UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE
QUARTERLY PERIOD ENDED MARCH 31,
2011
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD
FROM TO
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Commission file number:
33-03094
MetLife Insurance Company of
Connecticut
(Exact name of registrant as
specified in its charter)
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Connecticut
(State or other jurisdiction
of
incorporation or organization)
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06-0566090
(I.R.S. Employer
Identification No.)
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1300 Hall Boulevard, Bloomfield, Connecticut
(Address of principal
executive offices)
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06002
(Zip
Code)
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(860) 656-3000
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
At May 12, 2011, 34,595,317 shares of the
registrants common stock, $2.50 par value per share,
were outstanding, of which 30,000,000 shares were owned
directly by MetLife, Inc. and the remaining
4,595,317 shares were owned by MetLife Investors Group,
Inc., a wholly-owned subsidiary of 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.
As used in this
Form 10-Q,
MICC, the Company, we,
our and us refer to MetLife Insurance
Company of Connecticut, a Connecticut corporation incorporated
in 1863, and its subsidiaries, including MetLife Investors USA
Insurance Company (MLI-USA). MetLife Insurance
Company of Connecticut is a wholly-owned subsidiary of MetLife,
Inc. (MetLife).
Note
Regarding Forward-Looking Statements
This Quarterly Report on
Form 10-Q,
including Managements Discussion and Analysis of Financial
Condition and Results of Operations, may contain or incorporate
by reference information that includes or is based upon
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements give expectations or forecasts of future events.
These statements can be identified by the fact that they do not
relate strictly to historical or current facts. They use words
such as anticipate, estimate,
expect, project, intend,
plan, believe and other words and terms
of similar meaning in connection with a discussion of future
operating or financial performance. In particular, these include
statements relating to future actions, prospective services or
products, future performance or results of current and
anticipated services or products, sales efforts, expenses, the
outcome of contingencies such as legal proceedings, trends in
operations and financial results.
Any or all forward-looking statements may turn out to be wrong.
They can be affected by inaccurate assumptions or by known or
unknown risks and uncertainties. Many such factors will be
important in determining the actual future results of MetLife
Insurance Company of Connecticut and its subsidiaries. These
statements are based on current expectations and the current
economic environment. They involve a number of risks and
uncertainties that are difficult to predict. These statements
are not guarantees of future performance. Actual results could
differ materially from those expressed or implied in the
forward-looking statements. Risks, uncertainties, and other
factors that might cause such differences include the risks,
uncertainties and other factors identified in MetLife Insurance
Company of Connecticuts filings with the
U.S. Securities and Exchange Commission (the
SEC). These factors include: (1) difficult
conditions in the global capital markets; (2) increased
volatility and disruption of the capital and credit markets,
which may affect our ability to seek financing or access our
credit facilities; (3) uncertainty about the effectiveness
of the U.S. governments programs to stabilize the
financial system, the imposition of fees relating thereto, or
the promulgation of additional regulations; (4) impact of
comprehensive financial services regulation reform on us;
(5) exposure to financial and capital market risk;
(6) changes in general economic conditions, including the
performance of financial markets and interest rates, which may
affect our ability to raise capital, generate fee income and
market-related revenue and finance statutory reserve
requirements and may require us to pledge collateral or make
payments related to declines in value of specified assets;
(7) potential liquidity and other risks resulting from our
participation in a securities lending program and other
transactions; (8) investment losses and defaults, and
changes to investment valuations; (9) impairments of
goodwill and realized losses or market value impairments to
illiquid assets; (10) defaults on our mortgage loans;
(11) the impairment of other financial institutions that
could adversely affect our investments or business;
(12) our ability to address unforeseen liabilities, asset
impairments, loss of key contractual relationships, or rating
actions arising from acquisitions or dispositions and to
successfully integrate and manage the growth of acquired
businesses with minimal disruption; (13) economic,
political, currency and other risks relating to our
international operations, including with respect to fluctuations
of exchange rates; (14) downgrades in our claims paying
ability, financial strength or credit ratings;
(15) ineffectiveness of risk management policies and
procedures; (16) availability and effectiveness of
reinsurance or indemnification arrangements, as well as default
or failure of counterparties to perform; (17) discrepancies
between actual claims experience and assumptions used in setting
prices for our products and establishing the liabilities for our
obligations for future policy benefits and claims;
(18) catastrophe losses; (19) heightened competition,
including with respect to pricing, entry of new competitors,
consolidation of distributors, the development of new products
by new and existing competitors, distribution of amounts
available under U.S. government programs, and for
personnel; (20) unanticipated changes in industry trends;
(21) changes in accounting standards, practices
and/or
policies; (22) changes in assumptions related to deferred
policy acquisition costs, deferred sales inducements, value of
business acquired or goodwill; (23) exposure to losses
related to variable annuity guarantee benefits, including from
significant and sustained downturns or extreme volatility in
equity markets, reduced interest rates, unanticipated
policyholder behavior, mortality or longevity, and the
adjustment for nonperformance risk; (24) adverse results or
other consequences from litigation,
3
arbitration or regulatory investigations; (25) inability to
protect our intellectual property rights or claims of
infringement of the intellectual property rights of others;
(26) discrepancies between actual experience and
assumptions used in establishing liabilities related to other
contingencies or obligations; (27) regulatory, legislative
or tax changes that may affect the cost of, or demand for, our
products or services, impair the ability of MetLife and its
affiliates to attract and retain talented and experienced
management and other employees, or increase the cost or
administrative burdens of providing benefits to the employees
who conduct our business; (28) the effects of business
disruption or economic contraction due to terrorism, other
hostilities, or natural catastrophes, including any related
impact on our disaster recovery systems and management
continuity planning which could impair our ability to conduct
business effectively; (29) the effectiveness of our
programs and practices in avoiding giving our associates
incentives to take excessive risks; and (30) other risks
and uncertainties described from time to time in MetLife
Insurance Company of Connecticuts filings with the SEC.
We do not undertake any obligation to publicly correct or update
any forward-looking statement if we later become aware that such
statement is not likely to be achieved. Please consult any
further disclosures MetLife Insurance Company of Connecticut
makes on related subjects in reports to the SEC.
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
MetLife Insurance Company of Connecticut, its subsidiaries 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:
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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;
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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;
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may apply standards of materiality in a way that is different
from what may be viewed as material to investors; and
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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.
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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 MetLife
Insurance Company of Connecticut and its subsidiaries may be
found elsewhere in this Quarterly Report on
Form 10-Q
and MetLife Insurance Company of Connecticuts other public
filings, which are available without charge through the SEC
website at www.sec.gov.
4
Part I
Financial Information
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Item 1.
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Financial
Statements
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March 31, 2011
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December 31, 2010
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Assets
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Investments:
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Fixed maturity securities
available-for-sale,
at estimated fair value (amortized cost: $44,390 and $44,132,
respectively)
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$
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45,100
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$
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44,924
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Equity securities
available-for-sale,
at estimated fair value (cost: $431 and $427, respectively)
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424
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405
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Other securities, at estimated fair value
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2,625
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2,247
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Mortgage loans (net of valuation allowances of $84 and $87,
respectively; includes $6,771 and $6,840, respectively, at
estimated fair value, relating to variable interest entities)
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12,634
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12,730
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Policy loans
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1,186
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1,190
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Real estate and real estate joint ventures
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511
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501
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Other limited partnership interests
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1,616
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1,538
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Short-term investments, principally at estimated fair value
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1,166
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1,235
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Other invested assets, principally at estimated fair value
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1,558
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1,716
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Total investments
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66,820
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66,486
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Cash and cash equivalents, principally at estimated fair value
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1,796
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1,928
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Accrued investment income (includes $30 and $31, respectively,
relating to variable interest entities)
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569
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559
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Premiums, reinsurance and other receivables
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16,616
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17,008
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Deferred policy acquisition costs and value of business acquired
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5,297
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5,099
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Current income tax recoverable
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32
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38
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Deferred income tax assets
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337
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356
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Goodwill
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953
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953
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Other assets
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1,846
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839
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Separate account assets
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66,280
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61,619
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Total assets
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$
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160,546
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$
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154,885
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Liabilities and Stockholders Equity
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Liabilities
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Future policy benefits
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$
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23,371
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$
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23,198
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Policyholder account balances
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40,432
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39,291
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Other policy-related balances
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2,705
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2,652
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Payables for collateral under securities loaned and other
transactions
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7,718
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8,103
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Long-term debt (includes $6,693 and $6,773, respectively, at
estimated fair value, relating to variable interest entities)
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7,488
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7,568
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Other liabilities (includes $30 and $31, respectively, relating
to variable interest entities)
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4,490
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4,503
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Separate account liabilities
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66,280
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61,619
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Total liabilities
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152,484
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146,934
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Contingencies, Commitments and Guarantees (Note 5)
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Stockholders Equity
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Common stock, par value $2.50 per share; 40,000,000 shares
authorized; 34,595,317 shares issued and outstanding at
March 31, 2011 and December 31, 2010
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86
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86
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Additional paid-in capital
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6,719
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6,719
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Retained earnings
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1,094
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934
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Accumulated other comprehensive income (loss)
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163
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212
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Total stockholders equity
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8,062
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7,951
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Total liabilities and stockholders equity
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$
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160,546
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$
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154,885
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See accompanying notes to the interim condensed consolidated
financial statements.
5
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Three Months
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Ended
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March 31,
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2011
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2010
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Revenues
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Premiums
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$
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136
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$
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455
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Universal life and investment-type product policy fees
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455
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369
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Net investment income
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788
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790
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Other revenues
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130
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110
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Net investment gains (losses):
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Other-than-temporary
impairments on fixed maturity securities
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(9
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)
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(34
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)
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Other-than-temporary
impairments on fixed maturity securities transferred to other
comprehensive income (loss)
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(2
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)
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16
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Other net investment gains (losses)
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(3
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)
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55
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Total net investment gains (losses)
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(14
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)
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37
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Net derivative gains (losses)
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(156
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)
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(308
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)
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Total revenues
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1,339
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1,453
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Expenses
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Policyholder benefits and claims
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327
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694
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Interest credited to policyholder account balances
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287
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316
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Other expenses
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504
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419
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Total expenses
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1,118
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1,429
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Income (loss) before provision for income tax
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221
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24
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Provision for income tax expense (benefit)
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61
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(8
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)
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Net income
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$
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160
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$
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32
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See accompanying notes to the interim condensed consolidated
financial statements.
6
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Accumulated Other
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Comprehensive Income (Loss)
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Net
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Foreign
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Additional
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Unrealized
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Other-Than-
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Currency
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Common
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Paid-in
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Retained
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Investment
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Temporary
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Translation
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Total
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Stock
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Capital
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Earnings
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Gains (Losses)
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Impairments
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Adjustments
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Equity
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Balance at December 31, 2010
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$
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86
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$
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6,719
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$
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934
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$
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388
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$
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(51
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)
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$
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(125
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)
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$
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7,951
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Comprehensive income (loss):
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Net income
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160
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160
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Other comprehensive income (loss):
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Unrealized gains (losses) on derivative instruments, net of
income tax
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(15
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(15
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Unrealized investment gains (losses), net of related offsets and
income tax
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(50
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)
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3
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(47
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)
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Foreign currency translation adjustments, net of income tax
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13
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13
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Other comprehensive income (loss)
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(49
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Comprehensive income (loss)
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111
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|
|
|
|
Balance at March 31, 2011
|
|
$
|
86
|
|
|
$
|
6,719
|
|
|
$
|
1,094
|
|
|
$
|
323
|
|
|
$
|
(48
|
)
|
|
$
|
(112
|
)
|
|
$
|
8,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the interim condensed consolidated
financial statements.
7
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Interim Condensed Consolidated Statements of Stockholders
Equity (Continued)
For the Three Months Ended March 31, 2010 (Unaudited)
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Unrealized
|
|
|
Other-Than-
|
|
|
Currency
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Investment
|
|
|
Temporary
|
|
|
Translation
|
|
|
Total
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Gains (Losses)
|
|
|
Impairments
|
|
|
Adjustments
|
|
|
Equity
|
|
|
Balance at December 31, 2009
|
|
$
|
86
|
|
|
$
|
6,719
|
|
|
$
|
541
|
|
|
$
|
(593
|
)
|
|
$
|
(83
|
)
|
|
$
|
(109
|
)
|
|
$
|
6,561
|
|
Cumulative effect of change in accounting principle, net of
income tax
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
23
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2010
|
|
|
86
|
|
|
|
6,719
|
|
|
|
507
|
|
|
|
(570
|
)
|
|
|
(72
|
)
|
|
|
(109
|
)
|
|
|
6,561
|
|
Comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on derivative instruments, net of
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Unrealized investment gains (losses), net of related offsets and
income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
367
|
|
Foreign currency translation adjustments, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
$
|
86
|
|
|
$
|
6,719
|
|
|
$
|
539
|
|
|
$
|
(197
|
)
|
|
$
|
(74
|
)
|
|
$
|
(116
|
)
|
|
$
|
6,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the interim condensed consolidated
financial statements.
8
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(3
|
)
|
|
$
|
484
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Sales, maturities and repayments of:
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
|
3,973
|
|
|
|
3,329
|
|
Equity securities
|
|
|
19
|
|
|
|
8
|
|
Mortgage loans
|
|
|
210
|
|
|
|
205
|
|
Real estate and real estate joint ventures
|
|
|
5
|
|
|
|
6
|
|
Other limited partnership interests
|
|
|
63
|
|
|
|
3
|
|
Purchases of:
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
|
(4,005
|
)
|
|
|
(4,454
|
)
|
Equity securities
|
|
|
(5
|
)
|
|
|
(23
|
)
|
Mortgage loans
|
|
|
(90
|
)
|
|
|
(113
|
)
|
Real estate and real estate joint ventures
|
|
|
(39
|
)
|
|
|
(41
|
)
|
Other limited partnership interests
|
|
|
(84
|
)
|
|
|
(47
|
)
|
Cash received in connection with freestanding derivatives
|
|
|
194
|
|
|
|
23
|
|
Cash paid in connection with freestanding derivatives
|
|
|
(145
|
)
|
|
|
(52
|
)
|
Net change in policy loans
|
|
|
4
|
|
|
|
(2
|
)
|
Net change in short-term investments
|
|
|
63
|
|
|
|
303
|
|
Net change in other invested assets
|
|
|
(151
|
)
|
|
|
(19
|
)
|
Other, net
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
13
|
|
|
|
(873
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Policyholder account balances:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
5,877
|
|
|
|
5,517
|
|
Withdrawals
|
|
|
(5,545
|
)
|
|
|
(5,655
|
)
|
Net change in payables for collateral under securities loaned
and other transactions
|
|
|
(385
|
)
|
|
|
104
|
|
Long-term debt repaid
|
|
|
(86
|
)
|
|
|
(185
|
)
|
Financing element on certain derivative instruments
|
|
|
(8
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(147
|
)
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
Effect of change in foreign currency exchange rates on cash and
cash equivalents balances
|
|
|
5
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
(132
|
)
|
|
|
(639
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
1,928
|
|
|
|
2,574
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,796
|
|
|
$
|
1,935
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Net cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
96
|
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
$
|
2
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the interim condensed consolidated
financial statements.
9
|
|
1.
|
Business,
Basis of Presentation and Summary of Significant Accounting
Policies
|
Business
MICC or the Company refers to MetLife
Insurance Company of Connecticut, a Connecticut corporation
incorporated in 1863, and its subsidiaries, including MetLife
Investors USA Insurance Company (MLI-USA). MetLife
Insurance Company of Connecticut is a subsidiary of MetLife,
Inc. (MetLife). The Company offers individual
annuities, individual life insurance, and institutional
protection and asset accumulation products.
Basis
of Presentation
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America (GAAP) requires management to adopt
accounting policies and make estimates and assumptions that
affect amounts reported in the interim condensed consolidated
financial statements.
In applying the Companys accounting policies, management
makes subjective and complex judgments that frequently require
estimates 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 Companys businesses and operations. Actual
results could differ from these estimates.
The accompanying interim condensed consolidated financial
statements include the accounts of MetLife Insurance Company of
Connecticut 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 investments
in equity securities in which it has a significant influence or
more than a 20% interest and for real estate joint ventures and
other limited partnership interests in which it has more than a
minor equity interest or more than a minor influence over the
joint ventures or partnerships operations, but does
not have a controlling interest and is not the primary
beneficiary. The Company uses the cost method of accounting for
investments in real estate joint ventures and other limited
partnership interests in which it has a minor equity investment
and virtually no influence over the joint ventures or the
partnerships operations.
Certain amounts in the prior year periods interim
condensed consolidated financial statements have been
reclassified to conform with the 2011 presentation. Such
reclassifications include:
|
|
|
|
|
Reclassification from other net investment gains (losses) of
($308) million to net derivative gains (losses) in the
consolidated statements of operations for the three months ended
March 31, 2010; and
|
|
|
|
Reclassifications related to operating revenues and expenses
that affected results of operations on a segment and
consolidated basis. See Note 7.
|
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 accompanying interim condensed consolidated financial
statements reflect all adjustments (including normal recurring
adjustments) necessary to present fairly the consolidated
financial position of the Company at March 31, 2011, its
consolidated results of operations for the three months ended
March 31, 2011 and 2010, its consolidated cash flows for
the three months ended March 31, 2011 and 2010, and its
consolidated statements of stockholders equity for the
three months ended March 31, 2011 and 2010, in conformity
with GAAP. Interim results are not necessarily indicative of
full year performance. The December 31, 2010 consolidated
balance sheet data was derived from audited consolidated
financial statements included in MetLife Insurance Company of
Connecticuts Annual Report on
Form 10-K
for the year ended December 31, 2010 (the 2010 Annual
Report), filed with the U.S. Securities and Exchange
Commission, which includes all disclosures required by GAAP.
10
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Therefore, these interim condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements of the Company included in the 2010 Annual
Report.
Adoption
of New Accounting Pronouncements
Effective January 1, 2011, the Company adopted new guidance
that addresses when a business combination should be assumed to
have occurred for the purpose of providing pro forma disclosure.
Under the new guidance, if an entity presents comparative
financial statements, the entity should disclose revenue and
earnings of the combined entity as though the business
combination that occurred during the current year had occurred
as of the beginning of the comparable prior annual reporting
period. The guidance also expands the supplemental pro forma
disclosures to include additional narratives. The adoption did
not have an impact on the Companys consolidated financial
statements.
Effective January 1, 2011, the Company adopted new guidance
regarding goodwill impairment testing. This guidance modifies
Step 1 of the goodwill impairment test for reporting units with
zero or negative carrying amounts. For those reporting units, an
entity would be required to perform Step 2 of the test if
qualitative factors indicate that it is more likely than not
that goodwill impairment exists. The adoption did not have an
impact on the Companys consolidated financial statements.
Effective January 1, 2011, the Company adopted new guidance
regarding accounting for investment funds determined to be VIEs.
Under this guidance, an insurance entity would not be required
to consolidate a voting-interest investment fund when it holds
the majority of the voting interests of the fund through its
separate accounts. In addition, an insurance entity would not
consider the interests held through separate accounts for the
benefit of policyholders in the insurers evaluation of its
economics in a VIE, unless the separate account contractholder
is a related party. The adoption did not have a material impact
on the Companys consolidated financial statements.
Future
Adoption of New Accounting Pronouncements
In April 2011, the Financial Accounting Standards Board
(FASB) issued new guidance regarding effective
control in repurchase agreements (Accounting Standards Update
(ASU)
2011-03,
Transfers and Servicing (Topic 860): Reconsideration of
Effective Control for Repurchase Agreements), effective for
the first interim or annual period beginning on or after
December 15, 2011. The guidance should be applied
prospectively to transactions or modifications of existing
transactions that occur on or after the effective date. The
amendments in this ASU remove from the assessment of effective
control the criterion requiring the transferor to have the
ability to repurchase or redeem the financial assets. The
Company is currently evaluating the impact of this guidance on
its consolidated financial statements.
In April 2011, the FASB issued new guidance regarding accounting
for troubled debt restructuring (ASU
2011-02,
Receivables (Topic 310): A Creditors Determination of
Whether a Restructuring Is a Troubled Debt Restructuring),
effective for the first interim or annual period beginning on or
after June 15, 2011 and should be applied retrospectively
to the beginning of the annual period of adoption. This guidance
clarifies whether a creditor has granted a concession and
whether a debtor is experiencing financial difficulties for the
purpose of determining when a restructuring constitutes a
troubled debt restructuring. The Company is currently evaluating
the impact this guidance would have on its consolidated
financial statements and related disclosures.
In October 2010, the FASB issued new guidance regarding
accounting for deferred acquisition costs (ASU
2010-26,
Accounting for Costs Associated with Acquiring or Renewing
Insurance Contracts) effective for the first quarter of
2012. This guidance clarifies the costs that should be deferred
by insurance entities when issuing and renewing insurance
contracts. The guidance also specifies that only costs related
directly to successful acquisition of new or renewal contracts
can be capitalized. All other acquisition-related costs should
be expensed as incurred.
11
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The Company is currently evaluating the impact this guidance
would have on its consolidated financial statements and related
disclosures.
Fixed
Maturity and Equity Securities
Available-for-Sale
The following tables present the cost or amortized cost, gross
unrealized gains and losses, estimated fair value of the
Companys fixed maturity and equity securities and the
percentage that each sector represents by the respective total
holdings for the periods shown. The unrealized loss amounts
presented below include the noncredit loss component of
other-than-temporary
impairment (OTTI) losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
Cost or
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
Temporary
|
|
|
OTTI
|
|
|
Fair
|
|
|
% of
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Losses
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
14,938
|
|
|
$
|
763
|
|
|
$
|
269
|
|
|
$
|
|
|
|
$
|
15,432
|
|
|
|
34.2
|
%
|
Foreign corporate securities
|
|
|
8,215
|
|
|
|
473
|
|
|
|
94
|
|
|
|
|
|
|
|
8,594
|
|
|
|
19.0
|
|
U.S. Treasury and agency securities
|
|
|
7,640
|
|
|
|
84
|
|
|
|
185
|
|
|
|
|
|
|
|
7,539
|
|
|
|
16.7
|
|
Residential mortgage-backed securities (RMBS)
|
|
|
6,870
|
|
|
|
191
|
|
|
|
166
|
|
|
|
73
|
|
|
|
6,822
|
|
|
|
15.1
|
|
Commercial mortgage-backed securities (CMBS)
|
|
|
2,107
|
|
|
|
102
|
|
|
|
19
|
|
|
|
|
|
|
|
2,190
|
|
|
|
4.9
|
|
Asset-backed securities (ABS)
|
|
|
1,898
|
|
|
|
42
|
|
|
|
80
|
|
|
|
7
|
|
|
|
1,853
|
|
|
|
4.1
|
|
State and political subdivision securities
|
|
|
1,905
|
|
|
|
26
|
|
|
|
144
|
|
|
|
|
|
|
|
1,787
|
|
|
|
4.0
|
|
Foreign government securities
|
|
|
817
|
|
|
|
70
|
|
|
|
4
|
|
|
|
|
|
|
|
883
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities (1), (2)
|
|
$
|
44,390
|
|
|
$
|
1,751
|
|
|
$
|
961
|
|
|
$
|
80
|
|
|
$
|
45,100
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable preferred stock (1)
|
|
$
|
301
|
|
|
$
|
12
|
|
|
$
|
40
|
|
|
$
|
|
|
|
$
|
273
|
|
|
|
64.4
|
%
|
Common stock
|
|
|
130
|
|
|
|
22
|
|
|
|
1
|
|
|
|
|
|
|
|
151
|
|
|
|
35.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
431
|
|
|
$
|
34
|
|
|
$
|
41
|
|
|
$
|
|
|
|
$
|
424
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Cost or
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
Temporary
|
|
|
OTTI
|
|
|
Fair
|
|
|
% of
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Losses
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
14,860
|
|
|
$
|
816
|
|
|
$
|
302
|
|
|
$
|
|
|
|
$
|
15,374
|
|
|
|
34.2
|
%
|
Foreign corporate securities
|
|
|
8,095
|
|
|
|
502
|
|
|
|
127
|
|
|
|
|
|
|
|
8,470
|
|
|
|
18.8
|
|
U.S. Treasury and agency securities
|
|
|
7,665
|
|
|
|
143
|
|
|
|
132
|
|
|
|
|
|
|
|
7,676
|
|
|
|
17.1
|
|
RMBS
|
|
|
6,803
|
|
|
|
203
|
|
|
|
218
|
|
|
|
79
|
|
|
|
6,709
|
|
|
|
14.9
|
|
CMBS
|
|
|
2,203
|
|
|
|
113
|
|
|
|
39
|
|
|
|
|
|
|
|
2,277
|
|
|
|
5.1
|
|
ABS
|
|
|
1,927
|
|
|
|
44
|
|
|
|
95
|
|
|
|
7
|
|
|
|
1,869
|
|
|
|
4.2
|
|
State and political subdivision securities
|
|
|
1,755
|
|
|
|
22
|
|
|
|
131
|
|
|
|
|
|
|
|
1,646
|
|
|
|
3.7
|
|
Foreign government securities
|
|
|
824
|
|
|
|
81
|
|
|
|
2
|
|
|
|
|
|
|
|
903
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities (1), (2)
|
|
$
|
44,132
|
|
|
$
|
1,924
|
|
|
$
|
1,046
|
|
|
$
|
86
|
|
|
$
|
44,924
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable preferred stock (1)
|
|
$
|
306
|
|
|
$
|
9
|
|
|
$
|
47
|
|
|
$
|
|
|
|
$
|
268
|
|
|
|
66.2
|
%
|
Common stock
|
|
|
121
|
|
|
|
17
|
|
|
|
1
|
|
|
|
|
|
|
|
137
|
|
|
|
33.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
427
|
|
|
$
|
26
|
|
|
$
|
48
|
|
|
$
|
|
|
|
$
|
405
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Upon acquisition, the Company classifies perpetual securities
that have attributes of both debt and equity as fixed maturity
securities if the security has an interest rate
step-up
feature which, when combined with other qualitative factors,
indicates that the security has more debt-like characteristics;
while those with more equity-like characteristics, are
classified as equity securities within non-redeemable preferred
stock. Many of such securities have been issued by
non-U.S.
financial institutions that are accorded Tier 1 and Upper
Tier 2 capital treatment by their respective regulatory
bodies and are commonly referred to as perpetual hybrid
securities. The following table presents the perpetual
hybrid securities held by the Company at: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
March 31, 2011
|
|
December 31, 2010
|
|
|
|
|
|
|
Estimated
|
|
Estimated
|
|
|
|
|
|
|
Fair
|
|
Fair
|
Consolidated Balance Sheets
|
|
Sector Table
|
|
Primary Issuers
|
|
Value
|
|
Value
|
|
|
|
|
|
|
(In millions)
|
|
Equity securities
|
|
Non-redeemable preferred stock
|
|
Non-U.S. financial institutions
|
|
$
|
206
|
|
|
$
|
202
|
|
Equity securities
|
|
Non-redeemable preferred stock
|
|
U.S. financial institutions
|
|
$
|
33
|
|
|
$
|
35
|
|
Fixed maturity securities
|
|
Foreign corporate securities
|
|
Non-U.S. financial institutions
|
|
$
|
394
|
|
|
$
|
450
|
|
Fixed maturity securities
|
|
U.S. corporate securities
|
|
U.S. financial institutions
|
|
$
|
10
|
|
|
$
|
10
|
|
|
|
|
(2) |
|
The Companys holdings in redeemable preferred stock with
stated maturity dates, commonly referred to as capital
securities, were primarily issued by U.S. financial
institutions and have cumulative interest deferral features. The
Company held $493 million and $645 million at
estimated fair value of such securities at March 31, 2011
and December 31, 2010, respectively, which are included in
the U.S. and foreign corporate securities sectors within fixed
maturity securities. |
13
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The below investment grade and non-income producing amounts
presented below are based on rating agency designations and
equivalent designations of the National Association of Insurance
Commissioners (NAIC), with the exception of certain
structured securities described below held by MetLife Insurance
Company of Connecticut and its domestic insurance subsidiary.
