Acquisitions and Dispositions

6 Months Ended

Jun. 30, 2012

Acquisitions and Dispositions [Abstract]

Acquisitions and Dispositions

2. Acquisitions and Dispositions

2012 Pending Dispositions

MetLife Bank

In December 2011, MetLife Bank, National Association (“MetLife Bank”) and MetLife, Inc. entered into a definitive agreement to sell most of the depository business of MetLife Bank to GE Capital Financial Inc. (“GE Capital Bank”). The transaction is subject to the receipt of regulatory approvals from the Federal Deposit Insurance Corporation (the “FDIC”) and to the satisfaction of other customary closing conditions. The Utah Department of Financial Institutions has approved the transaction and the Office of the Comptroller of the Currency (the “OCC”) has granted approval of a change in the composition of all or substantially all of MetLife Bank’s assets in connection with the transaction. GE Capital Bank has filed an application with the FDIC seeking approval of the assumption of the deposits to be transferred to it, and MetLife Bank has filed an application with the FDIC to terminate MetLife Bank’s FDIC deposit insurance contingent upon certification that MetLife Bank has no remaining deposits (which is dependent on the assumption by GE Capital Bank of the deposits to be transferred to it). The parties have each responded to questions on their applications from the staff of the FDIC, and GE Capital Bank is in the process of responding to recent additional requests from the FDIC. The parties are awaiting action by the FDIC on their applications. Additionally, in January 2012, MetLife, Inc. announced it was exiting the business of originating forward residential mortgages and, in April 2012, announced it was exiting the businesses of originating and servicing reverse residential mortgages and that it and MetLife Bank entered into a definitive agreement to sell MetLife Bank’s reverse mortgage servicing portfolio.

On June 29, 2012, the Company sold the majority of MetLife Bank’s reverse mortgage servicing rights and related assets and liabilities for $25 million in net consideration. The net assets sold were $127 million, resulting in a loss on disposal of $67 million, net of income tax, for the six months ended June 30, 2012. As a result of this sale, the Company de-recognized $8.7 billion of the associated securitized reverse residential mortgage loans that previously did not qualify as sales, as well as the corresponding liability of $8.7 billion related to these mortgages in the consolidated balance sheet at June 30, 2012. See Note 1 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report. The remaining loans and corresponding liability are expected to be de-recognized upon transfer of the remaining mortgage servicing rights anticipated in the second half of 2012.

In conjunction with exiting the depository and origination businesses, for the three months and six months ended June 30, 2012, the Company recorded a net loss of $50 million and $43 million, respectively, net of income tax, which included lease impairments, other employee-related charges, impairments on mortgage loans, and gains (losses) on securities and mortgage loans sold. The total assets and liabilities recorded in the consolidated balance sheets related to these businesses were approximately $7.0 billion and $6.2 billion at June 30, 2012, respectively, and $11.3 billion and $10.5 billion at December 31, 2011, respectively.

The Company expects to incur additional charges of $5 million to $50 million, net of income tax, during the remainder of 2012, related to exiting these four businesses. These businesses did not qualify for discontinued operations accounting treatment under GAAP.

MetLife Bank has historically taken advantage of collateralized borrowing opportunities with the Federal Home Loan Bank of New York (“FHLB of NY”). In January 2012, MetLife Bank discontinued taking advances from the FHLB of NY. In April 2012, MetLife Bank transferred cash to Metropolitan Life Insurance Company (“MLIC”) related to $3.8 billion of outstanding advances which had been included in long-term debt, and MLIC assumed the associated obligations under terms similar to those of the transferred advances by issuing funding agreements which are included in policyholder account balances (“PABs”).

