(1)For the nine months ended September 30, 2024 and 2023, the net effect of changes in cash flow assumptions was largely offset by the corresponding impact in DPL associated with the Latin America segment’s fixed annuity products of $3 million and $4 million, respectively.
(2)For the nine months ended September 30, 2024, the net effect of actual variances from expected experience was not offset by the corresponding impact in DPL associated with the Latin America segment’s fixed annuity products primarily due to the variance related to cohorts with no DPL. For the nine months ended September 30, 2023, the net effect of actual variances from expected experience was partially offset by the corresponding impact in DPL associated with the Latin America segment’s fixed annuity products of $2 million.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Future Policy Benefits (continued)
MetLife Holdings - Long-term Care
The MetLife Holdings segment’s long-term care products offer protection against potentially high costs of long-term health care services. Information regarding these products was as follows:
(1)Gross premiums are related to traditional and limited-payment contracts and are included in premiums. Assessments are related to additional insurance liabilities and are included in universal life and investment-type product policy fees and net investment income.
(2)Interest expense is included in policyholder benefits and claims.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
4. Future Policy Benefits (continued)
Liabilities for Unpaid Claims and Claim Expenses
Rollforward of Claims and Claim Adjustment Expenses
Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:
Nine Months Ended September 30,
2024
2023
(In millions)
Balance, beginning of period
$
16,468
$
16,098
Less: Reinsurance recoverables
2,592
2,452
Net balance, beginning of period
13,876
13,646
Incurred related to:
Current period
20,532
19,983
Prior periods (1)
80
327
Total incurred
20,612
20,310
Paid related to:
Current period
(14,470)
(13,991)
Prior periods
(5,773)
(5,883)
Total paid
(20,243)
(19,874)
Net balance, end of period
14,245
14,082
Add: Reinsurance recoverables
2,757
2,523
Balance, end of period (included in FPBs and other policy-related balances)
$
17,002
$
16,605
__________________
(1)For the nine months ended September 30, 2024 and 2023, incurred claims and claim adjustment expenses associated with prior periods increased due to events incurred in prior periods but reported in the respective current period.
5. Policyholder Account Balances
The Company establishes liabilities for PABs, which are generally equal to the account value, and which includes accrued interest credited, but excludes the impact of any applicable charge that may be incurred upon surrender.
The Company’s PABs on the interim condensed consolidated balance sheets were as follows at:
September 30, 2024
December 31, 2023
(In millions)
Group Benefits - Group life
$
7,676
$
7,692
RIS:
Capital markets investment products and stable value GICs
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Policyholder Account Balances (continued)
Rollforwards
The following information about the direct and assumed liability for PABs includes year-to-date disaggregated rollforwards. The products grouped within these rollforwards were selected based upon common characteristics and valuations using similar inputs, judgments, assumptions and methodologies within a particular segment of the business. Policy charges presented in each disaggregated rollforward reflect a premium and/or assessment based on the account balance.
Group Benefits
Group Life
The Group Benefits segment’s group life PABs predominantly consist of retained asset accounts, universal life products, and the fixed account of variable life insurance products. Information regarding this liability was as follows:
Nine Months Ended September 30,
2024
2023
(Dollars in millions)
Balance, beginning of period
$
7,692
$
8,028
Deposits
2,857
2,529
Policy charges
(493)
(475)
Surrenders and withdrawals
(2,512)
(2,432)
Benefit payments
(9)
(9)
Net transfers from (to) separate accounts
(3)
1
Interest credited
144
143
Balance, end of period
$
7,676
$
7,785
Weighted-average annual crediting rate
2.5 %
2.4 %
At period end:
Cash surrender value
$
7,614
$
7,721
Net amount at risk, excluding offsets from reinsurance:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Policyholder Account Balances (continued)
The Group Benefits segment’s group life product account values by range of guaranteed minimum crediting rates (“GMCR”) and the related range of differences between rates being credited to policyholders and the respective guaranteed minimums were as follows at:
Range of GMCR
At GMCR
Greater than 0% but less than 0.50% above GMCR
Equal to or greater than 0.50% but less than 1.50% above GMCR
Equal to or greater than 1.50% above GMCR
Total Account Value
(In millions)
September 30, 2024
Equal to or greater than 0% but less than 2%
$
456
$
72
$
877
$
4,141
$
5,546
Equal to or greater than 2% but less than 4%
1,266
8
59
1
1,334
Equal to or greater than 4%
684
—
39
36
759
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
37
Total
$
2,406
$
80
$
975
$
4,178
$
7,676
September 30, 2023
Equal to or greater than 0% but less than 2%
$
—
$
82
$
887
$
4,595
$
5,564
Equal to or greater than 2% but less than 4%
1,223
10
62
2
1,297
Equal to or greater than 4%
733
1
42
34
810
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
114
Total
$
1,956
$
93
$
991
$
4,631
$
7,785
RIS
Capital Markets Investment Products and Stable Value GICs
The RIS segment’s capital markets investment products and stable value GICs in PABs are investment-type products, mainly funding agreements. Information regarding this liability was as follows:
Nine Months Ended September 30,
2024
2023
(Dollars in millions)
Balance, beginning of period
$
64,140
$
63,723
Deposits
56,170
54,674
Surrenders and withdrawals
(57,068)
(56,873)
Interest credited
1,811
1,524
Effect of foreign currency translation and other, net
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Policyholder Account Balances (continued)
The RIS segment’s capital markets investment products and stable value GICs account values by range of GMCR and the related range of differences between rates being credited to policyholders and the respective guaranteed minimums were as follows at:
Range of GMCR
At GMCR
Greater than 0% but less than 0.50% above GMCR
Equal to or greater than 0.50% but less than 1.50% above GMCR
Equal to or greater than 1.50% above GMCR
Total Account Value
(In millions)
September 30, 2024
Equal to or greater than 0% but less than 2%
$
—
$
—
$
—
$
2,754
$
2,754
Equal to or greater than 2% but less than 4%
—
—
—
148
148
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
62,428
Total
$
—
$
—
$
—
$
2,902
$
65,330
September 30, 2023
Equal to or greater than 0% but less than 2%
$
—
$
—
$
1
$
2,620
$
2,621
Equal to or greater than 2% but less than 4%
—
—
—
—
—
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
60,796
Total
$
—
$
—
$
1
$
2,620
$
63,417
Annuities and Risk Solutions
The RIS segment’s annuity and risk solutions PABs include certain structured settlements and institutional income annuities, and benefit funding solutions that include postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives. Information regarding this liability was as follows:
Nine Months Ended September 30,
2024
2023
(Dollars in millions)
Balance, beginning of period
$
17,711
$
15,549
Deposits
2,367
2,007
Policy charges
(122)
(133)
Surrenders and withdrawals
(239)
(134)
Benefit payments
(731)
(615)
Net transfers from (to) separate accounts
20
54
Interest credited
556
469
Other
10
(133)
Balance, end of period
$
19,572
$
17,064
Weighted-average annual crediting rate
4.0 %
3.9 %
At period end:
Cash surrender value
$
8,476
$
7,693
Net amount at risk, excluding offsets from ceded reinsurance:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Policyholder Account Balances (continued)
The RIS segment’s annuity and risk solutions account values by range of GMCR and the related range of differences between rates being credited to policyholders and the respective guaranteed minimums were as follows at:
Range of GMCR
At GMCR
Greater than 0% but less than 0.50% above GMCR
Equal to or greater than 0.50% but less than 1.50% above GMCR
Equal to or greater than 1.50% above GMCR
Total Account Value
(In millions)
September 30, 2024
Equal to or greater than 0% but less than 2%
$
—
$
—
$
19
$
2,403
$
2,422
Equal to or greater than 2% but less than 4%
198
35
109
417
759
Equal to or greater than 4%
4,131
—
472
6
4,609
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
11,782
Total
$
4,329
$
35
$
600
$
2,826
$
19,572
September 30, 2023
Equal to or greater than 0% but less than 2%
$
—
$
—
$
22
$
1,525
$
1,547
Equal to or greater than 2% but less than 4%
260
33
94
437
824
Equal to or greater than 4%
4,363
—
277
6
4,646
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
10,047
Total
$
4,623
$
33
$
393
$
1,968
$
17,064
Asia
Universal and Variable Universal Life
The Asia segment’s universal and variable universal life PABs in Japan primarily include interest sensitive whole life products. Information regarding this liability was as follows:
Nine Months Ended September 30,
2024
2023
(Dollars in millions)
Balance, beginning of period
$
49,739
$
46,417
Deposits
4,694
5,439
Policy charges
(812)
(888)
Surrenders and withdrawals
(2,483)
(2,018)
Benefit payments
(345)
(393)
Interest credited
1,153
979
Effect of foreign currency translation and other, net
(190)
(1,906)
Balance, end of period
$
51,756
$
47,630
Weighted-average annual crediting rate
3.1 %
2.8 %
At period end:
Cash surrender value
$
46,366
$
40,663
Net amount at risk, excluding offsets from reinsurance:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Policyholder Account Balances (continued)
The Asia segment’s universal and variable universal life account values by range of GMCR and the related range of differences between rates being credited to policyholders and the respective guaranteed minimums were as follows at:
Range of GMCR
At GMCR
Greater than 0% but less than 0.50% above GMCR
Equal to or greater than 0.50% but less than 1.50% above GMCR
Equal to or greater than 1.50% above GMCR
Total Account Value
(In millions)
September 30, 2024
Equal to or greater than 0% but less than 2%
$
10,681
$
18
$
235
$
1,449
$
12,383
Equal to or greater than 2% but less than 4%
7,829
15,730
5,397
9,650
38,606
Equal to or greater than 4%
241
—
—
—
241
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
526
Total
$
18,751
$
15,748
$
5,632
$
11,099
$
51,756
September 30, 2023
Equal to or greater than 0% but less than 2%
$
9,986
$
25
$
233
$
729
$
10,973
Equal to or greater than 2% but less than 4%
5,742
17,923
5,628
6,633
35,926
Equal to or greater than 4%
256
—
—
—
256
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
475
Total
$
15,984
$
17,948
$
5,861
$
7,362
$
47,630
Fixed Annuities
Information regarding the Asia segment’s fixed annuity PAB liability in Japan was as follows:
The MetLife Holdings segment’s life and other PABs include retained asset accounts, universal life products, the fixed account of variable life insurance products and funding agreements. Information regarding this liability was as follows:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
5. Policyholder Account Balances (continued)
The MetLife Holdings segment’s life and other products account values by range of GMCR and the related range of differences between rates being credited to policyholders and the respective guaranteed minimums were as follows at:
Range of GMCR
At GMCR
Greater than
0% but less
than 0.50%
above GMCR
Equal to or
greater than
0.50% but less
than 1.50%
above GMCR
Equal to or
greater than
1.50% above
GMCR
Total Account Value
(In millions)
September 30, 2024
Equal to or greater than 0% but less than 2%
$
—
$
—
$
17
$
58
$
75
Equal to or greater than 2% but less than 4%
4,159
171
265
536
5,131
Equal to or greater than 4%
4,911
122
405
9
5,447
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
631
Total
$
9,070
$
293
$
687
$
603
$
11,284
September 30, 2023
Equal to or greater than 0% but less than 2%
$
—
$
—
$
19
$
54
$
73
Equal to or greater than 2% but less than 4%
4,595
172
285
554
5,606
Equal to or greater than 4%
5,109
126
414
15
5,664
Products with either a fixed rate or no GMCR
N/A
N/A
N/A
N/A
501
Total
$
9,704
$
298
$
718
$
623
$
11,844
6. Market Risk Benefits
The Company establishes liabilities for certain retirement assurance and variable annuity contract features which include a minimum benefit guarantee that provides to the contractholder a minimum return based on their initial deposit less withdrawals. In some cases, the benefit base may be increased by additional deposits, bonus amounts, accruals or optional market value resets.
The Company’s MRB assets and MRB liabilities on the interim condensed consolidated balance sheets were as follows at:
These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions, including changes in interest rates, equity indices, market volatility and foreign currency exchange rates; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, impact the estimated fair value of the guarantees and affect net income, and changes in nonperformance risk of the Company affect OCI.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
6. Market Risk Benefits (continued)
Other
In addition to the disaggregated MRB product rollforwards above, the Company offers other products with guaranteed minimum benefit features across various segments. These MRBs are measured at estimated fair value, with changes in estimated fair value reported in net income, except for changes in nonperformance risk of the Company which are recorded in OCI. See Note 12 for additional information on significant unobservable inputs used in the fair value measurement of MRBs. Information regarding these product liabilities was as follows:
Nine Months Ended September 30,
2024
2023
(In millions)
Balance, beginning of period
$
(32)
$
32
Balance, beginning of period, before effect of cumulative changes in the instrument-specific credit risk
$
(50)
$
24
Attributed fees collected
38
23
Benefit payments
(5)
(23)
Effect of changes in interest rates
(12)
(98)
Effect of changes in capital markets
(8)
(15)
Effect of changes in equity index volatility
—
(4)
Actual policyholder behavior different from expected behavior
6
(21)
Effect of changes in future expected policyholder behavior and other assumptions
(2)
2
Effect of foreign currency translation and other, net
22
37
Effect of changes in risk margin
(1)
(2)
Balance, end of period, before the cumulative effect of changes in the instrument-specific credit risk
(12)
(77)
Cumulative effect of changes in the instrument-specific credit risk
13
20
Effect of foreign currency translation on the cumulative instrument-specific credit risk
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8. Deferred Policy Acquisition Costs, Value of Business Acquired and Unearned Revenue
DAC and VOBA
Information regarding total DAC and VOBA by segment, as well as Corporate & Other, was as follows at:
Group
Benefits
RIS
Asia (1)
Latin
America (2)
EMEA (2)
MetLife
Holdings (3)
Corporate &
Other
Total
(In millions)
DAC:
Balance at January 1, 2024
$
258
$
397
$
10,864
$
1,950
$
1,618
$
3,271
$
30
$
18,388
Capitalizations
13
160
1,032
527
362
13
7
2,114
Amortization
(19)
(43)
(579)
(348)
(254)
(171)
(6)
(1,420)
Effect of foreign currency translation and other, net
—
—
(71)
(224)
(5)
—
—
(300)
Balance at September 30, 2024
$
252
$
514
$
11,246
$
1,905
$
1,721
$
3,113
$
31
$
18,782
Balance at January 1, 2023
$
265
$
267
$
10,270
$
1,542
$
1,480
$
3,791
$
29
$
17,644
Capitalizations
16
136
1,202
470
341
17
7
2,189
Amortization
(19)
(34)
(518)
(306)
(245)
(194)
(8)
(1,324)
Effect of foreign currency translation and other, net
—
—
(600)
125
(27)
—
—
(502)
Balance at September 30, 2023
$
262
$
369
$
10,354
$
1,831
$
1,549
$
3,614
$
28
$
18,007
VOBA:
Balance at January 1, 2024
$
—
$
16
$
1,119
$
497
$
113
$
18
$
—
$
1,763
Amortization
—
(2)
(55)
(32)
(11)
(3)
—
(103)
Effect of foreign currency translation and other, net
—
—
(19)
(22)
—
—
—
(41)
Balance at September 30, 2024
$
—
$
14
$
1,045
$
443
$
102
$
15
$
—
$
1,619
Balance at January 1, 2023
$
—
$
19
$
1,290
$
545
$
127
$
28
$
—
$
2,009
Amortization
—
(2)
(69)
(38)
(12)
(3)
—
(124)
Effect of foreign currency translation and other, net
—
—
(144)
(10)
(1)
—
—
(155)
Balance at September 30, 2023
$
—
$
17
$
1,077
$
497
$
114
$
25
$
—
$
1,730
Total DAC and VOBA:
Balance at September 30, 2024
$
20,401
Balance at September 30, 2023
$
19,737
Balance at December 31, 2023
$
20,151
__________________
(1)Includes DAC balances primarily related to accident & health, universal and variable universal life, variable life and fixed annuity products and VOBA balances primarily related to accident & health products.
(2)Includes DAC balances primarily related to universal life and variable universal life products.
(3)Includes DAC balances primarily related to universal life, variable universal life, whole life, term life and variable annuity products.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
8. Deferred Policy Acquisition Costs, Value of Business Acquired and Unearned Revenue (continued)
Unearned Revenue
Information regarding the Company’s unearned revenue primarily related to universal life and variable universal life products by segment included in other policy-related balances was as follows:
Nine Months Ended September 30, 2024
RIS
Asia
Latin America
EMEA
MetLife Holdings
Total
(In millions)
Balance, beginning of period
$
31
$
2,850
$
989
$
608
$
59
$
4,537
Deferrals
1
424
111
72
12
620
Amortization
(4)
(167)
(88)
(51)
(4)
(314)
Effect of foreign currency translation and other, net
—
(9)
(124)
3
—
(130)
Balance, end of period
$
28
$
3,098
$
888
$
632
$
67
$
4,713
Nine Months Ended September 30, 2023
RIS
Asia
Latin America
EMEA
MetLife Holdings
Total
(In millions)
Balance, beginning of period
$
36
$
2,382
$
848
$
559
$
281
$
4,106
Deferrals
2
477
108
71
41
699
Amortization
(5)
(129)
(87)
(47)
(16)
(284)
Effect of foreign currency translation and other, net
—
(49)
85
4
—
40
Balance, end of period
$
33
$
2,681
$
954
$
587
$
306
$
4,561
9. Closed Block
On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company (“MLIC”) converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance approving MLIC’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, MLIC established a closed block for the benefit of holders of certain individual life insurance policies of MLIC. See Note 10 to the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for further information on the closed block.
Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon policy count within the closed block.
Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
9. Closed Block (continued)
Information regarding the closed block revenues and expenses was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Revenues
Premiums
$
214
$
219
$
648
$
680
Net investment income
336
345
1,021
1,024
Net investment gains (losses)
1
4
(19)
13
Net derivative gains (losses)
(1)
(2)
6
1
Total revenues
550
566
1,656
1,718
Expenses
Policyholder benefits and claims
390
403
1,209
1,261
Policyholder dividends
90
89
266
275
Other expenses
21
21
61
65
Total expenses
501
513
1,536
1,601
Revenues, net of expenses before provision for income tax expense (benefit)
49
53
120
117
Provision for income tax expense (benefit)
11
11
26
24
Revenues, net of expenses and provision for income tax expense (benefit)
$
38
$
42
$
94
$
93
MLIC charges the closed block with federal income taxes, state and local premium taxes and other state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan of Reorganization. MLIC also charges the closed block for expenses of maintaining the policies included in the closed block.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments
Fixed Maturity Securities AFS
Fixed Maturity Securities AFS by Sector
The following table presents fixed maturity securities AFS by sector. U.S. corporate and foreign corporate sectors include redeemable preferred stock. Residential mortgage-backed securities (“RMBS”) includes agency, prime, prime investor, non-qualified residential mortgage, alternative, reperforming and sub-prime mortgage-backed securities. ABS & CLO includes securities collateralized by consumer loans, corporate loans and broadly syndicated bank loans. Municipals includes taxable and tax-exempt revenue bonds and, to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) primarily includes securities collateralized by multiple commercial mortgage loans. RMBS, ABS & CLO and CMBS are, collectively, “Structured Products.”
September 30, 2024
December 31, 2023
Amortized Cost
Gross Unrealized
Estimated Fair Value
Amortized Cost
Gross Unrealized
Estimated Fair Value
Sector
Allowance
for
Credit Loss
(“ACL”)
Gains
Losses
ACL
Gains
Losses
(In millions)
U.S. corporate
$
88,612
$
(60)
$
2,275
$
5,976
$
84,851
$
85,563
$
(68)
$
1,894
$
6,672
$
80,717
Foreign corporate
59,282
(15)
2,164
4,679
56,752
59,123
(2)
1,750
5,427
55,444
Foreign government
47,586
(62)
1,776
5,168
44,132
48,260
(88)
1,754
4,437
45,489
U.S. government and agency
37,727
—
589
3,640
34,676
35,374
—
590
3,712
32,252
RMBS
36,761
(1)
630
2,126
35,264
31,479
(1)
353
2,735
29,096
ABS & CLO
17,750
(10)
138
358
17,520
17,910
(7)
54
663
17,294
Municipals
11,521
—
354
1,077
10,798
11,991
—
408
1,228
11,171
CMBS
10,167
(14)
167
534
9,786
10,855
(18)
73
961
9,949
Total fixed maturity securities AFS
$
309,406
$
(162)
$
8,093
$
23,558
$
293,779
$
300,555
$
(184)
$
6,876
$
25,835
$
281,412
Maturities of Fixed Maturity Securities AFS
The amortized cost, net of ACL, and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at September 30, 2024:
Due in One Year or Less
Due After One Year Through Five Years
Due After Five Years Through Ten Years
Due After Ten Years
Structured Products
Total Fixed
Maturity
Securities
AFS
(In millions)
Amortized cost, net of ACL
$
11,313
$
48,735
$
54,449
$
130,094
$
64,653
$
309,244
Estimated fair value
$
11,361
$
48,895
$
54,079
$
116,874
$
62,570
$
293,779
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities AFS not due at a single maturity date have been presented in the year of final contractual maturity. Structured Products are shown separately, as they are not due at a single maturity.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities AFS in an unrealized loss position without an ACL by sector and aggregated by length of time that the securities have been in a continuous unrealized loss position.
September 30, 2024
December 31, 2023
Less than 12 Months
Equal to or Greater than 12 Months
Less than 12 Months
Equal to or Greater than 12 Months
Sector & Credit Quality
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
Estimated Fair Value
Gross Unrealized Losses
(Dollars in millions)
U.S. corporate
$
4,384
$
685
$
41,061
$
5,258
$
4,722
$
420
$
45,373
$
6,208
Foreign corporate
2,505
181
28,069
4,477
3,210
187
32,355
5,240
Foreign government
2,828
432
19,170
4,735
3,913
246
19,715
4,187
U.S. government and agency
3,426
159
15,987
3,481
7,856
368
13,960
3,344
RMBS
1,926
73
15,673
2,053
3,465
60
17,128
2,675
ABS & CLO
2,441
17
5,833
341
1,662
31
11,438
629
Municipals
209
87
5,241
990
483
34
5,449
1,194
CMBS
433
15
5,433
517
1,034
36
6,671
917
Total fixed maturity securities AFS
$
18,152
$
1,649
$
136,467
$
21,852
$
26,345
$
1,382
$
152,089
$
24,394
Investment grade
$
15,804
$
1,577
$
131,959
$
21,256
$
24,834
$
1,287
$
146,138
$
23,675
Below investment grade
2,348
72
4,508
596
1,511
95
5,951
719
Total fixed maturity securities AFS
$
18,152
$
1,649
$
136,467
$
21,852
$
26,345
$
1,382
$
152,089
$
24,394
Total number of securities in an unrealized loss position
2,855
11,063
2,922
13,049
Evaluation of Fixed Maturity Securities AFS for Credit Loss
Evaluation and Measurement Methodologies
See Note 11 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for a description of the Company’s Evaluation and Measurement Methodologies of Fixed Maturity Securities AFS for Credit Loss.
Evaluation of Fixed Maturity Securities AFS in an Unrealized Loss Position
Gross unrealized losses on securities without an ACL decreased $2.3 billion for the nine months ended September 30, 2024 to $23.5 billion primarily due to a decrease in interest rates.
As shown in the table above, most of the gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater at September 30, 2024, relate to investment grade securities. These unrealized losses are principally due to widening credit spreads since purchase and, with respect to fixed-rate securities, rising interest rates since purchase.
As of September 30, 2024, $596 millionof gross unrealized losses on securities without an ACL that have been in a continuous gross unrealized loss position for 12 months or greater on below investment grade securities were concentrated in the utility, consumer, and communications sectors within corporate securities and in foreign government securities. These unrealized losses are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty and, with respect to fixed-rate securities, rising interest rates since purchase.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
At September 30, 2024, the Company did not intend to sell its securities in an unrealized loss position without an ACL, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost. Therefore, the Company concluded that these securities had not incurred a credit loss and should not have an ACL at September 30, 2024.
Future provisions for credit loss 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 and collateral valuation.
Rollforward of ACL for Fixed Maturity Securities AFS By Sector
The rollforward of ACL for fixed maturity securities AFS by sector is as follows:
U.S. Corporate
Foreign Corporate
Foreign Government
RMBS
ABS & CLO
CMBS
Total
(In millions)
Three Months Ended September 30, 2024
Balance, at beginning of period
$
37
$
2
$
58
$
1
$
9
$
14
$
121
ACL not previously recorded
27
13
—
—
—
—
40
Changes for securities with previously recorded ACL
(1)
—
4
—
1
—
4
Securities sold or exchanged
(3)
—
—
—
—
—
(3)
Balance, at end of period
$
60
$
15
$
62
$
1
$
10
$
14
$
162
Three Months Ended September 30, 2023
Balance, at beginning of period
$
69
$
2
$
115
$
—
$
—
$
11
$
197
ACL not previously recorded
—
—
—
1
7
2
10
Changes for securities with previously recorded ACL
—
—
(7)
—
—
3
(4)
Securities sold or exchanged
(2)
—
(19)
—
—
—
(21)
Balance, at end of period
$
67
$
2
$
89
$
1
$
7
$
16
$
182
U.S. Corporate
Foreign Corporate
Foreign Government
RMBS
ABS & CLO
CMBS
Total
(In millions)
Nine Months Ended September 30, 2024
Balance, at beginning of period
$
68
$
2
$
88
$
1
$
7
$
18
$
184
ACL not previously recorded
41
13
—
—
—
—
54
Changes for securities with previously recorded ACL
10
—
(1)
—
3
2
14
Securities sold or exchanged
(59)
—
(25)
—
—
(6)
(90)
Balance, at end of period
$
60
$
15
$
62
$
1
$
10
$
14
$
162
Nine Months Ended September 30, 2023
Balance, at beginning of period
$
29
$
5
$
130
$
—
$
—
$
19
$
183
ACL not previously recorded
36
—
—
1
7
2
46
Changes for securities with previously recorded ACL
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
Equity Securities
The following table presents equity securities by security type:
September 30, 2024
December 31, 2023
Cost
Net Unrealized Gains (Losses) (1)
Estimated
Fair Value
Cost
Net Unrealized Gains (Losses) (1)
Estimated Fair Value
Security Type
(In millions)
Common stock (2)
$
453
$
193
$
646
$
424
$
239
$
663
Non-redeemable preferred stock
100
—
100
90
4
94
Total
$
553
$
193
$
746
$
514
$
243
$
757
________________
(1) Represents cumulative changes in estimated fair value, recognized in earnings, and not in OCI.
(2) Includes common stock, exchange traded funds, certain mutual funds and certain real estate investment trusts.