Non-agency RMBS, including RMBS backed by
sub-prime
mortgage loans reported within ABS, CMBS and all other ABS held
by MetLife Insurance Company of Connecticut and its domestic
insurance subsidiary, are presented based on final ratings from
the revised NAIC rating methodologies which became effective
prior to January 1, 2011 (which may not correspond to
rating agency designations). All NAIC designation (e.g., NAIC
1 6) amounts and percentages presented herein
are based on the revised NAIC methodologies. All rating agency
designation (e.g., Aaa/AAA) amounts and percentages presented
herein are based on rating agency designations without
adjustment for the revised NAIC methodologies described above.
Rating agency designations are based on availability of
applicable ratings from rating agencies on the NAIC acceptable
rating organization list, including Moodys Investors
Service (Moodys), Standard &
Poors Ratings Services (S&P) and Fitch
Ratings (Fitch).
The following table presents selected information about certain
fixed maturity securities held by the Company at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
December 31, 2010
|
|
|
(In millions)
|
|
Below investment grade or non-rated fixed maturity securities:
|
|
|
|
|
|
|
|
|
Estimated fair value
|
|
$
|
3,979
|
|
|
$
|
4,027
|
|
Net unrealized gains (losses)
|
|
$
|
(36
|
)
|
|
$
|
(125
|
)
|
Non-income producing fixed maturity securities:
|
|
|
|
|
|
|
|
|
Estimated fair value
|
|
$
|
16
|
|
|
$
|
36
|
|
Net unrealized gains (losses)
|
|
$
|
2
|
|
|
$
|
2
|
|
Concentrations of Credit Risk (Fixed Maturity
Securities) Summary. The
following section contains a summary of the concentrations of
credit risk related to fixed maturity securities holdings.
The Company was not exposed to any concentrations of credit risk
of any single issuer greater than 10% of the Companys
stockholders equity, other than the government securities
summarized in the table below.
Concentrations of Credit Risk (Government and Agency
Securities). The following section contains a
summary of the concentrations of credit risk related to
government and agency fixed maturity and fixed-income securities
holdings which were greater than 10% of the Companys
equity at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
December 31, 2010
|
|
|
Carrying Value (1)
|
|
|
(In millions)
|
|
U.S. Treasury and agency fixed maturity securities
|
|
$
|
7,539
|
|
|
$
|
7,676
|
|
U.S. Treasury and agency fixed-income securities included in:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
$
|
946
|
|
|
$
|
935
|
|
Cash equivalents
|
|
$
|
1,057
|
|
|
$
|
1,287
|
|
|
|
|
(1) |
|
Represents estimated fair value for fixed maturity securities;
amortized cost, which approximates estimated fair value or
estimated fair value, if available, for short-term investments;
and amortized cost, which approximates estimated fair value for
cash equivalents. |
14
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Concentrations of Credit Risk (Fixed Maturity
Securities) U.S. and Foreign Corporate
Securities. The Company maintains a diversified
portfolio of corporate fixed maturity securities across
industries and issuers. This portfolio does not have an exposure
to any single issuer in excess of 1% of total investments. The
tables below present information for U.S. and foreign
corporate securities at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Fair
|
|
|
% of
|
|
|
Fair
|
|
|
% of
|
|
|
|
Value
|
|
|
Total
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Corporate fixed maturity securities by sector:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign corporate fixed maturity securities (1)
|
|
$
|
8,594
|
|
|
|
35.8
|
%
|
|
$
|
8,470
|
|
|
|
35.5
|
%
|
U.S. corporate fixed maturity securities by industry:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
3,912
|
|
|
|
16.3
|
|
|
|
3,893
|
|
|
|
16.3
|
|
Utility
|
|
|
3,399
|
|
|
|
14.1
|
|
|
|
3,379
|
|
|
|
14.2
|
|
Industrial
|
|
|
3,323
|
|
|
|
13.8
|
|
|
|
3,282
|
|
|
|
13.7
|
|
Finance
|
|
|
2,493
|
|
|
|
10.4
|
|
|
|
2,569
|
|
|
|
10.8
|
|
Communications
|
|
|
1,489
|
|
|
|
6.2
|
|
|
|
1,444
|
|
|
|
6.1
|
|
Other
|
|
|
816
|
|
|
|
3.4
|
|
|
|
807
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,026
|
|
|
|
100.0
|
%
|
|
$
|
23,844
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes U.S. dollar-denominated debt obligations of foreign
obligors and other foreign fixed maturity securities. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
December 31, 2010
|
|
|
Estimated
|
|
|
|
Estimated
|
|
|
|
|
Fair
|
|
% of Total
|
|
Fair
|
|
% of Total
|
|
|
Value
|
|
Investments
|
|
Value
|
|
Investments
|
|
|
(In millions)
|
|
Concentrations within corporate fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Largest exposure to a single issuer
|
|
$
|
255
|
|
|
|
0.4
|
%
|
|
$
|
252
|
|
|
|
0.4
|
%
|
Holdings in ten issuers with the largest exposures
|
|
$
|
1,650
|
|
|
|
2.5
|
%
|
|
$
|
1,683
|
|
|
|
2.5
|
%
|
15
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Concentrations of Credit Risk (Fixed Maturity
Securities) RMBS. The table below
presents information on the Companys RMBS holdings at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Fair
|
|
|
% of
|
|
|
Fair
|
|
|
% of
|
|
|
|
Value
|
|
|
Total
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
By security type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass-through securities
|
|
$
|
3,613
|
|
|
|
53.0
|
%
|
|
$
|
3,466
|
|
|
|
51.7
|
%
|
Collateralized mortgage obligations
|
|
|
3,209
|
|
|
|
47.0
|
|
|
|
3,243
|
|
|
|
48.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS
|
|
$
|
6,822
|
|
|
|
100.0
|
%
|
|
$
|
6,709
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By risk profile:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
$
|
5,204
|
|
|
|
76.3
|
%
|
|
$
|
5,080
|
|
|
|
75.7
|
%
|
Prime
|
|
|
997
|
|
|
|
14.6
|
|
|
|
1,023
|
|
|
|
15.3
|
|
Alternative residential mortgage loans
|
|
|
621
|
|
|
|
9.1
|
|
|
|
606
|
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RMBS
|
|
$
|
6,822
|
|
|
|
100.0
|
%
|
|
$
|
6,709
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Aaa/AAA
|
|
$
|
5,368
|
|
|
|
78.7
|
%
|
|
$
|
5,254
|
|
|
|
78.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated NAIC 1
|
|
$
|
5,729
|
|
|
|
84.0
|
%
|
|
$
|
5,618
|
|
|
|
83.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 2 Investments
Concentrations of Credit Risk (Fixed Maturity
Securities) RMBS in the Notes to the
Consolidated Financial Statements included in the 2010 Annual
Report for a description of the security types and risk profile.
The following tables present information on the Companys
investment in alternative residential mortgage loans
(Alt-A) RMBS at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Fair
|
|
|
% of
|
|
|
Fair
|
|
|
% of
|
|
|
|
Value
|
|
|
Total
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Vintage Year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 & Prior
|
|
$
|
9
|
|
|
|
1.4
|
%
|
|
$
|
9
|
|
|
|
1.5
|
%
|
2005
|
|
|
325
|
|
|
|
52.3
|
|
|
|
302
|
|
|
|
49.8
|
|
2006
|
|
|
83
|
|
|
|
13.4
|
|
|
|
88
|
|
|
|
14.6
|
|
2007
|
|
|
204
|
|
|
|
32.9
|
|
|
|
207
|
|
|
|
34.1
|
|
2008 to 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
621
|
|
|
|
100.0
|
%
|
|
$
|
606
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Net unrealized gains (losses)
|
|
$
|
(110
|
)
|
|
|
|
|
|
$
|
(141
|
)
|
|
|
|
|
Rated Aa/AA or better
|
|
|
|
|
|
|
0.5
|
%
|
|
|
|
|
|
|
1.5
|
%
|
Rated NAIC 1
|
|
|
|
|
|
|
15.4
|
%
|
|
|
|
|
|
|
14.9
|
%
|
Distribution of holdings at estimated fair
value by collateral type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate mortgage loans collateral
|
|
|
|
|
|
|
96.3
|
%
|
|
|
|
|
|
|
96.1
|
%
|
Hybrid adjustable rate mortgage loans collateral
|
|
|
|
|
|
|
3.7
|
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Alt-A RMBS
|
|
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrations of Credit Risk (Fixed Maturity
Securities) CMBS. The following
tables present information about CMBS held by the Company at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Fair
|
|
|
% of
|
|
|
Fair
|
|
|
% of
|
|
|
|
Value
|
|
|
Total
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Vintage Year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 & Prior
|
|
$
|
866
|
|
|
|
39.6
|
%
|
|
$
|
947
|
|
|
|
41.6
|
%
|
2004
|
|
|
439
|
|
|
|
20.0
|
|
|
|
442
|
|
|
|
19.4
|
|
2005
|
|
|
422
|
|
|
|
19.3
|
|
|
|
431
|
|
|
|
18.9
|
|
2006
|
|
|
439
|
|
|
|
20.0
|
|
|
|
442
|
|
|
|
19.4
|
|
2007
|
|
|
16
|
|
|
|
0.7
|
|
|
|
15
|
|
|
|
0.7
|
|
2008 to 2011
|
|
|
8
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,190
|
|
|
|
100.0
|
%
|
|
$
|
2,277
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
Amount
|
|
|
Total
|
|
|
Amount
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Net unrealized gains (losses)
|
|
$
|
83
|
|
|
|
|
|
|
$
|
74
|
|
|
|
|
|
Rated Aaa/AAA
|
|
|
|
|
|
|
87
|
%
|
|
|
|
|
|
|
88
|
%
|
Rated NAIC 1
|
|
|
|
|
|
|
95
|
%
|
|
|
|
|
|
|
95
|
%
|
The tables above reflect rating agency designations assigned by
nationally recognized rating agencies including Moodys,
S&P, Fitch and Realpoint, LLC.
17
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Concentrations of Credit Risk (Fixed Maturity
Securities) ABS. The Companys
ABS are diversified both by collateral type and by issuer. The
following table presents information about ABS held by the
Company at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Fair
|
|
|
% of
|
|
|
Fair
|
|
|
% of
|
|
|
|
Value
|
|
|
Total
|
|
|
Value
|
|
|
Total
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
By collateral type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit card loans
|
|
$
|
729
|
|
|
|
39.3
|
%
|
|
$
|
753
|
|
|
|
40.3
|
%
|
Collateralized debt obligations
|
|
|
240
|
|
|
|
13.0
|
|
|
|
254
|
|
|
|
13.5
|
|
RMBS backed by
sub-prime
mortgage loans
|
|
|
237
|
|
|
|
12.8
|
|
|
|
247
|
|
|
|
13.2
|
|
Student loans
|
|
|
172
|
|
|
|
9.3
|
|
|
|
174
|
|
|
|
9.3
|
|
Utility loans
|
|
|
154
|
|
|
|
8.3
|
|
|
|
157
|
|
|
|
8.4
|
|
Automobile loans
|
|
|
110
|
|
|
|
5.9
|
|
|
|
98
|
|
|
|
5.3
|
|
Other loans
|
|
|
211
|
|
|
|
11.4
|
|
|
|
186
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,853
|
|
|
|
100.0
|
%
|
|
$
|
1,869
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated Aaa/AAA
|
|
$
|
1,211
|
|
|
|
65.4
|
%
|
|
$
|
1,251
|
|
|
|
66.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rated NAIC 1
|
|
$
|
1,693
|
|
|
|
91.4
|
%
|
|
$
|
1,699
|
|
|
|
90.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrations of Credit Risk (Equity
Securities). The Company was not exposed to any
concentrations of credit risk in its equity securities holdings
of any single issuer greater than 10% of the Companys
stockholders equity or 1% of total investments at
March 31, 2011 and December 31, 2010.
Maturities of Fixed Maturity Securities. The
amortized cost and estimated fair value of fixed maturity
securities, by contractual maturity date (excluding scheduled
sinking funds), were as follows at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
Due in one year or less
|
|
$
|
1,786
|
|
|
$
|
1,805
|
|
|
$
|
1,874
|
|
|
$
|
1,889
|
|
Due after one year through five years
|
|
|
9,677
|
|
|
|
10,051
|
|
|
|
9,340
|
|
|
|
9,672
|
|
Due after five years through ten years
|
|
|
7,825
|
|
|
|
8,303
|
|
|
|
7,829
|
|
|
|
8,333
|
|
Due after ten years
|
|
|
14,227
|
|
|
|
14,076
|
|
|
|
14,156
|
|
|
|
14,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
33,515
|
|
|
|
34,235
|
|
|
|
33,199
|
|
|
|
34,069
|
|
RMBS, CMBS and ABS
|
|
|
10,875
|
|
|
|
10,865
|
|
|
|
10,933
|
|
|
|
10,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
$
|
44,390
|
|
|
$
|
45,100
|
|
|
$
|
44,132
|
|
|
$
|
44,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual maturities may differ from contractual maturities due to
the exercise of call or prepayment options. Fixed maturity
securities not due at a single maturity date have been included
in the above table in the year of final contractual maturity.
RMBS, CMBS and ABS are shown separately in the table, as they
are not due at a single maturity.
Evaluating
Available-for-Sale
Securities for
Other-Than-Temporary
Impairment
As described more fully in Note 1 of the Notes to the
Consolidated Financial Statements included in the 2010 Annual
Report, the Company performs a regular evaluation, on a
security-by-security
basis, of its
available-for-sale
securities holdings, including fixed maturity securities, equity
securities and perpetual hybrid securities, in accordance with
its impairment policy in order to evaluate whether such
investments are
other-than-temporarily
impaired.
18
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Net
Unrealized Investment Gains (Losses)
The components of net unrealized investment gains (losses),
included in accumulated other comprehensive income (loss), were
as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Fixed maturity securities
|
|
$
|
787
|
|
|
$
|
878
|
|
Fixed maturity securities with noncredit OTTI losses in
accumulated other comprehensive income (loss)
|
|
|
(80
|
)
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
|
707
|
|
|
|
792
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
(4
|
)
|
|
|
(21
|
)
|
Derivatives
|
|
|
(132
|
)
|
|
|
(109
|
)
|
Short-term investments
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Other
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
565
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
Amounts allocated from:
|
|
|
|
|
|
|
|
|
Insurance liability loss recognition
|
|
|
(34
|
)
|
|
|
(33
|
)
|
DAC and VOBA related to noncredit OTTI losses recognized in
accumulated other comprehensive income (loss)
|
|
|
5
|
|
|
|
5
|
|
DAC and VOBA
|
|
|
(124
|
)
|
|
|
(126
|
)
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
(153
|
)
|
|
|
(154
|
)
|
Deferred income tax benefit (expense) related to noncredit OTTI
losses recognized in accumulated other comprehensive income
(loss)
|
|
|
27
|
|
|
|
30
|
|
Deferred income tax benefit (expense)
|
|
|
(164
|
)
|
|
|
(196
|
)
|
|
|
|
|
|
|
|
|
|
Net unrealized investment gains (losses)
|
|
$
|
275
|
|
|
$
|
337
|
|
|
|
|
|
|
|
|
|
|
The changes in fixed maturity securities with noncredit OTTI
losses in accumulated other comprehensive income (loss), were as
follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Balance, beginning of period
|
|
$
|
(86
|
)
|
|
$
|
(141
|
)
|
Noncredit OTTI losses recognized (1)
|
|
|
2
|
|
|
|
(53
|
)
|
Transferred to retained earnings (2)
|
|
|
|
|
|
|
16
|
|
Securities sold with previous noncredit OTTI loss
|
|
|
5
|
|
|
|
28
|
|
Subsequent increases (decreases) in estimated fair value
|
|
|
(1
|
)
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
(80
|
)
|
|
$
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Noncredit OTTI losses recognized, net of deferred policy
acquisition costs (DAC), were $1 million and
($44) million for the periods ended March 31, 2011 and
December 31, 2010, respectively. |
|
(2) |
|
Amounts transferred to retained earnings were in connection with
the adoption of guidance related to the consolidation of VIEs as
described in Note 1 of the Notes to the Consolidated
Financial Statements included in the 2010 Annual Report. |
19
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The changes in net unrealized investment gains (losses) were as
follows:
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31, 2011
|
|
|
|
(In millions)
|
|
|
Balance, beginning of period
|
|
$
|
337
|
|
Fixed maturity securities on which noncredit OTTI losses have
been recognized
|
|
|
6
|
|
Unrealized investment gains (losses) during the period
|
|
|
(98
|
)
|
Unrealized investment gains (losses) relating to:
|
|
|
|
|
Insurance liability gain (loss) recognition
|
|
|
(1
|
)
|
DAC and VOBA related to noncredit OTTI losses recognized in
accumulated other comprehensive income (loss)
|
|
|
|
|
DAC and VOBA
|
|
|
2
|
|
Deferred income tax benefit (expense) related to noncredit OTTI
losses recognized in accumulated other comprehensive income
(loss)
|
|
|
(3
|
)
|
Deferred income tax benefit (expense)
|
|
|
32
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
275
|
|
|
|
|
|
|
Change in net unrealized investment gains (losses)
|
|
$
|
(62
|
)
|
|
|
|
|
|
20
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Continuous
Gross Unrealized Losses and OTTI Losses for Fixed Maturity and
Equity Securities
Available-for-Sale
by Sector
The following tables present the estimated fair value and gross
unrealized losses of the Companys fixed maturity and
equity securities in an unrealized loss position, aggregated by
sector and by length of time that the securities have been in a
continuous unrealized loss position. The unrealized loss amounts
presented below include the noncredit component of OTTI loss.
Fixed maturity securities on which a noncredit OTTI loss has
been recognized in accumulated other comprehensive income (loss)
are categorized by length of time as being less than
12 months or equal to or greater than
12 months in a continuous unrealized loss position
based on the point in time that the estimated fair value
initially declined to below the amortized cost basis and not the
period of time since the unrealized loss was deemed a noncredit
OTTI loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
|
|
|
Equal to or Greater
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
than 12 Months
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In millions, except number of securities)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
2,001
|
|
|
$
|
58
|
|
|
$
|
1,673
|
|
|
$
|
211
|
|
|
$
|
3,674
|
|
|
$
|
269
|
|
Foreign corporate securities
|
|
|
830
|
|
|
|
23
|
|
|
|
663
|
|
|
|
71
|
|
|
|
1,493
|
|
|
|
94
|
|
U.S. Treasury and agency securities
|
|
|
3,111
|
|
|
|
163
|
|
|
|
82
|
|
|
|
22
|
|
|
|
3,193
|
|
|
|
185
|
|
RMBS
|
|
|
2,385
|
|
|
|
73
|
|
|
|
1,142
|
|
|
|
166
|
|
|
|
3,527
|
|
|
|
239
|
|
CMBS
|
|
|
101
|
|
|
|
1
|
|
|
|
146
|
|
|
|
18
|
|
|
|
247
|
|
|
|
19
|
|
ABS
|
|
|
220
|
|
|
|
2
|
|
|
|
571
|
|
|
|
85
|
|
|
|
791
|
|
|
|
87
|
|
State and political subdivision securities
|
|
|
678
|
|
|
|
35
|
|
|
|
341
|
|
|
|
109
|
|
|
|
1,019
|
|
|
|
144
|
|
Foreign government securities
|
|
|
156
|
|
|
|
3
|
|
|
|
9
|
|
|
|
1
|
|
|
|
165
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
$
|
9,482
|
|
|
$
|
358
|
|
|
$
|
4,627
|
|
|
$
|
683
|
|
|
$
|
14,109
|
|
|
$
|
1,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable preferred stock
|
|
$
|
27
|
|
|
$
|
3
|
|
|
$
|
187
|
|
|
$
|
37
|
|
|
$
|
214
|
|
|
$
|
40
|
|
Common stock
|
|
|
10
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
37
|
|
|
$
|
4
|
|
|
$
|
187
|
|
|
$
|
37
|
|
|
$
|
224
|
|
|
$
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of securities in an unrealized loss position
|
|
|
840
|
|
|
|
|
|
|
|
557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Equal to or Greater
|
|
|
|
|
|
|
Less than 12 Months
|
|
|
than 12 Months
|
|
|
Total
|
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
Estimated
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In millions, except number of securities)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
1,956
|
|
|
$
|
56
|
|
|
$
|
1,800
|
|
|
$
|
246
|
|
|
$
|
3,756
|
|
|
$
|
302
|
|
Foreign corporate securities
|
|
|
727
|
|
|
|
24
|
|
|
|
816
|
|
|
|
103
|
|
|
|
1,543
|
|
|
|
127
|
|
U.S. Treasury and agency securities
|
|
|
2,857
|
|
|
|
113
|
|
|
|
85
|
|
|
|
19
|
|
|
|
2,942
|
|
|
|
132
|
|
RMBS
|
|
|
2,228
|
|
|
|
59
|
|
|
|
1,368
|
|
|
|
238
|
|
|
|
3,596
|
|
|
|
297
|
|
CMBS
|
|
|
68
|
|
|
|
1
|
|
|
|
237
|
|
|
|
38
|
|
|
|
305
|
|
|
|
39
|
|
ABS
|
|
|
245
|
|
|
|
5
|
|
|
|
590
|
|
|
|
97
|
|
|
|
835
|
|
|
|
102
|
|
State and political subdivision securities
|
|
|
716
|
|
|
|
36
|
|
|
|
352
|
|
|
|
95
|
|
|
|
1,068
|
|
|
|
131
|
|
Foreign government securities
|
|
|
49
|
|
|
|
1
|
|
|
|
9
|
|
|
|
1
|
|
|
|
58
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
$
|
8,846
|
|
|
$
|
295
|
|
|
$
|
5,257
|
|
|
$
|
837
|
|
|
$
|
14,103
|
|
|
$
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable preferred stock
|
|
$
|
26
|
|
|
$
|
5
|
|
|
$
|
187
|
|
|
$
|
42
|
|
|
$
|
213
|
|
|
$
|
47
|
|
Common stock
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
$
|
35
|
|
|
$
|
6
|
|
|
$
|
187
|
|
|
$
|
42
|
|
|
$
|
222
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of securities in an unrealized loss position
|
|
|
759
|
|
|
|
|
|
|
|
637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Aging
of Gross Unrealized Losses and OTTI Losses for Fixed Maturity
and Equity Securities
Available-for-Sale
The following tables present the cost or amortized cost, gross
unrealized losses, including the portion of OTTI loss on fixed
maturity securities recognized in accumulated other
comprehensive income (loss), gross unrealized losses as a
percentage of cost or amortized cost and number of securities
for fixed maturity and equity securities where the estimated
fair value had declined and remained below cost or amortized
cost by less than 20%, or 20% or more at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Number of
|
|
|
|
Amortized Cost
|
|
|
Unrealized Losses
|
|
|
Securities
|
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
|
(In millions, except number of securities)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
9,260
|
|
|
$
|
549
|
|
|
$
|
300
|
|
|
$
|
137
|
|
|
|
641
|
|
|
|
44
|
|
Six months or greater but less than nine months
|
|
|
409
|
|
|
|
15
|
|
|
|
37
|
|
|
|
5
|
|
|
|
155
|
|
|
|
4
|
|
Nine months or greater but less than twelve months
|
|
|
97
|
|
|
|
22
|
|
|
|
3
|
|
|
|
6
|
|
|
|
13
|
|
|
|
5
|
|
Twelve months or greater
|
|
|
4,189
|
|
|
|
609
|
|
|
|
361
|
|
|
|
192
|
|
|
|
431
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,955
|
|
|
$
|
1,195
|
|
|
$
|
701
|
|
|
$
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of amortized cost
|
|
|
|
|
|
|
|
|
|
|
5
|
%
|
|
|
28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
31
|
|
|
$
|
27
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
|
10
|
|
|
|
8
|
|
Six months or greater but less than nine months
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Nine months or greater but less than twelve months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months or greater
|
|
|
154
|
|
|
|
51
|
|
|
|
16
|
|
|
|
17
|
|
|
|
13
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
187
|
|
|
$
|
78
|
|
|
$
|
18
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of cost
|
|
|
|
|
|
|
|
|
|
|
10
|
%
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Number of
|
|
|
|
Amortized Cost
|
|
|
Unrealized Losses
|
|
|
Securities
|
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
Less than
|
|
|
20% or
|
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
20%
|
|
|
more
|
|
|
|
(In millions, except number of securities)
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
8,882
|
|
|
$
|
439
|
|
|
$
|
268
|
|
|
$
|
109
|
|
|
|
686
|
|
|
|
43
|
|
Six months or greater but less than nine months
|
|
|
152
|
|
|
|
40
|
|
|
|
6
|
|
|
|
13
|
|
|
|
30
|
|
|
|
10
|
|
Nine months or greater but less than twelve months
|
|
|
48
|
|
|
|
25
|
|
|
|
2
|
|
|
|
11
|
|
|
|
11
|
|
|
|
3
|
|
Twelve months or greater
|
|
|
4,768
|
|
|
|
881
|
|
|
|
450
|
|
|
|
273
|
|
|
|
475
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,850
|
|
|
$
|
1,385
|
|
|
$
|
726
|
|
|
$
|
406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of amortized cost
|
|
|
|
|
|
|
|
|
|
|
5
|
%
|
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than six months
|
|
$
|
31
|
|
|
$
|
30
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
|
8
|
|
|
|
12
|
|
Six months or greater but less than nine months
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Nine months or greater but less than twelve months
|
|
|
5
|
|
|
|
7
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
Twelve months or greater
|
|
|
150
|
|
|
|
44
|
|
|
|
18
|
|
|
|
16
|
|
|
|
12
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
186
|
|
|
$
|
84
|
|
|
$
|
22
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of cost
|
|
|
|
|
|
|
|
|
|
|
12
|
%
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities with gross unrealized losses of 20% or more
for twelve months or greater increased from $16 million at
December 31, 2010 to $17 million at March 31,
2011. As shown in the section Evaluating
Temporarily Impaired
Available-for-Sale
Securities below, all $17 million of the equity
securities with gross unrealized losses of 20% or more for
twelve months or greater at March 31, 2011 were financial
services industry investment grade non-redeemable preferred
stock, of which 59% were rated A or better.
24
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Concentration
of Gross Unrealized Losses and OTTI Losses for Fixed Maturity
and Equity Securities
Available-for-Sale
The Companys gross unrealized losses related to its fixed
maturity and equity securities, including the portion of OTTI
losses on fixed maturity securities recognized in accumulated
other comprehensive income (loss) of $1.1 billion and
$1.2 billion at March 31, 2011 and December 31,
2010, respectively, were concentrated, calculated as a
percentage of gross unrealized losses and OTTI losses, by sector
and industry as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
Sector:
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
|
25
|
%
|
|
|
26
|
%
|
RMBS
|
|
|
22
|
|
|
|
25
|
|
U.S. Treasury and agency securities
|
|
|
17
|
|
|
|
11
|
|
State and political subdivision securities
|
|
|
13
|
|
|
|
11
|
|
Foreign corporate securities
|
|
|
9
|
|
|
|
11
|
|
ABS
|
|
|
8
|
|
|
|
9
|
|
CMBS
|
|
|
2
|
|
|
|
3
|
|
Other
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Industry:
|
|
|
|
|
|
|
|
|
Mortgage-backed
|
|
|
24
|
%
|
|
|
28
|
%
|
U.S. Treasury and agency securities
|
|
|
17
|
|
|
|
11
|
|
Finance
|
|
|
15
|
|
|
|
19
|
|
State and political subdivision securities
|
|
|
13
|
|
|
|
11
|
|
Asset-backed
|
|
|
8
|
|
|
|
9
|
|
Consumer
|
|
|
6
|
|
|
|
5
|
|
Utility
|
|
|
3
|
|
|
|
3
|
|
Communications
|
|
|
2
|
|
|
|
2
|
|
Transportation
|
|
|
2
|
|
|
|
1
|
|
Industrial
|
|
|
1
|
|
|
|
1
|
|
Other
|
|
|
9
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
Evaluating
Temporarily Impaired
Available-for-Sale
Securities
The following table presents the Companys fixed maturity
and equity securities, each with gross unrealized losses of
greater than $10 million, the number of securities, total
gross unrealized losses and percentage of total gross unrealized
losses at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Fixed Maturity
|
|
|
Equity
|
|
|
Fixed Maturity
|
|
|
Equity
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
(In millions, except number of securities)
|
|
|
Number of securities
|
|
|
15
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
Total gross unrealized losses
|
|
$
|
239
|
|
|
$
|
|
|
|
$
|
210
|
|
|
$
|
|
|
Percentage of total gross unrealized losses
|
|
|
23
|
%
|
|
|
|
%
|
|
|
19
|
%
|
|
|
|
%
|
25
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Fixed maturity and equity securities, each with gross unrealized
losses greater than $10 million, increased $29 million
during the three months ended March 31, 2011. The increase
in gross unrealized losses for the three months ended
March 31, 2011 was primarily attributable to an increase in
interest rates. These securities were included in the
Companys OTTI review process. Based upon the
Companys current evaluation of these securities and other
available-for-sale
securities in an unrealized loss position in accordance with its
impairment policy, and the Companys current intentions and
assessments (as applicable to the type of security) about
holding, selling and any requirements to sell these securities,
the Company has concluded that these securities are not
other-than-temporarily
impaired.
