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”). 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:



	September 30, 2013			December 31, 2012
	(In millions)
Closed Block Liabilities
Future policy benefits	$	42,105		$	42,586
Other policy-related balances	301			298
Policyholder dividends payable	507			466
Policyholder dividend obligation	2,013			3,828
Other liabilities	724			602
Total closed block liabilities	45,650			47,780
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	28,124			30,546
Equity securities available-for-sale, at estimated fair value	87			41
Mortgage loans	6,520			6,192
Policy loans	4,669			4,670
Real estate and real estate joint ventures	481			459
Other invested assets	923			953
Total investments	40,804			42,861
Cash and cash equivalents	404			381
Accrued investment income	497			481
Premiums, reinsurance and other receivables	101			107
Current income tax recoverable	15			2
Deferred income tax assets	292			319
Total assets designated to the closed block	42,113			44,151
Excess of closed block liabilities over assets designated to the closed block	3,537			3,629
Amounts included in AOCI:
Unrealized investment gains (losses), net of income tax	1,682			2,891
Unrealized gains (losses) on derivatives, net of income tax	2			9
Allocated to policyholder dividend obligation, net of income tax	(1,309		)	(2,488		)
Total amounts included in AOCI	375			412
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,912		$	4,041

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



	Nine Months Ended September 30, 2013			Year Ended December 31, 2012
	(In millions)
Balance, beginning of period	$	3,828		$	2,919
Change in unrealized investment and derivative gains (losses)	(1,815		)	909
Balance, end of period	$	2,013		$	3,828

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(In millions)
Revenues
Premiums	$	478		$	512		$	1,431		$	1,538
Net investment income	514			555			1,576			1,644
Net investment gains (losses)	(7		)	6			20			30
Net derivative gains (losses)	(16		)	(9		)	(1		)	(7		)
Total revenues	969			1,064			3,026			3,205
Expenses
Policyholder benefits and claims	651			654			1,963			2,016
Policyholder dividends	251			278			740			821
Other expenses	39			45			124			136
Total expenses	941			977			2,827			2,973
Revenues, net of expenses before provision for income tax expense (benefit)	28			87			199			232
Provision for income tax expense (benefit)	10			30			70			82
Revenues, net of expenses and provision for income tax expense (benefit) from continuing operations	18			57			129			150
Revenues, net of expenses and provision for income tax expense (benefit) from discontinued operations	—			—			—			4
Revenues, net of expenses and provision for income tax expense (benefit)	$	18		$	57		$	129		$	154

MLIC charges the closed block with federal income taxes, state and local premium taxes and other additive state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan. MLIC also charges the closed block for expenses of maintaining the policies included in the closed block.