METLIFE INC – 10-K – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 For purposes of this discussion, "MetLife," the "Company," "we," "our" and "us" refer to MetLife, Inc., a Delaware corporation incorporated in 1999, its subsidiaries and affiliates. Following this summary is a discussion addressing the consolidated results of operations and financial condition of the Company for the periods indicated. This discussion should be read in conjunction with "Note Regarding Forward-Looking Statements," "Risk Factors," "Selected Financial Data" and the Company's consolidated financial statements included elsewhere herein.  This Management's Discussion and Analysis of Financial Condition and Results of Operations may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results. Any or all forward-looking statements may turn out to be wrong. 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 measures, operating earnings and operating earnings available to common shareholders, that are 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, operating earnings is our measure of segment performance. Operating earnings is also a measure by which senior management's and many other employees' performance is evaluated for the purposes of determining their compensation under applicable compensation plans.  Operating earnings is defined as operating revenues less operating expenses, both net of income tax. Operating earnings available to common shareholders is defined as operating earnings less preferred stock dividends.  

Operating revenues and operating expenses exclude results of discontinued operations and other businesses that have been or will be sold or exited by MetLife, Inc. ("Divested Businesses"). Operating revenues also excludes 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 excludes the

amortization of unearned revenue related to net investment gains (losses) and

net derivative gains (losses) and certain variable annuity guaranteed minimum

      income benefits ("GMIB") fees ("GMIB Fees");    

• Net investment income: (i) includes amounts for scheduled periodic settlement

payments and amortization of premium on derivatives that are hedges of

investments but do not qualify for hedge accounting treatment, (ii) includes

income from discontinued real estate operations, (iii) excludes post-tax

operating earnings adjustments relating to insurance joint ventures accounted

for under the equity method, (iv) excludes certain amounts related to

contractholder-directed unit-linked investments, and (v) excludes certain

      amounts related to securitization entities that are variable interest       entities ("VIEs") consolidated under GAAP; and    

• Other revenues are adjusted for settlements of foreign currency earnings

      hedges.                                            77 

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

• Policyholder benefits and claims and policyholder dividends excludes:

(i) changes in the policyholder dividend obligation related to net investment

gains (losses) and net derivative gains (losses), (ii) inflation-indexed

benefit adjustments associated with contracts backed by inflation-indexed

investments and amounts associated with periodic crediting rate adjustments

based on the total return of a contractually referenced pool of assets,

(iii) benefits and hedging costs related to GMIBs ("GMIB Costs"), and

(iv) market value adjustments associated with surrenders or terminations of

      contracts ("Market Value Adjustments");    

• Interest credited to policyholder account balances includes adjustments for

scheduled periodic settlement payments and amortization of premium on

derivatives that are hedges of policyholder account balances ("PABs") but do

not qualify for hedge accounting treatment and excludes amounts related to

      net investment income earned on contractholder-directed unit-linked       investments;    

• Amortization of deferred policy acquisition costs ("DAC") and value of

business acquired ("VOBA") excludes amounts related to: (i) net investment

gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB

       Costs, and (iii) Market Value Adjustments;       •   Amortization of negative VOBA excludes amounts related to Market Value

      Adjustments;    

• Interest expense on debt excludes certain amounts related to securitization

      entities that are VIEs consolidated under GAAP; and    

• Other expenses excludes costs related to: (i) noncontrolling interests,

(ii) implementation of new insurance regulatory requirements, and

(iii) business combinations.

   We believe the presentation of operating earnings and operating earnings available to common shareholders 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, operating earnings, and operating earnings available to common shareholders, should not be viewed as substitutes for the following financial measures calculated in accordance with GAAP: GAAP revenues, GAAP expenses, GAAP income (loss) from continuing operations, net of income tax, and GAAP net income (loss) available to MetLife, Inc.'s common shareholders, respectively. Reconciliations of these measures to the most directly comparable GAAP measures are included in "- Results of Operations."  In 2011, management modified its definition of operating earnings to exclude the impacts of Divested Businesses, which includes certain operations of MetLife Bank, National Association ("MetLife Bank") and our insurance operations in the Caribbean region, Panama and Costa Rica (the "Caribbean Business"), as these results are not relevant to understanding the Company's ongoing operating results. Consequently, prior years' results for Corporate & Other and total consolidated operating earnings have been decreased by $111 million, net of $66 million of income tax, and $211 million, net of $139 million of income tax, for the years ended December 31, 2010 and 2009, respectively.  In addition, in 2011, management modified its definition of operating earnings and operating earnings available to common shareholders 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. Accordingly, such results are no longer reported in operating earnings and operating earnings available to common shareholders. Consequently, prior years' results for Retirement Products and total consolidated operating earnings have been increased by $64 million, net of $34 million of income tax, and $90 million, net of $49 million of income tax, for the years ended December 31, 2010 and 2009, respectively.                                           78 

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  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. Additionally, the impact of changes in our foreign currency exchange rates is calculated using the average foreign currency exchange rates for the current year and is applied to each of the comparable years.  

Executive Summary

MetLife is a leading global provider of insurance, annuities and employee benefit programs throughout the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. Through its subsidiaries and affiliates, MetLife offers life insurance, annuities, auto and homeowners insurance, mortgage and deposit products and other financial services to individuals, as well as group insurance and retirement & savings products and services to corporations and other institutions. MetLife is organized into six segments: Insurance Products, Retirement Products, Corporate Benefit Funding and Auto & Home (collectively, "U.S. Business"), and Japan and Other International Regions (collectively, "International"). In addition, the Company reports certain of its results of operations in Corporate & Other, which includes MetLife Bank and other business activities.  On November 21, 2011, MetLife, Inc. announced that it will be reorganizing its business into three broad geographic regions: The Americas; Europe, the Middle East and Africa ("EMEA"); and Asia, and creating a global employee benefits business to better reflect its global reach. While the Company has initiated certain changes in response to this announcement, including the appointment of certain executive leadership into some of the roles designed for the reorganized structure, management continued to evaluate the performance of the operating segments under the existing segment structure as of December 31, 2011. In addition, management continues to evaluate the Company's segment performance and allocated resources and may adjust such measurements in the future to better reflect segment profitability.  In December 2011, MetLife Bank and MetLife, Inc. entered into a definitive agreement to sell most of the depository business of MetLife Bank. The transaction is expected to close in the second quarter of 2012, subject to certain regulatory approvals and other customary closing conditions. Additionally, in January 2012, MetLife, Inc. announced it is exiting the business of originating forward residential mortgages (together with MetLife Bank's pending actions to exit the depository business, including the aforementioned December 2011 agreement, the "MetLife Bank Events"). Once MetLife Bank has completely exited its depository business, MetLife, Inc. plans to terminate MetLife Bank'sFederal Deposit Insurance Corporation ("FDIC") insurance, putting MetLife, Inc. in a position to be able to deregister as a bank holding company. See "Business - U.S. Regulation - Financial Holding Company Regulation." The Company continues to originate reverse mortgages and will continue to service its current mortgage customers. As a result of the MetLife Bank Events, for the year ended December 31, 2011, the Company recorded charges totaling $212 million, net of income tax, which included intent-to-sell other-than-temporary impairment ("OTTI") investment charges, charges related to the de-designation of certain cash flow hedges, a goodwill impairment charge and other employee-related charges. In addition, the Company expects to incur additional charges of $90 million to $110 million, net of income tax, during 2012, related to exiting the forward residential mortgage origination business, with no expected impact on the Company's operating earnings. See Note 2 of the Notes to the Consolidated Financial Statements.  On November 1, 2010 (the "Acquisition Date"), MetLife, Inc. completed the acquisition of American Life Insurance Company ("American Life") from AM Holdings LLC (formerly known as ALICO Holdings LLC) ("AM Holdings"), a subsidiary of American International Group, Inc. ("AIG"), and Delaware American Life Insurance Company ("DelAm") from AIG (American Life, together with DelAm, collectively, "ALICO") (the "Acquisition"). ALICO's fiscal year-end is November 30. Accordingly, the Company's consolidated financial statements reflect the assets and liabilities of ALICO as of November 30, 2011 and 2010, and the operating results of ALICO for the year ended November 30, 2011 and the one month ended November 30, 2010. The assets, liabilities and operating results relating to the Acquisition are included in the Japan and Other International Regions segments. Prior year results have been adjusted to conform to the current year presentation of segments. See Note 2 of the Notes to the Consolidated Financial Statements.                                           79

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  We continue to experience an increase in market share and sales in several of our businesses; however, the general economic conditions, including the high levels of unemployment, negatively impacted the demand for certain of our products. Portfolio growth in response to the higher sales levels drove improved investment results despite lower yields experienced in connection with the continued decline in interest rates in 2011. The declining interest rate environment, however, also generated significant derivative gains in 2011. Current year results were negatively impacted by severe weather, including the earthquake and tsunami in Japan in the first quarter, record numbers of tornadoes in the second quarter and Hurricane Irene in the third quarter.                                                                 Years Ended December 31,                                                       2011             2010             2009                                                                    (In millions) Income (loss) from continuing operations, net of income tax                                       $   6,951        $   2,747        $  (2,336 ) Less: Net investment gains (losses)                      (867 )           (408 )         (2,901 ) Less: Net derivative gains (losses)                     4,824             (265 )         (4,866 ) Less: Other adjustments to continuing operations (1)                                         (1,641 )           (914 )            480 Less: Provision for income tax (expense) benefit                                                  (845 )            379            2,597  Operating earnings                                      5,480            3,955            2,354 Less: Preferred stock dividends                           122              122              122  Operating earnings available to common shareholders                                        $   5,358        $   3,833        $   2,232       

(1) See definitions of operating revenues and operating expenses for the

components of such adjustments.

Year Ended December 31, 2011 compared with the Year Ended December 31, 2010

Unless otherwise stated, all amounts discussed below are net of income tax.

  During the year ended December 31, 2011, income (loss) from continuing operations, net of income tax, increased $4.2 billion to $7.0 billion from $2.8 billion in 2010. The change was predominantly due to a $5.1 billion favorable change in net derivative gains (losses), before income tax, and a $1.5 billion favorable change in operating earnings available to common shareholders, which includes the impact of the Acquisition.  The favorable change in net derivative gains (losses) of $3.3 billion was primarily driven by favorable changes in freestanding derivatives, partially offset by unfavorable changes in embedded derivatives. The favorable change in freestanding derivatives was primarily attributable to the impact of falling long-term and mid-term interest rates and equity market movements and volatility.  The Acquisition drove the majority of the $1.5 billion increase in operating earnings available to common shareholders. In addition, improved investment performance was the result of portfolio growth in response to increased sales across many of our businesses, which more than offset the negative impact of the declining interest rate environment on yields. Current year results were negatively impacted by severe weather, as well as, in the third quarter, a charge to increase reserves in connection with the Company's use of the U.S. Social Security Administration's Death Master File and similar databases to identify potential life insurance claims that have not been presented to the Company ("Death Master File") and expenses incurred related to a liquidation plan filed by the New York State Department of Financial Services (the "Department of Financial Services") for Executive Life Insurance Company of New York ("ELNY").  

Year Ended December 31, 2010 compared with the Year Ended December 31, 2009

Unless otherwise stated, all amounts discussed below are net of income tax.

  During the year ended December 31, 2010, MetLife's income (loss) from continuing operations, net of income tax increased $5.1 billion to a gain of $2.8 billion from a loss of $2.3 billion in 2009, of which $2 million in losses is from the inclusion of ALICO results for one month in 2010 and the impact of financing costs for the                                           80 

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  Acquisition. The change was predominantly due to a $4.6 billion favorable change in net derivative gains (losses), before income tax, and a $2.5 billion favorable change in net investment gains (losses), before income tax. Offsetting these favorable variances were unfavorable changes in adjustments related to continuing operations of $1.4 billion, before income tax, and $2.2 billion of income tax, resulting in a total favorable variance of $3.5 billion. In addition, operating earnings available to common shareholders increased $1.6 billion to $3.8 billion in 2010 from $2.2 billion in 2009.  The favorable change in net derivative gains (losses) of $3.0 billion was primarily driven by net gains on freestanding derivatives in 2010 compared to net losses in 2009, partially offset by an unfavorable change in embedded derivatives from gains in 2009 to losses in 2010. The favorable change in freestanding derivatives was primarily attributable to market factors, including falling long-term and mid-term interest rates, a stronger recovery in equity markets in 2009 than 2010, equity volatility, which decreased more in 2009 as compared to 2010, a strengthening U.S. dollar and widening corporate credit spreads in the financial services sector. The favorable change in net investment gains (losses) of $1.6 billion was primarily driven by a decrease in impairments and a decrease in the provision for credit losses on mortgage loans. These favorable changes in net derivative and net investment gains (losses) were partially offset by an unfavorable change of $518 million in related adjustments.  The improvement in the financial markets, which began in the second quarter of 2009 and continued into 2010, was a key driver of the $1.6 billion increase in operating earnings available to common shareholders. Such market improvement was most evident in higher net investment income and policy fees, as well as a decrease in variable annuity guarantee benefit costs. These increases were partially offset by an increase in amortization of DAC, VOBA and deferred sales inducements ("DSI") as a result of an increase in average separate account balances and higher 2010 gross margins in the closed block driven by increased investment yields and the impact of dividend scale reductions. The 2010 period also includes one month of ALICO results, contributing $114 million to the increase in operating earnings. The favorable impact of a reduction in discretionary spending associated with our enterprise-wide cost reduction and revenue enhancement initiative was more than offset by an increase in other expenses related to our Other International Regions segment. This increase primarily stemmed from the impact of a benefit recorded in the prior year related to the pesification in Argentina, as well as current year business growth in the segment.  

Consolidated Company Outlook

In 2012, we expect a solid improvement in the operating earnings of the Company over 2011, driven primarily by the following:

• Premiums, fees and other revenues growth in 2012 is expected to be driven by:

      -   Rational pricing strategy in the group insurance marketplace.          -   Higher fees earned on separate accounts primarily due to favorable net

flows of variable annuities, which are expected to remain strong in 2012,

         thereby increasing the value of those separate accounts; and    

- Increases in our International businesses, notably accident and health,

from continuing organic growth throughout our various geographic regions.

      •   Focus on disciplined underwriting. We see no significant changes to the

underlying trends that drive underwriting results and continue to anticipate

solid results in 2012; however, unanticipated catastrophes, similar to those

that occurred during 2011, could result in a high volume of weather-related

      claims.    

• Focus on expense management. We continue to focus on expense control

      throughout the Company, and managing the costs associated with the       integration of ALICO.    

• Continued disciplined approach to investing and asset/liability management,

      including significant hedging to protect against low interest rates.                                            81 

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  As a result of new financial accounting guidance for DAC which we intend to adopt in the first quarter of 2012, we estimate that, on the date of adoption, DAC will be reduced by approximately $3.1 billion to $3.6 billion and total equity will be reduced by approximately $2.1 billion to $2.4 billion, net of income tax. Additionally, we estimate that there will be a negative impact on our 2012 operating earnings primarily in Japan, with no impact on our on-going cash flows. The Company plans to apply this accounting change retrospectively to all prior periods presented in its consolidated financial statements for all insurance contracts.  We expect only modest investment losses in 2012, but more difficult to predict is the impact of potential changes in fair value of freestanding and embedded derivatives as even relatively small movements in market variables, including interest rates, equity levels and volatility, can have a large impact on the fair value of derivatives and net derivative gains (losses). Additionally, changes in fair value of embedded derivatives within certain insurance liabilities may have a material impact on net derivative gains (losses) related to the inclusion of an adjustment for nonperformance risk.  

Industry Trends

We continue to be impacted by the unstable global financial and economic environment that has been affecting the industry.

  Financial and Economic Environment. Our business and results of operations are materially affected by conditions in the global capital markets and the economy generally. Stressed conditions, volatility and disruptions in global capital markets, 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. Global market factors, including interest rates, credit spreads, equity prices, real estate markets, foreign currency exchange rates, consumer spending, business investment, government spending, the volatility and strength of the capital markets, deflation and inflation all affect the business and economic environment and, ultimately, the amount and profitability of our business. Disruptions in one market or asset class can also spread to other markets or asset classes. Upheavals in the financial markets can also affect our business through their effects on general levels of economic activity, employment and customer behavior. While our diversified business mix and geographically diverse business operations partially mitigate these risks, correlation across regions, countries and global market factors may reduce the benefits of diversification.  Beginning in 2010 and continuing throughout 2011, concerns increased about capital markets and the solvency of certain European Union member states, including Portugal, Ireland, Italy, Greece and Spain ("Europe's perimeter region"), and of financial institutions that have significant direct or indirect exposure to their sovereign debt. See "- Investments - Current Environment" for information regarding credit ratings downgrades and support programs for Europe's perimeter region. These ratings downgrades and implementation of European Union and private sector support programs have increased concerns that other European Union member states could experience similar financial troubles, that some countries could default on their obligation or have to restructure their outstanding debt, that financial institutions with significant holdings of sovereign or private debt issued by borrowers in peripheral European countries could experience financial stress, or that one or more countries may exit the Euro zone, any of which could have significant adverse effects on the European and global economies and on financial markets, generally. See "Risk Factors - We Are Exposed to Significant Financial and Capital Markets Risk Which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and May Cause Our Net Investment Income to Vary from Period to Period."  Although the downgrade by Standard & Poor's Ratings Services ("S&P") of U.S. Treasury securities initially had an adverse effect on financial markets, the extent of the longer-term impact cannot be predicted. Fitch Ratings ("Fitch") warned that it may in the future downgrade the U.S. credit rating unless action is taken to reduce the national debt of the U.S. See "Risk Factors - Concerns Over U.S. Fiscal Policy and the Trajectory of the National Debt of the U.S., as well as Rating Agency Downgrades of U.S. Treasury Securities, Could Have an                                           82

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  Adverse Effect on Our Business, Financial Condition and Results of Operations." See also "- Investments - Current Environment" for further information about European region support programs announced in July 2011 and October 2011, ratings actions and our exposure to obligations of European governments and private obligors.  All of these factors have had and could continue to have an adverse effect on the financial results of companies in the financial services industry, including MetLife. Such global economic conditions, as well as the global financial markets, continue to impact our net investment income, our net investment and net derivative gains (losses), and the demand for and the cost and profitability of certain of our products, including variable annuities and guarantee benefits. See "- Results of Operations" and "- Liquidity and Capital Resources."  As a financial holding company with significant operations in the U.S., we are affected by the monetary policy of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") and the Federal Reserve Bank of New York (the "FRB of NY" and, collectively with the Federal Reserve Board, the "Federal Reserve"). The Federal Reserve Board has taken a number of actions in recent years to spur economic activity by keeping interest rates low and may take further actions to influence interest rates in the future, which may have an impact on the pricing levels of risk-bearing investments, and may adversely impact the level of product sales. In January 2012, the Federal Reserve Board announced its plans to keep interest rates low until at least through late 2014, 18 months longer than previously planned in order to revive the slow recovery from stressed economic conditions. See "Risk Factors - Governmental and Regulatory Actions 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 Our Competitive Position" and "- Investments - Current Environment."  Competitive Pressures. The life insurance industry remains highly competitive. The product development and product life-cycles have shortened in many product segments, leading to more intense competition with respect to product features. Larger companies have the ability to invest in brand equity, product development, technology and risk management, which are among the fundamentals for sustained profitable growth in the life insurance industry. In addition, several of the industry's products can be quite homogeneous and subject to intense price competition. Sufficient scale, financial strength and financial flexibility are becoming prerequisites for sustainable growth in the life insurance industry. Larger market participants tend to have the capacity to invest in additional distribution capability and the information technology needed to offer the superior customer service demanded by an increasingly sophisticated industry client base. We believe that the turbulence in financial markets that began in the second half of 2007, its impact on the capital position of many competitors, and subsequent actions by regulators and rating agencies have highlighted financial strength as a significant differentiator from the perspective of customers and certain distributors. In addition, the financial market turbulence and the economic recession have led many companies in our industry to re-examine the pricing and features of the products they offer and may lead to consolidation in the life insurance industry.  Regulatory Changes. The U.S. life insurance industry is regulated primarily at the state level, with some products and services also subject to Federal regulation. As life insurers introduce new and often more complex products, regulators refine capital requirements and introduce new reserving standards for the life insurance industry. Regulations recently adopted or currently under review can potentially impact the statutory reserve and capital requirements of the industry. In addition, regulators have undertaken market and sales practices reviews of several markets or products, including equity-indexed annuities, variable annuities and group products. The regulation of the financial services industry in the U.S. and internationally has received renewed scrutiny as a result of the disruptions in the financial markets. Significant regulatory reforms have been recently adopted and additional reforms proposed, and these or other reforms could be implemented. See "Business - U.S. Regulation," "Business - International Regulation," "Risk Factors - Our Insurance, Brokerage and Banking Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth" and "Risk Factors - Changes in U.S. Federal and State Securities Laws and Regulations, and State Insurance Regulations Regarding Suitability of Annuity Product Sales, May Affect Our Operations and Our Profitability."                                           83

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  The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), which was signed by President Obama in July 2010, effected the most far-reaching overhaul of financial regulation in the U.S. in decades. The full impact of Dodd-Frank on us will depend on the numerous rulemaking initiatives required or permitted by Dodd-Frank which are scheduled to be completed over the next few years. See "Business - U.S. Regulation - Dodd-Frank and Other Legislative and Regulatory Developments" and "Risk Factors - Various Aspects of Dodd-Frank Could Impact Our Business Operations, Capital Requirements and Profitability and Limit Our Growth."  As a federally chartered national banking association, MetLife Bank is subject to a wide variety of banking laws, regulations and guidelines, as is MetLife, Inc., as a bank holding company. See "Business - U.S. Regulation - Banking Regulation" and "Business - U.S. Regulation - Financial Holding Company Regulation." In December 2011, MetLife Bank and MetLife, Inc. entered into a definitive agreement to sell most of the depository business of MetLife Bank. In January 2012, MetLife, Inc. announced it is exiting the business of originating forward residential mortgages. Once MetLife Bank has completely exited its depository business, MetLife, Inc. plans to terminate MetLife Bank'sFDIC insurance, putting MetLife, Inc. in a position to be able to deregister as a bank holding company. Upon completion of the foregoing, MetLife, Inc. will no longer be regulated as a bank holding company or subject to enhanced supervision and prudential standards as a bank holding company with assets of $50 billion or more. However, if, in the future, MetLife, Inc. is designated by the Financial Stability Oversight Council ("FSOC") as a non-bank systemically important financial institution (as discussed below), it could once again be subject to regulation by the Federal Reserve and enhanced supervision and prudential standards, such as Regulation YY (as discussed below). In October 2011, the FSOC issued a notice of proposed rulemaking, outlining the process it will follow and the criteria it will use to assess whether a non-bank financial company should be subject to enhanced supervision by the Federal Reserve as a non-bank systemically important financial institution. If MetLife, Inc. meets the quantitative thresholds set forth in the proposal, the FSOC will continue with a further analysis using qualitative and quantitative factors.  In December 2010, the Basel Committee on Banking Supervision published its final rules for increased capital and liquidity requirements (commonly referred to as "Basel III") for bank holding companies, such as MetLife, Inc. Assuming these requirements are endorsed and adopted by the U.S. banking regulators, they are to be phased in beginning January 1, 2013. It is possible that even more stringent capital and liquidity requirements could be imposed under Basel III, Dodd-Frank and Regulation YY, as long as MetLife, Inc. remains a bank holding company or if, in the future, it is designated by the FSOC as a non-bank systemically important financial institution. The Basel Committee has also published rules requiring a capital surcharge for globally systemically important banks, which are to be phased in beginning January 2016 if they are endorsed and adopted by the U.S. banking regulators. As currently proposed, this surcharge would not apply to global non-bank systemically important financial institutions. However, international regulatory bodies are currently engaged in evaluating standards to identify such companies and to develop a regulatory regime that would apply to them, which may include enhanced capital requirements or other measures. The ability of MetLife Bank and MetLife, Inc. to pay dividends, repurchase common stock or other securities or engage in other transactions that could affect its capital or need for capital could be reduced by any additional capital requirements that might be imposed as a result of the enactment of Dodd-Frank, Regulation YY and/or the endorsement and adoption by the U.S. of Basel III and other regulatory initiatives. See "Risk Factors - Our Insurance, Brokerage and Banking Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth."  In April 2011, the Federal Reserve Board and the FDIC proposed a rule regarding the implementation of the Dodd-Frank requirement that (i) each non-bank financial company designated by the FSOC for enhanced supervision by the Federal Reserve Board (a "non-bank systemically important financial institution" or "non-bank SIFI") and each bank holding company with assets of $50 billion or more report periodically to the Federal Reserve Board, the FDIC and the FSOC the plan of such company for rapid and orderly resolution in the event of material financial distress or failure, and (ii) that each such company report on the nature and extent of credit exposures of such company to significant bank holding companies and significant non-bank financial companies                                           84

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  and the nature and extent of credit exposures of significant bank holding companies and significant non-bank financial companies to such covered company. In November 2011, the Federal Reserve Board and the FDIC adopted a final rule implementing the resolution plan requirement, effective November 30, 2011, but deferred finalizing the credit exposure reporting requirement until a later date. If MetLife, Inc. remains a bank holding company on July 1, 2012, or if, in the future, it is designated by the FSOC as a non-bank SIFI, it would be required to submit a resolution plan. See "Business - U.S. Regulation - Dodd-Frank and Other Legislative and Regulatory Developments - Orderly Liquidation Authority."  In December 2011, the Federal Reserve Board issued a release proposing the adoption of enhanced prudential standards required by Dodd-Frank ("Regulation YY"). Regulation YY would apply to bank holding companies with assets of $50 billion or more and non-bank SIFIs. Regulation YY would impose (i) enhanced risk-based capital ("RBC") requirements, (ii) leverage limits, (iii) liquidity requirements, (iv) single counterparty exposure limits, (v) governance requirements for risk management, (vi) stress test requirements, and (vii) special debt-to-equity limits for certain companies, and would establish a procedure for early remediation based on the failure to comply with these requirements. As proposed, Regulation YY would apply the same enhanced regulatory standards to non-bank systemically important financial institutions as would apply to systemically important banks; the Federal Reserve Board has solicited comments on the appropriateness of this treatment. For further information regarding enhanced prudential standards and Regulation YY, see "Business - U.S. Regulation - Dodd-Frank and Other Legislative and Regulatory Developments - Enhanced Prudential Standards." Dodd-Frank also includes provisions that may impact the investment and investment activities of MetLife, Inc. and its subsidiaries, including the federal regulation of such activities. Such provisions include the regulation of the over-the-counter ("OTC") derivatives markets and the prohibitions on covered banking entities engaging in proprietary trading or sponsoring or investing in hedge funds or private equity funds. See "Business - U.S. Regulation - Dodd-Frank and Other Legislative and Regulatory Developments - Regulation of Over-the-Counter Derivatives" and "Business - U.S. Regulation - Dodd-Frank and Other Legislative and Regulatory Developments - Volcker Rule."  Mortgage and Foreclosure-Related Exposures In 2008, MetLife Bank acquired certain assets to enter the forward and reverse residential mortgage origination and servicing business, including rights to service residential mortgage loans. At various times since then, including most recently in the third quarter of 2010, MetLife Bank has acquired additional residential mortgage loan servicing rights. On January 10, 2012, MetLife, Inc. announced that it is exiting the business of originating forward residential mortgages, but will continue to service its current mortgage customers. As an originator and servicer of mortgage loans, which are usually sold to an investor shortly after origination, MetLife Bank has obligations to repurchase loans or compensate for losses upon demand by the investor due to defects in servicing of the loans or a determination that material representations made in connection with the sale of the loans (relating, for example, to the underwriting and origination of the loans) are incorrect. MetLife Bank is indemnified by the sellers of the acquired assets, for various periods depending on the transaction and the nature of the claim, for origination and servicing deficiencies that occurred prior to MetLife Bank's acquisition, including indemnification for any repurchase claims made from investors who purchased mortgage loans from the sellers. Substantially all mortgage servicing rights ("MSRs") that were acquired by MetLife Bank relate to loans sold to Federal National Mortgage Association ("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC"). MetLife Bank has originated and sold mortgages primarily to FNMA and FHLMC and sold Federal Housing Administration and loans guaranteed by the United States Department of Veterans' Affairs in mortgage-backed securities guaranteed by Government National Mortgage Association ("GNMA") (collectively, the "Agency Investors") and, to a limited extent, a small number of private investors. Currently 99.5% of MetLife Bank's$82.0 billion servicing portfolio consists of Agency Investors' product. Other than repurchase obligations which are subject to indemnification by sellers of acquired assets as described above, MetLife Bank's exposure to repurchase obligations and losses related to origination deficiencies is limited to the approximately $58.6 billion of loans originated by MetLife Bank (all of which have been originated since August 2008). Reserves for representation and warranty repurchases and indemnifications were $69 million and $56 million at December 31, 2011 and 2010, respectively. MetLife Bank is exposed to losses due to servicing deficiencies on loans originated and sold, as                                           85

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  well as servicing acquired, to the extent such servicing deficiencies occurred after the date of acquisition. Management is satisfied that adequate provision has been made in the Company's consolidated financial statements for all probable and reasonably estimable repurchase obligations and losses.  Currently, MetLife Bank services approximately 1% of the aggregate principal amount of the mortgage loans serviced in the U.S. State and federal regulatory and law enforcement authorities have initiated various inquiries, investigations or examinations of alleged irregularities in the foreclosure practices of the residential mortgage servicing industry. Mortgage servicing practices have also been the subject of Congressional attention. Authorities have publicly stated that the scope of the investigations extends beyond foreclosure documentation practices to include mortgage loan modification and loss mitigation practices.  MetLife Bank's mortgage servicing has been the subject of recent inquiries and requests by state and federal regulatory and law enforcement authorities. MetLife Bank is cooperating with the authorities' review of this business. On April 13, 2011, the Office of the Comptroller of the Currency ("OCC") entered into consent decrees with several banks, including MetLife Bank. The consent decrees require an independent review of foreclosure practices and set forth new residential mortgage servicing standards, including a requirement for a designated point of contact for a borrower during the loss mitigation process. In addition, the Federal Reserve Board entered into consent decrees with the affiliated bank holding companies of these banks, including MetLife, Inc., to enhance the supervision of the mortgage servicing activities of their banking subsidiaries. In a February 9, 2012 press release, the Federal Reserve Board announced that it had issued monetary sanctions against five banking organizations for deficiencies in the organizations' servicing of residential mortgage loans and processing of foreclosures. The Federal Reserve Board also stated that it plans to announce monetary penalties against six other institutions under its supervision against whom it had issued enforcement actions in 2011 for deficiencies in servicing of residential mortgage loans and processing foreclosures. The Federal Reserve Board did not identify these six institutions, but MetLife, Inc. is among the institutions that entered into consent decrees with the Federal Reserve Board in 2011. MetLife Bank has also had a meeting with the Department of Justice regarding mortgage servicing and foreclosure practices. It is possible that various state or federal regulatory and law enforcement authorities may seek monetary penalties from MetLife Bank relating to foreclosure practices. MetLife Bank is responding to a subpoena issued by the Department of Financial Services regarding hazard insurance and flood insurance that MetLife Bank obtains to protect the lienholder's interest when the borrower's insurance has lapsed.  These consent decrees, as well as the inquiries or investigations referred to above, could adversely affect MetLife's reputation or result in material fines, penalties, equitable remedies or other enforcement actions, and result in significant legal costs in responding to governmental investigations or other litigation. In addition, the changes to the mortgage servicing business required by the consent decrees and the resolution of any other inquiries or investigations may affect the profitability of such business.  The MetLife Bank Events may not relieve MetLife from complying with the consent decrees, or protect it from the inquiries and investigations relating to residential mortgage servicing and foreclosure activities, or any fines, penalties, equitable remedies or enforcement actions that may result, the costs of responding to any such governmental investigations, or other litigation.  

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 consolidated financial statements. For a discussion of the Company's significant accounting policies see Note 1 of the Notes to the Consolidated Financial Statements. The most critical estimates include those used in determining:    

(i) estimated fair values of investments in the absence of quoted market

         values;       (ii) investment impairments;    

(iii) estimated fair values of freestanding derivatives and the recognition

           and estimated fair value of embedded derivatives requiring

bifurcation;                                            86 

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  Table of Contents   (iv) amortization of DAC and the establishment and amortization of VOBA;       (v) measurement of goodwill and related impairment, if any;          (vi) liabilities for future policyholder benefits and the accounting for           reinsurance;    

(vii) measurement of income taxes and the valuation of deferred tax assets;

      (viii) measurement of employee benefit plan liabilities; and       (ix) liabilities for litigation and regulatory matters.   In addition, the application of acquisition accounting requires the use of estimation techniques in determining the estimated fair values of assets acquired and liabilities assumed - the most significant of which relate to aforementioned critical accounting estimates. In applying the Company's 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 Company's business and operations. Actual results could differ from these estimates.  

Estimated Fair Value of Investments

  In determining the estimated fair value of fixed maturity securities, equity securities, trading and other securities, short-term investments, cash equivalents, mortgage loans and MSRs, various methodologies, assumptions and inputs are utilized.  When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The inputs to 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, estimated duration and management's assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's 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, liquid 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. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities.  The estimated fair value of residential mortgage loans held-for-sale and securitized reverse residential mortgage loans is determined based on observable pricing for securities backed by similar types of loans, adjusted to convert the securities prices to loan prices, or from independent broker quotations, which is intended to approximate the amounts that would be received from third parties. Certain other mortgage loans that were previously designated as held-for-investment, but now are designated as held-for-sale, are recorded at the lower                                           87 

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  of amortized cost or estimated fair value, or for collateral dependent loans, estimated fair value of the collateral less expected disposition costs determined on an individual loan basis. For these loans, estimated fair value is determined using independent broker quotations, or values provided by independent valuation specialists, or when the loan is in foreclosure or otherwise collateral dependent, the estimated fair value of the underlying collateral is estimated using internal models.  The estimated fair value of MSRs is principally determined through the use of internal discounted cash flow models which utilize various assumptions. Valuation inputs and assumptions include generally observable items such as type and age of loan, loan interest rates, current market interest rates, and certain unobservable inputs, including assumptions regarding estimates of discount rates, loan prepayments and servicing costs, all of which are sensitive to changing markets conditions. The use of different valuation assumptions and inputs, as well as assumptions relating to the collection of expected cash flows, may have a material effect on the estimated fair values of MSRs.  Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company's ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities.  

See Note 5 of the Notes to the Consolidated Financial Statements for additional information regarding the estimated fair value of investments.

Investment Impairments

  One of the significant estimates related to available-for-sale securities is the evaluation of investments for impairments. The assessment of whether impairments have occurred is based on our case-by-case evaluation of the underlying reasons for the decline in estimated fair value. The Company's review of its fixed maturity and equity securities for impairment includes an analysis of gross unrealized losses by three categories of severity and/or age of gross unrealized loss. 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 Company's 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 certain equity securities, greater weight and consideration are given by the Company to a decline in estimated fair value and the likelihood such estimated fair value decline will recover.  Additionally, we consider a wide range of factors about the security issuer and use our best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in our evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to:   

(i) the length of time and the extent to which the estimated fair value has

       been below cost or amortized cost;    

(ii) the potential for impairments of securities when the issuer is experiencing

       significant financial difficulties;    

(iii) the potential for impairments in an entire industry sector or sub-sector;

(iv) the potential for impairments in certain economically depressed geographic

       locations;       (v)  the potential for impairments of securities where the issuer, series of        issuers or industry has suffered a catastrophic type of loss or has        exhausted natural resources;                                            88 

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(vi) with respect to fixed maturity securities, whether the Company has the

intent to sell or will more likely than not be required to sell a

particular security before recovery of the decline in estimated fair value

       below amortized cost;    

(vii) with respect to equity securities, whether the Company's ability and

intent to hold a particular security for a period of time sufficient to

        allow for the recovery of its estimated fair value to an amount at least         equal to its cost;    

(viii) with respect to structured securities, changes in forecasted cash flows

after considering the quality of underlying collateral; expected

prepayment speeds; current and forecasted loss severity; consideration of

the payment terms of the underlying assets backing a particular security;

         and the payment priority within the tranche structure of the          security; and    

(ix) other subjective factors, including concentrations and information obtained

from regulators and rating agencies.

The determination of the amount of allowances and impairments on other invested asset classes is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.

See Note 3 of the Notes to the Consolidated Financial Statements for additional information relating to investment impairments.