In the Companys impairment review process, the duration
and severity of an unrealized loss position for equity
securities are given greater weight and consideration than for
fixed maturity securities. An extended and severe unrealized
loss position on a fixed maturity security may not have any
impact on the ability of the issuer to service all scheduled
interest and principal payments and the Companys
evaluation of recoverability of all contractual cash flows or
the ability to recover an amount at least equal to its amortized
cost based on the present value of the expected future cash
flows to be collected. In contrast, for an equity security,
greater weight and consideration are given by the Company to a
decline in market value and the likelihood such market value
decline will recover.
The following table presents certain information about the
Companys equity securities
available-for-sale
with gross unrealized losses of 20% or more at March 31,
2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Preferred Stock
|
|
|
|
|
|
|
All Types of
|
|
|
|
|
|
|
|
|
|
All Equity
|
|
|
Non-Redeemable
|
|
|
Investment Grade
|
|
|
|
Securities
|
|
|
Preferred Stock
|
|
|
All Industries
|
|
|
Financial Services Industry
|
|
|
|
Gross
|
|
|
Gross
|
|
|
% of All
|
|
|
Gross
|
|
|
% of All
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Equity
|
|
|
Unrealized
|
|
|
Non-Redeemable
|
|
|
Unrealized
|
|
|
% of All
|
|
|
% A Rated or
|
|
|
|
Losses
|
|
|
Losses
|
|
|
Securities
|
|
|
Losses
|
|
|
Preferred Stock
|
|
|
Losses
|
|
|
Industries
|
|
|
Better
|
|
|
|
(In millions)
|
|
|
Less than six months
|
|
$
|
6
|
|
|
$
|
5
|
|
|
|
83
|
%
|
|
$
|
5
|
|
|
|
100
|
%
|
|
$
|
5
|
|
|
|
100
|
%
|
|
|
100
|
%
|
Six months or greater but less than twelve months
|
|
|
|
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
%
|
|
|
|
|
|
|
|
%
|
|
|
|
%
|
Twelve months or greater
|
|
|
17
|
|
|
|
17
|
|
|
|
100
|
%
|
|
|
17
|
|
|
|
100
|
%
|
|
|
17
|
|
|
|
100
|
%
|
|
|
59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All equity securities with gross unrealized losses of 20% or more
|
|
$
|
23
|
|
|
$
|
22
|
|
|
|
96
|
%
|
|
$
|
22
|
|
|
|
100
|
%
|
|
$
|
22
|
|
|
|
100
|
%
|
|
|
68
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the equity securities impairment review
process, the Company evaluated its holdings in non-redeemable
preferred stock, particularly those companies in the financial
services industry. The Company considered several factors
including whether there has been any deterioration in credit of
the issuer and the likelihood of recovery in value of
non-redeemable preferred stock with a severe or an extended
unrealized loss. The Company also considered whether any issuers
of non-redeemable preferred stock with an unrealized loss held
by the Company, regardless of credit rating, have deferred any
dividend payments. No such dividend payments had been deferred.
With respect to common stock holdings, the Company considered
the duration and severity of the unrealized losses for
securities in an unrealized loss position of 20% or more; and
the duration of unrealized losses for securities in an
unrealized loss position of less than 20% in an extended
unrealized loss position (i.e., 12 months or greater).
Future OTTIs will depend primarily on economic fundamentals,
issuer performance (including changes in the present value of
future cash flows expected to be collected), changes in credit
rating, changes in collateral valuation,
26
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
changes in interest rates and changes in credit spreads. If
economic fundamentals and any of the above factors deteriorate,
additional OTTIs may be incurred in upcoming quarters.
Net
Investment Gains (Losses)
The components of net investment gains (losses) were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Total gains (losses) on fixed maturity securities:
|
|
|
|
|
|
|
|
|
Total OTTI losses recognized
|
|
$
|
(9
|
)
|
|
$
|
(34
|
)
|
Less: Noncredit portion of OTTI losses transferred to and
recognized in other comprehensive income (loss)
|
|
|
(2
|
)
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Net OTTI losses on fixed maturity securities recognized in
earnings
|
|
|
(11
|
)
|
|
|
(18
|
)
|
Fixed maturity securities net gains (losses) on
sales and disposals
|
|
|
(20
|
)
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total gains (losses) on fixed maturity securities
|
|
|
(31
|
)
|
|
|
(14
|
)
|
Other net investment gains (losses):
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
1
|
|
|
|
(1
|
)
|
Mortgage loans
|
|
|
4
|
|
|
|
(8
|
)
|
Real estate and real estate joint ventures
|
|
|
|
|
|
|
(16
|
)
|
Other limited partnership interests
|
|
|
2
|
|
|
|
(2
|
)
|
Other investment portfolio gains (losses)
|
|
|
(4
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Subtotal investment portfolio gains (losses)
|
|
|
(28
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
Fair value option (FVO) consolidated securitization
entities changes in estimated fair value included in
net investment gains (losses):
|
|
|
|
|
|
|
|
|
Commercial mortgage loans
|
|
|
18
|
|
|
|
481
|
|
Long-term debt related to commercial mortgage loans
|
|
|
(6
|
)
|
|
|
(485
|
)
|
Other gains (losses)
|
|
|
2
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
Subtotal FVO consolidated securitization entities and other
gains (losses)
|
|
|
14
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
Total net investment gains (losses)
|
|
$
|
(14
|
)
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
See Variable Interest Entities for
discussion of consolidated securitization entities
(CSEs) included in the table above.
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 ($1) million and
$80 million for the three months ended March 31, 2011
and 2010, respectively.
27
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
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 below.
Investment gains and losses on sales of securities are
determined on a specific identification basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
Fixed Maturity Securities
|
|
|
Equity Securities
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Proceeds
|
|
$
|
2,513
|
|
|
$
|
2,188
|
|
|
$
|
16
|
|
|
$
|
5
|
|
|
$
|
2,529
|
|
|
$
|
2,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross investment gains
|
|
$
|
18
|
|
|
$
|
44
|
|
|
$
|
3
|
|
|
$
|
|
|
|
$
|
21
|
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross investment losses
|
|
|
(38
|
)
|
|
|
(40
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
(40
|
)
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses recognized in earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit-related
|
|
|
(11
|
)
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
(17
|
)
|
Other (1)
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total OTTI losses recognized in earnings
|
|
|
(11
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
$
|
(31
|
)
|
|
$
|
(14
|
)
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
(30
|
)
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other OTTI losses recognized in earnings include impairments on
equity securities, impairments on perpetual hybrid securities
classified within fixed maturity securities where the primary
reason for the impairment was the severity and/or the duration
of an unrealized loss position and fixed maturity securities
where there is an intent to sell or it is more likely than not
that the Company will be required to sell the security before
recovery of the decline in estimated fair value. |
Fixed maturity security OTTI losses recognized in earnings
related to the following sectors and industries within the
U.S. and foreign corporate securities sector:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Sector:
|
|
|
|
|
|
|
|
|
U.S. and foreign corporate securities by industry:
|
|
|
|
|
|
|
|
|
Communications
|
|
$
|
4
|
|
|
$
|
3
|
|
Consumer
|
|
|
|
|
|
|
9
|
|
Finance
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total U.S. and foreign corporate securities
|
|
|
4
|
|
|
|
13
|
|
CMBS
|
|
|
3
|
|
|
|
1
|
|
RMBS
|
|
|
2
|
|
|
|
4
|
|
ABS
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11
|
|
|
$
|
18
|
|
|
|
|
|
|
|
|
|
|
The Company had no equity security OTTI losses recognized in
earnings for both the three months ended March 31, 2011 and
2010.
28
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Credit
Loss Rollforward Rollforward of the Cumulative
Credit Loss Component of OTTI Loss Recognized in Earnings on
Fixed Maturity Securities Still Held for Which a Portion of the
OTTI Loss Was Recognized in Other Comprehensive Income
(Loss)
The table below presents a rollforward of the cumulative credit
loss component of OTTI loss recognized in earnings on fixed
maturity securities still held by the Company for which a
portion of the OTTI loss was recognized in other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Balance, beginning of period
|
|
$
|
63
|
|
|
$
|
213
|
|
Additions:
|
|
|
|
|
|
|
|
|
Initial impairments credit loss OTTI recognized on
securities not previously impaired
|
|
|
|
|
|
|
2
|
|
Additional impairments credit loss OTTI recognized
on securities previously impaired
|
|
|
3
|
|
|
|
2
|
|
Reductions:
|
|
|
|
|
|
|
|
|
Due to sales (maturities, pay downs or prepayments) during the
period of securities previously credit loss OTTI impaired
|
|
|
(2
|
)
|
|
|
(36
|
)
|
Due to securities de-recognized in connection with the adoption
of new guidance related to the consolidation of VIEs
|
|
|
|
|
|
|
(100
|
)
|
Due to securities impaired to net present value of expected
future cash flows
|
|
|
(20
|
)
|
|
|
|
|
Due to increases in cash flows accretion of previous
credit loss OTTI
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
43
|
|
|
$
|
80
|
|
|
|
|
|
|
|
|
|
|
29
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Net
Investment Income
The components of net investment income were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Investment income:
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
$
|
535
|
|
|
$
|
529
|
|
Equity securities
|
|
|
2
|
|
|
|
2
|
|
Mortgage loans
|
|
|
84
|
|
|
|
68
|
|
Policy loans
|
|
|
16
|
|
|
|
16
|
|
Real estate and real estate joint ventures
|
|
|
(8
|
)
|
|
|
(26
|
)
|
Other limited partnership interests
|
|
|
80
|
|
|
|
68
|
|
Cash, cash equivalents and short-term investments
|
|
|
2
|
|
|
|
2
|
|
International joint ventures
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Other
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
712
|
|
|
|
660
|
|
Less: Investment expenses
|
|
|
24
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Subtotal, net
|
|
|
688
|
|
|
|
637
|
|
|
|
|
|
|
|
|
|
|
Other securities FVO contractholder-directed
unit-linked investments (1)
|
|
|
5
|
|
|
|
48
|
|
FVO consolidated securitization entities commercial
mortgage loans
|
|
|
95
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
100
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
788
|
|
|
$
|
790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Changes in estimated fair value subsequent to purchase
included in net investment income
|
|
$
|
(25
|
)
|
|
$
|
41
|
|
See Variable Interest Entities for
discussion of CSEs included in the table above.
Affiliated investment expenses, included in the table above,
were $15 million and $13 million for the three months
ended March 31, 2011 and 2010, respectively. See
Related Party Investment Transactions
for discussion of affiliated net investment income included in
the table above.
Securities
Lending
The Company participates in securities lending programs whereby
blocks of securities, which are included in fixed maturity
securities and short-term investments, are loaned to third
parties, primarily brokerage firms and commercial banks. The
Company generally obtains collateral, generally cash, in an
amount equal to 102% of the estimated fair value of the
securities loaned, which is obtained at the inception of a loan
and maintained at a level greater than or equal to 100% for the
duration of the loan. Securities loaned under such transactions
may be sold or repledged by the transferee. The Company is
liable to return to its counterparties the cash collateral under
its control. These transactions are treated as financing
arrangements and the associated liability is recorded at the
amount of the cash received.
30
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Elements of the securities lending programs are presented below
at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Securities on loan:
|
|
|
|
|
|
|
|
|
Amortized cost
|
|
$
|
6,746
|
|
|
$
|
6,992
|
|
Estimated fair value
|
|
$
|
6,701
|
|
|
$
|
7,054
|
|
Aging of cash collateral liability:
|
|
|
|
|
|
|
|
|
Open (1)
|
|
$
|
1,040
|
|
|
$
|
1,292
|
|
Less than thirty days
|
|
|
2,254
|
|
|
|
3,297
|
|
Thirty days or greater but less than sixty days
|
|
|
2,056
|
|
|
|
1,221
|
|
Sixty days or greater but less than ninety days
|
|
|
687
|
|
|
|
326
|
|
Ninety days or greater
|
|
|
783
|
|
|
|
1,002
|
|
|
|
|
|
|
|
|
|
|
Total cash collateral liability
|
|
$
|
6,820
|
|
|
$
|
7,138
|
|
|
|
|
|
|
|
|
|
|
Security collateral on deposit from counterparties
|
|
$
|
11
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Reinvestment portfolio estimated fair value
|
|
$
|
6,665
|
|
|
$
|
6,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Open meaning that the related loaned security could
be returned to the Company on the next business day requiring
the Company to immediately return the cash collateral. |
The estimated fair value of the securities on loan related to
the cash collateral on open at March 31, 2011 was
$1,018 million, of which $938 million were
U.S. Treasury and agency securities which, if put to the
Company, can be immediately sold to satisfy the cash
requirements. The remainder of the securities on loan was
primarily U.S. Treasury and agency securities, and very
liquid RMBS. The U.S. Treasury securities on loan were
primarily holdings of
on-the-run
U.S. Treasury securities, the most liquid
U.S. Treasury securities available. If these high quality
securities that are on loan are put back to the Company, the
proceeds from immediately selling these securities can be used
to satisfy the related cash requirements. The reinvestment
portfolio acquired with the cash collateral consisted
principally of fixed maturity securities (including RMBS,
U.S. corporate securities, U.S. Treasury and agency
securities and ABS). If the on loan securities 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 are put back to
the Company.
Security collateral on deposit from counterparties in connection
with the securities lending transactions may not be sold or
repledged, unless the counterparty is in default, and is not
reflected in the consolidated financial statements.
31
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Invested
Assets on Deposit and Pledged as Collateral
Invested assets on deposit and pledged as collateral are
presented in the table below at estimated fair value for cash
and cash equivalents and fixed maturity securities and at
carrying value for mortgage loans.
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Invested assets on deposit:
|
|
|
|
|
|
|
|
|
Regulatory agencies
|
|
$
|
55
|
|
|
$
|
55
|
|
Invested assets pledged as collateral:
|
|
|
|
|
|
|
|
|
Funding agreements Federal Home Loan Bank of Boston
|
|
|
600
|
|
|
|
211
|
|
Funding agreements Federal Agricultural Mortgage
Corporation
|
|
|
231
|
|
|
|
231
|
|
Derivative transactions
|
|
|
104
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
Total invested assets on deposit and pledged as collateral
|
|
$
|
990
|
|
|
$
|
580
|
|
|
|
|
|
|
|
|
|
|
See Note 2 Investments
Invested Assets on Deposit and Pledged as Collateral of
the Notes to the Consolidated Financial Statements included in
the 2010 Annual Report for a description of the types of
invested assets on deposit and pledged as collateral and
selected other information about the related program or
counterparty.
See also Securities Lending for the
amount of the Companys cash received from and due back to
counterparties pursuant to the Companys securities lending
program. See Variable Interest Entities
for assets of certain CSEs that can only be used to settle
liabilities of such entities.
Other
Securities
The table below presents certain information about the
Companys securities for which the FVO has been elected:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
FVO general account securities
|
|
$
|
7
|
|
|
$
|
7
|
|
FVO contractholder-directed unit-linked investments
|
|
|
2,618
|
|
|
|
2,240
|
|
|
|
|
|
|
|
|
|
|
Total other securities at estimated fair value
|
|
$
|
2,625
|
|
|
$
|
2,247
|
|
|
|
|
|
|
|
|
|
|
See Note 1 of the Notes to the Consolidated Financial
Statements included in the 2010 Annual Report for discussion of
FVO contractholder-directed unit-linked investments. See
Net Investment Income for the net
investment income recognized on other securities and the related
changes in estimated fair value subsequent to purchase included
in net investment income.
32
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Mortgage
Loans
Mortgage loans are summarized as follows at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Carrying
|
|
|
% of
|
|
|
Carrying
|
|
|
% of
|
|
|
|
Value
|
|
|
Total
|
|
|
Value
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
4,621
|
|
|
|
36.6
|
%
|
|
$
|
4,635
|
|
|
|
36.4
|
%
|
Agricultural
|
|
|
1,326
|
|
|
|
10.5
|
|
|
|
1,342
|
|
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
5,947
|
|
|
|
47.1
|
%
|
|
|
5,977
|
|
|
|
47.0
|
%
|
Valuation allowances
|
|
|
(84
|
)
|
|
|
(0.7
|
)
|
|
|
(87
|
)
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal mortgage loans, net
|
|
|
5,863
|
|
|
|
46.4
|
|
|
|
5,890
|
|
|
|
46.3
|
|
Commercial mortgage loans held by consolidated securitization
entities FVO
|
|
|
6,771
|
|
|
|
53.6
|
|
|
|
6,840
|
|
|
|
53.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans, net
|
|
$
|
12,634
|
|
|
|
100.0
|
%
|
|
$
|
12,730
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Variable Interest Entities for
discussion of CSEs included in the table above.
See Note 2 of the Notes to the Consolidated Financial
Statements in the 2010 Annual Report for discussion of
affiliated mortgage loans included in the table above. The
carrying values of such loans were $198 million and
$199 million at March 31, 2011 and December 31,
2010, respectively.
Concentration of Credit Risk The Company
diversifies its mortgage loan portfolio by both geographic
region and property type to reduce the risk of concentration.
The Companys commercial and agricultural mortgage loans
are collateralized by properties primarily located in the United
States (U.S.). The carrying values of the
Companys commercial and agricultural mortgage loans
located in California, New York and Texas were 27%, 14% and 6%,
respectively, of total mortgage loans (excluding commercial
mortgage loans held by CSEs) at March 31, 2011.
Additionally, the Company manages risk when originating
commercial and agricultural mortgage loans by generally lending
only up to 75% of the estimated fair value of the underlying
real estate.
33
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The following tables present the recorded investment in mortgage
loans, by portfolio segment, by method of evaluation of credit
loss, and the related valuation allowances, by type of credit
loss, at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Agricultural
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluated individually for credit losses
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
23
|
|
Evaluated collectively for credit losses
|
|
|
4,598
|
|
|
|
1,326
|
|
|
|
5,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
|
4,621
|
|
|
|
1,326
|
|
|
|
5,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowances:
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific credit losses
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
Non-specifically identified credit losses
|
|
|
57
|
|
|
|
4
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total valuation allowances
|
|
|
80
|
|
|
|
4
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans, net of valuation allowance
|
|
$
|
4,541
|
|
|
$
|
1,322
|
|
|
$
|
5,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluated individually for credit losses
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
23
|
|
Evaluated collectively for credit losses
|
|
|
4,612
|
|
|
|
1,342
|
|
|
|
5,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loans
|
|
|
4,635
|
|
|
|
1,342
|
|
|
|
5,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowances:
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific credit losses
|
|
|
23
|
|
|
|
|
|
|
|
23
|
|
Non-specifically identified credit losses
|
|
|
61
|
|
|
|
3
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total valuation allowances
|
|
|
84
|
|
|
|
3
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans, net of valuation allowance
|
|
$
|
4,551
|
|
|
$
|
1,339
|
|
|
$
|
5,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present the changes in the valuation
allowance, by portfolio segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Loan Valuation Allowances
|
|
|
|
Commercial
|
|
|
Agricultural
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Balance at January 1, 2010
|
|
$
|
74
|
|
|
$
|
3
|
|
|
$
|
77
|
|
Provision (release)
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
Charge-offs, net of recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010
|
|
$
|
82
|
|
|
$
|
3
|
|
|
$
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2011
|
|
$
|
84
|
|
|
$
|
3
|
|
|
$
|
87
|
|
Provision (release)
|
|
|
(4
|
)
|
|
|
1
|
|
|
|
(3
|
)
|
Charge-offs, net of recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2011
|
|
$
|
80
|
|
|
$
|
4
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Commercial Mortgage Loans by Credit Quality
Indicators with Estimated Fair Value: Presented
below for the commercial mortgage loans is the recorded
investment, prior to valuation allowances, by the indicated
loan-to-value
ratio categories and debt service coverage ratio categories and
estimated fair value of such mortgage loans by the indicated
loan-to-value
ratio categories at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
|
|
|
|
|
Debt Service Coverage Ratios
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
> 1.20x
|
|
|
1.00x - 1.20x
|
|
|
< 1.00x
|
|
|
Total
|
|
|
% of Total
|
|
|
Fair Value
|
|
|
% of Total
|
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan-to-value
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 65%
|
|
$
|
2,255
|
|
|
$
|
10
|
|
|
$
|
31
|
|
|
$
|
2,296
|
|
|
|
49.7
|
%
|
|
$
|
2,433
|
|
|
|
52.0
|
%
|
65% to 75%
|
|
|
785
|
|
|
|
41
|
|
|
|
150
|
|
|
|
976
|
|
|
|
21.1
|
|
|
|
998
|
|
|
|
21.3
|
|
76% to 80%
|
|
|
299
|
|
|
|
29
|
|
|
|
7
|
|
|
|
335
|
|
|
|
7.3
|
|
|
|
339
|
|
|
|
7.2
|
|
Greater than 80%
|
|
|
743
|
|
|
|
131
|
|
|
|
140
|
|
|
|
1,014
|
|
|
|
21.9
|
|
|
|
911
|
|
|
|
19.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,082
|
|
|
$
|
211
|
|
|
$
|
328
|
|
|
$
|
4,621
|
|
|
|
100.0
|
%
|
|
$
|
4,681
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan-to-value
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 65%
|
|
$
|
2,051
|
|
|
$
|
11
|
|
|
$
|
34
|
|
|
$
|
2,096
|
|
|
|
45.2
|
%
|
|
$
|
2,196
|
|
|
|
47.1
|
%
|
65% to 75%
|
|
|
824
|
|
|
|
99
|
|
|
|
148
|
|
|
|
1,071
|
|
|
|
23.1
|
|
|
|
1,099
|
|
|
|
23.6
|
|
76% to 80%
|
|
|
301
|
|
|
|
29
|
|
|
|
7
|
|
|
|
337
|
|
|
|
7.3
|
|
|
|
347
|
|
|
|
7.4
|
|
Greater than 80%
|
|
|
828
|
|
|
|
163
|
|
|
|
140
|
|
|
|
1,131
|
|
|
|
24.4
|
|
|
|
1,018
|
|
|
|
21.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,004
|
|
|
$
|
302
|
|
|
$
|
329
|
|
|
$
|
4,635
|
|
|
|
100.0
|
%
|
|
$
|
4,660
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural Mortgage Loans by Credit Quality
Indicator: The recorded investment in agricultural mortgage
loans, prior to valuation allowances, by credit quality
indicator, is as shown below. The estimated fair value of
agricultural mortgage loans was $1.4 billion at both
March 31, 2011 and December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Recorded Investment
|
|
|
% of Total
|
|
|
Recorded Investment
|
|
|
% of Total
|
|
|
|
(In millions)
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Loan-to-value
ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 65%
|
|
$
|
1,266
|
|
|
|
95.5
|
%
|
|
$
|
1,289
|
|
|
|
96.0
|
%
|
65% to 75%
|
|
|
60
|
|
|
|
4.5
|
|
|
|
53
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,326
|
|
|
|
100.0
|
%
|
|
$
|
1,342
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past Due and Interest Accrual Status of Mortgage
Loans. The Company has a high quality, well
performing, mortgage loan portfolio with approximately 99% of
all mortgage loans classified as performing at both
March 31, 2011 and December 31, 2010. The Company
defines delinquent mortgage loans consistent with industry
practice, when interest and principal payments are past due as
follows: commercial mortgage loans 60 days or
more past due; and agricultural mortgage loans
90 days or more past due. The recorded investment in
mortgage loans, prior
35
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
to valuation allowances, past due according to these aging
categories, past due 90 days or more and still accruing
interest and in nonaccrual status, by portfolio segment, were as
follows at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater than 90 Days Past Due
|
|
|
|
|
|
|
Past Due
|
|
|
Still Accruing Interest
|
|
|
Nonaccrual Status
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
Agricultural
|
|
|
6
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Mortgage Loans. The unpaid principal
balance, recorded investment, valuation allowances and carrying
value, net of valuation allowances, for impaired mortgage loans,
by portfolio segment, were as follows at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Mortgage Loans
|
|
|
|
|
|
|
Loans without
|
|
|
|
|
|
|
Loans with a Valuation Allowance
|
|
|
a Valuation Allowance
|
|
|
All Impaired Loans
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
Principal
|
|
|
Recorded
|
|
|
Valuation
|
|
|
Carrying
|
|
|
Principal
|
|
|
Recorded
|
|
|
Principal
|
|
|
Carrying
|
|
|
|
Balance
|
|
|
Investment
|
|
|
Allowances
|
|
|
Value
|
|
|
Balance
|
|
|
Investment
|
|
|
Balance
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
6
|
|
|
|
7
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
30
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
23
|
|
|
$
|
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
30
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal balance is generally prior to any charge-off.
The average investment in impaired mortgage loans, and the
related interest income, by portfolio segment, was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Mortgage Loans
|
|
|
|
Average Investment
|
|
|
Interest Income Recognized
|
|
|
|
|
|
|
Cash Basis
|
|
|
Accrual Basis
|
|
|
|
(In millions)
|
|
|
For the Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
45
|
|
|
$
|
1
|
|
|
$
|
|
|
Agricultural
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
57
|
|
|
$
|
1
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
30
|
|
|
$
|
|
|
|
$
|
|
|
Agricultural
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Cash
Equivalents
Cash equivalents, which include investments with an original or
remaining maturity of three months or less at the time of
purchase, were $1.7 billion and $1.8 billion at
March 31, 2011 and December 31, 2010, respectively.
Variable
Interest Entities
The Company holds investments in certain 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
following table presents the total assets and total liabilities
relating to VIEs for which the Company has concluded that it is
the primary beneficiary and which are consolidated in the
Companys financial statements at March 31, 2011 and
December 31, 2010. 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
Companys obligation to the VIEs is limited to the amount
of its committed investment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
Total
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Consolidated securitization entities: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans
held-for-investment
(commercial mortgage loans)
|
|
$
|
6,771
|
|
|
$
|
|
|
|
$
|
6,840
|
|
|
$
|
|
|
Accrued investment income
|
|
|
30
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
6,693
|
|
|
|
|
|
|
|
6,773
|
|
Other liabilities
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,801
|
|
|
$
|
6,723
|
|
|
$
|
6,871
|
|
|
$
|
6,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Company consolidated former qualified special purpose
entities (QSPEs) that are structured as CMBS. The
assets of these entities can only be used to settle their
respective liabilities, and under no circumstances is the
Company or any of its subsidiaries or affiliates liable for any
principal or interest shortfalls should any arise. The
Companys exposure is limited to that of its remaining
investment in the former QSPEs of $74 million and
$64 million at estimated fair value at March 31, 2011
and December 31, 2010, respectively. The long-term debt
referred to above bears interest at primarily fixed rates
ranging from 2.25% to 5.57%, payable on a monthly basis and is
expected to be repaid over the next 7 years. Interest
expense related to these obligations, included in other
expenses, was $93 million and $103 million for the
three months ended March 31, 2011 and 2010, respectively. |
37
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The following table presents the carrying amount and maximum
exposure to loss relating to VIEs for which the Company holds
significant variable interests but is not the primary
beneficiary and which have not been consolidated at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
Maximum
|
|
|
|
Carrying
|
|
|
Exposure
|
|
|
Carrying
|
|
|
Exposure
|
|
|
|
Amount
|
|
|
to Loss (1)
|
|
|
Amount
|
|
|
to Loss (1)
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Fixed maturity securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMBS (2)
|
|
$
|
6,822
|
|
|
$
|
6,822
|
|
|
$
|
6,709
|
|
|
$
|
6,709
|
|
CMBS (2)
|
|
|
2,190
|
|
|
|
2,190
|
|
|
|
2,277
|
|
|
|
2,277
|
|
ABS (2)
|
|
|
1,853
|
|
|
|
1,853
|
|
|
|
1,869
|
|
|
|
1,869
|
|
Foreign corporate securities
|
|
|
376
|
|
|
|
376
|
|
|
|
348
|
|
|
|
348
|
|
U.S. corporate securities
|
|
|
367
|
|
|
|
367
|
|
|
|
336
|
|
|
|
336
|
|
Other limited partnership interests
|
|
|
1,320
|
|
|
|
2,119
|
|
|
|
1,192
|
|
|
|
1,992
|
|
Real estate joint ventures
|
|
|
25
|
|
|
|
31
|
|
|
|
10
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,953
|
|
|
$
|
13,758
|
|
|
$
|
12,741
|
|
|
$
|
13,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The maximum exposure to loss relating to the fixed maturity
securities is equal to the carrying amounts or carrying amounts
of retained interests. The maximum exposure to loss relating to
the other limited partnership interests and real estate joint
ventures is equal to the carrying amounts plus any unfunded
commitments of the Company. Such a maximum loss would be
expected to occur only upon bankruptcy of the issuer or investee. |
|
(2) |
|
For these variable interests, the Companys involvement is
limited to that of a passive investor. |
As described in Note 5, 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
during the three months ended March 31, 2011 and 2010.
