10-Q 1 met-2017331x10q.htm 10-Q Document
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ______________________________________
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2017
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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer (Do not check if a smaller reporting company)
¨
 
 
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨No þ
At April 28, 2017, 1,075,933,159 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, 2017 (Unaudited) and December 31, 2016 and for the Three Months Ended March 31, 2017 and 2016 (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 United Kingdom’s notice of withdrawal from the European Union, other 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) unanticipated developments that could delay, prevent or otherwise adversely affect the separation of Brighthouse Financial; (9) 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, including failure to achieve projected operational benefit from such transactions and any restrictions, liabilities, losses or indemnification obligations arising from any transitional services or tax arrangements related to the separation of any business, or from the failure of such a separation to qualify for any intended tax-free treatment; (c) entry into joint ventures, or (d) legal entity reorganizations; (10) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; including any separated business’ incurrence of debt in connection with such a separation; (11) investment losses and defaults, and changes to investment valuations; (12) changes in assumptions related to investment valuations, deferred policy acquisition costs, deferred sales inducements, value of business acquired or goodwill; (13) impairments of goodwill and realized losses or market value impairments to illiquid assets; (14) defaults on our mortgage loans; (15) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (16) economic, political, legal, currency and other risks relating to our international operations, including with respect to fluctuations of exchange rates; (17) downgrades in our claims paying ability, financial strength or credit ratings; (18) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (19) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (20) differences between actual claims experience and underwriting and reserving assumptions; (21) ineffectiveness of risk management policies and procedures; (22) catastrophe losses; (23) increasing cost and limited market capacity for statutory life insurance reserve financings; (24) 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; (25) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (26) legal, regulatory and other restrictions affecting MetLife, Inc.’s ability to pay dividends and repurchase common stock; (27) MetLife, Inc.’s and its subsidiary holding companies’ primary reliance, as holding companies, 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; (28) 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; (29) changes in accounting standards, practices and/or policies; (30) increased expenses relating to pension and postretirement benefit plans, as well as health care and other employee benefits; (31) inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (32) difficulties in marketing and distributing products through our distribution channels; (33) provisions of laws and our incorporation documents may delay, deter or prevent takeovers and corporate combinations involving MetLife; (34) 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; (35) any failure to protect the confidentiality of client information; (36) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; and (37) 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, news 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, 2017 (Unaudited) and December 31, 2016
(In millions, except share and per share data)
 
 
March 31, 2017
 
December 31, 2016
Assets
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $333,985 and $330,354, respectively; includes $0 and $3,422, respectively, relating to variable interest entities)
 
$
355,528

 
$
350,889

Equity securities available-for-sale, at estimated fair value (cost: $2,919 and $2,744, respectively)
 
3,377

 
3,194

Fair value option securities, at estimated fair value (includes $7 and $8, respectively, relating to variable interest entities)
 
14,399

 
13,923

Mortgage loans (net of valuation allowances of $353 and $344, respectively; includes $129 and $136, respectively, at estimated fair value, relating to variable interest entities; includes $639 and $566, respectively, under the fair value option)
 
76,541

 
74,545

Policy loans
 
11,115

 
11,028

Real estate and real estate joint ventures (includes $8 and $59, respectively, of real estate held-for-sale)
 
9,464

 
9,041

Other limited partnership interests (includes $14 and $14, respectively, relating to variable interest entities)
 
6,762

 
6,778

Short-term investments, principally at estimated fair value (includes $50 and $0, respectively, relating to variable interest entities)
 
9,968

 
7,810

Other invested assets, principally at estimated fair value (includes $31 and $31, respectively, relating to variable interest entities)
 
19,724

 
23,185

Total investments
 
506,878

 
500,393

Cash and cash equivalents, principally at estimated fair value (includes $3,374 and $1, respectively, relating to variable interest entities)
 
17,411

 
17,877

Accrued investment income (includes $1 and $1, respectively, relating to variable interest entities)
 
3,984

 
3,988

Premiums, reinsurance and other receivables (includes $6 and $2, respectively, relating to variable interest entities)
 
25,916

 
26,081

Deferred policy acquisition costs and value of business acquired
 
25,547

 
24,798

Current income tax recoverable
 
25

 
20

Goodwill
 
9,350

 
9,220

Other assets (includes $3 and $3, respectively, relating to variable interest entities)
 
