Edgar Filing: METLIFE INC

MET-2013.9.30-10Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

Form 10-Q

(Mark One)



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-15787

________________________________________

MetLife, Inc.

(Exact name of registrant as specified in its charter)



Delaware		13-4075851
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Park Avenue, New York, N.Y.		10166-0188
(Address of principal executive offices)		(Zip Code)

(212) 578-2211

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer þ		Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

At October 31, 2013, 1,121,056,612 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

Table of Contents



		Page
Part I — Financial Information
Item 1.	Financial Statements (at September 30, 2013 (Unaudited) and December 31, 2012 and for the Three Months and Nine Months Ended September 30, 2013 and 2012 (Unaudited))	4
	Interim Condensed Consolidated Balance Sheets	4
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	5
	Interim Condensed Consolidated Statements of Equity	6
	Interim Condensed Consolidated Statements of Cash Flows	8
	Notes to the Interim Condensed Consolidated Financial Statements:
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	9
	Note 2 — Segment Information	11
	Note 3 — Acquisitions and Disposition	18
	Note 4 — Insurance	19
	Note 5 — Closed Block	21
	Note 6 — Investments	23
	Note 7 — Derivatives	37
	Note 8 — Fair Value	51
	Note 9 — Goodwill	81
	Note 10 — Common Equity Units	82
	Note 11 — Equity	82
	Note 12 — Other Expenses	85
	Note 13 — Employee Benefit Plans	87
	Note 14 — Earnings Per Common Share	88
	Note 15 — Contingencies, Commitments and Guarantees	89
	Note 16 — Subsequent Events	96
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	97
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	183
Item 4.	Controls and Procedures	192

Part II — Other Information		192
Item 1.	Legal Proceedings	192
Item 1A.	Risk Factors	195
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	205
Item 5.	Other Information	205
Item 6.	Exhibits	206

Signatures		207

Exhibit Index		E - 1

Table of Contents

As used in this Form 10-Q, “MetLife,” the “Company,” “we,” “our” and “us” refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates.

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MetLife, Inc., its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission (the “SEC”). These factors include: (1) difficult conditions in the global capital markets; (2) increased volatility and disruption of the capital and credit markets, which may affect our ability to meet liquidity needs and access capital, including through our credit facilities, generate fee income and market-related revenue and finance statutory reserve requirements and may require us to pledge collateral or make payments related to declines in value of specified assets, including assets supporting risks ceded to certain of our captive reinsurers or hedging arrangements associated with those risks; (3) exposure to financial and capital market risks, including as a result of the disruption in Europe and possible withdrawal of one or more countries from the Euro zone; (4) impact of comprehensive financial services regulation reform on us, as a potential non-bank systemically important financial institution, or otherwise; (5) numerous rulemaking initiatives required or permitted by the Dodd-Frank Wall Street Reform and Consumer Protection Act which may impact how we conduct our business, including those compelling the liquidation of certain financial institutions; (6) regulatory, legislative or tax changes relating to our insurance, international, or other operations that may affect the cost of, or demand for, our products or services, or increase the cost or administrative burdens of providing benefits to employees; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (9) investment losses and defaults, and changes to investment valuations; (10) changes in assumptions related to investment valuations, deferred policy acquisition costs, deferred sales inducements, value of business acquired or goodwill; (11) impairments of goodwill and realized losses or market value impairments to illiquid assets; (12) defaults on our mortgage loans; (13) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (14) economic, political, legal, currency and other risks relating to our international operations, including with respect to fluctuations of exchange rates; (15) downgrades in our claims paying ability, financial strength or credit ratings; (16) a deterioration in the experience of the “closed block” established in connection with the reorganization of Metropolitan Life Insurance Company; (17) availability and effectiveness of reinsurance or indemnification arrangements, as well as any default or failure of counterparties to perform; (18) differences between actual claims experience and underwriting and reserving assumptions; (19) ineffectiveness of risk management policies and procedures; (20) catastrophe losses; (21) increasing cost and limited market capacity for statutory life insurance reserve financings; (22) heightened competition, including with respect to pricing, entry of new competitors, consolidation of distributors, the development of new products by new and existing competitors, and for personnel; (23) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and the adjustment for nonperformance risk; (24) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, including our acquisition of American Life Insurance Company and Delaware American Life Insurance Company, and integrating and managing the growth of such acquired businesses, or arising from dispositions of businesses or legal entity reorganizations; (25) the dilutive impact on our stockholders resulting from the settlement of our outstanding common equity units; (26) regulatory and other restrictions affecting MetLife, Inc.’s ability to pay dividends and repurchase common stock; (27) MetLife, Inc.’s primary reliance, as a holding company, on dividends from its subsidiaries to meet debt payment obligations and the applicable regulatory restrictions on the ability of the subsidiaries to pay such dividends; (28) the possibility that MetLife, Inc.’s Board of Directors may control the outcome of stockholder votes through the voting provisions of the MetLife Policyholder Trust; (29) changes in accounting standards, practices and/or policies; (30) increased expenses relating to pension and postretirement benefit plans, as well as health care and other employee benefits; (31) inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (32) inability to attract and retain sales representatives; (33) provisions of laws and our incorporation documents may delay, deter or prevent takeovers and corporate combinations involving MetLife; (34) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural catastrophes, including any related impact on the value of our investment portfolio, our disaster recovery systems, cyber- or other information security systems and management continuity planning; (35) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; and (36) other risks and uncertainties described from time to time in MetLife, Inc.’s filings with the SEC.

