period ” means the period beginning on the date hereof and ending on the earlier of (a) the Closing Date and (b) the date of termination of this Agreement.

“ IRS ” means the Internal Revenue Service.

“ Knowledge ” means, (a) in the case of the Seller, the actual knowledge after reasonable inquiry of Paul LaPiana, Kumar Das Gupta, Christine DeBiase, Jeffery Halperin, and Margery Brittain (provided, that for purposes of Section 3.15(a)(vii) , “Knowledge” means the actual knowledge after reasonable inquiry of Christine DeBiase), and (b) in the case of the Buyer, the actual knowledge after reasonable inquiry of John Vaccaro, Christine Frederick and Robert Rosenthal.

“ Law ” means, with respect to any Person, any statute, law, principle of common law, code, treaty, ordinance, rule or regulation of any Governmental Entity applicable to such Person.

“ Lease Consent ” has the meaning set forth in Section 7.19(a) .

“ Leased Real Property ” has the meaning set forth in Section 3.23(a) .

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“ Legal Proceeding ” means any claim, suit or other proceeding (whether at law or in equity) or arbitration before, or any formal investigation by, a Governmental Entity.

“ Liabilities ” means any debt, liability, claim, expense, commitment or obligation (whether direct or indirect, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, or due or to become due) of every kind and description.

“ Licensed Intellectual Property ” means the Intellectual Property owned by a third party that is used by or for the benefit of the Company or the Purchased Property. The Licensed Intellectual Property does not include the Peanuts Characters.

“ Lien ” means, with respect to any property or asset, any lien, mortgage, pledge, charge, security interest, restriction on transfer or voting, or other encumbrance in respect of such property or asset.

“ Losses ” has the meaning set forth in Section 9.2(a) .

“ Material Adverse Effect ” means any change, development, condition, occurrence or event that is, or is reasonably likely to be, individually or in the aggregate, materially adverse to the business, assets, properties or condition (financial or other) of the Business, taken as a whole; provided , however , that none of the following items, in and of itself or themselves, shall constitute or be taken into account when determining whether a Material Adverse Effect has occurred: (a) changes in economic, political, regulatory, financial or capital market conditions generally or in the industries in which the Business operates; (b) any acts of war (declared or undeclared), hostilities, sabotage or terrorist activities or any escalation of any of the foregoing; (c) effects of weather, meteorological events or other acts of God; (d) any change in Law, GAAP, accounting standards, regulatory policy or industry standards after the date hereof, or any change in interpretation of any of the foregoing; (e) the announcement, execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby or the fact that the prospective owner of the Business is the Buyer; (f) the loss of any employees, Adviser Representatives, clients or client assets as a result of the announcement of this Agreement or any Legal Proceeding, protest or dispute arising therefrom or relating thereto; (h) any actions taken by, or at the request of, the Buyer (including any breach by the Buyer of this Agreement); (i) any failure, by itself, of the Company or the Business as a whole to meet projections or forecasts or revenue or earnings predictions for any period (but, for the purposes of clarity, the underlying cause of such failure may be taken into account when determining whether a Material Adverse Effect has occurred); (j) any change or development in the credit, financial strength, or other ratings of the Seller and its Affiliates; and (k) any actions required to be taken or contemplated by this Agreement; and provided further , that such matters in the case of clauses (a), (b), (c) and (d) shall be taken into account in determining whether there has been or will be a “Material Adverse Effect” to the extent of any disproportionate impact on the Company and the Business, taken as a whole, relative to other participants operating in the same industry as the Company and the Business.

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“ Material Contracts ” has the meaning set forth in Section 3.15(b) .

“ Material Leased Real Property ” has the meaning set forth in Section 3.23(b) .

“ Material Relevant Affiliate Leases ” has the meaning set forth in Section 3.23(b) .

“ MetLife FIA ” has the meaning set forth in Section 7.17(c) .

“ MetLife Products ” shall mean the products issued by the Seller and its applicable Affiliates to be distributed pursuant to the Distribution Agreement. The MetLife Products as of the Closing Date are specified in Exhibit A hereto.

“ MetLife USA ” has the meaning set forth in Section 13.9 .

“ MetLife USA Side Letter ” shall mean a side letter in the form attached hereto as Exhibit E-1.

“ Net Capital ” means, with respect to a broker-dealer, such broker-dealer’s “net capital” as would be appropriately entered on line 10 (Item 3750) on the “Computation of Net Capital” page of the SEC’s Financial and Operational Combined Uniform Single Report.

“ New Hire Adviser Representative ” means any Adviser Representative hired by the Seller or any of its Affiliates (a) on or after January 1, 2016 and prior to the date hereof or (b) so long as such Adviser Representative has been hired pursuant to a protocol mutually agreeable to Buyer and Seller (as to be agreed in by Buyer and Seller acting in good faith promptly following the date here), after the date hereof and prior to Closing.

“ New Hire GDC ” means, in respect of each New Hire Adviser Representative, an amount expressed as the annualized value attributed to such New Hire Adviser Representative’s historical performance, if applicable, or such other value, in each case, used by the Seller or its applicable Affiliate in connection with establishing such Adviser Representative’s annualized compensation, commission and bonus structure, and annualized GDC targets at the time of hiring, in a manner consistent with past practice.

“ Non-Exclusive Property ” has the meaning set forth in Section 7.22(b) .

“ Notice of Claim ” has the meaning set forth in Section 9.4(a) .

“ Notice of Objection ” has the meaning set forth in Section 2.3(a) .

“ Order ” means any award, injunction, judgment, order, writ, decree or ruling entered, issued, made, or rendered by, or any binding agreement or stipulation entered into with, any Governmental Entity that possesses competent jurisdiction.

“ Organizational Documents ” means, with respect to any Person, the articles or certificate of incorporation or organization, certificate of formation, by-laws, limited partnership agreement, partnership agreement, limited liability company agreement, shareholders agreement or such other organizational documents of such Person.

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“ Outside Date ” has the meaning set forth in Section 12.1(a) .

“ Parent Entity ” has the meaning set forth in Section 13.9 .

“ Parent Entity Side Letter ” shall mean a side letter in the form attached hereto as Exhibit E-2.

“ Party ” and “ Parties ” have the meanings set forth in the preamble to this Agreement.

“ Peanuts Characters ” means the “Peanuts” cartoon characters licensed to Metropolitan Life Insurance Company by Peanuts Worldwide LLC.

“ PEO ” means each third party professional employer organization through which Buyer will employ certain of the Dedicated Employees who become Transferred Employees from and after the Closing Date.

“ Permit ” has the meaning set forth in Section 3.2(b) .

“ Permitted Liens ” means (a) any Lien arising pursuant to, or as a result of the transactions contemplated by, this Agreement, (b) any Lien arising pursuant to or described in the Organizational Documents of the Company or applicable securities Laws, (c) Liens for Taxes not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate accruals or reserves have been established, (d) any state of facts an accurate survey would disclose that, individually or in the aggregate, does not materially adversely affect the value or the continued use of the Leased Real Property to which they apply, or (e) mechanics’, carriers’, landlords’, workmen’s, repairmen’s and similar Liens, incurred in the ordinary course of business not yet due and payable or being contested in good faith by appropriate proceedings and for which adequate accruals or reserves have been established.

“ Person ” means any natural person, corporation, trust, estate, general partnership, limited partnership, limited liability company, proprietorship, other business organization or Governmental Entity or other legal entity.

“ Plan ” means each “employee benefit plan” within the meaning of Section 3(3) of ERISA and all other stock purchase, stock option, restricted stock, severance, retention, employment, consulting, change-of-control, collective bargaining, bonus, incentive, deferred compensation, retirement, and other benefit plan, program or arrangement, in each case which is maintained, sponsored or contributed to by the Seller or any of its Affiliates and in which any Adviser Representative or Dedicated Employee or any of their respective covered dependents participate or is eligible to participate.

“ PlanSmart Services Agreement ” means the PlanSmart Services Agreement, to be negotiated in good faith by the Parties in accordance with the terms and conditions set forth in Exhibit B and executed on the Closing Date.

“ Post-Closing Adjustment Amount ” has the meaning set forth in Section 2.2(a) .

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“ Post-Closing Period ” means any taxable period or portion thereof beginning after the Closing Date. If a taxable period begins on or prior to the Closing Date and ends after the Closing Date, then the portion of the taxable period that begins on the day following the Closing Date shall constitute a Post-Closing Period.

“ Post-Closing Statement ” has the meaning set forth in Section 2.2(a) .

“ Pre-Closing Insurance Contracts ” means any whole life insurance policy issued by the Seller or any of its Affiliates as of the date of the Purchase Agreement to customers of the Business prior to the Closing.

“ Pre-Closing Period ” means any taxable period or portion thereof that is not a Post-Closing Period.

“ Product Development and Distribution Agreement ” means the Product Development and Distribution Agreement to be entered into by MetLife USA, an appropriate NY Affiliate of MetLife USA, and the Buyer, to be negotiated in good faith by the Parties in accordance with the terms and conditions set forth in Exhibit D and executed on the Closing Date.

“ Purchase Price ” has the meaning set forth in Section 2.1(c) .

“ Purchased Intellectual Property ” means the Intellectual Property that is Purchased Property, as set forth on Section 1.1(g) of the Disclosure Schedule.

“ Purchased Property ” means the assets owned by the Seller or any of its Affiliates that are primarily related to the Business, including:

(a) the goodwill of the Business as a going concern;

(b) the Assigned Contracts;

(c) all Permits, which are held by any Affiliate of the Seller and required primarily for the conduct of the Business as currently conducted or for the ownership and use of the Purchased Property, including those that are listed on Section 1.1(h) of the Disclosure Schedule, to the extent assignable or transferable (the “ Purchased Permits ”);

(d) all Records;

(e) the Purchased Intellectual Property;

(f) all of each Affiliate of the Seller’s right, title and interest in and to Customer Data as of the Closing Date, subject to applicable Law and each Affiliate of the Seller’s right to maintain a copy of such Customer Data for its records to the extent required by each such Affiliate of the Seller’s document retention policies, applicable Law or to operate its businesses, in all cases limited solely to such Customer Data relating to the customers of the Business to the extent serviced by any Transferred Adviser Representatives or Transferred Brokers;

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(g) all client relationships, client work papers, client work product and client and vendor lists relating primarily to the Business as of the Closing Date, subject to applicable Law and each Affiliate of the Seller’s right to maintain a copy of such information for its records to the extent required by each Affiliate of the Seller’s document retention policies, applicable Law or to operate its businesses, in all cases limited solely to such information relating to the clients of the Business to the extent serviced by any Transferred Adviser Representatives or Transferred Brokers;

(h) all trade secrets and other proprietary or confidential information used by each Affiliate of the Seller primarily in the Business, subject to applicable Law and each Affiliate of the Seller’s right to maintain a copy of such information for its records to the extent required by each such Affiliate of the Seller’s document retention policies or applicable Law;

(i) all telephone and telephone facsimile numbers used primarily in the Business;

(j) all claims, causes of action, choses in action, rights of recovery, rights of indemnity and rights under all warranties, representations and guarantees made by Persons other than any Affiliate of the Seller, in each case (i) related primarily to the Business, or related to any Purchased Property or Assumed Liability, (ii) in respect of events or occurrences after the Closing, and (iii) whether mature, contingent or otherwise;

(k) without duplication of any of the Assigned Contracts, the Assumed Loans;

(m) the Consulting Agreement; and

(n) all other assets of the Seller or any of its Affiliates that are primarily related to the Business.

“ Records ” means all publications, know-how, product roadmaps, business records, developments, models, databases, computer files, training programs, books and records, employee records of Transferred Employees, website content and other content (including all data, information and other content stored on discs, tapes or other media and all archives of any kind) (i) of the Company, or (ii) used primarily in the Business.

“ Registered Intellectual Property ” means all Intellectual Property that the Company, the Seller or any Affiliate purports to own that is registered, filed or issued under the authority of any Governmental Entity (or with respect to an Internet domain name, is filed or issued under the authority of a domain name registrar), or for which an application to register has been filed with any Governmental Entity, constituting registered copyrights, registered trademarks, issued patents and all pending applications for any of the foregoing.

“ Reinsurance Agreement ” has the meaning set forth in Section 7.17(a) .

“ Relevant Affiliate Leases ” has the meaning set forth in Section 3.23(a) .

“ Relevant Affiliates ” has the meaning set forth in the recitals to this Agreement.

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“ Representative Contract ” means any Contract between the Company, the Seller or any of the Relevant Affiliates, on one hand, and an Adviser Representative, on the other hand, governing the activities of the relevant Adviser Representative on behalf of the Company, the Seller or any of the Relevant Affiliates, in his or her capacity as an Adviser Representative.

“ Representatives ” means, with respect to any Person, the officers, directors, managers, employees, counsel, accountants, financial advisers and consultants of such Person.

“ Restrictive Covenants ” has the meaning set forth in Section 7.7(d) .

“ Retained Claims ” has the meaning set forth in Section 9.2(a) .

“ Retained Leases ” has the meaning set forth in Section 7.25 .

“ Retention Award ” means all awards granted pursuant to the Retention Program.

“ Retention Program ” has the meaning set forth in Section 10.1(l)(i) .

“ Review Period ” has the meaning set forth in Section 2.3(b) .

“ SEC ” means the United States Securities and Exchange Commission.

“ Section 338(h)(10) Election ” means an election described in Section 338(h)(10) of the Code (and any corresponding elections under other applicable Law) with respect to Buyer’s acquisition of the Shares pursuant to this Agreement.

“ Section 338 Forms ” means all returns, documents, statements, and other forms that are required to be submitted to any federal, state, local, or foreign Taxing Authority in connection with a Section 338(h)(10) Election. Section 338 Forms shall include any “statement of section 338 election” and IRS Form 8023 and any successor forms (together with any schedules or attachments thereto) that are required pursuant to Treasury Regulations Section 1.338-1 or Treasury Regulations Section 1.338(h)(10)-1 or any successor provisions.

“ Self-Regulatory Organization ” means any self-regulatory organization in the securities industry, including FINRA and the Municipal Securities Rulemaking Board.

“ Seller ” has the meaning set forth in the preamble to this Agreement.

“ Seller Fundamental Representations ” has the meaning set forth in Section 9.1(a) .

“ Seller Indemnitees ” has the meaning set forth in Section 9.3(a) .

“ Seller Intellectual Property ” means all Intellectual Property that is owned by the Seller or its Affiliates other than the Company, but excluding the Purchased Intellectual Property.

“ Seller Names and Marks ” has the meaning set forth in Section 7.14 .

“ Separation ” has the meaning set forth in Section 13.9 .

“ Shares ” has the meaning set forth in Section 3.5(a) .

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“ Shared Affiliate Leased Real Property ” has the meaning set forth in Section 3.23(h) .

“ Straddle Period ” means any taxable period that begins before and ends after the Closing Date.

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other Person) owns, directly or indirectly, more than fifty percent (50%) of the Equity Securities entitled to vote for the election of the board of directors or other governing body of a non-corporate Person.

“ Sufficiency Representation ” shall have the meaning ascribed to such term in Section 3.13 .

“ Sufficiency Representation Remedy ” has the meaning set forth in Section 7.21(a) .

“ Tax ” or “ Taxes ” means any federal, state, local, or foreign income, franchise, profits, gross receipts, capital base, withholding, ad valorem, personal property (tangible and intangible), employment, payroll, sales and use, Social Security, disability, occupation, real property, real property transfer, severance, excise and any other taxes or surcharges imposed by a Taxing Authority, including any related interest, penalties, or addition thereto.

“ Tax Adjustment ” has the meaning set forth in Section 8.8(a) .

“ Tax Contest ” means any civil, criminal, administrative, or other claim, action, suit, litigation, arbitration, investigation, examination, audit, or other similar proceeding in respect of Taxes, in each case by or before any Governmental Entity or arbitral body or any Person acting on behalf of a Governmental Entity.

“ Tax Returns ” means any return, report, statement or other written information (including any election, declaration, disclosure or schedule) filed or required to be filed with respect to any Taxes, including any information return, claim for refund, amended return and declaration of estimated Tax.

“ Taxing Authority ” means, with respect to any Tax, the Governmental Entity or political subdivision thereof that imposes such Tax, and the agency or Person (if any) charged with the assessment, determination, collection or other imposition of such Tax for such entity or subdivision.

“ Third Party Claim ” has the meaning set forth in Section 9.4(a) .

“ Third Party Defense ” has the meaning set forth in Section 9.4(b) .

“ Transfer Taxes ” means all transfer, sales, use, real property transfer, goods and services, value added, documentary, stamp duty, gross receipts, excise, transfer and conveyance Taxes and other similar Taxes, duties, fees or charges.

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“ Transferred Adviser Representative ” means any Adviser Representative who accepts Buyer’s offer of employment extended in accordance to Section 10.1(c) hereof, has executed a career agent or similar agreement on or prior to the Closing Date, and who commences employment with the Buyer or any of its Affiliates on or within 30 days following the Closing Date (or, if such Transferred Adviser Representative is on short- or long-term disability or other approved leave of absence as of the Closing Date, on or within 30 days following receipt of an offer from the Buyer or any of its Affiliates in accordance with Section 10.1(a)(ii) hereof.

“ Transferred Broker ” means any Broker who accepts Buyer’s offer extended in accordance with to Section 10.1(d) hereof, has executed a brokerage or similar agreement at or prior to the Closing Date, and who commences service to the Buyer or any of its Affiliates on or within 30 days following the Closing Date.

“ Transferred Employees ” has the meaning set forth in Section 10.1(a) .

“ Transferred New Hire GDC ” means, the sum an amount equal to the sum of the New Hire GDC for each Transferred New Hire Adviser Representative.

“ Transition Services Agreement ” means the Transition Services Agreement between Buyer, Seller and its Relevant Affiliates, to be negotiated in good faith by the Parties in accordance with the terms and conditions set forth in Exhibit C and executed on the Closing Date.

“ Treasury Regulations ” means the regulations promulgated under the Code, as amended from time to time (including any successor regulations).

“ Undisputed Amounts ” has the meaning set forth in Section 2.3(b) .

“ Unvested Assumed Deferral Amount ” means any after-Tax amount (computed based on the Buyer’s applicable Tax rate in respect of such payments) actually paid by the Buyer in respect of deferred compensation payable pursuant to the Assumed Deferred Compensation Plans that is not fully vested immediately prior to the Closing in accordance with the terms of the applicable Assumed Deferred Compensation Plans as in effect as of immediately prior to the Closing.

“ Use Agreement ” has the meaning set forth in Section 7.19(a) .

“ WARN Act ” has the meaning set forth in Section 10.1(o) .

SECTION 2. PURCHASE AND SALE OF SECURITIES AND PURCHASED PROPERTY .

SECTION 2.1. Closing Date Transactions .

(a) Purchase and Sale of the Shares and the Purchased Property . Subject to the terms and conditions set forth in this Agreement, at the Closing, in exchange for the Purchase Price: (i) the Seller shall sell to the Buyer, and the Buyer shall purchase from the Seller, the

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Shares; and (ii) the Seller shall cause the applicable Relevant Affiliates to sell, convey, transfer, assign and deliver to the Buyer, and the Buyer shall purchase and accept from the applicable Relevant Affiliates, all right, title and interest of such Relevant Affiliate in and to the Purchased Property, wherever located, free and clear of any Liens (other than Permitted Liens).

(b) Closing Statements .

(i) On the day that is five Business Days immediately prior to the anticipated Closing Date, the Buyer shall deliver to the Seller a list of the Adviser Representatives who are expected to become Transferred Adviser Representatives or Transferred Brokers at Closing. Using such information, the Seller shall prepare and deliver to the Buyer a statement setting forth a good faith estimate of the Closing GDC Amount and the calculations required to confirm satisfaction of the condition set forth in Section 11.1(h) (the “ GDC Closing Statement ”), together with all related supporting schedules, calculations and documentation.

(ii) On the day that is five Business Days immediately prior to the anticipated Closing Date, the Seller shall prepare and deliver to the Buyer a statement setting forth a good faith estimate of the Company Closing Net Worth (the “ Estimated Company Closing Net Worth ”) and the Company Net Worth Closing Adjustment (the “ Closing Statement ”), together with all related supporting schedules, calculations and documentation. The Closing Statement shall be binding on the Parties for the purposes of determining the Company Net Worth Closing Adjustment payable by the Buyer to the Seller at the Closing.

(c) Purchase Price . The “ Purchase Price ” shall be an amount equal to the sum of (i) $164,550,000.00, plus (ii) the Company Net Worth Closing Adjustment (which may be a negative number), plus (iii) the outstanding balance of any Post-Signing Assumed Loan, plus (iv) the Additional Amount, subject to adjustment following the Closing as set forth in Section 2.2 . The Buyer shall pay the Purchase Price to the Seller on the Closing Date in cash by wire transfer of immediately available U.S. funds to an account or accounts to be specified by the Seller and otherwise in accordance with Section 2.5(a)(i) .

(d) Purchased Property Sale at Closing . The sale, transfer, assignment and delivery by each of the Seller and the applicable Relevant Affiliates of the Purchased Property to the Buyer, as herein provided, shall be effected at the Closing by the execution and delivery of the Assignment and Assumption Agreement, the Assignment and Assumption of Lease Agreements and the License Agreements.

(e) Assumption of Liabilities . From and after the Closing, the Buyer shall assume and the Buyer hereby agrees to pay, perform and discharge when due, all of the liabilities, claims, contingencies, obligations or causes of action that arise or are incurred after, or, if before, to the extent relating to any period after, the Closing Date to the extent relating to or arising from the Purchased Property (other than any such liabilities, claims, contingencies, obligations or causes of action that arise or are incurred after the Closing Date to the extent relating to any period prior to the Closing Date) or any of the liabilities and obligations set forth

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on Section 2.1(e) of the Disclosure Schedule (the “ Assumed Liabilities ”), but excluding, for the avoidance of doubt, the Excluded Liabilities.

(f) Retention of Excluded Liabilities . The Buyer shall not assume any liabilities, claims, contingencies, obligations or causes of action in respect of the Purchased Property (including, without limitation, any liabilities set forth on Section 2.1(f) of the Disclosure Schedule) other than the Assumed Liabilities (all such other liabilities and obligations, the “ Excluded Liabilities ”) and the Excluded Liabilities shall remain the liabilities and obligations of the applicable Seller or the Relevant Affiliate before and after the Closing.

(g) Assumption of Assumed Plans and Retention Awards . Notwithstanding anything herein to the contrary, from and after the Closing, the Buyer shall assume each of the Assumed Plans (including all related administrative obligations, and, subject to the provisions of Section 10.1(k)(ii) ) and all Retention Awards, the Buyer hereby agrees to pay, perform and discharge when due, all of the liabilities, claims, contingencies, obligations or causes of action that arise or are incurred or are payable after the Closing Date to the extent relating to or arising from the Assumed Plans and the Retention Awards. For the avoidance of doubt, nothing in this Section 2.1(g) shall be construed to cancel, extinguish or amend the Buyer’s right to reimbursement pursuant to Sections 10.1(l)(i) and (ii) below.

SECTION 2.2. Post-Closing Adjustment .

(a) The Buyer will prepare and deliver to the Seller, no later than 60 days after the Closing Date, a statement setting forth the exact amount of the Company Closing Net Worth (the “ Post-Closing Statement ”), calculated in accordance with the provisions set forth in the definition of “Company Closing Net Worth” herein, together with all related supporting schedules, calculations and documentation. The Post-Closing Statement shall not be binding on the Parties for the purposes of determining the Post-Closing Adjustment Amount payable by the Buyer or the Seller, as applicable, to the other Party, as provided herein, until the earlier of (i) the Seller confirming it has accepted such calculation of the Company Closing Net Worth in writing to the Buyer, and (ii) if the Seller has failed to deliver a Notice of Objection to the Buyer in respect of the Post-Closing Statement, the end of the last day of the Review Period in respect of the Post-Closing Statement, and (iii) the decision of the Independent Expert pursuant to Section 2.3 in respect of any Notice of Objection delivered by the Seller to the Buyer in respect of the Post-Closing Statement. In the event the Seller disagrees with any portion of the Post-Closing Statement, the Seller may object in accordance with the procedures set forth in Section 2.3 following the Closing. The amount by which the Company Closing Net Worth as finally determined pursuant to this Section 2.2(a) and Section 2.3 exceeds or is less than the Estimated Company Closing Net Worth in absolute value shall be referred to as the “ Post-Closing Adjustment Amount ”.

(b) Promptly upon the Post-Closing Statement becoming binding on the Parties, and in any event within 5 Business Days thereafter, (i) if the Company Closing Net Worth exceeds the Estimated Company Closing Net Worth, the Buyer shall pay to the Seller, and

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(ii) if the Estimated Company Closing Net Worth exceeds the Company Closing Net Worth, the Seller shall pay to the Buyer, an amount equal to the Post-Closing Adjustment Amount in cash by wire transfer of immediately available U.S. funds to an account or accounts to be specified by the applicable Party.

SECTION 2.3. Dispute and Payment Procedures .

