false--12-31Q2201900009378341.001.000.99100000010000001800000014000000230000000.010.01100000000010000000004944666644944666644944666644944666640.100.102026-07-312019-10-312026-07-312023-07-312019-07-312020-06-30P0YP0YP0YP0Y0.0904600000000100000050000005000000500000021000000021000000011300000001137000000090200000081800000020000002000000113000000108000000830000002000000300000013940000001409000000950000001800000060000000001300000000
 
 
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 SEPTEMBERJUNE 30, 20172019
or
¨☐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: 000-55029

________________________________________
Metropolitan Life Insurance CompanyCompany
(Exact name of registrant as specified in its charter)
New York 13-5581829
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
  
200 Park Avenue,New York N.Y.,NY 10166-0188
(Address of principal executive offices) (Zip Code)
(212) (212) 578-9500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
NoneN/AN/A
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.    Yesþ☑    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).    Yesþ☑   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 an 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
¨

☐		Accelerated filer
¨

☐
Non-accelerated filer (Do not check if a smaller reporting company)þ☑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 NovemberAugust 8, 2017,2019, 494,466,664 shares of the registrant’s common stock, $0.01 par value per share, were outstanding, all of which were owned directly by MetLife, Inc.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.
 
 




Table of Contents
  Page
Part I — Financial Information
 
Item 1.Financial Statements (Unaudited) (at SeptemberJune 30, 2017 (Unaudited)2019 and December 31, 20162018 and for the Three Months and NineSix Months Ended SeptemberJune 30, 20172019 and 2016 (Unaudited))2018) 
 
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
1011
 
Note 3 — Insurance
1716
 
Note 4 — Closed Block
1918
 
Note 5 — Investments
2221
 
Note 6 — Derivatives
36
 
Note 7 — Fair Value
5150
 
Note 8 — Leases
67
Note 9 — Equity
69
 
Note 910 — Other Revenues and Other Expenses
72
 
Note 1011 — Employee Benefit Plans
72
 
Note 1112 — Contingencies, Commitments and GuaranteesIncome Tax
73
 
Note 1213 — Contingencies, Commitments and Guarantees
74
Note 14 — Related Party Transactions
79
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8482
Item 4.
Controls and Procedures
9792
   
Part II — Other Information
 
Item 1.
Legal Proceedings
9893
Item 1A.
Risk Factors
10093
Item 6. 
Exhibits
10194
   
Signatures
10295

Table of Contents


As used in this Form 10-Q, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q,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”“believe,” “will,” and other words and terms of similar meaning, or are tied to future periods, 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 MLIC. TheseMetropolitan Life Insurance Company, 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.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. These statements are not guarantees of future performance. Actual resultsResults 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 Metropolitan Life Insurance Company'sCompany’s filings with the U.S. Securities and Exchange Commission. These factors include: (1) difficult economic conditions, in the global capital markets;including risks relating to interest rates, credit spreads, equity, real estate, obligors and counterparties, and derivatives; (2) increased volatility and disruption of theadverse global capital and credit markets,market conditions, which may affect our ability to meet liquidity needs and access capital, including through credit facilities, generate market-related revenuefacilities; (3) downgrades in our claims paying ability, financial strength or credit ratings; (4) availability and finance statutory reserve requirements; (3) exposureeffectiveness of reinsurance, hedging or indemnification arrangements; (5) the impact on us of changes to global financial and capital market risks; (4)implementation of the wide variety of laws and regulations to which we are subject; (6) regulatory, legislative or tax changes relating to our insurance or other operations that may affect the cost of, or demand for, our products or services; (5)(7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (6) impact on us of comprehensive financial services regulation reform, including potential regulation of MetLife, Inc. as a non-bank systemically important financial institution, or otherwise; (7) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, dispositions of businesses, entry into joint ventures, or legal entity reorganizations; (8) investment losses, defaults and volatility; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (9) investment losses,(10) differences between actual claims experience and changes to investment valuations; (10) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements, or value of business acquired;underwriting and reserving assumptions; (11) the defaults or deteriorating creditimpact of other financial institutions that could adversely affect us;technological changes on our businesses; (12) downgrades in our financial strength or credit ratings, or MetLife, Inc.’s credit ratings;catastrophe losses; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) availability and effectivenesschanges in assumptions related to deferred policy acquisition costs, deferred sales inducements or value of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform;business acquired; (15) differences between actual claims experience and underwriting and reserving assumptions; (16) ineffectiveness of MetLife’s risk management policies and procedures; (17) exposure to losses related to variable annuity guarantee benefits, including from significantguarantees in certain products; (16) ineffectiveness of risk management policies and sustained downturnsprocedures or extreme volatilitymodels; (17) a failure in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (18) changes in accounting standards, practices and/or policies; (19) 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 MetLife’s disaster recoverycybersecurity systems cyber- or other information security systems and management continuity planning; (20)or MetLife’s disaster recovery plans; (18) any failure to protect the confidentiality of client information; (26) changes in accounting standards; (19) MetLife associates taking excessive risks; (20) difficulties in marketing and distributing products through our distribution channels; (21) difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions and dispositions, joint ventures, or other legal entity reorganizations; and (22) other risks and uncertainties described from time to time in Metropolitan Life Insurance Company'sCompany’s filings with the U.S. Securities and Exchange Commission.
Metropolitan Life Insurance Company does not undertake any obligation to publicly correct or update any forward-looking statement if Metropolitan Life Insurance Company later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures Metropolitan Life Insurance Company makes on related subjects in reports to the U.S. Securities and Exchange Commission.
Note Regarding Reliance on Statements in Our Contracts
See “Item 6. Exhibits“Exhibits — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Quarterly Report on Form 10-Q.

2
Table of Contents

Part I — Financial Information
Item 1. Financial Statements
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Balance Sheets
SeptemberJune 30, 2017 (Unaudited)2019 and December 31, 20162018 (Unaudited)
(In millions, except share and per share data)
 September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
Assets        
Investments:        
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $160,383 and $155,141, respectively) $172,284
 $163,120
Equity securities available-for-sale, at estimated fair value (cost: $1,712 and $1,785, respectively) 1,791
 1,839
Mortgage loans (net of valuation allowances of $272 and $267, respectively; includes $564 and $566, respectively, under the fair value option) 58,054
 56,560
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $152,346 and $155,175, respectively) $165,102
 $159,073
Equity securities, at estimated fair value 805
 773
Mortgage loans (net of valuation allowances of $300 and $291, respectively; includes $210 and $210, respectively, relating to variable interest entities; includes $262 and $299, respectively, under the fair value option) 64,671
 63,687
Policy loans 5,985
 5,945
 6,064
 6,061
Real estate and real estate joint ventures (includes $1,102 and $1,124, respectively, relating to variable interest entities; includes $61 and $56, respectively, of real estate held-for-sale) 6,657
 6,386
Other limited partnership interests (includes $0 and $14, respectively, relating to variable interest entities) 3,893
 3,725
Real estate and real estate joint ventures (includes $1,409 and $1,394, respectively, relating to variable interest entities; includes $22 and $0, respectively, of real estate held-for-sale) 6,414
 6,152
Other limited partnership interests 4,647
 4,481
Short-term investments, principally at estimated fair value 4,682
 4,690
 1,127
 1,506
Other invested assets (includes $140 and $39, respectively, relating to variable interest entities) 15,335
 17,255
Other invested assets (includes $1,137 and $1,130, respectively, of leveraged and direct financing leases and $108 and $113, respectively, relating to variable interest entities) 16,840
 15,690
Total investments 268,681
 259,520
 265,670
 257,423
Cash and cash equivalents, principally at estimated fair value (includes $9 and $0, respectively, relating to variable interest entities) 4,323
 5,714
Accrued investment income 2,228
 2,019
Premiums, reinsurance and other receivables (includes $3 and $6, respectively, relating to variable interest entities) 22,148
 22,383
Cash and cash equivalents, principally at estimated fair value (includes $23 and $14, respectively, relating to variable interest entities) 9,269
 6,882
Accrued investment income (includes $1 and $1, respectively, relating to variable interest entities) 2,014
 2,050
Premiums, reinsurance and other receivables (includes $3 and $2, respectively, relating to variable interest entities) 22,752
 21,829
Deferred policy acquisition costs and value of business acquired 4,492
 4,743
 3,687
 4,117
Other assets (includes $3 and $3, respectively, relating to variable interest entities) 4,514
 4,346
Deferred income tax asset —
 43
Other assets (includes $2 and $2, respectively, relating to variable interest entities) 4,539
 3,723
Separate account assets 132,670
 133,836
 120,172
 110,850
Total assets $439,056
 $432,561
 $428,103
 $406,917
Liabilities and Equity        
Liabilities        
Future policy benefits $118,726
 $115,556
 $126,717
 $126,099
Policyholder account balances 94,175
 92,466
 92,625
 90,656
Other policy-related balances 6,607
 6,731
 7,609
 7,264
Policyholder dividends payable 551
 510
 520
 494
Policyholder dividend obligation 2,201
 1,931
 1,834
 428
Payables for collateral under securities loaned and other transactions 21,839
 20,815
 18,263
 18,472
Short-term debt 100
 100
 128
 129
Long-term debt (includes $6 and $12, respectively, at estimated fair value, relating to variable interest entities) 1,679
 1,589
Long-term debt (includes $5 and $5, respectively, at estimated fair value, relating to variable interest entities) 1,554
 1,567
Current income tax payable 236
 50
 1
 611
Deferred income tax liability 2,738
 2,503
 1,506
 —
Other liabilities 28,976
 29,497
 26,502
 24,620
Separate account liabilities 132,670
 133,836
 120,172
 110,850
Total liabilities 410,498
 405,584
 397,431
 381,190
Contingencies, Commitments and Guarantees (Note 11) 
 
Contingencies, Commitments and Guarantees (Note 13) 

 

Equity        
Metropolitan Life Insurance Company stockholder’s equity:        
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding 5
 5
 5
 5
Additional paid-in capital 14,149
 14,413
 12,452
 12,450
Retained earnings 9,184
 9,250
 9,018
 9,512
Accumulated other comprehensive income (loss) 5,041
 3,119
 8,990
 3,562
Total Metropolitan Life Insurance Company stockholder’s equity 28,379
 26,787
 30,465
 25,529
Noncontrolling interests 179
 190
 207
 198
Total equity 28,558
 26,977
 30,672
 25,727
Total liabilities and equity $439,056
 $432,561
 $428,103
 $406,917
See accompanying notes to the interim condensed consolidated financial statements.

3
Table of Contents


Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
For the Three Months and NineSix Months Ended SeptemberJune 30, 20172019 and 20162018 (Unaudited)
(In millions)
Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,		 Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,
2017 2016 2017 2016 2019 2018 2019 2018
Revenues               
Premiums$6,629
 $6,142
 $17,597
 $16,801
 $5,154
 $10,920
 $10,206
 $15,869
Universal life and investment-type product policy fees556
 638
 1,706
 1,928
 521
 529
 1,024
 1,060
Net investment income2,660
 2,870
 7,955
 8,349
 2,794
 2,684
 5,439
 5,385
Other revenues371
 389
 1,148
 1,121
 403
 401
 804
 802
Net investment gains (losses):       
Other-than-temporary impairments on fixed maturity securities(6) (4) (7) (66)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)1
 (5) 1
 (9)
Other net investment gains (losses)101
 51
 190
 190
Total net investment gains (losses)96
 42
 184
 115
Net investment gains (losses) 66
 (30) 12
 (226)
Net derivative gains (losses)(26) (205) (317) (562) 208
 305
 (102) 365
Total revenues10,286
 9,876
 28,273
 27,752
 9,146
 14,809
 17,383
 23,255
Expenses               
Policyholder benefits and claims7,317
 6,897
 19,561
 19,019
 5,765
 11,552
 11,427
 17,066
Interest credited to policyholder account balances567
 560
 1,660
 1,675
 663
 612
 1,325
 1,193
Policyholder dividends267
 302
 827
 924
 260
 268
 517
 530
Other expenses1,205
 1,364
 3,808
 4,450
 1,235
 1,277
 2,383
 2,631
Total expenses9,356
 9,123
 25,856
 26,068
 7,923
 13,709
 15,652
 21,420
Income (loss) before provision for income tax930
 753
 2,417
 1,684
 1,223
 1,100
 1,731
 1,835
Provision for income tax expense (benefit)187
 123
 475
 232
 156
 93
 156
 156
Net income (loss)743
 630
 1,942
 1,452
 1,067
 1,007
 1,575
 1,679
Less: Net income (loss) attributable to noncontrolling interests5
 (7) 8
 (9) —
 5
 1
 8
Net income (loss) attributable to Metropolitan Life Insurance Company$738
 $637
 $1,934
 $1,461
 $1,067
 $1,002
 $1,574
 $1,671
Comprehensive income (loss)$914
 $637
 $3,864
 $5,619
 $3,540
 $(191) $6,986
 $(1,886)
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax5
 (7) 8
 (9) —
 5
 1
 8
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company$909
 $644
 $3,856
 $5,628
 $3,540
 $(196) $6,985
 $(1,894)
See accompanying notes to the interim condensed consolidated financial statements.


4
Table of Contents



Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Equity
For the NineSix Months Ended SeptemberJune 30, 20172019 and 20162018 (Unaudited)
(In millions)
  
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2016 $5
 $14,413
 $9,250
 $3,119
 $26,787
 $190
 $26,977
Capital contributions from MetLife, Inc. 
 5
 
 
 5
 
 5
Returns of capital 
 (20) 

 
 (20) 
 (20)
Dividends paid to MetLife, Inc. 
 

 (2,000) 
 (2,000) 

 (2,000)
Purchase of operating joint venture interest from an affiliate (Note 5) 
 (249) 

 
 (249) 
 (249)
Change in equity of noncontrolling interests 
 

 
 
 

 (19) (19)
Net income (loss) 
 
 1,934
 
 1,934
 8
 1,942
Other comprehensive income (loss), net of income tax 
 
 
 1,922
 1,922
 

 1,922
Balance at September 30, 2017 $5
 $14,149
 $9,184
 $5,041
 $28,379
 $179
 $28,558
  
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2018 $5
 $12,450
 $9,512
 $3,562
 $25,529
 $198
 $25,727
Cumulative effects of changes in accounting
principles, net of income tax (Note 1)		     78
 17
 95
   95
Balance at January 1, 2019 5
 12,450
 9,590
 3,579
 25,624
 198
 25,822
Capital contributions from MetLife, Inc.   1
 
   1
   1
Dividends to MetLife, Inc.     (2,146)   (2,146)   (2,146)
Change in equity of noncontrolling interests     
   —
 (4) (4)
Net income (loss)     507
   507
 1
 508
Other comprehensive income (loss), net of income tax     
 2,938
 2,938
   2,938
Balance at March 31, 2019 5
 12,451
 7,951
 6,517
 26,924
 195
 27,119
Capital contributions from MetLife, Inc.   1
     1
   1
Change in equity of noncontrolling interests         —
 12
 12
Net income (loss)     1,067
   1,067
   1,067
Other comprehensive income (loss), net of income tax       2,473
 2,473
   2,473
Balance at June 30, 2019 $5
 $12,452
 $9,018
 $8,990
 $30,465
 $207
 $30,672
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Metropolitan Life
Insurance Company
Stockholder’s Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance at December 31, 2015 $5
 $14,444
 $13,738
 $2,685
 $30,872
 $372
 $31,244
Balance at December 31, 2017 $5
 $14,150
 $10,035
 $5,428
 $29,618
 $143
 $29,761
Cumulative effects of changes in accounting
principles, net of income tax

     (917) 924
 7
   7
Balance at January 1, 2018 5
 14,150
 9,118
 6,352
 29,625
 143
 29,768
Capital contributions from MetLife, Inc. 
 4
 
 
 4
 
 4
   1
     1
   1
Returns of capital 
 (62) 

 
 (62) 
 (62)
Tax deficiencies related to stock-based compensation 
 (11) 

 
 (11) 
 (11)
Dividends paid to MetLife, Inc. 
 
 (3,600) 
 (3,600) 
 (3,600)
Dividends to MetLife, Inc.

     (1,000)   (1,000)   (1,000)
Change in equity of noncontrolling interests 
 

 
 
 

 (203) (203)         —
 59
 59
Net income (loss) 
 
 1,461
 
 1,461
 (9) 1,452
     669
   669
 3
 672
Other comprehensive income (loss), net of income tax 
 
 
 4,167
 4,167
 

 4,167
       (2,367) (2,367)   (2,367)
Balance at September 30, 2016 $5
 $14,375
 $11,599
 $6,852
 $32,831
 $160
 $32,991
Balance at March 31, 2018 5
 14,151
 8,787
 3,985
 26,928
 205
 27,133
Capital contributions from MetLife, Inc.   2
 
   2
   2
Returns of capital   (2)     (2)   (2)
Dividends to MetLife, Inc.     (705)   (705)   (705)
Change in equity of noncontrolling interests     
   —
 (6) (6)
Net income (loss)     1,002
   1,002
 5
 1,007
Other comprehensive income (loss), net of income tax     
 (1,198) (1,198)   (1,198)
Balance at June 30, 2018 $5
 $14,151
 $9,084
 $2,787
 $26,027
 $204
 $26,231
See accompanying notes to the interim condensed consolidated financial statements.




5
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Cash Flows
For the NineSix Months Ended SeptemberJune 30, 20172019 and 20162018 (Unaudited)
(In millions)


 Nine Months
Ended
September 30,
 2017 2016
Net cash provided by (used in) operating activities$5,010
 $3,625
Cash flows from investing activities   
Sales, maturities and repayments of:   
Fixed maturity securities37,260
 53,466
Equity securities470
 798
Mortgage loans5,696
 9,008
Real estate and real estate joint ventures673
 353
Other limited partnership interests412
 618
Purchases of:   
Fixed maturity securities(40,819) (53,863)
Equity securities(387) (703)
Mortgage loans(7,020) (11,010)
Real estate and real estate joint ventures(671) (1,125)
Other limited partnership interests(536) (589)
Cash received in connection with freestanding derivatives1,439
 1,165
Cash paid in connection with freestanding derivatives(2,259) (1,589)
Net change in policy loans(40) 86
Net change in short-term investments78
 (128)
Net change in other invested assets(168) (316)
Net change in property, equipment and leasehold improvements(148) (154)
Net cash provided by (used in) investing activities(6,020) (3,983)
Cash flows from financing activities   
Policyholder account balances:   
Deposits53,149
 46,119
Withdrawals(52,610) (44,175)
Net change in payables for collateral under securities loaned and other transactions1,443
 1,698
Long-term debt issued169
 11
Long-term debt repaid(81) (55)
Financing element on certain derivative instruments and other derivative related transactions, net(210) (72)
Dividends paid to MetLife, Inc.(2,000) (3,600)
Returns of capital(5) (62)
Return of capital associated with the purchase of operating joint venture interest from an affiliate (Note 5)(249) —
Other, net(10) 19
Net cash provided by (used in) financing activities(404) (117)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances23
 —
Change in cash and cash equivalents(1,391) (475)
Cash and cash equivalents, beginning of period5,714
 4,651
Cash and cash equivalents, end of period$4,323
 $4,176
Supplemental disclosures of cash flow information   
Net cash paid (received) for:   
Interest$64
 $71
Income tax$1,137
 $596
Non-cash transactions:   
Capital contributions from MetLife, Inc.$5
 $4
Returns of capital$15
 $—
Fixed maturity securities received in connection with pension risk transfer transactions$—
 $985
Transfer of fixed maturity securities from affiliate$292
 $—
Transfer of fixed maturity securities to affiliates$—
 $3,435
Transfer of mortgage loans to affiliates$—
 $375
Deconsolidation of real estate joint venture:   
Reduction of real estate and real estate joint ventures$—
 $339
Reduction of noncontrolling interests$—
 $339
 Six Months
Ended
June 30,
 2019 2018
Net cash provided by (used in) operating activities$2,009
 $4,881
Cash flows from investing activities   
Sales, maturities and repayments of:   
Fixed maturity securities available-for-sale28,997
 33,260
Equity securities83
 80
Mortgage loans4,763
 4,041
Real estate and real estate joint ventures110
 342
Other limited partnership interests269
 219
Purchases and originations of:   
Fixed maturity securities available-for-sale(25,773) (32,814)
Equity securities(31) (95)
Mortgage loans(5,779) (5,421)
Real estate and real estate joint ventures(493) (250)
Other limited partnership interests(463) (326)
Cash received in connection with freestanding derivatives958
 1,178
Cash paid in connection with freestanding derivatives(1,261) (1,667)
Net change in policy loans(3) (13)
Net change in short-term investments397
 1,400
Net change in other invested assets147
 238
Net change in property, equipment and leasehold improvements(8) 216
Other, net9
 (36)
Net cash provided by (used in) investing activities1,922
 352
Cash flows from financing activities   
Policyholder account balances:   
Deposits35,914
 37,730
Withdrawals(35,034) (39,860)
Net change in payables for collateral under securities loaned and other transactions(209) 675
Long-term debt issued—
 14
Long-term debt repaid(17) (39)
Financing element on certain derivative instruments and other derivative related transactions, net(49) (63)
Dividends paid to MetLife, Inc.(2,146) (1,705)
Other, net4
 73
Net cash provided by (used in) financing activities(1,537) (3,175)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances(7) 1
Change in cash and cash equivalents2,387
 2,059
Cash and cash equivalents, beginning of period6,882
 5,069
Cash and cash equivalents, end of period$9,269
 $7,128
Supplemental disclosures of cash flow information   
Net cash paid (received) for:   
Interest$52
 $53
Income tax$402
 $253
Non-cash transactions:   
Capital contributions from MetLife, Inc.$2
 $3
Fixed maturity securities available-for-sale received in connection with pension risk transfer transaction$—
 $3,016
Reclassification of certain equity securities to other invested assets$—
 $733

See accompanying notes to the interim condensed consolidated financial statements.


6
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)


1. Business, Basis of Presentation and Summary of Significant Accounting Policies
Business
Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of insurance, annuities, employee benefits and asset management.management and is organized into two segments: U.S. and MetLife Holdings. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).
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, 2018 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 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 2018 Annual Report.
Consolidation
The accompanying interim condensed consolidated financial statements include the accounts of Metropolitan Life Insurance Company 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”investee”) 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 in net investment income 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.
Reclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2017 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.
Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.
The accompanyingReclassifications
Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2019 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.
Recent Accounting Pronouncements
Changes to GAAP are unauditedestablished by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and reflectimpact of all adjustments (including normal recurring adjustments) necessary to present fairlyASUs. The following tables provide a description of new ASUs issued by the financial position, results of operationsFASB 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, 2016 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 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 statementsimpact of the Company included in the 2016 Annual Report.
Adoption of New Accounting Pronouncements
Effective January 1, 2017, the Company early adopted guidance relating to business combinations. The new guidance clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard will result in fewer acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. The adoption did not have a material impact on the Company’s consolidated financial statements.
Effective January 1, 2017, the Company retrospectively adopted guidance relating to consolidation. The new guidance does not change the characteristics of a primary beneficiary under current GAAP. It changes how a reporting entity evaluates whether it is the primary beneficiary of a VIE by changing how a reporting entity that is a single decisionmaker of a VIE handles indirect interests in the entity held through related parties that are under common control with the reporting entity. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.


7
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of 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 3, 2017, the Chicago Mercantile Exchange (“CME”) 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 CME serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $751 million, gross derivative liabilities by $603 million, accrued investment income by $55 million, accrued investment expense recorded within other liabilities by $10 million, collateral receivables recorded within premiums, reinsurance and other receivables of $226 million, and collateral payables recorded within payables for collateral under securities loaned and other transactions of $419 million.
Future Adoption of New Accounting Pronouncements
In August 2017,Except as noted below, 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 isASUs adopted by the Company effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied onJanuary 1, 2019 did not have a modified retrospective basis through a cumulative-effect adjustment directly 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 the financial statements. The Company is currently evaluating thematerial impact of this 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 directly 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 this guidance on its consolidated financial statements.
StandardDescriptionEffective Date and Method of AdoptionImpact on Financial Statements
ASU 2017-12,Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, as clarified and amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
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.
January 1, 2019. The Company adopted using a modified retrospective approach.


The adoption of the guidance resulted in an $18 million, net of income tax, increase to accumulated other comprehensive income (loss) (“AOCI”) with a corresponding decrease to retained earnings due to the reclassification of hedge ineffectiveness for cash flow hedging relationships existing as of January 1, 2019. The Company has included the expanded disclosures within Note 6.
ASU 2016-02,Leases (Topic 842), as clarified and amended by ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements, andASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors
The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases are classified as finance or operating leases and both types of leases are recognized on the balance sheet. Lessor accounting remains largely unchanged from previous guidance except for certain targeted changes. The new guidance also requires new qualitative and quantitative disclosures. In July 2018, two amendments to the new guidance were issued. The amendments provide the option to adopt the new guidance prospectively without adjusting comparative periods. Also, the amendments provide lessors with a practical expedient not to separate lease and non-lease components for certain operating leases. In December 2018, an amendment was issued to clarify lessor accounting relating to taxes, certain lessor’s costs and variable payments related to both lease and non-lease components.


January 1, 2019. The Company adopted using a modified retrospective approach.

The Company elected the package of practical expedients allowed under the transition guidance. This allowed the Company to carry forward its historical lease classification. In addition, the Company elected all other practical expedients that were allowed under the new guidance and were applicable, including the practical expedient to combine lease and non-lease components into one lease component for certain real estate leases.


The adoption of this guidance resulted in the recording of additional net right-of-use (“ROU”) assets and lease liabilities of approximately $818 million and $902 million, respectively, as of January 1, 2019. The reduction of the ROU assets was a result of adjustments for prepaid/deferred rent, unamortized initial direct costs and impairment of certain ROU assets based on the net present value of the remaining minimum lease payments and sublease revenues. In addition, retained earnings increased by $95 million, net of income tax, as a result of the recognition of deferred gains on previous sale leaseback transactions. The guidance did not have a material impact on the Company’s consolidated net income and cash flows. The Company has included expanded disclosures on the consolidated balance sheets and in Notes 5 and 8.


In March 2017, the FASB issued new guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost (ASU 2017-07,Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost). The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The 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 arising from services rendered by the pertinent employees during the period. The other components of net 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. The guidance should be applied retrospectively for the presentation of the service cost component in the income statement and allows a practical expedient for the estimation basis for applying the retrospective presentation requirements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
In February 2017, the FASB issued new guidance on derecognition of nonfinancial assets (ASU 2017-05,Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption was permitted for interim or annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. 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 ASU also adds guidance for partial sales of nonfinancial assets. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.


8
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of 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 January 2017,Future Adoption of New Accounting Pronouncements
ASUs not listed below were assessed and either determined to be not applicable or are not expected to have a material impact on 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. 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 is currently evaluating the impact of this guidance on itsCompany’s consolidated financial statements.
In November 2016, ASUs issued but not yet adopted as of June 30, 2019 that are currently being assessed and may or may not have a material impact on the FASB issued new guidance on restricted cash (ASU 2016-18,Statement of Cash Flows (Topic 230): a consensus of the FASB Emerging Issues Task Force). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a retrospective basis. Early adoption is permitted. The new guidance requires that a statement of cash flows explain the change during the periodCompany’s consolidated financial statements are summarized 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 Company is currently evaluating the impact of this guidance on its consolidated financial statements.table below.
In October 2016, the FASB issued new guidance on tax accounting for intra-entity transfers of assets (ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a modified retrospective basis. Early adoption is permitted in the first interim or annual reporting period. Current guidance prohibits 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. Also, the guidance eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
StandardDescriptionEffective Date and Method of AdoptionImpact on Financial Statements
ASU 2018-15,Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as an asset and which costs to expense as incurred. Implementation costs that are capitalized under the new guidance are required to be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use.

January 1, 2020. The new guidance can be applied either prospectively to eligible costs incurred on or after the guidance is first applied, or retrospectively to all periods presented.
The new guidance will not have a material impact on the Company’s consolidated financial statements and will be adopted prospectively.

ASU 2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

The new guidance removes certain disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant for employers that sponsor defined benefit pension or other postretirement plans.

December 31, 2020, to be applied on a retrospective basis to all periods presented (with early adoption permitted).The new guidance will not have a material impact on the Company’s consolidated financial statements.
ASU 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
The new guidance modifies the disclosure requirements on fair value by removing some requirements, modifying others, adding changes in unrealized gains and losses included in other comprehensive income (loss) (“OCI”) for recurring Level 3 fair value measurements, and under certain circumstances, providing the option to disclose certain other quantitative information with respect to significant unobservable inputs in lieu of a weighted average.

January 1, 2020. Amendments related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively.As of December 31, 2018, the Company early adopted the provisions of the guidance that removed the requirements relating to transfers between fair value hierarchy levels and certain disclosures about valuation processes for Level 3 fair value measurements. The Company will adopt the remainder of the new guidance at the effective date. The new guidance will not have a material impact on the Company’s consolidated financial statements.
ASU 2018-12,Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts
The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of deferred policy acquisition costs (“DAC”) for virtually all long-duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures.January 1, 2021, to be applied retrospectively to January 1, 2019 (with early adoption permitted).
The Company has started its implementation efforts and is currently evaluating the impact of the new guidance. Given the nature and extent of the required changes to a significant portion of the Company’s operations, the adoption of this guidance is expected to have a material impact on its consolidated financial statements.


In August 2016, the FASB issued new guidance on cash flow statement presentation (ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Early adoption is permitted in any interim or annual period. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
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 continuing to evaluate the overall impact of the new guidance on its consolidated financial statements.


9
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of 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. Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms
StandardDescriptionEffective Date and Method of AdoptionImpact on Financial Statements
ASU 2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment

The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the 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.

January 1, 2020, to 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 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.

ASU 2016-13,Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as clarified and amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments andASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief

This new guidance requires an allowance for credit losses based on the expectation of lifetime credit losses on financing receivables carried at amortized cost, including, but not limited to, mortgage loans, premium receivables, reinsurance receivables and certain leases.

The current model for other-than-temporary impairment (“OTTI”) on available-for-sale (“AFS”) debt securities has been modified and requires the recording of an allowance for credit losses rather than a reduction of the carrying value. Any improvements in expected future cash flows will no longer be reflected as a prospective yield adjustment, but rather as a reduction in the allowance. The new guidance also replaces the model for purchased credit impaired debt securities and financing receivables and requires the establishment of an allowance for credit losses at acquisition, which is added to the purchase price to establish the initial amortized cost.

The new guidance also requires enhanced disclosures.

January 1, 2020, to be applied on a modified retrospective basis, which requires transition adjustments to be recorded as a cumulative effect adjustment to retained earnings. 
The Company continues to evaluate the impact of the new guidance on its consolidated financial statements.

The Company is finalizing the development of the credit loss models for its financing receivables carried at amortized cost that are within the scope of the new guidance. The development of these credit loss models has resulted in data input validations, enhanced policies and controls and continued updates to information systems. The Company will begin testing these models and information systems in the second half of 2019.

The Company is in the process of preparing the required disclosures.



10
Table of more than 12 months. Leases would be classified as finance or operating leases and both typesContents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary 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. The Company’s implementation efforts are primarily focused on the review of its existing lease contracts, as well as identification of other contracts that may fall under the scope of the new guidance. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.MetLife, Inc.)
In January 2016, the FASB issued new guidance (ASU 2016-01,Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities) on the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the instrument-specific credit risk provision. The new 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. Additionally, 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. The Company has assessed the population of financial instruments that are subjectNotes to the new guidance and has determined that the most significant impact will be the requirement to report changes in fair value in net income each reporting period for all equity securities currently classified as available-for-sale (“AFS”) and to a lesser extent, other limited partnership interests and real estate joint ventures that are currently accounted for under the cost method. The estimated impact, using values as of September 30, 2017, related to the change in accounting for equity securities AFS, was $50 million of net unrealized investment gains, net of income tax, which would be reclassified from accumulated other comprehensive income (“AOCI”) to retained earnings. The estimated financial statement impact related to cost method other limited partnership interests and real estate joint ventures was not material.Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
In May 2014, the FASB issued a comprehensive new revenue recognition standard (ASU 2014-09,Revenue from Contracts with Customers (Topic 606)), effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company will apply this guidance retrospectively with a cumulative-effect adjustment as of January 1, 2018. The new guidance will supersede nearly all existing revenue recognition guidance under U.S. GAAP. However, it will not impact the accounting for insurance and investment contracts within the scope of Accounting Standards Codification Topic 944,Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance will require 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. Given the scope of the new revenue recognition guidance, the Company does not expect the adoption to have a material impact on its consolidated revenues or statements of operations, with the Company’s implementation efforts primarily focused on other revenues on the consolidated statements of operations. Other revenues on the consolidated statements of operations represents less than 5% of consolidated total revenues for the nine months ended September 30, 2017. Based on implementation efforts completed to date, the Company has identified revenue streams within the scope of the guidance and is evaluating the related contracts, primarily consisting of prepaid legal plans and administrative-only contracts in the U.S. segment, advisory fees in the MetLife Holdings segment, and fee-based investment management services in Corporate & Other. While the Company has not yet identified any material changes in the recognition and measurement of other revenue, the Company’s assessment is ongoing, including the consideration of the new disclosure requirements.

2. Segment Information
The Company is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other.

10
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

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 the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing 80.8% of those shares, to MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding.
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 two businesses: Group Benefits and Retirement and Income Solutions.Solutions (“RIS”).
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, critical illness, 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 SolutionsRIS business offers a broad range of annuitylife and annuity-based insurance and investment products, including guaranteed interest contractsstable value and other stable valuepension risk transfer products, institutional income annuities, and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This business also includes structuredtort settlements, and certaincapital markets investment products, to fundas well as solutions for funding postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives.insurance.
MetLife Holdings
The MetLife Holdings segment consists of operations relating to products and businesses, previously included in MLIC’s former retail business, that the Company no longer actively marketed by the Company in the United States. These products and businesses includemarkets, such as variable, universal, term and whole life as well asinsurance, variable, fixed and index-linked annuities. The MetLife Holdings segment also includes the Company’s discontinuedannuities and long-term care business.insurance.
Corporate & Other
Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including 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, as well as the direct to consumer portion of the U.S. Direct business).businesses. Additionally, Corporate & Other also includes run-off businesses, the Company’s ancillary international operations, the business of the Company that MetLife, Inc. separated and included in Brighthouse Financial in the prior periods and 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
OperatingAdjusted earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operatingadjusted earnings is also the Company’s GAAP measure of segment performance and is reported below. OperatingAdjusted earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of operatingadjusted 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 allows analysis of the Company’s performance and facilitates comparisons to industry results.
OperatingAdjusted earnings is defined as operatingadjusted revenues less operatingadjusted expenses, both net of income tax.