MetLife, Inc. does not undertake any obligation to publicly correct or update any forward-looking statement if MetLife, Inc. later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures MetLife, Inc. makes on related subjects in reports to the SEC.

Note Regarding Reliance on Statements in Our Contracts

See “Exhibit Index — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Quarterly Report on Form 10-Q.

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Part I — Financial Information

Item 1. Financial Statements

MetLife, Inc.

Interim Condensed Consolidated Balance Sheets

September 30, 2013 (Unaudited) and December 31, 2012

(In millions, except share and per share data)



	September 30, 2013			December 31, 2012
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $330,900 and $340,870, respectively: includes $3,940 and $3,378, respectively, relating to variable interest entities)	$	348,787		$	374,266
Equity securities available-for-sale, at estimated fair value (cost: $2,978 and $2,838, respectively)	3,241			2,891
Fair value option and trading securities, at estimated fair value (includes $636 and $659, respectively, of actively traded securities; and $91 and $112, respectively, relating to variable interest entities)	16,646			16,348
Mortgage loans:
Held-for-investment, principally at amortized cost (net of valuation allowances of $326 and $347, respectively; includes $2,119 and $2,715, respectively, at estimated fair value, relating to variable interest entities)	57,508			56,592
Held-for-sale, principally at estimated fair value (includes $0 and $49, respectively, under the fair value option)	225			414
Mortgage loans, net	57,733			57,006
Policy loans (includes $3 and $0, respectively, relating to variable interest entities)	11,782			11,884
Real estate and real estate joint ventures (includes $9 and $10, respectively, relating to variable interest entities)	10,053			9,918
Other limited partnership interests (includes $151 and $274, respectively, relating to variable interest entities)	7,253			6,688
Short-term investments, principally at estimated fair value (includes $6 and $0, respectively, relating to variable interest entities)	12,664			16,906
Other invested assets, principally at estimated fair value (includes $78 and $81, respectively, relating to variable interest entities)	16,766			21,145
Total investments	484,925			517,052
Cash and cash equivalents, principally at estimated fair value (includes $64 and $99, respectively, relating to variable interest entities)	11,376			15,738
Accrued investment income (includes $27 and $13, respectively, relating to variable interest entities)	4,519			4,374
Premiums, reinsurance and other receivables (includes $19 and $5, respectively, relating to variable interest entities)	23,473			21,634
Deferred policy acquisition costs and value of business acquired (includes $251 and $0, respectively, relating to variable interest entities)	25,639			24,761
Goodwill	9,509			9,953
Other assets (includes $133 and $5, respectively, relating to variable interest entities)	7,952			7,876
Separate account assets (includes $984 and $0, respectively, relating to variable interest entities)	255,250			235,393
Total assets	$	822,643		$	836,781
Liabilities and Equity
Liabilities
Future policy benefits (includes $468 and $0, respectively, relating to variable interest entities)	$	186,528		$	192,351
Policyholder account balances (includes $55 and $0, respectively, relating to variable interest entities)	214,512			225,821
Other policy-related balances (includes $124 and $0, respectively, relating to variable interest entities)	15,530			15,463
Policyholder dividends payable	769			728
Policyholder dividend obligation	2,013			3,828
Payables for collateral under securities loaned and other transactions	31,866			33,687
Bank deposits	—			6,416
Short-term debt	100			100
Long-term debt (includes $1,946 and $2,527, respectively, at estimated fair value, relating to variable interest entities)	18,252			19,062
Collateral financing arrangements	4,196			4,196
Junior subordinated debt securities	3,193			3,192
Current income tax payable	199			401
Deferred income tax liability	5,955			8,693
Other liabilities (includes $89 and $40, respectively, relating to variable interest entities)	22,902			22,492
Separate account liabilities (includes $984 and $0, respectively, relating to variable interest entities)	255,250			235,393
Total liabilities	761,265			771,823
Contingencies, Commitments and Guarantees (Note 15)
Redeemable noncontrolling interests in partially-owned consolidated subsidiaries	110			121
Equity
MetLife, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized: 84,000,000 shares issued and outstanding; $2,100 aggregate liquidation preference	1			1
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 1,124,039,249 and 1,094,880,623 shares issued at September 30, 2013 and December 31, 2012, respectively; 1,120,845,362 and 1,091,686,736 shares outstanding at September 30, 2013 and December 31, 2012, respectively	11			11
Additional paid-in capital	29,221			28,011
Retained earnings	26,766			25,205
Treasury stock, at cost; 3,193,887 shares at September 30, 2013 and December 31, 2012	(172		)	(172		)
Accumulated other comprehensive income (loss)	5,100			11,397
Total MetLife, Inc.’s stockholders’ equity	60,927			64,453
Noncontrolling interests	341			384
Total equity	61,268			64,837
Total liabilities and equity	$	822,643		$	836,781

