Edgar Filing: METLIFE INC

Document

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 JUNE 30, 2018



¨	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) 578-9500

(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, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 July 31, 2018, 994,837,941 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 June 30, 2018 and December 31, 2017 (Unaudited) and for the Three Months and Six Months Ended June 30, 2018 and 2017 (Unaudited))
	Interim Condensed Consolidated Balance Sheets	3
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Interim Condensed Consolidated Statements of Equity	5
	Interim Condensed Consolidated Statements of Cash Flows	6
	Notes to the Interim Condensed Consolidated Financial Statements:
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	7
	Note 2 — Segment Information	13
	Note 3 — Dispositions	21
	Note 4 — Insurance	27
	Note 5 — Closed Block	29
	Note 6 — Investments	32
	Note 7 — Derivatives	46
	Note 8 — Fair Value	63
	Note 9 — Long-Term Debt	83
	Note 10 — Equity	83
	Note 11 — Other Expenses	90
	Note 12 — Employee Benefit Plans	91
	Note 13 — Income Tax	92
	Note 14 — Earnings Per Common Share	93
	Note 15 — Contingencies, Commitments and Guarantees	94
	Note 16 — Subsequent Events	101
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	102
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	183
Item 4.	Controls and Procedures	184

Part II — Other Information
Item 1.	Legal Proceedings	185
Item 1A.	Risk Factors	185
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	187
Item 6.	Exhibits	188

Signatures		190

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 and terms such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future 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.

Many factors will be important in determining the results of MetLife, Inc., its subsidiaries and affiliates. Forward-looking statements are based on our assumptions and current expectations, which may be inaccurate, and on the current economic environment, which may change. These statements are not guarantees of future performance. They involve a number of risks and uncertainties that are difficult to predict. 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. These factors include: (1) adverse effects which may arise in connection with the material weaknesses in our internal control over financial reporting or our failure to promptly remediate them; (2) difficult conditions in the global capital markets; (3) increased volatility and disruption of the global 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; (4) exposure to global financial and capital market risks, including as a result of the United Kingdom’s notice of withdrawal from the European Union or other disruption in global political, security or economic conditions; (5) impact on us of comprehensive financial services regulation reform; (6) 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; (7) 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; (8) adverse results or other consequences from litigation, arbitration or regulatory investigations; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (10) investment losses and defaults, and changes to investment valuations; (11) changes in assumptions related to investment valuations, deferred policy acquisition costs, deferred sales inducements, value of business acquired or goodwill; (12) impairments of goodwill and realized losses or market value impairments to illiquid assets; (13) defaults on our mortgage loans; (14) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (15) economic, political, legal, currency and other risks relating to our international operations, including with respect to fluctuations of exchange rates; (16) downgrades in our claims paying ability, financial strength or credit ratings; (17) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (18) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (19) differences between actual claims experience and underwriting and reserving assumptions; (20) ineffectiveness of risk management policies and procedures; (21) catastrophe losses; (22) increasing cost and limited market capacity for statutory life insurance reserve financings; (23) 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; (24) 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 any adjustment for nonperformance risk; (25) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from (a) business acquisitions and integrating and managing the growth of such acquired businesses, (b) dispositions of businesses via sale, initial public offering, spin-off or otherwise, including failure to achieve projected operational benefit from such transactions and any restrictions, liabilities, losses or indemnification obligations arising from any transitional services or tax arrangements related to the separation of any business, or from the failure of such a separation to qualify for any intended tax-free treatment, (c) entry into joint ventures, or (d) legal entity reorganizations; (26) unanticipated or adverse developments that could adversely affect our achieving expected operational or other benefits from the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”); (27) liabilities, losses or indemnification obligations arising from our transitional services, investment management or tax arrangements or other agreements with Brighthouse; (28) failure of the separation of Brighthouse to qualify for intended tax-free treatment; (29) legal, regulatory and other restrictions affecting MetLife, Inc.’s ability to pay dividends and repurchase common stock; (30) MetLife, Inc.’s and its subsidiary holding companies’ primary reliance, as holding companies, on dividends from subsidiaries to meet free cash flow targets and debt payment obligations and the applicable regulatory restrictions on the ability of the subsidiaries to pay such dividends; (31) the possibility that MetLife, Inc.’s Board of Directors may influence the outcome of stockholder votes through the voting provisions of the MetLife Policyholder Trust; (32) changes in accounting standards, practices and/or policies; (33) increased expenses relating to pension and postretirement benefit plans, as well as health care and other employee benefits; (34) inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; (35) difficulties in marketing and distributing products through our distribution channels; (36) provisions of laws and our incorporation documents that may delay, deter or prevent takeovers and corporate combinations involving MetLife; (37) 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; (38) any failure to protect the confidentiality of client information; (39) the effectiveness of our programs and practices in avoiding giving our associates incentives to take excessive risks; (40) the impact of technological changes on our businesses; and (41) other risks and uncertainties described from time to time in MetLife, Inc.’s filings with the U.S. Securities and Exchange Commission.

