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Separation
 9 Months Ended
Sep. 30, 2017
Discontinued Operation, Additional Disclosures [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]
3. Separation
Separation of Brighthouse
In January 2016, MetLife, Inc. announced its 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. MetLife, Inc. subsequently re-segmented the business to be separated and rebranded it as “Brighthouse Financial.” On July 6, 2017, MetLife, Inc. announced that the U.S. Securities and Exchange Commission (“SEC”) declared Brighthouse Financial, Inc.’s registration statement on Form 10 effective. Additionally, all required state regulatory approvals were granted.
On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse. MetLife, Inc. common shareholders received a distribution of one share of Brighthouse Financial, Inc. common stock for every 11 shares of MetLife, Inc. common stock they owned as of 5:00 p.m., New York City time, on the July 19, 2017 record date. Shareholders of MetLife, Inc. who owned less than 11 shares of common stock, or others who would have otherwise received fractional shares, received cash. MetLife, Inc. distributed 96,776,670 of the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing approximately 80.8% of those shares. Certain MetLife affiliates hold MetLife, Inc. common stock and, as a result, participated in the distribution.
The loss recognized in the third quarter of 2017 in connection with the Separation was $1,084 million, net of income tax, which includes: (i) a $1,061 million loss on MetLife's retained investment in Brighthouse Financial, Inc., (ii) a $42 million net tax charge and (iii) a $42 million charge, net of income tax, for transaction costs, partially offset by a $61 million gain, net of income tax, for previously deferred intercompany gains realized upon Separation. The $42 million net tax charge is comprised of a $1,093 million tax separation agreement charge offset by $1,051 million of Separation tax benefits. Of the $1,084 million total loss, net of income tax, a $104 million loss, net of income tax, was reported within continuing operations as (i) a $738 million net investment loss, (ii) a $147 million charge within policyholder benefits and claims, (iii) a $107 million charge within other expenses, and (iv) an $888 million income tax benefit. The remaining $980 million loss was reported within discontinued operations, which primarily includes a tax-related charge.
For the nine months ended September 30, 2017, the loss recognized in connection with the Separation was $1,347 million, net of income tax, which included additional transaction costs. Of the $1,347 million total loss, net of income tax, a $176 million loss, net of income tax, was reported within continuing operations as (i) a $738 million net investment loss, (ii) a $147 million charge within policyholder benefits and claims, (iii) a $218 million charge within other expenses, and (iv) a $927 million income tax benefit. The remaining $1,171 million loss was reported within discontinued operations, which primarily includes a tax-related charge.
MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock and recognized its investment in Brighthouse Financial, Inc. common stock based on the NASDAQ reported market price. The Company elected to record the investment under the FVO as an observable measure of estimated fair value that is aligned with the Company’s intent to divest of the retained shares as soon as practicable. Subsequent changes in estimated fair value of the investment are recorded to net investment gains (losses). The estimated fair value of the Brighthouse Financial, Inc. common stock held by the Company (“FVO Brighthouse Common Stock”) as of September 30, 2017 was $1.4 billion reported within fair value option securities. In the third quarter of 2017, the Company recorded a $1,016 million mark-to-market loss on its retained investment in Brighthouse Financial, Inc. to net investment gains (losses) at Separation and an additional $45 million loss to net investment gains (losses) for the change in Brighthouse Financial, Inc.’s common stock share price from the Separation date to September 30, 2017. As of the Separation date, the Company evaluated the assets of Brighthouse for potential impairment, and determined that no impairment charge was required.
The Company incurred pre-tax Separation-related transaction costs of $64 million and $470 million for the three months and nine months ended September 30, 2017, respectively, primarily related to fees for the terminations of financing arrangements and professional services. The Company incurred pre-tax Separation-related transaction costs of $51 million and $108 million for the three months and nine months ended September 30, 2016, respectively, primarily related to professional services. For the three months and nine months ended September 30, 2017, the Company reported $39 million and $333 million, respectively, within discontinued operations for fees for the terminations of financing arrangements and costs required to complete the Separation. All other Separation-related transaction costs are recorded in other expenses and reported within continuing operations.
Upon Separation, MetLife, Inc. terminated a net worth maintenance agreement with Brighthouse Life Insurance Company of NY (formerly, First MetLife Investors Insurance Company) in accordance with its terms. See Schedule II included in the 2016 Annual Report for further information.
Agreements
In connection with the Separation, MetLife and Brighthouse entered into various agreements. The significant agreements were as follows:
Master Separation Agreement
MetLife entered into a master separation agreement with Brighthouse prior to the completion of the distribution. The master separation agreement sets forth agreements with Brighthouse relating to the ownership of certain assets and the allocation of certain liabilities in connection with the separation of Brighthouse from MetLife. It also sets forth other agreements governing the relationship with Brighthouse after the distribution, including certain payment obligations between the parties.
Tax Agreements
Immediately prior to the Separation, MetLife entered into a tax separation agreement with Brighthouse. Among other things, the tax separation agreement governs the allocation between MetLife and Brighthouse of the responsibility for the taxes of the MetLife group. The tax separation agreement also allocates rights, obligations and responsibilities in connection with certain administrative matters relating to the preparation of tax returns and control of tax audits and other proceedings relating to taxes. For the taxable periods prior to Separation, MetLife and Brighthouse have joint and several liability for the MetLife consolidated U.S. federal income tax returns’ current taxes (and the benefits of tax attributes such as losses) allocated to Brighthouse. The tax separation agreement provides that the Brighthouse allocation of taxes could vary depending upon the outcome of Internal Revenue Service examinations. Upon Separation, the Company recorded a current income tax receivable of $1.4 billion and a corresponding payable to Brighthouse reported in other liabilities. On October 2, 2017, in accordance with the tax separation agreement, $729 million of this amount was paid by MetLife to Brighthouse.