8,055

 
7,767

Separate account assets
 
317,521

 
308,620

Total assets
 
$
914,687

 
$
898,764

Liabilities and Equity
 
 
 
 
Liabilities
 
 
 
 
Future policy benefits
 
$
203,226

 
$
199,971

Policyholder account balances
 
214,757

 
210,235

Other policy-related balances
 
14,713

 
14,386

Policyholder dividends payable
 
699

 
708

Policyholder dividend obligation
 
1,983

 
1,931

Payables for collateral under securities loaned and other transactions
 
32,899

 
33,264

Short-term debt
 
260

 
242

Long-term debt (includes $32 and $35, respectively, at estimated fair value, relating to variable interest entities)
 
16,511

 
16,502

Collateral financing arrangements
 
4,059

 
4,071

Junior subordinated debt securities
 
3,169

 
3,169

Deferred income tax liability
 
9,550

 
9,367

Other liabilities
 
27,232

 
28,818

Separate account liabilities
 
317,521

 
308,620

Total liabilities
 
846,579

 
831,284

Contingencies, Commitments and Guarantees (Note 13)
 

 

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; 1,165,870,885 and 1,164,029,985 shares issued, respectively; 1,081,321,114 and 1,095,519,005 shares outstanding, respectively
 
12

 
12

Additional paid-in capital
 
30,990

 
30,944

Retained earnings
 
34,863

 
34,480

Treasury stock, at cost; 84,549,771 and 68,510,980 shares, respectively
 
(4,332
)
 
(3,474
)
Accumulated other comprehensive income (loss)
 
6,396

 
5,347

Total MetLife, Inc.’s stockholders’ equity
 
67,929

 
67,309

Noncontrolling interests
 
179

 
171

Total equity
 
68,108

 
67,480

Total liabilities and equity
 
$
914,687

 
$
898,764

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, 2017 and 2016 (Unaudited)
(In millions, except per share data)

 
 
Three Months
Ended
March 31,
 
 
2017
 
2016
Revenues
 
 
 
 
Premiums
 
$
9,315

 
$
9,693

Universal life and investment-type product policy fees
 
2,302

 
2,344

Net investment income
 
5,196

 
4,559

Other revenues
 
374

 
487

Net investment gains (losses):
 
 
 
 
Other-than-temporary impairments on fixed maturity securities
 

 
(78
)
Other net investment gains (losses)
 
8

 
93

Total net investment gains (losses)
 
8

 
15

Net derivative gains (losses)
 
(926
)
 
1,335

Total revenues
 
16,269

 
18,433

Expenses
 
 
 
 
Policyholder benefits and claims
 
9,859

 
9,678

Interest credited to policyholder account balances
 
1,712

 
1,326

Policyholder dividends
 
317

 
315

Other expenses
 
3,564

 
4,192

Total expenses
 
15,452

 
15,511

Income (loss) before provision for income tax
 
817

 
2,922

Provision for income tax expense (benefit)
 
(12
)
 
719

Net income (loss)
 
829

 
2,203

Less: Net income (loss) attributable to noncontrolling interests
 
3

 
2

Net income (loss) attributable to MetLife, Inc.
 
826

 
2,201

Less: Preferred stock dividends
 
6

 
6

Net income (loss) available to MetLife, Inc.’s common shareholders
 
$
820

 
$
2,195

Comprehensive income (loss)
 
$
1,879

 
$
8,388

Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax
 
4

 
93

Comprehensive income (loss) attributable to MetLife, Inc.
 