11
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

The financial measures of operatingadjusted revenues and operatingadjusted 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 MLIC 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 MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. OperatingAdjusted revenues also excludes net investment gains (losses) and net derivative gains (losses).

11
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of 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 operatingadjusted 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 annuityguaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”); and
•
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 annuityguaranteed minimum income benefits (“GMIBs”) fees (“GMIB fees”); and
Net investment income: (i) includes adjustments for 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 operatingadjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, and (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP and (iv) 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) under GAAP.
The following additional adjustments are made to expenses, in the line items indicated, in calculating operatingadjusted 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) 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”costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”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;
Amortization ofdeferred 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 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;
Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and
Other expenses excludes costs related toto: (i) noncontrolling interests, (ii) acquisition, integration and other costs, and (iii) goodwill impairments.
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 thethree monthsand ninesix months endedSeptemberJune 30, 20172019and2016.2018. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operatingadjusted 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 MetLife’s and the Company’s business.

12
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

MetLife’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. MetLife’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, net income (loss), or operatingadjusted earnings.

12
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

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.
 Operating Results    
Three Months Ended September 30, 2017 U.S. 
MetLife
Holdings
 
Corporate
& Other
 Total Adjustments 
Total
Consolidated
Three Months Ended June 30, 2019 U.S. 
MetLife
Holdings
 
Corporate
& Other
 Total Adjustments 
Total
Consolidated
 (In millions) (In millions)
Revenues                        
Premiums $5,820
 $806
 $3
 $6,629
 $—
 $6,629
 $4,380
 $774
 $—
 $5,154
 $—
 $5,154
Universal life and investment-type product policy fees 245
 286
 —
 531
 25
 556
 264
 235
 —
 499
 22
 521
Net investment income 1,554
 1,228
 (39) 2,743
 (83) 2,660
 1,701
 1,191
 (26) 2,866
 (72) 2,794
Other revenues 191
 36
 144
 371
 —
 371
 202
 51
 150
 403
 —
 403
Net investment gains (losses) —
 —
 —
 —
 96
 96
 —
 —
 —
 —
 66
 66
Net derivative gains (losses) —
 —
 —
 —
 (26) (26) —
 —
 —
 —
 208
 208
Total revenues 7,810
 2,356
 108
 10,274
 12
 10,286
 6,547
 2,251
 124
 8,922
 224
 9,146
Expenses                        
Policyholder benefits and claims and policyholder dividends 6,006
 1,448
 —
 7,454
 130
 7,584
 4,522
 1,456
 —
 5,978
 47
 6,025
Interest credited to policyholder account balances 373
 195
 —
 568
 (1) 567
 488
 180
 —
 668
 (5) 663
Capitalization of DAC (15) (2) —
 (17) —
 (17) (19) 2
 —
 (17) —
 (17)
Amortization of DAC and VOBA 15
 (79) —
 (64) 21
 (43) 13
 60
 —
 73
 (32) 41
Interest expense on debt 3
 2
 21
 26
 —
 26
 2
 2
 22
 26
 —
 26
Other expenses 681
 291
 272
 1,244
 (5) 1,239
 724
 206
 255
 1,185
 —
 1,185
Total expenses 7,063
 1,855
 293
 9,211
 145
 9,356
 5,730
 1,906
 277
 7,913
 10
 7,923
Provision for income tax expense (benefit) 262
 161
 (190) 233
 (46) 187
 169
 67
 (126) 110
 46
 156
Operating earnings $485
 $340
 $5
 830
    
Adjusted earnings $648
 $278
 $(27) 899
    
Adjustments to:                        
Total revenues       12
           224
    
Total expenses       (145)           (10)    
Provision for income tax (expense) benefit       46
           (46)    
Net income (loss)Net income (loss) $743
   $743
Net income (loss) $1,067
   $1,067


13
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)


Three Months Ended June 30, 2018 U.S. 
MetLife
Holdings
 
Corporate
& Other
 Total Adjustments 
Total
Consolidated
  (In millions)
Revenues            
Premiums $10,123
 $795
 $2
 $10,920
 $—
 $10,920
Universal life and investment-type product policy fees 257
 248
 —
 505
 24
 529
Net investment income 1,645
 1,177
 (38) 2,784
 (100) 2,684
Other revenues 196
 67
 138
 401
 —
 401
Net investment gains (losses) —
 —
 —
 —
 (30) (30)
Net derivative gains (losses) —
 —
 —
 —
 305
 305
Total revenues 12,221
 2,287
 102
 14,610
 199
 14,809
Expenses            
Policyholder benefits and claims and policyholder dividends 10,332
 1,457
 2
 11,791
 29
 11,820
Interest credited to policyholder account balances 425
 187
 —
 612
 —
 612
Capitalization of DAC (10) 1
 —
 (9) —
 (9)
Amortization of DAC and VOBA 15
 74
 —
 89
 (10) 79
Interest expense on debt 3
 2
 23
 28
 —
 28
Other expenses 705
 245
 234
 1,184
 (5) 1,179
Total expenses 11,470
 1,966
 259
 13,695
 14
 13,709
Provision for income tax expense (benefit) 159
 61
 (164) 56
 37
 93
Adjusted earnings $592
 $260
 $7
 859
    
Adjustments to:            
Total revenues       199
    
Total expenses       (14)    
Provision for income tax (expense) benefit       (37)    
Net income (loss) $1,007
   $1,007

  Operating Results    
Three Months Ended September 30, 2016 U.S. 
MetLife
Holdings
 
Corporate
& Other
 Total Adjustments 
Total
Consolidated
  (In millions)
Revenues            
Premiums $5,036
 $1,091
 $15
 $6,142
 $—
 $6,142
Universal life and investment-type product policy fees 244
 310
 58
 612
 26
 638
Net investment income 1,554
 1,463
 (7) 3,010
 (140) 2,870
Other revenues 188
 46
 155
 389
 —
 389
Net investment gains (losses) —
 —
 —
 —
 42
 42
Net derivative gains (losses) —
 —
 —
 —
 (205) (205)
Total revenues 7,022
 2,910
 221
 10,153
 (277) 9,876
Expenses            
Policyholder benefits and claims and policyholder dividends 5,281
 1,814
 29
 7,124
 75
 7,199
Interest credited to policyholder account balances 322
 230
 9
 561
 (1) 560
Capitalization of DAC (17) (44) 2
 (59) —
 (59)
Amortization of DAC and VOBA 14
 217
 10
 241
 (29) 212
Interest expense on debt 2
 2
 24
 28
 —
 28
Other expenses 668
 341
 163
 1,172
 11
 1,183
Total expenses 6,270
 2,560
 237
 9,067
 56
 9,123
Provision for income tax expense (benefit) 269
 109
 (139) 239
 (116) 123
Operating earnings $483
 $241
 $123
 847
    
Adjustments to:            
Total revenues       (277)    
Total expenses       (56)    
Provision for income tax (expense) benefit       116
    
Net income (loss) $630
   $630





14
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)


Six Months Ended June 30, 2019 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
  (In millions)
Revenues            
Premiums $8,682
 $1,524
 $—
 $10,206
 $—
 $10,206
Universal life and investment-type product policy fees 528
 452
 —
 980
 44
 1,024
Net investment income 3,339
 2,330
 (83) 5,586
 (147) 5,439
Other revenues 406
 114
 284
 804
 —
 804
Net investment gains (losses) —
 —
 —
 —
 12
 12
Net derivative gains (losses) —
 —
 —
 —
 (102) (102)
Total revenues 12,955
 4,420
 201
 17,576
 (193) 17,383
Expenses            
Policyholder benefits and claims and policyholder dividends 8,960
 2,854
 —
 11,814
 130
 11,944
Interest credited to policyholder account balances 975
 358
 —
 1,333
 (8) 1,325
Capitalization of DAC (34) 5
 —
 (29) —
 (29)
Amortization of DAC and VOBA 27
 107
 —
 134
 (74) 60
Interest expense on debt 5
 4
 44
 53
 —
 53
Other expenses 1,447
 406
 446
 2,299
 —
 2,299
Total expenses 11,380
 3,734
 490
 15,604
 48
 15,652
Provision for income tax expense (benefit) 326
 134
 (254) 206
 (50) 156
Adjusted earnings $1,249
 $552
 $(35) 1,766
    
Adjustments to:            
Total revenues       (193)    
Total expenses       (48)    
Provision for income tax (expense) benefit       50
    
Net income (loss) $1,575
   $1,575
 Operating Results    
Nine Months Ended September 30, 2017 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
Six Months Ended June 30, 2018 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
 (In millions) (In millions)
Revenues                        
Premiums $15,055
 $2,530
 $12
 $17,597
 $—
 $17,597
 $14,300
 $1,568
 $1
 $15,869
 $—
 $15,869
Universal life and investment-type product policy fees 757
 876
 —
 1,633
 73
 1,706
 510
 503
 —
 1,013
 47
 1,060
Net investment income 4,646
 3,711
 (103) 8,254
 (299) 7,955
 3,238
 2,381
 (42) 5,577
 (192) 5,385
Other revenues 581
 126
 441
 1,148
 —
 1,148
 392
 133
 277
 802
 —
 802
Net investment gains (losses) —
 —
 —
 —
 184
 184
 —
 —
 —
 —
 (226) (226)
Net derivative gains (losses) —
 —
 —
 —
 (317) (317) —
 —
 —
 —
 365
 365
Total revenues 21,039
 7,243
 350
 28,632
 (359) 28,273
 18,440
 4,585
 236
 23,261
 (6) 23,255
Expenses                        
Policyholder benefits and claims and policyholder dividends 15,743
 4,395
 3
 20,141
 247
 20,388
 14,743
 2,831
 (9) 17,565
 31
 17,596
Interest credited to policyholder account balances 1,076
 587
 —
 1,663
 (3) 1,660
 819
 375
 —
 1,194
 (1) 1,193
Capitalization of DAC (42) (15) —
 (57) —
 (57) (22) 3
 —
 (19) —
 (19)
Amortization of DAC and VOBA 44
 165
 —
 209
 (85) 124
 32
 151
 —
 183
 (16) 167
Interest expense on debt 8
 6
 65
 79
 —
 79
 6
 4
 44
 54
 —
 54
Other expenses 2,044
 895
 735
 3,674
 (12) 3,662
 1,424
 500
 512
 2,436
 (7) 2,429
Total expenses 18,873
 6,033
 803
 25,709
 147
 25,856
 17,002
 3,864
 547
 21,413
 7
 21,420
Provision for income tax expense (benefit) 756
 381
 (485) 652
 (177) 475
 306
 138
 (283) 161
 (5) 156
Operating earnings $1,410
 $829
 $32
 2,271
    
Adjusted earnings $1,132
 $583
 $(28) 1,687
    
Adjustments to:                        
Total revenues       (359)           (6)    
Total expenses       (147)           (7)    
Provision for income tax (expense) benefit       177
           5
    
Net income (loss)Net income (loss) $1,942
   $1,942
Net income (loss) $1,679
   $1,679



15
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
2. Segment Information (continued)

  Operating Results    
Nine Months Ended September 30, 2016 U.S. MetLife
Holdings		 Corporate
& Other		 Total Adjustments Total
Consolidated
  (In millions)
Revenues            
Premiums $13,451
 $3,303
 $47
 $16,801
 $—
 $16,801
Universal life and investment-type product policy fees 741
 928
 182
 1,851
 77
 1,928
Net investment income 4,518
 4,260
 (35) 8,743
 (394) 8,349
Other revenues 561
 98
 462
 1,121
 —
 1,121
Net investment gains (losses) —
 —
 —
 —
 115
 115
Net derivative gains (losses) —
 —
 —
 —
 (562) (562)
Total revenues 19,271
 8,589
 656
 28,516
 (764) 27,752
Expenses            
Policyholder benefits and claims and policyholder dividends 14,232
 5,475
 103
 19,810
 133
 19,943
Interest credited to policyholder account balances 964
 687
 26
 1,677
 (2) 1,675
Capitalization of DAC (43) (239) (3) (285) —
 (285)
Amortization of DAC and VOBA 43
 591
 51
 685
 (265) 420
Interest expense on debt 7
 5
 72
 84
 —
 84
Other expenses 2,057
 1,439
 612
 4,108
 123
 4,231
Total expenses 17,260
 7,958
 861
 26,079
 (11) 26,068
Provision for income tax expense (benefit) 720
 178
 (403) 495
 (263) 232
Operating earnings $1,291
 $453
 $198
 1,942
    
Adjustments to:            
Total revenues       (764)    
Total expenses       11
    
Provision for income tax (expense) benefit       263
    
Net income (loss) $1,452
   $1,452

The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:
 June 30, 2019 December 31, 2018
 (In millions)
U.S.$247,783
 $233,998
MetLife Holdings154,635
 147,498
Corporate & Other25,685
 25,421
Total$428,103
 $406,917

 September 30, 2017 December 31, 2016
 (In millions)
U.S.$250,516
 $247,314
MetLife Holdings164,588
 163,048
Corporate & Other23,952
 22,199
Total$439,056
 $432,561

16
Revenues derived from one U.S. segment customer were $800 million and $1.6 billion for the three months and six months ended June 30, 2019, respectively, which represented 13% and 13%, respectively, of consolidated premiums, universal life and investment-type product policy fees and other revenues. Revenues derived from one U.S. segment customer were $6.0 billion for both the three months and six months ended June 30, 2018, which represented 50% and 34%, respectively, of consolidated premiums, universal life and investment-type product policy fees and other revenues.The revenue was from a single premium received for a pension risk transfer.
Revenues derived from any other customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the three months and six months ended June 30, 2019 and 2018.
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

3. Insurance
Guarantees
As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 20162018 Annual Report, the Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portioncertain non-life contingent portions of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 6.6.
The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.
Information regarding the Company’s guarantee exposure, which includes direct business, but excludes offsets from hedging or reinsurance, if any, was as follows at:
 September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
 In the
Event of Death		 At
Annuitization		 In the
Event of Death		 At
Annuitization		 In the
Event of Death		 At
Annuitization		 In the
Event of Death		 At
Annuitization
 (Dollars in millions)  (Dollars in millions) 
Annuity Contracts (1):            
Annuity Contracts:            
Variable Annuity Guarantees:                        
Total account value (2) $55,962
  $25,123
  $54,629
  $24,310
 
Total account value (1), (2) $49,796
  $21,826
  $47,393
  $20,692
 
Separate account value(1) $45,046
  $24,179
  $43,359
  $23,330
  $39,994
  $20,993
  $37,342
  $19,839
 
Net amount at risk $1,082
(3) $383
(4) $1,386
(3) $328
(4) $1,282
(3) $375
(4) $2,433
(3) $418
(4)
Average attained age of contractholders 66 years
  65 years
  65 years
  64 years
  68 years
  66 years
  67 years
  65 years
 
Other Annuity Guarantees:                        
Total account value (2) N/A
  $140
  N/A
  $141
 
Total account value (1), (2) N/A
  $144
  N/A
  $144
 
Net amount at risk N/A
  $93
(5) N/A
  $92
(5) N/A
  $83
(5) N/A
  $85
(5)
Average attained age of contractholders N/A
  52 years
  N/A
  52 years
  N/A
  54 years
  N/A
  53 years
 

16
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

September 30, 2017 December 31, 2016June 30, 2019 December 31, 2018
Secondary
Guarantees		 Paid-Up
Guarantees		 Secondary
Guarantees		 Paid-Up
Guarantees		Secondary
Guarantees		 Paid-Up
Guarantees		 Secondary
Guarantees		 Paid-Up
Guarantees
(Dollars in millions)(Dollars in millions)
Universal and Variable Life Contracts (1):       
Total account value (2)$4,548
 $985
 $4,306
 $1,014
Universal and Variable Life Contracts:       
Total account value (1), (2)$4,575
 $916
 $4,614
 $937
Net amount at risk (6)$47,348
 $6,826
 $49,161
 $7,164
$43,042
 $6,085
 $44,596
 $6,290
Average attained age of policyholders54 years
 62 years
 53 years
 62 years
56 years
 64 years
 55 years
 63 years
__________________
(1)The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.
(2)Includes the contractholder’s investments in the general account and separate account, if applicable.
(3)Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

17
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

(4)Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved.
(5)Defined as either the excess of the upper tier, adjusted for a profit margin, less the lower tier, as of the balance sheet date or the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. These amounts represent the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date.
(6)Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

17
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
3. Insurance (continued)

Liabilities for Unpaid Claims and Claim Expenses
Rollforward of Claims and Claim Adjustment Expenses
Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:


Nine Months
Ended
September 30,
Six Months
Ended
June 30,


2017
2016
2019
2018


(In millions)
(In millions)
Balance at December 31 of prior period
$11,621
 $7,527
Balance, beginning of period
$12,590
 $12,090
Less: Reinsurance recoverables
539
 273

1,497
 1,401
Net Balance at December 31 of prior period
11,082
 7,254
Cumulative adjustment (1)
—
 3,397
Net balance, beginning of period
11,082
 10,651

11,093
 10,689
Incurred related to:
   
   
Current period
11,768
 12,392

8,830
 8,425
Prior periods (2)
205
 239
Prior periods (1)
(53) 73
Total incurred
11,973
 12,631

8,777
 8,498
Paid related to:
   
   
Current period
(8,952) (8,678)
(5,424) (5,172)
Prior periods
(3,115) (3,505)
(3,060) (3,164)
Total paid
(12,067) (12,183)
(8,484) (8,336)
Net balance, end of period
10,988
 11,099

11,386
 10,851
Add: Reinsurance recoverables
1,355
 1,489

1,587
 1,446
Balance, end of period (included in future policy benefits and other policy-related balances)
$12,343
 $12,588

$12,973
 $12,297
__________________
(1)ReflectsFor the accumulated adjustment, net of reinsurance, upon implementation of the new short-duration contracts guidance which clarified the requirement to include claim information for long-duration contracts. The accumulated adjustment primarily reflects unpaid claim liabilities, net of reinsurance, for long-duration contracts as of the beginning of the period presented.
(2)During both the ninesix months ended SeptemberJune 30, 20172019, claims and 2016, as a result of changes in estimates of insured eventsclaim adjustment expenses associated with prior periods decreased due to favorable claims experience in the respective prior periods,current period. For the six months ended June 30, 2018, claims and claim adjustment expenses associated with prior periods increased due to unfavorable claims experience.events incurred in prior periods but reported in the current period.

18
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Closed Block
On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance approving Metropolitan Life Insurance Company’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company.
Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company’s net income continues to be sensitive to the actual performance of the closed block.
Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item.


1918
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Closed Block (continued)


Information regarding the closed block liabilities and assets designated to the closed block was as follows at:
  June 30, 2019 December 31, 2018
  (In millions)
Closed Block Liabilities    
Future policy benefits $39,608
 $40,032
Other policy-related balances 395
 317
Policyholder dividends payable 457
 431
Policyholder dividend obligation 1,834
 428
Deferred income tax liability 51
 28
Other liabilities 137
 328
Total closed block liabilities 42,482
 41,564
Assets Designated to the Closed Block    
Investments:    
Fixed maturity securities available-for-sale, at estimated fair value 26,132
 25,354
Equity securities, at estimated fair value 64
 61
Contractholder-directed equity securities and fair value option securities, at estimated fair value 49
 43
Mortgage loans 6,900
 6,778
Policy loans 4,498
 4,527
Real estate and real estate joint ventures 550
 544
Other invested assets 657
 643
Total investments 38,850
 37,950
Cash and cash equivalents 75
 —
Accrued investment income 434
 443
Premiums, reinsurance and other receivables 85
 83
Current income tax recoverable 78
 69
Total assets designated to the closed block 39,522
 38,545
Excess of closed block liabilities over assets designated to the closed block 2,960
 3,019
Amounts included in AOCI:    
Unrealized investment gains (losses), net of income tax 2,226
 1,089
Unrealized gains (losses) on derivatives, net of income tax 103
 86
Allocated to policyholder dividend obligation, net of income tax (1,449) (338)
Total amounts included in AOCI 880
 837
Maximum future earnings to be recognized from closed block assets and liabilities $3,840
 $3,856
  September 30, 2017 December 31, 2016
  (In millions)
Closed Block Liabilities    
Future policy benefits $40,489
 $40,834
Other policy-related balances 193
 257
Policyholder dividends payable 483
 443
Policyholder dividend obligation 2,201
 1,931
Current income tax payable —
 4
Other liabilities 277
 196
Total closed block liabilities 43,643
 43,665
Assets Designated to the Closed Block    
Investments:    
Fixed maturity securities available-for-sale, at estimated fair value 27,541
 27,220
Equity securities available-for-sale, at estimated fair value 71
 100
Mortgage loans 5,904
 5,935
Policy loans 4,542
 4,553
Real estate and real estate joint ventures 628
 655
Other invested assets 1,053
 1,246
Total investments 39,739
 39,709
Cash and cash equivalents 60
 18
Accrued investment income 487
 467
Premiums, reinsurance and other receivables 68
 68
Current income tax recoverable 30
 —
Deferred income tax assets 109
 177
Total assets designated to the closed block 40,493
 40,439
Excess of closed block liabilities over assets designated to the closed block 3,150
 3,226
Amounts included in accumulated other comprehensive income (loss) (“AOCI”):    
Unrealized investment gains (losses), net of income tax 1,851
 1,517
Unrealized gains (losses) on derivatives, net of income tax 23
 95
Allocated to policyholder dividend obligation, net of income tax (1,431) (1,255)
Total amounts included in AOCI 443
 357
Maximum future earnings to be recognized from closed block assets and liabilities $3,593
 $3,583

Information regarding the closed block policyholder dividend obligation was as follows:
  Six Months
Ended
June 30, 2019		 Year 
 Ended 
 December 31, 2018
  (In millions)
Balance, beginning of period $428
 $2,121
Change in unrealized investment and derivative gains (losses) 1,406
 (1,693)
Balance, end of period $1,834
 $428

  Nine Months
Ended
September 30, 2017		 Year 
 Ended 
 December 31, 2016
  (In millions)
Balance, beginning of period $1,931
 $1,783
Change in unrealized investment and derivative gains (losses) 270
 148
Balance, end of period $2,201
 $1,931


2019
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Closed Block (continued)


Information regarding the closed block revenues and expenses was as follows:
 Three Months 
 Ended 
June 30,		 Six Months
Ended
June 30,
 2019 2018 2019 2018
 (In millions)
Revenues       
Premiums$390
 $410
 $757
 $797
Net investment income447
 431
 875
 875
Net investment gains (losses)(4) (24) (5) (53)
Net derivative gains (losses)9
 13
 12
 10
Total revenues842
 830
 1,639
 1,629
Expenses       
Policyholder benefits and claims563
 596
 1,102
 1,167
Policyholder dividends231
 238
 459
 482
Other expenses28
 30
 57
 59
Total expenses822
 864
 1,618
 1,708
Revenues, net of expenses before provision for income tax expense (benefit)20
 (34) 21
 (79)
Provision for income tax expense (benefit)4
 (7) 4
 (17)
Revenues, net of expenses and provision for income tax expense (benefit)$16
 $(27) $17
 $(62)
  Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
  2017 2016 2017 2016
  (In millions)
Revenues        
Premiums $413
 $436
 $1,247
 $1,297
Net investment income 450
 486
 1,368
 1,435
Net investment gains (losses) —
 (3) (10) (19)
Net derivative gains (losses) (6) 4
 (24) (3)
Total revenues 857
 923
 2,581
 2,710
Expenses        
Policyholder benefits and claims 591
 619
 1,773
 1,861
Policyholder dividends 235
 232
 732
 723
Other expenses 30
 33
 94
 100
Total expenses 856
 884
 2,599
 2,684
Revenues, net of expenses before provision for income tax expense (benefit) 1
 39
 (18) 26
Provision for income tax expense (benefit) —
 13
 (8) 8
Revenues, net of expenses and provision for income tax expense (benefit) $1
 $26
 $(10) $18

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


2120
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)


5. Investments
Fixed Maturity and Equity Securities Available-for-Sale
Fixed Maturity and Equity Securities Available-for-Sale by Sector
The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemablesectors include redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including residentialstock. Residential mortgage-backed securities (“RMBS”), asset-backed includes Agency, prime, alternative and sub-prime mortgage-backed securities. Asset-backed securities (“ABS”) includes securities collateralized by corporate loans and commercialconsumer loans. Municipals includes taxable and tax-exempt revenue bonds and, to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) (collectively,primarily includes securities collateralized by multiple properties. RMBS, ABS and CMBS are collectively, “Structured Securities”).Securities.”
September 30, 2017 December 31, 2016June 30, 2019 December 31, 2018
Cost or
Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		 Cost or
Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		Amortized
Cost		 Gross Unrealized Estimated
Fair
Value		 Amortized
Cost		 Gross Unrealized Estimated
Fair
Value

Gains		 Temporary
Losses		 OTTI
Losses (1)		 
Gains		 Temporary
Losses		 OTTI
Losses (1)		 
Gains		 Temporary
Losses		 OTTI
Losses (1)		 
Gains		 Temporary
Losses		 OTTI
Losses (1)		 
(In millions)(In millions)
Fixed maturity securities:                  
U.S. corporate$52,903
 $4,851
 $277
 $—
 $57,477
 $52,665
 $4,079
 $586
 $—
 $56,158
$52,042
 $5,084
 $300
 $—
 $56,826
 $53,927
 $2,440
 $1,565
 $—
 $54,802
U.S. government and agency36,722
 3,630
 244
 —
 40,108
 32,834
 3,238
 457
 —
 35,615
25,195
 3,483
 22
 —
 28,656
 28,139
 2,388
 366
 —
 30,161
Foreign corporate24,311
 1,563
 507
 —
 25,367
 24,596
 957
 1,196
 —
 24,357
27,852
 1,787
 694
 —
 28,945
 26,592
 674
 1,303
 —
 25,963
RMBS23,470
 1,095
 184
 (39) 24,420
 22,786
 911
 290
 (10) 23,417
22,187
 1,261
 76
 (36) 23,408
 22,186
 831
 305
 (25) 22,737
ABS7,652
 68
 15
 —
 7,705
 7,567
 32
 95
 —
 7,504
9,449
 52
 49
 —
 9,452
 8,599
 40
 112
 —
 8,527
State and political subdivision6,284
 1,159
 8
 —
 7,435
 6,252
 928
 44
 —
 7,136
Municipals5,983
 1,390
 —
 —
 7,373
 6,070
 907
 30
 —
 6,947
CMBS5,239
 145
 27
 —
 5,357
 4,876
 118
 59
 —
 4,935
5,396
 222
 16
 —
 5,602
 5,471
 48
 75
 —
 5,444
Foreign government3,802
 639
 26
 —
 4,415
 3,565
 507
 74
 —
 3,998
4,242
 641
 43
 —
 4,840
 4,191
 408
 107
 —
 4,492
Total fixed maturity securities$160,383

$13,150

$1,288

$(39)
$172,284

$155,141

$10,770

$2,801

$(10)
$163,120
Equity securities:                   
Common stock$1,274
 $72
 $16
 $—
 $1,330
 $1,220
 $91
 $12
 $—
 $1,299
Non-redeemable preferred stock438
 29
 6
 —
 461
 565
 14
 39
 —
 540
Total equity securities$1,712

$101

$22

$—

$1,791

$1,785

$105

$51

$—

$1,839
Total fixed maturity securities AFS$152,346

$13,920

$1,200

$(36)
$165,102

$155,175

$7,736

$3,863

$(25)
$159,073
__________________
(1)Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”
The Company held non-income producing fixed maturity securities AFS with an estimated fair value of $1$25 million and less than $1$14 million, withand unrealized gains (losses) of less than $1 million and ($1) million and less than $1 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
Maturities of Fixed Maturity Securities AFS
The amortized cost and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at SeptemberJune 30, 2017:2019:
 
Due in One
Year or Less
 
Due After
 One Year
Through
Five Years
 
Due After
Five Years
Through Ten
Years
 Due After Ten Years 
Structured
Securities
 
Total Fixed
Maturity
Securities AFS
 (In millions)
Amortized cost$9,778
 $25,123
 $25,828
 $54,585
 $37,032
 $152,346
Estimated fair value$9,734
 $25,726
 $27,617
 $63,563
 $38,462
 $165,102
 
Due in One
Year or Less
 
Due After
 One Year
Through
Five Years
 
Due After
Five Years
Through Ten
Years
 
Due After Ten
Years
 
Structured
Securities
 
Total Fixed
Maturity
Securities
 (In millions)
Amortized cost$6,872
 $35,227
 $30,763
 $51,160
 $36,361
 $160,383
Estimated fair value$6,894
 $36,381
 $32,449
 $59,078
 $37,482
 $172,284

22
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)


Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities AFS not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

21
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position aggregated by sector and aggregated by length of time that the securities have been in a continuous unrealized loss position at:
 June 30, 2019 December 31, 2018
 Less than 12 Months Equal to or Greater
than 12 Months		 Less than 12 Months Equal to or Greater
than 12 Months
 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses
 (Dollars in millions)
U.S. corporate$3,379
 $91
 $3,005
 $209
 $23,398
 $1,176
 $3,043
 $389
U.S. government and agency1,483
 1
 2,270
 21
 4,322
 29
 7,948
 337
Foreign corporate1,976
 119
 4,955
 575
 12,911
 893
 2,138
 410
RMBS1,154
 13
 2,420
 27
 5,611
 107
 4,482
 173
ABS3,718
 28
 1,636
 21
 5,958
 105
 223
 7
Municipals21
 —
 16
 —
 675
 22
 94
 8
CMBS381
 1
 265
 15
 2,455
 45
 344
 30
Foreign government56
 3
 280
 40
 1,364
 83
 191
 24
Total fixed maturity securities AFS$12,168
 $256
 $14,847
 $908
 $56,694
 $2,460
 $18,463
 $1,378
Total number of securities in an
unrealized loss position
1,208
 
 1,042
 
 5,263
 
 1,125
 
 September 30, 2017 December 31, 2016
 Less than 12 Months Equal to or Greater
than 12 Months		 Less than 12 Months Equal to or Greater
than 12 Months
 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Gross
Unrealized
Losses
 (Dollars in millions)
Fixed maturity securities:               
U.S. corporate$4,644
 $119
 $1,750
 $158
 $8,406
 $337
 $2,260
 $249
U.S. government and agency15,499
 240
 149
 4
 6,032
 457
 —
 —
Foreign corporate2,153
 74
 3,870
 433
 5,343
 336
 4,523
 860
RMBS5,075
 77
 1,566
 68
 6,662
 187
 1,707
 93
ABS1,156
 2
 463
 13
 1,482
 12
 1,714
 83
State and political subdivision222
 6
 60
 2
 943
 43
 17
 1
CMBS882
 8
 123
 19
 922
 15
 432
 44
Foreign government216
 6
 249
 20
 581
 26
 309
 48
Total fixed maturity securities$29,847
 $532
 $8,230
 $717
 $30,371
 $1,413
 $10,962
 $1,378
Equity securities:
 
 
 
 
 
 
 
Common stock$98
 $16
 $3
 $—
 $58
 $12
 $10
 $—
Non-redeemable preferred stock—
 —
 82
 6
 139
 6
 120
 33
Total equity securities$98
 $16
 $85
 $6
 $197
 $18
 $130
 $33
Total number of securities in an
unrealized loss position
1,592
 
 886
 
 3,076
 
 940
 

Evaluation of Fixed Maturity Securities AFS Securities for OTTI and Evaluating Temporarily Impaired Fixed Maturity Securities AFS Securities
As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 20162018 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities equity securitiesAFS and perpetual hybrid securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired.
Current Period Evaluation
Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at SeptemberJune 30, 2017.2019. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), and changes in credit ratings, collateral valuation interest rates and credit spreads, as well as a change in the Company’s intention to hold or sell a security that is in an unrealized loss position.foreign currency exchange rates. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

Gross unrealized losses on fixed maturity securities AFS decreased $2.7 billion for the six months ended June 30, 2019 to $1.2 billion. The decrease in gross unrealized losses for the six months ended June 30, 2019 was primarily attributable to decreases in interest rates and narrowing credit spreads.
At June 30, 2019, $127 million of the total $1.2 billion of gross unrealized losses were from 20 fixed maturity securities AFS with an unrealized loss position of 20% or more of amortized cost for six months or greater.