(a) Upon receipt from the Buyer, the Seller shall have 60 days to review the Post-Closing Statement (the “ Review Period ”). At the Seller’s request, the Buyer (i) shall reasonably cooperate and assist, and, if applicable, shall cause the Company and its Representatives to reasonably cooperate and assist, the Seller and its Representatives in the review of the Post-Closing Statement (including by executing such documents and other instruments and taking such further actions as may be reasonably required to cause the Buyer and its and, if applicable, the Company’s accountants to deliver to the Seller and their respective Representatives copies of their work papers relating to the Company and the Shares, as well as, solely in the case of the Buyer, the Acquired Assets and Liabilities) and (ii) shall provide the Seller and its Representatives with any information reasonably requested by the Seller that is necessary for its review of the Post-Closing Statement. If the Seller disagrees with the Buyer’s computations in the Post-Closing Statement, the Seller shall, on or prior to the last day of the Review Period, deliver a written notice to the Buyer (the “ Notice of Objection ”), which sets forth the Seller’s objections to the Buyer’s calculations in the Post-Closing Statement. Any Notice of Objection shall specify those items or amounts with which the Seller disagrees (the “ Disputed Amounts ”) and shall set forth the Seller’s calculations of such items or amount based on such objections.

(b) If the Seller does not deliver a Notice of Objection to the Buyer within the Review Period, the Seller shall be deemed to have accepted the Buyer’s calculations in the Post-Closing Statement and such calculations shall be final, conclusive and binding. If the Seller delivers a Notice of Objection to the Buyer within the Review Period, the Buyer and the Seller shall, during the 30-day period following delivery of such Notice of Objection or any mutually agreed extension thereof, negotiate in good faith to reach agreement on the Disputed Amounts; provided , however , that any amounts not being disputed (the “ Undisputed Amounts ”) shall be final, conclusive and binding on the Parties. If, at the end of such period or any mutually agreed extension thereof, the Buyer and the Seller are unable to resolve their disagreements, they shall jointly retain and refer their disagreements to a nationally recognized independent accounting firm as may be mutually acceptable to the Buyer and the Seller (the “ Independent Expert ”). The Parties shall instruct the Independent Expert promptly to determine, solely with respect to the Disputed Amounts, whether and to what extent, if any, the Post-Closing Statement requires adjustment. The Independent Expert shall base its determination solely on written submissions by the Buyer and the Seller and not on an independent review. The Buyer and the Seller shall make available to the Independent Expert all relevant books and records and other items reasonably requested by the Independent Expert. As promptly as practicable, but in no event later than 30 days after its retention, the Independent Expert shall deliver to the Buyer and the Seller a

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report that sets forth its resolution of the Disputed Amounts and its calculation of the Post-Closing Statement; provided , however , that the Independent Expert may not assign a value to any item greater than the greatest value for such item claimed by either Party or less than the smallest value for such item claimed by either Party. The decision of the Independent Expert shall be final, conclusive and binding on the Parties. The costs and expenses of the Independent Expert shall be allocated between the Buyer, on the one hand, and the Seller, on the other hand, based upon the percentage that the portion of the contested amount not awarded to each Party bears to the amount actually contested by such Party, as determined by the Independent Expert. The Buyer and the Seller agree to execute, if requested by the Independent Expert, a reasonable engagement letter, including customary indemnities in favor of the Independent Expert.

(c) The amount of any payment to be made pursuant to Section 2.1 shall bear interest from and including the date such payment becomes due at a rate per annum equal to the “prime rate” as published in The Wall Street Journal , Eastern Edition on the Closing Date. Such interest shall be calculated daily on the basis of a year of 365 days and the actual number of days elapsed, without compounding.

(d) Any payment required to be made pursuant to Section 2.1 or Section 2.2 , as applicable, shall be made by wire transfer of immediately available funds to such account or accounts designated in writing by the receiving party at least one Business Day prior to such transfer.

SECTION 2.4. Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at 10:00 a.m., local time, at the offices of Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, New York, on the third Business Day after all the conditions to the obligations of the Parties hereunder set forth in Section 11 hereof have been satisfied or waived (other than those conditions that are not capable of being satisfied until the Closing), or at such other time, date and place as may be mutually agreed upon in writing by the Parties (the date on which the Closing actually occurs being referred to as the “ Closing Date ”).

SECTION 2.5. Transactions to Be Effected at the Closing .

(a) At the Closing, the Buyer will deliver to the Seller:

(i) an amount (by wire transfer of immediately available funds in Dollars to such account or accounts specified by the Seller to the Buyer at least three (3) Business Days prior to the Closing) equal to the Purchase Price;

(ii) a counterpart signature page to the Distribution Agreement, duly executed by the Buyer;

(iii) a counterpart signature page to the Product Development and Distribution Agreement, duly executed by the Buyer;

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(iv) a counterpart signature page to the Transition Services Agreement, duly executed by the Buyer;

(v) a counterpart signature page to the PlanSmart Services Agreement, duly executed by the Buyer;

(vi) a counterpart signature page to the Assignment and Assumption Agreement, the Assignment and Assumption of Lease Agreements and the License Agreements, duly executed by the Buyer;

(vii) a counterpart signature page to the Intellectual Property License Agreement, duly executed by the Buyer, if necessary;

(viii) a counterpart signature to the cross-receipt for the Purchase Price, duly executed by the Buyer;

(ix) a counterpart signature page to the MetLife USA Side Letter, duly executed by the Buyer;

(x) in the event a Separation has occurred, a counterpart signature page to the Parent Entity Side Letter, duly executed by the Buyer; and

(xi) all other documents, instruments or certificates required to be delivered by the Buyer at or prior to the Closing pursuant to Section 11.2 of this Agreement.

(b) At the Closing, the Seller will deliver to the Buyer:

(i) the Shares, each duly endorsed by the Seller for transfer to the Buyer or accompanied by separate stock powers attached thereto and signed in blank;

(ii) all corporate books and records of the Company;

(iii) ownership of all of the books and records related to the operation of the Company (not transferred pursuant to subsection (ii) above), including those books and records, whether in electronic or paper format, that are retained in a manner such that they are readily identifiable as records of the Company or that relate primarily to the Acquired Assets and Liabilities (other than any assets that are not capable of being transferred at the Closing which shall be subject to the Seller’s obligations pursuant to Section 2.6 ), which will be transferred to the Buyer;

(iv) a counterpart signature page to the Distribution Agreement, duly executed by MetLife USA;

(v) a counterpart signature page to the Product Development and Distribution Agreement, duly executed by MetLife USA;

(vi) a counterpart signature page to the Transition Services Agreement, duly executed by the Seller;

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(vii) a counterpart signature page to the PlanSmart Services Agreement, duly executed by the Seller;

(viii) a counterpart signature page to the Assignment and Assumption Agreement, the Assignment and Assumption of Lease Agreements and the License Agreements, duly executed by the Seller;

(ix) a counterpart signature page to the Intellectual Property License Agreement, duly executed by the Seller and/or any applicable Relevant Affiliate, if necessary

(x) a counterpart signature to the cross-receipt for the Purchase Price, duly executed by the Seller;

(xi) a counterpart signature page to the MetLife USA Side Letter, duly executed by MetLife USA;

(xii) in the event a Separation has occurred, a counterpart signature page to the Parent Entity Side Letter, duly executed by Parent Entity; and

(xiii) all other documents, instruments or certificates required to be delivered by the Seller at or prior to the Closing pursuant to Section 11.1 of this Agreement.

SECTION 2.6. Procedures for Assets Not Transferable . Notwithstanding anything to the contrary contained in this Agreement, if any Purchased Property is not assignable or transferable to the Buyer without the consent of any Governmental Entity or third party, and such consent has not been obtained on or prior to the Closing Date, this Agreement shall not constitute an assignment or transfer thereof unless and until such consent is obtained. In such case, the Seller shall, or shall cause each applicable Relevant Affiliate to, (i) use commercially reasonable efforts and cooperate with the Buyer to obtain such consent as soon as practicable after the Closing Date, it being understood that neither such Relevant Affiliate nor any of its Affiliates (including the Seller) shall be required to expend money, or commence any litigation or offer or grant any accommodation (financial or otherwise) to obtain such consents (except as expressly set forth in Section 7.19 ), and (ii) until such necessary consent is obtained, provide Buyer or any applicable Affiliate designated by Buyer in an arrangement reasonably acceptable to Buyer the full benefits and burdens in respect of any such Purchased Property, including enforcement for the benefit of Buyer or any such Affiliate designated by Buyer of any and all rights of Seller or the applicable Relevant Affiliate against a third party thereto arising out of the breach or cancellation by such third party or otherwise. Upon obtaining the requisite consent of any Governmental Entity or third party, any Purchased Property that was not assigned or transferred at the Closing in accordance with the terms of this Section 2.6 shall be promptly transferred and assigned to the Buyer at no additional cost.

SECTION 2.7. No Withholding for the Seller . Provided that the certificate described in Section 11.1(i) is delivered, Buyer shall not withhold for any U.S. federal tax with respect to any payments of the Purchase Price made hereunder to the Seller. Seller is permitted to withhold

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amounts from the Purchase Price as required under applicable state and local Law. However, if Buyer intends to withhold any such amounts from the Purchase Price, Buyer shall promptly notify Seller of such intention and shall use commercially reasonable efforts to provide such notice at least within fifteen (15) days of the expected Closing Date. Furthermore, Buyer shall reasonably cooperate with Seller to reduce the amount of withholding Taxes imposed on the payment of the Purchase Price, including by executing and filing any forms or certificates reasonably required to claim an available reduced rate of, or exemption from, withholding Taxes.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER .

Subject to the matters set forth in the disclosure schedules accompanying this Agreement (collectively, the “ Disclosure Schedule ”), the Seller hereby represents and warrants to the Buyer, as of the date hereof and as of the Closing Date, as follows ( provided that for purposes of this Section 3 , the term “Affiliates” does not include the Company):

SECTION 3.1. Organization, Authority and Enforceability .

(c) The Seller (and each Affiliate that will enter into an Ancillary Agreement) is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization. The Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) of this Agreement and the Ancillary Agreements to which it will be a party, and the consummation by the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) of the transactions contemplated hereby and thereby, have been duly authorized by all necessary action on the part of the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate), and no other action is necessary on the part of the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) to authorize this Agreement or the Ancillary Agreements to which it will be a party or to consummate the transactions contemplated hereby or thereby. This Agreement has been, and at Closing each Ancillary Agreement to which the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) will be a party will be, duly executed and delivered by the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) and, assuming the due authorization, execution and delivery by each other Party hereto and thereto, this Agreement and each Ancillary Agreement to which the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate) will be a party constitutes (or, upon execution and delivery thereof, will constitute) a legal, valid and binding obligation of the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its relevant Affiliate), enforceable against the Seller (or, in the case of the Ancillary Agreements, where and to the extent applicable, its

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relevant Affiliate) in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

(d) The Company is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, and has all requisite power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties or assets owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. A correct and complete copy of the Organizational Documents of the Company has been provided or made available to the Buyer, and each such Organizational Document is in full force and effect. The Seller has provided or made available to the Buyer copies of the corporate records of the Company, including minutes of shareholder and director meetings and resolutions adopted by the shareholders or directors of the Company, whether in person or via written consent in lieu of a meeting of the shareholders or directors, as applicable.

SECTION 3.2. Noncontravention .

(e) Neither the execution, delivery and performance of this Agreement by the Seller or any Ancillary Agreement by the Seller (or, to the extent applicable, its relevant Affiliate), nor the consummation of the transactions contemplated hereby or thereby, will, with or without the giving of notice or the lapse of time or both, result in a violation or breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or require that a notice be given to, or a Consent be obtained from, a third party (excluding a Governmental Entity), or result in the creation or imposition of any Lien upon the Seller (or, to the extent applicable, any of its Affiliates party to an Ancillary Agreement), any of the Shares, the Purchased Property or any of the other assets of the Seller (or any of its Affiliates party to an Ancillary Agreement), under (i) the Organizational Documents of the Seller (or, to the extent applicable, its relevant Affiliate), (ii) any Law or Order applicable to the Seller (or, to the extent applicable, its relevant Affiliate party to an Ancillary Agreement), or (iii) any Contract to which the Seller (or, to the extent applicable, any of its Affiliates party to an Ancillary Agreement or any Relevant Affiliate) is a party, except in the case of clauses (ii) and (iii) to the extent that any such violation would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Seller’s ability to perform its obligations under this Agreement.

(f) No consent, approval, license, permit, certificate or authorization from any Governmental Entity (each, a “ Permit ”) of, or registration, declaration or filing with a Governmental Entity (each, a “ Filing ”), is required in connection with the consummation of the

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transactions contemplated by this Agreement or any Ancillary Agreement by the Seller (or, to the extent applicable, any of its Affiliates party to an Ancillary Agreement) other than (i) those Permits and Filings that have been obtained or made by the Seller or the Relevant Affiliates prior to the date hereof (copies of which have been provided to the Buyer), (ii) those Permits and Filings required as a result of the identity or regulatory obligations of the Buyer and its Relevant Affiliates, and (iii) those Permits and Filings the failure of which to obtain or make would not, individually or in the aggregate, materially impair the Seller’s ability to perform its obligations hereunder.

(g) Except as set forth on Section 3.2(c) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements will not, with or without the giving of notice or the lapse of time or both, result in a violation or breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or require that a notice be given to, or a Consent be obtained from, a third party (excluding a Governmental Entity), or result in the creation or imposition of any Lien upon the Company or any of the assets of the Company under (i) the Organizational Documents of the Company, (ii) any Law or Order applicable to the Company, or (iii) any Material Contract, except in the case of clauses (ii) and (iii), to the extent that any such violation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(h) No Permit of, or Filing with, any Governmental Entity by the Company is required in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements other than (i) the Permits and Filings set forth on Section 3.2(d) of the Disclosure Schedule, (ii) those Permits and Filings that have been obtained or made by the Seller and the Relevant Affiliates (including the Company) prior to the date hereof, and (iii) those Permits and Filings the failure of which to obtain or make would not be material to the Company or its operations.

SECTION 3.3. Title to Shares . The Seller owns (of record and beneficially) good and valid title to the Shares, free and clear of all Liens (other than any Permitted Lien).

SECTION 3.4. Title to Purchased Property . The Seller and each Relevant Affiliate owns or has a valid leasehold interest in or other right to use, good and valid title to (or, if applicable, a valid leasehold interest in, or other right to use), the applicable Purchased Property, free and clear of all Liens (other than any Permitted Lien).

SECTION 3.5. Capitalization .

(a) The authorized capital stock of the Company consists of 1,000 shares of capital stock, par value $1.00, of which 25 shares of common stock are issued and outstanding (the “ Shares ”).

(b) All of the outstanding Shares were validly issued, are fully paid and nonassessable and free of preemptive rights, rights of first refusal and subscription rights, and

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were not issued in violation of the Organizational Documents of the Company. There are no outstanding restrictions on transfers or voting of the Shares and no Person has been granted any agreement or option, or any right or privilege capable of becoming an agreement or option, for the purchase, subscription, allotment or issue of any Equity Securities of the Company.

(c) The Company has no Subsidiaries. The Company, directly or indirectly, owns no or has no right to acquire any outstanding voting securities or other equity interests in any corporation, partnership, joint venture or other entity, other than investment assets owned or held in the ordinary course of business.

SECTION 3.6. Legal Proceedings .

(a) Except as disclosed on Section 3.6(a) of the Disclosure Schedule, there are no (i) Legal Proceedings pending or, to the Knowledge of the Seller, threatened against the Seller or any Relevant Affiliate, other than as would not have a material adverse effect on the Seller’s ability to enter into this Agreement or consummate the transactions contemplated hereby, or (ii) material Legal Proceedings pending or, to the Knowledge of the Seller, threatened against the Company.

(b) Except as disclosed on Section 3.6(b) of the Disclosure Schedule, the Company is not subject to any material Order.

(c) Except as disclosed on Section 3.6(c) of the Disclosure Schedule, there are no material Legal Proceedings pending or, to the Knowledge of the Seller, threatened against or otherwise primarily relating to the Business or the transactions contemplated herein.

(d) Except as disclosed on Section 3.6(d) of the Disclosure Schedule, neither Seller nor any of the Relevant Affiliates are subject to any material Order related to the Business.

SECTION 3.7. Brokers . Other than Sandler O’Neill + Partners, L.P., neither the Seller nor the Company has any liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

SECTION 3.8. Broker-Dealer and Insurance Matters .

(a) The Company is duly registered under the Exchange Act as a broker-dealer with the SEC and is in compliance in all material respects with the applicable provisions of the Exchange Act and the rules promulgated thereunder applicable to broker-dealers. The Company is a member organization in good standing of FINRA and in compliance in all material respects with all applicable rules and regulations of FINRA as well as with the terms of its membership agreement with FINRA. The Company is duly registered as a broker-dealer and, where applicable, licensed as an insurance agency under, and is in compliance in all material respects with, the Laws of all jurisdictions in which it is required to be so licensed or registered. The jurisdictions in which the Company is required to be so licensed or registered are set forth in Section 3.8(a) of the Disclosure Schedule. The Company is a member of the Securities Investor Protection Corporation and is registered with the Municipal Securities Rulemaking Board.

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(b) Each Business Associate who is required to be registered, licensed or qualified with any Governmental Entity in order to perform his or her responsibilities for or on behalf of the Company or the Business is, and since December 31, 2013 (or such more recent date on which such Person first became associated with the Company or the Business) has been, duly and properly registered, licensed or qualified in all material respects as a registered representative or principal and such licenses are, and since December 31, 2013 have been, in full force and effect, or such Person is in the process of being registered as such within the time periods required by applicable Law. None of the Company, any such Business Associates described in the foregoing sentence or the Company’s directors, officers, employees, or their Associated Persons to the extent applicable is (i) subject to any order of any Governmental Entity that permanently enjoins such Person from engaging in or continuing any conduct or practice in connection with any activity involving or in connection with the purchase or sale of any security or (ii) ineligible to serve as a broker-dealer or an Associated Person of a broker-dealer under Section 15(b) of the Exchange Act (including being subject to any “statutory disqualification” as defined in Section 3(a)(39) of the Exchange Act). There is no Legal Proceeding pending or, to the Knowledge of the Seller, threatened in writing that would reasonably be expected to result in the Company, the Business Associates, the Company’s directors, officers, employees, or Associated Persons, becoming subject to an order described in clause (i) of the foregoing sentence or ineligible to serve in a capacity described in clause (ii) of the foregoing sentence.

(c) The Company maintains its minimum Net Capital (i) in compliance in all material respects with applicable Law imposed by the SEC or any other Governmental Entity and (ii) in an amount sufficient to ensure that it has not been required to file notice under Rule 17a-11 under the Exchange Act. The Company is in compliance in all material respects with all applicable regulatory requirements for the protection of customer funds and securities.

(d) The Seller has made available to the Buyer a copy of the Company’s current Uniform Application for Broker-Dealer Registration on Form BD, which reflects all amendments thereto filed with the Central Registration Depository of FINRA prior to the date of this Agreement (a “ Form BD ”). Since December 31, 2013, each Form BD and the Company’s other registrations, declarations, reports, notices, forms and other documents required to be filed with any Governmental Entity in connection with its operations as a broker-dealer or insurance agency, and all amendments or supplements to any of the foregoing (collectively, the “ Company Broker-Dealer Filings ”), complied in all material respects at the time of filing with the requirements of applicable Law.

(e) The Company maintains written policies and procedures reasonably designed to achieve compliance with applicable Law relating to or affecting the conduct of the broker-dealer and insurance activities of the Company. Since December 31, 2013, the Company has complied in all material respects with applicable Law concerning its supervisory responsibilities with respect to Adviser Representatives and Brokers associated with it. The Company has, and since December 31, 2013 has had, an anti-money laundering program and a

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customer identification program in compliance in all material respects with applicable Law and has not failed to comply in any material respect with the terms of such programs.

(f) The Company has timely filed all Company Broker-Dealer Filings since December 31, 2013. The Company Broker-Dealer Filings are in full force and effect and all material fees and assessments due and payable in connection therewith have been paid in a timely manner. The information contained in the Company Broker-Dealer Filings filed by the Company with any Governmental Entity since December 31, 2013 was complete and accurate in all material respects as of the time of filing thereof.

(g) Since December 31, 2013, (i) the Company and, to the Knowledge of the Seller, each Business Associate and each of the Company’s officers, employees, solicitors, third-party administrators, managers, brokers and distributors, that have marketed or sold investment products or securities, or provided other brokerage services, have done so in compliance in all material respects with applicable Law governing the marketing, solicitation, sale, investment management or issuance of securities and other investment products as well as investment advisory services, or in connection with any advice provided with respect thereto, including with respect to churning, twisting, suitability, conservation, surrender, investment or allocation of funds, market timing or late trading and (ii) the Company has not breached, and to the Knowledge of the Seller, there have been no instances of Adviser Representatives or Brokers for the Company having breached in any material respect, the material terms of any applicable Representative Contract or client, agency or broker contract.

(h) The Company and, to the Knowledge of the Seller, the Adviser Representatives and Brokers are and have been since December 31, 2013, in connection with the insurance and annuity contracts marketed and sold by the Company, in compliance in all material respects with all applicable Laws regulating the marketing and sale of such insurance policies and annuity contracts, regulating advertisements, requiring mandatory disclosure of policy information, requiring employment of standards to determine if the purchase of a policy or contract is suitable for an applicant, prohibiting the use of unfair methods of competition and deceptive acts or practices and regulating replacement transactions. For purposes of this Section 3.8(h) , (i) “advertisement” means any material designed to create public interest in insurance policies and annuity contracts or in an insurer, or in an insurance producer, or to induce the public to purchase, increase, modify, reinstate, borrow on, surrender, replace or retain such a policy or contract and (ii) “replacement transaction” means a transaction in which a new life insurance policy or annuity contract is to be purchased by a prospective insured and the proposing producer knows or should know that one or more existing life insurance policies or annuity contracts will lapse, or will be forfeited, surrendered, reduced in value or pledged as collateral.

(i) Since December 31, 2013, (i) the Company and, to the Knowledge of the Seller, each Adviser Representative and each Broker at the time that such Person wrote, sold or produced any insurance policy or annuity contract on behalf of the Company or the Business,

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was duly licensed, authorized and appointed (for the type of business written, sold or produced by such Person) in the particular jurisdiction in which such Person wrote, sold or produced such business, and no such Person violated any term or provision of applicable Law relating to the writing, sale or production of such business in any material respect, (ii) no Adviser Representative or Broker has breached the material terms of any agency or broker Contract with the Company or any of its Affiliates in any material respect or violated any applicable Law or policy of the Company or the relevant Affiliate in the solicitation, negotiation, writing, sale or production of such business in any material respect and (iii) no Adviser Representative or Broker has been enjoined, indicted, convicted or made the subject of any consent decree or judgment on account of any violation in any material respect of any applicable Law in connection with such Person’s actions in his, her or its capacity as an Adviser Representative or Broker for the Company or the Business with respect to insurance policies or annuity contracts, and there exists no enforcement or disciplinary proceeding alleging any such violation.

SECTION 3.9. Investment Adviser Matters .

(a) The Company is duly registered under the Advisers Act as an Investment Adviser with the SEC and is in compliance in all material respects with the applicable provisions of the Advisers Act and the rules promulgated thereunder applicable to Investment Advisers. The Company is duly registered as an Investment Adviser under, and in compliance in all material respects with, the Laws of all jurisdictions in which it is required to be so registered, and/or it has made the required notice filing with the relevant jurisdictions, all of which are set forth on Section 3.9(a) of the Disclosure Schedule.

(b) Each Business Associate and each of the Company’s officers and employees and independent contractors who are required to be registered, licensed or qualified as an investment adviser representative is, and since December 31, 2013 (or such more recent date on which such Business Associate first became associated with the Company) has been, duly registered as such and such registrations are and were, since December 31, 2013, in full force and effect, or such Person is in the process of being registered as such within the time period required by applicable Law. Neither the Company nor any of its Associated Persons or “supervised persons” (as defined in the Advisers Act) are ineligible to serve as an investment adviser or as an Associated Person of a registered investment adviser, as is described in Sections 203(e) and (f) of the Advisers Act, respectively, or subject to any “statutory disqualification” as defined in Section 3(a)(39) of the Exchange Act. There is no Legal Proceeding pending or, to the Knowledge of the Seller, threatened in writing that would reasonably be expected to result in the Company, the Dedicated Employees, the Company’s directors, officers, employees, or Associated Persons, or, to the Knowledge of the Seller, the Adviser Representatives or Brokers becoming subject to an order described in the foregoing sentence. The Company has resolved all material deficiencies asserted by any Governmental Entity in connection with any regulatory examination or other similar proceeding relating to its investment advisory or investment management activities.

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(c) The Seller or its Affiliates have made available to the Buyer a copy of the Company’s Uniform Applications for Investment Adviser Registration on Form ADV filed since December 31, 2013, reflecting all amendments thereto filed with the Investment Adviser Registration Depository of FINRA prior to the date of this Agreement (a “ Form ADV ”). Each Form ADV and the Company’s other registrations, declarations, reports, notices, forms and other documents required to be filed with any Governmental Entity in connection with its operations as an investment adviser, and all amendments or supplements to any of the foregoing (collectively, the “ Company Investment Adviser Filings ”), complied in all material respects at the time of filing with the requirements of applicable Law.

(d) The Company has timely filed all Company Investment Adviser Filings since December 31, 2013. The Company Investment Adviser Filings are in full force and effect and all material fees and assessments due and payable in connection therewith have been paid in a timely manner. The information contained in the Company Investment Adviser Filings filed by the Company with any Governmental Entity since December 31, 2013 was complete and accurate in all material respects as of the time of filing thereof.

(e) As it relates to its investment advisory activities, the Company has implemented written policies and procedures in compliance in all material respects with applicable Law, and such policies and procedures have been made available to the Buyer. Except as otherwise noted in any Company Investment Adviser Filing, the Company has been in compliance in all material respects with such policies and procedures.