Related
Party Investment Transactions
At March 31, 2011 and December 31, 2010, the Company
held $52 million and $63 million, respectively, in the
Metropolitan Money Market Pool and the MetLife Intermediate
Income Pool, which are affiliated partnerships. These amounts
are included in short-term investments. Net investment income
from these investments was less than $1 million for both
the three months ended March 31, 2011 and 2010.
In the normal course of business, the Company transfers invested
assets, primarily consisting of fixed maturity securities, to
and from affiliates. Transfers of invested assets are done at
estimated fair value with net investment gains (losses)
recognized by the affiliate initiating the transfer. The
estimated fair value of invested assets transferred from
affiliates, inclusive of amounts related to reinsurance
agreements, was less than $1 million, and there were no
transfers to affiliates for the three months ended
March 31, 2011. There were no transfers of invested assets
to or from affiliates for the three months ended March 31,
2010.
|
|
3.
|
Derivative
Financial Instruments
|
Accounting
for Derivative Financial Instruments
Derivatives are financial instruments whose values are 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
market. The Company uses a variety of derivatives, including
swaps, forwards, futures and option
38
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
contracts, to manage various risks relating to its ongoing
business. To a lesser extent, the Company uses credit
derivatives, such as credit default swaps, to synthetically
replicate investment risks and returns which are not readily
available in the cash market. The Company also purchases certain
securities, issues certain insurance policies and investment
contracts and engages in certain reinsurance contracts that have
embedded derivatives.
Freestanding derivatives are carried on the Companys
consolidated balance sheets either as assets within other
invested assets or as liabilities within other liabilities at
estimated fair value as determined through the use of quoted
market prices for exchange-traded derivatives or through the use
of pricing models for
over-the-counter
derivatives. The determination of estimated fair value, when
quoted market values are not available, is based on market
standard valuation methodologies and inputs that are assumed to
be consistent with what other market participants would use when
pricing the instruments. Derivative valuations can be affected
by changes in interest rates, foreign currency exchange rates,
financial indices, credit spreads, default risk (including the
counterparties to the contract), volatility, liquidity and
changes in estimates and assumptions used in the pricing models.
The Company does not offset the fair value amounts recognized
for derivatives executed with the same counterparty under the
same master netting agreement.
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
generally reported in net derivative gains (losses) except for
those in net investment income for economic hedges of equity
method investments in joint ventures. The fluctuations in
estimated fair value of derivatives which have not been
designated for hedge accounting can result in significant
volatility in net income.
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 as either (i) a
hedge of the estimated fair value of a recognized asset or
liability (fair value hedge); or (ii) 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 (cash flow hedge). In this 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 instruments effectiveness
and the method which will be used to measure ineffectiveness. 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 periodically 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 accounting for derivatives is complex and interpretations of
the primary accounting guidance continue to evolve in practice.
Judgment is applied in determining the availability and
application of hedge accounting designations and the appropriate
accounting treatment under such accounting guidance. If it was
determined that hedge accounting designations were not
appropriately applied, reported net income could be materially
affected.
Under a fair value hedge, changes in the estimated fair value of
the hedging derivative, including amounts measured as
ineffectiveness, and changes in the estimated fair value of the
hedged item related to the designated risk being hedged, are
reported within net derivative gains (losses). The estimated
fair values of the hedging derivatives are exclusive of any
accruals that are separately reported in the consolidated
statement of operations within interest income or interest
expense to match the location of the hedged item. However,
accruals that are not scheduled to settle until maturity are
included in the estimated fair value of derivatives in the
consolidated balance sheets.
Under a cash flow hedge, changes in the estimated fair value of
the hedging derivative measured as effective are reported within
other comprehensive income (loss), a separate component of
stockholders equity, and the deferred gains or losses on
the derivative are reclassified into the consolidated statement
of operations when the Companys earnings are affected by
the variability in cash flows of the hedged item. Changes in the
estimated fair
39
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
value of the hedging instrument measured as ineffectiveness are
reported within net derivative gains (losses). The estimated
fair values of the hedging derivatives are exclusive of any
accruals that are separately reported in the consolidated
statement of operations within interest income or interest
expense to match the location of the hedged item. However,
accruals that are not scheduled to settle until maturity are
included in the estimated fair value of derivatives in the
consolidated balance sheets.
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.
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 in the consolidated
balance sheets at its estimated fair value, with changes in
estimated fair value recognized currently 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, the changes in estimated fair value of
derivatives recorded in other comprehensive income (loss)
related to discontinued cash flow hedges are released into the
consolidated statement of operations when the Companys
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 in the consolidated balance
sheets 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
other comprehensive income (loss) pursuant to the discontinued
cash flow hedge of a forecasted transaction that is no longer
probable are recognized immediately in net derivative gains
(losses).
In all other situations in which hedge accounting is
discontinued, the derivative is carried at its estimated fair
value in the consolidated balance sheets, with changes in its
estimated fair value recognized in the current period as net
derivative gains (losses).
The Company is also a party to financial instruments that
contain terms which are deemed to be embedded derivatives. The
Company assesses each identified embedded derivative to
determine whether it is required to be bifurcated. If the
instrument would not be accounted for in its entirety at
estimated fair value and it is determined that the terms of the
embedded derivative are not clearly and closely related to the
economic characteristics of the host contract, and that a
separate instrument with the same terms would qualify as a
derivative instrument, the embedded derivative is bifurcated
from the host contract and accounted for as a freestanding
derivative. Such embedded derivatives are carried in the
consolidated balance sheets 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.
See Note 4 for information about the fair value hierarchy
for derivatives.
40
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Primary
Risks Managed by Derivative Financial Instruments
The Company is exposed to various risks relating to its ongoing
business operations, including interest rate risk, foreign
currency risk, credit risk and equity market risk. The Company
uses a variety of strategies to manage these risks, including
the use of derivative instruments. The following table presents
the gross notional amount, estimated fair value and primary
underlying risk exposure of the Companys derivative
financial instruments, excluding embedded derivatives held at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
Primary Underlying
|
|
|
|
Notional
|
|
|
Fair Value (1)
|
|
|
Notional
|
|
|
Fair Value (1)
|
|
Risk Exposure
|
|
Instrument Type
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Interest rate
|
|
Interest rate swaps
|
|
$
|
9,755
|
|
|
$
|
621
|
|
|
$
|
242
|
|
|
$
|
9,102
|
|
|
$
|
658
|
|
|
$
|
252
|
|
|
|
Interest rate floors
|
|
|
7,986
|
|
|
|
99
|
|
|
|
51
|
|
|
|
7,986
|
|
|
|
127
|
|
|
|
62
|
|
|
|
Interest rate caps
|
|
|
7,658
|
|
|
|
50
|
|
|
|
|
|
|
|
7,158
|
|
|
|
29
|
|
|
|
1
|
|
|
|
Interest rate futures
|
|
|
1,671
|
|
|
|
2
|
|
|
|
|
|
|
|
1,966
|
|
|
|
5
|
|
|
|
7
|
|
|
|
Interest rate forwards
|
|
|
695
|
|
|
|
|
|
|
|
79
|
|
|
|
695
|
|
|
|
|
|
|
|
71
|
|
Foreign currency
|
|
Foreign currency swaps
|
|
|
2,041
|
|
|
|
434
|
|
|
|
81
|
|
|
|
2,561
|
|
|
|
585
|
|
|
|
68
|
|
|
|
Foreign currency forwards
|
|
|
182
|
|
|
|
|
|
|
|
6
|
|
|
|
151
|
|
|
|
4
|
|
|
|
1
|
|
Credit
|
|
Credit default swaps
|
|
|
1,745
|
|
|
|
17
|
|
|
|
21
|
|
|
|
1,324
|
|
|
|
15
|
|
|
|
22
|
|
Equity market
|
|
Equity futures
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
Equity options
|
|
|
1,313
|
|
|
|
154
|
|
|
|
|
|
|
|
733
|
|
|
|
77
|
|
|
|
|
|
|
|
Variance swaps
|
|
|
1,081
|
|
|
|
16
|
|
|
|
10
|
|
|
|
1,081
|
|
|
|
20
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,263
|
|
|
$
|
1,393
|
|
|
$
|
490
|
|
|
$
|
32,850
|
|
|
$
|
1,520
|
|
|
$
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The estimated fair value of all derivatives in an asset position
is reported within other invested assets in the consolidated
balance sheets and the estimated fair value of all derivatives
in a liability position is reported within other liabilities in
the consolidated balance sheets. |
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 principal amount. 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. The
Company utilizes interest rate swaps in fair value, cash flow
and non-qualifying hedging relationships.
The Company also enters into basis swaps to better match the
cash flows from assets and related liabilities. In a basis swap,
both legs of the swap are floating with each based on a
different index. Generally, no cash is exchanged at the outset
of the contract and no principal payments are made by either
party. A single net payment is usually made by one counterparty
at each due date. Basis swaps are included in interest rate
swaps in the preceding table. The Company utilizes basis swaps
in non-qualifying hedging relationships.
Inflation swaps are used as an economic hedge to reduce
inflation risk generated from inflation-indexed liabilities.
Inflation swaps are included in interest rate swaps in the
preceding table. The Company utilizes inflation swaps in
non-qualifying hedging relationships.
Implied volatility swaps are used by the Company primarily as
economic hedges of interest rate risk associated with the
Companys investments in mortgage-backed securities. In an
implied volatility swap, the Company
41
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
exchanges fixed payments for floating payments that are linked
to certain market volatility measures. If implied volatility
rises, the floating payments that the Company receives will
increase, and if implied volatility falls, the floating payments
that the Company receives will decrease. Implied volatility
swaps are included in interest rate swaps in the preceding
table. The Company utilizes implied volatility swaps in
non-qualifying 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
(duration mismatches), as well as to protect its minimum rate
guarantee liabilities against declines in interest rates below a
specified level, respectively. 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 non-qualifying
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, and to post
variation margin on a daily basis in an amount equal to the
difference in the daily market values of those contracts. 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 and to hedge against
changes in interest rates on anticipated liability issuances by
replicating Treasury or swap curve performance. The Company
utilizes exchange-traded interest rate futures in non-qualifying
hedging relationships.
The Company writes covered call options on its portfolio of
U.S. Treasuries as an income generation strategy. In a
covered call transaction, the Company receives a premium at the
inception of the contract in exchange for giving the derivative
counterparty the right to purchase the referenced security from
the Company at a predetermined price. The call option is
covered because the Company owns the referenced
security over the term of the option. Covered call options are
included in interest rate options. The Company utilizes covered
call options in non-qualifying hedging relationships.
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 non-qualifying hedging relationships.
Foreign currency derivatives, including foreign currency swaps
and foreign currency forwards, are used by the Company 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 principal amount. The principal 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 non-qualifying
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 in a different currency at the specified future
date. The Company utilizes foreign currency forwards in
non-qualifying hedging relationships.
Swap spreadlocks are used by the Company to hedge invested
assets on an economic basis against the risk of changes in
credit spreads. Swap spreadlocks are forward transactions
between two parties whose underlying reference index is a
forward starting interest rate swap where the Company agrees to
pay a coupon based on a
42
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
predetermined reference swap spread in exchange for receiving a
coupon based on a floating rate. The Company has the option to
cash settle with the counterparty in lieu of maintaining the
swap after the effective date. The Company utilizes swap
spreadlocks in non-qualifying hedging relationships.
Certain credit default swaps are used by the Company to hedge
against credit-related changes in the value of its investments
and to diversify its credit risk exposure in certain portfolios.
In a credit default swap transaction, the Company agrees with
another party, at specified intervals, to pay a premium to hedge
credit risk. If a credit event, as defined by the contract,
occurs, generally the contract will require the swap to be
settled gross by the delivery of par quantities of the
referenced investment equal to the specified swap notional in
exchange for the payment of cash amounts by the counterparty
equal to the par value of the investment surrendered. The
Company utilizes credit default swaps in non-qualifying hedging
relationships.
Credit default swaps are also used 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. Treasury or agency security. 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 as credit forwards. The Company
utilizes credit forwards in cash flow 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. 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 liabilities embedded in certain variable annuity
products offered by the Company. The Company utilizes
exchange-traded equity futures in non-qualifying hedging
relationships.
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
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. 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.
Equity index options are included in equity options in the
preceding table. The Company utilizes equity index options in
non-qualifying 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.
Equity variance swaps are included in variance swaps in the
preceding table. The Company utilizes equity variance swaps in
non-qualifying hedging relationships.
43
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Hedging
The following table presents the gross notional amount and
estimated fair value of derivatives designated as hedging
instruments by type of hedge designation at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Notional
|
|
|
Fair Value
|
|
|
Notional
|
|
|
Fair Value
|
|
Derivatives Designated as Hedging Instruments
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency swaps
|
|
$
|
734
|
|
|
$
|
330
|
|
|
$
|
16
|
|
|
$
|
787
|
|
|
$
|
334
|
|
|
$
|
18
|
|
Interest rate swaps
|
|
|
298
|
|
|
|
10
|
|
|
|
18
|
|
|
|
193
|
|
|
|
11
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
1,032
|
|
|
|
340
|
|
|
|
34
|
|
|
|
980
|
|
|
|
345
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency swaps
|
|
|
339
|
|
|
|
16
|
|
|
|
13
|
|
|
|
295
|
|
|
|
15
|
|
|
|
11
|
|
Interest rate swaps
|
|
|
520
|
|
|
|
|
|
|
|
50
|
|
|
|
575
|
|
|
|
1
|
|
|
|
45
|
|
Interest rate forwards
|
|
|
695
|
|
|
|
|
|
|
|
79
|
|
|
|
695
|
|
|
|
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
1,554
|
|
|
|
16
|
|
|
|
142
|
|
|
|
1,565
|
|
|
|
16
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total qualifying hedges
|
|
$
|
2,586
|
|
|
$
|
356
|
|
|
$
|
176
|
|
|
$
|
2,545
|
|
|
$
|
361
|
|
|
$
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the gross notional amount and
estimated fair value of derivatives that were not designated or
do not qualify as hedging instruments by derivative type at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
Derivatives Not Designated or
|
|
Notional
|
|
|
Fair Value
|
|
|
Notional
|
|
|
Fair Value
|
|
Not Qualifying as Hedging Instruments
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Amount
|
|
|
Assets
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
8,937
|
|
|
$
|
611
|
|
|
$
|
174
|
|
|
$
|
8,334
|
|
|
$
|
646
|
|
|
$
|
192
|
|
Interest rate floors
|
|
|
7,986
|
|
|
|
99
|
|
|
|
51
|
|
|
|
7,986
|
|
|
|
127
|
|
|
|
62
|
|
Interest rate caps
|
|
|
7,658
|
|
|
|
50
|
|
|
|
|
|
|
|
7,158
|
|
|
|
29
|
|
|
|
1
|
|
Interest rate futures
|
|
|
1,671
|
|
|
|
2
|
|
|
|
|
|
|
|
1,966
|
|
|
|
5
|
|
|
|
7
|
|
Foreign currency swaps
|
|
|
968
|
|
|
|
88
|
|
|
|
52
|
|
|
|
1,479
|
|
|
|
236
|
|
|
|
39
|
|
Foreign currency forwards
|
|
|
182
|
|
|
|
|
|
|
|
6
|
|
|
|
151
|
|
|
|
4
|
|
|
|
1
|
|
Credit default swaps
|
|
|
1,745
|
|
|
|
17
|
|
|
|
21
|
|
|
|
1,324
|
|
|
|
15
|
|
|
|
22
|
|
Equity futures
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
Equity options
|
|
|
1,313
|
|
|
|
154
|
|
|
|
|
|
|
|
733
|
|
|
|
77
|
|
|
|
|
|
Variance swaps
|
|
|
1,081
|
|
|
|
16
|
|
|
|
10
|
|
|
|
1,081
|
|
|
|
20
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-designated or non-qualifying derivatives
|
|
$
|
31,677
|
|
|
$
|
1,037
|
|
|
$
|
314
|
|
|
$
|
30,305
|
|
|
$
|
1,159
|
|
|
$
|
332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Net
Derivative Gains (Losses)
The components of net derivative gains (losses) were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Derivatives and hedging gains (losses) (1)
|
|
$
|
(103
|
)
|
|
$
|
(97
|
)
|
Embedded derivatives
|
|
|
(53
|
)
|
|
|
(211
|
)
|
|
|
|
|
|
|
|
|
|
Total net derivative gains (losses)
|
|
$
|
(156
|
)
|
|
$
|
(308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes foreign currency transaction gains (losses) on hedged
items in cash flow and non-qualifying hedge relationships, which
are not presented elsewhere in this note. |
The following table presents the settlement payments recorded in
income for the:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Qualifying hedges:
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
1
|
|
|
$
|
|
|
Interest credited to policyholder account balances
|
|
|
11
|
|
|
|
10
|
|
Non-qualifying hedges:
|
|
|
|
|
|
|
|
|
Net derivative gains (losses)
|
|
|
10
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
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
investments to floating rate investments; (ii) interest
rate swaps to convert fixed rate liabilities to floating rate
liabilities; and (iii) foreign currency swaps to hedge the
foreign currency fair value exposure of foreign currency
denominated liabilities.
45
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (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 represents the amount of
such net derivative gains (losses) recognized for the three
months ended March 31, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ineffectiveness
|
|
|
|
|
|
Net Derivative Gains
|
|
|
Net Derivative Gains
|
|
|
Recognized in Net
|
|
Derivatives in Fair Value
|
|
Hedged Items in Fair Value
|
|
(Losses) Recognized
|
|
|
(Losses) Recognized
|
|
|
Derivative Gains
|
|
Hedging Relationships
|
|
Hedging Relationships
|
|
for Derivatives
|
|
|
for Hedged Items
|
|
|
(Losses)
|
|
|
|
|
|
(In millions)
|
|
|
For the Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
Fixed maturity securities
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
|
Policyholder account balances (1)
|
|
|
(5
|
)
|
|
|
4
|
|
|
|
(1
|
)
|
Foreign currency swaps:
|
|
Foreign-denominated policyholder
account balances (2)
|
|
|
22
|
|
|
|
(26
|
)
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18
|
|
|
$
|
(23
|
)
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps:
|
|
Policyholder account balances (1)
|
|
$
|
1
|
|
|
$
|
(4
|
)
|
|
$
|
(3
|
)
|
Foreign currency swaps:
|
|
Foreign-denominated policyholder
account balances (2)
|
|
|
(52
|
)
|
|
|
44
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(51
|
)
|
|
$
|
40
|
|
|
$
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fixed rate liabilities |
|
(2) |
|
Fixed rate or floating rate liabilities |
All components of each derivatives 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) foreign currency swaps to hedge the foreign
currency cash flow exposure of foreign currency denominated
investments and liabilities; (ii) interest rate forwards
and credit forwards to lock in the price to be paid for forward
purchases of investments; (iii) interest rate swaps and
interest rate forwards to hedge the forecasted purchases of
fixed-rate investments; and (iv) interest rate swaps to
convert floating rate investments to fixed rate investments.
For both the three months ended March 31, 2011 and 2010,
the Company recognized insignificant net derivative gains
(losses) which represented the ineffective portion of all cash
flow hedges. For the three months ended March 31, 2011 and
2010, there were no instances in which the Company discontinued
cash flow hedge accounting because the forecasted transactions
did not occur on the anticipated date or within two months of
that date. At March 31, 2011 and March 31, 2010, 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 six years and one year, respectively.
46
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The following table presents the components of accumulated other
comprehensive income (loss), before income tax, related to cash
flow hedges:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Accumulated other comprehensive income (loss), balance at
beginning of period
|
|
$
|
(109
|
)
|
|
$
|
(1
|
)
|
Gains (losses) deferred in other comprehensive income (loss) on
the effective portion of cash flow hedges
|
|
|
(21
|
)
|
|
|
3
|
|
Amounts reclassified to net derivative gains (losses)
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), balance at end of
period
|
|
$
|
(132
|
)
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2011, $1 million of deferred net gains
(losses) on derivatives in accumulated other comprehensive
income (loss) was expected to be reclassified to earnings within
the next 12 months.
The following table presents the effects of derivatives in cash
flow hedging relationships on the interim condensed consolidated
statements of operations and the interim condensed consolidated
statements of stockholders equity for the three months
ended March 31, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Location of
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
|
Amount of Gains
|
|
|
Reclassified from
|
|
|
|
(Losses) Deferred
|
|
|
Accumulated Other
|
|
|
|
in Accumulated
|
|
|
Comprehensive Income
|
|
|
|
Other Comprehensive
|
|
|
(Loss) into Income (Loss)
|
|
|
|
Income (Loss) on
|
|
|
Net Derivative
|
|
Derivatives in Cash Flow Hedging Relationships
|
|
Derivatives
|
|
|
Gains (Losses)
|
|
|
|
(In millions)
|
|
|
For the Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
(11
|
)
|
|
$
|
|
|
Foreign currency swaps
|
|
|
(1
|
)
|
|
|
2
|
|
Interest rate forwards
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(21
|
)
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
Foreign currency swaps
|
|
$
|
|
|
|
$
|
(2
|
)
|
Credit forwards
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
All components of each derivatives gain or loss were
included in the assessment of hedge effectiveness.
Non-Qualifying
Derivatives and Derivatives for Purposes Other Than
Hedging
The Company enters into the following derivatives that do not
qualify for hedge accounting or for purposes other than hedging:
(i) interest rate swaps, implied volatility swaps, caps and
floors and interest rate futures to economically hedge its
exposure to interest rates; (ii) foreign currency forwards
and swaps to economically hedge its exposure to adverse
movements in exchange rates; (iii) credit default swaps to
economically hedge exposure to adverse movements in credit;
(iv) equity futures, equity index options, interest rate
futures and equity variance swaps to economically hedge
liabilities embedded in certain variable annuity products;
(v) swap spreadlocks to economically hedge invested assets
against the risk of changes in credit spreads; (vi) credit
default swaps to
47
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
synthetically create investments; (vii) interest rate
forwards to buy and sell securities to economically hedge its
exposure to interest rates; (viii) basis swaps to better
match the cash flows of assets and related liabilities;
(ix) inflation swaps to reduce risk generated from
inflation-indexed liabilities; (x) covered call options for
income generation; and (xi) equity options to economically
hedge certain invested assets against adverse changes in equity
indices.
The following tables present the amount and location of gains
(losses) recognized in income for derivatives that were not
designated or qualifying as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Net Derivative
|
|
|
Net Investment
|
|
|
|
Gains (Losses)
|
|
|
Income (1)
|
|
|
|
(In millions)
|
|
|
For the Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
(24
|
)
|
|
$
|
|
|
Interest rate floors
|
|
|
(17
|
)
|
|
|
|
|
Interest rate caps
|
|
|
(1
|
)
|
|
|
|
|
Interest rate futures
|
|
|
(1
|
)
|
|
|
|
|
Foreign currency swaps
|
|
|
3
|
|
|
|
|
|
Foreign currency forwards
|
|
|
(11
|
)
|
|
|
|
|
Equity options
|
|
|
(22
|
)
|
|
|
(1
|
)
|
Variance swaps
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(79
|
)
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
18
|
|
|
$
|
|
|
Interest rate floors
|
|
|
(7
|
)
|
|
|
|
|
Interest rate caps
|
|
|
(8
|
)
|
|
|
|
|
Interest rate futures
|
|
|
(5
|
)
|
|
|
|
|
Equity futures
|
|
|
(5
|
)
|
|
|
|
|
Foreign currency swaps
|
|
|
(44
|
)
|
|
|
|
|
Foreign currency forwards
|
|
|
4
|
|
|
|
|
|
Equity options
|
|
|
(23
|
)
|
|
|
(1
|
)
|
Variance swaps
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(80
|
)
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Changes in estimated fair value related to economic hedges of
equity method investments in joint ventures. |
Credit
Derivatives
In connection with synthetically created 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 non-qualifying derivatives
and derivatives for purposes other than hedging table. If a
credit event occurs, as defined by the contract, generally the
contract will require the Company to pay the counterparty the
specified swap notional amount in exchange for the delivery of
par quantities of the referenced credit obligation. The
Companys maximum amount at risk, assuming the value of all
referenced credit obligations is zero, was $1,382 million
and $912 million at March 31, 2011 and
December 31, 2010, respectively. The Company can terminate
these contracts at any time through cash settlement with the
counterparty at an amount equal to the then current fair value
of the credit default
48
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
swaps. At March 31, 2011 and December 31, 2010, the
Company would have received $15 million and
$13 million, respectively, to terminate all of these
contracts.
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 March 31, 2011 and
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
Estimated
|
|
|
Amount of
|
|
|
|
|
|
Estimated
|
|
|
Amount of
|
|
|
|
|
|
|
Fair
|
|
|
Future
|
|
|
Weighted
|
|
|
Fair
|
|
|
Future
|
|
|
Weighted
|
|
|
|
Value of
|
|
|
Payments under
|
|
|
Average
|
|
|
Value of
|
|
|
Payments under
|
|
|
Average
|
|
Rating Agency Designation of Referenced
|
|
Credit Default
|
|
|
Credit Default
|
|
|
Years to
|
|
|
Credit Default
|
|
|
Credit Default
|
|
|
Years to
|
|
Credit Obligations (1)
|
|
Swaps
|
|
|
Swaps (2)
|
|
|
Maturity (3)
|
|
|
Swaps
|
|
|
Swaps (2)
|
|
|
Maturity (3)
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
Aaa/Aa/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single name credit default swaps (corporate)
|
|
$
|
1
|
|
|
$
|
80
|
|
|
|
4.1
|
|
|
$
|
1
|
|
|
$
|
45
|
|
|
|
3.6
|
|
Credit default swaps referencing indices
|
|
|
11
|
|
|
|
754
|
|
|
|
3.6
|
|
|
|
11
|
|
|
|
679
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
12
|
|
|
|
834
|
|
|
|
3.7
|
|
|
|
12
|
|
|
|
724
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single name credit default swaps (corporate)
|
|
|
|
|
|
|
125
|
|
|
|
5.0
|
|
|
|
|
|
|
|
5
|
|
|
|
3.0
|
|
Credit default swaps referencing indices
|
|
|
3
|
|
|
|
423
|
|
|
|
4.8
|
|
|
|
1
|
|
|
|
183
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
3
|
|
|
|
548
|
|
|
|
4.8
|
|
|
|
1
|
|
|
|
188
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15
|
|
|
$
|
1,382
|
|
|
|
4.1
|
|
|
$
|
13
|
|
|
$
|
912
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The rating agency designations are based on availability and the
midpoint of the applicable ratings among Moodys, S&P
and Fitch. If no rating is available from a rating agency, then
an internally developed rating is used. |
|
(2) |
|
Assumes the value of the referenced credit obligations is zero. |
|
(3) |
|
The weighted average years to maturity of the credit default
swaps is calculated based on weighted average notional amounts. |
Credit
Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event
of nonperformance by counterparties to derivative financial
instruments. Generally, the current credit exposure of the
Companys derivative contracts is limited to the net
positive estimated fair value of derivative contracts at the
reporting date after taking into consideration the existence of
netting agreements and any collateral received pursuant to
credit support annexes.