2322
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Gross unrealized losses on fixed maturity securities decreased $1.5 billion during the nine months ended September 30, 2017 to $1.2 billion. The decrease in gross unrealized losses for the nine months ended September 30, 2017 was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads, and to a lesser extent the impact of strengthening foreign currencies on non-functional currency denominated fixed maturity securities.
At September 30, 2017, $107 million of the total $1.2 billion of gross unrealized losses were from 30 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.
Gross unrealized losses on equity securities decreased $29 million during the nine months ended September 30, 2017 to $22 million.
Investment Grade Fixed Maturity Securities AFS
Of the $107$127 million of gross unrealized losses on fixed maturity securities AFS with an unrealized loss of 20% or more of amortized cost for six months or greater, $70$85 million, or 65%67%, were related to gross unrealized losses on 1311 investment grade fixed maturity securities.securities AFS. Unrealized losses on investment grade fixed maturity securities AFS are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities AFS, rising interest rates since purchase.
Below Investment Grade Fixed Maturity Securities AFS
Of the $107$127 million of gross unrealized losses on fixed maturity securities AFS with an unrealized loss of 20% or more of amortized cost for six months or greater, $37$42 million, or 35%33%, were related to gross unrealized losses on 17nine below investment grade fixed maturity securities.securities AFS. Unrealized losses on below investment grade fixed maturity securities AFS are principally related to U.S. and foreign corporate securities (primarily industrialindustrial) and utility securities)CMBS and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty including concerns over lower oil prices in the energy sector.uncertainty. Management evaluates U.S. corporate and foreign corporate securities based on factors such as expected cash flows, and the financial condition and near-term and long-term prospects of the issuers. Management evaluates CMBS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security.
Equity Securities
Equity securities are summarized as follows at:
 June 30, 2019 December 31, 2018
 
Estimated
Fair
Value
 
% of
Total
 
Estimated
Fair
Value
 
% of
Total
 
 (Dollars in millions)
Common stock$472
 58.6% $442
 57.2%
Non-redeemable preferred stock333
 41.4
 331
 42.8
Total equity securities$805
 100.0% $773
 100.0%

Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
 June 30, 2019 December 31, 2018
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 (Dollars in millions)
Mortgage loans:       
Commercial$38,270
 59.2 % $38,123
 59.9 %
Agricultural14,523
 22.5
 14,164
 22.2
Residential11,916
 18.4
 11,392
 17.9
Total recorded investment64,709
 100.1
 63,679
 100.0
Valuation allowances(300) (0.5) (291) (0.5)
Subtotal mortgage loans, net64,409
 99.6
 63,388
 99.5
Residential — FVO (1)262
 0.4
 299
 0.5
Total mortgage loans, net$64,671
 100.0 % $63,687
 100.0 %

__________________

23
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)
 September 30, 2017 December 31, 2016
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 (Dollars in millions)
Mortgage loans:       
Commercial$34,495
 59.4 % $34,008
 60.1 %
Agricultural12,700
 21.9
 12,358
 21.9
Residential10,567
 18.2
 9,895
 17.5
Subtotal (1)57,762
 99.5
 56,261
 99.5
Valuation allowances(272) (0.5) (267) (0.5)
Subtotal mortgage loans, net57,490
 99.0
 55,994
 99.0
Residential — FVO564
 1.0
 566
 1.0
Total mortgage loans, net$58,054
 100.0 % $56,560
 100.0 %
__________________
(1)
Purchases ofInformation on residential mortgage loans primarily— fair value option (“FVO”) is presented in Note 7. The Company elects the FVO for certain residential were$409 millionand $1.9 billionfor thethree monthsand nine months endedSeptember 30, 2017, respectively, and$732 millionand $1.9 billionfor thethree monthsand nine months endedSeptember 30, 2016, respectively.mortgage loans that are managed on a total return basis.
The amount of net discounts, included within total recorded investment, primarily residential, was $904 million and $907 million at June 30, 2019 and December 31, 2018, respectively.
Purchases of mortgage loans, primarily residential, were $472 million and $1.8 billion for the three months and six months endedJune 30, 2019, respectively, and$666 million and $954 million for the three monthsandsix months endedJune 30, 2018, respectively.

Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment
Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at:
 Evaluated Individually for Credit Losses 
Evaluated Collectively for
Credit Losses
 
Impaired
Loans
 
Impaired Loans with a
Valuation Allowance
 
Impaired Loans without a
Valuation Allowance
      
 
Unpaid
Principal
Balance
 
Recorded
Investment
 Valuation
Allowances		 
Unpaid
Principal
Balance
 Recorded
Investment		 Recorded
Investment		 Valuation
Allowances		 Carrying
Value
 (In millions)
June 30, 2019               
Commercial$—
 $—
 $—
 $—
 $—
 $38,270
 $193
 $—
Agricultural31
 31
 3
 191
 190
 14,302
 43
 218
Residential—
 —
 —
 504
 403
 11,513
 61
 403
Total$31

$31

$3

$695

$593

$64,085

$297

$621
December 31, 2018               
Commercial$—
 $—
 $—
 $—
 $—
 $38,123
 $190
 $—
Agricultural31
 31
 3
 169
 169
 13,964
 41
 197
Residential—
 —
 —
 431
 386
 11,006
 57
 386
Total$31

$31

$3

$600

$555

$63,093

$288

$583
 Evaluated Individually for Credit Losses 
Evaluated Collectively for
Credit Losses
 
Impaired
Loans
 
Impaired Loans with a
Valuation Allowance
 
Impaired Loans without a
Valuation Allowance
      
 
Unpaid
Principal
Balance
 
Recorded
Investment
 Valuation
Allowances		 
Unpaid
Principal
Balance
 Recorded
Investment		 Recorded
Investment		 Valuation
Allowances		 Carrying
Value
 (In millions)
September 30, 2017               
Commercial$—
 $—
 $—
 $—
 $—
 $34,495
 $171
 $—
Agricultural22
 21
 2
 28
 28
 12,651
 38
 47
Residential—
 —
 —
 335
 304
 10,263
 61
 304
Total$22

$21

$2

$363

$332

$57,409

$270

$351
December 31, 2016               
Commercial$—
 $—
 $—
 $12
 $12
 $33,996
 $167
 $12
Agricultural11
 9
 1
 27
 27
 12,322
 37
 35
Residential—
 —
 —
 265
 241
 9,654
 62
 241
Total$11

$9

$1

$304

$280

$55,972

$266

$288

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $31$172 million and $297$401 million, respectively, for the three months ended SeptemberJune 30, 2017;2019 and $6 million, $28$0, $181 million and $275$396 million, respectively, for the ninesix months ended SeptemberJune 30, 2017.2019.
The average recorded investment for impaired commercial, agricultural and residential mortgage loans was$12 million, $48 millionand $202 million, respectively, for the three months ended September 30, 2016; and $34 million, $52 $0, $122 million and $174$351 million, respectively, for the ninethree months ended September June 30, 2016.2018, and $0, $97 million and $342 million, respectively, for the six months ended June 30, 2018.

24
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Valuation Allowance Rollforward by Portfolio Segment
The changes in the valuation allowance, by portfolio segment, were as follows:

Six Months
Ended
June 30,
 2019
2018
 Commercial
Agricultural
Residential
Total
Commercial
Agricultural
Residential
Total
 (In millions)
Balance, beginning of period$190

$44

$57

$291

$173

$40

$58

$271
Provision (release)3

2

8

13

10

—

2

12
Charge-offs, net of recoveries—

—

(4)
(4)
—

—

(4)
(4)
Balance, end of period$193

$46

$61

$300

$183

$40

$56

$279


Nine Months
Ended
September 30,
 2017
2016
 Commercial
Agricultural
Residential
Total
Commercial
Agricultural
Residential
Total
 (In millions)
Balance, beginning of period$167

$38

$62

$267

$165

$37

$55

$257
Provision (release)4

4

10

18

—

2

11

13
Charge-offs, net of recoveries—

(2)
(11)
(13)
—

(2)
(12)
(14)
Balance, end of period$171

$40

$61

$272

$165

$37

$54

$256
Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans was as follows at:
24
 Recorded Investment Estimated
Fair
Value		 % of
Total
 Debt Service Coverage Ratios   % of
Total		 
 > 1.20x 1.00x - 1.20x < 1.00x Total 
 (Dollars in millions)
June 30, 2019             
Loan-to-value ratios:             
Less than 65%$31,529
 $612
 $152
 $32,293
 84.4% $33,456
 84.6%
65% to 75%4,548
 26
 152
 4,726
 12.3
 4,849
 12.3
76% to 80%309
 210
 55
 574
 1.5
 566
 1.4
Greater than 80%482
 195
 —
 677
 1.8
 653
 1.7
Total$36,868

$1,043

$359

$38,270

100.0%
$39,524

100.0%
December 31, 2018             
Loan-to-value ratios:             
Less than 65%$31,282
 $723
 $85
 $32,090
 84.2% $32,440
 84.3%
65% to 75%4,759
 —
 21
 4,780
 12.5
 4,829
 12.6
76% to 80%340
 210
 56
 606
 1.6
 585
 1.5
Greater than 80%480
 167
 —
 647
 1.7
 613
 1.6
Total$36,861

$1,100

$162

$38,123

100.0%
$38,467

100.0%


25
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans was as follows at:
 Recorded Investment Estimated
Fair
Value		 % of
Total
 Debt Service Coverage Ratios   % of
Total		 
 > 1.20x 1.00x - 1.20x < 1.00x Total 
 (Dollars in millions)
September 30, 2017             
Loan-to-value ratios:             
Less than 65%$29,702
 $1,430
 $242
 $31,374
 91.0% $32,058
 91.1%
65% to 75%2,441
 159
 168
 2,768
 8.0
 2,769
 7.9
76% to 80%149
 —
 57
 206
 0.6
 202
 0.6
Greater than 80%—
 —
 147
 147
 0.4
 143
 0.4
Total$32,292

$1,589

$614

$34,495

100%
$35,172

100%
December 31, 2016             
Loan-to-value ratios:             
Less than 65%$29,352
 $1,036
 $564
 $30,952
 91.0% $31,320
 91.2%
65% to 75%2,522
 —
 198
 2,720
 8.0
 2,694
 7.9
76% to 80%116
 —
 —
 116
 0.3
 115
 0.3
Greater than 80%118
 27
 75
 220
 0.7
 214
 0.6
Total$32,108

$1,063

$837

$34,008

100%
$34,343

100%

Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans was as follows at:
 June 30, 2019 December 31, 2018
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 (Dollars in millions)
Loan-to-value ratios:       
Less than 65%$13,555
 93.3% $13,075
 92.3%
65% to 75%876
 6.0
 1,034
 7.3
76% to 80%69
 0.5
 32
 0.2
Greater than 80%23
 0.2
 23
 0.2
Total$14,523
 100.0% $14,164
 100.0%

 September 30, 2017 December 31, 2016
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 (Dollars in millions)
Loan-to-value ratios:       
Less than 65%$12,162
 95.7% $11,829
 95.7%
65% to 75%520
 4.1
 424
 3.4
76% to 80%9
 0.1
 17
 0.2
Greater than 80%9
 0.1
 88
 0.7
Total$12,700
 100.0% $12,358
 100.0%
The estimated fair value of agricultural mortgage loans was $12.8 billion and $12.5 billion at September 30, 2017 and December 31, 2016, respectively.


25
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Credit Quality of Residential Mortgage Loans
The credit quality of residential mortgage loans was as follows at:
 June 30, 2019 December 31, 2018
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 (Dollars in millions)
Performance indicators:       
Performing$11,555
 97.0% $10,990
 96.5%
Nonperforming (1)361
 3.0
 402
 3.5
Total$11,916
 100.0% $11,392
 100.0%

 September 30, 2017 December 31, 2016
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 (Dollars in millions)
Performance indicators:       
Performing$10,198
 96.5% $9,563
 96.6%
Nonperforming369
 3.5
 332
 3.4
Total$10,567
 100.0% $9,895
 100.0%
__________________
The estimated fair value of residential mortgage loans was $11.2 billion and $10.3 billion at September 30, 2017 and December 31, 2016, respectively.
(1)Includes residential mortgage loans in process of foreclosure of $123 million and $140 million at June 30, 2019 and December 31, 2018, respectively.
Past Due and Nonaccrual Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both SeptemberJune 30, 20172019 and December 31, 2016.2018. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and nonaccrual mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:
 Past Due Greater than 90 Days Past Due and Still Accruing Interest Nonaccrual
 June 30, 2019 December 31, 2018 June 30, 2019 December 31, 2018 June 30, 2019 December 31, 2018
 (In millions)
Commercial$—
 $—
 $—
 $—
 $167
 $167
Agricultural134
 204
 52
 109
 105
 105
Residential361
 402
 —
 —
 361
 402
Total$495
 $606
 $52
 $109
 $633
 $674

 Past Due Greater than 90 Days Past Due and Still Accruing Interest Nonaccrual
 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
 (In millions)
Commercial$—
 $—
 $—
 $—
 $—
 $—
Agricultural134
 127
 125
 104
 36
 23
Residential369
 332
 —
 —
 369
 332
Total$503
 $459
 $125
 $104
 $405
 $355
Mortgage Loans Modified in a Troubled Debt Restructuring
During both thethree months and nine months endedSeptember 30, 2017 and 2016, the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring.
Cash Equivalents
The carrying value of cash equivalents was $3.0 billion and $4.7 billion at September 30, 2017 and December 31, 2016, respectively.


26
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)


Real Estate and Real Estate Joint Ventures
The Company’s real estate investment portfolio is diversified by property type, geography and income stream, including income from operating leases, operating income and equity method income from real estate joint ventures. Real estate investments, by income type, as well as income earned, are as follows at and for the periods indicated:
 June 30, 2019 December 31, 2018 Three Months 
 Ended 
June 30,		 Six Months
Ended
June 30,
   2019 2018 2019 2018
 Carrying Value Income
 (In millions)
Leased real estate investments$1,246
 $1,134
 $40
 $57
 $81
 $113
Other real estate investments477
 460
 50
 53
 80
 84
Real estate joint ventures4,691
 4,558
 23
 32
 18
 56
Total real estate and real estate joint ventures$6,414
 $6,152
 $113
 $142
 $179
 $253

The carrying value of real estate investments acquired through foreclosure was $41 million and $42 million at June 30, 2019 and December 31, 2018, respectively. Depreciation expense on real estate investments was $17 million and $32 million for the three months and six months ended June 30, 2019, respectively, and $15 million and $34 million for the three months and six months ended June 30, 2018, respectively. Real estate investments were net of accumulated depreciation of $700 million and $671 million at June 30, 2019 and December 31, 2018, respectively.
Leases
Leased Real Estate Investments - Operating Leases
The Company, as lessor, leases investment real estate, principally commercial real estate for office and retail use, through a variety of operating lease arrangements, which typically include tenant reimbursement for property operating costs and options to renew or extend the lease. In some circumstances, leases may include an option for the lessee to purchase the property. In addition, certain leases of retail space may stipulate that a portion of the income earned is contingent upon the level of the tenants’ revenues. The Company has elected a practical expedient of not separating non-lease components related to reimbursement of property operating costs from associated lease components. These property operating costs have the same timing and pattern of transfer as the related lease component, because they are incurred over the same period of time as the operating lease. Therefore, the combined component is accounted for as an operating lease. Risk is managed through lessee credit analysis, property type diversification, and geographic diversification, primarily across the United States. Leased real estate investments and income earned, by property type, are as follows at and for the periods indicated:
 June 30, 2019 December 31, 2018 Three Months 
 Ended 
June 30,		 Six Months
Ended
June 30,
   2019 2018 2019 2018
 Carrying Value Income
 (In millions)
Leased real estate investments:           
Office$373
 $373
 $12
 $18
 $26
 $34
Retail532
 450
 18
 15
 35
 33
Apartment (1)—
 —
 —
 16
 —
 29
Industrial262
 209
 10
 8
 20
 17
Other79
 102
 —
 —
 —
 —
Total leased real estate investments$1,246
 $1,134
 $40
 $57
 $81
 $113
__________________

27
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

(1)    The Company sold its investment in apartment properties in the fourth quarter of 2018.
Future contractual receipts under operating leases at June 30, 2019 are $64 million for the remainder of 2019, $120 million in 2020, $97 million in 2021, $77 million in 2022, $60 million in 2023, $149 million thereafter, and in total are $567 million.
Leveraged and Direct Financing Leases
The Company has diversified leveraged lease and direct financing lease portfolios. Its leveraged leases principally include renewable energy generation facilities, rail cars, commercial real estate and commercial aircraft, and its direct financing leases principally include renewable energy generation facilities. These assets are leased through a variety of lease arrangements, which may include options to renew or extend the lease and options for the lessee to purchase the property. Residual values are estimated using available third-party data at inception of the lease. Risk is managed through lessee credit analysis, asset allocation, geographic diversification, and ongoing reviews of estimated residual values, using available third-party data. Generally, estimated residual values are not guaranteed by the lessee or a third party.
Investment in leveraged and direct financing leases consisted of the following at:
 June 30, 2019 December 31, 2018
 Leveraged
Leases		 Direct
Financing
Leases		 Leveraged
Leases		 Direct
Financing
Leases
 (In millions)
Lease receivables, net (1)$707
 $244
 $715
 $256
Estimated residual values618
 42
 618
 42
Subtotal1,325
 286
 1,333
 298
Unearned income(383) (91) (401) (100)
Investment in leases$942
 $195
 $932
 $198
__________________
(1)Future contractual receipts under direct financing leases at June 30, 2019 are $11 million for the remainder of 2019, $21 million in 2020, $21 million in 2021, $21 million in 2022, $21 million in 2023, $149 million thereafter, and in total are $244 million.
Lease receivables are generally due in periodic installments, with payment periods generally ranging from one to 15 years, but in certain circumstances can be over 25 years. For lease receivables, the primary credit quality indicator is whether the lease receivable is performing or nonperforming, which is assessed monthly. The Company generally defines nonperforming lease receivables as those that are 90 days or more past due. At both June 30, 2019 and December 31, 2018, all lease receivables were performing.
The Company’s deferred income tax liability related to leveraged leases was $459 million and $465 million at June 30, 2019 and December 31, 2018, respectively.
Cash Equivalents
The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $7.5 billion and $5.0 billion at June 30, 2019 and December 31, 2018, respectively.

28
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Net Unrealized Investment Gains (Losses)
Unrealized investment gains (losses) on fixed maturity and equity securities AFS and derivatives and the effect on DAC, VOBA, deferred sales inducements (“DSI”), future policy benefits and the policyholder dividend obligation, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.
The components of net unrealized investment gains (losses), included in AOCI, were as follows:
 June 30, 2019 December 31, 2018
 (In millions)
Fixed maturity securities AFS$12,733
 $3,890
Fixed maturity securities AFS with noncredit OTTI losses included in AOCI36
 25
Total fixed maturity securities AFS12,769
 3,915
Derivatives2,292
 1,742
Other162
 231
Subtotal15,223
 5,888
Amounts allocated from:   
Future policy benefits(641) (5)
DAC, VOBA and DSI(979) (571)
Policyholder dividend obligation(1,834) (428)
Subtotal(3,454) (1,004)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(7) (5)
Deferred income tax benefit (expense)(2,436) (982)
Net unrealized investment gains (losses)$9,326
 $3,897
 September 30, 2017 December 31, 2016
 (In millions)
Fixed maturity securities$11,787
 $7,912
Fixed maturity securities with noncredit OTTI losses included in AOCI39
 10
Total fixed maturity securities11,826
 7,922
Equity securities123
 72
Derivatives1,557
 2,244
Other62
 16
Subtotal13,568
 10,254
Amounts allocated from:   
Future policy benefits(18) (9)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI(1) (1)
DAC, VOBA and DSI(759) (569)
Policyholder dividend obligation(2,201) (1,931)
Subtotal(2,979) (2,510)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(13) (3)
Deferred income tax benefit (expense)(3,689) (2,690)
Net unrealized investment gains (losses)$6,887
 $5,051

The changes in net unrealized investment gains (losses) were as follows:
 Six Months
Ended
June 30, 2019
 (In millions)
Balance, beginning of period$3,897
Cumulative effects of changes in accounting principles, net of income tax (Note 1)17
Fixed maturity securities AFS on which noncredit OTTI losses have been recognized11
Unrealized investment gains (losses) during the period9,302
Unrealized investment gains (losses) relating to: 
Future policy benefits(636)
DAC, VOBA and DSI(408)
Policyholder dividend obligation(1,406)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(2)
Deferred income tax benefit (expense)(1,449)
Balance, end of period$9,326
Change in net unrealized investment gains (losses)$5,429
 Nine Months
Ended
September 30, 2017
 (In millions)
Balance, beginning of period$5,051
Fixed maturity securities on which noncredit OTTI losses have been recognized29
Unrealized investment gains (losses) during the period3,285
Unrealized investment gains (losses) relating to: 
Future policy benefits(9)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI—
DAC, VOBA and DSI(190)
Policyholder dividend obligation(270)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI(10)
Deferred income tax benefit (expense)(999)
Balance, end of period$6,887
Change in net unrealized investment gains (losses)$1,836

Concentrations of Credit Risk
There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both SeptemberJune 30, 20172019 and December 31, 2016.2018.


2729
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)


Securities Lending and Repurchase Agreements
ElementsSecurities, Collateral and Reinvestment Portfolio
A summary of the securities lending program are presented below at:and repurchase agreements transactions is as follows:
 September 30, 2017 December 31, 2016
 (In millions)
Securities on loan: (1)   
Amortized cost$14,447
 $15,694
Estimated fair value$15,551
 $16,496
Cash collateral received from counterparties (2)$15,919
 $16,807
Security collateral received from counterparties (3)$—
 $14
Reinvestment portfolio — estimated fair value$16,012
 $16,821
 June 30, 2019 December 31, 2018
 Securities on Loan (1)     Securities on Loan (1)  
 Amortized Cost Estimated Fair Value Cash Collateral Received from Counterparties (2), (3) Reinvestment Portfolio at Estimated Fair Value Amortized Cost Estimated Fair Value Cash Collateral Received from Counterparties (2), (3) Reinvestment Portfolio at Estimated Fair Value
       (In millions)      
Securities lending$11,061
 $12,500
 $12,778
 $12,936
 $12,521
 $13,138
 $13,351
 $13,376
Repurchase agreements$1,458
 $1,565
 $1,535
 $1,553
 $974
 $1,020
 $1,000
 $1,001
__________________
(1)IncludedSecurities on loan in connection with securities lending are included within fixed maturity securities.maturities securities AFS and cash equivalents and securities on loan in connection with repurchase agreements are included within fixed maturities securities AFS, short-term investments and cash equivalents.
(2)Included within payables for collateral underIn connection with securities loaned and other transactions.
(3)
Securitylending, in addition to cash collateral received, the Company received from counterparties security collateral of $8 million and $64 million at June 30, 2019 and December 31, 2018, respectively, which may not be sold or re-pledged, unless the counterparty is in default,and is not reflected on the consolidated financial statements.
(3)The securities lending liability for cash collateral is included within payables for collateral under securities loaned and other transactions, and the repurchase agreements liability for cash collateral is included within payables for collateral under securities loaned and other transactions and other liabilities.
The cash collateral liability by loaned security type and remaining tenorContractual Maturities
A summary of the remaining contractual maturities of securities lending agreements wasand repurchase agreements is as follows at:follows:
September 30, 2017 December 31, 2016June 30, 2019 December 31, 2018
Remaining Tenor of Securities
Lending Agreements
  
Remaining Tenor of Securities
Lending Agreements
  Remaining Maturities   Remaining Maturities  
Open (1) 1 Month or Less 1 to 6 Months Total Open (1) 1 Month or Less 1 to 6 Months TotalOpen (1) 
1 Month
or Less
 
Over
 1 to 6
Months
 Total Open (1) 
1 Month
or Less
 
Over
1 to 6
Months
 Total
(In millions)(In millions)
Cash collateral liability by loaned security type:                              
Securities lending:               
U.S. government and agency$3,532
 $6,962
 $5,425
 $15,919
 $4,033
 $5,640
 $7,134
 $16,807
$2,168
 $3,137
 $7,473
 $12,778
 $1,970
 $7,426
 $3,955
 $13,351
               
Repurchase agreements:               
U.S. government and agency$—
 $1,535
 $—
 $1,535
 $—
 $1,000
 $—
 $1,000
__________________
(1)The related loaned security could be returned to the Company on the next business day, which would require the Company to immediately return the cash collateral. The estimated fair value of the securities on loan related to this cash collateral at June 30, 2019 was $2.1 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

30
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2017 was $3.5 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.
The securities lending and repurchase agreements reinvestment portfolioportfolios acquired with the cash collateral consistedconsist principally of high quality, liquid, publicly-traded fixed maturity securities (including agency RMBS, U.S. government and agency and ABS), short-term investments and cash equivalents with 68% invested in agency RMBS, U.S. government and agency securities,AFS, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

28
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Repurchase Agreements
Elements of the short-term repurchase agreements are presented below at:
 September 30, 2017
 (In millions)
Securities on loan: (1) 
Amortized cost$1,879
Estimated fair value$2,000
Cash collateral received from counterparties (2)$1,960
Reinvestment portfolio — estimated fair value$1,972
__________________
(1)Included within fixed maturity securities.
(2)Included within payables for collateral under securities loaned and other transactions.
The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:
 September 30, 2017
 Remaining Tenor of Repurchase Agreements  
 1 Month or Less Total
 (In millions)
Cash collateral liability by loaned security type: 
U.S. government and agency$1,960
 $1,960
The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. government and agency securities and ABS), short-term investments and cash equivalents with 68% invested in agency RMBS, U.S. government and agency securities, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company. There were no repurchase agreements outstanding at December 31, 2016.
Invested Assets on Deposit and Pledged as Collateral
Invested assets on deposit and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value at:
September 30, 2017 December 31, 2016June 30, 2019 December 31, 2018
(In millions)(In millions)
Invested assets on deposit (regulatory deposits)$49
 $47
$47
 $47
Invested assets pledged as collateral(1)20,938
 20,750
20,756
 20,207
Total invested assets on deposit and pledged as collateral$20,987

$20,797
$20,803

$20,254
The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report) and derivative transactions (see Note 6). Amounts in the table above include invested assets, and cash and cash equivalents. See Note 6.__________________
(1)
The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report) and derivative transactions (see Note 6).
See “— Securities Lending”Lending and “— Repurchase Agreements” for information regarding securities on loansupporting securities lending and repurchase agreement transactions and Note 4 for information regarding investments designated to the closed block. In addition, the restricted investment in Federal Home Loan Bank common stock was $727 million and $724 million, at redemption value, at June 30, 2019 and December 31, 2018, respectively.

29
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Variable Interest Entities
The Company has invested in legal entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity.
Consolidated VIEs
Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.

31
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

The following table presents the total assets and total liabilities relating to investment-related VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at:
September 30, 2017 December 31, 2016June 30, 2019 December 31, 2018
Total
Assets
 
Total
Liabilities
 
Total
Assets
 
Total
Liabilities
Total
Assets
 
Total
Liabilities
 
Total
Assets
 
Total
Liabilities
(In millions)(In millions)
Real estate joint ventures (1)$1,102
 $—
 $1,124
 $—
$1,409
 $—
 $1,394
 $—
Renewable energy partnership (2)114
 —
 —
 —
99
 —
 102
 —
Other investments (3)41
 6
 62
 12
Investment fund (primarily mortgage loans) (3)228
 —
 219
 —
Other investments20
 5
 21
 5
Total$1,257

$6

$1,186

$12
$1,756

$5

$1,736

$5
__________________
(1)The Company’s investment in these affiliated real estate joint ventures was $1.0$1.3 billion at both SeptemberJune 30, 20172019 and December 31, 2016.2018. Other affiliates’ investments in these affiliated real estate joint ventures totaled $83were $130 million and $85$123 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
(2)Assets of the renewable energy partnership primarily consistingconsisted of other invested assets, were consolidated in prior periods. As a result of the Separation and a reassessment in the third quarter of 2017, the renewable energy partnership was determined to be a consolidated VIE.assets.
(3)Other investments is primarily comprisedThe Company’s investment in this affiliated investment fund was $186 million and $178 million at June 30, 2019 and December 31, 2018, respectively. An affiliate had an investment in this affiliated investment fund of other invested assets$42 million and other limited partnership interests. The Company consolidates entities that are structured as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities,$41 million at June 30, 2019 and under no circumstances is the Company liable for any principal or interest shortfalls should any arise.December 31, 2018, respectively.

30
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Unconsolidated VIEs
The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:
September 30, 2017 December 31, 2016June 30, 2019 December 31, 2018
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
(In millions)(In millions)
Fixed maturity securities AFS:              
Structured Securities (2)$35,845
 $35,845
 $34,912
 $34,912
$36,871
 $36,871
 $35,112
 $35,112
U.S. and foreign corporate1,162
 1,162
 1,167
 1,167
920
 920
 669
 669
Other limited partnership interests3,490
 5,865
 3,383
 5,674
4,141
 6,959
 3,979
 6,405
Other invested assets2,159
 2,570
 2,089
 2,666
1,796
 1,905
 1,914
 2,066
Real estate joint ventures70
 84
 81
 95
25
 29
 33
 37
Total$42,726

$45,526

$41,632

$44,514
$43,753

$46,684

$41,707

$44,289
__________________
(1)The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $123$73 million and $150$93 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.
(2)For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset backedasset-backed securities issued by trusts that do not have substantial equity.

32
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

As described in Note 11,13, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs duringfor both the ninesix months ended SeptemberJune 30, 20172019 and 2016.2018.

For the three months ended June 30, 2019, the Company securitized certain residential mortgage loans and acquired an interest in the related RMBS issued. While the Company has a variable interest in the issuer of the securities, it is not the primary beneficiary of the issuer of the securities since it does not have any rights to remove the servicer or veto rights over the servicer’s actions. For the three months ended June 30, 2019, the carrying value and the estimated fair value of mortgage loans securitized were $443 million and $467 million, respectively, resulting in a gain of $24 million, which was included within net investment gains (losses). The estimated fair value of the RMBS acquired in connection with the securitizations was $133 million, which was included in the carrying amount and maximum exposure to loss for Structured Securities presented above. See Note 7 for information on how the estimated fair value of mortgage loans and RMBS is determined, the valuation approaches and key inputs, their placement in the fair value hierarchy, and, for certain RMBS, quantitative information about the significant unobservable inputs and the sensitivity of their estimated fair value to changes in those inputs.
31
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)

Net Investment Income
The components of net investment income were as follows:
Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,		Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,
2017 2016 2017 20162019 2018 2019 2018
(In millions)(In millions)
Investment income:              
Fixed maturity securities$1,764
 $1,907
 $5,274
 $5,803
Fixed maturity securities AFS$1,780
 $1,816
 $3,548
 $3,601
Equity securities20
 19
 68
 65
10
 10
 19
 21
Mortgage loans697
 630
 1,989
 1,930
786
 688
 1,550
 1,359
Policy loans77
 104
 230
 311
77
 73
 153
 145
Real estate and real estate joint ventures104
 159
 327
 366
113
 142
 179
 253
Other limited partnership interests163
 154
 506
 274
173
 88
 258
 235
Cash, cash equivalents and short-term investments20
 10
 54
 31
44
 29
 87
 49
FVO Securities (1)10
 —
 33
 —
Operating joint venture6
 2
 12
 7
34
 14
 45
 21
Other49
 67
 154
 136
32
 64
 91
 143
Subtotal2,900
 3,052
 8,614

8,923
3,059
 2,924
 5,963

5,827
Less: Investment expenses240
 182
 659
 574
265
 240
 524
 442
Net investment income$2,660
 $2,870
 $7,955

$8,349
$2,794
 $2,684
 $5,439

$5,385
__________________
(1)
Changes in estimated fair value subsequent to purchase for FVO securities (“FVO Securities”) still held as of June 30, 2019 included in net investment income were $10 million and $33 million for the three months and six months endedJune 30, 2019, respectively. There were no changes in estimated fair value subsequent to purchase for FVO Securities still held as of June 30, 2018 included in net investment income for both the three monthsandsix months ended June 30, 2018.
See “— Related Party Investment Transactions” for discussion of affiliated net investment income and investment expenses.



3233
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)


The Company invests in real estate joint ventures, other limited partnership interests and tax credit and renewable energy partnerships, and also does business through an operating joint venture, the majority of which is accounted for under the equity method. Net investment income from other limited partnership interests and the operating joint venture, accounted for under the equity method, and real estate joint ventures and tax credit and renewable energy partnerships, primarily accounted for under the equity method, totaled $157 million and $193 million for the three months and six months endedJune 30, 2019, respectively, and $57 million and$190 million for the three months and six months ended June 30, 2018, respectively.
Net Investment Gains (Losses)
Components of Net Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
 Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,
 2019 2018 2019 2018
 (In millions)
Total gains (losses) on fixed maturity securities AFS:       
Total OTTI losses recognized — by sector and industry:       
U.S. and foreign corporate securities — by industry:       
Industrial$—
 $—
 $(6) $—
Total U.S. and foreign corporate securities—
 —
 (6) —
RMBS—
 —
 (2) —
OTTI losses on fixed maturity securities AFS recognized in earnings—
 —
 (8) —
Fixed maturity securities AFS — net gains (losses) on sales and disposals81
 (64) 49
 (109)
Total gains (losses) on fixed maturity securities AFS81
 (64) 41

(109)
Total gains (losses) on equity securities:    
 
Equity securities — net gains (losses) on sales and disposals2
 8
 11
 8
Change in estimated fair value of equity securities (1)(12) —
 45
 (39)
Total gains (losses) on equity securities(10) 8
 56

(31)
Mortgage loans18
 (12) 4
 (33)
Real estate and real estate joint ventures(1) 75
 2
 100
Other limited partnership interests—
 8
 —
 8
Other (2) (3)(9) (73) (59) (179)
Subtotal79
 (58) 44

(244)
Change in estimated fair value of other limited partnership interests and real estate joint ventures4
 (1) (12) (7)
Non-investment portfolio gains (losses)(17) 29
 (20) 25
Subtotal(13) 28
 (32)
18
Total net investment gains (losses)$66
 $(30) $12

$(226)

 Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Total gains (losses) on fixed maturity securities:       
Total OTTI losses recognized — by sector and industry:       
U.S. and foreign corporate securities — by industry:       
Industrial$—
 $—
 $—
 $(58)
Communications—
 —
 —
 (3)
Consumer(5) —
 (5) —
Total U.S. and foreign corporate securities(5) —
 (5) (61)
State and political subdivision—
 —
 (1) —
RMBS—
 (9) —
 (14)
OTTI losses on fixed maturity securities recognized in earnings(5) (9) (6) (75)
Fixed maturity securities — net gains (losses) on sales and disposals1
 61
 41
 268
Total gains (losses) on fixed maturity securities(4) 52
 35

193
Total gains (losses) on equity securities:    
 
Total OTTI losses recognized — by sector:    
 
Common stock(4) (5) (16) (71)
Non-redeemable preferred stock—
 —
 (1) —
OTTI losses on equity securities recognized in earnings(4) (5) (17)
(71)
Equity securities — net gains (losses) on sales and disposals—
 7
 1
 21
Total gains (losses) on equity securities(4) 2
 (16)
(50)
Mortgage loans(16) (9) (44) (6)
Real estate and real estate joint ventures169
 20
 436
 28
Other limited partnership interests(30) (8) (44) (38)
Other21
 (14) (90) (44)
Subtotal136
 43
 277

83
FVO consolidated securitization entities:       
Securities—
 1
 —
 2
Non-investment portfolio gains (losses)(40) (2) (93) 30
Subtotal(40) (1) (93)
32
Total net investment gains (losses)$96
 $42
 $184

$115
__________________
(1)
Changes in estimated fair value subsequent to purchase for equity securities still held as of the end of the period included in net investment gains (losses) were ($10) million and $42 million for thethree months and six months ended June 30, 2019, respectively, and $7 million and ($30) million for the three months and six months endedJune 30, 2018, respectively.
(2)
Other gains (losses) for the three monthsandsix months endedJune 30, 2019 included tax credit partnership impairment losses of $14 million and $92 million, respectively, and a renewable energy partnership disposal gain of $46 million for the six months endedJune 30, 2019.
See “— Related Party Investment Transactions” for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates.
Gains (losses) from foreign currency transactions included within net investment gains (losses) were ($30) millionand ($139) million for thethree months and nine months endedSeptember 30, 2017, respectively, and $1 millionand $24 millionfor thethree monthsand nine months endedSeptember 30, 2016, respectively.