$
1,875

 
$
8,295

Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
 
 
 
 
Basic
 
$
0.75

 
$
1.99

Diluted
 
$
0.75

 
$
1.98

Cash dividends declared per common share
 
$
0.400

 
$
0.375

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, 2017 and 2016 (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
 
Total
Equity
Balance at December 31, 2016
 
$

 
$
12

 
$
30,944

 
$
34,480

 
$
(3,474
)
 
$
5,347

 
$
67,309

 
$
171

 
$
67,480

Treasury stock acquired in connection with share repurchases
 
 
 

 


 
 
 
(858
)
 
 
 
(858
)
 
 
 
(858
)
Stock-based compensation
 
 
 
 
 
46

 
 
 
 
 
 
 
46

 
 
 
46

Dividends on preferred stock
 
 
 
 
 
 
 
(6
)
 
 
 
 
 
(6
)
 
 
 
(6
)
Dividends on common stock
 
 
 
 
 
 
 
(437
)
 
 
 
 
 
(437
)
 
 
 
(437
)
Change in equity of noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 

 
4

 
4

Net income (loss)
 
 
 
 
 
 
 
826

 
 
 
 
 
826

 
3

 
829

Other comprehensive income (loss), net of income tax
 
 
 
 
 
 
 
 
 
 
 
1,049

 
1,049

 
1

 
1,050

Balance at March 31, 2017
 
$

 
$
12

 
$
30,990

 
$
34,863

 
$
(4,332
)
 
$
6,396

 
$
67,929

 
$
179

 
$
68,108

 
 
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
 
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

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, 2017 and 2016 (Unaudited)
(In millions)

 
Three Months
Ended
March 31,
 
2017
 
2016
Net cash provided by (used in) operating activities
$
2,098

 
$
1,913

Cash flows from investing activities
 
 
 
Sales, maturities and repayments of:
 
 
 
Fixed maturity securities
23,086

 
35,095

Equity securities
188

 
631

Mortgage loans
1,776

 
2,857

Real estate and real estate joint ventures
39

 
56

Other limited partnership interests
461

 
295

Purchases of:
 
 
 
Fixed maturity securities
(22,484
)
 
(37,247
)
Equity securities
(299
)
 
(675
)
Mortgage loans
(3,430
)
 
(4,413
)
Real estate and real estate joint ventures
(341
)
 
(233
)
Other limited partnership interests
(362
)
 
(281
)
Cash received in connection with freestanding derivatives
2,515

 
1,337

Cash paid in connection with freestanding derivatives
(3,372
)
 
(1,173
)
Net change in policy loans
(20
)
 
85

Net change in short-term investments
(1,892
)
 
(2,302
)
Net change in other invested assets
(43
)
 
252

Other, net
(98
)
 
(23
)
Net cash provided by (used in) investing activities
(4,276
)
 
(5,739
)
Cash flows from financing activities
 
 
 
Policyholder account balances:
 
 
 
Deposits
21,271

 
19,925

Withdrawals
(19,100
)
 
(19,310
)
Net change in payables for collateral under securities loaned and other transactions
391

 
4,161

Net change in short-term debt
18

 

Long-term debt repaid
(4
)
 
(5
)
Collateral financing arrangements repaid
(12
)
 
(12
)
Financing element on certain derivative instruments and other derivative related transactions, net
188

 
(13
)
Treasury stock acquired in connection with share repurchases
(858
)
 
(70
)
Dividends on preferred stock
(6
)
 
(6
)
Dividends on common stock
(437
)
 
(413
)
Other, net
48

 
34

Net cash provided by (used in) financing activities
1,499

 
4,291

Effect of change in foreign currency exchange rates on cash and cash equivalents balances
213

 
73

Change in cash and cash equivalents
(466
)
 
538

Cash and cash equivalents, beginning of period
17,877

 
12,752

Cash and cash equivalents, end of period
$
17,411

 
$
13,290

Supplemental disclosures of cash flow information
 
 
 
Net cash paid (received) for:
 
 
 
Interest
$
255

 
$
249

Income tax
$
109

 
$
125

Non-cash transactions:
 
 
 
Reduction of fixed maturity securities in connection with a reinsurance transaction
$

 
$
224

Deconsolidation of operating joint venture:
 
 
 