Caribbean Business

In November 2011, the Company entered into an agreement to sell its insurance operations in the Caribbean region, Panama and Costa Rica (the “Caribbean Business”). The total assets and liabilities recorded in the consolidated balance sheets related to these insurance operations were $782 million and $623 million at June 30, 2012, respectively, and $859 million and $707 million at December 31, 2011, respectively. Subsequent to June 30, 2012, regulatory approvals have been received and closings have taken place in approximately half of the jurisdictions. There was no additional gain or loss recorded upon any of the closings. See Note 2 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report. Sales in the remaining jurisdictions are expected to close in the third quarter of 2012, subject to regulatory approval and other customary closing conditions in each of the jurisdictions. The results of the Caribbean Business are included in continuing operations.

2010 Acquisition

American Life Insurance Company

Contingent Consideration

Related to the 2010 acquisition of American Life Insurance Company (“American Life”), the Company guaranteed that the fair value of a fund of assets backing certain United Kingdom unit-linked contracts will have a value of at least £1 per unit on July 1, 2012. If the shortfall between the aggregate guaranteed amount and the fair value of the fund exceeds £106 million (as adjusted for withdrawals), American International Group, Inc. (“AIG”) will pay the difference to the Company and, conversely, if the shortfall at July 1, 2012 is less than £106 million, the Company will pay the difference to AIG. At July 1, 2012, the shortfall between the aggregate guaranteed amount and the fair value of the fund was less than £106 million, resulting in a contingent consideration liability of $108 million at June 30, 2012, which is expected to be settled in the third quarter of 2012. The contingent consideration liability was $109 million at December 31, 2011. The decrease in the contingent consideration liability amount from December 31, 2011 to June 30, 2012 was recorded in net derivative gains (losses) in the interim condensed consolidated statement of operations and comprehensive income. See Note 2 of the Notes to the Consolidated Financial Statements included in the 2011 Annual Report.

Branch Restructuring

During the second quarter of 2012, and in accordance with the closing agreement American Life entered into on March 4, 2010 (the “Closing Agreement”) with the Commissioner of the Internal Revenue Service, the Company transferred the business of the Japan branch to a newly incorporated wholly-owned subsidiary in Japan, MetLife Alico Life Insurance K. K. (“MLKK”). Also during the second quarter of 2012, the Company revised the estimate of the valuation allowance required for U.S. deferred tax assets relating to the ongoing restructuring of American Life’s other non-U.S. branches. As of December 31, 2011 the Company had recorded a valuation allowance related to the branch restructuring of $720 million to reduce the net amount of U.S. deferred tax assets to an amount that is more likely than not realizable. This valuation allowance was reduced to $118 million as of June 30, 2012. The net reduction in the valuation allowance was primarily due to the following factors:

• Additional U.S. deferred tax assets that were determined to be realizable in the second quarter of 2012;

• Additional tax basis in assets as a result of the gain recognized during the second quarter of 2012 related to the branch restructuring that more likely than not will not be realizable; and

• A reduction in both the gross deferred tax asset and the valuation allowance related to the completion of the Company’s transfer of the Japan branch business to MLKK.

The following table provides a rollforward of the deferred tax asset valuation allowance associated with the branch restructuring:

	Japan			Other Non-U.S. Branches			Total
	(In millions)
Balance, beginning of period	$	566		$	154		$	720
Income tax expense (benefit)		10			(11	)		(1	)
Deferred income tax expense (benefit) related to unrealized investment gains (losses)		320			(25	)		295
Offsetting reduction in gross deferred tax asset related to the branch transfer to subsidiary		(896	)		—			(896	)
Balance, end of period	$	—		$	118		$	118

A liability of $277 million was recognized in purchase accounting as of November 1, 2010 for the anticipated and estimated costs associated with restructuring American Life’s foreign branches into subsidiaries in connection with the Closing Agreement. This liability has been reduced based on payments through June 30, 2012. In addition, based on revised estimates of anticipated costs, this liability was reduced by $35 million for both the three months and six months ended June 30, 2012, which was recorded as a reduction in other expenses in the interim condensed consolidated statements of operations and comprehensive income, resulting in a liability of $120 million at June 30, 2012.