Contractholder-Directed Equity Securities and FVO Securities
The following table presents these investments by asset type. Unit-linked investments are primarily equity securities (including mutual funds). FVO securities include fixed maturity and equity securities to support asset and liability management strategies for certain insurance products and investments in certain separate accounts.
September 30, 2024
December 31, 2023
Cost or Amortized Cost
Net Unrealized Gains (Losses) (1)
Estimated
Fair Value
Cost or Amortized Cost
Net Unrealized Gains (Losses) (1)
Estimated Fair Value
Asset Type
(In millions)
Unit-linked investments
$
6,263
$
1,345
$
7,608
$
7,770
$
1,112
$
8,882
FVO securities
1,025
656
1,681
972
477
1,449
Total
$
7,288
$
2,001
$
9,289
$
8,742
$
1,589
$
10,331
________________
(1)Represents cumulative changes in estimated fair value, recognized in earnings, and not in OCI.
Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
September 30, 2024
December 31, 2023
Portfolio Segment
Carrying Value (1)
% of Total
Carrying Value (1)
% of Total
(Dollars in millions)
Commercial
$
57,949
64.1
%
$
60,326
65.2
%
Agricultural
19,469
21.5
19,805
21.4
Residential
13,844
15.3
13,096
14.2
Total amortized cost
91,262
100.9
93,227
100.8
ACL
(847)
(0.9)
(721)
(0.8)
Total mortgage loans
$
90,415
100.0
%
$
92,506
100.0
%
__________________
(1)Includes certain mortgage loans originated for third parties of $7.7 billion at amortized cost ($7.5 billion commercial and $259 million agricultural) and the related ACL of $88 million, with the corresponding mortgage loan secured financing liability of $7.7 billion included in other liabilities on the consolidated balance sheet at September 30, 2024. The consolidated balance sheet at December 31, 2023 includes certain mortgage loans originated for third parties of
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
$8.5 billion at amortized cost ($8.2 billion commercial and $246 million agricultural) and the related ACL of $73 million, with the corresponding mortgage loan secured financing liability of $8.5 billion included in other liabilities. The investment income on the mortgage loans originated for third parties and the interest expense on the related mortgage loan secured financing liability was $87 million and $272 million for the three months and nine months ended September 30, 2024, respectively, and were recorded in investment income and investment expenses, both within net investment income.
The amount of net (discounts) premiums and deferred (fees) expenses, included within total amortized cost, primarily attributable to residential mortgage loans was ($863) million and ($736) million at September 30, 2024 and December 31, 2023, respectively. The accrued interest income excluded from total amortized cost for commercial, agricultural and residential mortgage loans at September 30, 2024 was $269 million, $189 million and $104 million, respectively. The accrued interest income excluded from total amortized cost for commercial, agricultural and residential mortgage loans at December 31, 2023 was $277 million, $204 million and $95 million, respectively.
Purchases of mortgage loans, consisting primarily of residential mortgage loans, were $753 million and $1.5 billion for the three months and nine months ended September 30, 2024, respectively, and $221 million and $1.2 billion for the three months and nine months ended September 30, 2023, respectively.
Sales of mortgage loans, consisting primarily of commercial mortgage loans, to an equity method investee were $168 million for both the three months and nine months ended September 30, 2024.
For the nine months ended September 30, 2024, the Company contributed commercial mortgage loans with an amortized cost of $218 million to REJVs which subsequently completed foreclosure on those mortgage loans. See “— Real Estate and REJV” for the carrying value of wholly-owned real estate acquired through foreclosure.
Rollforward of ACL for Mortgage Loans by Portfolio Segment
The rollforward of ACL for mortgage loans, by portfolio segment, is as follows:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
ACL Methodology
The Company records an allowance for expected lifetime credit loss in earnings within net investment gains (losses) in an amount that represents the portion of the amortized cost basis of mortgage loans that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. In determining the Company’s ACL, management applies significant judgment to estimate expected lifetime credit loss, including: (i) pooling mortgage loans that share similar risk characteristics, (ii) considering expected lifetime credit loss over the contractual term of its mortgage loans adjusted for expected prepayments and any extensions, and (iii) considering past events and current and forecasted economic conditions. Each of the Company’s commercial, agricultural and residential mortgage loan portfolio segments are evaluated separately. The ACL is calculated for each mortgage loan portfolio segment based on inputs unique to each loan portfolio segment. On a quarterly basis, mortgage loans within a portfolio segment that share similar risk characteristics, such as internal risk ratings or consumer credit scores, are pooled for calculation of ACL. On an ongoing basis, mortgage loans with dissimilar risk characteristics (i.e., loans with significant declines in credit quality), such as collateral dependent mortgage loans (i.e., when the borrower is experiencing financial difficulty, including when foreclosure is reasonably possible or probable), are evaluated individually for credit loss. The ACL for loans evaluated individually are established using the same methodologies for all three portfolio segments. For example, the ACL for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan’s underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent loans, which are evaluated individually for credit loss, is recorded as a change in the ACL which is recorded on a quarterly basis as a charge or credit to earnings in net investment gains (losses).
Commercial and Agricultural Mortgage Loan Portfolio Segments
Within each loan portfolio segment, commercial and agricultural loans are pooled by internal risk rating. Estimated lifetime loss rates, which vary by internal risk rating, are applied to the amortized cost of each loan, excluding accrued investment income, on a quarterly basis to develop the ACL. Internal risk ratings are based on an assessment of the loan’s credit quality, which can change over time. The estimated lifetime loss rates are based on several loan portfolio segment-specific factors, including (i) the Company’s experience with defaults and loss severity, (ii) expected default and loss severity over the forecast period, (iii) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, (iv) loan specific characteristics including loan-to-value (“LTV”) ratios, and (v) internal risk ratings. These evaluations are revised as conditions change and new information becomes available. The Company uses its several decades of historical default and loss severity experience which capture multiple economic cycles. The Company uses a forecast of economic assumptions for a two-year period for most of its commercial and agricultural mortgage loans, while a one-year period is used for loans originated in certain markets. After the applicable forecast period, the Company reverts to its historical loss experience using a straight-line basis over two years. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, recent loss and recovery trend experience as compared to historical loss and recovery experience, and loan specific characteristics including debt service coverage ratios (“DSCR”). In estimating expected lifetime credit loss over the term of its commercial mortgage loans, the Company adjusts for expected prepayment and extension experience during the forecast period using historical prepayment and extension experience considering the expected position in the economic cycle and the loan profile (i.e., floating rate, shorter-term fixed rate and longer-term fixed rate) and after the forecast period using long-term historical prepayment experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. In estimating expected lifetime credit loss over the term of its agricultural mortgage loans, the Company’s experience is much less sensitive to the position in the economic cycle and by loan profile; accordingly, historical prepayment experience is used, while extension terms are not prevalent with the Company’s agricultural mortgage loans.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
Commercial mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, LTV ratios, DSCR and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher LTV ratios and lower DSCR. Agricultural mortgage loans are reviewed on an ongoing basis, which review includes, but is not limited to, property inspections, market analysis, estimated valuations of the underlying collateral, LTV ratios and borrower creditworthiness, as well as reviews on a geographic and property-type basis. The monitoring process for agricultural mortgage loans also focuses on higher risk loans.
For commercial mortgage loans, the primary credit quality indicator is the DSCR, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the DSCR, the higher the risk of experiencing a credit loss. The Company also reviews the LTV ratio of its commercial mortgage loan portfolio. LTV ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the LTV ratio, the higher the risk of experiencing a credit loss. The DSCR and the values utilized in calculating the ratio are updated routinely. In addition, the LTV ratio is routinely updated for all but the lowest risk loans as part of the Company’s ongoing review of its commercial mortgage loan portfolio.
For agricultural mortgage loans, the Company’s primary credit quality indicator is the LTV ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated.
After commercial and agricultural mortgage loans are approved, the Company makes commitments to lend and, typically, borrowers draw down on some or all of the commitments. The timing of mortgage loan funding is based on the commitment expiration dates. A liability for credit loss for unfunded commercial and agricultural mortgage loan commitments that is not unconditionally cancellable is recognized in earnings and is reported within net investment gains (losses). The liability is based on estimated lifetime loss rates as described above and the amount of the outstanding commitments, which for lines of credit, considers estimated utilization rates. When the commitment is funded or expires, the liability is adjusted accordingly.
Residential Mortgage Loan Portfolio Segment
The Company’s residential mortgage loan portfolio is comprised primarily of purchased closed end, amortizing residential mortgage loans, including both performing loans purchased within 12 months of origination and reperforming loans purchased after they have been performing for at least 12 months post-modification. Residential mortgage loans are pooled by loan type (i.e., new origination and reperforming) and pooled by similar risk profiles (including consumer credit score and LTV ratios). Estimated lifetime loss rates, which vary by loan type and risk profile, are applied to the amortized cost of each loan excluding accrued investment income on a quarterly basis to develop the ACL. The estimated lifetime loss rates are based on several factors, including (i) industry historical experience and expected results over the forecast period for defaults, (ii) loss severity, (iii) prepayment rates, (iv) current and forecasted economic conditions including growth, inflation, interest rates and unemployment levels, and (v) loan pool specific characteristics including consumer credit scores, LTV ratios, payment history and home prices. These evaluations are revised as conditions change and new information becomes available. The Company uses industry historical experience which captures multiple economic cycles as the Company has purchased most of its residential mortgage loans in the last five years. The Company uses a forecast of economic assumptions for a two-year period for most of its residential mortgage loans. After the applicable forecast period, the Company reverts to industry historical loss experience using a straight-line basis over one year.
For residential mortgage loans, the Company’s primary credit quality indicator is whether the loan is performing or nonperforming. The Company generally defines nonperforming residential mortgage loans as those that are 60 or more days past due and/or in nonaccrual status which is assessed monthly. Generally, nonperforming residential mortgage loans have a higher risk of experiencing a credit loss.
Modifications to Borrowers Experiencing Financial Difficulty
The Company may modify mortgage loans to borrowers. Each mortgage loan modification is evaluated to determine whether the borrower was experiencing financial difficulties. Disclosed below are those modifications, in materially impacted mortgage segments, where the borrower was determined to be experiencing financial difficulties and the mortgage loans were modified by any of the following means: principal forgiveness, interest rate reduction, other-than-
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
insignificant payment delay or term extension. The amount, timing and extent of modifications granted and subsequent performance are considered in determining any ACL recorded.
These mortgage loan modifications are summarized as follows:
Three Months Ended September 30,
2024
2023
Maturity
Extension
Weighted Average Life Increase
Maturity
Extension
Weighted Average Life Increase
Amortized
Cost
Affected Loans (in Years)
% of Book
Value
Amortized
Cost
Affected Loans (in Years)
% of Book
Value
(Dollars in millions)
Commercial
$
39
Less than one year
<1%
$
145
Less than one year
<1%
Nine Months Ended September 30,
2024
2023
Maturity
Extension
Weighted Average Life Increase
Maturity
Extension
Weighted Average Life Increase
Amortized
Cost
Affected Loans (in Years)
% of Book
Value
Amortized
Cost
Affected Loans (in Years)
% of Book
Value
(Dollars in millions)
Commercial
$
236
Less than one year
<1
%
$
367
Less than one year
<1
%
For the three months ended September 30, 2024 and for both the three months and nine months ended September 30, 2023, all commercial mortgage loans which were modified to borrowers experiencing financial difficulties were current. For the nine months ended September 30, 2024, commercial mortgage loans with an amortized cost of $182 million which were extended over the past 12 months became delinquent and foreclosed.
Credit Quality of Mortgage Loans by Portfolio Segment
The amortized cost of commercial mortgage loans by credit quality indicator and vintage year was as follows at September 30, 2024:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
The amortized cost of agricultural mortgage loans by credit quality indicator and vintage year was as follows at September 30, 2024:
Credit Quality Indicator
2024
2023
2022
2021
2020
Prior
Revolving Loans
Total
% of Total
(Dollars in millions)
LTV ratios:
Less than 65%
$
459
$
1,177
$
2,792
$
2,602
$
2,639
$
7,090
$
1,427
$
18,186
93.4
%
65% to 75%
9
56
44
306
119
512
104
1,150
5.9
76% to 80%
—
—
24
—
3
—
3
30
0.2
Greater than 80%
—
—
—
14
29
46
14
103
0.5
Total
$
468
$
1,233
$
2,860
$
2,922
$
2,790
$
7,648
$
1,548
$
19,469
100.0
%
The amortized cost of residential mortgage loans by credit quality indicator and vintage year was as follows at September 30, 2024:
Credit Quality Indicator
2024
2023
2022
2021
2020
Prior
Revolving Loans
Total
% of Total
(Dollars in millions)
Performance indicators:
Performing
$
805
$
927
$
2,493
$
1,747
$
326
$
7,112
$
—
$
13,410
96.9
%
Nonperforming (1)
2
34
75
24
15
284
—
434
3.1
Total
$
807
$
961
$
2,568
$
1,771
$
341
$
7,396
$
—
$
13,844
100.0
%
__________________
(1)Includes residential mortgage loans in process of foreclosure of $136 million and $140 million at September 30, 2024 and December 31, 2023, respectively.
Past Due and Nonaccrual Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio, with 98% and 99% of all mortgage loans classified as performing at September 30, 2024 and December 31, 2023, respectively. The Company defines delinquency consistent with industry practice, when mortgage loans are past due more than two or more months, as applicable, by portfolio segment.The past due and nonaccrual mortgage loans at amortized cost, prior to ACL by portfolio segment, were as follows:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
Real Estate and REJV
The Company’s real estate investment portfolio is diversified by property type, geography and income stream, including income from operating leases, operating income and equity in earnings from equity method REJV. Real estate investments, by income type, as well as income earned, were as follows at and for the periods indicated:
September 30, 2024
December 31, 2023
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Income Type
Carrying Value
Income
(In millions)
Wholly-owned real estate:
Leased real estate
$
4,536
$
4,446
$
88
$
89
$
255
$
271
Other real estate
687
507
79
71
204
206
REJV
8,508
8,379
11
(64)
(191)
(218)
Total real estate and REJV
$
13,731
$
13,332
$
178
$
96
$
268
$
259
The carrying value of wholly-owned real estate acquired through foreclosure was $264 million and $190 million at September 30, 2024 and December 31, 2023, respectively. Depreciation expense on real estate investments was $32 million and $91 million for the three months and nine months ended September 30, 2024, respectively, and $26 million and $84 million for the three months and nine months ended September 30, 2023, respectively. Real estate investments were net of accumulated depreciation of $1.0 billion and $952 million at September 30, 2024 and December 31, 2023, respectively.
Leased Real Estate Investments - Operating Leases
The Company, as lessor, leases investment real estate, principally commercial real estate for office and retail use, through a variety of operating lease arrangements, which typically include tenant reimbursement for property operating costs and options to renew or extend the lease. In some circumstances, leases may include an option for the lessee to purchase the property. In addition, certain leases of retail space may stipulate that a portion of the income earned is contingent upon the level of the tenants’ revenues. The Company has elected a practical expedient of not separating non-lease components related to reimbursement of property operating costs from associated lease components. These property operating costs have the same timing and pattern of transfer as the related lease component, because they are incurred over the same period of time as the operating lease. Therefore, the combined component is accounted for as a single operating lease. Risk is managed through lessee credit analysis, property type diversification and geographic diversification.
See Note 11 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for a summary of leased real estate investments and income earned, by property type.
Other Invested Assets
Tax Equity Investments
The Company invests in certain tax equity investments, including low income housing tax credit partnerships and renewable energy partnerships. The carrying value of tax equity investments, reported in other invested assets on the interim condensed consolidated balance sheet, was $737 million and $1.0 billion at September 30, 2024 and December 31, 2023, respectively. Beginning January 1, 2024, tax equity investments that meet certain criteria are accounted for using the proportional amortization method, where the initial cost of the investment is amortized in proportion to the tax credits received and recognized as a component of income tax expense (benefit) in the interim condensed consolidated statements of operations. Investments which do not meet the qualification criteria for the proportional amortization method are accounted for using the equity method of accounting. For the three months and nine months ended September 30, 2024, income tax credits and other income tax benefits of $37 million and $112 million, respectively, and amortized expense of $33 million and $100 million, respectively, were recognized net as a component of income tax expense in the Company’s interim condensed consolidated statement of operations.
Cash Equivalents
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 $12.1 billion and $10.8 billion, principally at estimated fair value, at September 30, 2024 and December 31, 2023, respectively.
Concentrations of Credit Risk
Investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at estimated fair value, were in fixed income securities of the following foreign governments and their agencies:
September 30, 2024
December 31, 2023
(In millions)
Japan
$
21,688
$
22,606
South Korea
$
6,654
$
6,411
Mexico
$
3,651
$
3,778
Securities Lending Transactions and Repurchase Agreements
Securities, Collateral and Reinvestment Portfolio
A summary of these transactions and agreements accounted for as secured borrowings were as follows:
September 30, 2024
December 31, 2023
Securities (1)
Securities (1)
Agreement Type
Estimated Fair Value
Cash Collateral
Received from
Counterparties (2)
Reinvestment Portfolio at Estimated Fair Value
Estimated
Fair Value
Cash Collateral
Received from
Counterparties (2)
Reinvestment Portfolio at Estimated Fair Value
(In millions)
Securities lending
$
11,079
$
11,257
$
11,178
$
10,510
$
10,788
$
10,553
Repurchase agreements
$
3,010
$
2,975
$
2,895
$
3,029
$
2,975
$
2,913
__________________
(1)These securities were included within fixed maturity securities AFS and cash equivalents at September 30, 2024 and within fixed maturity securities AFS, short-term investments and cash equivalents at December 31, 2023.
(2)The liability for cash collateral is included within payables for collateral under securities loaned and other transactions.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
Contractual Maturities
Contractual maturities of these transactions and agreements accounted for as secured borrowings were as follows:
September 30, 2024
December 31, 2023
Remaining Maturities
Remaining Maturities
Security Type
Open (1)
1 Month or Less
Over 1
Month
to 6
Months
Over 6 Months to 1 Year
Total
Open (1)
1 Month or Less
Over 1
Month
to 6
Months
Over 6 Months to 1 Year
Total
(In millions)
Cash collateral liability by security type:
Securities lending:
U.S. government and agency
$
2,295
$
6,077
$
1,459
$
—
$
9,831
$
1,393
$
4,106
$
3,919
$
—
$
9,418
Foreign government
—
232
1,018
—
1,250
—
483
624
—
1,107
Agency RMBS
—
176
—
—
176
—
88
175
—
263
Total
$
2,295
$
6,485
$
2,477
$
—
$
11,257
$
1,393
$
4,677
$
4,718
$
—
$
10,788
Repurchase agreements:
U.S. government and agency
$
—
$
2,975
$
—
$
—
$
2,975
$
—
$
2,975
$
—
$
—
$
2,975
__________________
(1)The related security could be returned to the Company on the next business day, which would require the Company to immediately return the cash collateral.
If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell investments to meet the return obligation, it may have difficulty selling such collateral that is invested in a timely manner, be forced to sell investments in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both.
The securities lending and repurchase agreement reinvestment portfolios consist principally of high quality, liquid, publicly traded fixed maturity securities AFS, short-term investments, cash equivalents or cash. If the securities in the reinvestment portfolio become less liquid, liquidity resources within the general account are available to meet any potential cash demands when securities are put back by the counterparty.
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value, and were as follows at:
September 30, 2024
December 31, 2023
(In millions)
Invested assets on deposit (regulatory deposits)
$
1,584
$
1,596
Invested assets held in trust (external reinsurance agreements) (1)
989
941
Invested assets pledged as collateral (2)
29,423
26,017
Total invested assets on deposit, held in trust and pledged as collateral
$
31,996
$
28,554
__________________
(1)Represents assets held in trust related to third-party reinsurance agreements. Excludes assets held in trust related to reinsurance agreements between wholly-owned subsidiaries of $2.0 billion at both September 30, 2024 and December 31, 2023.
(2)The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements, repurchase agreements and a collateral financing arrangement (see Notes 5, 16 and 17 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report). For information regarding invested assets pledged in connection with derivative transactions, see Note 11.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
See “— Securities Lending Transactions and Repurchase Agreements” for information regarding securities supporting securities lending transactions and repurchase agreements, and Note 9 for information regarding investments designated to the closed block. In addition, the Company’s investment in Federal Home Loan Bank of New York common stock, included within other invested assets, which is considered restricted until redeemed by the issuer, was $715 million and $714 million, at redemption value, at September 30, 2024 and December 31, 2023, respectively.
Variable Interest Entities
The Company has invested in legal entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity.
Consolidated VIEs
Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.
The following table presents the total assets and total liabilities relating to investment-related VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at:
September 30, 2024
December 31, 2023
Asset Type
Total Assets
Total Liabilities
Total Assets
Total Liabilities
(In millions)
Investment funds (primarily other invested assets and REJV)
$
691
$
181
$
282
$
1
Renewable energy partnership (primarily other invested assets)
64
—
64
—
Total
$
755
$
181
$
346
$
1
Unconsolidated VIEs
The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:
September 30, 2024
December 31, 2023
Asset Type
Carrying Amount
Maximum Exposure to Loss (1)
Carrying Amount
Maximum Exposure to Loss (1)
(In millions)
Fixed maturity securities AFS (2)
$
60,218
$
60,218
$
54,182
$
54,182
Other limited partnership interests (“OLPI”)
13,300
17,937
14,034
19,591
Other investments (REJV, FVO securities and mortgage loans)
1,307
1,324
1,039
1,055
Other invested assets
1,061
1,197
1,206
1,275
Total
$
75,886
$
80,676
$
70,461
$
76,103
__________________
(1)The maximum exposure to loss relating to fixed maturity securities AFS and FVO securities is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to OLPI, REJV and mortgage loans is equal to the carrying amounts plus any unrecognized unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
(2)For variable interests in Structured Products included within fixed maturity securities AFS, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset-backed securities issued by trusts that do not have substantial equity.
As described in Note 19, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs for either the nine months ended September 30, 2024 or 2023.
Net Investment Income
The composition of net investment income by asset type was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Asset Type
2024
2023
2024
2023
(In millions)
Fixed maturity securities AFS
$
3,457
$
3,314
$
10,100
$
9,681
Equity securities
4
5
18
27
FVO securities
76
(17)
183
81
Mortgage loans
1,184
1,189
3,565
3,536
Policy loans
116
120
339
358
Real estate and REJV
178
96
268
259
OLPI
87
206
713
456
Cash, cash equivalents and short-term investments
299
268
840
733
Operating joint ventures
92
4
136
36
Other
159
180
502
458
Subtotal investment income
5,652
5,365
16,664
15,625
Less: Investment expenses
571
544
1,703
1,686
Subtotal, net
5,081
4,821
14,961
13,939
Unit-linked investments
146
4
907
603
Net investment income
$
5,227
$
4,825
$
15,868
$
14,542
Net Investment Income Information
Net realized and unrealized gains (losses) recognized in net investment income:
Net realized gains (losses) from sales and disposals (primarily FVO securities and Unit-linked investments)
$
65
$
47
$
199
$
126
Net unrealized gains (losses) from changes in estimated fair value (primarily FVO securities and Unit-linked investments)
121
(80)
840
572
Net realized and unrealized gains (losses) recognized in net investment income
$
186
$
(33)
$
1,039
$
698
Changes in estimated fair value subsequent to purchase of FVO securities and Unit-linked investments still held at the end of the respective periods and recognized in net investment income
$
209
$
(63)
$
813
$
506
Equity method investments net investment income (primarily REJV, OLPI, tax credit and renewable energy partnerships and operating joint ventures)
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
Net Investment Gains (Losses)
Net Investment Gains (Losses) by Asset Type and Transaction Type
The composition of net investment gains (losses) by asset type and transaction type was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Asset Type
2024
2023
2024
2023
(In millions)
Fixed maturity securities AFS
$
(157)
$
(698)
$
(488)
$
(2,274)
Equity securities
(31)
(14)
(22)
66
Mortgage loans
(151)
11
(246)
(194)
Real estate and REJV (excluding changes in estimated fair value)
128
1
175
32
OLPI (excluding changes in estimated fair value) (1)
4
—
(55)
12
Other gains (losses)
(57)
(161)
(28)
(141)
Subtotal
(264)
(861)
(664)
(2,499)
Change in estimated fair value of OLPI and REJV
(1)
(3)
5
(6)
Non-investment portfolio gains (losses)
188
(63)
(214)
(145)
Subtotal
187
(66)
(209)
(151)
Net investment gains (losses)
$
(77)
$
(927)
$
(873)
$
(2,650)
Transaction Type
Realized gains (losses) on investments sold or disposed (1)
$
(39)
$
(281)
$
(369)
$
(847)
Impairment (losses)
(17)
(591)
(17)
(1,496)
Recognized gains (losses):
Change in ACL recognized in earnings
(150)
25
(231)
(199)
Unrealized net gains (losses) recognized in earnings
(59)
(17)
(42)
37
Total recognized gains (losses)
(209)
8
(273)
(162)
Non-investment portfolio gains (losses)
188
(63)
(214)
(145)
Net investment gains (losses)
$
(77)
$
(927)
$
(873)
$
(2,650)
Net Investment Gains (Losses) Information
Changes in estimated fair value subsequent to purchase of equity securities
still held at the end of the respective periods and recognized in net investment gains (losses)
$
(36)
$
(10)
$
(23)
$
9
Other gains (losses) include:
Gains (losses) on disposed investments which were previously in a qualified cash flow hedging relationship
$
—
$
2
$
—
$
(20)
Foreign currency gains (losses)
$
170
$
(21)
$
5
$
(7)
Net Realized Investment Gains (Losses) From Sales and Disposals of Investments
Recognized in net investment gains (losses)
$
(39)
$
(281)
$
(369)
$
(847)
Recognized in net investment income
65
47
199
126
Net realized investment gains (losses) from sales and disposals of investments
$
26
$
(234)
$
(170)
$
(721)
__________________
(1)Includes a net loss of $46 million for the nine months ended September 30, 2024 for private equity investments sold. For the nine months ended September 30, 2024, the Company sold $798 million in portfolios of investments to a fund for proceeds of $752 million in cash and receivables secured by the value of the fund. The Company’s investment
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
10. Investments (continued)
management business has entered into an agreement to serve as the investment manager of the fund for which it will receive a management fee.
