10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		FOR THE TRANSITION PERIOD FROM TO

Commission file number: 33-03094

MetLife Insurance Company of Connecticut

(Exact name of registrant as specified in its charter)


Connecticut		06-0566090
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1300 Hall Boulevard, Bloomfield, Connecticut		06002
(Address of principal executive offices)		(Zip Code)

(860) 656-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

At November 7, 2008, 34,595,317 shares of the registrant’s common stock, $2.50 par value per share, were outstanding, of which 30,000,000 shares were owned directly by MetLife, Inc. and the remaining 4,595,317 shares were owned by MetLife Investors Group, Inc., a wholly-owned subsidiary of MetLife, Inc.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is, therefore, filing this Form 10-Q with the reduced disclosure format.

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Part I — Financial Information


Item 1.	*Financial Statements*

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Balance Sheets
September 30, 2008 (Unaudited) and December 31, 2007

(In millions, except share and per share data)


	September 30,			December 31,
	2008			2007

Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $42,875 and $46,264, respectively)	$	39,538		$	45,671
Equity securities available-for-sale, at estimated fair value (cost: $859 and $992, respectively)		718			952
Mortgage and consumer loans		4,415			4,404
Policy loans		1,198			913
Real estate and real estate joint ventures held-for-investment		611			541
Other limited partnership interests		1,348			1,130
Short-term investments		524			1,335
Other invested assets		1,457			1,445

Total investments		49,809			56,391
Cash and cash equivalents		3,313			1,774
Accrued investment income		546			637
Premiums and other receivables		10,306			8,320
Deferred policy acquisition costs and value of business acquired		5,357			4,948
Current income tax recoverable		116			72
Deferred income tax assets		1,477			846
Goodwill		953			953
Other assets		759			753
Separate account assets		43,796			53,867

Total assets	$	116,432		$	128,561

Liabilities and Stockholders’ Equity
Liabilities
Future policy benefits	$	19,744		$	19,576
Policyholder account balances		32,166			33,815
Other policyholder funds		1,878			1,777
Long-term debt — affiliated		950			635
Payables for collateral under securities loaned and other transactions		10,099			10,471
Other liabilities		1,566			1,072
Separate account liabilities		43,796			53,867

Total liabilities		110,199			121,213

Contingencies, Commitments and Guarantees (Note 6)

Stockholders’ Equity
Common stock, par value $2.50 per share; 40,000,000 shares authorized; 34,595,317 shares issued and outstanding at both September 30, 2008 and December 31, 2007		86			86
Additional paid-in capital		6,719			6,719
Retained earnings		1,396			892
Accumulated other comprehensive loss		(1,968	)		(349	)

Total stockholders’ equity		6,233			7,348

Total liabilities and stockholders’ equity	$	116,432		$	128,561

See accompanying notes to interim condensed consolidated financial statements.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Statements of Income

For the Three Months and Nine Months Ended September 30, 2008 and 2007 (Unaudited)

(In millions)


	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
			As Restated,						As Restated,
	2008		2007			2008			2007

Revenues
Premiums	$	90	$	92		$	310		$	263
Universal life and investment-type product policy fees		436		351			1,208			1,033
Net investment income		621		719			1,968			2,183
Other revenues		54		64			169			188
Net investment gains (losses)		80		(48	)		(91	)		(249	)

Total revenues		1,281		1,178			3,564			3,418

Expenses
Policyholder benefits and claims		265		256			813			722
Interest credited to policyholder account balances		253		325			849			967
Other expenses		462		319			1,219			999

Total expenses		980		900			2,881			2,688

Income from continuing operations before provision for income tax		301		278			683			730
Provision for income tax		82		88			179			201

Income from continuing operations		219		190			504			529
Income from discontinued operations, net of income tax		—		—			—			4

Net income	$	219	$	190		$	504		$	533

See accompanying notes to interim condensed consolidated financial statements.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Statement of Stockholders’ Equity
For the Nine Months Ended September 30, 2008 (Unaudited)

(In millions)


							Accumulated Other
							Comprehensive Loss
							Net			Foreign
			Additional				Unrealized			Currency
	Common		Paid-in		Retained		Investment			Translation
	Stock		Capital		Earnings		Gains (Losses)			Adjustments			Total

Balance at January 1, 2008	$	86	$	6,719	$	892	$	(361	)	$	12		$	7,348
Comprehensive income (loss):
Net income						504								504
Other comprehensive loss:
Unrealized gains (losses) on derivative instruments, net of income tax								10						10
Unrealized investment gains (losses), net of related offsets and income tax								(1,569	)					(1,569	)
Foreign currency translation adjustments, net of income tax											(60	)		(60	)
Other comprehensive loss														(1,619	)

Comprehensive loss														(1,115	)

Balance at September 30, 2008	$	86	$	6,719	$	1,396	$	(1,920	)	$	(48	)	$	6,233

See accompanying notes to interim condensed consolidated financial statements.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Interim Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2008 and 2007 (Unaudited)

(In millions)


	Nine Months Ended
	September 30,
				As Restated,
	2008			2007

Net cash provided by operating activities	$	1,157		$	1,881

Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities		14,047			17,241
Equity securities		73			143
Mortgage and consumer loans		373			815
Real estate and real estate joint ventures		14			146
Other limited partnership interests		181			435
Purchases of:
Fixed maturity securities		(11,902	)		(17,593	)
Equity securities		(153	)		(315	)
Mortgage and consumer loans		(429	)		(1,815	)
Real estate and real estate joint ventures		(88	)		(378	)
Other limited partnership interests		(404	)		(354	)
Net change in policy loans		(285	)		2
Net change in short-term investments		815			106
Net change in other invested assets		189			(145	)
Other, net		—			13

Net cash provided by (used in) investing activities		2,431			(1,699	)

Cash flows from financing activities
Policyholder account balances:
Deposits		2,474			8,425
Withdrawals		(4,435	)		(9,843	)
Net change in payables for collateral under securities loaned and other		(372	)		2,177
transactions
Net change in short-term debt — affiliated		—			52
Long-term debt issued — affiliated		750			—
Long-term debt repaid — affiliated		(435	)		—
Financing element on certain derivative instruments		(23	)		52
Debt and equity issuance costs		(8	)		—

Net cash (used in) provided by financing activities		(2,049	)		863

Change in cash and cash equivalents		1,539			1,045
Cash and cash equivalents, beginning of period		1,774			649

Cash and cash equivalents, end of period	$	3,313		$	1,694

Supplemental disclosures of cash flow information:
Net cash paid during the period for:
Interest	$	29		$	25

Income tax	$	23		$	81

See Note 12 for disclosure regarding the receipt of $901 million under an affiliated reinsurance agreement during the nine months ended September 30, 2007, which is included in net cash provided by operating activities.

See accompanying notes to interim condensed consolidated financial statements.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)


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

Business

“MICC” or the “Company” refers to MetLife Insurance Company of Connecticut, a Connecticut corporation incorporated in 1863, and its subsidiaries, including MetLife Investors USA Insurance Company (“MLI-USA”). The Company is a wholly-owned subsidiary of MetLife, Inc. (“MetLife”). The Company offers individual annuities, individual life insurance and institutional protection and asset accumulation products.

Basis of Presentation

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the interim condensed consolidated financial statements. The most critical estimates include those used in determining:


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

	(ii)	investment impairments;

	(iii)	the recognition of income on certain investment entities;

	(iv)	the application of the consolidation rules to certain investments;

	(v)	the existence and fair value of embedded derivatives requiring bifurcation;

	(vi)	the fair value of and accounting for derivatives;

	(vii)	the capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”);

	(viii)	the measurement of goodwill and related impairment, if any;

	(ix)	the liability for future policyholder benefits;

	(x)	accounting for income taxes and the valuation of deferred tax assets;

	(xi)	accounting for reinsurance transactions; and

	(xii)	the liability for litigation and regulatory matters.

In applying the Company’s accounting policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s businesses and operations. Actual results could differ from these estimates.

The accompanying interim condensed consolidated financial statements include the accounts of: (i) the Company; (ii) partnerships and joint ventures in which the Company has control; and (iii) variable interest entities for which the Company is deemed to be the primary beneficiary. Intercompany accounts and transactions have been eliminated.

The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint venture’s or partnership’s operations, but does not have a controlling interest and is not the primary beneficiary. The Company uses the cost method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint venture’s or the partnership’s operations.

The accompanying interim condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company at September 30, 2008, its consolidated results of operations for the three months and nine months ended September 30, 2008 and 2007, its consolidated cash flows for the nine months ended September 30, 2008 and

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

2007, and its consolidated statement of stockholders’ equity for the nine months ended September 30, 2008, in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2007 consolidated balance sheet data was derived from audited consolidated financial statements included in MICC’s Annual Report on Form 10-K for the year ended December 31, 2007 (as amended on Form 10-K/A, the “2007 Annual Report”) filed with the U.S. Securities and Exchange Commission, which includes all disclosures required by GAAP. Therefore, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company included in the 2007 Annual Report.

During the first quarter of 2008, the Company identified a miscalculation of the foreign exchange adjustment related to the accrued interest credited liability included within policyholder account balances on its foreign denominated issuances under its guaranteed interest contract (“GIC”) program. This miscalculation resulted in an overstatement of the foreign currency exchange loss on accrued interest credited payable and an understatement of net income. In addition, the Company recognized that its assessment of the functional currency of its operations in Ireland was not in accordance with the applicable accounting principles. As a result of identifying these foreign currency related matters in the first quarter of 2008, the Company restated its December 31, 2007 consolidated financial statements in the aforementioned Form 10-K/A. The Company also revised its consolidated financial statements for the quarter ended September 30, 2007 to properly reflect the accrued interest credited liability on its foreign denominated GICs in that Form 10-K/A. The Company’s net income for the quarter ended September 30, 2007 increased by $36 million as a result of the correction of such matters. The consolidated financial statements as of and for the three and nine months ended September 30, 2007, as presented herein, have been restated for the effects of such adjustments.

Adoption of New Accounting Pronouncements

Fair Value

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a consistent framework for measuring fair value, establishes a fair value hierarchy based on the observability of inputs used to measure fair value, and requires enhanced disclosures about fair value measurements.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In many cases, the exit price and the transaction (or entry) price will be the same at initial recognition. However, in certain cases, the transaction price may not represent fair value. Prior to SFAS 157, the fair value of a liability was often based on a settlement price concept, which assumed the liability was extinguished. Under SFAS 157, fair value is based on the amount that would be paid to transfer a liability to a third party with the same credit standing. SFAS 157 requires that fair value be a market-based measurement in which the fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant. Accordingly, fair value is no longer determined based solely upon the perspective of the reporting entity. When quoted prices are not used to determine fair value, SFAS 157 requires consideration of three broad valuation techniques: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The approaches are not new, but SFAS 157 requires that entities determine the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs. SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Company has categorized its assets and liabilities into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

to unobservable inputs (Level 3). An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows:


	Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities.

	Level 2	Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

	Level 3	Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Effective January 1, 2008, the Company adopted SFAS 157 and applied the provisions of the statement prospectively to assets and liabilities measured at fair value. The adoption of SFAS 157 changed the valuation of certain freestanding derivatives by moving from a mid to bid pricing convention as it relates to certain volatility inputs as well as the addition of liquidity adjustments and adjustments for risks inherent in a particular input or valuation technique. The adoption of SFAS 157 also changed the valuation of the Company’s embedded derivatives, most significantly the valuation of embedded derivatives associated with certain riders on variable annuity contracts. The change in valuation of embedded derivatives associated with riders on annuity contracts resulted from the incorporation of risk margins associated with non-capital market inputs and the inclusion of the Company’s own credit standing in their valuation. At January 1, 2008, the impact of adopting SFAS 157 on assets and liabilities measured at fair value was $59 million ($38 million, net of income tax) and was recognized as a change in estimate in the accompanying interim condensed consolidated statement of income where it was presented in the respective income statement caption to which the item measured at fair value is presented. There were no significant changes in fair value of items measured at fair value and reflected in accumulated other comprehensive income (loss). The addition of risk margins and the Company’s own credit spread in the valuation of embedded derivatives associated with annuity contracts may result in significant volatility in the Company’s consolidated net income in future periods. Note 11 presents the fair value of all assets and liabilities required to be measured at fair value as well as the expanded fair value disclosures required by SFAS 157, which includes updated critical accounting estimates related to investments, derivatives and embedded derivatives. This information should be read in conjunction with Note 1 of the Notes to Consolidated Financial Statements included in the 2007 Annual Report.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 permits entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to recognize related unrealized gains and losses in earnings. The fair value option is applied on an instrument-by-instrument basis upon adoption of the standard, upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election is an irrevocable election. Effective January 1, 2008, the Company did not elect the fair value option for any instruments.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Accounting for Leases. The Company also adopted FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 which delays the effective date of SFAS 157 for certain nonfinancial assets and liabilities that are recorded at fair value on a nonrecurring basis. The effective date is delayed until January 1, 2009 and impacts balance sheet items including nonfinancial assets and liabilities in a business combination and the impairment testing of goodwill and long-lived assets.

Effective September 30, 2008, the Company adopted FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active (“FSP 157-3”). FSP 157-3 provides guidance on how a company’s internal cash flow and discount rate assumptions should be considered in the measurement of fair value when relevant market data does not exist, how observable market information in an inactive market affects fair value measurement and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. The adoption of FSP 157-3 did not have a material impact on the Company’s interim condensed consolidated financial statements.

Other

Effective January 1, 2008, the Company adopted FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 (“FSP 39-1”). FSP 39-1 amends FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts (“FIN 39”), to permit a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement that have been offset in accordance with FIN 39. FSP 39-1 also amends FIN 39 for certain terminology modifications. Upon adoption of FSP 39-1, the Company did not change its accounting policy of not offsetting fair value amounts recognized for derivative instruments under master netting arrangements. The adoption of FSP 39-1 did not have an impact on the Company’s interim condensed consolidated financial statements.

Effective January 1, 2008, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”) Implementation Issue E-23, Clarification of the Application of the Shortcut Method (“Issue E-23”). Issue E-23 amended SFAS 133 by permitting interest rate swaps to have a non-zero fair value at inception when applying the shortcut method of assessing hedge effectiveness, as long as the difference between the transaction price (zero) and the fair value (exit price), as defined by SFAS 157, is solely attributable to a bid-ask spread. In addition, entities are not precluded from applying the shortcut method of assessing hedge effectiveness in a hedging relationship of interest rate risk involving an interest bearing asset or liability in situations where the hedged item is not recognized for accounting purposes until settlement date as long as the period between trade date and settlement date of the hedged item is consistent with generally established conventions in the marketplace. The adoption of Issue E-23 did not have an impact on the Company’s interim condensed consolidated financial statements.

Future Adoption of New Accounting Pronouncements

Business Combinations

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations — A Replacement of FASB Statement No. 141 (“SFAS 141(r)”) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS 160”). Under SFAS 141(r) and SFAS 160:


	•	All business combinations (whether full, partial or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions.

	•	Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date.

	•	The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


	•	Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies.

	•	Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense.

	•	Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities.

	•	When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized.

	•	Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions.

	•	When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized.

The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company is currently evaluating the impact of SFAS 141(r) on its accounting for future acquisitions and the impact of SFAS 160 on its consolidated financial statements.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). This change is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(r) and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.

Derivatives

In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees — An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 (“FSP 133-1 and FIN 45-4”). FSP 133-1 and FIN 45-4 amends SFAS 133 to require certain enhanced disclosures by sellers of credit derivatives by requiring additional information about the potential adverse effects of changes in their credit risk, financial performance, and cash flows. It also amends FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34 (“FIN 45”), to require an additional disclosure about the current status of the payment/performance risk of a guarantee. FSP 133-1 and FIN 45-4 is effective for reporting periods ending after November 15, 2008. The Company provided a majority of the required disclosures related to credit derivatives under this FSP and is currently evaluating the impact of FSP 133-1 and FIN 45-4 on its consolidated financial statement disclosures for guarantees.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

beginning after November 15, 2008. The Company is currently evaluating the impact of SFAS 161 on its consolidated financial statements.

Other

In September 2008, the FASB ratified the consensus on Emerging Issues Task Force (“EITF”) Issue No. 08-5, Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement (“EITF 08-5”). EITF 08-5 concludes that an issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. In addition, EITF 08-5 requires disclosures about the existence of any third-party credit enhancement related to liabilities that are measured at fair value. EITF 08-5 is effective beginning in the first reporting period after December 15, 2008 and will be applied prospectively, with the effect of initial application included in the change in fair value of the liability in the period of adoption. The Company does not expect EITF 08-5 to have a material impact on the Company’s consolidated financial statements.

In February 2008, the FASB issued FSP No. FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions (“FSP 140-3”). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of FSP 140-3 on its consolidated financial statements.

In December 2007, the FASB ratified as final the consensus on EITF Issue No. 07-6, Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause (“EITF 07-6”). EITF 07-6 addresses whether the existence of a buy-sell arrangement would preclude partial sales treatment when real estate is sold to a jointly owned entity. The consensus concludes that the existence of a buy-sell clause does not necessarily preclude partial sale treatment under current guidance. EITF 07-6 applies prospectively to new arrangements entered into and assessments on existing transactions performed in fiscal years beginning after December 15, 2008. The Company does not expect the adoption of EITF 07-6 to have a material impact on its consolidated financial statements.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


2.	Investments

Fixed Maturity and Equity Securities Available-for-Sale

The following tables present the cost or amortized cost, gross unrealized gain and loss, estimated fair value of the Company’s fixed maturity and equity securities, and the percentage that each sector represents by the respective total holdings at:


	September 30, 2008
	Cost or
	Amortized		Gross Unrealized				Estimated		% of
	Cost		Gain		Loss		Fair Value		Total
			(In millions)

U.S. corporate securities	$	16,326	$	84	$	1,769	$	14,641		37.0	%
Residential mortgage-backed securities		10,083		73		490		9,666		24.5
Foreign corporate securities		6,307		37		526		5,818		14.7
U.S. Treasury/agency securities		2,982		128		25		3,085		7.8
Commercial mortgage-backed securities		3,198		12		405		2,805		7.1
Asset-backed securities		2,524		—		377		2,147		5.4
Foreign government securities		572		31		9		594		1.5
State and political subdivision securities		883		3		104		782		2.0

Total fixed maturity securities	$	42,875	$	368	$	3,705	$	39,538		100.0	%

Non-redeemable preferred stock	$	581	$	1	$	138	$	444		61.8	%
Common stock		278		1		5		274		38.2

Total equity securities	$	859	$	2	$	143	$	718		100.0	%


	December 31, 2007
	Cost or
	Amortized		Gross Unrealized				Estimated		% of
	Cost		Gain		Loss		Fair Value		Total
	(In millions)

U.S. corporate securities	$	17,174	$	119	$	618	$	16,675		36.5	%
Residential mortgage-backed securities		11,914		98		80		11,932		26.1
Foreign corporate securities		6,536		83		184		6,435		14.1
U.S. Treasury/agency securities		3,976		126		11		4,091		9.0
Commercial mortgage-backed securities		3,182		28		67		3,143		6.9
Asset-backed securities		2,236		4		108		2,132		4.7
Foreign government securities		635		55		2		688		1.5
State and political subdivision securities		611		4		40		575		1.2

Total fixed maturity securities	$	46,264	$	517	$	1,110	$	45,671		100.0	%

Non-redeemable preferred stock	$	777	$	21	$	63	$	735		77.2	%
Common stock		215		9		7		217		22.8

Total equity securities	$	992	$	30	$	70	$	952		100.0	%

Below Investment Grade or Non Rated Fixed Maturity Securities — The Company held fixed maturity securities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $2.9 billion and $3.8 billion at September 30, 2008 and December 31, 2007, respectively. These securities had net unrealized losses of $472 million and $94 million at September 30, 2008 and December 31, 2007, respectively.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Non-Income Producing Fixed Maturity Securities — Non-income producing fixed maturity securities at estimated fair value were $12 million and $1 million at September 30, 2008 and December 31, 2007, respectively. Net unrealized gains associated with non-income producing fixed maturity securities were less than $1 million at both September 30, 2008 and December 31, 2007.

Concentrations of Credit Risk (Fixed Maturity Securities) — The Company is exposed to concentrations of credit risk related to U.S. Treasury securities and obligations of U.S. government and agencies. At September 30, 2008 and December 31, 2007, the Company’s holdings in U.S. Treasury and agency fixed maturity securities at estimated fair value were $3.1 billion and $4.1 billion, respectively.

At September 30, 2008 and December 31, 2007, the Company’s holdings in U.S. corporate and foreign corporate fixed maturity securities at estimated fair value were $20.5 billion and $23.1 billion, respectively. The Company maintains a diversified portfolio of corporate securities across industries and issuers. The portfolio does not have exposure to any single issuer in excess of 1% of total invested assets. At September 30, 2008 and December 31, 2007, the Company’s combined holdings in the ten issuers to which it had the greatest exposure totaled $1.8 billion and $1.9 billion, respectively, each less than 4% of the Company’s total invested assets at such dates. The exposure to the largest single issuer of corporate fixed maturity securities held at September 30, 2008 and December 31, 2007 was $352 million and $254 million, respectively.

At September 30, 2008 and December 31, 2007, the Company’s holdings in structured securities — which includes residential mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities — at estimated fair value were $14.6 billion and $17.2 billion, respectively.