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 U.S. Securities and Exchange Commission.

Corporate Information

We announce financial and other information about MetLife to our investors through the MetLife Investor Relations web page at www.metlife.com, as well as U.S. Securities and Exchange Commission filings, news releases, public conference calls and webcasts. MetLife encourages investors to visit the Investor Relations web page from time to time, as information is updated and new information is posted. The information found on our website is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the U.S. Securities and Exchange Commission, and any references to our website are intended to be inactive textual references only.

Note Regarding Reliance on Statements in Our Contracts

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

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

MetLife, Inc.

Interim Condensed Consolidated Balance Sheets

June 30, 2018 and December 31, 2017 (Unaudited)

(In millions, except share and per share data)



	June 30, 2018			December 31, 2017
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $292,257 and $286,069, respectively)	$	306,331		$	308,931
Equity securities, at estimated fair value	1,483			2,513
Contractholder-directed equity securities and fair value option securities, at estimated fair value (includes $5 and $6, respectively, relating to variable interest entities)	13,848			16,745
Mortgage loans (net of valuation allowances of $325 and $314, respectively; includes $405 and $520, respectively, under the fair value option)	70,852			68,731
Policy loans	9,702			9,669
Real estate and real estate joint ventures (includes $630 and $25, respectively, of real estate held-for-sale)	9,741			9,637
Other limited partnership interests	5,985			5,708
Short-term investments, principally at estimated fair value	3,853			4,870
Other invested assets (includes $453 and $125, respectively, relating to variable interest entities)	17,017			17,263
Total investments	438,812			444,067
Cash and cash equivalents, principally at estimated fair value (includes $11 and $12, respectively, relating to variable interest entities)	16,312			12,701
Accrued investment income	3,512			3,524
Premiums, reinsurance and other receivables (includes $2 and $3, respectively, relating to variable interest entities)	19,608			18,423
Deferred policy acquisition costs and value of business acquired	19,013			18,419
Goodwill	9,499			9,590
Other assets (includes $2 and $2, respectively, relating to variable interest entities)	8,230			8,167
Separate account assets	191,347			205,001
Total assets	$	706,333		$	719,892
Liabilities and Equity
Liabilities
Future policy benefits	$	184,461		$	177,974
Policyholder account balances	182,493			182,518
Other policy-related balances	15,908			15,515
Policyholder dividends payable	695			682
Policyholder dividend obligation	792			2,121
Payables for collateral under securities loaned and other transactions	27,030			25,723
Short-term debt	479			477
Long-term debt (includes $5 and $6, respectively, at estimated fair value, relating to variable interest entities)	14,536			15,686
Collateral financing arrangement	1,085			1,121
Junior subordinated debt securities	3,146			3,144
Current income tax payable	222			311
Deferred income tax liability	5,377			6,767
Other liabilities (includes $1 and $3, respectively, relating to variable interest entities)	24,930			23,982
Separate account liabilities	191,347			205,001
Total liabilities	652,501			661,022
Contingencies, Commitments and Guarantees (Note 15)
Equity
MetLife, Inc.’s stockholders’ equity:
Preferred stock, par value $0.01 per share; $3,405 and $2,100 aggregate liquidation preference, respectively	—			—
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 1,170,816,195 and 1,168,710,101 shares issued, respectively; 1,000,153,999 and 1,043,588,396 shares outstanding, respectively	12			12
Additional paid-in capital	32,454			31,111
Retained earnings	26,870			26,527
Treasury stock, at cost; 170,662,196 and 125,121,705 shares, respectively	(8,557		)	(6,401		)
Accumulated other comprehensive income (loss)	2,854			7,427
Total MetLife, Inc.’s stockholders’ equity	53,633			58,676
Noncontrolling interests	199			194
Total equity	53,832			58,870
Total liabilities and equity	$	706,333		$	719,892