Fixed Maturity Securities AFS and Equity Securities – Composition of Net Investment Gains (Losses)
The composition of net investment gains (losses) for these securities is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Fixed Maturity Securities AFS
2024
2023
2024
2023
(In millions)
Proceeds
$
6,815
$
9,263
$
21,273
$
32,719
Gross investment gains
$
111
$
63
$
388
$
429
Gross investment (losses)
(228)
(334)
(898)
(1,403)
Realized gains (losses) on sales and disposals
(117)
(271)
(510)
(974)
Net credit loss (provision) release (change in ACL recognized in earnings)
(40)
17
22
—
Impairment (losses)
—
(444)
—
(1,300)
Net credit loss (provision) release and impairment (losses)
(40)
(427)
22
(1,300)
Net investment gains (losses)
$
(157)
$
(698)
$
(488)
$
(2,274)
Equity Securities
Realized gains (losses) on sales and disposals
$
27
$
—
$
25
$
22
Unrealized net gains (losses) recognized in earnings
(58)
(14)
(47)
44
Net investment gains (losses)
$
(31)
$
(14)
$
(22)
$
66
11. Derivatives
Accounting for Derivatives
See Note 1 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for a description of the Company’s accounting policies for derivatives and Note 12 for information about the fair value hierarchy for derivatives.
Derivative Strategies
Types of Derivative Instruments and Derivative Strategies
The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives. Commonly used derivative instruments include, but are not limited to:
•Interest rate derivatives: swaps, total return swaps, caps, floors, futures, swaptions, forwards and synthetic GICs;
•Credit derivatives: purchased or written single name or index credit default swaps, and forwards; and
•Equity derivatives: index options, variance swaps, exchange-traded futures and total return swaps.
For detailed information on these contracts and the related strategies, see Note 12 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
Primary Risks Managed by Derivatives
The following table presents the primary underlying risk exposure, gross notional amount and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:
September 30, 2024
December 31, 2023
Primary Underlying Risk Exposure
Gross Notional Amount
Estimated Fair Value
Gross Notional Amount
Estimated Fair Value
Assets
Liabilities
Assets
Liabilities
(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps
Interest rate
$
5,188
$
1,134
$
554
$
4,550
$
1,257
$
535
Foreign currency swaps
Foreign currency exchange rate
1,664
43
7
1,475
55
—
Foreign currency forwards
Foreign currency exchange rate
350
—
69
450
—
65
Subtotal
7,202
1,177
630
6,475
1,312
600
Cash flow hedges:
Interest rate swaps
Interest rate
4,155
—
259
4,156
1
265
Interest rate forwards
Interest rate
5,090
59
923
6,115
51
938
Foreign currency swaps
Foreign currency exchange rate
45,985
2,458
1,655
43,906
2,457
1,509
Subtotal
55,230
2,517
2,837
54,177
2,509
2,712
Net investment in a foreign operation hedges:
Foreign currency forwards
Foreign currency exchange rate
205
7
—
503
—
8
Currency options
Foreign currency exchange rate
3,000
412
—
3,000
394
—
Subtotal
3,205
419
—
3,503
394
8
Total qualifying hedges
65,637
4,113
3,467
64,155
4,215
3,320
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps
Interest rate
29,675
1,654
1,062
29,801
1,497
1,102
Interest rate floors
Interest rate
9,228
48
—
15,321
41
—
Interest rate caps
Interest rate
29,052
130
1
30,016
373
—
Interest rate futures
Interest rate
1,732
2
2
1,243
1
5
Interest rate options
Interest rate
43,481
269
119
43,926
385
103
Interest rate forwards
Interest rate
2,934
130
76
2,383
69
36
Synthetic GICs
Interest rate
49,081
—
—
49,066
—
—
Foreign currency swaps
Foreign currency exchange rate
10,755
981
231
11,891
1,200
356
Foreign currency forwards
Foreign currency exchange rate
13,511
283
961
14,128
310
806
Currency futures
Foreign currency exchange rate
321
2
—
314
2
—
Currency options
Foreign currency exchange rate
—
—
—
50
—
—
Credit default swaps — purchased
Credit
2,801
4
74
2,877
3
79
Credit default swaps — written
Credit
12,851
267
2
12,468
233
5
Equity futures
Equity market
1,866
13
6
2,163
8
11
Equity index options
Equity market
14,106
276
263
19,421
399
255
Equity variance swaps
Equity market
114
—
3
99
—
2
Equity total return swaps
Equity market
2,301
—
90
1,912
1
218
Longevity swaps (1)
Longevity
1,000
—
—
—
—
—
Total non-designated or nonqualifying derivatives
224,809
4,059
2,890
237,079
4,522
2,978
Total
$
290,446
$
8,172
$
6,357
$
301,234
$
8,737
$
6,298
__________________
(1)Longevity swaps are used by the Company to mitigate risk associated with life expectancy and unanticipated changes in mortality rates.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
Included in the table above, the Company uses various over-the-counter (“OTC”) and exchange traded derivatives to hedge variable annuity guarantees. The table below presents the gross notional amount, estimated fair value and primary underlying risk exposure of the derivatives hedging variable annuity guarantees accounted for as MRBs:
September 30, 2024
December 31, 2023
Primary Underlying Risk Exposure
Gross Notional Amount
Estimated Fair Value
Gross Notional Amount
Estimated Fair Value
Assets
Liabilities
Assets
Liabilities
(In millions)
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate
$
9,092
$
13
$
603
$
9,096
$
13
$
663
Foreign currency exchange rate
577
20
1
716
22
2
Equity market
4,659
94
193
5,189
77
373
$
14,328
$
127
$
797
$
15,001
$
112
$
1,038
The change in estimated fair values and earned income of derivatives hedging variable annuity guarantees, recorded in net derivative gains (losses), were ($395) million and ($740) million for the nine months ended September 30, 2024 and 2023, respectively.
Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2024 and December 31, 2023. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules, (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship, (iii) derivatives that economically hedge MRBs that do not qualify for hedge accounting because the changes in estimated fair value of the MRBs are already recorded in net income, and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
The Effects of Derivatives on the Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
The following table presents the interim condensed consolidated financial statement location and amount of gain (loss) recognized on fair value, cash flow, net investment in a foreign operation (“NIFO”), nonqualifying hedging relationships and embedded derivatives:
Three Months Ended September 30, 2024
Net
Investment
Income
Net
Investment
Gains
(Losses)
Net
Derivative
Gains
(Losses)
Policyholder
Benefits and
Claims
Interest
Credited to
PABs
Other
Expenses
OCI
(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)
$
(1)
$
—
N/A
$
185
$
92
$
—
N/A
Hedged items
1
—
N/A
(191)
(93)
—
N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)
(23)
41
N/A
—
32
—
N/A
Hedged items
22
(30)
N/A
—
(34)
—
N/A
Amount excluded from the assessment of hedge effectiveness
—
(15)
N/A
—
—
—
N/A
Subtotal
(1)
(4)
N/A
(6)
(3)
—
N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI
N/A
N/A
N/A
N/A
N/A
N/A
$
286
Amount of gains (losses) reclassified from AOCI into income
5
(1)
—
—
—
—
(4)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI
N/A
N/A
N/A
N/A
N/A
N/A
(161)
Amount of gains (losses) reclassified from AOCI into income
1
602
—
—
—
—
(603)
Foreign currency transaction gains (losses) on hedged items
—
(585)
—
—
—
—
—
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI
N/A
N/A
N/A
N/A
N/A
N/A
—
Amount of gains (losses) reclassified from AOCI into income
—
—
—
—
—
—
—
Subtotal
6
16
—
—
—
—
(482)
Gain (Loss) on NIFO Hedges:
Foreign currency exchange rate derivatives (1)
N/A
—
N/A
N/A
N/A
N/A
(141)
Non-derivative hedging instruments
N/A
N/A
N/A
N/A
N/A
N/A
(33)
Subtotal
N/A
—
N/A
N/A
N/A
N/A
(174)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)
—
N/A
360
N/A
N/A
N/A
N/A
Foreign currency exchange rate derivatives (1)
—
N/A
573
N/A
N/A
N/A
N/A
Credit derivatives — purchased (1)
—
N/A
(8)
N/A
N/A
N/A
N/A
Credit derivatives — written (1)
—
N/A
25
N/A
N/A
N/A
N/A
Equity derivatives (1)
(10)
N/A
(95)
N/A
N/A
N/A
N/A
Foreign currency transaction gains (losses) on hedged items
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
Nine Months Ended September 30, 2023
Net
Investment
Income
Net
Investment
Gains
(Losses)
Net
Derivative
Gains
(Losses)
Policyholder
Benefits and
Claims
Interest
Credited to
PABs
Other
Expenses
OCI
(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)
$
(3)
$
—
N/A
$
(239)
$
(59)
$
—
N/A
Hedged items
3
—
N/A
218
57
—
N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)
(10)
(73)
N/A
—
(14)
—
N/A
Hedged items
9
56
N/A
—
15
—
N/A
Amount excluded from the assessment of hedge effectiveness
—
(2)
N/A
—
—
—
N/A
Subtotal
(1)
(19)
N/A
(21)
(1)
—
N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI
N/A
N/A
N/A
N/A
N/A
N/A
$
(369)
Amount of gains (losses) reclassified from AOCI into income
38
77
—
—
—
—
(115)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI
N/A
N/A
N/A
N/A
N/A
N/A
(715)
Amount of gains (losses) reclassified from AOCI into income
3
10
—
—
—
2
(15)
Foreign currency transaction gains (losses) on hedged items
—
(2)
—
—
—
—
—
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI
N/A
N/A
N/A
N/A
N/A
N/A
(1)
Amount of gains (losses) reclassified from AOCI into income
—
—
—
—
—
—
—
Subtotal
41
85
—
—
—
2
(1,215)
Gain (Loss) on NIFO Hedges:
Foreign currency exchange rate derivatives (1)
N/A
5
N/A
N/A
N/A
N/A
280
Non-derivative hedging instruments
N/A
N/A
N/A
N/A
N/A
N/A
37
Subtotal
N/A
5
N/A
N/A
N/A
N/A
317
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)
—
N/A
(1,381)
N/A
N/A
N/A
N/A
Foreign currency exchange rate derivatives (1)
—
N/A
(1,518)
N/A
N/A
N/A
N/A
Credit derivatives — purchased (1)
—
N/A
(1)
N/A
N/A
N/A
N/A
Credit derivatives — written (1)
—
N/A
48
N/A
N/A
N/A
N/A
Equity derivatives (1)
(34)
N/A
(801)
N/A
N/A
N/A
N/A
Foreign currency transaction gains (losses) on hedged items
—
N/A
455
N/A
N/A
N/A
N/A
Subtotal
(34)
N/A
(3,198)
N/A
N/A
N/A
N/A
Earned income on derivatives
157
—
802
5
(111)
—
—
Synthetic GICs
N/A
N/A
56
N/A
N/A
N/A
N/A
Embedded derivatives
N/A
N/A
51
N/A
N/A
N/A
N/A
Total
$
163
$
71
$
(2,289)
$
(16)
$
(112)
$
2
$
(898)
__________________
(1)Excludes earned income on derivatives.
Fair Value Hedges
The Company designates and accounts for the following as fair value hedges when they have met the requirements of fair value hedging: (i) interest rate swaps to convert fixed rate assets and liabilities to floating rate assets and liabilities, (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated assets and liabilities, and (iii) foreign currency forwards to hedge the foreign currency fair value exposure of foreign currency denominated investments.
The following table presents the balance sheet classification, carrying amount and cumulative fair value hedging adjustments for items designated and qualifying as hedged items in fair value hedges:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
Balance Sheet Line Item
Carrying Amount of the Hedged Assets/(Liabilities)
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets/(Liabilities) (1)
September 30, 2024
December 31, 2023
September 30, 2024
December 31, 2023
(In millions)
Fixed maturity securities AFS
$
388
$
454
$
—
$
3
Mortgage loans
$
305
$
359
$
(2)
$
(11)
FPBs
$
(2,750)
$
(2,863)
$
151
$
191
PABs
$
(2,438)
$
(1,911)
$
43
$
25
__________________
(1)Includes ($96) million and ($111) million of hedging adjustments on discontinued hedging relationships at September 30, 2024 and December 31, 2023, respectively.
For the Company’s foreign currency forwards, the change in the estimated fair value of the derivative related to the changes in the difference between the spot price and the forward price is excluded from the assessment of hedge effectiveness. The Company has elected to record changes in estimated fair value of excluded components in earnings. For all other derivatives, all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
Cash Flow Hedges
The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities, (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities, (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments, and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.
In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into income. These amounts were $10 million and$4 million for the three months and nine months ended September 30, 2024, respectively, and $1 million and $28 millionfor the three months and nine months ended September 30, 2023, respectively.
At both September 30, 2024 and December 31, 2023, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed five years.
At September 30, 2024 and December 31, 2023, the balance in AOCI associated with cash flow hedges was ($457) million and $166 million, respectively.
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
At September 30, 2024, the Company expected to reclassify ($46) million of deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months.
NIFO Hedges
The Company uses foreign currency exchange rate derivatives, which may include foreign currency forwards and currency options, to hedge portions of its net investments in foreign operations against adverse movements in exchange rates. The Company also designates a portion of its foreign-denominated debt as a non-derivative hedging instrument of its net investments in foreign operations. The Company assesses hedge effectiveness of its derivatives based upon the change in forward rates and assesses its non-derivative hedging instruments based upon the change in spot rates. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
When net investments in foreign operations are sold or substantially liquidated, the amounts in AOCI are reclassified to the statement of operations.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
At September 30, 2024 and December 31, 2023, the cumulative foreign currency translation gain (loss) recorded in AOCI related to NIFO hedges was $888 million and $681 million, respectively. At September 30, 2024 and December 31, 2023, the carrying amount of debt designated as a non-derivative hedging instrument was $294 million and $298 million, respectively.
Credit Derivatives
In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the effects of derivatives on the interim condensed consolidated statements of operations and comprehensive income (loss) table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps.
The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at:
September 30, 2024
December 31, 2023
Rating Agency Designation of Referenced Credit Obligations (1)
Estimated Fair Value of Credit Default Swaps
Maximum Amount of Future Payments under Credit Default Swaps
Weighted Average Years to Maturity (2)
Estimated Fair Value of Credit Default Swaps
Maximum Amount of Future Payments under Credit Default Swaps
Weighted Average Years to Maturity (2)
(Dollars in millions)
Aaa/Aa/A
Single name credit default swaps (3)
$
1
$
103
1.3
$
2
$
150
1.6
Credit default swaps referencing indices
83
4,261
2.4
80
3,830
2.7
Subtotal
84
4,364
2.4
82
3,980
2.6
Baa
Single name credit default swaps (3)
1
92
1.6
1
99
2.1
Credit default swaps referencing indices
169
8,195
5.0
145
8,188
5.4
Subtotal
170
8,287
5.0
146
8,287
5.3
Ba
Single name credit default swaps (3)
—
17
1.4
—
17
2.1
Credit default swaps referencing indices
2
24
2.2
2
25
3.0
Subtotal
2
41
1.9
2
42
2.6
B
Credit default swaps referencing indices
10
144
3.9
2
129
5.0
Subtotal
10
144
3.9
2
129
5.0
Caa
Credit default swaps referencing indices
(1)
15
2.2
(4)
30
2.5
Subtotal
(1)
15
2.2
(4)
30
2.5
Total
$
265
$
12,851
4.1
$
228
$
12,468
4.5
_________________
(1)The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.
(2)The weighted average years to maturity of the credit default swaps is calculated based on weighted average gross notional amounts.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
(3)Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or municipals.
Credit Risk on Freestanding Derivatives
The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.
The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties in jurisdictions in which it understands that close-out netting should be enforceable and establishing and monitoring exposure limits. The Company’s bilateral contracts between two counterparties (“OTC-bilateral”) derivative transactions are governed by International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, close-out netting permits the Company (subject to financial regulations such as the Orderly Liquidation Authority under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act) to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions and to apply collateral to the obligations, without application of the automatic stay, upon the counterparty’s bankruptcy. All of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives as required by applicable law. Additionally, the Company is required to pledge initial margin for certain new OTC-bilateral derivative transactions to third-party custodians.
The Company’s over-the-counter cleared (“OTC-cleared”) derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by brokers and central clearinghouses to such derivatives.
See Note 12 for a description of the impact of credit risk on the valuation of derivatives.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:
September 30, 2024
December 31, 2023
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement
Assets
Liabilities
Assets
Liabilities
(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)
$
8,111
$
6,036
$
8,749
$
6,014
OTC-cleared (1)
191
260
158
277
Exchange-traded
17
8
11
16
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)
8,319
6,304
8,918
6,307
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral
(3,035)
(3,035)
(3,568)
(3,568)
OTC-cleared
(5)
(5)
(5)
(5)
Exchange-traded
(3)
(3)
(1)
(1)
Cash collateral: (3), (4)
OTC-bilateral
(2,676)
—
(3,448)
—
OTC-cleared
(181)
(237)
(150)
(239)
Exchange-traded
—
(4)
—
(5)
Securities collateral: (5)
OTC-bilateral
(2,313)
(2,993)
(1,563)
(2,427)
OTC-cleared
—
(18)
—
(33)
Exchange-traded
—
(1)
—
(10)
Net amount after application of master netting agreements and collateral
$
106
$
8
$
183
$
19
__________________
(1)At September 30, 2024 and December 31, 2023, derivative assets included income (expense) accruals reported in accrued investment income or in other liabilities of $147 million and $181 million, respectively, and derivative liabilities included (income) expense accruals reported in accrued investment income or in other liabilities of ($53) million and $9 million, respectively.
(2)Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.
(3)Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives, where the central clearinghouse treats variation margin as collateral, is included in cash and cash equivalents, short-term investments or in fixed maturity securities AFS, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet. For certain collateral agreements, cash collateral is pledged to the Company as initial margin on its OTC-bilateral derivatives.
(4)The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2024 and December 31, 2023, the Company received excess cash collateral of $43 million and $163 million, respectively, and provided excess cash collateral of $93 million and $98 million, respectively, which is not included in the table above due to the foregoing limitation.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
(5)Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2024, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities AFS on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2024 and December 31,2023, the Company received excess securities collateral with an estimated fair value of $441 million and $298 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2024 and December 31, 2023, the Company provided excess securities collateral with an estimated fair value of $1.5 billion, at both periods, for its OTC-bilateral derivatives, $891 million and $945 million, respectively, for its OTC-cleared derivatives, and $181 million and $137 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.
The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the collateral amount owed by that counterparty reaches a minimum transfer amount. Substantially all of the Company’s netting agreements for derivatives contain provisions that require both the Company and the counterparty to maintain a specific investment grade credit rating from each of Moody’s and S&P. If a party’s credit or financial strength rating, as applicable, were to fall below that specific investment grade credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement payment based on such party’s reasonable valuation of the derivatives. A small number of these arrangements also include credit-contingent provisions that include a threshold above which collateral must be posted. Such agreements provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the credit ratings of MetLife, Inc. and/or the counterparty. At September 30, 2024, the amount of collateral not provided by the Company due to the existence of these thresholds was $15 million.
The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged.
September 30, 2024
December 31, 2023
Derivatives Subject to Credit- Contingent Provisions
Derivatives Not Subject to Credit- Contingent Provisions
Total
Derivatives Subject to Credit- Contingent Provisions
Derivatives Not Subject to Credit- Contingent Provisions
Total
(In millions)
Estimated fair value of derivatives in a net liability position (1)
$
2,954
$
47
$
3,001
$
2,443
$
4
$
2,447
Estimated fair value of collateral provided:
Fixed maturity securities AFS
$
3,612
$
53
$
3,665
$
3,011
$
6
$
3,017
__________________
(1)After taking into consideration the existence of netting agreements.
Embedded Derivatives
The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
11. Derivatives (continued)
The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:
Balance Sheet Location
September 30, 2024
December 31, 2023
(In millions)
Embedded derivatives within liability host contracts:
Funds withheld and guarantees on reinsurance
Other liabilities
$
(53)
$
(70)
Fixed annuities with equity indexed returns
PABs
172
163
Total
$
119
$
93
12. Fair Value
Considerable judgment is often required in interpreting the market data used to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Recurring Fair Value Measurements
The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
(2)Short-term investments as presented in the tables above differ from the amounts presented on the interim condensed consolidated balance sheets because certain short-term investments are not measured at estimated fair value on a recurring basis.
(3)Derivative assets are presented within other invested assets on the interim condensed consolidated balance sheets and derivative liabilities are presented within other liabilities on the interim condensed consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the interim condensed consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.
(4)Reinsured MRBs are presented within premiums, reinsurance and other receivables on the consolidated balance sheets.
(5)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.
(6)Total assets included in the fair value hierarchy exclude OLPI that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient. The estimated fair value of such investments was $51 million and $52 million at September 30, 2024 and December 31, 2023, respectively.
(7)Embedded derivatives within liability host contracts are presented within PABs and other liabilities on the interim condensed consolidated balance sheets.
The following describes the valuation methodologies used to measure assets and liabilities at fair value.
Investments
Securities, Short-term Investments and Other Investments
When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings, and valuation of these securities does not involve management’s judgment.
When quoted prices in active markets are not available, the determination of estimated fair value of securities is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based, in large part, on management’s judgment or estimation and cannot be supported by reference to market activity. Unobservable inputs are based on management’s assumptions about the inputs market participants would use in pricing such investments.
The estimated fair value of short-term investments and other investments is determined on a basis consistent with the methodologies described herein.
The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy are presented below. The primary valuation approaches are the market approach, which considers recent prices from market transactions involving identical or similar assets or liabilities, and the income approach, which converts expected future amounts (e.g., cash flows) to a single current, discounted amount. The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Fixed maturity securities AFS
U.S. corporate and Foreign corporate securities
Valuation Approaches: Principally the market and income approaches.
Valuation Approaches: Principally the market approach.
Key Inputs:
Key Inputs:
•
quoted prices in markets that are not active
•
illiquidity premium
•
benchmark yields; spreads off benchmark yields; new issuances; issuer ratings
•
delta spread adjustments to reflect specific credit-related issues
•
trades of identical or comparable securities; duration
•
credit spreads
•
privately-placed securities are valued using the additional key inputs:
•
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
•
market yield curve; call provisions
•
independent non-binding broker quotations
•
observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer
•
delta spread adjustments to reflect specific credit-related issues
Foreign government securities, U.S. government and agency securities and Municipals
Valuation Approaches: Principally the market approach.
Valuation Approaches: Principally the market approach.
Key Inputs:
Key Inputs:
•
quoted prices in markets that are not active
•
independent non-binding broker quotations
•
benchmark U.S. Treasury yield or other yields
•
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
•
the spread off the U.S. Treasury yield curve for the identical security
•
credit spreads
•
issuer ratings and issuer spreads; broker-dealer quotations
•
comparable securities that are actively traded
Structured Products
Valuation Approaches: Principally the market and income approaches.
Valuation Approaches: Principally the market and income approaches.
Key Inputs:
Key Inputs:
•
quoted prices in markets that are not active
•
credit spreads
•
spreads for actively traded securities; spreads off benchmark yields
•
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
•
expected prepayment speeds and volumes
•
independent non-binding broker quotations
•
current and forecasted loss severity; ratings; geographic region
•
credit ratings
•
weighted average coupon and weighted average maturity
•
average delinquency rates; DSCR
•
credit ratings
•
issuance-specific information, including, but not limited to:
•
collateral type; structure of the security; vintage of the loans
•
payment terms of the underlying assets
•
payment priority within the tranche; deal performance
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
Instrument
Level 2
Observable Inputs
Level 3
Unobservable Inputs
Equity securities
Valuation Approaches: Principally the market approach.
Valuation Approaches: Principally the market and income approaches.
Key Input:
Key Inputs:
•
quoted prices in markets that are not considered active
•
credit ratings; issuance structures
•
quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
•
independent non-binding broker quotations
Unit-linked and FVO securities, Short-term investments and Other investments
Valuation Approaches: Principally the market and income approaches.
Valuation Approaches: Principally the market and income approaches.
Key Inputs:
Key Inputs:
•
Unit-linked and FVO securities include mutual fund interests without readily determinable fair values given prices are not published publicly. Valuation of these mutual funds is based upon quoted prices or reported NAV provided by the fund managers, which were based on observable inputs.
•
Unit-linked and FVO securities, short-term investments and other investments are of a similar nature and class to the fixed maturity securities AFS and equity securities described above; accordingly, the valuation approaches and unobservable inputs used in their valuation are also similar to those described above. Other investments also include certain REJV and use the valuation approach and key inputs as described for OLPI below.
•
Short-term investments and other investments are of a similar nature and class to the fixed maturity securities AFS and equity securities described above; accordingly, the valuation approaches and observable inputs used in their valuation are also similar to those described above.
Separate account assets and Separate account liabilities (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
Key Input:
•
N/A
•
quoted prices or reported NAV provided by the fund managers
OLPI
•
N/A
Valued giving consideration to the underlying holdings of the partnerships and adjusting, if appropriate.
Key Inputs:
•
liquidity; bid/ask spreads; performance record of the fund manager
•
other relevant variables that may impact the exit value of the particular partnership interest
__________________
(1)Estimated fair value equals carrying value, based on the value of the underlying assets, including mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, OLPI, short-term investments and cash and cash equivalents. The estimated fair value of fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents is determined on a basis consistent with the assets described under “— Securities, Short-term Investments and Other Investments” and “— Derivatives — Freestanding Derivatives.”
Derivatives
The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models.
The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. With respect to certain OTC-bilateral and OTC-cleared derivatives, management may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs may involve significant management judgment or estimation. Unobservable inputs are based on management’s assumptions about the inputs market participants would use in pricing such derivatives.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.
The credit risk of both the counterparty and the Company is considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is, in part, due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.
Freestanding Derivatives
Level 2 Valuation Approaches and Key Inputs:
This level includes all types of derivatives utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivatives with unobservable inputs as described in Level 3.
Level 3 Valuation Approaches and Key Inputs:
These valuation methodologies generally use the same inputs as described in the corresponding sections for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.
Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. Key inputs are as follows:
Instrument
Interest Rate
Foreign Currency Exchange Rate
Credit
Equity Market
Inputs common to Level 2 and Level 3 by instrument type
•
swap yield curves
•
swap yield curves
•
swap yield curves
•
swap yield curves
•
basis curves
•
basis curves
•
credit curves
•
spot equity index levels
•
interest rate volatility (1)
•
currency spot rates
•
recovery rates
•
dividend yield curves
•
cross currency basis curves
•
equity volatility (1)
•
currency volatility (1)
Level 3
•
swap yield curves (2)
•
swap yield curves (2)
•
swap yield curves (2)
•
dividend yield curves (2)
•
basis curves (2)
•
basis curves (2)
•
credit curves (2)
•
equity volatility (1), (2)
•
repurchase rates
•
cross currency basis curves (2)
•
credit spreads
•
correlation between model inputs (1)
•
interest rate volatility (1), (2)
•
currency correlation
•
repurchase rates
•
currency volatility (1)
•
independent non-binding broker quotations
__________________
(1)Option-based only.