As part of the tax separation agreement, MetLife is liable for the U.S. federal income tax cost of a discrete Separation‑related tax charge incurred by Brighthouse. The income tax charge arises from the recapture of certain tax benefits incurred prior to Separation, and is caused by the deconsolidation of Brighthouse from the MetLife tax group at Separation. As a result, during the three months ended September 30, 2017, the Company recorded a decrease to current income tax recoverable and a charge to provision for income tax expense (benefit) of $1,093 million, which was reported in discontinued operations.
Additionally, MetLife has the right to receive future payments from Brighthouse for a tax asset that Brighthouse received as a result of restructuring prior to the Separation. Included in other assets at September 30, 2017, is a receivable from Brighthouse of $555 million related to these future payments.
Transactions Prior to the Separation
Prior to the Separation, the Company completed the following transactions in 2017. See “— Discontinued Operations” for additional information.
Contributions of Entities, Mergers and Dividend
In April 2017, following receipt of applicable regulatory approvals, MetLife contributed certain captive reinsurance companies to Brighthouse Life Insurance Company (“Brighthouse Insurance”), which were merged into Brighthouse Reinsurance Company of Delaware (“BRCD”), a newly-formed captive reinsurance company that is wholly-owned by Brighthouse Insurance.
In July 2017, MetLife, Inc. contributed the voting common interests of Brighthouse Holdings, LLC, a subsidiary of MetLife, Inc., to Brighthouse Financial, Inc. Brighthouse Holdings, LLC is an intermediate holding company, which owns all of the subsidiaries within Brighthouse.
On August 3, 2017, Brighthouse Financial, Inc. paid a cash dividend to MetLife, Inc. of $1.8 billion in connection with the Separation.
Termination of Financing Arrangements
In April 2017, MetLife, Inc. and MetLife Reinsurance Company of South Carolina (“MRSC”) terminated the MRSC collateral financing arrangement associated with secondary guarantees. As a result, the $2.8 billion collateral financing arrangement liability outstanding was extinguished utilizing $2.8 billion of assets held in trust with the remaining $590 million of assets held in trust returned to MetLife, Inc. as a cash return of capital from a subsidiary. Total fees associated with the termination were $37 million and were reported in discontinued operations.
In April 2017, MetLife, Inc. and MetLife Reinsurance Company of Vermont (“MRV”) terminated the $4.3 billion committed facility, and MetLife, Inc. and MRSC terminated the $3.5 billion committed facility. Total fees associated with the terminations were $257 million and were reported in discontinued operations.
See Note 9 for discussion of impacts to the junior subordinated debentures as a result of the Separation.
New Financing Arrangements
In April 2017, BRCD entered into a new financing arrangement with a pool of highly rated third-party reinsurers with a total capacity of $10.0 billion. This financing arrangement consists of credit-linked notes that each has a term of 20 years.
In June 2017, Brighthouse Holdings, LLC issued 50,000 units of 6.50% fixed rate cumulative preferred units to MetLife, Inc. and in turn MetLife, Inc. sold the preferred units to third-party investors, for net proceeds of $49 million.
In June 2017, Brighthouse Financial, Inc. issued $1.5 billion of senior notes due in June 2027 (the “2027 Senior Notes”) which bear interest at a fixed rate of 3.70%, payable semi-annually. Also in June 2017, Brighthouse Financial, Inc. issued $1.5 billion of senior notes due in June 2047 (the “2047 Senior Notes,” and together with the 2027 Senior Notes, the “Senior Notes”) which bear interest at a fixed rate of 4.70%, payable semi-annually. In connection with the issuance of the Senior Notes, MetLife, Inc. had initially guaranteed the Senior Notes on a senior unsecured basis. The guarantee was released, in accordance with its terms, in connection with consummation of the Separation.
In June 2017, subsequent to the issuance of the Senior Notes, the borrowing capacity under Brighthouse Financial, Inc.’s three-year senior unsecured delayed draw term loan agreement (the “2016 Term Loan Agreement”) was decreased from $3.0 billion to $536 million. On July 21, 2017, concurrently with entering into a new term loan agreement described below, Brighthouse Financial, Inc. terminated the 2016 Term Loan Agreement without penalty.
In July 2017, Brighthouse Financial, Inc. entered into a new $600 million senior unsecured delayed draw term loan agreement (the “2017 Term Loan Agreement”). Under the 2017 Term Loan Agreement, Brighthouse Financial, Inc. may borrow up to a maximum of $600 million which may be used for general corporate purposes, including in connection with the Separation, of which $500 million was available prior to the Separation. The 2017 Term Loan Agreement contains certain covenants that could restrict the operations and use of funds of Brighthouse. On August 2, 2017, Brighthouse Financial, Inc. borrowed $500 million under the 2017 Term Loan Agreement in connection with the Separation.
Termination of Support Agreements
In April 2017, in connection with the contribution of entities, mergers and financing transactions discussed above, MetLife, Inc. terminated various support agreements with the captive reinsurance companies merged into BRCD. See Schedule II included in the 2016 Annual Report for information on the support agreements that were terminated.
Ongoing Transactions with Brighthouse
The Company considered all of its continuing involvement with Brighthouse in determining to deconsolidate and present Brighthouse results as discontinued operations, including the agreements described above and the ongoing transactions described below.
The Company entered into reinsurance, committed facility, structured settlement, and contract administrative services transactions with Brighthouse in the normal course of business and such transactions will continue based upon business needs. In addition, prior to and in connection with the Separation, the Company entered into various other agreements with Brighthouse for services necessary for both the Company and Brighthouse to conduct their activities. Intercompany transactions prior to the Separation between the Company and Brighthouse are eliminated and excluded from the interim condensed consolidated statements of operations and comprehensive income (loss) and interim condensed consolidated balance sheets. Transactions between the Company and Brighthouse that continue after the Separation are included on the Company’s interim condensed consolidated statements of operations and comprehensive income (loss) and interim condensed consolidated balance sheets.
Reinsurance
The Company entered into reinsurance transactions with Brighthouse in the normal course of business and such transactions will continue based upon business needs. Information regarding the significant effects of reinsurance transactions with Brighthouse was as follows:
 