(f) Since December 31, 2013, to the Knowledge of the Seller, (i) each of the Company, the Business Associates, and the Company’s directors, officers and employees have provided investment advisory services in compliance in all material respects with applicable Law governing the provision of investment advisory or investment management services, (ii) the Company has not breached, and there have been no instances of an Adviser Representative or Broker for the Company having breached in any material respect, the terms of any applicable Representative Contract or Advisory Client Agreement, and (iii) all compensation paid to the Company in connection with investment advisory or investment management services and in turn paid or shared by the Company with others has complied in all material respects with applicable Law.

(g) To the Knowledge of the Seller, each client to which the Company provides investment management, advisory, subadvisory or other services that is (i) an employee benefit plan, as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (ii) a person acting on behalf of such a plan or (iii) an entity whose assets include the assets of such a plan within the meaning of ERISA has been managed by the Company such that (A) the exercise of such management or provision of any such services is in compliance in all material respects with the applicable fiduciary duty requirements, if any, of ERISA and (B) the Company has not engaged in a “Prohibited Transaction” within the meaning of Section 406 of ERISA or Section

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4975(c) of the Code that would subject it to liability or Taxes under Section 5409 or 502(i) of ERISA or Section 4975(a) of the Code.

SECTION 3.10. GDC .

(a) Section 3.10 of the Disclosure Schedule sets forth a list of each Adviser Representative and Broker who provides services to the Business as of the date of this Agreement and for each of them sets forth the GDC attributable to each Adviser Representative and Broker for the year ended December 31, 2015 in the aggregate expressed as a dollar amount. From January 1, 2016 through the date hereof, except as disclosed in Section 3.10 of the Disclosure Schedule, no Adviser Representative or Broker has notified the Seller, Company or any Relevant Affiliate in writing of an intent to terminate the relationship of such Adviser Representative or Broker with the Seller or any of its Affiliates.

(b) The Additional Financial Schedule has been prepared in all material respects in accordance with the Calculation Principles and has been derived in all material respects from applicable Records of the Business.

SECTION 3.11. Financial Statements .

(a) The Seller has previously furnished, or made available to, the Buyer copies of (i) the audited balance sheets of the Company as of December 31, 2014 and December 31, 2015, and the related audited statements of income, shareholder’s equity and cash flows for the years ended December 31, 2014 and December 31, 2015, and (ii) the audited balance sheets of the Company (each, a “ Balance Sheet ” and collectively, the “ Balance Sheets ”) as of December 31, 2015 (the “ Balance Sheet Date ”), and the related audited statements of income, shareholder’s equity and cash flows for the year ended December 31, 2015 (the foregoing subclauses (i) and (ii) are referred to collectively as the “ Financial Statements ”). The Financial Statements have been prepared in accordance with GAAP, consistently applied (except as may be indicated in the notes thereto), and, on that basis, present fairly, in all material respects, the financial condition, results of operations and cash flows of the Company as of the indicated dates and for the indicated periods.

(b) The books and records of the Company have been maintained in material compliance with all applicable Laws.

(c) The Company has systems of internal accounting controls that are designed to reasonably ensure that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain proper accountability for items, (iii) access to its property and assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

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(d) Except for (i) Liabilities expressly reflected, reserved against or otherwise disclosed in the Balance Sheets or the notes to the Financial Statements, (ii) Liabilities incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date, and (iii) Liabilities incurred pursuant to the transactions contemplated by this Agreement, the Company has no material Liabilities.

SECTION 3.12. Absence of Certain Changes or Events . Since the Balance Sheet Date, the Company has conducted its business in the ordinary course of business, except in connection with any process relating to a sale of the Company, including entering into this Agreement. Without in any way limiting the following, except as expressly contemplated or permitted by this Agreement and the Ancillary Agreements, from the Balance Sheet Date, to the date hereof, (a) there has not been any event that has had or would reasonably be expected to have a Material Adverse Effect, or that would materially impair or delay the ability of the Seller to consummate the transactions contemplated by, or to perform its respective obligations under, this Agreement or the Ancillary Agreements, (b) there has not been any material damage, destruction or other casualty loss with respect to any material assets or property owned, leased or otherwise used by the Company, which damage, destruction or other casualty loss was not fully covered by insurance (subject to any applicable deductibles) and (c) except as set forth on Section 3.12(c) of the Disclosure Schedule, there has not been any action taken by the Company that, if taken during the period from the date of this Agreement through the Closing, would, absent the consent of the Buyer, constitute a breach of Section 7.2 .

SECTION 3.13. Sufficiency of Assets . Except as set forth on Section 3.13 of the Disclosure Schedule, (i) the Purchased Property, (ii) the services to be provided to Buyer and its Affiliates under the Transition Services Agreement, (iii) the Company and the Buyer’s ownership thereof and rights thereto, and (iv) the Buyer’s or its Affiliate’s employment or engagement of the Transferred Employees and the Transferred Brokers are sufficient to enable the Buyer to conduct the Business after the Closing in substantially the same manner as conducted by the Seller and its Affiliates immediately prior to the Closing Date (the “ Sufficiency Representation ”).

SECTION 3.14. Compliance with Laws; Permits; Filings .

(a) Since December 31, 2013, the Company is, and the Relevant Affiliates with respect to the Business are, in material compliance with all Laws and the Seller and each of the Relevant Affiliates is in compliance in all material respects with all Laws applicable to ownership and use of the Purchased Property.

(b) All material Permits that the Company requires in order to own, lease, maintain, operate and conduct its business as currently conducted are held by the Company. All material Permits each Relevant Affiliate requires in order to own, lease, maintain, operate and conduct the Business, are held by the Relevant Affiliate. The Company and each Relevant Affiliate is in compliance in all material respects with the terms of all such material Permits.

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(c) Since December 31, 2013, the Company has not received any written notification or written communication from any Governmental Entity (i) asserting that the Company is in material noncompliance with any applicable Law or is subject to any active regulatory enforcement action, (ii) threatening to revoke any material Permit, (iii) requiring the Company to enter into a material cease and desist order, agreement or memorandum of understanding, (iv) materially restricting or disqualifying the Company’s present business activities, or (v) threatening to initiate any material proceeding or investigation into the business or operations of the Company. The Company is not in material default in any respect with respect to any order, writ, judgment, award, injunction or decree of any court, arbitrator or other Governmental Entity.

(d) Since December 31, 2013, none of the Seller or any of the Relevant Affiliates has received any written notification or written communication from any Governmental Entity (i) asserting that the Seller or such Relevant Affiliates are in material noncompliance with any applicable Law, (ii) threatening to revoke any material Permit, (iii) requiring the Seller or the Relevant Affiliates to enter into a material cease and desist order, agreement or memorandum of understanding, (iv) materially restricting or disqualifying the Seller’s or the Relevant Affiliates’ use of the Purchased Property, or (v) threatening to initiate any material proceeding or investigation into the Seller’s or the Relevant Affiliates’ use of the Purchased Property. None of the Seller or the Relevant Affiliates are in material default in any respect with respect to any order, writ, judgment, award, injunction or decree of any court, arbitrator or other Governmental Entity applicable to the Purchased Property or the transactions contemplated by this Agreement or any Ancillary Agreement to which they are a party.

(e) Section 3.14(e) of the Disclosure Schedule sets forth a true and complete list of all material licenses, permits, franchises, authorizations and approvals issued or granted by any Governmental Entity constituting Purchased Permits, and all pending applications therefor. Each such Purchased Permit has been duly obtained, is valid and in full force and effect, and is not subject to any pending or, to the Knowledge of the Seller, threatened administrative or judicial proceeding to revoke, cancel, suspend or declare such Purchased Permit invalid in any respect, except where such would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the Knowledge of the Seller, (a) neither the Company, the Seller nor any Relevant Affiliate is in default or violation, and no event has occurred which, with notice or the lapse of time or both, would constitute a default or a violation, in any material respect, of any term, condition or provision of any Purchased Permit to which it is a party, to which its business is subject or by which its properties or assets are bound and (b) there are no facts or circumstances which would reasonably be expected to form the basis for any such default or violation.

SECTION 3.15. Material Contracts .

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(a) Section 3.15(a) of the Disclosure Schedule sets forth a list of the following Contracts (other than a Plan), to which (x) a Company is a party, or (y) an Affiliate of a Company is a party and such Contract is utilized in the business of the Company:

(i) each Intercompany Contract;

(ii) any Contract providing for indemnification by the Company of (A) any officer, director, employee, agent of the Company or any of its Affiliates, or (B) any other Person, except in the case of this clause (B) for any such Contract that is a commercial Contract with a third party entered into in the ordinary course of business;

(iii) any selling, principal, underwriting, distribution or similar agreement that resulted in revenues in excess of 10% of the aggregate total revenue earned by the Company during the fiscal year ended December 31, 2015;

(iv) any applicable form or forms on which Representative Contracts are based with each Adviser Representative who has generated, or to whom is attributable, GDC in excess of $750,000 or more;

(v) any agency, broker, selling, marketing, distribution, underwriting or similar Contract under which payments of $1,000,000 or more were made during the 12-month period ending on December 31, 2015;

(vi) any loan agreements, promissory notes, indentures, bonds, security agreements, guarantees or obligations for borrowed money or other instruments involving Indebtedness of the Company; and

(vii) any Contract containing, to the Knowledge of the Seller, any covenant or provision that materially prohibits or restricts the Company from engaging in any line or type of business or operating in any geographical area and that would be binding upon the Company or the Buyer following the Closing;

(b) The Contracts required to be set forth on Section 3.15(a) of the Disclosure Schedule are collectively referred to as the “ Material Contracts ”. Neither the Company nor, to the Knowledge of the Seller, any other party thereto, is in, or has received written notice of any, material violation of or material default under (including any condition that with the passage of time or the giving of notice would cause such a material violation or material default under) any Material Contract. Each Material Contract is a valid and binding agreement of the Company or an Affiliate thereof, as applicable, and is in full force and effect and is enforceable against the Company or such Affiliate of the Company and, to the Knowledge of the Seller, each other party thereto, in accordance with its terms, except (i) as limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally, and (ii) as limited by general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

SECTION 3.16. Taxes . Except as set forth on Section 3.16 of the Disclosure Schedule:

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(a) All material separate Tax Returns required by applicable Law to be filed by the Company have been duly and timely filed (taking into account applicable extensions properly obtained), and all such Tax Returns are true, correct, and complete in all material respects. All Taxes shown as due and payable on all such Tax Returns and any other Taxes due and payable by the Company (other than any such Taxes that are being contested in good faith by appropriate proceedings and are adequately reserved for on the applicable Financial Statements) have been paid.

(b) There are no audits by any Governmental Entity or any other proceedings pending, asserted, or, to the Knowledge of the Seller, threatened in respect of any Taxes with respect to separate Tax Returns the Company files for which the Company is or may become liable.

(c) The Company has not granted any extension or waiver of the statute of limitations period, or of the time for assessment or collection, applicable to any Taxes for which the Company is liable on a stand-alone basis or with respect to any Tax Return filed by the Company, which period (after giving effect to such extension or waiver) has not yet expired.

(d) Since January 1, 2010, no jurisdiction in which the Company has not filed a particular type of Tax Return has asserted that the Company is required to file such Tax Return in such jurisdiction.

(e) None of the assets of the Company is subject to any Lien for Taxes other than Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and are adequately reserved for on the applicable Financial Statements.

(f) The Company has never been a member of an Affiliated Group for any Tax purposes other than the Affiliated Group of which the Seller is currently a member.

(g) None of the Purchased Property is subject to any Lien for Taxes other than a Permitted Lien.

SECTION 3.17. Tax Matters . None of the Purchased Property is subject to any Lien for Taxes other than a Permitted Lien.

SECTION 3.18. Intellectual Property .

(a) Section 3.18 of the Disclosure Schedule identifies all Registered Intellectual Property included in the Company Intellectual Property. With respect to any Registered Intellectual Property included in the Company Intellectual Property, all maintenance filings, fees or annuities that have come finally due for which the Seller, the Company or any of their respective Affiliates are responsible have been paid, except in each case, for any such Registered Intellectual Property that the Seller, the Company or any of their respective Affiliates (as applicable) have permitted to lapse or be abandoned in the ordinary course of business and in their reasonable business judgment.

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(b) The Company shall, as of the date of this Agreement, own, free and clear of any Lien, all right, title and interest in all Company Intellectual Property identified in Section 3.18(b) of the Disclosure Schedule. Excluding the Purchased Intellectual Property, which is addressed in Section 3.18(f) , the Company Intellectual Property, the Seller Intellectual Property, the Peanuts Characters and the Licensed Intellectual Property constitute all material Intellectual Property used by, and reasonably necessary to the operation of, the businesses of the Company as they are conducted on the date of this Agreement.

(c) Other than with respect to the Licensed Intellectual Property, for which no representations or warranties are made, to the Knowledge of the Seller, the operation of the businesses of the Company as currently conducted does not infringe upon or misappropriate the Intellectual Property of any third party, except as to the extent as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. For the avoidance of doubt, the Seller (together with its Affiliates, excluding the Company) shall retain all licenses (i) for Licensed Intellectual Property at and after Closing except for (A) Licensed Intellectual Property licensed in the name of the Company and used primarily in the businesses of the Company, but not in the businesses of the Seller or any other Affiliate pursuant to the same license and (B) Assigned Contracts that are licenses for Intellectual Property; and (ii) the Peanuts Characters.

(d) To the Knowledge of the Seller, no Person is engaging in any activity that infringes upon the Company Intellectual Property, except as to the extent as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(e) Except as set forth on Section 3.18(e) of the Disclosure Schedule, to the Knowledge of Seller, (i) none of the Seller, the Company, or any of their respective Affiliates have received any unresolved written claim or written notice from any Person within the three (3) years (or within the six (6) years, in the case of patents) ending on the date of this Agreement alleging that the operation of the Company’s businesses infringes in any material respect upon any Intellectual Property of any third party, and (ii) as of the date of this Agreement, there are no infringement, dilution or misappropriation claims or actions pending or threatened against the Company with respect to any Company Intellectual Property owned by the Company.

(f) Section 3.18(f) of the Disclosure Schedule identifies all Registered Intellectual Property included in the Purchased Intellectual Property. With respect to any Registered Intellectual Property included in the Purchased Intellectual Property, all maintenance filings, fees or annuities that have come finally due for which the Seller or the Relevant Affiliates are responsible have been paid, except, in each case, for any such Purchased Intellectual Property that Seller or the Relevant Affiliates have permitted to lapse or be abandoned in the ordinary course of business and in their reasonable business judgment.

SECTION 3.19. Insurance .

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(a) Section 3.19(a) of the Disclosure Schedule sets forth a true and complete list of the Current E&O Policies and each fidelity bond on which the Company is the named insured as of the date hereof. The insurance coverage provided by such policies and programs is on such terms, covers such risks, and is in such amounts as the insurance customarily carried by comparable Persons of established reputation similarly situated and carrying on the same or a similar business.

(b) The insurance policies identified in Section 3.19(a) of the Disclosure Schedule, or renewals or replacements thereof, are in full force and effect, all premiums due with respect to such policies have either been paid or adequate provisions for the payment thereof have been made, the Company is not in material breach or default under, and has not taken any action or failed to take any action that would constitute a material breach or default (or an action or inaction that with notice or lapse of time or both would become a default) under, any of such policies, and, as of the date hereof, no material claim made under any such policy has been denied or disputed and, during the period the Company has been a Subsidiary of the Seller, the Company has made no claim under any directors and officers liability insurance policy insuring the Company. No notice of cancellation or termination of any such policy has been given to the Company and, to the Knowledge of the Seller, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will give rise, whether with the giving of notice, the lapse of time, or both, to any right to terminate or cancel such policies prior to the Closing.

SECTION 3.20. Affiliate Transactions . Except as pursuant to a Plan or as set forth in the Financial Statements or Section 3.20 of the Disclosure Schedule, to the Knowledge of the Seller, there are no transactions or agreements between the Company, on the one hand, and (a) any of its current or former officers or directors or other Affiliates (other than any Intercompany Contract), (b) any Person who is a beneficial owner of five percent (5%) or more of the voting securities of the Company or (c) any associate (as defined in Rule 12b-2 under the Exchange Act) or Affiliate of any such officer, director or Person who is a beneficial owner of five percent (5%) or more of the voting securities of the Company, on the other hand.

SECTION 3.21. Real Property . The Company owns no parcel of real property or any option to acquire any real property. The Company is not party to any lease or similar agreement under which the Company is the lessee or the sub-lessee of any real property owned by any third Person. Except as set forth in Section 3.21 of the Disclosure Schedule, the Company has no Liability with respect to, or under, any lease or other agreement relating to any real property.

SECTION 3.22. Assigned Contracts .

(a) Section 3.22 of the Disclosure Schedule includes each Contract included in the Purchased Property and being assigned and assumed by the Buyer (each, an “ Assigned Contract ” and collectively, the “ Assigned Contracts ”). Such Contracts include:

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(i) any selling, principal, underwriting, distribution or similar agreement that resulted in revenues in excess of 10% of the aggregate total revenue earned in connection with the Purchased Property by the Seller or the Relevant Affiliates during the fiscal year ended December 31, 2015;

(ii) any Assumed Loans;

(iii) any agency, broker, selling, marketing, distribution, underwriting or similar Contract under which payments of $1,000,000 or more were made during the 12-month period ending on December 31, 2015;

(iv) any loan agreements, promissory notes, indentures, bonds, security agreements, guarantees or obligations for borrowed money or other instruments involving Indebtedness relating to the Purchased Property; and

(v) the Relevant Affiliate Leases (excluding the Retained Leases).

(b) Neither the Seller or the applicable Relevant Affiliate or its Affiliate nor, to the Knowledge of the Seller, any other party thereto, is in, or has received written notice of, any material violation of or material default under (including any condition that with the passage of time or the giving of notice would cause such a material violation or material default under) any Assigned Contract. Each Assigned Contract is a valid and binding agreement of the Seller or the applicable Relevant Affiliate or its Affiliate, is in full force and effect and is enforceable against the Seller, the applicable Relevant Affiliate or its Affiliate and, to the Knowledge of the Seller, each other party thereto in accordance with its terms, except (i) as limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally, and (ii) as limited by general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

SECTION 3.23. Leases .

(a) Section 3.23(a) of the Disclosure Schedule sets forth a list of all real property leased, licensed, subleased, or otherwise occupied by a Relevant Affiliate in connection with the Business (the “ Leased Real Property ”) under any lease, license, permit, sublease, occupancy agreement, guaranty, letter of credit or other agreement (together with all amendments thereto, the “ Relevant Affiliate Leases ”) by address and the applicable Relevant Affiliate that is the occupant thereof.

(b) Section 3.23(b) of the Disclosure Schedule sets forth a list of Relevant Affiliate Leases for any Leased Real Property that is the Office of Supervisory Jurisdiction (OSJ) of record for each of the forty member firms (the “ Material Leased Real Property ”) (together with all amendments thereto, the “ Material Relevant Affiliate Leases ”). True, complete and accurate copies of the Material Relevant Affiliate Leases have been delivered to the Buyer prior to the date hereof. The transactions contemplated by this Agreement do not require the consent

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or approval of the other party to the Material Relevant Affiliate Leases, except as otherwise set forth on Section 3.23(b) of the Disclosure Schedule.

(c) No party to any Material Relevant Affiliate Lease has given the Seller or any Relevant Affiliate written notice of or, to the Knowledge of the Seller, made a claim with respect to any breach or default. No conditions or circumstances exist which, with the lapse of time or the giving of notice, or both, would (i) constitute a material default by the Relevant Affiliates under any Material Relevant Affiliate Lease or (ii) to the Knowledge of the Seller, constitute a material default by any other party to any Material Relevant Affiliate Lease.

(d) To the Knowledge of the Seller, no Material Relevant Affiliate Lease is subject to any defenses, setoffs or counterclaims, and, to the Knowledge of the Seller, no obligations of any landlords or sublandlords thereunder are delinquent.

(e) Each Material Relevant Affiliate Lease is in full force and effect and is the valid, binding and enforceable obligation of the applicable Relevant Affiliate in accordance with its terms, subject to bankruptcy, insolvency, reorganization or similar laws of general application affecting rights and remedies of creditors, and to general equity principles.

(f) Each Material Leased Real Property occupied by the Relevant Affiliates is being used for the operation of the business of such Relevant Affiliate and is suitable for the same.

(g) The Relevant Affiliates or their Affiliates have not entered into any occupancy agreements or subleases whereby any third party shares occupancy of any Material Leased Real Property, except as otherwise set forth on Section 3.23(g) of the Disclosure Schedule.

(h) Section 3.23(h) of the Disclosure Schedule sets forth a list by address of all Leased Real Property which is at least partially occupied by personnel of a Relevant Affiliate that are not dedicated to a Premier Client Group (the “ Shared Affiliate Leased Real Property ”).

SECTION 3.24. Employees and Benefit Matters .

(a) Each Plan that is intended to qualify under Section 401(a) of the Code from which Buyer is required to accept a direct “rollover” pursuant to Section 10.1(j) hereof has received a determination letter (or opinion letters in the case of any prototype plans) from the IRS that it is so qualified and that its trust is exempt from tax under Section 501(a) of the Code, and nothing has occurred with respect to the operation of any such plan which would reasonably be expected to cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. From and after the Closing Date, Buyer and its Affiliates shall have no liabilities or obligations in respect of any Plan (other than the Assumed Plans and the Retention Awards) as a result of the transactions contemplated by this Agreement. No event has occurred and no condition exists that would reasonably be expected to subject the Buyer or any of its Subsidiaries (including, following Closing, the Company) to any

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liability imposed by ERISA or the Code, in each case, in respect of any employee benefit plan maintained, sponsored, or contributed to, by the Seller or any of its Subsidiaries, other than the Assumed Plans and the Retention Awards.

(b) Section 1.1(c) of the Disclosure Schedule as delivered on the date hereof sets forth a true and complete list of each individual whose primary responsibility is the provision of brokerage and investment services to customers of the Business and that is designated as an “advisor representative” by the Company, the Seller, or any of the Relevant Affiliates as of the date hereof; Section 1.1(e) of the Disclosure Schedule as delivered on the date hereof sets forth a true and complete list of each individual who provides insurance brokerage and investment services to customers and is designated as a “broker” by the Company, the Seller, or any of the Relevant Affiliates as of the date hereof; within five (5) Business Days following the date hereof, Sellers shall provide Section 1.1(f) of the Disclosure Schedule, which shall, as of the date of delivery, set forth a true and complete list of each employee who primarily provides services to the Business and that is designated as a “dedicated employee” by the Seller or any applicable Relevant Affiliate as of the date hereof.

(c) The Seller or the Relevant Affiliates have made available to the Buyer a true and complete copy of each Assumed Plan. There are no material claims or disputes pending, or to the Knowledge of the Seller, threatened with respect to any Assumed Plan, other than claims for benefits in the ordinary course of business and, or to the Knowledge of the Seller, none of the Assumed Deferred Compensation Plans are the subject of a governmental or regulatory audit, investigation or formal inquiry.

(d) Each Assumed Plan has been designed, drafted and operated in all material respects in accordance with the terms of such Assumed Plan and applicable Laws, including, without limitation, Section 409A of the Code and the security benefit provisions of Section 4228 (b)(24) and (e)(5) of the New York Insurance Law. No Assumed Plan is a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) or subject to Title IV of ERISA. Each Adviser Loan has been designed, drafted and operated in all material respects in accordance with the terms of all applicable Laws, including, without limitation, Section 4228 ((b)(1) and (e)(9)) of the New York Insurance Law.

(e) Except as set forth in Section 3.24(e) of the Disclosure Schedule, the Relevant Affiliates are not a party to any collective bargaining agreement in respect of the Business or any Business Associates nor, to the Knowledge of the Seller, are there any activities or proceedings of any labor union to organize any employees of the Business. Except as would not reasonably be expected, individually or in the aggregate, to result in any material liability to the Buyer or any of its Affiliates, with respect to each Business Associate, each Relevant Affiliate is currently in compliance with applicable Laws relating to the employment of labor, including those related to wages, hours, collective bargaining and the payment and withholding of Taxes.

(f) There is no contract, plan or arrangement (written or otherwise) covering any Business Associate that, in connection with the transactions contemplated by this Agreement,

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would reasonably be expected to give rise to the payment of any amount that would not be deductible pursuant to the terms of Section 280G of the Code.

(g) Notwithstanding any other representation and warranty in Section 3 or otherwise, the representations and warranties contained in this Section 3.24 constitute the sole representations and warranties of the Seller relating to any employee benefit matters and labor relations.

SECTION 3.25. Exclusive Representations and Warranties . Except for the representations and warranties contained in this Section 3 and the certificate delivered pursuant to Section 11.1(c) (as qualified by the Disclosure Schedule), none of the Seller, nor any of its Affiliates (including the Relevant Affiliates), nor any of their respective directors, officers, employees, stockholders, agents, Affiliates or Representatives, has made or shall be deemed to have made any representation or warranty to the Buyer or any of its Affiliates, express or implied, at Law or in equity. The Seller hereby disclaims any representations or warranties not expressly set forth in this Section 3 and the certificate delivered pursuant to Section 11.1(c) (as qualified by the Disclosure Schedule) and the Buyer acknowledges and agrees that none of the Seller, nor any of its Affiliates (including the Relevant Affiliates), nor any of their respective directors, officers, employees, stockholders, agents, Affiliates or Representatives shall have or be subject to any liability to the Buyer, any of its Affiliates or any other Person with respect to any representations or warranties, express or implied, except as expressly set forth in this Section 3 and the certificate delivered pursuant to Section 11.1(c) (as qualified by the Disclosure Schedule).

SECTION 4. [RESERVED .]