The Company manages its credit risk related to
over-the-counter
derivatives by entering into transactions with creditworthy
counterparties, maintaining collateral arrangements and through
the use of master agreements that provide for a single net
payment to be made by one counterparty to another at each due
date and upon termination. Because exchange-traded futures are
effected through regulated exchanges, and positions are marked
to market on a daily basis, the Company has minimal exposure to
credit-related losses in the event of nonperformance by
counterparties to such derivative instruments. See Note 4
for a description of the impact of credit risk on the valuation
of derivative instruments.
The Company enters into various collateral arrangements which
require both the pledging and accepting of collateral in
connection with its derivative instruments. At March 31,
2011 and December 31, 2010, the Company was obligated to
return cash collateral under its control of $898 million
and $965 million, respectively. This unrestricted cash
collateral is included in cash and cash equivalents or in
short-term investments and the obligation to return it is
included in payables for collateral under securities loaned and
other transactions in the consolidated balance sheets. At
March 31, 2011 and December 31, 2010, the Company had
also accepted collateral consisting of various securities with a
fair market value of $24 million and $3 million,
respectively, which were held in separate
49
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
custodial accounts. The Company is permitted by contract to sell
or repledge this collateral, but at March 31, 2011, none of
the collateral had been sold or repledged.
The Companys collateral arrangements for its
over-the-counter
derivatives generally require the counterparty in a net
liability position, after considering the effect of netting
agreements, to pledge collateral when the fair value of that
counterpartys derivatives reaches a pre-determined
threshold. Certain of these arrangements also include
credit-contingent provisions that provide for a reduction of
these thresholds (on a sliding scale that converges toward zero)
in the event of downgrades in the credit ratings of the Company
and/or the
counterparty. In addition, certain of the Companys netting
agreements for derivative instruments contain provisions that
require the Company to maintain a specific investment grade
credit rating from at least one of the major credit rating
agencies. If the Companys credit ratings were to fall
below that specific investment grade credit rating, it would be
in violation of these provisions, and the counterparties to the
derivative instruments could request immediate payment or demand
immediate and ongoing full overnight collateralization on
derivative instruments that are in a net liability position
after considering the effect of netting agreements.
The following table presents the estimated fair value of the
Companys
over-the-counter
derivatives that are 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 the Company would be required to provide if
there was a one notch downgrade in the Companys credit
rating at the reporting date or if the Companys credit
rating sustained a downgrade to a level that triggered full
overnight collateralization or termination of the derivative
position at the reporting date. Derivatives that are not subject
to collateral agreements are not included in the scope of this
table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Incremental Collateral
|
|
|
|
|
|
|
Provided Upon:
|
|
|
|
|
|
|
|
|
Downgrade in the
|
|
|
|
|
Estimated
|
|
One Notch
|
|
Companys Credit Rating
|
|
|
|
|
Fair Value of
|
|
Downgrade
|
|
to a Level that Triggers
|
|
|
Estimated
|
|
Collateral
|
|
in the
|
|
Full Overnight
|
|
|
Fair Value (1) of
|
|
Provided:
|
|
Companys
|
|
Collateralization or
|
|
|
Derivatives in Net
|
|
Fixed Maturity
|
|
Credit
|
|
Termination
|
|
|
Liability Position
|
|
Securities (2)
|
|
Rating
|
|
of the Derivative Position
|
|
|
(In millions)
|
|
March 31, 2011
|
|
$
|
147
|
|
|
$
|
76
|
|
|
$
|
13
|
|
|
$
|
78
|
|
December 31, 2010
|
|
$
|
96
|
|
|
$
|
58
|
|
|
$
|
11
|
|
|
$
|
62
|
|
|
|
|
(1) |
|
After taking into consideration the existence of netting
agreements. |
|
(2) |
|
Included in fixed maturity securities in the consolidated
balance sheets. The counterparties are permitted by contract to
sell or repledge this collateral. At both March 31, 2011
and December 31, 2010, the Company did not provide any cash
collateral. |
Without considering the effect of netting agreements, the
estimated fair value of the Companys
over-the-counter
derivatives with credit-contingent provisions that were in a
gross liability position at March 31, 2011 was
$206 million. At March 31, 2011, the Company provided
securities collateral of $76 million in connection with
these derivatives. In the unlikely event that both: (i) the
Companys credit rating was downgraded to a level that
triggers full overnight collateralization or termination of all
derivative positions; and (ii) the Companys netting
agreements were deemed to be legally unenforceable, then the
additional collateral that the Company would be required to
provide to its counterparties in connection with its derivatives
in a gross liability position at March 31, 2011 would be
$130 million. This amount does not consider gross
derivative assets of $59 million for which the Company has
the contractual right of offset.
The Company also has exchange-traded futures, which may require
the pledging of collateral. At both March 31, 2011 and
December 31, 2010, the Company did not pledge any
securities collateral for exchange-traded
50
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
futures. At March 31, 2011 and December 31, 2010, the
Company provided cash collateral for exchange-traded futures of
$28 million and $25 million, respectively, which is
included in premiums, reinsurance and other receivables.
Embedded
Derivatives
The Company has certain embedded derivatives that are required
to be separated from their host contracts and accounted for as
derivatives. These host contracts principally include: variable
annuities with guaranteed minimum benefits, including guaranteed
minimum withdrawal benefits (GMWBs), guaranteed
minimum accumulation benefits (GMABs) and certain
guaranteed minimum income benefits (GMIBs);
affiliated reinsurance contracts of guaranteed minimum benefits
related to GMWBs, GMABs and certain GMIBs; ceded reinsurance
written on a funds withheld basis; and options embedded in debt
or equity securities.
The following table presents the estimated fair value of the
Companys embedded derivatives at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Net embedded derivatives within asset host contracts:
|
|
|
|
|
|
|
|
|
Ceded guaranteed minimum benefits
|
|
$
|
563
|
|
|
$
|
936
|
|
Options embedded in debt or equity securities
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within asset host contracts
|
|
$
|
562
|
|
|
$
|
934
|
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within liability host contracts:
|
|
|
|
|
|
|
|
|
Direct guaranteed minimum benefits
|
|
$
|
(61
|
)
|
|
$
|
254
|
|
Other
|
|
|
(23
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within liability host contracts
|
|
$
|
(84
|
)
|
|
$
|
259
|
|
|
|
|
|
|
|
|
|
|
The following table presents changes in estimated fair value
related to embedded derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Net derivative gains (losses) (1), (2)
|
|
$
|
(53
|
)
|
|
$
|
(211
|
)
|
|
|
|
|
|
|
|
(1) |
|
The valuation of direct guaranteed minimum benefits includes an
adjustment for nonperformance risk. Included in net derivative
gains (losses), in connection with this adjustment, were gains
(losses) of ($29) million and ($71) million, for the
three months ended March 31, 2011 and 2010, respectively.
In addition, the valuation of ceded guaranteed minimum benefits
includes an adjustment for nonperformance risk. Included in net
derivative gains (losses), in connection with this adjustment,
were gains (losses) of $41 million and $44 million,
for the three months ended March 31, 2011 and 2010,
respectively. |
|
(2) |
|
See Note 8 for discussion of affiliated net derivative
gains (losses) included in the table above. |
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.
51
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Assets
and Liabilities Measured at Fair Value
Recurring
Fair Value Measurements
The assets and liabilities measured at estimated fair value on a
recurring basis, including those items for which the Company has
elected the FVO, were determined as described below. These
estimated fair values and their corresponding placement in the
fair value hierarchy are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
|
|
|
Significant
|
|
|
Total
|
|
|
|
Identical Assets
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
Estimated
|
|
|
|
and Liabilities
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
Fair
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Value
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
|
|
|
$
|
14,004
|
|
|
$
|
1,428
|
|
|
$
|
15,432
|
|
Foreign corporate securities
|
|
|
|
|
|
|
7,812
|
|
|
|
782
|
|
|
|
8,594
|
|
U.S. Treasury and agency securities
|
|
|
4,230
|
|
|
|
3,277
|
|
|
|
32
|
|
|
|
7,539
|
|
RMBS
|
|
|
|
|
|
|
6,804
|
|
|
|
18
|
|
|
|
6,822
|
|
CMBS
|
|
|
|
|
|
|
2,038
|
|
|
|
152
|
|
|
|
2,190
|
|
ABS
|
|
|
|
|
|
|
1,292
|
|
|
|
561
|
|
|
|
1,853
|
|
State and political subdivision securities
|
|
|
|
|
|
|
1,755
|
|
|
|
32
|
|
|
|
1,787
|
|
Foreign government securities
|
|
|
|
|
|
|
881
|
|
|
|
2
|
|
|
|
883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
|
4,230
|
|
|
|
37,863
|
|
|
|
3,007
|
|
|
|
45,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable preferred stock
|
|
|
|
|
|
|
54
|
|
|
|
219
|
|
|
|
273
|
|
Common stock
|
|
|
42
|
|
|
|
78
|
|
|
|
31
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
|
42
|
|
|
|
132
|
|
|
|
250
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FVO general account securities
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
FVO contractholder-directed unit-linked investments
|
|
|
2,618
|
|
|
|
|
|
|
|
|
|
|
|
2,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
2,618
|
|
|
|
7
|
|
|
|
|
|
|
|
2,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments (1)
|
|
|
598
|
|
|
|
403
|
|
|
|
82
|
|
|
|
1,083
|
|
Mortgage loans held by consolidated securitization entities
|
|
|
|
|
|
|
6,771
|
|
|
|
|
|
|
|
6,771
|
|
Derivative assets: (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
2
|
|
|
|
766
|
|
|
|
4
|
|
|
|
772
|
|
Foreign currency contracts
|
|
|
|
|
|
|
434
|
|
|
|
|
|
|
|
434
|
|
Credit contracts
|
|
|
|
|
|
|
5
|
|
|
|
12
|
|
|
|
17
|
|
Equity market contracts
|
|
|
|
|
|
|
154
|
|
|
|
16
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets
|
|
|
2
|
|
|
|
1,359
|
|
|
|
32
|
|
|
|
1,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within asset host contracts (3)
|
|
|
|
|
|
|
|
|
|
|
563
|
|
|
|
563
|
|
Separate account assets (4)
|
|
|
231
|
|
|
|
65,919
|
|
|
|
130
|
|
|
|
66,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,721
|
|
|
$
|
112,454
|
|
|
$
|
4,064
|
|
|
$
|
124,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
|
|
|
$
|
293
|
|
|
$
|
79
|
|
|
$
|
372
|
|
Foreign currency contracts
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
87
|
|
Credit contracts
|
|
|
|
|
|
|
20
|
|
|
|
1
|
|
|
|
21
|
|
Equity market contracts
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities
|
|
|
|
|
|
|
400
|
|
|
|
90
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within liability host contracts (3)
|
|
|
|
|
|
|
|
|
|
|
(84
|
)
|
|
|
(84
|
)
|
Long-term debt of consolidated securitization entities
|
|
|
|
|
|
|
6,693
|
|
|
|
|
|
|
|
6,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
|
|
|
$
|
7,093
|
|
|
$
|
6
|
|
|
$
|
7,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
|
|
|
Significant
|
|
|
Total
|
|
|
|
Identical Assets
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
Estimated
|
|
|
|
and Liabilities
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
Fair
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate securities
|
|
$
|
|
|
|
$
|
13,864
|
|
|
$
|
1,510
|
|
|
$
|
15,374
|
|
Foreign corporate securities
|
|
|
|
|
|
|
7,590
|
|
|
|
880
|
|
|
|
8,470
|
|
U.S. Treasury and agency securities
|
|
|
4,616
|
|
|
|
3,026
|
|
|
|
34
|
|
|
|
7,676
|
|
RMBS
|
|
|
|
|
|
|
6,674
|
|
|
|
35
|
|
|
|
6,709
|
|
CMBS
|
|
|
|
|
|
|
2,147
|
|
|
|
130
|
|
|
|
2,277
|
|
ABS
|
|
|
|
|
|
|
1,301
|
|
|
|
568
|
|
|
|
1,869
|
|
State and political subdivision securities
|
|
|
|
|
|
|
1,614
|
|
|
|
32
|
|
|
|
1,646
|
|
Foreign government securities
|
|
|
|
|
|
|
889
|
|
|
|
14
|
|
|
|
903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed maturity securities
|
|
|
4,616
|
|
|
|
37,105
|
|
|
|
3,203
|
|
|
|
44,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-redeemable preferred stock
|
|
|
|
|
|
|
54
|
|
|
|
214
|
|
|
|
268
|
|
Common stock
|
|
|
43
|
|
|
|
72
|
|
|
|
22
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities
|
|
|
43
|
|
|
|
126
|
|
|
|
236
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FVO general account securities
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
FVO contractholder-directed unit-linked investments
|
|
|
2,240
|
|
|
|
|
|
|
|
|
|
|
|
2,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other securities
|
|
|
2,240
|
|
|
|
7
|
|
|
|
|
|
|
|
2,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments (1)
|
|
|
390
|
|
|
|
584
|
|
|
|
173
|
|
|
|
1,147
|
|
Mortgage loans held by consolidated securitization entities
|
|
|
|
|
|
|
6,840
|
|
|
|
|
|
|
|
6,840
|
|
Derivative assets: (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
5
|
|
|
|
804
|
|
|
|
10
|
|
|
|
819
|
|
Foreign currency contracts
|
|
|
|
|
|
|
589
|
|
|
|
|
|
|
|
589
|
|
Credit contracts
|
|
|
|
|
|
|
3
|
|
|
|
12
|
|
|
|
15
|
|
Equity market contracts
|
|
|
|
|
|
|
77
|
|
|
|
20
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets
|
|
|
5
|
|
|
|
1,473
|
|
|
|
42
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within asset host contracts (3)
|
|
|
|
|
|
|
|
|
|
|
936
|
|
|
|
936
|
|
Separate account assets (4)
|
|
|
76
|
|
|
|
61,410
|
|
|
|
133
|
|
|
|
61,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,370
|
|
|
$
|
107,545
|
|
|
$
|
4,723
|
|
|
$
|
119,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities: (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
7
|
|
|
$
|
315
|
|
|
$
|
71
|
|
|
$
|
393
|
|
Foreign currency contracts
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
Credit contracts
|
|
|
|
|
|
|
21
|
|
|
|
1
|
|
|
|
22
|
|
Equity market contracts
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liabilities
|
|
|
7
|
|
|
|
405
|
|
|
|
80
|
|
|
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net embedded derivatives within liability host contracts (3)
|
|
|
|
|
|
|
|
|
|
|
259
|
|
|
|
259
|
|
Long-term debt of consolidated securitization entities
|
|
|
|
|
|
|
6,773
|
|
|
|
|
|
|
|
6,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
7
|
|
|
$
|
7,178
|
|
|
$
|
339
|
|
|
$
|
7,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
(1) |
|
Short-term investments as presented in the tables above differ
from the amounts presented in the consolidated balance sheets
because certain short-term investments are not measured at
estimated fair value (e.g., time deposits, etc.), and therefore
are excluded from the tables presented above. |
|
(2) |
|
Derivative assets are presented within other invested assets in
the consolidated balance sheets and derivative liabilities are
presented within other liabilities in the consolidated balance
sheets. The amounts are presented gross in the tables above to
reflect the presentation in the consolidated balance sheets, but
are presented net for purposes of the rollforward in the Fair
Value Measurements Using Significant Unobservable Inputs
(Level 3) tables which follow. |
|
(3) |
|
Net embedded derivatives within asset host contracts are
presented within premiums, reinsurance and other receivables in
the consolidated balance sheets. Net embedded derivatives within
liability host contracts are presented in the consolidated
balance sheets within policyholder account balances and other
liabilities. At March 31, 2011, fixed maturity securities
and equity securities also included embedded derivatives of
$6 million and ($7) million, respectively. At
December 31, 2010, fixed maturity securities and equity
securities included embedded derivatives of $3 million and
($5) million, respectively. |
|
(4) |
|
Separate account assets are measured at estimated fair value.
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. |
See Variable Interest Entities in
Note 2 for discussion of CSEs included in the tables above.
The methods and assumptions used to estimate the fair value of
financial instruments are summarized as follows:
Fixed
Maturity Securities, Equity Securities, Other Securities and
Short-term Investments
When available, the estimated fair value of the Companys
fixed maturity securities, equity securities, other securities
and short-term investments are based on quoted prices in active
markets that are readily and regularly obtainable. Generally,
these are the most liquid of the Companys securities
holdings and valuation of these securities does not involve
management judgment.
When quoted prices in active markets are not available, the
determination of estimated fair value is based on market
standard valuation methodologies. The market standard valuation
methodologies utilized include: discounted cash flow
methodologies, matrix pricing or other similar techniques. The
inputs in applying these market standard valuation methodologies
include, but are not limited to: interest rates, credit standing
of the issuer or counterparty, industry sector of the issuer,
coupon rate, call provisions, sinking fund requirements,
maturity and managements assumptions regarding estimated
duration, liquidity and estimated future cash flows.
Accordingly, the estimated fair values are based on available
market information and managements judgments about
financial instruments.
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. Such observable inputs include
benchmarking prices for similar assets in active markets, quoted
prices in markets that are not active and observable yields and
spreads in the market.
When observable inputs are not available, the market standard
valuation methodologies for determining the estimated fair value
of certain types of securities that trade infrequently, and
therefore have little or no price transparency, 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 judgment or
estimation and cannot be supported by reference to market
activity.
54
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Even though unobservable, these inputs are assumed to be
consistent with what other market participants would use when
pricing such securities and are considered appropriate given the
circumstances.
The use of different methodologies, assumptions and inputs may
have a material effect on the estimated fair values of the
Companys securities holdings.
Mortgage
Loans Held by CSEs
Mortgage loans presented in the tables above consist of
commercial mortgage loans held by CSEs for which the Company has
elected the FVO and which are carried at estimated fair value.
The Company consolidates certain securitization entities that
hold commercial mortgage loans. See Valuation
Techniques and Inputs by Level Within the
Three-Level Fair Value Hierarchy by Major Classes of Assets
and Liabilities below for a discussion of the methods and
assumptions used to estimate the fair value of these financial
instruments.
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
over-the-counter
derivatives. The determination of estimated fair value, when
quoted market values are not available, is based on market
standard valuation methodologies and inputs that are assumed to
be consistent with what other market participants would use when
pricing the instruments. Derivative valuations can be affected
by changes in interest rates, foreign currency exchange rates,
financial indices, credit spreads, default risk (including the
counterparties to the contract), volatility, liquidity and
changes in estimates and assumptions used in the pricing models.
The significant inputs to the pricing models for most
over-the-counter
derivatives are inputs that are observable in the market or can
be derived principally from or corroborated by observable market
data. Significant inputs that are observable generally include:
interest rates, foreign currency exchange rates, interest rate
curves, credit curves and volatility. However, certain
over-the-counter
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. Significant inputs that are unobservable generally
include: independent broker quotes, credit correlation
assumptions, references to emerging market currencies and inputs
that are outside the observable portion of the interest rate
curve, credit curve, volatility or other relevant market
measure. 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 are assumed to be consistent with what
other market participants would use when pricing such
instruments.
The credit risk of both the counterparty and the Company are
considered in determining the estimated fair value for all
over-the-counter
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 derivative positions using the standard swap
curve which includes a spread to the risk free rate. This credit
spread is appropriate for those parties that execute trades at
pricing levels consistent with the standard swap curve. As the
Company and its significant derivative counterparties
consistently execute trades at such pricing levels, additional
credit risk adjustments are not currently required in the
valuation process. The Companys 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. The evaluation
of the requirement to make additional credit risk adjustments is
performed by the Company each reporting period.
Most inputs for
over-the-counter
derivatives are mid market inputs but, in certain cases, bid
level inputs are used 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 Companys
derivatives and could materially affect net income.
55
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Net Embedded Derivatives Within Asset and Liability Host
Contracts
Embedded derivatives principally include certain direct and
ceded variable annuity guarantees and embedded derivatives
related to funds withheld on ceded reinsurance. Embedded
derivatives are recorded at estimated fair value with changes in
estimated fair value reported in net income.
The Company issues certain variable annuity products with
guaranteed minimum benefit guarantees. GMWBs, GMABs and certain
GMIBs are 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 in the consolidated balance sheets.
The fair value of these guarantees is estimated using the
present value of future benefits minus the present value of
future fees using actuarial and capital market assumptions
related to the projected cash flows over the expected lives of
the contracts. A risk neutral valuation methodology is used
under which the cash flows from the guarantees are projected
under multiple capital market scenarios using observable risk
free rates, currency exchange rates and observable and estimated
implied volatilities.
The valuation of these guarantee liabilities includes
adjustments for nonperformance risk and for a risk margin
related to non-capital market inputs. Both of these adjustments
are captured as components of the spread which, when combined
with the risk free rate, is used to discount the cash flows of
the liability for purposes of determining its fair value.
The nonperformance adjustment is determined by taking into
consideration publicly available information relating to spreads
in the secondary market for MetLifes 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 compared to MetLife.
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 GMIB,
GMAB and GMWB guarantees described above to an affiliated
reinsurance company that are also accounted for as embedded
derivatives. In addition to ceding risks associated with
guarantees that are accounted for as embedded derivatives, the
Company also cedes, to the same affiliated reinsurance company,
certain directly written GMIB guarantees that are accounted for
as insurance (i.e., not as embedded derivatives) but where the
reinsurance contract contains an embedded derivative. These
embedded derivatives are included in premiums, reinsurance and
other receivables in the consolidated balance sheets with
changes in estimated fair value reported in net derivative gains
(losses). The value of the embedded derivatives on these ceded
risks is determined using a methodology consistent with that
described previously for the guarantees directly written by the
Company. Because the direct guarantee is not accounted for at
fair value, significant fluctuations in net income may occur as
the change in fair value of the embedded derivative on the ceded
risk is being recorded in net income without a corresponding and
offsetting change in fair value of the direct guarantee.
56
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
As part of its regular review of critical accounting estimates,
the Company periodically assesses inputs for estimating
nonperformance risk (commonly referred to as own
credit) in fair value measurements. During the second
quarter of 2010, the Company completed a study that aggregated
and evaluated data, including historical recovery rates of
insurance companies, as well as policyholder behavior observed
over the past two years as the recent financial crisis evolved.
As a result, at the end of the second quarter of 2010, the
Company refined the way in which it incorporates expected
recovery rates into the nonperformance risk adjustment for
purposes of estimating the fair value of investment-type
contracts and embedded derivatives within insurance contracts.
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 previously described
in Fixed Maturity Securities, Equity
Securities, Other Securities and Short-term Investments.
The estimated fair value of these embedded derivatives is
included, along with their funds withheld hosts, in other
liabilities in 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.
Separate Account Assets
Separate account assets are carried at estimated fair value and
reported as a summarized total on the consolidated balance
sheets. The estimated fair value of separate account assets is
based on the estimated fair value of the underlying assets owned
by the separate account. Assets within the Companys
separate accounts include: mutual funds, fixed maturity
securities, equity securities, derivatives, other limited
partnership interests, short-term investments and cash and cash
equivalents. See Valuation Techniques and
Inputs by Level Within the Three-Level Fair Value
Hierarchy by Major Classes of Assets and Liabilities below
for a discussion of the methods and assumptions used to estimate
the fair value of these financial instruments.
Long-term Debt of CSEs
The Company has elected the FVO for the long-term debt of CSEs,
which are carried at estimated fair value. See
Valuation Techniques and Inputs by
Level Within the Three-Level Fair Value Hierarchy by
Major Classes of Assets and Liabilities below for a
discussion of the methods and assumptions used to estimate the
fair value of these financial instruments.
Valuation
Techniques and Inputs by Level Within the
Three-Level Fair Value Hierarchy by Major Classes of Assets
and Liabilities
A description of the significant valuation techniques and inputs
to the determination of estimated fair value for the more
significant asset and liability classes measured at fair value
on a recurring basis is as follows:
The Company determines the estimated fair value of its
investments using primarily the market approach and the income
approach. The use of quoted prices for identical assets and
matrix pricing or other similar techniques are examples of
market approaches, while the use of discounted cash flow
methodologies is an example of the income approach. The Company
attempts to maximize the use of observable inputs and minimize
the use of unobservable inputs in selecting whether the market
or income approach is used.
While certain investments have been classified as Level 1
from the use of unadjusted quoted prices for identical
investments supported by high volumes of trading activity and
narrow bid/ask spreads, most investments have been classified as
Level 2 because the significant inputs used to measure the
fair value on a recurring basis of the same or similar
investment are market observable or can be corroborated using
market observable information for the full term of the
investment. Level 3 investments include those where
estimated fair values are based on
57
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
significant unobservable inputs that are supported by little or
no market activity and may reflect our own assumptions about
what factors market participants would use in pricing these
investments.
Level 1
Measurements:
Fixed Maturity Securities, Equity Securities, Other
Securities and Short-term Investments
These securities are comprised of U.S. Treasury securities,
exchange traded common stock, exchange traded registered mutual
fund interests included in other securities and short-term money
market securities, including U.S. Treasury bills. Valuation
of these securities is based on unadjusted quoted prices in
active markets that are readily and regularly available.
Contractholder-directed unit-linked investments reported within
other securities include certain registered mutual fund
interests priced using daily net asset value (NAV)
provided by the fund managers.
Derivative Assets and Derivative Liabilities
These assets and liabilities are comprised of exchange-traded
derivatives. Valuation of these assets and liabilities is based
on unadjusted quoted prices in active markets that are readily
and regularly available.
Separate Account Assets
These assets are comprised of (i) securities that are
similar in nature to the fixed maturity securities, equity
securities and short-term investments referred to above; and
(ii) certain exchange-traded derivatives, including
financial futures. Valuation of these assets is based on
unadjusted quoted prices in active markets that are readily and
regularly available.
Level 2
Measurements:
Fixed Maturity Securities, Equity Securities, Other
Securities and Short-term Investments
This level includes fixed maturity securities and equity
securities priced principally by independent pricing services
using observable inputs. Other securities and short-term
investments within this level are of a similar nature and class
to the Level 2 securities described below
U.S. corporate and foreign corporate
securities. These securities are principally
valued using the market and income approaches. Valuation is
based primarily on quoted prices in markets that are not active,
or using matrix pricing or other similar techniques that use
standard market observable inputs such as benchmark yields,
spreads off benchmark yields, new issuances, issuer rating,
duration, and trades of identical or comparable securities.
Investment grade privately placed securities are valued using
discounted cash flow methodologies using standard market
observable inputs, and inputs derived from, or corroborated by,
market observable data including market yield curve, duration,
call provisions, observable prices and spreads for similar
publicly traded or privately traded issues that incorporate the
credit quality and industry sector of the issuer. This level
also includes certain below investment grade privately placed
fixed maturity securities priced by independent pricing services
that use observable inputs.
Structured securities comprised of RMBS, CMBS and
ABS. These securities are principally valued
using the market approach. Valuation is based primarily on
matrix pricing or other similar techniques using standard market
inputs including spreads for actively traded securities, spreads
off benchmark yields, expected prepayment speeds and volumes,
current and forecasted loss severity, rating, weighted average
coupon, weighted average maturity, average delinquency rates,
geographic region, debt-service coverage ratios and
issuance-specific information including, but not limited to:
collateral type, payment terms of the underlying assets, payment
priority within the tranche, structure of the security, deal
performance and vintage of loans.
58
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
U.S. Treasury and agency
securities. These securities are principally
valued using the market approach. Valuation is based primarily
on quoted prices in markets that are not active, or using matrix
pricing or other similar techniques using standard market
observable inputs such as benchmark U.S. Treasury yield
curve, the spread off the U.S. Treasury curve for the
identical security and comparable securities that are actively
traded.