3334
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)


(3)
Other gains (losses) included renewable energy partnership disposal losses of $83 million for both the three months and six months endedJune 30, 2018 and leveraged lease impairment losses of$105 million for the six months ended June 30, 2018.
See “— Related Party Investment Transactions” for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates.
Gains (losses) from foreign currency transactions included within net investment gains (losses) were($10) millionand($11) millionfor thethree monthsandsix months endedJune 30, 2019, respectively, and $29 million and $18 million for thethree monthsandsix months endedJune 30, 2018, respectively.
Sales or Disposals and Impairments of Fixed Maturity and Equity Securities AFS
Investment gains and losses on salesSales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below.below:
 Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,
 2019 2018 2019 2018
 (In millions)
Proceeds$10,194
 $11,585
 $20,859
 $24,840
Gross investment gains$169
 $40
 $304
 $91
Gross investment losses(88) (104) (255) (200)
OTTI losses—
 —
 (8) —
Net investment gains (losses)$81
 $(64) $41
 $(109)
 Three Months 
 Ended 
September 30,
 2017 2016 2017 2016
 Fixed Maturity Securities Equity Securities
 (In millions)
Proceeds$5,888
 $15,343
 $317
 $28
Gross investment gains$32
 $135
 $4
 $9
Gross investment losses(31) (74) (4) (2)
OTTI losses(5) (9) (4) (5)
Net investment gains (losses)$(4) $52
 $(4) $2

Nine Months
Ended
September 30,

2017
2016
2017
2016

Fixed Maturity Securities
Equity Securities

(In millions)
Proceeds$22,256

$41,425

$407

$85
Gross investment gains$225

$637

$9

$28
Gross investment losses(184)
(369)
(8)
(7)
OTTI losses(6)
(75)
(17)
(71)
Net investment gains (losses)$35

$193

$(16)
$(50)

Credit Loss Rollforward of Fixed Maturity Securities AFS
The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities AFS still held for which a portion of the OTTI loss was recognized in other comprehensive income (loss) (“OCI”):OCI:
 Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,
 2019 2018 2019 2018
 (In millions)
Balance, beginning of period$66
 $104
 $70
 $110
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI(8) (11) (11) (17)
Increase in cash flows — accretion of previous credit loss OTTI—
 (1) (1) (1)
Balance, end of period$58
 $92
 $58

$92

 Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Balance, beginning of period$136
 $171
 $157
 $188
Addition:       
Additional impairments — credit loss OTTI on securities previously impaired—
 8
 —
 11
Reduction:       
Sales (maturities, pay downs or prepayments) of securities previously
impaired as credit loss OTTI
(4) (10) (25) (30)
Balance, end of period$132
 $169
 $132

$169


3435
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Investments (continued)


Related Party Investment Transactions
The Company transfers invested assets primarily consisting of fixed maturity securitiesRecurring related party investments and mortgage loans to and from affiliates. Invested assets transferred to and from affiliates were as follows:
 Three Months 
 Ended 
September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Estimated fair value of invested assets transferred to affiliates$—
 $179
 $453
 $4,555
Amortized cost of invested assets transferred to affiliates$—
 $169
 $416
 $4,297
Net investment gains (losses) recognized on transfers$—
 $10
 $37
 $258
Estimated fair value of invested assets transferred from affiliates$—
 $51
 $293
 $150
In January 2017, the Company received transferred investments with an estimated fair value of $292 million, which are included in the table above, in addition to $275 million in cash related to the recapture of risks from minimum benefit guarantees on certain variable annuities previously reinsured by Brighthouse Life Insurance Company (“Brighthouse Insurance”). See Note 12 for additional information related to the transfer.
Below is a summary of certain affiliated loans which are more fully described in Note 8 of the Notes of the Consolidated Financial Statements included in the 2016 Annual Report.
The Company had affiliated loans outstanding to MetLife, Inc., which are included in other invested assets, totaling $1.8 billion at both September 30, 2017 and December 31, 2016. Net investment income from affiliated loans was$19 millionand $58 millionfor thethree monthsandnine months endedSeptember 30, 2017, respectively, and$23 millionand $70 millionfor thethree monthsandnine months endedSeptember 30, 2016, respectively.
As a structured settlements assignment company, the Company purchases annuities from Brighthouse to fund the periodic structured settlement claim payment obligations it assumes. Each annuity purchased is contractually designated to the assumed claim obligation it funds. The aggregate annuity contract values recorded, for which the Company has also recorded unpaid claim obligations of equal amounts, were $1.3 billion at both September 30, 2017 and December 31, 2016. The related net investment income and corresponding policyholder benefits and claims recognized were $18 millionas follows at and $51 million for the three monthsandnine months endedSeptember 30, 2017, respectively, and$17 millionand$46 millionfor thethree monthsandnine months endedSeptember 30, 2016, respectively.periods ended:
The Company holds a surplus note from American Life Insurance Company,
    June 30, 2019 December 31, 2018 Three Months Ended June 30, Six Months Ended June 30,
      2019 2018 2019 2018
Investment Type/Balance Sheet Category Related Party Carrying Value Net Investment Income
    (In millions)
Affiliated investments (1) MetLife, Inc. $1,834
 $1,798
 $9
 $4
 $17
 $15
Affiliated investments (2) American Life Insurance Company 100
 100
 1
 1
 2
 2
Affiliated investments (3) Metropolitan Property and Casualty Insurance Company 315
 315
 2
 2
 5
 4
Other invested assets   $2,249
 $2,213
 $12
 $7
 $24
 $21
Money market pool (4) Metropolitan Money Market Pool $64
 $52
 $1
 $1
 $1
 $1
Short-term investments   $64
 $52
 $1
 $1
 $1
 $1
________________
(1)
Represents an investment in affiliated senior notes. See Note 8 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report for a description of the redenomination of each of these affiliated senior notes in 2018 from U.S. dollar to Japanese yen, and the respective maturity dates, interest rates and interest payment terms of each of the redenominated affiliated senior notes. In July 2019, a ¥53.3 billion 1.45% affiliated senior note matured and was refinanced with a ¥37.3 billion 1.60% affiliated senior note due July 2023 and a ¥16.0 billion 1.64% affiliated senior note due July 2026. The affiliated senior notes have maturity dates from October 2019 to July 2026 and bear interest, payable semi-annually, at a rate per annum ranging from 0.82% to 3.14%.
(2)Represents an investment in an affiliated surplus note. The surplus note, which bears interest at a fixed rate of 3.17%, payable semiannually, is due June 2020.
(3)Represents an affiliate, which is includedinvestment in other invested assets, with a carrying value of $100 million at both September 30, 2017 and December 31, 2016. Net investment income from this surplus note was $1 million and $3 million for both the three monthsandnine months endedSeptember 30, 2017, and thethree monthsandnine months endedSeptember 30, 2016.
The Company held preferred stock of Metropolitan Property and Casualty Insurance Company, an affiliate, which was included in other invested assets, with a carrying value of $315 million at both September 30, 2017 and December 31, 2016. Net investment income from the affiliated preferred stock dividends was $1 million and $4 million for both thethree monthsandnine months endedSeptember 30, 2017, and thethree monthsandnine months endedSeptember 30, 2016.stock. Dividends are payable quarterly at a variable rate.
In(4)The investment has a variable rate of return.
Through March 2017,31, 2018, the Company purchased from Brighthouse Insurance an interest in an operating joint venture for $286 million, which was settled in cash in April 2017.
The Company providesprovided investment administrative services to certain affiliates. The related investment administrative service charges to these affiliates were$18 $19 millionand $54 millionfor the six months ended June 30, 2018. Effective April 1, 2018, the Company receives investment advisory services from an affiliate. The related affiliated investment advisory charges to the Company were $72 million and $148 million for the three monthsandnine six months endedSeptember June 30, 2017,2019, respectively, and$42 $69 million and$127 millionfor thethree monthsandnine months endedSeptemberJune 30, 2016, respectively.2018.
See “— Variable Interest Entities” for information on investments in affiliated real estate joint ventures.ventures and affiliated investment fund.

35
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives
Accounting for Derivatives
Freestanding Derivatives
Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.
Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivativesderivative’s carrying value in other invested assets or other liabilities.

36
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are reported in net derivative gains (losses) except as follows:
Statement of Operations Presentation:Derivative:
Policyholder benefits and claims• 
Economic hedges of variable annuity guarantees included in
future policy benefits
Net investment income• 
Economic hedges of equity method investments in joint
ventures
• All derivatives held in relation to trading portfolios
Hedge Accounting
To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:
Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.
Cash flow hedge (a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).
•
Fair value hedge - a hedge of the estimated fair value of a recognized asset or liability - in the same line item as the earnings effect of the hedged item. The carrying value of the hedged recognized asset or liability is adjusted for changes in its estimated fair value due to the hedged risk.
•
Cash flow hedge - a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability - in OCI and reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.
The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item.
In its hedge documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method that will be used to measure ineffectiveness.effectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.
The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; or (iv) the derivative is de-designated as a hedging instrument.

36
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence,occurring, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.
When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable of occurring are recognized immediately in net derivativeinvestment gains (losses).
In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the balance sheet, with changes in its estimated fair value recognized in the current period as net derivative gains (losses).

37
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Embedded Derivatives
The Company sellssold variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:
the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;
the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and
a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.
Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.
See Note 7 for information about the fair value hierarchy for derivatives.
Derivative Strategies
The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.
Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash markets.

37
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Interest Rate Derivatives
The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, interest rate total return swaps, caps, floors, swaptions, futures and forwards.
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.
The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. government and agency, or other fixed maturity security.securities AFS. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.

38
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Interest rate total return swaps are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Interbank Offered Rate (“LIBOR”),a benchmark interest rate, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. Interest rate total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate total return swaps in nonqualifying hedging relationships.
The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, as well asand interest rate floors primarily to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively.level. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in nonqualifying hedging relationships.
In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures in nonqualifying hedging relationships.
Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.
The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and nonqualifying hedging relationships.
ToA synthetic guaranteed interest contract (“GIC”) is a lesser extent,contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the contractholder owns the underlying assets. The Company uses exchange-traded interestguarantees a rate futures in nonqualifyingof return on those assets for a premium. Synthetic GICs are not designated as hedging relationships.instruments.
Foreign Currency Exchange Rate Derivatives
The Company uses foreign currency exchange rate derivatives, including foreign currency swaps and foreign currency forwards, to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.
In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon notional amount. The notional amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow and nonqualifying hedging relationships.
In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company utilizes foreign currency forwards in nonqualifying hedging relationships.


3839
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)


Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium involuntary restructuring or governmental intervention.intervention for sovereign obligors. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency, securities, or other fixed maturity securities.securities AFS. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.
In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts.contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR,a benchmark interest rate, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.


3940
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)


Primary Risks Managed byCredit Derivatives
The following table presentsCompany enters into purchased credit default swaps to hedge against credit-related changes in the primary underlying risk exposure,value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount and estimated fairin exchange for the payment of cash amounts by the counterparty equal to the par value of the Company’s derivatives, excluding embedded derivatives, held at:
    September 30, 2017 December 31, 2016
  Primary Underlying Risk Exposure Gross
Notional
Amount		 Estimated Fair Value Gross
Notional
Amount		 Estimated Fair Value
  Assets Liabilities Assets Liabilities
    (In millions)
Derivatives Designated as Hedging Instruments:            
Fair value hedges:              
Interest rate swaps Interest rate $3,942
 $2,305
 $3
 $4,993
 $2,221
 $6
Foreign currency swaps Foreign currency exchange rate 636
 44
 4
 1,200
 29
 224
Subtotal   4,578
 2,349
 7
 6,193
 2,250
 230
Cash flow hedges:              
Interest rate swaps Interest rate 3,534
 307
 —
 1,793
 325
 26
Interest rate forwards Interest rate 3,413
 —
 203
 4,033
 —
 370
Foreign currency swaps Foreign currency exchange rate 22,027
 936
 1,043
 20,080
 1,435
 1,604
Subtotal   28,974
 1,243
 1,246
 25,906
 1,760
 2,000
Total qualifying hedges   33,552
 3,592
 1,253
 32,099
 4,010
 2,230
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swaps Interest rate 43,155
 1,773
 328
 32,662
 2,514
 879
Interest rate floors Interest rate 7,201
 127
 —
 9,001
 173
 2
Interest rate caps Interest rate 73,018
 54
 2
 78,358
 112
 3
Interest rate futures Interest rate 2,096
 2
 —
 2,342
 3
 —
Interest rate options Interest rate 7,525
 156
 35
 850
 144
 1
Interest rate forwards Interest rate —
 —
 —
 396
 —
 3
Interest rate total return swaps Interest rate 1,048
 3
 9
 1,549
 2
 127
Synthetic GICs Interest rate 11,254
 —
 —
 5,566
 —
 —
Foreign currency swaps Foreign currency exchange rate 7,068
 644
 135
 8,175
 1,247
 58
Foreign currency forwards Foreign currency exchange rate 1,429
 37
 6
 1,396
 52
 18
Credit default swaps — purchased Credit 878
 10
 7
 961
 12
 6
Credit default swaps — written Credit 8,031
 166
 1
 8,025
 119
 8
Equity futures Equity market 1,712
 —
 6
 1,851
 10
 —
Equity index options Equity market 6,773
 223
 496
 11,119
 260
 426
Equity variance swaps Equity market 5,579
 81
 228
 5,579
 69
 193
Equity total return swaps Equity market 1,063
 —
 35
 1,013
 1
 42
Total non-designated or nonqualifying derivatives 177,830
 3,276
 1,288
 168,843
 4,718
 1,766
Total   $211,382
 $6,868
 $2,541
 $200,942
 $8,728
 $3,996
Basedinvestment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. In each case, payout on gross notional amounts, a substantial portioncredit default swap is triggered only after the Credit Derivatives Determinations Committee of the Company’s derivatives was not designated or did not qualify as part ofInternational Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationship at both September 30, 2017 and December 31, 2016. relationships.
The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv)Company enters into written credit default swaps and interest rate swaps that are used to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and that doone or more cash instruments, such as U.S. government and agency, or other fixed maturity securities AFS. These credit default swaps are not qualifydesignated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives,against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market factors can leadrisk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.
In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, to post variation margin on a daily basis in an amount equal to the recognitiondifference in the daily market values of fair value changesthose contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and a benchmark interest rate, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the statementterms of operations without an offsetting gainthe swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or loss recognizedto synthetically create investments. The Company utilizes equity total return swaps in earnings for the item being hedged.nonqualifying hedging relationships.


40
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)


Net Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Freestanding derivatives and hedging gains (losses) (1)$(167) $(342) $(634) $947
Embedded derivatives gains (losses)141
 137
 317
 (1,509)
Total net derivative gains (losses)$(26) $(205) $(317) $(562)
__________________
(1)Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.
The following table presents earned income on derivatives:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Qualifying hedges:       
Net investment income$73
 $70
 $220
 $199
Interest credited to policyholder account balances(20) —
 (40) 7
Nonqualifying hedges:       
Net investment income—
 —
 —
 (1)
Net derivative gains (losses)93
 152
 327
 428
Policyholder benefits and claims2
 1
 4
 3
Total$148
 $223
 $511
 $636

41
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging
The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or not qualifying as hedging instruments:
 
Net
Derivative
Gains (Losses)
 
Net
Investment
Income (1)
 
Policyholder
Benefits and
Claims (2)
 (In millions)
Three Months Ended September 30, 2017     
Interest rate derivatives$(60) $(2) $—
Foreign currency exchange rate derivatives(238) —
 —
Credit derivatives — purchased(6) —
 —
Credit derivatives — written24
 —
 —
Equity derivatives(124) (2) (52)
Total$(404) $(4) $(52)
Three Months Ended September 30, 2016     
Interest rate derivatives$(305) $—
 $—
Foreign currency exchange rate derivatives65
 —
 —
Credit derivatives — purchased(13) —
 —
Credit derivatives — written36
 —
 —
Equity derivatives(231) (2) (62)
Total$(448) $(2) $(62)
Nine Months Ended September 30, 2017     
Interest rate derivatives$(260) $(2) $—
Foreign currency exchange rate derivatives(639) —
 —
Credit derivatives — purchased(14) —
 —
Credit derivatives — written80
 —
 —
Equity derivatives(442) (4) (149)
Total$(1,275) $(6) $(149)
Nine Months Ended September 30, 2016     
Interest rate derivatives$867
 $—
 $—
Foreign currency exchange rate derivatives275
 —
 —
Credit derivatives — purchased(31) —
 —
Credit derivatives — written38
 —
 —
Equity derivatives(304) (12) (57)
Total$845
 $(12) $(57)
__________________
(1)Changes in estimated fair value related to economic hedges of equity method investments in joint ventures and derivatives held in relation to trading portfolios.
(2)Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

42
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):
Derivatives in Fair Value
Hedging Relationships
 
Hedged Items in Fair Value
Hedging Relationships
 
Net Derivative
Gains (Losses)
Recognized
for Derivatives
 
Net Derivative
Gains (Losses)
Recognized for
Hedged Items
 
Ineffectiveness
Recognized in
Net Derivative
Gains (Losses)

 
 (In millions)
Three Months Ended September 30, 2017      
Interest rate swaps: Fixed maturity securities $1
 $—
 $1
  Policyholder liabilities (1) (13) 12
 (1)
Foreign currency swaps: Foreign-denominated fixed maturity securities (8) 9
 1
  Foreign-denominated policyholder account balances (2) 15
 (16) (1)
Total $(5) $5
 $—
Three Months Ended September 30, 2016      
Interest rate swaps: Fixed maturity securities $5
 $(3) $2
  Policyholder liabilities (1) (47) 42
 (5)
Foreign currency swaps: Foreign-denominated fixed maturity securities 1
 (1) —
  Foreign-denominated policyholder account balances (2) (1) 1
 —
Total $(42) $39
 $(3)
Nine Months Ended September 30, 2017      
Interest rate swaps: Fixed maturity securities $2
 $(2) $—
  Policyholder liabilities (1) (15) 83
 68
Foreign currency swaps: Foreign-denominated fixed maturity securities (13) 14
 1
  Foreign-denominated policyholder account balances (2) 61
 (40) 21
Total $35
 $55
 $90
Nine Months Ended September 30, 2016      
Interest rate swaps: Fixed maturity securities $(3) $1
 $(2)
  Policyholder liabilities (1) 472
 (482) (10)
Foreign currency swaps: Foreign-denominated fixed maturity securities 5
 (4) 1
  Foreign-denominated policyholder account balances (2) (27) 24
 (3)
Total $447
 $(461) $(14)
__________________
(1)Fixed rate liabilities reported in policyholder account balances or future policy benefits.
(2)Fixed rate or floating rate liabilities.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.

43
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). There were no amounts reclassified from AOCI into net derivative gains (losses) for the three months ended September 30, 2017. The amount reclassified from AOCI into net derivative gains (losses) was $20 million for the nine months ended September 30, 2017. These amounts were $7 million and $10 million for the three months and nine months ended September 30, 2016.
At both September 30, 2017 and December 31, 2016, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed five years.
At September 30, 2017 and December 31, 2016, the balance in AOCI associated with cash flow hedges was $1.6 billion and $2.2 billion, respectively.
The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:
Derivatives in Cash Flow
Hedging Relationships		 Amount of Gains
(Losses) Deferred in
AOCI on Derivatives		 Amount and Location
of Gains (Losses)
Reclassified from
AOCI into Income (Loss)		 Amount and Location
of Gains (Losses)
Recognized in Income
(Loss) on Derivatives
  (Effective Portion) (Effective Portion) (Ineffective Portion)
    Net Derivative
Gains (Losses)		 Net Investment
Income		 Net Derivative
Gains (Losses)
  (In millions)
Three Months Ended September 30, 2017        
Interest rate swaps $15
 $8
 $4
 $(2)
Interest rate forwards 2
 (1) 1
 —
Foreign currency swaps (37) 282
 (1) —
Credit forwards —
 —
 

 —
Total $(20) $289
 $4
 $(2)
Three Months Ended September 30, 2016        
Interest rate swaps $21
 $27
 $4
 $—
Interest rate forwards (6) 1
 —
 —
Foreign currency swaps 24
 69
 —
 (4)
Credit forwards —
 —
 —
 —
Total $39
 $97
 $4
 $(4)
Nine Months Ended September 30, 2017        
Interest rate swaps $90
 $22
 $12
 $5
Interest rate forwards 138
 (5) 2
 (1)
Foreign currency swaps (2) 882
 (1) 1
Credit forwards —
 1
 —
 —
Total $226
 $900
 $13
 $5
Nine Months Ended September 30, 2016        
Interest rate swaps $330
 $44
 $10
 $—
Interest rate forwards 34
 —
 2
 —
Foreign currency swaps 339
 169
 (1) (3)
Credit forwards —
 3
 —
 —
Total $703
 $216
 $11
 $(3)
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

44
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

At September 30, 2017,the Company expected to reclassify ($3) millionof deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months.
Credit Derivatives
The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.
The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency, or other fixed maturity securities AFS. These credit default swaps are not designated as hedging instruments.
The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.
Equity Derivatives
The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.
Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the underlying equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. Certain of these contracts may also contain settlement provisions linked to interest rates. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. The Company utilizes equity index options in nonqualifying hedging relationships.
Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. The Company utilizes equity variance swaps in nonqualifying hedging relationships.
In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in nonqualifying hedging relationships.
In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and a benchmark interest rate, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

40
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
    June 30, 2019 December 31, 2018
  Primary Underlying Risk Exposure Gross
Notional
Amount		 Estimated Fair Value Gross
Notional
Amount		 Estimated Fair Value
  Assets Liabilities Assets Liabilities
    (In millions)
Derivatives Designated as Hedging Instruments:            
Fair value hedges:              
Interest rate swaps Interest rate $2,315
 $2,590
 $3
 $2,446
 $2,197
 $2
Foreign currency swaps Foreign currency exchange rate 1,140
 36
 4
 1,191
 49
 —
Subtotal   3,455
 2,626
 7
 3,637
 2,246
 2
Cash flow hedges:              
Interest rate swaps Interest rate 3,457
 164
 8
 3,181
 139
 1
Interest rate forwards Interest rate 2,855
 39
 19
 3,023
 —
 216
Foreign currency swaps Foreign currency exchange rate 26,004
 1,330
 1,163
 26,239
 1,218
 1,318
Subtotal   32,316
 1,533
 1,190
 32,443
 1,357
 1,535
Total qualifying hedges   35,771
 4,159
 1,197
 36,080
 3,603
 1,537
Derivatives Not Designated or Not Qualifying as Hedging Instruments:            
Interest rate swaps Interest rate 35,384
 2,030
 109
 36,238
 1,507
 85
Interest rate floors Interest rate 12,701
 186
 —
 12,701
 102
 —
Interest rate caps Interest rate 52,388
 30
 2
 54,576
 154
 1
Interest rate futures Interest rate 448
 —
 —
 794
 —
 1
Interest rate options Interest rate 28,430
 605
 —
 24,340
 185
 —
Interest rate total return swaps Interest rate 1,048
 65
 —
 1,048
 33
 2
Synthetic GICs Interest rate 16,985
 —
 —
 18,006
 —
 —
Foreign currency swaps Foreign currency exchange rate 6,326
 642
 93
 5,986
 700
 79
Foreign currency forwards Foreign currency exchange rate 662
 11
 7
 943
 15
 14
Credit default swaps — purchased Credit 843
 16
 3
 858
 24
 4
Credit default swaps — written Credit 8,887
 180
 1
 7,864
 67
 13
Equity futures Equity market 1,707
 1
 7
 1,006
 1
 6
Equity index options Equity market 24,158
 482
 442
 23,162
 706
 396
Equity variance swaps Equity market 1,946
 35
 88
 1,946
 32
 81
Equity total return swaps Equity market 724
 —
 12
 886
 89
 —
Total non-designated or nonqualifying derivatives 192,637
 4,283
 764
 190,354
 3,615
 682
Total   $228,408
 $8,442
 $1,961
 $226,434
 $7,218
 $2,219

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both June 30, 2019 and December 31, 2018. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

41
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)


The Effects of Derivatives on the Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
The following table presents the consolidated financial statement location and amount of gain (loss) recognized on fair value, cash flow, nonqualifying hedging relationships and embedded derivatives:


  Three Months Ended June 30, 2019
  Net Investment Income Net Investment Gains (Losses) Net Derivative Gains (Losses) Policyholder Benefits and Claims Interest Credited to Policyholder Account Balances Other Expenses OCI
  (In millions)
Gain (Loss) on Fair Value Hedges:              
Interest rate derivatives:              
Derivatives designated as hedging instruments (1) $(1) $—
 $—
 $205
 $—
 $—
 N/A
Hedged items 2
 —
 —
 (206) —
 —
 N/A
Foreign currency exchange rate derivatives:              
Derivatives designated as hedging instruments (1) 9
 —
 —
 —
 —
 —
 N/A
Hedged items (10) —
 —
 —
 —
 —
 N/A
Amount excluded from the assessment of hedge effectiveness —
 —
 —
 —
 —
 —
 N/A
Subtotal —
 —
 —
 (1) —
 —
 N/A
Gain (Loss) on Cash Flow Hedges:              
Interest rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 $351
Amount of gains (losses) reclassified from AOCI into income 6
 5
 —
 —
 —
 —
 (11)
Foreign currency exchange rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 172
Amount of gains (losses) reclassified from AOCI into income (1) 34
 —
 —
 —
 —
 (33)
Foreign currency transaction gains (losses) on hedged items —
 (37) —
 —
 —
 —
 —
Credit derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 —
Amount of gains (losses) reclassified from AOCI into income —
 —
 —
 —
 —
 —
 —
Subtotal 5
 2
 —
 —
 —
 —
 479
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:              
Interest rate derivatives (1) (1) —
 607
 —
 —
 —
 N/A
Foreign currency exchange rate derivatives (1) —
 —
 77
 —
 —
 —
 N/A
Credit derivatives — purchased (1) —
 —
 (2) —
 —
 —
 N/A
Credit derivatives — written (1) —
 —
 36
 —
 —
 —
 N/A
Equity derivatives (1) —
 —
 (147) (21) —
 —
 N/A
Foreign currency transaction gains (losses) on hedged items —
 —
 (106) —
 —
 —
 N/A
Subtotal (1) —
 465
 (21) —
 —
 N/A
Earned income on derivatives 64
 —
 68
 32
 (36) —
 —
Embedded derivatives (2) N/A
 N/A
 (325) —
 N/A
 N/A
 N/A
Total $68
 $2
 $208
 $10
 $(36) $—
 $479

42
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

  Three Months Ended June 30, 2018
  Net Investment Income Net Investment Gains (Losses) Net Derivative Gains (Losses) Policyholder Benefits and Claims Interest Credited to Policyholder Account Balances Other Expenses OCI
  (In millions)
Gain (Loss) on Fair Value Hedges:              
Interest rate derivatives:              
Derivatives designated as hedging instruments (1) $—
 $—
 $(68) $—
 $—
 $—
 N/A
Hedged items —
 —
 70
 —
 —
 —
 N/A
Foreign currency exchange rate derivatives:              
Derivatives designated as hedging instruments (1) —
 —
 54
 —
 —
 —
 N/A
Hedged items —
 —
 (55) —
 —
 —
 N/A
Amount excluded from the assessment of hedge effectiveness —
 —
 —
 —
 —
 —
 N/A
Subtotal —
 —
 1
 —
 —
 —
 N/A
Gain (Loss) on Cash Flow Hedges:              
Interest rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 $(58)
Amount of gains (losses) reclassified from AOCI into income 6
 —
 —
 —
 —
 —
 (6)
Foreign currency exchange rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 235
Amount of gains (losses) reclassified from AOCI into income (1) —
 (398) —
 —
 —
 399
Foreign currency transaction gains (losses) on hedged items —
 —
 398
 —
 —
 —
 —
Credit derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 —
Amount of gains (losses) reclassified from AOCI into income —
 —
 —
 —
 —
 —
 —
Subtotal 5
 —
 —
 —
 —
 —
 570
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:              
Interest rate derivatives (1) —
 —
 (85) —
 —
 —
 N/A
Foreign currency exchange rate derivatives (1) —
 —
 394
 —
 —
 —
 N/A
Credit derivatives — purchased (1) —
 —
 13
 —
 —
 —
 N/A
Credit derivatives — written (1) —
 —
 (27) —
 —
 —
 N/A
Equity derivatives (1) —
 —
 (111) (16) —
 —
 N/A
Foreign currency transaction gains (losses) on hedged items —
 —
 (170) —
 —
 —
 N/A
Subtotal —
 —
 14
 (16) —
 —
 N/A
Earned income on derivatives 99
 —
 84
 2
 (29) —
 —
Embedded derivatives (2) N/A
 N/A
 206
 —
 N/A
 N/A
 N/A
Total $104
 $—
 $305
 $(14) $(29) $—
 $570



43
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

  Six Months Ended June 30, 2019
  Net Investment Income Net Investment Gains (Losses) Net Derivative Gains (Losses) Policyholder Benefits and Claims Interest Credited to Policyholder Account Balances Other Expenses OCI
  (In millions)
Gain (Loss) on Fair Value Hedges:              
Interest rate derivatives:              
Derivatives designated as hedging instruments (1) $(4) $—
 $—
 $332
 $—
 $—
 N/A
Hedged items 5
 —
 —
 (334) —
 —
 N/A
Foreign currency exchange rate derivatives:              
Derivatives designated as hedging instruments (1) (20) —
 —
 —
 —
 —
 N/A
Hedged items 18
 —
 —
 —
 —
 —
 N/A
Amount excluded from the assessment of hedge effectiveness —
 —
 —
 —
 —
 —
 N/A
Subtotal (1) —
 —
 (2) —
 —
 N/A
Gain (Loss) on Cash Flow Hedges:              
Interest rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 $593
Amount of gains (losses) reclassified from AOCI into income 11
 (1) —
 —
 —
 —
 (10)
Foreign currency exchange rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 46
Amount of gains (losses) reclassified from AOCI into income (2) 81
 —
 —
 —
 —
 (79)
Foreign currency transaction gains (losses) on hedged items —
 (93) —
 —
 —
 —
 —
Credit derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 —
Amount of gains (losses) reclassified from AOCI into income —
 —
 —
 —
 —
 —
 —
Subtotal 9
 (13) —
 —
 —
 —
 550
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:              
Interest rate derivatives (1) (2) —
 748
 —
 —
 —
 N/A
Foreign currency exchange rate derivatives (1) —
 —
 16
 —
 —
 —
 N/A
Credit derivatives — purchased (1) —
 —
 (12) —
 —
 —
 N/A
Credit derivatives — written (1) —
 —
 128
 —
 —
 —
 N/A
Equity derivatives (1) —
 —
 (629) (89) —
 —
 N/A
Foreign currency transaction gains (losses) on hedged items —
 —
 (69) —
 —
 —
 N/A
Subtotal (2) —
 182
 (89) —
 —
 N/A
Earned income on derivatives 134
 —
 139
 63
 (68) —
 —
Embedded derivatives (2) N/A
 N/A
 (423) —
 N/A
 N/A
 N/A
Total $140
 $(13) $(102) $(28) $(68) $—
 $550

44
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

  Six Months Ended June 30, 2018
  Net Investment Income Net Investment Gains (Losses) Net Derivative Gains (Losses) Policyholder Benefits and Claims Interest Credited to Policyholder Account Balances Other Expenses OCI
  (In millions)
Gain (Loss) on Fair Value Hedges:              
Interest rate derivatives:              
Derivatives designated as hedging instruments (1) $—
 $—
 $(278) $—
 $—
 $—
 N/A
Hedged items —
 —
 280
 —
 —
 —
 N/A
Foreign currency exchange rate derivatives: 

 

 

 

 

 

 

Derivatives designated as hedging instruments (1) —
 —
 47
 —
 —
 —
 N/A
Hedged items —
 —
 (48) —
 —
 —
 N/A
Amount excluded from the assessment of hedge effectiveness —
 —
 —
 —
 —
 —
 N/A
Subtotal —
 —
 1
 —
 —
 —
 N/A
Gain (Loss) on Cash Flow Hedges:              
Interest rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 $(335)
Amount of gains (losses) reclassified from AOCI into income 10
 —
 20
 —
 —
 —
 (30)
Foreign currency exchange rate derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 6
Amount of gains (losses) reclassified from AOCI into income (1) —
 (238) —
 —
 —
 (239)
Foreign currency transaction gains (losses) on hedged items —
 —
 240
 —
 —
 —
 —
Credit derivatives: (1)              
Amount of gains (losses) deferred in AOCI N/A
 N/A
 N/A
 N/A
 N/A
 N/A
 —
Amount of gains (losses) reclassified from AOCI into income —
 —
 —
 —
 —
 —
 —
Subtotal 9
 —
 22
 —
 —
 —
 (598)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:              
Interest rate derivatives (1) 4
 —
 (341) —
 —
 —
 N/A
Foreign currency exchange rate derivatives (1) —
 —
 180
 —
 —
 —
 N/A
Credit derivatives — purchased (1) —
 —
 12
 —
 —
 —
 N/A
Credit derivatives — written (1) —
 —
 (55) —
 —
 —
 N/A
Equity derivatives (1) 1
 —
 (101) (15) —
 —
 N/A
Foreign currency transaction gains (losses) on hedged items —
 —
 (58) —
 —
 —
 N/A
Subtotal 5
 —
 (363) (15) —
 —
 N/A
Earned income on derivatives 176
 —
 166
 4
 (52) —
 —
Embedded derivatives (2) N/A
 N/A
 539
 —
 N/A
 N/A
 N/A
Total $190
 $—
 $365
 $(11) $(52) $—
 $(598)
__________________
(1)Excludes earned income on derivatives.
(2)The valuation of guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were $0 and ($11) million for the three months and six months ended June 30, 2019, respectively, and $0 and ($21) million for the three months and six months ended June 30, 2018, respectively.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities.