SECTION 5. [RESERVED .]

SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER .

Subject to the matters set forth in the disclosure schedules delivered by the Buyer to the Seller (the “ Buyer Disclosure Schedule ”), the Buyer hereby represents and warrants to the Seller, as of the date hereof and as of the Closing Date, as follows:

SECTION 6.1. Organization, Authority and Enforceability . The Buyer is duly organized, validly existing and in good standing under the laws of Massachusetts. The Buyer is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the character of the properties owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except where failure to be so qualified, individually or in the aggregate, would not reasonably be expected to materially delay or impair the Buyer’s ability to perform its obligations under this Agreement. The Buyer has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Buyer of this Agreement and the Ancillary Agreements to which it will be a

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party and the consummation by the Buyer of the transactions contemplated hereby and thereby has been duly authorized by all necessary action on the part of such Buyer, and no other action is necessary on the part of the Buyer to authorize this Agreement and the Ancillary Agreements to which it will be a party or to consummate the transactions contemplated hereby or thereby. This Agreement has been, and each Ancillary Agreement to which the Buyer will be a party will be, duly executed and delivered by the Buyer and, assuming the due authorization, execution and delivery by each other Party hereto and thereto, each of this Agreement and the Ancillary Agreements to which the Buyer will be a party constitutes a legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

SECTION 6.2. Noncontravention .

(d) Neither the execution, delivery and performance of this Agreement or any Ancillary Agreement by the Buyer, nor the consummation of the transactions contemplated hereby or thereby, will, with or without the giving of notice or the lapse of time or both, result in a violation or breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or require that a notice be given to a third party under, or result in the creation or imposition of any Lien upon the Buyer or any of the other assets of the Buyer, under (i) the Organizational Documents of the Buyer, (ii) any Law or Order applicable to the Buyer, or (iii) any Contract to which the Buyer is a party, except in the case of clauses (ii) and (iii) to the extent that any such violation, individually or in the aggregate, would not reasonably be expected to materially delay or impair the Buyer’s ability to perform its obligations under this Agreement.

(e) No Permit of, or Filing with, any Governmental Entity is required in connection with the execution and delivery of this Agreement or any Ancillary Agreement by the Buyer, the performance by the Buyer of its obligations hereunder or thereunder or the consummation by the Buyer of the transactions contemplated hereby and thereby other than (i) the Permits and Filings set forth on Section 6.2(b) of the Buyer Disclosure Schedule, (ii) those Permits and Filings that have been obtained or made by the Buyer prior to the date hereof (copies of which have been or will be made available to the Seller) and (iii) those Permits and Filings the failure of which to obtain or make would not, individually or in the aggregate, reasonably be expected to materially impair the Buyer’s ability to perform its obligations under this Agreement. No disciplinary matter or, to the Knowledge of the Buyer, other event or fact related to the Buyer or its Affiliates is reasonably likely to result in a denial of the FINRA Approval.

SECTION 6.3. Legal Proceedings . There are no Legal Proceedings pending or, to the Knowledge of the Buyer, threatened against or otherwise relating to the Buyer that (a) challenge or seek to enjoin, alter or materially delay the transactions contemplated by this Agreement or (b)

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would, individually or in the aggregate, reasonably be expected to have a material adverse effect on such Buyer’s ability to perform its obligations hereunder.

SECTION 6.4. Financial Capability . Buyer has and will have on the Closing Date sufficient cash on hand or other sources of immediately available funds to enable it to pay the Purchase Price and to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.

SECTION 6.5. No Distribution . The Buyer acknowledges that the Shares being acquired pursuant to this Agreement have not been registered under the Securities Act of 1933, as amended, or under any state or foreign securities Laws. The Buyer is purchasing the Shares for their own account and not with a view to any public resale or other distribution thereof, except in compliance with applicable securities Laws.

SECTION 6.6. Investigation . The Buyer is a sophisticated entity, knowledgeable about the industry in which the Company operates, experienced in investments in such businesses and are able to bear the economic risk associated with the purchase of the Shares and the other transactions contemplated by this Agreement. The Buyer has such knowledge and experience as to be aware of the risks and uncertainties inherent in the purchase of the type contemplated in this Agreement, as well as the knowledge of the Company its operations in particular, and, in addition to their reliance on the Seller’s representations and warranties set forth in Section 3 of this Agreement, have independently made their own analysis and decision to enter into this Agreement.

SECTION 6.7. No Reliance . The Buyer acknowledges and agrees that none of the Seller or its Affiliates, the Company, or any person representing the Seller or its Affiliates or the Company, has made to the Buyer or any of its Representatives, and the Buyer is not relying upon, any representation, warranty or agreement with respect to the Company, other than the representations, warranties and agreements of the Seller set forth in Sections 3 of this Agreement or any certificate delivered by the Seller pursuant to Section 11.1(c)(3) .

SECTION 6.8. Brokers . Other than Barclays Capital, neither the Buyer nor any of its Affiliates has any liability or obligation to pay fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

SECTION 6.9. Exclusive Representations and Warranties . Except for the representations and warranties contained in this Section 6 and the certificate delivered by the Buyer pursuant to Section 11.2(c) , neither the Buyer nor any of its directors, officers, employees, stockholders, agents, Affiliates or Representatives has made or shall be deemed to have made any representation or warranty to the Seller, express or implied, at Law or in equity. The Buyer hereby disclaims any such representations or warranties not expressly set forth in this Section 6 or the certificate delivered by the Buyer pursuant to Section 11.2(c) , and the Seller acknowledges and agrees that neither the Buyer nor any of its directors, officers, employees, stockholders, agents, Affiliates or Representatives shall have or be subject to any liability to the Seller or any

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other Person for representations or warranties, express or implied, except as expressly set forth in this Section 6 or the certificate delivered by the Buyer pursuant to Section 11.2(c) .

SECTION 7. COVENANTS .

SECTION 7.1. Access to Information .

(f) During the Interim Period, the Seller shall provide the Buyer and their Representatives with access to information regarding the Business, the Company, the Purchased Property and Assumed Liabilities, in each case, as reasonably requested by the Buyer and to the extent such information is reasonably available or is reasonably obtainable without any material interference with the business or operations of the Seller, its Affiliates or the Company, in each case, other than (i) information that the Seller reasonably believes it, its Affiliates or the Company is prohibited by Law from providing to the Buyer or its Representatives, (ii) information that constitutes information protected by attorney/client privilege, the provision of access to which, as reasonably determined by Seller’s counsel, constitutes a waiver of any such privilege, or (iii) information that the Seller, any such Affiliate or the Company is required to keep confidential or to prevent access to by reason of any Contract with a third party; provided that Seller shall use its commercially reasonable efforts to provide such information without violation of applicable Law or to waivers with respect to the confidentiality restrictions to which any such information is subject; provided , further , that such access (A) shall be conducted at the Buyer’s expense, during normal business hours and under the supervision of such Company’s, Seller’s or Affiliate’s personnel, (B) does not disrupt the normal operations of such Company, Seller or Affiliate and (C) shall comply with all Laws, including those regarding the exchange of competitively sensitive information. For the sake of clarity, the foregoing shall include reasonable access to work papers, U-4s, 1099s, general ledger detail, commission system detail, and other relevant documentation, as well as the Seller’s and the Relevant Affiliates’ employees, commission system experts and accountants and information to facilitate the Buyer’s integration planning. Notwithstanding anything contained herein, neither the Buyer nor any of its Representatives shall be permitted during the Interim Period to contact any of the Company’s or Business’s vendors, customers or suppliers, or any Governmental Entities (except in connection with applications for Permits or Filings required to be made prior to the Closing under this Agreement and, in such case, only in accordance with the terms of this Agreement) regarding the operations or legal status of the Company or the Business without receiving prior written consent from the Seller.

(g) During the Interim Period, the Seller will notify the Buyer in writing (i) promptly, but in any event within 10 Business Days, if they become aware of any actual or announced departure of any Adviser Representative, and (ii) promptly, if they become aware of any fact or condition that is reasonably likely to make the satisfaction of the conditions in Section 11 impossible or unlikely.

(h) During the Interim Period, the Seller shall cause to be delivered to the Buyer (i) on or prior to the 18th Business Day of each calendar month, a scheduled reflecting

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operating revenues and expenses of the Company for the preceding calendar month prepared in a manner consistent with the Company’s ordinary course of business and (ii) within 30 days after the end of each calendar quarter, the most recent Financial and Operational Combined Uniform Single (FOCUS) report of the Company filed with FINRA and the SEC for the applicable period then ended.

(i) Following the Closing, to the extent permitted by applicable Law, the Seller and each Relevant Affiliate shall be entitled to retain copies (at such Person’s sole cost and expense) of all books and records, including the Records, relating to its ownership of the Company, the Business, the Purchased Property and to any Retained Business, as applicable.

(j) After the Closing, the Buyer will, and will cause its Representatives to, afford to the Seller and each Relevant Affiliate, including their respective Representatives, reasonable access to all books, records, files and documents to the extent they are related to the Company, the Business and the Purchased Property, as applicable, in order to permit such Persons to prepare for and participate in any investigation and defend any Legal Proceedings relating to or involving such Person, to discharge its obligations under this Agreement, to comply with financial reporting requirements, and for other reasonably necessary business purposes, and will afford such Person reasonable assistance in connection therewith. The Buyer will cause such records to be maintained for not less than six years from the Closing Date; provided , however , that in the event that the Buyer transfers the Company or all or a portion of the Business to any third party during such period, the Buyer may transfer to such third party all or a portion of the books, records, files and documents related thereof, provided further , that such third-party transferee expressly assumes in writing the obligations of the Buyer under this Section 7.1(e) .

(k) After the Closing, the Seller will, and will cause the Relevant Affiliates and each of their respective Representatives to, afford to the Buyer and the Company, including their respective Representatives, reasonable access to all material books, records, files and documents to the extent they are related to the Company, the Business and the Purchased Property, as applicable, and were not transferred to the Buyer at the Closing and that are necessary to comply in all material respects with applicable Law regarding the preservation and retention of business records, in order to permit such Persons to prepare for and participate in any investigation and defend any Legal Proceedings relating to or involving such Person, to discharge its obligations under this Agreement, to comply with financial reporting requirements, and for other reasonably necessary business purposes, and will afford such Person reasonable assistance in connection therewith. All such remaining books, records, files and documents shall be maintained in accordance with the Seller’s or the applicable Relevant Affiliate’s business record retention policies; provided , however , that in the event that the Seller or any such Relevant Affiliate transfers all or a portion of its business to any third party during such period, the Seller or such Relevant Affiliate may transfer to such third party all or a portion of the relevant books, records, files and documents related thereof, provided further , that such third-party transferee expressly assumes in writing the obligations of the Seller or the Relevant Affiliate under this Section 7.1(f) .

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(l) From and after the Closing Date, the Seller shall, and shall cause the Relevant Affiliates to, use their reasonable best efforts to identify and, to the extent commercially practicable and in accordance with the Transition Services Agreement, transfer to the Buyer as soon as practicable any of the books and records of the Company or that pertain exclusively to the Business that were not transferred to the Buyer at the Closing pursuant to Section 2.6 ; provided that until such time as these records are transferred, the Seller shall, and shall cause the Relevant Affiliates to, provide the Buyer, at the Seller’s or such Relevant Affiliate’s expense, reasonable access to such records during normal business hours under the supervision of the Seller’s or such Relevant Affiliate’s personnel (unless other degrees of access or supervision are otherwise mandated by applicable Law); provided further , however , that such access shall comply with all Laws. Notwithstanding anything herein to the contrary, in no event, pursuant to this Section 7.1 or otherwise, shall the Seller or any of its Affiliates be required to provide access to, copies of or otherwise share, transfer or distribute, at any time from and after the date hereof, any sensitive personal data (as defined by applicable Law) or other personal data in violation of any Law, and the Buyer hereby agrees, on behalf of itself and each of its Affiliates (including, from and after the Closing, the Company) and Representatives, that promptly following the earlier of the termination of this Agreement or Closing it shall destroy any such personal data received in connection with this Section 7.1 or otherwise related to any Business Associate that is not a Transferred Representative, Transferred Broker or Transferred Employee, or any client of any such Business Associate.

(m) The Buyer hereby agrees that all information provided to it or any of its Affiliates or Representatives in connection with this Agreement, the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby shall be deemed to be Confidential Information, as such term is used in, and shall be treated in accordance with, the Confidentiality Agreement (except that the Seller and the Buyer agree that information that is primarily related to the Business or constituting Records shall not be Confidential Information of the Seller under such agreement). The Seller hereby agrees that all information known to it or any of its Affiliates primarily related to the Business, constituting Records, or in connection with this Agreement or the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby shall be deemed to be Confidential Information of the Buyer and not previously known or developed by the Seller for purposes of this Section 7.1(h) , as such term is used in, and shall be treated in accordance with, the confidentiality agreement, dated February 25, 2016, by and between the Seller and the Buyer.

SECTION 7.2. Conduct of the Business Pending the Closing . During the Interim Period and except as prohibited pursuant to this Section 7.2 , the Seller shall use its commercially reasonable efforts to cause, and to cause the Relevant Affiliates to cause, the Business to be conducted in the ordinary course of business, and, subject to the requirements of this Agreement, to use commercially reasonable efforts to preserve, maintain and protect the assets of the Company and the Purchased Property, including preserving the goodwill, customer base and relationships with the Business Associates. Without limiting the foregoing, during the Interim

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Period, except (1) as otherwise expressly contemplated by this Agreement, (2) as set forth on Section 7.2 of the Disclosure Schedule, (3) as consented to in advance by the Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), or (4) as required by applicable Law, solely with respect to (and solely to the extent of such obligations related to) the Business, the Seller shall not and shall cause the Company and the Relevant Affiliates not to:

(e) sell, transfer or dispose of any of the Business’s material assets or properties (including transfer of any Purchased Property or assets of the Company to Affiliates of the Buyer or any Affiliate of any Seller), other than (i) sales, transfers or dispositions of obsolete or surplus assets, and (ii) sales, transfers or dispositions made in the ordinary course of business consistent with past practice;

(f) amend or modify the Company’s Organizational Documents;

(g) directly or indirectly acquire, whether by merger or consolidation, or by acquiring all or substantially all of the assets of, any other Person;

(h) (i) grant, issue, sell or otherwise dispose of Equity Securities of the Company or (ii) effect any recapitalization or reclassification of the Company or effect any like change in the Company’s equity capitalization (other than capital contributions by the Seller to the Company);

(i) Solely with respect to the Business, enter into any new line of business, or introduce any material new products or services, or change in any material respect existing products and services;

(j) liquidate, dissolve or reorganize the Company;

(k) sell, transfer, assign or license any Purchased Intellectual Property to any Person other than non-exclusive licenses granted in the ordinary course of business;

(l) (i) change any Tax or accounting methods, policies or practices inconsistent with past practice, except as required by a change in GAAP or applicable Law, (ii) make, revoke or amend any Tax election that relates solely to the Company or the Business, (iii) file any amended Tax Return that relates solely to the Company, (iv) enter into any closing agreement or similar arrangement that relates solely to the Company or the Business, (v) settle or compromise any Tax Contests that relate solely to the Company or the Business, (vi) surrender any right to claim a refund of Taxes that relates solely to the Company, (vii) consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment that relates solely to the Company, or (viii) file any ruling request with regard to Taxes that relates solely to the Company or the Business;

(m) (i) amend or modify the terms of any Representative Contract (including the terms of the compensation payable thereunder) or (ii) terminate any Representative Contract;

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(n) (i) except as contemplated by Section 7.23 or Section 10.1(l) hereof, amend, alter or otherwise change the terms of any Assumed Plan, (ii) hire, transfer or reassign any Business Associate with a title of Assistant Vice President or higher (except as otherwise contemplated by this Agreement), (iii) except in the ordinary course of business, terminate any Business Associate with a title of Assistant Vice President or higher, other than for “cause”, (iv) enter into or amend any individual employment or individual severance Contracts with any Business Associate with a title of Assistant Vice President or above, or (v) grant any material salary or material wage increase or materially increase any material benefit (including incentive or bonus payments) to any such Business Associate, except (A) for any changes that are required by applicable Law or the terms of a Plan, (B) in connection with new hires, (C) to satisfy contractual obligations, (D) for any incentive, commission or bonus payment in respect of any period prior to the Closing Date, whether or not payable prior to the Closing Date the cost of which will be exclusively borne by the Seller, or (F) for any benefit modification the cost of which will be exclusively borne by the Seller;

(o) voluntarily grant or otherwise permit any Lien on any of the Purchased Property or any assets of the Company other than Permitted Liens;

(p) except in the ordinary course of business consistent with past practice or pursuant to Section 7.6(d) , terminate any Material Contracts or Assigned Contracts or amend or modify in any material respect any of the Material Contracts or Assigned Contracts; or

(q) agree or commit to do any of the foregoing.

Notwithstanding anything herein to the contrary, nothing in this Section 7.2 shall be interpreted to restrict the ability of the Company (without the prior consent of the Buyer or any other Person) to make any cash dividend or distribution to the Seller, subject in all events to maintaining sufficient capital in the Company as required to meet the Company’s regulatory capital obligations, or to release any party from or terminate any Intercompany Contract. For the avoidance of doubt and notwithstanding anything herein to the contrary, the obligations of the Seller, the Relevant Affiliates and the Company under this Section 7.2 shall apply solely with respect to (and solely to the extent of such obligations relation to) the Business.

SECTION 7.3. Government Filings .

(a) Subject to the terms and conditions of this Agreement, each of the Buyer and the Seller shall, and Seller shall cause the applicable Company or Affiliate to, cooperate with each other and shall use (and cause their respective Subsidiaries to use) their commercially reasonable efforts to take or cause to be taken all actions, and do or cause to be done, and reasonably assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to comply promptly with all legal requirements that may be imposed on such Party or its Subsidiaries with respect to the Agreement and, subject to the conditions set forth in Section 11.3 , to consummate the transactions contemplated by this Agreement as soon as reasonably practicable. If required by the HSR Act, each Party hereto agrees to make an appropriate filing

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pursuant to the HSR Act with respect to the transactions contemplated by this Agreement as promptly as reasonably practicable after the date hereof and to supply as promptly as reasonably practicable to the appropriate Governmental Entity any additional information and documentary material that may be requested pursuant to the HSR Act. The Buyer and the Seller shall, and Seller shall cause the Company and its Affiliates to, as soon as reasonably practicable, prepare and file with each applicable Governmental Entity all other Filings and requests for such Permits as may be necessary for the consummation of the transactions contemplated hereby in accordance with the terms of this Agreement. The Buyer and the Seller will, and Seller will cause the Company and its Affiliates to, diligently pursue and use their commercially reasonable efforts to obtain such Permits as soon as reasonably practical and will cooperate with each other in seeking such Permits. To such end, the Parties agree to make available the personnel and other resources of their respective organizations in order to obtain all such Permits. Each Party will promptly inform the other Parties of any material communication received by such Party from, or given by such Party to, any Governmental Entity from which any such Permit or any other approval is required and of any material communication received or given in connection with any Legal Proceeding by a private party, in each case regarding any of the transactions contemplated hereby, and will permit the other Party to review any communication given by it to, and consult with each other in advance of any response to, or meeting or conference with, any such Governmental Entity or, in connection with any Legal Proceeding by a private party, with such other Person, and to the extent permitted by such Governmental Entity or other Person, give the other Party the opportunity to review such response and to attend and participate in such meetings and conferences.

(b) Without limiting the generality of Section 7.3(a) :

(i) the Seller shall cause the Company to prepare and file, as soon as reasonably practicable after the date of this Agreement, (A) an application for approval of a change in ownership or control of the Company under NASD Rule 1017 (the “ FINRA Approval ”) and (B) applications for approval of, or notice filings required under applicable state securities Laws with respect to, a change in ownership or control of the Company, as set forth on Section 7.3(b)(i) of the Disclosure Schedule, and each Party shall, as promptly as practicable, supply any additional information or documentary material that may be requested by the other Party to complete any such application or notice, including with respect to any inquiries or requests for additional information or documents made by FINRA or an applicable state securities regulator; and

(ii) each of the Buyer and the Seller shall, and Seller shall cause the Company and its applicable Affiliates to, prepare and file, as soon as reasonably practicable after the date of this Agreement, applications for approval of a change in ownership or control under applicable state Laws governing insurance agencies and the distribution of insurance products, as set forth on Section 7.3(b)(ii) of the Disclosure Schedule and each Party shall, as promptly as practicable, supply any additional information or documentary material that may be requested by

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the other Party to complete such application, including with respect to any inquiries made by any Governmental Entity.

SECTION 7.4. Publicity . The Parties shall reasonably cooperate to prepare and make a public announcement and create and implement a communications plan regarding the transactions contemplated by this Agreement following the date hereof. Notwithstanding the foregoing, none of the Parties will make any public announcement or issue any public communication regarding this Agreement or the transactions contemplated hereby or any matter related to the foregoing, without the prior written consent of the other Parties (not to be unreasonably withheld), except: (a) if such announcement or other communication is required by applicable Law or Order, in which case the disclosing Party shall, to the extent permitted by applicable Law or Order, first allow the other Party to review such announcement or communication and the opportunity to comment thereon; (b) to the extent consistent with the communications plan mutually agreed upon by the Parties, internal announcements to the Business Associates; and (c) announcements and communications to Governmental Entities in connection with Filings or Permits relating to the transactions contemplated by this Agreement.

SECTION 7.5. Expenses . Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated hereby are consummated, each Party will pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and the transactions contemplated hereby. Notwithstanding the immediately preceding sentence, the Buyer, on the one hand, and the Seller, on the other hand, shall be responsible for fifty percent (50%) of all filing fees required by Governmental Entities in connection with the consummation of the transactions contemplated hereby.

SECTION 7.6. Further Actions .

(c) Subject to the terms and conditions of this Agreement, each of the Buyer and the Seller agree to use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including working together to determine the mechanics necessary to make final commission payments owed to the Transferred Adviser Representatives or Transferred Brokers with respect to the periods prior to the Closing. Each of the Buyer and the Seller agree not to take any action, or fail to take any action, that would otherwise have the effect of preventing or materially delaying the consummation of the Closing.

(d) Subject to the terms and conditions of this Agreement, at any time and from time to time after the Closing, at a Party’s request and without further consideration, the other Party shall execute and deliver to such requesting Party such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as such Party may reasonably request in order to consummate the transactions contemplated by this Agreement.

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(e) During the period from the date hereof to the Closing, the Parties agree to negotiate in good faith and reasonably cooperate in preparing, supplementing and finalizing the Ancillary Agreements, any schedules or exhibits to the Ancillary Agreements and all other documents, contracts or instruments contemplated hereby to be delivered by any party or any Affiliate thereof at or prior to the Closing. Notwithstanding any provision to the contrary herein, the finalized schedules and exhibits to each of the Ancillary Agreements shall be attached to the applicable forms of Ancillary Agreements to be executed and delivered by the Parties (or their Affiliates) as of the Closing.

(f) Within thirty (30) days following the date hereof, the Buyer shall notify the Seller in writing of the Buyer’s desire to assume the rights and obligations with respect to any recognition conference or similar meeting scheduled in respect of the Business during calendar year 2017 and set forth on Schedule 7.6(d) (each, a “ 2017 Conference ”). With respect to any 2017 Conference that Buyer gives timely notice of its desire to assume (each, an “ Assumed Conference ”), the Buyer shall pay (or, to the extent any amounts are paid by the Seller, reimburse the Seller for) any and all amounts payable in respect of, or in connection with, such Assumed 2017 Conference, including, without limitation, cost of attendance or termination. With respect to any 2017 Conference that is not an Assumed Conference, the Seller shall retain all rights and obligations with respect thereto, including the right to cancel attendance.

SECTION 7.7. Restrictive Covenants .

(e) The Parties hereby agree to be bound by the covenant set forth on Section 7.7(a) of the Disclosure Schedule.

(f) The Seller hereby acknowledges and agrees that (i) from the Closing Date until the third anniversary of the Closing Date, the Seller shall not, and shall cause each of its Affiliates (including Parent Entity and its Affiliates following its formation) not to (A) create, through a series of hiring decisions or engagements of independent contractors, a Captive Agency Force, or (B) acquire, in one or a series of related transactions, a standalone Captive Agency Force; and (ii) from the date that the Parent Entity is separated from the Seller until the earlier of (x) the third anniversary of the Closing Date, and (y) the termination of the Distribution Agreement, the Seller shall cause Parent Entity or any of its Affiliates not to acquire, in one or a series of related transactions, the equity or assets of any other Person which sells life insurance or annuity products predominantly through a Captive Agency Force.

(g) The Seller hereby acknowledges and agrees that from the Closing Date until the third anniversary of the Closing Date, the Seller shall not and shall cause each of its Affiliates not to solicit or attempt to solicit, any Transferred Employee, Transferred Broker or any individual included in the Buyer’s captive agency force for employment or in any other capacity (including as an independent contractor or consultant) with the Seller or any of its Affiliates. Nothing in this Section 7.7(c) shall prohibit the Seller or any of its Affiliate from (i) publishing or posting open positions in the course of normal hiring practices which are not specifically sent to, or do not specifically target, Transferred Employees, Transferred Brokers or

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any individual included in the Buyer’s captive agency force, and hiring any Transferred Employee, Transferred Broker or any individual included in the Buyer’s captive agency force as a result thereof, or (ii) soliciting for employment any Transferred Employee, Transferred Broker or any individual included in the Buyer’s captive agency force that was terminated by Buyer or any of its Affiliates.