Derivative Financial Instruments

  The determination of estimated fair value of freestanding derivatives, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. See Note 5 of the Notes to the Consolidated Financial Statements for additional details on significant inputs into the OTC derivative pricing models and credit risk adjustment.  The Company issues certain variable annuity products with guaranteed minimum benefits, which are measured at estimated fair value separately from the host variable annuity product, with changes in estimated fair value reported in net derivative gains (losses). The estimated fair values of these embedded derivatives are determined based on the present value of projected future benefits minus the present value of projected future fees. The projections of future benefits and future fees require capital market and actuarial assumptions including expectations concerning policyholder behavior. 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. The valuation of these embedded derivatives also includes an adjustment for the Company's nonperformance risk and risk margins for non-capital market inputs. The nonperformance risk adjustment, which is captured as a spread over the risk free rate in determining the discount rate to discount the cash flows of the liability, is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.'s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries compared to MetLife, Inc. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties in certain actuarial assumptions. 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.                                           89

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  As part of its regular review of critical accounting estimates, the Company periodically assesses inputs for estimating nonperformance risk 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 during the recent financial crisis. As a result, at the end of the second quarter of 2010, the Company refined the manner in which its insurance subsidiaries incorporate 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 refinement impacted the Company's income from continuing operations, net of income tax, with no effect on operating earnings.  The table below illustrates the impact that a range of reasonably likely variances in credit spreads would have on the Company's consolidated balance sheet, excluding the effect of income tax. However, these estimated effects do not take into account potential changes in other variables, such as equity price levels and market volatility, that can also contribute significantly to changes in carrying values. Therefore, the table does not necessarily reflect the ultimate impact on the consolidated financial statements under the credit spread variance scenarios presented below.  In determining the ranges, the Company has considered current market conditions, as well as the market level of spreads that can reasonably be anticipated over the near term. The ranges do not reflect extreme market conditions experienced during the recent financial crisis as the Company does not consider those to be reasonably likely events in the near future.                                                               Carrying Value                                                         At December 31, 2011                                                                        DAC and                                                         PABs             VOBA                                                            (In millions)

100% increase in the Company's credit spread $ 2,449$ 700

      As reported                                    $     4,176       $   

958

50% decrease in the Company's credit spread $ 5,479$ 1,110

   The accounting for derivatives is complex and interpretations of accounting standards continue to evolve in practice. If it is determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Assessments of hedge effectiveness and measurements of ineffectiveness of hedging relationships are also subject to interpretations and estimations and different interpretations or estimates may have a material effect on the amount reported in net income.  Variable annuities with guaranteed minimum benefits 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 the Company's nonperformance risk, 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. If interpretations change, there is a risk that features previously not bifurcated may require bifurcation and reporting at estimated fair value in the consolidated financial statements and respective changes in estimated fair value could materially affect net income.  Additionally, the Company ceded the risk associated with certain of the variable annuities with guaranteed minimum benefits described in the preceding paragraphs. The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the                                           90

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  reinsurer. Because certain of the direct guarantees do not meet the definition of an embedded derivative and, thus are not accounted for at fair value, significant fluctuations in net income may occur since 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.  

See Note 4 of the Notes to the Consolidated Financial Statements for additional information on the Company's derivatives and hedging programs.

Deferred Policy Acquisition Costs and Value of Business Acquired

  The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new and renewal insurance business are deferred as DAC. Such costs consist principally of commissions, certain agency expenses, policy issuance expenses and certain advertising costs. VOBA represents the excess of book value over the estimated fair value of acquired insurance, annuity, and investment-type contracts in-force at the acquisition date. For certain acquired blocks of business, the estimated fair value of the in-force contract obligations exceeded the book value of assumed in-force insurance policy liabilities, resulting in negative VOBA, which is presented separately from VOBA as an additional insurance liability included in other policy-related balances. The estimated fair value of the acquired liabilities is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns, nonperformance risk adjustment and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. The Company will adopt new guidance regarding the accounting for DAC beginning in the first quarter of 2012 and will apply it retrospectively to all prior periods presented in its consolidated financial statements for all insurance contracts. See Note 1 of the Notes to the Consolidated Financial Statements.  Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period which can result in significant fluctuations in amortization of DAC and VOBA. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these events and only changes the assumption when its long-term expectation changes. The effect of an increase/(decrease) by 100 basis points in the assumed future rate of return is reasonably likely to result in a decrease/(increase) in the DAC and VOBA amortization of approximately $161 million with an offset to the Company's unearned revenue liability of approximately $26 million for this factor.  The Company also periodically reviews other long-term assumptions underlying the projections of estimated gross margins and profits. These include investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency, and expenses to administer business. Assumptions used in the calculation of estimated gross margins and profits which may have significantly changed are updated annually. If the update of assumptions causes expected future gross margins and profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and profits to decrease.  The Company's most significant assumption updates resulting in a change to expected future gross margins and profits and the amortization of DAC and VOBA are due to revisions to expected future investment returns, expenses, in-force or persistency assumptions and policyholder dividends on participating traditional life contracts, variable and universal life contracts and annuity contracts. The Company expects these assumptions to be the ones most reasonably likely to cause significant changes in the future. Changes in these assumptions can be offsetting and the Company is unable to predict their movement or offsetting impact over time.                                           91 

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  At December 31, 2011, 2010 and 2009, DAC and VOBA for the Company was $28.0 billion, $27.1 billion and $19.1 billion, respectively. Amortization of DAC and VOBA associated with the variable and universal life and the annuity contracts was significantly impacted by movements in equity markets. The following chart illustrates the effect on DAC and VOBA of changing each of the respective assumptions, as well as updating estimated gross margins or profits with actual gross margins or profits during the years ended December 31, 2011, 2010 and 2009. Increases (decreases) in DAC and VOBA balances, as presented below, resulted in a corresponding decrease (increase) in amortization.                                                       Years Ended December 31,                                             2011             2010            2009                                                         (In millions)      Investment return                    $     (64 )     $      (84 )    $       22      Separate account balances                 (145 )             23             (85 )      Net investment gain (loss)                (576 )           (124 )           712      Guaranteed Minimum Income Benefits         (15 )             84             187      Expense                                     (7 )             96              61      In-force/Persistency                        (2 )              9            (118 )      Policyholder dividends and other            60             (203 )           154       Total                                $    (749 )     $     (199 )    $      933   

The following represents significant items contributing to the changes to DAC and VOBA amortization in 2011:

• The decrease in equity markets during the year lowered separate account

balances which led to a reduction in actual and expected future gross profits

on variable universal life contracts and variable deferred annuity contracts

resulting in an increase of $145 million in DAC and VOBA amortization.

• Changes in net investment gains (losses) resulted in the following changes in

      DAC and VOBA amortization:    

- Actual gross profits decreased as a result of an increase in liabilities

associated with guarantee obligations on variable annuities, resulting in

a decrease of DAC and VOBA amortization of $531 million, excluding the

impact from the Company's nonperformance risk and risk margins, which are

described below. This decrease in actual gross profits was more than

offset by freestanding derivative gains associated with the hedging of

such guarantee obligations, which resulted in an increase in DAC and VOBA

         amortization of $847 million.    

- The widening of the Company's nonperformance risk adjustment decreased the

valuation of guarantee liabilities, increased actual gross profits and

increased DAC and VOBA amortization by $260 million. This was partially

offset by higher risk margins which increased the guarantee liability

         valuations, decreased actual gross profits and decreased DAC and VOBA          amortization by $72 million.          -   The remainder of the impact of net investment gains (losses), which

increased DAC amortization by $72 million, was primarily attributable to

current period investment activities.

The following represents significant items contributing to the changes to DAC and VOBA amortization in 2010:

• Changes in net investment gains (losses) resulted in the following changes in

      DAC and VOBA amortization:    

- Actual gross profits increased as a result of a decrease in liabilities

associated with guarantee obligations on variable annuities, resulting in

an increase of DAC and VOBA amortization of $197 million, excluding the

         impact from the Company's nonperformance risk and risk margins, which                                            92 

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are described below. This increase in actual gross profits was partially

offset by freestanding derivative losses associated with the hedging of

such guarantee obligations, which resulted in a decrease in DAC and VOBA

       amortization of $88 million.    

- The narrowing of the Company's nonperformance risk adjustment increased

the valuation of guarantee liabilities, decreased actual gross profits and

decreased DAC and VOBA amortization by $96 million. In addition, higher

risk margins which increased the guarantee liability valuations, decreased

         actual gross profits and decreased DAC and VOBA amortization by          $18 million.          -   The remainder of the impact of net investment gains (losses), which

increased DAC amortization by $129 million, was primarily attributable to

         current period investment activities.    

• Included in policyholder dividends and other was an increase in DAC and VOBA

amortization of $42 million as a result of changes to long-term assumptions.

In addition, amortization increased by $39 million as a result of favorable

gross margin variances. The remainder of the increase was due to various

immaterial items.

The following represents significant items contributing to the changes to DAC and VOBA amortization in 2009:

• Changes in net investment gains (losses) resulted in the following changes in

      DAC and VOBA amortization:    

- Actual gross profits increased as a result of a decrease in liabilities

associated with guarantee obligations on variable annuities, resulting in

an increase of DAC and VOBA amortization of $995 million, excluding the

impact from the Company's nonperformance risk and risk margins, which are

described below. This increase in actual gross profits was partially

offset by freestanding derivative losses associated with the hedging of

such guarantee obligations, which resulted in a decrease in DAC and VOBA

         amortization of $636 million.    

- The narrowing of the Company's nonperformance risk adjustment increased

the valuation of guarantee liabilities, decreased actual gross profits and

decreased DAC and VOBA amortization by $607 million. This was partially

offset by lower risk margins which decreased the guarantee liability

         valuations, increased actual gross profits and increased DAC and VOBA          amortization by $20 million.          -   The remainder of the impact of net investment gains (losses), which

decreased DAC amortization by $484 million, was primarily attributable to

         current period investment activities.    

• Included in policyholder dividends and other was a decrease in DAC and VOBA

amortization of $90 million as a result of changes to long-term assumptions.

The remainder of the decrease was due to various immaterial items.

   The Company's DAC and VOBA balance is also impacted by unrealized investment gains (losses) and the amount of amortization which would have been recognized if such gains and losses had been realized. The increase in unrealized investment gains decreased the DAC and VOBA balance by $879 million and $1.4 billion in 2011 and 2010, respectively. The decrease in unrealized investment losses decreased the DAC and VOBA balance by $2.8 billion in 2009. Notes 3 and 6 of the Notes to the Consolidated Financial Statements include the DAC and VOBA offset to unrealized investment losses.  

Goodwill

  Goodwill is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test.  For purposes of goodwill impairment testing, if the carrying value of a reporting unit exceeds its estimated fair value, the implied fair value of the reporting unit goodwill is compared to the carrying value of that goodwill to measure the amount of impairment loss, if any. In such instances, the implied fair value of the goodwill is                                           93 

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  determined in the same manner as the amount of goodwill that would be determined in a business acquisition. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting units include projected operating earnings, current book value (with and without accumulated other comprehensive income), the level of economic capital required to support the mix of business, long-term growth rates, comparative market multiples, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount rate that we believe is appropriate for the respective reporting unit. The estimated fair values of the retirement products and individual life reporting units are particularly sensitive to the equity market levels.  We apply significant judgment when determining the estimated fair value of our reporting units and when assessing the relationship of market capitalization to the aggregate estimated fair value of our reporting units. The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management's reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of our reporting units could result in goodwill impairments in future periods which could materially adversely affect our results of operations or financial position.  During the third quarter of 2011, the Company announced its decision to explore the sale of MetLife Bank's depository business. As a result, in September 2011, the Company performed a goodwill impairment test on MetLife Bank, which is a separate reporting unit within Corporate & Other. As a result of the testing, the Company recorded a $65 million goodwill impairment charge that is reflected as a net investment loss for the year ended December 31, 2011. See Note 7 of the Notes to the Consolidated Financial Statements.  In addition, the Company performed its annual goodwill impairment tests of its other reporting units and concluded that the fair values of all reporting units were in excess of their carrying values and, therefore, goodwill was not impaired. On an ongoing basis, we evaluate potential triggering events that may affect the estimated fair value of our reporting units to assess whether any goodwill impairment exists.  In the fourth quarter of 2011, the Company performed interim goodwill impairment testing on the Retirement Products reporting unit. This testing was due to adverse market conditions, which caused both the equity markets and interest rates to decline. The fair value of the Retirement Products reporting unit, which was calculated based on application of an actuarial valuation approach, exceeded the carrying value by approximately 10%. The valuation methodology is subject to judgments and assumptions that are sensitive to change. If we had assumed that the discount rate was 100 basis points higher than the discount rate, the fair value of the Retirement Products reporting unit would have exceeded the carrying value by approximately 2%. As of December 31, 2011, the amount of goodwill allocated to the Retirement Products reporting unit was approximately $1.7 billion. The estimate of fair value is inherently uncertain and the judgments and assumptions upon which the estimate is based, will, in all likelihood, differ in some respects from actual future results. A change in market conditions, including equity market returns, interest rate levels and market volatility could result in a goodwill impairment.  In the fourth quarter of 2011, the Company announced that it will be reorganizing its business into three broad geographic regions, The Americas, EMEA and Asia, and creating a global employee benefits business, to better reflect its global reach. As a result, the Company's reporting structure may change the composition of certain of its reporting units.  

See Note 7 of the Notes to the Consolidated Financial Statements for additional information on the Company's goodwill.

Liability for Future Policy Benefits

  Generally, future policy benefits are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for                                           94

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  future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, disability incidence, disability terminations, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type and geographical area. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. Utilizing these assumptions, liabilities are established on a block of business basis. If experience is less favorable than assumed, additional liabilities may be established, resulting in a charge to policyholder benefits and claims.  

Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest.

  Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation.  Future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts are based on estimates of the expected value of benefits in excess of the projected account balance, recognizing the excess ratably over the accumulation period based on total expected assessments. Liabilities for universal and variable life secondary guarantees and paid-up guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility for variable products are consistent with historical experience of the appropriate underlying equity index, such as the S&P 500 Index.  The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with its actual experience. Differences between actual experience and the assumptions used in pricing these policies and guarantees, as well as in the establishment of the related liabilities result in variances in profit and could result in losses.  

See Note 8 of the Notes to the Consolidated Financial Statements for additional information on the Company's liability for future policy benefits.

Reinsurance

  Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Additionally, for each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. The Company reviews all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting.  

See Note 9 of the Notes to the Consolidated Financial Statements for additional information on the Company's reinsurance programs.

Income Taxes

The Company provides for federal, state and foreign income taxes currently payable, as well as those deferred due to temporary differences between the financial reporting and tax bases of assets and liabilities. The Company's accounting for income taxes represents management's best estimate of various events and

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  transactions. These tax laws are complex and are subject to differing interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and foreign.  The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Factors in management's determination include the performance of the business and its ability to generate capital gains. Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following:    

(i) future taxable income exclusive of reversing temporary differences and

       carryforwards;       (ii) future reversals of existing taxable temporary differences;       (iii) taxable income in prior carryback years; and       (iv) tax planning strategies.   Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the various tax jurisdictions or may be settled with the taxing authority upon audit. The Company determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit is recorded in the financial statements. The Company may be required to change its provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change, or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur.  

See Note 15 of the Notes to the Consolidated Financial Statements for additional information on the Company's income taxes.

Employee Benefit Plans

  Certain subsidiaries of MetLife, Inc. sponsor and/or administer pension and other postretirement benefit plans covering employees who meet specified eligibility requirements. The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates and mortality. In consultation with our external consulting actuarial firms, we determine these assumptions based upon a variety of factors such as historical performance of the plan and its assets, currently available market and industry data, and expected benefit payout streams. We determine our expected rate of return on plan assets based upon an approach that considers inflation, real return, term premium, credit spreads, equity risk premium and capital appreciation, as well as expenses, expected asset manager performance and the effect of rebalancing for the equity, debt and real estate asset mix applied on a weighted average basis to our pension asset portfolio. Given the amount of plan assets as of December 31, 2010, if we had assumed an expected rate of return for both our pension and other postretirement benefit plans that was 100 basis points higher or 100 basis points lower than the rates we assumed, the change in our net periodic costs would have been a decrease of $75 million and an increase of $75 million, respectively. This considers only changes in our assumed long-term rate of return given the level and mix of                                           96

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  invested assets at the beginning of the year, without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed long-term rate of return.  We determine our discount rates used to value the pension and postretirement obligations, based upon rates commensurate with current yields on high quality corporate bonds. Given the amount of pension and postretirement obligations as of December 31, 2010, the beginning of the measurement year, if we had assumed a discount rate for both our pension and postretirement benefit plans that was 100 basis points higher or 100 basis points lower than the rates we assumed, the change in our net periodic costs would have been a decrease of $122 million and an increase of $142 million, respectively. This considers only changes in our assumed discount rates without consideration of possible changes in any of the other assumptions described above that could ultimately accompany any changes in our assumed discount rate. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company's consolidated financial statements and liquidity.  See Note 17 of the Notes to the Consolidated Financial Statements for additional assumptions used in measuring liabilities relating to the Company's employee benefit plans.  

Litigation Contingencies

  The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities related to certain lawsuits, including the Company's asbestos-related liability, are especially difficult to estimate due to the limitation of available data and uncertainty regarding numerous variables that can affect liability estimates. The data and variables that impact the assumptions used to estimate the Company's asbestos-related liability include the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against the Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company's consolidated financial statements. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, including asbestos-related cases, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods.  

See Note 16 of the Notes to the Consolidated Financial Statements for additional information regarding the Company's assessment of litigation contingencies.

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 the Company's business.  Effective January 1, 2011, the Company updated its economic capital model to align segment allocated equity with emerging standards and consistent risk principles. Such changes to the Company's 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 Company's consolidated net investment income, operating earnings or income (loss) from continuing operations, net of income tax.                                           97

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Acquisitions and Dispositions

See Note 2 of the Notes to the Consolidated Financial Statements.

  During 2011, a local operating subsidiary of American Life closed on the purchase of a 99.86% stake in a Turkish life insurance and pension company and at the same time entered into an exclusive 15-year distribution arrangement with the seller to distribute the company's products in Turkey. Also in 2011, American Life agreed to sell certain closed blocks of business in the U.K. Finally, in 2011, Punjab National Bank ("PNB") agreed to acquire a 30% stake in MetLife India Insurance Company Limited ("MetLife India") and to enter into a separate exclusive 10-year distribution arrangement to sell MetLife India's products through PNB's branch network. PNB's acquisition of the 30% stake in MetLife India is subject to, among other things, regulatory approval and final agreements among PNB and the existing shareholders of MetLife India. If such agreements are not obtained, or the transaction does not receive regulatory approval, PNB may request to amend or cancel the distribution agreement.  In addition, in 2012, local operating subsidiaries of MetLife, Inc. agreed to acquire, from members of the Aviva Plc group ("Aviva"), Aviva's life insurance business in the Czech Republic and Hungary and Aviva's life insurance and pensions business in Romania. The closing of each of these transactions is subject to regulatory and other approvals.                                           98

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Results of Operations

Year Ended December 31, 2011 Compared with the Year Ended December 31, 2010

Consolidated Results

  We have experienced growth and an increase in market share in several of our businesses. Sales of our domestic annuity products were up 51% driven by strong growth in variable annuities across all distribution channels. Even with the impact of the March 2011 earthquake and tsunami, our sales results in Japan are stronger than anticipated and continue to show steady growth and improvement across essentially all distribution channels. Market penetration continues in our pension closeout business in the U.K.; however, our domestic pension closeout business has been adversely impacted by a combination of poor equity market returns and lower interest rates. In the U.S., sustained high levels of unemployment and a challenging pricing environment continue to depress growth across our group insurance businesses. While we experienced growth in our traditional life and universal life businesses, sales of group life and non-medical health products declined. Policy sales of auto and homeowners products decreased as the housing and automobile markets remained sluggish. We experienced steady growth and improvement in sales of the majority of our products abroad.                                                Years Ended December 31,                                              2011               2010            Change          % Change                                                          (In millions) Revenues Premiums                                 $     36,361         $  27,071        $  9,290              34.3 % Universal life and investment-type product policy fees                             7,806             6,028           1,778              29.5 % Net investment income                          19,606            17,511           2,095              12.0 % Other revenues                                  2,532             2,328             204               8.8 % Net investment gains (losses)                    (867 )            (408 )          (459 ) Net derivative gains (losses)                   4,824              (265 )         5,089  Total revenues                                 70,262            52,265          17,997              34.4 %  Expenses Policyholder benefits and claims and policyholder dividends                         36,903            30,670           6,233              20.3 % Interest credited to policyholder account balances                                5,603             4,919             684              13.9 % Capitalization of DAC                          (6,858 )          (3,299 )        (3,559 ) Amortization of DAC and VOBA                    5,391             2,843           2,548              89.6 % Amortization of negative VOBA                    (697 )             (64 )          (633 ) Interest expense on debt                        1,629             1,550              79               5.1 % Other expenses                                 18,265            11,734           6,531              55.7 %  Total expenses                                 60,236            48,353          11,883              24.6 %  Income (loss) from continuing operations before provision for income tax                                     10,026             3,912     

6,114

 Provision for income tax expense (benefit)                                       3,075             1,165           1,910  Income (loss) from continuing operations, net of income tax                   6,951             2,747           4,204 Income (loss) from discontinued operations, net of income tax                      20                39             (19 )           (48.7 )%  Net income (loss)                               6,971             2,786     

4,185

 Less: Net income (loss) attributable to noncontrolling interests                       (10 )              (4 )   

(6 )

  Net income (loss) attributable to MetLife, Inc.                                   6,981             2,790     

4,191

 Less: Preferred stock dividends                   122               122               -                 - %      Preferred stock redemption premium                                           146                 -     

146

  Net income (loss) available to MetLife, Inc.'s common shareholders      $      6,713         $   2,668        $  4,045                                             99 

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Unless otherwise stated, all amounts discussed below are net of income tax.

  During the year ended December 31, 2011, income (loss) from continuing operations, net of income tax, increased $4.2 billion to $7.0 billion primarily driven by a favorable change in net derivative gains (losses), partially offset by increased net investment losses, net of related adjustments, principally associated with DAC and VOBA amortization. Also included in income (loss) from continuing operations, net of income tax, are the results of the Divested Businesses. In addition, operating earnings increased, reflecting the impact of the Acquisition.  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 trading and other securities, contractholder-directed investments supporting unit-linked variable annuity type liabilities, which do not qualify as separate account assets. The returns on these contractholder-directed investments, which can 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 incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign 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. Changes in these factors from period to period can significantly impact the levels of both impairments and realized gains and losses on investments sold.  We use freestanding interest rate, equity, credit and currency 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 factors 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 factors and are also recognized in net derivative gains (losses).  

The favorable change in net derivative gains (losses) of $3.3 billion, from losses of $172 million in 2010 to gains of $3.1 billion in 2011, was driven by a favorable change in freestanding derivatives of $3.9 billion, which

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  was partially offset by an unfavorable change in embedded derivatives of $583 million primarily associated with variable annuity minimum benefit guarantees. The $3.9 billion favorable change in freestanding derivatives was primarily attributable to the impact of falling long-term and mid-term interest rates and equity market movements and volatility. Long-term and mid-term interest rates fell more in 2011 than in 2010 which had a positive impact of $2.1 billion on our interest rate derivatives, $670 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 volatility in 2011 compared to 2010 had a positive impact of $1.5 billion on our equity derivatives, which was primarily attributable to hedges of variable annuity minimum benefit guarantee liabilities that are accounted for as embedded derivatives.  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 recorded in net derivative gains (losses). The fair value of these embedded derivatives also includes an adjustment for nonperformance risk, which is unhedged. The $583 million unfavorable change in embedded derivatives was primarily attributable to hedged risks relating to changes in market factors of $1.6 billion and an unfavorable change in other unhedged non-market risks of $308 million, partially offset by a favorable change in unhedged risks for changes in the adjustment for nonperformance risk of $1.3 billion. The aforementioned $1.6 billion unfavorable change in embedded derivatives was more than offset by favorable changes on freestanding derivatives that hedge these risks, which are described in the preceding paragraphs.  The increase in net investment losses primarily reflects impairments on Greece sovereign debt securities, intent-to-sell impairments on other sovereign debt securities due to the repositioning of the ALICO portfolio into longer duration and higher yielding investments, intent-to-sell impairments related to the Divested Businesses, and lower net gains on sales of fixed maturity and equity securities. These losses were partially offset by net gains on the sales of certain real estate investments and reductions in the mortgage valuation allowance reflecting improving real estate market fundamentals.  Income (loss) from continuing operations, net of income tax, related to the Divested Businesses, excluding net investment gains (losses) and net derivative gains (losses), decreased $152 million to a loss of $41 million in 2011 compared to a gain of $111 million in 2010. Included in this loss was a reduction in total revenues of $73 million and an increase in total expenses of $79 million. As previously mentioned, the Divested Businesses include certain operations of MetLife Bank and the Caribbean Business.  Income tax expense for the year ended December 31, 2011 was $3.1 billion, or 31% of income (loss) from continuing operations before provision for income tax, compared with $1.2 billion, or 30% of income (loss) from continuing operations before provision for income tax, for 2010. The Company's 2011 and 2010 effective tax rates differ from the U.S. statutory rate of 35% primarily due to the impact of certain permanent tax differences, including non-taxable investment income and tax credits for investments in low income housing, in relation to income (loss) from continuing operations before provision for income tax, as well as certain foreign permanent tax differences.  As more fully described in the discussion of performance measures above, we use operating earnings, which does not equate to income (loss) from continuing operations, net of income tax, as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. We believe that the presentation of operating earnings and operating earnings available to common shareholders, 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 and operating earnings available to common shareholders should not be viewed as substitutes for GAAP income (loss) from continuing operations, net of income tax, and GAAP net income (loss) available to MetLife, Inc.'s common shareholders, respectively. Operating earnings available to common shareholders increased $1.5 billion to $5.3 billion in 2011 from $3.8 billion in 2010.                                          101

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Reconciliation of income (loss) from continuing operations, net of income tax, to operating earnings available to common shareholders

  Year Ended December 31, 2011                                                  0000000000        0000000000        0000000000        0000000000        0000000000         0000000000          0000000000        0000000000                                                                                  Corporate                                                 Other                                              Insurance         Retirement         Benefit            Auto &                            International        Corporate                                               Products          Products          Funding             Home             Japan              Regions            & Other            Total                                                                                                             (In millions) Income (loss) from continuing operations, net of income tax                           $      2,629      $      1,419      $      1,405      $         90      $      1,190      $           782      $       (564 )    $      6,951 Less: Net investment gains (losses)                   53                84                23                (9 )            (221 )               (616 )            (181 )            (867 ) Less: Net derivative gains (losses)                1,849             1,747               366               (12 )             200                  785              (111 )           4,824 Less: Other adjustments to continuing operations (1)                                      (125 )            (777 )              91                 -                38                 (441 )            (427 )          (1,641 ) Less: Provision for income tax (expense) benefit                                             (623 )            (368 )            (166 )               7                (3 )                 18               290              (845 )  Operating earnings                          $      1,475      $        733      $      1,091      $        104      $      1,176      $         1,036              (135 )           5,480  Less: Preferred stock dividends                                                                                                                                     122               122  Operating earnings available to common shareholders                                                                                                                                               $       (257 )    $      5,358    Year Ended December 31, 2010                                                    0000000000        0000000000        0000000000        0000000000        0000000000         0000000000          0000000000        0000000000                                                                                    Corporate                                                 Other                                                Insurance         Retirement         Benefit            Auto &                            International        Corporate                                                 Products          Products          Funding             Home             Japan              Regions            & Other            Total                                                                                                               (In millions) Income (loss) from continuing operations, net of income tax                             $      1,367      $        

792 $ 1,020 $ 295 $ 2 $ (155 ) $ (574 ) $ 2,747 Less: Net investment gains (losses)

                    103               139               176                (7 )              (9 )               (280 )            (530 )            (408 ) Less: Net derivative gains (losses)                    215               235              (162 )              (1 )            (144 )               (347 )             (61 )            (265 ) Less: Other adjustments to continuing operations (1)                                        (244 )            (381 )             140                 -                12                 (439 )              (2 )            (914 ) Less: Provision for income tax (expense) benefit                                                (28 )              (4 )             (54 )               3                49                  225               188               379  Operating earnings                            $      1,321      $        803      $        920      $        300      $         94      $           686              (169 )           3,955  Less: Preferred stock dividends                                                                                                                                       122               122  Operating earnings available to common shareholders                                                                                                                                                 $       (291 )    $      3,833       

(1) See definitions of operating revenues and operating expenses for the components of such adjustments.

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  Reconciliation of GAAP revenues to operating revenues and GAAP expenses to operating expenses  Year Ended December 31, 2011                                                                          Corporate                                       Other                                     Insurance        Retirement        Benefit        Auto &                      International        Corporate                                      Products         Products         Funding         Home         Japan            Regions            & Other         Total                                                                                            (In millions) Total revenues                      $   27,841      $      9,015     $     8,613     $  3,217      $  8,822      $        10,538      $     2,216      $ 70,262 Less: Net investment gains (losses)                                    53                84              23           (9 )        (221 )               (616 )           (181 )        (867 ) Less: Net derivative gains (losses)                                 1,849             1,747             366          (12 )         200                  785             (111 )     

4,824

 Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                   14                 -               -            -             -                    -                -            14 Less: Other adjustments to revenues (1)                              (224 )              78             145            -          (407 )                 50            1,265       

907

  Total operating revenues            $   26,149      $      7,106     $     8,079     $  3,238      $  9,250      $        10,319      $     1,243      $ 65,384  Total expenses                      $   23,795      $      6,833     $     6,454     $  3,162      $  6,994      $         9,376      $     3,622      $ 60,236 Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                  (85 )             638               -            -            19                    -                -           572 Less: Other adjustments to expenses (1)                                 -               217              54            -          (464 )                491            1,692       

1,990

  Total operating expenses            $   23,880      $      5,978     $     6,400     $  3,162      $  7,439      $         8,885      $     1,930      $ 57,674    Year Ended December 31, 2010                                                                           Corporate                                      Other                                     Insurance        Retirement         Benefit         Auto &                    International        Corporate                                      Products         Products          Funding          Home        Japan           Regions            & Other          Total                                                                                            (In millions) Total revenues                      $   26,444      $      6,849      $     7,568      $  3,146      $  669      $         5,685      $     1,904      $  52,265 Less: Net investment gains (losses)                                   103               139              176            (7 )        (9 )               (280 )           (530 )         (408 ) Less: Net derivative gains (losses)                                   215               235             (162 )          (1 )      (144 )               (347 )            (61 )         (265 ) Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                    1                 -                -             -           -                    -                -              1 Less: Other adjustments to revenues (1)                              (151 )             (39 )            190             -         116                  (72 )          1,450          1,494  Total operating revenues            $   26,276      $      6,514      $     7,364      $  3,154      $  706      $         6,384      $     1,045      $  51,443  Total expenses                      $   24,338      $      5,622      $     5,999      $  2,781      $  664      $         5,917      $     3,032      $  48,353 Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                   90                35                -             -           -                    -                -            125 Less: Other adjustments to expenses (1)                                 4               307               50             -         104                  367            1,452          2,284  Total operating expenses            $   24,244      $      5,280      $     5,949      $  2,781      $  560      $         5,550      $     1,580      $  45,944       

(1) See definitions of operating revenues and operating expenses for the components of such adjustments.

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Consolidated Results - Operating

                                               Years Ended December 31,                                              2011               2010            Change          % Change                                                          (In millions) OPERATING REVENUES Premiums                                 $     36,269         $  27,071        $  9,198              34.0 % Universal life and investment-type product policy fees                             7,528             5,817           1,711              29.4 % Net investment income                          19,676            16,880           2,796              16.6 % Other revenues                                  1,911             1,675             236              14.1 %  Total operating revenues                       65,384            51,443          13,941              27.1 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                         36,227            29,972           6,255              20.9 % Interest credited to policyholder account balances                                6,057             4,697           1,360              29.0 % Capitalization of DAC                          (6,849 )          (3,299 )        (3,550 ) Amortization of DAC and VOBA                    4,799             2,802           1,997              71.3 % Amortization of negative VOBA                    (619 )             (57 )          (562 ) Interest expense on debt                        1,305             1,139             166              14.6 % Other expenses                                 16,754            10,690           6,064              56.7 %  Total operating expenses                       57,674            45,944          11,730              25.5 %  Provision for income tax expense (benefit)                                       2,230             1,544             686              44.4 %  Operating earnings                              5,480             3,955           1,525              38.6 % Less: Preferred stock dividends                   122               122               -                 - %  Operating earnings available to common shareholders                      $      5,358         $   3,833        $  1,525              39.8 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  The increase in operating earnings reflects the impact of the Acquisition with the corresponding effects on each of our financial statement lines in both Japan and Other International Regions. Further trends and matters impacting our business and the comparison to 2010 results are discussed below.  Positive results from strong sales in 2011 were offset by losses from severe weather and the impact of the low interest rate environment. Changes in foreign currency exchange rates had a slightly positive impact on results compared to 2010.  In 2011, we benefited from strong sales as well as growth and higher persistency in our business, across many of our products. As a result, we experienced growth in our investment portfolio, as well as our average separate account assets, generating both higher net investment income of $479 million and higher policy fee income of $265 million. Since many of our products are interest spread-based, the growth in our individual life, long-term care ("LTC") and structured settlement businesses also resulted in a $131 million increase in interest credited expenses. These increased sales also generated an increase in commission and other volume-related expenses of $622 million, which was largely offset by an increase of $538 million in related DAC capitalization. In addition, other non-variable expenses increased $73 million due to growth in our existing businesses.  On an annual basis, we perform experience studies, as well as update our assumptions regarding both expected policyholder behaviors and the related investment environment. These updates, commonly known as unlocking events, result in changes to certain insurance-related liabilities, DAC and revenue amortization. The impact of updates to our assumptions in both 2011 and 2010, resulted in a net increase to operating earnings of $23 million, in the current year.  

In the fourth quarter of 2011, we announced a reduction in our dividend scale related to our closed block. The impact of this action increased operating earnings by $54 million.

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  Severe weather during 2011 was the primary driver of our unfavorable claims experience in Auto & Home, which decreased operating earnings by $239 million. In addition, in the third quarter of 2011, we incurred a $117 million charge to increase reserves in connection with our use of the Death Master File, impacting primarily Insurance Products. These events overshadowed favorable claims experience in our dental and disability businesses and strong mortality gains in our group life business, which, combined, improved operating earnings by $100 million.  Market factors, specifically the current low interest rate environment, continued to be a challenge during 2011. Also in 2011, equity markets remained relatively flat compared to much stronger 2010 equity market performance. Investment yields were negatively impacted by the current low interest rate environment and lower returns in the equity markets, partially offset by improving real estate markets, resulting in a $157 million decrease in net investment income. DAC, VOBA and DSI amortization and certain insurance-related liabilities are sensitive to market fluctuations, which was the primary driver of higher expenses of $102 million in these categories. In particular, the less favorable 2011 investment markets caused acceleration of DAC amortization. Partially offsetting these decreases was a $119 million improvement in operating earnings, primarily driven by lower average crediting rates on our annuity and funding agreement businesses. The lower average crediting rates continue to reflect the lower investment returns available in the marketplace. Also contributing to the decrease in interest credited is the impact from derivatives that are used to hedge certain liabilities in our funding agreement business. In addition, growth in our separate accounts due to favorable equity market performance in 2010 and stable equity markets in 2011 resulted in increased fees and other revenues of $79 million.  

Interest expense on debt increased $109 million primarily as a result of debt issued in the third and fourth quarters of 2010 in connection with the Acquisition and Federal Home Loan Bank ("FHLB") borrowings.

  The Company incurred $40 million of expenses related to a liquidation plan filed by the Department of Financial Services for ELNY in the third quarter of 2011. Results from our mortgage loan servicing business were lower driven by an increase in expenses of $31 million in response to both a larger portfolio and increased regulatory oversight.  The Company also benefited from a higher tax benefit in 2011 of $88 million over 2010 primarily due to $75 million of charges in 2010 related to the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (together, the "Health Care Act"). The Health Care Act reduced the tax deductibility of retiree health care costs to the extent of any Medicare Part D subsidy received beginning in 2013. Because the deductibility of future retiree health care costs was reflected in our financial statements, the entire future impact of this change in law was required to be recorded as a charge in the first quarter of 2010, when the legislation was enacted. The higher tax benefit was also a result of higher utilization of tax preferenced investments which provide tax credits and deductions.                                          105

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  Table of Contents  Insurance Products                                                  Years Ended December 31,                                             2011                  2010              Change         % Change                                                               (In millions) OPERATING REVENUES Premiums                                $     16,949         $        17,200        $  (251 )           (1.5 )% Universal life and investment-type product policy fees                            2,264                   2,247             17              0.8 % Net investment income                          6,107                   6,068             39              0.6 % Other revenues                                   829                     761             68              8.9 %  Total operating revenues                      26,149                  26,276           (127 )           (0.5 )%  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                    18,707                  19,075           (368 )           (1.9 )% Interest credited to policyholder account balances                                 997                     963             34              3.5 % Capitalization of DAC                           (864 )                  (841 )          (23 )           (2.7 )% Amortization of DAC and VOBA                     897                     966            (69 )           (7.1 )% Interest expense on debt                           -                       1             (1 )         (100.0 )% Other expenses                                 4,143                   4,080             63              1.5 %  Total operating expenses                      23,880                  24,244           (364 )           (1.5 )%  Provision for income tax expense (benefit)                                        794                     711             83             11.7 %  Operating earnings                      $      1,475         $         1,321        $   154             11.7 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  Strong underwriting results generated about half of our increase in operating earnings. The remaining increase resulted from the impact of annual assumption updates, lower policyholder dividends and higher fees from our variable and universal life business. These increases were dampened by the negative impacts of the sustained low interest rate environment.  Growth in our open block traditional life and in our variable and universal life businesses was more than offset by declines in our group life and non-medical health businesses, as well as the expected run-off from our closed block business. Sustained high levels of unemployment and a challenging pricing environment continue to depress growth in many of our group insurance businesses. Our dental business benefited from higher enrollment and certain pricing actions, but this was more than offset by a decline in revenues from our disability business. This reduction was mainly due to net customer cancellations and lower covered lives. Our LTC revenues were flat period over period, consistent with the discontinuance of the sale of this coverage at the end of 2010. Although revenues have declined from the prior year, current year premiums and deposits, along with an expansion of our securities lending program, resulted in an increase in our average invested assets, which contributed $189 million to operating earnings. Mirroring the growth in average invested assets in our individual life and LTC businesses, interest credited on long-duration contracts and on our policyholder account balances increased by $76 million. The aforementioned increased sales of our individual variable and universal life products, which was mainly driven by our launch of a new product in the current year, coupled with ongoing organic growth in the business, increased operating earnings by $41 million. These increased sales also generated an increase in commission expenses, which was mostly offset by the capitalization of these expenses. Broker-dealer related revenues also increased during the year and were significantly offset by a corresponding increase in other expenses.  In 2011, pricing actions and improved claims experience, mainly as a result of stabilizing benefits utilization, drove a $57 million increase in our dental results. Higher closures and lower incidences in 2011 contributed to the $43 million increase in our disability results. Our life businesses were essentially flat; however, lower claims incidence resulted in very strong group life mortality gains, which were offset by increased severity of claims in the variable and universal life businesses. On an annual basis, we perform experience studies, as well as update                                          106

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  our assumptions surrounding both expected policyholder behaviors and the related investment environment. These updates, commonly known as unlocking events, result in changes to certain insurance related liabilities, DAC and revenue amortization. The impact of updates to our assumptions, in both 2011 and 2010 primarily related to policyholder behaviors, such as projected premium assumptions and various factors impacting persistency, coupled with insurance related refinements, resulted in a net increase to operating earnings of $41 million. Partially offsetting these favorable impacts was a $109 million charge, recorded in the third quarter of the current year, related to our use of the Death Master File, in both our group and individual life businesses.  Refinements in our DAC model in both years as well as the impact of higher amortization in 2010 contributed to a $37 million net decrease in amortization. The higher level of amortization in 2010 was primarily due to the emergence of actual premium and lapse information which differed from management's expectations.  