(2)Extrapolation beyond the observable limits of the curve(s).
Embedded Derivatives
Embedded derivatives principally include equity-indexed annuity contracts and investment risk within funds withheld related to certain reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
The estimated fair value of the embedded derivatives within funds withheld related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as described in “— Investments — Securities, Short-term Investments and Other Investments.” The estimated fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities on the interim condensed consolidated balance sheets with changes in estimated fair value recorded in net derivative gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.
The estimated fair value of the embedded equity indexed derivatives, based on the present value of future equity returns to the policyholder using actuarial and present value assumptions including expectations concerning policyholder behavior, is calculated by the Company’s actuarial department. The calculation is based on in-force business and uses standard capital market techniques, such as Black-Scholes, to calculate the value of the portion of the embedded derivative for which the terms are set. The portion of the embedded derivative covering the period beyond where terms are set is calculated as the present value of amounts expected to be spent to provide equity indexed returns in those periods. The valuation of these embedded derivatives also includes the establishment of a risk margin, as well as changes in nonperformance risk.
MRBs
See Note 6 for information on the Company’s valuation approaches and key inputs for MRBs.
Transfers between Levels
Overall, transfers between levels occur when there are changes in the observability of inputs and market activity.
Transfers into or out of Level 3:
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:
September 30, 2024
December 31, 2023
Impact of Increase in Input on Estimated Fair Value (2)
Valuation Techniques
Significant Unobservable Inputs
Range
Weighted Average (1)
Range
Weighted Average (1)
Fixed maturity securities AFS (3)
U.S. corporate and foreign corporate
•
Matrix pricing
•
Offered quotes (4)
34
-
133
94
4
-
131
93
Increase
•
Market pricing
•
Quoted prices (4)
13
-
116
97
—
-
110
92
Increase
•
Consensus pricing
•
Offered quotes (4)
92
-
100
96
86
-
102
96
Increase
RMBS
•
Market pricing
•
Quoted prices (4)
—
-
121
95
—
-
112
93
Increase (5)
ABS & CLO
•
Market pricing
•
Quoted prices (4)
3
-
106
97
3
-
101
93
Increase (5)
Derivatives
Interest rate
•
Present value techniques
•
Swap yield (6)
—
-
—
—
367
-
399
385
Increase (7)
Foreign currency exchange rate
•
Present value techniques
•
Swap yield (6)
111
-
168
166
185
-
399
193
Increase (7)
Credit
•
Consensus pricing
•
Offered quotes (8)
MRBs and Reinsured MRBs
Direct, assumed and ceded guaranteed minimum benefits
•
Option pricing techniques
•
Mortality rates:
Ages 0 - 40
0%
-
0.15%
0.05%
0%
-
0.15%
0.05%
(9)
Ages 41 - 60
0.04%
-
0.79%
0.22%
0.04%
-
0.75%
0.22%
(9)
Ages 61 - 115
0%
-
100%
1.14%
0%
-
100%
1.23%
(9)
•
Lapse rates:
Durations 1 - 10
0.14%
-
20.10%
12.86%
0.39%
-
20.10%
8.72%
Decrease (10)
Durations 11 - 20
0.39%
-
15%
6.05%
0.39%
-
15%
4.34%
Decrease (10)
Durations 21 - 116
0.39%
-
15%
8.20%
0.10%
-
15%
4.59%
Decrease (10)
•
Utilization rates
0.20%
-
22%
0.79%
0.20%
-
22%
0.44%
Increase (11)
•
Withdrawal rates
0%
-
20%
4.77%
0%
-
20%
4.47%
(12)
•
Long-term equity volatilities
14.23%
-
22.27%
18.77%
8.05%
-
21.85%
18.55%
Increase (13)
•
Nonperformance risk spread
0.11%
-
1.49%
0.64%
0.38%
-
1.59%
0.73%
Decrease (14)
__________________
(1)The weighted average for fixed maturity securities AFS and derivatives is determined based on the estimated fair value of the securities and derivatives. The weighted average for MRBs is determined based on a combination of account values and experience data.
(2)The impact of a decrease in input would have resulted in the opposite impact on estimated fair value. For MRBs, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions.
(3)Significant increases (decreases) in expected default rates in isolation would have resulted in substantially lower (higher) valuations.
(4)Range and weighted average are presented in accordance with the market convention for fixed maturity securities AFS of dollars per hundred dollars of par.
(5)Changes in the assumptions used for the probability of default would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.
(6)Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curves are utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
(7)Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.
(8)At September 30, 2024 and December 31, 2023, independent non-binding broker quotations were used in the determination of 0% and less than 1%, respectively, of the total net derivative estimated fair value.
(9)Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the MRBs. For contracts that contain only a GMDB, any increase (decrease) in mortality rates result in an increase (decrease) in the estimated fair value of MRBs. Generally, for contracts that contain both a GMDB and a living benefit (e.g., GMIB, GMWB, GMAB), any increase (decrease) in mortality rates result in a decrease (increase) in the estimated fair value of MRBs.
(10)Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the MRBs.
(11)The utilization rate assumption estimates the percentage of contractholders with GMIBs or a lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the MRBs.
(12)The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the MRBs. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.
(13)Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the MRBs.
(14)Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the MRBs.
All other classes of securities classified within Level 3, including those within Unit-linked and FVO securities, Other investments, Separate account assets, and Embedded derivatives within funds withheld related to certain ceded reinsurance, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. Generally, all other classes of assets and liabilities classified within Level 3 that are not included above use the same valuation techniques and significant unobservable inputs as previously described for Level 3. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table. The valuation techniques and significant unobservable inputs used in the fair value measurement for the more significant assets measured at estimated fair value on a nonrecurring basis and determined using significant unobservable inputs (Level 3) are summarized in “— Nonrecurring Fair Value Measurements.”
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
The following tables summarize the change of assets (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3), excluding MRBs (see Note 6):
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fixed Maturity Securities AFS
Corporate (6)
Foreign Government
Structured Products
Municipals
Equity
Securities
Unit-linked and FVO Securities
(In millions)
Three Months Ended September 30, 2024
Balance, beginning of period
$
29,240
$
40
$
5,867
$
1
$
262
$
1,096
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)
(10)
(8)
6
—
(15)
56
Total realized/unrealized gains (losses) included in AOCI
1,169
7
132
—
—
—
Purchases (3)
2,080
2
1,080
—
9
135
Sales (3)
(1,255)
(1)
(539)
(1)
(14)
(111)
Issuances (3)
—
—
—
—
—
—
Settlements (3)
—
—
—
—
—
—
Transfers into Level 3 (4)
94
1
31
—
—
—
Transfers out of Level 3 (4)
(1,111)
—
(1,069)
—
—
—
Balance, end of period
$
30,207
$
41
$
5,508
$
—
$
242
$
1,176
Three Months Ended September 30, 2023
Balance, beginning of period
$
25,968
$
60
$
4,554
$
7
$
250
$
1,057
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)
3
4
(8)
—
(5)
(31)
Total realized/unrealized gains (losses) included in AOCI
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Short-term Investments
Other Investments
Net Derivatives (7)
Net Embedded Derivatives (8)
Separate Accounts (9)
(In millions)
Nine Months Ended September 30, 2024
Balance, beginning of period
$
27
$
975
$
(143)
$
(93)
$
1,147
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)
1
21
5
(21)
(46)
Total realized/unrealized gains (losses) included in AOCI
(1)
—
(28)
—
—
Purchases (3)
5
54
—
—
15
Sales (3)
(26)
(186)
—
—
(92)
Issuances (3)
—
—
—
—
—
Settlements (3)
—
—
201
(5)
—
Transfers into Level 3 (4)
—
231
—
—
2
Transfers out of Level 3 (4)
—
—
(11)
—
(7)
Balance, end of period
$
6
$
1,095
$
24
$
(119)
$
1,019
Nine Months Ended September 30, 2023
Balance, beginning of period
$
57
$
926
$
(170)
$
(17)
$
1,210
Total realized/unrealized gains (losses) included in net income (loss) (1), (2)
—
19
(21)
51
(62)
Total realized/unrealized gains (losses) included in AOCI
1
—
(59)
—
—
Purchases (3)
25
25
—
—
181
Sales (3)
(48)
—
—
—
(128)
Issuances (3)
—
—
—
—
—
Settlements (3)
—
—
121
(39)
1
Transfers into Level 3 (4)
—
—
—
—
14
Transfers out of Level 3 (4)
(10)
—
(160)
—
(9)
Balance, end of period
$
25
$
970
$
(289)
$
(5)
$
1,207
Changes in unrealized gains (losses) included in
net income (loss) for the instruments still held
at September 30, 2024 (5)
$
1
$
19
$
2
$
(21)
$
—
Changes in unrealized gains (losses) included in
net income (loss) for the instruments still held
at September 30, 2023 (5)
$
—
$
20
$
(28)
$
51
$
—
Changes in unrealized gains (losses) included in
AOCI for the instruments still held
at September 30, 2024 (5)
$
—
$
—
$
—
$
—
$
—
Changes in unrealized gains (losses) included in
AOCI for the instruments still held
at September 30, 2023 (5)
$
—
$
—
$
(85)
$
—
$
—
__________________
(1)Amortization of premium/accretion of discount is included within net investment income. Impairments and changes in ACL charged to net income (loss) on certain securities are included in net investment gains (losses), while changes in estimated fair value of Unit-linked and FVO securities are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(2)Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.
(3)Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.
(4)Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
(5)Changes in unrealized gains (losses) included in net income (loss) and included in AOCI relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).
(6)Comprised of U.S. and foreign corporate securities.
(7)Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.
(8)Embedded derivative assets and liabilities are presented net for purposes of the rollforward.
(9)Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net income (loss). Separate account assets and liabilities are presented net for the purposes of the rollforward.
Nonrecurring Fair Value Measurements
The following table presents information for assets measured at estimated fair value on a nonrecurring basis during the periods and still held at the reporting dates (for example, when there is evidence of impairment), using significant unobservable inputs (Level 3).
September 30, 2024
December 31, 2023
(In millions)
Carrying value after measurement:
Mortgage loans (1)
$
1,087
$
474
Other invested assets (2)
$
63
$
63
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Realized gains (losses) net:
Mortgage loans (1)
$
(100)
$
(49)
$
(253)
$
(190)
__________________
(1)Estimated fair values of impaired mortgage loans are based on the underlying collateral or discounted cash flows. See Note 10.
(2)The Company recognized an impairment loss in connection with the pending disposition of MetLife Malaysia. See Note 3.
Fair Value of Financial Instruments Carried at Other Than Fair Value
The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and therefore are not included in the three-level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The Company believes that due to the short-term nature of these excluded assets, which are primarily classified in Level 2, the estimated fair value approximates carrying value. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
12. Fair Value (continued)
The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
13. Long-term Debt
Senior Notes
In June and September 2024, MetLife, Inc. issued $500 million and $250 million, respectively, of senior notes due December 2034, which form a single series and bear interest at a fixed rate of 5.300%, payable semi-annually. In connection with the June and September issuances, MetLife, Inc. incurred $4 million and $2 million, respectively, of related costs, which, in each case, will be amortized over the term of the applicable senior notes.
In April 2024, MetLife, Inc. redeemed for $438 million in cash all of its £350 million aggregate principal amount outstanding 5.375% senior notes due December 2024.
In March 2024, MetLife, Inc. issued the following fixed rate senior notes totaling $752 million, interest on which is payable semi-annually:
•¥7.1 billion due March 2029 which bear interest annually at 1.009%;
•¥23.1 billion due March 2031 which bear interest annually at 1.415%;
•¥16.7 billion due March 2034 which bear interest annually at 1.670%;
•¥11.2 billion due March 2039 which bear interest annually at 1.953%;
•¥15.5 billion due March 2044 which bear interest annually at 2.195%;
•¥23.5 billion due March 2054 which bear interest annually at 2.390%; and
•¥15.2 billion due March 2059 which bear interest annually at 2.448%.
In connection with the March 2024 issuances, MetLife, Inc. incurred $6 million of related costs which are amortized over the applicable term of each series of the senior notes.
14. Equity
Preferred Stock
Preferred stock authorized, issued and outstanding was as follows at both September 30, 2024 and December 31, 2023:
Series
Shares Authorized
Shares Issued and Outstanding
Floating Rate Non-Cumulative Preferred Stock, Series A
27,600,000
24,000,000
5.875% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series D
500,000
500,000
5.625% Non-Cumulative Preferred Stock, Series E
32,200
32,200
4.75% Non-Cumulative Preferred Stock, Series F
40,000
40,000
3.85% Fixed Rate Reset Non-Cumulative Preferred Stock, Series G
1,000,000
1,000,000
Series A Junior Participating Preferred Stock
10,000,000
—
Not designated
160,827,800
—
Total
200,000,000
25,572,200
The per share and aggregate dividends declared for MetLife, Inc.’s preferred stock were as follows:
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
14. Equity (continued)
Common Stock
MetLife, Inc. announced that its Board of Directors authorized common stock repurchases as follows:
Announcement Date
Authorization Amount
Authorization Remaining at
September 30, 2024 (1)
(In millions)
May 1, 2024
$
3,000
$
2,301
May 25, 2023
$
1,000
$
—
May 3, 2023
$
3,000
$
—
May 4, 2022
$
3,000
$
—
__________________
(1)The Inflation Reduction Act, signed into law on August 16, 2022, imposes a one percent excise tax, net of any allowable offsets, on certain corporate stock buybacks made after December 31, 2022. The authorization remaining at September 30, 2024 does not reflect the applicable excise tax payable.
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. Common stock repurchases are subject to the discretion of MetLife, Inc.’s Board of Directors and will depend upon the Company’s capital position, liquidity, financial strength and credit ratings, general market conditions, the market price of MetLife, Inc.’s common stock compared to management’s assessment of the stock’s underlying value, applicable regulatory approvals, and other legal and accounting factors.
For the nine months ended September 30, 2024 and 2023, MetLife, Inc. repurchased 39,373,496 shares and 36,602,858 shares of its common stock, respectively, through open market purchases for $2.8 billion and $2.2 billion, respectively, excluding applicable excise tax. The excise tax is reflected in treasury stock as part of the cost basis of the common stock repurchased.
Stock-Based Compensation Plans
Performance Shares and Performance Units
Final Performance Shares are paid in shares of MetLife, Inc.’s common stock. Final Performance Units are payable in cash equal to the closing price of MetLife, Inc.’s common stock on a date following the last day of the three-year performance period. The performance factor for the January 1, 2021 – December 31, 2023 performance period was 147.5%, which was determined within a possible range from 0% to 175%. This factor has been applied to the 1,048,303 Performance Shares and 118,848 Performance Units associated with that performance period that vested on December 31, 2023. As a result, in the first quarter of 2024, MetLife, Inc. issued 1,546,247 shares of its common stock (less withholding for taxes and other items, as applicable), excluding shares that payees choose to defer, and MetLife, Inc. or its affiliates paid the cash value of 175,301 Performance Units (less withholding for taxes and other items, as applicable).
Dividend Restrictions
Insurance Operations
For the nine months ended September 30, 2024, American Life Insurance Company paid a dividend of $1.1 billion to MetLife, Inc., for which regulatory approval was obtained as required.
See Note 19 of the Notes to Consolidated Financial Statements included in the 2023 Annual Report for additional information on dividend restrictions.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
15. Other Revenues and Other Expenses
Other Revenues
Information on other revenues, which primarily includes fees related to service contracts from customers, was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Vision fee for service arrangements
$
126
$
144
$
402
$
446
Prepaid legal plans
144
128
437
389
Fee-based investment management
99
103
295
306
Administrative services-only contracts
69
65
205
193
Recordkeeping and administrative services (1)
38
39
113
114
Other revenue from service contracts from customers
78
75
237
214
Total revenues from service contracts from customers
554
554
1,689
1,662
Other
94
52
271
204
Total other revenues
$
648
$
606
$
1,960
$
1,866
__________________
(1)Related to products and businesses no longer actively marketed by the Company.
Receivables related to revenues from service contracts from customers were $245 million and $243 million at September 30, 2024 and December 31, 2023, respectively.
Other Expenses
Information on other expenses was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Employee-related costs (1)
$
892
$
914
$
2,742
$
2,743
Third-party staffing costs
371
362
1,082
1,066
General and administrative expenses
162
209
463
539
Pension, postretirement and postemployment benefit costs
65
59
195
177
Premium taxes, other taxes, and licenses & fees
183
162
530
507
Commissions and other variable expenses
1,515
1,483
4,480
4,347
Capitalization of DAC
(691)
(742)
(2,114)
(2,189)
Amortization of DAC and VOBA
516
499
1,523
1,448
Amortization of negative VOBA
(7)
(7)
(19)
(20)
Interest expense on debt
257
265
778
776
Total other expenses
$
3,263
$
3,204
$
9,660
$
9,394
__________________
(1)Includes ($58) million and ($135) million for the three months and nine months ended September 30, 2024, respectively, and $12 million and ($60) million for the three months and nine months ended September 30, 2023, respectively, for the net change in cash surrender value of investments in certain life insurance policies, net of premiums paid.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
16. Employee Benefit Plans
Pension and Other Postretirement Benefit Plans
Certain subsidiaries of MetLife, Inc. sponsor a U.S. qualified and various U.S. and non-U.S. nonqualified defined benefit pension plans covering employees who meet specified eligibility requirements. These subsidiaries also provide certain postemployment benefits and certain postretirement medical and life insurance benefits for U.S. and non-U.S. retired employees.
The components of net periodic benefit costs, reported in other expenses, were as follows:
Three Months Ended September 30,
2024
2023
Pension Benefits
Other Postretirement Benefits
Pension Benefits
Other Postretirement Benefits
(In millions)
Service costs
$
41
$
—
$
38
$
1
Interest costs
114
10
118
11
Expected return on plan assets
(115)
(14)
(119)
(13)
Amortization of net actuarial (gains) losses
42
(7)
40
(7)
Amortization of prior service costs (credit)
(3)
—
(3)
—
Net periodic benefit costs (credit)
$
79
$
(11)
$
74
$
(8)
Nine Months Ended September 30,
2024
2023
Pension Benefits
Other Postretirement Benefits
Pension Benefits
Other Postretirement Benefits
(In millions)
Service costs
$
122
$
2
$
113
$
2
Interest costs
342
30
353
32
Expected return on plan assets
(345)
(42)
(360)
(41)
Amortization of net actuarial (gains) losses
125
(21)
118
(22)
Amortization of prior service costs (credit)
(9)
—
(9)
—
Net periodic benefit costs (credit)
$
235
$
(31)
$
215
$
(29)
17. Income Tax
For the three months and nine months ended September 30, 2024, the effective tax rate on income (loss) before provision for income tax was 33% and 25%, respectively. The Company’s effective tax rate for the three months ended September 30, 2024 differed from the U.S. statutory rate of 21% primarily due to tax charges from foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates, partially offset by tax benefits from (i) non-taxable investment income and (ii) low income housing and other tax credits, partially offset by the impact of tax equity investments now accounted for under the proportional amortization method. The Company’s effective tax rate for the nine months ended September 30, 2024 differed from the U.S. statutory rate of 21% primarily due to tax charges from foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates, partially offset by tax benefits from (i) non-taxable investment income, (ii) low income housing and other tax credits, partially offset by the impact of tax equity investments now accounted for under the proportional amortization method, and (iii) the corporate tax deduction for stock compensation.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
17. Income Tax (continued)
For the three months and nine months ended September 30, 2023, the effective tax rate on income (loss) before provision for income tax was 7% and 19%, respectively. The Company’s effective tax rate for the three months ended September 30, 2023 differed from the U.S. statutory rate of 21% primarily due to tax benefits from (i) the reversal of previously non-deductible losses, (ii) low income housing and other tax credits and (iii) foreign earnings taxed at lower statutory rates than the U.S. statutory rate and foreign losses taxed at higher statutory rates, partially offset by the non-taxable investment loss related to the pending disposition of MetLife Malaysia. The Company’s effective tax rate for the nine months ended September 30, 2023 differed from the U.S. statutory rate of 21% primarily due to tax benefits from (i) low income housing and other tax credits, and (ii) non-taxable investment income, largely offset by tax charges from (i) foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates and (ii) the non-taxable investment loss related to the pending disposition of MetLife Malaysia.
18. Earnings Per Common Share
The following table presents the weighted average shares, basic earnings per common share and diluted earnings per common share:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions, except per share data)
Weighted Average Shares:
Weighted average common stock outstanding - basic
699.3
751.4
710.9
764.1
Incremental common shares from assumed exercise or issuance of stock-based awards
4.4
4.1
4.6
4.6
Weighted average common stock outstanding - diluted
703.7
755.5
715.5
768.7
Net Income (Loss):
Net income (loss)
$
1,341
$
495
$
3,169
$
988
Less: Net income (loss) attributable to noncontrolling interests
(1)
6
14
17
Less: Preferred stock dividends
67
67
168
165
Net income (loss) available to MetLife, Inc.’s common shareholders
$
1,275
$
422
$
2,987
$
806
Basic
$
1.82
$
0.56
$
4.20
$
1.05
Diluted
$
1.81
$
0.56
$
4.17
$
1.05
19. Contingencies, Commitments and Guarantees
Contingencies
Litigation
The Company is a defendant in a large number of litigation matters. Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed below and those otherwise provided for in the Company’s interim condensed consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, mortgage lending bank, employer, investor, investment advisor, broker-dealer, and taxpayer.
The Company also receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority, as well as from local and national regulators and government authorities in jurisdictions outside the United States where the Company conducts business. The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. The Company cooperates in these inquiries.
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
19. Contingencies, Commitments and Guarantees (continued)
It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. In certain circumstances where liabilities have been established, there may be coverage under one or more corporate insurance policies, pursuant to which there may be an insurance recovery. Insurance recoveries are recognized as gains when any contingencies relating to the insurance claim have been resolved, which is the earlier of when the gains are realized or realizable. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at September 30, 2024. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position. Given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.
Matters as to Which an Estimate Can Be Made
For some matters, the Company is able to estimate a reasonably possible range of loss. For matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of September 30,2024, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $125 million.
Matters as to Which an Estimate Cannot Be Made
For other matters, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
Asbestos-Related Claims
MLIC is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. MLIC has never engaged in the business of manufacturing or selling asbestos-containing products, nor has MLIC issued liability or workers’ compensation insurance to companies in the business of manufacturing or selling asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of MLIC’s employees during the period from the 1920s through approximately the 1950s and allege that MLIC learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. MLIC believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against MLIC.
MLIC’s defenses include that: (i) MLIC owed no duty to the plaintiffs; (ii) plaintiffs did not rely on any actions of MLIC; (iii) MLIC’s conduct was not the cause of the plaintiffs’ injuries; and (iv) plaintiffs’ exposure occurred after the dangers of asbestos were known. During the course of the litigation, certain trial courts have granted motions dismissing claims against MLIC, while other trial courts have denied MLIC’s motions. There can be no assurance that MLIC will receive favorable decisions on motions in the future. While most cases brought to date have settled, MLIC intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials.
As reported in the 2023 Annual Report, MLIC received approximately 2,565 asbestos-related claims in 2023. For the nine months ended September 30, 2024 and 2023, MLIC received approximately 2,251 and 1,924 new asbestos-related claims, respectively. See Note 24 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for historical information concerning asbestos claims and MLIC’s update in its recorded liability at December 31, 2023. The number of asbestos cases that may be brought, the aggregate amount of any liability that MLIC
Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)
19. Contingencies, Commitments and Guarantees (continued)
may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.
The ability of MLIC to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the willingness of courts to allow plaintiffs to pursue claims against MLIC when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.
The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary, but management does not believe any such charges are likely to have a material effect on the Company’s financial position.
The Company believes adequate provision has been made in its interim condensed consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. MLIC’s recorded asbestos liability covers pending claims, claims not yet asserted, and legal defense costs and is based on estimates and includes significant assumptions underlying its analysis.
MLIC reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. Based upon its regular reevaluation of its exposure from asbestos litigation, MLIC has updated its liability analysis for asbestos-related claims through September 30, 2024.
Total Asset Recovery Services, LLC. v. MetLife, Inc., et al. (Supreme Court of the State of New York, County of New York, filed December 27, 2017)
Total Asset Recovery Services (the “Relator”) brought an action under the qui tam provision of the New York False Claims Act (the “Act”) on behalf of itself and the State of New York. The Relator originally filed this action under seal in 2010, and the complaint was unsealed on December 19, 2017. The Relator alleges that MetLife, Inc., MLIC, and several other insurance companies violated the Act by filing false unclaimed property reports with the State of New York from 1986 to 2017, to avoid having to escheat the proceeds of more than 25,000 life insurance policies, including policies for which the defendants escheated funds as part of their demutualizations in the late 1990s. The Relator seeks treble damages and other relief. In December of 2020, the Appellate Division of the New York State Supreme Court, First Department, reversed the court’s order granting MetLife, Inc. and MLIC’s motion to dismiss and remanded the case. The Relator filed a Fourth Amended Complaint in January of 2023. On October 13, 2024, the trial court denied the defendants’ motion to dismiss the complaint. The Company intends to defend the action vigorously.
Matters Related to Group Annuity Benefits
In 2018, the Company announced that it identified a material weakness in its internal control over financial reporting related to the practices and procedures for estimating reserves for certain group annuity benefits. Several regulators have made inquiries into the issue, and it is possible that other jurisdictions may pursue similar investigations or inquiries. The Company could be exposed to lawsuits and additional legal actions relating to the issue. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or awarded by courts or regulatory authorities under applicable escheat, tax, securities, Employee Retirement Income Security Act of 1974, or other laws or regulations. The Company could incur significant costs in connection with these actions.
Commitments
Mortgage Loan Commitments
The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $2.4 billion and $4.0 billion at September 30, 2024 and December 31, 2023, respectively.
Commitments to Fund Partnership Investments, Bank Credit Facilities and Private Corporate Bond Investments
The Company commits to fund partnership investments and to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $8.3 billionand $9.2 billion at September 30, 2024 and December 31, 2023, respectively.
Guarantees
In the normal course of its business, the Company has provided certain indemnities and guarantees to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $329 million, with a cumulative maximum of $638 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities or guarantees.
In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.
The Company also has minimum fund yield requirements on certain pension funds. Since these guarantees are not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future.
The Company’s recorded liabilities were $19 million at both September 30, 2024 and December 31, 2023, for indemnities and guarantees.
Forward-Looking Statements and Other Financial Information
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. This discussion should be read in conjunction with MetLife, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, “Quantitative and Qualitative Disclosures About Market Risk” and the Company’s interim condensed 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. See “Note Regarding Forward-Looking Statements” for cautionary language regarding forward-looking statements.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes references to our performance measures, adjusted earnings and adjusted earnings available to common shareholders, that are not based on accounting principles generally accepted in the United States of America (“GAAP”). See “— Non-GAAP and Other Financial Disclosures” for definitions and a discussion of these and other financial measures, and “— Results of Operations” and “— Investments” for reconciliations of historical non-GAAP financial measures to the most directly comparable GAAP measures.