	•	The majority of the residential mortgage-backed securities are guaranteed or otherwise supported by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association. At September 30, 2008 and December 31, 2007, $9.6 billion and $11.9 billion, respectively, of the estimated fair value or 99% for both, of the residential mortgage-backed securities were rated Aaa/AAA by Moody’s Investors Service (“Moody’s”), Standard & Poor’s (“S&P”) or Fitch Ratings Insurance Group (“Fitch”). Alternative residential mortgage loans (“Alt-A”) are a classification of mortgage loans where the risk profile of the borrower falls between prime and sub-prime. At September 30, 2008 and December 31, 2007, the Company’s Alt-A residential mortgage-backed securities exposure at estimated fair value was $0.9 billion and $1.1 billion, respectively, with an unrealized loss of $188 million and $28 million, respectively.

	•	At September 30, 2008 and December 31, 2007, $2.4 billion and $2.6 billion, respectively, of the estimated fair value, or 86% and 84%, respectively, of the commercial mortgage-backed securities were rated Aaa/AAA by Moody’s, S&P or Fitch.

	•	The Company’s asset-backed securities are diversified both by sector and by issuer. At September 30, 2008 and December 31, 2007, $1.2 billion and $1.0 billion, respectively, or 58% and 48%, respectively, of total asset-backed securities were rated Aaa/AAA by Moody’s, S&P or Fitch. At September 30, 2008, the largest exposures in the Company’s asset-backed securities portfolio were credit card receivables and automobile receivables of 43% and 12% of the total holdings, respectively. The Company’s asset-backed securities include exposure to residential mortgage-backed securities backed by sub-prime mortgage loans. Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles. At September 30, 2008 and December 31, 2007, the Company had exposure to fixed maturity securities backed by sub-prime mortgage loans with estimated fair values of $407 million and $570 million, respectively, and unrealized losses of $138 million and $45 million, respectively. At September 30, 2008, 17% of the asset-backed securities backed by sub-prime mortgage loans have been guaranteed by financial guarantee insurers, of which 1% and 53% were guaranteed by financial guarantee insurers who were Aaa, and Aa rated, respectively.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

At September 30, 2008, $1.2 billion of the estimated fair value of the Company’s fixed maturity securities were credit enhanced by financial guarantee insurers of which $516 million, $497 million, $166 million and $7 million, are included within U.S. corporate securities, state and political subdivision securities, asset-backed securities and mortgage-backed securities, respectively, and 23%, 24% and 38% were guaranteed by financial guarantee insurers who were Aaa, Aa and A rated, respectively.

At September 30, 2008, the Company’s direct investments in fixed maturity securities and equity securities in Lehman Brothers Holdings Inc., Washington Mutual, Inc. and American International Group, Inc. have an aggregate book value (after impairments) of approximately $60 million. In addition, the Company has made secured loans to affiliates of Lehman Brothers Holdings Inc. which are fully collateralized.

Concentrations of Credit Risk (Equity Securities) — The Company is not exposed to any significant concentrations of credit risk in its equity securities portfolio.

Net Unrealized Investment Gains (Losses)

The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), are as follows:


	September 30, 2008			December 31, 2007
	(In millions)

Fixed maturity securities	$	(3,337	)	$	(593	)
Equity securities		(141	)		(40	)
Derivatives		2			(13	)
Other		(13	)		(3	)

Subtotal		(3,489	)		(649	)

Amounts allocated from:
DAC and VOBA		537			93

Deferred income tax		1,032			195

Subtotal		1,569			288

Net unrealized investment gains (losses)	$	(1,920	)	$	(361	)

The changes in net unrealized investment gains (losses) are as follows:


	September 30, 2008
	(In millions)

Balance at December 31, 2007	$	(361	)
Unrealized investment losses during the period		(2,840	)
Unrealized investment gains relating to:
DAC and VOBA		444
Deferred income tax		837

Balance at September 30, 2008	$	(1,920	)

Change in net unrealized investment gains (losses)	$	(1,559	)

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Unrealized Loss for Fixed Maturity and Equity Securities Available-for-Sale

The following tables present the estimated fair value and gross unrealized loss of the Company’s fixed maturity (aggregated by sector) and equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position at:


	September 30, 2008
					Equal to or Greater
	Less than 12 months				than 12 months				Total
	Estimated		Gross		Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
	(In millions, except number of securities)

U.S. corporate securities	$	7,874	$	775	$	4,663	$	994	$	12,537	$	1,769
Residential mortgage-backed securities		4,158		303		1,176		187		5,334		490
Foreign corporate securities		2,988		253		1,652		273		4,640		526
U.S. Treasury/agency securities		884		17		137		8		1,021		25
Commercial mortgage-backed securities		1,899		177		892		228		2,791		405
Asset-backed securities		1,348		116		779		261		2,127		377
Foreign government securities		257		8		14		1		271		9
State and political subdivision securities		400		50		301		54		701		104


Total fixed maturity securities	$	19,808	$	1,699	$	9,614	$	2,006	$	29,422	$	3,705

Equity securities	$	159	$	46	$	207	$	97	$	366	$	143

Total number of securities in an unrealized loss position		2,690				1,421


	December 31, 2007
					Equal to or Greater
	Less than 12 months				than 12 months				Total
	Estimated		Gross		Estimated		Gross		Estimated		Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
	(In millions, except number of securities)

U.S. corporate securities	$	6,643	$	316	$	5,010	$	302	$	11,653	$	618
Residential mortgage-backed securities		2,374		52		1,160		28		3,534		80
Foreign corporate securities		2,350		86		2,234		98		4,584		184
U.S. Treasury/agency securities		307		2		343		9		650		11
Commercial mortgage-backed securities		417		26		1,114		41		1,531		67
Asset-backed securities		1,401		91		332		17		1,733		108
Foreign government securities		63		1		62		1		125		2
State and political subdivision securities		84		9		387		31		471		40

Total fixed maturity securities	$	13,639	$	583	$	10,642	$	527	$	24,281	$	1,110

Equity securities	$	386	$	42	$	190	$	28	$	576	$	70

Total number of securities in an unrealized loss position		2,011				1,487

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Aging of Gross Unrealized Loss for Fixed Maturity and Equity Securities Available-for-Sale

The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20% or 20% or more at:


	September 30, 2008
	Cost or				Gross				Number of
	Amortized Cost				Unrealized Loss				Securities
	Less than		20% or		Less than		20% or		Less than		20% or
	20%		more		20%		more		20%		more
	(In millions, except number of securities)

Fixed Maturity Securities:
Less than six months	$	11,706	$	4,724	$	530	$	1,336		1,801		542
Six months or greater but less than nine months		6,302		893		458		347		582		113
Nine months or greater but less than twelve months		1,573		183		140		95		151		29
Twelve months or greater		7,709		37		777		22		876		6

Total	$	27,290	$	5,837	$	1,905	$	1,800

Equity Securities:
Less than six months	$	45	$	250	$	5	$	90		28		40
Six months or greater but less than nine months		57		125		8		37		5		12
Nine months or greater but less than twelve months		23		—		3		—		5		—
Twelve months or greater		9		—		—		—		4		—

Total	$	134	$	375	$	16	$	127


	December 31, 2007
	Cost or				Gross
	Amortized Cost				Unrealized Loss				Number of Securities
	Less than		20% or		Less than		20% or		Less than		20% or
	20%		more		20%		more		20%		more
	(In millions, except number of securities)

Fixed Maturity Securities:
Less than six months	$	10,460	$	428	$	349	$	114		1,825		80
Six months or greater but less than nine months		2,900		—		145		—		321		—

Nine months or greater but less than twelve months		1,523		—		81		—		162		—

Twelve months or greater		10,079		—		421		—		1,358		—

Total	$	24,962	$	428	$	996	$	114

Equity Securities:
Less than six months	$	261	$	56	$	19	$	16		98		18
Six months or greater but less than nine months		111		—		10		—		16		—
Nine months or greater but less than twelve months		37		—		5		—		12		—
Twelve months or greater		182		—		20		—		17		—

Total	$	591	$	56	$	54	$	16

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

As disclosed in Note 1 of the Notes to Consolidated Financial Statements included in the 2007 Annual Report, the Company performs a regular evaluation, on a security-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company’s intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company’s need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than-temporarily impaired in the period that the sale decision was made and an other-than-temporary impairment loss will be recognized.

At September 30, 2008 and December 31, 2007, $1.9 billion and $1.0 billion, respectively, of unrealized losses related to fixed maturity securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 7% and 4%, respectively, of the cost or amortized cost of such securities. At September 30, 2008 and December 31, 2007, $16 million and $54 million, respectively, of unrealized losses related to equity securities with an unrealized loss position of less than 20% of cost, which represented 12% and 9%, respectively, of the cost of such securities.

At September 30, 2008, $1.8 billion and $127 million of unrealized losses related to fixed maturity securities and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 31% and 34% of the cost or amortized cost for fixed maturity securities and equity securities, respectively. Of such unrealized losses of $1.8 billion and $127 million, $1.3 billion and $90 million related to fixed maturity securities and equity securities, respectively, that were in an unrealized loss position for a period of less than six months. At December 31, 2007, $114 million and $16 million of unrealized losses related to fixed maturity securities and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 27% and 29% of the cost or amortized cost of such fixed maturity securities and equity securities, respectively. Of such unrealized losses of $114 million and $16 million related to fixed maturity securities and equity securities, respectively, all were in an unrealized loss position for a period of less than six months.

The Company held 35 fixed maturity securities, each with a gross unrealized loss at September 30, 2008 of greater than $10 million. These 35 fixed maturity securities represented 13%, or $499 million in the aggregate, of the gross unrealized loss on fixed maturity securities. There were two equity securities with an unrealized loss of over $10 million at September 30, 2008. These two equity securities represented 20%, or $28 million in the aggregate, of the gross unrealized loss on equity securities. The Company held two fixed maturity securities, each with a gross unrealized loss at December 31, 2007 of greater than $10 million. These two fixed maturity securities represented 2%, or $21 million in the aggregate, of the gross unrealized loss on fixed maturity securities. There were no equity securities with a gross unrealized loss of over $10 million at December 31, 2007. The fixed maturity and equity securities, each with a gross unrealized loss greater than $10 million, increased $506 million during the nine months ended September 30, 2008. These securities were included in the regular evaluation of whether such securities are other-than-temporarily impaired. Based upon the Company’s current evaluation of these securities in accordance with its impairment policy, the cause of the decline being primarily attributable to a rise in market yields caused principally by an extensive widening of credit spreads which resulted from a lack of market liquidity and a short-term market dislocation versus a long-term deterioration in credit quality, and the Company’s current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that these securities are not other-than-temporarily impaired.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

In the Company’s impairment review process, the duration of, and severity of, an unrealized loss position, such as unrealized losses of 20% or more for equity securities, which was $127 million at September 30, 2008 and $16 million at December 31, 2007, is given greater weight and consideration, than for fixed maturity securities. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company’s evaluation of recoverability of all contractual cash flows, as well as the Company’s ability and intent to hold the security, including holding the security until the earlier of a recovery in value, or until maturity. In contrast, for an equity security, greater weight and consideration is given by the Company to a decline in market value and the likelihood such market value decline will recover. Equity securities with an unrealized loss of 20% or more for six months or greater was $37 million at September 30, 2008 all of which was comprised of unrealized losses on investment grade financial services industry trust preferred securities, of which 92% are rated A or higher. Equity securities with an unrealized loss of 20% or more for six months or less was $90 million at September 30, 2008 of which $83 million, or 92%, are investment grade financial services industry trust preferred securities, of which 98% are rated A or higher. There were no equity securities with an unrealized loss of 20% or more for nine months or greater. In connection with the equity securities impairment review process during the third quarter of 2008, the Company evaluated its holdings in non-redeemable trust preferred securities, particularly those of financial services industry companies. The Company considered several factors including the likelihood of recovery in value of trust preferred securities with a severe unrealized loss and the likelihood of recovery in value of trust preferred securities with an extended unrealized loss (i.e., 12 months or more). The Company believes the unrealized loss position is not necessarily predictive of the ultimate performance of these securities and it has the ability and intent to hold until the market value decline recovers. Future other-than-temporary impairments will depend primarily on economic fundamentals, issuer performance, changes in collateral valuation, changes in interest rates, and changes in credit spreads. If economic fundamentals and other of the above factors continue to deteriorate, additional other-than-temporary impairments may be incurred in upcoming quarters.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Net Investment Gains (Losses)

The components of net investment gains (losses) are as follows:


	Three Months						Nine Months
	Ended						Ended
	September 30,						September 30,
				As Restated,						As Restated,
	2008			2007			2008			2007
	(In millions)

Fixed maturity securities	$	(224	)	$	(82	)	$	(366	)	$	(245	)
Equity securities		(42	)		8			(54	)		6
Mortgage and consumer loans		(3	)		1			(35	)		1
Real estate and real estate joint ventures		—			—			(2	)		1
Other limited partnership interests		(1	)		(4	)		(3	)		(17	)
Derivatives		27			117			197			151
Other		323			(88	)		172			(146	)

Net investment gains (losses)	$	80		$	(48	)	$	(91	)	$	(249	)

The components of fixed maturity and equity securities net investment gains (losses) are as follows:


	Fixed Maturity Securities												Equity Securities
	Three Months						Nine Months						Three Months					Nine Months
	Ended						Ended						Ended					Ended
	September 30,						September 30,						September 30,					September 30,
				As Restated,						As Restated,						As Restated,					As Restated,
	2008			2007			2008			2007			2008			2007		2008			2007
	(In millions)

Gross investment gains	$	43		$	19		$	85		$	53		$	—		$	8	$	6		$	12
Gross investment losses		(79	)		(93	)		(197	)		(276	)		(12	)		—		(17	)		(4	)
Writedowns		(188	)		(8	)		(254	)		(22	)		(30	)		—		(43	)		(2	)

Net investment gains (losses)	$	(224	)	$	(82	)	$	(366	)	$	(245	)	$	(42	)	$	8	$	(54	)	$	6

The Company periodically disposes of fixed maturity and equity securities at a loss. Generally, such losses are insignificant in amount or in relation to the cost basis of the investment, are attributable to declines in estimated fair value occurring in the period of the disposition or are as a result of management’s decision to sell securities based on current conditions or the Company’s need to shift the portfolio to maintain its portfolio management objectives.

Losses from fixed maturity and equity securities deemed other-than-temporarily impaired, included within net investment gains (losses), were $218 million and $297 million for the three months and nine months ended September 30, 2008, respectively, and $8 million and $24 million for the three months and nine months ended September 30, 2007, respectively. The third quarter of 2008 impairments were concentrated in the Company’s financial services industry holdings and were comprised of $146 million in impairments on fixed maturity securities and $29 million in impairments on equity securities for a total of $175 million. All of the impairments of equity securities of $29 million were on holdings of trust preferred securities in financial institutions. The Company also recognized in the third quarter of 2008 impairments of $35 million on fixed maturity securities it intends to sell at a loss subsequent to the balance sheet date. The remainder of the third quarter of 2008 impairments are attributable to extensive credit spread widening on certain securities where the Company was uncertain of its intent to retain the securities for a period of time sufficient to allow for a recovery of the market value decline.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Net Investment Income

The components of net investment income are as follows:


	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
				As Restated,				As Restated,
	2008			2007		2008		2007
				(In millions)

Fixed maturity securities	$	600		$	729	$	1,877	$	2,110
Equity securities		7			9		32		27
Mortgage and consumer loans		62			69		193		194
Policy loans		13			13		46		39
Real estate and real estate joint ventures		8			18		22		69
Other limited partnership interests		(4	)		20		12		140
Cash, cash equivalents and short-term investments		15			27		55		72
Other		—			1		—		7

Total investment income		701			886		2,237		2,658
Less: Investment expenses		80			167		269		475

Net investment income	$	621		$	719	$	1,968	$	2,183

Affiliated investment income, included in cash, cash equivalents and short-term investments in the table above, related to the Company’s investment in affiliated partnerships, Metropolitan Money Market Pool and MetLife Intermediate Income Pool, was $2 million and $9 million for the three months and nine months ended September 30, 2008, respectively, and $4 million and $17 million for the three months and nine months ended September 30, 2007, respectively.

Affiliated investment expenses, included in the table above, were $7 million and $24 million for the three months and nine months ended September 30, 2008, respectively, and $9 million and $27 million for the three months and nine months ended September 30, 2007, respectively.

Securities Lending

The Company participates in a securities lending program whereby blocks of securities, which are included in fixed maturity and equity securities, are loaned to third parties, primarily major brokerage firms and commercial banks. The Company requires a minimum of 100% of the estimated fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $9.4 billion and $9.9 billion and an estimated fair value of $8.9 billion and $9.8 billion were on loan under the program at September 30, 2008 and December 31, 2007, respectively. Securities loaned under such transactions may be sold or repledged by the transferee. The Company was liable for cash collateral under its control of $9.3 billion and $10.1 billion at September 30, 2008 and December 31, 2007, respectively. Of this $9.3 billion of cash collateral to be returned at September 30, 2008, approximately $2.8 billion was on open terms, meaning that the related loaned security could be returned to the Company on the next business day requiring return of cash collateral. The fair value of the securities on loan related to such cash collateral which could be required to be returned the next business day was $2.6 billion at September 30, 2008. U.S. Treasury and agency securities with a fair value of $1.2 billion were included in such securities on loan and could be immediately sold to satisfy the on open cash collateral requirements. Other than the cash collateral due on open terms, substantially all of the remaining cash collateral is due — based upon when the related loaned security is scheduled to be returned — within 90 days.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Security collateral of $40 million on deposit from customers in connection with the securities lending transactions at December 31, 2007, may not be sold or repledged and is not reflected in the interim condensed consolidated financial statements. There was no security collateral on deposit at September 30, 2008.

Assets on Deposit, Held in Trust and Pledged as Collateral

The Company had investment assets on deposit with regulatory agencies with an estimated fair value of $22 million at both September 30, 2008 and December 31, 2007, consisting primarily of fixed maturity and equity securities.

The Company has pledged fixed maturity securities in support of its debt and funding agreements with the Federal Home Loan Bank of Boston of $679 million and $901 million at September 30, 2008 and December 31, 2007, respectively. The nature of these Federal Home Loan Bank arrangements are described in Note 8 of the Notes to Consolidated Financial Statements included in the 2007 Annual Report.

Certain of the Company’s fixed maturity securities are pledged as collateral for various derivative transactions as described in Note 3.


3.	Derivative Financial Instruments

Types of Derivative Financial Instruments

The following table presents the notional amount and current market or fair value of derivative financial instruments, excluding embedded derivatives, held at:


	September 30, 2008						December 31, 2007
			Current Market						Current Market
	Notional		or Fair Value				Notional		or Fair Value
	Amount		Assets		Liabilities		Amount		Assets		Liabilities
					(In millions)

Interest rate swaps	$	7,040	$	405	$	117	$	12,437	$	336	$	144
Interest rate floors		12,071		174		—		12,071		159		—
Interest rate caps		3,516		11		—		10,715		7		—
Financial futures		1,458		22		7		881		2		5
Foreign currency swaps		3,724		665		104		3,716		788		97
Foreign currency forwards		106		2		—		167		2		—
Options		838		120		—		1,004		85		1
Financial forwards		1,009		17		1		2,330		20		—
Credit default swaps		399		6		2		1,013		5		3

Total	$	30,161	$	1,422	$	231	$	44,334	$	1,404	$	250

This information should be read in conjunction with Note 5 of the Notes to Consolidated Financial Statements included in the 2007 Annual Report.

The Company commenced the use of inflation swaps during the first quarter of 2008. Inflation swaps are used as an economic hedge to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are included in interest rate swaps in the preceding table.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Hedging

The following table presents the notional amount and fair value of derivatives by type of hedge designation at:


	September 30, 2008						December 31, 2007
	Notional		Fair Value				Notional		Fair Value
	Amount		Assets		Liabilities		Amount		Assets		Liabilities
	(In millions)

Fair value	$	753	$	30	$	46	$	651	$	20	$	3
Cash flow		486		78		1		486		85		3
Non-qualifying		28,922		1,314		184		43,197		1,299		244

Total	$	30,161	$	1,422	$	231	$	44,334	$	1,404	$	250

The following table presents the settlement payments recorded in income for the:


	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
			As Restated,						As Restated,
	2008		2007			2008			2007
	(In millions)

Qualifying hedges:
Net investment income	$	—	$	—		$	(1	)	$	—
Interest credited to policyholder account balances		—		(2	)		3			(5	)
Non-qualifying hedges:
Net investment gains (losses)		3		23			29			58

Total	$	3	$	21		$	31		$	53

Fair Value Hedges

The Company designates and accounts for the following as fair value hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert fixed rate investments to floating rate investments; and (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities.

The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:


	Three Months						Nine Months
	Ended						Ended
	September 30,						September 30,
				As Restated,						As Restated,
	2008			2007			2008			2007
	(In millions)

Changes in the fair value of derivatives	$	(39	)	$	22		$	(30	)	$	22
Changes in the fair value of the items hedged		43			(19	)		34			(24	)

Net ineffectiveness of fair value hedging activities	$	4		$	3		$	4		$	(2	)

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Cash Flow Hedges

The Company designates and accounts for the following as cash flow hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilities to fixed rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities.

For the three months and nine months ended September 30, 2008 and 2007, the Company did not recognize any net investment gains (losses) which represented the ineffective portion of all cash flow hedges. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For the three months and nine months ended September 30, 2008 and 2007, there were no instances in which the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted by SFAS 133. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments, for the three months and nine months ended September 30, 2008 and 2007.