In the fourth quarter of 2011, we announced a reduction to our dividend scale related to our closed block. The impact of this action increased operating earnings by $54 million.

  Market factors, specifically the current low interest rate environment, continued to be a challenge during 2011. Investment yields were negatively impacted by lower returns on allocated equity and lower returns in the equity markets, partially offset by improving real estate markets. Unlike in Retirement Products and Corporate Benefit Funding, a reduction in investment yield does not necessarily drive a corresponding change in the rates credited on policyholder account balances or amounts held for future policyholder benefits. The reduction in investment yield resulted in a $164 million decrease in operating earnings. Partially offsetting this decline was the impact of updating projected market factors as part of our aforementioned annual update to assumptions. This update resulted in an unlocking event, resulting in a $32 million increase to operating earnings.  Retirement Products                                                Years Ended December 31,                                           2011                  2010              Change          % Change                                                             (In millions) OPERATING REVENUES Premiums                              $      1,141         $           875        $   266              30.4 % Universal life and investment-type product policy fees                                         2,463                   2,024            439              21.7 % Net investment income                        3,195                   3,395           (200 )            (5.9 )% Other revenues                                 307                     220             87              39.5 %  Total operating revenues                     7,106                   6,514            592               9.1 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                   1,846                   1,487            359              24.1 % Interest credited to policyholder account balances                             1,595                   1,612            (17 )            (1.1 )% Capitalization of DAC                       (1,612 )                (1,067 )         (545 )           (51.1 )% Amortization of DAC and VOBA                 1,004                     808            196              24.3 % Interest expense on debt                         2                       3             (1 )           (33.3 )% Other expenses                               3,143                   2,437            706              29.0 %  Total operating expenses                     5,978                   5,280            698              13.2 %  Provision for income tax expense (benefit)                                      395                     431            (36 )            (8.4 )%  Operating earnings                    $        733         $           803        $   (70 )            (8.7 )%   

Unless otherwise stated, all amounts discussed below are net of income tax.

  Total annuity sales increased 51% to $30.4 billion due to strong growth in variable annuities across all distribution channels. Variable annuity product sales increased primarily due to the introduction of a new higher benefit, lower-risk variable annuity rider and changes in competitors' offerings which, we believe, made our products more attractive. We have launched several changes to the products and riders we offer that we expect will reduce sales volumes in 2012, as we manage these sales volumes to strike the right balance among growth, profitability and risk. Total annuity net flows were $16.2 billion, higher than in 2010. Changes in interest rates                                          107

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  and equity markets can significantly impact our earnings. In 2011, interest rates declined while equity markets remained relatively flat compared to much stronger 2010 equity market performance. Operating earnings were down 9% mainly due to these market factors.  Strong sales and higher persistency in 2011, along with the impact of an increase in allocated equity, increased operating earnings by $147 million. The strong sales of variable annuities increased our average separate account assets and, as a result, we generated higher asset-based fee revenue on the separate account assets and higher net investment income, partially offset by increases in DAC amortization. Partially offsetting these favorable impacts was an increase in variable expenses, primarily related to new business commissions and asset-based commissions of $38 million, net of related DAC capitalization. Other non-variable expenses also increased $16 million due to growth in the business.  Investment market performance reduced our operating earnings by $56 million. DAC, VOBA and DSI amortization, as well as certain insurance-related liabilities, are sensitive to market fluctuations, which was the primary driver of higher expenses in these categories. In particular, the less favorable 2011 equity markets when compared to 2010 caused an acceleration of DAC amortization. Lower investment returns on certain limited partnerships and lower returns on allocated equity also contributed to the decline in operating earnings. Partially offsetting these decreases was an improvement in operating earnings, primarily driven by lower average crediting rates on annuity fixed rate funds. Lower average crediting rates continue to reflect the lower investment returns available in the marketplace. Growth in our separate accounts, due to favorable equity market performance in 2010 and 2011, resulted in increased fees and other revenues.  To better align with hedged risks, certain elements of our variable annuity hedging program that were previously recorded in net investment income were recorded in net derivative gains (losses) beginning in 2011 which resulted in a decrease in operating earnings of $77 million. Lower income annuity mortality gains of $18 million also reduced operating earnings in 2011. We review and update our long-term assumptions used in our calculations of certain insurance-related liabilities and DAC annually, which may result in changes and are recorded in the fourth quarter each year. This annual update of assumptions, other insurance liability refinements and DAC model revisions made during the year, contributed to a net operating earnings reduction of $12 million.  Corporate Benefit Funding                                               Years Ended December 31,                                         2011                   2010              Change          % Change                                                            (In millions) OPERATING REVENUES Premiums                             $     2,418          $         1,938        $   480              24.8 % Universal life and investment-type product policy fees                                         231                      226              5               2.2 % Net investment income                      5,181                    4,954            227               4.6 % Other revenues                               249                      246              3               1.2 %  Total operating revenues                   8,079                    7,364            715               9.7 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                 4,594                    4,041            553              13.7 % Interest credited to policyholder account balances              1,321                    1,445           (124 )            (8.6 )% Capitalization of DAC                        (27 )                    (19 )           (8 )           (42.1 )% Amortization of DAC and VOBA                  17                       16              1               6.3 % Interest expense on debt                       8                        6              2              33.3 % Other expenses                               487                      460             27               5.9 %  Total operating expenses                   6,400                    5,949            451               7.6 %  Provision for income tax expense (benefit)                                    588                      495             93              18.8 %  Operating earnings                   $     1,091          $           920        $   171              18.6 %                                            108 

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Unless otherwise stated, all amounts discussed below are net of income tax.

  Corporate Benefit Funding had strong pension closeout sales in the U.K., and strong sales of structured settlements. Although the combination of poor equity returns and the low interest rate environment has resulted in underfunded pension plans, which reduces our customers' flexibility to engage in transactions such as pension closeouts, sales in the U.K. remained strong as we continue to penetrate that market. Sales in our structured settlement business were strong as we remain very competitive in the marketplace. Premiums for these businesses were almost entirely offset by the related change in policyholder benefits. However, current year premiums, deposits, funding agreement issuances, increased allocated equity, and the expansion of our securities lending program, all contributed to the growth of our average invested assets, which led to an increase in net investment income of $167 million.  Deposits into separate accounts, including guaranteed interest contracts, and corporate owned life insurance, increased significantly resulting in a $9 million increase in advisory fees and an $8 million increase in premium tax. However, these expenses are offset by a corresponding increase in revenues.  Market factors, including the current low interest rate environment, have negatively impacted our investment returns by $19 million. These lower investment returns include the impact of returns on invested economic capital. The low interest rate environment was also the primary driver of the decrease in interest credited to policyholders of $81 million. Many of our funding agreement and guaranteed interest contract liabilities are tied to market indices. Interest rates on new business were set lower, as were the rates on existing business with terms that can fluctuate. Also contributing to the decrease in interest credited is the impact from derivatives that are used to hedge certain liabilities in our funding agreement business. Commensurate with our strong sales of structured settlements, the interest credited expense associated with these insurance liabilities increased $26 million.  The Company's use of the Death Master File in connection with our post-retirement benefit business resulted in a charge in the third quarter of the current year of $8 million. Other insurance liability refinements and mortality results negatively impacted our year-over-year operating earnings by $20 million.  Auto & Home                                                 Years Ended December 31,                                           2011                   2010              Change          % Change                                                              (In millions) OPERATING REVENUES Premiums                               $     3,000          $         2,923        $    77               2.6 % Net investment income                          205                      209             (4 )            (1.9 )% Other revenues                                  33                       22             11              50.0 %  Total operating revenues                     3,238                    3,154             84               2.7 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                   2,375                    2,021            354              17.5 % Capitalization of DAC                         (453 )                   (448 )           (5 )            (1.1 )% Amortization of DAC and VOBA                   448                      439              9               2.1 % Other expenses                                 792                      769             23               3.0 %  Total operating expenses                     3,162                    2,781            381              13.7 %  Provision for income tax expense (benefit)                                      (28 )                     73           (101 )  Operating earnings                     $       104          $           300        $  (196 )           (65.3 )%   

Unless otherwise stated, all amounts discussed below are net of income tax.

  In 2011, operating results were negatively impacted by severe weather including record numbers of tornadoes in the second quarter and Hurricane Irene in the third quarter. Policy sales decreased as the housing and new                                          109

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  automobile sales markets remained sluggish, resulting in a decrease in exposures. However, average premium per policy increased for both our homeowners and auto policies, more than offsetting the negative impact from the decrease in exposures.  Adverse claims experience was the primary driver of the decrease in operating earnings. Catastrophe-related losses increased $187 million compared to 2010 mainly due to severe storm activity in the U.S. during the second and third quarters of 2011, which resulted in $261 million of losses. The second quarter included catastrophe-related losses mainly due to a record number of tornadoes for a one-month period that resulted in damage in many states. The third quarter included catastrophe-related losses resulting from the impact from Hurricane Irene. In addition, current year non-catastrophe claim costs increased $75 million as a result of higher claim frequencies in both our auto and homeowners businesses due primarily to more severe winter weather in the first quarter of 2011 and to non-catastrophe wind and hail through the remainder of the year. The negative impact of these items was partially offset by additional favorable development of prior year losses of $23 million.  

The increase in average premium per policy in both our homeowners and auto businesses improved operating earnings by $60 million and the decrease in exposures resulted in a $4 million decrease in operating earnings as the negative impact from lower premiums exceeded the positive impact from lower claims. Exposures are primarily each automobile for the auto line of business and each residence for the homeowners line of business.

  The impact of the items discussed above can be seen in the unfavorable change in the combined ratio, including catastrophes, to 104.9% in 2011 from 94.6% in 2010. The combined ratio, excluding catastrophes, was 89.1% in 2011 compared to 88.1% in 2010.  Higher commissions, resulting from the increase in average premium per policy, coupled with an increase in other volume-related expenses contributed to the decrease in operating earnings. This increase is included in the $18 million increase in other expenses, including the net change in DAC.  Japan                                                        Years Ended December 31,                                                    2011                   2010             Change                                                                   (In millions) OPERATING REVENUES Premiums                                       $       6,325           $      499         $  5,826 Universal life and investment-type product policy fees                                      824                   55              769 Net investment income                                  2,079                  145            1,934 Other revenues                                            22                    7               15  Total operating revenues                               9,250                  706            8,544  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                                 3,973                  309            3,664 Interest credited to policyholder account balances                                               1,561                  123            1,438 Capitalization of DAC                                 (2,250 )               (149 )         (2,101 ) Amortization of DAC and VOBA                           1,312                   82            1,230 Amortization of negative VOBA                           (555 )                (49 )           (506 ) Other expenses                                         3,398                  244            3,154  Total operating expenses                               7,439                  560            6,879  Provision for income tax expense (benefit)                                                635                   52              583  Operating earnings                             $       1,176           $       94         $  1,082   

Unless otherwise stated, all amounts discussed below are net of income tax.

Our Japan operation is comprised of the Japanese business acquired in the Acquisition and remains among the largest foreign life insurers in Japan. The stability of this business is evidenced by a solvency margin ratio

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  significantly in excess of the legally mandated solvency margin in Japan and above average with respect to the industry. Through our Japan operation, we provide accident and health insurance, life insurance, annuities and endowment products to both individuals and groups. Japan's operating earnings for 2010 include one month of results from the ALICO operations.  The Japanese economy, to which we face substantial exposure given our operations there, was significantly negatively impacted by the March 2011 earthquake and tsunami. Although we expect modest growth in the Japanese economy during 2012, 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. Despite the impact of the earthquake and tsunami, our sales results continued to show steady growth and improvement across our captive agent, independent agent, broker, bancassurance, and direct marketing distribution channels.  Japan reported premiums, fees and other revenues of $7.2 billion for 2011, including $4.3 billion from accident and health insurance and $2.7 billion from life insurance products distributed through our multi-distribution platform. In addition, during 2011, the Company incurred $39 million of incremental insurance claims and operating expenses related to the March 2011 earthquake and tsunami.  

Other International Regions

                                               Years Ended December 31,                                             2011                2010            Change          % Change                                                          (In millions) OPERATING REVENUES Premiums                                $      6,426         $     3,625        $ 2,801              77.3 % Universal life and investment-type product policy fees                            1,746               1,265            481              38.0 % Net investment income                          1,995               1,466            529              36.1 % Other revenues                                   152                  28            124  Total operating revenues                      10,319               6,384          3,935              61.6 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                     4,724               3,053          1,671              54.7 % Interest credited to policyholder account balances                                 583                 554             29               5.2 % Capitalization of DAC                         (1,643 )              (775 )         (868 ) Amortization of DAC and VOBA                   1,120                 490    

630

 Amortization of negative VOBA                    (64 )                (8 )          (56 ) Interest expense on debt                           1                   3             (2 )           (66.7 )% Other expenses                                 4,164               2,233          1,931              86.5 %  Total operating expenses                       8,885               5,550          3,335              60.1 %  Provision for income tax expense (benefit)                                        398                 148            250  Operating earnings                      $      1,036         $       686        $   350              51.0 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  Sales results continued to show steady growth and improvement, with increases over 2010 in essentially all of our businesses. In the Asia Pacific region, sales continued to grow, driven by strong variable universal life sales, the launch of a whole life cancer product in Korea and higher group sales in the Australia business. In Latin America, accident and health sales increased throughout the region. In addition, there was strong retirement sales growth in Mexico, as well as strong growth in Chile's immediate annuity products. Our business in Europe experienced higher credit life sales and continued growth in our variable annuity business.  Reported operating earnings increased over 2010 as a result of the inclusion of a full year of results of the ALICO operations other than Japan for 2011 compared to one month of results for 2010. The positive impact of changes in foreign currency exchange rates improved reported earnings by $19 million for 2011 compared to 2010.                                          111 

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  In addition to the increase in operating earnings due to the ALICO operations other than Japan, the current year benefited from business growth, most notably in Mexico, Korea and Ireland. These increases were partially offset by a decrease in the Japan reinsurance business mainly due to market performance. The impact of the sale of the Company's interest in Mitsui Sumitomo MetLife Insurance Co., LTD ("MSI MetLife") on April 1, 2011 also decreased operating results for 2011, as no earnings were recognized in the current year.  Net investment income increased reflecting an increase from growth in average invested assets and a decrease from lower yields. The increase in average invested assets reflects the Acquisition and growth in our businesses. Beginning in the fourth quarter of 2010, investment earnings and interest credited related to contractholder-directed unit-linked investments were 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 in the current period; however, it unfavorably impacted the change in net investment income in 2011, when compared to 2010 as positive returns were incurred in 2010 from recovering equity markets. The corresponding favorable impact is reflected in interest credited expense. Decreased yields reflect the decreased operating joint venture returns from the sale of MSI MetLife in second quarter of 2011, the Acquisition, as ALICO's acquired investment portfolio has a larger allocation to lower yielding government securities, partially offset by the impact of higher inflation. The change in net investment income from inflation was offset by a similar change in the related insurance liabilities.  In addition to an increase associated with the Acquisition, operating expenses increased primarily due to higher commissions and compensation expenses in Korea, Mexico, Brazil and Ireland due to business growth, a portion which is offset by DAC capitalization.  Corporate & Other                                                 Years Ended December 31,                                             2011                 2010            Change          % Change                                                           (In millions) OPERATING REVENUES Premiums                                 $        10          $        11        $    (1 )            (9.1 )% Net investment income                            914                  643            271              42.1 % Other revenues                                   319                  391            (72 )           (18.4 )%  Total operating revenues                       1,243                1,045            198              18.9 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                             8                  (14 ) 

22

 Amortization of DAC and VOBA                       1                    1              -                 - % Interest expense on debt                       1,294                1,126            168              14.9 % Other expenses                                   627                  467            160              34.3 %  Total operating expenses                       1,930                1,580            350              22.2 %  Provision for income tax expense (benefit)                                       (552 )               (366 )         (186 )           (50.8 )%  Operating earnings                              (135 )               (169 )           34              20.1 % Less: Preferred stock dividends                  122                  122              -                 - %  Operating earnings available to common shareholders                      $      (257 )        $      (291 )      $    34              11.7 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

MetLife, Inc. completed four debt financings in August 2010 in connection with the Acquisition, issuing $1.0 billion of 2.375% senior notes, $1.0 billion of 4.75% senior notes, $750 million of 5.875% senior notes, and $250 million of floating rate senior notes. MetLife, Inc. also issued debt securities in November 2010, which are part of the $3.0 billion stated value of common equity units. The proceeds from these debt issuances were used to finance the Acquisition.                                          112 

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Operating earnings available to common shareholders and operating earnings each increased $34 million, primarily due to higher net investment income and a higher tax benefit. These increases were partially offset by an increase in interest expense of $109 million, primarily resulting from the 2010 debt issuances, a decrease in earnings related to resolutions of certain legal matters in 2010 and an increase in other expenses.

  Net investment income increased $176 million due to an increase of $130 million from higher yields and an increase of $46 million from growth in average invested assets. Yields were primarily impacted by the decline in interest rates, as lower crediting rates were paid to the segments on the economic capital invested on their behalf period over period, lower returns in equity markets and lower returns on alternative investments. An increase in the average invested assets was primarily due to proceeds from the debt issuances referenced above. Our investments primarily include structured securities, investment grade corporate fixed maturities, mortgage loans and U.S. Treasury and agency securities. In addition, our investment portfolio includes the excess capital not allocated to the segments. Accordingly, it includes a higher allocation to certain other invested asset classes to provide additional diversification and opportunity for long-term yield enhancement, including leveraged leases, other limited partnership interests, real estate, real estate joint ventures, trading and other securities and equity securities.  

Corporate & Other also benefited in 2011 from a higher tax benefit of $133 million over 2010 primarily due to $75 million of charges in 2010 related to the Health Care Act. The higher tax benefit was also a result of higher utilization of tax preferenced investments which provide tax credits and deductions.

  Results from our mortgage loan servicing business were lower, driven by an increase in expenses of $31 million in response to both a larger portfolio and increased regulatory oversight. In addition hedging results were lower by $21 million.  The Company incurred $40 million of expenses related to a liquidation plan filed by the Department of Financial Services for ELNY in the third quarter of 2011. In addition, the Company increased advertising costs by $15 million and incurred higher internal resources costs for associates committed to the Acquisition of $13 million. Minor fluctuations in various other expense categories, such as interest on uncertain tax positions, and discretionary spending, such as consulting and postemployment related costs, offset each other and resulted in a small increase to earnings. Additionally, the resolutions of certain legal matters in the prior period resulted in $39 million of lower operating earnings for 2011.                                          113 

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Results of Operations

Year Ended December 31, 2010 Compared with the Year Ended December 31, 2009

Consolidated Results

  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 a year ago, positively impacted our results most significantly through increased net cash flows, improved yields on our investment portfolio and increased policy fee income. Sales of our domestic annuity products were up 14%, driven by an increase in variable annuity sales compared with the prior year. We benefited in 2010 from strong sales of structured settlement products. Market penetration continues in our pension closeout business in the U.K.; however, although improving, our domestic pension closeout business has been adversely impacted by a combination of poor equity returns and lower interest rates. High levels of unemployment continue to depress growth across our group insurance businesses due to lower covered payrolls. While we experienced growth in our group life business, sales of non-medical health and individual life products declined. Sales of new homeowner and auto policies increased 11% and 4%, respectively, as the housing and automobile markets have improved. We experienced a 30% increase in sales of retirement and savings products abroad.                                                Years Ended December 31,                                               2010              2009           Change         % Change                                                          (In millions) Revenues Premiums                                  $     27,071        $  26,157       $    914              3.5 % Universal life and investment-type product policy fees                              6,028            5,197            831             16.0 % Net investment income                           17,511           14,741          2,770             18.8 % Other revenues                                   2,328            2,329             (1 )              - % Net investment gains (losses)                     (408 )         (2,901 )        2,493             85.9 % Net derivative gains (losses)                     (265 )         (4,866 )        4,601             94.6 %  Total revenues                                  52,265           40,657         11,608             28.6 %  Expenses Policyholder benefits and claims and policyholder dividends                          30,670           29,652          1,018              3.4 % Interest credited to policyholder account balances                                 4,919            4,845             74              1.5 % Capitalization of DAC                           (3,299 )         (2,976 )         (323 )          (10.9 )% Amortization of DAC and VOBA                     2,843            1,289     

1,554

 Amortization of negative VOBA                      (64 )              -            (64 ) Interest expense on debt                         1,550            1,044            506             48.5 % Other expenses                                  11,734           11,164            570              5.1 %  Total expenses                                  48,353           45,018          3,335              7.4 %  Income (loss) from continuing operations before provision for income tax                                              3,912           (4,361 )   

8,273

 Provision for income tax expense (benefit)                                        1,165           (2,025 )        3,190  Income (loss) from continuing operations, net of income tax                    2,747           (2,336 )        5,083 Income (loss) from discontinued operations, net of income tax                       39               58     

(19 ) (32.8 )%

  Net income (loss)                                2,786           (2,278 )   

5,064

 Less: Net income (loss) attributable to noncontrolling interests                         (4 )            (32 )           28             87.5 %  Net income (loss) attributable to MetLife, Inc.                                    2,790           (2,246 )   

5,036

 Less: Preferred stock dividends                    122              122              -                - %      Preferred stock redemption premium                                              -                -              -                - %  Net income (loss) available to MetLife, Inc.'s common shareholders       $      2,668        $  (2,368 )     $  5,036                                            114 

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Unless otherwise stated, all amounts discussed below are net of income tax.

  During the year ended December 31, 2010, income (loss) from continuing operations, net of income tax increased $5.1 billion to a gain of $2.8 billion from a loss of $2.3 billion in 2009, of which $2 million in losses was from the inclusion of one month of ALICO results in 2010. The change was predominantly due to a $3.0 billion favorable change in net derivative gains (losses) and a $1.6 billion favorable change in net investment gains (losses). Offsetting these favorable variances totaling $4.6 billion were unfavorable changes in adjustments related to net derivative and net investment gains (losses) of $518 million, net of income tax, principally associated with DAC and VOBA amortization, resulting in a total favorable variance related to net derivative and net investment gains (losses), net of related adjustments and income tax, of $4.1 billion.  The favorable variance in net derivative gains (losses) of $3.0 billion, from losses of $3.2 billion in 2009 to losses of $172 million in 2010 was primarily driven by a favorable change in freestanding derivatives of $4.4 billion, comprised of a $4.5 billion favorable change from losses in the prior year of $4.3 billion to gains in the current year of $203 million and $123 million in ALICO freestanding derivative losses. This favorable variance was partially offset by an unfavorable change in embedded derivatives primarily associated with variable annuity minimum benefit guarantees of $1.4 billion from gains in the prior year of $1.1 billion to losses in the current year of $257 million, net of $5 million in ALICO embedded derivative gains.  We use freestanding interest rate, currency, credit and equity derivatives to provide economic hedges of certain invested assets and insurance liabilities, including embedded derivatives within certain of our variable annuity minimum benefit guarantees. The $4.5 billion favorable variance in freestanding derivatives was primarily attributable to market factors, including falling long-term and mid-term interest rates, a stronger recovery in equity markets in the prior year than the current year, a greater decrease in equity volatility in the prior year as compared to the current year, a strengthening U.S. dollar and widening corporate credit spreads in the financial services sector. Falling long-term and mid-term interest rates in the current year compared to rising long-term and mid-term interest rates in the prior year had a positive impact of $2.6 billion on our interest rate derivatives, $931 million of which is attributable to hedges of variable annuity minimum benefit guarantee liabilities, which are accounted for as embedded derivatives. In addition, stronger equity market recovery and lower equity market volatility in the prior year as compared to the current year had a positive impact of $1.1 billion on our equity derivatives, which we use to hedge variable annuity minimum benefit guarantees. U.S. dollar strengthening had a positive impact of $554 million on certain of our foreign currency derivatives, which are used to hedge foreign-denominated asset and liability exposures. Finally, widening corporate credit spreads in the financial services sector had a positive impact of $221 million on our purchased protection credit derivatives.  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). These embedded derivatives also include an adjustment for nonperformance risk of the related liabilities carried at estimated fair value. The $1.4 billion unfavorable change in embedded derivatives was primarily attributable to the impact of market factors, including falling long-term and mid-term interest rates, changes in foreign currency exchange rates, equity volatility and equity market movements. Falling long-term and mid-term interest rates in the current year compared to rising long-term and mid-term interest rates in the prior year had a negative impact of $1.4 billion. Changes in foreign currency exchange rates had a negative impact of $468 million. Equity volatility decreased more in the prior year than in the current year causing a negative impact of $284 million, and a stronger recovery in the equity markets in the prior year than in the current year had a negative impact of $228 million. The unfavorable impact from these hedged risks was partially offset by a favorable change related to the adjustment for nonperformance risk of $1.2 billion, from losses of $1.3 billion in 2009 to losses of $62 million in 2010. This $62 million loss was net of a $621 million loss related to a refinement in estimating the spreads used in the adjustment for nonperformance risk made in the second quarter of 2010. Gains on the freestanding derivatives that hedged these embedded derivative risks largely offset the change in liabilities attributable to market factors, excluding the adjustment for nonperformance risk, which does not have an economic impact on the Company.                                          115 

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  Improved or stabilizing market conditions across several invested asset classes and sectors as compared to the prior year resulted in decreases in impairments and in net realized losses from sales and disposals of investments in most components of our investment portfolio. These decreases, coupled with a decrease in the provision for credit losses on mortgage loans due to improved market conditions, resulted in a $1.6 billion improvement in net investment gains (losses).  Income from continuing operations, net of income tax for 2010 includes $138 million of expenses related to the acquisition and integration of ALICO. These expenses, which primarily consisted of investment banking and legal fees, are recorded in Corporate & Other and are not a component of operating earnings.  Income tax expense for the year ended December 31, 2010 was $1.2 billion, or 30% of income from continuing operations before provision for income tax, compared with income tax benefit of $2.0 billion, or 46% of the loss from continuing operations before benefit for income tax, for the comparable 2009 period. The Company's 2010 and 2009 effective tax rates differ from the U.S. statutory rate of 35% primarily due to the impact of certain permanent tax differences, including non-taxable investment income and tax credits for investments in low income housing, in relation to income (loss) from continuing operations before income tax, as well as certain foreign permanent tax differences.  As more fully described in the discussion of performance measures above, we use operating earnings, which does not equate to income (loss) from continuing operations as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. Operating earnings is also a measure by which senior management's and many other employees' performance is evaluated for the purpose of determining their compensation under applicable compensation plans. 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 income (loss) from continuing operations, net of income tax. Operating earnings available to common shareholders increased by $1.6 billion to $3.8 billion in 2010 from $2.2 billion in 2009.                                          116

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Reconciliation of income (loss) from continuing operations, net of income tax, to operating earnings available to common shareholders

Year Ended December 31, 2010

                                                                              000000000        000000000        000000000        000000000        000000000         000000000           000000000        000000000                                                                                                             Corporate                                              Other                                                                           Insurance       Retirement         Benefit          Auto &                  

International Corporate

                                                                          Products         Products          Funding           Home             Japan             Regions            & Other           Total                                                                                                                                      (In millions) Income (loss) from continuing operations, net of income tax              $  

1,367 $ 792 $ 1,020 $ 295 $ 2 $ (155 ) $ (574 ) $ 2,747 Less: Net investment gains (losses)

                                              103              139              176               (7 )             (9 )               (280 )           (530 )           (408 ) Less: Net derivative gains (losses)                                              215              235             (162 )             (1 )           (144 )               (347 )            (61 )           (265 ) Less: Other adjustments to continuing operations (1)                            (244 )           (381 )            140                -               12                 (439 )             (2 )           (914 ) Less: Provision for income tax (expense) benefit                                 (28 )             (4 )            (54 )              3               49                  225              188              379  Operating earnings                                                       $     1,321      $       803      $       920      $       300      $        94      $           686             (169 )          3,955  Less: Preferred stock dividends                                                                                                                                                            122              122  Operating earnings available to common shareholders                                                                                                                                $      (291 )    $     3,833    Year Ended December 31, 2009                                                    000000000        000000000        000000000        000000000        000000000        000000000           000000000        000000000                                                                                  Corporate                                             Other                                                Insurance       Retirement         Benefit          Auto &                          International        Corporate                                                Products         Products          Funding           Home             Japan            Regions            & Other           Total                                                                                                           (In millions) Income (loss) from continuing operations, net of income tax                             $      (422 )    $      (466 

) $ (746 ) $ 321 $ - $ (289 ) $ (734 ) $ (2,336 ) Less: Net investment gains (losses)

                  (472 )           (533 )         (1,486 )            (41 )              -                (100 )           (269 )         (2,901 ) Less: Net derivative gains (losses)                (1,786 )         (1,175 )           (672 )             39                -                (798 )           (474 )         (4,866 ) Less: Other adjustments to continuing operations (1)                                       (146 )            379              121                -                -                (206 )            332              480 Less: Provision for income tax (expense) benefit                                               840              465              711                1                -                 364              216            2,597  Operating earnings                            $     1,142      $       398      $       580      $       322      $         -     $           451             (539 )          2,354  Less: Preferred stock dividends                                                                                                                                122              122  Operating earnings available to common shareholders                                                                                                                                           $      (661 )    $     2,232     

(1) See definitions of operating revenues and operating expenses for the components of such adjustments.

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  Reconciliation of GAAP revenues to operating revenues and GAAP expenses to operating expenses  Year Ended December 31, 2010                                                                             Corporate                                     Other                                       Insurance        Retirement         Benefit        Auto &                    International        Corporate                                       Products          Products          Funding         Home        Japan           Regions            & Other         Total                                                                                             (In millions) Total revenues                       $    26,444      $      6,849      $     7,568      $ 3,146      $  669      $         5,685      $     1,904      $ 52,265 Less: Net investment gains (losses)                                     103               139              176           (7 )        (9 )               (280 )           (530 )        (408 ) Less: Net derivative gains (losses)                                     215               235             (162 )         (1 )      (144 )               (347 )            (61 )        (265 ) Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                      1                 -                -            -           -                    -                -     

1

 Less: Other adjustments to revenues (1)                                (151 )             (39 )            190            -         116                  (72 )          1,450     

1,494

  Total operating revenues             $    26,276      $      6,514      $     7,364      $ 3,154      $  706      $         6,384      $     1,045      $ 51,443  Total expenses                       $    24,338      $      5,622      $     5,999      $ 2,781      $  664      $         5,917      $     3,032      $ 48,353 Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                     90                35                -            -           -                    -                -     

125

 Less: Other adjustments to expenses (1)                                   4               307               50            -         104                  367            1,452         2,284  Total operating expenses             $    24,244      $      5,280      $     5,949      $ 2,781      $  560      $         5,550      $     1,580      $ 45,944    Year Ended December 31, 2009                                                                             Corporate                                     Other                                       Insurance        Retirement         Benefit        Auto &                    International        Corporate                                       Products          Products          Funding         Home         Japan          Regions            & Other         Total                                                                                             (In millions) Total revenues                       $    23,476      $      3,975      $     5,231      $ 3,113      $     -     $         3,997      $       865      $ 40,657 Less: Net investment gains (losses)                                    (472 )            (533 )         (1,486 )        (41 )          -                (100 )           (269 )      (2,901 ) Less: Net derivative gains (losses)                                  (1,786 )          (1,175 )           (672 )         39            -                (798 )           (474 )      (4,866 ) Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                    (27 )               -                -            -            -                   -                -           (27 ) Less: Other adjustments to revenues (1)                                 (81 )             (51 )            184            -            -                (169 )          1,283     

1,166

  Total operating revenues             $    25,842      $      5,734      $     7,205      $ 3,115      $     -     $         5,064      $       325      $ 47,285  Total expenses                       $    24,165      $      4,690      $     6,400      $ 2,697      $     -     $         4,495      $     2,571      $ 45,018 Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)                     39              (739 )              -            -            -                   -                -          (700 ) Less: Other adjustments to expenses (1)                                  (1 )             309               63            -            -                  37              951         1,359  Total operating expenses             $    24,127      $      5,120      $     6,337      $ 2,697      $     -     $         4,458      $     1,620      $ 44,359     

(1) See definitions of operating revenues and operating expenses for the

    components of such adjustments.                                           118 

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Consolidated Results - Operating

                                               Years Ended December 31,                                              2010               2009           Change          % Change                                                          (In millions) OPERATING REVENUES Premiums                                 $     27,071         $  26,157        $   914               3.5 % Universal life and investment-type product policy fees                             5,817             5,055            762              15.1 % Net investment income                          16,880            14,600          2,280              15.6 % Other revenues                                  1,675             1,473            202              13.7 %  Total operating revenues                       51,443            47,285          4,158               8.8 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                         29,972            29,104            868               3.0 % Interest credited to policyholder account balances                                4,697             4,849           (152 )            (3.1 )% Capitalization of DAC                          (3,299 )          (2,976 )         (323 )           (10.9 )% Amortization of DAC and VOBA                    2,802             2,186            616              28.2 % Amortization of negative VOBA                     (57 )               -            (57 ) Interest expense on debt                        1,139             1,044             95               9.1 % Other expenses                                 10,690            10,152            538               5.3 %  Total operating expenses                       45,944            44,359          1,585               3.6 %  Provision for income tax expense (benefit)                                       1,544               572            972  Operating earnings                              3,955             2,354          1,601              68.0 % Less: Preferred stock dividends                   122               122              -                 - %  Operating earnings available to common shareholders                      $      3,833         $   2,232        $ 1,601              71.7 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  The improvement in the financial markets was the primary driver of the increase in operating earnings as evidenced by higher net investment income and an increase in average separate account balances, which resulted in an increase in policy fee income. Partially offsetting this improvement was an increase in amortization of DAC, VOBA and DSI. The increase in operating earnings also includes the positive impact of changes in foreign currency exchange rates in 2010. This improved reported operating earnings by $37 million for 2010 compared to 2009. Furthermore, the 2010 period also includes one month of ALICO results, contributing $114 million to the increase in operating earnings. The current period also benefited from the dividend scale reduction in the fourth quarter of 2009. The improvement in 2010 results compared to 2009 was partially offset by the prior period impact of pesification in Argentina and unfavorable claims experience.  Net investment income increased from higher yields and growth in average invested assets. Yields were positively impacted by the effects of stabilizing real estate markets and recovering private equity markets year over year on real estate joint ventures and other limited partnership interests, and by the effects of continued repositioning of the accumulated liquidity in our portfolio to longer duration and higher yielding investments, including investment grade corporate fixed maturity securities. Growth in our investment portfolio was primarily due to the Acquisition and positive net cash flows from growth in our domestic individual and group life businesses, as well as certain international businesses, higher cash collateral balances received from our derivative counterparties, as well as the temporary investment of proceeds from the debt and common stock issuances in anticipation of the Acquisition. With the exception of the cash flows from such securities issuances, which were temporarily invested in lower yielding liquid investments, we continued to reposition the accumulated liquidity in our portfolio to longer duration and higher yielding investments.  

