FORM 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 MARCH 31, 2009

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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


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 May 13, 2009, 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.”

Note Regarding Reliance on Statements in Our Contracts

In reviewing the agreements included as exhibits to this Quarterly Report on Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about MetLife Insurance Company of Connecticut, its subsidiaries or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:


	•	should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

	•	have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

	•	may apply standards of materiality in a way that is different from what may be viewed as material to investors; and

	•	were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about MetLife Insurance Company of Connecticut and its subsidiaries may be found elsewhere in this Quarterly Report on Form 10-Q and MetLife Insurance Company of Connecticut’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission (“SEC”) website at www.sec.gov.

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
March 31, 2009 (Unaudited) and December 31, 2008

(In millions, except share and per share data)


	March 31, 2009			December 31, 2008

Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $40,049 and $39,601, respectively)	$	34,778		$	34,846
Equity securities available-for-sale, at estimated fair value (cost: $625 and $673, respectively)		372			474
Trading securities, at estimated fair value (cost: $293 and $251, respectively)		264			232
Mortgage and consumer loans (net of valuation allowances of $55 and $46, respectively)		4,373			4,447
Policy loans		1,187			1,192
Real estate and real estate joint ventures held-for-investment		562			608
Other limited partnership interests		1,090			1,249
Short-term investments		2,799			3,127
Other invested assets		1,843			2,297

Total investments		47,268			48,472
Cash and cash equivalents		3,694			5,656
Accrued investment income		522			487
Premiums and other receivables		13,119			12,463
Deferred policy acquisition costs and value of business acquired		5,671			5,440
Current income tax recoverable		95			66
Deferred income tax assets		2,210			1,843
Goodwill		953			953
Other assets		735			752
Separate account assets		34,067			35,892

Total assets	$	108,334		$	112,024

Liabilities and Stockholders’ Equity
Liabilities:
Future policy benefits	$	20,495		$	20,213
Policyholder account balances		37,411			37,175
Other policyholder funds		2,137			2,085
Short-term debt		300			300
Long-term debt — affiliated		950			950
Payables for collateral under securities loaned and other transactions		6,719			7,871
Other liabilities		2,023			2,604
Separate account liabilities		34,067			35,892

Total liabilities		104,102			107,090

Contingencies, Commitments and Guarantees (Note 7)

Stockholders’ Equity:
Common stock, par value $2.50 per share; 40,000,000 shares authorized; 34,595,317 shares issued and outstanding at March 31, 2009 and December 31, 2008		86			86
Additional paid-in capital		6,719			6,719
Retained earnings		583			965
Accumulated other comprehensive loss		(3,156	)		(2,836	)

Total stockholders’ equity		4,232			4,934

Total liabilities and stockholders’ equity	$	108,334		$	112,024

See accompanying notes to the interim condensed consolidated financial statements.

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

Interim Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2009 (Unaudited)

(In millions)


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

Balance at December 31, 2008	$	86	$	6,719	$	965		$	(2,682	)	$	(154	)	$	4,934
Comprehensive income (loss):
Net loss						(382	)								(382	)
Other comprehensive income (loss):
Unrealized gains (losses) on derivative instruments, net of income tax									(2	)					(2	)
Unrealized investment gains (losses), net of related offsets and income tax									(313	)					(313	)
Foreign currency translation adjustments, net of income tax												(5	)		(5	)

Other comprehensive loss															(320	)

Comprehensive loss															(702	)

Balance at March 31, 2009	$	86	$	6,719	$	583		$	(2,997	)	$	(159	)	$	4,232

See accompanying notes to the interim condensed consolidated financial statements.

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

Interim Condensed Consolidated Statements of Stockholders’ Equity (Continued)
For the Three Months Ended March 31, 2008 (Unaudited)

(In millions)


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

Balance at December 31, 2007	$	86	$	6,719	$	892	$	(361	)	$	12		$	7,348
Comprehensive income (loss):
Net income, As Restated						71								71
Other comprehensive income (loss):
Unrealized gains (losses) on derivative instruments, net of income tax								(4	)					(4	)
Unrealized investment gains (losses), net of related offsets and income tax								(395	)					(395	)
Foreign currency translation adjustments, net of income tax											(7	)		(7	)

Other comprehensive loss														(406	)

Comprehensive loss														(335	)

Balance at March 31, 2008, As Restated	$	86	$	6,719	$	963	$	(760	)	$	5		$	7,013

See accompanying notes to the 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 Three Months Ended March 31, 2009 and 2008 (Unaudited)

(In millions)


	Three Months Ended
	March 31,
				As Restated,
	2009			2008

Cash flows from operating activities
Net income (loss)	$	(382	)	$	71
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization expenses		7			7
Amortization of premiums and accretion of discounts associated with investments, net		17			3
(Gains) losses from sales of investments, net		600			49
Undistributed equity earnings of real estate joint ventures and other limited partnership interests		119			11
Interest credited to policyholder account balances		300			308
Universal life and investment-type product policy fees		(284	)		(346	)
Change in accrued investment income		(35	)		80
Change in premiums and other receivables		(993	)		(81	)
Change in deferred policy acquisition costs, net		(152	)		111
Change in insurance-related liabilities		316			185
Change in trading securities		(61	)		—
Change in income tax recoverable		(225	)		8
Change in other assets		155			130
Change in other liabilities		(545	)		378
Other, net		4			(8	)

Net cash (used in) provided by operating activities		(1,159	)		906

Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities		4,042			4,693
Equity securities		12			25
Mortgage and consumer loans		108			171
Real estate and real estate joint ventures		2			10
Other limited partnership interests		68			21
Purchases of:
Fixed maturity securities		(4,724	)		(4,645	)
Equity securities		(22	)		(42	)
Mortgage and consumer loans		(53	)		(232	)
Real estate and real estate joint ventures		(11	)		(30	)
Other limited partnership interests		(36	)		(74	)
Net change in short-term investments		328			312
Net change in other invested assets		238			(231	)
Net change in policy loans		5			(286	)

Net cash used in investing activities		(43	)		(308	)

Cash flows from financing activities
Policyholder account balances:
Deposits		5,575			1,900
Withdrawals		(5,173	)		(2,334	)
Net change in payables for collateral under securities loaned and other transactions		(1,152	)		64
Financing element on certain derivative instruments		(9	)		15

Net cash used in financing activities		(759	)		(355	)

Effect of change in foreign currency exchange rates on cash balances		(1	)		2

Change in cash and cash equivalents		(1,962	)		245
Cash and cash equivalents, beginning of period		5,656			1,774

Cash and cash equivalents, end of period	$	3,694		$	2,019

Supplemental disclosures of cash flow information:
Net cash paid during the period for:
Interest	$	1		$	13

Income tax	$	1		$	2

See accompanying notes to the 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 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 estimated 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 estimated fair value of embedded derivatives requiring bifurcation;

	(vi)	the estimated 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 income 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 MICC and its subsidiaries. Intercompany accounts and transactions have been eliminated.

In addition, the Company has invested in certain structured transactions that are variable interest entities (“VIEs”) under Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46(r), Consolidation of Variable Interest Entities — An Interpretation of Accounting Research Bulletin No. 51. These structured transactions include reinsurance trusts, asset-backed securitizations, trust preferred securities, joint ventures, limited partnerships and limited liability companies. The Company is required to consolidate those VIEs for which it is deemed to be the primary beneficiary. The Company reconsiders whether it is the primary beneficiary for investments designated as VIEs on a quarterly basis.

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

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

The Company uses the equity method of accounting for investments in equity securities in which it has a significant influence or more than a 20% interest and for real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than a minor influence over the joint 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.

Certain amounts in the prior year periods’ interim condensed consolidated financial statements have been reclassified to conform with the 2009 presentation. Such reclassifications include $2 million for the three months ended March 31, 2008 relating to the effect of change in foreign currency exchange rates on cash balances. These amounts were reclassified from cash flows from operating activities in the consolidated statements of cash flows for the three months ended March 31, 2008.

The consolidated financial statements at and for the three months ended March 31, 2008, as presented herein, have been restated as described in Note 12.

The accompanying interim condensed consolidated financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly the consolidated financial position of the Company at March 31, 2009, its consolidated results of operations for the three months ended March 31, 2009 and 2008, its consolidated cash flows for the three months ended March 31, 2009 and 2008, and its consolidated statement of stockholders’ equity for the three months ended March 31, 2009, in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2008 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, 2008 (the “2008 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 2008 Annual Report.

Adoption of New Accounting Pronouncements

Business Combinations and Noncontrolling Interests

Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations — A Replacement of FASB Statement No. 141 (“SFAS 141(r)”), FASB Staff Position (“FSP”) 141(r)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP 141(r)-1”) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS 160”). Under this new guidance:


	•	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.

	•	Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable.

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

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


	•	Changes in deferred income 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.

	•	Net income includes amounts attributable to noncontrolling interests.

	•	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 adoption of SFAS 141(r) and FSP 141(r)-1 on a prospective basis did not have an impact on the Company’s consolidated financial statements. As the Company did not have a minority interest, the adoption of SFAS 160, which required retrospective application of presentation requirements of noncontrolling interest, did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted prospectively Emerging Issues Task Force (“EITF”) Issue No. 08-6, Equity Method Investment Accounting Considerations (“EITF 08-6”). EITF 08-6 addresses a number of issues associated with the impact that SFAS 141(r) and SFAS 160 might have on the accounting for equity method investments, including how an equity method investment should initially be measured, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. The adoption of EITF 08-6 did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted prospectively EITF Issue No. 08-7, Accounting for Defensive Intangible Assets (“EITF 08-7”). EITF 08-7 requires that an acquired defensive intangible asset (i.e., an asset an entity does not intend to actively use, but rather, intends to prevent others from using) be accounted for as a separate unit of accounting at time of acquisition, not combined with the acquirer’s existing intangible assets. In addition, the EITF concludes that a defensive intangible asset may not be considered immediately abandoned following its acquisition or have indefinite life. The adoption of EITF 08-7 did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted prospectively 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. The Company will determine useful lives and provide all of the material required disclosures prospectively on intangible assets acquired on or after January 1, 2009.

Other Pronouncements

Effective January 1, 2009, the Company adopted 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

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

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

features in derivative agreements. The Company has provided all of the material required disclosures in its consolidated financial statements.