The following table presents the components of other comprehensive income (loss) before income tax, related to cash flow hedges:


	Three Months						Nine Months
	Ended						Ended
	September 30,						September 30,
				As Restated,						As Restated,
	2008			2007			2008			2007
	(In millions)

Other comprehensive income (loss) balance at the beginning of the period	$	(14	)	$	(11	)	$	(13	)	$	(9	)
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges		(40	)		19			(4	)		27
Amounts reclassified to net investment gains (losses)		56			(20	)		19			(30	)

Other comprehensive income (loss) balance at the end of the period	$	2		$	(12	)	$	2		$	(12	)

At September 30, 2008, $65 million of the deferred net gains on derivatives accumulated in other comprehensive income (loss) is expected to be reclassified to earnings within the next 12 months.

Non-qualifying Derivatives and Derivatives for Purposes Other Than Hedging

The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest rate swaps, purchased caps and floors, and interest rate futures to economically hedge its exposure to interest rates; (ii) foreign currency forwards, swaps and option contracts to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, equity index options and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) credit default swaps to synthetically create investments; (vi) financial forwards to buy and sell securities to economically hedge its exposure to interest rates; (vii) basis swaps to better match the cash flows of assets and related liabilities; and (viii) inflation swaps to reduce risk generated from inflation-indexed liabilities.

The following table presents changes in fair value related to derivatives that do not qualify for hedge accounting:


	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
				As Restated,					As Restated,
	2008			2007		2008			2007
	(In millions)

Net investment gains (losses), excluding embedded derivatives	$	(52	)	$	109	$	(31	)	$	88

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Embedded Derivatives

The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts principally include: variable annuities with guaranteed minimum withdrawal, guaranteed minimum accumulation and certain guaranteed minimum income riders; affiliated reinsurance contracts related to guaranteed minimum withdrawal, guaranteed minimum accumulation, and certain guaranteed minimum income riders and ceded reinsurance written on a funds withheld basis.

The following table presents the fair value of the Company’s embedded derivatives at:


	September 30,			December 31,
	2008			2007
	(In millions)

Net embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefit riders	$	764		$	382
Call options in equity securities		(14	)		—

Net embedded derivatives within asset host contracts	$	750		$	382

Net embedded derivatives within liability host contracts:
Direct guaranteed minimum benefit riders	$	421		$	257
Ceded funds withheld balances		(35	)		—

Net embedded derivatives within liability host contracts	$	386		$	257

The following table presents changes in fair value related to embedded derivatives:

Three Months

Nine Months

Ended

September 30,

As Restated,

2008

2007

2008

2007

(In millions)

Net investment gains (losses)

101

(16

)

195

Credit Risk

The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company’s derivative contracts is limited to the fair value at the reporting date. The credit exposure of the Company’s derivative transactions is represented by the fair value of contracts with a net positive fair value at the reporting date.

The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange-traded futures are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments.

The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. As of September 30, 2008 and December 31, 2007, the Company was obligated to return cash collateral under its control of $829 million and $370 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. As of September 30, 2008 and December 31, 2007, the Company had also accepted collateral consisting of various securities with a fair market value of $122 million and $526 million, respectively, which are held in separate

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but as of September 30, 2008 and December 31, 2007, none of the collateral had been sold or repledged.

In addition, the Company has exchange-traded futures, which require the pledging of collateral. As of September 30, 2008 and December 31, 2007, the Company pledged securities collateral for exchange-traded futures of $6 million and $25 million, respectively, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. As of September 30, 2008 the Company provided cash collateral of $12 million which is included in premiums and other receivables in the consolidated balance sheet. As of December 31, 2007 the Company did not provide any cash collateral.

In connection with synthetically created investment transactions and credit default swaps held in relation to the available-for-sale securities, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event, as defined by the contract, occurs generally the contract will require the Company to pay the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of the referenced credit obligations is zero, was $221 million at September 30, 2008. The credit default swaps expire at various times during the next five years.

The following table presents the fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at September 30, 2008:


	September 30, 2008
	Fair Value of			Maximum Amount of		Weighted
	Credit Default			Future Payments under		Average Years
Rating Agency Designation of Referenced Credit Obligations (1)	Swaps			Credit Default Swaps (2)		to Maturity (3)
	(In millions)

Aaa/Aa/A
Single name credit default swaps (corporate)	$	—		$	—		—
Credit default swaps referencing indices		(1	)		201		4.3

Subtotal		(1	)		201		4.3

Baa
Single name credit default swaps (corporate)		—			—		—
Credit default swaps referencing indices		—			—		—

Subtotal		—			—		—

Ba
Single name credit default swaps (corporate)		—			20		1.0
Credit default swaps referencing indices		—			—		—

Subtotal		—			20		1.0

B
Single name credit default swaps (corporate)		—			—		—
Credit default swaps referencing indices		—			—		—

Subtotal		—			—		—

Caa and lower
Single name credit default swaps (corporate)		—			—		—
Credit default swaps referencing indices		—			—		—

Subtotal		—			—		—

In or near default
Single name credit default swaps (corporate)		—			—		—
Credit default swaps referencing indices		—			—		—

Subtotal		—			—		—

	$	(1	)	$	221		4.0


(1)		The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then the MetLife rating is used.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


(2)		Assumes the value of the referenced credit obligations is zero.

(3)		The weighted average years to maturity of the credit default swaps are calculated based upon weighted average notional amounts.


4.	Insurance

Insurance Liabilities

Insurance liabilities are as follows:


	Future Policy Benefits				Policyholder Account Balances				Other Policyholder Funds
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,
	2008		2007		2008		2007		2008		2007
					(In millions)

Individual
Traditional life	$	929	$	921	$	—	$	—	$	66	$	50
Universal & variable life		652		575		5,356		4,995		1,596		1,496
Annuities		1,009		944		15,244		15,058		28		36
Other		—		—		70		47		—		—
Institutional
Group life		207		220		1,053		763		4		5
Retirement & savings		11,907		12,040		10,150		12,780		—		—
Non-medical health & other		296		303		—		—		2		2
Corporate & Other (1)		4,744		4,573		293		172		182		188

Total	$	19,744	$	19,576	$	32,166	$	33,815	$	1,878	$	1,777


(1)		Corporate & Other includes intersegment eliminations.

Affiliated insurance liabilities included in the table above include reinsurance assumed. Affiliated future policy benefits, included in the table above, were $32 million and $29 million at September 30, 2008 and December 31, 2007, respectively. Affiliated policyholder account balances, included in the table above, were $146 million and $97 million at September 30, 2008 and December 31, 2007, respectively. Affiliated other policyholder funds, included in the table above, were $1.3 billion at both September 30, 2008 and December 31, 2007.


5.	Long-term Debt — Affiliated

In April 2008, MetLife Insurance Company of Connecticut issued a surplus note with a principal amount of $750 million and an interest rate of 8.595%, to MetLife Capital Trust X, an affiliate.

In June 2008, MLI-USA repaid surplus notes of $400 million and $35 million to MetLife, Inc. and MetLife Investors Group, Inc., respectively.


6.	Contingencies, Commitments and Guarantees

Contingencies

Litigation

The Company is a defendant in a number of litigation matters. In some of the matters, large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrate to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Thus, unless stated below, the specific monetary relief sought is not noted.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses’ testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

On a quarterly and annual basis, the Company reviews relevant information with respect to litigation and contingencies to be reflected in the Company’s consolidated financial statements. The review includes senior legal and financial personnel. Estimates of possible losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of September 30, 2008.

The Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. The Company continues to vigorously defend against the claims in all pending matters. Some sales practices claims have been resolved through settlement. Other sales practices claims have been won by dispositive motions or have gone to trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys’ fees. Additional litigation relating to the Company’s marketing and sales of individual life insurance, annuities, mutual funds or other products may be commenced in the future.

Various litigation, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s 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, employer, investor, investment advisor or taxpayer. Further, federal, state or industry regulatory or governmental authorities may conduct investigations, serve subpoenas or make other inquiries concerning a wide variety of issues, including the Company’s compliance with applicable insurance and other laws and regulations.

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses. In some of the matters referred to previously, large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company’s financial position, based on information currently known by the Company’s management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s net income or cash flows in particular quarterly or annual periods.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Commitments

Commitments to Fund Partnership Investments

The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $1.6 billion and $1.4 billion at September 30, 2008 and December 31, 2007, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years.

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $339 million and $626 million at September 30, 2008 and December 31, 2007, respectively.

Commitments to Fund Bank Credit Facilities and Private Corporate Bond Investments

The Company commits to lend funds under bank credit facilities and private corporate bond investments. The amounts of these unfunded commitments were $413 million and $488 million at September 30, 2008 and December 31, 2007, respectively.

Other Commitments

The Company has entered into collateral arrangements with affiliates which require the transfer of collateral in connection with secured demand notes. At both September 30, 2008 and December 31, 2007, the Company had agreed to fund up to $60 million of cash upon the request of an affiliate and had transferred collateral consisting of various securities with a fair market value of $76 million and $73 million, respectively, to custody accounts to secure the notes. The counterparties are permitted by contract to sell or repledge this collateral.

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which 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, such as in the case of MetLife International Insurance Company, Ltd. (“MLII”), a former affiliate, discussed below, 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.

The Company has provided a guarantee on behalf of MLII that is triggered if MLII cannot pay claims because of insolvency, liquidation or rehabilitation. Life insurance coverage in-force, representing the maximum potential obligation under this guarantee, was $401 million and $434 million at September 30, 2008 and December 31, 2007, respectively. The Company does not hold any collateral related to this guarantee, but has recorded a liability of $1 million that was based on the total account value of the guaranteed policies plus the amounts retained per policy at both September 30, 2008 and December 31, 2007. The remainder of the risk was ceded to external reinsurers.

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

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

See also Note 3 for disclosures related to credit default swap obligations.


7.	Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:


	Three Months						Nine Months
	Ended						Ended
	September 30,						September 30,
				As Restated,						As Restated,
	2008			2007			2008			2007
	(In millions)

Net income	$	219		$	190		$	504		$	533
Other comprehensive income (loss):
Unrealized gains (losses) on derivative instruments, net of income tax		11			(1	)		10			(2	)
Unrealized gains (losses), net of related offsets and income tax		(851	)		175			(1,569	)		(179	)
Foreign currency translation adjustments, net of income tax		(57	)		8			(60	)		14

Other comprehensive income (loss)		(897	)		182			(1,619	)		(167	)

Comprehensive income (loss)	$	(678	)	$	372		$	(1,115	)	$	366

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


8.	Other Expenses

Information on other expenses is as follows:


	Three Months						Nine Months
	Ended						Ended
	September 30,						September 30,
				As Restated,						As Restated,
	2008			2007			2008			2007
	(In millions)

Compensation	$	32		$	32		$	89		$	92
Commissions		189			203			538			570
Interest and debt issue costs		19			8			53			25
Amortization of DAC and VOBA		258			149			629			481
Capitalization of DAC		(215	)		(216	)		(596	)		(587	)
Rent, net of sublease income		1			2			3			4
Insurance tax		10			12			30			34
Other		168			129			473			380

Total other expenses	$	462		$	319		$	1,219		$	999

See Note 12 for discussion of affiliated expenses included in the table above.


9.	Business Segment Information

The Company has two operating segments, Individual and Institutional, as well as Corporate & Other. These segments are managed separately because they provide different products and services, require different strategies or have different technology requirements.

Individual offers a wide variety of protection and asset accumulation products, including life insurance, annuities and mutual funds. Institutional offers a broad range of group insurance and retirement & savings products and services, including group life insurance and other insurance products and services. Corporate & Other contains the excess capital not allocated to the business segments, various start-up entities and run-off business, the Company’s ancillary international operations, interest expense related to the majority of the Company’s outstanding debt, expenses associated with certain legal proceedings and the elimination of intersegment transactions.

Economic capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The economic capital model accounts for the unique and specific nature of the risks inherent in MetLife’s businesses. As a part of the economic capital process, a portion of net investment income is credited to the segments based on the level of allocated equity.

Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for the three months and nine months ended September 30, 2008 and 2007. The accounting policies of the segments are the same as those of the Company, except for the method of capital allocation and the accounting for gains (losses) from intercompany sales, which are eliminated in consolidation. The Company allocates equity to each segment based upon the economic capital model used by MetLife that allows MetLife and the Company to effectively manage their capital. The Company evaluates the performance of each segment based upon net income, excluding net investment gains (losses), net of income tax, and adjustments related to net investment gains (losses), net of income tax.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


						Corporate &
For the Three Months Ended September 30, 2008	Individual		Institutional			Other			Total
	(In millions)

Revenues
Premiums	$	35	$	49		$	6		$	90
Universal life and investment-type product policy fees		419		15			2			436
Net investment income		277		331			13			621
Other revenues		51		2			1			54
Net investment gains (losses)		123		(11	)		(32	)		80

Total revenues		905		386			(10	)		1,281

Expenses
Policyholder benefits and claims		103		151			11			265
Interest credited to policyholder account balances		163		108			(18	)		253
Other expenses		413		12			37			462

Total expenses		679		271			30			980

Income from continuing operations before provision for income tax		226		115			(40	)		301
Provision for income tax		78		38			(34	)		82

Net income	$	148	$	77		$	(6	)	$	219


						Corporate &
For the Three Months Ended September 30, 2007 — As Restated	Individual		Institutional			Other			Total
	(In millions)

Revenues
Premiums	$	74	$	12		$	6		$	92
Universal life and investment-type product policy fees		338		12			1			351
Net investment income		266		391			62			719
Other revenues		61		3			—			64
Net investment gains (losses)		24		(64	)		(8	)		(48	)

Total revenues		763		354			61			1,178

Expenses
Policyholder benefits and claims		116		135			5			256
Interest credited to policyholder account balances		165		160			—			325
Other expenses		287		16			16			319

Total expenses		568		311			21			900

Income from continuing operations before provision for income tax		195		43			40			278
Provision for income tax		70		15			3			88

Net income	$	125	$	28		$	37		$	190

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


							Corporate &
For the Nine Months Ended September 30, 2007 — As Restated	Individual			Institutional			Other			Total
	(In millions)

Revenues
Premiums	$	221		$	24		$	18		$	263
Universal life and investment-type product policy fees		1,001			31			1			1,033
Net investment income		813			1,130			240			2,183
Other revenues		178			10			—			188
Net investment gains (losses)		(43	)		(191	)		(15	)		(249	)

Total revenues		2,170			1,004			244			3,418

Expenses
Policyholder benefits and claims		330			370			22			722
Interest credited to policyholder account balances		484			482			1			967
Other expenses		921			38			40			999

Total expenses		1,735			890			63			2,688

Income from continuing operations before provision for income tax		435			114			181			730
Provision for income tax		154			40			7			201

Income from continuing operations		281			74			174			529
Income from discontinued operations, net of income tax		—			4			—			4

Net income	$	281		$	78		$	174		$	533

The following table presents total assets with respect to the Company’s segments, as well as Corporate & Other, at:


	September 30,		December 31,
	2008		2007
	(In millions)

Individual	$	73,286	$	82,214
Institutional		29,696		35,154
Corporate & Other		13,450		11,193

Total	$	116,432	$	128,561

Net investment income and net investment gains (losses) are based upon the actual results of each segment’s specifically identifiable asset portfolio adjusted for allocated equity. Other costs are allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company’s product pricing.

Revenues derived from any customer did not exceed 10% of consolidated revenues for the three months and nine months ended September 30, 2008 and 2007. Substantially all of the Company’s revenues originated in the United States.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


10.	Discontinued Operations

The Company actively manages its real estate portfolio with the objective of maximizing earnings through selective acquisitions and dispositions. Income related to real estate classified as held-for-sale or sold is presented in discontinued operations. These assets are carried at the lower of depreciated cost or fair value less expected disposition costs. There was no carrying value of real estate related to discontinued operations at both September 30, 2008 and December 31, 2007.

The Company had no discontinued operations for the three months and nine months ended September 30, 2008. In the Institutional segment, the Company had net investment income of $1 million, net investment gains of $5 million and income tax of $2 million, related to discontinued operations resulting in income from discontinued operations of $4 million, net of income tax, for the nine months ended September 30, 2007. The Company did not have investment income or expense related to discontinued operations for the three months ended September 30, 2007.


11.	Fair Value

Assets and Liabilities Measured at Fair Value

Recurring Fair Value Measurements

The fair value of the Company’s financial instruments which are measured at estimated fair value in the consolidated financial statements is estimated as follows:


	•	Fixed Maturity, Equity Securities and Short-Term Investments — When available, the estimated fair value of the Company’s fixed maturity and equity securities as well as certain short-term investments are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management judgment.


		When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management’s assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management’s judgments about financial instruments.

		The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market.

		When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and, therefore, have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


		The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s securities holdings.


	•	Derivatives — The fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models.


		The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments.

		The credit risk of both the counterparty and the Company are considered in determining the fair value for all over-the-counter derivatives, after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is on a net exposure by counterparty basis due to the existence of netting agreements and collateral arrangements. The Company values its derivative positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not required in the valuation process. It should be noted that 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. Such agreements serve to effectively mitigate credit risk.

		Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. 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.


	•	Embedded Derivatives — Embedded derivatives principally include certain direct, assumed and ceded variable annuity riders, and embedded derivatives related to funds withheld on ceded reinsurance. Embedded derivatives are recorded in the financial statements at fair value with changes in fair value adjusted through net income.


		The Company issues certain variable annuity products with guaranteed minimum benefit riders. These include guaranteed minimum withdrawal benefit (“GMWB”) riders, guaranteed minimum accumulation benefit (“GMAB”) riders, and certain guaranteed minimum income benefit (“GMIB”) riders. GMWB, GMAB and certain GMIB riders are embedded derivatives, which are measured at fair value separately from the host variable annuity contract, with changes in fair value reported in net investment gains (losses). These embedded derivatives are classified within policyholder account balances. The fair value for these riders is

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


		estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Effective January 1, 2008, upon adoption of SFAS 157, the valuation of these riders now includes an adjustment for the Company’s own credit and risk margins for non-capital market inputs. The Company’s own credit adjustment is determined taking into consideration publicly available information relating to the Company’s debt as well as its claims paying ability. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in the Company’s own credit standing; and variations in actuarial assumptions regarding policyholder behavior and risk margins related to non-capital market inputs may result in significant fluctuations in the fair value of the riders that could materially affect net income.


		The Company cedes the risks associated with certain of the GMIB, GMAB and GMWB riders described in the preceding paragraph to an affiliated reinsurance company. These reinsurance contracts contain embedded derivatives which are included in premiums and other receivables with changes in fair value reported in net investment gains (losses). The value of the embedded derivatives on the ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company.

		In addition to ceding risks associated with riders that are accounted for as embedded derivatives, the Company also cedes to the same affiliated reinsurance company certain directly written GMIB riders that are accounted for as insurance (i.e. not as embedded derivatives) but where the reinsurance contract contains an embedded derivative. These embedded derivatives are included in premiums and other receivables with changes in fair value reported in net investment gains (losses). The value of the embedded derivatives on these ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. Because the direct rider is not accounted for at fair value, significant fluctuations in net income may occur as the change in fair value of the embedded derivative on the ceded risk is being recorded in net income without a corresponding and offsetting change in fair value of the direct rider.

		The Company has assumed risks related to guaranteed minimum benefit riders from an affiliated joint venture under a reinsurance contract. These risks are fully retroceded to the same affiliated reinsurance company. Both the assumed and retroceded contracts contain embedded derivatives. The embedded derivatives associated with the assumed risks are included in policyholder account balances and the embedded derivatives associated with the retroceded risks are included in premiums and other receivables with changes in fair value of both reported in net investment gains (losses). The values of the embedded derivatives in both the assumed and retroceded contracts are determined in a similar manner and using a methodology consistent with that described previously for the riders directly written by the Company.

		The fair value of the embedded derivatives within funds withheld at interest related to certain ceded reinsurance is determined based on the change in fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The fair value of the underlying assets is determined as described above in “— Fixed Maturity, Equity Securities and Short-Term Investments.” The fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities with changes in fair value recorded in net investment gains (losses). Changes in the credit spreads

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


		on the underlying assets, interest rates and market volatility may result in significant fluctuations in the fair value of these embedded derivatives that could materially affect net income.


		The accounting for embedded derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. If interpretations change, there is a risk that features previously not bifurcated may require bifurcation and reporting at fair value in the interim condensed consolidated financial statements and respective changes in fair value could materially affect net income.