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months and Nine Months Ended September 30, 2013 and 2012 (Unaudited)

(In millions, except per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Revenues
Premiums	$	9,094		$	9,096		$	27,403		$	27,386
Universal life and investment-type product policy fees	2,372			2,131			7,034			6,306
Net investment income	5,026			5,517			16,385			16,436
Other revenues	476			455			1,446			1,445
Net investment gains (losses):
Other-than-temporary impairments on fixed maturity securities	(13		)	(57		)	(77		)	(310		)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)	(21		)	10			(56		)	39
Other net investment gains (losses)	(51		)	69			472			119
Total net investment gains (losses)	(85		)	22			339			(152		)
Net derivative gains (losses)	(546		)	(718		)	(2,866		)	(604		)
Total revenues	16,337			16,503			49,741			50,817
Expenses
Policyholder benefits and claims	9,472			8,943			27,827			26,958
Interest credited to policyholder account balances	1,600			2,102			6,036			5,681
Policyholder dividends	312			355			954			1,050
Goodwill impairment	—			1,868			—			1,868
Other expenses	3,977			4,245			12,140			13,341
Total expenses	15,361			17,513			46,957			48,898
Income (loss) from continuing operations before provision for income tax	976			(1,010		)	2,784			1,919
Provision for income tax expense (benefit)	3			(53		)	308			710
Income (loss) from continuing operations, net of income tax	973			(957		)	2,476			1,209
Income (loss) from discontinued operations, net of income tax	2			—			1			17
Net income (loss)	975			(957		)	2,477			1,226
Less: Net income (loss) attributable to noncontrolling interests	3			(3		)	17			29
Net income (loss) attributable to MetLife, Inc.	972			(954		)	2,460			1,197
Less: Preferred stock dividends	30			30			91			91
Net income (loss) available to MetLife, Inc.’s common shareholders	$	942		$	(984	)	$	2,369		$	1,106
Comprehensive income (loss)	$	(188	)	$	1,655		$	(3,891	)	$	6,474
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	(58		)	19			(54		)	35
Comprehensive income (loss) attributable to MetLife, Inc.	$	(130	)	$	1,636		$	(3,837	)	$	6,439
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders per common share:
Basic	$	0.85		$	(0.92	)	$	2.15		$	1.02
Diluted	$	0.84		$	(0.92	)	$	2.14		$	1.01
Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
Basic	$	0.85		$	(0.92	)	$	2.15		$	1.04
Diluted	$	0.84		$	(0.92	)	$	2.14		$	1.03
Cash dividends declared per common share	$	—		$	—		$	0.735		$	—

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Equity

For the Nine Months Ended September 30, 2013 (Unaudited)