45
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the balance sheet classification, carrying amount and cumulative fair value hedging adjustments for items designated and qualifying as hedged items in fair value hedges:
  June 30, 2019
Balance Sheet Line Item Carrying Amount of the
Hedged
Assets/(Liabilities)		 Cumulative Amount
of Fair Value Hedging Adjustments
Included in the Carrying Amount of Hedged
Assets/(Liabilities) (1)
  (In millions)
Fixed maturity securities AFS $257
 $(1)
Mortgage loans $1,074
 $6
Future policy benefits $(4,286) $(873)
Policyholder account balances $(74) $—
__________________
(1)Includes ($1) million of hedging adjustments on discontinued hedging relationships.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.
In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net investment gains (losses). These amounts were $47 million and $49 million for the three months and six months ended June 30, 2019, respectively, and were less than $1 million for both the three months and six months ended June 30, 2018.
At June 30, 2019 and December 31, 2018, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed nine years and four years, respectively.
At June 30, 2019 and December 31, 2018, the balance in AOCI associated with cash flow hedges was $2.3 billion and $1.7 billion, respectively.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At June 30, 2019,the Company expected to reclassify $92 millionof deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $8.0$8.9 billion and $7.9 billion at both SeptemberJune 30, 20172019 and December 31, 2016.2018, respectively. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At SeptemberJune 30, 20172019 and December 31, 2016,2018, the Company would have received $165$179 million and $111$54 million, respectively, to terminate all of these contracts.

46
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
 September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
Rating Agency Designation of Referenced
Credit Obligations (1)
 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)		 Estimated
Fair Value
of Credit
Default
Swaps		 Maximum
Amount of
Future
Payments under
Credit Default
Swaps		 Weighted
Average
Years to
Maturity (2)
 (Dollars in millions) (Dollars in millions)
Aaa/Aa/A                        
Single name credit default swaps (3) $3
 $229
 2.2
 $1
 $229
 2.7
 $2
 $154
 1.5
 $2
 $154
 2.0
Credit default swaps referencing indices 42
 2,193
 3.0
 32
 2,093
 3.5
 38
 2,428
 2.4
 27
 2,079
 2.5
Subtotal 45
 2,422
 2.9
 33
 2,322
 3.4
 40
 2,582
 2.4
 29
 2,233
 2.5
Baa                        
Single name credit default swaps (3) 5
 493
 1.6
 3
 563
 2.2
 2
 222
 1.4
 1
 277
 1.6
Credit default swaps referencing indices 96
 4,761
 5.4
 61
 4,730
 5.1
 121
 5,853
 5.2
 20
 5,124
 5.2
Subtotal 101
 5,254
 5.0
 64
 5,293
 4.8
 123
 6,075
 5.0
 21
 5,401
 5.0
Ba                        
Single name credit default swaps (3) —
 105
 3.6
 (2) 115
 4.2
 —
 10
 1.0
 —
 10
 1.5
Credit default swaps referencing indices —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Subtotal —
 105
 3.6
 (2) 115
 4.2
 —
 10
 1.0
 —
 10
 1.5
B                        
Single name credit default swaps (3) 2
 30
 2.6
 —
 70
 1.8
 —
 —
 —
 —
 —
 —
Credit default swaps referencing indices 17
 220
 5.2
 16
 225
 5.0
 16
 220
 5.0
 4
 220
 5.0
Subtotal 19
 250
 4.9
 16
 295
 4.2
 16
 220
 5.0
 4
 220
 5.0
Total $165
 $8,031
 4.4
 $111
 $8,025
 4.4
 $179
 $8,887
 4.3
 $54
 $7,864
 4.3
__________________
(1)
The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”),Standard & Poor’s S&P Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
(3)Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.municipals.

45
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amount of potential future recoveries available to offset the $8.0 billion from the table above was $30 million at both September 30, 2017 and December 31, 2016.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.
The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.

47
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.
See Note 7 for a description of the impact of credit risk on the valuation of derivatives.

46
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
 September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1) Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities
 (In millions) (In millions)
Gross estimated fair value of derivatives:                
OTC-bilateral (1) $6,773
 $2,284
 $7,926
 $3,349
 $8,383
 $1,940
 $7,255
 $2,166
OTC-cleared (1), (6) 152
 218
 905
 611
OTC-cleared (1) 146
 14
 52
 24
Exchange-traded 2
 6
 13
 —
 1
 7
 1
 7
Total gross estimated fair value of derivatives (1) 6,927
 2,508
 8,844
 3,960
Amounts offset on the consolidated balance sheets —
 —
 —
 —
Estimated fair value of derivatives presented on the consolidated balance
sheets (1), (6)
 6,927
 2,508
 8,844
 3,960
Gross amounts not offset on the consolidated balance sheets:        
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1) 8,530
 1,961
 7,308
 2,197
Gross amounts not offset on the interim condensed consolidated balance sheets: 

 

 

 

Gross estimated fair value of derivatives: (2)                
OTC-bilateral (1,914) (1,914) (2,737) (2,737) (1,845) (1,845) (1,988) (1,988)
OTC-cleared (32) (32) (391) (391) (5) (5) (20) (20)
Exchange-traded —
 —
 —
 —
 —
 —
 —
 —
Cash collateral: (3), (4)                
OTC-bilateral (3,702) —
 (3,418) —
 (3,711) —
 (4,000) —
OTC-cleared (115) (181) (497) (217) (136) —
 (26) —
Exchange-traded —
 —
 —
 —
 —
 —
 —
 —
Securities collateral: (5)                
OTC-bilateral (1,092) (371) (1,560) (609) (2,689) (95) (1,136) (178)
OTC-cleared —
 (5) —
 —
 —
 (9) —
 (4)
Exchange-traded —
 (5) —
 —
 —
 (7) —
 (7)
Net amount after application of master netting agreements and collateral $72
 $—
 $241
 $6
 $144
 $—
 $138
 $—
__________________
(1)
At SeptemberJune 30, 20172019 and December 31, 2016,2018, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of $59$88 million and $116$90 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($33) million$0and ($36)22) million, respectively.
(2)Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities AFS, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.
(4)The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At SeptemberJune 30, 20172019 and December 31, 2016,2018, the Company received excess cash collateral of $143$103 million and $77$95 million, respectively, and provided excess cash collateral of $4 million$0 and $9$1 million, respectively, which is not included in the table above due to the foregoing limitation.


4748
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)


(5)Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at SeptemberJune 30, 2017,2019, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities AFS on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At SeptemberJune 30, 20172019 and December 31, 2016,2018, the Company received excess securities collateral with an estimated fair value of $81$74 million and $21$28 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At SeptemberJune 30, 20172019 and December 31, 2016,2018, the Company provided excess securities collateral with an estimated fair value of $179$42 million and $75$94 million, respectively, for its OTC-bilateral derivatives, and $307$295 million and $531$231 million, respectively, for its OTC-cleared derivatives, and $66$81 million and $116$52 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
(6)Effective January 3, 2017, the CME amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the CME amendments.
The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the collateral amount owed by that partycounterparty reaches a minimum transfer amount. A small number of these arrangements also include financial strength or credit rating contingent provisions that include a threshold above which collateral must be posted. Such agreements provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in credit ratings of Metropolitan Life Insurance Company and/or the credit ratings of the counterparty. In addition, substantially allAll of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

48
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that arewere in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that Metropolitan Life Insurance Company would be required to provide if there was a one-notch downgrade in its financial strength or credit rating, as applicable, at the reporting date or if its financial strength or credit rating, as applicable, sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.
  September 30, 2017 December 31, 2016
  
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total
  (In millions)
Estimated Fair Value of Derivatives in a Net
Liability Position (1)
 $371
 $—
 $371
 $612
 $—
 $612
Estimated Fair Value of Collateral Provided:            
Fixed maturity securities $465
 $—
 $465
 $684
 $—
 $684
Cash $—
 $—
 $��
 $—
 $—
 $—
Estimated Fair Value of Incremental Collateral
Provided Upon:
            
One-notch downgrade in financial strength or
credit rating, as applicable
 $—
 $—
 $—
 $—
 $—
 $—
Downgrade in financial strength or credit rating, as
applicable, to a level that triggers full overnight
collateralization or termination of the derivative
position
 $—
 $—
 $—
 $—
 $—
 $—
  June 30, 2019 December 31, 2018
  
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total 
Derivatives
Subject to
Financial
Strength-
Contingent
Provisions
 
Derivatives
Not Subject
to Financial
Strength-
Contingent
Provisions
 Total
  (In millions)
Estimated Fair Value of Derivatives in a Net
Liability Position (1)
 $95
 $—
 $95
 $178
 $—
 $178
Estimated Fair Value of Collateral Provided:            
Fixed maturity securities AFS $137
 $—
 $137
 $187
 $—
 $187
Cash $—
 $—
 $—
 $1
 $—
 $1
__________________
(1)After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issueshas issued certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs;GMWBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance;reinsurance and fixed annuities with equity indexed returns; and certain debt and equity securities.returns.


49
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Derivatives (continued)


The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
  Balance Sheet Location June 30, 2019 December 31, 2018
    (In millions)
Embedded derivatives within liability host contracts:      
Direct guaranteed minimum benefits Policyholder account balances $179
 $178
Assumed guaranteed minimum benefits Policyholder account balances 3
 3
Funds withheld on ceded reinsurance (including affiliated) Other liabilities 930
 465
Fixed annuities with equity indexed returns Policyholder account balances 107
 58
Embedded derivatives within liability host contracts $1,219
 $704

  Balance Sheet Location September 30, 2017 December 31, 2016
    (In millions)
Embedded derivatives within asset host contracts:      
Ceded guaranteed minimum benefits Premiums, reinsurance and other receivables $—
 $460
Options embedded in debt or equity securities Investments (119) (78)
Embedded derivatives within asset host contracts $(119) $382
Embedded derivatives within liability host contracts:      
Direct guaranteed minimum benefits Policyholder account balances $(31) $169
Assumed guaranteed minimum benefits Policyholder account balances 3
 390
Funds withheld on ceded reinsurance Other liabilities 906
 777
Fixed annuities with equity indexed returns Policyholder account balances 53
 17
Embedded derivatives within liability host contracts $931
 $1,353
The following table presents changes in estimated fair value related to embedded derivatives:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Net derivative gains (losses) (1), (2)$141
 $137
 $317
 $(1,509)
__________________
(1)The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($17) million and ($39) million for the three months and nine months ended September 30, 2017, respectively, and ($47) million and $173 million for the three months and nine months ended September 30, 2016, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes a nonperformance risk adjustment. For the three months and nine months ended September 30, 2017, the Company did not have any ceded guaranteed minimum benefits. The amounts included in net derivative gains (losses) in connection with this adjustment were $9 million and ($64) million for the three months and nine months ended September 30, 2016, respectively.
(2)
See Note 12 for discussion of affiliated net derivative gains (losses).

50
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value
ConsiderableWhen developing estimated fair values, considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

50
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:
September 30, 2017June 30, 2019
Fair Value Hierarchy  Fair Value Hierarchy  
Level 1 Level 2 Level 3 Total 
Estimated
Fair Value		Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
(In millions)(In millions)
Assets              
Fixed maturity securities:       
Fixed maturity securities AFS:       
U.S. corporate$—
 $52,694
 $4,783
 $57,477
$—
 $53,609
 $3,217
 $56,826
U.S. government and agency20,192
 19,916
 —
 40,108
11,226
 17,430
 —
 28,656
Foreign corporate—
 21,403
 3,964
 25,367
—
 24,512
 4,433
 28,945
RMBS412
 20,637
 3,371
 24,420
20
 20,513
 2,875
 23,408
ABS—
 7,286
 419
 7,705
—
 9,126
 326
 9,452
State and political subdivision—
 7,434
 1
 7,435
Municipals—
 7,366
 7
 7,373
CMBS—
��5,329
 28
 5,357
—
 5,561
 41
 5,602
Foreign government—
 4,401
 14
 4,415
—
 4,830
 10
 4,840
Total fixed maturity securities20,604
 139,100
 12,580
 172,284
Total fixed maturity securities AFS11,246
 142,947
 10,909
 165,102
Equity securities483
 943
 365
 1,791
381
 72
 352
 805
Short-term investments2,467
 1,813
 402
 4,682
230
 784
 113
 1,127
Residential mortgage loans — FVO—
 —
 564
 564
—
 —
 262
 262
Other investments—
 1
 268
 269
Derivative assets: (1)              
Interest rate2
 4,722
 3
 4,727
—
 5,606
 103
 5,709
Foreign currency exchange rate—
 1,661
 —
 1,661
—
 2,019
 —
 2,019
Credit—
 137
 39
 176
—
 160
 36
 196
Equity market—
 199
 105
 304
1
 473
 44
 518
Total derivative assets2
 6,719
 147
 6,868
1
 8,258
 183
 8,442
Embedded derivatives within asset host contracts (3)—
 —
 —
 —
Embedded derivatives within asset host contracts (2)—
 —
 —
 —
Separate account assets (3)23,832
 107,799
 1,039
 132,670
23,370
 95,870
 932
 120,172
Total assets$47,388
 $256,374
 $15,097
 $318,859
Total assets (4)$35,228
 $247,932
 $13,019
 $296,179
Liabilities              
Derivative liabilities: (1)              
Interest rate$—
 $368
 $212
 $580
$—
 $122
 $19
 $141
Foreign currency exchange rate—
 1,184
 4
 1,188
—
 1,264
 3
 1,267
Credit—
 8
 —
 8
—
 4
 —
 4
Equity market6
 531
 228
 765
7
 454
 88
 549
Total derivative liabilities6
 2,091
 444
 2,541
7
 1,844
 110
 1,961
Embedded derivatives within liability host contracts (2)—
 —
 931
 931
—
 —
 1,219
 1,219
Long-term debt—
 —
 —
 —
Separate account liabilities (3)1
 6
 2
 9
2
 33
 7
 42
Total liabilities$7
 $2,097
 $1,377
 $3,481
$9
 $1,877
 $1,336
 $3,222


51
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


December 31, 2016December 31, 2018
Fair Value Hierarchy  Fair Value Hierarchy  
Level 1 Level 2 Level 3 Total 
Estimated
Fair Value		Level 1 Level 2 Level 3 Total 
Estimated
Fair Value
(In millions)(In millions)
Assets              
Fixed maturity securities:       
Fixed maturity securities AFS:       
U.S. corporate$—
 $51,303
 $4,855
 $56,158
$—
 $51,676
 $3,126
 $54,802
U.S. government and agency17,597
 18,018
 —
 35,615
12,310
 17,851
 —
 30,161
Foreign corporate—
 20,373
 3,984
 24,357
—
 21,988
 3,975
 25,963
RMBS—
 19,719
 3,698
 23,417
—
 19,719
 3,018
 22,737
ABS—
 6,745
 759
 7,504
—
 8,072
 455
 8,527
State and political subdivision—
 7,126
 10
 7,136
Municipals—
 6,947
 —
 6,947
CMBS—
 4,851
 84
 4,935
—
 5,376
 68
 5,444
Foreign government—
 3,977
 21
 3,998
—
 4,482
 10
 4,492
Total fixed maturity securities17,597
 132,112
 13,411
 163,120
Total fixed maturity securities AFS12,310
 136,111
 10,652
 159,073
Equity securities408
 1,011
 420
 1,839
341
 76
 356
 773
Short-term investments2,945
 1,720
 25
 4,690
698
 783
 25
 1,506
Residential mortgage loans — FVO—
 —
 566
 566
—
 —
 299
 299
Other investments—
 1
 215
 216
Derivative assets: (1)              
Interest rate3
 5,489
 2
 5,494
—
 4,284
 33
 4,317
Foreign currency exchange rate—
 2,763
 —
 2,763
—
 1,982
 —
 1,982
Credit—
 101
 30
 131
—
 62
 29
 91
Equity market10
 226
 104
 340
1
 776
 51
 828
Total derivative assets13
 8,579
 136
 8,728
1
 7,104
 113
 7,218
Embedded derivatives within asset host contracts (2)—
 —
 460
 460
—
 —
 —
 —
Separate account assets (3)27,633
 105,055
 1,148
 133,836
20,558
 89,348
 944
 110,850
Total assets$48,596
 $248,477
 $16,166
 $313,239
Total assets (4)$33,908
 $233,423
 $12,604
 $279,935
Liabilities              
Derivative liabilities: (1)              
Interest rate$—
 $917
 $500
 $1,417
$1
 $89
 $218
 $308
Foreign currency exchange rate—
 1,902
 2
 1,904
—
 1,410
 1
 1,411
Credit—
 14
 —
 14
—
 13
 4
 17
Equity market—
 468
 193
 661
6
 395
 82
 483
Total derivative liabilities—
 3,301
 695
 3,996
7
 1,907
 305
 2,219
Embedded derivatives within liability host contracts (3)—
 —
 1,353
 1,353
Long-term debt—
 —
 74
 74
Embedded derivatives within liability host contracts (2)—
 —
 704
 704
Separate account liabilities (3)—
 16
 7
 23
1
 20
 7
 28
Total liabilities$—
 $3,317
 $2,129
 $5,446
$8
 $1,927
 $1,016
 $2,951
__________________
(1)Derivative assets are presented within other invested assets on the interim condensed consolidated balance sheets and derivative liabilities are presented within other liabilities on the interim condensed consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the interim condensed consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(2)Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets. At September 30, 2017 and December 31, 2016, debt and equity securities also included embedded derivatives of ($119) million and ($78) million, respectively.


52
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


(3)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.
(4)Total assets included in the fair value hierarchy excluded other limited partnership interests that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient. At June 30, 2019 and December 31, 2018, the estimated fair value of such investments was $105 million and $140 million, respectively.
The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy.
Investments
Valuation Controls and Procedures
On behalf of the Company and MetLife, Inc.’s Chief Investment Officer and Chief Financial Officer, a pricing and valuation committee that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a quarterly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. This committee also provides oversight of the selection of independent third-party pricing providers and the controls and procedures to evaluate third-party pricing. Periodically, the Chief Accounting Officer reports to the Audit Committee of the Board of Directors of each of MetLife, Inc. and Metropolitan Life Insurance Company regarding compliance with fair value accounting standards.
The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and less than 1% of the total estimated fair value of Level 3 fixed maturity securities at September 30, 2017.
The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained, or an internally developed valuation is prepared. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and nonperformance risks, compared with pricing received from the independent pricing services, did not produce material differences in the estimated fair values for the majority of the portfolio; accordingly, overrides were not material. This is, in part, because internal estimates of liquidity and nonperformance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used.
Securities, Short-term Investments and Long-term DebtOther Investments
When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances.
The estimated fair value of long-term debtother investments is determined on a basis consistent with the methodologies described herein for securities.
The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy are presented below. The primary valuation approaches are the market approach, which considers recent prices from market transactions involving identical or similar assets or liabilities, and the income approach, which converts expected future amounts (i.e., cash flows) to a single current, discounted amount. The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Instrument 
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Fixed Maturity Securitiesmaturity securities AFS
U.S. corporate and Foreign corporate securities
 Valuation Approaches: Principally the market and income approaches.Valuation Approaches: Principally the market approach.
 Key Inputs:Key Inputs:
 •quoted prices in markets that are not active•illiquidity premium
 •benchmark yields; spreads off benchmark yields; new issuances; issuer rating•delta spread adjustments to reflect specific credit-related issues
 •trades of identical or comparable securities; duration•credit spreads
 •Privately-placed securities are valued using the additional key inputs:•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
  •market yield curve; call provisions 
  •
observable prices and spreads for similar public or private securities that
incorporate the credit quality and industry sector of the issuer
•


independent non-binding broker quotations
  •delta spread adjustments to reflect specific credit-related issues  
U.S. government and agency State and political subdivisionsecurities, Municipals and Foreign government securities
 Valuation Approaches: Principally the market approach.Valuation Approaches: Principally the market approach.
 Key Inputs:Key Inputs:
 •quoted prices in markets that are not active•independent non-binding broker quotations
 •benchmark U.S. Treasury yield or other yields•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
 •the spread off the U.S. Treasury yield curve for the identical security 
 •issuer ratings and issuer spreads; broker-dealer quotes•credit spreads
 •comparable securities that are actively traded  
Structured Securities
 Valuation Approaches: Principally the market and income approaches.Valuation Approaches: Principally the market and income approaches.
 Key Inputs:Key Inputs:
 •quoted prices in markets that are not active•credit spreads
 •spreads for actively traded securities; spreads off benchmark yields•
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
 •expected prepayment speeds and volumes 
 •current and forecasted loss severity; ratings; geographic region•independent non-binding broker quotations
 •weighted average coupon and weighted average maturity  
 •average delinquency rates; debt-service coverage ratios  
 •issuance-specific information, including, but not limited to:  
  •collateral type; structure of the security; vintage of the loans  
  •payment terms of the underlying assets  
  •payment priority within the tranche; deal performance  


54
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Equity Securitiessecurities
 Valuation Approaches: Principally the market approach.Valuation Approaches: Principally the market and income approaches.
 Key Input:Key Inputs:
 •quoted prices in markets that are not considered active•credit ratings; issuance structures
   •
quoted prices in markets that are not active for identical or similar
securities that are less liquid and based on lower levels of trading
activity than securities classified in Level 2
   •independent non-binding broker quotations
Short-term investments and Other investments
 •
Short-term investments and other investments are of a similar nature and class to the fixed maturity
securities AFS and equity securities described above; accordingly, the valuation
approaches and observable inputs used in their valuation are also
similar to those described above.
•
Short-term investments and other investments are of a similar nature and class to the fixed
maturity securities AFS and equity securities described above; accordingly,
the valuation approaches and unobservable inputs
used in their
valuation are also similar to those described above.
Residential mortgage loans — FVO
 •N/A
Valuation Approaches: Principally the market approach.

   
Valuation Techniques and Key Inputs: These investments are based primarily on matrix pricing or other similar techniques that utilize inputs from mortgage servicers that are unobservable or cannot be derived principally from, or corroborated by, observable market data.

Separate Account Assetsaccount assets and Separate Account Liabilitiesaccount liabilities (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
 Key Input:•N/A
 •quoted prices or reported Net Asset value (“NAV”)NAV provided by the fund managers  
Other limited partnership interests
 
•


N/A
Valued giving consideration to the underlying holdings

of the partnerships and by applying a premium or discount,adjusting, if appropriate.
   Key Inputs:
   •liquidity; bid/ask spreads; performance record of the fund manager
   •
other relevant variables that may impact the exit value of the particular
partnership interest
__________________
(1)Estimated fair value equals carrying value, based on the value of the underlying assets, including: mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. Fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents are similar in nature to the instruments described under “— Securities, Short-term Investments and Long-term Debt”Other Investments” and “— Derivatives — Freestanding Derivatives.”
Derivatives
The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments.”
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and management believes they are consistent with what other market participants would use when pricing such instruments.


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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Freestanding Derivatives
Level 2 Valuation Approaches and Key Inputs:
This level includes all types of derivatives utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivatives with unobservable inputs as described in Level 3.
Level 3 Valuation Approaches and Key Inputs:
These valuation methodologies generally use the same inputs as described in the corresponding sections for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.
Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. Key inputs are as follows:
Instrument Interest Rate 
Foreign Currency
Exchange Rate
 Credit Equity Market
Inputs common to Level 2 and Level 3 by instrument type•swap yield curves•swap yield curves•swap yield curves•swap yield curves
•basis curves•basis curves•credit curves•spot equity index levels
•interest rate volatility (1)•currency spot rates•recovery rates•dividend yield curves
   •cross currency basis curves  •equity volatility (1)
Level 3•swap yield curves (2)•swap yield curves (2)•swap yield curves (2)•dividend yield curves (2)
 •basis curves (2)•basis curves (2)•credit curves (2)•equity volatility (1), (2)
 •repurchase rates•cross currency basis curves (2)
•


credit spreads•
correlation between model
inputs (1)
   •currency correlation•repurchase rates  
     •
independent non-binding
broker quotations
  
__________________
(1)Option-based only.
(2)Extrapolation beyond the observable limits of the curve(s).

Embedded Derivatives
Embedded derivatives principally include certain direct and assumed variable annuity guarantees, annuity contracts, and those related to funds withheld on ceded reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Embedded Derivatives
Embedded derivatives principally include certain direct, assumed and ceded variable annuity guarantees, certain affiliated ceded reinsurance agreements related to such variable annuity guarantees, equity or bond indexed crediting rates within certain funding agreements and those related to funds withheld on ceded reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.
The Company issueshas issued certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.
The Company’s actuarial departmentCompany calculates the fair value of these embedded derivatives, which are estimated as the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projectsprojecting future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates.
Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.
The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries as compared to MetLife, Inc.
Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income.
The Company ceded the risk associated with certain of the GMIBs, GMABs and GMWBs previously described. In addition to ceding risks associated with guarantees that are accounted for as embedded derivatives, the Company also ceded directly written GMIBs that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance agreement contains an embedded derivative. These embedded derivatives are included within premiums, reinsurance and other receivables on the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.
The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as described in “— Investments — Securities, Short-term Investments and Long-term Debt.Other Investments.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities on the consolidated balance sheets with changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

57
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including a nonperformance risk adjustment. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within policyholder account balances with changes in estimated fair value recorded in net derivative gains (losses). Changes in equity and bond indices, interest rates and the Company’s credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.
Embedded Derivatives Within Asset and Liability Host Contracts
Level 3 Valuation Approaches and Key Inputs:
Direct and assumed guaranteed minimum benefits
These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curves, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curves and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin.
Reinsurance ceded on certain guaranteed minimum benefits
These embedded derivatives are principally valued using
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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in “— Direct and assumed guaranteed minimum benefits” and also include counterparty credit spreads.Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Embedded derivatives within funds withheld related to certain ceded reinsurance
These embedded derivatives are principally valued using the income approach. The valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curves and the fair value of assets within the reference portfolio. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include the fair value of certain assets within the reference portfolio which are not observable in the market and cannot be derived principally from, or corroborated by, observable market data.
Transfers between Levels
Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into or out of any level are assumed to occur at the beginning of the period.
Transfers between Levels 1 and 2:
For assets and liabilities measured at estimated fair value and still held at September 30, 2017 and December 31, 2016, there were no transfers between Levels 1 and 2.
Transfers into or out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.


58
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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
 September 30, 2017 December 31, 2016 Impact of
Increase in Input
on Estimated
Fair Value (2)		 June 30, 2019 December 31, 2018 Impact of
Increase in Input
on Estimated
Fair Value (2)
Valuation
Techniques		 
Significant
Unobservable Inputs
 Range 
Weighted
Average (1)
 Range 
Weighted
Average (1)
 Valuation
Techniques		 
Significant
Unobservable Inputs
 Range 
Weighted
Average (1)
 Range 
Weighted
Average (1)
 
Fixed maturity securities (3) 
Fixed maturity securities AFS (3)Fixed maturity securities AFS (3) 
U.S. corporate and foreign corporate•Matrix pricing •Offered quotes (4) 21-140 108 18-138 106 Increase•Matrix pricing •Offered quotes (4) 92-142 112 85-134 105 Increase
•Market pricing
•Quoted prices (4)
25-498
121
25-700
117
Increase•Market pricing
•Quoted prices (4)
25-416
110
25-638
107
Increase
RMBS•Market pricing •Quoted prices (4) 5-173 94 19-137 91 Increase (5)•Market pricing •Quoted prices (4) —-111 95 —-106 94 Increase (5)
ABS•Market pricing •Quoted prices (4) 28-104 100 20-106 99 Increase (5)•Market pricing •Quoted prices (4) 9-102 98 10-101 97 Increase (5)
•Consensus pricing •Offered quotes (4) 99-100 99 98-100 100 Increase (5)
Derivatives  
Interest rate•Present value techniques •Swap yield (6) 200-300 200-300 Increase (7)•Present value techniques •Swap yield (6) 197-259 268-317 Increase (7)
 •Repurchase rates (8) —-8 (44)-18 Decrease (7) •Repurchase rates (8) (25)-1 (5)-6 Decrease (7)
Foreign currency exchange rate•Present value techniques •Swap yield (6) (24)-(1) 50-236 Increase (7)•Present value techniques •Swap yield (6) (23)-(5) (20)-(5) Increase (7)
Credit•Present value techniques •Credit spreads (9) 97-100 97-98 Decrease (7)•Present value techniques •Credit spreads (9) 96-100 97-103 Decrease (7)
•Consensus pricing •Offered quotes (10) •Consensus pricing •Offered quotes (10) 
Equity market•
Present value
   techniques or
   option pricing
   models
 •Volatility (11) 9%-30% 14%-32% Increase (7)•
Present value
   techniques or
   option pricing
   models
 •Volatility (11) 16%-23%
21%-26% Increase (7)
 •Correlation (12) 10%-30% 40%-40%  •Correlation (12) 10%-30%
10%-30% 
Embedded derivativesEmbedded derivatives Embedded derivatives 
Direct, assumed and ceded
guaranteed minimum
benefits		•Option pricing
techniques		 •Mortality rates: 
Direct and assumed guaranteed
minimum benefits		•Option pricing
techniques		 •Mortality rates: 
 Ages 0 - 40 0%-0.09% 0%-0.09% Decrease (13) Ages 0 - 40 0.01%-0.18% 0.01%-0.18% Decrease (13)
 Ages 41 - 60 0.04%-0.65% 0.04%-0.65% Decrease (13) Ages 41 - 60 0.04%-0.57% 0.04%-0.57% Decrease (13)
 Ages 61 - 115 0.26%-100% 0.26%-100% Decrease (13) Ages 61 - 115 0.26%-100% 0.26%-100% Decrease (13)
 •Lapse rates:  •Lapse rates: 
 Durations 1 - 10 0.25%-100% 0.25%-100% Decrease (14) Durations 1 - 10 0.25%-100% 0.25%-100% Decrease (14)
 Durations 11 - 20 3%-100% 3%-100% Decrease (14) Durations 11 - 20 3%-100% 3%-100% Decrease (14)
 Durations 21 - 116 3%-100% 3%-100% Decrease (14) Durations 21 - 116 2.5%-100% 2.5%-100% Decrease (14)
 •Utilization rates 0%-25% 0%-25% Increase (15) •Utilization rates 0%-25% 0%-25% Increase (15)
 •Withdrawal rates 0.25%-10% 0.25%-10% (16) •Withdrawal rates 0.25%-10% 0.25%-10% (16)
 •Long-term equity
volatilities		 17.40%-25% 17.40%-25% Increase (17) •Long-term equity
volatilities		 16.50%-22% 16.50%-22% Increase (17)
 •Nonperformance risk
spread		 0.03%-0.46% 0.04%-0.57% Decrease (18) •Nonperformance risk
spread		 0.03%-0.45% 0.05%-0.59% Decrease (18)
__________________
(1)The weighted average for fixed maturity securities AFS is determined based on the estimated fair value of the securities.
(2)The impact of a decrease in input would have resulted in the opposite impact on estimated fair value. For embedded derivatives, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions.
(3)Significant increases (decreases) in expected default rates in isolation would resulthave resulted in substantially lower (higher) valuations.
(4)Range and weighted average are presented in accordance with the market convention for fixed maturity securities AFS of dollars per hundred dollars of par.


59
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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


(5)Changes in the assumptions used for the probability of default arewould have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.
(6)Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curves are utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
(7)Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.
(8)Ranges represent different repurchase rates utilized as components within the valuation methodology and are presented in basis points.
(9)Represents the risk quoted in basis points of a credit default event on the underlying instrument. Credit derivatives with significant unobservable inputs are primarily comprised of written credit default swaps.
(10)At both SeptemberJune 30, 20172019 and December 31, 2016,2018, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.
(11)Ranges represent the underlying equity volatility quoted in percentage points. Since this valuation methodology uses a range of inputs across multiple volatility surfaces to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
(12)Ranges represent the different correlation factors utilized as components within the valuation methodology. Presenting a range of correlation factors is more representative of the unobservable input used in the valuation. Increases (decreases) in correlation in isolation will increase (decrease) the significance of the change in valuations.
(13)Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(14)Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(15)The utilization rate assumption estimates the percentage of contractholders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(16)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(17)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.
(18)Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.