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 Six Months Ended June 30, 2018 and 2017 (Unaudited)

(In millions, except per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenues
Premiums	$	15,153		$	9,580		$	24,331		$	18,545
Universal life and investment-type product policy fees	1,370			1,364			2,762			2,724
Net investment income	4,473			4,193			8,218			8,614
Other revenues	475			292			949			634
Net investment gains (losses)	(227		)	104			(560		)	192
Net derivative gains (losses)	(59		)	(200		)	290			(412		)
Total revenues	21,185			15,333			35,990			30,297
Expenses
Policyholder benefits and claims	14,866			9,427			23,584			18,290
Interest credited to policyholder account balances	1,424			1,292			2,193			2,743
Policyholder dividends	309			313			606			623
Other expenses	3,485			3,283			6,850			6,551
Total expenses	20,084			14,315			33,233			28,207
Income (loss) from continuing operations before provision for income tax	1,101			1,018			2,757			2,090
Provision for income tax expense (benefit)	207			162			606			282
Income (loss) from continuing operations, net of income tax	894			856			2,151			1,808
Income (loss) from discontinued operations, net of income tax	—			58			—			(18		)
Net income (loss)	894			914			2,151			1,790
Less: Net income (loss) attributable to noncontrolling interests	3			3			7			6
Net income (loss) attributable to MetLife, Inc.	891			911			2,144			1,784
Less: Preferred stock dividends	46			46			52			52
Net income (loss) available to MetLife, Inc.’s common shareholders	$	845		$	865		$	2,092		$	1,732
Comprehensive income (loss)	$	(1,885	)	$	2,953		$	(3,333	)	$	4,860
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	4			2			8			6
Comprehensive income (loss) attributable to MetLife, Inc.	$	(1,889	)	$	2,951		$	(3,341	)	$	4,854



Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders:
Basic	$	0.83	$	0.76	$	2.04	$	1.62
Diluted	$	0.83	$	0.75	$	2.02	$	1.61
Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
Basic	$	0.83	$	0.81	$	2.04	$	1.60
Diluted	$	0.83	$	0.80	$	2.02	$	1.59
Cash dividends declared per common share	$	0.420	$	0.400	$	0.820	$	0.800

See accompanying notes to the interim condensed consolidated financial statements.

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MetLife, Inc.

Interim Condensed Consolidated Statements of Equity

For the Six Months Ended June 30, 2018 and 2017 (Unaudited)

(In millions)



	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock at Cost			Accumulated Other Comprehensive Income (Loss)			Total MetLife, Inc.’s Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2017	$	—	$	12	$	31,111	$	26,527		$	(6,401	)	$	7,427		$	58,676		$	194		$	58,870
Cumulative effects of changes in accounting principles, net of income tax (Note 1)							(905		)				912			7						7
Balance at January 1, 2018	—		12		31,111		25,622			(6,401		)	8,339			58,683			194			58,877
Preferred stock issuance					1,274											1,274						1,274
Treasury stock acquired in connection with share repurchases										(2,156		)				(2,156		)				(2,156		)
Stock-based compensation					69											69						69
Dividends on preferred stock							(52		)							(52		)				(52		)
Dividends on common stock							(844		)							(844		)				(844		)
Change in equity of noncontrolling interests																—			(3		)	(3		)
Net income (loss)							2,144									2,144			7			2,151
Other comprehensive income (loss), net of income tax													(5,485		)	(5,485		)	1			(5,484		)
Balance at June 30, 2018	$	—	$	12	$	32,454	$	26,870		$	(8,557	)	$	2,854		$	53,633		$	199		$	53,832



	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Treasury Stock at Cost			Accumulated Other Comprehensive Income (Loss)		Total MetLife, Inc.’s Stockholders’ Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2016, as previously reported	$	—	$	12	$	30,944	$	34,480		$	(3,474	)	$	5,347	$	67,309		$	171	$	67,480
Prior period revisions (Note 1)							203						19		222					222
Balance at December 31, 2016	—		12		30,944		34,683			(3,474		)	5,366		67,531			171		67,702
Treasury stock acquired in connection with share repurchases										(1,810		)			(1,810		)			(1,810		)
Stock-based compensation					77										77					77
Dividends on preferred stock							(52		)						(52		)			(52		)
Dividends on common stock							(868		)						(868		)			(868		)
Change in equity of noncontrolling interests															—			37		37
Net income (loss)							1,784								1,784			6		1,790
Other comprehensive income (loss), net of income tax													3,070		3,070			—		3,070
Balance at June 30, 2017	$	—	$	12	$	31,021	$	35,547		$	(5,284	)	$	8,436	$	69,732		$	214	$	69,946