Since many of our products are interest spread-based, higher net investment income is typically offset by higher interest credited expense. However, interest credited expense, including amounts reflected in policyholder

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  benefits and claims, decreased primarily in our domestic funding agreement business, which experienced lower average crediting rates combined with lower average account balances. Our fixed annuities business also experienced lower crediting rates. Certain crediting rates can move consistently with the underlying market indices, primarily the London Inter-Bank Offer Rate ("LIBOR"), which were lower than the prior year. The impact from the growth in our structured settlement, LTC and disability businesses partially offset those decreases in interest credited expense.  A significant increase in average separate account balances is largely attributable to favorable market performance resulting from improved market conditions since the second quarter of 2009 and positive net cash flows from the annuity business. This resulted in higher policy fees and other revenues of $444 million, most notably in our Retirement Products segment. In addition, changes in foreign currency exchange rates increased policy fees by $52 million. The improvement in fees is partially offset by greater DAC, VOBA and DSI amortization of $325 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. A portion of the increase in amortization was due to the impact of higher current year gross margins, a primary component in the determination of the amount of amortization for our Insurance Products segment, mostly in the closed block resulting from increased investment yields and the impact of dividend scale reductions.  The reduction in the dividend scale in the fourth quarter of 2009 resulted in a $109 million decrease in policyholder dividends in the traditional life business in the current period.  Claims experience varied amongst our businesses with a net unfavorable impact of $153 million to operating earnings compared to the prior year. We had unfavorable claims experience in our Auto & Home segment, primarily due to increased catastrophes. Our Insurance Products segment experienced mixed claims experience with a net unfavorable impact. We experienced less favorable mortality experience in our Corporate Benefit Funding segment despite favorable experience in our structured settlements business.  Interest expense increased $62 million primarily as a result of the full year impact of debt issuances in 2009 and of senior notes and debt securities issued in anticipation of the Acquisition, partially offset by the impact of lower interest rates on variable rate collateral financing arrangements.  In addition to a $269 million increase associated with the Acquisition, operating expenses increased due to the impact of a $95 million benefit recorded in the prior period related to the pesification in Argentina, as well as a $60 million increase related to the investment and growth in our international businesses. Changes in foreign currency exchange rates also increased other expenses by $54 million. In addition, the current period includes a $14 million increase in charitable contributions and $13 million of costs associated with the integration of ALICO. Offsetting these increases was a $76 million reduction in discretionary spending, such as consulting, rent and postemployment related costs. In addition, we experienced a $47 million decline in market driven expenses, primarily pension and post retirement benefit costs. Also contributing to the decrease was a $35 million reduction in real estate-related charges and $15 million of lower legal costs.  The 2010 period includes $75 million of charges related to the Health Care Act. The Federal government currently provides a Medicare Part D subsidy. The Health Care Act reduced the tax deductibility of retiree health care costs to the extent of any Medicare Part D subsidy received beginning in 2013. Because the deductibility of future retiree health care costs is reflected in our financial statements, the entire future impact of this change in law was required to be recorded as a charge in the period in which the legislation was enacted. Changes to the provision for income taxes in both periods contributed to an increase in operating earnings of $86 million for our Other International Regions segment, resulting from a $34 million unfavorable impact in 2009 due to a change in assumption regarding the repatriation of earnings and a benefit of $52 million in the current year from additional permanent reinvestment of earnings, the reversal of tax provisions and favorable changes in liabilities for tax uncertainties. In addition, in 2009 we had a larger benefit of $82 million as compared to 2010 related to the utilization of tax preferenced investments which provide tax credits and deductions.                                          120

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   Table of Contents  Insurance Products                                                 Years Ended December 31,                                               2010               2009           Change          % Change                                                           (In millions) OPERATING REVENUES Premiums                                  $     17,200         $  17,168        $    32               0.2 % Universal life and investment-type product policy fees                              2,247             2,281            (34 )            (1.5 )% Net investment income                            6,068             5,614            454               8.1 % Other revenues                                     761               779            (18 )            (2.3 )%  Total operating revenues                        26,276            25,842            434               1.7 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                          19,075            19,111            (36 )            (0.2 )% Interest credited to policyholder account balances                                   963               952             11               1.2 % Capitalization of DAC                             (841 )            (873 )           32               3.7 % Amortization of DAC and VOBA                       966               725            241              33.2 % Interest expense on debt                             1                 6             (5 )           (83.3 )% Other expenses                                   4,080             4,206           (126 )            (3.0 )%  Total operating expenses                        24,244            24,127            117               0.5 %  Provision for income tax expense (benefit)                                          711               573            138              24.1 %  Operating earnings                        $      1,321         $   1,142        $   179              15.7 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  The improvement in the global financial markets had a positive impact on net investment income, which contributed to the increase in Insurance Products' operating earnings. In addition, we experienced overall modest revenue growth in several of our businesses despite this challenging environment. High levels of unemployment continue to depress growth across most of our group insurance businesses due to lower covered payrolls. Growth in our group life business was dampened by a decline in our non-medical health and individual life businesses. However, our dental business benefited from higher enrollment and pricing actions, partially offset by lower persistency and the loss of existing subscribers, driven by high unemployment. This business also experienced more stable utilization and benefits costs in the current year. The revenue growth from our dental business was more than offset by a decline in revenues from our disability business, mainly due to net customer cancellations, changes in benefit levels and lower covered lives. Our long-term care revenues were flat year over year, concurrent with the discontinuance of the sale of this coverage at the end of 2010. In our individual life business, the change in revenues was suppressed by the impact of a benefit recorded in the prior year related to the positive resolution of certain legal matters. Excluding this impact, the traditional life business experienced 8% growth in our open block of business. The expected run-off of our closed block more than offset this growth.  The significant components of the $179 million increase in operating earnings were an improvement in net investment income and the impact of a reduction in dividends to certain policyholders, coupled with lower expenses. These improvements were partially offset by an increase in DAC amortization, as well as net unfavorable claims experience across several of our businesses.  Higher net investment income of $295 million was due to a $202 million increase from growth in average invested assets and a $93 million increase from higher yields. Growth in the investment portfolio was attributed to an increase in net cash flows from the majority of our businesses. The increase in yields was largely due to the positive effects of recovering private equity markets and stabilizing real estate markets on other limited partnership interests and real estate joint ventures. To manage the needs of our intermediate to longer-term liabilities, our portfolio consists primarily of investment grade corporate fixed maturity securities, mortgage loans, structured finance securities (comprised of mortgage and asset-backed securities) and U.S. Treasury and agency securities and, to a lesser extent, certain other invested asset classes, including other limited partnership interests, real estate joint ventures and other invested assets which provide additional diversification and opportunity for long-term yield enhancement.                                          121

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  The increase in net investment income was partially offset by a $36 million increase in interest credited on long duration contracts, which is reflected in the change in policyholder benefits and dividends, primarily due to growth in future policyholder benefits in our LTC and disability businesses.  Other expenses decreased by $82 million, largely due to a decrease of $40 million from the impact of market conditions on certain expenses, such as pension and post-retirement benefit costs. In addition, a decrease in information technology expenses of $29 million contributed to the improvement in operating earnings. A decrease in variable expenses, such as commissions and premium taxes, further reduced expenses by $11 million, a portion of which is offset by DAC capitalization.  The reduction in the dividend scale in the fourth quarter of 2009 resulted in a $109 million decrease in policyholder dividends in the traditional life business in 2010.  Claims experience varied amongst Insurance Products' businesses with a net unfavorable impact of $42 million to operating earnings. We experienced excellent mortality results in our group life business due to a decrease in severity, as well as favorable reserve refinements in 2010. In addition, an improvement in our LTC results was driven by favorable claim experience mainly due to higher terminations and less claimants in 2010, coupled with the impact of unfavorable reserve refinements in 2009. Our improved dental results were driven by higher enrollment and pricing actions, as well as improved claim experience in the current year. The impact of this positive experience was surpassed by solid, but less favorable mortality, in our individual life business combined with higher incidence and severity of group disability claims in the current year, and the impact of a gain from the recapture of a reinsurance agreement in 2009.  Higher DAC amortization of $157 million was primarily driven by the impact of higher gross margins, a primary component in the determination of the amount of amortization, mostly in the closed block resulting from increased investment yields and the impact of dividend scale reductions. In addition, the net impact of various model refinements in both 2010 and 2009 increased DAC amortization.  

Certain events reduced operating earnings, including the impact of a benefit being recorded in 2009 of $17 million related to the positive resolution of certain legal matters and an increase in current income tax expense of $27 million, resulting from an increase in our effective tax rate.

  Retirement Products                                               Years Ended December 31,                                             2010               2009            Change          % Change                                                         (In millions) OPERATING REVENUES Premiums                                $        875         $     920        $    (45 )            (4.9 )% Universal life and investment-type product policy fees                            2,024             1,543             481              31.2 % Net investment income                          3,395             3,098             297               9.6 % Other revenues                                   220               173              47              27.2 %  Total operating revenues                       6,514             5,734             780              13.6 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                     1,487             1,486               1               0.1 % Interest credited to policyholder account balances                               1,612             1,688             (76 )            (4.5 )% Capitalization of DAC                         (1,067 )          (1,067 )             -                 - % Amortization of DAC and VOBA                     808               610             198              32.5 % Interest expense on debt                           3                 -      

3

 Other expenses                                 2,437             2,403              34               1.4 %  Total operating expenses                       5,280             5,120             160               3.1 %  Provision for income tax expense (benefit)                                        431               216             215              99.5 %  Operating earnings                      $        803         $     398        $    405                                            122 

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Unless otherwise stated, all amounts discussed below are net of income tax.

  During 2010, overall annuity sales decreased 5% compared to 2009 as declines in fixed annuity sales were partially offset by increased sales of our variable annuity products. The financial market turmoil in early 2009 resulted in extraordinarily high sales of fixed annuity products in 2009. The high sales level was not expected to continue after the financial markets returned to more stable levels. Variable annuity product sales increased primarily due to the expansion of alternative distribution channels and fewer competitors in the market place. Surrender rates for both our variable and fixed annuities remained low during the current period as we believe our customers continue to value our products compared to other alternatives in the marketplace.  

Interest rate and equity market changes were the primary driver of the $405 million increase in operating earnings, with the largest impact resulting from a $343 million increase in policy fees and other revenues and, a $193 million increase in net investment income, offset by a $132 million increase in DAC, VOBA and DSI amortization and a $39 million increase in commission expense resulting from growth in annuity contract balances.

  A significant increase in average separate account balances was largely attributable to favorable market performance resulting from improved market conditions since the second quarter of 2009 and positive net cash flows from the annuity business. This resulted in higher policy fees and other revenues of $343 million, partially offset by greater DAC, VOBA and DSI amortization. Policy fees are typically calculated as a percentage of the average assets in the separate account. 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.  Financial market improvements also resulted in the increase in net investment income of $193 million as a $291 million increase from higher yields was partially offset by a $98 million decrease from a decline in average invested assets. Yields were positively impacted by the effects of the continued repositioning of the accumulated liquidity in our investment portfolio to longer duration and higher yielding assets, including investment grade corporate fixed maturity securities. Yields were also positively impacted by the effects of recovering private equity markets and stabilizing real estate markets on other limited partnership interests and real estate joint ventures. Despite positive net cash flows, a reduction in the general account investment portfolio was due to the impact of more customers gaining confidence in the equity markets and, as a result, electing to transfer funds into our separate account investment options as market conditions improved. To manage the needs of our intermediate to longer-term liabilities, our investment portfolio consists primarily of investment grade corporate fixed maturity securities, structured finance securities, mortgage loans and U.S. Treasury and agency securities and, to a lesser extent, certain other invested asset classes, including other limited partnership interests, real estate joint ventures and other invested assets, in order to provide additional diversification and opportunity for long-term yield enhancement.  

Annuity guaranteed benefit liabilities, net of a decrease in paid claims, increased benefits by $13 million primarily from our annual unlocking of assumptions related to these liabilities.

  Interest credited expense decreased $49 million driven by lower average crediting rates on fixed annuities and higher amortization of excess interest reserve due to one large case surrender in 2010, partially offset by growth in our fixed annuity PABs.                                          123 

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   Table of Contents  Corporate Benefit Funding                                                 Years Ended December 31,                                           2010                   2009              Change          % Change                                                              (In millions) OPERATING REVENUES Premiums                               $     1,938          $         2,264        $  (326 )           (14.4 )% Universal life and investment-type product policy fees                            226                      176             50              28.4 % Net investment income                        4,954                    4,527            427               9.4 % Other revenues                                 246                      238              8               3.4 %  Total operating revenues                     7,364                    7,205            159               2.2 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                   4,041                    4,245           (204 )            (4.8 )% Interest credited to policyholder account balances                             1,445                    1,632           (187 )           (11.5 )% Capitalization of DAC                          (19 )                    (14 )           (5 )           (35.7 )% Amortization of DAC and VOBA                    16                       15              1               6.7 % Interest expense on debt                         6                        3              3             100.0 % Other expenses                                 460                      456              4               0.9 %  Total operating expenses                     5,949                    6,337           (388 )            (6.1 )%  Provision for income tax expense (benefit)                                      495                      288            207              71.9 %  Operating earnings                     $       920          $           580        $   340              58.6 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  Corporate Benefit Funding benefited in 2010 from strong sales of structured settlement products and continued market penetration of our pension closeout business in the U.K. However, structured settlement premiums have declined $174 million, before income tax, from 2009 reflecting extraordinary sales in the fourth quarter of 2009. While market penetration continued in our pension closeout business in the U.K. as the number of sold cases increased, the average premium has declined, resulting in a decrease in premiums of $216 million, before income tax. Although improving, a combination of poor equity returns and lower interest rates have contributed to pension plans remaining underfunded, both in the U.S. and in the U.K., which reduces our customers' flexibility to engage in transactions such as pension closeouts. For each of these businesses, the movement in premiums is almost entirely offset by the related change in policyholder benefits. The insurance liability that is established at the time we assume the risk under these contracts is typically equivalent to the premium recognized.  The $340 million increase in operating earnings was primarily driven by an improvement in net investment income and the impact of lower crediting rates, partially offset by the impact of prior period favorable liability refinements and less favorable mortality.  The primary driver of the $340 million increase in operating earnings was higher net investment income of $278 million, reflecting a $187 million increase from higher yields and a $91 million increase in average invested assets. Yields were positively impacted by the effects of stabilizing real estate markets and recovering private equity markets on real estate joint ventures and other limited partnership interests. These improvements in yields were partially offset by decreased yields on fixed maturity securities due to the reinvestment of proceeds from maturities and sales during this lower interest rate environment. Growth in the investment portfolio is due to an increase in average PABs and growth in the securities lending program. To manage the needs of our longer-term liabilities, our portfolio consists primarily of investment grade corporate fixed maturity securities, structured finance securities, mortgage loans and U.S. Treasury and agency securities, and, to a lesser extent, certain other invested asset classes including other limited partnership interests, real estate joint ventures and other invested assets in order to provide additional diversification and opportunity for long-term yield enhancement. For our short-term obligations, we invest primarily in structured finance securities, mortgage loans and investment grade                                          124

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  corporate fixed maturity securities. The yields on these short-term investments have moved consistently with the underlying market indices, primarily LIBOR and U.S. Treasury, on which they are based.  As many of our products are interest spread-based, changes in net investment income are typically offset by a corresponding change in interest credited expense. However, interest credited expense decreased $122 million, primarily related to our funding agreement business as a result of lower average crediting rates combined with lower average account balances. Certain crediting rates can move consistently with the underlying market indices, primarily LIBOR, which were lower than the prior year. Interest credited expense related to the structured settlement businesses increased $40 million as a result of the increase in the average policyholder liabilities.  Mortality experience was mixed and reduced operating earnings in 2010 by $26 million. Less favorable mortality in our pension closeouts and corporate owned life insurance businesses compared to 2009 was only slightly offset by favorable mortality experience in our structured settlements business.  Liability refinements in both 2010 and 2009 resulted in a $28 million decrease to operating earnings. These were largely offset by the impact of a charge in the 2009 period related to a refinement of a reinsurance recoverable in the small business recordkeeping business which increased operating earnings by $20 million.  Auto & Home                                                 Years Ended December 31,                                           2010                   2009               Change          % Change                                                              (In millions) OPERATING REVENUES Premiums                               $     2,923          $         2,902        $     21               0.7 % Net investment income                          209                      180              29              16.1 % Other revenues                                  22                       33             (11 )           (33.3 )%  Total operating revenues                     3,154                    3,115              39               1.3 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                   2,021                    1,932              89               4.6 % Capitalization of DAC                         (448 )                   (435 )           (13 )            (3.0 )% Amortization of DAC and VOBA                   439                      436               3               0.7 % Other expenses                                 769                      764               5               0.7 %  Total operating expenses                     2,781                    2,697              84               3.1 %  Provision for income tax expense (benefit)                                       73                       96             (23 )           (24.0 )%  Operating earnings                     $       300          $           322        $    (22 )            (6.8 )%   

Unless otherwise stated, all amounts discussed below are net of income tax.

  The improving housing and automobile markets have provided opportunities that led to increased new business sales for both homeowners and auto policies in 2010. Sales of new policies increased 11% for our homeowners business and 4% for our auto business in 2010 compared to 2009. Average premium per policy also improved in 2010 over 2009 in our homeowners businesses but remained flat in our auto business.  

The primary driver of the $22 million decrease in operating earnings was unfavorable claims experience, partially offset by higher net investment income and increased premiums.

  Catastrophe-related losses increased by $58 million compared to 2009 due to increases in both the number and severity of storms. The 2010 claim costs decreased $19 million as a result of lower frequencies in both our auto and homeowners businesses; however, this was partially offset by a $13 million increase in claims due to higher severity in our homeowners business. Also contributing to the decline in operating earnings was an increase of $7 million in loss adjusting expenses, primarily related to a decrease in our unallocated loss adjusting expense liabilities at the end of 2009.                                          125

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  The impact of the items discussed above can be seen in the unfavorable change in the combined ratio, including catastrophes, increasing to 94.6% in 2010 from 92.3% in 2009 and the favorable change in the combined ratio, excluding catastrophes, decreasing to 88.1% in 2010 from 88.9% in 2009.  A $19 million increase in net investment income partially offset the declines in operating earnings discussed above. Net investment income was higher primarily as a result of an increase in average invested assets, including changes in allocated equity, partially offset by a decrease in yields. This portfolio is comprised primarily of high quality municipal bonds.  The increase in average premium per policy in our homeowners businesses improved operating earnings by $10 million as did an increase in exposures which improved operating earnings by $1 million. Exposures are primarily each automobile for the auto line of business and each residence for the property line of business. Also improving operating earnings, through an increase in premiums, was a $5 million reduction in reinsurance costs.  

The slight increase in other expenses was more than offset by an $8 million increase in DAC capitalization, resulting primarily from increased premiums written.

  In addition, a first quarter 2010 write-off of an equity interest in a mandatory state underwriting pool required by a change in legislation and a decrease in income from a retroactive reinsurance agreement in run-off, both of which were recorded in other revenues, drove a $7 million decrease in operating earnings. Auto & Home also benefited from a lower effective tax rate which improved operating earnings by $8 million primarily as a result of tax free interest income representing a larger portion of pre-tax income.  Japan                                                         Years Ended December 31,                                                   2010                      2009              Change                                                                         (In millions) OPERATING REVENUES Premiums                                     $          499            $             -        $   499 Universal life and investment-type product policy fees                                      55                          -             55 Net investment income                                   145                          -            145 Other revenues                                            7                          -              7  Total operating revenues                                706                          -            706  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                                  309                          -            309 Interest credited to policyholder account balances                                        123                          -            123 Capitalization of DAC                                  (149 )                        -           (149 ) Amortization of DAC and VOBA                             82                          -             82 Amortization of negative VOBA                           (49 )                        -            (49 ) Other expenses                                          244                          -            244  Total operating expenses                                560                          -            560  Provision for income tax expense (benefit)                                                52                          -             52  Operating earnings                           $           94            $             -        $    94    Our Japan operation is comprised of the Japan business acquired in the Acquisition and is among the largest foreign life insurers in Japan. Through our Japan operation we provide life insurance, accident and health insurance, annuities and endowment products to both individuals and groups. Reported operating earnings reflect the operating results of ALICO from the Acquisition Date through November 30, 2010, ALICO's fiscal year-end. Therefore, Japan's operating earnings for 2010 include one month of results from ALICO operations.                                          126 

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   Table of Contents  Other International Regions                                                 Years Ended December 31,                                           2010                   2009              Change          % Change                                                              (In millions) OPERATING REVENUES Premiums                               $     3,625          $         2,884        $   741              25.7 % Universal life and investment-type product policy fees                          1,265                    1,055            210              19.9 % Net investment income                        1,466                    1,111            355              32.0 % Other revenues                                  28                       14             14             100.0 %  Total operating revenues                     6,384                    5,064          1,320              26.1 %  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                   3,053                    2,326            727              31.3 % Interest credited to policyholder account balances                               554                      577            (23 )            (4.0 )% Capitalization of DAC                         (775 )                   (587 )         (188 )           (32.0 )% Amortization of DAC and VOBA                   490                      397             93              23.4 % Amortization of negative VOBA                   (8 )                      -             (8 ) Interest expense on debt                         3                        8             (5 )           (62.5 )% Other expenses                               2,233                    1,737            496              28.6 %  Total operating expenses                     5,550                    4,458          1,092              24.5 %  Provision for income tax expense (benefit)                                      148                      155             (7 )            (4.5 )%  Operating earnings                     $       686          $           451        $   235              52.1 %   

Unless otherwise stated, all amounts discussed below are net of income tax.

  The improvement in the global financial markets has resulted in continued growth, with an increase in sales in the current period compared to the prior period excluding the results of our Japan joint venture. Retirement and savings sales increased driven by strong annuity, universal life and pension sales in Europe, Mexico, Chile, Korea and China. In our Europe and the Middle East operations, sales of annuities and universal life products remained strong, more than doubling from the prior year, partially offset by lower pension and variable universal life sales in IndiaLatin America operation experienced an overall increase in sales resulting from solid growth in pension and universal life sales in Mexico and an increase in fixed annuity sales in Chile due to market recovery, slightly offset by lower bank sales in Brazil resulting from incentives offered in the prior year. Sales in our Asia Pacific operation, excluding the results of our Japan joint venture, increased primarily due to higher variable universal life sales in Korea, slightly offset by the decline in annuity sales and strong bank channel sales in China.  Reported operating earnings increased by $235 million over the prior year. The positive impact of changes in foreign currency exchange rates improved reported earnings by $37 million for 2010 compared to 2009. Reported operating earnings reflect the operating results of ALICO operations other than Japan from the Acquisition Date through November 30, 2010, which contributed $20 million to our 2010 operating earnings. As previously noted, ALICO's fiscal year-end is November 30; therefore, our results for the year include one month of results from ALICO operations other than Japan.  Changes in assumptions for measuring the impact of inflation on certain inflation-indexed fixed maturity securities increased operating earnings. Changes to the provision for income taxes in both periods contributed to an increase in operating earnings, resulting from an unfavorable impact in 2009 from a change in assumption regarding the repatriation of earnings and a benefit in the current year from additional permanent reinvestment of earnings, the reversal of tax provisions and favorable changes in liabilities for tax uncertainties. Business growth in our Latin America operation contributed to an increase in operating earnings. Operating earnings in Mexico increased due to growth in our institutional and individual businesses, partially offset by the impact of                                          127 

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  unfavorable claims experience. Higher investment yields resulting from portfolio restructuring was the primary driver in Argentina contributing to an improvement in operating earnings. India's results benefited primarily due to lower expenses resulting from the loss of a major distributor and slower growth resulting from market conditions.  Partially offsetting these increases is the impact of pesification in Argentina, which favorably impacted 2009 reported earnings by $95 million. This prior period benefit was due to a liability release resulting from a reassessment of our approach in managing existing and potential future claims related to certain social security pension annuity contractholders in Argentina. In addition, operating earnings in Australia were lower, which was primarily due to a write-off of DAC attributable to a change in a product feature in the current period.  Net investment income increased from growth in average invested assets and improved yields. Growth in average invested assets reflects growth in our businesses. Improved yields reflects the impact of increased inflation, primarily in Chile, as well as the impact of changes in assumptions for measuring the effects of inflation on certain inflation-indexed fixed maturity securities. The increase in net investment income from higher inflation was offset by an increase in the related insurance liabilities due to higher inflation. Although diversification into higher yielding investments had a positive impact on yields, this was partially offset by decreased trading and other securities results driven by a stronger recovery in equity markets in 2009 compared to 2010, primarily in Hong Kong, and by a decrease in the results of our operating joint ventures. The reduction in net investment income from our trading portfolio is entirely offset by a corresponding decrease in the interest credited on the related contractholder account balances and therefore had no impact on operating earnings.  In addition to an increase associated with the Acquisition, operating expenses increased due to the impact of the pesification in Argentina noted above, as well as current period business growth in Korea, Brazil and Mexico, which resulted in increased commissions and compensation. These increases were partially offset by lower commissions and business expenses in India.  Corporate & Other                                                Years Ended December 31,                                          2010                   2009              Change          % Change                                                             (In millions) OPERATING REVENUES Premiums                              $        11          $            19        $    (8 )           (42.1 )% Net investment income                         643                       70  

573

 Other revenues                                391                      236            155              65.7 %  Total operating revenues                    1,045                      325  

720

  OPERATING EXPENSES Policyholder benefits and claims and policyholder dividends                    (14 )                      4            (18 ) Amortization of DAC and VOBA                    1                        3             (2 )           (66.7 )% Interest expense on debt                    1,126                    1,027             99               9.6 % Other expenses                                467                      586           (119 )           (20.3 )%  Total operating expenses                    1,580                    1,620            (40 )            (2.5 )%  Provision for income tax expense (benefit)                                    (366 )                   (756 )          390              51.6 %  Operating earnings                           (169 )                   (539 )          370              68.6 % Less: Preferred stock dividends               122                      122              -                 - %  

Operating earnings (losses) available to common shareholders $ (291 ) $ (661 ) $ 370

              56.0 %    

Unless otherwise stated, all amounts discussed below are net of income tax.

MetLife, Inc. completed four debt financings in August 2010 in anticipation of the Acquisition, issuing $1.0 billion of 2.375% senior notes, $1.0 billion of 4.75% senior notes, $750 million of 5.875% senior notes, and                                          128

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$250 million of floating rate senior notes. MetLife, Inc. also issued debt securities, which are part of the $3.0 billion stated value of common equity units. The proceeds from these debt issuances were used to finance the Acquisition. MetLife, Inc. completed three debt issuances in 2009 in response to the economic crisis, issuing $397 million of floating rate senior notes in March 2009, $1.3 billion of senior notes in May 2009, and $500 million of junior subordinated debt securities in July 2009. The proceeds from these debt issuances were used for general corporate purposes.  

Operating earnings available to common shareholders and operating earnings, which excludes preferred stock dividends, each increased $370 million, primarily due to an increase in net investment income and a reduction in operating expenses, partially offset by a decrease in tax benefit and an increase in interest expense resulting from the debt issuances noted above.

  Net investment income increased $372 million reflecting an increase of $242 million due to higher yields and an increase of $130 million from growth in average invested assets. Yields were positively impacted by the effects of recovering private equity markets and stabilizing real estate markets on other limited partnership interests and real estate joint ventures. This was partially offset by lower fixed maturities and mortgage loan yields which were adversely impacted by the reinvestment of proceeds from maturities and sales during this lower interest rate environment and from decreased trading and other securities results due to a stronger recovery in equity markets in 2009 as compared to 2010. In addition, due to the lower interest rate environment in the current year, less net investment income was credited to the segments in 2010 compared to 2009. Growth in average invested assets was primarily due to higher cash collateral balances received from our derivative counterparties and the temporary investment of the proceeds from the debt and common stock issuances in anticipation of the Acquisition. Our investments primarily include structured finance securities, investment grade corporate fixed maturities, mortgage loans and U.S. Treasury and agency securities. In addition, our investment portfolio includes the excess capital not allocated to the segments. Accordingly, it includes a higher allocation of certain other invested asset classes to provide additional diversification and opportunity for long-term yield enhancement, including leveraged leases, other limited partnership interests, real estate, real estate joint ventures, trading securities and equity securities.  Corporate & Other benefited in 2010 from a $76 million reduction in discretionary spending, such as consulting and postemployment related costs, a $35 million decrease in real estate-related charges and $15 million of lower legal costs. These savings were partially offset by a $14 million increase in charitable contributions. The current year also included $44 million of internal resource costs for associates committed to the Acquisition. Additionally, the resolutions of certain legal matters increased operating earnings by $35 million.  Positive results from our mortgage loan servicing business were driven by a $32 million improvement in hedging results. A larger portfolio resulted in higher servicing fees of $18 million. This was partially offset by $10 million of additional expenses incurred in response to both the larger portfolio and increased regulatory oversight.  

Interest expense increased $64 million primarily as a result of the debt issuances in 2009 and the senior notes and debt securities issued in anticipation of the Acquisition, partially offset by the impact of lower interest rates on variable rate collateral financing arrangements.

  The 2010 period includes $75 million of charges related to the Health Care Act. The Federal government currently provides a Medicare Part D subsidy. The Health Care Act reduced the tax deductibility of retiree health care costs to the extent of any Medicare Part D subsidy received beginning in 2013. Because the deductibility of future retiree health care costs is reflected in our financial statements, the entire future impact of this change in law was required to be recorded as a charge in the period in which the legislation was enacted. As a result, we incurred a $75 million charge in the first quarter of 2010. The Health Care Act also amended Internal Revenue Code Section 162(m) as a result of which MetLife was initially considered a healthcare provider, as defined, and would be subject to limits on tax deductibility of certain types of compensation. In December 2010, the Internal                                          129

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  Revenue Service issued Notice 2011-2 which clarified that the executive compensation deduction limitation included in the Health Care Act did not apply to insurers like MetLife selling de minimis amounts of health care coverage. As a result, in the fourth quarter of 2010, we reversed $18 million of previously recorded taxes for 2010. In 2009, Corporate & Other received a larger benefit of $49 million as compared to 2010 related to the utilization of tax preferenced investments which provide tax credits and deductions.  

Effects of Inflation

Management believes that inflation has not had a material effect on its consolidated results of operations, except insofar as inflation may affect interest rates.

  An increase in inflation could affect our business in several ways. During inflationary periods, the value of fixed income investments falls which could increase realized and unrealized losses. Inflation also increases expenses for labor and other materials, potentially putting pressure on profitability if such costs cannot be passed through in our product prices. Inflation could also lead to increased costs for losses and loss adjustment expenses in certain of our businesses, which could require us to adjust our pricing to reflect our expectations for future inflation. Prolonged and elevated inflation could adversely affect the financial markets and the economy generally, and dispelling it may require governments to pursue a restrictive fiscal and monetary policy, which could constrain overall economic activity, inhibit revenue growth and reduce the number of attractive investment opportunities.  

Investments

Investment Risks

  The Company's primary investment objective is to optimize, net of income tax, risk-adjusted investment income and risk-adjusted total return while ensuring that assets and liabilities are managed on a cash flow and duration basis. The Company is exposed to four primary sources of investment risk:    

• credit risk, relating to the uncertainty associated with the continued

ability of a given obligor to make timely payments of principal and interest;

• interest rate risk, relating to the market price and cash flow variability

      associated with changes in market interest rates;       •   liquidity risk, relating to the diminished ability to sell certain       investments in times of strained market conditions; and    

• market valuation risk, relating to the variability in the estimated fair

value of investments associated with changes in market factors such as credit

spreads.

   The Company manages risk through in-house fundamental analysis of the underlying obligors, issuers, transaction structures and real estate properties. The Company also manages credit risk, market valuation risk and liquidity risk through industry and issuer diversification and asset allocation. For real estate and agricultural assets, the Company manages credit risk and market valuation risk through geographic, property type and product type diversification and asset allocation. The Company manages interest rate risk as part of its asset and liability management strategies; through product design, such as the use of market value adjustment features and surrender charges; and through proactive monitoring and management of certain non-guaranteed elements of its products, such as the resetting of credited interest and dividend rates for policies that permit such adjustments. The Company also uses certain derivative instruments in the management of credit, interest rate, currency and equity market risks.  

Purchased credit default swaps are utilized by the Company to mitigate credit risk in its investment portfolio. Generally, the Company purchases credit protection by entering into credit default swaps referencing the issuers of specific assets owned by the Company. In certain cases, basis risk exists between these credit default swaps

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  and the specific assets owned by the Company. For example, the Company may purchase credit protection on a macro basis to reduce exposure to specific industries or other portfolio concentrations. In such instances, the referenced entities and obligations under the credit default swaps may not be identical to the individual obligors or securities in the Company's investment portfolio. In addition, the Company's purchased credit default swaps may have shorter tenors than the underlying investments they are hedging. However, the Company dynamically hedges this risk through the rebalancing and rollover of its credit default swaps at their most liquid tenors. The Company believes that its purchased credit default swaps serve as effective legal and economic hedges of its credit exposure.  The Company generally enters into market standard purchased and written credit default swap contracts. Payout under such contracts is triggered by certain credit events experienced by the referenced entities. For credit default swaps covering North American corporate issuers, credit events typically include bankruptcy and failure to pay on borrowed money. For European corporate issuers, credit events typically also include involuntary restructuring. With respect to credit default contracts on Western European sovereign debt, credit events typically include failure to pay debt obligations, repudiation, moratorium, or involuntary restructuring. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association deems that a credit event has occurred.  Current Environment  The global economy and markets are still affected by a period of significant stress that began in the second half of 2007. This disruption adversely affected the financial services sector in particular and global capital markets. The Federal Reserve Board has taken a number of actions in recent years to spur economic activity by keeping interest rates low and may take further actions to influence interest rates in the future, which may have an impact on the pricing levels of risk-bearing investments. See "Risk Factors - Governmental and Regulatory Actions 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 Our Competitive Position."  Beginning in 2010 and continuing throughout 2011, concerns increased about capital markets and the solvency of certain European Union member states, including Portugal, Ireland, Italy, Greece and Spain, and of financial institutions that have significant direct or indirect exposure to their sovereign debt. This, in turn, increased market volatility that will continue to affect the performance of various asset classes in 2012, and perhaps longer, until there is an ultimate resolution of these European Union sovereign debt-related concerns.  As a result of concerns about the ability of Portugal, Ireland, Italy, Greece and Spain, commonly referred to as "Europe's perimeter region," to service their sovereign debt, these countries have experienced credit ratings downgrades, including the downgrade of Greece's sovereign debt in July 2011 by Moody's Investors Service, Inc. ("Moody's") and S&P to Ca and CC ratings, respectively - rating designations of likely in, or very near, default, following the announcement of the debt exchange proposal summarized below. In February 2012, S&P further downgraded Greece, as described below. Despite support programs for Europe's perimeter region, concerns about the ability to service sovereign debt subsequently expanded to other European Union member states. As a result, in late 2011 and early 2012, several other European Union member states have experienced credit ratings downgrades or have had their credit ratings outlook changed to negative. As summarized below, at December 31, 2011, the Company did not have significant exposure to the sovereign debt of Europe's perimeter region. Accordingly, we do not expect such investments to have a material adverse effect on our results of operations or financial condition. Outside of Europe's perimeter region, the Company's sovereign debt, corporate debt and perpetual hybrid securities in Europe were concentrated in the United Kingdom, Germany, France, the Netherlands and Poland, which are higher-rated countries within the European Union, as well in Switzerland and Norway, which are two higher-rated non-European Union countries.  Greece Support Program. In July 2011, a public sector support program for Greece of €109 billion was announced, as well as a separate, voluntary debt exchange proposal for private sector holders of Greece sovereign debt (known as Private Sector Involvement, or "PSI"). Private investors that voluntarily participate in the initially proposed July PSI proposal, which was expected to apply to Greece's sovereign debt maturing                                          131

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  through 2019, were expected to incur losses on a net present value basis of approximately 20% on such securities. In October 2011, a revision of the July PSI proposal was announced which included a voluntary 50% nominal discount on all maturities of Greece sovereign debt held by the private sector. In addition to this, the public sector Greece financing package was revised to €100 billion plus a contribution of €30 billion from Greece's public sector creditors to provide collateral enhancements on the exchanged Greece sovereign bonds under the October PSI proposal. On February 21, 2012, the Euro Group, which is comprised of the finance ministers of the member states of the European Union, representatives of the European Commission and the European Central Bank, announced a €130 billion support program that contains a PSI proposal for a voluntary 53.5% nominal discount on all maturities of Greece sovereign debt held by the private sector. On February 23, 2012, Greece's Parliament retroactively inserted collective action clauses in the documentation of certain series of its sovereign debt, which has the effect of binding all private sector investors to accept the terms of a debt exchange, if a quorum of private sector investors accepts the debt exchange proposal. Greece launched a sovereign debt exchange offer on February 24, 2012. On February 27, 2012, as a result of the retroactive insertion of such collective action clauses, S&P downgraded Greece's credit rating to SD, a rating of selective default. If the Greece sovereign debt exchange offer is consummated, S&P has stated it will likely consider the selective default to have been cured and would likely raise the sovereign credit rating on Greece.  Europe'sPerimeter Region Sovereign Debt Securities. Our holdings of Greece sovereign debt were acquired in the Acquisition and our amortized cost basis reflects recording such securities at estimated fair value on November 1, 2010, which was substantially below par, partially mitigating our impairment exposure. During the year ended December 31, 2011, we recorded non-cash impairment charges of $405 million on our holdings of Greece's sovereign debt. In addition, during the year ended December 31, 2011, we sold a significant portion of our Europe's perimeter region sovereign debt, thereby substantially reducing our exposure. The par value, amortized cost and estimated fair value of holdings in sovereign debt of Europe's perimeter region were $874 million, $254 million and $264 million at December 31, 2011, respectively, and $1.9 billion, $1.6 billion and $1.6 billion at December 31, 2010, respectively.  Select European Countries - Investment Exposures. Due to the current level of economic, fiscal and political strain in Europe's perimeter region and Cyprus, the Company continually monitors and adjusts its level of investment exposure in these countries. We manage direct and indirect investment exposure in these countries through fundamental credit analysis. The following table presents a summary of investments by invested asset class and related purchased credit default protection across Europe's perimeter region, by country, and Cyprus.                                                                                          Summary of Select European Country Investment Exposure at December 31, 2011 (1)(2)                                                           Fixed maturity securities (3)                                                                                                                      All Other                                                                                                                   General Account                                            Purchased                                                            Financial          Non-Financial                         Investment               Total                         Credit Default           Net                                         Sovereign           Services            Services            Total         Exposure (4)(5)        Exposure (6)          %           Protection (7)         Exposure           %                                                                                                                          (In millions) Europe's perimeter region: Portugal                               $        16        $          4       $           164       $   184       $               9       $         193           5  %     $            (31 )     $      162            4  % Italy                                           30                 242                   995         1,267                      80               1,347          33                     (11 )          1,336           33 Ireland                                         16                   6                   537           559                     532               1,091          26                       -            1,091           27 Greece                                         189                   -                     -           189                     203                 392           9                       -              392            9 Spain                                           13                 163                   764           940                      60               1,000          24                       -            1,000           24  Total Europe's perimeter region                264                 415                 2,460         3,139                     884               4,023          97                     (42 )          3,981           97  Cyprus                                          80                   -                     -            80                      34                 114           3                       -              114            3  Total                                  $       344        $        415       $         2,460       $ 3,219       $             918       $       4,137         100  %     $            (42 )     $    4,095          100  %  As percent of total cash and invested assets                                0.1 %               0.1 %                 0.4 %         0.6 %                   0.2 %               0.8 %                               0.0 %            0.8  % Investment grade percent                        41 %                99 %                  93 %          88 % Non investment grade percent                    59 %                 1 %                   7 %          12 %      

(1) Information is presented on a country of risk basis (e.g. the country where

    the issuer primarily conducts business).    

