Closed Block

6 Months Ended

Jun. 30, 2020

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, 2020			December 31, 2019
	(In millions)
Closed Block Liabilities
Future policy benefits	$	39,037		$	39,379
Other policy-related balances	331			423
Policyholder dividends payable	433			432
Policyholder dividend obligation	2,798			2,020
Deferred income tax liability	101			79
Other liabilities	128			81
Total closed block liabilities	42,828			42,414
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	26,576			25,977
Equity securities, at estimated fair value	45			49
Contractholder-directed equity securities and fair value option securities, at estimated fair value	53			53
Mortgage loans	6,985			7,052
Policy loans	4,419			4,489
Real estate and real estate joint ventures	565			544
Other invested assets	724			314
Total investments	39,367			38,478
Cash and cash equivalents	111			448
Accrued investment income	409			419
Premiums, reinsurance and other receivables	65			75
Current income tax recoverable	13			91
Total assets designated to the closed block	39,965			39,511
Excess of closed block liabilities over assets designated to the closed block	2,863			2,903
AOCI:
Unrealized investment gains (losses), net of income tax	3,039			2,453
Unrealized gains (losses) on derivatives, net of income tax	257			97
Allocated to policyholder dividend obligation, net of income tax	(2,210		)	(1,596		)
Total amounts included in AOCI	1,086			954
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,949		$	3,857

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



	Six Months Ended June 30, 2020		Year Ended December 31, 2019
	(In millions)
Balance, beginning of period	$	2,020	$	428
Change in unrealized investment and derivative gains (losses)	778		1,592
Balance, end of period	$	2,798	$	2,020

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(In millions)
Revenues
Premiums	$	371		$	390		$	738		$	757
Net investment income	371			447			778			875
Net investment gains (losses)	10			(4		)	(9		)	(5		)
Net derivative gains (losses)	(3		)	9			23			12
Total revenues	749			842			1,530			1,639
Expenses
Policyholder benefits and claims	589			563			1,139			1,102
Policyholder dividends	217			231			436			459
Other expenses	25			28			52			57
Total expenses	831			822			1,627			1,618
Revenues, net of expenses before provision for income tax expense (benefit)	(82		)	20			(97		)	21
Provision for income tax expense (benefit)	(17		)	4			(20		)	4
Revenues, net of expenses and provision for income tax expense (benefit)	$	(65	)	$	16		$	(77	)	$	17

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.