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 Six Months Ended June 30, 2018 and 2017

(Unaudited)

(In millions)



	Six Months Ended June 30,
	2018			2017
Net cash provided by (used in) operating activities	$	6,904		$	5,499
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	54,497			47,120
Equity securities	280			452
Mortgage loans	4,341			4,354
Real estate and real estate joint ventures	422			490
Other limited partnership interests	337			689
Purchases of:
Fixed maturity securities	(58,061		)	(49,995		)
Equity securities	(64		)	(616		)
Mortgage loans	(6,380		)	(7,126		)
Real estate and real estate joint ventures	(495		)	(602		)
Other limited partnership interests	(568		)	(682		)
Cash received in connection with freestanding derivatives	2,376			3,945
Cash paid in connection with freestanding derivatives	(2,638		)	(5,698		)
Net change in policy loans	(42		)	6
Net change in short-term investments	1,055			914
Net change in other invested assets	164			(206		)
Other, net	12			(194		)
Net cash provided by (used in) investing activities	(4,764		)	(7,149		)
Cash flows from financing activities
Policyholder account balances:
Deposits	46,858			44,854
Withdrawals	(44,976		)	(42,387		)
Net change in payables for collateral under securities loaned and other transactions	1,633			1,205
Long-term debt issued	14			2,989
Long-term debt repaid	(200		)	(9		)
Collateral financing arrangements repaid	(36		)	(2,836		)
Financing element on certain derivative instruments and other derivative related transactions, net	12			(94		)
Treasury stock acquired in connection with share repurchases	(2,156		)	(1,810		)
Preferred stock issued, net of issuance costs	1,274			—
Dividends on preferred stock	(52		)	(52		)
Dividends on common stock	(844		)	(868		)
Other, net	85			(186		)
Net cash provided by (used in) financing activities	1,612			806
Effect of change in foreign currency exchange rates on cash and cash equivalents balances	(141		)	286
Change in cash and cash equivalents	3,611			(558		)
Cash and cash equivalents, beginning of period	12,701			17,877
Cash and cash equivalents, end of period	$	16,312		$	17,319
Cash and cash equivalents, of disposed subsidiary, beginning of period	$	—		$	5,226
Cash and cash equivalents, of disposed subsidiary, end of period	$	—		$	4,443
Cash and cash equivalents, from continuing operations, beginning of period	$	12,701		$	12,651
Cash and cash equivalents, from continuing operations, end of period	$	16,312		$	12,876



Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	592	$	574
Income tax	$	577	$	505
Non-cash transactions:
Fixed maturity securities received in connection with pension risk transfer transaction	$	3,016	$	—
Brighthouse common stock exchange transaction (Note 3):
Reduction of long-term debt	$	944	$	—
Reduction of fair value option securities	$	1,030	$	—

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” and the “Company” refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates. MetLife is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management. MetLife is organized into five segments: U.S.; Asia; Latin America; Europe, the Middle East and Africa (“EMEA”); and MetLife Holdings.

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 on 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 these estimates.

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, 2017 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, 2017 (the “2017 Annual Report”), 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 2017 Annual Report.

Consolidation

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.

The Company uses the equity method of accounting for equity securities when it has significant influence or at least 20% interest and for real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. 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. Subsequent to the adoption of guidance relating to the recognition and measurement of financial instruments on January 1, 2018, the Company accounts for interests in unconsolidated entities that are not accounted for under the equity method, at estimated fair value. Such investments were previously accounted for under the cost method of accounting. See “— Adoption of New Accounting Pronouncements.”

Discontinued Operations

The results of operations of a component of the Company that has either been disposed of or is classified as held-for-sale are reported in discontinued operations if certain criteria are met. A disposal of a component is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results.

On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) through a distribution of 96,776,670 shares of Brighthouse Financial, Inc. common stock to the MetLife, Inc. common shareholders (the “Separation”). The results of Brighthouse are reflected in MetLife, Inc.’s interim condensed consolidated financial statements as discontinued operations and, therefore, are presented as income (loss) from discontinued operations on the consolidated statements of operations and comprehensive income (loss). Prior year periods’ results have been revised to reflect discontinued operations. Intercompany transactions between the Company and Brighthouse prior to the Separation have been eliminated. Transactions between the Company and Brighthouse after the Separation are reflected in continuing operations for the Company. See Note 3 for information on discontinued operations and transactions with Brighthouse.