(In millions)



														Accumulated Other Comprehensive Income (Loss)
	Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock at Cost			Net Unrealized Investment Gains (Losses)			Other-Than- Temporary Impairments			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total MetLife, Inc.’s Stockholders’ Equity			Noncontrolling Interests (1)			Total Equity
Balance at December 31, 2012	$	1	$	11	$	28,011		$	25,205		$	(172	)	$	14,642		$	(223	)	$	(533	)	$	(2,489	)	$	64,453		$	384		$	64,837
Common stock issuance — newly issued shares					1,000																					1,000						1,000
Stock-based compensation					249																					249						249
Dividends on preferred stock								(91		)																(91		)				(91		)
Dividends on common stock								(808		)																(808		)				(808		)
Change in equity of noncontrolling interests					(39		)																			(39		)	11			(28		)
Net income (loss)								2,460																		2,460			17			2,477
Other comprehensive income (loss), net of income tax														(5,389		)	70			(1,085		)	107			(6,297		)	(71		)	(6,368		)
Balance at September 30, 2013	$	1	$	11	$	29,221		$	26,766		$	(172	)	$	9,253		$	(153	)	$	(1,618	)	$	(2,382	)	$	60,927		$	341		$	61,268

__________________


(1)	Net income (loss) attributable to noncontrolling interests excludes gains (losses) of redeemable noncontrolling interests in partially-owned consolidated subsidiaries of less than $1 million.

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Equity — (Continued)

For the Nine Months Ended September 30, 2012 (Unaudited)

(In millions)



													Accumulated Other Comprehensive Income (Loss)
	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock at Cost			Net Unrealized Investment Gains (Losses)		Other-Than- Temporary Impairments			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total MetLife, Inc.’s Stockholders’ Equity			Noncontrolling Interests (1)			Total Equity
Balance at December 31, 2011	$	1	$	11	$	26,782	$	24,814		$	(172	)	$	9,115	$	(441	)	$	(648	)	$	(1,943	)	$	57,519		$	370		$	57,889
Stock-based compensation					182																			182						182
Dividends on preferred stock							(91		)															(91		)				(91		)
Change in equity of noncontrolling interests																											(56		)	(56		)
Net income (loss)							1,197																	1,197			24			1,221
Other comprehensive income (loss), net of income tax													4,908		170			89			75			5,242			11			5,253
Balance at September 30, 2012	$	1	$	11	$	26,964	$	25,920		$	(172	)	$	14,023	$	(271	)	$	(559	)	$	(1,868	)	$	64,049		$	349		$	64,398

__________________


(1)	Net income (loss) attributable to noncontrolling interests excludes gains (losses) of redeemable noncontrolling interests in partially-owned consolidated subsidiaries of $5 million.

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2013 and 2012 (Unaudited)

(In millions)



	Nine Months Ended September 30,
	2013			2012
Net cash provided by (used in) operating activities	$	9,984		$	15,288
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	95,972			78,296
Equity securities	567			1,011
Mortgage loans	8,000			6,696
Real estate and real estate joint ventures	323			669
Other limited partnership interests	546			690
Purchases of:
Fixed maturity securities	(93,304		)	(91,998		)
Equity securities	(812		)	(499		)
Mortgage loans	(9,570		)	(7,585		)
Real estate and real estate joint ventures	(991		)	(595		)
Other limited partnership interests	(1,077		)	(1,017		)
Cash received in connection with freestanding derivatives	1,333			1,560
Cash paid in connection with freestanding derivatives	(5,593		)	(2,534		)
Net change in securitized reverse residential mortgage loans	—			(1,198		)
Sales of businesses, net of cash and cash equivalents disposed of $13 and $0, respectively	386			—
Sale of bank deposits	(6,395		)	—
Net change in policy loans	(93		)	(116		)
Net change in short-term investments	4,272			2,825
Net change in other invested assets	(121		)	(206		)
Other, net	(18		)	(74		)
Net cash provided by (used in) investing activities	(6,575		)	(14,075		)
Cash flows from financing activities
Policyholder account balances:
Deposits	60,168			69,438
Withdrawals	(65,141		)	(64,718		)
Net change in payables for collateral under securities loaned and other transactions	(1,821		)	4,777
Net change in bank deposits	8			(4,052		)
Net change in short-term debt	—			(586		)
Long-term debt issued	—			750
Long-term debt repaid	(765		)	(1,106		)
Collateral financing arrangements repaid	—			(349		)
Cash received (paid) in connection with collateral financing arrangements	—			(44		)
Net change in liability for securitized reverse residential mortgage loans	—			1,198
Common stock issued, net of issuance costs	1,000			—
Dividends on preferred stock	(91		)	(91		)
Dividends on common stock	(808		)	—
Other, net	(134		)	35
Net cash provided by (used in) financing activities	(7,584		)	5,252
Effect of change in foreign currency exchange rates on cash and cash equivalents balances	(187		)	24
Change in cash and cash equivalents	(4,362		)	6,489
Cash and cash equivalents, beginning of period	15,738			10,461
Cash and cash equivalents, end of period	$	11,376		$	16,950
Supplemental disclosures of cash flow information:
Net cash paid (received) for:
Interest	$	891		$	946
Income tax	$	539		$	442
Non-cash transactions:
Real estate and real estate joint ventures acquired in satisfaction of debt	$	55		$	334
Collateral financing arrangements repaid	$	—		$	102
Redemption of advances agreements in long-term debt (1)	$	—		$	3,806
Issuance of funding agreements in policyholder account balances (1)	$	—		$	3,806