(2) The Company has not written any credit default swaps with an underlying risk

    related to any of these six countries.                                             132 

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Table of Contents (3) Presented at estimated fair value. The par value and amortized cost of the

fixed maturity securities were $3.9 billion and $3.4 billion, respectively,

    at December 31, 2011.    

(4) Comprised of equity securities, FVO general account securities, real estate

and real estate joint ventures, other limited partnership interests, cash,

cash equivalents and short-term investments, and other invested assets at

carrying value. See Note 1 of the Notes to the Consolidated Financial

Statements for an explanation of the carrying value for these invested asset

    classes.    

(5) Excludes FVO contractholder-directed unit-linked investments of $667 million,

which support unit-linked variable annuity type liabilities and do not

qualify for separate account summary total assets and liabilities. The

contractholder, and not the Company, directs the investment of these funds.

The related variable annuity type liability is satisfied from the

contractholder's account balance and not from the general account investments

    of the Company.    

(6) There were no unfunded commitments related to these investments as of

December 31, 2011.    

(7) Purchased credit default protection is stated at the estimated fair value of

the swap. For Portugal, the purchased credit default protection relates to

sovereign securities and this swap had a notional amount of $100 million and

an estimated fair value of $31 million as of December 31, 2011. For Italy,

the purchased credit default protection relates to financial services

corporate securities and these swaps had a notional amount of $80 million and

an estimated fair value of $11 million at December 31, 2011. The

counterparties to these swaps are financial institutions with S&P credit

ratings ranging from A+ to A- as of December 31, 2011.

   European Region Investments. The Company has investments across certain European Union member states and other countries in the region that are not members of the European Union (collectively, the "European Region"). In the European Region, we have proactively mitigated risk in both direct and indirect exposures by investing in a diversified portfolio of high quality investments with a focus on the higher-rated countries, reducing our holdings through sales of financial services securities during 2010 and 2011 and sales of Europe's perimeter region sovereign debt in 2011, and by purchasing certain single name credit default protection in 2010 and 2011. Our sales of financial services securities were focused on institutions with exposure to Europe's perimeter region, lower preference capital structure instruments, and larger positions. Sovereign debt issued by countries outside of Europe's perimeter region comprised $8.4 billion, or 97% of European Region sovereign fixed maturity securities, at estimated fair value at December 31, 2011. The European Region corporate securities (fixed maturity and perpetual hybrid securities classified as non-redeemable preferred stock) are invested in a diversified portfolio of primarily non-financial services securities, which comprised $25.8 billion, or 77% of European Region total corporate securities, at estimated fair value at December 31, 2011. Of these European Region sovereign fixed maturity and corporate securities, 92% were investment grade and, for the 8% that were below investment grade, the majority were non-financial services corporate securities at December 31, 2011. European Region financial services corporate securities at estimated fair value were $7.6 billion, including $5.9 billion within the banking sector, with 94% invested in investment grade rated corporate securities, at December 31, 2011.  Rating Actions - U.S. Treasury Securities. In August 2011, S&P downgraded the AAA rating on U.S. Treasury securities to AA+ with a negative outlook, while Moody's affirmed the Aaa rating on U.S. Treasury securities, but with a negative outlook. Fitch affirmed its AAA rating on U.S. Treasury securities and kept its outlook stable. In October 2011, Moody's affirmed its August 2011 ratings but revised its negative outlook to stable. In November 2011, Fitch affirmed its AAA rating on U.S. Treasury securities but changed its U.S. credit rating outlook to negative from stable, citing the failure of a special Congressional committee to agree on certain deficit-reduction measures. We continue to closely evaluate the implications on our investment portfolio of further rating agency downgrades of U.S. Treasury securities and believe our investment portfolio is well positioned. In light of the related market uncertainty, we increased our liquidity position in July 2011. With the raising of the statutory debt ceiling in August 2011, we have subsequently redeployed and reduced some of                                          133

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  this increased liquidity position into higher yielding investments according to our ALM discipline. Despite the downgrade by S&P, yields on U.S. Treasury securities have decreased since these actions, causing an increase in the unrealized gain position on our holdings of U.S. Treasury and agency securities. The S&P downgrade initially had an adverse effect on financial markets but the extent of the longer-term impact cannot be predicted. See "Risk Factors - Concerns Over U.S. Fiscal Policy and the Trajectory of the National Debt of the U.S., as well as Rating Agency Downgrades of U.S. Treasury Securities Could Have an Adverse Effect on Our Business, Financial Condition and Results of Operations."  Japan Investments. The Japanese economy, to which we face substantial exposure given our operations there, was significantly negatively impacted by the March 2011 earthquake and tsunami. Although we expect modest growth in the Japanese economy during 2012, 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. The Company's investment in fixed maturity and equity securities in Japan were $28.4 billion, of which , or 74%, were Japan government and agency fixed maturity securities at December 31, 2011.  Summary. All of these factors have had and could continue to have an adverse effect on the financial results of companies in the financial services industry, including MetLife. Such global economic conditions, as well as the global financial markets, continue to impact our net investment income, our net investment gains (losses) and net derivative gains (losses), level of unrealized gains and (losses) within the various asset classes within our investment portfolio and our allocation to lower yielding cash equivalents and short-term investments. See "- Industry Trends" and "Risk Factors - 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."                                          134 

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Composition of Investment Portfolio and Investment Portfolio Results

  The following yield table presents the investment income, investment portfolio gains (losses), annualized yields on average ending assets and ending carrying value for each of the asset classes within the investment portfolio, as well as investment income and investment portfolio gains (losses) for the investment portfolio as a whole. The yield table also presents gains (losses) on derivative instruments which are used to manage risk for certain invested assets and certain insurance liabilities:                                                               At and for the Years Ended                                                                   December 31,                                                       2011            2010            2009                                                                   (In millions) Fixed Maturity Securities: Yield (1)                                                4.94 %          5.54 %          5.75 % Investment income (2),(3),(4)                       $  15,016       $  12,567       $  11,827 Investment gains (losses) (3)                       $    (932 )     $    (255 )     $  (1,658 ) Ending carrying value (2),(3)                       $ 351,011       $ 325,391       $ 228,070 Mortgage Loans: Yield (1)                                                5.53 %          5.51 %          5.38 % Investment income (3),(4)                           $   3,162       $   2,821       $   2,734 Investment gains (losses) (3)                       $     175       $      22       $    (442 ) Ending carrying value (3)                           $  61,303       $  55,457       $  50,824 Real Estate and Real Estate Joint Ventures: Yield (1)                                                3.76 %          1.10 %         (7.47 )% Investment income (3)                               $     307       $      77       $    (541 ) Investment gains (losses) (3)                       $     230       $     (40 )     $    (156 ) Ending carrying value                               $   8,563       $   8,030       $   6,896 Policy Loans: Yield (1)                                                5.43 %          6.38 %          6.49 % Investment income                                   $     641       $     649       $     641 Ending carrying value                               $  11,892       $  11,761       $   9,932 Equity Securities: Yield (1)                                                4.44 %          4.40 %          5.12 % Investment income                                   $     141       $     128       $     176 Investment gains (losses)                           $     (23 )     $     104       $    (399 ) Ending carrying value                               $   3,023       $   3,602       $   3,081 Other Limited Partnership Interests: Yield (1)                                               10.58 %         14.99 %          3.22 % Investment income                                   $     681       $     879       $     174 Investment gains (losses)                           $       4       $     (18 )     $    (356 ) Ending carrying value                               $   6,378       $   6,416       $   5,508 Cash and Short-Term Investments: Yield (1), (5)                                           1.04 %          0.61 %          0.53 % Investment income                                   $     155       $      81       $      93 Investment gains (losses)                           $       2       $       2       $       6 Ending carrying value (3)                           $  27,750       $  22,302       $  18,385 Other Invested Assets: (1) Investment income                                   $     454       $     492       $     335 Investment gains (losses) (3)                       $      (9 )     $      (8 )     $     (32 ) Ending carrying value                               $  23,628       $  15,430       $  12,697 Total Investments: Investment income yield (1)                              5.01 %          5.51 %          5.08 % Investment fees and expenses yield                      (0.13 )         

(0.14 ) (0.14 )

  Net Investment Income Yield (1), (3),(5)                 4.88 %          5.37 %          4.94 %  Investment income                                   $  20,557       $  17,694       $  15,439 Investment fees and expenses                             (546 )          (465 )          (432 )  Net investment income including divested businesses                                          $  20,011       $  17,229       $  15,007 Less: net investment income from divested businesses (5)                                           (335 )          (349 )          (407 )  Net Investment Income (3)                           $  19,676       $  16,880       $  14,600  Ending Carrying Value (3)                           $ 493,548       $ 448,389       $ 335,393  Investment portfolio gains (losses) including divested businesses                                 $    (553 )     $    (193 )     $  (3,037 ) Less: investment portfolio gains (losses) from divested businesses (5)                                   140              33             129  Investment portfolio gains (losses) (3),(5),(6)     $    (413 )     $    (160 )     $  (2,908 ) Gross investment gains                              $   1,354       $   1,180       $   1,226 Gross investment losses                                (1,058 )          (840 )        (1,393 ) Writedowns                                               (709 )          (500 )        (2,741 )  Investment Portfolio Gains (Losses) (3),(5),(6)     $    (413 )     $    (160 )     $  (2,908 ) Investment portfolio gains (losses) income tax (expense) benefit                                         148              46           1,068  Investment Portfolio Gains (Losses), Net of Income Tax                                          $    (265 )     $    

(114 ) $ (1,840 )

  Derivative gains (losses) including divested businesses                                          $   4,545       $    (614 )     $  (5,106 ) Less: derivative gains (losses) from divested businesses (5)                                            163              41              (2 )  Derivative gains (losses) (3),(5),(6)               $   4,708       $    (573 )     $  (5,108 ) Derivative gains (losses) income tax (expense) benefit                                                (1,643 )           144           1,804  

Derivative Gains (Losses), Net of Income Tax $ 3,065 $ (429 ) $ (3,304 )

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    As described in the footnotes below, the yield table reflects certain differences from the presentation of invested assets, net investment income, net investment gains (losses) and net derivative gains (losses) as presented in the consolidated balance sheets and consolidated statements of operations. This yield table presentation is consistent with how we measure our investment performance for management purposes, and we believe it enhances understanding of our investment portfolio results.    

(1) Yields are calculated as investment income as a percent of average quarterly

asset carrying values. Investment income excludes recognized gains and losses

and reflects the operating revenue adjustments related to net investment

income. Asset carrying values exclude unrealized investment gains (losses),

collateral received from counterparties associated with our securities

lending program, freestanding derivative assets, collateral received from

derivative counterparties, the effects of consolidating under GAAP certain

VIEs that are treated as consolidated securitization entities ("CSEs"),

contractholder-directed unit-linked investments and securitized reverse

residential mortgage loans. A yield is not presented for other invested

assets, as it is not considered a meaningful measure of performance for this

    asset class.    

(2) Fixed maturity securities include $740 million, $594 million and $2.4 billion

at estimated fair value of trading and other securities at December 31, 2011,

2010 and 2009, respectively. Fixed maturity securities include $31 million,

$234 million and $400 million of investment income (loss) related to trading

and other securities for the years ended December 31, 2011, 2010 and 2009,

    respectively.    

(3) As described in footnote (1) above, ending carrying values

exclude contractholder-directed unit-linked investments - reported within

trading and other securities, securities held by CSEs - reported within

trading and other securities, and securitized reverse residential mortgage

loans- reported within mortgage loans. The related adjustments to ending

carrying value, investment income and investment gains (losses) by invested

asset class are presented below. The adjustments to investment income, net

investment income and investment gains (losses) in the aggregate are as shown

in footnote (6) to this yield table. The adjustment to investment gains

(losses) presented below and in footnote (6) to this yield table includes the

     effects of remeasuring both the invested assets and long-term debt in     accordance with the FVO.                                             At or For the Year Ended December 31, 2011                         At or For the Year Ended December 31, 2010                                  As Reported in the            Excluded                             As Reported in the           Excluded                                     Yield Table                Amounts              Total              Yield Table               Amounts              Total                                                        (In millions)                                                      (In millions) Trading and Other Securities: (included within Fixed Maturity Securities): Ending carrying value           $                740         $     17,528         $  18,268        $                594        $     17,995         $   18,589 Investment income               $                 31         $       (444 )       $    (413 )      $                234        $        226         $      460 Investment gains (losses)       $                 (2 )       $         (8 )       $     (10 )      $                  -        $        (30 )       $      (30 ) Mortgage Loans: Ending carrying value           $             61,303         $     10,790         $  72,093        $             55,457        $      6,840         $   62,297 Investment income               $              3,162         $        332         $   3,494        $              2,821        $        396         $    3,217 Investment gains (losses)       $                175         $         13         $     188        $                 22        $         36         $       58 Cash and Short-Term Investments: Ending carrying value           $             27,750         $         21         $  27,771        $             22,302        $         39         $   22,341 Total Investments: Ending carrying value           $            493,548         $     28,339         $ 521,887        $            448,389        $     24,874         $  473,263    

(4) Investment income from fixed maturity securities and mortgage loans includes

    prepayment fees.    

(5) For further information on Divested Businesses, see Note 2 of the Notes to

the Consolidated Financial Statements. Prior period yields have been recast

    to conform to the current period presentation to exclude                                           136 

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from asset carrying values freestanding derivatives and collateral received

from derivative counterparties. Net investment income, investment portfolio

gains (losses), and derivative gains (losses) are presented including and

excluding the impact of Divested Businesses. Yields are calculated including

    the net investment income and ending carrying values of the Divested     Businesses.    

(6) Net investment income, investment portfolio gains (losses) and derivative

gains (losses) presented in this yield table vary from the most directly

comparable measures presented in the GAAP consolidated statements of

operations due to certain reclassifications affecting net investment income,

net investment gains (losses), net derivative gains (losses), interest

credited to policyholder account balances, and other revenues, and excludes

     the effects of consolidating under GAAP certain VIEs that are treated as     CSEs. Such reclassifications are presented in the tables below.                                                                    Years Ended December 31,                                                            2011          2010          2009                                                                     (In millions)

Net investment income - in the above yield table $ 20,011$ 17,229$ 15,007 Real estate discontinued operations - deduct from net investment income

                                              (4 )          (2 )         (22 ) Scheduled periodic settlement payments on derivatives not qualifying for hedge accounting -deduct from net investment income, add to net derivative gains (losses)                                                     (249 )        

(208 ) (88 ) Equity method operating joint ventures - add to net investment income, deduct from net derivative gains (losses)

                                                      (23 )        (130 )        (156 ) Net investment income on contractholder-directed unit-linked investments - reported within trading and other securities - add to net investment income              (453 )         211             - 

Incremental net investment income from CSEs - add to net investment income

                                         324           411             -  

Net investment income - GAAP consolidated statements of operations

$ 19,606      $ 

17,511 $ 14,741

Investment portfolio gains (losses) - in the above yield table

                                              $   (553 )    $   

(193 ) $ (3,037 ) Real estate discontinued operations - deduct from net investment gains (losses)

                                     (96 )         

(14 ) (8 ) Investment gains (losses) related to CSEs - add to net investment gains (losses)

                                       5             6             - 

Other gains (losses) - add to net investment gains (losses)

                                                     (223 )        

(207 ) 144

  Net investment gains (losses) - GAAP consolidated statements of operations                                 $   (867 )    $   

(408 ) $ (2,901 )

  Derivative gains (losses) - in the above yield table     $  4,545      $   (614 )    $ (5,106 ) Scheduled periodic settlement payments on derivatives not qualifying for hedge accounting -add to net derivative gains (losses), deduct from net investment income                                                        249           208            88 Scheduled periodic settlement payments on derivatives not qualifying for hedge accounting - add to net derivative gains (losses), deduct from interest credited to PABs                                               19            11            (4 ) 

Settlement of foreign currency earnings hedges - add to net derivative gains (losses), deduct from other revenues

                                                      (12 )           -             - 

Equity method operating joint ventures- add to net investment income, deduct from net derivative gains (losses)

                                                       23           130           156  Net derivative gains (losses) - GAAP consolidated statements of operations                                 $  4,824      $   (265 )    $ (4,866 )    See "- Results of Operations - Year Ended December 31, 2011 Compared with the Year Ended December 31, 2010" and "- Year Ended December 31, 2010 Compared with the Year Ended December 31, 2009," for analyses of the year over year changes in net investment income, net investment gains (losses) and net derivative gains (losses).  

Fixed Maturity and Equity Securities Available-for-Sale

  Fixed maturity securities, which consisted principally of publicly-traded and privately placed fixed maturity securities, were $350.3 billion and $324.8 billion at estimated fair value, or 67% and 69% of total cash and invested assets, at December 31, 2011 and 2010, respectively. Publicly-traded fixed maturity securities represented $303.6 billion and $284.0 billion of total fixed maturity securities at estimated fair value, at December 31, 2011 and 2010, respectively, or 87% of total fixed maturity securities at estimated fair value, at both December 31, 2011 and                                          137

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  2010. Privately placed fixed maturity securities represented $46.7 billion and $40.8 billion at estimated fair value, at December 31, 2011 and 2010 respectively, or 13% of total fixed maturity securities at estimated fair value, at both December 31, 2011 and 2010.  Equity securities, which consisted principally of publicly-traded and privately-held common and preferred stocks, including certain perpetual hybrid securities and mutual fund interests, were $3.0 billion and $3.6 billion at estimated fair value, or 0.6% and 0.8% of total cash and invested assets, at December 31, 2011 and 2010, respectively. Publicly-traded equity securities represented $1.7 billion and $2.3 billion at estimated fair value, or 57% and 64% of total equity securities, at December 31, 2011 and 2010, respectively. Privately-held equity securities represented $1.3 billion of total equity securities at estimated fair value, at both December 31, 2011 and 2010, or 43% and 36% of total equity securities at estimated fair value, at December 31, 2011 and 2010, respectively.  Upon acquisition, the Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the securities have an interest rate step-up feature which, when combined with other qualitative factors, indicates that the securities have 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, commonly referred to as "perpetual hybrid securities," have been issued by non-U.S. financial institutions that are accorded the highest two capital treatment categories by their respective regulatory bodies (i.e. core capital, or "Tier 1 capital" and perpetual deferrable securities, or "Upper Tier 2 capital"). The following table presents the amount and classification of perpetual hybrid securities held by the Company at:                                                                                                            December 31,                                                                                                     2011            2010                                          Classification                                            Estimated       Estimated                                                                                                     Fair            Fair Consolidated Balance Sheets            Sector Table                    Primary Issuers              Value           Value                                                                                                         (In millions) Fixed maturity securities     Foreign corporate securities     Non-U.S. financial institutions   $       523     $     2,008 Fixed maturity securities     U.S. corporate securities        U.S. financial institutions       $       226     $        83 Equity securities             Non-redeemable preferred stock   Non-U.S. financial institutions   $       440     $     1,043 Equity securities             Non-redeemable preferred stock   U.S. financial institutions       $       350     $       236   The Company's 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 $1.9 billion and $2.7 billion at estimated fair value of such securities at December 31, 2011 and 2010, respectively, which are included in the U.S. and foreign corporate securities sectors within fixed maturity securities.  Valuation of Securities. We are responsible for the determination of estimated fair value. The estimated fair value of publicly-traded securities is determined by management after considering one of three primary sources of information: quoted market prices in active markets, independent pricing services, or independent broker quotations; whereas for privately placed securities, estimated fair value is determined after considering one of three primary sources of information: market standard internal matrix pricing, market standard internal discounted cash flow techniques, or independent pricing services after we determine their use of available observable market data. Discounted cash flow techniques rely upon the estimated future cash flows of the security, credit spreads of comparable public securities and secondary transactions, as well as other factors, including the credit quality of the issuer and the reduced liquidity associated with privately placed debt securities. For publicly-traded securities, the number of quotations obtained varies by instrument and depends on the liquidity of the particular instrument. Generally, we obtain prices from multiple pricing services to cover all asset classes and obtain multiple prices for certain securities, but ultimately utilize the price with the highest placement in the fair value hierarchy. Independent pricing services that value these instruments use market standard valuation methodologies based on data about market transactions and inputs from multiple pricing sources that are market observable or can be derived principally from or corroborated by observable market data. See Note 5                                          138

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  of the Notes to the Consolidated Financial Statements for a discussion of the types of market standard valuation methodologies utilized and key assumptions and observable inputs used in applying these standard valuation methodologies. When a price is not available in the active market or through an independent pricing service, management will value the security primarily using market standard internal matrix pricing or discounted cash flow techniques, and non-binding quotations from independent brokers who are knowledgeable about these securities. Independent non-binding broker quotations utilize inputs that may be difficult to corroborate with observable market data. As shown in the following section, less than 1% of our fixed maturity securities were valued using non-binding quotations from independent brokers at December 31, 2011.  Senior management, independent of the trading and investing functions, is responsible for the oversight of control systems and valuation policies, including reviewing and approving new transaction types and markets, for ensuring that observable market prices and market-based parameters are used for valuation, wherever possible, and for determining that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. We review our valuation methodologies on an ongoing basis and revise when necessary based on changing market conditions. We gain assurance on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with accounting standards for fair value determination through our controls designed to ensure that the financial assets and financial liabilities are appropriately valued and represent an exit price. We utilize several controls, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management's knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple pricing sources, when available, reviewing independent auditor reports regarding the controls over valuation of securities employed by independent pricing services, and ongoing due diligence to confirm that independent pricing services use market-based parameters for valuation. We determine the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data.  The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If we conclude that prices received from independent pricing services are not reflective of market activity or representative of estimated fair value, we will seek independent non-binding broker quotes or use an internally developed valuation to override these prices. As described below, such overrides have not been material. Our internally developed valuations of current estimated fair value, which reflect our estimates of liquidity and non-performance risks, compared with pricing received from the independent pricing services, did not produce material differences for the vast majority of our fixed maturity securities portfolio. This is, in part, because our internal estimates of liquidity and non-performance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management's best estimate is used. As a result, we generally use the price provided by the independent pricing service under our normal pricing protocol.  The Company has reviewed the significance and observability of inputs used in the valuation methodologies to determine the appropriate fair value hierarchy level for each of its securities. Based on the results of this review and investment class analyses, each instrument is categorized as Level 1, 2 or 3 based on the lowest level significant input to its valuation. Certain securities have been classified into Level 1 because of unadjusted quoted prices and high volumes of trading activity and narrow bid/ask spreads. Most securities valued by independent pricing services have been classified into Level 2 because the significant inputs used in pricing these securities are market observable or can be corroborated using market observable information. Most investment grade privately placed fixed maturity securities and certain below investment grade privately placed fixed maturity securities priced by independent pricing services that use observable inputs have been classified within Level 2. Distressed privately placed fixed maturity securities have been classified within Level 3. Below investment grade privately placed fixed maturity securities and less liquid securities with very limited trading activity where estimated fair values are determined by independent pricing services or by non-binding quotations from independent brokers that use inputs that may be difficult to corroborate with observable market data, are                                          139

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  classified as Level 3. Use of independent non-binding broker quotations generally indicates there is a lack of liquidity or the general lack of transparency in the process to develop these price estimates causing them to be considered Level 3. See Note 5 of the Notes to the Consolidated Financial Statements for further information regarding the valuation techniques and inputs by level within the three level fair value hierarchy by major classes of invested assets.  

Quarterly, we evaluate and monitor the markets in which our fixed maturity and equity securities trade and, in our judgment, despite reduced levels of liquidity discussed above, believe none of these fixed maturity and equity securities trading markets should be characterized as distressed and disorderly.

  Fair Value Hierarchy and Level 3 Rollforward - Fixed Maturity and Equity Securities. Fixed maturity securities and equity securities available-for-sale measured at estimated fair value on a recurring basis and their corresponding fair value pricing sources and fair value hierarchy are as follows:                                                                     December 31, 2011                                                      Fixed Maturity                   Equity                                                        Securities                   Securities                                                                    (In millions) Level 1: Quoted prices in active markets for identical assets                                           $   19,987          5.7 %     $   819         27.1 %  Level 2: Independent pricing source                          275,575         78.7           497         16.4 Internal matrix pricing or discounted cash flow techniques                                      36,944         10.5    

988 32.7

  Significant other observable inputs                 312,519         89.2         1,485         49.1  Level 3: Independent pricing source                            8,178          2.4           513         17.0 Internal matrix pricing or discounted cash flow techniques                                       8,138          2.3           158          5.2 Independent broker quotations                         1,449          0.4            48          1.6  Significant unobservable inputs                      17,765          5.1           719         23.8  Total estimated fair value                       $  350,271        100.0 %     $ 3,023        100.0 %                                            140 

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  Table of Contents                                                                     December 31, 2011                                                            Fair Value Measurements Using                                          Quoted                                        Prices in             Significant                                          Active                 Other            Significant                                       Markets for            Observable          Unobservable           Total                                     Identical Assets           Inputs               Inputs            Estimated                                        (Level 1)              (Level 2)           (Level 3)           Fair Value                                                                    (In millions) Fixed Maturity Securities: U.S. corporate securities          $                -       $      99,001       $        6,784       $    105,785 Foreign corporate securities                        -              59,648                4,370             64,018 Foreign government securities                      76              50,138                2,322             52,536 Residential mortgage-backed securities ("RMBS")                                 -              41,035                1,602             42,637 U.S. Treasury and agency securities                                     19,911              20,070                   31             40,012 Commercial mortgage-backed securities ("CMBS")                                 -              18,316                  753             19,069 State and political subdivision securities                              -              13,182                   53             13,235 Asset-backed securities ("ABS")                                             -              11,129                1,850             12,979 Other fixed maturity securities                                          -                   -                    -                  -  Total fixed maturity securities                         $           19,987       $     312,519       $       17,765       $    350,271  Equity Securities: Common stock                       $              819       $       1,105       $          281       $      2,205 Non-redeemable preferred stock                      -                 380                  438                818  Total equity securities            $              819       $       1,485       $          719       $      3,023   

The composition of fair value pricing sources for and significant changes in Level 3 securities at December 31, 2011 are as follows:

• The majority of the Level 3 fixed maturity and equity securities (83%, as

      presented above) were concentrated in four sectors: U.S. and foreign       corporate securities, foreign government securities and ABS.    

• Level 3 fixed maturity securities are priced principally through market

standard valuation methodologies, independent pricing services and

independent non-binding broker quotations using inputs that are not market

observable or cannot be derived principally from or corroborated by

observable market data. Level 3 fixed maturity securities consist of less

liquid fixed maturity securities with very limited trading activity or where

less price transparency exists around the inputs to the valuation

methodologies including alternative residential mortgage loan ("Alt-A") and

sub-prime RMBS and less liquid prime RMBS, certain below investment grade

private placements and less liquid investment grade corporate securities

(included in U.S. and foreign corporate securities), less liquid foreign

      government securities and less liquid ABS.    

• During the year ended December 31, 2011, Level 3 fixed maturity securities

decreased by $5.0 billion, or 22%. The decrease was driven by net transfers

out of Level 3, partially offset by net purchases in excess of sales and

increase in estimated fair value recognized in accumulated other

comprehensive income (loss). See analysis of transfers into and/or out of

Level 3 below. The increase in net purchases in excess of sales of fixed

maturity securities were concentrated in ABS and foreign government

securities, and the increase in estimated fair value recognized in

accumulated other comprehensive income (loss) for fixed maturity securities

       was concentrated in U.S. corporate securities due in part to a decrease in       interest rates.                                           141 

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  A rollforward of the fair value measurements for fixed maturity securities and equity securities available-for-sale measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs is as follows:                                                              Year Ended December 31, 2011                                                      Fixed  Maturity                 Equity                                                       Securities                  Securities                                                                  (In millions) Balance, beginning of period                       $          22,716             $      1,173 Total realized/unrealized gains (losses) included in: Earnings (1)                                                      48                      (57 ) Other comprehensive income (loss)                                403                       10 Purchases                                                      4,907                      109 Sales                                                         (4,219 )                   (462 ) Transfers into Level 3                                           599                       12 Transfers out of Level 3                                      (6,689 )                    (66 )  Balance, end of period                             $          17,765             $        719     

(1) Total gains and losses in earnings and other comprehensive income (loss) are

calculated assuming transfers into or out of Level 3 occurred at the

beginning of the period. Items transferred into and out for the same period

are excluded from the rollforward. Total gains (losses) for fixed maturity

securities included in earnings of ($7) million and other comprehensive

income (loss) of $9 million, were incurred on these securities subsequent to

their transfer into Level 3, for the year ended December 31, 2011,

respectively.

An analysis of transfers into and/or out of Level 3 for the year ended December 31, 2011 is as follows:

  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 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 year ended December 31, 2011 are summarized below:    

• During the year ended December 31, 2011, fixed maturity securities transfers

into Level 3 of $599 million 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). These current market conditions have resulted in decreased

transparency of valuations and an increased use of broker quotations and

unobservable inputs to determine estimated fair value principally for certain

U.S. and foreign corporate securities and foreign government securities.

• During the year ended December 31, 2011, fixed maturity securities transfers

out of Level 3 of ($6.7) billion 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 issuances that, over time, the Company was able to

obtain pricing from, or corroborate pricing received from independent pricing

services with observable inputs, or there were increases in market activity

                                      142

  See Note 5 of the Notes to the Consolidated Financial Statements for further information about the valuation techniques and inputs by level by major classes of invested assets that affect the amounts reported above.  

December 31, 2011 and 2010;    

       equity at December 31, 2011 and 2010; and       •   Maturities of fixed maturity securities at December 31, 2011 and 2010.   Fixed Maturity Securities Credit Quality - Ratings. The Securities Valuation Office of the National Association of Insurance Commissioners ("NAIC") evaluates the fixed maturity security investments of insurers for regulatory reporting and capital assessment purposes and assigns securities to one of six credit quality categories called "NAIC designations." If no rating is available from the NAIC, then as permitted by the NAIC, an internally developed rating is used. The NAIC ratings are generally similar to the credit quality designations of the Nationally Recognized Statistical Ratings Organizations ("NRSROs") for marketable fixed maturity securities, called "rating agency designations," except for certain structured securities as described below. NAIC ratings 1 and 2 include fixed maturity securities generally considered investment grade (i.e., rated "Baa3" or better by Moody's or rated "BBB" or better by S&P and Fitch) by such rating organizations. NAIC ratings 3 through 6 include fixed maturity securities generally considered below investment grade (i.e., rated "Ba1" or lower by Moody's or rated "BB+" or lower by S&P and Fitch) by such rating organizations. Rating agency designations are based on availability of applicable ratings from rating agencies on the NAIC acceptable rating organizations list, including Moody's, S&P, Fitch and Realpoint, LLC. If no rating is available from a rating agency, then an internally developed rating is used.  The NAIC adopted revised rating methodologies for certain structured securities comprised of non-agency RMBS, CMBS and ABS. The NAIC's objective with the revised rating methodologies for these structured securities was to increase the accuracy in assessing expected losses, and to use the improved assessment to determine a more appropriate capital requirement for such structured securities. The revised methodologies reduce regulatory reliance on rating agencies and allow for greater regulatory input into the assumptions used to estimate expected losses from structured securities. The Company applies the revised NAIC rating methodologies to structured securities held by MetLife, Inc.'s insurance subsidiaries that file NAIC statutory financial statements. The NAIC's present methodology is to evaluate structured securities held by insurers using the revised NAIC rating methodologies on an annual basis. If such insurance subsidiaries of the Company acquire structured securities that have not been previously evaluated by the NAIC, but are expected to be evaluated by the NAIC in the upcoming annual review, an internally developed rating is used until a final rating becomes available.  The four tables below present fixed maturity securities based on rating agency designations and equivalent designations of the NAIC, with the exception of certain structured securities described above. These structured securities are presented based on ratings from the revised NAIC rating methodologies described above (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 described above. 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.                                          143

  The following table presents total fixed maturity securities by NRSRO designation and the equivalent designations of the NAIC, except for certain structured securities, which are presented as described above, as well as the percentage, based on estimated fair value, that each designation is comprised of at:                                                                                   December 31,                                                             2011                                          2010                                                             Estimated                                     Estimated NAIC                                        Amortized         Fair          % of          Amortized         Fair          % of Rating      Rating Agency Designation         Cost            Value         Total           Cost            Value         Total                                                                                (In millions)   1      Aaa/Aa/A                          $   230,195     $   246,786        70.5  %    $   226,639     $   231,198        71.2  %   2      Baa                                    73,352          78,531        22.4            65,412          68,729        21.2   3      Ba                                     14,604          14,375         4.1            15,331          15,290         4.7   4      B                                       9,437           8,849         2.5             8,742           8,308         2.6   5      Caa and lower                           2,142           1,668         0.5             1,340           1,142         0.3   6      In or near default                         81              62           -               153             130           - 

    The following tables present total fixed maturity securities, based on estimated fair value, by sector classification and by NRSRO designation and the equivalent designations of the NAIC, except for certain structured securities, which are presented as described above, that each designation is comprised of at December 31, 2011and 2010:                                                        Fixed Maturity

 NAIC Rating:                       1                    2                  3                 4                5                  6                  Total       Rating Agency                                                                                        Caa and           In or Near           Estimated       Designation:              Aaa/Aa/A               Baa                Ba                 B              Lower             Default            Fair  Value                                                                                        (In millions) U.S. corporate securities     $     51,045          $   41,533         $   8,677         $   4,257         $    271         $          2         $    105,785 Foreign corporate securities                          33,403              26,383             2,915             1,173              140                    4               64,018 Foreign government securities                          42,360               7,553             1,146             1,281              196                    -               52,536 RMBS (1)                            36,699               1,477             1,450             2,026              933                   52               42,637 U.S. Treasury and agency securities                          40,012                   -                 -                 -                -                    -               40,012 CMBS (1)                            18,403                 388               125                57               96                    -               19,069 State and political subdivision securities              12,357                 842                23                 5                8                    -               13,235 ABS (1)                             12,507                 355                39                50               24                    4               12,979 Other fixed maturity securities                               -                   -                 -                 -                -                    -                    -  Total fixed maturity securities                    $    246,786          $   78,531         $  14,375         $   8,849         $  1,668         $         62         $    350,271  Percentage of total                   70.5  %             22.4  %            4.1  %            2.5  %           0.5  %                 -  %             100.0  %                                           144 

  Table of Contents                                                       Fixed Maturity Securities - by Sector & Credit Quality Rating at December 31, 2010 NAIC Rating:                     1                     2                    3                 4               5                  6                  Total Rating Agency                                                                                              Caa and           In or Near           Estimated Designation:                  Aaa/Aa/A                Baa                  Ba                 B             Lower             Default             Fair Value                                                                                       (In millions) U.S. corporate securities                  $     46,035          $    34,259          $     7,633         $ 3,452         $    353         $         40         $     91,772 Foreign corporate securities                        39,430               24,352                2,474           1,454              169                    9               67,888 Foreign government securities                        31,559                7,184                2,179           1,080                -                    -               42,002 RMBS (1) (2)                      39,640                1,196                2,411           2,054              497                   54               45,852 U.S. Treasury and agency securities                 33,304                    -                    -               -                -                    -               33,304 CMBS (1)                          19,385                  665                  363             205               56                    1               20,675 State and political subdivision securities             9,368                  722                   32               -                7                    -               10,129 ABS (1) (2)                       12,477                  348                  198              59               60                   26               13,168 Other fixed maturity securities                             -                    3                    -               4                -                    -                    7  Total fixed maturity securities                  $    231,198          $    68,729          $    15,290         $ 8,308         $  1,142         $        130         $    324,797  Percentage of total                 71.2  %              21.2  %               4.7  %          2.6  %           0.3  %                 -  %             100.0  %      

   The following table presents selected information about certain fixed maturity securities held at:                                                                              December 31,                                                                       2011             2010                                                                          

                                                $ 24,954         $ 24,870 Net unrealized gains (losses)                                       $ (1,310 )       $   (696 ) Non-income producing fixed maturity securities: Estimated fair value                                                $     62         $    130 Net unrealized gains (losses)                                       $    (19 )       $    (23 )                                           145 