	•	Separate Account Assets — Separate account assets are carried at fair value and reported as a summarized total on the consolidated balance sheet in accordance with Statement of Position (“SOP”) 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts (“SOP 03-1”). The fair value of separate account assets are based on the fair value of the underlying assets owned by the separate account. Assets within the Company’s separate accounts include: mutual funds, fixed maturity securities, equity securities, derivatives, other limited partnership interests, short-term investments and cash and cash equivalents. The fair value of mutual funds is based upon quoted prices or reported net assets values provided by the fund manager and are reviewed by management to determine whether such values require adjustment to represent exit value. The fair values of fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents held by separate accounts are determined on a basis consistent with the methodologies described herein for similar financial instruments held within the general account. Other limited partnership interests are valued giving consideration to the value of the underlying holdings of the partnerships and by applying a premium or discount, if appropriate, for factors such as liquidity, bid/ask spreads, the performance record of the fund manager or other relevant variables which may impact the exit value of the particular partnership interest.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

The fair value of assets and liabilities measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy, are summarized as follows:


	September 30, 2008
	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Total
	(Level 1)		(Level 2)		(Level 3)		Fair Value
	(In millions)

Assets
Fixed maturity securities:
U.S. corporate securities	$	—	$	13,204	$	1,437	$	14,641
Residential mortgage-backed securities		—		9,574		92		9,666
Foreign corporate securities		—		4,569		1,249		5,818
U.S. Treasury/agency securities		873		2,128		84		3,085
Commercial mortgage-backed securities		—		2,641		164		2,805
Asset-backed securities		—		1,458		689		2,147
Foreign government securities		—		583		11		594
State and political subdivision securities		—		741		41		782

Total fixed maturity securities		873		34,898		3,767		39,538

Equity securities:
Non-redeemable preferred stock		—		60		384		444
Common stock		173		71		30		274

Total equity securities		173		131		414		718

Short-term investments (1)		12		133		—		145
Derivative assets (2)		22		1,260		140		1,422
Net embedded derivatives within asset host contracts (3)		—		—		764		764
Separate account assets (4)		43,460		172		164		43,796

Total assets	$	44,540	$	36,594	$	5,249	$	86,383

Liabilities
Derivative liabilities (2)	$	7	$	221	$	3	$	231
Net embedded derivatives within liability host contracts (3)		—		—		386		386

Total liabilities	$	7	$	221	$	389	$	617


(1)		Short-term investments as presented in the table above differ from the amounts presented in the consolidated balance sheet because certain short-term investments are not measured at estimated fair value (e.g. time deposits, money market funds, etc.).

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


(2)		Derivative assets are presented within other invested assets and derivatives liabilities are presented within other liabilities. The amounts are presented gross in the table above to reflect the presentation in the consolidated balance sheet, but are presented net for purposes of the rollforward in the following tables.

(3)		Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Equity securities also includes embedded derivatives of ($14) million. Net embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities.

(4)		Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the fair value of separate account assets as prescribed by SOP 03-1.

The Company has categorized its assets and liabilities into the three-level fair value hierarchy, as defined in Note 1, based upon the priority of the inputs to the respective valuation technique. The following summarizes the types of assets and liabilities included within the three-level fair value hierarchy presented in the preceding table.


	Level 1	This category includes certain U.S. Treasury and agency fixed maturity securities, exchange-traded common stock, and certain short-term money market securities. As it relates to derivatives, this level includes financial futures including exchange-traded equity and interest rate futures. Separate account assets classified within this level principally include mutual funds. Also included are assets held within separate accounts which are similar in nature to those classified in this level for the general account.

	Level 2	This category includes fixed maturity and equity securities priced principally by independent pricing services using observable inputs. These fixed maturity securities include most U.S. Treasury and agency securities as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, state and political subdivision securities, foreign government securities, and asset-backed securities. Equity securities classified as Level 2 securities consist principally of non-redeemable preferred stock and certain equity securities where market quotes are available but are not considered actively traded. Short-term investments included within Level 2 are of a similar nature to these fixed maturity and equity securities. As it relates to derivatives, this level includes all types of derivative instruments utilized by the Company with the exception of exchange-traded futures included within Level 1 and those derivative instruments with unobservable inputs as described in Level 3. Separate account assets classified within this level are generally similar to those classified within this level for the general account.

	Level 3	This category includes fixed maturity securities priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities — including below investment grade private placements; residential mortgage-backed securities; asset backed securities — including all of those supported by sub-prime mortgage loans. Equity securities classified as Level 3 securities consist principally of common stock of privately held companies and non-redeemable preferred stock where there has been very limited trading activity or where less price transparency exists around the inputs to the valuation. As it relates to derivatives this category includes: financial forwards including swap spread locks with maturities which extend beyond observable periods; equity variance swaps with unobservable volatility inputs; credit default swaps which are priced through independent broker quotations; equity options with unobservable volatility inputs; and interest rate caps and floors referencing unobservable yield curves and/or which include liquidity and volatility adjustments. Separate account assets classified within this level are generally similar to those classified within this level for

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


		the general account; however, they also include other limited partnership interests. Embedded derivatives classified within this level include embedded derivatives associated with certain variable annuity riders and embedded derivatives related to funds withheld on ceded reinsurance.

A rollforward of the fair value measurements for all assets and liabilities measured at fair value on a recurring basis using significant unobservable (Level 3) inputs for the three months and nine months ended September 30, 2008 is as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
							Total Realized/Unrealized
			Impact of				Gains (Losses) included in:						Purchases,
	Balance,		SFAS 157		Balance,					Other			Sales,			Transfer In			Balance,
	December 31,		and SFAS 159		Beginning					Comprehensive			Issuances and			and/or Out of			End of
	2007		Adoption (1)		of Period		Earnings (2, 3)			Income (Loss)			Settlements (4)			Level 3 (5)			Period
	(In millions)

For the Nine Months Ended September 30, 2008
Fixed maturity securities	$	4,602	$	—	$	4,602	$	(131	)	$	(549	)	$	(226	)	$	71		$	3,767
Equity securities		556		—		556		(42	)		(55	)		(46	)		1			414
Net derivatives (6)		108		—		108		80			—			(51	)		—			137
Separate account assets (7)		183		—		183		(17	)		—			—			(2	)		164
Net embedded derivatives (8)		125		92		217		103			—			58			—			378
For the Three Months Ended September 30, 2008
Fixed maturity securities						3,974		(97	)		(274	)		80			84			3,767
Equity securities						471		(28	)		(13	)		(11	)		(5	)		414
Net derivatives (6)						104		55			—			(22	)		—			137
Separate account assets (7)						176		(12	)		—			—			—			164
Net embedded derivatives (8)						259		101			—			18			—			378


(1)		Impact of SFAS 157 adoption represents the amount recognized in earnings as a change in estimate upon the adoption of SFAS 157 associated with Level 3 financial instruments held at January 1, 2008. Such amount was offset by a reduction to DAC of $30 million resulting in a net impact of $62 million. This net impact of $62 million along with a $3 million reduction in the fair value of Level 2 freestanding derivatives results in a total impact of adoption of SFAS 157 of $59 million.

(2)		Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains/(losses). Impairments are included within net investment gains (losses) which is reported within the earnings caption of total gains/(losses). Lapses associated with embedded derivatives are included with the earnings caption of total gains/(losses).

(3)		Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward.

(4)		The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded from the rollforward. For embedded derivatives, attributed fees are included within this caption along with settlements, if any.

(5)		Total gains and (losses) (in earnings and other comprehensive income (loss)) are calculated assuming transfers in (out) of Level 3 occurred at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward.

(6)		Freestanding derivative assets and liabilities are presented net for purposes of the rollforward.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)


(7)		Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities.

(8)		Embedded derivative assets and liabilities are presented net for purposes of the rollforward.

(9)		Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging activities, could differ materially.

The table below summarizes both realized and unrealized gains and losses for the three months and nine months ended September 30, 2008 due to changes in fair value recorded in earnings for Level 3 assets and liabilities:


	Total Gains and Losses
	Classification of Realized/Unrealized
	Gains (Losses) included in
	Net Investment		Net Investment
	Income		Gains (Losses)			Total
	(In millions)

For the Nine Months Ended September 30, 2008
Fixed maturity securities	$	4	$	(135	)	$	(131	)
Equity securities		—		(42	)		(42	)
Net derivatives		—		80			80
Net embedded derivatives		—		103			103
For the Three Months Ended September 30, 2008
Fixed maturity securities		3		(100	)		(97	)
Equity securities		—		(28	)		(28	)
Net derivatives		—		55			55
Net embedded derivatives		—		101			101

The table below summarizes the portion of unrealized gains and (losses) recorded in earnings for the three months and nine months ended September 30, 2008 for Level 3 assets and liabilities that are still held at September 30, 2008.


	Changes in Unrealized Gains (Losses)
	Relating to Assets Held at September 30, 2008
	Net Investment		Investment
	Income		Gains (Losses)			Total
	(In millions)

For the Nine Months Ended September 30, 2008
Fixed maturity securities	$	4	$	(104	)	$	(100	)
Equity securities		—		(30	)		(30	)
Net derivatives		—		59			59
Net embedded derivatives		—		93			93
For the Three Months Ended September 30, 2008
Fixed maturity securities		2		(82	)		(80	)
Equity securities		—		(28	)		(28	)
Net derivatives		—		49			49
Net embedded derivatives		—		97			97

Non-Recurring Fair Value Measurements

Certain non-financial assets are measured at fair value on a non-recurring basis (e.g. goodwill and other intangibles considered impaired).

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

At September 30, 2008, the Company held $46 million in mortgage loans which are carried at fair value based on the value of the underlying collateral or independent broker quotations, if lower, of which $1 million was related to impaired mortgage loans held-for-investment and $45 million to certain mortgage loans held-for-sale. These impaired mortgage loans were recorded at fair value and represent a nonrecurring fair value measurement. The fair value was categorized as Level 3. Included within net investment gains (losses) for such impaired mortgage loans are net impairments of $4 million and $18 million for the three months and nine months ended September 30, 2008, respectively.

At September 30, 2008, the Company held $2 million in cost basis other limited partnership interests which were impaired during the three months ended September 30, 2008 based on the underlying limited partnership financial statements. These other limited partnership interests were recorded at estimated fair value and represent a non-recurring fair value measurement. The estimated fair value was categorized as Level 3. Included within net investment gains (losses) for such other limited partnerships are impairments of $1 million and $4 million for the three months and nine months ended September 30, 2008, respectively.


12.	Related Party Transactions

Service Agreements

The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include management, policy administrative functions, personnel, investment advice and distribution services. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $167 million and $485 million for the three months and nine months ended September 30, 2008, respectively, and $87 million and $322 million for the three months and nine months ended September 30, 2007, respectively. See Note 2 for expenses related to investment advice under these agreements, recorded in net investment income.

The Company had net payables to affiliates of $5 million and $27 million at September 30, 2008 and December 31, 2007, respectively, excluding affiliated reinsurance balances discussed below.

Reinsurance Transactions

As disclosed in Note 9 of the Notes to Consolidated Financial Statements included in the 2007 Annual Report, on December 1, 2006, the Company acquired a block of structured settlement business from Texas Life Insurance Company (“Texas Life”), a wholly-owned subsidiary of MetLife, through an assumptive reinsurance agreement. During the nine months ended September 30, 2007, the receivable from Texas Life related to premiums and other considerations of $1.2 billion held at December 31, 2006, was settled with $901 million of cash and $304 million of fixed maturity securities.

The Company has reinsurance agreements with certain MetLife subsidiaries, including Metropolitan Life Insurance Company, MetLife Reinsurance Company of South Carolina, Exeter Reassurance Company, Ltd., General American Life Insurance Company, Mitsui Sumitomo MetLife Insurance Co., Ltd. and MetLife Reinsurance Company of Vermont (“MRV”). The Company also has reinsurance agreements with Reinsurance Group of America, Incorporated, (“RGA”) a former affiliate, which was split-off from MetLife, Inc. in September 2008. The table below includes amounts related to transactions with RGA through the date of the split-off. At September 30, 2008 and December 31, 2007, the Company had reinsurance-related assets from these agreements of $4.1 billion and $3.4 billion, respectively. At September 30, 2008 and December 31, 2007, the Company had reinsurance-related liabilities from these agreements of $2.1 billion and $1.7 billion, respectively.

MetLife Insurance Company of Connecticut
(A Wholly-Owned Subsidiary of MetLife, Inc.)

Notes to Interim Condensed Consolidated Financial Statements (Unaudited) — (Continued)

The following table reflects related party reinsurance information:


	Three Months					Nine Months
	Ended					Ended
	September 30,					September 30,
				As Restated,				As Restated,
	2008			2007		2008		2007
	(In millions)

Assumed premiums	$	6		$	3	$	13	$	12
Assumed fees, included in universal life and investment-type product policy fees	$	35		$	27	$	113	$	90
Assumed benefits, included in policyholder benefits and claims	$	5		$	4	$	23	$	13
Assumed benefits, included in interest credited to policyholder account balances	$	14		$	13	$	42	$	40
Assumed acquisition costs, included in other expenses	$	16		$	5	$	45	$	30
Ceded premiums	$	28		$	9	$	76	$	23
Ceded fees, included in universal life and investment-type product policy fees	$	(9	)	$	57	$	76	$	158
Interest earned on ceded reinsurance, included in other revenues	$	20		$	22	$	60	$	65
Ceded benefits, included in policyholder benefits and claims	$	71		$	34	$	181	$	83
Ceded benefits, included in interest credited to policyholder account balances	$	6		$	—	$	15	$	—
Interest costs on ceded reinsurance, included in other expenses	$	19		$	15	$	55	$	43

The Company has assumed risks related to guaranteed minimum benefit riders from an affiliated joint venture under a reinsurance contract. Such guaranteed minimum benefit riders are embedded derivatives and changes in their fair value are included within net investment gains (losses). The embedded derivatives assumed are included within policyholder account balances and were liabilities of $146 million and $97 million at September 30, 2008 and December 31, 2007, respectively. For the three months and nine months ended September 30, 2008, net investment gains (losses) included ($2) million and ($49) million, respectively, and for the three months and nine months ended September 30, 2007, net investment gains (losses) included ($92) million and ($6) million, respectively, in changes in fair value of such embedded derivatives. These risks have been retroceded in full to another affiliate under a retrocessional agreement. The ceded embedded derivatives are included within premiums and other receivables. The assumption is offset by the retrocession resulting in no net impact on net investment gains (losses).

The Company has also ceded risks to another affiliate related to guaranteed minimum benefit riders written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their fair value are also included within net investment gains (losses). The embedded derivatives ceded are included within premiums and other receivables and were assets of $604 million and $239 million at September 30, 2008 and December 31, 2007, respectively. For the three months and nine months ended September 30, 2008, net investment gains (losses) included $108 million and $325 million, respectively, and for the three months and nine months ended September 30, 2007, net investment gains (losses) included $56 million and $40 million, respectively, in changes in fair value of such embedded derivatives.

Effective December 31, 2007, MLI-USA entered into a reinsurance agreement to cede two blocks of business to MRV, on a 90% coinsurance with funds withheld basis. Certain contractual features of this agreement create an embedded derivative, which is separately accounted for at fair value on the Company’s consolidated balance sheet. The embedded derivative related to the funds withheld associated with this reinsurance agreement is included within other liabilities and reduced the funds withheld balance by $35 million at September 30, 2008. The change in fair value of the embedded derivative, included in net investment gains (losses), was $19 million and $35 million during the three months and nine months ended September 30, 2008, respectively.


13.	Subsequent Event

In October 2008, the Company received advances totaling $300 million from the Federal Home Loan Bank of Boston, which will be included in short-term debt. The Company has pledged assets in support of this borrowing.


Item 2.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

For purposes of this discussion, “MICC” or the “Company” refers to MetLife Insurance Company of Connecticut, a Connecticut corporation incorporated in 1863, and its subsidiaries, including MetLife Investors USA Insurance Company (“MLI-USA”). The Company is a subsidiary of MetLife, Inc. (“MetLife”). Management’s narrative analysis of the results of operations is presented pursuant to General Instruction H(2)(a) of Form 10-Q. This narrative analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (as amended on Form 10-K/A, the “2007 Annual Report”) filed with the U.S. Securities and Exchange Commission (“SEC”), the forward-looking statement information included below and the Company’s interim condensed consolidated financial statements included elsewhere herein.

This narrative analysis contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the Company’s actual future results. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include the risks, uncertainties and other factors identified in the Company’s filings with the SEC. These factors include: (i) difficult and adverse conditions in the global and domestic capital and credit markets; (ii) continued volatility and further deterioration of the capital and credit markets; (iii) uncertainty about the effectiveness of the U.S. government’s plan to purchase large amounts of illiquid, mortgage-backed and other securities from financial institutions; (iv) the impairment of other financial institutions; (v) potential liquidity and other risks resulting from the Company’s participation in a securities lending program and other transactions; (vi) exposure to financial and capital market risk; (vii) changes in general economic conditions, including the performance of financial markets and interest rates, which may affect the Company’s ability to raise capital and generate fee income and market-related revenue; (viii) defaults on the Company’s mortgage and consumer loans; (ix) investment losses and defaults, and changes to investment valuations; (x) market value impairments to illiquid assets; (xi) unanticipated changes in industry trends; (xii) heightened competition, including with respect to pricing, entry of new competitors, the development of new products by new and existing competitors and for personnel; (xiii) discrepancies between actual claims experience and assumptions used in setting prices for the Company’s products and establishing the liabilities for the Company’s obligations for future policy benefits and claims; (xiv) discrepancies between actual experience and assumptions used in establishing liabilities related to other contingencies or obligations; (xv) ineffectiveness of risk management policies and procedures; (xvi) catastrophe losses; (xvii) changes in assumptions related to deferred policy acquisition costs (“DAC”), value of business acquired (“VOBA”) or goodwill; (xviii) downgrades in the Company’s and its affiliates’ claims paying ability, financial strength or credit ratings; (xix) regulatory, legislative or tax changes that may affect the cost of, or demand for, the Company’s products or services; (xx) changes in accounting standards, practices and/or policies; (xxi) adverse results or other consequences from litigation, arbitration or regulatory investigations; (xxii) the effects of business disruption or economic contraction due to terrorism or other hostilities; (xxiii) the Company’s ability to identify and consummate on successful terms any future acquisitions, and to successfully integrate acquired businesses with minimal disruption; and (xxiv) other risks and uncertainties described from time to time in the Company’s filings with the SEC.

The Company does not undertake any obligation to publicly correct or update any forward-looking statement if the Company later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures the Company makes on related subjects in reports to the SEC.

Business

The Company offers individual annuities, individual life insurance, and institutional protection and asset accumulation products. The Company’s Individual segment offers a wide variety of individual insurance, as well as annuities and investment-type products, aimed at serving the financial needs of its customers throughout their entire life cycle. Products offered by Individual include insurance products, such as variable, universal and traditional life insurance, and variable and fixed annuities. In addition, Individual sales representatives distribute investment products such as mutual funds and other products offered by the Company’s other businesses. The Company’s Institutional segment offers a broad range of group insurance and retirement & savings products and services to corporations and other institutions and their respective employees. Group insurance products and services include specialized life insurance products offered through corporate-owned life insurance. Retirement & savings products and services include an array of annuity and investment products, guaranteed interest contracts (“GICs”), funding agreements and similar products, as well as fixed annuity products, generally in connection with defined contribution plans, the termination of pension plans and the funding of structured settlements.

Summary of Critical Accounting Estimates


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

	(ii)	investment impairments;

	(iii)	the recognition of income on certain investment entities;

	(iv)	the application of the consolidation rules to certain investments;

	(v)	the existence and fair value of embedded derivatives requiring bifurcation;

	(vi)	the fair value of and accounting for derivatives;

	(vii)	the capitalization and amortization of DAC and the establishment and amortization of VOBA;

	(viii)	the measurement of goodwill and related impairment, if any;

	(ix)	the liability for future policyholder benefits;

	(x)	accounting for income taxes and the valuation of deferred tax assets;

	(xi)	accounting for reinsurance transactions; and

	(xii)	the liability for litigation and regulatory matters.

In applying the Company’s accounting policies, which are more fully described in the 2007 Annual Report, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company’s businesses and operations. Actual results could differ from these estimates.

Results of Operations

Discussion of Results

The following table presents consolidated financial information for the Company for the periods indicated:


	Nine Months Ended
	September 30,
				As Restated,
	2008			2007 (1)
	(In millions)

Revenues
Premiums	$	310		$	263
Universal life and investment-type product policy fees		1,208			1,033
Net investment income		1,968			2,183
Other revenues		169			188
Net investment gains (losses)		(91	)		(249	)

Total revenues		3,564			3,418

Expenses
Policyholder benefits and claims		813			722
Interest credited to policyholder account balances		849			967
Other expenses		1,219			999

Total expenses		2,881			2,688

Income from continuing operations before provision for income tax		683			730
Provision for income tax		179			201

Income from continuing operations		504			529
Income from discontinued operations, net of income tax		—			4

Net income	$	504		$	533


(1)		During the first quarter of 2008, the Company identified several foreign currency related matters which required restatement of the Company’s December 31, 2007 consolidated financial statements. The consolidated financial statements were restated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (as amended on Form 10-K/A, the “2007 Annual Report”) filed with the U.S. Securities and Exchange Commission. The Company also revised its consolidated financial statements for the quarter ended September 30, 2007 in the aforementioned Form 10-K/A. The Company’s net income for the quarter ended September 30, 2007 increased by $36 million as a result of the correction of such matters. The consolidated financial statements as of and for the three and nine months ended September 30, 2007, as presented herein, have been restated for the effects of such adjustments.

Income from Continuing Operations

Income from continuing operations decreased by $25 million, or 5%, to $504 million for the nine months ended September 30, 2008 from $529 million in the comparable 2007 period.

Partially offsetting this decrease were higher earnings of $103 million, net of income tax, from lower net investment losses. The decrease in net investment losses is due to an increase in losses on fixed maturity and equity securities which were more than offset by foreign exchange gains and derivative gains. The losses on fixed maturity and equity securities are principally attributable to an increase in impairments mainly related to financial services industry holdings which experienced losses as a result of bankruptcies, Federal Deposit Insurance Corporation receivership, and federal government assisted capital infusion transactions in the third quarter 2008 as well as other credit related impairments in conjunction with overall market declines. Foreign exchange gains were driven by gains from foreign currency transactions due to the U.S. dollar strengthening. These foreign exchange gains were virtually entirely offset by losses on related foreign currency swaps hedging such foreign currency transactions.