Industry Trends
We continue to be impacted by the changing 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 financial markets and the economy generally due to our market presence in numerous countries, our large investment portfolio and the sensitivity of our insurance liabilities and derivatives to changing market factors.
We are closely monitoring political and economic conditions that might contribute to global market volatility and impact our business operations, investment portfolio and derivatives, such as global inflation, supply chain disruptions, acts of war, and banking sector volatility. We are also monitoring the imposition of tariffs, sanctions or other barriers to international trade, changes to international trade agreements, and their potential impacts on our business, results of operations and financial condition. See “— Investments — Current Environment,” as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Impact of Market Interest Rates — Effects of Inflation” in the 2023 Annual Report.
Governments and central banks around the world use fiscal and monetary policies to address uncertain economic conditions. In the United States (“U.S.”), the Federal Open Market Committee (“FOMC”) took various actions in 2023 to promote economic stability and combat inflation, including raising interest rates. Rates remained steady through most of 2024. However, in September 2024, the FOMC lowered interest rates, and market forecasts suggest it will continue to reduce interest rates through the remainder of 2024 and 2025 reflecting expectations for continued lower inflation. Similarly, the European Central Bank and Bank of England have recently lowered interest rates, and market forecasts suggest the banks will continue reductions through the remainder of 2024 and 2025. The Bank of Japan raised interest rates in July 2024, but has since then mostly kept its policy settings on hold, reflecting a more cautious view on growth and inflation.
Impact of Market Interest Rates
Market interest rates are a key driver of our results. Increases and decreases in such rates, as well as extended periods of stagnation, may impact our business and investments in various ways. For a discussion of the potential impact of low and rising interest rates, and inflation, as well as management actions taken in response to the changing U.S. interest rate environment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Impact of Market Interest Rates” and “Risk Factors — Economic Environment and Capital Markets Risks” included in the 2023 Annual Report.
See “Business — Competition” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Competitive Pressures” in the 2023 Annual Report for information on our competitive position.
Regulatory Developments
The following discussion on regulatory developments should be read in conjunction with “Business — Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Industry Trends — Regulatory Developments” included in the 2023 Annual Report, as amended or supplemented here.
State Insurance Regulation
Surplus and Capital
Investments
The National Association of Insurance Commissioners (“NAIC”) is focused on enhancing regulatory oversight of insurers’ investments in complex assets, such as structured securities. In connection with evaluating the risks of investing in leveraged loans and collateralized loan obligations (“CLOs”), the NAIC adopted an amendment to the Purposes and Procedures Manual in 2023. Under the amendment, the NAIC Structured Securities Group (“SSG”) will assign risk weights to CLOs based on its own modeling, as opposed to credit ratings. The SSG will model CLO investments and evaluate tranche level losses across all debt tranches under a series of calibrated and weighted collateral stress scenarios to assign NAIC designations that minimize risk-based capital (“RBC”) arbitrage. The NAIC’s goal is to ensure that the aggregate RBC factor for owning all tranches of a CLO is similar to that required for owning all of the underlying loan collateral. In August 2024, the NAIC adopted an amendment to the Purposes and Procedures Manual, in which insurers are now required to begin reporting the financially modeled NAIC designations for CLOs with their year-end 2025 financial statement filings. The NAIC is collaborating with interested parties to refine the process for modeling CLO investments.
Innovation and Technology
The NAIC and state insurance regulators have been focused on addressing unfair discrimination in the use of consumer data and technology, and some states have passed laws targeting unfair discrimination practices. In July 2024, the New York State Department of Financial Services released its final circular letter focused on how insurers should develop and manage their use of external consumer data and artificial intelligence (“AI”) systems in underwriting and pricing so as not to harm consumers.
The European Union’s Artificial Intelligence Act (“EU AI Act”) has been enacted and entered into force in August 2024. Most of the provisions of the EU AI Act will apply starting August 2026, however certain key provisions will apply earlier, including the EU AI Act’s prohibition of certain “unacceptable” AI practices. The EU AI Act seeks to ensure AI systems are safe while boosting innovation and ensuring fundamental rights are not infringed by the technology. We continue to monitor the developments of the EU AI Act and other governmental initiatives around the world, particularly in jurisdictions where we operate.
Standards of Conduct, ERISA, Fiduciary Considerations, and Other Pension and Retirement Regulation
In 2023, the U.S. Department of Labor (the “DOL”) proposed a regulation to change the definition of “fiduciary” for purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”) and parallel provisions of the Internal Revenue Code of 1986, as amended (the “Code”), when a financial professional, including an insurance producer, provides investment advice, and to amend various existing prohibited transaction exemptions (“PTEs”) that financial professionals rely on when making recommendations. On April 23, 2024, the DOL finalized and published this new definition of “fiduciary” for purposes of ERISA and parallel provisions of the Code and finalized and published amendments to these PTEs. Shortly thereafter, these changes were challenged in court, including by a coalition of insurance industry trade associations that filed a motion for a preliminary injunction and stay of the amendments. In July 2024, two federal district courts entered separate stays of the effective date of the new regulation regarding the definition of “fiduciary” and the amendments to the PTEs, pending further orders of the courts. We are evaluating the potential impact of these developments on our business, particularly as it pertains to the sale of insurance, annuity and welfare benefit products to retirement investors.
The U.S. Securities and Exchange Commission (“SEC”) is also continuing its focus on climate, and environmental, social and governance (“ESG”) risks and opportunities and has published its rulemaking list which contains certain ESG-related rulemakings that the SEC is considering. In March 2024, the SEC adopted final rules requiring registrants to provide additional climate-related information in their registration statements and annual reports, including in their financial statements. The final rules set forth requirements for disclosure of material climate-related risks, mitigation activities, targets and goals, and governance. The rules also require disclosure of certain greenhouse gas emissions metrics and attestation of emissions disclosures. In addition, the final rules require disclosure of information relating to the financial statement effects of severe weather events and other natural conditions. The rules include a phased-in compliance period beginning with the 2025 fiscal year for large accelerated reporting companies, including MetLife, Inc. Multiple parties initiated litigation challenging the final rules, and in April 2024, the SEC voluntarily stayed the final rules pending completion of judicial review. In 2022, the SEC also proposed rules requiring registered investment companies, business development companies, and registered and certain unregistered investment advisers to disclose in their fund prospectuses, annual reports and Form ADV information about how funds and advisers incorporate ESG factors into their investment strategies.
Summary of Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the interim condensed consolidated financial statements. The most critical estimates include those used in determining:
(i)future policy benefit liabilities, market risk benefits (“MRBs”) and the accounting for reinsurance;
(ii)estimated fair values of investments in the absence of quoted market values;
(iii)investment allowance for credit loss (“ACL”) and impairments;
(iv)estimated fair values of freestanding derivatives;
(v)measurement of goodwill and related impairment;
(vi)measurement of employee benefit plan liabilities;
(vii)measurement of income taxes and the valuation of deferred tax assets; and
(viii)liabilities for litigation and regulatory matters.
In 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 the aforementioned critical accounting estimates. In applying these policies and estimates, management makes subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our business and operations. Actual results could differ from these estimates.
The Company’s critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.
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, an impairment charge would be recognized for the amount by which the carrying value exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, the Company will consider income tax effects from any tax-deductible goodwill on the carrying value of the reporting unit when measuring the goodwill impairment loss, if applicable. The key inputs, judgments and assumptions necessary in determining estimated fair value of the reporting units include projected adjusted earnings, current book value, 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 renewed business, as well as margins on such business, interest rate levels, credit spreads, equity market levels, and the discount rate that we believe is appropriate for the respective reporting unit.
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 reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based may differ from actual future results. The estimated fair value of the reporting units tested can be impacted by unexpected changes in the legislative, regulatory and macroeconomic environment. 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.
In the third quarter of 2024, the Company performed its annual goodwill impairment tests on all reporting units using both qualitative and quantitative assessments. The quantitative assessment utilized the market multiple or embedded value approaches, and, when appropriate, was supplemented with a discounted cash flow valuation based on best available data as of June 30, 2024. The Company concluded that the estimated fair values of all such reporting units were substantially in excess of their carrying values and, therefore, goodwill was not impaired.
Acquisitions and Dispositions
Pending Disposition of MetLife Malaysia
For information regarding the Company’s pending disposition of its ownership interests in AmMetLife Insurance Berhad (Malaysia) and AmMetLife Takaful Berhad (Malaysia) (collectively, “MetLife Malaysia”), each an operating joint venture accounted for under the equity method, see Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements.
MetLife is one of the world’s leading financial services companies, providing insurance, annuities, employee benefits and asset management. In the fourth quarter of 2023, MetLife reorganized from five segments into the following six segments to reflect changes in management’s responsibilities: Group Benefits; Retirement and Income Solutions (“RIS”); Asia; Latin America; Europe, the Middle East and Africa (“EMEA”); and MetLife Holdings. The Group Benefits and RIS businesses were previously reported as the U.S. segment. These changes were applied retrospectively and did not have an impact on prior period total consolidated net income (loss) or adjusted earnings. In addition, the Company continues to report certain of its results of operations in Corporate & Other. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other.
Key Financial Highlights
•Net income available to MetLife, Inc.’s common shareholders of $1.3 billion and $3.0 billion for the three months and nine months ended September 30, 2024, respectively, compared to $422 million and $806 million for the three months and nine months ended September 30, 2023, respectively.
•Adjusted earnings available to common shareholders of $1.4 billion and $4.3 billion for the three months and nine months ended September 30, 2024, respectively, compared to $1.5 billion and $4.2 billion for the three months and nine months ended September 30, 2023, respectively.
108
Consolidated Results
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Revenues
Premiums
$
10,647
$
11,230
$
32,328
$
32,497
Universal life and investment-type product policy fees
1,228
1,334
3,757
3,911
Net investment income
5,227
4,825
15,868
14,542
Other revenues
648
606
1,960
1,866
Net investment gains (losses)
(77)
(927)
(873)
(2,650)
Net derivative gains (losses)
767
(1,202)
(720)
(2,289)
Total revenues
18,440
15,866
52,320
47,877
Expenses
Policyholder benefits and claims and policyholder dividends
Interest credited to policyholder account balances
2,037
1,658
6,327
5,455
Amortization of deferred policy acquisition costs and value of business acquired
516
499
1,523
1,448
Amortization of negative value of business acquired
(7)
(7)
(19)
(20)
Interest expense on debt
257
265
778
776
Other expenses, net of capitalization of deferred policy acquisition costs
2,497
2,447
7,378
7,190
Total expenses
16,446
15,332
48,079
46,656
Income (loss) before provision for income tax
1,994
534
4,241
1,221
Provision for income tax expense (benefit)
653
39
1,072
233
Net income (loss)
1,341
495
3,169
988
Less: Net income (loss) attributable to noncontrolling interests
(1)
6
14
17
Net income (loss) attributable to MetLife, Inc.
1,342
489
3,155
971
Less: Preferred stock dividends
67
67
168
165
Net income (loss) available to MetLife, Inc.’s common shareholders
$
1,275
$
422
$
2,987
$
806
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Net income (loss) available to MetLife, Inc.’s common shareholders- Increased $853 million primarily due to the following:
Net Investment Gains (Losses)(1)- Favorable change of $850 million ($672 million, net of income tax):
•Impairment losses in the prior period for investments disposed of in connection with a reinsurance transaction that closed in November 2023 and the pending disposition of MetLife Malaysia
•Gains on foreign currency transactions in the current period
•Lower losses on investments sold or disposed
Partially offset by:
•Impairment losses on mortgage loans in the current period
Net Derivative Gains (Losses)(2)- Favorable change of $2.0 billion ($1.6 billion, net of income tax)(3):
•Long-term interest rates decreased in the current period compared to increased in the prior period - favorable impact to the estimated fair value of receiver swaps and swaptions
109
•The U.S. dollar weakened against the Japanese yen in the current period compared to strengthened in the prior period - favorable impact to the estimated fair value of sell-U.S. dollar currency forwards
Partially offset by:
•Key equity indexes increased in the current period compared to decreased in the prior period - unfavorable impact to the estimated fair value of total rate of return swaps and short futures
Market Risk Benefit Remeasurement (Gains) Losses(4) - Unfavorable change of $1.3 billion ($1.0 billion, net of income tax):
•Long-term interest rates decreased in the current period compared to increased in the prior period
Partially offset by:
•Key equity indexes increased in the current period compared to decreased in the prior period
Actuarial Assumption Review - Favorable change of $70 million ($55 million, net of income tax):
Three Months Ended September 30,
Variance
2024
2023
(In millions, net of income tax)
Assumptions
Economic
$
(55)
$
(40)
$
(15)
Mortality
110
51
59
Morbidity
53
(14)
67
Policyholder behavior
(91)
—
(91)
Operational
47
12
35
Total
$
64
$
9
$
55
•Total results for the three months ended September 2024 and 2023 include gains of $64 million and $9 million, respectively:
◦Of the $64 million gain, a loss of $5 million was recognized in MRB remeasurement (gains) losses, a loss of $1 million was recognized in net derivative gains (losses), both of which are discussed above, and a gain of $70 million was recognized in adjusted earnings, which is discussed below
◦Of the $9 million gain, a loss of $4 million was recognized in MRB remeasurement (gains) losses, a loss of $2 million was recognized in net derivative gains (losses), both of which are discussed above, and a gain of $15 million was recognized in adjusted earnings, which is discussed below
◦The $55 million increase was primarily driven by (i) favorable mortality experience in the RIS segment in the current period, (ii) updates made in the prior period to morbidity assumptions in the MetLife Holdings segment associated with an increase in incident rates for our long-term care business, and (iii) updates to policyholder behavior assumptions in the Asia segment related to lapse assumptions in the accident & health business, partially offset by updates to policyholder behavior assumptions in the MetLife Holdings segment related to claim utilization experience for our long-term care business
Adjusted Earnings(5)- Unfavorable change of $113 million. See “— Consolidated Results — Adjusted Earnings.”
Taxes - Unfavorable change in effective tax rate - 33% in the current period compared to 7% in the prior period
•Current period effective tax rate on income before provision for income tax was 33% compared to the U.S. statutory rate of 21% primarily due to tax charges from:
◦Foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates
Partially offset by tax benefits from:
◦Non-taxable investment income
110
◦Low income housing and other tax credits, partially offset by the impact of tax equity investments now accounted for under the proportional amortization method
•Prior period effective tax rate on income before provision for income tax was 7% compared to the U.S. statutory rate of 21% primarily due to tax benefits from:
◦Reversal of previous non-deductible losses
◦Low income housing and other tax credits
◦Foreign earnings taxed at lower statutory rates than the U.S. statutory rate and foreign losses taxed at higher statutory rates
Partially offset by tax charges from:
◦Non-taxable investment loss related to the pending disposition of MetLife Malaysia
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Net income (loss) available to MetLife, Inc.’s common shareholders- Increased $2.2 billion primarily due to the following:
Net Investment Gains (Losses)(1)- Favorable change of $1.8 billion ($1.4 billion, net of income tax):
•Impairment losses in the prior period for investments disposed of in connection with a reinsurance transaction that closed in November 2023
•Lower losses on sales of fixed maturity securities
•Higher gains on sales of real estate investments
Net Derivative Gains (Losses)(2)- Favorable change of $1.6 billion ($1.2 billion, net of income tax)(3):
•Long-term interest rates decreased in the current period compared to increased in the prior period - favorable impact to the estimated fair value of receiver swaps and swaptions
•The U.S. dollar strengthened less against the Japanese yen in the current period compared to the prior period - favorable impact to the estimated fair value of sell-U.S. dollar currency forwards
Market Risk Benefit Remeasurement (Gains) Losses(4) - Unfavorable change of $1.1 billion ($853 million, net of income tax):
•Long-term interest rates decreased in the current period compared to increased in the prior period
Actuarial Assumption Review- For the results of the actuarial assumption reviews, see “— Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023 — Actuarial Assumption Review.”
Adjusted Earnings(5)- Favorable change of $173 million. See “— Consolidated Results — Adjusted Earnings.”
Taxes - Unfavorable change in effective tax rate - 25% in the current period compared to 19% in the prior period
•Current period effective tax rate on income before provision for income tax was 25% compared to the U.S. statutory rate of 21% primarily due to tax charges from:
◦Foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates
Partially offset by tax benefits from:
◦Non-taxable investment income
◦Low income housing and other tax credits, partially offset by the impact of tax equity investments now accounted for under the proportional amortization method
◦Corporate tax deduction for stock compensation
•Prior period effective tax rate on income before provision for income tax was 19% compared to the U.S. statutory rate of 21% primarily due to tax benefits from:
◦Low income housing and other tax credits
111
◦Non-taxable investment income
Largely offset by tax charges from:
◦Foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates
◦Non-taxable investment loss related to the pending disposition of MetLife Malaysia
__________________
(1)See “— Investments — Overview” and “— Investments — Investment Portfolio Results — Net Investment Gains (Losses)” for information regarding management of our investment portfolio.
(2)See “— Derivatives — Net Derivative Gains (Losses)” for information regarding the use of derivatives to hedge market risk.
(3)Includes amounts relating to investment hedge adjustments, which are also included in adjusted earnings available to common shareholders. See “— Investments — Investment Portfolio Results” for additional information.
(4)See Note 6 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s MRBs.
(5)As used in “— Consolidated Results — Adjusted Earnings” and as more fully described in “— Non-GAAP and Other Financial Disclosures,” we refer to adjusted earnings, which does not equate to net income (loss), as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. We believe that the presentation of adjusted earnings and other financial measures based on adjusted 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. Adjusted earnings and other financial measures based on adjusted earnings allow analysis of our performance relative to our business plan and facilitate comparisons to industry results. Adjusted earnings should not be viewed as a substitute for net income (loss). Adjusted earnings available to common shareholders and adjusted earnings available to common shareholders on a constant currency basis should not be viewed as substitutes for net income (loss) available to MetLife, Inc.’s common shareholders.
Reconciliation of net income (loss) to adjusted earnings available to common shareholders and premiums, fees and other revenues to adjusted premiums, fees and other revenues
Three Months Ended September 30, 2024
Group Benefits
RIS
Asia
Latin America
EMEA
MetLife Holdings
Corporate & Other
Total
(In millions)
Net income (loss) available to MetLife, Inc.'s common shareholders
$
330
$
246
$
1,044
$
258
$
76
$
(214)
$
(465)
$
1,275
Add: Preferred stock dividends
—
—
—
—
—
—
67
67
Add: Net income (loss) attributable to noncontrolling interests
—
—
—
(4)
1
—
2
(1)
Net income (loss)
330
246
1,044
254
77
(214)
(396)
1,341
Less: adjustments from net income (loss) to adjusted earnings available to common shareholders:
Revenues:
Net investment gains (losses)
17
(125)
273
12
8
(7)
(255)
(77)
Net derivative gains (losses)
(56)
(47)
780
114
(4)
(16)
(4)
767
Premiums
16
—
—
—
—
—
—
16
Universal life and investment-type product policy fees
—
—
—
—
—
—
—
—
Net investment income
(18)
(45)
16
(8)
174
(43)
8
84
Other revenues
—
(19)
—
—
—
50
5
36
Expenses:
Policyholder benefits and claims and policyholder dividends
Adjusted earnings available to common shareholders
$
(262)
$
1,488
Adjusted earnings available to common shareholders on a constant currency basis (1)
$
510
$
470
$
271
$
179
$
87
$
208
$
(262)
$
1,463
Premiums, fees and other revenues
$
5,866
$
2,458
$
1,743
$
1,484
$
588
$
910
$
121
$
13,170
Less: adjustments to premiums, fees and other revenues
—
(20)
—
—
—
—
9
(11)
Adjusted premiums, fees and other revenues
$
5,866
$
2,478
$
1,743
$
1,484
$
588
$
910
$
112
$
13,181
Adjusted premiums, fees and other revenues on a constant currency basis (1)
$
5,866
$
2,478
$
1,704
$
1,349
$
573
$
910
$
112
$
12,992
__________________
(1)Amounts for Group Benefits, RIS, MetLife Holdings and Corporate & Other are shown on a reported basis, as constant currency impact is not significant.
Adjusted earnings available to common shareholders
$
(726)
$
4,164
Adjusted earnings available to common shareholders on a constant currency basis (1)
$
1,189
$
1,287
$
957
$
610
$
208
$
577
$
(726)
$
4,102
Premiums, fees and other revenues
$
17,928
$
5,893
$
5,264
$
4,241
$
1,752
$
2,807
$
389
$
38,274
Less: adjustments to premiums, fees and other revenues
—
(56)
—
—
1
—
34
(21)
Adjusted premiums, fees and other revenues
$
17,928
$
5,949
$
5,264
$
4,241
$
1,751
$
2,807
$
355
$
38,295
Adjusted premiums, fees and other revenues on a constant currency basis (1)
$
17,928
$
5,949
$
4,954
$
4,069
$
1,695
$
2,807
$
355
$
37,757
__________________
(1)Amounts for Group Benefits, RIS, MetLife Holdings and Corporate & Other are shown on a reported basis, as constant currency impact is not significant.
Business Overview. Adjusted premiums, fees and other revenues for the three months ended September 30, 2024 decreased $710 million, or 5%, compared to the prior period. Adjusted premiums, fees and other revenues, net of foreign currency fluctuations, decreased $521 million, or 4%, compared to the prior period primarily due to lower premiums in the pension risk transfer business in the RIS segment and the expected decline in the MetLife Holdings segment from business run-off, partially offset by growth in the other segments.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Group Benefits
$
373
$
510
$
1,190
$
1,189
RIS
472
470
1,281
1,287
Asia
306
275
1,178
986
Latin America
221
199
680
633
EMEA
70
88
224
218
MetLife Holdings
182
208
494
577
Corporate & Other
(249)
(262)
(710)
(726)
Adjusted earnings available to common shareholders
$
1,375
$
1,488
$
4,337
$
4,164
Adjusted earnings available to common shareholders on a constant currency basis
$
1,375
$
1,463
$
4,337
$
4,102
Adjusted premiums, fees and other revenues
$
12,471
$
13,181
$
37,942
$
38,295
Adjusted premiums, fees and other revenues on a constant currency basis
$
12,471
$
12,992
$
37,942
$
37,757
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings Available to Common Shareholders - Decreased $113 million on a reported basis, primarily due to the following business drivers:
Reinsurance Transaction - Decreased adjusted earnings by approximately $50 million as a result of the reinsurance transaction that closed in November 2023 in the MetLife Holdings segment
Foreign Currency - Decreased adjusted earnings by $24 million, primarily in the Latin America and Asia segments
Market Factors- Decreased adjusted earnings by $69 million:
•Higher average interest crediting rates primarily on investment-type products in the RIS segment
•Variable investment income decreased - lower returns on private equity funds
Partially offset by:
•Recurring investment income increased - higher yields on fixed income securities and mortgage loans, as well as higher returns on fair value option (“FVO”) securities, partially offset by lower income on derivatives
Volume Growth - Increased adjusted earnings by $44 million:
•Higher average invested assets primarily in the RIS and Latin America segments
•Higher sales and business growth in the EMEA segment
Largely offset by:
•Increase in interest credited expenses on long duration products primarily in the RIS and Latin America segments
Underwriting and Other Insurance Adjustments - Decreased adjusted earnings by $20 million:
•Unfavorable mortality and morbidity results in the Group Benefits segment, coupled with unfavorable claims experience in the EMEA segment, partially offset by favorable mortality in the RIS segment
Partially offset by:
•Favorable change from refinements to certain insurance assets and other liabilities in both periods, primarily in the Asia and EMEA segments
Notable Items - Actuarial assumption review and other insurance adjustments - Increased adjusted earnings by $2 million on a reported basis:
Three Months Ended September 30,
Variance
2024
2023
(In millions)
Group Benefits
$
(58)
$
27
$
(85)
RIS
104
61
43
Asia
(41)
(94)
53
Latin America
4
—
4
EMEA
(5)
18
(23)
MetLife Holdings
12
2
10
Corporate & Other
—
—
—
Total
$
16
$
14
$
2
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings Available to Common Shareholders - Increased $173 million on a reported basis, primarily due to the following business drivers:
Reinsurance Transaction - Decreased adjusted earnings by approximately $150 million as a result of the reinsurance transaction that closed in November 2023 in the MetLife Holdings segment
Foreign Currency - Decreased adjusted earnings by $62 million, primarily in the Asia and Latin America segments
Market Factors- Increased adjusted earnings by $127 million:
•Variable investment income increased - higher returns on private equity and real estate funds
•Recurring investment income increased - higher yields on fixed income securities and mortgage loans, partially offset by lower income on derivatives
Largely offset by:
•Higher average interest crediting rates on investment-type and certain insurance products, primarily in the RIS and Asia segments
Volume Growth - Increased adjusted earnings by $152 million:
•Higher average invested assets primarily in the RIS and Latin America segments
•Higher sales and business growth in the EMEA and Latin America segments
Largely offset by:
•Increase in interest credited expenses on long duration products primarily in the RIS and Latin America segments
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $188 million:
•Favorable mortality results primarily in the Group Benefits segment, higher surrender charges in the Asia segment, and favorable morbidity experience in the MetLife Holdings segment, partially offset by unfavorable mortality experience in the MetLife Holdings segment
•Favorable change from refinements to certain insurance assets and other liabilities in both periods, primarily in the Group Benefits segment
Expenses - Decreased adjusted earnings by $37 million:
•Higher direct expenses, including employee-related costs, in most of the segments
•Higher litigation reserves
Largely offset by:
•Lower corporate-related expenses, primarily in Corporate & Other
Taxes - Unfavorable change in effective tax rate - 24% in the current period compared to 23% in the prior period
•Current period effective tax rate on income before provision for income tax was 24% compared to the U.S. statutory rate of 21% primarily due to tax charges from:
◦Foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates
Partially offset by tax benefits from:
◦Non-taxable investment income
◦Low income housing and other tax credits, partially offset by the impact of tax equity investments now accounted for under the proportional amortization method
◦Corporate tax deduction for stock compensation
•Prior period effective tax rate on income before provision for income tax was 23% compared to the U.S. statutory rate of 21% primarily due to tax charges from:
◦Foreign earnings taxed at higher statutory rates than the U.S. statutory rate and foreign losses taxed at lower statutory rates
Largely offset by tax benefits from:
◦Low income housing and other tax credits
◦Non-taxable investment income
◦Adjustments related to prior years taxes
◦Corporate tax deduction for stock compensation
Notable Items - For the results of the notable items, see “— Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023 — Notable Items.”
