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Dispositions - Dispositions
 12 Months Ended
Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Acquisitions and Dispositions
3. Dispositions
Disposition of MetLife Afore, S.A. de C.V.
In October 2017, the Company entered into a definitive agreement to sell MetLife Afore, S.A. de C.V. (“MetLife Afore”), its pension fund management business in Mexico. As a result of the agreement, a loss of $98 million ($73 million, net of income tax), which includes a reduction to goodwill of $16 million, was recorded for the year ended December 31, 2017 and is reflected within net investment gains (losses).
At December 31, 2017, MetLife Afore reported $3.9 billion and $3.7 billion of total assets and total liabilities, respectively, which primarily consisted of $3.7 billion of separate account assets and liabilities. MetLife Afore’s results of operations are included in continuing operations and are reported in the Latin America segment. The transaction closed on February 20, 2018.
Separation of Brighthouse
2018 Sale of FVO Brighthouse Common Stock
In June 2018, the Company sold FVO Brighthouse Common Stock in exchange for $944 million aggregate principal amount of MetLife, Inc. senior notes, which MetLife, Inc. canceled. The Company recorded $327 million of mark-to-market and disposition losses on the FVO Brighthouse Common Stock to net investment gains (losses) for the year ended December 31, 2018. At December 31, 2018, the Company no longer held any shares of Brighthouse Financial, Inc. for its own account; however, certain insurance company separate accounts managed by the Company held shares of Brighthouse Financial, Inc. See Note 12 for further information on this transaction.
2017 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. 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.
MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding 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 was 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 were recorded to net investment gains (losses). FVO Brighthouse Common Stock at December 31, 2017 was $1.3 billion reported within FVO Securities. 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 the Separation date and an additional $95 million loss to net investment gains (losses) for the change in Brighthouse Financial, Inc.’s common stock share price from the Separation date to December 31, 2017.
The loss recognized in 2017 in connection with the Separation was $1,302 million, net of income tax, which included: (i) a $1,016 million loss on MetLife’s retained investment in Brighthouse Financial, Inc., (ii) a $42 million net tax charge and (iii) a $306 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 $1,302 million total loss, net of income tax, a $131 million loss, net of income tax, was reported within continuing operations as (i) a $693 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.
The Company incurred pre-tax Separation-related transaction costs of $470 million for the year ended December 31, 2017, primarily related to fees for the terminations of financing arrangements and professional services. The Company incurred pre-tax Separation-related transaction costs of $212 million for the year ended December 31, 2016 primarily related to professional services. For the year ended December 31, 2017, the Company reported $333 million 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.
In 2016, the Company recorded a non-cash charge of $260 million ($223 million, net of income tax) for the impairment of Brighthouse goodwill included in discontinued operations. As of the Separation date, the Company evaluated the assets of Brighthouse for potential impairment, and determined that no additional impairment charge was required.
In connection with the Separation, MetLife, Inc. terminated various support agreements with Brighthouse.
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. 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 (“IRS”) examinations. Upon Separation, MetLife, Inc. recorded a current income tax receivable of $1.4 billion and a corresponding payable to Brighthouse reported in other liabilities. In October 2017, in accordance with the tax separation agreement, $729 million of this amount was paid by MetLife, Inc. to Brighthouse. Accordingly, at December 31, 2017, the Company’s current income tax receivable and corresponding payable to Brighthouse, reported in other liabilities, was $726 million. In 2018, as a result of filing its U.S. tax return, the Company increased its current income tax receivable and corresponding payable to Brighthouse by $183 million. The adjusted payable of $909 million was settled in 2018 in accordance with the tax separation agreement. In addition, at December 31, 2018, the Company also reported a receivable from Brighthouse of $111 million in other assets, offset by a tax payable of $111 million, of which $68 million was reported in current income tax payable and $43 million was reported in other liabilities. These amounts represent Brighthouse uncertain tax items and audit adjustments while it was a member of the Company’s U.S. consolidated tax return.
As part of the tax separation agreement, MetLife, Inc. 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, MetLife, Inc. 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 for the Company.
Additionally, MetLife, Inc. 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 is a receivable from Brighthouse of $330 million and $333 million, at December 31, 2018 and 2017, respectively, related to these future payments, after a reduction in 2017 of $222 million as a result of U.S. Tax Reform.
Transactions Prior to the Separation
Prior to the Separation, the Company completed the following transactions in 2017.
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. at that time, to Brighthouse Financial, Inc. Brighthouse Holdings, LLC was at that time an intermediate holding company which owned all of the subsidiaries within Brighthouse.
In August 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 14 for information on the junior subordinated debentures in connection with 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 have 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, upon 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.
Ongoing Transactions with Brighthouse
The Company considered all of its continuing involvement with Brighthouse in determining whether 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, including investment management, transition services and employee matters 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 consolidated statements of operations and consolidated balance sheets. Transactions between the Company and Brighthouse that continue after the Separation are included on the Company’s consolidated statements of operations and consolidated balance sheets.
In June 2018, the Company sold FVO Brighthouse Common Stock and as a result the Company no longer considers Brighthouse to be a related party. Therefore, the following discussion of the ongoing transactions with Brighthouse only includes disclosures of related party amounts through June 30, 2018 and at December 31, 2017. However, since the Company considers the reinsurance transactions and the transition service agreement discussed below to have a significant impact on its consolidated statements of operations, it has updated these disclosures through December 31, 2018.
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 Consolidated
Statements of Operations
 