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. As previously announced, in the third quarter of 2016, MetLife reorganized its businesses into six segments: U.S.; Asia; Latin America; Europe, the Middle East and Africa (“EMEA”); MetLife Holdings; and Brighthouse Financial, as a result of the Company’s plan to separate a substantial portion of its former Retail segment, as well as certain portions of its former Corporate Benefit Funding segment and Corporate & Other (the “Separation”). See Note 2 for further information on the reorganization, which was applied retrospectively.
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from these estimates.
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.
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. 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 to the 2017 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, 2016 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, 2016 (the “2016 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 2016 Annual Report.
Adoption of New Accounting Pronouncements
Effective January 1, 2017, the Company early adopted guidance relating to business combinations. The new guidance clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard will result in fewer acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. The adoption did not have an impact on the Company’s consolidated financial statements.
Effective January 1, 2017, the Company retrospectively adopted guidance relating to consolidation. The new guidance does not change the characteristics of a primary beneficiary under current GAAP. It changes how a reporting entity evaluates whether it is the primary beneficiary of a VIE by changing how a reporting entity that is a single decisionmaker of a VIE handles indirect interests in the entity held through related parties that are under common control with the reporting entity. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

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)

Effective January 1, 2017, the Company adopted new guidance related to stock-based compensation. The new guidance changes several aspects of the accounting for share-based payment and award transactions, including (i) income tax consequences when awards vest or are settled; (ii) classification as either equity or liability due to statutory tax withholding requirements; and (iii) classification on the statement of cash flows. In addition, the new guidance provides an accounting policy election to account for forfeitures as they occur, rather than to account for them based on an estimate of expected forfeitures. The Company has elected to continue to account for forfeitures based on an estimate of expected forfeitures. In addition, the Company elected to apply the change in presentation in the statement of cash flows related to excess tax benefits prospectively and prior periods have not been adjusted. The change in presentation for cash paid to a taxing authority when directly withholding equivalent shares has been classified as a financing activity in the statement of cash flows. The change was applied retrospectively and thus the directly withheld share equivalent amount was reclassified from an operating activity to a financing activity in the consolidated statements of cash flows for the three months ended March 31, 2016. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.
Other
Effective January 3, 2017, the Chicago Mercantile Exchange (“CME”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives for which the CME serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $1.8 billion, gross derivative liabilities by $2.0 billion, accrued investment income by $101 million, accrued investment expense recorded within other liabilities by $14 million, collateral receivables recorded within premiums, reinsurance and other receivables of $991 million, and collateral payables recorded within payables for collateral under securities loaned and other transactions of $816 million.
Future Adoption of New Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance on purchased callable debt securities (Accounting Standards Update (“ASU”) 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.) The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those years and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In March 2017, the FASB issued new guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost (ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost). The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance requires that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The guidance should be applied retrospectively for the presentation of the service cost component in the income statement and allows a practical expedient for the estimation basis for applying the retrospective presentation requirements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In February 2017, the FASB issued new guidance on derecognition of nonfinancial assets (ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted for interim or annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The new guidance clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” The ASU also adds guidance for partial sales of nonfinancial assets. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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 January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In November 2016, the FASB issued new guidance on restricted cash (ASU 2016-18, Statement of Cash Flows (Topic 230): a consensus of the FASB Emerging Issues Task Force). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a retrospective basis. Early adoption is permitted. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In October 2016, the FASB issued new guidance on tax accounting for intra-entity transfers of assets (ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a modified retrospective basis. Early adoption is permitted in the first interim or annual reporting period. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Also, the guidance eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In August 2016, the FASB issued new guidance on cash flow statement presentation (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Early adoption is permitted in any interim or annual period. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other-than-temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and is currently assessing the accounting and reporting system changes that will be required to comply with the new guidance. The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is continuing to evaluate the overall impact of the new guidance on its consolidated financial statements.

9

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 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. 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. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. The Company’s implementation efforts are primarily focused on the review of its existing lease contracts as well as identification of other contracts that may fall under the scope of the new guidance. 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. Additionally, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. The Company has assessed the population of financial instruments that are subject to the new guidance and has determined that the most significant impact will be the requirement to report changes in fair value in net income each reporting period for all equity securities currently classified as available-for-sale (“AFS”) and to a lesser extent, other limited partnership interests and real estate joint ventures that are currently accounted for under the cost method. The population of these investments accounted for under the cost method is not material. The Company is continuing to evaluate the overall impact of this guidance on its consolidated financial statements.
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, 2017 and interim periods within those years. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The new guidance will supersede nearly all existing revenue recognition guidance under U.S. GAAP; however, it will not impact the accounting for insurance and investment contracts within the scope of Financial Services insurance (Topic 944), leases, financial instruments and guarantees. For those contracts that are impacted, 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. Given the scope of the new revenue recognition guidance, the Company does not expect the adoption to have a material impact on its consolidated revenues or statements of operations, with the Company’s implementation efforts primarily focused on other revenues on the consolidated statements of operations, which represents less than 3% of consolidated total revenues in 2016.