U.S. and Foreign Corporate Fixed Maturity 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:                                                                       December 31,                                                      2011                                2010                                             Estimated                           Estimated                                               Fair             % of               Fair             % of                                               Value            Total              Value            Total                                           (In millions)                       (In millions) Corporate fixed maturity securities - by sector: Foreign corporate fixed maturity securities (1)                           $        64,018         37.7  %     $        67,888         42.5  % U.S. corporate fixed maturity securities - by industry: Industrial                                        26,962         15.9                 22,070         13.8 Consumer                                          26,739         15.7                 21,482         13.5 Finance                                           20,854         12.3                 20,785         13.0 Utility                                           19,508         11.5                 16,902         10.6 Communications                                     8,178          4.8                  7,335          4.6 Other                                              3,544          2.1                  3,198          2.0  Total                                    $       169,803        100.0  %     $       159,660        100.0  %       

     foreign obligors and other foreign fixed maturity securities.                                                                         December 31,                                                   2011                                        2010                                       Estimated                                   Estimated                                         Fair              % of Total                Fair              % of Total                                         Value             Investments               Value             Investments                                     (In millions)                               (In millions) Concentrations within corporate fixed maturity securities: Largest exposure to a single issuer                             $         1,642                 0.3  %      $         2,291                 0.5  % Holdings in ten issuers with the largest exposures              $        10,716                 2.1  %      $        14,247                 3.1  %   Structured Securities. The following table presents information about structured securities at:                                                          December 31,                                            2011                          2010                                    Estimated                     Estimated                                      Fair          % of            Fair          % of                                      Value         Total           Value         Total                                                       (In millions)     RMBS                          $    42,637        57.1  %    $    45,852        57.5  %     CMBS                               19,069        25.5            20,675        26.0     ABS                                12,979        17.4            13,168        16.5      Total structured securities   $    74,685       100.0  %    $    79,695       100.0  %      Ratings profile:     RMBS rated Aaa/AAA            $    31,690        74.3  %    $    36,244        79.0  %     RMBS rated NAIC 1             $    36,699        86.1  %    $    39,640        86.5  %     CMBS rated Aaa/AAA            $    15,785        82.8  %    $    16,901        81.7  %     CMBS rated NAIC 1             $    18,403        96.5  %    $    19,385        93.7  %     ABS rated Aaa/AAA             $     8,223        63.4  %    $    10,252        77.9  %     ABS rated NAIC 1              $    12,507        96.4  %    $    12,477        94.8  %                                           146 

                                                                       December 31,                                                      2011                                  2010                                            Estimated                             Estimated                                              Fair               % of               Fair               % of                                              Value             Total               Value             Total                                          (In millions)                         (In millions) By security type: Collateralized mortgage obligations     $        23,392          54.9  %      $        23,422          51.1  % Pass-through securities                          19,245           45.1                 22,430           48.9  Total RMBS                              $        42,637         100.0  %      $        45,852         100.0  %  By risk profile: Agency                                  $        31,055          72.8  %      $        34,254          74.7  % Prime                                             5,959           14.0                  6,258           13.7 Alt-A                                             4,648           10.9                  4,221            9.2 Sub-prime                                           975            2.3                  1,119            2.4  Total RMBS                              $        42,637         100.0  %      $        45,852         100.0  %    Collateralized mortgage obligations are a type of mortgage-backed security structured by dividing the cash flows of mortgages into separate pools or tranches of risk that create multiple classes of bonds with varying maturities and priority of payments. Pass-through mortgage-backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages. The monthly mortgage payments from homeowners pass from the originating bank through an intermediary, such as a government agency or investment bank, which collects the payments and, for a fee, remits or passes these payments through to the holders of the pass-through securities.  The majority of RMBS held by the Company was rated Aaa/AAA by Moody's, S&P or Fitch; and the majority was rated NAIC 1 by the NAIC at December 31, 2011 and 2010, as presented above. Agency RMBS were guaranteed or otherwise supported by FNMA, FHLMC or GNMA. Non-agency RMBS include prime, Alt-A and sub-prime RMBS. Prime residential mortgage lending includes the origination of residential mortgage loans to the most creditworthy borrowers with high quality credit profiles. Alt-A is a classification of mortgage loans where the risk profile of the borrower falls between prime and sub-prime. Sub-prime mortgage lending is the origination of residential mortgage loans to borrowers with weak credit profiles. Included within prime and Alt-A RMBS are resecuritization of real estate mortgage investment conduit ("Re-REMIC") securities. Re-REMIC RMBS involve the pooling of previous issues of prime and Alt-A RMBS and restructuring the combined pools to create new senior and subordinated securities. The credit enhancement on the senior tranches is improved through the resecuritization.  At December 31, 2011 and 2010, the Company's Alt-A securities portfolio has no exposure to option adjustable rate mortgages ("ARMs") and a minimal exposure to hybrid ARMs. The Company's Alt-A securities portfolio is comprised primarily of fixed rate mortgages (93% and 91% at December 31, 2011 and 2010, respectively) which have performed better than both option ARMs and hybrid ARMs in the overall Alt-A market. The Company's Alt-A RMBS holdings had unrealized losses of $871 million and $670 million at December 31, 2011 and 2010, respectively. Approximately 7% and 16% of this portfolio was rated Aa or better at December 31, 2011 and 2010, respectively.  The sub-prime RMBS had unrealized losses of $347 million and $317 million at December 31, 2011 and 2010, respectively. At December 31, 2011, approximately 21% of this portfolio was rated Aa or better, of which 79% was in vintage year 2005 and prior. At December 31, 2010, approximately 54% of this portfolio was rated Aa or better, of which 88% was in vintage year 2005 and prior. These older vintages from 2005 and prior benefit from better underwriting, improved credit enhancement levels and higher residential property price appreciation. Approximately 69% and 66% of this portfolio was rated NAIC 2 or better at December 31, 2011 and 2010,                                          147 

  respectively. The slowing U.S. housing market, greater use of affordable mortgage products and relaxed underwriting standards for some originators of sub-prime residential mortgage loans have led to higher delinquency and loss rates, especially within the 2006 and 2007 vintage years. These factors have caused a pull-back in market liquidity and repricing of risk, which has led to higher levels of unrealized losses on securities backed by sub-prime residential mortgage loans as compared to historical levels.  CMBS. The following tables present holdings of CMBS by rating agency designation and by vintage year at:                                                                                                                                                                 December 31, 2011                                                                                                                                                                                                                       Below                                                                                                                                                                                                                    Investment                                                                                Aaa                               Aa                                 A                                Baa                              Grade                             Total                                                                                     Estimated                         Estimated                         Estimated                         Estimated                         Estimated                         Estimated                                                                     Amortized         Fair            Amortized         Fair            Amortized         Fair            Amortized         Fair            Amortized         Fair            Amortized         Fair                                                                       Cost            Value             Cost            Value             Cost            Value             Cost            Value             Cost            Value             Cost            Value                                                                                                                                                                (In millions) 2003 & Prior                                                       $     5,574$     5,677       $       176     $       176       $        91     $        88       $        54     $        52       $        29     $        27       $     5,924$     6,020 2004                                                                     3,586           3,730               430             440               135             129                83              80                32              25             4,266           4,404 2005                                                                     3,081           3,318               427             432               277             269               184             175                31              28             4,000           4,222 2006                                                                     1,712           1,835               245             237                89              83               118             110               123             106             2,287           2,371 2007                                                                       643             665               395             332               163             138                67              71                94              88             1,362           1,294 2008                                                                         -               -                 -               -                 -               -                 -               -                25              27                25              27 2009                                                                         -               -                 -               -                 -               -                 -               -                 -               -                 -               - 2010                                                                         3               3                 -               -                 -               -                60              66                 -               -                63              69 2011                                                                       536             557                 1               1                92              96                 -               -                 9               8               638             662  Total                                                              $    15,135$    15,785$     1,674$     1,618       $       847     $       803       $       566     $       554       $       343     $       309       $    18,565$    19,069  Ratings Distribution                                                                      82.8  %                            8.5  %                            4.2  %                            2.9  %                            1.6  %                          100.0  %                                                                                                                                                                December 31, 2010                                                                                                                                                                                                                       Below                                                                                                                                                                                                                    Investment                                                                                Aaa                               Aa                                 A                                Baa                              Grade                             Total                                                                                     Estimated                         Estimated                         Estimated                         Estimated                         Estimated                         Estimated                                                                     Amortized         Fair            Amortized         Fair            Amortized         Fair            Amortized         Fair            Amortized         Fair            Amortized         Fair                                                                       Cost            Value             Cost            Value             Cost            Value             Cost            Value             Cost            Value             Cost            Value                                                                                                                                                                (In millions) 2003 & Prior                                                       $     7,411$     7,640       $       282     $       282       $       228     $       227       $        74     $        71       $        28     $        24       $     8,023$     8,244 2004                                                                     3,489           3,620               277             273               216             209               181             175                91              68             4,254           4,345 2005                                                                     3,113           3,292               322             324               286             280               263             255                73              66             4,057           4,217 2006                                                                     1,463           1,545               159             160               168             168               385             398               166             156             2,341           2,427 2007                                                                       840             791               344             298                96              95               119             108               122             133             1,521           1,425 2008                                                                         2               2                 -               -                 -               -                 -               -                 -               -                 2               2 2009                                                                         3               3                 -               -                 -               -                 -               -                 -               -                 3               3 2010                                                                         8               8                 -               -                 4               4                 -               -                 -               -                12              12  Total                                                              $    16,329$    16,901$     1,384$     1,337       $       998     $       983       $     1,022$     1,007       $       480     $       447       $    20,213$    20,675  Ratings Distribution                                                                      81.7  %                            6.4  %                            4.8  %                            4.9  %                            2.2  %                          100.0  %   

  The weighted average credit enhancement of the Company's CMBS holdings was 27% and 26% at December 31, 2011 and 2010, respectively. This credit enhancement percentage represents the current weighted average estimated percentage of outstanding capital structure subordinated to the Company's investment holding that is available to absorb losses before the security incurs the first dollar of loss of principal. The credit protection does not include any equity interest or property value in excess of outstanding debt.                                          148

                                                                      December 31,                                                     2011                                  2010                                            Estimated                             Estimated                                              Fair              % of                Fair              % of                                              Value             Total               Value             Total                                          (In millions)                         (In millions) By collateral type: Credit card loans                       $         4,038          31.1  %      $         6,027          45.8  % Collateralized debt obligations                   2,575          19.8                   1,798          13.7 Student loans                                     2,434          18.8                   2,416          18.3 Automobile loans                                    977           7.5                     605           4.6 Other loans                                       2,955          22.8                   2,322          17.6  Total                                   $        12,979         100.0  %      $        13,168         100.0  %   

      •   Net unrealized investment gains (losses);    

       equity securities available-for-sale by sector;       •   Aging of gross unrealized losses and OTTI losses for fixed maturity and

      equity securities available-for-sale;    

      and equity securities available-for-sale; and       •   Evaluating temporarily impaired available-for-sale securities.  

  The Company has a trading securities portfolio, principally invested in fixed maturity securities, to support investment strategies that involve the active and frequent purchase and sale of securities ("Actively Traded Securities") and the execution of short sale agreements. Trading and other securities also include securities for which the FVO has been elected ("FVO Securities"). FVO Securities include certain fixed maturity and equity securities held for investment by the general account to support asset and liability matching strategies for certain insurance products. FVO Securities also include contractholder-directed investments supporting unit-linked variable annuity type liabilities which do not qualify for presentation as separate account summary total assets and liabilities. These investments are primarily mutual funds and, to a lesser extent, fixed maturity and equity securities, short-term investments and cash and cash equivalents. The investment returns on these investments inure to contractholders and are offset by a corresponding change in PABs through interest credited to policyholder account balances. FVO Securities also include securities held by CSEs (former qualifying special purpose entities). Trading and other securities were $18.3 billion and $18.6 billion at estimated fair value, or 3.5% and 3.9% of total cash and invested assets, at December 31, 2011 and 2010, respectively. See Note 3 of the Notes to the Consolidated Financial Statements for tables which present information about the Actively Traded Securities and FVO Securities, related short sale agreement liabilities and investments pledged to secure short sale agreement liabilities at December 31, 2011 and 2010.                                          149 

  Trading and other securities and trading (short sale agreement) liabilities, measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, are presented as follows:                                                                     December 31, 2011                                                    Trading and Other                  Trading                                                        Securities                   Liabilities                                                                    (In millions) Quoted prices in active markets for identical assets and liabilities (Level 1)      $     7,572           41  %      $  124          98  % Significant other observable inputs (Level 2)                                             9,287           51              3           2 Significant unobservable inputs (Level 3)             1,409            8              -           -  Total estimated fair value                      $    18,268          100  %      $  127         100  %   

                                                               Year Ended December 31, 2011                                                                    (In 

 Balance, beginning of period                          $                                   822 Total realized/unrealized gains (losses) included in earnings                                                              (2 ) Purchases                                                                               1,246 Sales                                                                                    (519 ) Transfers into Level 3                                                                    121 Transfers out of Level 3                                                                 (259 )  Balance, end of period                                $                                 1,409   

  See Note 5 of the Notes to the Consolidated Financial Statements for further information about the valuation techniques and inputs by level of major classes of invested assets that affect the amounts reported above.  

December 31, 2011, 2010 and 2009;    

       (losses) for the years ended December 31, 2011, 2010 and 2009;    

       industry within the U.S. and foreign corporate securities sector for the        years ended December 31, 2011, 2010 and 2009; and    

   Overview of Fixed Maturity and Equity Security OTTI Losses Recognized in Earnings. Impairments of fixed maturity and equity securities were $1.0 billion, $484 million and $1.9 billion for the years ended December 31, 2011, 2010 and 2009, respectively. Impairments of fixed maturity securities were $955 million, $470 million and $1.5 billion for the years ended December 31, 2011, 2010 and 2009, respectively. Impairments of equity securities were $60 million, $14 million and $400 million for the years ended December 31, 2011, 2010 and 2009, respectively.                                          150 

  The Company records OTTI losses charged to earnings within net investment gains (losses) and adjusts the cost basis of the fixed maturity and equity securities accordingly. The Company does not change the revised cost basis for subsequent recoveries in value.  

      sectors, reflecting improving economic fundamentals.    

   Future Impairments. 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 ratings, changes in collateral valuation, changes in interest rates and changes in credit spreads. If economic fundamentals or any of the above factors deteriorate, additional OTTIs may be incurred in upcoming quarters.  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)  See Note 3 of the Notes to the Consolidated Financial Statements for the table that presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held at December 31, 2011 and 2010 for which a portion of the OTTI loss was recognized in other comprehensive income (loss) for the years ended December 31, 2011 and 2010.                                          151

  The Company participates in a securities lending program 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 obtains collateral, usually cash, in an amount generally 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.  See Note 3 of the Notes to the Consolidated Financial Statements for the following information regarding the Company's securities lending program: securities on loan, cash collateral on deposit from counterparties, security collateral on deposit from counterparties and the estimated fair value of the reinvestment portfolio at December 31, 2011 and 2010.  

  The Company's mortgage loans are principally collateralized by commercial real estate, agricultural real estate and residential properties. The carrying value of mortgage loans was $72.1 billion and $62.3 billion, or 13.8% and 13.1% of total cash and invested assets at December 31, 2011 and 2010, respectively. See Note 3 of the Notes to the Consolidated Financial Statements for a table that presents the Company's mortgage loans held-for-investment of $56.9 billion and $59.0 billion by portfolio segment at December 31, 2011 and 2010, respectively, as well as the components of the mortgage loans held-for-sale of $15.2 billion and $3.3 billion at December 31, 2011 and 2010, respectively. The information presented below excludes the effects of consolidating certain VIEs that are treated as CSEs and securitized reverse residential mortgage loans. Such amounts are presented in the aforementioned table.  The Company diversifies its mortgage loan portfolio by both geographic region and property type to reduce the risk of concentration. Of the Company's commercial and agricultural mortgage loans, 90% are collateralized by properties located in the U.S., with the remaining 10% collateralized by properties located outside the U.S., calculated as a percent of the total mortgage loans held - for- investment (excluding commercial mortgage loans held by CSEs) at December 31, 2011. The carrying value of the Company's commercial and agricultural mortgage loans located in California, New York and Texas were 19%, 10% and 8%, respectively, of total mortgage loans held for investment (excluding commercial mortgage loans held by CSEs) at December 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 collateral.                                          152

  Commercial Mortgage Loans by Geographic Region and Property Type. Commercial mortgage loans are the largest component of the mortgage loan invested asset class as it represents over 70% of total mortgage loans held-for-investment (excluding the effects of consolidating certain VIEs that are treated as CSEs) at both December 31, 2011 and 2010. The tables below present the diversification across geographic regions and property types of commercial mortgage loans held-for-investment at:                                                                      December 31,                                                        2011                         2010                                                               % of                         % of                                                 Amount        Total          Amount        Total                                                                  (In millions) Region (1): South Atlantic                                 $  9,022         22.3  %     $  7,910         20.9  % Pacific                                           8,209         20.3           8,616         22.8 Middle Atlantic                                   6,370         15.8           5,486         14.5 International                                     4,713         11.7           4,095         10.8 West South Central                                3,220          8.0           2,922          7.7 East North Central                                2,984          7.3           2,900          7.7 New England                                       1,563          3.9           1,310          3.5 Mountain                                            746          1.8             811          2.2 East South Central                                  487          1.2             461          1.2 West North Central                                  365          0.9             643          1.7 Multi-Region and Other                            2,761          6.8           2,664          7.0  Total recorded investment                        40,440        100.0  %       37,818        100.0  %  Less: valuation allowances                          398                          562  Carrying value, net of valuation allowances    $ 40,042                     $ 37,256   Property Type: Office                                         $ 18,582         45.9  %     $ 16,857         44.6  % Retail                                            9,524         23.6           9,215         24.3 Apartments                                        4,011          9.9           3,630          9.6 Hotels                                            3,114          7.7           3,089          8.2 Industrial                                        3,102          7.7           2,910          7.7 Other                                             2,107          5.2           2,117          5.6  Total recorded investment                        40,440        100.0  %       37,818        100.0  %  Less: valuation allowances                          398                          562  Carrying value, net of valuation allowances    $ 40,042                     $ 37,256     

   Mortgage Loan Credit Quality - Restructured, Potentially Delinquent, Delinquent or Under Foreclosure. The Company monitors its mortgage loan investments on an ongoing basis, including reviewing loans that are restructured, potentially delinquent, and delinquent or under foreclosure. These loan classifications are consistent with those used in industry practice.  The Company defines restructured mortgage loans as loans in which the Company, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not otherwise consider. The Company defines potentially delinquent loans as loans that, in management's opinion, have a high probability of becoming delinquent in the near term. The Company defines delinquent mortgage loans consistent                                          153

  with industry practice, when interest and principal payments are past due as follows: commercial mortgage loans - 60 days or more; agricultural mortgage loans - 90 days or more; and residential mortgage loans - 60 days or more. The Company defines mortgage loans under foreclosure as loans in which foreclosure proceedings have formally commenced.  

                                                                                                   December 31,                                                                2011                                                                     2010                                                                                          % of                                                                     % of                                    Recorded          % of            Valuation         Recorded             Recorded          % of            Valuation         Recorded                                   Investment         Total           Allowance        Investment           Investment         Total           Allowance        Investment                                                                                                (In millions) Commercial: Performing                       $     40,106          99.1  %      $       339               0.8  %      $     37,487          99.1  %      $       528               1.4  % Restructured (1)                          248           0.6                  44              17.7  %                93           0.2                   6               6.5  % Potentially delinquent                     23           0.1                  15              65.2  %               180           0.5                  28              15.6  % Delinquent or under foreclosure                                63           0.2                   -                 -  %                58           0.2                   -                 -  %  Total                            $     40,440         100.0  %      $       398               1.0  %      $     37,818         100.0  %      $       562               1.5  %  Agricultural (2): Performing                       $     12,899          98.3  %      $        41               0.3  %      $     12,486          97.9  %      $        35               0.3  % Restructured (3)                           58           0.4                   7              12.1  %                33           0.3                   8              24.2  % Potentially delinquent                     25           0.2                   4              16.0  %                62           0.5                  11              17.7  % Delinquent or under foreclosure (3)                           147           1.1                  29              19.7  %               170           1.3                  34              20.0  %  Total                            $     13,129         100.0  %      $        81               0.6  %      $     12,751         100.0  %      $        88               0.7  %  Residential (4): Performing                       $        664          96.4  %      $         1               0.2  %      $      2,145          96.1  %      $        12               0.6  % Restructured (5)                            -             -                   -                 -  %                 4           0.2                   -                 -  % Potentially delinquent                      -             -                   -                 -  %                 4           0.2                   -                 -  % Delinquent or under foreclosure (5)                            25           3.6                   1               4.0  %                78           3.5                   2               2.6  %  Total (6)                        $        689         100.0  %      $         2               0.3  %      $      2,231         100.0  %      $        14               0.6  %       

    performing.    

    refinanced or extended at market terms.    

    respectively, which were not performing.    

    residential mortgage loans and home equity lines of credit.    

    As of December 31, 2010, restructured residential mortgage loans were     comprised of 12 restructured loans, all of which were performing.    

    residential mortgage loans held-for-investment was transferred to     held-for-sale in connection with the pending disposition of certain     operations of MetLife Bank. See Note 2 of the Notes to the Consolidated     Financial Statements.                                           154 

  Mortgage Loan Credit Quality - Monitoring Process - Commercial and Agricultural Mortgage Loans. The Company reviews all commercial mortgage loans on an ongoing basis. These reviews may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, potentially delinquent, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar, with a focus on higher risk loans, such as loans with higher loan-to-value ratios, including reviews on a geographic and property type basis.  Loan-to-value ratios and debt service coverage ratios are common measures in the assessment of the quality of commercial mortgage loans. Loan-to-value ratios are a common measure in the assessment of the quality of agricultural mortgage loans. Loan-to-value ratios compare the amount of the loan to the estimated fair value of the underlying collateral. A loan-to-value ratio greater than 100% indicates that the loan amount is greater than the collateral value. A loan-to-value ratio of less than 100% indicates an excess of collateral value over the loan amount. The debt service coverage ratio compares a property's net operating income to amounts needed to service the principal and interest due under the loan. For commercial mortgage loans, the average loan-to-value ratio was 61% and 66% at December 31, 2011 and 2010, respectively, and the average debt service coverage ratio was 2.1x at December 31, 2011, as compared to 2.4x at December 31, 2010. The commercial mortgage loan debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis, with a portion of the commercial mortgage loan portfolio updated each quarter. For agricultural mortgage loans, the average loan-to-value ratio was 48% and 49% at December 31, 2011 and 2010, respectively. The values utilized in calculating the agricultural mortgage loan loan-to-value ratio are developed in connection with the ongoing review of the agricultural loan portfolio and are routinely updated.  Mortgage Loan Credit Quality - Monitoring Process - Residential Mortgage Loans. The Company has a conservative residential mortgage loan portfolio and does not hold any option ARMs, sub-prime or low teaser rate loans. Higher risk loans include those that are classified as restructured, potentially delinquent, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and interest-only loans. The Company's investment in residential junior lien loans and residential mortgage loans with a loan-to-value ratio of 80% or more was $74 million and $95 million at December 31, 2011 and 2010, respectively, and certain of the higher loan-to-value residential mortgage loans have mortgage insurance coverage which reduces the loan-to-value ratio to less than 80%. Additionally, the Company's investment in traditional residential interest-only mortgage loans was $6 million and $389 million at December 31, 2011 and 2010, respectively.  Mortgage Loan Valuation Allowances. The Company's valuation allowances are established both on a loan specific basis for those loans considered impaired where a property specific or market specific risk has been identified that could likely result in a future loss, as well as for pools of loans with similar risk characteristics where a property specific or market specific risk has not been identified, but for which the Company expects to incur a loss. Accordingly, a valuation allowance is provided to absorb these estimated probable credit losses. The Company records additions to and decreases in its valuation allowances and gains and losses from the sale of loans in net investment gains (losses).  The Company records valuation allowances for loans considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Based on the facts and circumstances of the individual loans being impaired, loan specific valuation allowances are established for the excess carrying value of the loan over either: (i) the present value of expected future cash flows discounted at the loan's original effective interest rate; (ii) the estimated fair value of the loan's underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent; or (iii) the loan's observable market price.                                          155

  The Company also establishes valuation allowances for loan losses for pools of loans with similar risk characteristics, such as property types, loan-to-value ratios and debt service coverage ratios when, based on past experience, it is probable that a credit event has occurred and the amount of loss can be reasonably estimated. These valuation allowances are based on loan risk characteristics, historical default rates and loss severities, real estate market fundamentals and outlook, as well as other relevant factors.  The determination of the amount of, and additions or decreases to, valuation allowances is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with its loan portfolios. Such evaluations and assessments are based upon several factors, including the Company's experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations and assessments are revised as conditions change and new information becomes available. We update our evaluations regularly, which can cause the valuation allowances to increase or decrease over time as such evaluations are revised. Negative credit migration including an actual or expected increase in the level of problem loans will result in an increase in the valuation allowance. Positive credit migration including an actual or expected decrease in the level of problem loans will result in a decrease in the valuation allowance. Such changes in the valuation allowance are recorded in net investment gains (losses).  See Note 3 of the Notes to the Consolidated Financial Statements for a table that presents the activity in the Company's valuation allowances, by portfolio segment, for the years ended December 31, 2011, 2010 and 2009; and for tables that present the Company's valuation allowances, by type of credit loss, by portfolio segment, at December 31, 2011 and 2010.  Impairments to estimated fair value included within net investment gains (losses) for impaired mortgage loans were $18 million and $17 million for the year ended December 31, 2011 and 2010, respectively. The estimated fair value of the impaired mortgage loans after these impairments was $209 million and $197 million at December 31, 2011 and 2010, respectively, which are carried at estimated fair value based on the value of the underlying collateral or independent broker quotations, if lower, of which $151 million and $164 million related to impaired mortgage loans held-for-investment and $58 million and $33 million to certain mortgage loans held-for-sale, at December 31, 2011 and 2010, respectively. These impaired mortgage loans were recorded at estimated fair value and represent a nonrecurring fair value measurement. The estimated fair value is categorized as Level 3 due to the lack of transparency and unobservability in collateral valuation and independent broker quotations.  

  The Company diversifies its real estate investments by both geographic region and property type to reduce risk of concentration. Of the Company's real estate investments, 83% are primarily located in the United States, with the remaining 17% located outside the United States, at December 31, 2011. The three locations with the largest real estate investments were California, Japan and Florida at 19%, 14%, and 12%, respectively, at December 31, 2011. See Note 3 of the Notes to the Consolidated Financial Statements for additional information regarding real estate and real estate joint venture investments.                                          156

  Real estate and real estate joint venture investments by property type are categorized as follows:                                                                                   December 31,                                                                 2011                                  2010                                                       Carrying            % of              Carrying            % of                                                         Value             Total               Value             Total                                                     (In millions)                         (In millions) Office                                             $         5,089            59.4  %    $         4,369            54.4  % Apartments                                                   1,610            18.8                 1,774            22.1 Real estate investment funds                                   562             6.6                   552             6.9 Industrial                                                     427             5.0                   433             5.4 Retail                                                         332             3.9                   389             4.8 Hotel                                                          218             2.5                   233             2.9 Land                                                           126             1.5                   133             1.7 Agriculture                                                     14             0.2                    17             0.2 Other                                                          185             2.1                   130             1.6 

  100.0  %    $         8,030           100.0  %    There were no impairments recognized on real estate and real estate joint ventures held-for-investment for the year ended December 31, 2011. Impairments recognized on real estate and real estate joint ventures held-for-investment were $48 million and $160 million for the years ended December 31, 2010 and 2009, respectively, which included impairments on cost basis real estate joint ventures of $25 million and $82 million, respectively. There were no impaired cost basis real estate joint ventures held as of December 31, 2011. The estimated fair value of the impaired cost basis real estate joint ventures, after impairments, held as of December 31, 2010, was $8 million. 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 limited price transparency inherent in the market for such investments. Impairments recognized on real estate held-for-sale were $2 million and $1 million for the years ended December 31, 2011 and 2010, respectively. There were no impairments recognized on real estate held-for-sale for the year ended December 31, 2009.  

  The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that principally make private equity investments in companies in the United States and overseas) was $6.4 billion at both December 31, 2011 and 2010, which included $1.1 billion and $1.0 billion of hedge funds, at December 31, 2011 and 2010, respectively. Impairments to estimated fair value for such other limited partnership interests of $5 million, $12 million and $354 million for the years ended December 31, 2011, 2010 and 2009, respectively, were recognized within net investment gains (losses). The estimated fair value of the impaired other limited partnership interests after these impairments was $13 million, $23 million and $561 million at December 31, 2011, 2010 and 2009, respectively. 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 limited price transparency inherent in the market for such investments.  

  See Note 3 of the Notes to the Consolidated Financial Statements for a table that presents the Company's other invested assets by type at December 31, 2011 and 2010 and related information.  

  The carrying value of short-term investments, which includes securities and other investments with remaining maturities of one year or less, but greater than three months, at the time of purchase was $17.3 billion and $9.4 billion, or 3.3% and 2.0% of total cash and invested assets, at December 31, 2011 and 2010, respectively. The                                          157 

  carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $5.0 billion and $9.6 billion, or 1.0% and 2.0% of total cash and invested assets, at December 31, 2011 and 2010, respectively.  

  Derivatives. 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. See Note 4 of the Notes to Consolidated Financial Statements for:    

       instruments, including the strategies for which derivatives are used in        managing various risks.    

       non-derivative instruments designated as hedging instruments by type of        hedge designation at December 31, 2011 and 2010.    

December 31, 2011 and 2010.    

  Fair Value Hierarchy. Derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, are presented as follows:                                                                      December 31, 2011                                                        Derivative                   Derivative                                                          Assets                    Liabilities                                                                     (In millions) Quoted prices in active markets for identical assets and liabilities (Level 1)                  $     62            1  %     $   103            3  % Significant other observable inputs (Level 2)       14,746           90          3,750           93 Significant unobservable inputs (Level 3)            1,392            9            158            4  Total estimated fair value                        $ 16,200          100  %     $ 4,011          100  %    The valuation of Level 3 derivatives involves the use of significant unobservable inputs and generally requires a higher degree of management judgment or estimation than the valuations of Level 1 and Level 2 derivatives. Although Level 3 inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such instruments and are considered appropriate given the circumstances. The use of different inputs or methodologies could have a material effect on the estimated fair value of Level 3 derivatives and could materially affect net income.                                          158

  Derivatives categorized as Level 3 at December 31, 2011 include: interest rate swaps and interest rate forwards with maturities which extend beyond the observable portion of the yield curve; interest rate lock commitments with certain unobservable inputs, including pull-through rates; equity variance swaps with unobservable volatility inputs; foreign currency swaps which are cancelable and priced through independent broker quotations; credit default swaps based upon baskets of credits having unobservable credit spreads, or that are priced through independent broker quotations; equity options with unobservable volatility inputs or that are priced via independent broker quotations; and credit forwards having unobservable repurchase rates.  

                                                              Year Ended December 31, 2011                                                                   (In millions) Balance, beginning of period                            $                              173 Total realized/unrealized gains (losses) included in: Earnings                                                                               637 Other comprehensive income (loss)                                                      344 Purchases, sales, issuances and settlements                                            156 Transfer into and/or out of Level 3                                                    (76 )  Balance, end of period                                  $                            1,234   

  Credit Risk. See Note 4 of the Notes to Consolidated Financial Statements for information about how the Company manages credit risk related to its freestanding derivatives, including the use of master netting agreements and collateral arrangements.  The Company's policy is not to offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement. This policy applies to the recognition of derivatives in the consolidated balance sheets, and does not affect the Company's legal right of offset. The estimated fair value of the Company's net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at December 31, 2011:                                                                        December 31, 2011                                                           Net Derivative         Net Derivative                                                               Assets              Liabilities                                                                       (In millions) Estimated Fair Value of OTC Derivatives After Application of Master Netting Agreements (1)             $          12,905      $            619 Cash collateral on OTC Derivatives                                  (9,493 )                  (8 )  Estimated Fair Value of OTC Derivatives After Application of Master Netting Agreements and Cash Collateral (1)                                                       3,412                   611 Securities Collateral on OTC Derivatives (2)                        (2,520 )                (416 )  

                                              892                   195 Estimated Fair Value of Exchange-Traded Derivatives                     54                    30  Total Estimated Fair Value of Derivatives After Application of Master Netting Agreements and Cash and Securities Collateral (1)                                $             946      $            225                                            159 

  Table of Contents     

  Embedded Derivatives. The embedded derivatives measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, are presented as follows:                                                                          December 31, 2011                                                                Net Embedded Derivatives Within                                                           Asset Host                 Liability Host                                                            Contracts                    Contracts                                                                         (In millions) Quoted prices in active markets for identical assets and liabilities (Level 1)                     $      -            -  %    $        -            -  % Significant other observable inputs (Level 2)               1            1               19            1 Significant unobservable inputs (Level 3)                 362           99            4,565           99  Total estimated fair value                           $    363          100  %    $    4,584          100  %   

                                                              Year Ended December 31, 2011                                                                   (In millions) Balance, beginning of period                            $                           (2,438 ) Total realized/unrealized gains (losses) included in: Earnings                                                                            (1,191 ) Other comprehensive income (loss)                                                     (119 ) Purchases, sales, issuances and settlements                                                                           (455 ) Transfer into and/or out of Level 3                                                      -  Balance, end of period                                  $                           (4,203 )   

  The Company maintains unsecured credit and committed facilities with various financial institutions. See "- Liquidity and Capital Resources - The Company - Liquidity and Capital Sources - Credit and Committed Facilities" for further descriptions of such arrangements.  

  The Company has non-cash collateral for securities lending from counterparties on deposit from customers, which cannot be sold or repledged, and which has not been recorded on its consolidated balance sheets. The                                          160

  Company participates in a securities lending program in the normal course of business for the purpose of enhancing the Company's total return on its investment portfolio. The amount of this collateral was $371 million at estimated fair value at December 31, 2011. There was no non-cash collateral for securities lending on deposit from customers at December 31, 2010. See "- Investments - Securities Lending" and "Securities Lending" in Note 1 of the Notes to the Consolidated Financial Statements for discussion of the Company's securities lending program and the classification of revenues and expenses and the nature of the secured financing arrangement and associated liability.  The Company has non-cash collateral from counterparties for derivative financial instruments, which can be sold or repledged subject to certain constraints, and has not been recorded on its consolidated balance sheets. The Company enters into derivative financial instruments to manage various risks relating to its ongoing business operations. The amount of this collateral was $2.5 billion and $984 million at December 31, 2011 and 2010, respectively, which were held in separate custodial accounts and not recorded on the Company's consolidated balance sheets. See "- Liquidity and Capital Resources -The Company - Liquidity and Capital Sources - Collateral Financing Arrangements" and "Derivatives" in Note 4 of the Notes to the Consolidated Financial Statements for information on the earned income on and the gross notional amount, estimated fair value of assets and liabilities and primary underlying risk exposure of the Company's derivative financial instruments.  

  The Company, as lessee, has entered into various lease and sublease agreements for office space, information technology and other equipment. The Company's commitments under such lease agreements are included within the contractual obligations table. See "- Liquidity and Capital Resources - The Company - Liquidity and Capital Uses - Contractual Obligations" and Note 16 of the Notes to the Consolidated Financial Statements.  

     •   Commitments to Fund Partnership Investments;       •   Mortgage Loan Commitments; and    

   See "Net Investment Income" and "Net Investment Gains (Losses)" in Note 3 of the Notes to the Consolidated Financial Statements for information on the investment income, investment expense, gains and losses from such investments. See also "Fixed Maturity and Equity Securities Available-for-Sale," "Mortgage Loans," "Real Estate and Real Estate Joint Ventures," and "Other Limited Partnerships" in Note 3 of the Notes to the Consolidated Financial Statements for information on our investments in fixed maturity securities, mortgage loans and partnership investments.  Other than the commitments disclosed in Note 16 of the Notes to the Consolidated Financial Statements, there are no other material obligations or liabilities arising from the commitments to fund partnership investments, mortgage loans, bank credit facilities, bridge loans, and private corporate bond investments.  See also "- Liquidity and Capital Resources - The Company - Liquidity and Capital Uses - Contractual Obligations" for further information on commitments to fund partnership investments, mortgage loans, bank credit facilities, bridge loans and private corporate bond investments. In addition, see "Primary Risks Managed by Derivative Financial Instruments and Non-Derivative Financial Instruments" in Note 4 of the Notes to the Consolidated Financial Statements for further information on interest rate lock commitments.                                          161

  We establish, and carry as liabilities, actuarially determined amounts that are calculated to meet policy obligations when a policy matures or is surrendered, an insured dies or becomes disabled or upon the occurrence of other covered events, or to provide for future annuity payments. Amounts for actuarial liabilities are computed and reported in the consolidated financial statements in conformity with GAAP. For more details on Policyholder Liabilities, see "- Summary of Critical Accounting Estimates."  Due to the nature of the underlying risks and the high degree of uncertainty associated with the determination of actuarial liabilities, the Company cannot precisely determine the amounts that will ultimately be paid with respect to these actuarial liabilities, and the ultimate amounts may vary from the estimated amounts, particularly when payments may not occur until well into the future.  Our actuarial liabilities for future benefits are adequate to cover the ultimate benefits required to be paid to policyholders. We periodically review our estimates of actuarial liabilities for future benefits and compare them with our actual experience. We revise estimates, to the extent permitted or required under GAAP, if we determine that future expected experience differs from assumptions used in the development of actuarial liabilities.  Insurance regulators in many of the non-U.S. countries in which MetLife operates require certain MetLife entities to prepare a sufficiency analysis of the reserves posted in the locally required regulatory financial statements, and to submit that analysis to the regulatory authorities. See "Business - International Regulation."  We have experienced, and will likely in the future experience, catastrophe losses and possibly acts of terrorism, and turbulent financial markets that may have an adverse impact on our business, results of operations, and financial condition. Catastrophes can be caused by various events, including pandemics, hurricanes, windstorms, earthquakes, hail, tornadoes, explosions, severe winter weather (including snow, freezing water, ice storms and blizzards), fires and man-made events such as terrorist attacks. Due to their nature, we cannot predict the incidence, timing, severity or amount of losses from catastrophes and acts of terrorism, but we make broad use of catastrophic and non-catastrophic reinsurance to manage risk from these perils.  