Effective January 1, 2009, the Company implemented guidance of SFAS No. 157, Fair Value Measurements (“SFAS 157”), for certain nonfinancial assets and liabilities that are recorded at fair value on a nonrecurring basis. This guidance which applies to such items as (i) nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination, (ii) reporting units measured at estimated fair value in the first step of a goodwill impairment test and (iii) indefinite-lived intangible assets measured at estimated fair value for impairment assessment was previously deferred under FSP 157-2, Effective Date of FASB Statement No. 157. Subsequent to January 1, 2009, the Company has applied the provisions of FSP 157-2 to the determination of fair values subject to such standard.

Effective January 1, 2009, the Company adopted prospectively 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. The adoption of EITF 08-5 did not have an impact on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted prospectively 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. The adoption of FSP 140-3 did not have an impact on the Company’s consolidated financial statements.

Future Adoption of New Accounting Pronouncements

In April 2009, the FASB issued three FSPs providing additional guidance relating to fair value and other-than-temporary impairment (“OTTI”) measurement and disclosure. The FSPs must be adopted by the second quarter of 2009.


	•	FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”), provides guidance on (1) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities and (2) identifying transactions that are not orderly. Further, the FSP 157-4 requires disclosure in the interim financial statements of the inputs and valuation techniques used to measure fair value. The Company is currently evaluating the impact of FSP 157-4 on its consolidated financial statements.

	•	FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“OTTI FSP”), provides new guidance for determining whether an other-than-temporary impairment exists. The OTTI FSP requires a company to assess the likelihood of selling a security prior to recovering its cost basis. If a company intends to sell a security or it is more-likely-than-not that it will be required to sell a security prior to recovery of its cost basis, a security would be written down to fair value with the full charge recorded in earnings. If a company does not intend to sell a security and it is not more-likely-than-not that it would be required to sell the security prior to recovery, the security would not be considered other-than-temporarily impaired unless there are credit losses associated with the security. Where credit losses exist, the portion of the impairment related to those credit losses would be recognized in earnings. Any remaining difference between the fair value and the cost basis would be recognized as part of other comprehensive income. The Company is currently evaluating the impact of the OTTI FSP 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)


	•	FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, requires interim financial instrument fair value disclosures similar to those included in annual financial statements. The Company will provide all of the material required disclosures in future periods.


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:


	March 31, 2009
	Cost or
	Amortized		Gross Unrealized				Estimated		% of
	Cost		Gain		Loss		Fair Value		Total
	(In millions)

U.S. corporate securities	$	15,229	$	74	$	2,559	$	12,744		36.6	%
Residential mortgage-backed securities		6,957		183		861		6,279		18.1
U.S. Treasury, agency and government guaranteed securities (1)		4,901		449		23		5,327		15.3
Foreign corporate securities		6,203		42		1,126		5,119		14.7
Commercial mortgage-backed securities		2,944		5		658		2,291		6.6
Asset-backed securities		2,458		12		638		1,832		5.3
State and political subdivision securities		947		3		167		783		2.2
Foreign government securities		410		24		31		403		1.2

Total fixed maturity securities (2), (3)	$	40,049	$	792	$	6,063	$	34,778		100.0	%

Non-redeemable preferred stock (2)	$	494	$	—	$	248	$	246		66.1	%
Common stock		131		1		6		126		33.9

Total equity securities	$	625	$	1	$	254	$	372		100.0	%

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

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


	December 31, 2008
	Cost or
	Amortized		Gross Unrealized				Estimated		% of
	Cost		Gain		Loss		Fair Value		Total
	(In millions)

U.S. corporate securities	$	15,440	$	126	$	2,335	$	13,231		38.0	%
Residential mortgage-backed securities		7,901		124		932		7,093		20.4
U.S. Treasury, agency and government guaranteed securities (1)		3,407		926		—		4,333		12.4
Foreign corporate securities		6,157		41		1,136		5,062		14.5
Commercial mortgage-backed securities		2,933		6		665		2,274		6.5
Asset-backed securities		2,429		1		703		1,727		5.0
State and political subdivision securities		880		2		225		657		1.9
Foreign government securities		454		48		33		469		1.3

Total fixed maturity securities (2), (3)	$	39,601	$	1,274	$	6,029	$	34,846		100.0	%

Non-redeemable preferred stock (2)	$	551	$	1	$	196	$	356		75.1	%
Common stock		122		1		5		118		24.9

Total equity securities	$	673	$	2	$	201	$	474		100.0	%


(1)		The Company has classified within the U. S. Treasury, agency and government guaranteed securities caption above certain corporate fixed maturity securities issued by U.S. financial institutions that are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) pursuant to the FDIC’s Temporary Liquidity Guarantee Program of $490 million at estimated fair value with unrealized gains of $3 million at March 31, 2009. The Company held no securities issued by U.S. financial institutions that are guaranteed pursuant to FDIC’s Temporary Liquidity Guarantee Program at December 31, 2008.

(2)		The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest rate step-up feature as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest rate step-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued by non-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as “perpetual hybrid securities.” Perpetual hybrid securities classified as non-redeemable preferred stock held by the Company at March 31, 2009 and December 31, 2008 had an estimated fair value of $214 million and $304 million, respectively. In addition, the Company held $32 million and $52 million at estimated fair value at March 31, 2009 and December 31, 2008, respectively, of other perpetual hybrid securities, primarily of U.S. financial institutions, also included in non-redeemable preferred stock. Perpetual hybrid securities held by the Company and included within fixed maturity securities (primarily within foreign corporate securities) at March 31, 2009 and December 31, 2008 had an estimated fair value of $328 million and $425 million, respectively. In addition, the Company held $38 million and $16 million at estimated fair value at March 31, 2009 and December 31, 2008, respectively, of other perpetual hybrid securities, primarily U.S. financial institutions, included in U.S. corporate securities.

(3)		At March 31, 2009 and December 31, 2008 the Company also held $309 million and $385 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates. These securities are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are commonly referred to as “capital securities” and are included within U.S. corporate securities.

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

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

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 $3.0 billion and $2.6 billion at March 31, 2009 and December 31, 2008, respectively. These securities had net unrealized losses of $1,344 million and $1,130 million at March 31, 2009 and December 31, 2008, respectively.

Non-Income Producing Fixed Maturity Securities. Non-income producing fixed maturity securities at estimated fair value were $17 million at both March 31, 2009 and December 31, 2008. Net unrealized losses associated with non-income producing fixed maturity securities were $1 million and $2 million at March 31, 2009 and December 31, 2008, respectively.

Fixed Maturity Securities Credit Enhanced by Financial Guarantee Insurers. At March 31, 2009, $1.0 billion of the estimated fair value of the Company’s fixed maturity securities were credit enhanced by financial guarantee insurers of which $472 million, $411 million, $126 million, $8 million, $3 million and $2 million, are included within state and political subdivision securities, U.S. corporate securities, asset-backed securities, residential mortgage-backed securities, commercial mortgage-backed securities and foreign corporate securities, respectively, and 25% and 59% were guaranteed by financial guarantee insurers who were rated Aa and Baa, respectively. At December 31, 2008, $1.1 billion of the estimated fair value of the Company’s fixed maturity securities were credit enhanced by financial guarantee insurers of which $525 million, $415 million, $145 million, $8 million and $3 million are included within U.S. corporate securities, state and political subdivision securities, asset-backed securities, residential mortgage-backed securities and commercial mortgage-backed securities, respectively, and 20% and 65% were guaranteed by financial guarantee insurers who were rated Aa and Baa, respectively. Approximately 42% of the asset-backed securities held at March 31, 2009 that are credit enhanced by financial guarantee insurers are asset-backed securities which are backed by sub-prime mortgage loans.

Concentrations of Credit Risk (Fixed Maturity Securities). The following section contains a summary of the concentrations of credit risk related to fixed maturity securities holdings.

The Company is not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company’s stockholders’ equity, other than securities of the U.S. government, certain U.S. government agencies and certain securities guaranteed by the U.S. government. At March 31, 2009 and December 31, 2008, the Company’s holdings in U.S. Treasury, agency and government guaranteed fixed maturity securities at estimated fair value were $5.3 billion and $4.3 billion, respectively. As shown in the sector table above, at March 31, 2009 the Company’s three largest exposures in its fixed maturity security portfolio were U.S. corporate securities (36.6%), residential mortgage-backed securities (18.1%) and U.S. Treasury, agency and government guaranteed securities (15.3%); and at December 31, 2008 were U.S. corporate securities (38.0%), residential mortgage-backed securities (20.4%) and foreign corporate securities (14.5%).

Concentrations of Credit Risk (Fixed Maturity Securities) — U.S. and Foreign Corporate Securities. At March 31, 2009 and December 31, 2008, the Company’s holdings in U.S. corporate and foreign corporate securities at estimated fair value were $17.9 billion and $18.3 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 investments. The largest exposure to a single issuer of corporate securities held at March 31, 2009 and December 31, 2008 was $183 million and $313 million, respectively. At March 31, 2009 and December 31, 2008, the Company’s combined holdings in the ten issuers to which it had the greatest exposure totaled $1.5 billion and $1.7 billion, respectively, the total of these ten issuers being less than 4% of the Company’s

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

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

total investments at such dates. The table below shows the major industry types that comprise the corporate securities holdings at:


	March 31, 2009					December 31, 2008
	Estimated		% of			Estimated		% of
	Fair Value		Total			Fair Value		Total
	(In millions)

Foreign (1)	$	5,119		28.6	%	$	5,062		27.6	%
Finance		2,873		16.1			3,397		18.6
Utility		2,838		15.9			2,810		15.4
Consumer		2,761		15.4			2,666		14.6
Industrial		2,352		13.2			1,775		9.7
Communications		1,303		7.3			1,305		7.1
Other		617		3.5			1,278		7.0

Total	$	17,863		100.0	%	$	18,293		100.0	%


(1)		Includes U.S. dollar-denominated debt obligations of foreign obligors, and other fixed maturity securities foreign investments.