Excluded from Consolidated Statements of Operations
 
Years
Ended
December 31,
 
Years
Ended
December 31,
 
2018
 
2017 (1)
 
2017 (2)
 
2016
 
(In millions)
Premiums
 
 
 
 
 
 
 
Reinsurance assumed
$
401

 
$
183

 
$
248

 
$
462

Reinsurance ceded
(13
)
 
(4
)
 
(7
)
 
(9
)
Net premiums
$
388

 
$
179

 
$
241

 
$
453

Universal life and investment-type product policy fees
 
 
 
 
 
 
 
Reinsurance assumed
$
7

 
$
(4
)
 
$
(6
)
 
$
(2
)
Reinsurance ceded
(96
)
 
(44
)
 
(55
)
 
(102
)
Net universal life and investment-type product policy fees
$
(89
)
 
$
(48
)
 
$
(61
)
 
$
(104
)
Policyholder benefits and claims
 
 
 
 
 
 
 
Reinsurance assumed
$
328

 
$
150

 
$
196

 
$
385

Reinsurance ceded
(36
)
 
(22
)
 
(16
)
 
(23
)
Net policyholder benefits and claims
$
292

 
$
128

 
$
180

 
$
362

Interest credited to policyholder account balances
 
 
 
 
 
 
 
Reinsurance assumed
$
14

 
$
6

 
$
10

 
$
16

Reinsurance ceded
(71
)
 
(30
)
 
(42
)
 
(75
)
Net interest credited to policyholder account balances
$
(57
)
 
$
(24
)
 
$
(32
)
 
$
(59
)
Other expenses
 
 
 
 
 
 
 
Reinsurance assumed
$
105

 
$
39

 
$
10

 
$
88

Reinsurance ceded
(29
)
 
7

 
(28
)
 
(29
)
Net other expenses
$
76

 
$
46

 
$
(18
)
 
$
59

__________________
(1)
Includes transactions after the Separation.
(2)
Includes transactions prior to the Separation.
Information regarding the related party effects of reinsurance transactions with Brighthouse included on the consolidated balance sheets was as follows at:
 
December 31, 2017
 
Assumed
 
Ceded
 
(In millions)
Assets
 
 
 
Premiums, reinsurance and other receivables
$
167

 
$
1,793

Deferred policy acquisition costs and value of business acquired
384

 
(40
)
Total assets
$
551

 
$
1,753

Liabilities
 
 
 