10

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

2. Segment Information
As previously announced, in the third quarter of 2016, MetLife reorganized its businesses into six segments: U.S.; Asia; Latin America; EMEA; MetLife Holdings; and Brighthouse Financial, in anticipation of the proposed Separation. In addition, the Company reports certain of its results of operations in Corporate & Other. Prior period results have been revised in connection with the reorganization and did not have an impact on total consolidated net income (loss) or operating earnings.
On January 12, 2016, MetLife, Inc. announced its plan to pursue the Separation. MetLife, Inc. subsequently re-segmented the business to be separated and rebranded it as “Brighthouse Financial.”
On October 5, 2016, Brighthouse Financial, Inc., a subsidiary of MetLife, Inc. (“Brighthouse”), filed a registration statement on Form 10 (the “Form 10”) with the U.S. Securities and Exchange Commission (“SEC”). On December 6, 2016 and on April 18, 2017, Brighthouse filed amendments to its registration statement on Form 10 with the SEC. The information statement filed as an exhibit to the Form 10 disclosed that the Company intends to include Brighthouse Life Insurance Company (formerly, MetLife Insurance Company USA (“MetLife USA”)) (“Brighthouse Insurance”), New England Life Insurance Company (“NELICO”), Brighthouse Life Insurance Company of NY (formerly, First MetLife Investors Insurance Company (“FMLI”)), Brighthouse Investment Advisers, LLC (formerly, MetLife Advisers, LLC) and certain captive reinsurance companies in the proposed separated business and distribute at least 80.1% of the shares of Brighthouse’s common stock on a pro rata basis to the holders of MetLife, Inc. common stock.
Effective April 28, 2017, following receipt of applicable regulatory approvals, MetLife contributed certain captive reinsurance companies to Brighthouse Insurance, which were then merged into a newly-formed captive reinsurance company that is wholly-owned by Brighthouse Insurance. See Note 14 for information on related financing arrangements.
The ultimate form and timing of the Separation will be influenced by a number of factors, including regulatory considerations and economic conditions. MetLife continues to evaluate and pursue structural alternatives for the proposed Separation. The Separation remains subject to certain conditions, including among others, obtaining final approval from the MetLife, Inc. Board of Directors, receipt of a favorable ruling from the Internal Revenue Service and an opinion from MetLife’s tax advisor regarding certain U.S. federal income tax matters, insurance and other regulatory approvals, and an SEC declaration of the effectiveness of the Form 10.
U.S.
The U.S. segment offers a broad range of protection products and services aimed at serving the financial needs of customers throughout their lives. These products are sold to corporations and their respective employees, other institutions and their respective members, as well as individuals. The U.S. segment is organized into three businesses: Group Benefits, Retirement and Income Solutions and Property & Casualty.
The Group Benefits business offers insurance products and services which include life, dental, group short- and long-term disability, individual disability, accidental death and dismemberment, critical illness, vision and accident & health coverages, as well as prepaid legal plans. This business also sells administrative services-only arrangements to some employers.
The Retirement and Income Solutions business offers a broad range of annuity and investment products, including guaranteed interest contracts and other stable value products, institutional income annuities and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This business 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.
The Property & Casualty business offers personal and commercial lines of property and casualty insurance, including private passenger automobile, homeowners’ and personal excess liability insurance. In addition, Property & Casualty offers small business owners property, liability and business interruption insurance.
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.

