Closed Block

9 Months Ended

Sep. 30, 2021

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:


	September 30, 2021		December 31, 2020
	(In millions)
Closed Block Liabilities
Future policy benefits	$	38,191	$	38,758
Other policy-related balances	289		321
Policyholder dividends payable	299		337
Policyholder dividend obligation	1,952		2,969
Deferred income tax liability	175		130
Other liabilities	269		172
Total closed block liabilities	41,175		42,687
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	25,977		27,186
Equity securities, at estimated fair value	21		24
Mortgage loans	6,441		6,807
Policy loans	4,235		4,355
Real estate and real estate joint ventures	575		559
Other invested assets	540		468
Total investments	37,789		39,399
Cash and cash equivalents	173		—
Accrued investment income	391		402
Premiums, reinsurance and other receivables	40		50
Current income tax recoverable	52		28
Total assets designated to the closed block	38,445		39,879
Excess of closed block liabilities over assets designated to the closed block	2,730		2,808
AOCI:
Unrealized investment gains (losses), net of income tax	2,730		3,524
Unrealized gains (losses) on derivatives, net of income tax	100		23
Allocated to policyholder dividend obligation, net of income tax	(1,542)		(2,346)
Total amounts included in AOCI	1,288		1,201
Maximum future earnings to be recognized from closed block assets and liabilities	$	4,018	$	4,009

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


	Nine Months Ended September 30, 2021		Year Ended December 31, 2020
	(In millions)
Balance, beginning of period	$	2,969	$	2,020
Change in unrealized investment and derivative gains (losses)	(1,017)		949
Balance, end of period	$	1,952	$	2,969

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In millions)
Revenues
Premiums	$	310	$	359	$	955	$	1,097
Net investment income	390		420		1,165		1,198
Net investment gains (losses)	(7)		1		(12)		(8)
Net derivative gains (losses)	12		(16)		19		7
Total revenues	705		764		2,127		2,294
Expenses
Policyholder benefits and claims	522		575		1,588		1,714
Policyholder dividends	127		136		478		572
Other expenses	24		27		73		79
Total expenses	673		738		2,139		2,365
Revenues, net of expenses before provision for income tax expense (benefit)	32		26		(12)		(71)
Provision for income tax expense (benefit)	6		5		(3)		(15)
Revenues, net of expenses and provision for income tax expense (benefit)	$	26	$	21	$	(9)	$	(56)

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.