__________________


(1)	See Note 3 of the Notes to the Consolidated Financial Statements included in the 2012 Annual Report.

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

1. Business, Basis of Presentation and Summary of Significant Accounting Policies

Business

“MetLife” or the “Company” refers to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates. MetLife is a leading global provider of insurance, annuities and employee benefit programs throughout the United States, Japan, Latin America, Asia, Europe and the Middle East. MetLife offers life insurance, annuities, property & casualty insurance, and other financial services to individuals, as well as group insurance and retirement & savings products and services to corporations and other institutions.

MetLife is organized into six segments: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and Europe, the Middle East and Africa (“EMEA”).

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the interim condensed consolidated financial statements. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s business and operations. Actual results could differ from estimates.

The accompanying interim condensed consolidated financial statements include the accounts of MetLife, Inc. and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany accounts and transactions have been eliminated.

Certain international subsidiaries have a fiscal year-end of November 30. Accordingly, the Company’s interim condensed consolidated financial statements reflect the assets and liabilities of such subsidiaries as of August 31, 2013 and November 30, 2012 and the operating results of such subsidiaries for the three months and nine months ended August 31, 2013 and 2012.

The Company uses the equity method of accounting for investments in equity securities when it has significant influence or at least a 20% interest and for investments in real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than minor influence over the investee’s operations, but does not have a controlling financial interest. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. The Company uses the cost method of accounting for investments in which it has virtually no influence over the investee’s operations.

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform with the 2013 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2012 consolidated balance sheet data was derived from audited consolidated financial statements included in MetLife, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012, (the “2012 Annual Report”), filed with the U.S. Securities and Exchange Commission (“SEC”), which include all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2012 Annual Report.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Adoption of New Accounting Pronouncements

Effective July 17, 2013, the Company adopted new guidance regarding derivatives that permits the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) to be used as a U.S. benchmark interest rate for hedge accounting purposes, in addition to the United States Treasury and London Interbank Offered Rate (“LIBOR”). Also, this new guidance removes the restriction on using different benchmark rates for similar hedges. The new guidance did not have a material impact on the consolidated financial statements upon adoption, but may impact the selection of benchmark interest rates for hedging relationships in the future.

Effective January 1, 2013, the Company adopted new guidance regarding comprehensive income that requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (loss) (“AOCI”) by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The adoption was prospectively applied and resulted in additional disclosures in Note 11.

Effective January 1, 2013, the Company adopted new guidance regarding balance sheet offsetting disclosures which requires an entity to disclose information about offsetting and related arrangements for derivatives, including bifurcated embedded derivatives, repurchase and reverse repurchase agreements, and securities borrowing and lending transactions, to enable users of its financial statements to understand the effects of those arrangements on its financial position. Entities are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The adoption was retrospectively applied and resulted in additional disclosures related to derivatives in Note 7.