Concentrations of Credit Risk (Fixed Maturity Securities) — Residential Mortgage-Backed Securities. The Company’s residential mortgage-backed securities consist of the following holdings at:


	March 31, 2009					December 31, 2008
	Estimated		% of			Estimated		% of
	Fair Value		Total			Fair Value		Total
	(In millions)

Residential mortgage-backed securities:
Collateralized mortgage obligations	$	4,447		70.8	%	$	5,028		70.9	%
Pass-through securities		1,832		29.2			2,065		29.1

Total residential mortgage-backed securities	$	6,279		100.0	%	$	7,093		100.0	%

Collateralized mortgage obligations are a type of mortgage-backed security that creates separate pools or tranches of pass-through cash flows for different classes of bondholders with varying maturities. Pass-through mortgage-backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages. The monthly mortgage payments from homeowners pass from the originating bank through an intermediary, such as a government agency or investment bank, which collects the payments, and for a fee, remits or passes these payments through to the holders of the pass-through securities.

The Company’s residential mortgage-backed securities portfolio consists of agency, prime and alternative residential mortgage loans (“Alt-A”) securities of 70%, 20% and 10% of the total holdings, respectively, at March 31, 2009 and 68%, 22% and 10% of the total holdings, respectively, at December 31, 2008. At March 31, 2009 and December 31, 2008, $5.3 billion and $6.5 billion, respectively, or 85% and 92%, respectively, of the residential mortgage-backed securities were rated Aaa/AAA by Moody’s Investors Service (“Moody’s”), Standard & Poor’s Ratings Services (“S&P”) or Fitch Ratings (“Fitch”). The majority of the agency residential mortgage-backed securities are guaranteed or otherwise supported by the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”) or the Government National Mortgage Association. In September 2008, the U.S. Treasury announced that FNMA and FHLMC had been placed into conservatorship. Prime residential mortgage lending includes the origination of residential mortgage loans to the most credit worthy customers with high quality credit profiles. Alt-A residential mortgage loans are a classification

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

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

of mortgage loans where the risk profile of the borrower falls between prime and sub-prime. At March 31, 2009 and December 31, 2008, the Company’s Alt-A residential mortgage-backed securities holdings at estimated fair value was $608 million and $706 million, respectively, with an unrealized loss of $422 million and $376 million, respectively. At March 31, 2009 and December 31, 2008, $34 million and $458 million, respectively, or 6% and 65%, respectively, of the Company’s Alt-A residential mortgage-backed securities were rated Aa/AA or better by Moody’s, S&P or Fitch. In January 2009, certain Alt-A residential mortgage-backed securities experienced ratings downgrades from investment grade to below investment grade, contributing to the decrease cited above in the Company’s Alt-A securities holdings rated Aa/AA or better. At March 31, 2009, the Company’s Alt-A holdings are distributed by vintage year as follows at estimated fair value: 27% in the 2007 vintage year, 15% in the 2006 vintage year and 58% in the 2005 and prior vintage years. At December 31, 2008 the Company’s Alt-A holdings are distributed by vintage year as follows at estimated fair value: 23% in the 2007 vintage year, 14% in the 2006 vintage year and 63% in the 2005 and prior vintage years. Vintage year refers to the year of origination and not to the year of purchase.

Concentrations of Credit Risk (Fixed Maturity Securities) — Commercial Mortgage-Backed Securities. At both March 31, 2009 and December 31, 2008, the Company’s holdings in commercial mortgage-backed securities were $2.3 billion at estimated fair value. At March 31, 2009 and December 31, 2008, $2.1 billion and $2.0 billion, respectively, of the estimated fair value, or 90% for both periods of the commercial mortgage-backed securities were rated Aaa/AAA by Moody’s, S&P or Fitch. At March 31, 2009, the rating distribution of the Company’s commercial mortgage-backed securities holdings was as follows: 90% Aaa, 5% Aa, 2% A, 1% Baa and 2% Ba or below. At December 31, 2008, the rating distribution of the Company’s commercial mortgage-backed securities holdings was as follows: 90% Aaa, 5% Aa, 2% A, 1% Baa and 2% Ba or below. At March 31, 2009 and December 31, 2008, 85% and 84%, respectively, of the holdings are in the 2005 and prior vintage years. At March 31, 2009 and December 31, 2008, the Company had no exposure to CMBX securities and its holdings of commercial real estate collateralized debt obligations securities were $65 million and $74 million, respectively, at estimated fair value.

Concentrations of Credit Risk (Fixed Maturity Securities) — Asset-Backed Securities. At March 31, 2009 and December 31, 2008, the Company’s holdings in asset-backed securities were $1.8 billion and $1.7 billion, respectively, at estimated fair value. The Company’s asset-backed securities are diversified both by sector and by issuer. At March 31, 2009 and December 31, 2008, $1.2 billion and $1.1 billion, respectively, or 68% and 64%, respectively, of total asset-backed securities were rated Aaa/AAA by Moody’s, S&P or Fitch. At March 31, 2009, the largest exposures in the Company’s asset-backed securities portfolio were credit card receivables, residential mortgage-backed securities backed by sub-prime mortgage loans, automobile receivables and student loan receivables of 46%, 16%, 12% and 6% of the total holdings, respectively. At December 31, 2008, the largest exposures in the Company’s asset-backed securities portfolio were credit card receivables, residential mortgage-backed securities backed by sub-prime mortgage loans, automobile receivables and student loan receivables of 41%, 17%, 12% and 6% of the total holdings, respectively. Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles. At March 31, 2009 and December 31, 2008, the Company had exposure to fixed maturity securities backed by sub-prime mortgage loans with estimated fair values of $291 million and $335 million, respectively, and unrealized losses of $209 million and $199 million, respectively. At March 31, 2009 and December 31, 2008, 18% of the asset-backed securities backed by sub-prime mortgage loans have been guaranteed by financial guarantee insurers, of which 1% for both and 58% and 52%, respectively, were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively.

Concentrations of Credit Risk (Equity Securities) — The Company is not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company’s stockholders’ equity in its equity securities holdings.

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

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

Net Unrealized Investment Gains (Losses)

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


	March 31, 2009			December 31, 2008
	(In millions)

Fixed maturity securities	$	(5,271	)	$	(4,755	)
Equity securities		(253	)		(199	)
Derivatives		(18	)		12
Short-term investments		(65	)		(100	)
Other		(4	)		(3	)

Subtotal		(5,611	)		(5,045	)

Amounts allocated from:
DAC and VOBA		996			916
Deferred income tax		1,618			1,447

Subtotal		2,614			2,363

Net unrealized investment gains (losses)	$	(2,997	)	$	(2,682	)

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


	March 31, 2009
	(In millions)

Balance, beginning of period	$	(2,682	)
Unrealized investment gains (losses) during the period		(566	)
Unrealized investment gains (losses) relating to:
DAC and VOBA		80
Deferred income tax		171

Balance, end of period	$	(2,997	)

Change in net unrealized investment gains (losses)	$	(315	)

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:


	March 31, 2009
					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	$	4,700	$	771	$	5,884	$	1,788	$	10,584	$	2,559
Residential mortgage-backed securities		361		80		1,839		781		2,200		861
U.S. Treasury, agency and government guaranteed securities		795		23		—		—		795		23
Foreign corporate securities		2,302		320		1,841		806		4,143		1,126
Commercial mortgage-backed securities		701		102		1,425		556		2,126		658
Asset-backed securities		713		81		791		557		1,504		638
State and political subdivision securities		354		58		292		109		646		167
Foreign government securities		203		16		28		15		231		31

Total fixed maturity securities	$	10,129	$	1,451	$	12,100	$	4,612	$	22,229	$	6,063

Equity securities	$	79	$	68	$	158	$	186	$	237	$	254

Total number of securities in an unrealized loss position		2,823				1,673

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

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


	December 31, 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	$	6,302	$	1,001	$	4,823	$	1,334	$	11,125	$	2,335
Residential mortgage-backed securities		1,740		501		934		431		2,674		932
U.S. Treasury, agency and government guaranteed securities		34		—		—		—		34		—
Foreign corporate securities		2,684		517		1,530		619		4,214		1,136
Commercial mortgage-backed securities		1,485		289		679		376		2,164		665
Asset-backed securities		961		221		699		482		1,660		703
State and political subdivision securities		348		91		220		134		568		225
Foreign government securities		229		21		20		12		249		33

Total fixed maturity securities	$	13,783	$	2,641	$	8,905	$	3,388	$	22,688	$	6,029

Equity securities	$	124	$	59	$	191	$	142	$	315	$	201

Total number of securities in an unrealized loss position		2,634				1,340

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:


	March 31, 2009
	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	$	5,255	$	7,563	$	270	$	2,593		1,242		618
Six months or greater but less than nine months		1,751		2,551		156		1,194		225		237
Nine months or greater but less than twelve months		2,266		488		169		272		300		429
Twelve months or greater		7,506		912		815		594		842		108

Total	$	16,778	$	11,514	$	1,410	$	4,653

Equity Securities:
Less than six months	$	13	$	174	$	1	$	88		219		288
Six months or greater but less than nine months		2		172		—		104		5		13
Nine months or greater but less than twelve months		—		54		—		34		1		5
Twelve months or greater		16		60		1		26		8		5

Total	$	31	$	460	$	2	$	252

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

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


	December 31, 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	$	5,444	$	9,799	$	392	$	3,547		1,314		1,089
Six months or greater but less than nine months		2,737		542		213		271		349		54
Nine months or greater but less than twelve months		3,554		810		392		470		342		95
Twelve months or greater		5,639		192		614		130		642		28

Total	$	17,374	$	11,343	$	1,611	$	4,418

Equity Securities:
Less than six months	$	23	$	298	$	3	$	130		13		50
Six months or greater but less than nine months		18		53		3		20		2		5
Nine months or greater but less than twelve months		—		102		—		43		—		9
Twelve months or greater		22		—		2		—		6		—

Total	$	63	$	453	$	8	$	193

As described more fully in Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 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 March 31, 2009 and December 31, 2008, $1.4 billion and $1.6 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 8% and 9%, respectively, of the cost or amortized cost of such securities. At March 31, 2009 and December 31, 2008, $2 million and $8 million, respectively, of unrealized losses related to equity securities with an unrealized loss position of less than 20% of cost, which represented 6% and 13%, respectively, of the cost of such securities.