60
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3, including those within separate account assets, and embedded derivatives within funds withheld related to certain ceded reinsurance, and other investments, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The residential mortgage loans — FVO and long-term debt are valued using independent non-binding broker quotations and internal models including matrix pricing and discounted cash flow methodologies using current interest rates. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table.
The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 Fixed Maturity Securities   Fixed Maturity Securities AFS    
 Corporate (1) 
U.S.
Government
and Agency
 
Structured
Securities
 State and
Political
Subdivision  		 Foreign
Government		 
Equity
Securities
 Corporate (1) Structured
Securities		 Foreign Government Municipals Equity
Securities		 Short-term
Investments
 (In millions) (In millions)
Three Months Ended September 30, 2017            
Three Months Ended June 30, 2019            
Balance, beginning of period $8,458
 $—
 $4,133
 $—
 $14
 $416
 $7,330
 $3,314
 $21
 $—
 $366
 $127
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 (4) —
 21
 —
 —
 —
 —
 11
 —
 —
 (4) —
Total realized/unrealized gains (losses)
included in AOCI		 121
 —
 17
 —
 —
 (3) 126
 24
 —
 —
 —
 —
Purchases (4) 420
 —
 220
 —
 —
 4
 416
 194
 —
 7
 6
 11
Sales (4) (255) —
 (303) —
 —
 (52) (205) (175) (2) —
 (16) (25)
Issuances (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 117
 —
 —
 1
 —
 —
 77
 6
 1
 —
 —
 —
Transfers out of Level 3 (5) (110) —
 (270) —
 —
 —
 (94) (132) (10) —
 —
 —
Balance, end of period $8,747
 $—
 $3,818
 $1
 $14
 $365
 $7,650
 $3,242
 $10
 $7
 $352
 $113
Three Months Ended September 30, 2016            
Three Months Ended June 30, 2018            
Balance, beginning of period $8,904
 $175
 $4,415
 $28
 $65
 $456
 $7,295
 $3,852
 $13
 $—
 $359
 $550
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 9
 —
 25
 —
 —
 4
 5
 20
 —
 —
 (5) —
Total realized/unrealized gains (losses)
included in AOCI		 66
 —
 23
 3
 —
 (12) (227) 4
 (1) —
 —
 —
Purchases (4) 431
 98
 702
 —
 17
 4
 637
 652
 —
 —
 5
 2
Sales (4) (407) —
 (294) —
 (1) (11) (559) (202) (1) —
 (14) —
Issuances (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 331
 —
 36
 7
 —
 1
 —
 2
 —
 —
 —
 —
Transfers out of Level 3 (5) (139) (2) (159) —
 (10) (5) (87) (458) —
 —
 —
 —
Balance, end of period $9,195
 $271
 $4,748
 $38
 $71
 $437
 $7,064
 $3,870
 $11
 $—
 $345
 $552
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
 $(3) $—
 $21
 $—
 $—
 $(2)
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
 $1
 $—
 $26
 $—
 $—
 $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019: (6) $(2) $11
 $—
 $—
 $(5) $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2018: (6) $(1) $18
 $—
 $—
 $—
 $—


61
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  Residential
Mortgage
Loans - FVO		 
Other
Investments
 Net
Derivatives (7)		 Net Embedded
Derivatives (8)		 Separate Accounts (9) 
  (In millions)
Three Months Ended June 30, 2019          
Balance, beginning of period $276
 $238
 $(87) $(847) $897
Total realized/unrealized gains (losses) included in net income (loss) (2), (3) 4
 10
 61
 (325) 2
Total realized/unrealized gains (losses) included in AOCI —
 —
 136
 —
 —
Purchases (4) —
 20
 4
 —
 101
Sales (4) (9) —
 —
 —
 (75)
Issuances (4) —
 —
 (1) —
 3
Settlements (4) (9) —
 (40) (47) (3)
Transfers into Level 3 (5) —
 —
 —
 —
 —
Transfers out of Level 3 (5) —
 —
 —
 —
 —
Balance, end of period $262
 $268
 $73
 $(1,219) $925
Three Months Ended June 30, 2018          
Balance, beginning of period $438
 $—
 $(293) $(591) $1,222
Total realized/unrealized gains (losses) included in net income (loss) (2), (3) 1
 —
 (24) 206
 (1)
Total realized/unrealized gains (losses) included in AOCI —
 —
 (8) —
 —
Purchases (4) —
 —
 4
 —
 270
Sales (4) (17) —
 —
 —
 (321)
Issuances (4) —
 —
 —
 —
 (2)
Settlements (4) (17) —
 46
 (52) 2
Transfers into Level 3 (5) —
 —
 —
 —
 71
Transfers out of Level 3 (5) —
 —
 —
 —
 (103)
Balance, end of period $405
 $—
 $(275) $(437) $1,138
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019: (6) $1
 $10
 $53
 $(323) $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2018: (6) $(1) $—
 $(6) $207
 $—

  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
  
Short-term
Investments
 
Residential
Mortgage
Loans - FVO
 
Net
Derivatives (7)
 
Net Embedded
Derivatives (8)
 
Separate
Accounts (9)
 
Long-term
Debt
  (In millions)
Three Months Ended September 30, 2017            
Balance, beginning of period $821
 $615
 $(277) $(1,008) $975
 $(19)
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 —
 32
 (5) 131
 6
 —
Total realized/unrealized gains (losses)
included in AOCI		 —
 —
 1
 —
 —
 —
Purchases (4) —
 10
 —
 —
 136
 —
Sales (4) (247) (72) —
 —
 (35) —
Issuances (4) —
 —
 —
 —
 1
 —
Settlements (4) —
 (21) (16) (54) (1) 19
Transfers into Level 3 (5) 2
 —
 —
 —
 56
 —
Transfers out of Level 3 (5) (174) —
 —
 —
 (101) —
Balance, end of period $402
 $564
 $(297) $(931) $1,037
 $—
Three Months Ended September 30, 2016            
Balance, beginning of period $—
 $449
 $102
 $(1,508) $1,485
 $(44)
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 —
 10
 (44) 119
 (25) —
Total realized/unrealized gains (losses)
included in AOCI		 —
 —
 (8) —
 —
 —
Purchases (4) 187
 42
 —
 —
 4
 —
Sales (4) (1) (5) —
 —
 (25) —
Issuances (4) —
 —
 (1) —
 30
 —
Settlements (4) —
 (15) (10) (57) (45) 2
Transfers into Level 3 (5) —
 —
 —
 —
 8
 —
Transfers out of Level 3 (5) —
 —
 —
 —
 (178) —
Balance, end of period $186
 $481
 $39
 $(1,446) $1,254
 $(42)
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
 $—
 $32
 $(9) $59
 $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
 $—
 $10
 $(33) $119
 $—
 $—


62
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


 Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 Fixed Maturity Securities   Fixed Maturity Securities AFS    
 Corporate (1) 
U.S.
Government
and Agency
 
Structured
Securities
 State and
Political
Subdivision  		 Foreign
Government		 
Equity
Securities
 Corporate (1)
Structured Securities Foreign Government
Municipals Equity
Securities		 Short-term
Investments
 (In millions) (In millions)
Nine Months Ended September 30, 2017            
Six Months Ended June 30, 2019            
Balance, beginning of period $8,839
 $—
 $4,541
 $10
��$21
 $420
 $7,101
 $3,541
 $10
 $—
 $356
 $25
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 5
 —
 76
 —
 —
 (14) (3) 24
 —
 —
 24
 —
Total realized/unrealized gains (losses)
included in AOCI		 394
 —
 94
 —
 —
 27
 349
 42
 —
 —
 —
 —
Purchases (4) 1,853
 —
 465
 —
 —
 10
 637
 275
 —
 7
 9
 113
Sales (4) (1,229) —
 (1,038) —
 (1) (74) (257) (297) (1) —
 (37) (25)
Issuances (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 58
 —
 10
 1
 —
 —
 174
 6
 1
 —
 —
 —
Transfers out of Level 3 (5) (1,173) —
 (330) (10) (6) (4) (351) (349) —
 —
 —
 —
Balance, end of period $8,747
 $—
 $3,818
 $1
 $14
 $365
 $7,650
 $3,242
 $10
 $7
 $352
 $113
Nine Months Ended September 30, 2016            
Six Months Ended June 30, 2018 

   

   

 

Balance, beginning of period $8,282
 $—
 $4,416
 $33
 $275
 $328
 $7,586
 $4,076
 $31
 $—
 $366
 $7
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		 1
 —
 73
 1
 —
 (21) 9
 43
 —
 —
 (11) —
Total realized/unrealized gains (losses)
included in AOCI		 633
 13
 (19) 2
 (1) 38
 (258) 11
 (1) —
 —
 (1)
Purchases (4) 1,155
 98
 1,726
 —
 18
 20
 927
 656
 —
 —
 5
 552
Sales (4) (717) —
 (966) —
 (1) (15) (1,016) (423) (1) —
 (15) (1)
Issuances (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Settlements (4) —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Transfers into Level 3 (5) 589
 160
 4
 7
 —
 282
 124
 48
 —
 —
 —
 —
Transfers out of Level 3 (5) (748) —
 (486) (5) (220) (195) (308) (541) (18) —
 —
 (5)
Balance, end of period $9,195
 $271
 $4,748
 $38
 $71
 $437
 $7,064
 $3,870
 $11
 $—
 $345
 $552
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
 $(1) $—
 $66
 $—
 $—
 $(12)
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
 $3
 $—
 $76
 $1
 $—
 $(26)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019: (6) $(4) $24
 $—
 $—
 $12
 $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2018: (6) $(1) $38
 $—
 $—
 $—
 $—



63
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Short-term
Investments
 
Residential
Mortgage
Loans - FVO
 
Net
Derivatives (7)
 
Net Embedded
Derivatives (8)
 
Separate
Accounts (9)
 
Long-term
Debt
 Residential
Mortgage
Loans - FVO		 
Other
 Investments
 Net
Derivatives (7)		 Net Embedded
Derivatives (8)		 Separate Accounts  (9) 
(In millions) (In millions)
Nine Months Ended September 30, 2017           
Six Months Ended June 30, 2019          
Balance, beginning of period$25
 $566
 $(559) $(893) $1,141
 $(74) $299
 $215
 $(192) $(704) $937
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		—
 38
 7
 343
 (22) —
 6
 33
 76
 (423) 6
Total realized/unrealized gains (losses)
included in AOCI		—
 —
 136
 —
 —
 —
 —
 —
 224
 —
 —
Purchases (4)400
 184
 —
 —
 269
 —
 —
 20
 4
 —
 124
Sales (4)—
 (155) —
 —
 (78) —
 (25) —
 —
 —
 (140)
Issuances (4)—
 —
 —
 —
 1
 —
 —
 —
 (1) —
 2
Settlements (4)—
 (69) 119
 (381) (62) 34
 (18) —
 (38) (92) (2)
Transfers into Level 3 (5)2
 —
 —
 —
 21
 —
 —
 —
 —
 —
 —
Transfers out of Level 3 (5)(25) —
 —
 —
 (233) 40
 —
 —
 —
 —
 (2)
Balance, end of period$402
 $564
 $(297) $(931) $1,037
 $—
 $262
 $268
 $73
 $(1,219) $925
Nine Months Ended September 30, 2016           
Six Months Ended June 30, 2018          
Balance, beginning of period$200
 $314
 $(23) $186
 $1,520
 $(36) $520
 $—
 $(191) $(876) $958
Total realized/unrealized gains (losses)
included in net income (loss) (2), (3)		—
 22
 63
 (1,476) 7
 —
 3
 —
 (71) 539
 1
Total realized/unrealized gains (losses)
included in AOCI		—
 —
 27
 —
 —
 —
 —
 —
 (112) —
 —
Purchases (4)187
 187
 6
 —
 107
 —
 —
 —
 4
 —
 307
Sales (4)(199) (12) —
 —
 (64) —
 (81) —
 —
 —
 (147)
Issuances (4)—
 —
 (1) —
 28
 (11) —
 —
 —
 —
 (3)
Settlements (4)—
 (30) (33) (156) (57) 5
 (37) —
 95
 (100) 1
Transfers into Level 3 (5)—
 —
 —
 —
 9
 —
 —
 —
 —
 —
 99
Transfers out of Level 3 (5)(2) —
 —
 —
 (296) —
 —
 —
 —
 —
 (78)
Balance, end of period$186
 $481
 $39
 $(1,446) $1,254
 $(42) $405
 $—
 $(275) $(437) $1,138
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2017 (6)
$—
 $38
 $(19) $343
 $—
 $—
Changes in unrealized gains (losses) included
in net income (loss) for the instruments still
held at September 30, 2016 (6)
$—
 $22
 $66
 $(1,470) $—
 $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2019: (6) $1
 $33
 $61
 $(420) $—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at June 30, 2018: (6) $(8) $—
 $11
 $542
 $—
__________________
(1)Comprised of U.S. and foreign corporate securities.
(2)Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses), while changes in estimated fair value of residential mortgage loans — FVO are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivativesderivative gains (losses).
(3)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(4)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(5)Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
(6)Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(7)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.


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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


(7)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(8)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(9)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). Separate account assets and liabilities are presented net for the purposes of the rollforward.
Fair Value Option
The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis. The following table presents information for residential mortgage loans, which are accounted for under the FVO and were initially measured at fair value.
 June 30, 2019 December 31, 2018
 (In millions)
Unpaid principal balance$309
 $344
Difference between estimated fair value and unpaid principal balance(47) (45)
Carrying value at estimated fair value$262
 $299
Loans in nonaccrual status$71
 $89
Loans more than 90 days past due$28
 $41
Loans in nonaccrual status or more than 90 days past due, or both - difference between aggregate estimated fair value and unpaid principal balance$(33) $(36)

 September 30, 2017 December 31, 2016
 (In millions)
Unpaid principal balance$711
 $794
Difference between estimated fair value and unpaid principal balance(147) (228)
Carrying value at estimated fair value$564
 $566
Loans in nonaccrual status$213
 $214
Loans more than 90 days past due$106
 $137
Loans in nonaccrual status or more than 90 days past due, or both - difference between aggregate estimated fair value and unpaid principal balance$(121) $(150)
The following table presents information for long-term debt, which is accounted for under the FVO, and was initially measured at fair value.
  September 30, 2017 December 31, 2016
  (In millions)
Contractual principal balance $—
 $71
Difference between estimated fair value and contractual
principal balance
 —
 3
Carrying value at estimated fair value (1) $—
 $74
__________________
(1)Changes in estimated fair value are recognized in net investment gains (losses). Interest expense is recognized in other expenses.
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and therefore are not included in the three levelthree-level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.


65
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)


The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
September 30, 2017June 30, 2019
  Fair Value Hierarchy    Fair Value Hierarchy  
Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value		Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value
(In millions)(In millions)
Assets                  
Mortgage loans$57,490
 $—
 $—
 $59,149
 $59,149
$64,409
 $—
 $—
 $66,590
 $66,590
Policy loans$5,985
 $—
 $259
 $6,769
 $7,028
$6,064
 $—
 $267
 $6,907
 $7,174
Real estate joint ventures$2
 $—
 $—
 $11
 $11
Other limited partnership interests$234
 $—
 $—
 $239
 $239
Other invested assets$2,260
 $—
 $2,051
 $159
 $2,210
$2,973
 $—
 $2,700
 $144
 $2,844
Premiums, reinsurance and other
receivables
$15,036
 $—
 $643
 $14,895
 $15,538
$14,342
 $—
 $366
 $14,707
 $15,073
Liabilities                  
Policyholder account balances$75,498
 $—
 $—
 $76,953
 $76,953
$74,364
 $—
 $—
 $76,592
 $76,592
Long-term debt$1,673
 $—
 $2,037
 $—
 $2,037
$1,549
 $—
 $1,846
 $—
 $1,846
Other liabilities$15,520
 $—
 $2,070
 $13,553
 $15,623
$13,671
 $—
 $677
 $13,134
 $13,811
Separate account liabilities$63,481
 $—
 $63,481
 $—
 $63,481
$54,884
 $—
 $54,884
 $—
 $54,884
 December 31, 2018
   Fair Value Hierarchy  
 Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value
 (In millions)
Assets         
Mortgage loans$63,388
 $—
 $—
 $64,409
 $64,409
Policy loans$6,061
 $—
 $269
 $6,712
 $6,981
Other invested assets$2,940
 $—
 $2,673
 $146
 $2,819
Premiums, reinsurance and other
receivables
$14,228
 $—
 $113
 $14,673
 $14,786
Liabilities         
Policyholder account balances$72,194
 $—
 $—
 $72,689
 $72,689
Long-term debt$1,562
 $—
 $1,746
 $—
 $1,746
Other liabilities$13,593
 $—
 $448
 $13,189
 $13,637
Separate account liabilities$50,578
 $—
 $50,578
 $—
 $50,578

 December 31, 2016
   Fair Value Hierarchy  
 Carrying
Value		 Level 1 Level 2 Level 3 Total
Estimated
Fair Value
 (In millions)
Assets         
Mortgage loans$55,994
 $—
 $—
 $57,171
 $57,171
Policy loans$5,945
 $—
 $258
 $6,695
 $6,953
Real estate joint ventures$4
 $—
 $—
 $26
 $26
Other limited partnership interests$336
 $—
 $—
 $362
 $362
Other invested assets$2,263
 $—
 $2,151
 $151
 $2,302
Premiums, reinsurance and other
receivables
$14,888
 $—
 $368
 $15,421
 $15,789
Liabilities         
Policyholder account balances$72,944
 $—
 $—
 $74,052
 $74,052
Long-term debt$1,503
 $—
 $1,755
 $—
 $1,755
Other liabilities$14,731
 $—
 $894
 $13,920
 $14,814
Separate account liabilities$65,545
 $—
 $65,545
 $—
 $65,545
The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:
Mortgage Loans
The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans.


66
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Policy Loans
Policy loans with fixed interest rates are classified within Level 3. The estimated fair values for these loans are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk, as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. Policy loans with variable interest rates are classified within Level 2 and the estimated fair value approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates.
Real Estate Joint Ventures and Other Limited Partnership Interests
The estimated fair values of these cost method investments are generally based on the Company’s share of the NAV as provided on the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments.
Other Invested Assets
These other invested assets are principally comprised of loans to affiliates. The estimated fair value of loans to affiliates is determined by discounting the expected future cash flows using market interest rates currently available for instruments with similar terms and remaining maturities.
Premiums, Reinsurance and Other Receivables
Premiums, reinsurance and other receivables are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivatives and amounts receivable for securities sold but not yet settled.
Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been classified as Level 3. The valuation is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty.
The amounts on deposit for derivative settlements, classified within Level 2, essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value.
Policyholder Account Balances
These policyholder account balances include investment contracts which primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts (“TCA”). The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability.
Long-term Debt
The estimated fair value of long-term debt is principally determined using market standard valuation methodologies.
Valuations of instruments are based primarily on quoted prices in markets that are not active or using matrix pricing that use standard market observable inputs such as quoted prices in markets that are not active and observable yields and spreads in the market. Instruments valued using discounted cash flow methodologies use standard market observable inputs including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues.

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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
7. Fair Value (continued)

Other Liabilities
Other liabilities consist primarily of amounts due for securities purchased but not yet settled, funds withheld amounts payable, which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements, and amounts payable under certain assumed reinsurance agreements, which are recorded using the deposit method of accounting. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For such payables, the estimated fair value is determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty.
Separate Account Liabilities
Separate account liabilities represent those balances due to policyholders under contracts that are classified as investment contracts.
Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding.
Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section “— Recurring Fair Value Measurements,” the value of those assets approximates the estimated fair value of the related separate account liabilities. The valuation techniques and inputs for separate account liabilities are similar to those described for separate account assets.

68
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)


8. Leases
The Company, as lessee, has entered into various lease and sublease agreements for office space and other equipment. At contract inception, the Company determines that an arrangement contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For contracts that contain a lease, the Company recognizes the ROU asset in Other assets and the lease liability in Other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are determined using the Company’s incremental borrowing rate based upon information available at commencement date to recognize the present value of lease payments over the lease term. The ROU asset also includes lease payments and excludes lease incentives. Lease terms may include options to extend or terminate the lease and are included in the lease measurement when it is reasonably certain that the Company will exercise that option.
The Company has lease agreements with lease and non-lease components. The Company elected the practical expedient to not separate lease and non-lease components and accounted for these items as a single lease component for all asset classes.
The majority of the Company’s leases and subleases are operating leases related to office space. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term.
The Company has operating leases with remaining lease terms of less than one year to 12 years. The remaining lease terms for the subleases are less than one year to 10 years.
ROU Asset andLease Liability
The ROU assets and lease liabilities for operating leases were:
  June 30, 2019
  (In millions)
ROU asset (1) $823
Lease liability (1) $917
__________________
(1)
Assets and liabilities include amounts recognized upon adoption of new guidance. See Note 1.
Lease Costs
The components of operating lease costs were as follows:
  Three Months 
 Ended 
June 30,		 Six Months
Ended
June 30,
  2019
  (In millions)
Operating lease cost $29
 $58
Variable lease cost 3
 6
Sublease income (20) (40)
Net lease cost $12
 $24

Operating lease expense was $29 million and $58 million for the three months and six months ended June 30, 2018, respectively. Non-cancelable sublease income was $17 million and $28 million for the three months and six months ended June 30, 2018, respectively.


67
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8. Leases (continued)



Other Information
Supplemental other information related to operating leases was as follows:
  June 30, 2019
  (Dollars in millions)
Cash paid for amounts included in the measurement of lease liability - operating cash flows $48
ROU assets obtained in exchange for new lease liabilities $141
Weighted-average remaining lease term 9 years
Weighted-average discount rate 3.9%

Maturities of Lease Liabilities
Maturities of operating lease liabilities were as follows:
  June 30, 2019
  (In millions)
Remainder of 2019 $65
2020 124
2021 125
2022 123
2023 112
Thereafter 554
Total undiscounted cash flows 1,103
Less: interest 186
Present value of lease liability $917

Future minimum gross rental payments relating to lease arrangements in effect as determined prior to the adoption of ASU 2016-02 are as follows:

 December 31, 2018

 (In millions)
2019 $125
2020 137
2021 136
2022 134
2023 122
Thereafter 567
Total $1,221

See Note 5 for information about the Company’s investments in leased real estate and leveraged and direct financing leases.

68
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Equity
Accumulated Other Comprehensive Income (Loss)
Information regarding changes in the balances of each component of AOCI attributable to Metropolitan Life Insurance Company was as follows:
Three Months 
 Ended 
 September 30, 2017		Three Months 
 Ended 
 June 30, 2019
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 TotalUnrealized Investment Gains (Losses), Net of Related Offsets (1) 
Unrealized
 Gains (Losses) on Derivatives
 Foreign Currency Translation Adjustments 
Defined Benefit
 Plans Adjustment
 Total
(In millions)(In millions)
Balance, beginning of period$5,549
 $1,216
 $(82) $(1,813) $4,870
$5,410
 $1,438
 $(74) $(257) $6,517
OCI before reclassifications560
 (20) 29
 2
 571
2,733
 523
 (11) —
 3,245
Deferred income tax benefit (expense)(214) 7
 (7) (1) (215)(586) (109) 1
 —
 (694)
AOCI before reclassifications, net of income tax5,895
 1,203
 (60) (1,812) 5,226
7,557
 1,852
 (84) (257) 9,068
Amounts reclassified from AOCI(30) (293) —
 40
 (283)(60) (44) —
 7
 (97)
Deferred income tax benefit (expense)10
 102
 —
 (14) 98
12
 9
 —
 (2) 19
Amounts reclassified from AOCI, net of income tax(20) (191) —
 26
 (185)(48) (35) —
 5
 (78)
Balance, end of period$5,875
 $1,012
 $(60) $(1,786) $5,041
$7,509
 $1,817
 $(84) $(252) $8,990
Three Months 
 Ended 
 September 30, 2016		Three Months 
 Ended 
 June 30, 2018
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 TotalUnrealized Investment Gains (Losses), Net of Related Offsets (1) 
Unrealized
 Gains (Losses) on Derivatives
 Foreign Currency Translation Adjustments 
Defined
 Benefit
 Plans Adjustment
 Total
(In millions)(In millions)
Balance, beginning of period$7,051
 $1,785
 $(53) $(1,938) $6,845
$5,597
 $563
 $(38) $(2,137) $3,985
OCI before reclassifications343
 39
 (16) (258) 108
(2,204) 177
 (10) —
 (2,037)
Deferred income tax benefit (expense)(117) (14) 5
 90
 (36)470
 (48) 1
 —
 423
AOCI before reclassifications, net of income tax7,277
 1,810
 (64) (2,106) 6,917
3,863
 692
 (47) (2,137) 2,371
Amounts reclassified from AOCI(44) (101) —
 46
 (99)89
 393
 —
 31
 513
Deferred income tax benefit (expense)15
 36
 —
 (17) 34
(19) (72) —
 (6) (97)
Amounts reclassified from AOCI, net of income tax(29) (65) —
 29
 (65)70
 321
 —
 25
 416
Balance, end of period$7,248
 $1,745
 $(64) $(2,077) $6,852
$3,933
 $1,013
 $(47) $(2,112) $2,787




69
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8.9. Equity (continued)


Nine Months
Ended
September 30, 2017		Six Months
Ended
June 30, 2019
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
(In millions)(In millions)
Balance, beginning of period$3,592
 $1,459
 $(67) $(1,865) $3,119
$2,515
 $1,382
 $(74) $(261) $3,562
OCI before reclassifications3,434
 226
 9
 5
 3,674
6,337
 617
 (14) (1) 6,939
Deferred income tax benefit (expense)(1,215) (79) (2) (2) (1,298)(1,340) (130) 4
 —
 (1,466)
AOCI before reclassifications, net of income tax5,811
 1,606
 (60) (1,862) 5,495
7,512
 1,869
 (84) (262) 9,035
Amounts reclassified from AOCI98
 (913) —
 118
 (697)(2) (89) —
 13
 (78)
Deferred income tax benefit (expense)(34) 319
 —
 (42) 243
—
 19
 —
 (3) 16
Amounts reclassified from AOCI, net of income tax64
 (594) —
 76
 (454)(2) (70) —
 10
 (62)
Cumulative effects of changes in accounting principles(1) 22
 —
 —
 21
Deferred income tax benefit (expense), cumulative effects of changes in accounting principles—
 (4) —
 —
 (4)
Cumulative effects of changes in accounting principles, net of income tax (2)(1) 18
 —
 —
 17
Balance, end of period$5,875
 $1,012
 $(60) $(1,786) $5,041
$7,509
 $1,817
 $(84) $(252) $8,990
Nine Months
Ended
September 30, 2016		Six Months
Ended
June 30, 2018
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
Unrealized
Investment Gains
(Losses), Net of
Related Offsets (1)
 
Unrealized
Gains (Losses)
on Derivatives
 
Foreign
Currency
Translation
Adjustments
 
Defined
Benefit
Plans
Adjustment
 Total
(In millions)(In millions)
Balance, beginning of period$3,337
 $1,436
 $(74) $(2,014) $2,685
$6,351
 $906
 $(47) $(1,782) $5,428
OCI before reclassifications6,132
 703
 6
 (241) 6,600
(4,584) (329) 12
 —
 (4,901)
Deferred income tax benefit (expense)(2,148) (247) 4
 84
 (2,307)985
 55
 (5) —
 1,035
AOCI before reclassifications, net of income tax7,321
 1,892
 (64) (2,171) 6,978
2,752
 632
 (40) (1,782) 1,562
Amounts reclassified from AOCI(113) (227) —
 145
 (195)99
 209
 —
 62
 370
Deferred income tax benefit (expense)40
 80
 —
 (51) 69
(21) (35) —
 (13) (69)
Amounts reclassified from AOCI, net of income tax(73) (147) —
 94
 (126)78
 174
 —
 49
 301
Cumulative effects of changes in accounting principles(119) —
 —
 —
 (119)
Deferred income tax benefit (expense), cumulative effects of changes in accounting principles1,222
 207
 (7) (379) 1,043
Cumulative effects of changes in accounting principles, net of income tax (3)1,103
 207
 (7) (379) 924
Balance, end of period$7,248
 $1,745
 $(64) $(2,077) $6,852
$3,933
 $1,013
 $(47) $(2,112) $2,787
__________________
(1)
See Note 5 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.
(2)
See Note 1 for further information on adoption of new accounting pronouncements.
(3)
See Note 1of the Notes to the Consolidated Financial Statements included in the2018 Annual Report for further information on adoption of new accounting pronouncements.


70
Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8.9. Equity (continued)


Information regarding amounts reclassified out of each component of AOCI was as follows:
AOCI Components Amounts Reclassified from AOCI Consolidated Statements of
Operations and
Comprehensive Income (Loss)
Locations		 Amounts Reclassified from AOCI Consolidated Statements of
Operations and
Comprehensive Income (Loss)
Locations
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,		  Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,		 
 2017 2016 2017 2016  2019 2018 2019 2018 
 (In millions)  (In millions) 
Net unrealized investment gains (losses):                  
Net unrealized investment gains (losses) $(5) $52
 $30
 $144
 Net investment gains (losses) $82
 $(58) $41
 $(105) Net investment gains (losses)
Net unrealized investment gains (losses) (3) —
 (5) 11
 Net investment income —
 7
 —
 10
 Net investment income
Net unrealized investment gains (losses) 38
 (8) (123) (42) Net derivative gains (losses) (22) (38) (39) (4) Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax 30
 44
 (98) 113
  60
 (89) 2
 (99) 
Income tax (expense) benefit (10) (15) 34
 (40)  (12) 19
 —
 21
 
Net unrealized investment gains (losses), net of income tax 20
 29
 (64) 73
  48
 (70) 2
 (78) 
Unrealized gains (losses) on derivatives - cash flow hedges:                  
Interest rate swaps 8
 27
 22
 44
 Net derivative gains (losses)
Interest rate swaps 4
 4
 12
 10
 Net investment income
Interest rate forwards (1) 1
 (5) —
 Net derivative gains (losses)
Interest rate forwards 1
 —
 2
 2
 Net investment income
Foreign currency swaps 282
 69
 882
 169
 Net derivative gains (losses)
Foreign currency swaps (1) —
 (1) (1) Net investment income
Credit forwards —
 ���
 1
 3
 Net derivative gains (losses)
Interest rate derivatives 6
 6
 11
 10
 Net investment income
Interest rate derivatives 5
 —
 (1) —
 Net investment gains (losses)
Interest rate derivatives —
 —
 —
 20
 Net derivative gains (losses)
Foreign currency exchange rate derivatives (1) (1) (2) (1) Net investment income
Foreign currency exchange rate derivatives 34
 —
 81
 —
 Net investment gains (losses)
Foreign currency exchange rate derivatives —
 (398) —
 (238) Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax 293
 101
 913
 227
  44
 (393) 89
 (209) 
Income tax (expense) benefit (102) (36) (319) (80)  (9) 72
 (19) 35
 
Gains (losses) on cash flow hedges, net of income tax 191
 65
 594
 147
  35
 (321) 70
 (174) 
Defined benefit plans adjustment: (1)                  
Amortization of net actuarial gains (losses) (45) (48) (134) (150)  (7) (35) (14) (71) 
Amortization of prior service (costs) credit 5
 2
 16
 5
  —
 4
 1
 9
 
Amortization of defined benefit plan items, before income tax (40) (46) (118) (145)  (7) (31) (13) (62) 
Income tax (expense) benefit 14
 17
 42
 51
  2
 6
 3
 13
 
Amortization of defined benefit plan items, net of income tax (26) (29) (76) (94)  (5) (25) (10) (49) 
Total reclassifications, net of income tax $185
 $65
 $454
 $126
  $78
 $(416) $62
 $(301) 
__________________
(1)
These AOCI components are included in the computation of net periodic benefit costs. See Note 1011.


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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)


9.10. Other Revenues and Other Expenses
Other Revenues
Information on other revenues, which primarily includes fees related to service contracts from customers, was as follows:
  Three Months 
 Ended 
June 30,		 Six Months
Ended
June 30,
  2019 2018 2019 2018
  (In millions)
Prepaid legal plans $82
 $73
 $163
 $146
Recordkeeping and administrative services (1) 51
 55
 101
 113
Administrative services-only contracts 53
 53
 106
 109
Other revenue from service contracts from customers 5
 22
 24
 34
Total revenues from service contracts from customers 191
 203
 394
 402
Other 212
 198
 410
 400
Total other revenues $403
 $401
 $804
 $802
__________________
(1)Related to products and businesses no longer actively marketed by the Company.
Other Expenses
Information on other expenses was as follows:
  Three Months 
 Ended 
 June 30,		 Six Months
Ended
June 30,
  2019 2018 2019 2018
  (In millions)
General and administrative expenses $629
 $649
 $1,199
 $1,340
Pension, postretirement and postemployment benefit costs 26
 17
 52
 34
Premium taxes, other taxes, and licenses & fees 76
 88
 153
 183
Commissions and other variable expenses 454
 425
 895
 872
Capitalization of DAC (17) (9) (29) (19)
Amortization of DAC and VOBA 41
 79
 60
 167
Interest expense on debt 26
 28
 53
 54
Total other expenses $1,235
 $1,277
 $2,383
 $2,631
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Compensation$530
 $488
 $1,541
 $1,598
Pension, postretirement and postemployment benefit costs51
 41
 138
 199
Commissions132
 168
 398
 527
Volume-related costs69
 40
 164
 162
Affiliated expenses on ceded and assumed reinsurance149
 152
 521
 774
Capitalization of DAC(17) (59) (57) (285)
Amortization of DAC and VOBA(43) 212
 124
 420
Interest expense on debt26
 28
 79
 84
Premium taxes, licenses and fees62
 89
 210
 272
Professional services266
 235
 755
 662
Rent and related expenses, net of sublease income72
 38
 122
 108
Other(92) (68) (187) (71)
Total other expenses$1,205
 $1,364
 $3,808
 $4,450

Affiliated Expenses
Commissions and other variable expenses, capitalization of DAC and amortization of DAC and VOBA include the impact of affiliated reinsurance transactions. See Note 1214 for a discussion of affiliated expenses included in the table above.
10.11. Employee Benefit Plans
Pension and Other Postretirement Benefit Plans
As of October 1, 2018, except for the nonqualified defined benefit pension plan, the plan sponsor was changed from the Company to an affiliate (the “Transferred Plans”). The Company sponsorsremains a participating affiliate of the Transferred Plans. See Note 14 for additional information on related affiliated expenses.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Employee Benefit Plans (continued)

Through September 30, 2018, the Company sponsored and administersadministered various qualified and nonqualified defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. Participating affiliates are allocated an equitable share of net expense related to the plans, proportionate to other expenses being allocated to these affiliates.
TheThrough September 30, 2018, the Company also providesprovided certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. Participating affiliates are allocated a proportionate share of net expense and contributions related to the postemployment and other postretirement plans.

The components of net periodic benefit costs, reported in other expenses, were as follows:
72
 Three Months 
 Ended 
June 30,
 2019 2018
 
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
 (In millions)
Service costs$5
 $—
 $39
 $2
Interest costs11
 —
 93
 14
Expected return on plan assets—
 —
 (132) (18)
Amortization of net actuarial (gains) losses7
 —
 44
 (9)
Amortization of prior service costs (credit)—
 —
 —
 (4)
Allocated to affiliates(5) —
 (21) 8
Net periodic benefit costs (credit)$18
 $—
 $23
 $(7)

 Six Months
Ended
June 30,
 2019 2018
 
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
 (In millions)
Service costs$9
 $—
 $79
 $3
Interest costs23
 —
 186
 25
Expected return on plan assets—
 —
 (263) (36)
Amortization of net actuarial (gains) losses14
 —
 88
 (17)
Amortization of prior service costs (credit)(1) —
 —
 (9)
Allocated to affiliates(11) —
 (38) 13
Net periodic benefit costs (credit)$34
 $—
 $52
 $(21)

12. Income Tax
For the three months and six months ended June 30, 2019, the effective tax rate on income (loss) before provision for income tax was 13% and 9%, respectively. The Company’s effective tax rate for both periods differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income and tax credits.
For both the three months and six months ended June 30, 2018, the effective tax rate on income (loss) before provision for income tax was 9%. The Company’s effective tax rate for both periods differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income, tax credits and a non-cash transfer of assets from a wholly-owned U.K. investment subsidiary to Metropolitan Life Insurance Company.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Employee Benefit Plans (continued)


The components of net periodic benefit costs were as follows:
 Three Months 
 Ended 
 September 30,
 2017 2016
 
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
 (In millions)
Service costs$40
 $—
 $49
 $3
Interest costs98
 16
 100
 20
Divestitures and curtailment costs (1)3
 2
 (1) (1)
Expected return on plan assets(121) (16) (139) (20)
Amortization of net actuarial (gains) losses45
 —
 45
 3
Amortization of prior service costs (credit)—
 (5) —
 (2)
Allocated to affiliates(9) —
 (15) (3)
Net periodic benefit costs (credit)$56
 $(3) $39
 $—
 Nine Months
Ended
September 30,
 2017 2016
 
Pension
Benefits
 
Other
Postretirement
Benefits
 
Pension
Benefits
 
Other
Postretirement
Benefits
 (In millions)
Service costs$120
 $3
 $155
 $7
Interest costs295
 50
 314
 62
Divestitures and curtailment costs (1)3
 2
 (1) 26
Expected return on plan assets(362) (48) (389) (56)
Amortization of net actuarial (gains) losses134
 —
 143
 7
Amortization of prior service costs (credit)(1) (15) —
 (5)
Allocated to affiliates(26) (1) (50) (7)
Net periodic benefit costs (credit)$163
 $(9) $172
 $34
__________________
(1)During the three months and nine months ended September 30, 2016, the Company recognized curtailment charges on certain postretirement benefit plans in connection with the sale to MassMutual of MetLife, Inc.’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc.
11.13. Contingencies, Commitments and Guarantees

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

Contingencies
Litigation
The Company is a defendant in a large number of litigation matters. Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed below and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, mortgage lending bank, employer, investor, investment advisor, broker-dealer, and taxpayer.
The Company also receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority, as well as from local and national regulators and government authorities in jurisdictions outside the United States where the Company conducts business. The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. The Company cooperates in these inquiries.
In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
DueIt is not possible to predict the vagaries of litigation, theultimate outcome of a litigation matterall pending investigations and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will view the relevant evidence and applicable law.
legal proceedings. The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at SeptemberJune 30, 2017.2019. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position. Given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Matters as to Which an Estimate Can Be Made
For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of SeptemberJune 30, 2017,2019, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $350 million.$175 million.
Matters as to Which an Estimate Cannot Be Made
For other matters disclosed below, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.