(h) The provisions of Section 7.7 (collectively, the “ Restrictive Covenants ”) have been separately bargained for to protect the Seller and its businesses, on the one hand, and the Buyer and its businesses, including goodwill, being acquired by the Buyer hereunder, on the other hand, and to ensure that the Parties shall have the full benefits of their agreements under this Agreement. Each Party recognizes that that the Restrictive Covenants constitute an important part of the consideration being provided under this Agreement, that such covenants are necessary in order to protect and maintain the legitimate business interests of the Seller, on the one hand, and the Buyer, on the other hand, and are fair and reasonable in all respects, and that the Parties would not consummate the transactions contemplated hereby but for such agreements. The Seller acknowledges and agrees that a substantial and legally sufficient portion of the Purchase Price is attributable to the Restrictive Covenants, and each of the Parties hereby waive any right to assert inadequacy of consideration as a defense to enforcement of the Restrictive Covenants should such enforcement ever become necessary.

(i) If the Buyer, or any of its Affiliates, breaches, or threatens to commit a breach of, any of the Restrictive Covenants, the Seller shall have, in addition to, and not in lieu of, any other rights and remedies available to it under law or in equity, the right to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Seller and that money damages would not provide an adequate remedy. The Buyer covenants and agrees not to oppose any demand for specific performance or injunctive or other equitable relief in case of any such breach or attempted breach.

(j) If either the Seller, or any of its Affiliates, breaches, or threatens to commit a breach of, any of the Restrictive Covenants, the Buyer shall have, in addition to, and not in lieu of, any other rights and remedies available to it under law or in equity, the right to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Buyer and that money damages would not provide an adequate remedy. The Seller covenants and agrees not to oppose any demand for specific performance or injunctive or other equitable relief in case of any such breach or attempted breach.

(k) The Parties agree that the covenants made in this Section 7.7 shall be construed as an agreement independent of any other provision of this Agreement and shall survive any order of a court of competent jurisdiction terminating any other provision of this Agreement. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 7.7 is invalid or unenforceable, the Parties agree that the court making

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the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and such provisions shall be enforceable as so modified.

SECTION 7.8. Advisory Client Consents .

(a) No later than sixty (60) days prior to the Closing Date, the Company shall send a written notice (an “ Account Transfer Notice ”) informing each Advisory Client of the Business of the deemed assignment of the applicable Advisory Client Agreement(s) in connection with the Buyer’s purchase of the Company at Closing. Except for each Affirmative Consent Client, each Account Transfer Notice shall provide the applicable Advisory Client a period of 60 calendar days after the date of such Account Transfer Notice within which to object to the assignment of the applicable Advisory Client Agreement (the “ Account Transfer Objection Period ”). For each Affirmative Consent Client only, each Account Transfer Notice shall request the written consent of such advisory client to the assignment of the applicable Advisory Client Agreement(s). The terms and provisions of each Account Transfer Notice shall be in compliance with applicable Law. The Seller shall use commercially reasonable efforts to obtain, prior to the Closing Date, the consent of each such Advisory Client to the assignment as required by applicable Law and the applicable Advisory Client Agreement.

(b) The Company shall provide the Buyer a reasonable opportunity prior to distribution to review and comment on all written materials to be used by the Company pursuant to this Section 7.8 or otherwise used for purposes of communicating with Advisory Clients generally about the transactions contemplated by this Agreement (with such comments to be considered for inclusion in good faith). The Company shall periodically notify the Buyer of the Company’s receipt of material communications received from Advisory Clients of the Business in response to any Account Transfer Notice, including any non-consent.

(c) Notwithstanding anything contained in this Agreement to the contrary, this Agreement shall not constitute an assignment of, or an agreement to assign, any Advisory Client Contract if either (i) the applicable Advisory Client objects to the assignment during the Account Transfer Objection Period or (ii) if affirmative written consent from the Advisory Client is required by applicable Law for the assignment (each such Advisory Client, an “ Affirmative Consent Client ”) and such consent is not obtained at or before the Closing unless, with respect to an Advisory Client Contract requiring written consent for assignment, the conduct of the client results in the deemed assignment of such Advisory Client Contract under applicable Law.

(d) Neither the Seller nor any of its Affiliates shall have any liability to the Buyer or any of its Affiliates (including, from and after the Closing, the Company) with respect to the non-assignability or non-transferability of any Advisory Client Contract to the extent such non-assignability or non-transferability arises solely as a result of the applicable Advisory Client objecting to assignment, terminating such agreement, failing to give an affirmative consent to

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assignment (to the extent affirmative consent was required by applicable Law) or being prevented by applicable Law from assigning such agreement to the Buyer; provided that the Company has complied with the provisions of this Section 7.8 .

SECTION 7.9. Termination of or Release from Intercompany Contracts . Except as expressly contemplated by this Agreement or any Ancillary Agreement, effective as of the Closing, the Company shall be released from any obligations or liabilities under, and shall cease to have any rights or privileges pursuant to, any and all Intercompany Contracts.

SECTION 7.10. Bulk Transfer Laws . The Buyer acknowledges that the Seller shall not comply with the provisions of any so-called bulk sales or transfer Laws of any applicable jurisdiction (including Article 6 of the Uniform Commercial Code) in connection with the transaction contemplated by this Agreement, and the Buyer hereby waives the Seller’s failure to comply with such Laws. The Seller shall indemnify and hold harmless the Buyer and its Affiliates from and against (and shall on demand reimburse them for) any Losses suffered or incurred by any such Person and any Liabilities (excluding any contingent liabilities) arising out of or related to the failure of the Seller to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction.

SECTION 7.11. Assignment or Enforcement of Certain Agreements . In furtherance of the sale of the Purchased Property and the Business to the Buyer hereunder by virtue of the transactions contemplated hereby and to more effectively protect the value and goodwill of the Purchased Property and the Business so sold, the Seller covenants and agrees that, with respect to each Dedicated Employee of the Seller or any of the Relevant Affiliates who does become an employee of the Buyer or any of its Affiliates after the Closing, the Seller shall either (a) assign to the Buyer or its Affiliates all rights of the Seller or Relevant Affiliate pursuant to all agreements, covenants or other obligations of such employee relating to confidentiality, noncompetition, nonsolicitation of employees or clients and similar matters or (b) if such agreements, covenants or obligations cannot be assigned to the Buyer or its Affiliates, then, upon the Buyer’s request and at the Buyer’s expense, enforce such agreements, covenants and obligations to the maximum extent permitted by applicable Laws.

SECTION 7.12. [Reserved]

SECTION 7.13. Ancillary Agreements . On the Closing Date, the Buyer shall, and shall cause its applicable Affiliates to, and the Seller shall, and shall cause its applicable Affiliates to, after giving effect to Section 7.6(c) , execute and deliver each of the Ancillary Agreements to which it is a party if such Ancillary Agreement has not been executed prior to the date hereof. On the Closing Date, (i) the Seller shall cause MetLife Investors Distribution Company, a company organized under the laws of the state of Missouri, and (ii) the Buyer shall cause the Company, to enter into a distribution agreement (between MetLife Investors Distribution Company and the Company) in form and substance substantially the same as the Distribution Agreement.

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SECTION 7.14. Use of Seller Names . The Buyer, for itself and its Affiliates (including, from and after the Closing, the Company), acknowledges and agrees that, except as otherwise provided in this Agreement and in the Ancillary Agreements, none of the Buyer nor any of its Affiliates is purchasing, acquiring or otherwise obtaining any right, title or interest in the name “Met”, “MetLife”, “Metropolitan”, “New England Financial”, NEF” or any trade names, trademarks, Internet domain names, tag-lines, identifying logos or service marks related thereto, employing the wording “Met”, “MetLife”, “Metropolitan”, “New England Financial”, “NEF” or any other marks owned or licensed by the Seller or its Affiliates (excluding the Purchased Property) or any variation of the foregoing marks or any confusingly similar trade name, trademark, Internet domain name, service mark or logo (collectively, the “ Seller Names and Marks ”), and, except as otherwise set forth in this Agreement or the Ancillary Agreements, none of the Buyer nor any of its Affiliates shall have any rights in the Seller Names and Marks and none of the Buyer nor any of its Affiliates shall contest the ownership or validity of any rights of the Seller in or to the Seller Names and Marks. Except as otherwise set forth in this Agreement or the Ancillary Agreements, the Buyer agrees that, following the Closing Date, the Buyer and each of its Affiliates (including, from and after the Closing, the Company) shall not use the Seller Names and Marks, either alone or in combination with other words and all marks, trade dress, logos, monograms and other source identifiers similar to any of the foregoing or embodying any of the foregoing alone or in combination with other words. No later than thirty (30) days after the Closing Date, (a) Buyer shall cause the Company to cease and discontinue any and all uses of the Seller Names and Marks, whether or not in combination with other words, symbols or other distinctive or non-distinctive elements, and (b) the Buyer, for itself and its Affiliates, agrees that any and all rights of the Company to the Seller Names and Marks, including any such rights licensed to the Company pursuant to any agreements or other arrangements, whether written or oral, with the Seller or its Affiliates, shall terminate at such time without recourse by any of the Buyer or its Affiliates (including the Company). For a period not to exceed thirty (30) days immediately following the Closing Date, Buyer and its Affiliates may use the Seller Names and Marks in (i) websites, systems and other Company materials currently containing the Seller Names and Marks, (ii) a non-promotional manner for historical reference to company names, products or other materials bearing such Seller Names and Marks to the extent not inconsistent with any transition plan, and (iii) a non-promotional manner in reference to products bearing such Seller Names and Marks that were sold prior to the Closing Date to the extent not inconsistent with any transition plan, in each case subject to compliance by the Seller and its Affiliates and the Buyer and its Affiliates (including, from and after the Closing, the Company) with all applicable Laws; provided; that with respect to any change of a Seller Name and Mark that requires regulatory approval or use required in the ordinary course of business pending such regulatory approval, the Company may continue to use such marks from Closing to a period that ends fifteen (15) days after obtaining any necessary regulatory approval; provided, further that Buyer has filed all documents necessary to receive such approval within thirty (30) days from Closing. Notwithstanding the foregoing, none of the Buyer, its Affiliates or, from and after the Closing, the Company shall have any right to use the

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Peanuts Characters. For the avoidance of doubt, Buyer understands and agrees that it has no rights in the Peanuts Characters and shall immediately after Closing remove all Peanuts Characters and any depictions of the Peanuts Characters from all Purchased Property, including but not limited to documents, systems, websites, and real estate (and any walls or other fixtures thereto).

SECTION 7.15. IP Transfer Covenant . On and after the Closing Date, except as contemplated by this Agreement or the Ancillary Agreements, to the extent that the Company has any rights in Licensed Intellectual Property (other than the Assigned Contracts) that is used in the business of the Seller or its Affiliates, the Company shall promptly transfer all right to such Licensed Intellectual Property to the Seller or its Affiliates as the Seller may direct. On and after the Closing Date, except as contemplated by this Agreement or the Ancillary Agreements, to the extent that the Seller or its Affiliates have any rights in Licensed Intellectual Property that is acquired by or transferred to the Buyer in accordance with the terms hereof, Seller shall, or shall cause its Affiliates to, transfer all right to such Licensed Intellectual Property to the Buyer.

SECTION 7.16. Conversion Assistance . From the date hereof until the Closing Date, the Buyer and the Seller shall, and the Seller shall cause the Company to, cooperate in good faith and use commercially reasonable efforts to resolve any adverse issues relating to or arising out of the Company’s conversion to the brokerage platform of National Finance Services LLC. Without limiting the generality of the foregoing, the Buyer and the Seller shall, and the Seller shall cause the Company to, use commercially reasonable efforts to (i) develop mutually acceptable corrective actions and milestone with respect to such issues, and (ii) implement and meet such actions and milestones prior to the Closing Date, in each case, at no material cost to and without imposing any material burden on the Seller or any of its Affiliates (including the Company).

SECTION 7.17. Product Development .

(a) From the date hereof to the Closing Date, the Buyer and Seller agree to negotiate in good faith and reasonably cooperate in preparing, supplementing and finalizing (A) the Product Development and Distribution Agreement, (B) an Indemnity Reinsurance Agreement between the Buyer and MetLife USA or an appropriate Affiliate of MetLife USA (the “ Reinsurance Agreement ”), providing for the Buyer to cede to MetLife USA or an appropriate Affiliate of MetLife USA, and for MetLife USA or such Affiliate to indemnify the Buyer, on a coinsurance basis, for an agreed upon percentage of the contractual liabilities of the Buyer with respect to the Buyer Products (as defined below) issued during the term of the Product Development and Distribution Agreement and payable by the Buyer after the commencement of the offering of the Buyer Products in accordance with the Product Development and Distribution Agreement, and (C) an Administration Agreement between the same parties (the “ Administration Agreement ”), under which MetLife USA or an appropriate Affiliate of MetLife USA will agree to administer the Buyer Products during the term of the Indemnity Reinsurance Agreement, in each case on terms to be negotiated and agreed upon in good faith by

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the Buyer and MetLife USA substantially consistent with the term sheet attached as Exhibit D . The Parties shall enter into the Product Development and Distribution Agreement, the Reinsurance Agreement and the Administration Agreement on the Closing Date, it being understood that none of such agreements shall be entered into unless all of them are entered into.

(b) On and after the date of this Agreement, until the effective date of the Product Development and Distribution Agreement, the Buyer and its Affiliates shall not develop, and will suspend the development, of any fixed indexed annuities.

(c) From the date of this Agreement, the Buyer shall and the Seller shall cause MetLife USA to, or shall cause their respective appropriate Affiliate, to use commercially reasonable efforts to jointly develop and agree to a fixed indexed annuity product design, including product specifications and all materials customarily included for the Buyer’s internal approval procedures for such products (the “ Buyer Products ”), which are to be offered by Buyer through its retail sales force in accordance with the Product Development and Distribution Agreement. After product design and specifications have been agreed upon, Seller shall cause MetLife USA to, or shall cause their respective Affiliate to, draft the contract forms and prepare all filing materials necessary or appropriate to make the filings with Governmental Authorities described in Section 7.17(d ) and Buyer shall have the right to pre-approve all such filings. Each of the parties will bear its own expense of drafting such forms and preparing such filing materials.

(d) Provided that the Seller fulfills its obligations under clauses (a) and (c) above, as applicable and Buyer has approved such filings, the Buyer shall transmit to the appropriate Governmental Entities and file all filings required to obtain approvals to issue the Buyer Products in all U.S. jurisdictions in which the Buyer and any of its Affiliates are authorized to issue fixed indexed annuity contracts and where the parties have mutually-agreed to make such filings; provided that the Buyer shall use commercially reasonable efforts to make all such required filings not later than the later of August 1, 2016 and the date that is thirty (30) days after MetLife USA or its appropriate Affiliate has provided to Buyer the materials required by second to last sentence of Section 7.17(c) . The Seller shall cause MetLife USA and MetLife USA’s appropriate Affiliates to use commercial best efforts to assist the Buyer and its Affiliates with respect to making such filings and obtaining such approvals.

(e) Subject to the terms and conditions of this Agreement, the Buyer shall use its commercially reasonable efforts to take, or cause to be taken, and to do, or cause to be done, all things necessary, proper or advisable to enable and permit the Buyer’s and its Affiliates’ retail sales force to market and sell MetLife Products pursuant to the Distribution Agreement and the Buyer Products pursuant to the Product Development and Distribution Agreement, including without limitation removing any limitations thereto contained in its errors and omissions insurance or other liability insurance coverage.

(f) From the date of this Agreement until the end of the sixth month following the Closing Date, the Buyer shall and the Seller shall cause MetLife USA to, or shall

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cause their respective appropriate Affiliate, to explore in good faith the possibility of entering into agreements to designate specified variable annuity contracts with one or more living benefit riders as Buyer Products subject to the Product Development and Distribution Agreement or a similar agreement, and subject to reinsurance and administrative arrangements similar to those described in this Section 7.17 with respect to Buyer Products. MetLife USA shall have a right of first refusal to develop and provide variable annuity products with living benefits (other than guaranteed accumulation benefits) to be issued by Buyer’s retail sales force, and to provide related reinsurance and administration.

(g) In connection with their distribution of ML USA variable annuity products, Buyer and its affiliates shall retain sole discretion to modify their business and compensation practices to comply with Law, including any requirements relating to the U.S. Department of Labor’s “investment advice” regulation and related fiduciary duties under ERISA and Section 4975 of the Internal Revenue Code. If Buyer or its Affiliates make any such change that affects the distribution of the ML USA variable annuity products, the Parties shall in good faith explore alternatives relating to the continued offer of such products through the Buyer's retail sales force.

SECTION 7.18. Crump Relationship . From and after the date hereof until the Closing Date, the Parties will negotiate in good faith and use their commercially reasonable efforts to facilitate the assumption of the Seller parties’ agreement with Crump Life Insurance Services, Inc., by Buyer on the Closing Date.

SECTION 7.19. Lease Consents .

(i) With respect to any consent or approval required pursuant to any of the Relevant Affiliate Leases (a “ Lease Consent ”), the Seller shall cause the applicable Relevant Affiliate to use commercially reasonable efforts and cooperate with the Buyer to obtain such Lease Consent prior to the Closing Date, it being understood that neither the Seller nor such Relevant Affiliate nor any of their respective Affiliates shall be required to expend a material amount of money (other than pursuant to Section 7.19(c) ), or commence any litigation or offer or grant any accommodation (financial or otherwise) to the landlord to obtain any such Lease Consent; provided , however , notwithstanding anything to the contrary contained in this Agreement, the Seller shall have no liability to the Buyer with respect to any such Lease Consent that is not obtained and the receipt of any such Lease Consent shall not be a condition to the Buyer’s obligations to close.

(j) If any Lease Consent is not obtained prior to the Closing Date, the Seller shall cause the applicable Relevant Affiliate to use commercially reasonable efforts and cooperate with the Buyer to (i) continue to pursue the applicable Lease Consent after the Closing Date or (ii) make the applicable Leased Real Property available to the Buyer by sublease, license, or other agreement (a “ Use Agreement ”), in which event the Buyer shall become responsible for all of the applicable Relevant Affiliate’s (or the Seller’s or any other Seller Affiliate’s, as applicable) obligations and liabilities under the applicable Relevant Affiliate Lease

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as though the applicable Relevant Affiliate Lease had been assigned to the Buyer on the Closing Date.

(k) Each of the Seller, on the one hand, and the Buyer, on the other hand, shall be responsible for fifty percent (50%) of all out-of-pocket costs incurred by the Seller and the Buyer in connection with seeking or obtaining any Lease Consent.

SECTION 7.20. Separation and Migration Cooperation . Following the date hereof, the Seller and the Buyer shall negotiate the Transition Services Agreement and shall discuss in good faith planning for the provision of services pursuant to the Transition Services Agreement and planning for the migration and integration of the Business (including the data, systems, operations and administration) to and into the Buyer, in accordance with mutually acceptable timetables, guidelines and procedures (which shall comply with applicable Law), with such cooperation to include each of the Seller and the Buyer: (i) appointing a divestiture planning manager; (ii) establishing divestiture planning committees as mutually agreed; (iii) setting regular meetings of the divestiture planning committees; (iv) making available appropriate knowledgeable business, operations, administration and technology personnel and any other personnel reasonably needed for the planning for the provision of services pursuant to the Transition Services Agreement and the planning for the migration and integration of the Business; (v) developing detailed project plans and budgets for the provision of services pursuant to the Transition Services Agreement and the migration and integration of the Business; (vi) using commercially reasonable efforts to promptly identify any and all services to be provided under the Transition Services Agreement, and (vii) dedicating commercially reasonable resources to accomplish the foregoing. All planning cooperation contemplated by this Section 7.20 shall be conducted in compliance with applicable Law (including privacy, antitrust and competition Law) and FINRA regulations and otherwise with the intention to minimize disruption to the Business and the businesses of the Company.

(h) During the period commencing on the date hereof and extending until the Closing Date, the Seller and the Buyer shall use commercially reasonable efforts to (i) determine and perform any migration or transition services reasonably required in order to migrate such services or access to facilities as were provided (A) by or on behalf of the Seller or its Affiliates to the Company or (B) by or on behalf of the Company to the Seller or its Affiliates, in each case, immediately prior to the Closing Date, but that will not be so provided under the Transition Services Agreement from and after the Closing Date; (ii) as may be necessary to give effect to Section 7.14 herein; and (iii) perform any other migration services as are mutually agreed to by the Seller and the Buyer.

(i) Each of the Seller and the Buyer shall bear its own costs and expenses incurred in connection with the planning cooperation contemplated by this Section 7.20 , except that the Buyer shall reimburse the Seller for any reasonable and necessary third-party out-of-pocket expenses paid by the Seller to an unaffiliated Person in connection with the planning cooperation contemplated by this Section 7.20 .

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(j) The Seller and the Buyer shall negotiate the Intellectual Property License Agreement to the extent that, after working together in good faith, during the period commencing on the date hereof and extending until the Closing Date, the Parties identify software, hardware, and computer systems, that are Seller Intellectual Property or Licensed Intellectual Property that the Parties agree the Company or the Buyer should have rights to use after Closing for the benefit of the Company or the Purchased Property.

SECTION 7.21. Sufficiency Representation Remedy .

(a) In connection with any breach by the Seller of the Sufficiency Representation, Buyer may provide written notice of such breach to the Seller at any time on or prior to the applicable Survival Period. Upon receipt of such notice, the Seller shall promptly (A) transfer the applicable assets to Buyer as may be required to cure such breach at no additional cost to the Buyer, or (B) in connection with any breach where the Buyer notifies the Seller within ninety (90) calendar days following the Closing, provide, or cause to be provided, such additional services to Buyer (at no cost to the Buyer) under the Transition Services Agreement and in accordance with and subject to its terms and conditions, including the obligations to use efforts to migrate from the Seller’s or its Affiliate’s systems or otherwise obviate the need for such service as soon as practicable, for a period up to but no longer than the term of the Transition Services Agreement, as may be required to cure such breach (the “ Sufficiency Representation Remedy ”).

(b) Notwithstanding anything herein to the contrary, the Parties hereby agree that the Sufficiency Representation Remedy shall be the sole and exclusive remedy with respect to any breach or alleged breach of the Sufficiency Representation. In no event shall any Buyer Indemnitees have any claim for monetary damages with respect to any breach or alleged breach of the Sufficiency Representation.

SECTION 7.22. Additional Acquired Assets and Liabilities .

(a) If either Party, or any of their Affiliates becomes aware of any Adviser Loan, which, other than its absence on Section 1.1(b)(4) of the Disclosure Schedule would otherwise constitute an Assumed Loan, (i) if prior to Closing, the Seller shall add such Adviser Loan to Section 1.1(b)(4) of the Disclosure Schedule, or (ii) if following the Closing, that is not transferred to, and assumed by, Buyer at the Closing, the Seller shall use its commercially reasonable efforts following the Closing, promptly upon becoming aware of any such Adviser Loans or, if earlier, notice of such by the Buyer, to cause its applicable Relevant Affiliates to transfer such Adviser Loans to Buyer, and Buyer shall accept and assume such Adviser Loans pursuant to the terms hereof (as if such Adviser Loans were Assumed Loans at the Closing).

(b) Notwithstanding anything herein to the contrary, in respect of any Purchased Property or other assets of the Seller or any of its Affiliates that is transferred, assigned, licensed or otherwise granted or conveyed to the Buyer or any of its Affiliates pursuant to the terms of this Agreement that is not exclusively used in or related to the Business (the

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“ Non-Exclusive Property ”), at or prior to the Closing or, if later, the time such Non-Exclusive Property is transferred, assigned, licensed or otherwise granted or conveyed to the Buyer or any of its Affiliates, the Buyer and its applicable Affiliates shall provide the Seller and its applicable Affiliates, on terms and conditions and pursuant to agreements reasonably satisfactory to the Seller, with the right to use such Non-Exclusive Property as such Non-Exclusive Property is currently used, or used as of the Closing Date, by the Seller and any of its Affiliates other than in connection with the Business, on terms at least as beneficial to the Seller and its applicable Affiliates as currently or as-then in effect.

SECTION 7.23. Assumed Loans . The Parties hereby agree, on behalf of themselves and their Affiliates, that (i) for purposes of the Assumed Loans only, a Transferred Adviser Representative’s appointment as a “Financial Services Representative” within MetLife’s Premier Client Group channel will not be deemed to have ended until such time as such Transferred Adviser Representative ceases to provide services to Buyer and its Affiliates, (ii) all references to the Seller or any of its Affiliates in any Assumed Loan will instead refer to Buyer and its Affiliates from and after the Closing, (iii) for purposes of the Assumed Loans only, a Transferred Adviser Representative’s “Total GDC” will be calculated in a manner consistent with how “Total GDC” was calculated by the Seller and its applicable Affiliates immediately prior to the Closing for each Transferred Adviser Representative, and (iv) with respect to each Assumed Loan, for the “Full Year” or “Partial Year” during which the Closing Date occurs, a Transferred Adviser Representative’s “Total GDC” for such “Full Year” or “Partial Year”, as applicable, shall include both the “Total GDC” produced by such Transferred Adviser Representative during such “Full Year” or “Partial Year” prior to Closing at the Seller or its applicable Relevant Affiliate and the “Total GDC” produced by such Transferred Adviser Representative during such “Full Year” or “Partial Year” from and after the Closing at the Buyer or its Affiliates. Promptly following the Closing, the Seller shall, or shall cause an Affiliate to, provide the Buyer with a schedule setting forth the “Total GDC” produced by such Transferred Adviser Representative during the “Full Year” or “Partial Year” in which the Closing occurs and prior to Closing.