At March 31, 2009, $4.7 billion and $252 million of unrealized losses related to fixed maturity and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 40% and 55% of the cost or amortized cost for fixed maturity and equity securities, respectively. Of such unrealized losses of $4.7 billion and $252 million, $2.6 billion and $88 million related to fixed maturity and

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

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

equity securities, respectively, that were in an unrealized loss position for a period of less than six months. At December 31, 2008, $4.4 billion and $193 million of unrealized losses related to fixed maturity and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 39% and 43% of the cost or amortized cost of such fixed maturity and equity securities, respectively. Of such unrealized losses of $4.4 billion and $193 million, $3.5 billion and $130 million related to fixed maturity and equity securities, respectively, that were in an unrealized loss position for a period of less than six months.

The Company held 105 fixed maturity securities and eight equity securities, each with a gross unrealized loss at March 31, 2009 of greater than $10 million. These 105 fixed maturity securities represented 31%, or $1,857 million in the aggregate, of the gross unrealized loss on fixed maturity securities. These eight equity securities represented 50%, or $128 million in the aggregate, of the gross unrealized loss on equity securities. The Company held 103 fixed maturity and six equity securities, each with a gross unrealized loss at December 31, 2008 of greater than $10 million. These 103 fixed maturity securities represented 29%, or $1,758 million in the aggregate, of the gross unrealized loss on fixed maturity securities. These six equity securities represented 42%, or $84 million in the aggregate, of the gross unrealized loss on equity securities. The fixed maturity and equity securities, each with a gross unrealized loss greater than $10 million, increased $143 million during the three months ended March 31, 2009. 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.

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 $252 million and $193 million at March 31, 2009 and December 31, 2008, respectively, 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 are 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 less than six months was $88 million at March 31, 2009, of which $83 million of the unrealized losses, or 94%, are for non-redeemable preferred securities, of which $59 million of the unrealized losses, or 71%, are for investment grade financial services industry non-redeemable preferred securities, of which 71% are rated A or higher.

Equity securities with an unrealized loss of 20% or more for six months or greater but less than twelve months was $138 million at March 31, 2009, all of which are for non-redeemable preferred securities, of which, $114 million of the unrealized losses, or 83%, are for investment grade and all of which are financial services industry non-redeemable preferred securities, of which 68% are rated A or higher.

Equity securities with an unrealized loss of 20% or more for twelve months or greater was $26 million at March 31, 2009, all of which are for investment grade financial services industry non-redeemable preferred securities that are rated A or higher.

In connection with the equity securities impairment review process at March 31, 2009, the Company evaluated its holdings in non-redeemable preferred securities, particularly those of financial services industry companies. The

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

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

Company considered several factors including whether there has been any deterioration in credit of the issuer and the likelihood of recovery in value of non-redeemable preferred securities with a severe or an extended unrealized loss. With respect to common stock holdings, the Company considered the duration and severity of the unrealized losses for securities in an unrealized loss position of 20% or more; and the duration of unrealized losses for securities in an unrealized loss position of 20% or less within an extended unrealized loss position (i.e., 12 months or greater).

At March 31, 2009, there are $252 million of equity securities with an unrealized loss of 20% or more, of which $247 million of the unrealized losses, or 98%, were for non-redeemable preferred securities. At March 31, 2009, $199 million of the unrealized losses of 20% or more, or 81%, of the non-redeemable preferred securities were investment grade financial services industry non-redeemable preferred securities; and all non-redeemable preferred securities with unrealized losses of 20% or more, regardless of credit rating, have not deferred any dividend payments.

Also, the Company believes the unrealized loss position is not necessarily predictive of the ultimate performance of these securities, and with respect to fixed maturity securities, it has the ability and intent to hold until the earlier of the recovery in value, or until maturity, and with respect to equity securities, it has the ability and intent to hold until the recovery in value.

Future other-than-temporary impairments will depend primarily on economic fundamentals, issuer performance, changes in credit rating, changes in collateral valuation, changes in interest rates and changes in credit spreads. If economic fundamentals and any 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 Ended
	March 31,
	2009			2008
	(In millions)

Fixed maturity securities	$	(161	)	$	(50	)
Equity securities		(58	)		(9	)
Mortgage and consumer loans		(14	)		(23	)
Real estate and real estate joint ventures		(11	)		(2	)
Other limited partnership interests		(50	)		(2	)
Freestanding derivatives		(178	)		56
Embedded derivatives		(184	)		139
Other		56			(154	)

Net investment gains (losses)	$	(600	)	$	(45	)

For the three months ended March 31, 2009 and 2008, affiliated net investment gains (losses) of ($475) million and $346 million, respectively, are included in embedded derivatives in the table above.

Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) are as follows:


	Fixed Maturity Securities						Equity Securities						Total
	Three Months Ended March 31,
	2009			2008			2009			2008			2009			2008
	(In millions)

Proceeds	$	3,258		$	2,586		$	8		$	8		$	3,266		$	2,594

Gross investment gains		47			27			1			—			48			27

Gross investment losses		(87	)		(67	)		(1	)		(2	)		(88	)		(69	)

Writedowns
Credit-related		(117	)		(10	)		(32	)		—			(149	)		(10	)
Other than credit-related (1)		(4	)		—			(26	)		(7	)		(30	)		(7	)

Total writedowns		(121	)		(10	)		(58	)		(7	)		(179	)		(17	)

Net investment gains (losses)	$	(161	)	$	(50	)	$	(58	)	$	(9	)	$	(219	)	$	(59	)


(1)		Other than credit-related writedowns include items such as equity securities and non-redeemable preferred securities classified within fixed maturity securities where the primary reason for the writedown was the severity and/or the duration of an unrealized loss position and fixed maturity securities where an interest-rate related writedown was taken.

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 fair value

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

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

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 $179 million and $17 million for the three months ended March 31, 2009 and 2008, respectively. The substantial increase in the three months ended March 31, 2009 was driven in part by writedowns totaling $59 million of financial services industry securities holdings, comprised of $20 million of fixed maturity securities and $39 million of equity securities. These financial services industry impairments included $53 million of perpetual hybrid securities, some classified as fixed maturity securities and some classified as non-redeemable preferred stock, where there had been a deterioration in the credit rating of the issuer to below investment grade and due to a severe and extended unrealized loss position. In addition, there were increased credit-related impairments in the fixed maturity securities portfolio across several industries as shown in the table below. The circumstances that gave rise to these impairments were financial restructurings, bankruptcy filings, ratings downgrades or difficult underlying operating environments for the entities concerned.

The $121 million and $10 million of fixed maturity security writedowns in the three months ended March 31, 2009 and 2008, respectively, related to the following:


	Three Months Ended
	March 31,
	2009		2008
	(In millions)

Communications	$	40	$	—
Asset-backed		23		2
Finance		20		8
Industrial		18		—
Consumer		14		—
Utility		4		—
Mortgage-backed		2		—

Total	$	121	$	10

Included within the $58 million of writedowns on equity securities in the three months ended March 31, 2009 are $39 million of writedowns related to the financial services industry holdings and $19 million of writedowns across several industries including communications and consumer. Equity security impairments in the three months ended March 31, 2009 included impairments totaling $36 million related to financial services industry perpetual hybrid securities where there had been a deterioration in the credit rating of the issuer to below investment grade and due to a severe and extended unrealized loss position.

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 Ended
	March 31,
	2009			2008
	(In millions)

Fixed maturity securities	$	511		$	651
Equity securities		7			12
Trading securities (1)		(9	)		—
Mortgage and consumer loans		59			67
Policy loans		21			16
Real estate and real estate joint ventures (2)		(46	)		7
Other limited partnership interests (3)		(81	)		(3	)
Cash, cash equivalents and short-term investments		7			20
International joint ventures		(1	)		(1	)
Other		(1	)		(1	)

Total investment income		467			768
Less: Investment expenses		27			106

Net investment income	$	440		$	662


(1)		Net investment income from trading securities includes interest and dividends earned on trading securities in addition to the net realized and unrealized gains (losses) recognized on trading securities. During the three months ended March 31, 2009, unrealized losses recognized on trading securities, due to the volatility in the equity and credit markets, were in excess of interest and dividends earned and net realized gains (losses) on securities sold.

(2)		Net investment income from real estate joint ventures within the real estate and real estate joint ventures caption represents distributions for investments accounted for under the cost method and equity in earnings for investments accounted for under the equity method. Overall for the three months ended March 31, 2009, the net amount recognized was a loss of $46 million resulting primarily from declining property valuations on real estate held by certain real estate investment funds that carry their real estate at fair value and operating losses incurred on real estate properties that were developed for sale by real estate development joint ventures, in excess of earnings from wholly owned real estate. The commercial real estate properties underlying real estate investment funds have experienced lower occupancy rates which has led to declining property valuations, while the real estate development joint ventures have experienced fewer property sales due to declining real estate market fundamentals and decreased availability of real estate lending to finance transactions.

(3)		Net investment income from other limited partnership interests, including hedge funds, represents distributions from other limited partnership interests accounted for under the cost method and equity in earnings from other limited partnership interests accounted for under the equity method. Overall for the three months ended March 31, 2009, the net amount recognized was a loss of $81 million resulting principally from losses on equity method investments. Such earnings and losses recognized for other limited partnership interests are impacted by volatility in the equity and credit markets.

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

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

Affiliated investment expenses, included in the table above, were $11 million and $9 million for the three months ended March 31, 2009 and 2008 respectively. See “— Related Party Investment Transactions” for discussion of affiliated net investment income related to short-term investments included in the table above.

Securities Lending

The Company participates in securities lending programs whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, primarily major brokerage firms and commercial banks. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. Securities with a cost or amortized cost of $5.3 billion and $5.6 billion and an estimated fair value of $5.6 billion and $6.3 billion were on loan under the program at March 31, 2009 and December 31, 2008, 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 $5.7 billion and $6.4 billion at March 31, 2009 and December 31, 2008, respectively. Of this $5.7 billion of cash collateral at March 31, 2009, $0.7 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, and $3.7 billion, $0.6 billion and $0.7 billion, respectively, were due within 30 days, 60 days, and over 90 days. Of the $0.7 billion of estimated fair value of the securities related to the cash collateral on open terms at March 31, 2009, $0.6 billion were U.S. Treasury, agency and government guaranteed securities which, if put to the Company, can be immediately sold to satisfy the cash requirements. The remainder of the securities on loan are primarily U.S. Treasury, agency and government guaranteed securities, and very liquid residential mortgage-backed securities. The estimated fair value of the reinvestment portfolio acquired with the cash collateral was $4.3 billion at March 31, 2009, and consisted principally of fixed maturity securities (including residential mortgage-backed, asset-backed, U.S. corporate and foreign corporate securities).