11

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 and savings 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 and savings products.
MetLife Holdings
The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company in the United States. These products and businesses include variable, universal, term and whole life, as well as variable, fixed and index-linked annuities. The MetLife Holdings segment also includes the Company’s discontinued long-term care business and the assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan.
Brighthouse Financial
The Brighthouse Financial segment offers a broad range of products and services which include variable, fixed, index-linked and income annuities, as well as variable, universal, term and whole life products. These products and services are actively marketed through various third party retail distribution channels in the United States. In addition, the Brighthouse Financial segment includes certain run-off businesses which are not actively marketed.
Corporate & Other
Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including external integration and disposition costs, internal resource costs for associates committed to acquisitions and dispositions, enterprise-wide strategic initiative restructuring charges and 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, as well as the direct to consumer portion of the U.S. Direct business). Corporate & Other also includes interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to affiliated reinsurance and intersegment loans, which bear interest rates commensurate with related borrowings.
Financial Measures and Segment Accounting Policies
Operating earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also the Company’s GAAP 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 allows analysis of the Company’s performance relative to the Company’s business plan and facilitates comparisons to industry results.
Operating earnings is defined as operating revenues less operating expenses, both net of income tax.
The financial measures of operating revenues and operating expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and divested businesses and certain entities required to be consolidated under GAAP. Also, these measures 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.

12

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

The following additional adjustments are made to 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”); and
Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment,(ii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to contractholder-directed unit-linked investments and (iv) 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 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.
The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.
Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months ended March 31, 2017 and 2016. 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, with the exception of the Brighthouse Financial segment, for which equity is reflective of the historical equity of the legal entities which comprise Brighthouse and related companies, which will be eliminated upon Separation. The Brighthouse Financial segment equity is not indicative of Brighthouse and related companies’ equity on a combined standalone basis.
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.

13

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, with the exception of the Brighthouse Financial segment, is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, net income (loss) or operating earnings. As noted above, the Brighthouse Financial segment’s net investment income represents that of the legal entities which comprise Brighthouse and related companies on a historical basis, however, Brighthouse Financial segment’s net investment income may not be indicative of that on a combined standalone basis.
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.

14

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



Operating Results




Three Months Ended March 31, 2017

U.S.
 
Asia
 
Latin
America
 
EMEA
 
MetLife
Holdings
 
Brighthouse
Financial
 
Corporate &
Other
 
Total
 
Adjustments
 
Total
Consolidated


(In millions)
Revenues




















Premiums

$
5,185


$
1,708


$
647


$
502


$
1,059


$
177


$
37


$
9,315


$


$
9,315

Universal life and investment-type product policy fees

265


366


260


95


362


884


(31
)

2,201


101


2,302

Net investment income

1,612


702


303


74


1,441


858


5


4,995


201


5,196

Other revenues

204


10


9


17


96


74


(42
)

368


6


374

Net investment gains (losses)

















8


8

Net derivative gains (losses)

















(926
)

(926
)
Total revenues

7,266

 
2,786

 
1,219

 
688

 
2,958

 
1,993

 
(31
)
 
16,879

 
(610
)
 
16,269

Expenses









 





 



 
Policyholder benefits and claims and policyholder dividends

5,235


1,315


633


269


1,736


631


9


9,828


348


10,176

Interest credited to policyholder account balances

351


321


82


24


257


275




1,310


402


1,712

Capitalization of DAC

(100
)

(420
)

(82
)

(92
)

(34
)

(67
)

(1
)

(796
)



(796
)
Amortization of DAC and VOBA

114


291


78


87


74


200


1


845


(312
)

533

Amortization of negative VOBA



(37
)



(3
)







(40
)

(3
)

(43
)
Interest expense on debt

2




1




15


32


246


296




296

Other expenses

909


875


326


316


340


612


90


3,468


106


3,574

Total expenses

6,511

 
2,345

 
1,038

 
601

 
2,388

 
1,683

 
345

 
14,911

 
541

 
15,452

Provision for income tax expense (benefit)

252


146


38


12


185


66


(283
)

416


(428
)

(12
)
Operating earnings

$
503

 
$
295

 
$
143

 
$
75

 
$
385

 
$
244

 
$
(93
)

1,552





Adjustments to:















 



 
Total revenues















(610
)



 
Total expenses















(541
)



 
Provision for income tax (expense) benefit
 
 
 
 
 
 
 
 
 
 
 
 
 
 

428




 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

$
829




$
829


15

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

 
 
Operating Results
 
 
 
 
Three Months Ended March 31, 2016
 
U.S.
 