Future Adoption of New Accounting Pronouncements

In March 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance regarding foreign currency (Accounting Standards Update (“ASU”) 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity), effective prospectively for fiscal years and interim reporting periods within those years beginning after December 15, 2013. The amendments require an entity that ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity to apply the guidance in Subtopic 830-30, Foreign Currency Matters — Translation of Financial Statements, to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. For an equity method investment that is a foreign entity, the partial sale guidance in section 830-30-40, Derecognition, still applies. As such, a pro rata portion of the cumulative translation adjustment should be released into net income upon a partial sale of such an equity method investment. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In February 2013, the FASB issued new guidance regarding liabilities (ASU 2013-04, Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date), effective retrospectively for fiscal years beginning after December 15, 2013 and interim periods within those years. The amendments require an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of the guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. In addition, the amendments require an entity to disclose the nature and amount of the obligation, as well as other information about the obligation. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

In July 2011, the FASB issued new guidance on other expenses (ASU 2011-06, Other Expenses (Topic 720): Fees Paid to the Federal Government by Health Insurers), effective for calendar years beginning after December 31, 2013. The objective of this standard is to address how health insurers should recognize and classify in their income statements fees mandated by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. The amendments in this standard specify that the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable with a corresponding deferred cost that is amortized to expense using the straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

2. Segment Information

MetLife is organized into six segments, reflecting three broad geographic regions: Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; and Latin America (collectively, the “Americas”); Asia; and EMEA. In addition, the Company reports certain of its results of operations in Corporate & Other, which includes MetLife Home Loans LLC (“MLHL”), the surviving, non-bank entity of the merger of MetLife Bank, National Association (“MetLife Bank”) with and into MLHL (see Note 3) and other business activities.

Americas

The Americas consists of the following segments:

Retail

The Retail segment offers a broad range of protection products and services and a variety of annuities to individuals and employees of corporations and other institutions, and is organized into two businesses: Life & Other and Annuities. Life & Other insurance products and services include variable life, universal life, term life and whole life products. Additionally, through broker-dealer affiliates, the Company offers a full range of mutual funds and other securities products. Life & Other products and services also include individual disability income products and personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance. Annuities includes a variety of variable and fixed annuities which provide for both asset accumulation and asset distribution needs.

Group, Voluntary & Worksite Benefits

The Group, Voluntary & Worksite Benefits segment offers a broad range of protection products and services to individuals and corporations, as well as other institutions and their respective employees, and is organized into two businesses: Group and Voluntary & Worksite. Group insurance products and services include variable life, universal life and term life products. Group insurance products and services also include dental, group short- and long-term disability and accidental death & dismemberment coverages. The Voluntary & Worksite business includes personal lines property & casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance offered to employees on a voluntary basis. The Voluntary & Worksite business also includes long-term care, prepaid legal plans and critical illness products.

Corporate Benefit Funding

The Corporate Benefit Funding segment offers a broad range of annuity and investment products, including guaranteed interest products and other stable value products, income annuities, and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This segment also includes certain products to fund postretirement benefits and company-, bank- or trust-owned life insurance used to finance non-qualified benefit programs for executives.

Latin America

The Latin America segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include life insurance, accident and health insurance, group medical, dental, credit insurance, endowment and retirement & savings products written in Latin America. Starting in the first quarter of 2013, the Latin America segment includes U.S. sponsored direct business, comprised of group products sold through sponsoring organizations and affinity groups. Products included are life, dental, group short- and long-term disability, accidental death & dismemberment coverages, property & casualty and critical illness.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Asia

The Asia segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include whole life, term life, variable life, universal life, accident and health insurance, fixed and variable annuities and endowment products.

EMEA

The EMEA segment offers a broad range of products to both individuals and corporations, as well as other institutions and their respective employees, which include life insurance, accident and health insurance, credit insurance, annuities, endowment and retirement & savings products.

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments, external integration costs, internal resource costs for associates committed to acquisitions, enterprise-wide strategic initiative restructuring charges, and various start-up and certain run-off businesses. Start-up businesses include expatriate benefits insurance, as well as direct and digital marketing products. Corporate & Other also includes assumed reinsurance of certain variable annuity products from the Company’s former operating joint venture in Japan. Under this in-force reinsurance agreement, the Company reinsures living and death benefit guarantees issued in connection with variable annuity products. Additionally, Corporate & Other includes interest expense related to the majority of the Company’s outstanding debt and expenses associated with certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings.