Security collateral of $10 million and $153 million on deposit from counterparties in connection with the securities lending transactions at March 31, 2009 and December 31, 2008, respectively, may not be sold or repledged, unless the counterparty is in default, and is not reflected in the consolidated financial statements.

Assets on Deposit and Pledged as Collateral

The assets on deposit and assets pledged as collateral are summarized in the table below. The amounts presented in the table below are at estimated fair value for fixed maturity and equity securities.


	March 31, 2009		December 31, 2008
	(In millions)

Assets on deposit:
Regulatory agencies (1)	$	23	$	23
Assets pledged as collateral:
Debt and funding agreements — FHLB of Boston (2)		939		1,284
Derivative transactions (3)		69		66

Total assets on deposit and pledged as collateral	$	1,031	$	1,373


(1)		The Company had investment assets on deposit with regulatory agencies consisting primarily of fixed maturity and equity securities.

(2)		The Company has pledged fixed maturity securities in support of its debt and funding agreements with the Federal Home Loan Bank of Boston (“FHLB of Boston”). The nature of these Federal Home Loan Bank arrangements is described in Note 6 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report.

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

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


(3)		Certain of the Company’s invested assets are pledged as collateral for various derivative transactions as described in Note 3.

See also the immediately preceding section “Securities Lending” for the amount of the Company’s cash and invested assets received from and due back to counterparties pursuant to the securities lending program.

Trading Securities

The Company has a trading securities portfolio to support investment strategies that involve the active and frequent purchase and sale of securities and asset and liability matching strategies for certain insurance products. Trading securities are recorded at estimated fair value with subsequent changes in estimated fair value recognized in net investment income.

At March 31, 2009 and December 31, 2008, trading securities at estimated fair value were $264 million and $232 million, respectively.

Interest and dividends earned on trading securities in addition to the net realized and unrealized gains (losses) recognized on the trading securities included within net investment income (loss) totaled ($9) million for the three months ended March 31, 2009. Included within unrealized gains (losses) on such trading securities are changes in estimated fair value of ($11) million for the three months ended March 31, 2009.

Variable Interest Entities

The following table presents the carrying amount and maximum exposure to loss relating to VIEs for which the Company holds significant variable interests but it is not the primary beneficiary and which have not been consolidated at March 31, 2009 and December 31, 2008:


	March 31, 2009				December 31, 2008
			Maximum				Maximum
	Carrying		Exposure to		Carrying		Exposure to
	Amount (1)		Loss (2)		Amount (1)		Loss (2)
	(In millions)

Fixed maturity securities available-for-sale: (3)
U.S. corporate securities	$	127	$	127	$	182	$	182
Foreign corporate securities		122		122		152		152
Real estate joint ventures (4)		42		42		41		41
Other limited partnership interests (4)		538		740		672		1,060

Total	$	829	$	1,031	$	1,047	$	1,435


(1)		See Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for further discussion of the Company’s accounting policies with respect to the basis for determining carrying value of these investments.

(2)		The maximum exposure to loss relating to the fixed maturity securities available-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to real estate joint ventures and other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(3)		These assets are reflected at estimated fair value within fixed maturity securities available-for-sale.

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

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


(4)		Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities.

As described in Note 7, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during the three months ended March 31, 2009.

Related Party Investment Transactions

At March 31, 2009 and December 31, 2008, the Company held $756 million and $1.6 billion, respectively, of its total cash and invested assets in the Metropolitan Money Market Pool and the MetLife Intermediate Income Pool which are affiliated partnerships. These amounts are included in short-term investments. Net investment income from these invested assets was $1 million and $5 million, for the three months ended March 31, 2009 and 2008, respectively.

In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Assets transferred to and from affiliates, inclusive of amounts related to reinsurance agreements, are as follows:


	Three Months Ended
	March 31,
	2009		2008
	(In millions)

Estimated fair value of assets transferred to affiliates	$	—	$	—
Amortized cost of assets transferred to affiliates	$	—	$	—
Net investment gains (losses) recognized on transfers	$	—	$	—
Estimated fair value of assets transferred from affiliates	$	143	$	230


3.	Derivative Financial Instruments

Accounting for Derivative Financial Instruments

Derivatives are financial instruments whose values are derived from interest rates, foreign currency exchange rates, or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter market. The Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage the risk associated with variability in cash flows or changes in estimated fair values related to the Company’s financial instruments. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance contracts that have embedded derivatives.

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

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

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

The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.

The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all 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 based on a net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate credit risk. 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 currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. 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. The evaluation of the requirement to make an additional credit risk adjustments is performed by the Company each reporting period.

Pursuant to FIN No. 39, Offsetting of Amounts Related to Certain Contracts, the Company’s policy is to not offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.

If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are generally reported in net investment gains (losses). The fluctuations in estimated fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income.

To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a hedge of the estimated fair value of a recognized asset or liability or an unrecognized firm commitment (“fair value hedge”); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”). In this documentation, the Company sets forth how the hedging instrument is expected to hedge the designated risks related to the hedged item and sets forth the method that will be used to retrospectively and prospectively assess the hedging instrument’s effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.

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

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

The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported.

Under a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives.

Under a cash flow hedge, changes in the estimated fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of stockholders’ equity, and the deferred gains or losses on the derivative are reclassified into the consolidated statement of income when the Company’s earnings are affected by the variability in cash flows of the hedged item. Changes in the estimated fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives.

The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item; (ii) the derivative expires, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged forecasted transaction will occur; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; or (v) the derivative is de-designated as a hedging instrument.

When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net investment gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of income when the Company’s earnings are affected by the variability in cash flows of the hedged item.

When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will occur by the end of the specified time period or the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in net investment gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income (loss) pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in net investment gains (losses).

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

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

In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the consolidated balance sheet, with changes in its estimated fair value recognized in the current period as net investment gains (losses).

The Company is also a party to financial instruments that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. If the instrument would not be accounted for in its entirety at estimated fair value and it is determined that the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheet at estimated fair value with the host contract and changes in their estimated fair value are reported currently in net investment gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at estimated fair value in the consolidated financial statements and that their related changes in estimated fair value could materially affect reported net income.

See Note 10 for information about the fair value hierarchy for derivatives.

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

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

Primary Risks Managed by Derivative Financial Instruments and Non Derivative Financial Instruments

The Company is exposed to various risks relating to its ongoing business operations, including interest rate risk, foreign currency risk, credit risk, and equity market risk. The Company uses a variety of strategies to manage these risks, including the use of derivative instruments. The following table presents the notional amount, estimated fair value, and primary underlying risk exposure of the Company’s derivative financial instruments, excluding embedded derivatives held at:


		March 31, 2009						December 31, 2008
				Current Market						Current Market
Primary Underlying		Notional		or Fair Value (1)				Notional		or Fair Value (1)
Risk Exposure	Derivative Type	Amount		Assets		Liabilities		Amount		Assets		Liabilities
						(In millions)

Interest rate	Interest rate swaps	$	5,152	$	656	$	233	$	7,074	$	736	$	347
	Interest rate floors		9,486		201		75		12,071		494		—
	Interest rate caps		4,006		8		—		3,513		1		—
	Interest rate futures		710		2		—		1,064		4		11
Foreign currency	Foreign currency swaps		3,417		565		202		3,771		699		219
	Foreign currency forwards		93		—		4		92		—		9
Credit	Swap spreadlocks		208		—		11		208		—		8
	Credit default swaps		806		42		9		648		19		8
Equity market	Equity futures		418		—		6		370		—		5
	Equity options		813		282		—		813		248		—
	Variance swaps		1,081		54		2		1,081		57		—

	Total	$	26,190	$	1,810	$	542	$	30,705	$	2,258	$	607


(1)		The estimated fair value of all derivatives in an asset position is reported within other invested assets in the consolidated balance sheets and the estimated fair value of all derivatives in a liability position is reported within other liabilities in the consolidated balance sheets.

Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. The Company utilizes interest rate swaps in fair value and non-qualifying hedging relationships.

The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. In a basis swap, both legs of the swap are floating with each based on a different index. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Basis swaps are included in interest rate swaps in the preceding table. The Company utilizes basis swaps in non-qualifying hedging relationships.

Inflation swaps are used as an economic hedge to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are included in interest rate swaps in the preceding table. The Company utilizes inflation swaps in non-qualifying hedging relationships.

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

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

The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches), as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In certain instances, the Company locks in the economic impact of existing purchased caps and floors by entering into offsetting written caps and floors. The Company utilizes interest rate caps and floors in non-qualifying hedging relationships.

In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance. The value of interest rate futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. The Company utilizes exchange-traded interest rate futures in non-qualifying hedging relationships.

Foreign currency derivatives, including foreign currency swaps and foreign currency forwards are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies.

In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a fixed exchange rate, generally set at inception, calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. The Company utilizes foreign currency swaps in fair value, cash flow, and non-qualifying hedging relationships.

In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. The Company utilizes foreign currency forwards in non-qualifying hedging relationships.

Swap spread locks are used by the Company to hedge invested assets on an economic basis against the risk of changes in credit spreads. Swap spread locks are forward transactions between two parties whose underlying reference index is a forward starting interest rate swap where the Company agrees to pay a coupon based on a predetermined reference swap spread in exchange for receiving a coupon based on a floating rate. The Company has the option to cash settle with the counterparty in lieu of maintaining the swap after the effective date. The Company utilizes swap spread locks in non-qualifying hedging relationships.

Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to insure credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. The Company utilizes credit default swaps in non-qualifying hedging relationships.

Credit default swaps are also used to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash

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

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

instrument such as a U.S. Treasury or Agency security. These credit default swaps are not designated as hedging instruments.

In exchange-traded equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded equity futures in non-qualifying hedging relationships.

Equity index options are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. To hedge against adverse changes in equity indices, the Company enters into contracts to sell the equity index within a limited time at a contracted price. The contracts will be net settled in cash based on differentials in the indices at the time of exercise and the strike price. In certain instances, the Company may enter into a combination of transactions to hedge adverse changes in equity indices within a pre-determined range through the purchase and sale of options. Equity index options are included in equity options in the preceding table. The Company utilizes equity index options in non-qualifying hedging relationships.

Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in variance swaps in the preceding table. The Company utilizes equity variance swaps in non-qualifying hedging relationships.