Asia
 
Latin
America
 
EMEA
 
MetLife
Holdings
 
Brighthouse
Financial
 
Corporate &
Other
 
Total
 
Adjustments
 
Total
Consolidated
 
 
(In millions)
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
5,020

 
$
1,658

 
$
601

 
$
500

 
$
1,097

 
$
393

 
$
(2
)
 
$
9,267

 
$
426

 
$
9,693

Universal life and investment-type product policy fees
 
250

 
350

 
268

 
95

 
355

 
858

 
(25
)
 
2,151

 
193

 
2,344

Net investment income
 
1,460

 
618

 
255

 
80

 
1,475

 
813

 
5

 
4,706

 
(147
)
 
4,559

Other revenues
 
204

 
17

 
7

 
20

 
204

 
86

 
(51
)
 
487

 

 
487

Net investment gains (losses)
 

 

 

 

 

 

 

 

 
15

 
15

Net derivative gains (losses)
 

 

 

 

 

 

 

 

 
1,335

 
1,335

Total revenues
 
6,934

 
2,643

 
1,131

 
695

 
3,131

 
2,150

 
(73
)
 
16,611

 
1,822

 
18,433

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits and claims and policyholder dividends
 
5,046

 
1,236

 
550

 
261

 
1,823

 
703

 
(26
)
 
9,593

 
400

 
9,993

Interest credited to policyholder account balances
 
322

 
319

 
80

 
29

 
258

 
289

 
4

 
1,301

 
25

 
1,326

Capitalization of DAC
 
(111
)
 
(385
)
 
(73
)
 
(101
)
 
(100
)
 
(102
)
 
(4
)
 
(876
)
 
(105
)
 
(981
)
Amortization of DAC and VOBA
 
118

 
286

 
63

 
102

 
148

 
162

 
2

 
881

 
114

 
995

Amortization of negative VOBA
 

 
(64
)
 

 
(3
)
 

 

 

 
(67
)
 
(32
)
 
(99
)
Interest expense on debt
 
2

 

 

 

 
14

 
32

 
264

 
312

 

 
312

Other expenses
 
942

 
851

 
310

 
333

 
596

 
624

 
54

 
3,710

 
255

 
3,965

Total expenses
 
6,319

 
2,243

 
930

 
621

 
2,739

 
1,708

 
294

 
14,854

 
657

 
15,511

Provision for income tax expense (benefit)
 
209

 
95

 
50

 
11

 
125

 
115

 
(183
)
 
422

 
297

 
719

Operating earnings
 
$
406

 
$
305

 
$
151

 
$
63

 
$
267

 
$
327

 
$
(184
)
 
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


16

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, 2017
 
December 31, 2016
 
 
(In millions)
U.S.
 
$
254,041

 
$
253,683

Asia
 
128,932

 
120,656

Latin America
 
71,697

 
67,233

EMEA
 
26,786

 
25,596

MetLife Holdings
 
184,187

 
184,276

Brighthouse Financial
 
223,746

 
222,681

Corporate & Other
 
25,298

 
24,639

Total
 
$
914,687

 
$
898,764

3. Insurance
Guarantees
As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2016 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 6.
The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.
Information regarding the Company’s guarantee exposure, which includes direct and assumed business, but excludes offsets from hedging or ceded reinsurance, if any, was as follows at:
 
 
March 31, 2017
 
 
December 31, 2016
 
 
 
In the
Event of Death
 
At
Annuitization
 
In the
Event of Death
 
At
Annuitization
 
 
(Dollars in millions)
 
Annuity Contracts (1):
 
 
 
 
 
 
 
 
 
 
 
 
Variable Annuity Guarantees:
 
 
 
 
 
 
 
 
 
 
 
 
Total account value (2), (3)
 
$
181,504

 
 
$
91,461

 
 
$
177,895

 
 
$
89,839

 
Separate account value
 
$
153,699

 
 
$
88,067

 
 
$
150,118

 
 
$
86,355

 
Net amount at risk (2)
 
$
7,740

(4
)
 
$
3,647

(5
)
 
$
8,679

(4
)
 
$
3,834

(5
)
Average attained age of contractholders
 
67 years

 
 
66 years

 
 
66 years

 
 
66 years

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

 
 