Business Overview. Adjusted premiums, fees and other revenues for the three months ended September 30, 2024 increased $280 million, or 5%, compared to the prior period, primarily driven by growth in both core and voluntary products, partially offset by a decrease in premiums related to our participating life contracts, which can fluctuate with claims experience.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Total adjusted revenues
$
6,457
$
6,196
$
19,625
$
18,895
Total adjusted expenses
5,985
5,551
18,120
17,388
Provision for income tax expense (benefit)
99
135
315
318
Adjusted earnings
$
373
$
510
$
1,190
$
1,189
Adjusted premiums, fees and other revenues
$
6,146
$
5,866
$
18,686
$
17,928
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax.
Adjusted Earnings - Decreased $137 million primarily due to the following business drivers:
Underwriting and Other Insurance Adjustments - Decreased adjusted earnings by $38 million:
•Unfavorable morbidity - primarily due to higher incidence in accident & health coupled with higher claims in vision
•Unfavorable mortality - lower severity in the prior period in accidental death & dismemberment
•Unfavorable changes from refinements to certain insurance and other liabilities in both periods
Expenses - Decreased adjusted earnings by $13 million:
•Higher legal plan utilization and technology, employee-related and various other operating expenses exceeded the corresponding increase in adjusted premiums, fees and other revenues
Notable Items - Decreased adjusted earnings by $85 million:
•Current period notable items -unfavorable impact of $58 million - actuarial assumption review and other insurance adjustments, which includes an unfavorable refinement on certain life policies
•Prior period notable item - favorable impact of $27 million - actuarial assumption review
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax.
Adjusted Earnings - Increased $1 million primarily due to the following business drivers:
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $119 million:
•Favorable mortality - lower claims incidence in our life business
•Favorable change from refinements to certain insurance and other liabilities in both periods
Expenses - Decreased adjusted earnings by $28 million:
•Higher legal plan utilization and technology, employee-related and various other operating expenses exceeded the corresponding increase in adjusted premiums, fees and other revenues
Notable Items - Decreased adjusted earnings by $85 million:
•Current period notable items - unfavorable impact of $58 million - actuarial assumption review and other insurance adjustments, which includes an unfavorable refinement on certain life policies
•Prior period notable item - favorable impact of $27 million - actuarial assumption review
Retirement & Income Solutions
Business Overview. Adjusted premiums, fees and other revenues for the three months ended September 30, 2024 decreased $899 million, or 36%, compared to the prior period. The decrease was primarily driven by lower premiums from our pension risk transfer business and structured settlement sales; partially offset by growth in our United Kingdom (“U.K.”) longevity reinsurance businesses. Changes in premiums are mostly offset by a corresponding change in policyholder benefits, both of which are reported net of ceded reinsurance.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Total adjusted revenues
$
3,712
$
4,487
$
11,313
$
11,720
Total adjusted expenses
3,121
3,893
9,700
10,094
Provision for income tax expense (benefit)
119
124
332
339
Adjusted earnings
$
472
$
470
$
1,281
$
1,287
Adjusted premiums, fees and other revenues
$
1,579
$
2,478
$
4,974
$
5,949
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax.
Adjusted Earnings- Increased $2 million primarily due to the following business drivers:
Market Factors - Decreased adjusted earnings by $72 million:
•Higher average interest crediting rates primarily on investment-type products
Partially offset by:
•Recurring investment income increased - higher yields on fixed income securities, partially offset by lower income on derivatives
Volume Growth - Increased adjusted earnings by $13 million:
•Positive flows from pension risk transfer transactions and funding agreement issuances resulted in higher average invested assets
Largely offset by:
•Increase in interest credited expenses on long duration products
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $14 million:
•Favorable mortality – mainly in pension risk transfer business
Partially offset by:
•Unfavorable refinements to certain insurance liabilities in both periods
Expenses - Decreased adjusted earnings by $8 million:
•Higher expenses, including certain employee-related costs
Notable Items - Increased adjusted earnings by $43 million:
•Current period notable item - favorable impact of $104 million - actuarial assumption review
Business Overview. Adjusted premiums, fees and other revenues for the three months ended September 30, 2024 decreased $33 million, or 2%, compared to the prior period. Adjusted premiums, fees and other revenues, net of foreign currency fluctuations, increased $6 million, or less than 1%, compared to the prior period, as an increase in premiums in Korea and higher fee income from Japan’s foreign currency life products were substantially offset by decreases in premiums from Japan’s accident & health and yen-denominated life products.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Total adjusted revenues
$
2,842
$
2,766
$
8,529
$
8,218
Total adjusted expenses
2,411
2,361
6,891
6,797
Provision for income tax expense (benefit)
125
130
460
435
Adjusted earnings
$
306
$
275
$
1,178
$
986
Adjusted earnings on a constant currency basis
$
306
$
271
$
1,178
$
957
Adjusted premiums, fees and other revenues
$
1,710
$
1,743
$
5,122
$
5,264
Adjusted premiums, fees and other revenues on a constant currency basis
$
1,710
$
1,704
$
5,122
$
4,954
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings - Increased $31 million on a reported basis, primarily due to the following business drivers:
Foreign Currency - Decreased adjusted earnings by $4 million:
•Japanese yen and Korean won weakened against the U.S. dollar
Market Factors - Decreased adjusted earnings by $32 million:
•Unfavorable change in market-sensitive policyholder liabilities
•Higher average interest crediting rates on investment-type and certain insurance products
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $12 million:
•Favorable change from refinements to certain insurance assets and liabilities in both periods
Notable Items - Increased adjusted earnings by $53 million on a reported basis:
•Current period notable item - unfavorable impact of $41 million - actuarial assumption review
•Prior period notable item - unfavorable impact of $94 million - actuarial assumption review
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings - Increased $192 million on a reported basis, primarily due to the following business drivers:
Foreign Currency - Decreased adjusted earnings by $29 million:
•Japanese yen and Korean won weakened against the U.S. dollar
Market Factors - Increased adjusted earnings by $68 million:
• Recurring investment income increased - higher yields on fixed income securities
• Variable investment income increased - higher returns on private equity and real estate funds
•Higher average interest crediting rates on investment-type and certain insurance products
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $64 million:
•Higher surrender charges in Japan
•Favorable change from refinements to certain insurance assets and liabilities in both periods
Taxes - Increased adjusted earnings by $33 million:
•Favorable change in Korea - tax benefits due to a tax audit settlement in the current period and lower dividend withholding tax as a result of a rate decrease
•Favorable change in Japan - tax benefits from higher foreign earnings taxed at lower rates in the current period and lower premium tax due to lower sales
Notable Items - Increased adjusted earnings by $53 million on a reported basis:
•Current period notable item - unfavorable impact of $41 million - actuarial assumption review
•Prior period notable item - unfavorable impact of $94 million - actuarial assumption review
Latin America
Business Overview. Adjusted premiums, fees and other revenues for the three months ended September 30, 2024 increased $12 million, or 1%, compared to the prior period. Adjusted premiums, fees and other revenues, net of foreign currency fluctuations, increased $147 million, or 11%, compared to the prior period, mainly driven by strong sales and solid persistency across the region.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Total adjusted revenues
$
1,931
$
1,849
$
5,717
$
5,403
Total adjusted expenses
1,622
1,567
4,766
4,537
Provision for income tax expense (benefit)
88
83
271
233
Adjusted earnings
$
221
$
199
$
680
$
633
Adjusted earnings on a constant currency basis
$
221
$
179
$
680
$
610
Adjusted premiums, fees and other revenues
$
1,496
$
1,484
$
4,498
$
4,241
Adjusted premiums, fees and other revenues on a constant currency basis
$
1,496
$
1,349
$
4,498
$
4,069
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings - Increased $22 million on a reported basis primarily due to the following business drivers:
Foreign Currency - Decreased adjusted earnings by $20 million:
•Mexican and Chilean pesos weakened against the U.S. dollar
Market Factors - Increased adjusted earnings by $31 million:
•Favorable impact of higher inflation, primarily in Chile
•Recurring investment income increased - higher returns on our Chilean encaje within FVO securities driven by an increase in bond index returns; partially offset by lower fixed income yields in Chile
Volume Growth - Increased adjusted earnings by $15 million:
•Strong sales of single premium immediate annuities in Chile resulted in higher average invested assets
Partially offset by:
•Increase in interest credited expenses on long duration products
Underwriting and Other Insurance Adjustments - Decreased adjusted earnings by $6 million:
•Unfavorable underwriting - higher loss ratio in Mexico and Brazil, partially offset by lower claims in Chile
Notable Items - Increased adjusted earnings by $4 million:
•Current period notable item - favorable impact of $4 million - actuarial assumption review
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings - Increased $47 million on a reported basis primarily due to the following business drivers:
Foreign Currency - Decreased adjusted earnings by $23 million:
•Chilean peso weakened against the U.S. dollar
Partially offset by:
•Mexican peso strengthened against the U.S. dollar
Market Factors - Increased adjusted earnings by $28 million:
•Favorable impact of higher inflation, primarily in Chile
•Recurring investment income increased - higher returns on our Chilean encaje within FVO securities, driven by an increase in bond index returns; largely offset by lower fixed income yields and derivative income in Chile
Volume Growth - Increased adjusted earnings by $52 million:
•Strong sales of single premium immediate annuities in Chile resulted in higher average invested assets
•Higher sales, primarily in Mexico and Chile
Partially offset by:
•Increase in interest credited expenses on long duration products
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $16 million:
•Favorable refinements to certain insurance liabilities primarily in Chile and Mexico
Expenses - Decreased adjusted earnings by $11 million:
•Higher corporate-related and various other operating expenses, primarily in Mexico and Chile
Taxes - Decreased adjusted earnings by $8 million:
•Tax adjustments in both periods - adjustments related to the filing of the tax return in Mexico and a recurring tax item related to inflation in Chile
Other - Decreased adjusted earnings by $11 million - includes amortization of DAC
Notable Items - Increased adjusted earnings by $4 million:
•Current period notable item - favorable impact of $4 million - actuarial assumption review
Business Overview. Adjusted premiums, fees and other revenues for the three months ended September 30, 2024 increased $67 million, or 11%, compared to the prior period. Adjusted premiums, fees and other revenues, net of foreign currency fluctuations, increased $82 million, or 14%, compared to the prior period primarily due to increases in our (i) corporate solutions business in the Gulf, the U.K. and Egypt, (ii) credit life and pension businesses in Turkey and Romania, and (iii) accident & health business across the region.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Total adjusted revenues
$
710
$
639
$
2,059
$
1,894
Total adjusted expenses
616
527
1,764
1,614
Provision for income tax expense (benefit)
24
24
71
62
Adjusted earnings
$
70
$
88
$
224
$
218
Adjusted earnings on a constant currency basis
$
70
$
87
$
224
$
208
Adjusted premiums, fees and other revenues
$
655
$
588
$
1,896
$
1,751
Adjusted premiums, fees and other revenues on a constant currency basis
$
655
$
573
$
1,896
$
1,695
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings - Decreased $18 million on a reported basis, primarily due to the following business drivers:
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax and foreign currency fluctuations. Foreign currency fluctuations can result in significant variances in the financial statement line items.
Adjusted Earnings - Increased $6 million on a reported basis, primarily due to the following business drivers:
Foreign Currency - Decreased adjusted earnings by $10 million:
•Turkish lira and Egyptian pound weakened against the U.S. dollar
Market Factors - Increased adjusted earnings by $22 million:
•Recurring investment income increased - higher yields on fixed income securities
Volume Growth - Increased adjusted earnings by $38 million:
•Increase in sales and business growth:
◦Credit life and pension businesses in Turkey and Romania
◦Corporate solutions business in the Gulf, the U.K. and Egypt
◦Accident & health business across the region
Underwriting and Other Insurance Adjustments - Increased adjusted earnings by $7 million:
•Favorable underwriting experience across the region
•Favorable change from refinements to certain insurance liabilities in both periods
Expenses - Decreased adjusted earnings by $23 million:
•Higher direct expenses, including employee-related costs and various other operating expenses across the region
Other - Decreased adjusted earnings by $3 million
Notable Items - Decreased adjusted earnings by $23 million on a reported basis:
•Current period notable item - unfavorable impact of $5 million - actuarial assumption review
•Prior period notable items - favorable impact of $18 million - actuarial assumption review and other insurance adjustments
Business Overview. The MetLife Holdings segment consists of operations relating to products and businesses, previously included in our former retail business, that we no longer actively market in the U.S. As anticipated, adjusted premiums, fees and other revenues continue to decline from expected business run-off.
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Total adjusted revenues
$
1,774
$
2,063
$
5,464
$
6,257
Total adjusted expenses
1,548
1,804
4,854
5,541
Provision for income tax expense (benefit)
44
51
116
139
Adjusted earnings
$
182
$
208
$
494
$
577
Adjusted premiums, fees and other revenues
$
793
$
910
$
2,457
$
2,807
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax.
Adjusted Earnings - Decreased $26 million primarily due to the following business drivers:
Reinsurance Transaction - Decreased adjusted earnings by approximately $50 million as a result of the reinsurance transaction that closed in November 2023
Market Factors - Increased adjusted earnings by $19 million:
•Decrease in interest credited expenses on long duration products
Partially offset by:
•Recurring investment income decreased - lower income on derivatives and lower average invested assets due to business run-off, substantially offset by higher yields on fixed income securities
Volume Growth - Decreased adjusted earnings by $9 million, consistent with business run-off
Underwriting and Other Insurance Adjustments- Increased adjusted earnings by $4 million:
•Favorable morbidity experience in our long-term care business
Largely offset by:
•Unfavorable mortality - higher claim volume and severity in our life business
Notable Items - Increased adjusted earnings by $10 million:
•Current period notable items - favorable impact of $12 million - actuarial assumption review and other insurance adjustments
•Prior period notable items - favorable impact of $2 million - actuarial assumption review, largely offset by other insurance adjustments
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Unless otherwise stated, all amounts discussed below are net of income tax.
Adjusted Earnings - Decreased $83 million primarily due to the following business drivers:
Reinsurance Transaction - Decreased adjusted earnings by approximately $150 million as a result of the reinsurance transaction that closed in November 2023
Market Factors - Increased adjusted earnings by $78 million:
•Variable investment income increased - higher returns on private equity funds
•Decrease in interest credited expenses on long duration products
•Recurring investment income decreased - lower average invested assets due to business run-off and lower income on derivatives, substantially offset by higher yields on fixed income securities
Volume Growth - Decreased adjusted earnings by $24 million, consistent with business run-off
Underwriting and Other Insurance Adjustments- Decreased adjusted earnings by $7 million:
•Unfavorable mortality - higher claim volume and severity in our life business
Partially offset by:
•Favorable morbidity experience in our long-term care business
•Lower dividend expense due to business run-off
Notable Items - Increased adjusted earnings by $10 million:
•Current period notable items - favorable impact of $12 million - actuarial assumption review and other insurance adjustments
•Prior period notable items - favorable impact of $2 million - actuarial assumption review, largely offset by other insurance adjustments
Adjusted earnings available to common shareholders
$
(249)
$
(262)
$
(710)
$
(726)
Adjusted premiums, fees and other revenues
$
92
$
112
$
309
$
355
The table below presents adjusted earnings available to common shareholders by source:
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Business activities
$
20
$
13
$
56
$
52
Net investment income
96
126
290
258
Interest expense on debt
(256)
(266)
(776)
(778)
Corporate initiatives and projects
(8)
(12)
(21)
(58)
Other
(75)
(135)
(249)
(300)
Provision for income tax (expense) benefit and other tax-related items
41
79
158
265
Preferred stock dividends
(67)
(67)
(168)
(165)
Adjusted earnings available to common shareholders
$
(249)
$
(262)
$
(710)
$
(726)
Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023
Adjusted Earnings Available to Common Shareholders - Increased $13 million primarily due to the following:
Business Activities – Increased adjusted earnings by $6 million:
•Lower expenses in certain of our businesses
Net Investment Income - Decreased adjusted earnings by $24 million:
•Variable investment income decreased - lower returns on private equity funds, partially offset by higher returns on corporate debt funds
Partially offset by:
•Recurring investment income increased - the impact of tax equity investments now accounted for under the proportional amortization method and higher returns on FVO securities, partially offset by lower yields on fixed income securities
Interest Expense on Debt - Increased adjusted earnings by $8 million:
•Surplus note repayment at maturity in January and February 2024
•Senior note repayment at maturity and early redemption in April 2024
Partially offset by:
•Senior note issuances in July 2023, March 2024, June 2024 and September 2024
Corporate Initiatives and Projects & Other - Increased adjusted earnings by $50 million:
•Lower corporate-related and employee-related expenses
Taxes - Unfavorable change in Corporate & Other’s taxes:
•Lower tax preferenced items, primarily due to the impact of tax equity investments now accounted for under the proportional amortization method, partially offset by foreign earnings taxed at different rates than the U.S. statutory rate
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Adjusted Earnings Available to Common Shareholders - Increased $16 million primarily due to the following:
Net Investment Income - Increased adjusted earnings by $25 million:
•Recurring investment income increased - the impact of tax equity investments now accounted for under the proportional amortization method, higher returns on FVO securities and higher average invested assets, partially offset by lower yields on fixed income securities
Corporate Initiatives and Projects & Other – Increased adjusted earnings by $69 million:
•Lower corporate-related expenses, including from initiatives and projects
Partially offset by:
•Higher litigation reserves
Taxes - Unfavorable change in Corporate & Other’s taxes:
•Lower tax preferenced items, primarily due to the impact of tax equity investments now accounted for under the proportional amortization method, partially offset by foreign earnings taxed at different rates than the U.S. statutory rate
We maintain a diversified global general account investment portfolio to support our mix of liabilities in our global businesses. We position our portfolio based on relative value and our view of the economy and financial markets. We maintain our focus on appropriate level of diversification and asset quality.
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 risk-adjusted investment income and risk-adjusted total return. Our investment portfolio is heavily weighted toward fixed income investments, with the vast majority of our portfolio invested in fixed maturity securities available-for-sale (“AFS”) and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities.
Current Environment
As a global insurance company, we continue to be impacted by the changing global financial and economic environment, the fiscal and monetary policy of governments and central banks around the world and other governmental measures. Global inflation, supply chain disruptions, acts of war and banking sector volatility continue to impact the global economy and financial markets and have caused volatility in the global equity, credit and real estate markets. See “— Industry Trends — Financial and Economic Environment” for further information regarding conditions in the global financial markets and the economy generally which may affect us. These factors may persist for some time and may continue to impact pricing levels of risk-bearing investments, as well as our business operations, investment portfolio and derivatives. Rising market interest rates have impacted our investment portfolio and derivatives. See “— Results of Operations — Consolidated Results” and “— Results of Operations — Consolidated Results — Adjusted Earnings” for impacts on our derivatives and analysis of the period over period changes in investment portfolio results and “Investments — Fixed Maturity Securities AFS — Evaluation of Fixed Maturity Securities AFS for Credit Loss — Evaluation of Fixed Maturity Securities AFS in an Unrealized Loss Position” in Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for impacts on the net unrealized gain (loss) on our fixed maturity securities AFS.
Selected Country Investments
We have a market presence in numerous countries and, therefore, our investment portfolio, which supports our insurance operations and related policyholder liabilities, as well as our global portfolio diversification objectives, is exposed to risks posed by local political and economic conditions. The countries included in the following table have been the most affected by these risks. The table below presents a summary of selected country fixed maturity securities AFS, at estimated fair value, on a “country of risk basis” (i.e., where the issuer primarily conducts business).
Selected Country Fixed Maturity Securities AFS at September 30, 2024
Country
Sovereign (1)
Financial Services
Non-Financial Services
Total (2)
(Dollars in millions)
Israel
122
16
95
233
Peru
88
2
210
300
Ukraine
31
—
1
32
Russian Federation
10
—
—
10
Total
$
251
$
18
$
306
$
575
Investment grade %
75.5
%
94.2
%
81.4
%
79.3
%
__________________
(1)Sovereign includes government and agency.
(2)The par value, amortized cost, net of ACL, and estimated fair value, net of purchased and written credit default swaps, of these securities were $639 million, $592 million and $398 million, respectively, at September 30, 2024. The notional value and estimated fair value of the net purchased credit default swaps were $177 million and ($3) million, respectively, at September 30, 2024.
We manage direct and indirect investment exposure in the selected countries through fundamental analysis and we continually monitor and adjust our level of investment exposure. We do not expect that our general account investments in these countries will have a material adverse effect on our results of operations or financial condition.
Investment Portfolio Results
See “— Overview” for a discussion of our investment portfolio and a summary of how we manage our investment portfolio. The following tables present a reconciliation of net investment income under GAAP to adjusted net investment income and our yield table. The 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.
Reconciliation of Net Investment Income under GAAP to Adjusted Net Investment Income
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
2024
2023
(In millions)
Net investment income — GAAP
$
5,227
$
4,825
$
15,868
$
14,542
Investment hedge adjustments
129
232
477
759
Unit-linked investment income
(147)
(4)
(908)
(603)
Other
(66)
3
(66)
4
Adjusted net investment income (1)
$
5,143
$
5,056
$
15,371
$
14,702
__________________
(1)See “Financial Measures and Segment Accounting Policies” in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for a discussion of the adjustments made to net investment income under GAAP in calculating adjusted net investment income.
Yield Table
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024
2023
2024
2023
Asset Class
Yield % (1)
Amount
Yield % (1)
Amount
Yield % (1)
Amount
Yield % (1)
Amount
(Dollars in millions)
Fixed maturity securities (2), (3)
4.52
%
$
3,357
4.19
%
$
3,123
4.43
%
$
9,763
4.14
%
$
9,258
Net mortgage loans (3)
5.32
1,097
5.18
1,094
5.29
3,293
5.07
3,226
Real estate and real estate joint ventures
1.67
57
(0.31)
(11)
(0.65)
(65)
(0.54)
(53)
Policy loans
5.72
116
5.52
120
5.57
339
5.42
358
Equity securities
3.47
4
4.14
5
4.79
18
3.65
27
Other limited partnership interests
2.45
87
5.56
206
6.62
713
4.17
457
Cash and short-term investments
5.23
257
6.38
220
5.06
712
5.78
582
Other invested assets
—
312
—
420
—
1,046
—
1,256
Investment income
4.75
%
5,287
4.68
%
5,177
4.77
%
15,819
4.55
%
15,111
Investment fees and expenses
(0.13)
(144)
(0.11)
(121)
(0.14)
(448)
(0.12)
(409)
Net investment income including divested businesses (4)
4.62
%
5,143
4.57
%
5,056
4.63
%
15,371
4.43
%
14,702
Less: net investment income from divested businesses (4)
—
—
—
—
Adjusted net investment income
$
5,143
$
5,056
$
15,371
$
14,702
__________________
(1)We calculate annualized yields using adjusted net investment income as a percent of average quarterly asset carrying values. Adjusted net investment income excludes realized gains (losses) from sales and disposals, and includes the impact of changes in foreign currency exchange rates. Asset carrying values utilized in the calculation of yields exclude unrecognized unrealized gains (losses), mortgage loans originated for third parties, collateral received in connection with our securities lending program, annuities funding structured settlement claims, freestanding derivative assets, collateral received from derivative counterparties and contractholder-directed equity securities. Invested assets reclassified to held-for-sale and ceded policy loans are included in the calculation of yields, but are otherwise excluded from asset carrying values. 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 in the yield table includes FVO securities; accordingly, investment income (loss) from fixed maturity securities includes amounts from FVO securities of $76 million and ($17) million for the three months ended September 30, 2024 and 2023, respectively, and $183 million and $81 million for the nine months ended September 30, 2024 and 2023, respectively, and FVO securities asset carrying values are included in the calculation of average quarterly fixed maturity securities asset carrying values in the yield calculation.
(3)Investment income from fixed maturity securities and net mortgage loans includes prepayment fees and excludes investment income from mortgage loans originated for third parties, respectively. See “— Net Mortgage Loans.”
(4)See “Financial Measures and Segment Accounting Policies” in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for a discussion of divested businesses.
See “— Results of Operations — Consolidated Results — Adjusted Earnings” for an analysis of the period over period changes in investment portfolio results.
Net Investment Gains (Losses)
We purchase investments to support our insurance liabilities and not to generate net investment gains and losses. However, net investment gains and losses are incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign currency exchange rates, credit spreads and equity markets; counterparty specific factors such as financial performance, credit rating and collateral valuation; and internal factors such as portfolio rebalancing. Changes in these factors from period to period can significantly impact the levels of provision for credit loss and impairments on our investment portfolio, as well as realized gains and losses on investments sold.
See “— Results of Operations — Consolidated Results” for an analysis of the period over period changes in realized gains (losses) on investments sold, provision (release) for credit loss and impairments and non-investment portfolio gains (losses).
Fixed Maturity Securities AFS and Equity Securities
The following table presents public and private fixed maturity securities AFS and equity securities held at:
September 30, 2024
December 31, 2023
Securities by Type
Estimated Fair Value
% of Total
Estimated Fair Value
% of Total
(Dollars in millions)
Fixed maturity securities AFS
Publicly traded
$
213,609
72.7
%
$
209,616
74.5
%
Privately-placed
80,170
27.3
71,796
25.5
Total fixed maturity securities AFS
$
293,779
100.0
%
$
281,412
100.0
%
Percentage of cash and invested assets
61.6
%
60.3
%
Equity securities
Publicly traded
$
494
66.2
%
$
506
66.8
%
Privately-held
252
33.8
251
33.2
Total equity securities
$
746
100.0
%
$
757
100.0
%
Percentage of cash and invested assets
0.2
%
0.2
%
See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information about fixed maturity securities AFS by sector, contractual maturities, continuous gross unrealized losses and equity securities by security type and the related cost, net unrealized gains (losses) and estimated fair value of these securities; as well as realized gains (losses) on sales and disposals and unrealized net gains (losses) recognized in earnings.
Included within fixed maturity securities AFS are structured securities, including residential mortgage-backed securities (“RMBS”), asset-backed securities and collateralized loan obligations (collectively, “ABS & CLO”) and commercial mortgage-backed securities (“CMBS”) (collectively, “Structured Products”). See “— Structured Products” for further information.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities AFS and Equity Securities — Valuation of Securities” included in the 2023 Annual Report for further information on the processes used to value securities and the related controls.
