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Closed Block

6 Months Ended

Jun. 30, 2013

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”). 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:


	June 30, 2013		December 31, 2012
	(In millions)
Closed Block Liabilities
Future policy benefits	$	42,228	$	42,586
Other policy-related balances		284		298
Policyholder dividends payable		489		466
Policyholder dividend obligation		2,273		3,828
Current income tax payable		21		—
Other liabilities		635		602

Total closed block liabilities		45,930		47,780

Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value		28,725		30,546
Equity securities available-for-sale, at estimated fair value		94		41
Mortgage loans		6,243		6,192
Policy loans		4,670		4,670
Real estate and real estate joint ventures		463		459
Other invested assets		963		953

Total investments		41,158		42,861
Cash and cash equivalents		302		381
Accrued investment income		492		481
Premiums, reinsurance and other receivables		87		107
Current income tax recoverable		—		2
Deferred income tax assets		324		319

Total assets designated to the closed block		42,363		44,151

Excess of closed block liabilities over assets designated to the closed block		3,567		3,629

Amounts included in AOCI:
Unrealized investment gains (losses), net of income tax		1,825		2,891
Unrealized gains (losses) on derivatives, net of income tax		15		9
Allocated to policyholder dividend obligation, net of income tax		(1,477)		(2,488)

Total amounts included in AOCI		363		412

Maximum future earnings to be recognized from closed block assets and liabilities	$	3,930	$	4,041

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


	Six Months Ended June 30, 2013			Year Ended December 31, 2012
	(In millions)
Balance, beginning of period	$	3,828		$	2,919
Change in unrealized investment and derivative gains (losses)		(1,555	)		909

Balance, end of period	$	2,273		$	3,828

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(In millions)
Revenues
Premiums	$	489	$	528	$	953	$	1,026
Net investment income		529		539		1,062		1,089
Net investment gains (losses)		24		13		27		24
Net derivative gains (losses)		7		11		15		2

Total revenues		1,049		1,091		2,057		2,141

Expenses
Policyholder benefits and claims		669		700		1,312		1,362
Policyholder dividends		247		275		489		543
Other expenses		43		46		85		91

Total expenses		959		1,021		1,886		1,996

Revenues, net of expenses before provision for income tax expense (benefit)		90		70		171		145
Provision for income tax expense (benefit)		33		25		60		52

Revenues, net of expenses and provision for income tax expense (benefit) from continuing operations		57		45		111		93
Revenues, net of expenses and provision for income tax expense (benefit) from discontinued operations		—		—		—		4

Revenues, net of expenses and provision for income tax expense (benefit)	$	57	$	45	$	111	$	97

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