$
1,382

 
 
N/A

 
 
$
1,393

 
Net amount at risk
 
N/A

 
 
$
486

(6
)
 
N/A

 
 
$
490

(6
)
Average attained age of contractholders
 
N/A

 
 
51 years

 
 
N/A

 
 
50 years

 

17

MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

 
 
March 31, 2017
 
December 31, 2016
 
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
Secondary
Guarantees
 
Paid-Up
Guarantees
 
 
(Dollars in millions)
Universal and Variable Life Contracts (1):
 
 
 
 
 
 
 
 
Total account value (3)
 
$
17,923

 
$
3,302

 
$
17,689

 
$
3,337

Net amount at risk (7)
 
$
171,785

 
$
17,476

 
$
172,860

 
$
17,785

Average attained age of policyholders
 
58 years

 
63 years

 
58 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.

18

MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

Liabilities for Unpaid Claims and Claim Expenses
Rollforward of Claims and Claim Adjustment Expenses
Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:
 
 
Three Months
Ended
March 31,
 
 
2017
 
2016
 
 
(In millions)
Balance at December 31 of prior period
 
$
18,159

 
$
11,388

Less: Reinsurance recoverables
 
3,058

 
2,042

Net Balance at December 31 of prior period
 
15,101

 
9,346

Cumulative adjustment (1)
 

 
4,988

Net balance, beginning of period
 
15,101

 
14,334

Incurred related to:
 
 
 
 
Current period
 
6,874

 
6,977

Prior periods (2)
 
(42
)
 
(139
)
Total incurred
 
6,832

 
6,838

Paid related to:
 

 

Current period
 
(3,777
)
 
(3,710
)
Prior periods
 
(2,698
)
 
(2,473
)
Total paid
 
(6,475
)
 
(6,183
)
Net balance, end of period
 
15,458

 
14,989

Add: Reinsurance recoverables
 
3,058

 
2,843

Balance, end of period (included in future policy benefits and other policy-related balances)
 
$
18,516

 
$
17,832

__________________
(1)
Reflects the accumulated adjustment, net of reinsurance, upon implementation of the new short-duration contracts guidance which clarified the requirement to include claim information for long-duration contracts. The accumulated adjustment primarily reflects unpaid claim liabilities, net of reinsurance, for long-duration contracts as of the beginning of the period presented.
(2)
During the three months ended March 31, 2017 and 2016, as a result of changes in estimates of insured events in the respective prior periods, the claims and claim adjustment expenses associated with prior periods decreased due to favorable claims experience.
4. 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.

19

MetLife, Inc.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Closed Block (continued)

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:
 
 
March 31, 2017
 
December 31, 2016
 
 
(In millions)
Closed Block Liabilities
 
 
 
 
Future policy benefits
 
$
40,654

 
$
40,834

Other policy-related balances
 
223

 
257

Policyholder dividends payable
 
470

 
443

Policyholder dividend obligation
 
1,983

 
1,931

Current income tax payable
 
11

 
4

Other liabilities
 
245

 
196

Total closed block liabilities
 
43,586

 
43,665

Assets Designated to the Closed Block
 
 
 
 
Investments:
 
 
 
 
Fixed maturity securities available-for-sale, at estimated fair value
 
27,554

 
27,220

Equity securities available-for-sale, at estimated fair value
 
102

 
100

Mortgage loans
 
5,857

 
5,935

Policy loans
 
4,550

 
4,553

Real estate and real estate joint ventures
 
654

 
655

Other invested assets
 
904

 
1,246

Total investments
 
39,621

 
39,709

Cash and cash equivalents
 
46

 
18

Accrued investment income
 
483

 
467

Premiums, reinsurance and other receivables
 
62

 
68

Deferred income tax assets
 
171

 
177

Total assets designated to the closed block
 
40,383

 
40,439

Excess of closed block liabilities over assets designated to the closed block
 
3,203

 
3,226

Amounts included in accumulated other comprehensive income (loss) (“AOCI”):
 
 
 
 
Unrealized investment gains (losses), net of income tax
 
1,582

 
1,517

Unrealized gains (losses) on derivatives, net of income tax
 
85

 
95

Allocated to policyholder dividend obligation, net of income tax