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MetLife, Inc.

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

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

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2018 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

Revisions

As discussed in Note 1 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report, the Company made adjustments for group annuity reserves and assumed variable annuity guarantee reserves for which amounts previously reported have been immaterially restated. In addition, the Company has corrected other unrelated immaterial errors which were previously recorded in the periods the Company identified them.

A summary of the revisions to prior year periods’ net income (loss) available to MetLife, Inc.’s common shareholders is shown in the table below:



	Three Months Ended June 30,			Six Months Ended June 30,
	2017
	(In millions)
Assumed variable annuity guarantee reserves	$	47		$	61
Group annuity reserves	(9		)	(18		)
Other revisions to continuing operations, net	3			66
Impact to income (loss) from continuing operations before provision for income tax	41			109
Provision for income tax expense (benefit)	14			38
Impact to income (loss) from continuing operations, net of income tax	27			71
Other revisions to discontinued operations, net of income tax	—			3
Impact to net income (loss) available to MetLife, Inc.’s common shareholders	$	27		$	74

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MetLife, Inc.

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

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

The impact of the revisions is shown in the tables below:



	Three Months Ended June 30,											Six Months Ended June 30,
	2017
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	As Previously Reported			Discontinued Operations			Revisions		As Revised			As Previously Reported			Discontinued Operations (1)			Revisions			As Revised
	(In millions, except per share data)
Revenues
Net investment gains (losses)	$	104		$	—		$	—	$	104		$	112		$	55		$	25		$	192
Net derivatives gains (losses)	$	(437	)	$	190		$	47	$	(200	)	$	(1,363	)	$	890		$	61		$	(412	)
Total revenues	$	17,245		$	(1,959	)	$	47	$	15,333		$	33,514		$	(3,303	)	$	86		$	30,297
Expenses
Policyholder benefits and claims	$	10,302		$	(881	)	$	6	$	9,427		$	20,161		$	(1,883	)	$	12		$	18,290
Other expenses	$	4,059		$	(776	)	$	—	$	3,283		$	7,623		$	(1,037	)	$	(35	)	$	6,551
Total expenses	$	16,243		$	(1,934	)	$	6	$	14,315		$	31,695		$	(3,465	)	$	(23	)	$	28,207
Income (loss) from continuing operations before provision for income tax	$	1,002		$	(25	)	$	41	$	1,018		$	1,819		$	162		$	109		$	2,090
Provision for income tax expense (benefit)	$	115		$	33		$	14	$	162		$	103		$	141		$	38		$	282
Income (loss) from continuing operations, net of income tax	$	887		$	(58	)	$	27	$	856		$	1,716		$	21		$	71		$	1,808
Income (loss) from discontinued operations, net of income tax	$	—		$	58		$	—	$	58		$	—		$	(21	)	$	3		$	(18	)
Net income (loss)	$	887		$	—		$	27	$	914		$	1,716		$	—		$	74		$	1,790
Net income (loss) attributable to MetLife, Inc.	$	884		$	—		$	27	$	911		$	1,710		$	—		$	74		$	1,784
Net income (loss) available to MetLife, Inc.’s common shareholders	$	838		$	—		$	27	$	865		$	1,658		$	—		$	74		$	1,732
Comprehensive income (loss)	$	2,926		$	—		$	27	$	2,953		$	4,805		$	—		$	55		$	4,860
Comprehensive income (loss) attributable to MetLife, Inc.	$	2,924		$	—		$	27	$	2,951		$	4,799		$	—		$	55		$	4,854
Income (loss) from continuing operations, net of income tax, available to MetLife, Inc.’s common shareholders:
Basic	$	0.78		$	(0.05	)	$	0.03	$	0.76		$	1.53		$	0.02		$	0.07		$	1.62
Diluted	$	0.77		$	(0.05	)	$	0.03	$	0.75		$	1.52		$	0.02		$	0.07		$	1.61
Net income (loss) available to MetLife, Inc.’s common shareholders per common share:
Basic	$	0.78		$	—		$	0.03	$	0.81		$	1.53		$	—		$	0.07		$	1.60
Diluted	$	0.77		$	—		$	0.03	$	0.80		$	1.52		$	—		$	0.07		$	1.59

__________________


(1)	See Note 3 for additional information on discontinued operations. Revisions include $5 million and $2 million of net investment gains (losses) and provision for income tax expense (benefit), respectively, related to discontinued operations.