Financial Measures and Segment Accounting Policies

Operating earnings is the measure of segment profit or loss the Company uses to evaluate segment performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is the Company’s measure of segment performance and is reported below. Operating earnings should not be viewed as a substitute for income (loss) from continuing operations, net of income tax. The Company believes the presentation of operating earnings as the Company measures it for management purposes enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business.

Operating earnings is defined as operating revenues less operating expenses, both net of income tax.

Operating revenues and operating expenses exclude results of discontinued operations and other businesses that have been or will be sold or exited by MetLife. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses). Operating expenses also excludes goodwill impairments.

The following additional adjustments are made to GAAP revenues, in the line items indicated, in calculating operating revenues:


•	Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity guaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”);

•

Net investment income: (i) includes amounts for scheduled periodic settlement payments and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) includes income from discontinued real estate operations, (iii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iv) excludes certain amounts related to contractholder-directed unit-linked investments, and (v) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and


•	Other revenues are adjusted for settlements of foreign currency earnings hedges.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

The following additional adjustments are made to GAAP expenses, in the line items indicated, in calculating operating expenses:

•

Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) inflation-indexed benefit adjustments associated with contracts backed by inflation-indexed investments and amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”), and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);


•	Interest credited to policyholder account balances includes adjustments for scheduled periodic settlement payments and amortization of premium on derivatives that are hedges of policyholder account balances (“PABs”) but do not qualify for hedge accounting treatment and excludes amounts related to net investment income earned on contractholder-directed unit-linked investments;


•	Amortization of deferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs, and (iii) Market Value Adjustments;


•	Amortization of negative VOBA excludes amounts related to Market Value Adjustments;


•	Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and


•	Other expenses excludes costs related to: (i) noncontrolling interests, (ii) implementation of new insurance regulatory requirements, and (iii) acquisition and integration costs.

Operating earnings also excludes the recognition of certain contingent assets and liabilities that could not be recognized at acquisition or adjusted for during the measurement period under GAAP business combination accounting guidance.

Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months and nine months ended September 30, 2013 and 2012. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operating earnings adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below.

Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in the Company’s business.

The Company’s economic capital model aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistical based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required economic capital shock factors to a specific confidence level and time horizon and applying an industry standard method for the inclusion of diversification benefits among risk types.

Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, operating earnings or income (loss) from continuing operations, net of income tax.

Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolio adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)



	Operating Earnings
	Americas
Three Months Ended September 30, 2013	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Total			Asia			EMEA			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	1,607		$	3,767		$	490		$	692		$	6,556		$	1,922		$	586		$	30		$	9,094		$	—		$	9,094
Universal life and investment-type product policy fees	1,257			171			54			222			1,704			438			100			34			2,276			96			2,372
Net investment income	1,928			459			1,424			354			4,165			696			124			58			5,043			(17		)	5,026
Other revenues	267			103			68			—			438			22			21			5			486			(10		)	476
Net investment gains (losses)	—			—			—			—			—			—			—			—			—			(85		)	(85		)
Net derivative gains (losses)	—			—			—			—			—			—			—			—			—			(546		)	(546		)
Total revenues	5,059			4,500			2,036			1,268			12,863			3,078			831			127			16,899			(562		)	16,337
Expenses
Policyholder benefits and claims and policyholder dividends	2,234			3,527			1,144			637			7,542			1,506			243			25			9,316			468			9,784
Interest credited to policyholder account balances	582			38			292			106			1,018			407			37			10			1,472			128			1,600
Goodwill impairment	—			—			—			—			—			—			—			—			—			—			—
Capitalization of DAC	(318		)	(37		)	(2		)	(103		)	(460		)	(515		)	(173		)	(5		)	(1,153		)	—			(1,153		)
Amortization of DAC and VOBA	315			37			4			63			419			393			166			1			979			(138		)	841
Amortization of negative VOBA	—			—			—			(1		)	(1		)	(99		)	(13		)	—			(113		)	(13		)	(126		)
Interest expense on debt	(1		)	—			3			—			2			—			—			286			288			29			317
Other expenses	1,245			595			134			395			2,369			1,040			443			179			4,031			67			4,098
Total expenses	4,057			4,160			1,575			1,097			10,889			2,732			703			496			14,820			541			15,361
Provision for income tax expense (benefit)	343			114			161			38			656			89			43			(239		)	549			(546		)	3
Operating earnings	$	659		$	226		$	300		$	133		$	1,318		$	257		$	85		$	(130	)	1,530
Adjustments to:
Total revenues																									(562		)
Total expenses																									(541		)
Provision for income tax (expense) benefit																									546
Income (loss) from continuing operations, net of income tax																									$	973					$	973