Fair Value of Fixed Maturity Securities AFS and Equity Securities
Fixed maturity securities AFS and equity securities measured at estimated fair value on a recurring basis and their corresponding fair value pricing sources were as follows:
September 30, 2024
Level
Fixed Maturity Securities AFS
Equity Securities
(Dollars in millions)
Level 1
Quoted prices in active markets for identical assets
$
16,650
5.7
%
$
430
57.6
%
Level 2
Independent pricing sources
241,373
82.1
71
9.6
Internal matrix pricing or discounted cash flow techniques
—
—
3
0.4
Significant other observable inputs
241,373
82.1
74
10.0
Level 3
Independent pricing sources
27,571
9.4
33
4.4
Internal matrix pricing or discounted cash flow techniques
7,586
2.6
206
27.6
Independent broker quotations
599
0.2
3
0.4
Significant unobservable inputs
35,756
12.2
242
32.4
Total at estimated fair value
$
293,779
100.0
%
$
746
100.0
%
See Note 12 of the Notes to the Interim Condensed Consolidated Financial Statements for the fixed maturity securities AFS and equity securities fair value hierarchy; a rollforward of the fair value measurements for securities measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs; transfers into and/or out of Level 3; and further information about the valuation approaches and inputs by level by major classes of invested assets that affect the amounts reported above.
The majority of the Level 3 fixed maturity securities AFS and equity securities were concentrated in three sectors at September 30, 2024: foreign corporate securities, U.S. corporate securities and ABS & CLO. During the three months ended September 30, 2024, Level 3 fixed maturity securities AFS increased by $608 million, or 1.7%. The increase was driven by purchases in excess of sales and an increase in estimated fair value recognized in other comprehensive income (loss), offset by transfers out of Level 3 in excess of transfers into Level 3. During the nine months ended September 30, 2024, Level 3 fixed maturity securities AFS increased by $2.8 billion, or 8.5%. The increase was driven by purchases in excess of sales and an increase in estimated fair value recognized in other comprehensive income (loss), offset by transfers out of Level 3 in excess of transfers into Level 3.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities AFS and Equity Securities — Valuation of Securities” included in the 2023 Annual Report for further information on the estimates and assumptions that affect the amounts reported above.
Fixed Maturity Securities AFS
See Notes 1 and 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information about fixed maturity securities AFS by sector, contractual maturities and continuous gross unrealized losses.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities AFS and Equity Securities — Fixed Maturity Securities AFS Credit Quality — Ratings” included in the 2023 Annual Report for a discussion of the credit quality ratings assigned by Nationally Recognized Statistical Rating Organizations (“NRSRO”), credit quality designations and designation categories assigned by the Securities Valuation Office of the NAIC for fixed maturity securities AFS and modeling methodologies adopted by the NAIC for non-agency RMBS and CMBS that estimate security level expected losses under a variety of economic scenarios.
NRSRO ratings and NAIC designations are as of the dates shown below. Over time, credit ratings and designations can migrate, up or down, through the NRSRO’s and NAIC’s continuous monitoring process. NRSRO ratings are based on availability of applicable ratings. If no NRSRO rating is available, then an internally developed rating is used. If no NAIC designation is available, then, as permitted by the NAIC, an internally developed designation is used. NAIC designations are generally similar to the credit quality ratings of the NRSRO, except for (i) non-agency RMBS and CMBS and (ii) securities rated Ca or C by NRSROs, included within Caa and lower, that are designated NAIC 6; accordingly, NAIC designations may not correspond to NRSRO ratings.
The following table presents total fixed maturity securities AFS by NRSRO rating, except for non-agency RMBS and CMBS, which are presented using NAIC designations for modeled securities. In addition, in the following table, the applicable NAIC designation from the NAIC published comparison of NRSRO ratings to NAIC designations is provided.
The following tables present total fixed maturity securities AFS, at estimated fair value, by sector and by NRSRO rating, except for non-agency RMBS and CMBS, which are presented using NAIC designations for modeled securities. In addition, in the following table, the applicable NAIC designation from the NAIC published comparison of the NRSRO ratings to NAIC designations is provided.
U.S. and Foreign Corporate Fixed Maturity Securities AFS
We maintain a broadly diversified portfolio of corporate fixed maturity securities AFS across many industries and issuers. This portfolio did not have any exposure to any single issuer in excess of 1% of total investments at either September 30, 2024 or December 31, 2023. The top 10 holdings comprised 1% of total investments at both September 30, 2024 and December 31, 2023. The table below presents our U.S. and foreign corporate securities portfolios by industry at:
September 30, 2024
December 31, 2023
Industry
Estimated Fair Value
% of Total
Estimated Fair Value
% of Total
(Dollars in millions)
Finance
$
32,859
23.2
%
$
32,142
23.5
%
Consumer (cyclical and non-cyclical)
28,479
20.1
28,391
20.9
Utility
26,416
18.7
24,058
17.7
Industrial (basic, capital goods and other)
15,228
10.8
14,240
10.5
Transportation
12,906
9.1
12,132
8.9
Communications
10,071
7.1
10,048
7.4
Energy
7,948
5.6
7,917
5.8
Technology
4,518
3.2
4,262
3.1
Other
3,178
2.2
2,971
2.2
Total
$
141,603
100.0
%
$
136,161
100.0
%
Structured Products
Our investments in Structured Products are collateralized by residential mortgages, commercial mortgages, bank loans and other assets. Our investment selection criteria and monitoring include review of credit ratings, characteristics of the assets underlying the securities, borrower characteristics and the level of credit enhancement. We held $62.6 billion and $56.3 billion of Structured Products, at estimated fair value, at September 30, 2024 and December 31, 2023, respectively, as presented in the RMBS, ABS & CLO and CMBS sections below.
Our RMBS portfolio is broadly diversified by security type and risk profile. The following table presents our RMBS portfolio by security type, risk profile and ratings profile at:
September 30, 2024
December 31, 2023
Estimated Fair Value
% of Total
Net Unrealized Gains (Losses)
Estimated Fair Value
% of Total
Net Unrealized Gains (Losses)
(Dollars in millions)
Security type
Collateralized mortgage obligations
$
22,425
63.6
%
$
(639)
$
16,704
57.4
%
$
(1,268)
Pass-through mortgage-backed securities
12,839
36.4
(857)
12,392
42.6
(1,114)
Total RMBS
$
35,264
100.0
%
$
(1,496)
$
29,096
100.0
%
$
(2,382)
Risk profile
Agency
$
21,089
59.9
%
$
(1,239)
$
18,472
63.5
%
$
(1,650)
Non-Agency
Prime and prime investor
6,537
18.5
(208)
4,827
16.6
(435)
Non-qualified residential mortgage (“NQM”) and alternative (“Alt-A”)
1,839
5.2
(7)
1,760
6.0
(75)
Reperforming and sub-prime
3,773
10.7
(39)
2,622
9.0
(167)
Other (1)
2,026
5.7
(3)
1,415
4.9
(55)
Subtotal Non-Agency
14,175
40.1
%
(257)
10,624
36.5
%
(732)
Total RMBS
$
35,264
100.0
%
$
(1,496)
$
29,096
100.0
%
$
(2,382)
Ratings profile
Rated Aaa and Aa
$
30,153
85.5
%
$
25,307
87.0
%
Designated NAIC 1
$
33,559
95.2
%
$
28,384
97.6
%
__________________
(1)Other Non-Agency RMBS are broadly diversified across several subsectors and issuers, including securities collateralized by the following mortgage loan types: single family rental, early buyout securitization and small business commercial.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Investments — Fixed Maturity Securities AFS and Equity Securities — Structured Products — RMBS” included in the 2023 Annual Report for further information about collateralized mortgage obligations and pass-through mortgage-backed securities, as well as agency, prime, prime investor, NQM, Alt-A, reperforming and sub-prime mortgage-backed securities.
We manage our exposure to reperforming and sub-prime RMBS holdings by focusing primarily on senior tranche securities, stress testing the portfolio with severe loss assumptions and closely monitoring the performance of the portfolio. Our reperforming RMBS are generally newer vintage securities and higher quality at purchase and the vast majority are investment grade under NAIC designations (e.g., NAIC 1 and NAIC 2). Our sub-prime RMBS portfolio consists predominantly of securities that were purchased at significant discounts to par value and discounts to the expected principal recovery value of these securities, and the vast majority are investment grade under NAIC designations.
Our non-mortgage loan-backed structured securities are comprised of two broad categories of securitizations: ABS & CLO. These portfolios are broadly diversified by collateral type and issuer. The following table presents our ABS & CLO portfolios by collateral type and ratings profile at:
September 30, 2024
December 31, 2023
Estimated Fair Value
% of Total
Net Unrealized Gains (Losses)
Estimated Fair Value
% of Total
Net Unrealized Gains (Losses)
(Dollars in millions)
ABS
Collateral type
Vehicle and equipment loans
$
1,519
8.6
%
$
3
$
1,605
9.2
%
$
(23)
Digital infrastructure
1,744
10.0
(18)
1,376
8.0
(77)
Consumer loans
1,102
6.3
(27)
944
5.5
(78)
Credit card
1,106
6.3
14
904
5.2
(4)
Franchise
851
4.9
(26)
852
4.9
(65)
Student loans
689
3.9
(31)
702
4.1
(58)
Other (1)
3,086
17.6
(147)
3,038
17.6
(241)
Total ABS
$
10,097
57.6
%
$
(232)
$
9,421
54.5
%
$
(546)
CLO (2)
$
7,423
42.4
%
$
12
$
7,873
45.5
%
$
(63)
Total ABS & CLO
$
17,520
100.0
%
$
(220)
$
17,294
100.0
%
$
(609)
ABS ratings profile
Rated Aaa and Aa
$
3,856
38.2
%
$
3,970
42.1
%
Designated NAIC 1
$
7,717
76.4
%
$
7,227
76.7
%
CLO ratings profile
Rated Aaa and Aa
$
5,516
74.3
%
$
5,913
75.1
%
Designated NAIC 1
$
6,654
89.6
%
$
7,118
90.4
%
ABS & CLO ratings profile
Rated Aaa and Aa
$
9,372
53.5
%
$
9,883
57.1
%
Designated NAIC 1
$
14,371
82.0
%
$
14,345
82.9
%
_________________
(1)Other ABS are broadly diversified across several subsectors and issuers, including securities with the following collateral types: foreign residential loans, transportation equipment and renewable energy.
(2)Includes primarily securities collateralized by broadly syndicated bank loans.
Our CMBS portfolio is comprised primarily of conduit, single asset and single borrower securities. Conduit securities are collateralized by many commercial mortgage loans and are broadly diversified by property type, borrower and geography. The following tables present our CMBS portfolio by collateral type and ratings profile at:
September 30, 2024
December 31, 2023
Estimated Fair Value
% of Total
Net Unrealized Gains (Losses)
Estimated Fair Value
% of Total
Net Unrealized Gains (Losses)
(Dollars in millions)
Collateral type
Conduit
$
5,473
56.1
%
$
(262)
$
6,102
61.3
%
$
(643)
Single asset and single borrower
2,215
22.6
(73)
1,997
20.1
(136)
Agency
660
6.7
(69)
735
7.4
(93)
Commercial real estate collateralized loan obligations
347
3.5
(3)
437
4.4
(9)
Other
1,091
11.1
40
678
6.8
(7)
Total CMBS
$
9,786
100.0
%
$
(367)
$
9,949
100.0
%
$
(888)
Ratings profile
Rated Aaa and Aa
$
7,813
79.8
%
$
8,262
83.0
%
Designated NAIC 1
$
9,682
98.9
%
$
9,710
97.6
%
Evaluation of Fixed Maturity Securities AFS for Credit Loss, Rollforward of Allowance for Credit Loss and Credit Loss on Fixed Maturity Securities AFS Recognized in Earnings
See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information about the evaluation of fixed maturity securities AFS for credit loss, rollforward of the ACL, net credit loss provision (release) and impairment (losses), as well as realized gains (losses) on sales and disposals of fixed maturity securities AFS at and for the nine months ended September 30, 2024.
Securities Lending Transactions, Repurchase Agreements and Third-Party Custodian Administered Programs
We participate in securities lending transactions, repurchase agreements and third-party custodian administered programs with unaffiliated financial institutions in the normal course of business for the purpose of enhancing the total return on our investment portfolio.
Securities lending transactions and repurchase agreements: We account for these arrangements as secured borrowings and record a liability in the amount of the cash received. We obtain collateral, usually cash, from the borrower, which must be returned to the borrower when the securities are returned to us. Through these arrangements, we were liable for cash collateral under our control of $14.2 billion and $13.8 billion at September 30, 2024 and December 31, 2023, respectively, including a portion that may require the immediate return of cash collateral we hold. See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements, as well as “Summary of Significant Accounting Policies — Investments — Securities Lending Transactions and Repurchase Agreements” in Note 1 and Note 11 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for further information about the secured borrowings accounting and the classification of revenues and expenses.
Third-party custodian administered programs: The estimated fair value of securities we own which are loaned in connection with these programs was $650 million and $362 million at September 30, 2024 and December 31, 2023, respectively. The estimated fair value of the related non-cash collateral on deposit with third-party custodians on our behalf, which is not reflected in our interim condensed consolidated financial statements and cannot be sold or re-pledged, was $675 million and $371 million at September 30, 2024 and December 31, 2023, respectively.
Our mortgage loan investments are principally collateralized by commercial, agricultural and residential properties. The Company originates and acquires mortgage loans and, in certain cases, transfers proportional rights to cash flows of certain mortgage loans to third parties under participation agreements, which are recorded as secured borrowings. The net mortgage loan information presented herein does not include mortgage loans originated for third parties and the related ACL. See Notes 1 and 10 of the Notes to the Interim Condensed Consolidated Financial Statements for further information.
Net mortgage loans carried at amortized cost and the related ACL are summarized as follows at:
September 30, 2024
December 31, 2023
Portfolio Segment
Amortized Cost (1)
% of
Total
ACL (1)
ACL as % of
Amortized Cost
Amortized Cost (1)
% of
Total
ACL (1)
ACL as % of
Amortized Cost
(Dollars in millions)
Commercial
$
50,478
60.4
%
$
464
0.9
%
$
52,111
61.5
%
$
295
0.6
%
Agricultural
19,210
23.0
134
0.7
%
19,559
23.1
171
0.9
%
Residential
13,844
16.6
161
1.2
%
13,096
15.4
182
1.4
%
Total
$
83,532
100.0
%
$
759
0.9
%
$
84,766
100.0
%
$
648
0.8
%
_________________
(1)Does not include mortgage loans originated for third parties of $7.7 billion at amortized cost ($7.5 billion commercial and $259 million agricultural) and the related ACL of $88 million at September 30, 2024, and $8.5 billion at amortized cost ($8.2 billion commercial and $246 million agricultural) and the related ACL of $73 million at December 31, 2023.
We diversify our mortgage loan investments by both geographic region and property type to reduce the risk of concentration. Of our net commercial and agricultural mortgage loans carried at amortized cost, 86% are collateralized by properties located in the U.S., with the remaining 14% collateralized by properties located primarily in Mexico, the U.K. and Australia at September 30, 2024. The carrying values of our net commercial and agricultural mortgage loans collateralized by properties located in California, New York and Texas were 15%, 8% and 7%, respectively, of total net commercial and agricultural mortgage loans at September 30, 2024. Additionally, we manage risk when originating commercial and agricultural mortgage loan investments by generally lending up to 75% of the estimated fair value of the underlying real estate collateral.
We manage our residential mortgage loans carried at amortized cost in a similar manner to reduce risk of concentration, with 90% collateralized by properties located in the U.S., and the remaining 10% collateralized by properties located in Chile, at September 30, 2024. The carrying values of our residential mortgage loans located in California, Florida and New York were 33%, 10% and 7%, respectively, of total residential mortgage loans at September 30, 2024.
Net Commercial Mortgage Loans by Geographic Region and Property Type. Net commercial mortgage loans are the largest mortgage loan portfolio segment. The tables below present, at amortized cost, the diversification of these investments across geographic regions and property types:
September 30, 2024
December 31, 2023
Amount
% of Total
Amount
% of Total
(Dollars in millions)
Region
Pacific
$
8,745
17.3
%
$
9,016
17.3
%
Non-U.S.
8,593
17.0
8,933
17.1
Middle Atlantic
6,999
13.9
7,477
14.3
South Atlantic
6,459
12.8
6,637
12.7
West South Central
3,455
6.9
3,472
6.7
New England
2,838
5.6
2,859
5.5
Mountain
2,217
4.4
2,193
4.2
East North Central
1,543
3.1
1,822
3.5
East South Central
608
1.2
654
1.3
West North Central
472
0.9
613
1.2
Multi-Region and Other
8,549
16.9
8,435
16.2
Total amortized cost
$
50,478
100.0
%
$
52,111
100.0
%
Less: ACL
464
295
Carrying value, net of ACL
$
50,014
$
51,816
Property Type
Office
$
18,861
37.4
%
$
19,651
37.7
%
Apartment
10,750
21.3
11,974
23.0
Retail
7,273
14.4
7,218
13.9
Industrial
5,313
10.5
5,275
10.1
Single Family Rental
5,141
10.2
4,728
9.1
Hotel
3,051
6.0
3,140
6.0
Other
89
0.2
125
0.2
Total amortized cost
$
50,478
100.0
%
$
52,111
100.0
%
Less: ACL
464
295
Carrying value, net of ACL
$
50,014
$
51,816
Our commercial mortgage loan investments are well positioned with exposures concentrated in high quality underlying properties located in primary markets typically with institutional investors who are better positioned to manage their assets during periods of market volatility. Our portfolio is comprised primarily of lower risk loans with higher debt service coverage ratios (“DSCR”) and lower loan-to-value (“LTV”) ratios, as shown below.
Credit Quality — Monitoring Process. We monitor our mortgage loan investments on an ongoing basis, including a review by credit quality indicator and by the performance indicators of current, past due, restructured and under foreclosure. See below for further information on net mortgage loans by credit quality indicator. See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for further information by performance indicator.
We review our commercial mortgage loan investments 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, LTV ratios, DSCR and tenant creditworthiness. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher LTV ratios and lower DSCR. The monitoring process for agricultural mortgage loan investments is generally similar, with a focus on higher risk loans, such as loans with higher LTV ratios. Agricultural mortgage loan investments are reviewed on an ongoing basis which include property inspections, market analysis, estimated valuations of the underlying collateral, LTV ratios and borrower creditworthiness, including reviews on a geographic and property-type basis. We review our residential mortgage loan investments on an ongoing basis, with a focus on higher risk loans, such as nonperforming loans. See Notes 1 and 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information on our evaluation of residential mortgage loan investments and related ACL methodology.
LTV ratios and DSCR are common measures in the assessment of the quality of commercial mortgage loan investments. LTV ratios are a common measure in the assessment of the quality of agricultural mortgage loan investments. LTV ratios compare the amount of the loan to the estimated fair value of the underlying collateral. An LTV ratio greater than 100% indicates that the loan amount is greater than the collateral value. An LTV ratio of less than 100% indicates an excess of collateral value over the loan amount. Generally, the higher the LTV ratio, the higher the risk of experiencing a credit loss. The DSCR compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the DSCR, the higher the risk of experiencing a credit loss. For our net commercial mortgage loans, our average LTV ratio was 68% and 64% at September 30, 2024 and December 31, 2023, respectively, and our average DSCR was 2.2x and 2.3x at September 30, 2024 and December 31, 2023, respectively. The DSCR and the values utilized in calculating the ratio are updated routinely. In addition, the LTV ratio is routinely updated for all but the lowest risk loans as part of our ongoing review of our commercial mortgage loan investments. For our net agricultural mortgage loans, our average LTV ratio was 47% at both September 30, 2024 and December 31, 2023. The values utilized in calculating our agricultural mortgage loan investments LTV ratio are developed in connection with the ongoing review of our portfolio and are routinely updated.
The distribution of our net commercial mortgage loan portfolios totaling $50.5 billion at amortized cost at September 30, 2024 by key credit quality indicators of LTV and DSCR was as follows:
September 30, 2024
DSCR
LTV
> 1.2x
1.0-1.2x
< 1.0x
Total
<65%
46.2
%
2.3
%
2.0
%
50.5
%
65% - 75%
17.9
%
1.3
%
0.3
%
19.5
%
76% - 80%
6.8
%
0.3
%
—
%
7.1
%
>80%
15.8
%
4.0
%
3.1
%
22.9
%
Total
86.7
%
7.9
%
5.4
%
100.0
%
The distribution of our net agricultural mortgage loan portfolios totaling $19.2 billion at amortized cost at September 30, 2024 by the key credit quality indicator of LTV was as follows:
September 30, 2024
LTV
Total
<65%
93.3
%
65% - 75%
6.0
%
76% - 80%
0.2
%
>80%
0.5
%
Total
100.0
%
Mortgage Loan Allowance for Credit Loss. Our ACL is established for both pools of loans with similar risk characteristics and for mortgage loan investments with dissimilar risk characteristics, such as collateral dependent loans, individually and on a loan specific basis. We record an allowance for expected lifetime credit loss in earnings within net investment gains (losses) in an amount that represents the portion of the amortized cost basis of mortgage loan investments that the Company does not expect to collect, resulting in mortgage loan investments being presented at the net amount expected to be collected.
In determining our ACL, management (i) pools mortgage loans that share similar risk characteristics, (ii) considers expected lifetime credit loss over contractual terms of mortgage loans, as adjusted for expected prepayments and any extensions, and (iii) considers past events and current and forecasted economic conditions. Actual credit loss realized could be different from the amount of the ACL recorded. These evaluations and assessments are revised as conditions change and new information becomes available, which can cause the ACL 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 ACL. Positive credit migration, including an actual or expected decrease in the level of problem loans, will result in a decrease in the ACL. See Notes 1 and 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information on how the ACL is established and monitored, and activity in and balances of the ACL.
Our real estate investments are comprised of wholly-owned properties, and interests in both real estate joint ventures and real estate funds which invest in a wide variety of properties and property types, including single and multi-property projects, and are broadly diversified across multiple property types and geographies.
The carrying value of our real estate investments was $13.7 billion and $13.3 billion at September 30, 2024 and December 31, 2023, respectively, or 2.9% of cash and invested assets at both September 30, 2024 and December 31, 2023.
Our real estate investments are typically stabilized properties that we intend to hold for the longer-term for portfolio diversification and long-term appreciation. Our real estate investment portfolio had appreciated to a $3.8 billion unrealized gain position at September 30, 2024.
We continuously monitor and assess our real estate investments for impairment when facts and circumstances indicate that the real estate may be impaired. As a result of our impairment analyses, we recorded impairment (loss) of $17 million for the nine months ended September 30, 2024. There was no impairment (loss) recognized on our real estate investments for the nine months ended September 30, 2023.
We diversify our real estate investments by property type, form of equity interest (wholly-owned, joint venture and funds) and geographic region to reduce risk of concentration. See Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for a summary of our real estate investments, by income type, as well as income earned.
Other Limited Partnership Interests
Other limited partnership interests are comprised of investments in private funds, including private equity funds and hedge funds. At September 30, 2024 and December 31, 2023, the carrying value of other limited partnership interests was $14.2 billion and $14.8 billion, which included $18 million and $27 million of hedge funds, respectively. Other limited partnership interests were 3.0% and 3.2% of cash and invested assets at September 30, 2024 and December 31, 2023, respectively. Cash distributions on these investments are generated from investment gains, operating income from the underlying investments of the funds and liquidation of the underlying investments of the funds.
We use the equity method of accounting for most of our private equity funds. We generally recognize our share of a private equity fund’s earnings in net investment income on a three-month lag, which is when the information is reported to us. Accordingly, changes in equity market levels, which can impact the underlying results of these private equity funds, are recognized in earnings within our net investment income on a three-month lag.
Other Invested Assets
The following table presents the carrying value of our other invested assets by type at:
September 30, 2024
December 31, 2023
Asset Type
Carrying Value
% of Total
Carrying Value
% of Total
(Dollars in millions)
Freestanding derivatives with positive estimated fair values
$
8,172
41.5
%
$
8,737
48.0
%
Direct financing leases
1,296
6.6
1,304
7.2
Annuities funding structured settlement claims
1,249
6.3
1,256
6.9
Operating joint ventures (1)
1,620
8.2
1,142
6.3
Company-owned life insurance policies
1,072
5.4
1,036
5.7
Tax credit and renewable energy partnerships
737
3.7
1,034
5.7
Federal Home Loan Bank of New York (“FHLBNY”) common stock
(1)See Note 3 of the Notes to the Interim Condensed Consolidated Financial Statements for information regarding the Company’s pending disposition of MetLife Malaysia.
See Notes 1, 11 and 12 of the Notes to the Consolidated Financial Statements included in the 2023 Annual Report for information regarding freestanding derivatives with positive estimated fair values, tax credit and renewable energy partnerships, annuities funding structured settlement claims, direct financing and leveraged leases, operating joint ventures, FHLBNY common stock, and funds withheld.
Investment Commitments
We enter into the following commitments in the normal course of business for the purpose of enhancing the total return on our investment portfolio: mortgage loan commitments and commitments to fund partnerships, bank credit facilities, bridge loans and private corporate bond investments. See Note 19 of the Notes to the Interim Condensed Consolidated Financial Statements for the amount of our unfunded investment commitments at September 30, 2024 and December 31, 2023. See “Net Investment Income” and “Net Investment Gains (Losses)” in Note 10 of the Notes to the Interim Condensed Consolidated Financial Statements for information on the investment income, investment expense, gains and losses from such investments and the liability for credit loss for unfunded mortgage loan commitments. See also “— Fixed Maturity Securities AFS and Equity Securities,” “— Net Mortgage Loans,” “— Real Estate and Real Estate Joint Ventures” and “— Other Limited Partnership Interests.”
Derivatives
Overview
We are exposed to various risks relating to our ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. We use a variety of strategies to manage these risks, including the use of derivatives, such as market standard purchased and written credit default swap contracts. See Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements for:
•A comprehensive description of the nature of our derivatives, including the strategies for which derivatives are used in managing various risks.
•Information about the primary underlying risk exposure, gross notional amount, and estimated fair value of our derivatives by type of hedge designation, excluding embedded derivatives held at September 30, 2024 and December 31, 2023.
•The statement of operations effects of derivatives in net investments in foreign operations, cash flow, fair value, or nonqualifying hedging relationships for the three months and nine months ended September 30, 2024 and 2023.
See “— Summary of Critical Accounting Estimates — Derivatives” in the 2023 Annual Report for further information on the estimates and assumptions that affect derivatives. See also “Quantitative and Qualitative Disclosures About Market Risk — Management of Market Risk Exposures — Hedging Activities” in the 2023 Annual Report for more information about our use of derivatives by major hedge program.
Net Derivative Gains (Losses)
A portion of our derivatives are designated and qualify as accounting hedges, which reduce volatility in earnings. For those derivatives not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings. We actively evaluate market risk hedging needs and strategies to ensure our free cash flow and capital objectives are met under a range of market conditions.