Hedging

The following table presents the notional amount and estimated fair value of derivatives designated as hedging instruments under SFAS 133 by type of hedge designation at:


	March 31, 2009						December 31, 2008
	Notional		Fair Value				Notional		Fair Value
Derivatives Designated as Hedging Instruments	Amount		Assets		Liabilities		Amount		Assets		Liabilities
	(In millions)

Fair Value Hedges:
Foreign currency swaps	$	1,246	$	312	$	135	$	707	$	68	$	133
Interest rate swaps		227		17		4		138		—		28

Subtotal		1,473		329		139		845		68		161

Cash Flow Hedges:
Foreign currency swaps		132		24		—		486		91		—

Subtotal		132		24		—		486		91		—

Total qualifying hedges	$	1,605	$	353	$	139	$	1,331	$	159	$	161

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

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

The following table presents the notional amount and estimated fair value of derivatives that are not designated or do not qualify as hedging instruments under SFAS 133 by derivative type at:


	March 31, 2009						December 31, 2008
	Notional		Fair Value				Notional		Fair Value
Derivatives Not Designated or Not Qualifying as Hedging Instruments	Amount		Assets		Liabilities		Amount		Assets		Liabilities
	(In millions)

Interest rate swaps	$	4,925	$	639	$	229	$	6,936	$	736	$	319
Interest rate floors		9,486		201		75		12,071		494		—
Interest rate caps		4,006		8		—		3,513		1		—
Interest rate futures		710		2		—		1,064		4		11
Foreign currency swaps		2,039		229		67		2,578		540		86
Foreign currency forwards		93		—		4		92		—		9
Swaps spreadlocks		208		—		11		208		—		8
Credit default swaps		806		42		9		648		19		8
Equity futures		418		—		6		370		—		5
Equity options		813		282		—		813		248		—
Variance swaps		1,081		54		2		1,081		57		—

Total non-designated or non-qualifying derivatives	$	24,585	$	1,457	$	403	$	29,374	$	2,099	$	446

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


	Three Months Ended
	March 31,
	2009			2008
	(In millions)

Qualifying hedges:
Net investment income	$	(1	)	$	—
Interest credited to policyholder account balances		8			1
Non-qualifying hedges:
Net investment gains (losses)		2			19

Total	$	9		$	20

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; (ii) interest rate swaps to convert fixed rate liabilities to floating rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated liabilities.

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

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

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net investment gains (losses). The following table represents the amount of such net investment gains (losses) recognized for the three months ended March 31, 2009 and 2008:


								Ineffectiveness
	Hedge Items in Fair Value	Net Investment Gains			Net Investment Gains			Recognized in Net
Derivatives in Fair Value	Hedging	(Losses) Recognized			(Losses) Recognized			Investment Gains
Hedging Relationships	Relationships	for Derivatives			for Hedged Items			(Losses)
					(In millions)

For the Three Months Ended March 31, 2009:
Interest rate swaps:	Fixed maturity securities	$	5		$	(5	)	$	—
	Policyholder account balances (1)		(3	)		2			(1	)
Foreign currency swaps:	Foreign-denominated policyholder account balances (2)		—			1			1

Total		$	2		$	(2	)	$	—

For the Three Months Ended March 31, 2008:
Total		$	22		$	(21	)	$	1


(1)		Fixed rate liabilities

(2)		Fixed rate or floating rate liabilities

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.

Cash Flow Hedges

The Company designates and accounts for foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities as cash flow hedges when they have met the requirements of SFAS 133.

For the three months ended March 31, 2009 and 2008, 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 ended March 31, 2009 and 2008, 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 ended March 31, 2009 and 2008.

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


	Three Months Ended March 31,
	2009			2008
	(In millions)

Other comprehensive income (loss), beginning of period	$	20		$	(13	)
Gains (losses) deferred in other comprehensive loss on the effective portion of cash flow hedges		(43	)		34
Amounts reclassified to net investment gains (losses)		40			(40	)

Other comprehensive income (loss), end of period	$	17		$	(19	)

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

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

At March 31, 2009, $1 million of the deferred net gain on derivatives accumulated in other comprehensive income (loss) is expected to be reclassified to earnings within the next 12 months.

The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of income and the consolidated statements of stockholders’ equity for the three months ended March 31, 2009 and 2008:


	Amount of Gains			Amount and Location of
	(Losses) Deferred			Gains (Losses)
	in Accumulated			Reclassified from
	Other Comprehensive			Accumulated Other
	Income (Loss) on			Comprehensive Income
Derivatives in Cash Flow Hedging Relationships	Derivatives			(Loss) into Income
				Net Investment
				Gains (Losses)
	(In millions)

For the Three Months Ended March 31, 2009:
Foreign currency swaps	$	(43	)	$	(40	)

For the Three Months Ended March 31, 2008:
Foreign currency swaps	$	34		$	40

There were no ineffective derivatives in cash flow hedging relationship for the three months ended March 31, 2009 and 2008.

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 caps and floors, and interest rate futures to economically hedge its exposure to interest rates; (ii) foreign currency forwards and swaps to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, equity index options and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) swap spread locks to economically hedge invested assets against the risk of changes in credit spreads; (vi) credit default swaps to synthetically create investments; (vii) financial forwards to buy and sell securities to economically hedge its exposure to interest rates; (vii) synthetic guaranteed interest contracts; (viii) basis swaps to better match the cash flows of assets and related liabilities; and (ix) inflation swaps to reduce risk generated from inflation-indexed liabilities.

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

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

The following table presents the amount and location of gains (losses) recognized in income for derivatives that are not designated or qualifying as hedging instruments under SFAS 133:


	Net Investment
	Gains (Losses)
	(In millions)

For the Three Months Ended March 31, 2009:
Interest rate swaps	$	(39	)
Interest rate floors		(184	)
Interest rate caps		(3	)
Interest rate futures		1
Equity futures		25
Foreign currency swaps		(51	)
Foreign currency forwards		4
Equity options		32
Variance swaps		(6	)
Swap spreadlocks		(4	)
Credit default swaps		20

Total	$	(205	)

For the Three Months Ended March 31, 2008:	$	35

Credit Derivatives

In connection with synthetically created investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the non-qualifying derivatives and derivatives for purposes other than hedging table. If a credit event, 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 all referenced credit obligations is zero, was $277 million at both March 31, 2009 and December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At both March 31, 2009 and December 31, 2008, the Company would have paid $3 million to terminate all of these contracts.

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

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

The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at March 31, 2009 and December 31, 2008:


	March 31, 2009							December 31, 2008
				Maximum							Maximum
				Amount of							Amount of
	Estimated			Future				Estimated			Future		Weighted
	Fair Value of			Payments under		Weighted		Fair Value of			Payments under		Average
Rating Agency Designation of Referenced	Credit Default			Credit Default		Average Years		Credit Default			Credit Default		Years to
Credit Obligation (1)	Swaps			Swaps (2)		to Maturity (3)		Swaps			Swaps (2)		Maturity (3)
	(In millions)

Aaa/Aa/A
Single name credit default swaps (corporate)	$	—		$	25		4.8	$	—		$	25		5.0
Credit default swaps referencing indices		(4	)		222		3.8		(2	)		222		4.0

Subtotal		(4	)		247		3.9		(2	)		247		4.1

Baa
Single name credit default swaps (corporate)		1			10		4.8		—			10		5.0
Credit default swaps referencing indices		—			—		—		—			—		—

Subtotal		1			10		4.8		—			10		5.0

Ba
Single name credit default swaps (corporate)		—			—		—		(1	)		20		0.7
Credit default swaps referencing indices		—			—		—		—			—		—

Subtotal		—			—		—		(1	)		20		0.7

B
Single name credit default swaps (corporate)		—			20		0.5		—			—		—
Credit default swaps referencing indices		—			—		—		—			—		—

Subtotal		—			20		0.5		—			—		—

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		—			—		—		—			—		—

Total	$	(3	)	$	277		3.7	$	(3	)	$	277		3.9


(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.

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

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

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

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

Credit Risk on Freestanding Derivatives

The Company may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company’s derivative contracts is limited to the net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to credit support annexes.

The Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange traded futures are affected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivative instruments. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for a description of the impact of credit risk on the valuation of derivative instruments.

The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. At March 31, 2009 and December 31, 2008, the Company was obligated to return cash collateral under its control of $1,012 million and $1,464 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents or in short-term investments and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. At March 31, 2009 and December 31, 2008, the Company had also accepted collateral consisting of various securities with a fair market value of $78 million and $215 million, respectively, which are held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but at March 31, 2009, none of the collateral had been sold or repledged.

The Company’s collateral arrangements for its over-the-counter derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the fair value of that counterparty’s derivatives reaches a pre-determined threshold. Certain of these arrangements also include credit-contingent provisions that provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in the credit ratings of the Company and/or the counterparty. In addition, certain of the Company’s netting agreements for derivative instruments contain provisions that require the Company to maintain a specific investment grade credit rating from at least one of the major credit rating agencies. If the Company’s credit ratings were to fall below that specific investment grade credit rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments that are in a net liability position after considering the effect of netting agreements.

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

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

The following table presents the estimated fair value of the Company’s over-the-counter derivatives that are in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. The table also presents the incremental collateral that the Company would be required to provide if there was a one notch downgrade in the Company’s credit rating at the reporting date or if the Company’s credit rating sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date.

Fair Value (1) of Derivatives in

Net Liability Position

Fair Value of Incremental Collateral

March 31, 2009

Fair Value of Collateral Provided

Provided Upon:

March 31, 2009

Downgrade in the Company’s Credit

Included in

One Notch

Rating to a Level that Triggers Full

Fixed Maturity

Premiums and Other

Downgrade in the

Overnight Collateralization or

Securities (2)

Receivables

Company’s Credit Rating

Termination of the Derivative Position

(In millions)

—


(1)		After taking into consideration the existence of netting agreements.

(2)		Included in fixed maturity securities in the consolidated balance sheet. The counterparties are permitted by contract to sell or repledge this collateral. At March 31, 2009, the Company did not provide any cash collateral.