Included on Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
 
Excluded from Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
 
Three and Nine Months
Ended
September 30,
 
Three Months
Ended
September 30,
 
Nine Months
Ended
September 30,
 
2017 (1)
 
2017 (2)
 
2016
 
2017 (2)
 
2016
 
(In millions)
Premiums
 
 
 
 
 
 
 
 
 
Reinsurance assumed
$
70

 
$
36


$
111


$
248


$
338

Reinsurance ceded
(2
)
 
1


(3
)

(7
)

(10
)
Net premiums
$
68

 
$
37

 
$
108

 
$
241

 
$
328

Universal life and investment-type product policy fees
 
 
 
 
 
 
 
 
 
Reinsurance assumed
$
(1
)
 
$
(1
)

$
(2
)

$
(6
)

$
(2
)
Reinsurance ceded
(22
)
 
(8
)

(30
)

(55
)

(76
)
Net universal life and investment-type product policy fees
$
(23
)
 
$
(9
)
 
$
(32
)
 
$
(61
)
 
$
(78
)
Policyholder benefits and claims
 
 
 
 
 
 
 
 
 
Reinsurance assumed
$
55

 
$
30


$
103


$
196


$
286

Reinsurance ceded
(6
)
 
(3
)

(14
)

(16
)

(9
)
Net policyholder benefits and claims
$
49

 
$
27

 
$
89

 
$
180

 
$
277

Interest credited to policyholder account balances
 
 
 
 
 
 
 
 
 