Derivative gains were driven significantly by gains resulting from the cession of variable annuity rider embedded derivatives. Losses on embedded derivatives resulting from directly written variable annuity riders, partially offset such gains. Losses on the embedded derivative liabilities were driven by poor equity market performance throughout the year; however, such losses were partially offset by gains on the valuation of the embedded derivative liability resulting from the effect of the widening of the Company’s own credit spread which is required to be used in the valuation of these variable annuity rider embedded derivative liabilities. Gains on equity options hedging the equity market performance of embedded derivatives on directly written variable annuity riders more than offset the losses on such riders.

Income from continuing operations, excluding the impact of net investment losses, decreased by $128 million primarily driven by the following items:


	•	An increase in DAC amortization of $96 million, net of income tax, within the Individual segment, primarily related to changes in management’s assumptions used to determine estimated gross profits and margins associated with unfavorable equity market performance and net investment gains, during the current period, and business growth. This increase in DAC was partially offset by higher DAC amortization in the Institutional segment in the prior period due to the adoption of Statement of Position (“SOP”) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges or Insurance Contracts (“SOP 05-1”).

	•	An increase in other expenses of $47 million, net of income tax, due primarily to higher non-deferrable volume related expenses and higher interest expenses, which decreased income from continuing operations.

	•	An increase in interest credited to policyholder account balances of $36 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business.

	•	A decrease in underwriting results of $24 million, net of income tax, primarily due to a $16 million decrease for life products. There were also decreases in the underwriting results for the retirement & savings and non-medical health & other businesses of $8 million and $5 million, respectively, both net of income tax. This was partially offset by a $5 million increase in the group life business. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs, less claims incurred, and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from period to period.

	•	Increase in policyholder benefits and claims of $24 million, net of income tax, primarily due to higher guaranteed annuity benefit rider costs and higher amortization of sales inducements.

	•	A decrease in net investment income of $20 million, net of income tax, primarily due to reduced yields on other limited partnerships including hedge funds and real estate joint ventures.

	•	A decrease in interest margins of $18 million, net of income tax. Management primarily attributes this to a decrease of $50 million, net of income tax, in the annuity business, partially offset by an increase of $36 million, net of income tax, in the retirement & savings business. Interest margin is the difference between interest earned and interest credited to policyholder account balances. Interest earned approximates net investment income on investable assets with minor adjustments related to the consolidation of certain separate accounts and other minor non-policyholder elements. Interest credited is the amount attributed to insurance products, recorded in policyholder benefits and claims, and the amount credited to policyholder account balances for investment-type products, recorded in interest credited to policyholder account balances. Interest credited on insurance products reflects the current year impact of the interest rate assumptions established at issuance or acquisition. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees. This tends to move gradually over time to reflect market interest rate movements and may reflect actions by management to respond to competitive pressures and, therefore, generally does not introduce volatility in expense.

The aforementioned decrease in income from continuing operations was partially offset by the following items:


	•	An increase in universal life and investment-type product policy fees combined with other revenues of $105 million, net of income tax, primarily related to growth in the life products and a reinsurance agreement with an affiliate, which resulted in higher fees driven by an experience rate refund.

	•	An increase in net investment income on blocks of business not driven by interest margins of $18 million, net of income tax.

	•	There was also an increase in income from continuing operations of $6 million, net of income tax, from the Ireland operations, due to an increase in fees and a decrease in interest credited to unit-linked policyholder liabilities reflecting the losses of the investment securities backing these liabilities.

Income tax expense for the nine months ended September 2008 was $179 million, compared with $201 million for the 2007 period. The effective tax rate of 26% and 28% for the nine months ended September 2008 and 2007, respectively, differs from the corporate tax rate of 35% primarily due to the impact of non-taxable investment income.

Revenues

Total revenues, excluding net investment gains (losses), decreased by $12 million to $3,655 million for the nine months ended September 30, 2008 from $3,667 million in the comparable 2007 period.

Premiums increased by $47 million primarily due to an increase of $124 million for the group institutional annuity business, mainly due to the first significant sales in the United Kingdom business in the current year period. In addition, there was an increase in structured settlements of $8 million, largely due to higher sales, as well as an increase of $2 million in general account annuities. Partially offsetting these increases was a decline of $87 million in income annuities and traditional life products due to reinsurance transactions with affiliates, partially offset with growth in the business.

Universal life and investment-type product policy fees combined with other revenues increased by $156 million. This increase was primarily due to a $71 million increase related to growth in universal life and investment-type products which was partially offset by unfavorable equity market performance during the current period. Additionally, a reinsurance agreement effective as of December 31, 2007 ceded certain life products to an affiliate which resulted in higher fees of $87 million driven by an experience rated refund. These increases were partially offset by a $5 million decrease primarily in corporate-owned life insurance fee income.

Net investment income decreased by $215 million to $1,968 million for the nine months ended September 30, 2008 from $2,183 million for the comparable 2007 period. Management attributes $179 million of this decrease to lower yields and $36 million of the decrease to a decline in average invested assets. This decrease in yields was primarily due to lower returns on other limited partnerships, real estate joint ventures, fixed maturity securities and short-term investments, partially offset by improved securities lending results. Management anticipates that net investment income and the related yields on other limited partnerships and real estate joint ventures will decline further, and could reduce net investment income, during the remainder of 2008 due to increased volatility in equity and credit markets. The decrease in net investment income from the decline in average invested assets was primarily within fixed maturity securities, partially offset by increases in net investment income due to increases in average invested assets within other limited partnership interests and real estate joint ventures.

Expenses

Total expenses increased by $193 million, or 7%, to $2,881 million for the nine months ended September 30, 2008 from $2,688 million in the comparable 2007 period.

The increase in policyholder benefits and claims of $91 million included a $32 million decrease related to net investment gains (losses). Excluding the decrease related to net investment gains (losses), policyholder benefits and claims increased by $123 million. The increase in policyholder benefits and claims was primarily attributable to a $137 million increase in the retirement & savings business. The increase in retirement & savings’ policyholder benefits was largely due to an increase in the group institutional annuity business of $135 million, primarily due to the aforementioned increase in premiums in addition to unfavorable mortality. The remaining $2 million increase in

the retirement & savings business was in the general account annuities products. In structured settlements, a prior year period favorable liability refinement of $12 million and the aforementioned increase in premiums was completely offset by favorable mortality. The increase in policyholder benefits and claims was partially offset by a decrease associated with income annuities and traditional life products of $87 million, commensurate with the aforementioned decrease in premiums discussed above. There was also an increase of $29 million due to unfavorable mortality in life products, a $36 million increase due to higher guaranteed annuity benefit costs and higher amortization of sales inducements and an $8 million increase in the non-medical health & other business, primarily due to unfavorable claim experience in the individual disability income business. These increases were partially offset by an $8 million decrease in the group life business due to favorable mortality in the current period.

Interest credited to policyholder account balances decreased by $118 million compared to the comparable 2007 period. This decrease was primarily due to a decrease of $103 million in LIBOR based funding agreements, which are tied to short-term interest rates. In addition, the impact of lower policyholder account balances and interest credited rates on the general account portion of investment-type products and guaranteed interest contracts decreased by $34 million and $28 million, respectively. There was also a decrease of $18 million due to a decrease in interest credited to unit-linked policyholder liabilities reflecting losses of the investment securities backing these liabilities. Partially offsetting these decreases to interest credited to policyholder account balances was an increase of $57 million due to lower amortization of the excess interest liability on acquired annuity and universal life blocks of businesses driven by lower lapses in the current period, and an increase in the group life business of $11 million.

Other expenses increased by $220 million, primarily due to higher DAC amortization of $148 million, within the Individual segment, primarily related to changes in management’s assumptions used to determine estimated gross profits and margins associated with unfavorable equity market performance and net investment gains, during the current period, and business growth. This increase in DAC was partially offset by higher DAC amortization in the Institutional segment in the prior period due to the adoption of SOP 05-1. Other expenses, excluding DAC amortization, increased by $72 million. Included in this increase were higher non-deferrable volume related expenses of $41 million, which include those expenses associated with information technology, compensation and direct departmental spending. Direct departmental spending includes those expenses associated with consultants, travel, printing and postage. Additionally, interest expense on debt increased by $28 million, primarily due to the issuances of surplus notes in December 2007 and April 2008, as well as higher legal costs primarily due to a decrease in the prior period of $8 million of legal liabilities resulting from the settlement of certain cases, partially offset by a decrease of $5 million, related to foreign currency transaction gains in Ireland.

Extraordinary Market Conditions

Since mid-September, the global financial markets have experienced unprecedented disruption, adversely affecting the business environment in general, as well as financial services companies in particular. The U.S. Government, as well as governments in many foreign markets in which the Company operates, have responded to address market imbalances and take meaningful steps intended to eventually restore market confidence.

While managing through these challenging market conditions, the Company benefits from the strength of its franchise, diversification of its businesses and strong financial fundamentals.

With respect to the Company’s insurance businesses, Individual and Institutional segments tend to behave differently under these extraordinary market conditions. In the Company’s Individual segment, which include individual life and annuity products, lapses and surrenders occur in the normal course of business in many product areas. These lapses and surrenders have not deviated materially from management expectations during the financial crisis.

Within the Institutional segment, the retirement & savings business consists of general account values of approximately $22 billion. About $20 billion of that amount is comprised of pension closeouts, other fixed annuity contracts without surrender or withdrawal options, as well as global GICs that have stated maturities and cannot be put back to the Company prior to maturity. As a result, the surrenders or withdrawals are fairly predictable and even during this difficult environment they have not deviated materially from management expectations.

With regard to retirement & savings liabilities where customers have limited liquidity rights, as of September 30, 2008 there were approximately $1.3 billion of funding agreements that can be put back to the Company after a period of notice. While the notice requirements vary, the shortest is 90 days, and that applies to

approximately $775 million of these liabilities. The remainder of the notice periods are between 6 and 13 months, so even on the small portion of the portfolio where there is ability to accelerate withdrawal, the exposure is relatively limited. With respect to credit ratings downgrade triggers that permit early termination, approximately $525 million of the retirement & savings liabilities are subject to such triggers. In addition, such early termination payments are subject to 90 day prior notice. Management continues to control the liquidity exposure that can arise from these various product features.

The Company’s securities lending business has been affected by the extraordinary market environment. In this activity, blocks of securities, which are included in fixed maturity and equity securities, are loaned to third parties, primarily major brokerage firms and commercial banks. The Company requires a minimum of 100% of the estimated fair value of the loaned securities to be separately maintained as collateral for the loans. The Company was liable for cash collateral under its control of $9.3 billion and $10.1 billion at September 30, 2008 and December 31, 2007, respectively.

During the unprecedented market disruption since mid-September, the demand for securities loans from the Company’s counterparties has decreased. As a result, the cash collateral liability has been reduced to approximately $6.5 billion as of October 28, 2008. Of this $6.5 billion of cash collateral to be returned, as of October 28, 2008, approximately $2.6 billion was on open terms, meaning that the related loaned security could be returned to the Company on the next business day requiring return of cash collateral. The fair value of the securities on loan related to such cash collateral which could be required to be returned the next business day was $2.5 billion at October 28, 2008. U.S. Treasury and agency securities with a fair value of $2.0 billion were included in such securities on loan and could be immediately sold to satisfy the on open cash collateral requirements.

The following table represents, as of September 30, 2008 and October 28, 2008, when the Company may be obligated to return cash collateral received in connection with its securities lending program. Cash collateral is required to be returned when the related loaned security can be returned to the Company.


	September 30, 2008					October 28, 2008
	Cash		% of			Cash		% of
	Collateral		Total			Collateral		Total
	(In millions)

Open	$	2,750		29.7	%	$	2,582		39.7	%
Less than 90 days		6,260		67.5			3,660		56.3
Greater than 90 days		260		2.8			256		4.0

Total	$	9,270		100.0	%	$	6,498		100.0	%

Based upon present market conditions, management anticipates further orderly reductions in this activity during the remainder of the year, which have been factored into the Company’s liquidity and investment plans. Sufficient liquidity has been accumulated by the Company in the form of highly liquid securities to facilitate such further reductions. Management plans to continue to lend securities and has appropriate policies and guidelines in place to manage this activity at a somewhat reduced level through this extraordinary business environment.

The Company does not operate a financial guarantee or financial products business with exposures in derivative products that could give rise to extremely large collateral calls. The Company is a net receiver of collateral from counterparties under the Company’s current derivative transactions. With respect to derivative transactions with credit ratings downgrade triggers, a two notch downgrade would have no material impact on the Company’s derivative collateral requirements. As a result, the Company does not have significant exposure to any credit ratings dependent liquidity factors resulting from current derivatives positions.

Processes for monitoring and managing liquidity risk, including liquidity stress models, have been enhanced to take into account the extraordinary market conditions, including the impact on policyholder and counterparty behavior, the ability to sell various investment assets and the ability to raise incremental funding from various sources. Management has taken steps to strengthen liquidity in light of its assessment of the impact of market conditions and will continue to monitor the situation closely.

Between September 30, 2008 and November 4, 2008, public equity markets continued to decline and credit spreads continued to widen across asset sectors worldwide. These deteriorating market conditions continue to impact the market value of the investment portfolio, resulting in increased unrealized losses.

MetLife Short Term Funding LLC, the issuer of commercial paper under a program supported by funding agreements issued by the Company and Metropolitan Life Insurance Company (“MLIC”), was accepted on October 24, 2008 for the Federal Reserve’s Commercial Paper Funding Facility (“CPFF”) and may issue a maximum amount of approximately $3.8 billion under the CPFF. The CPFF is intended to improve liquidity in short-term funding markets by increasing the availability of term commercial paper funding to issuers and by providing greater assurance to both issuers and investors that funds will be able to rollover their maturing commercial paper. As of October 31, 2008, MetLife Short Term Funding LLC had used approximately $900 million of its available capacity under the CPFF, and such amount was deposited under related funding agreements with MLIC.

Insurance Regulations

The Company is subject to certain Risk-Based Capital (“RBC”) requirements that are used as minimum capital requirements by the National Association of Insurance Commissioners and the state insurance departments to identify companies that merit regulatory action. RBC is based on a formula calculated by applying factors to various asset, premium and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk and is calculated on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose RBC ratio does not exceed certain RBC levels. As of the date of the most recent annual statutory financial statements filed with insurance regulators, the RBC of MetLife Insurance Company of Connecticut and MLI-USA were each in excess of those RBC levels.

During 2008, MetLife Insurance Company of Connecticut is permitted to pay, without prior regulatory approval, a dividend of $1,026 million. MetLife Insurance Company of Connecticut’s subsidiary, MLI-USA, had negative statutory unassigned surplus at December 31, 2007, and therefore cannot pay dividends to MetLife Insurance Company of Connecticut without prior regulatory approval from the Delaware Commissioner of Insurance.

Adoption of New Accounting Pronouncements

Fair Value


	Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities.

	Level 2	Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

	Level 3	Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Effective January 1, 2008, the Company adopted SFAS 157 and applied the provisions of the statement prospectively to assets and liabilities measured at fair value. The adoption of SFAS 157 changed the valuation of certain freestanding derivatives by moving from a mid to bid pricing convention as it relates to certain volatility inputs as well as the addition of liquidity adjustments and adjustments for risks inherent in a particular input or valuation technique. The adoption of SFAS 157 also changed the valuation of the Company’s embedded derivatives, most significantly the valuation of embedded derivatives associated with certain riders on variable annuity contracts. The change in valuation of embedded derivatives associated with riders on annuity contracts resulted from the incorporation of risk margins associated with non-capital market inputs and the inclusion of the Company’s own credit standing in their valuation. At January 1, 2008, the impact of adopting SFAS 157 on assets and liabilities measured at fair value was $59 million ($38 million, net of income tax) and was recognized as a change in estimate in the accompanying condensed consolidated statement of income where it was presented in the respective income statement caption to which the item measured at fair value is presented. There were no significant changes in fair value of items measured at fair value and reflected in accumulated other comprehensive income (loss). The addition of risk margins and the Company’s own credit spread in the valuation of embedded derivatives associated with annuity contracts may result in significant volatility in the Company’s consolidated net income in future periods. The impact of adopting SFAS 157 also changed the fair value measurement for assets and liabilities which are not measured at fair value in the financial statements but for which disclosures of fair value are required under SFAS No. 107, Disclosures about Fair Value of Financial Instruments.

As a result of the adoption of SFAS 157, the Company updated critical accounting estimates related to investments, derivative financial instruments and embedded derivatives, as described below. This information should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” included in the 2007 Annual Report.

Investments

The Company’s investments in fixed maturity and equity securities, which are classified as available-for-sale and certain short-term investments are reported at their estimated fair value. In determining the estimated fair value of these securities, various methodologies, assumptions and inputs are utilized, as described further below.

When available, the estimated fair value of securities 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 judgment.

When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund

requirements, maturity, estimated duration and management’s assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management’s judgments about financial instruments.

The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market.

When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and, therefore, have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities.

The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s securities holdings.

Derivative Financial Instruments

The fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models.

The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility, or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments.

The credit risk of both the counterparty and the Company are considered in determining the fair value for all over-the-counter derivatives. Due to the existence of netting agreements and collateral arrangements, credit risk is monitored and consideration of any potential credit adjustment is on a net exposure by counterparty basis. The Company values its positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not required in the valuation process. It should be noted that 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. Such agreements serve to effectively mitigate credit risk.

Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. 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. Also, fluctuations in the fair value of derivatives which have not been designated for hedge accounting may result in significant volatility in net income.

Embedded Derivatives

Embedded derivatives principally include certain direct, assumed and ceded variable annuity riders, and embedded derivatives related to funds withheld on ceded reinsurance. Embedded derivatives are recorded in the financial statements at fair value with changes in fair value adjusted through net income.

The Company issues certain variable annuity products with guaranteed minimum benefit riders. These include guaranteed minimum withdrawal benefit (“GMWB”) riders, guaranteed minimum accumulation benefit (“GMAB”) riders, and certain guaranteed minimum income benefit (“GMIB”) riders. GMWB, GMAB and certain GMIB riders are embedded derivatives, which are measured at fair value separately from the host variable annuity contract, with changes in fair value reported in net investment gains (losses). These embedded derivatives are classified within policyholder account balances. The fair value for these riders is estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Effective January 1, 2008, upon adoption of SFAS 157, the valuation of these riders now includes an adjustment for the Company’s own credit and risk margins for non-capital market inputs. The Company’s own credit adjustment is determined taking into consideration publicly available information relating to the Company’s debt as well as its claims paying ability. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates, changes in the Company’s own credit standing, and variations in actuarial assumptions regarding policyholder behavior and risk margins related to non-capital market inputs may result in significant fluctuations in the fair value of the riders that could materially affect net income.

The Company cedes the risks associated with certain of the GMIB, GMAB and GMWB riders described in the preceding paragraph to an affiliated reinsurance company. These reinsurance contracts contain embedded derivatives which are included in premiums and other receivables with changes in fair value reported in net investment gains (losses). The value of the embedded derivatives on the ceded risks are determined using a methodology consistent with that described previously for the riders directly written by the Company.

In addition to ceding risks associated with riders that are accounted for as embedded derivatives, the Company also cedes to the same affiliated reinsurance company certain directly written GMIB riders that are accounted for as insurance (i.e. not as embedded derivatives) but where the reinsurance contract contains an embedded derivative. These embedded derivatives are included in premiums and other receivables with changes in fair value reported in net investment gains (losses). The value of the embedded derivatives on these ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. Because the direct rider is not accounted for at fair value, significant fluctuations in net income may occur as the change in fair value of the embedded derivative on the ceded risk is being recorded in net income without a corresponding and offsetting change in fair value of the direct rider.

The Company has assumed risks related to guaranteed minimum benefit riders from an affiliated joint venture under a reinsurance contract. These risks are fully retroceded to the same affiliated reinsurance company. Both the assumed and retroceded contracts contain embedded derivatives. The embedded derivatives associated with the assumed risks are included in policyholder account balances and the embedded derivatives associated with the retroceded risks are included in premiums and other receivables with changes in fair value of both reported in net investment gains (losses). The values of the embedded derivatives in both the assumed and retroceded contracts are determined in a similar manner and using a methodology consistent with that described previously for the riders directly written by the Company.

The fair value of the embedded derivatives within funds withheld at interest related to certain ceded reinsurance is determined based on the change in fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The fair value of the underlying assets is determined as described above in “— Investments.” The fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities with changes in fair value recorded in net investment gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the fair value of these embedded derivatives that could materially affect net income.

The accounting for embedded derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. If interpretations change, there is a risk that features previously not bifurcated may require bifurcation and reporting at fair value in the interim condensed consolidated financial statements and respective changes in fair value could materially affect net income.

Effective January 1, 2008, the Company adopted FASB Staff Position (“FSP”) No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 (“FSP 157-1”). FSP 157-1 amends SFAS 157 to provide a scope out exception for lease classification and measurement under SFAS No. 13, Accounting for Leases. The Company also adopted FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 which delays the effective date of SFAS 157 for certain nonfinancial assets and liabilities that are recorded at fair value on a nonrecurring basis. The effective date is delayed until January 1, 2009 and impacts balance sheet items including nonfinancial assets and liabilities in a business combination and the impairment testing of goodwill and long-lived assets.