Without considering the effect of netting agreements, the estimated fair value of the Company’s over-the-counter derivatives with credit-contingent provisions that were in a gross liability position at March 31, 2009 was $542 million. At March 31, 2009, the Company provided insignificant amounts of securities collateral in connection with these derivatives. In the unlikely event that both (i) the Company’s credit rating is downgraded to a level that triggers full overnight collateralization or termination of all derivative positions, and (ii) the Company’s netting agreements are deemed to be legally unenforceable, then the additional collateral that the Company would be required to provide to its counterparties in connection with its derivatives in a gross liability position at March 31, 2009 would be $542 million. This amount does not consider gross derivative assets of $533 million for which the Company has the contractual right of offset.

At December 31, 2008, the Company provided securities collateral for various arrangements in connection with derivative instruments of $7 million, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral.

The Company also has exchange-traded futures, which require the pledging of collateral. At March 31, 2009 and December 31, 2008, the Company pledged securities collateral for exchange-traded futures of $26 million and $26 million, respectively, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. At March 31, 2009 and December 31, 2008, the Company provided cash collateral for exchange-traded futures of $43 million and $33 million, respectively, which is included in premiums and other receivables.

Embedded Derivatives

The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts principally include: variable annuities with guaranteed minimum 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.

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

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

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


	March 31, 2009			December 31, 2008
	(In millions)

Net embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefit riders	$	1,594		$	2,062
Call options in equity securities		(2	)		(36	)

Net embedded derivatives within asset host contracts	$	1,592		$	2,026

Net embedded derivatives within liability host contracts:
Direct guaranteed minimum benefit riders	$	1,156		$	1,432
Other		(46	)		(27	)

Net embedded derivatives within liability host contracts	$	1,110		$	1,405

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


	Three Months Ended March 31,
	2009			2008
	(In millions)

Net investment gains (losses) (1)	$	(184	)	$	139


(1)		Effective January 1, 2008, upon adoption of SFAS 157, the valuation of the Company’s guaranteed minimum benefit riders includes an adjustment for the Company’s own credit. Included in net investment gains (losses) for the three months ended March 31, 2009 and 2008 were gains of $229 million and $99 million respectively, in connection with this adjustment.


4.	Deferred Policy Acquisition Costs and Value of Business Acquired

Information regarding DAC and VOBA at March 31, 2009 and December 31, 2008 is as follows:


	DAC			VOBA			Total
	(In millions)

Balance, beginning of period	$	2,779		$	2,661		$	5,440
Capitalizations		227			—			227

Subtotal		3,006			2,661			5,667

Less: Amortization related to:
Net investment gains (losses)		(126	)		(18	)		(144	)
Other expenses		122			98			220

Total amortization		(4	)		80			76

Less: Unrealized investment gains (losses)		(91	)		11			(80	)

Balance, end of period	$	3,101		$	2,570		$	5,671

The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $308 million in 2009, $274 million in 2010, $251 million in 2011, $223 million in 2012, and $187 million in 2013. For the three months ended March 31, 2009, $98 million has been amortized resulting in $210 million estimated to be amortized for the remainder of 2009.

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

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

Amortization of VOBA and DAC is attributed to both investment gains and losses and other expenses which are the amount of gross profits originating from transactions other than investment gains and losses. Unrealized investment gains and losses provide information regarding the amount of DAC and VOBA that would have been amortized if such gains and losses had been recognized.

Information regarding DAC and VOBA by segment and reporting unit is as follows:


	DAC				VOBA				Total
	March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008
	(In millions)

Individual:
Traditional life	$	194	$	172	$	51	$	52	$	245	$	224
Variable & universal life		1,275		1,179		831		851		2,106		2,030
Annuities		1,615		1,416		1,686		1,755		3,301		3,171

Subtotal		3,084		2,767		2,568		2,658		5,652		5,425

Institutional:
Group life		5		5		1		2		6		7
Retirement & savings		—		—		1		1		1		1

Subtotal		5		5		2		3		7		8

Corporate & Other		12		7		—		—		12		7

Total	$	3,101	$	2,779	$	2,570	$	2,661	$	5,671	$	5,440


5.	Goodwill

Goodwill is the excess of cost over the estimated fair value of net assets acquired. Information regarding goodwill by segment and reporting unit is as follows:


	March 31, 2009		December 31, 2008
	(In millions)

Individual:
Traditional life	$	12	$	12
Variable & universal life		1		1
Annuities		218		218
Other		5		5

Subtotal		236		236

Institutional:
Group life		3		3
Retirement & savings		304		304
Non-medical health & other		5		5

Subtotal		312		312

Corporate & Other (1)		405		405

Total	$	953	$	953

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

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


(1)		The allocation of the goodwill to the reporting units was performed at the time of the respective acquisition. The $405 million of goodwill within Corporate & Other represents the excess of the amounts MetLife paid to acquire subsidiaries and other businesses over the estimated fair value of their net assets at the date of acquisition. For purposes of goodwill impairment testing at March 31, 2009 and December 31, 2008, the $405 million of Corporate & Other goodwill has been attributed to the Individual and Institutional segment reporting units. The Individual segment was attributed $210 million (traditional life — $23 million, variable & universal life — $11 million and annuities — $176 million), and the Institutional segment was attributed $195 million (group life — $2 million, retirement & savings — $186 million, and non-medical health & other — $7 million) at both March 31, 2009 and December 31, 2008.

The Company performs its annual goodwill impairment tests during the third quarter based upon data at June 30th and more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test.

In performing its goodwill impairment tests, when management believes meaningful comparable market data are available, the estimated fair values of the reporting units are determined using a market multiple approach. When relevant comparables are not available, the Company uses a discounted cash flow model. For reporting units which are particularly sensitive to market assumptions, such as the annuities and variable & universal life reporting units within the Individual segment, the Company may corroborate its estimated fair values by using additional valuation methodologies.

The key inputs, judgments and assumptions necessary in determining estimated fair value include projected earnings, current book value (with and without accumulated other comprehensive income), the level of capital required to support the mix of business, long- term growth rates, comparative market multiples, the account value of in-force business, projections of new and renewal business, as well as margins on such business, the level of interest rates, credit spreads, equity market levels and the discount rate management believes appropriate to the risk associated with the respective reporting unit. The estimated fair value of the annuity and variable & universal life reporting units are particularly sensitive to the equity market levels.

Management applies significant judgment when determining the estimated fair value of the Company’s reporting. The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company’s reporting units could result in goodwill impairments in future periods which could materially adversely affect the Company’s results of operations or financial position.

The Company’s annual tests indicated that goodwill was not impaired at September 30, 2008. Current economic conditions, the sustained low level of equity markets, declining market capitalizations in the insurance industry and lower operating earnings projections, particularly for the Individual segment, required management of the Company to consider the impact of these events on the recoverability of its assets, in particular its goodwill. Management concluded it was appropriate to perform an interim goodwill impairment test at December 31, 2008 and again, for certain reporting units most affected by the current economic environment, at March 31, 2009. Based upon the tests performed, management concluded no impairment of goodwill had occurred for any of the Company’s reporting units at March 31, 2009 and December 31, 2008.

Management continues to evaluate current market conditions that may affect the estimated fair value of the Company’s reporting units to assess whether any goodwill impairment exists. Continued deteriorating or adverse market conditions for certain reporting units may have a significant impact on the estimated fair value of these reporting units and could result in future impairments of goodwill.

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

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


6.	Insurance

Insurance Liabilities

Insurance liabilities are as follows:


	Future Policy Benefits				Policyholder Account Balances				Other Policyholder Funds
	March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008		March 31, 2009		December 31, 2008
	(In millions)

Institutional
Group life	$	204	$	208	$	1,049	$	1,045	$	4	$	5
Retirement & savings		12,050		12,042		9,327		11,511		3		—
Non-medical health & other		292		294		—		—		2		2
Individual
Traditional Life		964		944		—		—		69		55
Variable & universal life		759		678		5,549		5,456		1,827		1,791
Annuities		1,365		1,215		21,138		18,905		26		30
Other		—		—		83		72		—		—
Corporate & Other (1)		4,861		4,832		265		186		206		202

Total	$	20,495	$	20,213	$	37,411	$	37,175	$	2,137	$	2,085


(1)		Corporate & Other includes intersegment eliminations.

Affiliated insurance liabilities included in the table above include reinsurance assumed and ceded. Affiliated future policy benefits, included in the table above, were $26 million and $25 million at March 31, 2009 and December 31, 2008, respectively. Affiliated other policyholder funds, included in the table above, were $1.6 billion and $1.5 billion at March 31, 2009 and December 31, 2008, respectively.

Guarantees

The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (i) return of no less than total deposits made to the contract less any partial withdrawals (“return of net deposits”); and (ii) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary, or total deposits made to the contract less any partial withdrawals plus a minimum return (“anniversary contract value” or “minimum return”).

The Company also issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee.

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

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

Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:


	March 31, 2009						December 31, 2008
	In the			At			In the			At
	Event of Death			Annuitization			Event of Death			Annuitization
	(In millions)

*Annuity Contracts (1)*
Return of Net Deposits
Separate account value	$	9,877			N/A		$	9,721			N/A
Net amount at risk (2)	$	3,346	(3)		N/A		$	2,813	(3)		N/A
Average attained age of contractholders		63 years			N/A			62 years			N/A
Anniversary Contract Value or Minimum Return
Separate account value	$	26,302		$	13,538		$	27,572		$	13,217
Net amount at risk (2)	$	11,028	(3)	$	7,297	(4)	$	9,876	(3)	$	6,323	(4)
Average attained age of contractholders		58 years			62 years			58 years			61 years


	March 31, 2009			December 31, 2008
	Secondary Guarantees			Secondary Guarantees
	(In millions)

*Universal and Variable Life Contracts (1)*
Account value (general and separate account)	$	3,005		$	2,917
Net amount at risk (2)	$	44,759	(3)	$	43,237	(3)
Average attained age of policyholders		57 years			58 years


(1)		The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive.

(2)		The net amount at risk is based on the direct amount at risk (excluding reinsurance).

(3)		The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.

(4)		The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance.