Reinsurance assumed
$
3

 
$
1


$
4


$
10


$
12

Reinsurance ceded
(12
)
 
(6
)

(18
)

(42
)

(56
)
Net interest credited to policyholder account balances
$
(9
)
 
$
(5
)
 
$
(14
)
 
$
(32
)
 
$
(44
)
Other expenses
 
 
 
 
 
 
 
 
 
Reinsurance assumed
$
6

 
$
4


$
18


$
10


$
63

Reinsurance ceded
(7
)
 
(3
)

(8
)

(28
)

(24
)
Net other expenses
$
(1
)
 
$
1

 
$
10

 
$
(18
)
 
$
39

__________________
(1)
Includes transactions after the Separation.
(2)
Includes transactions prior to the Separation.
Information regarding the significant effects of reinsurance transactions with Brighthouse included on the interim condensed consolidated balance sheets was as follows at:
 
September 30, 2017
 
Assumed
 
Ceded
 
(In millions)
Assets
 
 
 
Premiums, reinsurance and other receivables
$
162

 
$
1,786

Deferred policy acquisition costs and value of business acquired
393

 
(22
)
Total assets
$
555

 
$
1,764

Liabilities
 
 
 
Future policy benefits
$
1,666

 
$
—

Other policy-related balances
121

 
29

Other liabilities
1,460

 
22

Total liabilities
$
3,247

 
$
51

Investment Management
In connection with the Separation, the Company entered into investment management services agreements with Brighthouse. Each agreement has an initial term of 18 months after the date of Separation, after which period either party to the agreement is permitted to terminate upon notice to the other party. After the Separation, during both the three months and nine months ended September 30, 2017, the Company recognized $18 million in other revenues for services provided under the agreements. Prior to the Separation, during the three months and nine months ended September 30, 2017, the Company charged Brighthouse $8 million and $57 million, respectively, for services provided under the agreements, which were intercompany transactions and eliminated and excluded from the interim condensed consolidated statement of operations and comprehensive income (loss).
Debt
MRV and MetLife, Inc. have a $2.9 billion committed facility which is used as collateral for certain affiliated reinsurance liabilities. As of September 30, 2017, Brighthouse is a beneficiary of $2.3 billion of letters of credit issued under this committed facility and in consideration Brighthouse reimburses MetLife, Inc. a portion of the letter of credit fees. The Company entered into the committed facility with Brighthouse in the normal course of business and such transactions will continue based upon business needs.
See “— Transactions Prior to the Separation — Termination of Financing Arrangements” for additional transactions with Brighthouse.
Transition Services
In connection with the Separation, the Company entered into a transition services agreement with Brighthouse for services necessary for Brighthouse to conduct their activities. The services are expected to continue up to 36 months, with certain services potentially to be made available for several years thereafter. After the Separation, during the three months ended September 30, 2017, the Company recognized $60 million as a reduction to other expenses for transitional services provided under the agreement. Prior to the Separation, during the three months and nine months ended September 30, 2017, the Company charged Brighthouse $27 million and $191 million, respectively, for services provided under the agreement, which were intercompany transactions and eliminated and excluded from the interim condensed consolidated statement of operations and comprehensive income (loss).
Other
The Company has existing assumed structured settlement claim obligations as an assignment company for Brighthouse. These liabilities are measured at the present value of the periodic claims to be provided and reported as other policy-related balances. The Company receives a fee for assuming these claim obligations and, as the assignee of the claim, is legally obligated to ensure periodic payments are made to the claimant. The Company purchased annuities from Brighthouse to fund these obligations and designates payments to be made directly to the claimant by Brighthouse as the annuity writer. The aggregate contract values of annuities funding structured settlement claims are recorded as an asset for which the Company has also recorded an unpaid claim obligation reported in other policy-related balances. Such aggregated contract values were $1.3 billion at September 30, 2017. The Company entered into these transactions with Brighthouse in the normal course of business and such transactions will continue based upon business needs.
The Company provides services necessary for Brighthouse to conduct its business, which primarily include contract administrative services for certain Brighthouse investment-type products. After the Separation, during both the three months and nine months ended September 30, 2017, the Company recognized $21 million in universal life and investment-type product policy fees for administrative services provided to Brighthouse. Prior to the Separation, during the three months and nine months ended September 30, 2017, the Company provided administrative services to Brighthouse for $10 million and $73 million, respectively, which were intercompany transactions and eliminated and excluded from the interim condensed consolidated statement of operations and comprehensive income (loss). The Company entered into these transactions with Brighthouse in the normal course of business and such transactions will continue based upon business needs.
In connection with the Separation, the Company entered into an employee matters agreement with Brighthouse to allocate obligations and responsibilities relating to employee compensation and benefit plans and other related matters. The employee matters agreement provides that MetLife will reimburse Brighthouse for certain pension benefit payments, retiree health and life benefit payments and deferred compensation payments. Included in other liabilities at September 30, 2017, is a payable to Brighthouse of $186 million related to these future payments.
At September 30, 2017, the Company had a net receivable from Brighthouse of $40 million related to services provided and received.
Discontinued Operations
The following table presents the amounts related to the operations and loss on disposal of Brighthouse that have been reflected in discontinued operations:
 