  Insurance Products. Future policy benefits are comprised mainly of liabilities for disabled lives under disability waiver of premium policy provisions, liabilities for survivor income benefit insurance, LTC policies, active life policies and premium stabilization and other contingency liabilities held under participating life insurance contracts. In order to manage risk, the Company has often reinsured a portion of the mortality risk on new individual life insurance policies. The reinsurance programs are routinely evaluated and this may result in increases or decreases to existing coverage. The Company entered into various derivative positions, primarily interest rate swaps and swaptions, to mitigate the risk that investment of premiums received and reinvestment of maturing assets over the life of the policy will be at rates below those assumed in the original pricing of these contracts.  Retirement Products. Future policy benefits are comprised mainly of liabilities for life-contingent income annuities, supplemental contracts with and without life contingencies, liabilities for Guaranteed Minimum Death Benefits ("GMDBs") included in certain annuity contracts, and a certain portion of guaranteed living benefits. See "- Variable Annuity Guarantees."  Corporate Benefit Funding. Liabilities are primarily related to payout annuities, including pension closeouts and structured settlement annuities. There is no interest rate crediting flexibility on these liabilities. A sustained low interest rate environment could negatively impact earnings as a result, however, the Company has employed various asset/liability management strategies, including the use of various derivative positions, primarily interest rate floors and interest rate swaps, to mitigate the risks associated with such a scenario.                                          162 

  Auto & Home. Future policy benefits include liabilities for unpaid claims and claim expenses for property and casualty insurance and represent the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon assumptions such as rates of claim frequencies, levels of severities, inflation, judicial trends, legislative changes or regulatory decisions. Assumptions are based upon the Company's historical experience and analyses of historical development patterns of the relationship of loss adjustment expenses to losses for each line of business, and consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation.  Japan and Other International Regions. Future policy benefits are held primarily for traditional life and accident and health contracts in Japan, Asia Pacific and immediate annuities in Latin America. They are also held for total return pass-thru provisions included in certain universal life and savings products mainly in Japan and Latin America, and traditional life, endowment and annuity contracts sold in various countries in Asia Pacific. They also include certain liabilities for variable annuity guarantees of minimum death benefits, and longevity guarantees sold in Japan and Asia Pacific. Finally, in Europe and the Middle East, they also include unearned premium liabilities established for credit insurance contracts covering death, disability and involuntary loss of employment, as well as traditional life, accident and health and endowment contracts. Factors impacting these liabilities include sustained periods of lower yields than rates established at issue, lower than expected asset reinvestment rates, actual lapses resulting in lower than expected income, asset impairments, and actual mortality resulting in higher than expected benefit payments. The Company mitigates its risks by implementing an asset/liability matching policy and through the development of periodic experience studies. See "- Variable Annuity Guarantees."  Estimates for the liabilities for unpaid claims and claim expenses are reset as actuarial indications change and these changes in the liability are reflected in the current results of operation as either favorable or unfavorable development of prior year losses.  Corporate & Other. Future policy benefits primarily include liabilities for quota-share reinsurance agreements for certain LTC and workers' compensation business written by MetLife Insurance Company of Connecticut ("MICC"), prior to its acquisition by MetLife, Inc. These are run-off businesses that have been included within Corporate & Other since the acquisition of MICC.  

  PABs are generally equal to the account value, which includes accrued interest credited, but exclude the impact of any applicable surrender charge that may be incurred upon surrender. See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for additional information.  Insurance Products. PABs are held for death benefit disbursement retained asset accounts, universal life policies, the fixed account of variable life insurance policies, specialized life insurance products for benefit programs and general account universal life policies. PABs are credited interest at a rate set by the Company, which are influenced by current market rates. The majority of the PABs have a guaranteed minimum credited rate between 0.5% and 6.0%. A sustained low interest rate environment could negatively impact earnings as a result of the minimum credited rate guarantees. The Company has various derivative positions, primarily interest rate floors, to partially mitigate the risks associated with such a scenario.  Retirement Products. PABs are held for fixed deferred annuities and the fixed account portion of variable annuities, for certain income annuities, and for certain portions of guaranteed benefits. PABs are credited interest at a rate set by the Company. Credited rates for deferred annuities are influenced by current market rates, and most of these contracts have a minimum guaranteed rate between 1.0% and 4.0%. See "- Variable Annuity Guarantees."  Corporate Benefit Funding. PABs are comprised of funding agreements. Interest crediting rates vary by type of contract, and can be fixed or variable. Variable interest crediting rates are generally tied to an external index,                                          163

  most commonly (1-month or 3-month) LIBOR. MetLife is exposed to interest rate risks, and foreign exchange risk when guaranteeing payment of interest and return of principal at the contractual maturity date. The Company may invest in floating rate assets, or enter into floating rate swaps, also tied to external indices, as well as caps to mitigate the impact of changes in market interest rates. The Company also mitigates its risks by implementing an asset/liability matching policy and seeks to hedge all foreign currency risk through the use of foreign currency hedges, including cross currency swaps.  Japan and Other International Regions. PABs are held largely for fixed income retirement and savings plans in Japan and Latin America and to a lesser degree, amounts for unit-linked-type funds in certain countries across all regions that do not meet the GAAP definition of separate accounts. Also included are certain liabilities for retirement and savings products sold in certain countries in Japan and Asia Pacific that generally are sold with minimum credited rate guarantees. Liabilities for guarantees on certain variable annuities in Japan and  are established in accordance with derivatives and hedging guidance and are also included within PABs. These liabilities are generally impacted by sustained periods of low interest rates, where there are interest rate guarantees. The Company mitigates its risks by implementing an asset/liability matching policy and by hedging its variable annuity guarantees. Liabilities for unit-linked-type funds are impacted by changes in the fair value of the associated underlying investments, as the return on assets is generally passed directly to the policyholder. See "- Variable Annuity Guarantees."  

  The Company issues, directly and through assumed reinsurance, certain variable annuity products with guaranteed minimum benefits that provide the policyholder a minimum return based on their initial deposit (i.e., the benefit base) less withdrawals. See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for additional information.  The net amount at risk ("NAR") for guarantees can change significantly during periods of sizable and sustained shifts in equity market performance, increased equity volatility, or changes in interest rates. The NAR disclosed in Note 8 of the Notes to the Consolidated Financial Statements represents management's estimate of the current value of the benefits under these guarantees if they were all exercised simultaneously at December 31, 2011 and 2010, respectively. However, there are features, such as deferral periods and benefits requiring annuitization or death, that limit the amount of benefits that will be payable in the near future.  Guarantees, including portions thereof, accounted for as embedded derivatives, are recorded at estimated fair value and included in PABs. Guarantees accounted for as embedded derivatives include guaranteed minimum accumulation benefits, the non life-contingent portion of guaranteed minimum withdrawal benefits ("GMWB") and the portion of certain GMIB that do not require annuitization. For more detail on the determination of estimated fair value, see Note 5 of the Notes to the Consolidated Financial Statements.  The table below contains the carrying value for guarantees included in PABs at:                                                             December 31,                                                       2011          2010                                                          (In millions)           U.S. Business:           Guaranteed minimum accumulation benefit   $      52     $      44           Guaranteed minimum withdrawal benefit           710           173           Guaranteed minimum income benefit               988           (51 )           International:           Guaranteed minimum accumulation benefit         694           454           Guaranteed minimum withdrawal benefit         2,000         1,936            Total                                     $   4,444     $   2,556    Included in net derivative gains (losses) for the years ended December 31, 2011 and 2010 were gains (losses) of ($1.3) billion and ($269) million, respectively, in embedded derivatives related to the change in estimated fair                                          164

  The estimated fair value of guarantees accounted for as embedded derivatives can change significantly during periods of sizable and sustained shifts in equity market performance, equity volatility, interest rates or foreign exchange rates. Additionally, because the estimated fair value for guarantees accounted for at estimated fair value includes an adjustment for nonperformance risk, a decrease in the Company's credit spreads could cause the value of these liabilities to increase. Conversely, a widening of the Company's credit spreads could cause the value of these liabilities to decrease. The Company uses derivative instruments and reinsurance to mitigate the liability exposure, risk of loss and the volatility of net income associated with these liabilities. The derivative instruments used are primarily equity and treasury futures, equity options and variance swaps, and interest rate swaps. The change in valuation arising from the nonperformance risk is not hedged.  

                                                                                                 December 31,                                                                         2011                                               2010                                                     Notional           Estimated Fair Value            Notional           Estimated Fair Value Primary Underlying                                   Amount          Assets          Liabilities        Amount         Assets           Liabilities Risk Exposure              Instrument Type                                                   (In millions) Interest rate        Interest rate swaps           $   22,719     $      1,869      $         598     $   13,762     $       401       $         193                      Interest rate futures             11,126               17                 16          5,822              32                  10                      Interest rate options             11,372              567                  6            614              15                   - Foreign currency     Foreign currency forwards          2,311               41                  4          2,320              46                   1                      Foreign currency futures             177                -                  -              -               -                   - Equity market        Equity futures                     4,916               15                 10          6,959              17                   9                      Equity options                    16,367            3,239                177         32,942           1,720               1,196                      Variance swaps                    18,402              390                 75         17,635             190                 118                      Total rate of return swaps         1,274                8                 31          1,547               -                   -                       Total                         $   88,664     $      6,146      $         917     $   81,601     $     2,421       $       1,527    Included in net derivative gains (losses) for the years ended December 31, 2011 and 2010 were gains (losses) of $3.2 billion and $113 million related to the change in estimated fair value of the above derivatives. Additionally, included in net derivative gains (losses) for the years ended December 31, 2011 and 2010 were gains (losses) of $26 million and ($35) million, respectively, related to ceded reinsurance.  Guarantees, including portions thereof, have liabilities established that are included in future policy benefits. Guarantees accounted for in this manner include GMDBs, the life-contingent portion of certain GMWB, and the portion of GMIB that require annuitization. These liabilities are accrued over the life of the contract in proportion to actual and future expected policy assessments based on the level of guaranteed minimum benefits generated using multiple scenarios of separate account returns. The scenarios use best estimate assumptions consistent with those used to amortize deferred acquisition costs. When current estimates of future benefits exceed those previously projected or when current estimates of future assessments are lower than those previously projected, liabilities will increase, resulting in a current period charge to net income. The opposite result occurs when the current estimates of future benefits are lower than that previously projected or when current estimates of future assessments exceed those previously projected. At each reporting period, the Company updates the actual amount of business remaining in-force, which impacts expected future assessments and the projection of estimated future benefits resulting in a current period charge or increase to earnings.                                          165

  The table below contains the carrying value for guarantees included in future policy benefits at:                                                          December 31,                                                     2011         2010                                                       (In millions)               U.S. Business:               Guaranteed minimum death benefit    $     260     $   167               Guaranteed minimum income benefit         723         507               International:               Guaranteed minimum death benefit          118          66               Guaranteed minimum income benefit         149         116                Total                               $   1,250     $   856    Included in policyholder benefits and claims for the year ended December 31, 2011 is a charge of $394 million and for the year ended December 31, 2010 is a charge of $302 million, related to the respective change in liabilities for the above guarantees.  The carrying amount of guarantees accounted for as insurance liabilities can change significantly during periods of sizable and sustained shifts in equity market performance, increased equity volatility, or changes in interest rates. The Company uses reinsurance in combination with derivative instruments to mitigate the liability exposure, risk of loss and the volatility of net income associated with these liabilities. Derivative instruments used are primarily equity futures, treasury futures and interest rate swaps.  Included in policyholder benefits and claims associated with the hedging of the guarantees in future policy benefits for the year ended December 31, 2011 and 2010 were gains (losses) of $86 million and $8 million, respectively, related to reinsurance agreements containing embedded derivatives carried at estimated fair value and gains (losses) of ($87) million and ($275) million, respectively, related to freestanding derivatives.  While the Company believes that the hedging strategies employed for guarantees included in both PABs and in future policy benefits, as well as other management actions, have mitigated the risks related to these benefits, the Company remains liable for the guaranteed benefits in the event that reinsurers or derivative counterparties are unable or unwilling to pay. Certain of the Company's reinsurance agreements and most derivative positions are collateralized and derivatives positions are subject to master netting agreements, both of which, significantly reduces the exposure to counterparty risk. In addition, the Company is subject to the risk that hedging and other management procedures prove ineffective or that unanticipated policyholder behavior or mortality, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed. Lastly, because the valuation of the guarantees accounted for as embedded derivatives includes an adjustment for nonperformance risk that is not hedged, changes in the nonperformance risk may result in significant volatility in net income.  

  Other policy-related balances include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid, and policyholder dividends left on deposit. See Notes 1 and 8 of the Notes to the Consolidated Financial Statements for additional information.  

  Our business and results of operations are materially affected by conditions in the global capital markets and the global economy. Stressed conditions, volatility and disruptions in global capital markets, particular markets, or financial asset classes can have an adverse effect on us, in part because we have a large investment portfolio                                          166

  and our insurance liabilities are sensitive to changing market factors. The global economy and markets are still affected by a period of significant stress that began in the second half of 2007. This disruption adversely affected the financial services sector, in particular, and global capital markets. Consequently, financial institutions paid higher spreads over benchmark U.S. Treasury securities than before the market disruption began.  Beginning in 2010 and continuing throughout 2011, concerns increased about capital markets and the solvency of certain European Union member states and of financial institutions that have significant direct or indirect exposure to debt issued by these countries. The Japanese economy, to which we face substantial exposure given our operations there, was significantly negatively impacted by the March 2011 earthquake and tsunami. 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. Although the August 2011 downgrade by S&P of U.S. Treasury securities initially had an adverse effect on financial markets, the extent of the longer-term impact cannot be predicted. In November 2011, Fitch warned that it may in the future downgrade the U.S. credit rating unless action is taken to reduce the national debt of the U.S. It is possible that the August 2011U.S. Treasury Securities, Could Have an Adverse Effect on Our Business, Financial Condition and Results of Operations."  

  Based upon the strength of its franchise, diversification of its businesses and strong financial fundamentals, we continue to believe the Company has ample liquidity to meet business requirements under current market conditions and unlikely but reasonably possible stress scenarios. The Company's short-term liquidity position includes cash and cash equivalents and short-term investments, excluding: (i) cash collateral received under the Company's securities lending program that has been reinvested in cash and cash equivalents, short-term investments and publicly-traded securities, and (ii) cash collateral received from counterparties in connection with derivative instruments. At December 31, 2011 and 2010, the Company's short-term liquidity position was $16.2 billion and $17.6 billion, respectively. We continuously monitor and adjust our liquidity and capital plans for MetLife, Inc. and its subsidiaries in light of changing needs and opportunities. See "- Investments - Current Environment."  Capital Management  The Company has established several senior management committees as part of its capital management process. These committees, including the Capital Management Committee and the Enterprise Risk Committee (comprised of members of senior management, including MetLife, Inc.'s Chief Financial Officer, Treasurer and Chief Risk Officer and, in the case of the Enterprise Risk Committee, MetLife, Inc.'s Chief Investment Officer), regularly review actual and projected capital levels (under a variety of scenarios including stress scenarios) and MetLife's capital plan in accordance with its capital policy.  MetLife's Board and senior management are directly involved in the development and maintenance of MetLife's capital policy. The capital policy sets forth, among other things, minimum and target capital levels and the governance of the capital management process. All capital actions, including proposed changes to the capital plan, capital targets or capital policy, are reviewed by the Finance and Risk Committee of the Board prior to obtaining full Board approval. The Board approves the capital policy and the annual capital plan and authorizes capital actions, as required.  MetLife's 2012 capital plan, as submitted to the Federal Reserve for approval in January 2012 as part of the Federal Reserve Board's 2012 Comprehensive Capital Analysis and Review, was created in accordance with MetLife's capital policy. See "Business - U.S. Regulation - Financial Holding Company Regulation."                                          167

  Table of Contents  The Company  Liquidity  Liquidity refers to a company's ability to generate adequate amounts of cash to meet its needs. Liquidity needs are determined from a rolling six-month forecast by portfolio of investment assets and are monitored daily. Asset mix and maturities are adjusted based on the forecast. Cash flow testing and stress testing provide additional perspectives on liquidity, which include various scenarios of the potential risk of early contractholder and policyholder withdrawal. The Company includes provisions limiting withdrawal rights on many of its products, including general account institutional pension products (generally group annuities, including funding agreements, and certain deposit fund liabilities) sold to employee benefit plan sponsors. Certain of these provisions prevent the customer from making withdrawals prior to the maturity date of the product.  

  Under certain stressful market and economic conditions, the Company's access to, or cost of, liquidity may deteriorate. If the Company requires significant amounts of cash on short notice in excess of anticipated cash requirements or is required to post or return cash collateral in connection with its investment portfolio, derivatives transactions or securities lending program, the Company may have difficulty selling investment assets in a timely manner, be forced to sell them for less than the Company otherwise would have been able to realize, or both. In addition, in the event of such forced sale, accounting guidance require the recognition of a loss for certain securities in an unrealized loss position and may require the impairment of other securities based upon the Company's ability to hold such securities, which may negatively impact the Company's financial condition. See "Risk Factors - Some of Our Investments Are Relatively Illiquid and Are in Asset Classes That Have Been Experiencing Significant Market Valuation Fluctuations."  In extreme circumstances, all general account assets within a particular legal entity - other than those which may have been pledged to a specific purpose - are available to fund obligations of the general account of that legal entity.  Capital  The Company's capital position is managed to maintain its financial strength and credit ratings and is supported by its ability to generate strong cash flows at the operating companies, borrow funds at competitive rates and raise additional capital to meet its operating and growth needs.  The Company was able to issue new debt and remarket outstanding debt during the difficult market conditions prevailing in the second half of 2008 and early 2009, as well as during the rebound and recovery periods beginning in the second quarter of 2009 and continuing into 2010. The increase in credit spreads experienced during the crisis resulted in an increase in the cost of capital, as well as increases in facility fees. Most recently, as a result of reductions in interest rates and credit spreads, the Company's interest expense and dividends on floating rate securities have been lower.  Despite the still unsettled financial markets, the Company also raised new capital from successful offerings of MetLife, Inc.'s common stock in August 2010 and March 2011. The August 2010 offering provided financing for the Acquisition and the March 2011 offering provided financing for the repurchase from AM Holdings of MetLife, Inc.'s Convertible Preferred Stock that was issued in connection with the Acquisition. See "- The Company - Liquidity and Capital Sources - Convertible Preferred Stock" and "- Common Stock."                                          168

  Rating Agencies. Rating agencies assign insurer financial strength ratings to MetLife, Inc.'s domestic life insurance subsidiaries and credit ratings to MetLife, Inc. and certain of its subsidiaries. The level and composition of regulatory capital at the subsidiary level and equity capital of the Company are among the many factors considered in determining the Company's insurer financial strength and credit ratings. Each agency has its own capital adequacy evaluation methodology, and assessments are generally based on a combination of factors. In addition to heightening the level of scrutiny that they apply to insurance companies, rating agencies have increased and may continue to increase the frequency and scope of their credit reviews, may request additional information from the companies that they rate and may adjust upward the capital and other requirements employed in the rating agency models for maintenance of certain ratings levels.  A downgrade in the credit or insurer financial strength ratings of MetLife, Inc. or its subsidiaries would likely impact the cost and availability of financing for MetLife, Inc. and its subsidiaries and result in additional collateral requirements or other required payments under certain agreements, which are eligible to be satisfied in cash or by posting securities held by the subsidiaries subject to the agreements.  

  Except for American Life, RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to identify companies that merit regulatory action. RBC is based on a formula calculated by applying factors to various asset, premium and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. These rules apply to each of MetLife, Inc.'s domestic insurance subsidiaries. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC levels. At the date of the most recent annual statutory financial statements filed with insurance regulators, the total adjusted capital of each of these subsidiaries was in excess of each of those RBC levels.  American Life does not conduct insurance business in Delaware or any other domestic state and, as such, is exempt from RBC requirements by Delaware law. In addition to Delaware, American Life operations are regulated by applicable authorities of the countries in which the company operates and are subject to capital and solvency requirements in those countries.  The amount of dividends that our insurance subsidiaries can pay to MetLife, Inc. or other parent entities is constrained by the amount of surplus we hold to maintain our ratings and provides an additional margin for risk protection and investment in our businesses. We proactively take actions to maintain capital consistent with these ratings objectives, which may include adjusting dividend amounts and deploying financial resources from internal or external sources of capital. Certain of these activities may require regulatory approval. Furthermore, the payment of dividends and other distributions to MetLife, Inc. and other parent entities by their respective insurance subsidiaries is regulated by insurance laws and regulations. See "Business - U.S. Regulation - Insurance Regulation," "Business - International Regulation," "- MetLife, Inc. - Liquidity and Capital Sources - Dividends from Subsidiaries" and Note 18 of the Notes to the Consolidated Financial Statements."                                          169

  Summary of Primary Sources and Uses of Liquidity and Capital. The Company's primary sources and uses of liquidity and capital are summarized as follows:                                                              Years Ended December 31,                                                     2011             2010            2009                                                                 (In millions) Sources:

        $   3,803 Net cash provided by changes in policyholder account balances                                      4,321           4,557                - Net cash provided by changes in payables for collateral under securities loaned and other transactions                                          6,444           3,076                - Net cash provided by changes in bank deposits                                                 96               -            3,164 Net cash provided by short-term debt issuances                                               380               -                - Long-term debt issued                                 1,346           5,090            2,961 Collateral financing arrangements issued                  -               -              105 Cash received in connection with collateral financing arrangements                                  100               -              775 Junior subordinated debt securities issued                -               -              500 Common stock issued, net of issuance costs            2,950           3,529                - Stock options exercised                                  88              52                8 Common stock issued to settle stock forward contracts                                                 -               -            1,035 Cash provided by other, net                             125               -                - Cash provided by the effect of change in foreign currency exchange rates                           -               -              108  Total sources                                        26,140          24,300           12,459  Uses: Net cash used in investing activities                22,235          18,314 

 Net cash used for changes in policyholder account balances                                          -               -            2,282 Net cash used for changes in payables for collateral under securities loaned and other transactions                                              -               -            6,863 Net cash used for changes in bank deposits                -              32                - Net cash used for short-term debt repayments              -             606            1,747 Long-term debt repaid                                 2,042           1,061              555 Collateral financing arrangements repaid                502               -                - Cash paid in connection with collateral financing arrangements                                   63               -              400 Debt issuance costs                                       1              14               30 Redemption of convertible preferred stock             2,805               -                - Preferred stock redemption premium                      146               -                - Dividends on preferred stock                            122             122              122 Dividends on common stock                               787             784              610 Cash used in other, net                                   -             304               42 Cash used in the effect of change in foreign currency exchange rates                                  22             129                -  Total uses                                           28,725          21,366           26,586  Net increase (decrease) in cash and cash equivalents                                      $   (2,585 )      $  2,934        $ (14,127 )                                            170 

  Cash Flows from Operations. The Company's principal cash inflows from its insurance activities come from insurance premiums, annuity considerations and deposit funds. A primary liquidity concern with respect to these cash inflows is the risk of early contractholder and policyholder withdrawal. See "- The Company - Liquidity and Capital Uses - Contractual Obligations."  Cash Flows from Investments. The Company's principal cash inflows from its investment activities come from repayments of principal, proceeds from maturities, sales of invested assets, settlements of freestanding derivatives and net investment income. The primary liquidity concerns with respect to these cash inflows are the risk of default by debtors and market disruption. The Company closely monitors and manages these risks through its credit risk management process.  Liquid Assets. An integral part of the Company's liquidity management is the amount of liquid assets it holds. Liquid assets include cash and cash equivalents, short-term investments and publicly-traded securities, excluding: (i) cash collateral received under the Company's securities lending program that has been reinvested in cash and cash equivalents, short-term investments and publicly-traded securities; (ii) cash collateral received from counterparties in connection with derivative instruments; (iii) cash and cash equivalents, short-term investments and securities on deposit with regulatory agencies; and (iv) securities held in trust in support of collateral financing arrangements and pledged in support of debt and funding agreements. At December 31, 2011 and 2010, the Company had $258.9 billion and $245.7 billion, respectively, in liquid assets. For further discussion of invested assets on deposit with regulatory agencies, held in trust in support of collateral financing arrangements and pledged in support of debt and funding agreements, see " - Investments - Invested Assets on Deposit, Held in Trust and Pledged as Collateral."  

  Global Funding Sources. Liquidity is provided by a variety of short-term instruments, including funding agreements, credit facilities and commercial paper. Capital is provided by a variety of instruments, including short-term and long-term debt, preferred securities, junior subordinated debt securities and equity and equity-linked securities. The diversity of the Company's funding sources enhances funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. The Company's global funding sources include:   

      paper program, including accrued interest payable, of $101 million and       $102 million, respectively.    

      discussion of MetLife, Inc.'s status as a bank holding company, see "-       MetLife, Inc. - Capital."                                           171 

      - Capital."    

      Consolidated Financial Statements.    

      transfer and the liability will be included in PABs for MLIC.    

       Note 8 of the Notes to the Consolidated Financial Statements.       •   The Company had obligations under funding agreements with the FHLB of Des

      such funding agreements for GALIC. See Note 8 of the Notes to the       Consolidated Financial Statements.                                           172 

   Outstanding Debt. The following table summarizes the outstanding debt of the Company at:                                                           December 31,                                                      2011         2010                                                        (In millions)              Short-term debt                       $    686     $    306              Long-term debt (1)                    $ 20,624     $ 20,766              Collateral financing arrangements     $  4,647     $  5,297              Junior subordinated debt securities   $  3,192     $  3,191    

   Debt Issuances and Other Borrowings.During the years ended December 31, 2011, 2010 and 2009, MetLife Bank received advances related to long-term borrowings totaling $1.3 billion, $2.1 billion and $1.3 billion, respectively, from the FHLB of NY. During the years ended December 31, 2011, 2010 and 2009, MetLife Bank received advances related to short-term borrowings totaling $10.1 billion, $12.5 billion and $26.3 billion, respectively, from the FHLB of NY.  In connection with the financing of the Acquisition (see Note 2 of the Notes to the Consolidated Financial Statements), in November 2010, MetLife, Inc. issued to AM Holdings$3.0 billion in three series of debt securities (the "Series C Debt Securities," the "Series D Debt Securities" and the "Series E Debt Securities," and, together, the "Debt Securities"), which constitute a part of the MetLife, Inc. common equity units (the "Equity Units") more fully described in Note 14 of the Notes to the Consolidated Financial Statements. The Debt Securities are subject to remarketing, initially bear interest at 1.56%, 1.92% and 2.46%, respectively (an average rate of 1.98%), and carry initial maturity dates of June 15, 2023, June 15, 2024 and June 15, 2045, respectively. The interest rates will be reset in connection with the successful remarketings of the Debt Securities. Prior to the first scheduled attempted remarketing of the Series C Debt Securities, such Debt Securities will be divided into two tranches equal in principal amount with maturity dates of June 15, 2018 and June 15, 2023. Prior to the first scheduled attempted remarketing of the Series E Debt Securities, such Debt Securities will be divided into two tranches equal in principal amount with maturity dates of June 15, 2018 and June 15, 2045.  

       fixed rate of 2.375%, payable semi-annually;       •   $1.0 billion senior notes due February 8, 2021, which bear interest at a       fixed rate of 4.75%, payable semi-annually;       •   $750 million senior notes due February 6, 2041, which bear interest at a       fixed rate of 5.875%, payable semi-annually; and       •   $250 million floating rate senior notes due August 6, 2013, which bear

      payable quarterly.                                           173 

  In July 2009, MetLife, Inc. issued $500 million of junior subordinated debt securities with a final maturity of August 2069. Interest is payable semi-annually at a fixed rate of 10.75% up to, but not including, August 1, 2039, the scheduled redemption date. In the event the debt securities are not redeemed on or before the scheduled redemption date, interest will accrue at an annual rate of three-month LIBOR plus a margin equal to 7.548%, payable quarterly in arrears. In connection with the offering, MetLife, Inc. incurred $5 million of issuance costs which have been capitalized and included in other assets. These costs are being amortized over the term of the securities. See Note 13 of the Notes to the Consolidated Financial Statements for a description of the terms of the junior subordinated debt securities.  In May 2009, MetLife, Inc. issued $1.3 billion of senior notes due June 1, 2016. The senior notes bear interest at a fixed rate of 6.75%, payable semi-annually. In connection with the offering, MetLife, Inc. incurred $6 million of issuance costs which have been capitalized and included in other assets. These costs are being amortized over the term of the senior notes.  In March 2009, MetLife, Inc. issued $397 million of floating rate senior notes due June 2012 under the FDIC's Temporary Liquidity Guarantee Program. The senior notes bear interest at a rate equal to three-month LIBOR, reset quarterly, plus 0.32%. The senior notes are not redeemable prior to their maturity. In connection with the offering, MetLife, Inc. incurred $15 million of issuance costs which have been capitalized and included in other assets. These costs are being amortized over the term of the senior notes.  In February 2009, MetLife, Inc. remarketed its existing $1.0 billion 4.91% Series B junior subordinated debt securities as 7.717% senior debt securities, Series B, due 2019. Interest on these senior debt securities is payable semi-annually. See " - The Company - Liquidity and Capital Sources - Remarketing of Junior Subordinated Debt Securities and Settlement of Stock Purchase Contracts."  

   Under this agreement, MetLife, Inc. may also be required to pledge collateral or make payments to the unaffiliated financial institution related to any decline in the estimated fair value of the surplus notes. Any such payments would be accounted for as a receivable and included in other assets on the Company's consolidated balance sheets and would not reduce the principal amount outstanding of the surplus notes. Such payments would, however, reduce the amount of interest payments due from MetLife, Inc. under the agreement. Any payment received from the unaffiliated financial institution would reduce the receivable by an amount equal to such payment and would also increase the amount of interest payments due from MetLife, Inc. under the agreement. In addition, the unaffiliated financial institution may be required to pledge collateral to MetLife, Inc. related to any increase in the estimated fair value of the surplus notes. MetLife, Inc. may also be required to make a payment to the unaffiliated financial institution in connection with any early termination of this agreement.  In December 2011, following regulatory approval, MRC repurchased and canceled $650 million in aggregate principal amount of the surplus notes (the "Partial Repurchase"). Payments made by the Company in December 2011 associated with the Partial Repurchase, which also included payments made                                          174

  to the unaffiliated financial institution, totaled $650 million, exclusive of accrued interest on the surplus notes. At December 31, 2011 and 2010, the amount of the surplus notes outstanding was $1.9 billion and $2.5 billion, respectively.  At December 31, 2011 and 2010, the amount of the receivable from the unaffiliated financial institution was $241 million and $425 million, respectively. In June 2011, MetLife, Inc. received $100 million from the unaffiliated financial institution related to an increase in the estimated fair value of the surplus notes. No payments were made or received by MetLife, Inc. during 2010. During 2009, on a net basis, MetLife, Inc. received $375 million from the unaffiliated financial institution related to changes in the estimated fair value of the surplus notes.  In addition, at December 31, 2011 and 2010, MetLife, Inc. had pledged collateral with an estimated fair value of $125 million and $49 million, respectively, to the unaffiliated financial institution.    

  Remarketing of Junior Subordinated Debt Securities and Settlement of Stock Purchase Contracts. In February 2009, MetLife, Inc. closed the remarketing of the Series B portion of its junior subordinated debt securities originally issued in 2005. The Series B junior subordinated debt securities were modified as permitted by their terms to be 7.717% senior debt securities, Series B, due February 15, 2019. MetLife, Inc. did not receive any proceeds from the remarketing. The subsequent settlement of the stock purchase contracts occurred on February 17, 2009, providing proceeds to MetLife, Inc. of $1.0 billion in exchange for shares of MetLife, Inc.'s common stock. MetLife, Inc. delivered 24,343,154 shares of its newly issued common stock to settle the stock purchase contracts.  

  The unsecured credit facilities are used for general corporate purposes, to support the borrowers' commercial paper programs and for the issuance of letters of credit. At December 31, 2011, the Company had outstanding $3.1 billion in letters of credit and no drawdowns against these facilities. Remaining unused commitments were $916 million at December 31, 2011.  

                                          175  

  We have no reason to believe that our lending counterparties will be unable to fulfill their respective contractual obligations under these facilities. As commitments associated with letters of credit and financing arrangements may expire unused, these amounts do not necessarily reflect the Company's actual future cash funding requirements.  

  Preferred Stock. See " - The Company - Liquidity and Capital Uses - Dividends" for information on MetLife, Inc.'s Floating Rate Non-Cumulative Preferred Stock, Series A, and 6.50% Non-Cumulative Preferred Stock, Series B (collectively, the "Preferred Stock").  Convertible Preferred Stock. In November 2010, MetLife, Inc. issued to AM Holdings in connection with the financing of the Acquisition 6,857,000 shares of Series B contingent convertible junior participating non-cumulative perpetual preferred stock (the "Convertible Preferred Stock") convertible into approximately 68,570,000 shares (valued at $40.90 per share at the time of the Acquisition) of MetLife, Inc.'s common stock (subject to anti-dilution adjustments) upon a favorable vote of MetLife, Inc.'s common stockholders. On March 8, 2011, MetLife, Inc. repurchased and canceled all of the Convertible Preferred Stock. See "- Common Stock" below.  Common Stock. In November 2010, MetLife, Inc. issued to AM Holdings in connection with the financing of the Acquisition 78,239,712 new shares of its common stock at $40.90 per share. On March 8, 2011, AM Holdings sold the 78,239,712 shares of common stock in a public offering concurrent with a public offering by MetLife, Inc. of 68,570,000 new shares of its common stock at a price of $43.25 per share for gross proceeds of $3.0 billion. In connection with the offering of common stock, MetLife, Inc. incurred $16 million of issuance costs which have been recorded as a reduction of additional paid-in capital. The proceeds were used to repurchase the Convertible Preferred Stock.  In August 2010, in connection with the financing of the Acquisition, MetLife, Inc. issued 86,250,000 new shares of its common stock at a price of $42.00 per share for gross proceeds of $3.6 billion. In connection with the offering of common stock, MetLife, Inc. incurred $94 million of issuance costs which have been recorded as a reduction of additional paid-in-capital.  In connection with the remarketing of the junior subordinated debt securities, in February 2009, MetLife, Inc. delivered 24,343,154 shares of its newly issued common stock to settle the stock purchase contracts. See "- The Company - Liquidity and Capital Sources - Remarketing of Junior Subordinated Debt Securities and Settlement of Stock Purchase Contracts."  During the years ended December 31, 2011 and 2010, 3,549,211 and 2,182,174 new shares of common stock were issued for $115 million and $74 million, respectively, to satisfy various stock option exercises and other stock-based awards. There were no new shares of common stock issued to satisfy the various stock option exercises and other stock-based awards during the year ended December 31, 2009. There were no shares of common stock issued from treasury stock during the year ended December 31, 2011. During the years ended December 31, 2010 and 2009, 332,121 shares and 861,586 shares of common stock were issued from treasury stock for $18 million and $46 million, respectively, to satisfy various stock option exercises and other stock-based awards.  Equity Units. On the Acquisition Date, MetLife, Inc. issued to AM Holdings in connection with the financing of the Acquisition $3.0 billion aggregate stated amount of Equity Units. On March 8, 2011, concurrently with the public offering of common stock by MetLife, Inc., AM Holdings sold all the Equity Units in a public offering. The terms and conditions of the Equity Units were unaffected by the resulting transfers of ownership. The Equity                                          176

  Units, which are mandatorily convertible securities, will initially consist of (i) purchase contracts obligating the holder to purchase a variable number of shares of MetLife, Inc.'s common stock on each of three specified future settlement dates (expected to be approximately two, three and four years after closing of the Acquisition) for a fixed amount per purchase contract (an aggregate of $1.0 billion on each settlement date) and (ii) an interest in each of three series of Debt Securities of MetLife, Inc. The value of the purchase contracts at issuance of $247 million was calculated as the present value of the future contract payments and was recorded in other liabilities. At future dates, the Series C, D and E Debt Securities will be subject to remarketing and sold to investors. Holders of the Equity Units who elect to include their Debt Securities in a remarketing can use the proceeds thereof to meet their obligations under the purchase contracts.  