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MetLife, Inc.

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

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



Interim Condensed Consolidated Statements of Equity	As Previously Reported		Revisions			As Revised
	(In millions)
Retained Earnings
Balance at December 31, 2016	$	34,480	$	203		$	34,683
Net income (loss)	$	1,710	$	74		$	1,784
Balance at June 30, 2017	$	35,270	$	277		$	35,547
Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2016	$	5,347	$	19		$	5,366
Other comprehensive income (loss), net of income tax	$	3,089	$	(19	)	$	3,070
Balance at June 30, 2017	$	8,436	$	—		$	8,436
Total MetLife, Inc.’s Stockholders’ Equity
Balance at December 31, 2016	$	67,309	$	222		$	67,531
Balance at June 30, 2017	$	69,455	$	277		$	69,732
Total Equity
Balance at December 31, 2016	$	67,480	$	222		$	67,702
Balance at June 30, 2017	$	69,669	$	277		$	69,946

Adoption of New Accounting Pronouncements

Effective January 1, 2018, the Company early adopted guidance relating to income taxes. The new guidance was applied in the period of adoption. Current GAAP guidance requires that the effect of a change in tax laws or rates on deferred tax liabilities or assets to be included in income from continuing operations in the reporting period that includes the enactment date, even if the related income tax effects were originally charged or credited directly to accumulated other comprehensive income (“AOCI”). The Company’s accounting policy for the release of stranded tax effects in AOCI is on an aggregate portfolio basis. The new guidance allows a reclassification of AOCI to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). Due to U.S. Tax Reform and the change in corporate tax rates, at December 22, 2017, the Company reported stranded tax effects in AOCI related to unrealized gains and losses on available-for-sale (“AFS”) securities, cumulative foreign translation adjustments and deferred costs on pension benefit plans. With the adoption of the guidance, the Company released these stranded tax effects in AOCI resulting in a decrease to retained earnings as of January 1, 2018 of $1.2 billion with a corresponding increase to AOCI.

Effective January 1, 2018, the Company prospectively adopted guidance relating to stock compensation. The new guidance includes guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Accounting Standards Codification (“ASC”) Topic 718, Compensation - Stock Compensation. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018 the Company retrospectively adopted guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item is not used, the line item used in the income statement to present the other components of net periodic benefit cost must be disclosed. In addition, the guidance allows only the service cost component to be eligible for capitalization when applicable. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to de-recognition of nonfinancial assets. The new guidance clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” The new guidance also adds guidance for partial sales of nonfinancial assets. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

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MetLife, Inc.

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

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

Effective January 1, 2018, the Company retrospectively adopted guidance relating to restricted cash. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to tax accounting for intra-entity transfers of assets. Prior guidance prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company retrospectively adopted guidance relating to cash flow statement presentation. The new guidance addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to recognition and measurement of financial instruments. The guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Effective January 1, 2018, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. Additionally, there will no longer be a requirement to assess equity securities for embedded derivatives requiring bifurcation. The adoption of this guidance resulted in a $328 million, net of income tax, increase to retained earnings largely offset by a decrease to AOCI that was primarily attributable to $1.7 billion of equity securities previously classified and measured as equity securities AFS. At December 31, 2017, equity securities of $16.0 billion primarily associated with contractholder-directed investments are accounted for using the FVO and therefore were unaffected by the new guidance. The Company has included the required disclosures related to equity securities within Note 6.

Effective January 1, 2018, the Company adopted, using a modified retrospective approach, guidance relating to revenue recognition. The new guidance supersedes nearly all existing revenue recognition guidance under U.S. GAAP. However, it does not impact the accounting for insurance and investment contracts within the scope of ASC Topic 944, Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements.

For the three months and six months ended June 30, 2018, the Company identified $328 million and $650 million, respectively, of revenue streams within the scope of the guidance that are all included within other revenues on the interim condensed consolidated statements of operations and comprehensive income (loss). Such amounts primarily consisted of: (i) prepaid legal plans and administrative-only contracts within the U.S. segment of $126 million and $255 million, for the three months and six months ended June 30, 2018, respectively, (ii) distribution and administrative services fees within the MetLife Holdings segment of $56 million and $114 million for the three months and six months ended June 30, 2018, respectively, and (iii) fee-based investment management services within Corporate & Other of $74 million and $145 million for the three months and six months ended June 30, 2018, respectively.