Foreign government and state and political subdivision
securities. These securities are principally
valued using the market approach. Valuation is based primarily
on matrix pricing or other similar techniques using standard
market observable inputs including benchmark U.S. Treasury
or other yields, issuer ratings, broker-dealer quotes, issuer
spreads and reported trades of similar securities, including
those within the same
sub-sector
or with a similar maturity or credit rating.
Common and non-redeemable preferred
stock. These securities are principally valued
using the market approach where market quotes are available but
are not considered actively traded. Valuation is based
principally on observable inputs including quoted prices in
markets that are not considered active.
Mortgage Loans Held by CSEs
These commercial mortgage loans are principally valued using the
market approach. The principal market for these commercial loan
portfolios is the securitization market. The Company uses the
quoted securitization market price of the obligations of the
CSEs to determine the estimated fair value of these commercial
loan portfolios. These market prices are determined principally
by independent pricing services using observable inputs.
Derivative Assets and Derivative Liabilities
This level includes all types of derivative instruments utilized
by the Company with the exception of exchange-traded derivatives
included within Level 1 and those derivative instruments
with unobservable inputs as described in Level 3. These
derivatives are principally valued using an income approach.
Interest rate contracts.
Non-option-based Valuations are based on present
value techniques, which utilize significant inputs that may
include the swap yield curve, London Inter-Bank Offer Rate
(LIBOR) basis curves and repurchase rates.
Option-based Valuations are based on option pricing
models, which utilize significant inputs that may include the
swap yield curve, LIBOR basis curves and interest rate
volatility.
Foreign currency contracts.
Non-option-based Valuations are based on present
value techniques, which utilize significant inputs that may
include the swap yield curve, LIBOR basis curves, currency spot
rates and cross currency basis curves.
Credit contracts.
Non-option-based Valuations are based on present
value techniques, which utilize significant inputs that may
include the swap yield curve, credit curves and recovery rates.
Equity market contracts.
Non-option-based Valuations are based on present
value techniques, which utilize significant inputs that may
include the swap yield curve, spot equity index levels and
dividend yield curves.
Option-based Valuations are based on option pricing
models, which utilize significant inputs that may include the
swap yield curve, spot equity index levels, dividend yield
curves and equity volatility.
59
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Separate Account Assets
These assets are comprised of investments that are similar in
nature to the fixed maturity securities, equity securities and
short-term investments referred to above. Also included are
certain mutual funds without readily determinable fair values
given prices are not published publicly. Valuation of the mutual
funds is based upon quoted prices or reported NAV provided by
the fund managers.
Long-term Debt of CSEs
The estimated fair value of the long-term debt of the
Companys CSEs is based on quoted prices when traded as
assets in active markets or, if not available, based on market
standard valuation methodologies, consistent with the
Companys methods and assumptions used to estimate the fair
value of comparable fixed maturity securities.
Level 3
Measurements:
In general, investments classified within Level 3 use many
of the same valuation techniques and inputs as described in
Level 2 Measurements. However, if key inputs are
unobservable, or if the investments are less liquid and there is
very limited trading activity, the investments are generally
classified as Level 3. The use of independent non-binding
broker quotations to value investments generally indicates there
is a lack of liquidity or a lack of transparency in the process
to develop the valuation estimates generally causing these
investments to be classified in Level 3.
Fixed Maturity Securities, Equity Securities and Short-term
Investments
This level includes fixed maturity securities and equity
securities priced principally by independent broker quotations
or market standard valuation methodologies using inputs that are
not market observable or cannot be derived principally from or
corroborated by observable market data. Short-term investments
within this level are of a similar nature and class to the
Level 3 securities described below; accordingly, the
valuation techniques and significant market standard observable
inputs used in their valuation are also similar to those
described below.
U.S. corporate and foreign corporate
securities. These securities, including financial
services industry hybrid securities classified within fixed
maturity securities, are principally valued using the market and
income approaches. Valuations are based primarily on matrix
pricing or other similar techniques that utilize unobservable
inputs or cannot be derived principally from, or corroborated
by, observable market data, including illiquidity premiums and
spread adjustments to reflect industry trends or specific
credit-related issues. Valuations may be based on independent
non-binding broker quotations. Generally, below investment grade
privately placed or distressed securities included in this level
are valued using discounted cash flow methodologies which rely
upon significant, unobservable inputs and inputs that cannot be
derived principally from, or corroborated by, observable market
data.
Structured securities comprised of RMBS, CMBS and
ABS. These securities are principally valued
using the market approach. Valuation is based primarily on
matrix pricing or other similar techniques that utilize inputs
that are unobservable or cannot be derived principally from, or
corroborated by, observable market data, or are based on
independent non-binding broker quotations. Below investment
grade securities and ABS supported by
sub-prime
mortgage loans included in this level are valued based on inputs
including 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, and certain of these
securities are valued based on independent non-binding broker
quotations.
Foreign government and state and political subdivision
securities. These securities are principally
valued using the market approach. Valuation is based primarily
on matrix pricing or other similar techniques, however these
securities are less liquid and certain of the inputs are based
on very limited trading activity.
Common and non-redeemable preferred
stock. These securities, including privately held
securities and financial services industry hybrid securities
classified within equity securities, are principally valued
using the
60
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
market and income approaches. Valuations are based primarily on
matrix pricing or other similar techniques using inputs such as
comparable credit rating and issuance structure. Equity
securities valuations determined with discounted cash flow
methodologies use inputs such as earnings multiples based on
comparable public companies, and industry-specific non-earnings
based multiples. Certain of these securities are valued based on
independent non-binding broker quotations.
Derivative Assets and Derivative Liabilities
These derivatives are principally valued using an income
approach. Valuations of non-option-based derivatives utilize
present value techniques, whereas valuations of option-based
derivatives utilize option pricing models. These valuation
methodologies generally use the same inputs as described in the
corresponding sections above 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.
Interest rate contracts.
Non-option-based Significant unobservable inputs may
include the extrapolation beyond observable limits of the swap
yield curve and LIBOR basis curves.
Option-based Significant unobservable inputs may
include the extrapolation beyond observable limits of the swap
yield curve, LIBOR basis curves and interest rate volatility.
Foreign currency contracts.
Non-option-based Significant unobservable inputs may
include the extrapolation beyond observable limits of the swap
yield curve, LIBOR basis curves and cross currency basis curves.
Certain of these derivatives are valued based on independent
non-binding broker quotations.
Credit contracts.
Non-option-based Significant unobservable inputs may
include credit correlation, repurchase rates, and the
extrapolation beyond observable limits of the swap yield curve
and credit curves. Certain of these derivatives are valued based
on independent non-binding broker quotations.
Equity market contracts.
Non-option-based Significant unobservable inputs may
include the extrapolation beyond observable limits of dividend
yield curves.
Option-based Significant unobservable inputs may
include the extrapolation beyond observable limits of dividend
yield curves and equity volatility.
Guaranteed Minimum Benefit Guarantees
These embedded derivatives are principally valued using an
income approach. Valuations are based on option pricing
techniques, which utilize significant inputs that may include
swap yield curve, 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 curve 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.
61
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Reinsurance Ceded on Certain Guaranteed Minimum Benefit
Guarantees
These embedded derivatives are principally valued using an
income approach. The valuation techniques and significant market
standard unobservable inputs used in their valuation are similar
to those previously described for Guaranteed Minimum Benefit
Guarantees and also include counterparty credit spreads.
Embedded Derivatives Within Funds Withheld Related to Certain
Ceded Reinsurance
These embedded derivatives are principally valued using an
income approach. Valuations are based on present value
techniques, which utilize significant inputs that may include
the swap yield curve 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.
Separate Account Assets
These assets are comprised of investments that are similar in
nature to the fixed maturity securities and equity securities
referred to above. Separate account assets within this level
also include other limited partnership interests. Other limited
partnership interests are valued giving consideration to the
value of the underlying holdings of the partnerships and by
applying a premium or discount, if appropriate, for factors such
as liquidity, bid/ask spreads, the performance record of the
fund manager or other relevant variables which may impact the
exit value of the particular partnership interest.
Transfers between Levels 1 and 2:
During the three months ended March 31, 2011 and 2010,
transfers between Levels 1 and 2 were not significant.
Transfers into or out of Level 3:
Overall, transfers into
and/or out
of Level 3 are attributable to a change in the
observability of inputs. 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. Transfers into
and/or out
of any level are assumed to occur at the beginning of the
period. Significant transfers into
and/or out
of Level 3 assets and liabilities for the three months
ended March 31, 2011 and 2010 are summarized below.
Transfers into Level 3 resulted primarily from current
market conditions characterized by a lack of trading activity,
decreased liquidity and credit ratings downgrades (e.g., from
investment grade to below investment grade) which have resulted
in decreased transparency of valuations and an increased use of
broker quotations and unobservable inputs to determine estimated
fair value.
During the three months ended March 31, 2011, transfers
into Level 3 for fixed maturity securities of
$20 million were principally comprised of certain
U.S. corporate securities. During the three months ended
March 31, 2010, transfers into Level 3 for fixed
maturity securities of $63 million were principally
comprised of certain CMBS and U.S. and foreign corporate
securities.
Transfers out of Level 3 resulted primarily from increased
transparency of both new issuances that subsequent to issuance
and establishment of trading activity, became priced by
independent pricing services and existing
62
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
issuances that, over time, the Company was able to obtain
pricing from, or corroborate pricing received from independent
pricing services with observable inputs or increases in market
activity and upgraded credit ratings. During the three months
ended March 31, 2011, transfers out of Level 3 for
fixed maturity securities of $138 million were principally
comprised of certain U.S. and foreign corporate securities
and RMBS. During the three months ended March 31, 2010,
transfers out of Level 3 for fixed maturity securities of
$216 million and separate account assets of $5 million
were principally comprised of certain U.S. and foreign
corporate securities, ABS and CMBS.
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),
including realized and unrealized gains (losses) of all assets
and (liabilities) and realized and unrealized gains (losses) of
all assets and (liabilities) still held at the end of the
respective time periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
|
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and
|
|
|
|
|
|
|
U.S.
|
|
|
Foreign
|
|
|
U.S. Treasury
|
|
|
|
|
|
|
|
|
|
|
|
Political
|
|
|
Foreign
|
|
|
|
Corporate
|
|
|
Corporate
|
|
|
and Agency
|
|
|
|
|
|
|
|
|
|
|
|
Subdivision
|
|
|
Government
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
RMBS
|
|
|
CMBS
|
|
|
ABS
|
|
|
Securities
|
|
|
Securities
|
|
|
|
(In millions)
|
|
|
Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
1,510
|
|
|
$
|
880
|
|
|
$
|
34
|
|
|
$
|
35
|
|
|
$
|
130
|
|
|
$
|
568
|
|
|
$
|
32
|
|
|
$
|
14
|
|
Total realized/unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings: (1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
|
(2
|
)
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
9
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
10
|
|
|
|
|
|
|
|
(1
|
)
|
Purchases (3)
|
|
|
31
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
Sales (3)
|
|
|
(50
|
)
|
|
|
(102
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
(37
|
)
|
|
|
|
|
|
|
(11
|
)
|
Transfers into Level 3 (4)
|
|
|
19
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers out of Level 3 (4)
|
|
|
(91
|
)
|
|
|
(30
|
)
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
1,428
|
|
|
$
|
782
|
|
|
$
|
32
|
|
|
$
|
18
|
|
|
$
|
152
|
|
|
$
|
561
|
|
|
$
|
32
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) relating to assets still
held at March 31, 2011 included in earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Net investment gains (losses)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
|
|
|
$
|
|
|
63
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
|
|
|
|
Equity Securities:
|
|
|
|
|
|
Net Derivatives: (5)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Separate
|
|
|
Net
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Short-term
|
|
|
Interest Rate
|
|
|
Credit
|
|
|
Market
|
|
|
Account
|
|
|
Embedded
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Investments
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Assets (6)
|
|
|
Derivatives (7)
|
|
|
Three Months Ended March 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
214
|
|
|
$
|
22
|
|
|
$
|
173
|
|
|
$
|
(61
|
)
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
133
|
|
|
$
|
677
|
|
Total realized/unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings: (1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
|
|
|
|
|
2
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
(53
|
)
|
Other comprehensive income (loss)
|
|
|
12
|
|
|
|
3
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
Purchases (3)
|
|
|
|
|
|
|
9
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Sales (3)
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
(124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Issuances (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Transfers into Level 3 (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers out of Level 3 (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
219
|
|
|
$
|
31
|
|
|
$
|
82
|
|
|
$
|
(75
|
)
|
|
$
|
11
|
|
|
$
|
6
|
|
|
$
|
130
|
|
|
$
|
647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) relating to assets and
liabilities still held at March 31, 2011 included in
earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative gains (losses)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
$
|
|
|
|
$
|
(51
|
)
|
64
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
|
|
|
|
Fixed Maturity Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and
|
|
|
|
|
|
|
U.S.
|
|
|
Foreign
|
|
|
U.S. Treasury
|
|
|
|
|
|
|
|
|
|
|
|
Political
|
|
|
Foreign
|
|
|
|
Corporate
|
|
|
Corporate
|
|
|
and Agency
|
|
|
|
|
|
|
|
|
|
|
|
Subdivision
|
|
|
Government
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
RMBS
|
|
|
CMBS
|
|
|
ABS
|
|
|
Securities
|
|
|
Securities
|
|
|
|
(In millions)
|
|
|
Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
1,605
|
|
|
$
|
994
|
|
|
$
|
33
|
|
|
$
|
25
|
|
|
$
|
45
|
|
|
$
|
537
|
|
|
$
|
32
|
|
|
$
|
16
|
|
Total realized/unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings: (1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
|
2
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
39
|
|
|
|
46
|
|
|
|
|
|
|
|
1
|
|
|
|
5
|
|
|
|
17
|
|
|
|
7
|
|
|
|
|
|
Purchases, sales, issuances and settlements (3)
|
|
|
(95
|
)
|
|
|
(33
|
)
|
|
|
(1
|
)
|
|
|
8
|
|
|
|
|
|
|
|
14
|
|
|
|
9
|
|
|
|
|
|
Transfers into Level 3 (4)
|
|
|
20
|
|
|
|
10
|
|
|
|
|
|
|
|
2
|
|
|
|
26
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
Transfers out of Level 3 (4)
|
|
|
(63
|
)
|
|
|
(57
|
)
|
|
|
|
|
|
|
(8
|
)
|
|
|
(27
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
1,510
|
|
|
$
|
953
|
|
|
$
|
32
|
|
|
$
|
28
|
|
|
$
|
48
|
|
|
$
|
521
|
|
|
$
|
48
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) relating to assets still
held at March 31, 2010 included in earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Net investment gains (losses)
|
|
$
|
(4
|
)
|
|
$
|
(4
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(1
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
65
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
|
|
|
|
Equity Securities:
|
|
|
|
|
|
Net Derivatives: (5)
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
Equity
|
|
|
Separate
|
|
|
Net
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Short-term
|
|
|
Interest Rate
|
|
|
Currency
|
|
|
Credit
|
|
|
Market
|
|
|
Account
|
|
|
Embedded
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Investments
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Contracts
|
|
|
Assets (6)
|
|
|
Derivatives (7)
|
|
|
|
(In millions)
|
|
|
Three Months Ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
258
|
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
23
|
|
|
$
|
4
|
|
|
$
|
18
|
|
|
$
|
153
|
|
|
$
|
445
|
|
Total realized/unrealized gains (losses) included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings: (1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
Net derivative gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
(210
|
)
|
Other comprehensive income (loss)
|
|
|
6
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases, sales, issuances and settlements (3)
|
|
|
(22
|
)
|
|
|
17
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
23
|
|
Transfers into Level 3 (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers out of Level 3 (4)
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
242
|
|
|
$
|
34
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
18
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
146
|
|
|
$
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in unrealized gains (losses) relating to assets still
held at March 31, 2010 included in earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative (losses)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4
|
|
|
$
|
(5
|
)
|
|
$
|
|
|
|
$
|
(11
|
)
|
|
$
|
|
|
|
$
|
(209
|
)
|
|
|
|
(1) |
|
Amortization of premium/discount is included within net
investment income. Impairments charged to earnings on securities
are included within net investment gains (losses). Lapses
associated with embedded derivatives are included within the
earnings caption of total gains (losses). |
|
(2) |
|
Interest and dividend accruals, as well as cash interest coupons
and dividends received, are excluded from the rollforward. |
|
(3) |
|
The amount reported within purchases, sales, issuances and
settlements is the purchase or issuance price and the sales or
settlement proceeds based upon the actual date purchased or
issued and sold or settled, respectively. Items purchased/issued
and sold/settled in the same period are excluded from the
rollforward. For the three months ended March 31, 2011,
fees attributed to embedded derivatives are included within
settlements. For the three months ended March 31, 2010,
fees attributed to embedded derivatives are included within
purchases, sales, issuances and settlements. |
|
(4) |
|
Total gains and losses (in earnings and other comprehensive
income (loss)) are calculated assuming transfers into and/or out
of Level 3 occurred at the beginning of the period. Items
transferred into and out of Level 3 in the same period are
excluded from the rollforward. |
|
(5) |
|
Freestanding derivative assets and liabilities are presented net
for purposes of the rollforward. |
66
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
(6) |
|
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. For the purpose of this disclosure, these changes are
presented within net investment gains (losses). |
|
(7) |
|
Embedded derivative assets and liabilities are presented net for
purposes of the rollforward. |
FVO
Consolidated Securitization Entities
The Company has elected the FVO for the following assets and
liabilities held by CSEs: commercial mortgage loans and
long-term debt. The following table presents these commercial
mortgage loans carried under the FVO at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Unpaid principal balance
|
|
$
|
6,550
|
|
|
$
|
6,636
|
|
Excess of estimated fair value over unpaid principal balance
|
|
|
221
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
Carrying value at estimated fair value
|
|
$
|
6,771
|
|
|
$
|
6,840
|
|
|
|
|
|
|
|
|
|
|
The following table presents the long-term debt carried under
the FVO related to the commercial mortgage loans at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Contractual principal balance
|
|
$
|
6,454
|
|
|
$
|
6,541
|
|
Excess of estimated fair value over contractual principal balance
|
|
|
239
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
Carrying value at estimated fair value
|
|
$
|
6,693
|
|
|
$
|
6,773
|
|
|
|
|
|
|
|
|
|
|
Interest income on commercial mortgage loans held by CSEs is
recorded in net investment income. Interest expense on long-term
debt of CSEs is recorded in other expenses. Gains and losses
from initial measurement, subsequent changes in estimated fair
value and gains or losses on sales of both the commercial
mortgage loans and long-term debt are recognized in net
investment gains (losses), which is summarized in Note 2.
Non-Recurring
Fair Value Measurements
Certain investments are measured at estimated fair value on a
non-recurring basis and are not included in the tables presented
above. The amounts below relate to certain investments measured
at estimated fair value during the period and still held at the
reporting dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2011
|
|
2010
|
|
|
|
|
Estimated
|
|
Net
|
|
|
|
Estimated
|
|
Net
|
|
|
Carrying
|
|
Fair
|
|
Investment
|
|
Carrying
|
|
Fair
|
|
Investment
|
|
|
Value Prior to
|
|
Value After
|
|
Gains
|
|
Value Prior to
|
|
Value After
|
|
Gains
|
|
|
Measurement
|
|
Measurement
|
|
(Losses)
|
|
Measurement
|
|
Measurement
|
|
(Losses)
|
|
|
(In millions)
|
|
Mortgage loans, net (1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
31
|
|
|
$
|
23
|
|
|
$
|
(8
|
)
|
Real estate joint ventures (2)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18
|
|
|
$
|
2
|
|
|
$
|
(16
|
)
|
|
|
|
(1) |
|
Mortgage loans The impaired mortgage loans
presented above were written down to their estimated fair values
at the date the impairments were recognized. Estimated fair
values for impaired mortgage loans are based on observable
market prices or, if the loans are in foreclosure or are
otherwise determined to be collateral dependent, on the
estimated fair value of the underlying collateral, or the
present value of the expected future |
67
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
cash flows. Impairments to estimated fair value represent
non-recurring fair value measurements that have been categorized
as Level 3 due to the lack of price transparency inherent
in the limited markets for such mortgage loans. |
|
(2) |
|
Real estate joint ventures The impaired
investments presented above were accounted for using the cost
method. Impairments on these cost method investments were
recognized at estimated fair value determined from information
provided in the financial statements of the underlying entities
in the period in which the impairment was incurred. These
impairments to estimated fair value represent non-recurring fair
value measurements that have been classified as Level 3 due
to the limited activity and price transparency inherent in the
market for such investments. This category includes several real
estate funds that typically invest primarily in commercial real
estate. The estimated fair values of these investments have been
determined using the NAV of the Companys ownership
interest in the partners capital. Distributions from these
investments will be generated from investment gains, from
operating income from the underlying investments of the funds
and from liquidation of the underlying assets of the funds. It
is estimated that the underlying assets of the funds will be
liquidated over the next 2 to 10 years. There were no
unfunded commitments for these investments at March 31,
2011. Unfunded commitments for these investments were
$10 million at March 31, 2010. |
68
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Fair
Value of Financial Instruments
Amounts related to the Companys financial instruments that
were not measured at fair value on a recurring basis were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
December 31, 2010
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
Notional
|
|
Carrying
|
|
Fair
|
|
Notional
|
|
Carrying
|
|
Fair
|
|
|
Amount
|
|
Value
|
|
Value
|
|
Amount
|
|
Value
|
|
Value
|
|
|
(In millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loans, net (1)
|
|
|
|
|
|
$
|
5,863
|
|
|
$
|
6,032
|
|
|
|
|
|
|
$
|
5,890
|
|
|
$
|
6,022
|
|
Policy loans
|
|
|
|
|
|
$
|
1,186
|
|
|
$
|
1,248
|
|
|
|
|
|
|
$
|
1,190
|
|
|
$
|
1,260
|
|
Real estate joint ventures (2)
|
|
|
|
|
|
$
|
82
|
|
|
$
|
102
|
|
|
|
|
|
|
$
|
79
|
|
|
$
|
102
|
|
Other limited partnership interests (2)
|
|
|
|
|
|
$
|
107
|
|
|
$
|
122
|
|
|
|
|
|
|
$
|
104
|
|
|
$
|
116
|
|
Short-term investments (3)
|
|
|
|
|
|
$
|
83
|
|
|
$
|
83
|
|
|
|
|
|
|
$
|
88
|
|
|
$
|
88
|
|
Cash and cash equivalents
|
|
|
|
|
|
$
|
1,796
|
|
|
$
|
1,796
|
|
|
|
|
|
|
$
|
1,928
|
|
|
$
|
1,928
|
|
Accrued investment income
|
|
|
|
|
|
$
|
569
|
|
|
$
|
569
|
|
|
|
|
|
|
$
|
559
|
|
|
$
|
559
|
|
Premiums, reinsurance and other receivables (2)
|
|
|
|
|
|
$
|
5,987
|
|
|
$
|
6,128
|
|
|
|
|
|
|
$
|
5,959
|
|
|
$
|
6,164
|
|
Other assets (2)
|
|
|
|
|
|
$
|
998
|
|
|
$
|
998
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder account balances (2)
|
|
|
|
|
|
$
|
25,378
|
|
|
$
|
26,430
|
|
|
|
|
|
|
$
|
24,622
|
|
|
$
|
26,061
|
|
Payables for collateral under securities loaned and other
transactions
|
|
|
|
|
|
$
|
7,718
|
|
|
$
|
7,718
|
|
|
|
|
|
|
$
|
8,103
|
|
|
$
|
8,103
|
|
Long-term debt (4)
|
|
|
|
|
|
$
|
795
|
|
|
$
|
945
|
|
|
|
|
|
|
$
|
795
|
|
|
$
|
930
|
|
Other liabilities (2)
|
|
|
|
|
|
$
|
555
|
|
|
$
|
555
|
|
|
|
|
|
|
$
|
294
|
|
|
$
|
294
|
|
Separate account liabilities (2)
|
|
|
|
|
|
$
|
1,442
|
|
|
$
|
1,442
|
|
|
|
|
|
|
$
|
1,407
|
|
|
$
|
1,407
|
|
Commitments: (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan commitments
|
|
$
|
281
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
270
|
|
|
$
|
|
|
|
$
|
(2
|
)
|
Commitments to fund bank credit facilities, bridge loans and
private corporate bond investments
|
|
$
|
238
|
|
|
$
|
|
|
|
$
|
(8
|
)
|
|
$
|
315
|
|
|
$
|
|
|
|
$
|
(12
|
)
|
|
|
|
(1) |
|
Mortgage loans as presented in the table above differs from the
amounts presented in the consolidated balance sheets because
this table does not include commercial mortgage loans held by
CSEs. |
|
(2) |
|
Carrying values presented herein differ from those presented in
the consolidated balance sheets because certain items within the
respective financial statement caption are not considered
financial instruments. Financial statement captions excluded
from the table above are not considered financial instruments. |
|
(3) |
|
Short-term investments as presented in the table above differ
from the amounts presented in the consolidated balance sheets
because this table does not include short-term investments that
meet the definition of a security, which are measured at
estimated fair value on a recurring basis. |
|
(4) |
|
Long-term debt as presented in the table above differs from the
amounts presented in the consolidated balance sheets because
this table does not include long-term debt of CSEs. |
|
(5) |
|
Commitments are off-balance sheet obligations. Negative
estimated fair values represent off-balance sheet liabilities. |
69
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
The methods and assumptions used to estimate the fair value of
financial instruments are summarized as follows:
The assets and liabilities measured at estimated fair value on a
recurring basis include: fixed maturity securities, equity
securities, other securities, certain short-term investments,
mortgage loans held by CSEs, derivative assets and liabilities,
net embedded derivatives within asset and liability host
contracts, separate account assets and long-term debt of CSEs.
These assets and liabilities are described in the section
Recurring Fair Value Measurements and,
therefore, are excluded from the table above. The estimated fair
value for these financial instruments approximates carrying
value.
Mortgage Loans
The Company originates mortgage loans principally for investment
purposes. These loans are principally carried at amortized cost.
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.
Policy Loans
For policy loans with fixed interest rates, estimated fair
values 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 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. The estimated fair value for policy loans with
variable interest rates 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
Real estate joint ventures and other limited partnership
interests included in the preceding table consists of those
investments accounted for using the cost method. The remaining
carrying value recognized in the consolidated balance sheets
represents investments in real estate carried at cost less
accumulated depreciation, or real estate joint ventures and
other limited partnership interests accounted for using the
equity method, which do not meet the definition of financial
instruments for which fair value is required to be disclosed.
The estimated fair values for real estate joint ventures and
other limited partnership interests accounted for under the cost
method are generally based on the Companys share of the
NAV as provided in 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.
Short-term Investments
Certain short-term investments do not qualify as securities and
are recognized at amortized cost in the consolidated balance
sheets. For these instruments, the Company believes that there
is minimal risk of material changes in interest rates or credit
of the issuer such that estimated fair value approximates
carrying value. In light of recent market conditions, short-term
investments have been monitored to ensure there is sufficient
demand and maintenance of issuer credit quality and the Company
has determined additional adjustment is not required.
70
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Cash and Cash Equivalents
Due to the short-term maturities of cash and cash equivalents,
the Company believes there is minimal risk of material changes
in interest rates or credit of the issuer such that estimated
fair value generally approximates carrying value. In light of
recent market conditions, cash and cash equivalent instruments
have been monitored to ensure there is sufficient demand and
maintenance of issuer credit quality, or sufficient solvency in
the case of depository institutions, and the Company has
determined additional adjustment is not required.
Accrued Investment Income
Due to the short term until settlement of accrued investment
income, the Company believes there is minimal risk of material
changes in interest rates or credit of the issuer such that
estimated fair value approximates carrying value. In light of
recent market conditions, the Company has monitored the credit
quality of the issuers and has determined additional adjustment
is not required.
Premiums, Reinsurance and Other Receivables
Premiums, reinsurance and other receivables in the preceding
table are principally comprised of certain amounts recoverable
under reinsurance contracts, amounts on deposit with financial
institutions to facilitate daily settlements related to certain
derivative positions and amounts receivable for securities sold
but not yet settled.