  Acquisitions. Cash outflows for acquisitions during the years ended December 31, 2011 and 2010 were $233 million and $7.2 billion, respectively. During the year ended December 31, 2009December 2011, MetLife, Inc. repaid its $750 million senior note with an interest rate of 6.13%. During the years ended December 31, 2011, 2010 and 2009, MetLife Bank made repayments of $750 million, $349 million and $497 million, respectively, to the FHLB of NY related to long-term borrowings. During the years ended December 31, 2011, 2010 and 2009, MetLife Bank made repayments to the FHLB of NY related to short-term borrowings of $9.7 billion, $12.9 billion and $26.4 billion, respectively. During the year ended December 31, 2009, MetLife Bank made repayments of $21.2 billion to the FRB of NY and MICC made repayments of $300 million to the FHLB of Boston, each related to short-term borrowings.  Debt Repurchases. We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise. Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, and applicable regulatory, legal and accounting factors. Whether or not to repurchase any debt and the size and timing of any such repurchases will be determined in the Company's discretion. In December 2011, following regulatory approval, the Company repurchased $650 million in aggregate principal amount of the surplus notes included in collateral financing arrangements.  Insurance Liabilities. The Company's principal cash outflows primarily relate to the liabilities associated with its various life insurance, property and casualty, annuity and group pension products, operating expenses and income tax, as well as principal and interest on its outstanding debt obligations. Liabilities arising from its insurance activities primarily relate to benefit payments under the aforementioned products, as well as payments for policy surrenders, withdrawals and loans. For annuity or deposit type products, surrender or lapse product behavior differs somewhat by segment. In the Retirement Products segment, which includes individual annuities, lapses and surrenders tend to occur in the normal course of business. During the years ended December 31, 2011 and 2010, general account surrenders and withdrawals from annuity products were $4.1 billion and $3.8 billion, respectively. In Corporate Benefit Funding, which includes pension closeouts, bank-owned life insurance and other fixed annuity contracts, as well as funding agreements (including funding agreements with the FHLB of NY, the FHLB of Des Moines and the FHLB of Boston) and other capital market products, most of the products offered have fixed maturities or fairly predictable surrenders or withdrawals. With regard to Corporate Benefit Funding liabilities that provide customers with limited liquidity rights, at December 31, 2011 there were $2.4 billion of funding agreements and other capital market products that could be put back to the Company after a period of notice. Of these liabilities, $535 million were subject to a notice period of 90 days. The remainder was subject to a notice period of five months or greater. An additional $188 million of Corporate Benefit Funding liabilities were subject to credit ratings downgrade triggers that permit early termination subject to a notice period of 90 days. See " - The Company - Liquidity and Capital Uses - Contractual Obligations."                                          177

                                                                                                  Dividend Declaration Date                  Record Date           Payment Date              Per Share                 Aggregate                                                                                  (In millions, except per share data) October 25, 2011                November 9, 2011      December 14, 2011      $              0.74        $             787 October 26, 2010                November 9, 2010      December 14, 2010                     0.74                      784 (1) October 29, 2009                November 9, 2009      December 14, 2009                     0.74                      610    

   Common stock dividend decisions are determined by MetLife, Inc.'s Board of Directors after taking into consideration factors such as the Company's current earnings, expected medium-term and long-term earnings, financial condition, regulatory capital position, and applicable governmental regulations and policies. The payment of dividends and other distributions by MetLife, Inc. to its security holders is subject to regulation by the Federal Reserve. See "Business - U.S. Regulation - Financial Holding Company Regulation" and Note 18 of the Notes to the Consolidated Financial Statements.  Information on the declaration, record and payment dates, as well as per share and aggregate dividend amounts, for Preferred Stock is as follows for the years ended December 31, 2011, 2010 and 2009:                                                                                            Dividend                                                                Series A         Series A         Series B         Series B Declaration Date       Record Date         Payment Date        Per Share        Aggregate        Per Share        Aggregate                                                                           (In millions, except per share data) November 15, 2011   November 30, 2011   December 15, 2011    $   0.2527777            $  7     $   0.4062500            $ 24 August 15, 2011     August 31, 2011     September 15, 2011   $   0.2555555            $  6     $   0.4062500            $ 24 May 16, 2011        May 31, 2011        June 15, 2011        $   0.2555555               7     $   0.4062500              24 March 7, 2011       February 28, 2011   March 15, 2011       $   0.2500000               6     $   0.4062500              24                                                                                        $ 26                              $ 96 

          $  7     $   0.4062500            $ 24 August 16, 2010     August 31, 2010     September 15, 2010   $   0.2555555               6     $   0.4062500              24 May 17, 2010        May 31, 2010        June 15, 2010        $   0.2555555               7     $   0.4062500              24 March 5, 2010       February 28, 2010   March 15, 2010       $   0.2500000               6     $   0.4062500              24                                                                                        $ 26                              $ 96 

          $  7     $   0.4062500            $ 24 August 17, 2009     August 31, 2009     September 15, 2009   $   0.2555555               6     $   0.4062500              24 May 15, 2009        May 31, 2009        June 15, 2009        $   0.2555555               7     $   0.4062500              24 March 5, 2009       February 28, 2009   March 16, 2009       $   0.2500000               6     $   0.4062500              24                                                                                        $ 26                              $ 96    Share Repurchases. At December 31, 2011, MetLife, Inc. had $1.3 billion remaining under its common stock repurchase program authorizations. See "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" for further information relating to such authorizations. During the years ended December 31, 2011, 2010 and 2009, the Company did not repurchase any shares.  Under these authorizations, MetLife, Inc. may purchase its common stock from the MetLife Policyholder Trust, in the open market (including pursuant to the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934) and in privately negotiated transactions. Any future common stock repurchases will be dependent upon several factors, including the Company's capital position, its liquidity, its financial strength and credit ratings, general market conditions and the market price of MetLife, Inc.'s common stock compared to management's assessment of the stock's underlying value and applicable regulatory approvals, as well as other legal and accounting factors. See "Business - U.S. Regulation - Financial Holding Company Regulation."                                          178 

  Residential Mortgage Loans Held-for-Sale. At December 31, 2011 and 2010, the Company held $15.2 billion and $3.3 billion, respectively, in residential mortgage loans held-for-sale. From time to time, MetLife Bank has an increased cash need to fund mortgage loans that it holds generally for a relatively short period before selling to one of the government-sponsored enterprises such as FNMA or FHLMC. To meet these increased funding requirements, as well as to increase overall liquidity, MetLife Bank takes advantage of collateralized borrowing opportunities with the FRB of NY and the FHLB of NY. For further detail on MetLife Bank's use of these funding sources, see " - The Company - Liquidity and Capital Sources - Global Funding Sources." Securitized reverse residential mortgage loans were funded through issuance of GNMA securities, for which the corresponding liability at December 31, 2011 of $7.7 billion is included in other liabilities.  Investment and Other. Additional cash outflows include those related to obligations of securities lending activities, investments in real estate, limited partnerships and joint ventures, as well as litigation-related liabilities. Also, the Company pledges collateral to, and has collateral pledged to it by, counterparties under the Company's current derivative transactions. At December 31, 2011 and 2010, the Company was obligated to return cash collateral under its control of $9.5 billion and $2.6 billion, respectively. See "- Investments - Derivative Financial Instruments - Credit Risk." With respect to derivative transactions with credit ratings downgrade triggers, a two-notch downgrade would have increased the Company's derivative collateral requirements by $83 million at December 31, 2011. In addition, the Company has pledged collateral and has had collateral pledged to it, and may be required from time to time to pledge additional collateral or be entitled to have additional collateral pledged to it, in connection with collateral financing arrangements related to the reinsurance of closed block liabilities and universal life secondary guarantee liabilities. See "- The Company - Liquidity and Capital Sources - Collateral Financing Arrangements."  Securities Lending. The Company participates in a securities lending program 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 obtains collateral, usually cash, from the borrower, which must be returned to the borrower when the loaned securities are returned to the Company. Under the Company's securities lending program, the Company was liable for cash collateral under its control of $24.2 billion and $24.6 billion at December 31, 2011 and 2010, respectively. Of these amounts, $2.7 billion and $2.8 billion at December 31, 2011 and 2010, respectively, were on open, meaning that the related loaned security could be returned to the Company on the next business day upon return of cash collateral. The estimated fair value of the securities on loan related to the cash collateral on open at December 31, 2011 was $2.7 billion, of which $2.6 billion were U.S. Treasury and agency securities which, if put to the Company, can be immediately sold to satisfy the cash requirements.  

                                                                         More than              More than                                                One Year or           One Year to          Three Years to           More than                              Total (1)          Less (1)           Three Years (1)        Five Years (1)         Five Years (1)                                                                         (In millions)

  10,561       $        13,444       $        286,987 Policyholder account balances                        295,341              33,909                  48,569                32,605                180,258 Other policyholder liabilities                      12,188               7,997                     390                   150                  3,651 Payables for collateral under securities loaned and other transactions           33,716              33,716                       -                     -                      - Bank deposits                    10,575               9,309                   1,218                    48                      - Short-term debt                     686                 686                       -                     -                      - Long-term debt                   30,054               2,390                   4,804                 6,126                 16,734 Collateral financing arrangements                      6,106                  67                     135                   133                  5,771 Junior subordinated debt securities                        9,933                 258                     517                   516                  8,642 Commitments to lend funds                            15,065              13,736                     101                    93                  1,135 Operating leases                  2,052                 337                     481                   317                    917 Other                            25,324              24,850                      31                     -                    443  Total                        $  758,380       $     133,603       $          66,807       $        53,432       $        504,538                                            179 

  Table of Contents     

    such obligations irrespective of the corresponding divestitures. See "-     MetLife, Inc. - Capital" and Note 2 of the Notes to the Consolidated     Financial Statements.   Future policy benefits - Future policy benefits include liabilities related to traditional whole life policies, term life policies, pension closeout and other group annuity contracts, structured settlements, master terminal funding agreements, single premium immediate annuities, long-term disability policies, individual disability income policies, LTC policies and property and casualty contracts. Included within future policy benefits are contracts where the Company is currently making payments and will continue to do so until the occurrence of a specific event, such as death, as well as those where the timing of a portion of the payments has been determined by the contract. Also included are contracts where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death or illness, or where the occurrence of the payment triggering event, such as a surrender of a policy or contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience, as well as its expectation of future payment patterns.  

  Amounts presented in the table above, excluding those related to property and casualty contracts, represent the estimated cash payments for benefits under such contracts including assumptions related to the receipt of future premiums and assumptions related to mortality, morbidity, policy lapse, renewal, retirement, inflation, disability incidence, disability terminations, policy loans and other contingent events as appropriate to the respective product type. Payments for case reserve liabilities and incurred but not reported liabilities associated with property and casualty contracts of $1.5 billion have been included using an estimate of the ultimate amount to be settled under the policies based upon historical payment patterns. The ultimate amount to be paid under property and casualty contracts is not determined until the Company reaches a settlement with the claimant, which may vary significantly from the liability or contractual obligation presented above, especially as it relates to incurred but not reported liabilities. All estimated cash payments presented in the table above are undiscounted as to interest, net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. The more than five years category includes estimated payments due for periods extending for more than 100 years from the present date.  The sum of the estimated cash flows shown for all years in the table of $317.3 billion exceeds the liability amount of $184.3 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions, most significantly mortality, between the date the liabilities were initially established and the current date.  For the majority of the Company's insurance operations, estimated contractual obligations for future policy benefits and policyholder account balance liabilities as presented in the table above are derived from the annual asset adequacy analysis used to develop actuarial opinions of statutory reserve adequacy for state regulatory purposes. These cash flows are materially representative of the cash flows under GAAP. (See "- Policyholder account balances" below.)  Actual cash payments to policyholders may differ significantly from the liabilities as presented in the consolidated balance sheet and the estimated cash payments as presented in the table above due to differences between actual experience and the assumptions used in the establishment of these liabilities and the estimation of these cash payments.                                          180

  Policyholder account balances - PABs include liabilities related to conventional guaranteed interest contracts, guaranteed interest contracts associated with formal offering programs, funding agreements, individual and group annuities, total control accounts, individual and group universal life, variable universal life and company-owned life insurance.  Included within PABs are contracts where the amount and timing of the payment is essentially fixed and determinable. These amounts relate to policies where the Company is currently making payments and will continue to do so, as well as those where the timing of the payments has been determined by the contract. Other contracts involve payment obligations where the timing of future payments is uncertain and where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death, or where the occurrence of the payment triggering event, such as a surrender of or partial withdrawal on a policy or deposit contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience, as well as its expectation of future payment patterns.  

  Amounts presented in the table above represent the estimated cash payments to be made to policyholders undiscounted as to interest and including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate to the respective product type. Such estimated cash payments are also presented net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. For obligations denominated in foreign currencies, cash payments have been estimated using current spot rates.  The sum of the estimated cash flows shown for all years in the table of $295.3 billion exceeds the liability amount of $217.7 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions between the date the liabilities were initially established and the current date. See the comments under "- Future policy benefits" above regarding the source and uncertainties associated with the estimation of the contractual obligations related to future policyholder benefits and PABs.  Other policyholder liabilities - Other policyholder liabilities are comprised of other policy-related balances, policyholder dividends payable and the policyholder dividend obligation. Amounts included in the table above related to these balances are as follows:        a. Other policy-related balances includes liabilities for incurred but not        reported claims and claims payable on group term life, long-term        disability, LTC and dental; policyholder dividends left on deposit and

       activity.                                           181 

       of the liability presented in the consolidated balance sheet.    

       of the Notes to the Consolidated Financial Statements. Because the exact        timing and amount of the ultimate policyholder dividend obligation is

   Payables for collateral under securities loaned and other transactions - The Company has accepted cash collateral in connection with securities lending and derivative transactions. As the securities lending transactions expire within the next year or the timing of the return of the collateral is uncertain, the return of the collateral has been included in the one year or less category in the table above. The Company also holds non-cash collateral, which is not reflected as a liability in the consolidated balance sheet, of $2.9 billion at December 31, 2011.  Bank deposits - Bank deposits of $10.6 billion exceed the amount on the balance sheet of $10.5 billion due to the inclusion of estimated interest payments. Liquid deposits, including demand deposit accounts, money market accounts and savings accounts, are assumed to mature at carrying value within one year. Certificates of deposit are assumed to pay all interest and principal at maturity.  Short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities - Amounts presented in the table above for short-term debt, long-term debt, collateral financing arrangements and junior subordinated debt securities differ from the balances presented on the consolidated balance sheet, as the amounts presented in the table above do not include premiums or discounts upon issuance or purchase accounting fair value adjustments. The amounts presented above also include future interest on such obligations as described below.  Short-term debt consists of borrowings with original maturities of one year or less carrying fixed interest rates. The contractual obligation for short-term debt presented in the table above represents the principal amounts due upon maturity plus the related future interest for the period from January 1, 2012 through maturity.  Long-term debt bears interest at fixed and variable interest rates through their respective maturity dates. Future interest on fixed rate debt was computed using the stated rate on the obligations for the period from January 1, 2012 through maturity. Future interest on variable rate debt was computed using prevailing rates at December 31, 2011 and, as such, does not consider the impact of future rate movements. Long-term debt also includes payments under capital lease obligations of $1 million, $6 million, $2 million and $28 million, in the one year or less, more than one year to three years, more than three years to five years and more than five years categories, respectively. Long-term debt presented in the table above excludes $3.1 billion at December 31, 2011 of long-term debt relating to CSEs.  Collateral financing arrangements bear interest at fixed and variable interest rates through their respective maturity dates. Future interest on fixed rate debt was computed using the stated rate on the obligations for the period from January 1, 2012 through maturity. Future interest on variable rate debt was computed using prevailing rates at December 31, 2011 and, as such, does not consider the impact of future rate movements. Pursuant to these collateral financing arrangements, MetLife, Inc. may be required to deliver cash or pledge collateral to the respective unaffiliated financial institutions. See "- The Company - Liquidity and Capital Sources - Collateral Financing Arrangements."                                          182 

  Junior subordinated debt securities bear interest at fixed interest rates through their respective redemption dates. Future interest was computed using the stated rates on the obligations for the period from January 1, 2012 through the scheduled redemption dates, as it is the Company's expectation that the debt will be redeemed at that time. Inclusion of interest payments on junior subordinated debt through the final maturity dates would increase the contractual obligation by $7.7 billion.  Commitments to lend funds - The Company commits to lend funds under mortgage loans, partnerships, bank credit facilities, bridge loans and private corporate bond investments. In the table above, the timing of the funding of mortgage loans and private corporate bond investments is based on the expiration dates of the corresponding commitments. As it relates to commitments to lend funds to partnerships and under bank credit facilities, the Company anticipates that these amounts could be invested any time over the next five years; however, as the timing of the fulfillment of the obligation cannot be predicted, such obligations are presented in the one year or less category in the table above. Commitments to fund bridge loans are short-term obligations and, as a result, are presented in the one year or less category in the table above. See Note 16 of the Notes to the Consolidated Financial Statements and "- Off-Balance Sheet Arrangements."  Operating leases - As a lessee, the Company has various operating leases, primarily for office space. Contractual provisions exist that could increase or accelerate those lease obligations presented, including various leases with early buyouts and/or escalation clauses. However, the impact of any such transactions would not be material to the Company's financial position or results of operations. See Note 16 of the Notes to the Consolidated Financial Statements.  Other - Other liabilities presented in the table above are principally comprised of amounts due under reinsurance agreements, payables related to securities purchased but not yet settled, securities sold short, accrued interest on debt obligations, estimated fair value of derivative obligations, deferred compensation arrangements, guaranty liabilities, the estimated fair value of forward stock purchase contracts, the liability related to securitized reverse residential mortgage loans, and general accruals and accounts payable due under contractual obligations. If the timing of any of the other liabilities is sufficiently uncertain, the amounts are included within the one year or less category.  The other liabilities presented in the table above differ from the amount presented in the consolidated balance sheet by $5.6 billion due primarily to the exclusion of items such as legal liabilities, pension and postretirement benefit obligations, taxes due other than income tax, unrecognized tax benefits and related accrued interest, accrued severance and employee incentive compensation and other liabilities such as deferred gains and losses. Such items have been excluded from the table above as they represent accounting conventions or are not liabilities due under contractual obligations.  The net funded status of the Company's pension and other postretirement liabilities included within other liabilities has been excluded from the amounts presented in the table above. Rather, the amounts presented represent the discretionary contributions of $205 million expected to be made by the Company to the pension plan in 2012 and the contributions of $109 million expected to be made by the Company to the postretirement benefit plans during 2012. Virtually all contributions to the pension and postretirement benefit plans are made by the insurance subsidiaries of MetLife, Inc. with little impact on MetLife, Inc.'s cash flows.  Excluded from the table above are unrecognized tax benefits and related accrued interest of $679 million and $235 million, respectively, for which the Company cannot reliably determine the timing of payment. Current income tax payable is also excluded from the table.  Separate account liabilities are excluded from the table above. Generally, the separate account owner, rather than the Company, bears the investment risk of these funds. The separate account assets are legally segregated and are not subject to the claims that arise out of any other business of the Company. Net deposits, net investment income and realized and unrealized capital gains and losses on the separate accounts are fully offset                                          183

  The Company also enters into agreements to purchase goods and services in the normal course of business; however, these purchase obligations were not material to its consolidated results of operations or financial position at December 31, 2011.  

  Support Agreements. MetLife, Inc. and several of its subsidiaries (each, an "Obligor") are parties to various capital support commitments, guarantees and contingent reinsurance agreements with certain subsidiaries of MetLife, Inc. Under these arrangements, each Obligor, with respect to the applicable entity, has agreed to cause such entity to meet specified capital and surplus levels, has guaranteed certain contractual obligations or has agreed to provide, upon the occurrence of certain contingencies, reinsurance for such entity's insurance liabilities. We anticipate that in the event that these arrangements place demands upon the Company, there will be sufficient liquidity and capital to enable the Company to meet anticipated demands. See "- MetLife, Inc. - Liquidity and Capital Uses - Support Agreements."  Litigation. Putative or certified class action litigation and other litigation, and claims and assessments against the Company, in addition to those discussed elsewhere herein and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, mortgage lending bank, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations.  The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For material matters where a loss is believed to be reasonably possible but not probable, no accrual is made but the Company discloses the nature of the contingency and an aggregate estimate of the reasonably possible range of loss in excess of amounts accrued, when such an estimate can be made. It is not possible to predict or determine the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to herein, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations, it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's financial position, based on information currently known by the Company's management, in its opinion, the outcome 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 Company's consolidated net income or cash flows in particular quarterly or annual periods.                                          184

  Table of Contents  MetLife, Inc.  Capital  Restrictions and Limitations on Bank Holding Companies and Financial Holding Companies. MetLife, Inc. and its insured depository institution subsidiary, MetLife Bank, are subject to risk-based and leverage capital guidelines issued by the federal banking regulatory agencies for banks and bank and financial holding companies. The federal banking regulatory agencies are required by law to take specific prompt corrective actions with respect to institutions that do not meet minimum capital standards. As of their most recently filed reports with the federal banking regulatory agencies, all of MetLife, Inc.'s and MetLife Bank's risk-based and leverage capital ratios met the federal banking regulatory agencies, "well capitalized" standards. In addition to requirements which may be imposed in connection with the implementation of Dodd-Frank, such as the enhanced prudential standards under proposed Regulation YY, if adopted in the U.S., Basel III will also lead to increased capital and liquidity requirements for bank holding companies, such as MetLife, Inc. See "Business - U.S. Regulation," "- Industry Trends" and "Risk Factors - Our Insurance, Brokerage and Banking Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth."  Once MetLife Bank has completely exited its depository business, MetLife, Inc. plans to terminate MetLife Bank's FDIC insurance, putting MetLife, Inc. in a position to be able to deregister as a bank holding company. Upon completion of the foregoing, MetLife, Inc. will no longer be regulated as a bank holding company. However, if, in the future, MetLife, Inc. is designated by the FSOC as a non-bank systemically important financial institution, it would once again be regulated by the Federal Reserve (including its capital requirements) and may be subject to enhanced supervision and prudential standards. In October 2011, the FSOC issued a notice of proposed rulemaking outlining the process it will follow and the criteria it will use to assess whether a non-bank financial company should be so subject. If MetLife, Inc. meets the quantitative thresholds set forth in the proposal, the FSOC will continue with a further analysis using qualitative and quantitative factors. For further information, see "- Industry Trends."  

                                   MetLife, Inc.                         RBC Ratios - Bank Holding Company                                                         Regulatory             Regulatory                              December 31,           Requirements           Requirements                            2011         2010           Minimum          "Well Capitalized"  Total RBC Ratio           10.25  %      8.52  %            8.00  %                  10.00  %  Tier 1 RBC Ratio           9.98  %      8.21  %            4.00  %                   6.00  %  Tier 1 Leverage Ratio      5.32  %      5.11  %            4.00  %                     N/A  Tier 1 Common Ratio        9.39  %      6.97  %              N/A                       N/A                                     MetLife Bank                                 RBC Ratios - Bank                                                          Regulatory             Regulatory                               December 31,           Requirements           Requirements                            2011          2010           Minimum          "Well Capitalized"  Total RBC Ratio           12.55  %      15.00  %            8.00  %                  10.00  %  Tier 1 RBC Ratio          12.54  %      14.16  %            4.00  %                   6.00  %  Tier 1 Leverage Ratio      5.27  %       7.14  %            4.00  %                   5.00  %  Tier 1 Common Ratio        9.72  %      13.56  %              N/A                       N/A                                           185 

  Summary of Primary Sources and Uses of Liquidity and Capital. For information regarding the primary sources and uses of MetLife, Inc.'s liquidity and capital, see "- The Company - Capital - Summary of Primary Sources and Uses of Liquidity and Capital."  Liquidity and Capital  Liquidity and capital are managed to preserve stable, reliable and cost-effective sources of cash to meet all current and future financial obligations and are provided by a variety of sources, including a portfolio of liquid assets, a diversified mix of short- and long-term funding sources from the wholesale financial markets and the ability to borrow through credit and committed facilities. MetLife, Inc. is an active participant in the global financial markets through which it obtains a significant amount of funding. These markets, which serve as cost-effective sources of funds, are critical components of MetLife, Inc.'s liquidity and capital management. Decisions to access these markets are based upon relative costs, prospective views of balance sheet growth and a targeted liquidity profile and capital structure. A disruption in the financial markets could limit MetLife, Inc.'s access to liquidity.  MetLife, Inc.'s ability to maintain regular access to competitively priced wholesale funds is fostered by its current credit ratings from the major credit rating agencies. We view our capital ratios, credit quality, stable and diverse earnings streams, diversity of liquidity sources and our liquidity monitoring procedures as critical to retaining such credit ratings. See "- The Company - Capital - Rating Agencies."  Liquidity is monitored through the use of internal liquidity risk metrics, including the composition and level of the liquid asset portfolio, timing differences in short-term cash flow obligations, access to the financial markets for capital and debt transactions and exposure to contingent draws on MetLife, Inc.'s liquidity.  Liquidity and Capital Sources  Dividends from Subsidiaries. MetLife, Inc. relies in part on dividends from its subsidiaries to meet its cash requirements. MetLife, Inc.'s insurance subsidiaries are subject to regulatory restrictions on the payment of dividends imposed by the regulators of their respective domiciles. The dividend limitation for U.S. insurance subsidiaries is generally based on the surplus to policyholders at the end of the immediately preceding calendar year and statutory net gain from operations for the immediately preceding calendar year. Statutory accounting practices, as prescribed by insurance regulators of various states in which the Company conducts business, differ in certain respects from accounting principles used in financial statements prepared in conformity with GAAP. The significant differences relate to the treatment of DAC, certain deferred income tax, required investment liabilities, statutory reserve calculation assumptions, goodwill and surplus notes.  The table below sets forth the dividends permitted to be paid by the respective insurance subsidiary without insurance regulatory approval and the respective dividends paid:                                               2012                                 2011                                           2010                                          2009                                        Permitted w/o              Paid               Permitted w/o                                   Permitted w/o                               Permitted w/o Company                                Approval (1)                (2)               Approval (3)              Paid (2)              Approval (3)              Paid (2)          Approval (3)                                                                                                             (In millions) Metropolitan Life Insurance Company                               $         1,350            $ 1,321  (4)       $         1,321            $     631  (4)       $         1,262            $       -        $           552 American Life Insurance Company       $           168  (5)       $   661            $           661  (5)       $       -  (6)       $           511  (5)       $     N/A        $           N/A MetLife Insurance Company of Connecticut                           $           504            $   517            $           517            $     330            $           659            $       -        $           714 Metropolitan Property and Casualty Insurance Company            $             -            $    30            $             -            $     260            $             -            $     300        $             9 Metropolitan Tower Life Insurance Company                     $            82            $    80            $            80            $     569  (7)       $            93            $       -        $            88 MetLife Investors Insurance Company                               $            18            $     -            $             -            $       -            $             -            $       -        $             - Delaware American Life Insurance Company                               $            12            $     -            $             -            $       -            $             -            $     N/A        $           N/A                                           186 

    regulatory approval. However, because dividend tests may be based on     dividends previously paid over rolling 12-month periods, if paid before a     specified date during 2012, some or all of such dividends may require     regulatory approval.    

    without prior regulatory approval.    

    regulatory approval.    

    of the Notes to the Consolidated Financial Statements.    

   In addition to the amounts presented in the table above, for the years ended December 31, 2011, 2010 and 2009, cash dividends in the aggregate amount of $139 million, $0 and $215 million, respectively, were paid to MetLife, Inc. by certain of its other subsidiaries. Additionally, for the years ended December 31, 2011, 2010 and 2009, MetLife, Inc. received cash of $771 million, $54 million and $0, respectively, representing returns of capital.  The dividend capacity of our non-U.S. operations is subject to similar restrictions established by the local regulators. The non-U.S. regulatory regimes also commonly limit the dividend payments to the parent to a portion of the prior year's statutory income, as determined by the local accounting principles. The regulators of our non-U.S. operations, including Japan's Financial Services Agency, may also limit or not permit profit repatriations or other transfers of funds to the U.S. if such transfers are deemed to be detrimental to the solvency or financial strength of the non-U.S. operations, or for other reasons. Most of the non-U.S. subsidiaries are second tier subsidiaries which are owned by various non-U.S. holding companies. The capital and rating considerations applicable to the first tier subsidiaries may also impact the dividend flow into MetLife, Inc.  The Company's management actively manages its target and excess capital levels and dividend flows on a proactive basis and forecasts local capital positions as part of the financial planning cycle. The dividend capacity of certain U.S. and non-U.S. subsidiaries is also subject to business targets in excess of the minimum capital necessary to maintain the desired rating or level of financial strength in the relevant market. Management of MetLife, Inc. cannot provide assurances that MetLife, Inc.'s subsidiaries will have statutory earnings to support payment of dividends to MetLife, Inc. in an amount sufficient to fund its cash requirements and pay cash dividends and that the applicable regulators will not disapprove any dividends that such subsidiaries must submit for approval. See Note 18 of the Notes to the Consolidated Financial Statements.  Liquid Assets. An integral part of MetLife, Inc.'s liquidity management is the amount of liquid assets it holds. Liquid assets include cash and cash equivalents, short-term investments and publicly-traded securities, excluding: (i) cash collateral received under the Company's securities lending program that has been reinvested in cash and cash equivalents, short-term investments and publicly-traded securities; and (ii) cash collateral received from counterparties in connection with derivative instruments. At December 31, 2011 and 2010, MetLife, Inc. had $4.2 billion and $2.8 billion, respectively, in liquid assets. In addition, MetLife, Inc. has pledged collateral and has had collateral pledged to it, and may be required from time to time to pledge additional collateral or be entitled to have additional collateral pledged to it. At December 31, 2011 and 2010, MetLife, Inc. had pledged $449 million and $362 million, respectively, of liquid assets under collateral support agreements.                                          187 

  Global Funding Sources. Liquidity is also provided by a variety of short-term instruments, including commercial paper. Capital is provided by a variety of instruments, including medium- and long-term debt, junior subordinated debt securities, collateral financing arrangements, capital securities and stockholders' equity. The diversity of MetLife, Inc.'s funding sources enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. Other sources of MetLife, Inc.'s liquidity include programs for short-term and long-term borrowing, as needed.  

  Long-term Debt. The following table summarizes the outstanding long-term debt of MetLife, Inc. at:                                                           December 31,                                                      2011         2010                                                        (In millions)              Long-term debt - unaffiliated         $ 15,666     $ 16,258              Long-term debt - affiliated (1)       $    500     $    665              Collateral financing arrangements     $  2,797     $  2,797              Junior subordinated debt securities   $  1,748     $  1,748    

   Short-term Debt. MetLife, Inc. maintains a commercial paper program, proceeds of which can be used to finance the general liquidity needs of MetLife, Inc. and its subsidiaries. MetLife, Inc. had no short-term debt outstanding at both December 31, 2011 and 2010. There was no short-term debt activity in both 2011 and 2010. During the year ended December 31, 2009, the weighted average interest rate on short-term debt, comprised only of commercial paper, was 1.25%. During the year ended December 31, 2009, the average daily balance on short-term debt was $5 million, and the average days outstanding was six days.  

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  Senior Notes. The following table summarizes MetLife, Inc.'s outstanding senior notes series by maturity date, excluding any premium or discount, at December 31, 2011:                Maturity Date      Principal              Interest Rate                              (In millions)             2012            $           400               5.38%             2012            $           397     three-month LIBOR + .032%             2013            $           500               5.00%             2013            $           250     three-month LIBOR + 1.25%             2014            $           350               5.50%             2014            $         1,000               2.38%             2015            $         1,000               5.00%             2016            $         1,250               6.75%             2018            $         1,035               6.82%             2018 (1)        $           500               1.56%             2018 (2)        $           500               2.46%             2019            $         1,035               7.72%             2020            $           729               5.25%             2021            $         1,000               4.75%             2023 (1)        $           500               1.56%             2024            $         1,000               1.92%             2024            $           673               5.38%             2032            $           600               6.50%             2033            $           200               5.88%             2034            $           750               6.38%             2035            $         1,000               5.70%             2041            $           750               5.88%             2045 (2)        $           500               2.46%    

   Collateral Financing Arrangements. For information on MetLife, Inc.'s collateral financing arrangements, see "- The Company - Liquidity and Capital Sources - Collateral Financing Arrangements" and Note 12 of the Notes to the Consolidated Financial Statements.  Credit and Committed Facilities. At December 31, 2011, MetLife, Inc., along with MetLife Funding, maintained $4.0 billion in unsecured credit facilities, the proceeds of which are available to be used for general corporate purposes, to support the borrowers' commercial paper programs and for the issuance of letters of credit. At December 31, 2011, MetLife, Inc. had outstanding $3.1 billion in letters of credit and no drawdowns against these facilities. Remaining unused commitments were $916 million at December 31, 2011.  MetLife, Inc. maintains committed facilities with a capacity of $300 million. At December 31, 2011, MetLife, Inc. had outstanding $300 million in letters of credit and no drawdowns against these facilities. There were no remaining unused commitments at December 31, 2011. In addition, MetLife, Inc. is a party to committed facilities of certain of its subsidiaries, which aggregated $12.1 billion at December 31, 2011. The committed facilities are used as collateral for certain of the Company's affiliated reinsurance liabilities.  

  Covenants. Certain of MetLife, Inc.'s debt instruments, credit facilities and committed facilities contain various administrative, reporting, legal and financial covenants. MetLife, Inc. believes it was in compliance with all such covenants at December 31, 2011.                                          189

  Preferred Stock, Convertible Preferred Stock, Common Stock and Equity Units. For information on preferred stock, convertible preferred stock, common stock and equity units issued by MetLife, Inc., see "- The Company - Liquidity and Capital Sources - Preferred Stock," "- Convertible Preferred Stock," "- Common Stock," and "- Equity Units," respectively.  

  The primary uses of liquidity of MetLife, Inc. include debt service, cash dividends on common and preferred stock, capital contributions to subsidiaries, payment of general operating expenses and acquisitions. Based on our analysis and comparison of our current and future cash inflows from the dividends we receive from subsidiaries that are permitted to be paid without prior insurance regulatory approval, our asset portfolio and other cash flows and anticipated access to the capital markets, we believe there will be sufficient liquidity and capital to enable MetLife, Inc. to make payments on debt, make cash dividend payments on its common and preferred stock, contribute capital to its subsidiaries, pay all general operating expenses and meet its cash needs.  Acquisitions. During the years ended December 31, 2011 and 2009, there were no cash outflows for acquisitions. Cash outflows for acquisitions during the year ended December 31, 2010 were $7.2 billion. See Note 2 of the Notes to the Consolidated Financial Statements for information regarding certain of these acquisitions.  

MetLife, Inc. lends funds, as necessary, to its subsidiaries, some of which are regulated, to meet their capital requirements. Such loans are included in loans to subsidiaries and consisted of the following at:                                                                                       December 31, Subsidiaries                         Interest Rate           Maturity Date       2011        2010                                                                                    (In millions) Metropolitan Life Insurance Company (1)                     Six-month LIBOR + 1.80%    December 31, 2011    $    -      $   775 Metropolitan Life Insurance Company (2)                              7.13%             December 15, 2032         -          400 Metropolitan Life Insurance Company (2)                              7.13%             January 15, 2033          -          100  Total                                                                           $    -      $ 1,275     

    York Superintendent of Insurance.    

   In September and November 2011, American Life issued notes to MetLife, Inc. for $100 million and $270 million, respectively. American Life repaid both notes during the fourth quarter of 2011.  

                                          190  

  In June 2011, MetLife, Inc. guaranteed the obligations of its subsidiary, DelAm, under a stop loss reinsurance agreement with RGA Reinsurance (Barbados) Inc. ("RGARe"), pursuant to which RGARe retrocedes to DelAm a portion of the whole life medical insurance business that RGARe assumed from American Life on behalf of its Japan branch.  Prior to the sale in April 2011 of its 50% interest in MSI MetLife to a third party, MetLife, Inc. guaranteed the obligations of its subsidiary, Exeter Reassurance Company, Ltd. ("Exeter"), under a reinsurance agreement with MSI MetLife, under which Exeter reinsures variable annuity business written by MSI MetLife. This guarantee will remain in place until such time as the reinsurance agreement between Exeter and MSI MetLife is terminated, notwithstanding the April 2011 disposition of MetLife, Inc.'s interest in MSI MetLife as described in Note 2 of the Notes to the Consolidated Financial Statements.  In March 2011, MetLife, Inc. guaranteed the obligations of its subsidiary, Missouri Reinsurance (Barbados) Inc. ("MoRe"), under a retrocession agreement with RGARe, pursuant to which MoRe retrocedes a portion of the closed block liabilities associated with industrial life and ordinary life insurance policies that it assumed from MLIC.  

  In December 2009, MetLife, Inc., in connection with MetLife Reinsurance Company of Vermont's ("MRV") reinsurance of certain universal life and term life insurance risks, committed to the Vermont Department of Banking, Insurance, Securities and Health Care Administration to take necessary action to cause the third protected cell of MRV to maintain total adjusted capital equal to or greater than 200% of such protected cell's authorized control level RBC, as defined in state insurance statutes. See "- The Company - Liquidity and Capital Sources - Credit and Committed Facilities" and Note 11 of the Notes to the Consolidated Financial Statements.  MetLife, Inc., in connection with MRV's reinsurance of certain universal life and term life insurance risks, committed to the Vermont Department of Banking, Insurance, Securities and Health Care Administration to take necessary action to cause each of the two initial protected cells of MRV to maintain total adjusted capital equal to or greater than 200% of such protected cell's authorized control level RBC, as defined in state insurance statutes. See "- The Company - Liquidity and Capital Sources - Credit and Committed Facilities" and Note 11 of the Notes to the Consolidated Financial Statements.  MetLife, Inc., in connection with the collateral financing arrangement associated with MRC's reinsurance of a portion of the liabilities associated with the closed block, committed to the South Carolina Department of Insurance to make capital contributions, if necessary, to MRC so that MRC may at all times maintain its total adjusted capital at a level of not less than 200% of the company action level RBC, as defined in state insurance statutes as in effect on the date of determination or <chron>December 31, 2007, whichever calculation produces the greater capital requirement, or as otherwise required by the South Carolina Department of Insurance. See "- The Company - Liquidity and Capital Sources - Debt Issuances and Other Borrowings" and Note 12 of the Notes to the Consolidated Financial Statements.  

                                          191  

  authorized control level RBC, as defined in state insurance statutes. See "- The Company - Liquidity and Capital Sources - Debt Issuances and Other Borrowings" and Note 12 of the Notes to the Consolidated Financial Statements.  MetLife, Inc. has net worth maintenance agreements with two of its insurance subsidiaries, MLIIC and First MetLife Investors Insurance Company. Under these agreements, as subsequently amended, MetLife, Inc. agreed, without limitation as to the amount, to cause each of these subsidiaries to have a minimum capital and surplus of $10 million, total adjusted capital at a level not less than 150% of the company action level RBC, as defined by state insurance statutes, and liquidity necessary to enable it to meet its current obligations on a timely basis.  MetLife, Inc. also guarantees the obligations of a number of its subsidiaries under credit facilities with third-party banks. See Note 11 of the Notes to the Consolidated Financial Statements.