Substantially all of the revenue from these services is recognized over time as the applicable services are provided or are made available to the customers and control is transferred continuously. The consideration received for these services is variable and constrained to the amount not probable of a significant revenue reversal.

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MetLife, Inc.

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

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

Other

Effective January 16, 2018, the London Clearing House (“LCH”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives, for which the LCH serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $369 million, gross derivative liabilities by $203 million, accrued investment income by $14 million, collateral receivables recorded within premiums, reinsurance and other receivables by $184 million, and collateral payables recorded within payables for collateral under securities loaned and other transactions by $365 million. The application of the amended rulebook increased accrued investment expense recorded within other liabilities by $1 million.

Future Adoption of New Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance on hedging activities (Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. Early adoption is permitted. The new guidance simplifies the application of hedge accounting in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in their financial statements. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2017, the FASB issued new guidance on purchased callable debt securities (ASU 2017-08, Receivables -Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. See Note 11 of the Notes to the Consolidated Financial Statements included in the 2017 Annual Report for a description of the two-step test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company expects the adoption of this new guidance will reduce the complexity involved with the evaluation of goodwill for impairment. The impact of the new guidance will depend on the outcomes of future goodwill impairment tests.

In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other-than-temporary impairment (“OTTI”) on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and is currently assessing the accounting and reporting system changes that will be required to comply with the new guidance. The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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MetLife, Inc.

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

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

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach (subject to optional practical expedients). Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, amending certain aspects of the new leases standard. The amendments include clarification on whether to recognize a transition adjustment to earnings rather than through equity when an entity initially applies the new guidance retrospectively to each prior reporting period. Also, in July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in the new guidance provide entities with an additional transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Also, the amendments provide lessors with a practical expedient related to separating components of a contract. The Company’s implementation efforts have been primarily focused on the review of its existing lease contracts, identification of other contracts that may fall under the scope of the new guidance, and performing a gap analysis on the current state of lease-related activities compared with the future state of lease-related activities. The Company identified its significant leases by geography and by asset type that will be impacted by the new guidance and has begun implementation of a new software platform to facilitate compliance with the new guidance. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

2. Segment Information

MetLife is organized into five segments: U.S.; Asia; Latin America; EMEA; and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other.

U.S.

The U.S. segment offers a broad range of protection products and services aimed at serving the financial needs of customers throughout their lives. These products are sold to corporations and their respective employees, other institutions and their respective members, as well as individuals. The U.S. segment is organized into three businesses: Group Benefits, Retirement and Income Solutions and Property & Casualty.


•	The Group Benefits business offers insurance products and services which include life, dental, group short- and long-term disability, individual disability, accidental death and dismemberment, vision and accident & health coverages, as well as prepaid legal plans. This business also sells administrative services-only arrangements to some employers.


•	The Retirement and Income Solutions business offers a broad range of annuity and investment products, including stable value and pension risk transfer products, institutional income annuities, tort settlements, capital market investment products, as well as postretirement benefits and company-, bank- or trust-owned life insurance.


•	The Property & Casualty business offers personal and commercial lines of property and casualty insurance, including private passenger automobile, homeowners’ and personal excess liability insurance. In addition, Property & Casualty offers small business owners property, liability and business interruption insurance.

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 and term life, endowments, universal and variable life, accident & health insurance and fixed and variable annuities.

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, retirement and savings products, accident & health insurance and credit insurance.

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MetLife, Inc.

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

2. Segment Information (continued)

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 & health insurance, retirement and savings products and credit insurance.

MetLife Holdings

The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company in the United States, such as variable, universal, term and whole life insurance, variable, fixed and index-linked annuities, long-term care insurance, as well as the assumed variable annuity guarantees from the Company’s former operating joint venture in Japan.

Corporate & Other

Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including external integration and disposition costs, internal resource costs for associates committed to acquisitions and dispositions, enterprise-wide strategic initiative restructuring charges and various start-up businesses (including the investment management business through which the Company offers fee-based investment management services to institutional clients). Additionally, Corporate & Other includes run-off businesses such as the direct to consumer portion of the U.S. Direct business. Corporate & Other also includes interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to affiliated reinsurance and intersegment loans, which bear interest rates commensurate with related borrowings.

