Closed Block

6 Months Ended

Jun. 30, 2019

5. Closed Block

On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company (“MLIC”) converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance approving MLIC’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, MLIC established a closed block for the benefit of holders of certain individual life insurance policies of MLIC.

Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company’s net income continues to be sensitive to the actual performance of the closed block.

Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item.

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:



	June 30, 2019			December 31, 2018
	(In millions)
Closed Block Liabilities
Future policy benefits	$	39,608		$	40,032
Other policy-related balances	395			317
Policyholder dividends payable	457			431
Policyholder dividend obligation	1,834			428
Deferred income tax liability	51			28
Other liabilities	137			328
Total closed block liabilities	42,482			41,564
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	26,132			25,354
Equity securities, at estimated fair value	64			61
Contractholder-directed equity securities and fair value option securities, at estimated fair value	49			43
Mortgage loans	6,900			6,778
Policy loans	4,498			4,527
Real estate and real estate joint ventures	550			544
Other invested assets	657			643
Total investments	38,850			37,950
Cash and cash equivalents	75			—
Accrued investment income	434			443
Premiums, reinsurance and other receivables	85			83
Current income tax recoverable	78			69
Total assets designated to the closed block	39,522			38,545
Excess of closed block liabilities over assets designated to the closed block	2,960			3,019
Amounts included in AOCI:
Unrealized investment gains (losses), net of income tax	2,226			1,089
Unrealized gains (losses) on derivatives, net of income tax	103			86
Allocated to policyholder dividend obligation, net of income tax	(1,449		)	(338		)
Total amounts included in AOCI	880			837
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,840		$	3,856

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



	Six Months Ended June 30, 2019		Year Ended December 31, 2018
	(In millions)
Balance, beginning of period	$	428	$	2,121
Change in unrealized investment and derivative gains (losses)	1,406		(1,693		)
Balance, end of period	$	1,834	$	428

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)
Revenues
Premiums	$	390		$	410		$	757		$	797
Net investment income	447			431			875			875
Net investment gains (losses)	(4		)	(24		)	(5		)	(53		)
Net derivative gains (losses)	9			13			12			10
Total revenues	842			830			1,639			1,629
Expenses
Policyholder benefits and claims	563			596			1,102			1,167
Policyholder dividends	231			238			459			482
Other expenses	28			30			57			59
Total expenses	822			864			1,618			1,708
Revenues, net of expenses before provision for income tax expense (benefit)	20			(34		)	21			(79		)
Provision for income tax expense (benefit)	4			(7		)	4			(17		)
Revenues, net of expenses and provision for income tax expense (benefit)	$	16		$	(27	)	$	17		$	(62	)

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