Premiums receivable and those amounts recoverable under
reinsurance treaties determined to transfer sufficient risk are
not financial instruments subject to disclosure and thus have
been excluded from the amounts presented in the preceding table.
Amounts recoverable under ceded reinsurance contracts, which the
Company has determined do not transfer sufficient risk such that
they are accounted for using the deposit method of accounting,
have been included in the preceding table. The estimated fair
value is determined as the present value of expected future cash
flows under the related contracts, which were discounted using
an interest rate determined to reflect the appropriate credit
standing of the assuming counterparty.
The amounts on deposit for derivative settlements 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. In light of recent market conditions, the Company has
monitored the solvency position of the financial institutions
and has determined additional adjustments are not required.
Other Assets
Other assets in the preceding table is primarily composed of a
receivable for funds due but not yet settled and is short-term
in nature, and therefore carrying value approximates fair value.
The amounts not included in the preceding table are not
considered financial instruments subject to disclosure.
Policyholder Account Balances
Policyholder account balances in the table above include
investment contracts. Embedded derivatives on investment
contracts and certain variable annuity guarantees accounted for
as embedded derivatives are included in this caption in the
consolidated financial statements but excluded from this caption
in the table above as they are separately presented in
Recurring Fair Value Measurements. The
remaining difference between the amounts reflected as
policyholder account balances in the preceding table and those
recognized in the consolidated balance sheets represents those
amounts due under contracts that satisfy the definition of
insurance contracts and are not considered financial instruments.
The investment contracts primarily include certain funding
agreements, fixed deferred annuities, modified guaranteed
annuities, fixed term payout annuities and total control
accounts. The fair values for these investment contracts are
estimated by discounting best estimate future cash flows using
current market risk-free interest rates and adding a spread to
reflect the nonperformance risk in the liability.
71
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Payables for Collateral Under Securities Loaned and Other
Transactions
The estimated fair value for payables for collateral under
securities loaned and other transactions approximates carrying
value. The related agreements to loan securities are short-term
in nature such that the Company believes there is limited risk
of a material change in market interest rates. Additionally,
because borrowers are cross-collateralized by the borrowed
securities, the Company believes no additional consideration for
changes in nonperformance risk are necessary.
Long-term Debt
The estimated fair value of long-term debt is generally
determined by discounting expected future cash flows using
market rates currently available for debt with similar terms,
remaining maturities and reflecting the credit risk of the
Company, including inputs when available, from actively traded
debt of other companies with similar types of borrowing
arrangements. Risk-adjusted discount rates applied to the
expected future cash flows can vary significantly based upon the
specific terms of each individual arrangement, including, but
not limited to: contractual interest rates in relation to
current market rates; the structuring of the arrangement; and
the nature and observability of the applicable valuation inputs.
Use of different risk-adjusted discount rates could result in
different estimated fair values.
Other Liabilities
Other liabilities included in the table above reflects those
other liabilities that satisfy the definition of financial
instruments subject to disclosure. These items consist primarily
of interest payable; amounts due for securities purchased but
not yet settled; and funds withheld under reinsurance treaties
accounted for as deposit type treaties. The Company evaluates
the specific terms, facts and circumstances of each instrument
to determine the appropriate estimated fair values, which were
not materially different from the carrying values.
Separate Account Liabilities
Separate account liabilities included in the preceding table
represents those balances due to policyholders under contracts
that are classified as investment contracts. The remaining
amounts presented in the consolidated balance sheets represent
those contracts classified as insurance contracts, which do not
satisfy the definition of financial instruments.
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 and certain contracts that provide
for benefit funding.
Separate account liabilities are recognized in the consolidated
balance sheets at an equivalent value of the related separate
account assets. Separate account assets, which equal net
deposits, net investment income and realized and unrealized
investment gains and losses, are fully offset by corresponding
amounts credited to the contractholders liability which is
reflected in separate account liabilities. 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 Company believes the value of those
assets approximates the estimated fair value of the related
separate account liabilities.
Mortgage Loan Commitments and Commitments to Fund Bank
Credit Facilities, Bridge Loans and Private Corporate Bond
Investments
The estimated fair values for mortgage loan commitments that
will be held for investment and commitments to fund bank credit
facilities, bridge loans and private corporate bonds that will
be held for investment reflected in the above table represents
the difference between the discounted expected future cash flows
using interest rates that incorporate current credit risk for
similar instruments on the reporting date and the principal
amounts of the commitments.
72
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
5.
|
Contingencies,
Commitments and Guarantees
|
Contingencies
Litigation
The Company is a defendant in a number of litigation matters. In
some of the matters, 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.
Due to the vagaries of litigation, the outcome of a litigation
matter 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, or at trial or on appeal.
Disposition valuations are also subject to the uncertainty of
how opposing parties and their counsel will themselves view the
relevant evidence and applicable law.
On a quarterly and annual basis, the Company reviews relevant
information with respect to litigation and contingencies to be
reflected in the Companys consolidated financial
statements. The review includes senior legal and financial
personnel. Estimates of possible losses or ranges of loss for
particular matters cannot in the ordinary course be made with a
reasonable degree of certainty. Liabilities are established when
it is probable that a loss has been incurred and the amount of
the loss can be reasonably estimated. 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 estimated at March 31, 2011.
Sales Practices Claims. Over the past several
years, the Company has faced claims, including class action
lawsuits, alleging improper marketing or sales of individual
life insurance policies, annuities, mutual funds or other
products. Some of the current cases seek substantial damages,
including punitive and treble damages and attorneys fees.
The Company continues to vigorously defend against the claims in
all pending matters. The Company believes adequate provision has
been made in its financial statements for all probable and
reasonably estimable losses for sales practices matters.
Retained Asset Account Matters. The New York
Attorney General announced on July 29, 2010 that his office
had launched a major fraud investigation into the life insurance
industry for practices related to the use of retained asset
accounts as a settlement option for death benefits and that
subpoenas requesting comprehensive data related to retained
asset accounts had been served on MetLife, Inc. and other
insurance carriers. MetLife, Inc. received the subpoena on
July 30, 2010. Metropolitan Life Insurance Company and its
affiliates have received requests for documents and information
from U.S. congressional committees and members as well as
various state regulatory bodies, including the New York
Insurance Department. It is possible that other state and
federal regulators or legislative bodies may pursue similar
investigations or make related inquiries. Management cannot
predict what effect any such investigations might have on the
Companys earnings or the availability of the
Companys retained asset account known as the Total Control
Account (TCA), but management believes that the
Companys financial statements taken as a whole would not
be materially affected. Management believes that any allegations
that information about the TCA is not adequately disclosed or
that the accounts are fraudulent or otherwise violate state or
federal laws are without merit.
73
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Connecticut General Life Insurance Company and MetLife Insurance
Company of Connecticut are engaged in an arbitration proceeding
to determine whether MetLife Insurance Company of Connecticut is
required to refund several million dollars it collected
and/or to
stop submitting certain claims under reinsurance contracts in
which Connecticut General Life Insurance Company reinsured death
benefits payable under certain MetLife Insurance Company of
Connecticut annuities.
A former Tower Square financial services representative is
alleged to have misappropriated funds from customers. The
Illinois Securities Division, the U.S. Postal Inspector,
the Internal Revenue Service, FINRA and the
U.S. Attorneys Office have conducted inquiries. Tower
Square has made remediation to all the affected customers. The
Illinois Securities Division has issued a Statement of
Violations to Tower Square, and Tower Square is conducting
discussions with the Illinois Securities Division.
Various litigation, claims and assessments against the Company,
in addition to those discussed previously and those otherwise
provided for in the Companys consolidated financial
statements, have arisen in the course of the Companys
business, including, but not limited to, in connection with its
activities as an insurer, employer, investor, investment advisor
and taxpayer. Further, state insurance regulatory authorities
and other federal and state authorities regularly make inquiries
and conduct investigations concerning the Companys
compliance with applicable insurance and other laws and
regulations.
It is not possible to predict the ultimate outcome or provide
reasonable ranges of potential losses of all pending
investigations and legal proceedings. In some of the matters
referred to previously, 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 adverse effect upon the Companys financial
position, based on information currently known by the
Companys 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 adverse effect on the Companys
consolidated net income or cash flows in particular quarterly or
annual periods.
Commitments
Commitments
to Fund Partnership Investments
The Company makes commitments to fund partnership investments in
the normal course of business. The amounts of these unfunded
commitments were $1.2 billion at both March 31, 2011
and December 31, 2010. The Company anticipates that these
amounts will be invested in partnerships over the next five
years.
Mortgage
Loan Commitments
The Company commits to lend funds under mortgage loan
commitments. The amounts of these mortgage loan commitments were
$281 million and $270 million at March 31, 2011
and December 31, 2010, respectively.
Commitments
to Fund Bank Credit Facilities, Bridge Loans and Private
Corporate Bond Investments
The Company commits to lend funds under bank credit facilities,
bridge loans and private corporate bond investments. The amounts
of these unfunded commitments were $238 million and
$315 million at March 31, 2011 and December 31,
2010, respectively.
Other
Commitments
The Company has entered into collateral arrangements with
affiliates, which require the transfer of collateral in
connection with secured demand notes. At March 31, 2011 and
December 31, 2010, the Company had agreed to
74
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
fund up to $95 million and $114 million, respectively,
of cash upon the request by these affiliates and had transferred
collateral consisting of various securities with a fair market
value of $117 million and $144 million, respectively,
to custody accounts to secure the notes. Each of these
affiliates is permitted by contract to sell or repledge this
collateral.
Guarantees
The Company has provided a guarantee on behalf of MetLife
International Insurance Company, Ltd. (MLII), a
former affiliate, that is triggered if MLII cannot pay claims
because of insolvency, liquidation or rehabilitation. Life
insurance coverage in-force, representing the maximum potential
obligation under this guarantee, was $297 million at both
March 31, 2011 and December 31, 2010. The Company does
not hold any collateral related to this guarantee, but has a
recorded liability of $1 million that was based on the
total account value of the guaranteed policies plus the amounts
retained per policy at both March 31, 2011 and
December 31, 2010. The remainder of the risk was ceded to
external reinsurers.
Information on other expenses was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Compensation
|
|
$
|
75
|
|
|
$
|
44
|
|
Commissions
|
|
|
306
|
|
|
|
220
|
|
Volume-related costs
|
|
|
38
|
|
|
|
60
|
|
Affiliated interest costs on ceded reinsurance
|
|
|
54
|
|
|
|
33
|
|
Capitalization of DAC
|
|
|
(310
|
)
|
|
|
(230
|
)
|
Amortization of DAC and VOBA
|
|
|
117
|
|
|
|
64
|
|
Interest expense on debt and debt issue costs
|
|
|
110
|
|
|
|
120
|
|
Premium taxes, licenses & fees
|
|
|
15
|
|
|
|
10
|
|
Professional services
|
|
|
9
|
|
|
|
4
|
|
Rent
|
|
|
7
|
|
|
|
1
|
|
Other
|
|
|
83
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
$
|
504
|
|
|
$
|
419
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense on Debt and Debt Issue Costs
Interest expense on debt and debt issue costs includes interest
expense related to CSEs of $93 million and
$103 million for the three months ended March 31, 2011
and 2010, respectively. See Note 2.
Affiliated
Expenses
See Note 8 for a discussion of affiliated expenses included
in the table above.
75
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
7.
|
Business
Segment Information
|
The Companys business is currently divided into three
segments: Retirement Products, Corporate Benefit Funding and
Insurance Products. In addition, the Company reports certain of
its results of operations in Corporate & Other.
Retirement Products offers asset accumulation and income
products, including a wide variety of annuities. Corporate
Benefit Funding offers pension risk solutions, structured
settlements, stable value and investment products and other
benefit funding products. Insurance Products offers a broad
range of protection products and services to individuals and
corporations, as well as other institutions and their respective
employees, and is organized into two distinct businesses:
Individual Life and Non-Medical Health. Individual Life
insurance products and services include variable life, universal
life, term life and whole life products. Non-Medical Health
includes individual disability insurance products.
Corporate & Other contains the excess capital not
allocated to the segments, various domestic and international
start-up
entities and run-off business, the Companys ancillary
international operations, interest expense related to the
majority of the Companys outstanding debt and expenses
associated with certain legal proceedings and income tax audit
issues. Corporate & Other also includes the
elimination of intersegment amounts.
Operating earnings is the measure of segment profit or loss the
Company uses to evaluate segment performance and allocate
resources. Consistent with GAAP accounting guidance for segment
reporting, it is the Companys measure of segment
performance reported below. Operating earnings should not be
viewed as a substitute for GAAP net income (loss). The Company
believes the presentation of operating earnings herein as the
Company measures it for management purposes enhances the
understanding of its performance by highlighting the results
from operations and the underlying profitability drivers of the
business.
Operating earnings is defined as operating revenues less
operating expenses, both net of income tax.
Operating revenues exclude net investment gains (losses) and net
derivative gains (losses). The following additional adjustments
are made to GAAP revenues, in the line items indicated, in
calculating operating revenues:
|
|
|
|
|
Universal life and investment-type product policy fees exclude
the amortization of unearned revenue related to net investment
gains (losses) and net derivative gains (losses) and certain
variable annuity GMIB fees (GMIB Fees); and
|
|
|
|
Net investment income: (i) includes amounts for scheduled
periodic settlement payments and amortization of premium on
derivatives that are hedges of investments but do not qualify
for hedge accounting treatment, (ii) excludes certain
amounts related to contractholder-directed unit-linked
investments and (iii) excludes certain amounts related to
securitization entities that are VIEs consolidated under GAAP.
|
The following adjustments are made to GAAP expenses, in the line
items indicated, in calculating operating expenses:
|
|
|
|
|
Policyholder benefits and claims exclude (i) amounts
associated with periodic crediting rate adjustments based on the
total return of a contractually referenced pool of assets,
(ii) benefits and hedging costs related to GMIBs
(GMIB Costs) and (iii) market value adjustments
associated with surrenders or terminations of contracts
(Market Value Adjustments);
|
|
|
|
Interest credited to policyholder account balances includes
adjustments for scheduled periodic settlement payments and
amortization of premium on derivatives that are hedges of
policyholder account balances but do not qualify for hedge
accounting treatment and amounts related to net investment
income earned on contractholder-directed unit-linked investments;
|
76
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
Amortization of DAC and value of business acquired
(VOBA) exclude amounts related to (i) net
investment gains (losses) and net derivative gains (losses),
(ii) GMIB Fees and GMIB Costs, and (iii) Market Value
Adjustments; and
|
|
|
|
Interest expense on debt excludes certain amounts related to
securitization entities that are VIEs consolidated under GAAP.
|
In the first quarter of 2011, management modified its definition
of operating earnings to exclude impacts related to certain
variable annuity guarantees and Market Value Adjustments to
better conform to the way it manages and assesses its business.
As a result, such product results are no longer reported in
operating earnings. Accordingly, prior period results for
Retirement Products and total consolidated operating earnings
have been reduced by $6 million, net of $3 million of
income tax expense, for the three months ended March 31,
2010.
Set forth in the tables below is certain financial information
with respect to the Companys segments, as well as
Corporate & Other for the three months ended
March 31, 2011 and 2010. The accounting policies of the
segments are the same as those of the Company, except for the
method of capital allocation and the accounting for gains
(losses) from intercompany sales, which are eliminated in
consolidation.
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 MetLifes business.
Effective January 1, 2011, MetLife updated its economic
capital model to align segment allocated equity with emerging
standards and consistent risk principles. Such changes to
MetLifes economic capital model are applied prospectively.
Segment net investment income is also credited or charged based
on the level of allocated equity; however, changes in allocated
equity do not impact the Companys consolidated net
investment income, operating earnings or net income.
77
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
|
Benefit
|
|
|
Insurance
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Total
|
|
Three Months Ended March 31, 2011
|
|
Products
|
|
|
Funding
|
|
|
Products
|
|
|
& Other
|
|
|
Total
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
30
|
|
|
$
|
62
|
|
|
$
|
44
|
|
|
$
|
|
|
|
$
|
136
|
|
|
$
|
|
|
|
$
|
136
|
|
Universal life and investment-type product policy fees
|
|
|
273
|
|
|
|
11
|
|
|
|
144
|
|
|
|
7
|
|
|
|
435
|
|
|
|
20
|
|
|
|
455
|
|
Net investment income
|
|
|
206
|
|
|
|
298
|
|
|
|
156
|
|
|
|
48
|
|
|
|
708
|
|
|
|
80
|
|
|
|
788
|
|
Other revenues
|
|
|
97
|
|
|
|
1
|
|
|
|
32
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
|
|
130
|
|
Net investment gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
(14
|
)
|
Net derivative gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(156
|
)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
606
|
|
|
|
372
|
|
|
|
376
|
|
|
|
55
|
|
|
|
1,409
|
|
|
|
(70
|
)
|
|
|
1,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder benefits and claims
|
|
|
63
|
|
|
|
188
|
|
|
|
69
|
|
|
|
|
|
|
|
320
|
|
|
|
7
|
|
|
|
327
|
|
Interest credited to policyholder account balances
|
|
|
180
|
|
|
|
50
|
|
|
|
60
|
|
|
|
|
|
|
|
290
|
|
|
|
(3
|
)
|
|
|
287
|
|
Capitalization of DAC
|
|
|
(191
|
)
|
|
|
(5
|
)
|
|
|
(101
|
)
|
|
|
(13
|
)
|
|
|
(310
|
)
|
|
|
|
|
|
|
(310
|
)
|
Amortization of DAC and VOBA
|
|
|
110
|
|
|
|
1
|
|
|
|
71
|
|
|
|
2
|
|
|
|
184
|
|
|
|
(67
|
)
|
|
|
117
|
|
Interest expense on debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
17
|
|
|
|
93
|
|
|
|
110
|
|
Other expenses
|
|
|
308
|
|
|
|
16
|
|
|
|
233
|
|
|
|
30
|
|
|
|
587
|
|
|
|
|
|
|
|
587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
470
|
|
|
|
250
|
|
|
|
332
|
|
|
|
36
|
|
|
|
1,088
|
|
|
|
30
|
|
|
|
1,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax expense (benefit)
|
|
|
47
|
|
|
|
43
|
|
|
|
16
|
|
|
|
(11
|
)
|
|
|
95
|
|
|
|
(34
|
)
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
$
|
89
|
|
|
$
|
79
|
|
|
$
|
28
|
|
|
$
|
30
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
(70
|
)
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
Provision for income tax (expense) benefit
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
160
|
|
|
|
|
|
|
$
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
|
Benefit
|
|
|
Insurance
|
|
|
Corporate
|
|
|
|
|
|
|
|
|
Total
|
|
Three Months Ended March 31, 2010
|
|
Products
|
|
|
Funding
|
|
|
Products
|
|
|
& Other
|
|
|
Total
|
|
|
Adjustments
|
|
|
Consolidated
|
|
|
|
(In millions)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
58
|
|
|
$
|
371
|
|
|
$
|
28
|
|
|
$
|
(2
|
)
|
|
$
|
455
|
|
|
$
|
|
|
|
$
|
455
|
|
Universal life and investment-type product policy fees
|
|
|
208
|
|
|
|
8
|
|
|
|
130
|
|
|
|
5
|
|
|
|
351
|
|
|
|
18
|
|
|
|
369
|
|
Net investment income
|
|
|
229
|
|
|
|
269
|
|
|
|
114
|
|
|
|
83
|
|
|
|
695
|
|
|
|
95
|
|
|
|
790
|
|
Other revenues
|
|
|
76
|
|
|
|
1
|
|
|
|
33
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
110
|
|
Net investment gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
37
|
|
Net derivative gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(308
|
)
|
|
|
(308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
571
|
|
|
|
649
|
|
|
|
305
|
|
|
|
86
|
|
|
|
1,611
|
|
|
|
(158
|
)
|
|
|
1,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder benefits and claims
|
|
|
86
|
|
|
|
499
|
|
|
|
84
|
|
|
|
1
|
|
|
|
670
|
|
|
|
24
|
|
|
|
694
|
|
Interest credited to policyholder account balances
|
|
|
182
|
|
|
|
45
|
|
|
|
58
|
|
|
|
45
|
|
|
|
330
|
|
|
|
(14
|
)
|
|
|
316
|
|
Capitalization of DAC
|
|
|
(120
|
)
|
|
|
(1
|
)
|
|
|
(98
|
)
|
|
|
(11
|
)
|
|
|
(230
|
)
|
|
|
|
|
|
|
(230
|
)
|
Amortization of DAC and VOBA
|
|
|
92
|
|
|
|
|
|
|
|
71
|
|
|
|
1
|
|
|
|
164
|
|
|
|
(100
|
)
|
|
|
64
|
|
Interest expense on debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
17
|
|
|
|
103
|
|
|
|
120
|
|
Other expenses
|
|
|
219
|
|
|
|
9
|
|
|
|
208
|
|
|
|
29
|
|
|
|
465
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
459
|
|
|
|
552
|
|
|
|
323
|
|
|
|
82
|
|
|
|
1,416
|
|
|
|
13
|
|
|
|
1,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income tax expense (benefit)
|
|
|
39
|
|
|
|
34
|
|
|
|
(7
|
)
|
|
|
(14
|
)
|
|
|
52
|
|
|
|
(60
|
)
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
$
|
73
|
|
|
$
|
63
|
|
|
$
|
(11
|
)
|
|
$
|
18
|
|
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
Provision for income tax (expense) benefit
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
32
|
|
|
|
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents total assets with respect to the
Companys segments, as well as Corporate & Other,
at:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
(In millions)
|
|
|
Retirement Products
|
|
$
|
90,208
|
|
|
$
|
87,461
|
|
Corporate Benefit Funding
|
|
|
31,533
|
|
|
|
30,491
|
|
Insurance Products
|
|
|
17,768
|
|
|
|
16,296
|
|
Corporate & Other
|
|
|
21,037
|
|
|
|
20,637
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
160,546
|
|
|
$
|
154,885
|
|
|
|
|
|
|
|
|
|
|
Net investment income is based upon the actual results of each
segments specifically identifiable asset portfolio
adjusted for allocated equity. Other costs are allocated to each
of the segments based upon: (i) a review of
79
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
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 Companys
product pricing.
Operating revenues derived from any customer did not exceed 10%
of consolidated operating revenues for the three months ended
March 31, 2011 and 2010. Operating revenues from
U.S. operations were $1.3 billion and
$1.2 billion for the three months ended March 31, 2011
and 2010, respectively, which represented 94% and 74%,
respectively, of consolidated operating revenues.
|
|
8.
|
Related
Party Transactions
|
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 management,
policy administrative functions, personnel, investment advice
and distribution services. For certain of the 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 incidence of cost
incurred by the Company
and/or
affiliate. Expenses and fees incurred with affiliates related to
these agreements, recorded in other expenses, were
$377 million and $298 million for the three months
ended March 31, 2011 and 2010, respectively. The
aforementioned expenses and fees incurred with affiliates were
comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Compensation
|
|
$
|
63
|
|
|
$
|
36
|
|
Commissions
|
|
|
185
|
|
|
|
123
|
|
Volume-related costs
|
|
|
48
|
|
|
|
67
|
|
Professional services
|
|
|
4
|
|
|
|
|
|
Rent
|
|
|
6
|
|
|
|
|
|
Other
|
|
|
71
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
$
|
377
|
|
|
$
|
298
|
|
|
|
|
|
|
|
|
|
|
Revenues received from affiliates related to these agreements
were recorded as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Ended
|
|
|
March 31,
|
|
|
2011
|
|
2010
|
|
|
(In millions)
|
|
Universal life and investment-type product policy fees
|
|
$
|
33
|
|
|
$
|
26
|
|
Other revenues
|
|
$
|
31
|
|
|
$
|
23
|
|
The Company had net receivables from affiliates of
$83 million and $60 million at March 31, 2011 and
December 31, 2010, respectively, related to the items
discussed above. These amounts exclude affiliated reinsurance
balances discussed below. See Note 2 for expenses related
to investment advice under these agreements, recorded in net
investment income.
Reinsurance
Transactions
The Company has reinsurance agreements with certain MetLife
subsidiaries, including Metropolitan Life Insurance Company,
MetLife Reinsurance Company of South Carolina, Exeter
Reassurance Company, Ltd.,
80
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
General American Life Insurance Company, MetLife Investors
Insurance Company and MetLife Reinsurance Company of Vermont,
all of which are related parties.
Information regarding the effect of affiliated reinsurance
included in the interim condensed consolidated statements of
operations was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Premiums:
|
|
|
|
|
|
|
|
|
Reinsurance assumed
|
|
$
|
(2
|
)
|
|
$
|
4
|
|
Reinsurance ceded
|
|
|
(54
|
)
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
Net premiums
|
|
$
|
(56
|
)
|
|
$
|
(55
|
)
|
|
|
|
|
|
|
|
|
|
Universal life and investment-type product policy fees:
|
|
|
|
|
|
|
|
|
Reinsurance assumed
|
|
$
|
20
|
|
|
$
|
11
|
|
Reinsurance ceded
|
|
|
(91
|
)
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
Net universal life and investment-type product policy fees
|
|
$
|
(71
|
)
|
|
$
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
Other revenues:
|
|
|
|
|
|
|
|
|
Reinsurance assumed
|
|
$
|
|
|
|
$
|
|
|
Reinsurance ceded
|
|
|
80
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
Net other revenues
|
|
$
|
80
|
|
|
$
|
74
|
|
|
|
|
|
|
|
|
|
|
Policyholder benefits and claims:
|
|
|
|
|
|
|
|
|
Reinsurance assumed
|
|
$
|
3
|
|
|
$
|
1
|
|
Reinsurance ceded
|
|
|
(115
|
)
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
Net policyholder benefits and claims
|
|
$
|
(112
|
)
|
|
$
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
Interest credited to policyholder account balances:
|
|
|
|
|
|
|
|
|
Reinsurance assumed
|
|
$
|
16
|
|
|
$
|
15
|
|
Reinsurance ceded
|
|
|
(18
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
Net interest credited to policyholder account balances
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
Reinsurance assumed
|
|
$
|
15
|
|
|
$
|
12
|
|
Reinsurance ceded
|
|
|
45
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
Net other expenses
|
|
$
|
60
|
|
|
$
|
36
|
|
|
|
|
|
|
|
|
|
|
81
MetLife
Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited) (Continued)
Information regarding the effect of affiliated reinsurance
included in the consolidated balance sheets was as follows at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
December 31, 2010
|
|
|
|
Assumed
|
|
|
Ceded
|
|
|
Assumed
|
|
|
Ceded
|
|
|
|
(In millions)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums, reinsurance and other receivables
|
|
$
|
32
|
|
|
$
|
9,265
|
|
|
$
|
40
|
|
|
$
|
9,826
|
|
Deferred policy acquisition costs and value of business acquired
|
|
|
158
|
|
|
|
(487
|
)
|
|
|
164
|
|
|
|
(484
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
190
|
|
|
$
|
8,778
|
|
|
$
|
204
|
|
|
$
|
9,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future policy benefits
|
|
$
|
42
|
|
|
$
|
|
|
|
$
|
41
|
|
|
$
|
|
|
Other policy-related balances
|
|
|
1,449
|
|
|
|
542
|
|
|
|
1,435
|
|
|
|
508
|
|
Other liabilities
|
|
|
16
|
|
|
|
2,914
|
|
|
|
12
|
|
|
|
3,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
1,507
|
|
|
$
|
3,456
|
|
|
$
|
1,488
|
|
|
$
|
3,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company ceded risks to affiliates related to guaranteed
minimum benefit guarantees written directly by the Company
through December 31, 2010. These ceded reinsurance
agreements contain embedded derivatives and changes in their
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 assets of $563 million and $936 million at
March 31, 2011 and December 31, 2010, respectively.
For the three months ended March 31, 2011 and 2010, net
derivative gains (losses) included ($443) million and
($366) million, respectively, in changes in fair value of
such embedded derivatives.