Other

effectiveness in a hedging relationship of interest rate risk involving an interest bearing asset or liability in situations where the hedged item is not recognized for accounting purposes until settlement date as long as the period between trade date and settlement date of the hedged item is consistent with generally established conventions in the marketplace. The adoption of Issue E-23 did not have an impact on the Company’s interim condensed consolidated financial statements.

Future Adoption of New Accounting Pronouncements

Business Combinations


	•	All business combinations (whether full, partial or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions.

	•	Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date.

	•	The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date.

	•	Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies.

	•	Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense.

	•	Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities.

	•	When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized.

	•	Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions.

	•	When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized.

Derivatives

FIN 45-4 amends SFAS 133, to require certain enhanced disclosures by sellers of credit derivatives by requiring additional information about the potential adverse effects of changes in their credit risk, financial performance, and cash flows. It also amends FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others — An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34 (“FIN 45”), to require an additional disclosure about the current status of the payment/performance risk of a guarantee. FSP 133-1 and FIN 45-4 is effective for reporting periods ending after November 15, 2008. The Company provided a majority of the required disclosures related to credit derivatives under this FSP and is currently evaluating the impact of FSP 133-1 and FIN 45-4 on its consolidated financial statement disclosures for guarantees.

Other


Item 3.	*Quantitative and Qualitative Disclosures About Market Risk*

MetLife regularly analyzes its exposure to interest rate, equity market and foreign currency exchange risks. As a result of that analysis, MetLife has determined that the fair value of the Company’s interest rate sensitive invested assets is materially exposed to changes in interest rates, and that the amount of that risk has decreased from that reported at December 31, 2007 in the 2007 Annual Report. The equity and foreign currency portfolios do not expose the Company to material market risks, nor has the Company’s exposure to those risks materially changed from that reported on December 31, 2007 in the 2007 Annual Report.

MetLife analyzes interest rate risk using various models including multi-scenario cash flow projection models that forecast cash flows of certain liabilities and their supporting investments, including derivative instruments. As disclosed in the 2007 Annual Report, MetLife uses a variety of strategies to manage interest rate, equity market, and foreign currency exchange risk, including the use of derivative instruments.

MetLife’s management processes for measuring, managing and monitoring market risk remain as described in the 2007 Annual Report.

Risk Measurement: Sensitivity Analysis

MetLife measures market risk related to its holdings of invested assets and other financial instruments, including certain market risk sensitive insurance contracts, based on changes in interest rates, equity market prices and currency exchange rates, utilizing a sensitivity analysis. This analysis estimates the potential changes in fair value based on a hypothetical 10% change (increase or decrease) in interest rates, equity market prices and currency exchange rates. MetLife believes that a 10% change (increase or decrease) in these market rates and prices is reasonably possible in the near-term. In performing this analysis, MetLife used market rates at September 30, 2008 to re-price the Company’s invested assets and other financial instruments. The sensitivity analysis separately calculated each of the Company’s market risk exposures (interest rate, equity market price and foreign currency exchange rate) related to non-trading invested assets and other financial instruments. The Company does not maintain a trading portfolio. The sensitivity analysis performed included the market risk sensitive holdings described above. MetLife modeled the impact of changes in market rates and prices on the fair values of the Company’s invested assets as follows:


	•	the net present values of the Company’s interest rate sensitive exposures resulting from a 10% change (increase or decrease) in interest rates;

	•	the market value of the Company’s equity positions due to a 10% change (increase or decrease) in equity prices; and

	•	the U.S. dollar equivalent balances of the Company’s currency exposures due to a 10% change (increase or decrease) in currency exchange rates.

The sensitivity analysis is an estimate and should not be viewed as predictive of the Company’s future financial performance. The Company cannot assure that its actual losses in any particular year will not exceed the amounts indicated in the table below. Limitations related to this sensitivity analysis include:


	•	the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis;

	•	for derivatives that qualify as hedges, the impact on reported earnings may be materially different from the change in market values;

	•	the analysis excludes other significant real estate holdings and liabilities pursuant to insurance contracts; and

	•	the model assumes that the composition of assets and liabilities remains unchanged throughout the year.

Accordingly, MetLife uses such models as tools and not substitutes for the experience and judgment of its investments, asset/liability management and corporate risk personnel. Based on its analysis of the impact of a 10% change (increase or decrease) in market rates and prices, MetLife has determined that such a change could have a material adverse effect on the fair value of the Company’s interest rate sensitive invested assets. Based upon MetLife’s analysis of the impact of a 10% change (increase or decrease) in equity markets or in currency exchange rates, the equity and foreign currency portfolios do not expose the Company to material market risk.

The table below illustrates the potential loss in fair value of the Company’s interest rate sensitive financial instruments at September 30, 2008. In addition, the potential loss with respect to the fair value of currency exchange rates and the Company’s equity price sensitive positions at September 30, 2008 is set forth in the table below.

The potential loss in fair value for each market risk exposure of the Company’s non-trading portfolio at September 30, 2008 was:


	September 30, 2008
	(In millions)

Non-trading:
Interest rate risk	$	614
Equity price risk	$	119
Foreign currency exchange rate risk	$	33

The table below provides additional detail regarding the potential loss in fair value of the Company’s non-trading interest sensitive financial instruments at September 30, 2008 by type of asset or liability:


	As of September 30, 2008
						Assuming a
			Estimated			10% Increase
	Notional		Fair			in the
	Amount		Value			Yield Curve
	(In millions)

Assets:
Fixed maturity securities			$	39,538		$	(754	)
Equity securities				718			—
Mortgage and consumer loans				4,376			(33	)
Policy loans				1,256			(10	)
Short-term investments				524			—
Cash and cash equivalents				3,313			—
Mortgage loan commitments	$	339		(14	)		—
Commitments to fund bank credit facilities and private corporate bond investments		413		(43	)		—
Commitments to fund partnership investments		1,584		—			—

Total assets						$	(797	)

Liabilities:
Policyholder account balances			$	20,316		$	350
Long-term debt — affiliated				624			12
Payables for collateral under securities loaned and other transactions				10,099			—

Total Liabilities						$	362

Other:
Derivative Instruments (designated hedges or otherwise)
Interest rate swaps	$	7,040	$	288		$	(13	)
Interest rate floors		12,071		174			(37	)
Interest rate caps		3,516		11			5
Financial futures		1,458		15			(96	)
Foreign currency swaps		3,724		561			(30	)
Foreign currency forwards		106		2			—
Options		838		120			(7	)
Financial forwards		1,009		16			(1	)
Credit default swaps		399		4			—

Total Other						$	(179	)

Net change						$	(614	)

This quantitative measure of risk has decreased by $14 million, or 2%, to $614 million at September 30, 2008 from $628 million at December 31, 2007. From December 31, 2007 to September 30, 2008 there was a decline in interest rates across both the swaps and treasury curves which resulted in a decrease in the interest rate sensitivity by $176 million. The most significant movement in both yield curves occurred at the short end with U.S. Treasuries dropping precipitously. Partially offsetting this decline was an increase in interest rate risk of $165 million resulting from the amount of derivatives employed by the Company.


Item 4(T).	*Controls and Procedures*

Management, with the participation of the President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the President and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II — Other Information


Item 1.	*Legal Proceedings*

The following should be read in conjunction with (i) Part I, Item 3 of the 2007 Annual Report, and (ii) Note 6 to the interim condensed consolidated financial statements in Part I of this report.

During the quarter ended September 30, 2008, no new material legal or governmental proceedings were instituted and no material developments in any such previously reported proceedings occurred, to which MetLife Insurance Company of Connecticut or any of its subsidiaries is a party or any of their property is subject.


Item 1A.	*Risk Factors*

The following should be read in conjunction with and supplements and amends the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the 2007 Annual Report.

Adverse Capital and Credit Market Conditions May Significantly Affect Our Ability to Meet Liquidity Needs, Access to Capital and Cost of Capital

The capital and credit markets have been experiencing extreme volatility and disruption for more than twelve months. In recent weeks, the volatility and disruption have reached unprecedented levels. In some cases, the markets have exerted downward pressure on availability of liquidity and credit capacity for certain issuers.

We need liquidity to pay our operating expenses, interest on our debt and dividends on our capital stock, maintain our securities lending activities and replace certain maturing liabilities. Without sufficient liquidity, we will be forced to curtail our operations, and our business will suffer. The principal sources of our liquidity are insurance premiums, annuity considerations, deposit funds, cash flow from our investment portfolio and assets, consisting mainly of cash or assets that are readily convertible into cash. Sources of liquidity in normal markets also include borrowings from MetLife, Inc. or other affiliates and capital contributions from MetLife, Inc.

In the event current resources do not satisfy our needs, we may have to seek additional financing. The availability of additional financing will depend on a variety of factors such as market conditions, the general availability of credit, the volume of trading activities, the overall availability of credit to the financial services industry, our credit ratings and credit capacity, as well as the possibility that customers or lenders could develop a negative perception of our long- or short-term financial prospects if we incur large investment losses or if the level of our business activity decreased due to a market downturn. Similarly, our access to funds may be impaired if regulatory authorities or rating agencies take negative actions against us. Our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all.

Our liquidity requirements may change. For instance, we have funding agreements which can be put to us after a period of notice. The notice requirements vary; however, the shortest period is 90 days, applicable to approximately $775 million of such liabilities as of September 30, 2008.

Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital required to operate our business. Such market conditions may limit our ability to replace, in a timely manner, maturing liabilities; satisfy statutory capital requirements; generate fee income and market-related revenue to meet liquidity needs; and access the capital necessary to grow our business. As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, issue shorter tenor securities than we prefer, or bear an unattractive cost of capital which could decrease our profitability and significantly reduce our financial flexibility. Recently our credit spreads have

widened considerably. Our results of operations, financial condition, cash flows and statutory capital position could be materially adversely affected by disruptions in the financial markets.

Difficult Conditions in the Global Capital Markets and the Economy Generally May Materially Adversely Affect Our Business and Results of Operations and We Do Not Expect These Conditions to Improve in the Near Future

Our results of operations are materially affected by conditions in the global capital markets and the economy generally, both in the United States and elsewhere around the world. The stress experienced by global capital markets that began in the second half of 2007 continued and substantially increased during the third quarter of 2008. Recently, concerns over the availability and cost of credit, the U.S. mortgage market, geopolitical issues, energy costs, inflation and a declining real estate market in the United States have contributed to increased volatility and diminished expectations for the economy and the markets going forward. These factors, combined with declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and fears of a possible recession. In addition, the fixed-income markets are experiencing a period of extreme volatility which has negatively impacted market liquidity conditions. Initially, the concerns on the part of market participants were focused on the sub-prime segment of the mortgage-backed securities market. However, these concerns have since expanded to include a broad range of mortgage- and asset-backed and other fixed income securities, including those rated investment grade, the U.S. and international credit and interbank money markets generally, and a wide range of financial institutions and markets, asset classes and sectors. Securities that are less liquid are more difficult to value and have less opportunities for disposal. Domestic and international equity markets have also been experiencing heightened volatility and turmoil, with companies that have exposure to the real estate, mortgage and credit markets particularly affected. These events and the continuing market upheavals may have an adverse effect on us, in part because we have a large investment portfolio and are also dependent upon customer behavior. Our revenues are likely to decline in such circumstances and our profit margins could erode. In addition, in the event of extreme prolonged market events, such as the global credit crisis, we could incur significant losses. Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Extraordinary Market Conditions.”

We are a significant writer of variable annuity products. The account values of these products will be affected by the downturn in capital markets. Any decrease in account values will decrease the fees generated by our variable annuity products.

Factors such as consumer spending, business investment, government spending, the volatility and strength of the capital markets, and inflation all affect the business and economic environment and, ultimately, the amount and profitability of our business. In an economic downturn characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending, the demand for our financial and insurance products could be adversely affected. In addition, we may experience an elevated incidence of claims and lapses or surrenders of policies. Our policyholders may choose to defer paying insurance premiums or stop paying insurance premiums altogether. Adverse changes in the economy could affect earnings negatively and could have a material adverse effect on our business, results of operations and financial condition. The current mortgage crisis has also raised the possibility of future legislative and regulatory actions in addition to the recent enactment of the Emergency Economic Stabilization Act of 2008 (the “EESA”) that could further impact our business. We cannot predict whether or when such actions may occur, or what impact, if any, such actions could have on our business, results of operations and financial condition.

There Can be No Assurance that Actions of the U.S. Government, Federal Reserve and Other Governmental and Regulatory Bodies for the Purpose of Stabilizing the Financial Markets Will Achieve the Intended Effect

In response to the financial crises affecting the banking system and financial markets and going concern threats to investment banks and other financial institutions, on October 3, 2008, President Bush signed the EESA into law. Pursuant to the EESA, the U.S. Treasury has the authority to, among other things, purchase up to $700 billion of mortgage-backed and other securities from financial institutions for the purpose of stabilizing the financial markets. The Federal Government, Federal Reserve, the Federal Deposit Insurance Corporation and other governmental and regulatory bodies have taken or are considering taking other actions to address the financial crisis. There can be no assurance as to what impact such actions will have on the financial markets, whether on the extreme levels of volatility currently being

experienced, the levels of lending by financial institutions, the prices buyers are willing to pay for financial assets or otherwise. Continued volatility, low levels of credit availability and low prices for financial assets could materially and adversely affect our business, financial condition and results of operations, or the trading price of our common stock. In addition, the choices made by the U.S. Treasury in its distribution of amounts available under the EESA could have the effect of supporting some parts of the financial system more than others.

MetLife and some or all of its affiliates may be eligible to sell assets to the U.S. Treasury under one or more of the programs established under EESA, and some of their assets may be among those the U.S. Treasury offers to purchase, either directly or through auction. Furthermore, as a bank holding company, MetLife could be selected to participate in the recently announced program, pursuant to which the U.S. Treasury announced its intention to invest up to $250 billion in a large number of U.S. banks and bank holding companies and, in exchange, to receive certain equity securities of such banks or bank holding companies. Only MetLife can participate in the bank buy-in program. We can, however, apply to participate in any asset purchase or guarantee program that the U.S. Treasury may create. If we choose or are asked to participate in a purchase or guarantee program, we will become subject to requirements and restrictions on our business, depending on the amount we sell or the amount guaranteed. Depending on the type of a particular transaction, the Secretary of the Treasury may require us, or potentially MetLife, Inc., to provide warrants for common or preferred stock or senior debt securities. Issuing such securities could dilute MetLife’s ownership interest in us or the ownership interests of the stockholders of MetLife or affect our ability to raise capital in other transactions. We would also become subject to restrictions on the compensation that we can offer or pay to certain executive employees, including incentives or performance-based compensation. These restrictions could hinder or prevent us from attracting and retaining management with the talent and experience to manage our business effectively. Limits on our ability to deduct certain compensation paid to executive employees will also be imposed. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Extraordinary Market Conditions.”

The Impairment of Other Financial Institutions Could Adversely Affect Us

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, hedge funds and other investment funds and other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty. In addition, with respect to secured transactions, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to it. We also have exposure to these financial institutions in the form of unsecured debt instruments, derivative transactions and equity investments. There can be no assurance that any such losses or impairments to the carrying value of these assets would not materially and adversely affect our business and results of operations.

Our Participation in a Securities Lending Program Subjects Us to Potential Liquidity and Other Risks

We participate in a securities lending program whereby blocks of securities, which are included in fixed maturity and equity securities, are loaned to third parties, primarily major brokerage firms and commercial banks. The Company requires a minimum of 100% of the estimated fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $9.4 billion and $9.9 billion and an estimated fair value of $8.9 billion and $9.8 billion were on loan under the program at September 30, 2008 and December 31, 2007, respectively. Securities loaned under such transactions may be sold or repledged by the transferee. We were liable for cash collateral under our control of $9.3 billion and $10.1 billion at September 30, 2008 and December 31, 2007, respectively.

Of this $9.3 billion of cash collateral to be returned at September 30, 2008, approximately $2.8 billion was on open terms, meaning that the related loaned security could be returned to the Company on the next business day requiring return of cash collateral. The fair value of the securities on loan related to such cash collateral which could be required to be returned the next business day was approximately $2.6 billion at September 30, 2008. U.S. Treasury and agency securities with a fair value of approximately $1.2 billion were included in such securities on loan and could be immediately sold to satisfy the on open cash collateral requirements. The remainder of the securities on loan are high quality corporate fixed maturity securities. Other than the cash collateral due on open terms, substantially all of the remaining cash collateral is due — based upon when the related loaned security is scheduled to be returned — within 90 days.

Returns of loaned securities would require us to return the cash collateral associated with such loaned securities. In addition, in some cases, the maturity of the securities held as invested collateral (i.e., securities that we have purchased with cash received from the third parties) may exceed the term of the related securities on loan and the market value may fall below the amount of cash received as collateral and invested. If we are required to return significant amounts of cash collateral on short notice and we are forced to sell securities to meet the return obligation, we may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than we otherwise would have been able to realize under normal market conditions, or both. In addition, under stressful capital market and economic conditions, such as those conditions we have experienced recently, liquidity broadly deteriorates, which may further restrict our ability to sell securities.

If we decrease the amount of our securities lending activities over time, the amount of income generated by these activities will also likely decline.

We are Exposed to Significant Financial and Capital Markets Risk which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and Our Net Investment Income can Vary from Period to Period

We are exposed to significant financial and capital markets risk, including changes in interest rates, credit spreads, equity prices, real estate values, foreign currency exchange rates, market volatility, the performance of the economy in general, the performance of the specific obligors included in our portfolio and other factors outside our control. Our exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. A rise in interest rates will increase the net unrealized loss position of our investment portfolio and, if long-term interest rates rise dramatically within a six to twelve month time period, certain of our life insurance businesses may be exposed to disintermediation risk. Disintermediation risk refers to the risk that our policyholders may surrender their contracts in a rising interest rate environment, requiring us to liquidate assets in an unrealized loss position. Due to the long-term nature of the liabilities associated with certain of our life insurance businesses, and guaranteed benefits on variable annuities, and structured settlements, sustained declines in long-term interest rates may subject us to reinvestment risks and increased hedging costs. In other situations, declines in interest rates may result in increasing the duration of certain life insurance liabilities, creating asset liability duration mismatches. Our investment portfolio also contains interest rate sensitive instruments, such as fixed income securities, which may be adversely affected by changes in interest rates from governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A rise in interest rates would increase the net unrealized loss position of our investment portfolio, offset by our ability to earn higher rates of return on funds reinvested. Conversely, a decline in interest rates would decrease the net unrealized loss position of our investment portfolio, offset by lower rates of return on funds reinvested. Our mitigation efforts with respect to interest rate risk are primarily focused towards maintaining an investment portfolio with diversified maturities that has a weighted average duration that is approximately equal to the duration of our estimated liability cash flow profile. However, our estimate of the liability cash flow profile may be inaccurate and we may be forced to liquidate investments prior to maturity at a loss in order to cover the liability. Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate the interest rate risk of our assets relative to our liabilities. See also “— Changes in Market Interest Rates May Significantly Affect Our Profitability.”

Our exposure to credit spreads primarily relates to market price and cash flow variability associated with changes in credit spreads. A widening of credit spreads will increase the net unrealized loss position of the investment portfolio, will increase losses associated with credit based non-qualifying derivatives where we assume credit exposure, and, if issuer credit spreads increase significantly or for an extended period of time, would likely result in higher other-than-temporary impairments. Credit spread tightening will reduce net investment income associated with new purchases of fixed maturity securities. In addition, market volatility can make it difficult to value certain of our securities if trading becomes less frequent. As such, valuations may include assumptions or estimates that may have significant period to period changes which could have a material adverse effect on our consolidated results of operations or financial condition. Recent credit spreads on both corporate and structured securities have widened, resulting in continuing depressed pricing. Continuing challenges include continued weakness in the U.S. real estate market and increased mortgage delinquencies, investor anxiety over the U.S. economy, rating agency downgrades of various structured products and financial issuers, unresolved issues with structured investment vehicles and monolines, deleveraging of financial institutions and hedge funds and a serious

dislocation in the inter-bank market. If significant, continued volatility, changes in interest rates, changes in credit spreads and defaults, a lack of pricing transparency, market liquidity, declines in equity prices, and the strengthening or weakening of foreign currencies against the U.S. dollar, individually or in tandem, could have a material adverse effect on our consolidated results of operations, financial condition or cash flows through realized losses, impairments, and changes in unrealized positions.

Our primary exposure to equity risk relates to the potential for lower earnings associated with certain of our insurance businesses, such as variable annuities, where fee income is earned based upon the fair value of the assets under management. In addition, certain of our annuity products offer guaranteed benefits which increase our potential benefit exposure should equity markets decline. We are also exposed to interest rate and equity risk based upon the discount rate and expected long-term rate of return assumptions associated with our pension and other post-retirement benefit obligations. Sustained declines in long-term interest rates or equity returns likely would have a negative effect on the funded status of these plans.

Our primary foreign currency exchange risks are described under “— Fluctuations in Foreign Currency Exchange Rates and Foreign Securities Markets Could Negatively Affect our Profitability.” Significant declines in equity prices, changes in U.S. interest rates, changes in credit spreads, and changes in foreign currency could have a material adverse effect on our consolidated results of operations, financial condition or liquidity. Changes in these factors, which are significant risks to us, can affect our net investment income in any period, and such changes can be substantial.