Certain variable annuity products with guaranteed minimum benefits are accounted for as MRBs and measured at estimated fair value. We use freestanding derivatives to hedge the market risks inherent in these variable annuity guarantees.
We continuously review and refine our hedging strategy in light of changing economic and market conditions, evolving NAIC and the New York Department of Financial Services statutory requirements, and accounting rule changes. As a part of our current hedging strategy, we maintain portfolio level derivatives in our macro hedge program. These macro hedge program derivatives mitigate the potential deterioration in our capital positions from significant adverse economic conditions.
See “— Results of Operations — Consolidated Results” for an analysis of the period over period changes in net derivative gains (losses).
This discussion should be read in conjunction with the following sections included elsewhere herein for additional information regarding the topics noted below:
•Notes to the Interim Condensed Consolidated Financial Statements:
◦Note 13 (senior notes issuances and senior notes redemption); and
◦Note 14 (preferred stock, including the calculation and timing of dividend payments, and MetLife, Inc.’s common stock repurchase authorizations).
Additionally, this discussion should be read in conjunction with the following sections included in the 2023 Annual Report for additional information regarding the topics noted below:
•Notes to the Consolidated Financial Statements: (i) Note 3 (dispositions); (ii) Note 5 (funding agreements, reported in PABs, and the related pledged collateral); (iii) Note 16 (long-term debt, commercial paper and other short-term debt, credit and committed facilities, and debt and facility covenants); (iv) Note 17 (collateral financing arrangement and the related pledged collateral); (v) Note 18 (junior subordinated debt securities and the related replacement capital covenant); and (vi) Note 19 (preferred stock and common stock, including the calculation and timing of dividend payments, restrictions on dividends, “dividend stopper” provisions, and MetLife, Inc.’s common stock repurchase authorizations).
•Notes to the MetLife, Inc. (Parent Company Only) Condensed Financial Information included in Schedule II of the Financial Statement Schedules: (i) Note 4 (affiliated long-term debt); and (ii) Note 5 (support agreements).
•Risk Factors: (i) “— Capital Risks”; (ii) “— Investment Risks — We May Have Difficulty Selling Holdings in Our Investment Portfolio or in Our Securities Lending Program in a Timely Manner to Realize Their Full Value”; (iii) “— Economic Environment and Capital Markets Risks — We May Lose Business Due to a Downgrade or a Potential Downgrade in Our Financial Strength or Credit Ratings”; and (iv) “— Economic Environment and Capital Markets Risks — We May Not Meet Our Liquidity Needs, Access Capital, or May Face Significantly Increased Cost of Capital Due to Adverse Capital and Credit Market Conditions.”
Our business and results of operations are materially affected by conditions in the global financial markets and the economy generally due to our market presence in numerous countries, large investment portfolio and the sensitivity of our insurance liabilities and derivatives to changing market factors. Such conditions may affect our financing costs and market interest for our debt or equity securities. For further information regarding market factors that could affect our ability to meet liquidity and capital needs, see “— Industry Trends” and “— Investments — Current Environment.”
Liquidity Management
Based upon the strength of our franchise, diversification of our businesses, strong financial fundamentals and the substantial funding sources available to us as described herein, we continue to believe we have access to ample liquidity to meet business requirements under current market conditions and reasonably possible stress scenarios. We continuously monitor and adjust our liquidity and capital plans for MetLife, Inc. and its subsidiaries in light of market conditions, as well as changing needs and opportunities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity” included in the 2023 Annual Report.
Short-term Liquidity and Liquid Assets
An integral part of our liquidity management includes managing our level of liquid assets. At September 30, 2024 and December 31, 2023, our short-term liquidity position was $20.2 billion and $19.2 billion, respectively, and liquid assets were $182.7 billion and $182.6 billion, respectively.
Short-term liquidity includes cash and cash equivalents and short-term investments, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, repurchase agreements, derivatives, and secured borrowings, as well as amounts held in the closed block.
Liquid assets include short-term liquidity and publicly traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with securities lending, repurchase agreements, derivatives, regulatory deposits, the collateral financing arrangement, funding agreements and secured borrowings, as well as amounts held in the closed block.
Capital Management
We have established several senior management committees as part of our capital management process. These committees, including the Capital Management Committee and the Enterprise Risk Committee (“ERC”), regularly review actual and projected capital levels (under a variety of scenarios including stress scenarios) and our annual capital plan in accordance with our capital policy. The Capital Management Committee is comprised of members of senior management, including MetLife, Inc.’s Chief Financial Officer (“CFO”), Treasurer, and Chief Risk Officer (“CRO”). The ERC is also comprised of members of senior management, including MetLife, Inc.’s CFO, CRO and Chief Investment Officer.
MetLife, Inc.’s Board of Directors (“Board of Directors”) and senior management are directly involved in the development and maintenance of our 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 annual capital plan, capital targets or capital policy, are reviewed by the Finance and Risk Committee of the Board of Directors prior to obtaining full Board of Directors approval. The Board of Directors approves the capital policy and the annual capital plan and authorizes capital actions, as required.
The Company
Liquidity
Liquidity refers to the ability to generate adequate amounts of cash to meet our needs. In the event of significant cash requirements beyond anticipated liquidity needs, we have various alternatives available depending on market conditions and the amount and timing of the liquidity need. These available alternatives include cash flows from operations, sales of liquid assets, global funding sources including commercial paper and various credit and committed facilities.
Capital
We manage our capital position to maintain our financial strength and credit ratings. Our capital position is supported by our ability to generate strong cash flows within our operating companies and borrow funds at competitive rates, as well as by our demonstrated ability to raise additional capital to meet operating and growth needs despite adverse market and economic conditions.
Summary of the Company’s Primary Sources and Uses of Liquidity and Capital
Our primary sources and uses of liquidity and capital are summarized as follows:
Nine Months Ended September 30,
2024
2023
(In millions)
Sources:
Operating activities, net
$
9,987
$
8,539
Net change in PABs
2,535
3,493
Long-term debt issued
1,547
2,003
Other, net
140
—
Total sources
14,209
14,035
Uses:
Investing activities, net
6,129
10,822
Net change in payables for collateral under securities loaned and other transactions
394
2,927
Long-term debt repaid
1,742
1,027
Collateral financing arrangement repaid
108
65
Derivatives with certain financing elements and other derivative-related transactions, net
41
170
Net change in mortgage loan secured financing
431
385
Treasury stock acquired in connection with share repurchases
2,801
2,244
Dividends on preferred stock
168
165
Dividends on common stock
1,149
1,180
Other, net
—
97
Effect of change in foreign currency exchange rates on cash and cash equivalents
120
236
Total uses
13,083
19,318
Net increase (decrease) in cash and cash equivalents
$
1,126
$
(5,283)
Cash Flows from Operations
The principal cash inflows from our insurance activities come from insurance premiums, net investment income, annuity considerations and deposit funds. The principal cash outflows are the result of various life insurance, annuity and pension products, operating expenses and income tax, as well as interest expense.
Cash Flows from Investments
The principal cash inflows from our investment activities come from repayments of principal, proceeds from maturities and sales of investments and settlements of freestanding derivatives. The principal cash outflows relate to purchases of investments, issuances of policy loans and settlements of freestanding derivatives. In addition, cash inflows and outflows relate to sales and purchases of businesses. We typically have a net cash outflow from investing activities because cash inflows from insurance operations are reinvested in accordance with our ALM discipline to fund insurance liabilities. We closely monitor and manage these risks through our comprehensive investment risk management process.
Cash Flows from Financing
The principal cash inflows from our financing activities come from issuances of debt and other securities, deposits of funds associated with PABs and lending of securities. The principal cash outflows come from repayments of debt and the collateral financing arrangement, payments of dividends on and repurchases or redemptions of MetLife, Inc.’s securities, withdrawals associated with PABs and the return of securities on loan.
Liquidity and capital are provided by a variety of global funding sources, including: (i) preferred and common stock; (ii) short-term debt, which includes commercial paper; (iii) long-term debt; collateral financing arrangement; and junior subordinated debt securities; (iv) PABs, which includes funding agreements; (v) credit and committed facilities; (vi) shelf registration statement, which permits the issuance of public debt, equity and hybrid securities and provides for automatic effectiveness upon filing and has no stated issuance capacity; and (vii) dispositions. Additional details regarding certain of our primary sources of liquidity and capital are included in the Notes to the Interim Condensed Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the 2023 Annual Report referenced in “— Overview” and are discussed below.
The diversity of our global funding sources enhances our funding flexibility, limits dependence on any one market or source of funds and generally lowers the cost of funds. We have no reason to believe that our lending counterparties will be unable to fulfill their respective contractual obligations under our credit and committed facilities. As commitments under these facilities may expire unused, these amounts do not necessarily reflect our actual future cash funding requirements.
Credit and Committed Facilities
At September 30, 2024, the Company maintained its unsecured revolving credit facility (the “Credit Facility”), as well as certain committed facilities (the “Committed Facilities”). When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements.
Information on the Credit Facility and Committed Facilities at September 30, 2024 was as follows:
Account Party/Borrower(s)
Maximum Capacity
Letters of Credit Issued
Drawdowns
Unused Commitments
(In millions)
Credit Facility:
MetLife, Inc. and MetLife Funding, Inc.
$
3,000
$
297
$
—
$
2,703
Committed Facilities:
MetLife Reinsurance Company of Vermont and MetLife, Inc.
$
350
$
350
$
—
$
—
MetLife Reinsurance Company of Vermont and MetLife, Inc.
2,896
2,493
—
403
Total Committed Facilities
$
3,246
$
2,843
$
—
$
403
The following table summarizes our outstanding debt at:
September 30, 2024
December 31, 2023
(In millions)
Short-term debt (1)
$
404
$
119
Long-term debt (2)
$
15,278
$
15,548
Collateral financing arrangement
$
529
$
637
Junior subordinated debt securities
$
3,163
$
3,161
__________________
(1)Includes $404 million and $119 million of short-term debt that is non-recourse to MetLife, Inc. and Metropolitan Life Insurance Company (“MLIC”), subject to customary exceptions, at September 30, 2024 and December 31, 2023, respectively. Certain subsidiaries have pledged assets to secure this debt.
(2)Includes $376 million and $442 million of long-term debt that is non-recourse to MetLife, Inc. and MLIC, subject to customary exceptions, at September 30, 2024 and December 31, 2023, respectively. Certain investment subsidiaries have pledged assets to secure this debt.
Certain of our debt instruments and Committed Facilities, as well as our Credit Facility, contain various administrative, reporting, legal and financial covenants. We believe we were in compliance with all applicable financial covenants at September 30, 2024.
The primary uses of liquidity and capital include: (i) common stock repurchases; (ii) dividends on common and preferred stock; (iii) preferred stock redemptions; (iv) debt repayments; (v) debt repurchases, redemptions and exchanges; (vi) contractual obligations, including PABs and insurance liabilities; (vii) pledged collateral; (viii) securities lending transactions, repurchase agreements and third-party custodian administered programs; (ix) mortgage loan secured financing; and (x) acquisitions. Additional details regarding certain of our primary uses of liquidity and capital are included in the Notes to the Interim Condensed Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the 2023 Annual Report referenced in “— Overview” and are discussed below.
Common Stock Repurchases and Dividends
Among other factors that could restrict MetLife, Inc.’s ability to repurchase or pay dividends on its common stock are the “dividend stopper” provisions in MetLife, Inc.’s preferred stock and junior subordinated debentures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Liquidity and Capital Uses — ‘Dividend Stopper’ Provisions in MetLife’s Preferred Stock and Junior Subordinated Debentures” included in the 2023 Annual Report.
For the nine months ended September 30, 2024 and 2023, MetLife, Inc. paid dividends on its preferred stock of $168 million and $165 million, respectively. For the nine months ended September 30, 2024 and 2023, MetLife, Inc. paid dividends on its common stock of $1.1 billion and $1.2 billion, respectively.
Debt Repurchases, Redemptions and Exchanges
We may from time to time seek to retire or purchase our outstanding debt through cash purchases, redemptions and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise. Any such repurchases, redemptions, 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 or redeem any debt and the size and timing of any such repurchases or redemptions will be determined at our discretion.
Pledged Collateral
We pledge collateral to, and have collateral pledged to us by counterparties in connection with our derivatives, the collateral financing arrangement related to the reinsurance of closed block liabilities, and with funding and advance agreements. See Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements for additional information regarding derivatives.
Securities Lending Transactions, Repurchase Agreements and Third-Party Custodian Administered Programs
See “— Investments — Securities Lending Transactions, Repurchase Agreements and Third-Party Custodian Administered Programs.”
Mortgage Loan Secured Financing
See “— Investments — Net Mortgage Loans.”
Insurance Liabilities
Liabilities arising from our insurance activities primarily relate to benefit payments under various life insurance, annuity and group pension products, as well as payments for policy surrenders, withdrawals and loans. For annuity or deposit type products, surrender or lapse behavior differs somewhat by segment. In the MetLife Holdings segment, which includes individual annuities, lapses and surrenders tend to occur in the normal course of business. For the nine months ended September 30, 2024 and 2023, general account surrenders and withdrawals from annuity products were $1.3 billion and $1.4 billion, respectively. In the RIS segment, which includes pension risk transfers, bank-owned life insurance and other fixed annuity contracts, as well as funding agreements and other capital market products, most of the products offered have fixed maturities or fairly predictable surrenders or withdrawals. With regard to the RIS business products that provide customers with limited rights to accelerate payments, at September 30, 2024, there were funding agreements totaling $127 million that could be put back to the Company.
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. 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. 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company — Rating Agencies” included in the 2023 Annual Report.
Liquid Assets
At September 30, 2024 and December 31, 2023, MetLife holding companies had $4.5 billion and $5.2 billion, respectively, in liquid assets. Of these amounts, $3.6 billion and $4.2 billion were held by MetLife, Inc. and $911 million and $1.0 billion were held by other MetLife holding companies at September 30, 2024 and December 31, 2023, respectively. Liquid assets include cash and cash equivalents, short-term investments and publicly traded securities, excluding assets that are pledged or otherwise committed. Assets pledged or otherwise committed include amounts received in connection with derivatives and the collateral financing arrangement.
Liquid assets held in non-U.S. holding companies are generated in part through dividends from non-U.S. insurance operations. Such dividends are subject to local insurance regulatory requirements, as discussed in “— Liquidity and Capital Sources — Dividends from Subsidiaries.”
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Consolidated Company Outlook” included in the 2023 Annual Report for the targeted level of liquid assets at the holding companies. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — MetLife, Inc. — Liquid Assets” included in the 2023 Annual Report for additional information on the sources and uses of liquid assets, as well as sources and uses of liquid assets included in free cash flow for MetLife, Inc. and other MetLife holding companies.
Liquidity and Capital Sources
MetLife, Inc.’s primary sources of liquidity and capital are provided by a variety of global funding sources, including: (i) dividends from subsidiaries; (ii) issuances of long-term debt; (iii) collateral financing arrangement and junior subordinated debentures; (iv) credit and committed facilities; and (v) dispositions. Additional details regarding certain of MetLife, Inc.’s primary sources of liquidity and capital are included in “— The Company — Liquidity and Capital Sources,” the Notes to the Interim Condensed Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the 2023 Annual Report referenced in “— Overview” and are discussed below.
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 we conduct 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 in 2024 by MetLife, Inc.’s primary U.S. insurance subsidiaries without insurance regulatory approval and the actual dividends paid for the nine months ended September 30, 2024:
Company
Paid (1)
Permitted Without Approval (2)
(In millions)
MLIC
$
2,738
$
3,476
American Life Insurance Company
$
1,090
$
945
Metropolitan Tower Life Insurance Company
$
184
$
373
__________________
(1)Reflects all amounts paid, including those where regulatory approval was obtained as required.
(2)Reflects dividend amounts that may be paid during 2024 without prior 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 2024, some or all of such dividends may require regulatory approval.
In addition to the amounts presented in the table above, for the nine months ended September 30, 2024, MetLife, Inc. also received from certain other subsidiaries cash dividends of $29 million, as well as cash returns of capital of $16 million.
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 dividend payments to the parent company to a portion of the subsidiary’s prior year 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 our 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 our first-tier subsidiaries may also impact the dividend flow into MetLife, Inc.
We proactively manage target and excess capital levels and dividend flows and forecast 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.
Long-term Debt Outstanding
The following table summarizes the outstanding long-term debt of MetLife, Inc. at:
September 30, 2024
December 31, 2023
(In millions)
Long-term debt — unaffiliated
$
14,594
$
14,516
Long-term debt — affiliated
$
1,566
$
1,585
Junior subordinated debt securities
$
2,470
$
2,468
Liquidity and Capital Uses
MetLife, Inc.’s primary uses of liquidity and capital include: (i) debt service; (ii) cash dividends on common and preferred stock; (iii) capital contributions to subsidiaries; (iv) common stock, preferred stock and debt repurchases and/or redemptions; (v) payment of general operating expenses; (vi) support agreements; and (vii) acquisitions. Additional details regarding certain of MetLife, Inc.’s primary uses of liquidity and capital are included in “— The Company — Liquidity and Capital Uses,” the Notes to the Interim Condensed Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the 2023 Annual Report referenced in “— Overview” and are discussed below.
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 investment 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, pay cash dividends on its common and preferred stock, contribute capital to its subsidiaries, repurchase its common stock and certain of its other securities, pay all general operating expenses and meet its cash needs under current market conditions and reasonably possible stress scenarios.
For the nine months ended September 30, 2024 and 2023, MetLife, Inc. invested a net amount of $224 million and $430 million, respectively, in various subsidiaries.
MetLife, Inc. lends funds, as necessary, through credit agreements or otherwise to its subsidiaries and affiliates, some of which are regulated, to meet their capital requirements or to provide liquidity. MetLife, Inc. had loans to subsidiaries outstanding of $505 million and $305 million at September 30, 2024 and December 31, 2023, respectively.
Adopted Accounting Pronouncements
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.
Future Adoption of Accounting Pronouncements
See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.
Non-GAAP and Other Financial Disclosures
In this report, the Company presents certain measures of its performance on a consolidated and segment basis that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding for the Company and our investors of our performance by highlighting the results of operations and the underlying profitability drivers of our business. Segment-specific financial measures are calculated using only the portion of consolidated results attributable to that specific segment.
The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:
Non-GAAP financial measures:
Comparable GAAP financial measures:
(i)
adjusted premiums, fees and other revenues
(i)
premiums, fees and other revenues
(ii)
adjusted earnings
(ii)
net income (loss)
(iii)
adjusted earnings available to common shareholders
(iii)
net income (loss) available to MetLife, Inc.’s common shareholders
(iv)
adjusted net investment income
(iv)
net investment income
Any of these financial measures shown on a constant currency basis reflect the impact of changes in foreign currency exchange rates and are calculated using the average foreign currency exchange rates for the current period and applied to the comparable prior period (“constant currency basis”).
Reconciliations of these non-GAAP financial measures to the most directly comparable historical GAAP financial measures are included in “— Results of Operations” and “— Investments.” Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are not accessible on a forward-looking basis because we believe it is not possible without unreasonable effort to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income.
Our definitions of non-GAAP and other financial measures discussed in this report may differ from those used by other companies.
Adjusted earnings and related measures:
•adjusted earnings;
•adjusted earnings available to common shareholders; and
•adjusted earnings available to common shareholders on a constant currency basis.
These measures are used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings and components of, or other financial measures based on, adjusted earnings are also our GAAP measures of segment performance. Adjusted earnings and other financial measures based on adjusted earnings are also the measures by which senior management’s and many other employees’ performance is evaluated for the purposes of determining their compensation under applicable compensation plans. Adjusted earnings and other financial measures based on adjusted earnings allow analysis of our performance relative to our business plan and facilitate comparisons to industry results.
Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax. Adjusted earnings available to common shareholders is defined as adjusted earnings less preferred stock dividends. For additional information relating to adjusted earnings, see “Financial Measures and Segment Accounting Policies” in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.
In addition, adjusted earnings available to common shareholders excludes the impact of preferred stock redemption premium, which is reported as a reduction to net income (loss) available to MetLife, Inc.’s common shareholders.
Return on equity, allocated equity and related measures:
•Total MetLife, Inc.’s common stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”) other than foreign currency translation adjustments (“FCTA”), is defined as total MetLife, Inc.’s common stockholders’ equity, excluding the net unrealized investment gains (losses), future policy benefits discount rate remeasurement gains (losses), MRBs instrument-specific credit risk remeasurement gains (losses) and defined benefit plans adjustment components of AOCI, net of income tax.
•Return on MetLife, Inc.’s common stockholders’ equity: net income (loss) available to MetLife, Inc.’s common shareholders divided by MetLife, Inc.’s average common stockholders’ equity.
•Adjusted return on MetLife, Inc.’s common stockholders’ equity: adjusted earnings available to common shareholders divided by MetLife, Inc.’s average common stockholders’ equity.
•Adjusted return on MetLife, Inc.’s common stockholders’ equity, excluding AOCI other than FCTA: adjusted earnings available to common shareholders divided by MetLife, Inc.’s average common stockholders’ equity, excluding AOCI other than FCTA.
•Allocated equity is the portion of MetLife, Inc.’s common stockholders’ equity that management allocates to each of its segments based on local capital requirements and economic capital. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Economic Capital” in the 2023 Annual Report. Allocated equity excludes the impact of AOCI other than FCTA.
The above measures represent a level of equity consistent with the view that, in the ordinary course of business, we do not plan to sell most investments for the sole purpose of realizing gains or losses.
Expense ratio and direct expense ratio:
•Expense ratio: other expenses, net of capitalization of DAC, divided by premiums, fees and other revenues.
•Direct expense ratio: adjusted direct expenses divided by adjusted premiums, fees and other revenues. Direct expenses are comprised of employee-related costs, third-party staffing costs, and general and administrative expenses.
•Direct expense ratio, excluding total notable items related to direct expenses and pension risk transfers: adjusted direct expenses excluding total notable items related to direct expenses, divided by adjusted premiums, fees and other revenues, excluding pension risk transfers.
The following additional information is relevant to an understanding of our performance results and outlook:
•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. Further, sales statistics for our Latin America, Asia and EMEA segments are on a constant currency basis.
•Notable items reflect the unexpected impact of events that affect the Company’s results, but that were unknown and that the Company could not anticipate when it devised its business plan. Notable items also include certain items regardless of the extent anticipated in the business plan, to help investors have a better understanding of MetLife’s results and to evaluate and forecast those results. Notable items represent a positive (negative) impact to adjusted earnings available to common shareholders.
•The Company uses a measure of free cash flow to facilitate an understanding of its ability to generate cash for reinvestment into its businesses or use in non-mandatory capital actions. The Company defines free cash flow as the sum of cash available at MetLife’s holding companies from dividends from operating subsidiaries, expenses and other net flows of the holding companies (including capital contributions to subsidiaries), and net contributions from debt to be at or below target leverage ratios. This measure of free cash flow is prior to capital actions, such as common stock dividends and repurchases, debt reduction and mergers and acquisitions. Free cash flow should not be viewed as a substitute for net cash provided by (used in) operating activities calculated in accordance with GAAP. The free cash flow ratio is typically expressed as a percentage of annual adjusted earnings available to common shareholders.
•For further detail relating to total adjusted revenues and total adjusted expenses, as set forth in “— Results of Operations — Segment Results and Corporate & Other,” see total revenues and total expenses, respectively, within the tables in “Financial Measures and Segment Accounting Policies” in Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements.
Risk Management
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management” in the 2023 Annual Report for information on our risk management.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We regularly analyze our exposure to interest rate, equity market price and foreign currency exchange rate risks. As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are materially exposed to changes in interest rates, foreign currency exchange rates and changes in the equity markets. We have exposure to such market risks through our insurance operations and investment activities. We use a variety of strategies to manage these risks, including the use of derivatives. A description of our market risk exposures may be found under “Quantitative and Qualitative Disclosures About Market Risk” included in the 2023 Annual Report. There have been no material changes to our market risk exposures from those previously disclosed in the 2023 Annual Report.
Management, with the participation of the Chief Executive Officer (“CEO”) and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO have concluded that these disclosure controls and procedures are effective.
There were no material changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
See Note 19 of the Notes to the Interim Condensed Consolidated Financial Statements.
Item 1A. Risk Factors
Certain factors that may affect the Company’s business or operations are described under “Risk Factors” in Part I, Item 1A, of the 2023 Annual Report. There have been no material changes to our risk factors from the risk factors previously disclosed in the 2023 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Purchases of MetLife, Inc. common stock made by or on behalf of MetLife, Inc. or its affiliates during the quarter ended September 30, 2024 are set forth below:
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2)
July 1 — July 31, 2024
3,749,127
$
72.74
3,749,127
$
2,802,494,218
August 1 — August 31, 2024
3,930,057
$
71.94
3,930,057
$
2,519,747,093
September 1 — September 30, 2024
2,821,319
$
77.40
2,821,319
$
2,301,369,458
Total
10,500,503
10,500,503
__________________
(1)During the periods July 1 — July 31, 2024, August 1 — August 31, 2024 and September 1 — September 30, 2024, separate account index funds purchased 0 shares, 0 shares and 0 shares, respectively, of MetLife, Inc. common stock on the open market in non-discretionary transactions.
(2)In May 2024, MetLife, Inc. announced that its Board of Directors authorized an additional $3.0 billion of common stock repurchases. At September 30, 2024, MetLife, Inc. had $2.3 billion of common stock repurchases remaining under the authorization. Neither the authorization remaining, nor the amount repurchased, reflects the applicable excise tax payable in connection with such repurchases. For more information on common stock repurchases, including excise tax payable in connection therewith, see Note 14 of the Notes to the Interim Condensed Consolidated Financial Statements. See also “Risk Factors — Capital Risks — We May Not be Able to Pay Dividends or Repurchase Our Stock Due to Legal and Regulatory Restrictions or Cash Buffer Needs” included in the 2023 Annual Report.
During the three months ended September 30, 2024, none of our Section 16 officers or directors (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Section 408(c) of Regulation S-K).
(Note Regarding Reliance on Statements in Our Contracts:In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about MetLife, Inc., its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about MetLife, Inc., its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and MetLife, Inc.’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)
Incorporated by Reference
Exhibit No.
Description
Form
File Number
Exhibit
Filing Date
Filed or Furnished Herewith
4.1
Certain instruments defining the rights of holders of long-term debt of MetLife, Inc. and its consolidated subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. MetLife, Inc. hereby agrees to furnish to the Securities and Exchange Commission, upon request, copies of such instruments.
XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document.
X
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).
X
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*Indicates management contracts or compensatory plans or arrangements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
METLIFE, INC.
By:
/s/ Tamara L. Schock
Name: Tamara L. Schock Title: Executive Vice President and Chief Accounting Officer (Authorized Signatory and Principal Accounting Officer)