Financial Measures and Segment Accounting Policies

Adjusted earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings is also the Company’s GAAP measure of segment performance and is reported below. Adjusted earnings should not be viewed as a substitute for income (loss) from continuing operations, net of income tax. The Company believes the presentation of adjusted 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.

Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax.

The financial measures of adjusted revenues and adjusted expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MetLife but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MetLife that do not meet the criteria to be included in results of discontinued operations under GAAP. Adjusted revenues also excludes net investment gains (losses) and net derivative gains (losses). Adjusted expenses also excludes goodwill impairments.

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MetLife, Inc.

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

2. Segment Information (continued)

The following additional adjustments are made to revenues, in the line items indicated, in calculating adjusted 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 earned income on derivatives 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) excludes post-tax adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to contractholder-directed unit-linked investments, (iv) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP and (v) includes distributions of profits from certain other limited partnership interests that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in estimated fair value is recognized in net investment gains (losses) for GAAP; and


•	Other revenues is adjusted for settlements of foreign currency earnings hedges and excludes fees received in association with services provided under transition service agreements (“TSA fees”).

The following additional adjustments are made to expenses, in the line items indicated, in calculating adjusted 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 and other pass-through adjustments, (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 earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances 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, integration and other costs. Other expenses includes TSA fees.

Adjusted 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.

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.

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 six months ended June 30, 2018 and 2017. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for adjusted 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.

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MetLife, Inc.

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

2. Segment Information (continued)

The Company’s economic capital model, coupled with considerations of local capital requirements, aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-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 while applying an industry standard method for the inclusion of diversification benefits among risk types. The Company’s management is responsible for the ongoing production and enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards.

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, income (loss) from continuing operations, net of income tax, or adjusted earnings.

Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios 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)

2. Segment Information (continued)




Three Months Ended June 30, 2018	U.S.			Asia			Latin America			EMEA			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	11,302		$	1,654		$	688		$	546		$	957		$	6		$	15,153		$	—		$	15,153
Universal life and investment-type product policy fees	262			399			275			107			301			—			1,344			26			1,370
Net investment income	1,719			839			327			73			1,329			40			4,327			146			4,473
Other revenues	203			13			9			20			68			79			392			83			475
Net investment gains (losses)	—			—			—			—			—			—			—			(227		)	(227		)
Net derivative gains (losses)	—			—			—			—			—			—			—			(59		)	(59		)
Total revenues	13,486			2,905			1,299			746			2,655			125			21,216			(31		)	21,185
Expenses
Policyholder benefits and claims and policyholder dividends	11,233			1,237			660			286			1,706			3			15,125			50			15,175
Interest credited to policyholder account balances	439			362			95			26			235			—			1,157			267			1,424
Capitalization of DAC	(114		)	(495		)	(91		)	(121		)	(10		)	(3		)	(834		)	—			(834		)
Amortization of DAC and VOBA	114			313			71			108			101			1			708			(1		)	707
Amortization of negative VOBA	—			(12		)	—			(4		)	—			—			(16		)	—			(16		)
Interest expense on debt	4			—			1			—			2			272			279			30			309
Other expenses	965			976			363			339			275			259			3,177			142			3,319
Total expenses	12,641			2,381			1,099			634			2,309			532			19,596			488			20,084
Provision for income tax expense (benefit)	174			161			55			26			66			(234		)	248			(41		)	207
Adjusted earnings	$	671		$	363		$	145		$	86		$	280		$	(173	)	1,372
Adjustments to:
Total revenues																			(31		)
Total expenses																			(488		)
Provision for income tax (expense) benefit																			41
Income (loss) from continuing operations, net of income tax																			$	894					$	894

Table of Contents

MetLife, Inc.

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

2. Segment Information (continued)




Three Months Ended June 30, 2017	U.S.		Asia		Latin America		EMEA		MetLife Holdings		Corporate & Other		Total		Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	5,877	$	1,659	$	645	$	505	$	1,022	$	8	$	9,716	$	(136	)	$	9,580
Universal life and investment-type product policy fees	251		375		275		92		345		—		1,338		26			1,364
Net investment income	1,575		729		289		78		1,401		41		4,113		80			4,193
Other revenues	199		11		8		28		37		61		344		(52		)	292
Net investment gains (losses)	—		—		—		—		—		—		—		104			104
Net derivative gains (losses)	—		—		—		—		—		—		—