We invest a portion of our invested assets in investment funds, many of which make private equity investments. The amount and timing of income from such investment funds tends to be uneven as a result of the performance of the underlying investments, including private equity investments. The timing of distributions from the funds, which depends on particular events relating to the underlying investments, as well as the funds’ schedules for making distributions and their needs for cash, can be difficult to predict. As a result, the amount of income that we record from these investments can vary substantially from quarter to quarter. Recent equity and credit market volatility may reduce investment income for these type of investments.

Our Requirements to Pledge Collateral Related to Declines in Value of Specified Assets May Adversely Affect Our Liquidity and Expose Us to Counterparty Credit Risk

Some of our derivatives transactions with financial and other institutions specify the circumstances under which the parties are required to pledge collateral related to any decline in the value of the specified assets. The amount of collateral we may be required to pledge under these transactions may increase under certain circumstances, which could adversely affect our liquidity.

Defaults on Our Mortgage and Consumer Loans and Volatility in Performance May Adversely Affect Our Profitability

Our mortgage and consumer loans face default risk and are principally collateralized by commercial and agricultural properties. Mortgage and consumer loans are stated on our balance sheet at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, and are net of valuation allowances. We establish valuation allowances for estimated impairments as of the balance sheet date. Such valuation allowances are based on the excess carrying value of the loan over the present value of expected future cash flows discounted at the loan’s original effective interest rate, the value of the loan’s collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or the loan’s market value if the loan is being sold. We also establish allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. At September 30, 2008, loans that were either delinquent or in the process of foreclosure totaled less than 1% of our mortgage and consumer loan investments. The performance of our mortgage and consumer loan investments, however, may fluctuate in the future. In addition, substantially all of our mortgage loan investments have balloon payment maturities. An increase in the default rate of our mortgage and consumer loan investments could have a material adverse effect on our business, results of operations and financial condition.

Further, any geographic or sector concentration of our mortgage or consumer loans may have adverse effects on our investment portfolios and consequently on our consolidated results of operations or financial condition. While we seek to mitigate this risk by having a broadly diversified portfolio, events or developments that have a negative effect on any particular geographic region or sector may have a greater adverse effect on the investment

portfolios to the extent that the portfolios are concentrated. Moreover, our ability to sell assets relating to such particular groups of related assets may be limited if other market participants are seeking to sell at the same time.

Our Investments are Reflected Within the Consolidated Financial Statements Utilizing Different Accounting Basis and Accordingly We May Not Have Recognized Differences, Which May Be Significant, Between Cost and Fair Value in our Consolidated Financial Statements

Our principal investments are in fixed maturity and equity securities, short-term investments, mortgage and consumer loans, policy loans, real estate, real estate joint ventures and other limited partnerships and other invested assets. The carrying value of such investments is as follows:


	•	Fixed maturity and equity securities are classified as available-for-sale, and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes.

	•	Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates fair value.

	•	Mortgage and consumer loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances.

	•	Policy loans are stated at unpaid principal balances.

	•	Real estate joint ventures and other limited partnership interests in which we have more than a minor equity interest or more than a minor influence over the joint ventures or partnership’s operations, but where we do not have a controlling interest and are not the primary beneficiary, are carried using the equity method of accounting. We use the cost method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures or the partnership’s operations.

	•	Other invested assets consist of derivatives with positive fair values. Derivatives are carried at fair value with changes in fair value reflected in income from non-qualifying derivatives and derivatives in fair value hedging relationships. Derivatives in cash flow hedging relationships are reflected as a separate component of other comprehensive income or loss.

Investments not carried at fair value in our consolidated financial statements — principally, mortgage and consumer loans, policy loans, real estate, real estate joint ventures and other limited partnerships — may have fair values which are substantially higher or lower than the carrying value reflected in our consolidated financial statements. Each of such asset classes is regularly evaluated for impairment under the accounting guidance appropriate to the respective asset class.

Our Valuation of Fixed Maturity and Equity Securities May Include Methodologies, Estimations and Assumptions Which Are Subject to Differing Interpretations and Could Result in Changes to Investment Valuations that May Materially Adversely Affect Our Results of Operations or Financial Condition

Fixed maturity securities, equity securities and short-term investments which are reported at fair value on the consolidated balance sheet represented the majority of our total cash and invested assets. We have categorized these securities into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows:


	Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities. We define active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities.

	Level 2	Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.


	Level 3	Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

At September 30, 2008, approximately 3%, 87%, and 10% of these securities represented Level 1, Level 2 and Level 3, respectively. The Level 1 securities primarily consist of certain U.S. Treasury and agency fixed maturity securities; exchange-traded common stock and certain short-term investments. The Level 2 assets include fixed maturity and equity securities priced principally through independent pricing services using observable inputs. These fixed maturity securities include most U.S. Treasury and agency securities as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, state and political subdivision securities, foreign government securities, and asset-backed securities. Equity securities classified as Level 2 primarily consist of non-redeemable preferred stock and certain equity securities where market quotes are available but are not considered actively traded and are priced by independent pricing services. Management reviews the valuation methodologies used by the pricing services on an ongoing basis and ensures that any changes to valuation methodologies are justified. Level 3 assets include fixed maturity securities priced principally through independent broker quotes or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities — including below investment grade private placements; residential mortgage-backed securities, commercial mortgage-backed securities and asset backed securities — including all of those supported by sub-prime mortgage loans. Equity securities classified as Level 3 securities consist principally of common stock of privately held companies and non-redeemable preferred stock where there has been very limited trading activity or where less price transparency exists around the inputs to the valuation.

Prices provided by independent pricing services and independent broker quotes can vary widely even for the same security.

The determination of fair values by management in the absence of quoted market prices is based on: (i) valuation methodologies; (ii) securities we deem to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts.

During periods of market disruption including periods of significantly rising or high interest rates, rapidly widening credit spreads or illiquidity, it may be difficult to value certain of our securities, for example Alt-A and sub-prime mortgage backed securities, if trading becomes less frequent and/or market data becomes less observable. There may be certain asset classes that were in active markets with significant observable data that become illiquid due to the current financial environment. In such cases, more securities may fall to Level 3 and thus require more subjectivity and management judgment. As such, valuations may include inputs and assumptions that are less observable or require greater estimation as well as valuation methods which are more sophisticated or require greater estimation thereby resulting in values which may be less than the value at which the investments may be ultimately sold. Further, rapidly changing and unprecedented credit and equity market conditions could materially impact the valuation of securities as reported within our consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition.

Some of Our Investments Are Relatively Illiquid and Are in Asset Classes that Have Been Experiencing Significant Market Valuation Fluctuations

We hold certain investments that may lack liquidity, such as privately placed fixed maturity securities; mortgage and consumer loans; policy loans; and equity real estate, including real estate joint ventures; and other limited partnership interests. These asset classes represented 28% of the carrying value of our total cash and invested assets as of September 30, 2008. Even some of our very high quality assets have been more illiquid as a result of the recent challenging market conditions.

If we require significant amounts of cash on short notice in excess of normal cash requirements or are required to post or return collateral in connection with our investment portfolio, derivatives transactions or securities lending activities, we may have difficulty selling these investments in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both.

The reported value of our relatively illiquid types of investments, our investments in the asset classes described in the paragraph above and, at times, our high quality, generally liquid asset classes, do not necessarily reflect the lowest current market price for the asset. If we were forced to sell certain of our assets in the current market, there can be no assurance that we will be able to sell them for the prices at which we have recorded them and we may be forced to sell them at significantly lower prices.

The Determination of the Amount of Allowances and Impairments Taken on Our Investments is Highly Subjective and Could Materially Impact Our Results of Operations or Financial Position

The determination of the amount of allowances and impairments vary by investment type and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. There can be no assurance that our management has accurately assessed the level of impairments taken and allowances reflected in our financial statements. Furthermore, additional impairments may need to be taken or allowances provided for in the future. Historical trends may not be indicative of future impairments or allowances.

For example, the cost of our fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary in the period in which the determination is made. The assessment of whether impairments have occurred is based on management’s case-by-case evaluation of the underlying reasons for the decline in fair value. The review of our fixed maturity and equity securities for impairments includes an analysis of the total gross unrealized losses by three categories of securities: (i) securities where the estimated fair value had declined and remained below cost or amortized cost by less than 20%; (ii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for less than six months; and (iii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater.

Additionally, our management considers a wide range of factors about the security issuer and uses their best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost or amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) our ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost; (vii) unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies.

Changes in Market Interest Rates May Significantly Affect Our Profitability

Some of our products, principally traditional whole life insurance, fixed annuities and guaranteed investment contracts (“GICs”), expose us to the risk that changes in interest rates will reduce our “spread,” or the difference between the amounts that we are required to pay under the contracts in our general account and the rate of return we are able to earn on general account investments intended to support obligations under the contracts. Our spread is a key component of our net income.

As interest rates decrease or remain at low levels, we may be forced to reinvest proceeds from investments that have matured or have been prepaid or sold at lower yields, reducing our investment margin. Moreover, borrowers may prepay or redeem the fixed-income securities, commercial mortgages and mortgage-backed securities in our investment portfolio with greater frequency in order to borrow at lower market rates, which exacerbates this risk. Lowering interest crediting rates can help offset decreases in investment margins on some products. However, our ability to lower these rates could be limited by competition or contractually guaranteed minimum rates and may not match the timing or magnitude of changes in asset yields. As a result, our spread could decrease or potentially become negative. Our expectation for future spreads is an important component in the amortization of DAC and VOBA and significantly lower spreads may cause us to accelerate amortization, thereby reducing net income in the affected reporting period. In addition, during periods of declining interest rates, life insurance and annuity products may be relatively more attractive investments to consumers, resulting in increased premium payments on products with flexible premium features, repayment of policy loans and increased persistency, or a higher percentage of insurance policies remaining in force from year to year, during a period when our new investments carry lower returns. A decline in market interest rates could also reduce our return on investments that do not support particular policy obligations. Accordingly, declining interest rates may materially adversely affect our results of operations, financial position and cash flows and significantly reduce our profitability.

Increases in market interest rates could also negatively affect our profitability. In periods of rapidly increasing interest rates, we may not be able to replace, in a timely manner, the assets in our general account with higher yielding assets needed to fund the higher crediting rates necessary to keep interest sensitive products competitive. We, therefore, may have to accept a lower spread and, thus, lower profitability or face a decline in sales and greater loss of existing contracts and related assets. In addition, policy loans, surrenders and withdrawals may tend to increase as policyholders seek investments with higher perceived returns as interest rates rise. This process may result in cash outflows requiring that we sell invested assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which may result in realized investment losses. Unanticipated withdrawals and terminations may cause us to accelerate the amortization of DAC and VOBA, which would increase our current expenses and reduce net income. An increase in market interest rates could also have a material adverse effect on the value of our investment portfolio, for example, by decreasing the fair values of the fixed income securities that comprise a substantial portion of our investment portfolio.

Industry Trends Could Adversely Affect the Profitability of Our Businesses

Our business segments continue to be influenced by a variety of trends that affect the insurance industry.

The life insurance industry remains highly competitive. The product development and product life-cycles have shortened in many product segments, leading to more intense competition with respect to product features. Larger companies have the ability to invest in brand equity, product development, technology and risk management, which are among the fundamentals for sustained profitable growth in the life insurance industry. In addition, several of the industry’s products can be quite homogeneous and subject to intense price competition. Sufficient scale, financial strength and financial flexibility are becoming prerequisites for sustainable growth in the life insurance industry. Larger market participants tend to have the capacity to invest in additional distribution capability and the information technology needed to offer the superior customer service demanded by an increasingly sophisticated industry client base. See “— Competitive Factors May Adversely Affect Our Market Share and Profitability.”

Regulatory Changes. The life insurance industry is regulated at the state level, with some products and services also subject to federal regulation. As life insurers introduce new and often more complex products, regulators refine capital requirements and introduce new reserving standards for the life insurance industry. Regulations recently adopted or currently under review can potentially impact the reserve and capital requirements

of the industry. In addition, regulators have undertaken market and sales practices reviews of several markets or products, including, variable annuities and group products. See “— Our Insurance Businesses Are Heavily Regulated, and Changes in Regulation May Reduce Our Profitability and Limit Our Growth” and “Business — Regulation — Insurance Regulation” in the 2007 Annual Report.

Pension Plans. On August 17, 2006, President Bush signed the Pension Protection Act of 2006 (the “PPA”) into law. The PPA is a comprehensive reform of defined benefit and defined contribution plan rules. While the impact to the PPA is generally expected to be positive over time, these changes may have adverse short-term effects on our business as plan sponsors may react to these changes in a variety of ways as the new rules and related regulations begin to take effect.

A Decline in Equity Markets or an Increase in Volatility in Equity Markets May Adversely Affect Sales of Our Investment Products and Our Profitability

Significant downturns and volatility in equity markets could have a material adverse effect on our financial condition and results of operations in three principal ways.

First, market downturns and volatility may discourage purchases of separate account products, such as variable annuities and variable life insurance that have underlying mutual funds with returns linked to the performance of the equity markets and may cause some of our existing customers to withdraw cash values or reduce investments in those products.

Second, downturns and volatility in equity markets can have a material adverse effect on the revenues and returns from our savings and investment products and services. Because these products and services depend on fees related primarily to the value of assets under management, a decline in the equity markets could reduce our revenues by reducing the value of the investment assets we manage. The retail annuity business in particular is highly sensitive to equity markets, and a sustained weakness in the markets will decrease revenues and earnings in variable annuity products.

Third, we provide certain guarantees within some of our products that protect policyholders against significant downturns in the equity markets. For example, we offer variable annuity products with guaranteed features, such as death benefits, withdrawal benefits, and minimum accumulation and income benefits. In volatile or declining equity market conditions, we may need to increase liabilities for future policy benefits and policyholder account balances, negatively affecting net income.

If Our Business Does Not Perform Well, We May Be Required to Recognize an Impairment of Our Goodwill or Other Long-Lived Assets or to Establish a Valuation Allowance Against the Deferred Income Tax Asset, Which Could Adversely Affect Our Results of Operations or Financial Condition

Goodwill represents the excess of the amounts we paid to acquire subsidiaries and other businesses over the fair value of their net assets at the date of acquisition. We test goodwill at least annually for impairment. Impairment testing is performed based upon estimates of the fair value of the “reporting unit” to which the goodwill relates. The reporting unit is the operating segment or a business one level below that operating segment if discrete financial information is prepared and regularly reviewed by management at that level. The fair value of the reporting unit is impacted by the performance of the business. The performance of our business may be adversely impacted by prolonged market declines. If it is determined that the goodwill has been impaired, we must write down the goodwill by the amount of the impairment, with a corresponding charge to net income. Such write downs could have a material adverse effect on our results of operations or financial position.

Long-lived assets, including assets such as real estate, also require impairment testing to determine whether changes in circumstances indicate that MetLife will be unable to recover the carrying amount of the asset group through future operations of that asset group or market conditions that will impact the value of those assets. Such write downs could have a material adverse effect on our results of operations or financial position.

Deferred income tax represents the tax effect of the differences between the book and tax basis of assets and liabilities. Deferred tax assets are assessed periodically by management to determine if they are realizable. Factors in management’s determination include the performance of the business including the ability to generate capital gains. If based on available information, it is more likely than not that the deferred income tax asset will not be

realized then a valuation allowance must be established with a corresponding charge to net income. Such charges could have a material adverse effect on our results of operations or financial position.

Further or continued deterioration of financial market conditions could result in a decrease in the expected future earnings of our reporting units, which could lead to an impairment of some or all of the goodwill associated with them in future periods. Such deterioration could also result in the impairment of long-lived assets and the establishment of a valuation allowance on our deferred income tax assets.

Competitive Factors May Adversely Affect Our Market Share and Profitability

Our business segments are subject to intense competition. We believe that this competition is based on a number of factors, including service, product features, scale, price, financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition. We compete with a large number of other insurers, as well as non-insurance financial services companies, such as banks, broker-dealers and asset managers, for individual consumers, employers and other group customers and agents and other distributors of insurance and investment products. Some of these companies offer a broader array of products, have more competitive pricing or, with respect to other insurers, have higher claims paying ability ratings. Some may also have greater financial resources with which to compete. National banks, which may sell annuity products of life insurers in some circumstances, also have pre-existing customer bases for financial services products.

Many of our insurance products, particularly those offered by our Institutional segment, are underwritten annually, and, accordingly, there is a risk that group purchasers may be able to obtain more favorable terms from competitors rather than renewing coverage with us. The effect of competition may, as a result, adversely affect the persistency of these and other products, as well as our ability to sell products in the future.

In addition, the investment management and securities brokerage businesses have relatively few barriers to entry and continually attract new entrants. Many of our competitors in these businesses offer a broader array of investment products and services and are better known than we are as sellers of annuities and other investment products.

We May be Unable to Attract and Retain Sales Representatives for Our Products

We must attract and retain productive sales representatives to sell our insurance, annuities and investment products. Strong competition exists among insurers for sales representatives with demonstrated ability. In addition, there is competition for representatives with other types of financial services firms, such as independent broker-dealers. We compete with other insurers for sales representatives primarily on the basis of our financial position, support services and compensation and product features. We continue to undertake several initiatives to grow our career agency force while continuing to enhance the efficiency and production of our existing sales force. We cannot provide assurance that these initiatives will succeed in attracting and retaining new agents. Sales of individual insurance, annuities and investment products and our results of operations and financial condition could be materially adversely affected if we are unsuccessful in attracting and retaining agents.

Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results

Our earnings significantly depend upon the extent to which our actual claims experience is consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Our liabilities for future policy benefits and claims are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. For life insurance and annuity products, we calculate these liabilities based on many assumptions and estimates, including estimated premiums to be received over the assumed life of the policy, the timing of the event covered by the insurance policy, the amount of benefits or claims to be paid and the investment returns on the assets we purchase with the premiums we receive. To the extent that actual claims experience is less favorable than the underlying assumptions we used in establishing such liabilities, we could be required to increase our liabilities.

Due to the nature of the underlying risks and the high degree of uncertainty associated with the determination of liabilities for future policy benefits and claims, we cannot determine precisely the amounts which we will ultimately pay to settle our liabilities. Such amounts may vary from the estimated amounts, particularly when those payments may not occur until well into the future. We evaluate our liabilities periodically based on changes in the

assumptions used to establish the liabilities, as well as our actual experience. We charge or credit changes in our liabilities to expenses in the period the liabilities are established or re-estimated. If the liabilities originally established for future benefit payments prove inadequate, we must increase them. Such increases could affect earnings negatively and have a material adverse effect on our business, results of operations and financial condition.

MetLife’s Risk Management Policies and Procedures May Leave Us Exposed to Unidentified or Unanticipated Risk, Which Could Negatively Affect Our Business

Management of risk requires, among other things, policies and procedures to record properly and verify a large number of transactions and events. MetLife has devoted significant resources to develop risk management policies and procedures for itself and its subsidiaries and expects to continue to do so in the future. Nonetheless, these policies and procedures may not be comprehensive. Many of MetLife’s methods for managing risk and exposures are based upon the use of observed historical market behavior or statistics based on historical models. As a result, these methods may not fully predict future exposures, which can be significantly greater than historical measures indicate. Other risk management methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters that is publicly available or otherwise accessible. This information may not always be accurate, complete, up-to-date or properly evaluated. See “Quantitative and Qualitative Disclosures About Market Risk.”

Catastrophes May Adversely Impact Liabilities for Policyholder Claims and Reinsurance Availability

Our life insurance operations are exposed to the risk of catastrophic mortality, such as a pandemic or other event that causes a large number of deaths. Significant influenza pandemics have occurred three times in the last century, but neither the likelihood, timing, nor the severity of a future pandemic can be predicted. The effectiveness of external parties, including governmental and non-governmental organizations, in combating the spread and severity of such a pandemic could have a material impact on the losses experienced by us. In our group insurance operations, a localized event that affects the workplace of one or more of our group insurance customers could cause a significant loss due to mortality or morbidity claims. These events could cause a material adverse effect on our results of operations in any period and, depending on their severity, could also materially and adversely affect our financial condition.

The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Most catastrophes are restricted to small geographic areas; however, pandemics, hurricanes, earthquakes and man-made catastrophes may produce significant damage in larger areas, especially those that are heavily populated. Claims resulting from natural or man-made catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could materially reduce our profitability or harm our financial condition. Also, catastrophic events could harm the financial condition of our reinsurers and thereby increase the probability of default on reinsurance recoveries. Our ability to write new business could also be affected.

Consistent with industry practice and accounting standards, we establish liabilities for claims arising from a catastrophe only after assessing the probable losses arising from the event. We cannot be certain that the liabilities we have established will be adequate to cover actual claim liabilities. While we attempt to limit our exposure to acceptable levels, subject to restrictions imposed by insurance regulatory authorities, a catastrophic event or multiple catastrophic events could have a material adverse effect on our business, results of operations and financial condition.

A Downgrade or a Potential Downgrade in Our Financial Strength Ratings or that of MetLife’s Other Insurance Subsidiaries, or MetLife’s Credit Ratings Could Result in a Loss of Business and Materially Adversely Affect Our Financial Condition and Results of Operations

Financial strength ratings, which various Nationally Recognized Statistical Rating Organizations (“NRSROs”) publish as indicators of an insurance company’s ability to meet contractholder and policyholder obligations, are important to maintaining public confidence in our products, our ability to market our products and our competitive position. See “Business — Company Ratings — Insurer Financial Strength Ratings” in the 2007 Annual Report.