SECTION 7.24. Margin Payments . Subject to the Buyer’s continuing obligation to provide commercially reasonable infrastructure and field related support services generally consistent with industry standards to the Transferred Adviser Representatives who remain appointed by Buyer to facilitate such Transferred Adviser Representatives’ ability to service the Pre-Closing Insurance Contracts, the Seller shall make each of the payments set forth on Section 7.24 of the Disclosure Schedule to the Buyer within five Business Days of the payment date listed thereon, in cash by wire transfer of immediately available funds to an account specified by the Buyer in writing to the Seller. The Buyer shall have a reasonable opportunity to cure any breach of this Section 7.24 upon receipt of reasonable notice of such breach from the Seller. For the avoidance of doubt, nothing in this provision shall be construed to imply that Buyer has any policy-related servicing obligations to owners of the Pre-Closing Insurance Contracts.

SECTION 7.25. Retained Leases . The Seller has identified the Shared Affiliate Leased Real Properties. During the Interim Period, the Parties will use commercially reasonable efforts

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and cooperate in good faith with each other to separately demise the applicable Shared Affiliate Leased Real Property (including, without limitation, seeking landlord consent to such demising to the extent required under any applicable Relevant Affiliate Lease) such that the Business will be operated in space that is separated from the non-Business operations of the applicable Relevant Affiliate, the costs of any such demising to be solely borne by the Seller (provided that the parties shall work in good faith to mitigate such costs). In the event it is mutually determined by both Parties that separately demising any such Shared Affiliate Leased Real Property is impracticable or is unacceptable for any reason, the Parties shall cooperate in good faith with each other to determine which Party shall thereafter occupy the applicable Shared Affiliate Leased Real Property to the exclusion of the other Party; provided, however, that any Shared Affiliate Leased Real Property that is a Material Leased Real Property shall be assumed by Buyer on the Closing Date (subject to the provisions of Section 7.19). Any such Shared Affiliate Leased Real Properties (i) which are so separately demised or (ii) with respect to which it is determined that the Relevant Affiliate shall continue to solely occupy the space shall constitute a “ Retained Lease ”. With respect to any Material Leased Real Property that is a Shared Affiliate Leased Real Property, Seller and any Relevant Affiliate shall have the right, at its option, to continue to occupy the same for the duration of the term of the applicable Relevant Affiliate Lease so assigned to the Buyer, provided that Seller and/or any such Relevant Affiliate so occupying the Shared Affiliate Leased Real Property shall bear its pro rata costs, on a per rentable square foot basis, of rent and other charges due and payable under the applicable Relevant Affiliate Lease or in connection with such occupancy of the space. Each of the Seller, on the one hand, and the Buyer, on the other hand, shall be responsible for fifty percent (50%) of all reasonable, out-of-pocket costs incurred by the re-locating Party in connection with any such relocation, including, without limitation, moving expenses and market rent paid for the replacement premises, solely to the extent such costs, in the aggregate, exceed the costs that would have been incurred by such Party had such Party remained in the Shared Affiliate Leased Real Property.

SECTION 8. TAX MATTERS .

SECTION 8.1. Preparation and Filing of Tax Returns .

(r) Tax Returns of an Affiliated Group . The Seller, at its sole cost and expense, shall file or cause to be filed when due (1) all Tax Returns for any Affiliated Group that includes the Company and the Purchased Property and (2) all other Tax Returns of the Company that are due on or before the Closing Date and pay or cause to be paid when due all Taxes shown on such Tax Returns. The positions reflected on such Tax Returns shall, to the extent permitted by applicable Law, be consistent with past practice of the Seller and its Affiliates.

(s) Tax Periods Ending on or Before the Closing Date . The Seller, at its sole cost and expense, shall prepare, or cause to be prepared, and provide to the Buyer for review, not less than thirty (30) days before the due date for such Tax Returns, taking into account any available extensions, drafts of all Income Tax Returns of the Company for all taxable periods

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ending on or before the Closing Date that are not described in Section 8.1(a) . The positions reflected on such Income Tax Returns shall, to the extent permitted by applicable Law, be consistent with past practice of the Company. The Buyer shall provide any comments on such draft Income Tax Returns within ten (10) days after receipt and the Seller shall consider in good faith the Buyer’s reasonable comments prior to filing or causing the filing of such Income Tax Returns. The Buyer shall file, or cause to be filed, such Income Tax Returns and the Seller shall cause to be paid when due all Taxes shown on such Tax Returns.

(t) Tax Periods Ending on or Before the Closing Date; Straddle Periods . The Buyer, at its sole cost and expense, shall prepare, or cause to be prepared, and provide to the Seller for review, not less than thirty (30) days before the due date for such Tax Returns, taking into account any available extensions, drafts of all Tax Returns of the Company for all Straddle Periods and for taxable periods ending on or before the Closing Date that are not described in either Section 8.1(a) or Section 8.1(b) . The positions reflected on such Tax Returns shall, to the extent permitted by applicable Law, be consistent with past practice of the Company. The Seller shall provide any comments on such draft Tax Returns within ten (10) days after receipt and the Buyer shall consider in good faith Seller’s reasonable comments prior to filing or causing the filing of such Tax Returns. The Seller shall pay to the Buyer, within five (5) days following any demand by the Buyer, with respect to such Tax Returns, an amount equal to the portion of any Taxes allocable to the Pre-Closing Period, and the Buyer shall file, or cause to be filed, such Tax Returns.

SECTION 8.2. Cooperation in Preparing and Filing Tax Returns, Participating in Tax Contests, and Other Tax Matters .

(c) The Buyer and the Seller shall, and shall each cause their respective Affiliates to, provide to the other Party such cooperation and information, as and to the extent reasonably requested, in connection with preparing, reviewing and filing of any Tax Return, amended Tax Return or claim for refund, determining Liabilities for Taxes or a right to refund of Taxes, or in conducting any Tax Contest. Such cooperation and information shall include providing copies of all relevant portions of relevant Tax Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings and other determinations by Governmental Entities relating to Taxes, and relevant records concerning the ownership and Tax basis of property, which any such Party may possess. Each Party will retain all Tax Returns, schedules, work papers, and all material records and other documents relating to Tax matters of the Company for the Tax period first ending after the Closing Date and for all prior Tax periods until the later of either (i) the expiration of the applicable statute of limitations (and, to the extent notice is provided with respect thereto, any extensions thereof) for the Tax periods to which the Tax Returns and other documents relate or (ii) six (6) years following the due date (without extension) for such Tax Returns. Thereafter, the Party holding such Tax Returns or other documents may dispose of them; provided that such Party shall give to the other Party thirty (30) days’ written notice of such disposal and provide the other Party with the opportunity to copy (at such other Party’s cost) such Tax Returns or other documents. Each

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Party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Any information obtained under this Section 8.2(a) shall be kept confidential except as otherwise may be necessary in connection with the filing of Tax Returns or claims for refunds of Taxes or in conducting a Tax Contest or as otherwise may be required by applicable Law or the rules of any stock exchange.

(d) Notwithstanding any provision in this Agreement to the contrary, from and after the Closing Date, each of the Seller and the Buyer agrees to give the other written notice of the receipt by such Person or any of its Affiliates of any notice that involves the assertion of any claim concerning Taxes, or the commencement of any Tax Contest, in respect of which indemnity for Loss may be sought pursuant to Section 9.2(a) within five (5) days of receipt of such written notice.

(e) Notwithstanding any provision in this Agreement to the contrary, with respect to any Tax Contest involving only one or more taxable periods that end on or before the Closing Date, the Seller shall have the right to represent the interests of the Company in such Tax Contest and settle all issues in its discretion, and to employ counsel of its choice at its expense; provided , that the Seller shall not pay, discharge, settle, compromise, litigate, or otherwise dispose of any item subject to such Tax Contest in a manner that may adversely affect the Buyer or any of its Affiliates without obtaining the prior written consent of the Buyer, which consent may be withheld, conditioned, or delayed. Notwithstanding the preceding sentence, the Buyer shall be entitled, at the Buyer’s expense, to participate in the conduct of any such Tax Contest.

(f) Subject to Section 8.2(c) , and notwithstanding any provision in this Agreement to the contrary, the Buyer shall have the sole right to represent the interests of the Company and settle all issues in its sole discretion, and to employ counsel of its choice at its expense, in any Tax Contest; provided , that the Buyer shall not pay, discharge, settle, compromise, litigate, or otherwise dispose of any item subject to such Tax Contest in a manner that would give rise to a Loss for which indemnity may be sought pursuant to Section 9.2(a) without obtaining the prior written consent of the Seller, which consent shall not be unreasonably withheld, conditioned, or delayed.

SECTION 8.3. Allocation of Certain Taxes .

(j) If the Company is permitted, but not required, under applicable Tax Law to treat the Closing Date as the last day of a taxable period, then the Parties shall treat that day as the last day of a taxable period.

(k) In the case of Taxes arising in a taxable period of the Company that includes, but does not end on, the Closing Date, except as provided in Section 8.3(c) , the allocation of such Taxes between a Pre-Closing Period and a Post-Closing Period shall be made on the basis of an interim closing of the books as of the end of the Closing Date.

(l) In the case of any Taxes based on capitalization, debt or shares of stock authorized, issued or outstanding, or any real property, personal property or similar ad valorem

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Taxes that are payable for a taxable period that includes, but does not end on, the Closing Date, the portion of such Tax that relates to a Pre-Closing Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on (and including) the Closing Date and the denominator of which is the number of days in the entire taxable period. However, any such Taxes attributable to any property that was owned by the Company at any point in the Pre‑Closing Period, but is not owned as of the Closing Date, shall be allocated entirely to the Pre-Closing Period.

(m) Notwithstanding the foregoing provisions of this Section 8.3(d) , all Taxes attributable to (A) actions taken by the Buyer or its Affiliates on the Closing Date after the Closing other than in the ordinary course of business, or (B) the making of any election under Section 338(g) of the Code (or any corresponding elections under state or local law) for the Company, shall be allocated to the Post-Closing Period.

SECTION 8.4. Transfer Taxes . Notwithstanding Section 8.1 , which shall not apply to Tax Returns relating to Transfer Taxes, the Person required under applicable Law to file any Tax Return relating to Transfer Taxes required as a result of the transfer to the Buyer of the Shares or the Purchased Property, or with respect to any other transfers contemplated herein, shall timely file such Tax Return. The Buyer and the Seller shall cooperate in the preparation and filing of any such Tax Returns, and (i) the Buyer or its Affiliates shall remit fifty percent (50%) of the Taxes shown on such Tax Returns filed by the Seller (or the amount of any additional Transfer Taxes attributable to any adjustment with respect to any such Tax Returns filed by the Seller by any Taxing Authority) to the Seller within fifteen (15) days of the Buyer’s receipt of a copy of such Tax Returns (or evidence of the payment by the Seller (or any Affiliate thereof) of such additional Transfer Taxes) and (ii) the Seller shall remit fifty percent (50%) of the Taxes shown on such Tax Returns filed by the Buyer or any of its Affiliates (or the amount of any additional Transfer Taxes attributable to any adjustment with respect to such Tax Returns filed by the Buyer or any of its Affiliate by any Taxing Authority) to the Buyer within fifteen (15) days of the Seller’s receipt of a copy of such Tax Returns (or evidence of the payment by the Buyer (or an Affiliate thereof) of such additional Transfer Taxes).

SECTION 8.5. Termination of Tax Sharing Agreements . Prior to the Closing, the Seller shall ensure that any and all Tax allocation agreements, Tax sharing agreements, or other similar arrangements in respect of Taxes shall be terminated with respect to the Company as of the Closing Date, and, from and after the Closing Date, the Company shall have no obligation to make any payments in respect to such arrangements, or otherwise shall have any other obligations with respect to such arrangements, to any Person for any period.

SECTION 8.6. Refunds .

(l) Any refund of Taxes (including any interest thereon) that relates to the Company that is attributable to a Post-Closing Period shall be the property of the Company and shall be retained by the Company (or promptly paid by the Seller to the Company if any such

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refund (or interest thereon) is received by the Seller or any of its Affiliates). Without limiting the generality of the preceding sentence, any such refund or other benefit realized by the Company or an Affiliate of the Company in a Post-Closing Period that results from the carryforward of any Tax attribute from a Pre-Closing Period shall be the property of the Company or Affiliate of the Company and shall be retained by the Company or Affiliate of the Company, as applicable.

(m) If, after the Closing Date, the Company or any of its Affiliates receives a refund of any Tax that is attributable to a Pre-Closing Period of the Company, then the Company or the Affiliate of the Company, as the case may be, promptly shall pay or cause to be paid to the Seller the amount of such refund together with any interest thereon; provided , however , that, to the extent that such refund of Taxes was taken into account in calculating the Post-Closing Adjustment Amount, such refund (or such portion of such refund) shall be the property of the Company or Affiliate of the Company and shall be retained by the Company or Affiliate of the Company, as applicable.

(n) In applying Sections 8.6(a) and (b), any refund of Taxes (including any interest thereon) for a taxable period that includes but does not end on the Closing Date shall be allocated between the Pre-Closing Period and the Post-Closing Period in accordance with the principles of Section 8.3 .

SECTION 8.7. Allocation Under Section 1060 of the Code . As soon as practicable after the Closing, the Buyer shall prepare and deliver to the Seller a statement allocating the Purchase Price (and any liabilities assumed hereunder and other items that are relevant for applicable Tax purposes) among the Shares and the Purchased Property in accordance with Section 1060 of the Code (the “ Allocation ”). The Allocation shall be deemed to be accepted by, and shall be conclusive and binding on, the Seller unless the Seller shall have delivered within twenty (20) days after the delivery of the Allocation to the Seller a written notification to the Buyer stating each item that the Seller objects to in the Allocation (it being understood that any amounts not disputed shall be final and binding), in which case the Buyer and the Seller shall use commercially reasonable efforts to resolve such dispute within twenty (20) days. In the event that the Buyer and the Seller are unable to resolve such dispute within twenty (20) days, the Buyer and the Seller shall jointly retain the Independent Expert to resolve the disputed items. Upon resolution of the disputed items, the allocation reflected on the Allocation shall be adjusted to reflect such resolution. For purposes of this Section 8.7 , the costs, fees and expenses of the Independent Expert shall be borne equally by (i) the Buyer and (ii) the Seller. The Buyer and the Seller further agree to act in accordance with the Allocation in any Tax Returns and any other related filings. The Seller, and the Buyer, as may be the case, shall promptly notify the other Party of the commencement and progress of any Tax Contest relating to the Allocation. The Buyer and the Seller further agree to allocate any subsequent adjustments to the Purchase Price in accordance with the methodology of this Section 8.7 .

SECTION 8.8. Section 338(h)(10) Election .

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(a) As soon as practicable after the Parties have agreed to the allocation of the Purchase Price in accordance with Section 8.7 , the Buyer shall make a good faith determination as to the viability of a Section 338(h)(10) Election with respect to the purchase of the Shares. If the Buyer determines that a Section 338(h)(10) Election should be made with respect to the purchase of the Shares, the Buyer shall promptly communicate that determination to the Seller in writing, and the Parties thereafter shall cooperate in good faith to determine (i) the aggregate deemed sale price (as defined under Treasury Regulations Section 1.338-4) with respect to the Shares of the Company and (ii) the amount of additional consideration payable to the Seller on account of the Buyer making the Section 338(h)(10) election (such additional consideration, the “ Tax Adjustment ”).

(b) Upon the Parties’ making a final agreed determination of the Tax Adjustment pursuant to Section 8.8(a) , the Buyer shall decide, at its sole discretion, whether the Section 338(h)(10) Election will be made with respect to the purchase of the Shares. If the Buyer decides that such a Section 338(h)(10) Election will be made, (i) the Buyer shall promptly communicate that decision to the Seller in writing, (ii) the Buyer shall be responsible for the preparation of all Section 338 Forms in accordance with applicable Tax Law and the terms of this Agreement and shall deliver such Section 338 Forms to the Seller at least thirty (30) days prior to the date such Section 338 Forms are required to be filed, (iii) the Buyer shall consider in good faith any changes to the Section 338 Forms that are reasonably requested by the Seller, (iv) the Buyer and the Seller (or its Affiliate) shall jointly file all Section 338 Forms in accordance with applicable Tax Laws and the terms of this Agreement, (v) the Buyer and the Seller (or its Affiliate) shall execute and deliver to each other such documents or forms (including executed Section 338 Forms) as are reasonably requested and are required by applicable Law in order to properly complete the Section 338 Forms at least twenty (20) days prior to the date such Section 338 Forms are required to be filed, (vi) the Buyer and the Seller (or its Affiliate) shall provide each other with such information as such other Party reasonably requests in order to prepare the Section 338 Forms within fifteen (15) days after such request for such information, and (vii) the Buyer and the Seller (or its Affiliate) shall report the transfers under this Agreement consistent with such election and shall take no position contrary thereto unless required to do so by applicable Tax Law. Upon making a timely, irrevocable, and effective Section 338(h)(10) Election with respect to the purchase of the Shares in accordance with this Section 8.8(b) , the Buyer shall promptly pay the Tax Adjustment to the Seller.

(c) The Seller agrees that any income or gain recognized as a result of, and in accordance with, making the Section 338(h)(10) Election pursuant to this Section 8.8 will be included in the Tax Return that will be filed for the Tax period in which the sale of the Shares to the Buyer occurs in accordance with applicable Law, and any resulting Taxes will be paid by the Seller or the Affiliated Group of which the Seller is a member

(d) If a Section 338(h)(10) Election is not made with respect to the purchase of the Shares pursuant to this Section 8.8, the Seller shall make, or shall cause to be made, a valid and timely election pursuant to Treasury Regulations Sections 1.1502-36(d)(6)(i)(A) and

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1.1502-36(e)(5) to reduce the basis in the Shares to the extent required so that the Company will experience a reduction of Tax attributes as described in Treasury Regulations Section 1.1502 36(d) that will be one-half of what the reduction of Tax attributes would have been in the absence of such election. The Seller shall provide the Buyer with copies of all such elections made with respect to the Company within thirty (30) days after the filing of such elections.

SECTION 9. INDEMNIFICATION .

SECTION 9.1. Survival .

(g) Except as otherwise set forth in this Section 9.1(a) , all representations and warranties contained in this Agreement shall survive the Closing for a period of eighteen (18) months; provided , however , that (i) the representations and warranties contained in (i) Section 3.1(a) (Organization, Authority and Enforceability), Section 3.3 (Title to Shares), Section 3.4 (Title to Purchased Property), Section 3.5 (Capitalization), Section 3.7 (Brokers), Section 3.16 (Taxes) (all of the foregoing representations and warranties (other than the representations and warranties contained in Section 3.16 (Taxes)) collectively, the “ Seller Fundamental Representations ”), Section 6.1 (Organization, Authority and Enforceability) and Section 6.8 (Brokers) (each of the representations and warranties contained in Section 6.1 and Section 6.8 , the “ Buyer Fundamental Representations ”) shall survive the Closing until the date which is 30 days after the expiration of the applicable statute of limitations (including any extensions thereof).

(h) Except as otherwise set forth herein, (i) the covenants and agreements contained in this Agreement that contemplate performance on or prior to the Closing shall survive until the Closing for a period of six (6) months, and (ii) the covenants and agreements that contemplate performance following the Closing shall survive in accordance with their terms, or in the event there is no term, indefinitely.

(i) The period for which a representation or warranty, covenant or agreement survives the Closing is referred to herein as the “ Applicable Survival Period .” In the event notice of a claim for indemnification under Section 9.2 or Section 9.3 is given with reasonable specificity within the Applicable Survival Period, the representation or warranty, covenant or agreement that is the subject of such indemnification claim shall survive with respect to such claim until such claim is finally resolved; provided that the Indemnitee making such claim is diligently pursuing such claim.

SECTION 9.2. Indemnification by the Seller .

(n) Subject to the limitations set forth herein, after the Closing, the Seller shall indemnify and defend the Buyer against, and shall hold the Buyer, its Representatives and its Affiliates (including from, and after the Closing, the Company), each of their respective shareholders, officers, directors, employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ Buyer Indemnitees ”) harmless from, any actual loss, liability, claim, charge, action, suit, proceeding, assessed interest, penalty, damage,

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Tax or expense (collectively, “ Losses ”) suffered or incurred by or imposed on such Buyer Indemnitee to the extent arising out of, without duplication, (i) any breach of any representation and warranty of the Seller contained in Section 3 or the certificate delivered by the Seller to the Buyer pursuant to Section 11.1(c) , (ii) any breach of the covenants or agreements of the Seller contained in this Agreement, (iii) any Tax imposed on or relating to the Company with respect to any Pre-Closing Period, (iv) the Seller’s share of any Transfer Taxes pursuant to Section 8.4 , (v) any liabilities of the Company for the Taxes of another Person imposed pursuant to (A) Treasury Regulations Section 1.1502-6 (or any affiliated, combined, consolidated, unitary or similar provision of applicable state, local or foreign Law) with respect to any Affiliated Group that the Company was a member at the time of, or prior to, the Closing or (B) any contract primarily relating to Taxes entered into prior to the Closing, or (C) operation of applicable Law with reference to a pre-Closing event or act, (vi) any matter that (A) is disclosed or was required to be disclosed in Sections 3.6(a) , 3.8 , or 3.9 of the Disclosure Schedule (ignoring any “material”, “material adverse effect”, “Material Adverse Effect” or other similar qualification contained in or otherwise applicable to such representation or warranty for purposes of determining whether a matter was required to be disclosed therein) or (B) involves a claim by any Person, known or unknown, involving substantially the same set of facts or circumstances as were involved in the matters described in the preceding clause (A) and occurring prior to the Closing or relating to clause (viii) below, ( (A) and (B) collectively, the “ Retained Claims ”), (vii) any Loss resulting from any Excluded Liability or Excluded Property; (viii) any liability of the Company arising from any Pre-Closing Period; and (ix) in the event that the Separation has not occurred as of the Closing and the Seller does not cause Parent Entity to execute and deliver to the Buyer the Parent Entity Side Letter prior to the Separation pursuant to Section 13.9 , future actions of Parent Entity or its Affiliates that would have constituted breaches of the Parent Entity Side Letter by Parent Entity or its Affiliates had such letter been executed and delivered to the Buyer.

(o) The Seller shall not be liable for any Loss or Losses unless the claim for such Loss or Losses is brought within the Applicable Survival Period. The Seller shall not be liable for indemnification under Section 9.2(a)(i) , (i) unless and until the amount of Losses arising under Section 9.2(a)(i) from any matter or series of matters relating to the same underlying fact, circumstance, action or event exceeds $50,000 (“ Covered Losses ”), and (ii) unless and until the aggregate amount of all Covered Losses incurred by the Buyer Indemnitees exceeds $2,000,000 (the “ Deductible ”), and then only to the extent that such Covered Losses exceed the Deductible; provided that the cumulative indemnification obligations of the Seller under Section 9.2(a)(i) shall in no event exceed an amount equal to $20,000,000 (the “ Cap ”); provided , that the cumulative indemnification obligations of the Seller under Section 9.2(a)(viii) shall in no event exceed an amount equal to $20,000,000; provided further , that the cumulative indemnification obligations of the Seller under Section 9.2(a) shall in no event exceed an amount equal to the Purchase Price (the “ Indemnity Cap ”). Notwithstanding the foregoing, other than the first sentence of this Section 9.2(b) and the Indemnity Cap, the limitations set forth in this

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Section 9.2(b) shall not apply to any claim for indemnification with respect to any breach of any Seller Fundamental Representation, or in the case of fraud or intentional breach by the Seller.

(p) The rights of the Buyer to indemnification, payment of Losses or any other remedy under this Agreement shall not be impacted or limited by any knowledge that the Buyer may have acquired, or could have acquired, whether before or after the closing date, nor by any investigation or diligence by the Buyer.

(q) Except as provided under (i) the provisions hereof providing for equitable remedies, (ii) the provisions of Section 2.3 , (iii) the provisions of Sections 7.7 and 7.21 and (iv) the provisions of any Ancillary Agreement, the Buyer acknowledges and agrees that, should the Closing occur, except in the case of fraud or intentional breach by the Seller, the Buyer’s and each Buyer Indemnitee’s sole and exclusive remedy with respect to any and all matters arising out of, relating to or connected with this Agreement, the Company and its respective assets and liabilities, the Purchased Property, the transactions contemplated hereby and the Shares shall be pursuant to the indemnification provisions set forth in this Section 9 .

SECTION 9.3. Indemnification by the Buyer .

(h) Subject to the limitations set forth herein, after the Closing, the Buyer shall indemnify and defend the Seller, its Representatives and Affiliates, each of their respective shareholders, officers, directors, employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ Seller Indemnitees ”) against, and shall hold each Seller Indemnitee harmless from, any Loss suffered or incurred by or imposed on such Seller Indemnitee to the extent arising out of (i) any breach of any representation and warranty of the Buyer contained in Section 6 , (ii) any breach of any covenant or agreement of the Buyer contained in this Agreement, (iii) the use by the Buyer or its Affiliates (including, from and after the Closing, the Company) of any of the Seller Names and Marks, and (iv) any Assumed Liabilities or Purchased Property.

(i) The Buyer shall not be liable for any Loss or Losses unless the claim for such Loss or Losses is brought within the Applicable Survival Period. The Buyer shall not be liable for indemnification under Section 9.3(a)(i) , (i) unless the Loss arising under Section 9.3(a)(i) is a Covered Loss, and (ii) unless and until the aggregate amount of all Covered Losses incurred by the Seller Indemnitees exceeds the Deductible, and then only to the extent that such Covered Losses exceed the Deductible; provided that the cumulative indemnification obligations of the Buyer and the Company collectively under Section 9.3(a)(i) shall in no event exceed the Cap; provided further , that the cumulative indemnification obligations of the Buyer and the Company collectively under Section 9.3(a) shall in no event exceed the Indemnity Cap. Notwithstanding the foregoing, the limitations set forth in this Section 9.3(b) shall not apply to any claim for indemnification with respect to any Buyer Fundamental Representation or in the case of fraud or intentional breach by the Buyer.