Future policy benefits
$
1,734

 
$
—

Other policy-related balances
119

 
28

Other liabilities
1,458

 
19

Total liabilities
$
3,311

 
$
47

Transition Services
In connection with the Separation, the Company entered into a transition services agreement with Brighthouse for services necessary for Brighthouse to conduct its activities. The services are expected to continue up to 36 months after the date of Separation, with certain services potentially to be made available for several years thereafter. For the year ended December 31, 2018, the Company recognized $305 million in other revenues for services provided under such transition services agreement. After the Separation, for the year ended December 31, 2017, the Company recognized $140 million as a reduction to other expenses for transitional services provided under the agreement. Prior to the Separation, for the year ended December 31, 2017, the Company charged Brighthouse $191 million for services provided under the agreement, which were intercompany transactions and eliminated and excluded from the consolidated statements of operations.
Investment Management
In connection with the Separation, the Company entered into investment management services agreements with Brighthouse. Each agreement had an initial term of 18 months after the date of Separation, after which period either party to the agreements was permitted to terminate upon notice to the other party. On February 5, 2019, the Company entered into a new investment management services agreement with Brighthouse that remains in effect until terminated by either party upon notice. After the Separation, for the years ended December 31, 2018 and 2017, the Company recognized related party revenue of $61 million and $48 million in other revenues for services provided under the agreements. Prior to the Separation, for the year ended December 31, 2017, the Company charged Brighthouse $57 million for services provided under the agreements, which were intercompany transactions and eliminated and excluded from the consolidated statements of operations.
Committed Facility
MRV and MetLife, Inc. have a $2.9 billion committed facility which is used as collateral for certain affiliated reinsurance liabilities. At December 31, 2017, Brighthouse was a related party beneficiary of $2.4 billion of letters of credit issued under this committed facility and in consideration Brighthouse reimbursed MetLife, Inc. for a portion of the letter of credit fees. Prior to the Separation, 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.
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 related party contract values were $1.3 billion at December 31, 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, for the years ended December 31, 2018 and 2017, the Company recognized related party revenue of $63 million and $54 million for administrative services provided to Brighthouse. Prior to the Separation, during the year ended December 31, 2017, the Company provided administrative services to Brighthouse for $73 million which were intercompany transactions and eliminated and excluded from the consolidated statements of operations. 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 December 31, 2017, is a related party payable to Brighthouse of $186 million related to these future payments.
At December 31, 2017, the Company had a related party receivable from Brighthouse of $97 million related to services provided and a related party payable to Brighthouse of $50 million related to services 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:
 
 
For the Years Ended December 31,
 
 
2017 (1)
 
2016
 
 
(In millions)
Revenues
 
 
 
 
Premiums
 
$
820

 
$
1,951

Universal life and investment-type product policy fees
 
2,201

 
3,724

Net investment income
 
1,783

 
3,157

Other revenues
 
150

 
74

Total net investment gains (losses)
 
(48
)
 
(140
)
Net derivative gains (losses)
 
(1,061
)
 
(5,886
)
Total revenues
 
3,845

 
2,880

Expenses
 
 
 
 
Policyholder benefits and claims
 
2,217

 
4,487

Interest credited to policyholder account balances
 
620

 
1,107

Policyholder dividends
 
16

 
34

Goodwill impairment
 
—

 
260

Other expenses
 
853

 
1,333

Total expenses
 
3,706

 
7,221

Income (loss) from discontinued operations before provision for income tax and loss on disposal of discontinued operations
 
139

 
(4,341
)
Provision for income tax expense (benefit)
 
(46
)
 
(1,607
)
Income (loss) from discontinued operations before loss on disposal of discontinued operations, net of income tax
 
185

 
(2,734
)
Transaction costs associated with the Separation, net of income tax
 
(216
)
 
—

Tax charges associated with the Separation
 
(955
)
 
—

Income (loss) on disposal of discontinued operations, net of income tax
 
(1,171
)
 
—

Income (loss) from discontinued operations, net of income tax
 
$
(986
)
 
$
(2,734
)
__________________
(1)
Includes transactions prior to the Separation.
In the consolidated statements of cash flows, the cash flows from discontinued operations are not separately classified. The following table presents selected financial information regarding cash flows of the discontinued operations.
 
For the Years Ended December 31,
 
2017
 
2016
 
(In millions)
Net cash provided by (used in):
 
 
 
Operating activities
$
1,329

 
$
3,697

Investing activities
$
(2,732
)
 
$
4,674

Financing activities
$
(367
)
 
$
(4,715
)
U.S. Retail Advisor Force Divestiture
In July 2016, MetLife, Inc. completed the sale to Massachusetts Mutual Life Insurance Company (“MassMutual”) of its U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc. (collectively, the “U.S. Retail Advisor Force Divestiture”) for $291 million. MassMutual assumed all of the liabilities related to such assets that arise or occur after the closing of the sale. The Company recorded a gain of $103 million ($58 million, net of income tax), in net investment gains (losses) for the year ended December 31, 2016. See Notes 10 and 17 for discussion of certain charges related to the sale.