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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11.13. Contingencies, Commitments and Guarantees (continued)


Asbestos-Related Claims
Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life Insurance Company has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life Insurance Company issued liability or workers’ compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life Insurance Company’s employees during the period from the 1920’s through approximately the 1950’s and allege that Metropolitan Life Insurance Company learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life Insurance Company believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life Insurance Company. Metropolitan Life Insurance Company employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances.
Claims asserted against Metropolitan Life Insurance Company have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life Insurance Company’s defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life Insurance Company owed no duty to the plaintiffs — it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs did not rely on any actions of Metropolitan Life Insurance Company; (iii) Metropolitan Life Insurance Company’s conduct was not the cause of the plaintiffs’ injuries; (iv) plaintiffs’ exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against Metropolitan Life Insurance Company, while other trial courts have denied Metropolitan Life Insurance Company’s motions. There can be no assurance that Metropolitan Life Insurance Company will receive favorable decisions on motions in the future. While most cases brought to date have settled, Metropolitan Life Insurance Company intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials.
As reported in the 20162018 Annual Report, Metropolitan Life Insurance Company received approximately 4,1463,359 asbestos-related claims in 2016. During2018. For the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, Metropolitan Life Insurance Company received approximately 2,7421,705 and 3,2671,754 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 20162018 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increaseupdate in its recorded liability at December 31, 2014.2018. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.
The ability of Metropolitan Life Insurance Company to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life Insurance Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.
The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.


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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11.13. Contingencies, Commitments and Guarantees (continued)


The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life Insurance Company’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against Metropolitan Life Insurance Company, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against Metropolitan Life Insurance Company, but which Metropolitan Life Insurance Company believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life Insurance Company’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.
Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through SeptemberJune 30, 2017.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission (“SEC”); federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”). The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.2019.
In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida
In July 2010, the Environmental Protection Agency (“EPA”) advisedalleged that Metropolitan Life Insurance Company, that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” thatsuccessor to New England Mutual Life Insurance Company, (“New England Mutual”) signed inand a third party owed costs under 1989 and 1992 with respect toagreements for the oversight and cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company, and the third party executed an Administrative Order on Consentagreement under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain on-going environmental testing at the Chemform Site. TheOn July 19, 2019, the EPA, may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reachedand the third party executed a settlement in principal onagreement to resolve the EPA’s claimclaims for past costs. The Company estimatescosts incurred through that date in connection with the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.Chemform Site.
Sales Practices Regulatory Matters
Regulatory authorities in a number of states and FINRA, and occasionally the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by Metropolitan Life Insurance Company. These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for these sales practices-related investigations or inquiries.
Total Control Accounts Litigation
Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as total control accounts (“TCA”), as a settlement option for death benefits.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)
Plaintiff filed this class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.
Other Litigation
Sun Life Assurance Company of Canada Indemnity Claim
In 2006, Sun Life Assurance Company of Canada (“Sun Life”), as successor to the purchaser of Metropolitan Life Insurance Company’s Canadian operations, filed a lawsuit in Toronto, seeking a declaration that Metropolitan Life Insurance Company remains liable for “market conduct claims” related to certain individual life insurance policies sold by Metropolitan Life Insurance Company that were subsequently transferred to Sun Life. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted Metropolitan Life Insurance Company’s motion for summary judgment. Both parties agreed to consider the indemnity claim through arbitration. In September 2010, Sun Life notified Metropolitan Life Insurance Company that a purported class action lawsuit was filed against Sun Life in Toronto alleging sales practices claims regarding the policies sold by Metropolitan Life Insurance Company and transferred to Sun Life.Life (the “Ontario Litigation”). On August 30, 2011, Sun Life notified Metropolitan Life Insurance Company that another purported class action lawsuit was filed against Sun Life in Vancouver, BC alleging sales practices claims regarding certain of the same policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. Sun Life contends that Metropolitan Life Insurance Company is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. In September 2018, the Court of Appeal for Ontario affirmed the lower court’s decision to not certify the sales practices claims in the Ontario Litigation. These sales practices cases against Sun Life are ongoing, and the Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation.
Voshall
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Table of Contents
Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
13. Contingencies, Commitments and Guarantees (continued)

Owens v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Los Angeles,(N.D. Ga., filed April 8, 2015)17, 2014)
Plaintiff filed this putative class action lawsuit on behalf of himself and all persons covered under a long-term group disability income insurance policy issued byfor whom Metropolitan Life Insurance Company established a Total Control Account (“TCA”) to public entities in California between April 8, 2011 and April 8, 2015. Plaintiffpay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company improperly reduced benefits by including cost of living adjustments and employee paid contributions in the employer retirement benefits and other income that reduces the benefit payable under such policies. Plaintiff asserts causes of action for declaratory relief, violationCompany’s use of the California Business & Professions Code, breachTCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of contract and breachprofits that Metropolitan Life Insurance Company realized on accounts owned by members of the implied covenantclass. In addition, plaintiff, on behalf of good faitha subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and fair dealing.granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. On July 29, 2019, the court preliminarily approved a proposed settlement in which Metropolitan Life Insurance Company has agreed to pay $80 million to resolve the claims of all class members. The settlement does not include or constitute an admission, concession, or finding of any fault, liability, or wrongdoing by Metropolitan Life Insurance Company. The Company intends to defend this action vigorously.accrued the full amount of the settlement payment in prior periods.
Martin v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Contra Costa, filed December 17, 2015)
Plaintiffs filed this putative class action lawsuit on behalf of themselves and all California persons who have been charged compound interest by Metropolitan Life Insurance Company in life insurance policy and/or premium loan balances within the last four years. Plaintiffs allege that Metropolitan Life Insurance Company has engaged in a pattern and practice of charging compound interest on life insurance policy and premium loans without the borrower authorizing such compounding, and that this constitutes an unlawful business practice under California law. Plaintiff assertsPlaintiffs assert causes of action for declaratory relief, violation of California’s Unfair Competition Law and Usury Law, and unjust enrichment. Plaintiff seeksPlaintiffs seek declaratory and injunctive relief, restitution of interest, and damages in an unspecified amount. On April 12, 2016, the court granted Metropolitan Life Insurance Company’s motion to dismiss. Plaintiffs have appealed this ruling.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notesruling to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Contingencies, Commitments and Guarantees (continued)

Lau v. Metropolitan Life Insurance Company (S.D.N.Y. filed, December 3, 2015)
This putative class action lawsuit was filed by a single defined contribution plan participant on behalfUnited States Court of all ERISA plans whose assets were invested in Metropolitan Life Insurance Company’s “Group Annuity Contract Stable Value Funds” withinAppeals for the past six years. The suit alleges breaches of fiduciary duty under ERISA and challenges the “spread” with respect to the stable value fund group annuity products sold to retirement plans. The allegations focus on the methodology Metropolitan Life Insurance Company uses to establish and reset the crediting rate, the terms under which plan participants are permitted to transfer funds from a stable value option to another investment option, the procedures followed if an employer terminates a contract, and the level of disclosure provided. Plaintiff seeks declaratory and injunctive relief, as well as damages in an unspecified amount.Ninth Circuit. The Company intends to defend this action vigorously.
Newman v. Metropolitan Life Insurance Company (N.D. Ill., filed March 23, 2016)
Plaintiff filed this putative class action alleging causes of action for breach of contract, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, based on Metropolitan Life Insurance Company’s class-wide increase in premiums charged for long-term care insurance policies. Plaintiff alleges a class consistingbehalf of herself and all persons over age 65 who selected a Reduced Pay at Age 65 payment feature on their long-term care insurance policies and whose premium rates were increased after age 65. Plaintiff asserts that premiums could not be increased for these class members and/or that marketing material was misleading as to Metropolitan Life Insurance Company’s right to increase premiums. Plaintiff seeks unspecified compensatory, statutory and punitive damages, as well as recessionary and injunctive relief. On April 12, 2017, the court granted Metropolitan Life Insurance Company’s motion dismissingto dismiss the action with prejudice. On April 21, 2017, plaintiffaction. Plaintiff appealed this ruling.
Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)
Plaintiffs filed this putative class action against MetLife, Inc.ruling and Metropolitan Life Insurance Company in the U.S. DistrictUnited States Court of Appeals for the Central District of California, purportingSeventh Circuit reversed and remanded the case to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policythe district court for a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, Plaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York.further proceedings. The Company intends to defend this action vigorously.
Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)
Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On March 22, 2018, the Court conditionally certified the case as a collective action, requiring that notice be mailed to LTD claims specialists who worked for the Company from February 8, 2014 to the present. The Company intends to defend this action vigorously.
Sales Practices Claims
Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds, other products or the misuse of client assets. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys’ fees. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.
Summary
Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.


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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11.13. Contingencies, Commitments and Guarantees (continued)


It is not possibleTotal Asset Recovery Services, LLC. v. MetLife, Inc., et al. (Supreme Court of the State of New York, County of New York, filed December 27, 2017)
Total Asset Recovery Services (“The Relator”) brought an action under the qui tam provision of the New York False Claims Act (the “Act”) on behalf of itself and the State of New York. The Relator originally filed this action under seal in 2010, and the complaint was unsealed on December 19, 2017. The Relator alleges that MetLife, Inc., Metropolitan Life Insurance Company and several other insurance companies violated the Act by filing false unclaimed property reports with the State of New York from 1986 to predict2017, to avoid having to escheat the ultimate outcomeproceeds of more than 25,000 life insurance policies, including policies for which the defendants escheated funds as part of their demutualizations in the late 1990s. The Relator seeks treble damages and other relief. On April 3, 2019, the Court granted MetLife, Inc.’s and Metropolitan Life Insurance Company’s motion to dismiss and dismissed the complaint in its entirety. The Relator filed a notice of appeal with the Appellate Division of the New York State Supreme Court, First Division.
Miller, et al. v. Metropolitan Life Insurance Company (S.D.N.Y., filed January 4, 2019)
Plaintiff filed a second amended complaint in this putative class action, purporting to assert claims on behalf of all pending investigationspersons who replaced their MetLife Optional Term Life or Group Universal Life policy with a Group Variable Universal Life policy wherein Metropolitan Life Insurance Company allegedly charged smoker rates for certain non-smokers. Plaintiff seeks unspecified compensatory and legal proceedings. punitive damages, as well as other relief. The Company intends to defend this action vigorously.
Regulatory and Litigation Matters Related to Group Annuity Benefits
In some of2018, the matters referredCompany announced that it identified a material weakness in its internal control over financial reporting related to previously, very large and/or indeterminate amounts, including punitivethe practices and treble damages, are sought. Although in light of these considerationsprocedures for estimating reserves for certain group annuity benefits. Several regulators have made inquiries into this issue and it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pendingother jurisdictions may pursue similar investigations or inquiries. The Company is exposed to lawsuits and regulatory investigations, and could be exposed to additional legal proceedings are not likelyactions relating to have such an effect. However, given the large and/these issues. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or indeterminate amounts soughtawarded by courts or regulatory authorities under applicable escheat, tax, securities, ERISA, or other laws or regulations. The Company could incur significant costs in certain ofconnection with these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.actions.
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.3$3.5 billion and $3.9$3.6 billion at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $4.0 billion and $4.2$4.6 billion at Septemberboth June 30, 20172019 and December 31, 2016, respectively.2018.
Guarantees
In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $127$421 million, with a cumulative maximum of $367$793 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
13. Contingencies, Commitments and Guarantees (continued)

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
The Company’s recorded liabilities were $4 million at September 30, 2017 and $5 million at both June 30, 2019 and December 31, 2016, respectively,2018 for indemnities, guarantees and commitments.
12.14. Related Party Transactions

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Related Party Transactions (continued)

Service Agreements
The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include personnel, policy administrative functions and distribution services. For certain agreements, charges are based on various performance measures or activity-based costing. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual cost incurred by the Company and/or affiliate. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $575$704 million and $1.7$1.4 billion for the three months and ninesix months ended SeptemberJune 30, 2017,2019, respectively, and $631$468 millionand $1.7 billion$984 million for the three months and ninesix months ended SeptemberJune 30, 2016,2018, respectively. RevenuesTotal revenues received from affiliates related to these agreements recorded in universal life and investment-type product policy fees, were $31$7 million and $93$14 million for the three months and ninesix months ended SeptemberJune 30, 2017,2019, respectively, and $37$57 million and $104$115 million for the three months and ninesix months ended SeptemberJune 30, 2016,2018, respectively. Revenues received from affiliates related to these agreements, recorded in other revenues, were $27 million and $82 million for the three months and nine months ended September 30, 2017, respectively, and $37 million and $110 million for the three months and nine months ended September 30, 2016, respectively.
The Company also entered into agreements with affiliates to provide additional services necessary to conduct the affiliates’ activities. Typical services provided under these agreements include management, policy administrative functions, investment advice and distribution services. Expenses incurred by the Company related to these agreements, included in other expenses,were $378$0 for both the three months and six months endedJune 30, 2019, and $409 millionand $1.1 billion$707 million for the three months andninesix months endedSeptemberJune 30, 2017, respectively, and $304 million and $1.1 billion for the three months and nine months ended September 30, 2016,2018, respectively, and were reimbursed to the Company by these affiliates.
In 2018, the Company and the MetLife enterprise updated its shared facilities and services structure to more efficiently share enterprise assets and services. Effective as of October 1, 2018, the Company entered into new service agreements with its affiliates, which replaced existing agreements. Under the new agreements, the Company will no longer be the primary provider of services to affiliates and will receive further services from affiliates to conduct its activities.
The Company had net payables to affiliates, related to the items discussed above, of $142$170 million and $165$181 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
See Notes 5 and 1011 for additional information on related party transactions.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
14. Related Party Transactions (continued)

Related Party Reinsurance Transactions
The Company has reinsurance agreements with certain of MetLife, Inc.’s subsidiaries, including MetLife Reinsurance Company of Charleston (“MRC”), MetLife Reinsurance Company of Vermont, and Metropolitan Tower Life Insurance Company and General American Life Insurance Company, all of which are related parties. Additionally,
Information regarding the Company hassignificant effects of affiliated reinsurance agreements with Brighthouse Insurance, Brighthouse Life Insurance Companyon the interim condensed consolidated statements of NY (“Brighthouse NY”)operations and New England Life Insurance Company (“NELICO”), former subsidiaries of MetLife, Inc. that were part of the Separation. See Note 2.comprehensive income (loss) was as follows:

  Three Months Ended
June 30,		 Six Months
Ended
June 30,
  2019 2018 2019 2018
  (In millions)
Premiums        
Reinsurance assumed $2
 $2
 $5
 $5
Reinsurance ceded (27) (31) (59) (63)
Net premiums $(25) $(29) $(54) $(58)
Universal life and investment-type product policy fees        
Reinsurance assumed $—
 $(3) $—
 $(2)
Reinsurance ceded (3) (5) (9) (10)
Net universal life and investment-type product policy fees $(3) $(8) $(9) $(12)
Other revenues        
Reinsurance assumed $(5) $2
 $(9) $5
Reinsurance ceded 139
 130
 266
 263
Net other revenues $134
 $132
 $257
 $268
Policyholder benefits and claims        
Reinsurance assumed $1
 $—
 $2
 $4
Reinsurance ceded (25) (29) (58) (57)
Net policyholder benefits and claims $(24) $(29) $(56) $(53)
Interest credited to policyholder account balances        
Reinsurance assumed $8
 $11
 $15
 $22
Reinsurance ceded (3) (3) (6) (6)
Net interest credited to policyholder account balances $5
 $8
 $9
 $16
Other expenses        
Reinsurance assumed $—
 $2
 $—
 $10
Reinsurance ceded 139
 126
 264
 258
Net other expenses $139
 $128
 $264
 $268


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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12.14. Related Party Transactions (continued)



Information regarding the significant effects of affiliated reinsurance included on the consolidated statements of operations and comprehensive income (loss) was as follows:
 Three Months 
 Ended 
 September 30,		 Nine Months
Ended
September 30,
 2017 2016 2017 2016
 (In millions)
Premiums       
Reinsurance assumed$5
 $188
 $118
 $569
Reinsurance ceded(32) (9) (101) (30)
Net premiums$(27) $179
 $17
 $539
Universal life and investment-type product policy fees       
Reinsurance assumed$(2) $14
 $16
 $45
Reinsurance ceded(6) (40) (16) (109)
Net universal life and investment-type product policy fees$(8) $(26) $—
 $(64)
Other revenues       
Reinsurance assumed$4
 $9
 $30
 $(5)
Reinsurance ceded139
 143
 421
 429
Net other revenues$143
 $152
 $451
 $424
Policyholder benefits and claims       
Reinsurance assumed$4
 $197
 $63
 $532
Reinsurance ceded(26) (34) (90) (72)
Net policyholder benefits and claims$(22) $163
 $(27) $460
Interest credited to policyholder account balances       
Reinsurance assumed$12
 $8
 $36
 $24
Reinsurance ceded(3) (22) (9) (66)
Net interest credited to policyholder account balances$9
 $(14) $27
 $(42)
Other expenses       
Reinsurance assumed$(4) $9
 $33
 $456
Reinsurance ceded139
 145
 459
 417
Net other expenses$135
 $154
 $492
 $873

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on theinterim condensed consolidated balance sheets was as follows at:
 June 30, 2019 December 31, 2018
 Assumed Ceded Assumed Ceded
 (In millions)
Assets       
Premiums, reinsurance and other receivables$—
 $12,587
 $—
 $12,676
Deferred policy acquisition costs and value of business acquired—
 (165) —
 (175)
Total assets$—
 $12,422
 $—
 $12,501
Liabilities       
Future policy benefits$57
 $(6) $61
 $(1)
Policyholder account balances135
 —
 141
 —
Other policy-related balances1
 10
 6
 12
Other liabilities842
 12,688
 841
 12,366
Total liabilities$1,035
 $12,692
 $1,049
 $12,377

 September 30, 2017 December 31, 2016
 Assumed Ceded Assumed Ceded
 (In millions)
Assets       
Premiums, reinsurance and other receivables$50
 $12,730
 $229
 $13,334
Deferred policy acquisition costs and value of business acquired—
 (182) 38
 (198)
Total assets$50
 $12,548
 $267
 $13,136
Liabilities       
Future policy benefits$384
 $(4) $663
 $(4)
Policyholder account balances168
 —
 563
 —
Other policy-related balances104
 16
 212
 18
Other liabilities1,865
 12,969
 1,853
 13,065
Total liabilities$2,521
 $12,981
 $3,291
 $13,079
The Company ceded two blocks of business to an affiliate on a 75% coinsurance with funds withheld basis. Certain contractual features of these agreements qualify as embedded derivatives, which are separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivatives related to the funds withheld associated with these reinsurance agreements are included within other liabilities and were $15$21 million and $10$4 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively. Net derivative gains (losses) associated with these embedded derivatives were less than ($1)9) million and ($6)17) millionfor the three months and ninesix months ended SeptemberJune 30, 2017,2019, respectively, and less than ($1)$4 millionand ($17)$10 millionfor the threemonths and nine months ended September 30, 2016, respectively.
The Company ceded risks to an affiliate related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were $0 and $460 million at September 30, 2017 and December 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than ($1) million and ($110) million for the threemonths and ninesix months ended SeptemberJune 30, 2017, respectively, and ($33) million and $275 million for the threemonths and nine months ended September 30, 2016,2018, respectively.
Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and was $891$909 million and $767$461 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively. Net derivative gains (losses) associated with the embedded derivative were less than ($1)226) million and ($124)448) million for the threemonths and ninesix months ended SeptemberJune 30, 2017,2019, respectively, and ($3)and$128 million and ($512)$363 million for the threemonths and ninesix months ended SeptemberJune 30, 2016,2018, respectively.
The Company assumes risks from affiliates related to guaranteed minimum benefit guarantees written directly by the affiliates. These assumed reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $3 million and $390 million at September 30, 2017 and December 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than $1 million and $263 million for the threemonths and nine months ended September 30, 2017, respectively, $6 million and ($136) million for the threemonths andnine months endedSeptember 30, 2016, respectively.
In January 2017, Brighthouse NY and NELICO recaptured risks related to certain variable annuities, including guaranteed minimum benefits, reinsured by the Company. This recapture resulted in a decrease in cash and cash equivalents of $34 million, a decrease in premiums, reinsurance and other receivables of $77 million, a decrease in future policy benefits of $79 million, a decrease in policyholder account balances of $387 million and an increase in other liabilities of $76 million. For the nine months ended September 30, 2017, the Company recognized a gain of $178 million, net of income tax, as a result of this transaction.

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Metropolitan Life Insurance Company
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Related Party Transactions (continued)

In January 2017, the Company recaptured risks related to guaranteed minimum benefit guarantees on certain variable annuities reinsured by Brighthouse Insurance. This recapture resulted in an increase in investments and cash and cash equivalents of $428 million and a decrease in premiums, reinsurance and other receivables of $565 million. The Company recognized a loss of $89 million, net of income tax, for thenine months endedSeptember 30, 2017, as a result of this transaction.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations
 Page
Forward-Looking Statements and Other Financial Information
8583
Business
8583
Summary of Critical Accounting Estimates
8884
Results of Operations
8986
Adoption of New Accounting Pronouncements
9690
Future Adoption of New Accounting Pronouncements
9690
Non-GAAP and Other Financial Disclosures
9690

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Forward-Looking Statements and Other Financial Information
For purposes of this discussion, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”). Management’s narrative analysis of the Company’s results of operations is presented pursuant to General Instruction H(2)(a) of Form 10-Q. This narrative analysis should be read in conjunction with Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 20162018 (the “2016“2018 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, and the Company’s interim condensed consolidated financial statements included elsewhere herein.
This narrative analysis 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, or are tied to future periods, 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. Actual results could differ materially from those expressed or implied in the forward-looking statements. See “Note Regarding Forward-Looking Statements.”Statements” for cautionary language regarding forward-looking statements.
This narrative analysis includes references to our performance measure, operatingadjusted earnings, that is not based on accounting principles generally accepted in the United States of America (“GAAP”). This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also our GAAP measure of segment performance. Operating earnings allows analysis of our performance and facilitates comparisons to industry results. Forward-looking guidance provided on a non-GAAP basis cannot be reconciled to the most directly comparable GAAP measures on a forward-looking basis because net income may fluctuate significantly if net investment gains and losses and net derivative gains and losses move outside of estimated ranges. See “— Non-GAAP and Other Financial Disclosures” for a definition and discussion of this and other financial measures, and “— Results of Operations” for reconciliationsa reconciliation of the historical non-GAAP financial measuresmeasure to the most directly comparable GAAP measures.measure.
Business
Overview
MLIC is a provider of insurance, annuities, employee benefits and asset management to both individuals and groups.management. MLIC is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.
Other Key Information
Separation of Brighthouse
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 the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing 80.8% of those shares, to MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding. Certain MetLife affiliates hold MetLife, Inc. common stock and, as a result, participated in the distribution.

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U.S. Retail Advisor Force Divestiture
In July 2016, MetLife, Inc. completed the sale to Massachusetts Mutual Life Insurance Company (“MassMutual”) of MetLife’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc. (the “U.S. Retail Advisor Force Divestiture”). MassMutual assumed all of the liabilities related to such assets that arise or occur at or after the closing of the sale. As part of the transactions, MetLife, Inc. and MassMutual entered into a product development agreement under which the part of MetLife’s former U.S. retail business now in Brighthouse will be the exclusive developer of certain annuity products to be issued by MassMutual. In the MassMutual purchase agreement, MetLife, Inc. agreed to indemnify MassMutual for certain claims, liabilities and breaches of representations and warranties up to limits described in the purchase agreement.
Extraordinary Dividends
In December 2016, MLIC distributed to MetLife, Inc., as a non-cash extraordinary dividend, all of the issued and outstanding shares of common stock of each of New England Life Insurance Company (“NELICO”) and General American Life Insurance Company (“GALIC”). See “— Results of Operations” and Note 3 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for further information.
Non-Bank SIFI
On December 18, 2014, the Financial Stability Oversight Council (“FSOC”) designated MetLife, Inc. as a non-bank systemically important financial institution (“non-bank SIFI”) subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of New York (collectively with the Federal Reserve Board, the “Federal Reserve”) and the Federal Deposit Insurance Corporation (the “FDIC”), as well as to enhanced supervision and prudential standards. On March 30, 2016, the U.S. District Court for the District of Columbia (the “D.C. District Court”) ordered that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded. On April 8, 2016, the FSOC appealed the D.C. District Court’s order to the United States Court of Appeals for the District of Columbia (“D.C. Circuit”), and oral argument was heard on October 24, 2016. In a Presidential Memorandum for the Secretary of the Treasury dated April 21, 2017, President Trump directed the Secretary of the Treasury to review the FSOC SIFI designation process for transparency, due process and other factors, and, pending the completion of the review and submission of the Secretary’s recommendations, to refrain from voting for any non-emergency designations. The Secretary’s review and report were due by October 18, 2017. As of November 8, 2017, the Secretary’s report has not yet been issued. On August 2, 2017, the D.C. Circuit ordered that the appeal be held in abeyance pending the issuance of that report by the Secretary of the Treasury. The D.C. Circuit also ordered the parties to file additional procedural motions to govern future proceedings by November 17, 2017, or within 30 days of the issuance of the Treasury Secretary’s report, whichever occurs first. If the FSOC prevails on appeal or designates MetLife, Inc. as systemically important as part of its ongoing review of non-bank financial companies, MetLife, Inc. could once again be subject to regulation as a non-bank SIFI. See “Business — Regulation — Potential Regulation of MetLife, Inc. as a Non-Bank SIFI” included in the 2016 Annual Report.
Regulatory Developments
The U.S. insurance industry is regulated primarily at the state level,following discussion on regulatory developments should be read in conjunction with some products and services also subject to federal regulation. In addition, we are subject to regulation under the insurance holding company laws of the states of domicile of our U.S. insurance companies. Furthermore, some of our operations, products and services are subject to consumer protection laws, securities regulation, environmental and unclaimed property laws and regulations, and to the Employee Retirement Income Security Act of 1974 (“ERISA”). If MetLife, Inc. were re-designated as a non-bank SIFI, it could also be subject to regulation by the Federal Reserve and the FDIC and, as a subsidiary of MetLife, Inc., we could be affected by such regulation. We may also be affected by any additional capital requirements to which MetLife, Inc. may become subject as a global systemically important insurer. See “Business — Regulation,” “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” includedRegulation” in the 20162018 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments” and similarly named sections under the caption “Risk Factors.Developments.”

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The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) effected the most far-reaching overhaul of financial regulation in the United States in decades. However, President Trump and the majority party have expressed goals to amend Dodd-Frank. On June 8, 2017, the U.S. House of Representatives passed the Financial CHOICE Act of 2017, which proposes to amend or repeal various sections of Dodd-Frank. This proposed legislation is now being considered by the U.S. Senate. On February 3, 2017, President Trump issued an Executive Order that calls for a comprehensive review of laws, treaties, regulations, policies and guidance regulating the U.S. financial system, and requires the Secretary of the Treasury to consult with the heads of the member agencies of FSOC to identify any laws, regulations or requirements that inhibit federal regulation of the financial system in a manner consistent with the core principles identified in the Executive Order. The Secretary’s report on asset management and insurance was issued on October 26, 2017 and recommended activities-based evaluations of systemic risk in the insurance industry rather than an entity-based approach. The report also supported primary regulation of the U.S. insurance industry by the states rather than the federal government. See “Business — Regulation — Insurance Regulation” and “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated and Changes in Regulation and In Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” in the 2016 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q, for a discussion of Dodd-Frank and other U.S. regulation.
Insurance Regulation
Insurance Regulatory Examinations and Other Activities
NAIC
The InternationalNational Association of Insurance SupervisorsCommissioners (“NAIC”) has encouraged U.S.approved a new valuation manual containing a principle-based approach to the calculation of life insurance supervisors, such asreserves. Principle-based reserving is designed to better address reserving for products, including the current generation of products for which the current formulaic basis for reserve determination does not work effectively. The principle-based approach became effective on January 1, 2017 in the states where it had been adopted, to be followed by a three-year phase-in period (at the option of insurance companies on a product-by-product basis) for new business since it was enacted into law by the required number of state legislatures. New York has enacted legislation that will require principle-based reserving by no later than January 1, 2020. In May 2019, the New York State Department of Financial Services (“NYDFS”), to establish Supervisory Colleges for U.S.-based insurance groups with international operations, including MetLife, to facilitate cooperation and coordination among the insurance groups’ supervisors and to enhance the member regulators’ understanding of formally adopted a regulation, which was initially promulgated as an insurance group’s risk profile. In October 2017, a Supervisory College meeting was chaired byemergency regulation in December 2018, under which the NYDFS and attended by MetLife’s key U.S. and international regulators. MetLife has not received any reports or recommendationsis authorized to deviate from the Supervisory College meeting,reserve standards and we do not expect any outcomevaluation methods set forth in the NAIC Valuation Manual (the “Valuation Manual”), if the NYDFS determines that an alternative requirement would be in the best interest of the meeting to havepolicyholders of New York. The NYDFS is currently developing an amended version of the regulation that will contain deviations from the Valuation Manual formulaic floor that will be a material adverse effect on our business.requirement in New York.
ERISA, Fiduciary Considerations, and Other Pension and Retirement Regulation
We provide products and services to certain employee benefit plans that are subject to ERISA or the Internal Revenue Code of 1986, as amended (the “Code”). The applicable provisions of ERISA and the Code are subject to enforcement by theU.S. Department of Labor (“DOL”) issued regulations that largely were applicable in 2017 that expanded the definition of “investment advice” and required an advisor to meet an impartial or “best interests” standard (“BICE”), among others.but the regulations were formally vacated by the U.S. Court of Appeals for the Fifth Circuit in 2018. The Court of Appeals decision also vacated certain DOL regulations which became effective on June 9, 2017 broadened circumstances under which we may be deemed fiduciaries under ERISA in providingamendments to prohibited transaction exemptions. The DOL has announced that it plans to issue revised fiduciary investment advice increasingregulations in December 2019. At this time, we cannot predict what form those regulations may take or their potential impact on us.

In June 2019, the U.S Securities and Exchange Commission (“SEC”) adopted rules and interpretations addressing the standards of conduct applicable to broker-dealers and investment advisers and their associated persons. The conduct standards apply when providing brokerage and advisory products and services to benefit plans governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) and Individual Retirement Accounts (“IRAs”), as well as non-benefit plan retail clients. Under the SEC rules, broker-dealers are not deemed to be fiduciaries to their clients by virtue of making recommendations but must act in the best interest of individual investor retail clients when making a recommendation. The SEC’s best interest standard is not intended to track the DOL’s former BICE standard. Unlike the DOL rule that was vacated in 2018, there is no private right of action for violation of these SEC rules. The DOL is expected to adopt a new rule that will be consistent with the SEC’s rules, including the new best interest standard.
State regulators and legislatures in Nevada, New Jersey, Maryland and New York have proposed measures that would make broker-dealers, sales agents, and investment advisers and their representatives subject to a fiduciary duty when providing products and services to customers, including pension plans and IRAs. The SEC did not indicate an intent to pre-empt state regulation in this area, and some of the state proposals would allow for a private right of action. As a result of these developments, it is possible that it may become more costly to provide our potential exposureproducts and services to fiduciary liabilities. Regulationspension plans and IRAs operating in the states subject to the new rules.
Derivatives Regulation
In June 2019, the SEC adopted a set of rules that apply more onerous disclosureestablish capital and margin requirements for security-based swaps. The rules are part of the larger regulatory framework that the SEC is establishing over security-based swap dealers and major security-based swap participants that imposes registration, disqualification, recordkeeping and reporting requirements, and increase fiduciary requirements alsocross-border regulation. The rules will become effective 18 months after the adoption by the SEC of rules on January 1, 2018. On February 3, 2017, President Trump askedrecordkeeping and cross-border regulation of security-based swap dealers and major security-based swap participants, which have been proposed and are pending. We are monitoring these developments and evaluating the DOLpotential effect these rules might have on our business.
Securities, Broker-Dealer and Investment Adviser Regulation
In June 2019, the SEC adopted rules and interpretations addressing the standards of conduct applicable to update its analysisbroker-dealers and investment advisers and their associated persons, including Regulation Best Interest, which are primarily focused on offerings of the impactproducts and services to retail customers. As a result of the new regulations and possibly propose new regulations. On July 6, 2017,rules, beginning June 30, 2020, broker-dealers recommending our variable products to retail customers will be required to comply with a “best interest” standard, which the DOL published a new Request for Information regarding a possible delay inSEC did not define but did confirm would be higher than the applicability date of January 1, 2018 along with possible additional changescurrent suitability standard but not rise to the rule. Following this,level of being a fiduciary, and provide disclosures about their standard of conduct and conflicts of interest, including on August 31, 2017,new Form CRS. Investment advisers to retail clients will also be required to file new Form CRS with the DOL proposed to delay the applicability date to July 1, 2019. The public comment period for that proposal ended on September 15, 2017. The rule is also being challenged in the Fifth Circuit Court of Appeals (and elsewhere), where a decision is expected by the end of 2017. See “Risk Factors — RegulatorySEC and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” in the 2016 Annual Report. 
Potential Regulation of MetLife, Inc. as a Non-Bank SIFI
See “— Overview — Other Key Information — Non-Bank SIFI” above for recent developments concerning FSOC’s appealdeliver copies of the D.C. District Court’s order thatForm to their retail clients. As noted above, the designationSEC rules do not include a private right of MetLife, Inc. as a non-bank SIFI byaction. We are monitoring these developments and cannot at this time predict the FSOC be rescinded.
Regulation of Over-the-Counter Derivatives and Qualified Financial Contracts
Federal banking regulatorseffect they might have recently adopted new rules that will apply to certain qualified financial contracts, including many derivatives contracts, securities lending agreements and repurchase agreements, with certain banking institutions and certain of their affiliates. These new rules, which will begin to go into effect in 2019, will generally require the banking institutions and their applicable affiliates to include contractual provisions in their qualified financial contracts that limit or delay certain rights of their counterparties including counterparties’ default rights (such as the right to terminate the contracts or foreclose on collateral) and restrictions on assignments and transfers of credit enhancements (such as guarantees) arising in connection with the banking institution or an applicable affiliate becoming subject to a bankruptcy, insolvency, resolution or similar proceeding. To the extent that any of the derivatives, securities lending agreements or repurchase agreements that we enter into are subject to these new rules, it could limit our recovery in the event of a default and increase our counterparty risk.business.