MLI-USA cedes two blocks of business to an affiliate on a 90%
coinsurance with funds withheld basis. Certain contractual
features of this agreement qualify as embedded derivatives,
which are separately accounted for at estimated fair value on
the Companys consolidated balance sheet. The embedded
derivative related to the funds withheld associated with this
reinsurance agreement is included within other liabilities and
decreased the funds withheld balance by $20 million at
March 31, 2011, and increased the funds withheld balance by
$5 million at December 31, 2010. The changes in fair
value of the embedded derivatives, included in net derivative
gains (losses), were $25 million and ($9) million for
the three months ended March 31, 2011 and 2010,
respectively. The reinsurance agreement also includes an
experience refund provision, whereby some or all of the profits
on the underlying reinsurance agreement are returned to MLI-USA
from the affiliated reinsurer during the first several years of
the reinsurance agreement. The experience refund reduced the
funds withheld by MLI-USA from the affiliated reinsurer by
$49 million and $53 million for the three months ended
March 31, 2011 and 2010, respectively, and are considered
unearned revenue, amortized over the life of the contract using
the same assumptions as used for the DAC associated with the
underlying policies. Amortization and interest of the unearned
revenue associated with the experience refund was
$16 million and $23 million for the three months ended
March 31, 2011 and 2010, respectively, and is included in
premiums and universal life and investment-type product policy
fees in the consolidated statements of operations. At
March 31, 2011 and December 31, 2010, unearned revenue
related to the experience refund was $593 million and
$560 million, respectively, and is included in other
policy-related balances in the interim condensed consolidated
balance sheets.
82
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
For purposes of this discussion, MICC, the
Company, we, our and
us refer to MetLife Insurance Company of
Connecticut, a Connecticut corporation incorporated in 1863, and
its subsidiaries, including MetLife Investors USA Insurance
Company (MLI-USA). MetLife Insurance Company of
Connecticut is a subsidiary of MetLife, Inc.
(MetLife). Managements narrative analysis of
the 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
MetLife Insurance Company of Connecticuts Annual Report on
Form 10-K
for the year ended December 31, 2010 (2010 Annual
Report), filed with the U.S. Securities and Exchange
Commission (SEC), the forward-looking statement
information included below, the Risk Factors set
forth in Part II, Item 1A, and the additional risk
factors referred to therein, and the Companys interim
condensed consolidated financial statements included elsewhere
herein.
This Managements Discussion and Analysis of Financial
Condition and Results of Operations may contain or incorporate
by reference information that includes or is based upon
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements give expectations or forecasts of future events.
These statements can be identified by the fact that they do not
relate strictly to historical or current facts. They use words
such as anticipate, estimate,
expect, project, intend,
plan, believe and other words and terms
of similar meaning in connection with a discussion of future
operating or financial performance. In particular, these include
statements relating to future actions, prospective services or
products, future performance or results of current and
anticipated services or products, sales efforts, expenses, the
outcome of contingencies such as legal proceedings, trends in
operations and financial results. Any or all forward-looking
statements may turn out to be wrong. Actual results could differ
materially from those expressed or implied in the
forward-looking statements. See Note Regarding
Forward-Looking Statements.
The following discussion includes references to our performance
measure operating earnings that is not based on accounting
principles generally accepted in the United States of America
(GAAP). Operating earnings is the measure of segment
profit or loss we use to evaluate segment performance and
allocate resources. Consistent with GAAP accounting guidance for
segment reporting, it is our measure of segment performance.
Operating earnings is defined as operating revenues less
operating expenses, both net of income tax.
Operating revenues exclude net investment gains (losses) and net
derivative gains (losses). The following additional adjustments
are made to GAAP revenues, in the line items indicated, in
calculating operating revenues:
|
|
|
|
|
Universal life and investment-type product policy fees exclude
the amortization of unearned revenue related to net investment
gains (losses) and net derivative gains (losses) and certain
variable annuity guaranteed minimum income benefits
(GMIB) fees (GMIB Fees); and
|
|
|
|
Net investment income: (i) includes amounts for scheduled
periodic settlement payments and amortization of premium on
derivatives that are hedges of investments but do not qualify
for hedge accounting treatment, (ii) excludes certain
amounts related to contractholder-directed unit-linked
investments and (iii) excludes certain amounts related to
securitization entities that are variable interest entities
(VIEs) consolidated under GAAP.
|
The following adjustments are made to GAAP expenses, in the line
items indicated, in calculating operating expenses:
|
|
|
|
|
Policyholder benefits and claims exclude (i) amounts
associated with periodic crediting rate adjustments based on the
total return of a contractually referenced pool of assets,
(ii) benefits and hedging costs related to GMIBs
(GMIB Costs) and (iii) market value adjustments
associated with surrenders or terminations of contracts
(Market Value Adjustments);
|
|
|
|
Interest credited to policyholder account balances includes
adjustments for scheduled periodic settlement payments and
amortization of premium on derivatives that are hedges of
policyholder account balances but do not qualify for hedge
accounting treatment and amounts related to net investment
income earned on contractholder-directed unit-linked investments;
|
83
|
|
|
|
|
Amortization of deferred policy acquisition costs
(DAC) and value of business acquired
(VOBA) exclude amounts related to (i) net
investment gains (losses) and net derivative gains (losses),
(ii) GMIB Fees and GMIB Costs, and (iii) Market Value
Adjustments; and
|
|
|
|
Interest expense on debt excludes certain amounts related to
securitization entities that are VIEs consolidated under GAAP.
|
We believe the presentation of operating 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 our business. Operating
revenues, operating expenses and operating earnings should not
be viewed as a substitute for GAAP revenues, GAAP expenses and
GAAP net income (loss), respectively. These reconciliations to
the most directly comparable GAAP measures, are included in
Results of Operations.
In the first quarter of 2011, management modified its definition
of operating earnings to exclude impacts related to certain
variable annuity guarantees and Market Value Adjustments to
better conform to the way it manages and assesses its business.
As a result, such product results are no longer reported in
operating earnings. Accordingly, prior period results for
Retirement Products and total consolidated operating earnings
have been reduced by $6 million, net of $3 million of
income tax expense, for the three months ended March 31,
2010.
In this discussion, 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.
Business
The Companys business is currently divided into three
segments: Retirement Products, Corporate Benefit Funding and
Insurance Products. In addition, the Company reports certain of
its results of operations in Corporate & Other.
Retirement Products offers asset accumulation and income
products, including a wide variety of annuities. Corporate
Benefit Funding offers pension risk solutions, structured
settlements, stable value and investment products and other
benefit funding products. Insurance Products offers a broad
range of protection products and services to individuals and
corporations, as well as other institutions and their respective
employees, and is organized into two distinct businesses:
Individual Life and Non-Medical Health. Individual Life
insurance products and services include variable life, universal
life, term life and whole life products. Non-Medical Health
includes individual disability insurance products.
Corporate & Other contains the excess capital not
allocated to the segments, various domestic and international
start-up
entities and run-off business, the Companys ancillary
international operations, interest expense related to the
majority of the Companys outstanding debt and expenses
associated with certain legal proceedings and income tax audit
issues. Corporate & Other also includes the
elimination of intersegment amounts.
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 in the
interim condensed consolidated financial statements. The most
critical estimates include those used in determining:
|
|
|
|
(i)
|
the estimated fair value of investments in the absence of quoted
market values;
|
|
|
(ii)
|
investment impairments;
|
|
|
(iii)
|
the recognition of income on certain investment entities and the
application of the consolidation rules to certain investments;
|
|
|
(iv)
|
the estimated fair value of and accounting for freestanding
derivatives and the existence and estimated fair value of
embedded derivatives requiring bifurcation;
|
|
|
(v)
|
the capitalization and amortization of DAC and the establishment
and amortization of VOBA;
|
|
|
(vi)
|
the measurement of goodwill and related impairment, if any;
|
84
|
|
|
|
(vii)
|
the liability for future policyholder benefits and the
accounting for reinsurance contracts;
|
|
|
(viii)
|
accounting for income taxes and the valuation of deferred tax
assets; and
|
|
|
(ix)
|
the liability for litigation and regulatory matters.
|
In applying the Companys accounting policies, we make
subjective and complex judgments that frequently require
estimates 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 Companys business and operations. Actual
results could differ from these estimates.
The above critical accounting estimates are described in
Managements Discussion and Analysis of Financial
Condition and Results of Operations Summary of
Critical Accounting Estimates in the 2010 Annual Report
and Note 1 of the Notes to the Consolidated Financial
Statements in the 2010 Annual Report.
Economic
Capital
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 MetLifes business.
Effective January 1, 2011, MetLife updated its economic
capital model to align segment allocated equity with emerging
standards and consistent risk principles. Such changes to
MetLifes economic capital model are applied prospectively.
Segment net investment income is also credited or charged based
on the level of allocated equity; however, changes in allocated
equity do not impact the Companys consolidated net
investment income, operating earnings or net income.
Results
of Operations
Three
Months Ended March 31, 2011 Compared with the Three Months
Ended March 31, 2010
We have experienced growth and an increase in market share in
several of our businesses, which, together with improved overall
market conditions compared to conditions in the prior period,
positively impacted our results most significantly through
increased net cash flows and higher policy fee income. Sales of
our annuity products were up 47%, driven by an increase in
variable annuity sales compared with the prior period. We also
benefited in the current quarter from strong sales of funding
agreements. Although market penetration continues in our pension
closeout business in the United Kingdom, the number of sold
cases decreased, resulting in a decrease in premiums in the
current period of $305 million, before income tax. Premiums
associated with the closeout business can vary significantly
from period to period. While we experienced growth in our
traditional life business, sustained high levels of unemployment
and a challenging pricing environment continue to depress growth
across our group insurance businesses.
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
% Change
|
|
|
|
(In millions)
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
|
$
|
136
|
|
|
$
|
455
|
|
|
$
|
(319
|
)
|
|
|
(70.1
|
)%
|
Universal life and investment-type product policy fees
|
|
|
455
|
|
|
|
369
|
|
|
|
86
|
|
|
|
23.3
|
%
|
Net investment income
|
|
|
788
|
|
|
|
790
|
|
|
|
(2
|
)
|
|
|
(0.3
|
)%
|
Other revenues
|
|
|
130
|
|
|
|
110
|
|
|
|
20
|
|
|
|
18.2
|
%
|
Net investment gains (losses)
|
|
|
(14
|
)
|
|
|
37
|
|
|
|
(51
|
)
|
|
|
(137.8
|
)%
|
Net derivative gains (losses)
|
|
|
(156
|
)
|
|
|
(308
|
)
|
|
|
152
|
|
|
|
49.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,339
|
|
|
|
1,453
|
|
|
|
(114
|
)
|
|
|
(7.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder benefits and claims
|
|
|
327
|
|
|
|
694
|
|
|
|
(367
|
)
|
|
|
(52.9
|
)%
|
Interest credited to policyholder account balances
|
|
|
287
|
|
|
|
316
|
|
|
|
(29
|
)
|
|
|
(9.2
|
)%
|
Capitalization of DAC
|
|
|
(310
|
)
|
|
|
(230
|
)
|
|
|
(80
|
)
|
|
|
(34.8
|
)%
|
Amortization of DAC and VOBA
|
|
|
117
|
|
|
|
64
|
|
|
|
53
|
|
|
|
82.8
|
%
|
Interest expense on debt
|
|
|
110
|
|
|
|
120
|
|
|
|
(10
|
)
|
|
|
(8.3
|
)%
|
Other expenses
|
|
|
587
|
|
|
|
465
|
|
|
|
122
|
|
|
|
26.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,118
|
|
|
|
1,429
|
|
|
|
(311
|
)
|
|
|
(21.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income tax
|
|
|
221
|
|
|
|
24
|
|
|
|
197
|
|
|
|
820.8
|
%
|
Provision for income tax expense (benefit)
|
|
|
61
|
|
|
|
(8
|
)
|
|
|
69
|
|
|
|
862.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
160
|
|
|
$
|
32
|
|
|
$
|
128
|
|
|
|
400.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unless otherwise stated, all amounts discussed below are net of
income tax.
During the three months ended March 31, 2011, net income
increased $128 million to $160 million from
$32 million in the comparable 2010 period. The change was
predominantly due to an $83 million increase in operating
earnings and increased investment losses and derivative gains,
net of related adjustments, principally associated with DAC and
VOBA amortization.
We manage our investment portfolio using disciplined
Asset/Liability Management (ALM) 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, net
of income tax, 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 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. Other invested asset classes including, but not
limited to, equity securities, other limited partnership
interests and real estate and real estate joint ventures provide
additional diversification and opportunity for long-term yield
enhancement in addition to supporting the cash flow and duration
objectives of our investment portfolio. We also use derivatives
as an integral part of our management of the investment
portfolio to hedge certain risks, including changes in interest
rates, foreign currencies, credit spreads and equity market
levels. Additional considerations for our investment portfolio
include current and expected market conditions and expectations
for changes within our specific mix of products and business
segments. In addition, the general account investment portfolio
includes within other securities, contractholder-directed
investments supporting unit-linked variable annuity type
liabilities, which do not qualify as separate account assets.
The returns on these investments, which can
86
vary significantly period to period, include changes in
estimated fair value subsequent to purchase, inure to
contractholders and are offset in earnings by a corresponding
change in policyholder account balances through interest
credited to policyholder account balances.
The composition of the investment portfolio of each business
segment is tailored to the specific characteristics of its
insurance liabilities, causing certain portfolios to be shorter
in duration and others to be longer in duration. Accordingly,
certain portfolios are more heavily weighted in longer duration,
higher yielding fixed maturity securities, or certain
sub-sectors
of fixed maturity securities, than other portfolios.
Investments are purchased to support our insurance liabilities
and not to generate net investment gains and losses. However,
net investment gains and losses are generated and can change
significantly from period to period, due to changes in external
influences including movements in interest rates, foreign
currencies, credit spreads and equity markets, counterparty
specific factors such as financial performance, credit rating
and collateral valuation, and internal factors such as portfolio
rebalancing that can generate gains and losses. As an investor
in the fixed income, equity security, mortgage loan and certain
other invested asset classes, we are exposed to the above stated
risks, which can lead to both impairments and credit-related
losses.
We use freestanding interest rate, equity, currency and credit
derivatives to provide economic hedges of certain invested
assets and insurance liabilities, including embedded
derivatives, within certain of our variable annuity minimum
benefit guarantees. For those hedges not designated as
accounting hedges, changes in market risks can lead to the
recognition of fair value changes in net derivative gains
(losses) without an offsetting gain or loss recognized in
earnings for the item being hedged even though these are
effective economic hedges. Additionally, we issue liabilities
and purchase assets that contain embedded derivatives whose
changes in estimated fair value are sensitive to changes in
market risks and are also recognized in net derivative gains
(losses).
The favorable variance in net derivative gains (losses) of
$99 million, from losses of $200 million in the first
quarter of 2010 to losses of $101 million in the comparable
2011 period, was primarily driven by a favorable change in
embedded derivatives primarily associated with variable annuity
minimum benefit guarantees of $103 million. This favorable
variance was partially offset by an unfavorable change in
freestanding derivatives of $4 million.
The $4 million unfavorable variance in freestanding
derivatives was primarily attributable to rising long-term and
mid-term interest rates, partially offset by the positive impact
of the weakening of the U.S. dollar, the impact of equity
market movements and a smaller decrease in equity volatility in
the current period. Rising long-term and mid-term interest rates
in the current period compared to falling long-term and mid-term
interest rates in the prior period had a negative impact of
$15 million on our interest rate derivatives,
$5 million of which was attributable to hedges of variable
annuity minimum benefit guarantee liabilities, that are
accounted for as embedded derivatives. The impact of equity
market movements and a smaller decrease in equity volatility in
the current period compared to the prior period had a positive
impact of $7 million on our equity derivatives. In
addition, foreign currency derivatives had a positive impact of
$4 million related to hedges of foreign currency exposures.
Certain variable annuity products with minimum benefit
guarantees contain embedded derivatives that 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). The fair value of these embedded
derivatives also includes an adjustment for nonperformance risk.
The $103 million favorable variance in embedded derivatives
was primarily attributable to a favorable change in direct
variable annuity minimum benefit guarantee liabilities resulting
from rising long-term and mid-term interest rates, equity
volatility and equity market movements. Rising long-term and
mid-term interest rates in the current period compared to
falling long-term and mid-term interest rates in the prior
period had a positive impact of $89 million on direct
variable annuity minimum benefit guarantee liabilities. The
impact of equity market movements and a smaller decrease in
equity volatility in the current period compared to the prior
period had a negative impact of $22 million on direct
variable annuity minimum benefit guarantee liabilities. In
addition, there was a favorable change related to the adjustment
for nonperformance risk of $28 million on the related
liabilities. Finally, there was an unfavorable change of
$1 million on ceded reinsurance of certain variable annuity
minimum benefit guarantee risks, in addition to an unfavorable
change in the adjustment for the reinsurers nonperformance
risk in the current period of $2 million.
87
The unfavorable variance in net investment gains (losses) of
$33 million was due primarily to a decrease in foreign
currency gains related to foreign denominated guaranteed
investment contracts and losses on sales of fixed maturity
securities.
As more fully described in the discussion of performance
measures above, we use operating 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
operating 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. Operating earnings should not be viewed
as a substitute for GAAP net income (loss). Operating earnings
increased by $83 million to $226 million in the first
quarter of 2011 from $143 million in the comparable 2010
period.
Reconciliation
of net income to operating earnings
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Net income
|
|
$
|
160
|
|
|
$
|
32
|
|
Less: Net investment gains (losses)
|
|
|
(14
|
)
|
|
|
37
|
|
Less: Net derivative gains (losses)
|
|
|
(156
|
)
|
|
|
(308
|
)
|
Less: Other adjustments to net income (1)
|
|
|
70
|
|
|
|
100
|
|
Less: Provision for income tax (expense) benefit
|
|
|
34
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
$
|
226
|
|
|
$
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See definitions of operating revenues and operating expenses for
the components of such adjustments. |
Reconciliation
of GAAP revenues to operating revenues and GAAP expenses to
operating expenses
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Total revenues
|
|
$
|
1,339
|
|
|
$
|
1,453
|
|
Less: Net investment gains (losses)
|
|
|
(14
|
)
|
|
|
37
|
|
Less: Net derivative gains (losses)
|
|
|
(156
|
)
|
|
|
(308
|
)
|
Less: Adjustments related to net investment gains (losses) and
net derivative gains (losses)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
Less: Other adjustments to revenues (1)
|
|
|
102
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
1,409
|
|
|
$
|
1,611
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
$
|
1,118
|
|
|
$
|
1,429
|
|
Less: Adjustments related to net investment gains (losses) and
net derivative gains (losses)
|
|
|
(70
|
)
|
|
|
(101
|
)
|
Less: Other adjustments to expenses (1)
|
|
|
100
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
1,088
|
|
|
$
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See definitions of operating revenues and operating expenses for
the components of such adjustments. |
Unless otherwise stated, all amounts discussed below are net of
income tax.
The $83 million increase in operating earnings was
primarily driven by the improvement in the financial markets,
which was most evident in higher policy fee income, as average
separate account balances grew with favorable equity market
performance.
88
The significant increase in average separate account balances
was largely attributable to favorable equity market performance
resulting from improved market conditions and positive net cash
flows from the annuity business. This resulted in higher policy
fees and other revenues of $68 million, most notably in
Retirement Products. The improvement in fees was partially
offset by greater DAC, VOBA and deferred sales inducements
(DSI) amortization of $11 million. Policy fees
are typically calculated as a percentage of the average assets
in the separate accounts. DAC, VOBA and DSI amortization is
based on the earnings of the business, which in the retirement
business are derived, in part, from fees earned on separate
account balances.
Insurance Products benefited by $17 million in the first
quarter of 2011 from improved mortality in our traditional life
business. This benefit was partially offset by an increase in
the change in insurance-related liabilities on the variable and
universal life products.
The increase in net investment income of $8 million was due
to a $26 million increase from growth in average invested
assets, offset by an $18 million decrease from lower
yields. Growth in the investment portfolio was due to an
increase in net cash flows from the majority of our businesses
and growth in the securities lending program, which was
primarily invested in fixed maturity securities, other limited
partnership interests and mortgage loans. Yields were negatively
impacted by the effects of lower fixed maturity securities
yields due to the reinvestment of proceeds from maturities and
sales during this lower interest rate environment and lower
other limited partnership interests yields in the current period
from a stronger recovery in the private equity markets in the
prior period as compared to the current period. These decreases
in yield were partially offset by improved yields on real estate
joint ventures from the positive effects of the stabilizing real
estate markets period over period. Beginning in the fourth
quarter of 2010, investment earnings and interest credited
related to contractholder-directed unit-linked investments are
excluded from operating revenues and operating expenses, as the
contractholder, and not the Company, directs the investment of
the funds. This change in presentation had no impact on
operating earnings; however, it reduced both net investment
income and related interest credited on policyholder account
balances in the current period.
Other expenses increased by $79 million, which was mainly
attributable to higher variable expenses of $59 million,
such as commissions and premium taxes, a portion of which was
offset by DAC capitalization. Additionally, higher market driven
expenses of $13 million, such as letter of credit fees,
contributed to this increase.
Adoption
of New Accounting Pronouncements
See Adoption of New Accounting Pronouncements in
Note 1 of the Notes to the Interim Condensed Consolidated
Financial Statements.
Future
Adoption of New Accounting Pronouncements
See Future Adoption of New Accounting Pronouncements
in Note 1 of the Notes to the Interim Condensed
Consolidated Financial Statements.
Item 4.
Controls and Procedures
Management, with the participation of the Chief Executive
Officer and Chief Financial Officer, has evaluated the
effectiveness of the design and operation of the Companys
disclosure controls and procedures as defined in
Rule 15d-15(e)
under the Securities Exchange Act of 1934, as amended
(Exchange Act), as of the end of the period covered
by this report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective.
There were no changes to the Companys internal control
over financial reporting as defined in Exchange Act
Rule 15d-15(f)
during the three months ended March 31, 2011 that have
materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial
reporting.
89
Part II
Other Information
|
|
Item 1.
|
Legal
Proceedings
|
The following should be read in conjunction with
(i) Part I, Item 3, of MetLife Insurance Company
of Connecticuts Annual Report on
Form 10-K
for the year ended December 31, 2010 (the 2010 Annual
Report), filed with the U.S. Securities and Exchange
Commission (SEC); and (ii) Note 5 of the
Notes to the Interim Condensed Consolidated Financial Statements
in Part I of this report.
Various litigation, claims and assessments against the Company,
in addition to those discussed previously and those otherwise
provided for in the Companys consolidated financial
statements, have arisen in the course of the Companys
business, including, but not limited to, in connection with its
activities as an insurer, employer, investor, investment advisor
and taxpayer. Further, state insurance regulatory authorities
and other federal and state authorities regularly make inquiries
and conduct investigations concerning the Companys
compliance with applicable insurance and other laws and
regulations.
It is not possible to predict the ultimate outcome or provide
reasonable ranges of potential losses of all pending
investigations and legal proceedings. In some of the matters
referred to previously, 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 adverse effect upon the Companys financial
position, based on information currently known by the
Companys 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 adverse effect on the Companys
consolidated net income or cash flows in particular quarterly or
annual periods.
Item 1A.
Risk Factors
The following should be read in conjunction with, and
supplements and amends, the factors that may affect the
Companys business or operations described under Risk
Factors in Part I, Item 1A of the 2010 Annual
Report, as disclosed below.
Difficult
Conditions in the Global Capital Markets and the Economy
Generally May Materially Adversely Affect Our Business and
Results of Operations and These Conditions May Not Improve in
the Near Future
Our business and results of operations are materially affected
by conditions in the global capital markets and the economy
generally, both in the U.S. and elsewhere around the world.
Stressed conditions, volatility and disruptions in global
capital markets or in particular markets or financial asset
classes can have an adverse effect on us, in part because we
have a large investment portfolio and our insurance liabilities
are sensitive to changing market factors. Disruptions in one
market or asset class can also spread to other markets or asset
classes. Although the disruption in the global financial markets
that began in late 2007 has moderated, not all global financial
markets are functioning normally, and some remain reliant upon
government intervention and liquidity. Upheavals in the
financial markets can also affect our business through their
effects on general levels of economic activity, employment and
customer behavior. Although the recent recession in the
U.S. ended in June of 2009, the recovery from the recession
has been below historic averages and the unemployment rate is
expected to remain high for some time. Inflation had fallen over
the last several years, but is now rising, and Central Banks
around the world have begun tightening monetary conditions. The
global recession and disruption of the financial markets has led
to concerns over capital markets access and the solvency of
certain European Union member states, including Portugal,
Ireland, Italy, Greece and Spain. In the event political discord
in the U.S. prevents agreement on a national debt ceiling
or budget, the U.S. could default on obligations, which
would further exacerbate concerns over sovereign debt of other
countries. The Japanese economy has been significantly
negatively impacted by the March 2011 earthquake and
tsunami, and the resulting serious disruption to power supplies
and release of radiation from a damaged nuclear power plant in
northeastern Japan. Disruptions to the Japanese economy are
having and will continue to have negative impacts on the overall
global economy, not all of which can be foreseen.
90
Our revenues and net investment income are likely to remain
under pressure in such circumstances and our profit margins
could erode. Also, in the event of extreme prolonged market
events, such as the recent global credit crisis, we could incur
significant capital
and/or
operating losses. Even in the absence of a market downturn, we
are exposed to substantial risk of loss due to market volatility.
We are a significant writer of variable annuity products. The
account values of these products decrease as a result of
downturns in capital markets. Decreases in account values reduce
the fees generated by our variable annuity products, cause the
amortization of deferred policy acquisition costs to accelerate
and could increase the level of insurance liabilities we must
carry to support those variable annuities issued with any
associated guarantees.
Factors such as consumer spending, business investment,
government spending, the volatility and strength of the capital
markets, and inflation all affect the business and economic
environment and, ultimately, the amount and profitability of our
business. In an economic downturn characterized by higher
unemployment, lower family income, lower corporate earnings,
lower business investment and lower consumer spending, the
demand for our financial and insurance products could be
adversely affected. Group insurance, in particular, is affected
by the higher unemployment rate. In addition, we may experience
an elevated incidence of claims and lapses or surrenders of
policies. Our policyholders may choose to defer paying insurance
premiums or stop paying insurance premiums altogether. Adverse
changes in the economy could affect earnings negatively and
could have a material adverse effect on our business, results of
operations and financial condition. The recent market turmoil
has precipitated, and may continue to raise the possibility of,
legislative, regulatory and governmental actions. We cannot
predict whether or when such actions may occur, or what impact,
if any, such actions could have on our business, results of
operations and financial condition. See Risk
Factors Actions of the U.S. Government, Federal
Reserve Bank of New York and Other Governmental and Regulatory
Bodies for the Purpose of Stabilizing and Revitalizing the
Financial Markets and Protecting Investors and Consumers May Not
Achieve the Intended Effect or Could Adversely Affect the
Competitive Position of MetLife, Inc. and Its Subsidiaries,
Including Us, Risk Factors Various
Aspects of Dodd-Frank Could Impact Our Business Operations,
Capital Requirements and Profitability and Limit Our
Growth, Risk Factors Our Insurance and
Brokerage Businesses Are Heavily Regulated, and Changes in
Regulation May Reduce Our Profitability and Limit Our
Growth and Risk Factors Competitive
Factors May Adversely Affect Our Market Share and
Profitability in the 2010 Annual Report.
91
(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
MetLife Insurance Company of Connecticut, its subsidiaries 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 MetLife Insurance Company of
Connecticut and its subsidiaries may be found elsewhere in this
Quarterly Report on
Form 10-Q
and MetLife Insurance Company of Connecticuts other public
filings, which are available without charge through the
SECs website at www.sec.gov.)
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
92
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.
METLIFE INSURANCE COMPANY OF CONNECTICUT
Name: Peter M. Carlson
|
|
|
|
Title:
|
Executive Vice President, Finance Operations and
|
Chief Accounting Officer
(Authorized Signatory and Principal Accounting Officer)
Date: May 12, 2011
93
Exhibit Index
(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
MetLife Insurance Company of Connecticut, its subsidiaries 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 MetLife Insurance Company of
Connecticut and its subsidiaries may be found elsewhere in this
Quarterly Report on
Form 10-Q
and MetLife Insurance Company of Connecticuts other public
filings, which are available without charge through the
SECs website at www.sec.gov.)
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
E-1