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)



	Operating Earnings
	Americas
Three Months Ended September 30, 2012	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Total			Asia			EMEA			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	1,604		$	3,753		$	450		$	610		$	6,417		$	2,112		$	536		$	15		$	9,080		$	16		$	9,096
Universal life and investment-type product policy fees	1,132			166			53			189			1,540			388			82			38			2,048			83			2,131
Net investment income	1,930			450			1,421			299			4,100			709			122			117			5,048			469			5,517
Other revenues	221			100			64			3			388			4			35			8			435			20			455
Net investment gains (losses)	—			—			—			—			—			—			—			—			—			22			22
Net derivative gains (losses)	—			—			—			—			—			—			—			—			—			(718		)	(718		)
Total revenues	4,887			4,469			1,988			1,101			12,445			3,213			775			178			16,611			(108		)	16,503
Expenses
Policyholder benefits and claims and policyholder dividends	2,228			3,449			1,070			507			7,254			1,455			255			31			8,995			303			9,298
Interest credited to policyholder account balances	598			42			339			99			1,078			468			32			11			1,589			513			2,102
Goodwill impairment	—			—			—			—			—			—			—			—			—			1,868			1,868
Capitalization of DAC	(430		)	(38		)	(13		)	(83		)	(564		)	(579		)	(158		)	—			(1,301		)	(1		)	(1,302		)
Amortization of DAC and VOBA	438			40			4			42			524			396			130			1			1,051			(43		)	1,008
Amortization of negative VOBA	—			—			—			(1		)	(1		)	(128		)	(26		)	—			(155		)	(15		)	(170		)
Interest expense on debt	—			1			2			(4		)	(1		)	—			2			285			286			40			326
Other expenses	1,308			547			120			353			2,328			1,206			440			146			4,120			263			4,383
Total expenses	4,142			4,041			1,522			913			10,618			2,818			675			474			14,585			2,928			17,513
Provision for income tax expense (benefit)	253			145			163			36			597			136			38			(192		)	579			(632		)	(53		)
Operating earnings	$	492		$	283		$	303		$	152		$	1,230		$	259		$	62		$	(104	)	1,447
Adjustments to:
Total revenues																									(108		)
Total expenses																									(2,928		)
Provision for income tax (expense) benefit																									632
Income (loss) from continuing operations, net of income tax																									$	(957	)				$	(957	)

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MetLife, Inc.

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)



	Operating Earnings
	Americas
Nine Months Ended September 30, 2013	Retail			Group, Voluntary & Worksite Benefits			Corporate Benefit Funding			Latin America			Total			Asia			EMEA			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	4,735		$	11,438		$	1,457		$	2,077		$	19,707		$	5,900		$	1,711		$	84		$	27,402		$	1		$	27,403
Universal life and investment-type product policy fees	3,662			521			187			682			5,052			1,324			287			105			6,768			266			7,034
Net investment income	5,876			1,384			4,302			912			12,474			2,151			372			282			15,279			1,106			16,385
Other revenues	767			316			208			9			1,300			63			82			22			1,467			(21		)	1,446
Net investment gains (losses)	—			—			—			—			—			—			—			—			—			339			339
Net derivative gains (losses)	—			—			—			—			—			—			—			—			—			(2,866		)	(2,866		)
Total revenues	15,040			13,659			6,154			3,680			38,533			9,438			2,452			493			50,916			(1,175		)	49,741
Expenses
Policyholder benefits and claims and policyholder dividends	6,659			10,681			3,352			1,792			22,484			4,354			736			52			27,626			1,155			28,781
Interest credited to policyholder account balances	1,750			116			940			313			3,119			1,286			109			33			4,547			1,489			6,036
Goodwill impairment	—			—			—			—			—			—			—			—			—			—			—
Capitalization of DAC	(1,036		)	(105		)	(25		)	(316		)	(1,482		)	(1,583		)	(542		)	(14		)	(3,621		)	—			(3,621		)
Amortization of DAC and VOBA	1,042			104			21			220			1,387			1,186			526			1			3,100			(477		)	2,623
Amortization of negative VOBA	—			—			—