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Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements. The most critical estimates include those used in determining:
(i)liabilities for future policy benefits and the accounting for reinsurance;
(ii)capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”);
(iii)estimated fair values of investments in the absence of quoted market values;
(iv)investment impairments;
(v)estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;
(vi)measurement of employee benefit plan liabilities;
(vii)
measurement of income taxes and the valuation of deferred tax assets; and
(viii)
liabilities for litigation and regulatory matters.

In applying our accountingthese 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 our business and operations. Actual results could differ from these estimates.
The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in the 20162018 Annual Report.

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Results of Operations
Consolidated Results
Business Overview. Overall In our U.S. segment, overall sales for the ninesix months ended SeptemberJune 30, 2017 increased over2019 decreased from the prior period levels reflecting higher sales from our U.S. segmentas a result of a large pension risk transfer transaction in boththe prior period in our Retirement and Income Solutions (“RIS”) and Group Benefits businesses. The increasebusiness. Excluding this transaction, sales in RIS wasour U.S. segment improved primarily driven bydue to an increase in funding agreement issuances, as well as higher sales of pension risk transfers and stable value products, partially offset by lower sales of structured settlements. Strong performance from our core and voluntary products resultedstable value products. Sales increased in a 22% increase in sales from our Group Benefits business. In connection withbusiness as compared to the Separation and the U.S. Retail Advisor Force Divestiture, we have discontinued the marketing of life and annuity products in ourprior period. Our MetLife Holdings segment which has ledconsists of operations relating to lower sales.products and businesses, previously included in our former retail business, that we no longer actively market.
Nine Months
Ended
September 30,		 Six Months
Ended
June 30,
2017 2016 2019 2018
(In millions)(In millions)
Revenues       
Premiums$17,597
 $16,801
 $10,206
 $15,869
Universal life and investment-type product policy fees1,706
 1,928
 1,024
 1,060
Net investment income7,955
 8,349
 5,439
 5,385
Other revenues1,148
 1,121
 804
 802
Net investment gains (losses)184
 115
 12
 (226)
Net derivative gains (losses)(317) (562) (102) 365
Total revenues28,273
 27,752
 17,383
 23,255
Expenses       
Policyholder benefits and claims and policyholder dividends20,388
 19,943
 11,944
 17,596
Interest credited to policyholder account balances1,660
 1,675
 1,325
 1,193
Capitalization of DAC(57) (285) (29) (19)
Amortization of DAC and VOBA124
 420
 60
 167
Interest expense on debt79
 84
 53
 54
Other expenses3,662
 4,231
 2,299
 2,429
Total expenses25,856
 26,068
 15,652
 21,420
Income (loss) before provision for income tax2,417
 1,684
 1,731
 1,835
Provision for income tax expense (benefit)475
 232
 156
 156
Net income (loss)1,942
 1,452
 1,575
 1,679
Less: Net income (loss) attributable to noncontrolling interests8
 (9) 1
 8
Net income (loss) attributable to Metropolitan Life Insurance Company$1,934
 $1,461
 $1,574
 $1,671
NineSix Months Ended SeptemberJune 30, 20172019 Compared with the NineSix Months Ended SeptemberJune 30, 20162018
During the ninesix months ended SeptemberJune 30, 2017,2019, net income (loss) before provision for income tax increased $733decreased $104 million ($490 million, net of income tax) from the prior period, primarily driven by favorable changesan unfavorable change in operating earnings and net derivative gains (losses). As previously discussed, MLIC distributed to MetLife, Inc., as a non-cash extraordinary dividend, all of the issued and outstanding shares of common stock of each of NELICO and GALIC in December 2016. This transaction resulted in a $40 million decreasepartially offset by favorable changes in net income for the nine months ended September 30, 2017 as compared to the prior period.investment gains (losses) and adjusted earnings.

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Management of Investment Portfolio and Hedging Market Risks with Derivatives.Derivatives. We manage our investment portfolio using disciplined asset/liability management principles, focusing on cash flow and duration to support our current and future liabilities. Our intent is to match the timing and amount of liability cash outflows with invested assets that have cash inflows of comparable timing and amount, while optimizing risk-adjusted net investment income and risk-adjusted total return. Our investment portfolio is heavily weighted toward fixed income investments, with over 80% of our portfolio invested in fixed maturity securities available-for-sale (“AFS”) and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities.

We purchase investments to support our insurance liabilities and not to generate net investment gains and losses. However, net investment gains and losses are incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign currency exchange rates, credit spreads and equity markets; counterparty specific factors such as financial performance, credit rating and collateral valuation; and internal factors such as portfolio rebalancing. Changes in these factors from period to period can significantly impact the levels of both impairments and realized gains and losses on investments sold.
We also use derivatives as an integral part of our management of the investment portfolio and insurance liabilities to hedge certain risks, including changes in interest rates, foreign currency exchange rates, credit spreads and equity market levels.
We use freestanding interest rate, equity, credit and currency derivatives to hedge certain invested assets and insurance liabilities. A small portion of these hedges are designated and qualify as accounting hedges, which reduce volatility in earnings. For those hedges not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings. During the first quarter of 2017, we began restructuring certain derivative hedges to partially stabilize volatility from nonqualified interest rate derivatives and to help meet prospective dividend objectives under varying interest rate scenarios. The restructuring of the hedge program is substantially complete in meeting our initial objectives. As part of this restructuring, we replaced certain nonqualified derivatives with derivatives that qualify for hedge accounting treatment. In addition, we also entered into replication transactions using interest rate swaps, which are accounted for at amortized cost under statutory guidelines and are nonqualified derivatives under GAAP. We actively evaluate market risk hedging needs and strategies to ensure our capitalliquidity objectives are met under a range of market conditions.
Certain direct or assumed variable annuity products with guaranteed minimum benefits contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). We use reinsurance and derivatives to hedge the market and other risks inherent in these variable annuity guarantees. Ceded reinsuranceOngoing refinement of directthe strategy may be required to take advantage of NAIC rules related to a statutory accounting election for derivatives that mitigate interest rate sensitivity related to variable annuity products with guaranteed minimum benefits generally contain embeddedguarantees. The restructured hedge strategy is classified as a macro hedge program, included in the non-VA program derivatives that are measured at estimated fair value separatelysection of the table below, to protect our overall statutory capital from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses).significant adverse economic conditions. The valuation of these embedded derivatives includes a nonperformance risk adjustment, which is unhedged, and can be a significant driver of net derivative gains (losses) and volatility in earnings, but does not have an economic impact on us.

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Net Derivative Gains (Losses). Direct assumed and cededassumed variable annuity embedded derivatives, as well as the associated freestanding derivatives,derivative hedges, are referred to as “VA program derivatives” in the following table.derivatives.” All other embedded derivatives and all freestanding derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table.derivatives.” The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:
Nine Months 
 Ended
September 30,		Six Months
Ended
June 30,
2017 20162019 2018
(In millions)(In millions)
Non-VA program derivatives      
Interest rate$68
 $992
$808
 $(176)
Foreign currency exchange rate(354) (50)(7) 159
Credit107
 45
141
 (19)
Equity26
 9
(265) (11)
Non-VA embedded derivatives(190) (664)(514) 364
Total non-VA program derivatives(343) 332
163
 317
VA program derivatives      
Embedded derivatives-direct and assumed guarantees:      
Market risks511
 (85)211
 281
Nonperformance risk adjustment(39) 173
(11) (21)
Other risks145
 (1,209)(109) (85)
Total617
 (1,121)91
 175
Embedded derivatives - ceded reinsurance:   
Market and other risks(110) 340
Nonperformance risk adjustment—
 (64)
Total(110) 276
Freestanding derivatives hedging direct and assumed embedded derivatives(481) (49)(356) (127)
Total VA program derivatives26
 (894)(265) 48
Net derivative gains (losses)$(317) $(562)$(102) $365

The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $675$154 million ($439122 million, net of income tax). This was primarily due to mid- and long-term interest rates decreasing less in the current period versus the prior period, unfavorably impacting receive-fixed interest rate swaps, swaptions and floors, primarily hedging long duration liability portfolios. Additionally, the U.S. dollar weakened in relation to other key currencies more in the current period relative to the prior period, unfavorably impacting foreign currency swaps that primarily hedge foreign currency-denominated bonds. These unfavorable changes were partially offset by a change in the value of the underlying assets favorablyunfavorably impacting non-VA embedded derivatives related to funds withheld on a certain reinsurance agreement. Also, equity markets increased more in the current period versus the prior period, unfavorably impacting equity options acquired primarily as part of our macro hedge program. These unfavorable impacts were partially offset by a net favorable change in interest rate impact due to: (i) long-term U.S. interest rates decreasing in the current period and increasing in the prior period, favorably impacting receive fixed interest rate swaps, options and total rate of return swaps; and (ii) mid-term rates decreasing in the current period and increasing in the prior period, negatively impacting interest rate caps. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.
The favorableunfavorable change in net derivative gains (losses) on VA program derivatives was $920$313 million ($598247 million, net of income tax). This was due to a favorablean unfavorable change of $1.1 billion$323 million ($694255 million, net of income tax) in freestanding derivatives hedging market risks in embedded derivatives, net of embedded derivatives market and other risks, on direct and assumed variable annuity embedded derivatives, net of the impact of market and other risks on the ceded reinsurance embedded derivatives and net of freestanding derivatives hedging those risks, partially offset by an unfavorablea favorable change of $148$10 million ($968 million, net of income tax) related to the change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives, net of the impact of the nonperformance risk adjustment on the ceded variable annuity embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.

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The foregoing favorableaforementioned unfavorable change of $1.1 billion$323 million ($694255 million, net of income tax) was primarily driven by changes in market factors and other risks.
The primary changes in market factors are summarized as follows:
Long-term interest rates decreased less in the current period than in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased 6 basis points in the current period and decreased 84 basis points in the prior period.
Key weighted average equity index levels increased more in the current period than in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives.
The primary changes in other risks are summarized as follows:
Updates to actuarial policyholder behavior assumptions within For example, the valuation model;
Impacts due to variable annuity reinsurance recaptures, which became effectiveS&P 500 Index increased 17% in the first quarter of 2017;
An increasecurrent period and 2% in the risk margin adjustment measuring policyholder behavior risks, which was affected by market and interest rate changes; andprior period.
A combination of other factors, which include fees being deducted from accounts and changes in the benefit base, premiums, lapses, withdrawals and deaths.
•
Long-term U.S. interest rates decreased in the current period and increased in the prior period, contributing to an unfavorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased 62 basis points in the current period and increased 39 basis points in the prior period. The favorable change in our freestanding derivatives resulted from the restructuring of our VA hedging strategy in 2018.
We calculate the nonperformance risk adjustment as the change in the embedded derivative discounted at the risk-adjusted rate (which includes our own credit spread to the extent that the embedded derivative is in-the-money) less the change in the embedded derivative discounted at the risk-free rate. The unfavorablefavorable change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives of $212$10 million ($1388 million, net of income tax) was primarily due to an unfavorablea favorable change of $190$27 million, before income tax, as a result of model changes and changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, andpartially offset by an unfavorable change of $22 million, before income tax, related to changes in our own credit spread. The favorable change in the nonperformance risk adjustment on the ceded variable annuity embedded derivatives of $64 million ($42 million, net of income tax) was due to a favorable change of $53 million, before income tax, as a result of the impact of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and a favorable change of $11$17 million, before income tax, related to changes in our own credit spread.
When equity index levels decrease in isolation, the direct and assumed variable annuity guarantees become more valuable to policyholders, which results in an increase in the undiscounted embedded derivative liability. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.
When the risk-free interest rate decreases in isolation, discounting the embedded derivative liability produces a higher valuation of the liability than if the risk-free interest rate had remained constant. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free interest rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.
When our own credit spread increases in isolation, discounting the embedded derivative liability produces a lower valuation of the liability than if our own credit spread had remained constant. As a result, a gain is created from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees when the reinsurer’s credit spread increases in isolation. For each of these primary market drivers, the opposite effect occurs when they movethe driver moves in the opposite direction.
Generally, a higher portion of the ceded reinsurance for guaranteed minimum income benefits (“GMIBs”) is accounted for as an embedded derivative as compared to the direct guarantees since the settlement provisions of the reinsurance agreements generally meet the accounting criteria of “net settlement.” This mismatch in accounting can lead to significant volatility in earnings, even though the risks inherent in these direct guarantees are fully covered by the ceded reinsurance.

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Net Investment Gains (Losses). The favorable change in net investment gains (losses) of $69$238 million ($45188 million, net of income tax) primarily reflects higher gains on sales of real estate joint ventures and lower impairments of fixed maturity securities AFS in the current period versus losses in the prior period and mark-to-market gains on equity securities. Thesesecurities in the current period versus mark-to-market losses in the prior period, which were measured at estimated fair value through net income. Additionally, there were lower alternative investment impairments and losses in the current period. However, these favorable changes were partially offset by lower gains on sales of fixed maturity and equity securities, lower foreign currency transaction gains, increased provisions for loan losses on mortgage loans and higher impairments on leveraged leases.real estate joint ventures.
Actuarial Assumption Review. Results for
Taxes. For the current period include a $74 million ($48 million, net of income tax) gain associated with our annual review of actuarial assumptions related to reserves and DAC, of which an $18 million ($12 million, net of income tax) gain was recognized in net derivative gains (losses). Of the $74 million gain, a $141 million ($92 million, net of income tax) gain was associated with DAC, offset by a $67 million ($44 million, net of income tax) loss related to reserves. The $18 million gain recognized in net derivative gains (losses) associated with this annual review of actuarial assumptions was included within the other risks in embedded derivatives - direct and assumed guarantees caption in the table above.
As a result of our annual review of actuarial assumptions, changes were made to policyholder behavior, mortality and operational assumptions. The significant impacts of the assumption review were on the individual life and variable annuity blocks of business and are summarized as follows:
Changes in the mortality assumptions resulted in a net charge of $23 million ($15 million, net of income tax).
Changes in policyholder behavior assumptions resulted in reserve increases, net of reinsurance, which were partially offset by favorable DAC, resulting in a net charge of $45 million ($29 million net of income tax).
Operational updates, most notably related to updates to maintenance expense assumptions and the closed block projections, resulted in a net gain of $142 million ($92 million, net of income tax).
Results for the prior period include a $722 million ($469 million, net of income tax) loss associated with the annual review of actuarial assumptions related to reserves and DAC, of which a $798 million ($519 million, net of income tax) loss was recognized in net derivative gains (losses). Of the $722 million charge, a $787 million ($512 million, net of income tax) loss was related to reserves while a $65 million ($43 million, net of income tax) gain was associated with DAC.
Taxes. Income tax expense for the ninesix months ended SeptemberJune 30, 2017 was $475 million, or 20% of2019, our effective tax rate on income (loss) before provision for income tax compared with income tax expense of $232 million, or 14% of income before provision for income tax, for the nine months ended September 30, 2016.was 9%. Our effective tax rates differrate differed from the U.S. statutory rate of 35%primarily due to tax benefits related to non-taxable investment income and tax creditscredits. For the six months ended June 30, 2018, our effective tax rate on income (loss) before provision for low income housing. Current and prior period results includetax was 9%. Our effective tax rate differed from the U.S. statutory rate primarily due to tax benefits related to non-taxable investment income, tax credits and a non-cash transfer of $25 million and $36 million, respectively, for tax audit settlements.assets from a wholly-owned U.K. investment subsidiary to Metropolitan Life Insurance Company.
OperatingAdjusted Earnings. As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use operatingadjusted earnings, which does not equate to net income (loss), as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. We believe that the presentation of operatingadjusted earnings, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. OperatingAdjusted earnings allows analysis of our performance and facilitates comparisons to industry results. OperatingAdjusted earnings should not be viewed as a substitute for net income (loss). OperatingAdjusted earnings increased $329$79 million, net of income tax, to $2.3$1.8 billion, net of income tax, for the ninesix months ended SeptemberJune 30, 20172019 from $1.9$1.7 billion, net of income tax, for the ninesix months ended SeptemberJune 30, 2016.2018.

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Reconciliation of net income (loss) to operatingadjusted earnings
 Nine Months
Ended
September 30,
 2017
2016
 (In millions)
Net income (loss)$1,942
 $1,452
Less: Net investment gains (losses)184
 115
Less: Net derivative gains (losses)(317) (562)
Less: Other adjustments to net income (1)(373) (306)
Less: Provision for income tax (expense) benefit177
 263
Operating earnings$2,271
 $1,942
  Six Months
Ended
June 30,
  2019 2018
  (In millions)
Net income (loss)
$1,575
 $1,679
Less: adjustments from net income (loss) to adjusted earnings:
   
Revenues:   
 Net investment gains (losses)12
 (226)
 Net derivative gains (losses)(102) 365
 Premiums—
 —
 Universal life and investment-type product policy fees44
 47
 Net investment income(147) (192)
 Other revenues—
 —
Expenses:   
 Policyholder benefits and claims and policyholder dividends(130) (31)
 Interest credited to policyholder account balances8
 1
 Capitalization of DAC—
 —
 Amortization of DAC and VOBA74
 16
 Interest expense on debt—
 —
 Other expenses—
 7
Provision for income tax (expense) benefit50
 5
Adjusted earnings$1,766
 $1,687
__________________
(1)See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.
Reconciliation of revenues to operating revenues and expenses to operating expenses
 Nine Months
Ended
September 30,
 2017 2016
 (In millions)
Total revenues$28,273
 $27,752
Less: Net investment gains (losses)184
 115
Less: Net derivative gains (losses)(317) (562)
Less: Other adjustments to revenues (1)(226) (317)
Total operating revenues$28,632
 $28,516
Total expenses$25,856
 $26,068
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)(66) (281)
Less: Other adjustments to expenses (1)213
 270
Total operating expenses$25,709
 $26,079
__________________
(1)See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.
Consolidated Results — OperatingAdjusted Earnings
NineSix Months Ended SeptemberJune 30, 20172019 Compared with the NineSix Months Ended SeptemberJune 30, 20162018
Unless otherwise stated, all amounts discussed below are net of income tax.
As previously mentioned, MLIC transferredOverview. The primary drivers of the issuedincrease in adjusted earnings were lower expenses, favorable DAC and outstanding shares of NELICO’sinsurance-related liability refinements, favorable underwriting and GALIC’s common stock to MetLife, Inc. in the form of a non-cash extraordinary dividend in December 2016. This transaction, which is excluded from the discussion below, resulted in an $87 million decrease in operating earnings as compared to the prior period.larger invested asset base, partially offset by lower investment yields and higher interest credited expenses.

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Business Growth. An increasehigher average invested assets in net investment incomeour U.S. segment. The higher asset base in our U.S. segment was due to asset growththe impact of increased net flows, primarily from funding agreement issuances in our U.S. segment,the current period, and the impact of a large pension risk transfer transaction in the prior period. However, consistent with the growth in the U.S. segment’s average invested assets, from increased net flows in our RIS business. This increase was partially offset by negative net flows, primarily as a result of a reduced asset base in our MetLife Holdings segment, due to the recapture of two assumed single-premium deferred annuity reinsurance agreements with Brighthouse. Consistent with the growth in average invested assets from increased premiums in the U.S. segment, interest credited expenses on long-duration contractsliabilities increased. In our MetLife Holdings segment, negative net flows in our deferred annuities business and a decrease in universal life salesdeposits resulted in lower asset-based fee income, decreasing operating earnings. Higher interest credited on insurance liabilities and DAC amortization in our MetLife Holdings segment also decreased operatingadjusted earnings. In our U.S. segment, an increase in premiums, feeshigher volume-related and other revenues, coupled with a decline in direct and allocatedpremium tax expenses waswere partially offset by higher volume-relatedlower direct expenses, including certain employee-related expenses. The current periodnet increase in expenses, which included the favorable impact of the 2019 abatement of the annual health insurer fee under the Patient Protection and Affordable Care Act, was more than offset by a corresponding decreaseincrease in premiums, fees and other revenues. The combined impact of the items discussed above decreased operatingaffecting our business growth, net of lower DAC amortization, increased adjusted earnings by $67$23 million.
Market Factors. Market factors, including interest rate levels, variability in equity market returns, and foreign currency exchange rate fluctuations, continued to impact our results; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields were negatively affected by lower prepayment fees,income from derivatives, lower yields on fixed income on derivativessecurities and lower returns on real estate joint ventures. In addition,investments. Additionally, there were lower earnings on our securities lending program decreased, which primarily resultedresulting from lower margins due to the impact of a flatter yield curve. These declines wereThe resulting decrease in net investment income was partially offset by higher income on other limited partnership interests, driven by improvements in equity market performance,prepayment fees and increased yields on fixed maturity securities.mortgage loans. In our MetLife Holdingsthe U.S. segment, higher equity returns drove an increase in average separate account balances, resulting in higher asset-based fees in our deferred annuities business. Certain of our funding agreements and guaranteed interest contract liabilities have interest credited rates that are contractually tied to current market rates, specifically the 3-month London Interbank Offered Rate (“LIBOR”) and, as a result, a higher average interest credited raterates on deposit-type liabilities, partially offset by lower rates on long-duration liabilities, drove an increase in interest credited expense. In addition, the crediting rate on certain long-duration insurance contracts increased, which decreased operating earnings.expenses. The changes in market factors discussed above resulted in a $22$130 million decrease in operatingadjusted earnings.
Underwriting Actuarial Assumption Review and Other Insurance Adjustments. Favorable underwriting increased operatingadjusted earnings by $87$34 million due to favorable mortality in our MetLife Holdings and U.S. segments and favorable morbidity in our U.S. segment. Mortality results improved by $58 million primarily as a result of lower life claim severity in our MetLife Holdings segment and favorable claims experience in our U.S. segment, mainly driven by a prior period development in our term life business and favorable current period mortality in our pension risk transfer, structured settlement and post-retirement benefit businesses. These positive results were partially offset by less favorable mortality in our accidental death and dismemberment and universal life businesses, driven by higher incidence and severity, as well as less favorable mortality in our specialized life insurance and income annuities businesses. A $29 million increase in operating earnings was driven by favorable morbidity experience in our U.S. segment, partially offset by unfavorable morbidityless favorable mortality experience due to higher claim severity and volume in our long-term carelife business in our MetLife Holdings segment. TheFavorable mortality experience was due to favorable morbidityclaims experience in our U.S. segmentterm life business (primarily due to lower severity in the current period and the unfavorable impact of the influenza virus in the prior period), partially offset by less favorable mortality in our universal life, pension risk transfer and structured settlement businesses. Favorable morbidity experience was due to favorable claim experience in our Group Benefits business, primarily driven by lower claim severity, favorable renewal results and an increase in recoveries in our group disability business. In addition, growth in the result ofbusiness and favorable prior period development, current periodclaims experience in both our accident & health and individual disability businesses contributed to the increase in adjusted earnings. These increases were partially offset by less favorable dental results, driven by an increase in utilization and the impact of pricing actions in our dental business, as well as favorable claims experience in our group disability and accident & health businesses. The impact in both periods of our annual actuarial assumption review resulted in a $170 million increase in operating earnings, primarily driven by favorable DAC unlockingsunfavorable prior period development in the current period compared to unfavorable DAC unlockings in the prior period, primarily in the life business in our MetLife Holdings segment.period. Refinements to DAC and certain insurance-related liabilities, which were recorded in both periods, resulted in an increase in operating earnings of $73 million. This includes current period refinements in the MetLife Holdings segment of (i) favorable reserve adjustments resulting from modeling improvements in the reserving process of $32 million and $28 million, in our life and long-term care businesses, respectively; (ii) a $10 million unfavorable DAC adjustment related to certain participating whole life business assumed from Brighthouse; and (iii) a net unfavorable impact from an affiliated life reinsurance recapture. This also includes an unfavorable prior period refinement resulting from modeling improvements in the reserving process for our universal life business in the MetLife Holdings segment, which increased operating earnings by $25 million in the current period.
Expenses and Taxes. An $88$50 million increase in adjusted earnings, primarily in our U.S. segment.
Expenses. Adjusted earnings increased $118 million as a result of lower expenses, was primarily due to an increasedeclines in (i) interest on uncertain tax positions, (ii) legal expenses, (iii) expenses as a result of enterprise-wide initiatives, and (iv) employee-related costs, partially offset by higher costs associated with corporate initiatives and projects, higher employee-related expenses and expenses incurredincluding the continued investment in the current period related to the guaranty fund assessment for Penn Treaty Network America Insurance Company, partially offset by lower costs as a result of the U.S. Retail Advisor Force Divestiture. Costs associated with corporate initiatives and projects include leasehold impairments, Separation-related costs and costs related to our unit cost initiative.
Taxes. For the six months ended June 30, 2019, our effective tax rate on adjusted earnings was 10%. Our effective tax rates differrate differed from the U.S. statutory rate of 35%primarily due to tax benefits from non-taxable investment income and tax credits for investments in low income housing. Current and prior period results includecredits. For the six months ended June 30, 2018, our effective tax benefits of $25 million and $36 million, respectively, forrate on adjusted earnings was 9%. Our effective tax audit settlements.

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Other. In connection withrate differed from the Separation, annuities reinsurance activity with Brighthouse increased operating earnings by $254 million. This favorable impact wasU.S. statutory rate primarily due to the recapture in 2016tax benefits from non-taxable investment income, tax credits and a non-cash transfer of certain single-premium deferred annuity reinsurance agreements and the elimination of interest credited payments on the related reinsurance payable, as well as lower DAC amortization. This increase was partially offset by the net unfavorable impact in the current periodassets from the recapture and novation of, as well as refinementsa wholly-owned U.K. investment subsidiary to assumed and ceded agreements covering certain variable annuity business.Metropolitan Life Insurance Company.
Adoption of New Accounting Pronouncements
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.
Future Adoption of New Accounting Pronouncements
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.
Non-GAAP and Other Financial Disclosures
In this report, the Company presents certain measures of its performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.

The following non-GAAP financial measuresmeasure should not be viewed as substitutesa substitute for the most directly comparable financial measuresmeasure calculated in accordance with GAAP:
Non-GAAP financial measures:measure:Comparable GAAP financial measures:measure:
(i)operating revenuesadjusted earnings(i)revenues
(ii)operating expenses(ii)expenses
(iii)operating earnings(iii)net income (loss)
ReconciliationsA reconciliation of thesethis non-GAAP measuresfinancial measure to the most directly comparable historical GAAP measures arefinancial measure is included in the results of operations, see “— Results of Operations.” Reconciliations of thesethis non-GAAP measuresmeasure to the most directly comparable GAAP measures ismeasure are not accessible on a forward-looking basis because we believe it is not possible without unreasonable effortseffort to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income.
Our definitions of the various non-GAAP and other financial measures discussed in this report may differ from those used by other companies:companies.
OperatingAdjusted earnings
This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operatingadjusted earnings is also our GAAP measure of segment performance. OperatingAdjusted earnings allows analysis of our performance and facilitates comparisons to industry results.
OperatingAdjusted earnings is defined as operatingadjusted revenues less operatingadjusted expenses, both net of income tax.

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OperatingAdjusted revenues and operatingadjusted expenses
TheseThe financial measures of adjusted revenues and adjusted expenses focus on our 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 MLIC 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 MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. OperatingAdjusted revenues also excludes net investment gains (losses) and net derivative gains (losses).
The following additional adjustments are made to revenues, in the line items indicated, in calculating operatingadjusted 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 GMIB (“guaranteed minimum income benefit”) fees (“GMIB Fees”fees”); and
Net investment income: (i) includes adjustments for 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 (“Investment hedge adjustments”), (ii) excludes post-tax operatingadjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, and (iii) excludes certain amounts related to securitization entities that are variable interest entities (“VIEs”) consolidated under GAAP and (iv) 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) under GAAP.

The following additional adjustments are made to expenses, in the line items indicated, in calculating operatingadjusted 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) 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”costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”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;
Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Feesfees and GMIB Costscosts, and (iii) Market Value Adjustments;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 toto: (i) noncontrolling interests, (ii) acquisition, integration and other costs, and (iii) goodwill impairments.
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’sour 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.
The following additional information is relevant to an understanding of our performance results:
We sometimes refer to sales activity for various products. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.
Asymmetrical and non-economic accounting refers to: (i) the portion of net derivative gains (losses) on embedded derivatives attributable to the inclusion of our credit spreads in the liability valuations, (ii) hedging activity that generates net derivative gains (losses) and creates fluctuations in net income because hedge accounting cannot be achieved and the item being hedged does not a have an offsetting gain or loss recognized in earnings, and (iii) impact of changes in foreign currency exchange rates on the re-measurement of foreign denominated unhedged funding agreements and financing transactions to the U.S. dollar and the re-measurement of certain liabilities from non-functional currencies to functional currencies. We believe that excluding the impact of asymmetrical and non-economic accounting from total GAAP results enhances investor understanding of our performance by disclosing how these accounting practices affect reported GAAP results.
Item 4. Controls and Procedures
Management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive OfficerCEO and Chief Financial OfficerCFO have concluded that these disclosure controls and procedures are effective.
There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended SeptemberJune 30, 20172019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II — Other Information
Item 1. Legal Proceedings
The following should be read in conjunction with (i) Part I, Item 3, of the 2016 Annual Report; (ii) Part II, Item 1, of Metropolitan Life Insurance Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017; and (iii)See Note 1113 of the Notes to the Interim Condensed Consolidated Financial Statements in Part I of this report.Statements.
Asbestos-Related Claims
Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages.
As reported in the 2016 Annual Report, Metropolitan Life Insurance Company received approximately 4,146 asbestos-related claims in 2016. During the nine months ended September 30, 2017 and 2016, Metropolitan Life Insurance Company received approximately 2,742 and 3,267 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.
Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2017.
Regulatory Matters
The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the SEC; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.
In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida
In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain environmental testing at the Chemform Site. The EPA may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reached a settlement in principal on the EPA’s claim for past costs. The Company estimates that the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.
Total Control Accounts Litigation
Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as TCA, as a settlement option for death benefits.

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Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)
Plaintiff filed this class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.
Other Litigation
Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)
Plaintiffs filed this putative class action against MetLife, Inc. and Metropolitan Life Insurance Company in the U.S. District Court for the Central District of California, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy for a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, Plaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York. The Company intends to defend this action vigorously.
Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)
Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. The Company intends to defend this action vigorously.
Summary
Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, investor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

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Item 1A. Risk Factors
The following should be read in conjunction with, and supplements and amends, theCertain factors that may affect the Company’s business or operations are described under “Risk Factors” in Part I, Item 1A, of the 20162018 Annual Report, as amended or supplemented by the information under “Risk Factors” in Part II, Item 1A, of Metropolitan Life Insurance Company’sour subsequently filed Quarterly ReportReports on Form 10-Q for the quarter ended June 30, 2017 (the “Second Quarter 2017 Report”). Other than as described in thisunder Item 1A, there1A. Risk Factors. There have been no material changes to our risk factors from the risk factors previously disclosed in the 20162018 Annual Report as amended or supplemented by such information in the Second Quarter 2017 Report.
Risks Related to Our Business
The following updates and replaces the similar risk factor entitled “Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results” included in the 2016 Annual Report.
Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results
Our earnings significantly depend upon the extent to which our actual claims experience is consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Such amounts are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. We cannot determine precisely the amounts which we will ultimately pay to settle our liabilities, and such amounts may vary from the estimated amounts, particularly when those payments may not occur until well in the future. We evaluate our liabilities periodically based on accounting requirements, which change from time to time, the assumptions used to establish the liabilities, as well as our actual experience. Reserve estimates in some instances are affected by our operating practices and procedures that are used, among other things, to support our assumptions with respect to the Company’s obligations to its policyholders and contractholders. To the extent that these practices and procedures do not accurately produce the data to support our assumptions our reserves may require adjustment. If the liabilities originally established for future benefit payments prove inadequate, we must increase them and/or reduce associated DAC and/or VOBA. Such adjustments could affect earnings negatively and have a material adverse effect on our business, results of operations and financial condition. See “Business — Policyholder Liabilities” included in the 2016 Annual Report. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated Results — Nine Months Ended September 30, 2017 Compared with the Nine Months Ended September 30, 2016 — Actuarial Assumption Review,” as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Deferred Policy Acquisition Costs and Value of Business Acquired” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Derivatives” included in the 2016 Annual Report for further information regarding the manner in which policyholder behavior and other events may differ from our assumptions and, thereby affect our financial results.

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Item 6. Exhibits
(Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about Metropolitan Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Metropolitan Life Insurance Company, its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and Metropolitan Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)
    Incorporated by Reference  
Exhibit No. Description Form File Number Exhibit Filing Date Filed or Furnished Herewith
             
31.1 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
31.2 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
         X
32.1 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
32.2 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         X
101.INS XBRL Instance Document.Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.         X
101.SCH Inline XBRL Taxonomy Extension Schema Document.         X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.         X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.         X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.         X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.         X
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
X


101
Table of Contents



Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




METROPOLITAN LIFE INSURANCE COMPANY
    
By:  /s/ William O’DonnellTamara L. Schock
  Name:     William O’DonnellTamara L. Schock
  Title: Executive Vice President and Chief
   Accounting Officer (Authorized Signatory
   and Principal Accounting Officer)
Date: NovemberAugust 8, 20172019


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