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(j) Except as set forth in Section 13.7 , the Seller acknowledges and agrees that, should the Closing occur, except in the case of fraud or intentional breach by the Buyer, the Seller’s and each Seller Indemnitee’s sole and exclusive remedy with respect to any and all matters arising out of, relating to or connected with this Agreement, the Company and their respective assets and liabilities, the Purchased Property, the transactions contemplated hereby and the Shares (other than as expressly provided in Sections 7.7 and 7.21 ) shall be pursuant to the indemnification provisions set forth in this Section 9 .

SECTION 9.4. Indemnification Procedure for Third Party Claims .

(g) In the event that any claim or demand, or other circumstance or state of facts that could give rise to any claim or demand, for which an Indemnitor may be liable to an Indemnitee hereunder is asserted or sought to be collected, in each case, in writing, by a third party (“ Third Party Claim ”), the Indemnitee shall promptly, but in no event more than 30 days following such Indemnitee’s receipt of a Third Party Claim, notify the Indemnitor in writing of such Third Party Claim (“ Notice of Claim ”); provided , however , that a failure by an Indemnitee to provide timely notice shall not affect the rights or obligations of such Indemnitee other than if the Indemnitor shall have been actually prejudiced as a result of such failure. The Notice of Claim shall (i) state that the Indemnitee has paid or properly accrued Losses or anticipates that it will incur liability for Losses for which such Indemnitee is entitled to indemnification pursuant to this Agreement and (ii) specify in reasonable detail each individual item of Loss included in the amount so stated, the date such item was paid or properly accrued, the basis for any anticipated Loss and the nature of the misrepresentation, breach of warranty, breach of covenant or claim to which each such item is related and the computation of the amount to which such Indemnitee claims to be entitled hereunder. The Indemnitee shall enclose with the Notice of Claim a copy of all papers served with respect to such Third Party Claim, if any, and any other documents evidencing such Third Party Claim.

(h) The Indemnitor shall have the right, but not the obligation, to assume the defense or prosecution of such Third Party Claim and any litigation resulting therefrom with counsel of its choice and at its sole cost and expense (a “ Third Party Defense ”). If the Indemnitor assumes the Third Party Defense in accordance herewith, (i) the Indemnitee may retain separate co-counsel (reasonably acceptable to the Indemnitor) at its sole cost and expense and participate in the defense of the Third Party Claim, but the Indemnitor shall control the investigation, defense and settlement thereof, (ii) the Indemnitee will not file any papers or consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnitor and (iii) the Indemnitor will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim to the extent such judgment or settlement provides for equitable relief or includes an admission of liability or fault without the prior written consent of the Indemnitee, such consent not to be unreasonably withheld, conditioned or delayed. The Parties will use commercially reasonable efforts to minimize Losses from Third Party Claims and will act in good faith in responding to, defending against, settling or otherwise dealing with such claims. The Parties will

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also cooperate in any such defense and give each other reasonable access to all information relevant thereto. Whether or not the Indemnitor has assumed the Third Party Defense, such Indemnitor will not be obligated to indemnify the Indemnitee hereunder for any settlement entered into or any judgment that was consented to without the Indemnitor’s prior written consent.

(i) If the Indemnitor does not assume the Third Party Defense, the Indemnitee will be entitled to assume the Third Party Defense, at the expense of the Indemnitor, upon delivery of notice to such effect to the Indemnitor; provided that (i) the Indemnitor shall have the right to participate in the Third Party Defense at its sole cost and expense, but the Indemnitee shall control the investigation, defense and settlement thereof, (ii) the Indemnitor may at any time thereafter assume the Third Party Defense, in which event the Indemnitor shall bear the reasonable fees, costs and expenses of the Indemnitee’s counsel incurred prior to the assumption by the Indemnitor of the Third Party Defense and (iii) the Indemnitor will not be obligated to indemnify the Indemnitee hereunder for any settlement entered into or any judgment that was consented to without the Indemnitor’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed.

SECTION 9.5. Indemnification Procedures for Non-Third Party Claims . The Indemnitee shall notify the Indemnitor in writing promptly of its discovery of any matter that does not involve a Third Party Claim. Such notice shall (a) state that the Indemnitee has paid Losses or anticipates that it will incur liability for Losses for which such Indemnitee is entitled to indemnification pursuant to this Agreement, and (b) specify to the extent practicable in reasonable detail each individual item of Loss included in the amount so stated, the date such item was paid, the basis for any anticipated liability and the nature of the misrepresentation, breach of warranty, breach of covenant or claim to which each such item is related and the computation of the amount to which such Indemnitee claims to be entitled hereunder. The Indemnitee will reasonably cooperate and assist the Indemnitor in determining the validity of any claim for indemnity by the Indemnitee and in otherwise resolving such matters. Such assistance and cooperation will include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.

SECTION 9.6. Calculation of Indemnity Payments; Mitigation .

(e) The amount of Losses payable under this Section 9 by the Indemnitor shall be reduced by any and all amounts recovered by the Indemnitee under applicable insurance policies or from any other Person alleged to be responsible therefor. If the Indemnitee receives any amounts under applicable insurance policies or from any other Person alleged to be responsible for any Losses, subsequent to an indemnification payment by the Indemnitor, then such Indemnitee shall promptly reimburse the Indemnitor for any payment made or expense

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incurred by such Indemnitor in connection with providing such indemnification up to the amount received by the Indemnitee.

(f) The amount of any Loss incurred by an Indemnitee shall be reduced to take account of any net cash Tax benefit attributable to such Loss actually realized by the Indemnitee or its Affiliates (without treating the Company as an Affiliate of the Seller, but treating the Company as an Affiliate of the Buyer).

(g) The Indemnitee shall, and shall cause its Affiliates to, take all necessary steps to mitigate any Loss to the extent required under applicable Law upon becoming aware of any event that would reasonably be expected to, or does, give rise to such Loss.

(h) In no event shall any Party be liable for (and the term Losses shall exclude) any lost profits, punitive, consequential, special or exemplary damages (collectively, “ Consequential Damages ”) unless, and solely to the extent that, a Party becomes obligated to pay such damages to a third party that is not an Affiliate of any Party; provided , however , that solely in respect of indemnification claims pursuant to 9.2(a)(ix) , the Seller shall be liable for (and the term Losses shall include) any reasonably foreseeable Consequential Damages.

SECTION 9.7. Characterization of Indemnification Payments . Except as otherwise required by applicable Law, the Parties shall treat any payment made pursuant to this Section 9 as an adjustment to the Purchase Price for all Tax Purposes.

SECTION 9.8. Assignment of Claims . If any Indemnitee receives any indemnification payment pursuant to this Section 9 , at the election of the Indemnitor, such Indemnitee shall assign to the Indemnitor all of its claims for recovery against third Persons as to such Losses, whether by insurance coverage, contribution claims, subrogation or otherwise.

SECTION 9.9. Retained Claims .

(c) Following the Closing, the Seller shall, at its own expense, have the sole power to direct and control each Retained Claim, with counsel of its choosing. The Buyer Indemnitees shall have the right, but not the obligation, to participate in any such defense and to employ separate co-counsel (reasonably acceptable to the Seller) of their own choosing and may participate in any such defense at their own expense.

(d) The Buyer Indemnitees and the Seller shall cooperate in order to ensure the proper and adequate defense of the Retained Claims, including by providing access to each other’s relevant business records and other documents and employees.

(e) The Buyer Indemnitees and the Seller shall use commercially reasonable efforts to avoid production of confidential information (consistent with applicable Law), and to cause all communications among employees, counsel and others representing any party to a Retained Claim to be made so as to preserve any applicable attorney client or work product privileges.

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(f) To the extent the Company or the Buyer and each of the Buyer Indemnitees are entitled to reimbursement under an insurance policy covering the Retained Claim or the attorney’s fees and expenses of the Seller in respect of the Retained Claim, the Company, the Buyer and each of the Buyer Indemnitees shall assign and transfer such amounts to the Seller upon receipt thereof.

(g) Notwithstanding anything to the contrary set forth in this Section 9.9 , the Seller will not consent to the entry of any judgment or enter into any settlement with respect to the Retained Claim to the extent such judgment or settlement provides for equitable relief, includes an admission of liability or fault or purports to restrict the future operations of the Company without the prior written consent of the Buyer, such consent not to be unreasonably withheld, conditioned or delayed.

SECTION 9.10. Materiality . For purposes of this Section 9 , for purposes of determining whether there has been a breach of any representation or warranty contained in this Agreement or any certificate delivered pursuant to Sections 11.1(c) and 11.2(c) , or the amount of any Loss related to a breach of any representation or warranty contained in this Agreement or any certificate delivered pursuant to Sections 11.1(c) and 11.2(c) , the representations and warranties contained in this Agreement shall be considered without regard to any “material”, “material adverse effect”, “Material Adverse Effect” or other similar qualification contained in or otherwise applicable to such representation or warranty.

SECTION 10. EMPLOYMENT MATTERS .

SECTION 10.1. Employee Matters .

(r) Terms and Conditions of Offers of Employment .

(i) The Seller shall provide Buyer with updated versions of Sections 1.1(c) , (e) and (f) of the Disclosures Schedule so that they set forth a true and complete list of each Adviser Representative, Broker and Dedicated Employee, as applicable, no later than five (5) days prior to Closing. The Seller shall, and shall cause the Relevant Affiliates to, use commercially reasonable efforts and cooperate with the Buyer, in each case at the Buyer’s request, in compiling and distributing the offers contemplated by this Section 10.1 to the applicable Business Associates, including, by promptly (and in all events within five (5) Business Days of receiving such request) providing access to such information as is reasonably necessary for the Buyer to prepare and/or distribute such offers.

(ii) No later than thirty (30) days following the date of this Agreement (or, in respect of Adviser Representatives and Dedicated Employees that become such following the date of this Agreement in accordance with the terms hereof, no later than thirty (30) days following the date that a Seller informs the Buyer of the hiring of such Adviser Representatives or Dedicated Employee), the Buyer shall, or shall cause an Affiliate thereof to, offer employment, effective as of the Closing Date, to each such Adviser Representatives or Dedicated Employee who satisfactorily completes Buyer’s customary on-boarding process and standards

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(which on-boarding process and standards to be consistent with the on-boarding process and standards provided to the Seller or its counsel prior to the date hereof and applied by Buyer in a manner no less favorable to the Adviser Representatives than Buyer’s past practices and provided that no interviewing or assessment of skill set shall be conducted in connection with such processes), conditioned on such Person remaining an Adviser Representatives or Dedicated Employee as of the Closing Date, including each Adviser Representative and Dedicated Employee who is not actively at work as of the date that such offers of employment are made pursuant to the terms hereof due to vacation, sick leave or any other approved leave (individuals who accept such offer of employment and begin employment with the Buyer or its Affiliate are referred to herein as the “ Transferred Employees ”). With respect to each Adviser Representative and each Dedicated Employee who is on short, long-term disability or other approved leave as of the Closing Date and provided that such Person seeks to actively return to work within six (6) months of the Closing Date, the Sellers shall or shall cause the applicable Affiliate thereof to, effective as of the date that the Adviser Representative or Dedicated Employee actively returns to work, terminate the employment of, and the Buyer shall, or shall cause an Affiliate of the Buyer to, make an offer of employment to, such Dedicated Employee upon the date that the Adviser Representative or Dedicated Employee actively returns to work, subject to such Person’s satisfaction of Buyer’s customary on-boarding process, at which point such Person shall become a Transferred Employee. Notwithstanding anything herein to the contrary, Buyer may, with the prior written consent of the Sellers, make offers (A) of employment to employees of the Sellers and their respective Affiliates who are not Dedicated Employees prior to the Closing, and/or (B) to enter into Buyer’s standard statutory employee agent agreements to employees of the Seller and its Affiliates who are not Adviser Representatives prior to the Closing.

(iii) No later than thirty (30) days following the date of this Agreement (or, in respect of 403(b) Adviser Representatives that become such following the date of this Agreement in accordance with the terms hereof, no later than thirty (30) days following the date that a Seller informs the Buyer of the hiring of such 403(b) Adviser Representative), the Buyer shall, or shall cause an Affiliate thereof to, offer employment, effective as of the Closing Date, to each such 403(b) Adviser Representatives , in each case, who satisfactorily completes Buyer’s customary on-boarding process and standards (which on-boarding process and standards to be consistent with the on-boarding process and standards provided to the Seller or its counsel prior to the date hereof and applied by Buyer in a manner no less favorable to the Adviser Representatives than Buyer’s past practices), conditioned on such Person remaining a 403(b) Adviser Representatives as of the Closing Date, including each 403(b) Adviser Representative who is not actively at work as of the date that such offers of employment are made pursuant to the terms hereof due to vacation, sick leave or any other approved leave (individuals who accept such offer of employment and begin employment with the Buyer or its Affiliate are referred to herein as the “ 403(b) Transferred Adviser Representatives ”). With respect to each 403(b) Adviser Representative who is on short, long-term disability or other approved leave as of the Closing Date and provided that such Person seeks to actively return to work within six (6)

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months of the Closing Date, the Sellers shall or shall cause the applicable Affiliate thereof to, effective as of the date that the 403(b) Adviser Representative actively returns to work, terminate the employment of, and the Buyer shall, or shall cause an Affiliate of the Buyer to, make an offer of employment to, such 403(b) Adviser Representative upon the date that the 403(b) Adviser Representative actively returns to work, subject to such Person’s satisfaction of Buyer’s customary on-boarding process, at which point such Person shall become a 403(b) Transferred Adviser Representative.

(s) Dedicated Employee Offer Terms . Each offer made pursuant to Section 10.1(a)(ii) to a Dedicated Employee shall provide for a common law employment contract or employment with Buyer or one of its Affiliates as a common law employee and shall provide for (i) a base salary or hourly wage (as applicable) that is no less than such Dedicated Employee’s base salary or hourly wage as in effect immediately prior to the Closing Date, (ii) short-term incentive compensation opportunities that are no less favorable in the aggregate to the short-term incentive compensation opportunities provided to such Dedicated Employee immediately prior to the Closing Date, (iii) the same employee retirement and welfare benefits as provided to similarly situated employees of the Buyer and its Affiliates, (iv) substantially the same title, duties, responsibilities and authority as were provided to such Dedicated Employee by such Seller and its Affiliates immediately prior to the Closing Date, and (v) a work location that is no more than twenty five (25) miles from the Dedicated Employee’s work location immediately prior to the Closing Date. Notwithstanding anything herein to the contrary, in no event shall any offers made pursuant to Section 10.1(a)(ii) to a Dedicated Employee with the title at the Seller and its Affiliates of Managing Partner, Assistant Sales Director or other assistant manager provide that the Transferred Employee will be a General Manager or General Agent at Buyer or any of its Affiliates and all such Dedicated Employee shall be treated as common law employees and eligible to receive such retirement and welfare benefits applicable to common law employees of Buyer and its Affiliates.

(t) Adviser Representative and 403(b) Adviser Representative Offer Terms.

(i) Each offer made pursuant to Section 10.1(a)(ii) to an Adviser Representative shall provide for employment with Buyer or one of its Affiliates as a statutory employee and shall be in the form of a standard statutory employee agent agreement that will provide for (A) the same commission opportunities (including the same compensation grid) as applicable to similarly situated statutory employees of Buyer and its Affiliates, (B) the same employee retirement and welfare benefits as provided to similarly situated statutory employees of the Buyer and its Affiliates, (C) substantially the same title, duties and responsibilities as were provided to such Adviser Representative by such Seller and its Affiliates immediately prior to the Closing Date, (D) a work location that is no more than twenty five (25) miles from the Adviser Representative’s work location immediately prior to the Closing Date, and (E) only with respect to an Adviser Representative who is classified by the Seller or a Relevant Affiliate as a “functional manager”, the Seller and Buyer shall negotiate in good faith a structure that provides each such individual with compensation in respect of such individuals’ non-adviser

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responsibilities and duties that is at least equal to the base salary provided to such individual immediately prior to the Closing Date (provided that, for purposes of this clause (E) only, an Adviser Representative’s base salary shall not exceed one hundred percent (100%) of the median salary payable in respect of such non-adviser responsibilities and duties pursuant to a third-party market comparability survey or report).

(ii) Each offer made to a 403(b) Adviser Representative pursuant to Section 10.1(a)(iii) above shall be on such terms as may be determined by Buyer and its Affiliates in its sole discretion.

(u) Broker Offers . No later than thirty (30) days following the date of this Agreement (or, in respect of an Adviser Representative who becomes a Broker following the date of this Agreement, no later than thirty (30) days following the date that a Seller informs the Buyer that such person has become a Broker), the Buyer shall, or shall cause an Affiliate thereof to, offer to enter into (and, if accepted, enter into) a brokerage or similar agreement, effective as of the Closing Date, with each Broker on substantially similar terms in the aggregate as the brokerage or similar agreement in effect with the Sellers and their Affiliates as of the date of such offer. Buyer shall not voluntarily terminate such agreement other than for “cause” or nonperformance for a period of at least eighteen (18) months following the Closing Date.

(v) Compensation and Benefits . For a period of eighteen (18) months following the Closing Date, the employment of each Transferred Employee by the Buyer or any of its Affiliates shall be on terms and conditions set forth in Section 10.1(b) or (c) , as applicable; provided the Transferred Employee remains a common law or statutory employee of the Buyer, one of its Affiliates or the PEO (as applicable).

(w) Buyer Benefit Plans . As of the Closing Date, each Transferred Employee shall be eligible to participate in and, if such Transferred Employee elects (if an election to participate is required), shall commence participation in the employee benefit plans (within the meaning of Section 3(3) of ERISA), programs, human resources or other policies, contracts, fringe benefits, or arrangements (whether written or unwritten) of the Buyer or its Affiliates (collectively, “ Buyer Benefit Plans ”) on substantially the same basis as such Transferred Employee’s participation in comparable plans, programs and arrangements maintained by the Seller or its Affiliates immediately prior to the Closing Date. Notwithstanding the foregoing, participation in any Buyer Benefit Plan by a Transferred Adviser Representative and 403(b) Transferred Adviser Representative may be subject to production requirements, regardless of whether the same or similar requirements would have been applied under a plan of the Seller or its Affiliates immediately prior to the Closing Date; provided , that participation in such plans by such Transferred Adviser Representatives or 403(b) Transferred Adviser Representative shall be on terms and conditions no less favorable than those applicable to newly-hired statutory employees of the Buyer and its Affiliates, and provided , further , that no such production requirements shall be applied for purposes of determining such Transferred Adviser Representative’s and 403(b) Transferred Adviser Representative’s eligibility for participation in,

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or the subsidization of premiums paid for coverage under, the health and welfare plans of Buyer and its Affiliates (excluding group universal life insurance coverage) for a period of eighteen (18) months following the Closing Date. The Buyer shall waive, or use their reasonable commercial efforts to cause to be waived, any preexisting condition limitations, exclusions, actively at work requirements, waiting periods and evidence of insurability requirements under any Buyer Benefit Plan that is a welfare benefit plan in which Transferred Employees (and their eligible dependents) will be eligible to participate from and after the Closing Date. The Buyer shall recognize and credit, or shall use their commercially reasonable efforts to cause to be recognized and credited, the dollar amount of all co-payments/coinsurance, deductibles and similar expenses incurred by each Transferred Employee (and his or her eligible dependents) under the Plans during the year in which the Closing Date occurs for purposes of satisfying such year’s deductible and out of pocket maximum limitations under the relevant Buyer Benefit Plans in which they will be eligible to participate from and after the Closing Date.

(x) Service Credit . As of the Closing Date, each Transferred Employee shall be eligible to participate in and, for purposes of eligibility, vesting, level of benefits and benefit accrual under any Buyer Benefit Plans or human resources policies, and for any other service-related entitlements, the Buyer shall, or shall cause the applicable Affiliate thereof to, give each Transferred Employee full credit for such Transferred Employee’s service with the Seller or their respective Affiliates (as well as service with any predecessor employer, to the extent service with the predecessor employer is recognized by the Plans immediately prior to the Closing Date) to the same extent recognized by the Seller or its Affiliates immediately prior to the Closing Date, except to the extent that such credit would result in duplication of benefits (but explicitly including retiree medical plans), provided that no such service shall be credited for accrual purposes for any retiree medical or defined benefit pension plans of Buyer, their Affiliates or the PEO.

(y) Assumed Plans and Retention Awards . Following the Closing, the Buyer Parties shall, or shall cause their Affiliates to, assume, honor, fulfill and discharge the Seller’s and its Affiliates’ obligations under each Assumed Plan and Retention Awards.

(z) Paid Time-Off . To the extent permitted by Law, the Seller shall, or shall cause an Affiliate thereof to, make, promptly following the Closing Date, a cash payment to each Transferred Employee in settlement of each such individual’s earned but unused paid time-off as of the Closing Date as determined under the Seller’s (or its Affiliate’s) paid time-off or similar policy.

(aa) Direct Rollover . To the extent allowable by applicable Law, the Buyer shall use commercially reasonable efforts to cause the trustee of a defined contribution plan of the Buyer, if requested to do so by a Transferred Employee, to accept a direct “rollover” of all or a portion of such Transferred Employee’s distribution from the Seller’s or its Affiliates’ defined contribution plan (excluding securities, but including plan loans). Buyer shall use commercially reasonable efforts to similarly cause the trustee of any eligible retirement plan sponsored by the

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PEO to accept a “direct rollover” of all or a portion of such Transferred Employee’s distribution from the Seller’s or its Affiliates’ defined contribution plan (excluding securities, but including plan loans).

(bb) Severance .

(i) With respect to any Transferred Employee whose employment is terminated by the Buyer or any of its Affiliates within the eighteen (18) months immediately following the Closing Date, the Buyer shall provide, or shall cause their Affiliates to provide, severance payments and benefits to such Transferred Employee, that are no less favorable than the severance payments and benefits (and on no more restrictive terms) that such Transferred Employee would have been entitled to receive pursuant to the severance plan or agreement maintained by the Sellers or any of their respective Affiliates for the benefit of such Transferred Employee immediately prior to the Closing Date.

(ii) Notwithstanding anything herein to the contrary, in the event that any Dedicated Employee becomes eligible for severance payments and/or benefits from any of the Sellers or any of their Affiliates (as determined by the plan administrator of the applicable severance plan of the Sellers or any of their respective Affiliates on conditions consistent with Seller’s good faith administration of the severance plan consistent with past practices prior to this Agreement) following the date hereof, the Buyer and its Affiliates shall be solely responsible for (and shall indemnify the Sellers and their respective Affiliates against) the first fifteen million dollars ($15 million) of such severance payments, benefits and related costs (including, without limitation, legal or litigation-related costs, fees and expenses) associated with such Dedicated Employee that are paid or incurred by the Sellers or any of their Affiliates. The Buyer shall reimburse the applicable Seller or its Affiliates for any such payments, benefits and costs promptly (and in all events within thirty (30) Business Days) following receipt of an invoice from the Sellers.

(cc) Post-Closing Retention Program .

(i) Post-Closing Retention Programs . The Seller shall, or shall cause an Affiliate to, adopt a retention program for Adviser Representatives who become Transferred Employees (the “ Retention Program ”), with such program to become effective on the Closing Date. In no event shall the aggregate value of the Retention Awards granted pursuant to the Retention Program exceed fifty million dollars ($50 million). The Seller and Buyer shall mutually agree on the allocation of the Retention Awards among Adviser Representatives within sixty (60) days following the date hereof, with such allocations to be determined primarily pursuant to a formula based on the relative GDC for the 12-month period ended December 31, 2015 of each of the Adviser Representatives. Unless otherwise agreed to by the Seller and Buyer, all Retention Awards will be paid in a lump sum by Seller immediately prior to Closing. The retention payment will be subject to clawback for up to five years after the Closing Date with one-fifth (1/5 ^th ) of the payment released from clawback on each of the first five (5) anniversaries of the Closing Date provided that the Adviser Representative remains employed or

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otherwise in service with Buyer or its Affiliates on the applicable date. The retention payment will be taxable immediately to the Adviser Representative at the time of payment. The form of the Retention Awards, including any documentation that Adviser Representatives will sign to facilitate clawback, will be mutually agreed upon between Buyer and Seller. Promptly following the determination of the allocation of the Retention Awards among the Adviser Representatives, the Seller shall inform each Adviser Representative of the offer to extend a Retention Award as of immediately prior to the Closing Date. Notwithstanding the foregoing, the Parties hereto agree to renegotiate the design of the Retention Program to the extent that it is determined by either Party that the contemplated design will violate any law (with the intent to be to replicate the economics as closely as possible).