Three Months
Ended
September 30,
 
Nine Months
Ended
September 30,
 
2017 (1)
 
2016
 
2017 (1)
 
2016
 
(In millions)
Revenues
 
 
 
 
 
 
 
Premiums
$
116

 
$
552

 
$
820

 
$
1,544

Universal life and investment-type product policy fees
320

 
955

 
2,201

 
2,799

Net investment income
243

 
857

 
1,783

 
2,384

Other revenues
27

 
8

 
150

 
31

Total net investment gains (losses)
1

 
26

 
(53
)
 
(60
)
Net derivative gains (losses)
(171
)
 
(509
)
 
(1,061
)
 
(3,254
)
Total revenues
536

 
1,889

 
3,840

 
3,444

Expenses
 
 
 
 
 
 
 
Policyholder benefits and claims
335

 
1,244

 
2,217

 
3,414

Interest credited to policyholder account balances
89

 
276

 
620

 
827

Policyholder dividends
2

 
10

 
16

 
27

Goodwill impairment
—

 
260

 
—

 
260

Other expenses
108

 
710

 
853

 
1,068

Total expenses
534

 
2,500

 
3,706

 
5,596

Income (loss) from discontinued operations before provision for income tax and loss on disposal of discontinued operations
2

 
(611
)
 
134

 
(2,152
)
Provision for income tax expense (benefit)
(10
)
 
(160
)
 
(48
)
 
(773
)
Income (loss) from discontinued operations before loss on disposal of discontinued operations, net of income tax
12

 
(451
)
 
182

 
(1,379
)
Transaction costs associated with the Separation, net of income tax
(25
)
 
—

 
(216
)
 
—

Tax charges associated with the Separation
(955
)
 
—

 
(955
)
 
—

Income (loss) on disposal of discontinued operations, net of income tax
(980
)
 
—

 
(1,171
)
 
—

Income (loss) from discontinued operations, net of income tax
$
(968
)
 
$
(451
)
 
$
(989
)
 
$
(1,379
)
__________________
(1)
Includes transactions prior to the Separation.
The following table presents the amounts related to the financial position of Brighthouse that have been reflected in the assets and liabilities of disposed subsidiary:
 
 
December 31, 2016
 
 
(In millions)
Assets
 
 
Investments:
 
 
Fixed maturity securities available-for-sale
 
$
61,326

Equity securities available-for-sale
 
300

Mortgage loans
 
9,378

Policy loans
 
1,517

Real estate and real estate joint ventures
 
150

Other limited partnership interests
 
1,642

Short-term investments
 
1,288

Other invested assets
 
3,881

Total investments
 
79,482

Cash and cash equivalents
 
5,226

Accrued investment income
 
680

Premiums, reinsurance and other receivables
 
10,636

Deferred policy acquisition costs and value of business acquired
 
7,207

Other assets
 
709

Separate account assets
 
113,043

Total assets of disposed subsidiary
 
$
216,983

Liabilities
 
 
Future policy benefits
 
$
33,270

Policyholder account balances
 
37,066

Other policy-related balances
 
1,356

Policyholder dividends payable
 
12

Payables for collateral under securities loaned and other transactions
 
7,390

Long-term debt
 
60

Collateral financing arrangements
 
2,797

Deferred income tax liability
 
2,594

Other liabilities
 
5,119

Separate account liabilities
 
113,043

Total liabilities of disposed subsidiary
 
$
202,707

In the consolidated statements of cash flows, the cash flows from discontinued operations are not separately classified. As such, the following table presents selected financial information regarding cash flows of the discontinued operation.

Nine Months
Ended
September 30,

2017

2016
 
(In millions)
Net cash provided by (used in):
 
 
 
Operating activities
$
1,329


$
2,590

Investing activities
$
(2,732
)

$
(5,074
)
Financing activities
$
(367
)
 
$
3,739