10-Q 1 met-2016331x10q.htm 10-Q 10-Q
 
 
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
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission file number: 001-15787
 ________________________________________
MetLife, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
13-4075851
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
200 Park Avenue, New York, N.Y.
 
10166-0188
(Address of principal executive offices)
 
(Zip Code)
(212) 578-9500
(Registrant’s telephone number, including area code)
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
 
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))
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 6.
 
 
 
 
 
 
 
 
 



As used in this Form 10Q, “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.

2


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.

3

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.


4


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.

5

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.

6

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.

7

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

Adoption of New Accounting 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.

8

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

In 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.

9

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.

10

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.

11

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.

12

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


13

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


14

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.

15

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.

16

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


17

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 e