(ii) Seller Deferred Compensation. Prior to the Closing Date, the Seller shall amend the Assumed Deferred Compensation Plans to provide that benefit accruals under the Assumed Deferred Compensation Plans will cease effective on the Closing Date or such earlier date as determined by the Seller (the “ Freeze Effective Date ”) and Seller with the consent of Buyer (which shall not be unreasonably withheld) shall, prior to the Closing Date, determine the amount to credit (or formula for determining crediting) in respect of the period commencing on January 1, 2016 and ending on the date immediately prior to the Freeze Effective Date. No Transferred Employee (or other Person) shall accrue any additional benefits under the Assumed Deferred Compensation Plans from and after the Freeze Effective Date (except that Transferred Employees may continue to vest in unvested amounts accrued prior to the Freeze Effective Date and amounts accrued prior to the Freeze Effective Date will continue to increase or decrease based on the gains or losses based on the notional/deemed investment of the amounts deferred pursuant to the Assumed Deferred Compensation Plans). All Transferred Employees and all 403(b) Transferred Adviser Representatives shall be deemed to have experienced a “separation from service” (within the meaning set forth in Section 409A of the Code) as of the Closing Date for purposes of each of the Sellers’ nonqualified deferred compensation plans that is subject to Section 409A of the Code pursuant to which distributions are triggered by or in connection with a termination of employment or service. All nonqualified deferred compensation plan maintained by the Sellers and their respective Affiliates (not including the Company) in which any Transferred Employees participate pursuant to which distributions are not triggered by or in connection with a termination of employment or service (other than the Assumed Deferred Compensation Plans) shall continue to be administered by the Sellers and their respective Affiliates (not including the Company) in accordance with their respective terms as may be amended from time to time and Transferred Adviser Representatives and 403(b) Transferred Adviser Representatives shall continue to vest in amounts credited pursuant to the Assumed Deferred Compensation Plans based on continuous service to the Buyer and its Affiliates from and after the Closing Date. The Buyer shall, or shall cause an Affiliate to, administer the Assumed Deferred Compensation Plans from and after the Closing in accordance with their respective terms. The Sellers shall reimburse the Buyer for 50% of any Unvested Assumed Deferral Amounts paid by the Buyer or its Affiliates pursuant to the Assumed Deferred Compensation Plans, with such reimbursements to be paid on an annual basis promptly

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following receipt by the Sellers of a written request from the Buyer for payment, which request will include all supporting documentation for determination of such payment. The Parties agree that (x) any payment by the Sellers to the Buyer pursuant to the preceding sentence shall be treated as an adjustment to the Purchase Price for federal, state and local Tax purposes and (y) the Buyer shall be responsible for all employment, payroll and other Taxes and Tax Returns associated with payments made to the Transferred Employees or 403(b) Transferred Adviser Representatives under the deferred compensation plans referred to in this clause (y).

(dd) Welfare Claims . With respect to each Transferred Employee (including any beneficiary or the dependent thereof), the Seller or the applicable Affiliate thereof shall retain all liabilities and obligations for any medical, dental, health, accident or disability claim to the extent that such liability or obligation relates to claims incurred (whether or not reported or paid) prior to the Closing Date, and the Buyer and its Affiliates shall be liable for any such claim incurred on or following the Closing Date. For purposes of this Section 10.1(l) , a claim shall be deemed to be incurred (i) with respect to medical, dental and health-related benefits, when the medical, dental or health-related services, materials or supplies are provided; (ii) with respect to life, accident and workers’ compensation insurance benefits, on the event giving rise to such benefits; and (iii) with respect to disability benefits, including the current and future salary replacement benefit and the continuation of other applicable benefits during the length of disability, on the eligibility date determined by the policy or plan in which the applicable Transferred Employee participates.

(ee) COBRA . Effective as of the Closing Date, the Seller or the applicable Affiliate thereof shall be responsible for providing coverage under the Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”) to any Adviser Representative or Dedicated Employee (and his or her qualified beneficiaries) as to whom a “qualifying event” (as defined in Section 4890B of the Code) has occurred through and including the Closing Date, including, for the avoidance of doubt, individuals who do not become Transferred Employees. The Buyer shall be responsible for providing coverage under COBRA to any Transferred Employee (and his or her qualified beneficiaries) whose “qualifying event” occurs after the Closing Date while such Transferred Employee is a common law employee or statutory employee of the Buyer or one of its Affiliates.

(i) WARN Act . The Sellers shall be solely responsible for providing all notices required under the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2109 et seq., or the regulations promulgated thereunder (the “ WARN Act ”) (including comparable state, local or other requirements of Law) and for taking all remedial measures, including, without limitation, the payment of all amounts, penalties, liabilities, costs and expenses if such notices are not provided, with respect to any obligations under the WARN Act (including comparable state, local or other applicable Laws) arising out of or resulting from any termination of employment of any employee of the Business (including individuals who do not become Transferred Employees or 403(b) Transferred Adviser Representatives) prior to the Closing Date, subject to the Buyer’s compliance with its covenants pursuant to this Section 10.1 .

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The Buyer shall be solely responsible for providing all notices required under the WARN Act and for taking all remedial measures, including, without limitation, the payment of all amounts, penalties, liabilities, costs and expenses if such notices are not provided, with respect to any obligations under the WARN Act (including comparable state, local or other applicable Laws) arising out of or resulting from any termination of employment of any Transferred Employees or 403(b) Transferred Adviser Representatives by the Buyer or any of its Affiliates on or after the Closing Date.

SECTION 10.2. Indemnification and Insurance .

(k) The Buyer agrees that all rights to exculpation, indemnification and advancement of expenses existing as of the date of this Agreement in favor of the current or former directors, officers or employees of the Company or the Business, as the case may be (each, a “ D&O Indemnified Party ”), as provided in their applicable Organizational Documents or in any agreement with the Company, shall survive the Closing and shall continue in full force and effect exclusively with regard to activities by such former directors, officers and employees as they relate to actions taken while directors, officers and employees of the Company and prior to Closing. For a period of six years from the Closing Date, the Buyer shall maintain and cause the Company to maintain in effect, honor and perform the obligations imposed under the exculpation, indemnification and advancement of expenses provisions of the Company’s Organizational Documents as in effect immediately prior to the Closing Date or in any indemnification agreements of the Company with any of the D&O Indemnified Parties as in effect immediately prior to the Closing Date, and the Buyer shall and shall cause the Company to not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of D&O Indemnified Parties; provided , however , that all rights to indemnification or advancement of expenses in respect of any Legal Proceedings pending or asserted or any claim made within such period shall continue until the disposition of such Legal Proceeding or resolution of such claim. Subject to the provisions of Section 9.2 , from and after the Closing Date, the Buyer shall and shall cause the Company to honor, in accordance with their respective terms, each of the covenants contained in this Section 10.2 . In the event of any such Legal Proceeding, the Buyer and the Company shall reasonably cooperate with the D&O Indemnified Party in the defense of any such Legal Proceeding.

(l) The rights of each D&O Indemnified Party hereunder shall be in addition to, and not in limitation of, any other rights such person may have under any applicable Law. The provisions of this Section 10.2 shall survive the Closing and expressly are intended to benefit, and are enforceable by, each of the D&O Indemnified Parties, each of whom is an intended third-party beneficiary of this Section 10.2 .

(m) Prior to the Closing, the Seller shall arrange for the placement of “tail” insurance coverage at the Seller, subject to the review and written consent of the Seller (which shall not be unreasonably withheld), insuring the Company and the Transferred Adviser Representatives, Transferred Brokers and Transferred Employees under the same terms,

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conditions and exclusions as those provided by or contained in the existing errors and omissions liability insurance or any renewals or replacements thereof maintained as of the Closing Date by or on behalf of the Company (the “ Current E&O Policies ”) with an insurer(s) rated by A.M. Best at the same rating as, or better than, the insurer(s) for the Current E&O Policies for a period of three years commencing on the Closing Date (“ E&O Tail Coverage ”). The E&O Tail Coverage shall be paid for by the Seller at its expense.

(n) In the event the Buyer, the Company or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its outstanding capital stock or properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of the Buyer or the Company, as the case may be, shall assume the obligations set forth in this Section 10.2 .

SECTION 11. CLOSING CONDITIONS .

SECTION 11.1. The Buyer’s Conditions to Closing . The obligation of the Buyer to consummate the transactions contemplated by this Agreement shall be subject to fulfillment at or prior to the Closing of the following conditions, any one or more of which may be waived in writing by the Buyer:

(o) Representations and Warranties . (i) All representations and warranties of the Seller set forth in Section 3 hereof (other than the Seller Fundamental Representations) shall be true and correct as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) except where the failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate a Material Adverse Effect, and (ii) the Seller Fundamental Representations shall be true and correct as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date).

(p) Compliance with Agreements . The covenants, agreements and obligations required by this Agreement to be performed and complied with by the Seller prior to or at the Closing shall have been performed and complied with in all material respects prior to or at the Closing.

(q) Certificate . The Seller shall execute and deliver to the Buyer a certificate executed by an authorized officer of the Seller, dated as of the Closing Date, stating that the conditions specified in Section 11.1(a) and Section 11.1(b) of this Agreement have been satisfied.

(r) Intercompany Contracts . At the Seller’s option, either (i) the Company shall have been released from its rights and obligations under all Intercompany Contracts to

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which it is party or (ii) each Intercompany Contract to which it is party shall have been terminated with respect to the Business.

(s) No Material Adverse Effect . From the date hereof through the Closing Date, no Material Adverse Effect shall have occurred.

(t) Resignations . Each member of the board of directors of the Company shall have executed and delivered to the Company a letter of resignation resigning as a member of the board of directors of the Company and from all other similar non-executive positions held with the Company and delivered a hold harmless agreement in form reasonably acceptable to Buyer.

(u) Closing Deliveries . The Seller shall have made the deliveries required by Section 2.5(b) .

(v) Adviser Representatives and Brokers . The Closing GDC Amount, as calculated pursuant to the GDC Closing Statement, shall be equal to or greater than 65% of the Aggregate 2015 FY GDC.

(w) FIRPTA Certificate . The Buyer shall have received an affidavit from the Seller, under penalties of perjury, stating that the Seller is not a “foreign person” for purposes of Section 1445 of the Code, dated as of the Closing Date and in form and substance required under Treasury Regulation Section 1.1445-2(b).

(x) Side Letters . MetLife USA shall have executed and delivered to the Buyer the MetLife USA Side Letter. In the event a Separation has occurred, Parent Entity shall have executed and delivered to the Buyer the Parent Entity Side Letter.

SECTION 11.2. The Seller’s Conditions to Closing . The obligation of the Seller to consummate the transactions contemplated by this Agreement shall be subject to fulfillment at or prior to the Closing of the following conditions, any one or more of which may be waived in writing by the Seller:

(j) Representations and Warranties . All representations and warranties of the Buyer set forth in Section 6 hereof (other than the Buyer Fundamental Representations) shall be true and correct as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date) except where the failure of such representations and warranties to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the ability of the Buyer to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, and (ii) the Buyer Fundamental Representations shall be true and correct as of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date).

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(k) Compliance with Agreements . The covenants, agreements and obligations required by this Agreement to be performed and complied with by the Buyer prior to or at the Closing shall have been performed and complied with in all material respects prior to or at the Closing.

(l) Certificate . The Buyer shall execute and deliver to the Seller a certificate executed by an authorized officer of the Buyer, dated as of the Closing Date, stating that the conditions specified in Section 11.2(a) and Section 11.2(b) of this Agreement have been satisfied.

(m) Closing Deliveries . The Buyer shall have made the deliveries required by Section 2.5(a) .

(n) Side Letters . The Buyer shall have executed and delivered to MetLife USA the MetLife USA Side Letter. In the event a Separation has occurred, the Buyer shall have executed and delivered to Parent Entity the Parent Entity Side Letter.

SECTION 11.3. Mutual Conditions to Closing . The respective obligation of the Buyer and the Seller to consummate the transactions contemplated by this Agreement shall be subject to fulfillment at or prior to the Closing of the following conditions, any one or more of which may be waived by mutual written agreement of the Buyer and the Seller:

(o) FINRA Approvals . The Company’s application for FINRA Approval shall have been granted.

(p) Governmental and Regulatory Consents . (i) All consents, approvals and authorizations of, filings and registrations with, and notifications to, all Governmental Entities set forth on Section 11.3(b) of the Disclosure Schedule shall have been obtained or made and shall be in full force and effect, unless waived by mutual agreement of the Seller and the Buyer, and (ii) all waiting periods required by any Governmental Entity necessary for the consummation of the transactions contemplated by this Agreement under any antitrust Law shall have expired or been terminated.

(q) No Orders; Legal Proceedings . No Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) that has the effect of making the transactions contemplated by this Agreement or the Ancillary Agreements illegal or otherwise prohibiting the consummation of such transactions. There shall not be any Legal Proceedings instituted, commenced, pending or threatened in writing (i) by any Governmental Entity having jurisdiction over the Seller, the Company or any material portion of the Purchased Property that seeks to, or would reasonably be expected to, restrain, enjoin, prevent, prohibit or make illegal the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements, or (ii) before any Governmental Entity having jurisdiction over the Seller, the Company or any material portion of the Purchased Property that would reasonably be expected to restrain, enjoin, prevent, prohibit or make illegal the consummation of the transactions contemplated by this Agreement or the Ancillary Agreements.

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SECTION 12. TERMINATION.

SECTION 12.1. Grounds for Termination . This Agreement may be terminated:

(o) by either the Buyer or the Seller ( provided that the terminating Party is not then in breach of any representation, warranty, covenant or other agreement contained herein such that the conditions to Closing set forth in Section 11.1(a) , Section 11.1(b) , Section 11.2(a) , Section 11.2(b) , Section 11.3(a) , Section 11.3(b) , or Section 11.3(c) , as applicable, would not have been satisfied) if the Closing shall not have occurred within 9 months after the date of this Agreement (the “ Outside Date ”);

(p) by the Buyer if (i) the Seller shall have breached any of the covenants or agreements contained in this Agreement to be complied with by the Seller such that the Closing condition set forth in Section 11.1(b) would not be satisfied or (ii) there exists a breach of any representation or warranty of the Seller contained in this Agreement such that the Closing condition set forth in Section 11.1(a) would not be satisfied; provided , (A) in the case of (i) or (ii) that such breach is not cured by the Seller within 30 Business Days after the Seller receives written notice of such breach from Buyer and (B) the Buyer shall not be entitled to terminate this Agreement pursuant to this Section 12.1(b) if, at the time of such termination, the Buyer is in breach of any representation, warranty, covenant or other agreement contained herein in a manner that the conditions to Closing set forth in Section 11.2(a) or Section 11.2(b) , as applicable, would not have been satisfied;

(q) by the Seller if (i) the Buyer shall have breached any of the covenants or agreements contained in this Agreement to be complied with by the Buyer such that the Closing condition set forth in Section 11.2(b) would not be satisfied or (ii) there exists a breach of any representation or warranty of the Buyer contained in this Agreement such that the Closing condition set forth in Section 11.2(a) would not be satisfied; provided , (A) in the case of (i) or (ii) that such breach is not cured by the Buyer within 30 Business Days after the Buyer receives written notice of such breach from the Seller; and (B) the Seller shall not be entitled to terminate this Agreement pursuant to this Section 12.1(c) if, at the time of such termination the Seller is in breach of any representation, warranty, covenant or other agreement contained herein in a manner that the conditions to Closing set forth in Section 11.1(a) or Section 11.1(b) , as applicable, would not have been satisfied;

(r) by written notice from either the Buyer or the Seller to the other Party hereto, if any Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or Order that has the effect of making the transactions contemplated by this Agreement and the Ancillary Agreements illegal or otherwise prohibiting the consummation of such transactions, and such Law or Order has become final and non-appealable;

(s) by the Seller if the Seller has made a good faith determination that the Closing condition set forth in Section 11.1(h) cannot be satisfied; provided , that the Seller is not

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then in breach of any representation, warranty, covenant or other agreement contained herein that caused or substantially contributed to the inability of such Closing condition to be satisfied; or

(t) at any time prior to the Closing Date by mutual written agreement of the Buyer and the Seller.

SECTION 12.2. Effect of Termination . Termination of this Agreement pursuant to Section 12.1 shall cause this Agreement to become void and of no further force and effect (subject to the other terms of this Section 12.2 ), and shall terminate all obligations of the Parties, except for the obligations under Section 7.4 (Publicity), Section 7.5 (Expenses), Section 13 and the Confidentiality Agreement; provided , however , that (a) such termination shall not relieve any Party of any liability or damages suffered or incurred by another Party, to the extent such liabilities or damages were the result of fraud or an intentional breach by such Party of its representations, warranties, covenants or other agreements set forth in this Agreement, and (b) upon such termination, the provisions of the Confidentiality Agreement shall automatically be extended and remain in full force and effect without any further action by the Parties thereto for the longer of (i) one year following such termination or (ii) the remaining term under the Confidentiality Agreement.

SECTION 13. MISCELLANEOUS .

SECTION 13.1. Notices . Any notice, request, demand, waiver, consent, approval or other communication that is required or permitted hereunder shall be in writing and shall be deemed given: (a) on the date established by the sender as having been delivered personally, (b) on the date delivered by a private courier as established by the sender by evidence obtained from the courier, or (c) on the fifth Business Day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:

(r) if to the Buyer, to:

Massachusetts Mutual Life Insurance Company

1295 State St.

Springfield, MA 01111
Attention: Mark Roellig, Executive Vice President and General Counsel
E-mail: [redacted]

with a required copy (which shall not constitute notice) to:

Sutherland Asbill & Brennan LLP

The Grace Building

1114 Avenue of the Americas, 40 ^th Floor

New York, NY 10036-7703

Attention: Bert Adams

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Email: [redacted]

(s) if to the Seller, to:

MetLife, Inc.
1095 Avenue of the Americas
New York, N.Y. 10036
Attention: Ricardo Anzaldua, Executive Vice President and General Counsel
Email: [redacted]

with a required copy (which shall not constitute notice) to:

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Attention: John M. Schwolsky
Laura L. Delanoy
Email: [redacted]

or to such other address or to the attention of such Person or Persons as the recipient party has specified by prior written notice to the sending party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.

SECTION 13.2. Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may be possible.

SECTION 13.3. Counterparts . This Agreement may be executed in counterparts, and any Party may execute any such counterpart, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. This Agreement shall become effective when each Party shall have received a counterpart hereof signed by the other Party. The Parties agree that the delivery of this Agreement, and any other agreements and documents at the Closing, may be effected by means of an exchange of facsimile or electronically transmitted signatures.

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SECTION 13.4. Entire Agreement; No Third Party Beneficiaries . This Agreement, the Confidentiality Agreement (except to the extent its terms conflict with the terms of this Agreement, in which case the terms of this Agreement shall prevail), the Ancillary Agreements, the Schedules, Exhibits, Annexes, that certain Confidentiality and Non-Disclosure Agreement by and between the Seller and the Buyer dated January 13, 2015 (the “ Confidentiality Agreement ”), and the other documents, instruments and agreements specifically referred to herein or therein or delivered pursuant hereto or thereto set forth the entire understanding of the Parties hereto with respect to the transactions contemplated by this Agreement. All Schedules, Exhibits and Annexes referred to herein are intended to be and hereby are specifically made a part of this Agreement. Any and all previous agreements and understandings between or among the Parties regarding the subject matter hereof, whether written or oral, are superseded by this Agreement; provided , however , that in the event this Agreement is terminated, the Confidentiality Agreement shall remain in full force and effect. This Agreement will not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns, other than Section 9 (which will be for the benefit of the Indemnitees).

SECTION 13.5. Governing Law . This Agreement and the exhibits, annexes and schedules hereto shall be governed by and interpreted and enforced in accordance with the Laws of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of New York.

SECTION 13.6. Consent to Jurisdiction; Waiver of Jury Trial . Each Party irrevocably submits to the exclusive jurisdiction of any state or federal court located within the County of New York in the State of New York for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby or thereby, and agrees to commence any such action, suit or proceeding only in such courts. Each Party further agrees that service of any process, summons, notice or document by United States registered mail to such Party’s respective address set forth herein shall be effective service of process for any such action, suit or proceeding. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby or thereby in such courts, and hereby irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.

SECTION 13.7. Right to Specific Performance .

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(a) The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which such Party is entitled at law, in equity, in contract, in tort or otherwise.

(b) The Parties hereby agree not to raise any objections to the availability of the equitable remedy of specific performance to prevent or restrain breaches of this Agreement by the Buyer or the Seller, as applicable, and to specifically enforce the terms and provisions of this Agreement to prevent breaches or threatened breaches of, or to enforce compliance with, the respective covenants and obligations of the Buyer or the Seller, as applicable, under this Agreement all in accordance with the terms of this Section 13.7 .

(c) Neither the Buyer nor the Seller, as applicable, shall be required to provide any bond or other security in connection with seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, all in accordance with the terms of this Section 13.7 .

SECTION 13.8. Assignment . Neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any of the Parties without the prior written consent of the other Parties, except that each of the Seller and the Buyer may assign its rights and obligations hereunder to an Affiliate without the prior written consent of the Party; provided that no such assignment shall relieve the applicable Party of any of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the Parties and their respective successors and permitted assigns. Any attempted or purported assignment or delegation in violation of the terms of this Section 13.8 shall be null and void, ab initio .

SECTION 13.9. Entity Transfer . Prior to any transaction pursuant to which MetLife Insurance Company USA, a Delaware domiciled stock life Insurance Company (“ MetLife USA ”) would no longer be an Affiliate of Seller (a “ Separation ”), the Seller shall cause any entity (“ Parent Entity ”) to which it transfers control of MetLife USA to execute and deliver to the Buyer the Parent Entity Side Letter. Seller shall cause MetLife USA to execute and deliver to the Buyer the MetLife USA Side Letter on or prior to Closing.

SECTION 13.10. Headings . All headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement.

SECTION 13.11. Construction . For the purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (a) the meaning assigned to each term defined herein shall be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting either gender shall include both genders as the

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context requires; (b) where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning; (c) the terms “hereof”, “herein”, “hereunder”, “hereby” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement; (d) when a reference is made in this Agreement to a Section, paragraph, Exhibit, Annex or Schedule, such reference is to a Section, paragraph, Exhibit, Annex or Schedule to this Agreement unless otherwise specified; (e) the word “include”, “includes” and “including” when used in this Agreement shall be deemed to be followed by the words “without limitation”, unless otherwise specified; (f) a reference to any Party to this Agreement or any other agreement or document shall include such Party’s predecessors, successors and permitted assigns; and (g) all accounting terms used and not defined herein have the respective meanings given to them under GAAP. The Parties hereto have participated jointly in the negotiation and drafting of this Agreement, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any Party by virtue of the authorship of this Agreement shall not apply to the construction and interpretation hereof.

SECTION 13.12. Amendments and Waivers . This Agreement may not be amended, supplemented or modified except by an instrument in writing signed on behalf of the Buyer and by the Seller. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective, unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion.

SECTION 13.13. Exhibits, Annexes and Schedules . Except as otherwise provided in this Agreement, all Exhibits, Annexes and schedules referred to herein are intended to be and hereby are made a part of this Agreement. The Disclosure Schedule and the Buyer Disclosure Schedule have been arranged for purposes of convenience only, in sections corresponding to the Sections of this Agreement. The disclosure of any item in any section or subsection of the Disclosure Schedule and the Buyer Disclosure Schedule will be deemed disclosure with respect to each other section and subsection of the Disclosure Schedule or the Buyer Disclosure Schedule, as applicable, to which the relevance of such item is, on its face, reasonably apparent. Certain information set forth in the Disclosure Schedule and the Buyer Disclosure Schedule is included solely for informational purposes, is not an admission of liability with respect to the matters covered by the information, and may not be required to be disclosed pursuant to this Agreement. The specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any specific item in the Disclosure Schedule or the Buyer Disclosure Schedule is not intended to imply that such amounts (or higher or lower amounts) are or are not material, and no Party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Disclosure Schedule or the Buyer Disclosure Schedule in any dispute or controversy between the Parties as to whether any obligation, item, or

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matter not described herein or included in the Disclosure Schedule or the Buyer Disclosure Schedule is or is not material for purposes of this Agreement.

[Signature pages follow.]

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first above written.

METLIFE, INC.


By:	/s/ Adam M. Hodes Name: Adam M. Hodes Title: Executive Vice President, Global Head – Mergers and Acquisitions

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY


By:	/s/ Michael R. Fanning Name: Michael R. Fanning Title: Executive Vice President

Exhibit 18.1

May 5, 2016

MetLife, Inc.

1095 Avenue of the Americas

New York, New York 10036

To the Board of Directors and Stockholders of MetLife, Inc.:

At your request, we have read the description included in your Quarterly Report on Form 10-Q to the Securities and Exchange Commission for the quarter ended March 31, 2016, of the facts relating to the change to eliminate the financial reporting lag for the Company’s subsidiary in Japan to align with the Company’s fiscal year-end. We believe, on the basis of the facts so set forth and other information furnished to us by appropriate officials of MetLife, Inc., that the accounting change described in your Form 10-Q is to an alternative accounting principle that is preferable under the circumstances.

We have not audited any consolidated financial statements of MetLife, Inc. and its subsidiaries as of any date or for any period subsequent to December 31, 2015. Therefore, we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q, on the related information furnished to us by officials of MetLife, Inc., or on the financial position, results of operations, or cash flows of MetLife, Inc. and its subsidiaries as of any date or for any period subsequent to December 31, 2015.

Yours truly,

/s/ Deloitte & Touche LLP

New York, New York

Exhibit 31.1

CERTIFICATIONS

I, Steven A. Kandarian, certify that:

1. I have reviewed this quarterly report on Form 10-Q 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: May 5, 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 quarterly report on Form 10-Q of MetLife, Inc.;


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


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: May 5, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (the “Form 10-Q”) 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-Q fairly presents, in all material respects, the financial condition and results of operations of MetLife, Inc.

Date: May 5, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (the “Form 10-Q”) 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-Q fairly presents, in all material respects, the financial condition and results of operations of MetLife, Inc.

Date: May 5, 2016

/s/ John C. R. Hele

John C. R. Hele

Executive Vice President and

Chief Financial Officer