Downgrades in our financial strength ratings could have a material adverse effect on our financial condition and results of operations in many ways, including:


	•	reducing new sales of insurance products, annuities and other investment products;

	•	adversely affecting our relationships with our sales force and independent sales intermediaries;

	•	materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders;

	•	requiring us to reduce prices for many of our products and services to remain competitive; and

	•	adversely affecting our ability to obtain reinsurance at reasonable prices or at all.

On September 18, September 29, October 2, 2008 and October 10, 2008, A.M. Best Company, Inc., Fitch Ratings Insurance Group, Moody’s Investors Service (“Moody’s”) and Standard & Poor’s (“S&P”), respectively, each revised its outlook for the U.S. life insurance sector to negative from stable, citing, among other things, the significant deterioration and volatility in the credit and equity markets, economic and political uncertainty, and the expected impact of realized and unrealized investment losses on life insurers’ capital levels and profitability.

In view of the difficulties experienced recently by many financial institutions, including our competitors in the insurance industry, we believe it is possible that the NRSROs will heighten the level of scrutiny that they apply to such institutions, will increase the frequency and scope of their credit reviews, will request additional information from the companies that they rate, and may adjust upward the capital and other requirements employed in the NRSRO models for maintenance of certain ratings levels, such as the AA (“S&P”) and Aa2 (Moody’s) insurer financial strength ratings currently held by our life insurance subsidiaries.

We cannot predict what actions rating agencies may take, or what actions we may take in response to the actions of rating agencies, which could adversely affect our business. As with other companies in the financial services industry, our ratings could be downgraded at any time and without any notices by any NRSRO.

Guarantees Within Certain of Our Products that Protect Policyholders Against Significant Downturns in Equity Markets May Decrease Our Earnings, Increase the Volatility of Our Results If Hedging or Risk Management Strategies Prove Ineffective, Result in Higher Hedging Costs, Expose Us to Increased Counterparty Risk and Result in Own Credit Exposure

Certain of our variable annuity products include guaranteed benefit riders. These may include guaranteed death benefits, guaranteed withdrawal benefits, lifetime withdrawal guarantees, guaranteed minimum accumulation benefits, and guaranteed minimum income benefit riders. Periods of significant and sustained downturns in equity markets, increased equity volatility, or reduced interest rates could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction to net income. We use reinsurance in combination with derivative instruments to mitigate the liability exposure and the volatility of net income associated with these liabilities, and while we believe that these and other actions have mitigated the risks related to these benefits, we remain liable for the guaranteed benefits in the event that reinsurers or derivative counterparties are unable or unwilling to pay. In addition, we are subject to the risk that hedging and other management procedures prove ineffective or that unanticipated policyholder behavior or mortality, combined with adverse market events, produces economic losses beyond the scope of the risk management techniques employed. These, individually or collectively, may have a material adverse effect on net income, financial condition or liquidity. We are also subject to the risk that the cost of hedging these guaranteed minimum benefits increases, resulting in a reduction to net income. We also must consider our own credit standing, which is not hedged, in the valuation of certain of these liabilities. A decrease in our own credit spread could cause the value of these liabilities to increase, resulting in a reduction to net income.

If Our Business Does Not Perform Well or if Actual Experience Versus Estimates Used in Valuing and Amortizing DAC and VOBA Vary Significantly, We May Be Required to Accelerate the Amortization and/or Impair the DAC and VOBA Which Could Adversely Affect Our Results of Operations or Financial Condition

We incur significant costs in connection with acquiring new and renewal business. Those costs that vary with and are primarily related to the production of new and renewal business are deferred and referred to as DAC. The

recovery of DAC is dependent upon the future profitability of the related business. The amount of future profit or margin is dependent principally on investment returns in excess of the amounts credited to policyholders, mortality, morbidity, persistency, interest crediting rates, dividends paid to policyholders, expenses to administer the business, creditworthiness of reinsurance counterparties and certain economic variables, such as inflation. Of these factors, we anticipate that investment returns are most likely to impact the rate of amortization of such costs. The aforementioned factors enter into management’s estimates of gross profits or margins, which generally are used to amortize such costs. If the estimates of gross profits or margins were overstated, then the amortization of such costs would be accelerated in the period the actual experience is known and would result in a charge to income. Significant or sustained equity market declines could result in an acceleration of amortization of the DAC related to variable annuity and variable universal life contracts, resulting in a charge to income. Such adjustments could have a material adverse effect on our results of operations or financial condition.

VOBA reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the insurance and annuity contracts in-force at the acquisition date. VOBA is based on actuarially determined projections. Actual experience may vary from the projections. Revisions to estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in an impairment and a charge to income. Also, as VOBA is amortized similarly to DAC, an acceleration of the amortization of VOBA would occur if the estimates of gross profits or margins were overstated. Accordingly, the amortization of such costs would be accelerated in the period in which the actual experience is known and would result in a charge to net income. Significant or sustained equity market declines could result in an acceleration of amortization of the VOBA related to variable annuity and variable universal life contracts, resulting in a charge to income. Such adjustments could have a material adverse effect on our results of operations or financial condition.

Defaults, Downgrades or Other Events Impairing the Value of Our Fixed Maturity Securities Portfolio May Reduce Our Earnings

We are subject to the risk that the issuers, or guarantors, of fixed maturity securities we own may default on principal and interest payments they owe us. At September 30, 2008, the fixed maturity securities of $39.5 billion in our investment portfolio represented 74% of our total cash and invested assets. The occurrence of a major economic downturn (such as the current downturn in the economy), acts of corporate malfeasance, widening risk spreads, or other events that adversely affect the issuers or guarantors of these securities could cause the value of our fixed maturity securities portfolio and our net income to decline and the default rate of the fixed maturity securities in our investment portfolio to increase. A ratings downgrade affecting issuers or guarantors of particular securities, or similar trends that could worsen the credit quality of issuers, such as the corporate issuers of securities in our investment portfolio, could also have a similar effect. With economic uncertainty, credit quality of issuers or guarantors could be adversely affected. Any event reducing the value of these securities other than on a temporary basis could have a material adverse effect on our business, results of operations and financial condition. Levels of write down or impairment are impacted by our assessment of the intent and ability to hold securities which have declined in value until recovery. If we determine to reposition or realign portions of the portfolio where we determine not to hold certain securities in an unrealized loss position to recovery, then we will incur an other than temporary impairment charge.

Fluctuations in Foreign Currency Exchange Rates and Foreign Securities Markets Could Negatively Affect Our Profitability

We are exposed to risks associated with fluctuations in foreign currency exchange rates against the U.S. dollar resulting from our holdings of non-U.S. dollar denominated investments. These risks relate to potential decreases in value and income resulting from a strengthening or weakening in foreign exchange rates versus the U.S. dollar. In general, the weakening of foreign currencies versus the U.S. dollar will adversely affect the value of our non-U.S. dollar denominated investments. Although we use foreign currency swaps and forward contracts to mitigate foreign currency exchange rate risk, we cannot provide assurance that these methods will be effective or that our counterparties will perform their obligations. See “Quantitative and Qualitative Disclosures About Market Risk.”

From time to time, various emerging market countries have experienced severe economic and financial disruptions, including significant devaluations of their currencies. Our exposure to foreign exchange rate risk is exacerbated by our investments in emerging markets.

Reinsurance May Not Be Available, Affordable or Adequate to Protect Us Against Losses

As part of our overall risk management strategy, we purchase reinsurance for certain risks underwritten by our various business segments. See “Business — Reinsurance Activity” in the 2007 Annual Report. While reinsurance agreements generally bind the reinsurer for the life of the business reinsured at generally fixed pricing, market conditions beyond our control determine the availability and cost of the reinsurance protection for new business. In certain circumstances, the price of reinsurance for business already reinsured may also increase. Any decrease in the amount of reinsurance will increase our risk of loss and any increase in the cost of reinsurance will, absent a decrease in the amount of reinsurance, reduce our earnings. Accordingly, we may be forced to incur additional expenses for reinsurance or may not be able to obtain sufficient reinsurance on acceptable terms, which could adversely affect our ability to write future business or result in the assumption of more risk with respect to those policies we issue.

If the Counterparties to Our Reinsurance or Indemnification Arrangements or to the Derivative Instruments We Use to Hedge Our Business Risks Default or Fail to Perform, We May Be Exposed to Risks We Had Sought to Mitigate, Which Could Materially Adversely Affect Our Financial Condition and Results of Operations

We use reinsurance, indemnification and derivative instruments to mitigate our risks in various circumstances. In general, reinsurance does not relieve us of our direct liability to our policyholders, even when the reinsurer is liable to us. Accordingly, we bear credit risk with respect to our reinsurers and indemnitors. We cannot provide assurance that our reinsurers will pay the reinsurance recoverables owed to us or that indemnitors will honor their obligations now or in the future or that they will pay these recoverables on a timely basis. A reinsurer’s or indemnitor’s insolvency, inability or unwillingness to make payments under the terms of reinsurance agreements or indemnity agreements with us could have a material adverse effect on our financial condition and results of operations.

In addition, we use derivative instruments to hedge various business risks. We enter into a variety of derivative instruments, including options, forwards, interest rate, credit default and currency swaps with a number of counterparties. If our counterparties fail or refuse to honor their obligations under these derivative instruments, our hedges of the related risk will be ineffective. This is a more pronounced risk to us in view of the recent stresses suffered by financial institutions. Such failure could have a material adverse effect on our financial condition and results of operations.

Our Insurance Businesses Are Heavily Regulated, and Changes in Regulation May Reduce Our Profitability and Limit Our Growth

Our insurance operations are subject to a wide variety of insurance and other laws and regulations. State insurance laws regulate most aspects of our insurance businesses, and we are regulated by the insurance department of the states in which we are domiciled and the states in which we are licensed. See “Business — Regulation — Insurance Regulation” in the 2007 Annual Report.

State laws in the United States grant insurance regulatory authorities broad administrative powers with respect to, among other things:


	•	licensing companies and agents to transact business;

	•	calculating the value of assets to determine compliance with statutory requirements;

	•	mandating certain insurance benefits;

	•	regulating certain premium rates;

	•	reviewing and approving policy forms;

	•	regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements;


	•	regulating advertising;

	•	protecting privacy;

	•	establishing statutory capital and reserve requirements and solvency standards;

	•	fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts;

	•	approving changes in control of insurance companies;

	•	restricting the payment of dividends and other transactions between affiliates; and

	•	regulating the types, amounts and valuation of investments.

State insurance guaranty associations have the right to assess insurance companies doing business in their state for funds to help pay the obligations of insolvent insurance companies to policyholders and claimants. Because the amount and timing of an assessment is beyond our control, the liabilities that we have currently established for these potential liabilities may not be adequate. See “Business — Regulation — Insurance Regulation — Guaranty Associations and Similar Arrangements” in the 2007 Annual Report.

State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, are often made for the benefit of the consumer at the expense of the insurer and, thus, could have a material adverse effect on our financial condition and results of operations.

The NAIC and several states’ legislatures have considered the need for regulations and/or laws to address agent or broker practices that have been the focus of investigations of broker compensation in various jurisdictions. The NAIC adopted a Compensation Disclosure Amendment to its Producers Licensing Model Act which, if adopted by the states, would require disclosure by agents or brokers to customers that insurers will compensate such agents or brokers for the placement of insurance and documented acknowledgement of this arrangement in cases where the customer also compensates the agent or broker. Several states have enacted laws similar to the NAIC amendment. We cannot predict how many states may promulgate the NAIC amendment or alternative regulations or the extent to which these regulations may have a material adverse impact on our business.

Currently, the U.S. federal government does not directly regulate the business of insurance. However, federal legislation and administrative policies in several areas can significantly and adversely affect insurance companies. These areas include financial services regulation, securities regulation, pension regulation, privacy, tort reform legislation and taxation. In addition, various forms of direct federal regulation of insurance have been proposed. These proposals include the National Insurance Act of 2007, which would permit an optional federal charter for insurers. In view of recent events involving certain financial institutions, it is possible that the U.S. federal government will heighten its oversight of insurers such as us, including possibly through a federal system of insurance regulation. We cannot predict whether this or other proposals will be adopted, or what impact, if any, such proposals or, if enacted, such laws, could have on our business, financial condition or results of operations.

Many of our customers and independent sales intermediaries also operate in regulated environments. Changes in the regulations that affect their operations also may affect our business relationships with them and their ability to purchase or distribute our products. Accordingly, these changes could have a material adverse effect on our financial condition and results of operations.

Compliance with applicable laws and regulations is time consuming and personnel-intensive, and changes in these laws and regulations may materially increase our direct and indirect compliance and other expenses of doing business, thus having a material adverse effect on our financial condition and results of operations.

From time to time, regulators raise issues during examinations or audits of us that could, if determined adversely, have a material impact on us. We cannot predict whether or when regulatory actions may be taken that could adversely affect our operations. In addition, the interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact, particularly in areas such as accounting or statutory reserve requirements.

Litigation and Regulatory Investigations Are Increasingly Common in Our Businesses and May Result in Significant Financial Losses and Harm to Our Reputation

We face a significant risk of litigation and regulatory investigations in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In connection with our insurance operations, plaintiffs’ lawyers may bring or are bringing class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, claims payments and procedures, product design, disclosure, administration, denial or delay of benefits and breaches of fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts, including punitive and treble damages, and the damages claimed and the amount of any probable and estimable liability, if any, may remain unknown for substantial periods of time. See “Legal Proceedings.”

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses’ testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.

On a quarterly and annual basis, we review relevant information with respect to liabilities for litigation and contingencies to be reflected in our consolidated financial statements. The review includes senior legal and financial personnel. Estimates of possible losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some of the matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of September 30, 2008.

We are subject to various regulatory inquiries, such as information requests, subpoenas and books and record examinations, from state and federal regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have a material adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have a material adverse effect on our business, financial condition and results of operations, including our ability to attract new customers and retain our current customers.

We cannot give assurance that current claims, litigation, unasserted claims probable of assertion, investigations and other proceedings against us will not have a material adverse effect on our business, financial condition or results of operations. It is also possible that related or unrelated claims, litigation, unasserted claims probable of assertion, investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed or enforcement actions initiated against us. In addition, increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal actions and precedents and industry-wide regulations that could adversely affect our business, financial condition and results of operations.

Changes in Accounting Standards Issued by the Financial Accounting Standards Board or Other Standard-Setting Bodies May Adversely Affect Our Financial Statements

Our financial statements are subject to the application of GAAP, which is periodically revised and/or expanded. Accordingly, from time to time we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the Financial Accounting Standards Board. Market conditions have prompted accounting standard setters to expose new guidance which further interprets or seeks to revise accounting pronouncements related to financial instruments, structures or transactions as well as to issue new standards expanding disclosures. The impact of accounting pronouncements that have been issued but not yet implemented is disclosed in our annual and quarterly reports on Form 10-K and Form 10-Q. An assessment of proposed standards is not provided as such proposals are subject to change through the exposure process and, therefore, the effects on our financial statements cannot be meaningfully assessed. It is possible that future accounting standards we are required

to adopt could change the current accounting treatment that we apply to our consolidated financial statements and that such changes could have a material adverse effect on our financial condition and results of operations.

Further, the federal government, under the EESA, will conduct an investigation of fair value accounting during the fourth quarter of 2008 and has granted the SEC the authority to suspend fair value accounting for any registrant or group of registrants at its discretion. The impact of such actions on registrants who apply fair value accounting cannot be readily determined at this time; however, actions taken by the federal government could have a material adverse effect on the financial condition and results of operations of companies, including ours, that apply fair value accounting.

Changes in U.S. Federal and State Securities Laws and Regulations May Affect Our Operations and Our Profitability

Federal and state securities laws and regulations apply to insurance products that are also “securities,” including variable annuity contracts and variable life insurance policies. As a result, our activities in offering and selling variable insurance contracts and policies are subject to extensive regulation under these securities laws. We issue variable annuity contracts and variable life insurance policies through separate accounts that are registered with the SEC as investment companies under the Investment Company Act. Each registered separate account is generally divided into sub-accounts, each of which invests in an underlying mutual fund which is itself a registered investment company under the Investment Company Act. In addition, the variable annuity contracts and variable life insurance policies issued by the separate accounts are registered with the SEC under the Securities Act. Our subsidiary, Tower Square, is registered with the SEC as a broker-dealer under the Exchange Act, and is a member of, and subject to, regulation by FINRA. Further, Tower Square is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940, and is also registered as an investment adviser in various states.

Federal and state securities laws and regulations are primarily intended to ensure the integrity of the financial markets and to protect investors in the securities markets, as well as protect investment advisory or brokerage clients. These laws and regulations generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with the securities laws and regulations. Changes to these laws or regulations that restrict the conduct of our business could have a material adverse effect on our financial condition and results of operations. In particular, changes in the regulations governing the registration and distribution of variable insurance products, such as changes in the regulatory standards for suitability of variable annuity contracts or variable life insurance policies, could have such a material adverse effect.

Changes in Tax Laws Could Make Some of Our Products Less Attractive to Consumers; Changes in Tax Laws, Tax Regulations, or Interpretations of Such Laws or Regulations Could Increase Our Corporate Taxes

Changes in tax laws could make some of our products less attractive to consumers. For example, reductions in the federal income tax that investors are required to pay on long-term capital gains and dividends paid on stock may provide an incentive for some of our customers and potential customers to shift assets away from some insurance company products, including life insurance and annuities, designed to defer taxes payable on investment returns. Because the income taxes payable on long-term capital gains and some dividends paid on stock has been reduced, investors may decide that the tax-deferral benefits of annuity contracts are less advantageous than the potential after-tax income benefits of mutual funds or other investment products that provide dividends and long-term capital gains. A shift away from life insurance and annuity contracts and other tax-deferred products would reduce our income from sales of these products, as well as the assets upon which we earn investment income.

We cannot predict whether any tax legislation impacting insurance products will be enacted, what the specific terms of any such legislation will be or whether, if at all, any legislation would have a material adverse effect on our financial condition and results of operations. Furthermore, changes in tax laws, tax regulations, or interpretations of such laws or regulations could increase our corporate taxes.

The Continued Threat of Terrorism and Ongoing Military Actions May Adversely Affect the Level of Claim Losses We Incur and the Value of Our Investment Portfolio

The continued threat of terrorism, both within the United States and abroad, ongoing military and other actions and heightened security measures in response to these types of threats may cause significant volatility in global financial markets and result in loss of life, additional disruptions to commerce and reduced economic activity. Some of the assets in our investment portfolio may be adversely affected by declines in the equity markets and reduced economic activity caused by the continued threat of terrorism. We cannot predict whether, and the extent to which, companies in which we maintain investments may suffer losses as a result of financial, commercial or economic disruptions, or how any such disruptions might affect the ability of those companies to pay interest or principal on their securities. The continued threat of terrorism also could result in increased reinsurance prices and reduced insurance coverage and potentially cause us to retain more risk than we otherwise would retain if we were able to obtain reinsurance at lower prices. Terrorist actions also could disrupt our operations centers in the United States or abroad. In addition, the occurrence of terrorist actions could result in higher claims under our insurance policies than anticipated.

The Occurrence of Events Unanticipated In MetLife’s Disaster Recovery Systems and Management Continuity Planning Could Impair Our Ability to Conduct Business Effectively

In the event of a disaster such as a natural catastrophe, an epidemic, an industrial accident, a blackout, a computer virus, a terrorist attack or war, unanticipated problems with our disaster recovery systems could have a material adverse impact on our ability to conduct business and on our results of operations and financial position, particularly if those problems affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. We depend heavily upon computer systems to provide reliable service. Despite our implementation of a variety of security measures, our servers could be subject to physical and electronic break-ins, and similar disruptions from unauthorized tampering with our computer systems. In addition, in the event that a significant number of our managers were unavailable in the event of a disaster, our ability to effectively conduct business could be severely compromised. These interruptions also may interfere with our suppliers’ ability to provide goods and services and our employees’ ability to perform their job responsibilities.

We Face Unforeseen Liabilities or Asset Impairments Arising from Possible Acquisitions and Dispositions of Businesses

We have engaged in dispositions and acquisitions of businesses in the past, and may continue to do so in the future. There could be unforeseen liabilities or asset impairments, including goodwill impairments, that arise in connection with the businesses that we may sell or the businesses that we may acquire in the future. In addition, there may be liabilities or asset impairments that we fail, or are unable, to discover in the course of performing due diligence investigations on each business that we have acquired or may acquire.


	Page

Part I — Financial Information		4
Item 1. Financial Statements at September 30, 2008 (Unaudited) and December 31, 2007 and for the Three Months and Nine Months Ended September 30, 2008 and 2007 (Unaudited)		4
Interim Condensed Consolidated Balance Sheets		4
Interim Condensed Consolidated Statements of Income		5
Interim Condensed Consolidated Statement of Stockholders’ Equity		6
Interim Condensed Consolidated Statements of Cash Flows		7
Notes to Interim Condensed Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		47
Item 3. Quantitative and Qualitative Disclosures About Market Risk		60
Item 4(T). Controls and Procedures		63
Part II — Other Information		63
Item 1. Legal Proceedings		63
Item 1A. Risk Factors		63
Item 6. Exhibits		82
Signatures		83
Exhibit Index		E-1
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION


Exhibit
No.			Description

	31	.1	Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of President pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002