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

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

Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts at March 31, 2009 and December 31, 2008 is as follows:


						Universal and
	Annuity Contracts					Variable Life
	Guaranteed			Guaranteed		Contracts
	Death			Annuitization		Secondary
	Benefits			Benefits		Guarantees		Total
	(In millions)

*Direct:*
Balance, beginning of period	$	98		$	221	$	108	$	427
Incurred guaranteed benefits		38			71		18		127
Paid guaranteed benefits		(16	)		—		—		(16	)

Balance, end of period	$	120		$	292	$	126	$	538

*Ceded:*
Balance, beginning of period	$	86		$	72	$	—	$	158
Incurred guaranteed benefits		28			30		—		58
Paid guaranteed benefits		(8	)		—		—		(8	)

Balance, end of period	$	106		$	102	$	—	$	208

*Net:*
Balance, beginning of period	$	12		$	149	$	108	$	269
Incurred guaranteed benefits		10			41		18		69
Paid guaranteed benefits		(8	)		—		—		(8	)

Balance, end of period	$	14		$	190	$	126	$	330

Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:


	March 31, 2009		December 31, 2008
	(In millions)

Mutual Fund Groupings:
Equity	$	18,494	$	21,738
Balanced		8,098		6,971
Bond		2,441		2,280
Money Market		1,796		1,715
Specialty		507		228

Total	$	31,336	$	32,932


7.	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

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

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

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 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 at March 31, 2009.

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.

Travelers Ins. Co., et al. v. Banc of America Securities LLC (S.D.N.Y., filed December 13, 2001). On January 6, 2009, after a jury trial, the district court entered a judgment in favor of The Travelers Insurance Company, now known as MetLife Insurance Company of Connecticut, in the amount of approximately $42 million in connection with securities and common law claims against the defendant. On March 27, 2009, the district court heard oral argument on the defendant’s post judgment motion seeking a judgment in its favor or, in the alternative, a new trial. As it is possible that the judgment could be affected during the post judgment motion practice or during appellate practice, and the Company has not collected any portion of the judgment, the Company has not recognized any award amount in its consolidated financial statements.

Various litigation, claims and assessments against the Company, in addition to those discussed previously and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company’s compliance with applicable insurance and other laws and regulations.

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

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

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 consolidated net income or cash flows in particular quarterly or annual periods.

Commitments

Commitments to Fund Partnership Investments

The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $1.5 billion and $1.6 billion at March 31, 2009 and December 31, 2008, 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 $192 million and $231 million at March 31, 2009 and December 31, 2008, 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 $287 million and $332 million at March 31, 2009 and December 31, 2008, respectively. There are no other obligations or liabilities arising from such arrangements that are reasonably likely to become material.

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 March 31, 2009 and December 31, 2008, the Company had agreed to fund up to $135 million of cash upon the request by these affiliates and had transferred collateral consisting of various securities with a fair market value of $167 million and $160 million, respectively, to custody accounts to secure the notes. Each of these affiliates is 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

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

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

limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

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 $347 million at both March 31, 2009 and December 31, 2008. 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 March 31, 2009 and December 31, 2008. 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 Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.


8.	Other Expenses

Information on other expenses is as follows:


	Three Months Ended
	March 31,
	2009			2008
	(In millions)

Compensation	$	31		$	28
Commissions		200			170
Interest and debt issue costs		20			11
Amortization of DAC and VOBA		76			287
Capitalization of DAC		(227	)		(177	)
Rent, net of sublease income		1			1
Insurance tax		10			10
Other		147			127

Total other expenses	$	258		$	457

See Note 11 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 domestic and international 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.

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

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

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 ended March 31, 2009 and 2008. 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.


							Corporate &
For the Three Months Ended March 31, 2009:	Individual			Institutional			Other			Total
	(In millions)

Statement of Income:
Revenues
Premiums	$	99		$	85		$	—		$	184
Universal life and investment-type product policy fees		278			5			1			284
Net investment income		238			247			(45	)		440
Other revenues		67			2			—			69
Net investment gains (losses)		(381	)		(250	)		31			(600	)

Total revenues		301			89			(13	)		377

Expenses
Policyholder benefits and claims		215			212			—			427
Interest credited to policyholder account balances		240			67			(7	)		300
Other expenses		219			11			28			258

Total expenses		674			290			21			985

Loss from continuing operations before income tax benefit		(373	)		(201	)		(34	)		(608	)
Income tax benefit		(131	)		(71	)		(24	)		(226	)

Net loss	$	(242	)	$	(130	)	$	(10	)	$	(382	)

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 March 31, 2008, As Restated:	Individual		Institutional			Other			Total
	(In millions)

Statement of Income:
Revenues
Premiums	$	55	$	88		$	6		$	149
Universal life and investment-type product policy fees		335		11			—			346
Net investment income		279		363			20			662
Other revenues		56		—			—			56
Net investment gains (losses)		135		(203	)		23			(45	)

Total revenues		860		259			49			1,168

Expenses
Policyholder benefits and claims		123		194			8			325
Interest credited to policyholder account balances		178		130			—			308
Other expenses		431		14			12			457

Total expenses		732		338			20			1,090

Income from continuing operations before provision for income tax		128		(79	)		29			78
Provision for income tax expense (benefit)		43		(27	)		(9	)		7

Net income (loss)	$	85	$	(52	)	$	38		$	71

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


	March 31, 2009		December 31, 2008
	(In millions)

Individual	$	69,728	$	69,335
Institutional		26,590		29,224
Corporate & Other		12,016		13,465

Total	$	108,334	$	112,024

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 ended March 31, 2009 and 2008. Revenues from U.S. operations were $330 million and $1.1 billion for the three months ended March 31, 2009 and 2008, respectively, which represented 88% and 93%, respectively, of consolidated revenues.

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

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


10.	Fair Value

Assets and Liabilities Measured at Fair Value

The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding fair value hierarchy are summarized in the following table. Refer to Note 1 of the Notes to the Consolidated Financial Statements included in the 2008 Annual Report for the descriptions of the methods and assumptions used to estimate these fair values.


	March 31, 2009
	Fair Value Measurements at Reporting Date Using
	Quoted Prices in
	Active Markets for				Significant
	Identical Assets		Significant Other		Unobservable		Total
	and Liabilities		Observable Inputs		Inputs		Estimated
	(Level 1)		(Level 2)		(Level 3)		Fair Value
	(In millions)

Assets
Fixed maturity securities:
U.S. corporate securities	$	—	$	11,207	$	1,537	$	12,744
Residential mortgage-backed securities		—		6,231		48		6,279
U.S. Treasury, agency and government guaranteed securities		2,353		2,941		33		5,327
Foreign corporate securities		—		4,360		759		5,119
Commercial mortgage-backed securities		—		2,192		99		2,291
Asset-backed securities		—		1,359		473		1,832
State and political subdivision securities		—		756		27		783
Foreign government securities		—		388		15		403

Total fixed maturity securities		2,353		29,434		2,991		34,778

Equity securities:
Common stock		42		76		8		126
Non-redeemable preferred stock		—		30		216		246

Total equity securities		42		106		224		372

Trading securities		258		6		—		264
Short-term investments (1)		1,837		831		1		2,669
Derivative assets (2)		2		1,463		345		1,810
Net embedded derivatives within asset host contracts (3)		—		—		1,594		1,594
Separate account assets (4)		33,762		163		142		34,067

Total assets	$	38,254	$	32,003	$	5,297	$	75,554

Liabilities
Derivative liabilities (2)	$	6	$	519	$	17	$	542
Net embedded derivatives within liability host contracts (3)		—		—		1,110		1,110

Total liabilities	$	6	$	519	$	1,127	$	1,652

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

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


	December 31, 2008
	Fair Value Measurements at Reporting Date Using
	Quoted Prices in
	Active Markets for				Significant
	Identical Assets		Significant Other		Unobservable		Total
	and Liabilities		Observable Inputs		Inputs		Estimated
	(Level 1)		(Level 2)		(Level 3)		Fair Value
	(In millions)

Assets
Fixed maturity securities:
U.S. corporate securities	$	—	$	11,830	$	1,401	$	13,231
Residential mortgage-backed securities		—		7,031		62		7,093
Foreign corporate securities		—		4,136		926		5,062
U.S. Treasury, agency and government guaranteed securities		2,107		2,190		36		4,333
Commercial mortgage-backed securities		—		2,158		116		2,274
Asset-backed securities		—		1,169		558		1,727
State and political subdivision securities		—		633		24		657
Foreign government securities		—		459		10		469

Total fixed maturity securities		2,107		29,606		3,133		34,846

Equity securities:
Common stock		40		70		8		118
Non-redeemable preferred stock		—		38		318		356

Total equity securities		40		108		326		474

Trading securities		176		6		50		232
Short-term investments (1)		1,171		1,952		—		3,123
Derivative assets (2)		4		1,928		326		2,258
Net embedded derivatives within asset host contracts (3)		—		—		2,062		2,062
Separate account assets (4)		35,567		166		159		35,892

Total assets	$	39,065	$	33,766	$	6,056	$	78,887

Liabilities
Derivative liabilities (2)	$	16	$	574	$	17	$	607
Net embedded derivatives within liability host contracts (3)		—		—		1,405		1,405

Total liabilities	$	16	$	574	$	1,422	$	2,012


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

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

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

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


(3)		Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances. At March 31, 2009 and December 31, 2008, equity securities also include embedded derivatives of ($2) million and ($36) million, respectively.

(4)		Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets as prescribed by Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts.

The Company has categorized its assets and liabilities into the three-level fair value hierarchy 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, agency and government guaranteed fixed maturity securities, exchange-traded common stock, trading securities 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. Fixed maturity securities include most U.S. Treasury, agency and government guaranteed 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 and trading securities 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 primarily 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; 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. Trading securities and short-term investments included within Level 3 are of a similar nature to these fixed maturity and equity securities. As it relates to derivatives this category includes: swap spread locks with maturities which extend beyond observable periods; equity variance swaps with unobservable volatility inputs or that are priced via independent broker quotations; interest rate swaps with maturities which extend beyond the observable portion of the

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

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


		yield curve; credit default swaps based upon baskets of credits having unobservable credit correlations; equity options with unobservable volatility inputs; implied volatility swaps with unobservable volatility inputs; and interest rate caps 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 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 all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs for the three months ended March 31, 2009 and 2008 are as follows:


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

For the three months ended March 31, 2009:
Fixed maturity securities					$	3,133	$	(61	)	$	(225	)	$	(127	)	$	271		$	2,991
Equity securities						326		(51	)		(50	)		(1	)		—			224
Trading securities						50		—			—			(50	)		—			—
Short-term investments						—		—			—			1			—			1
Net derivatives (6)						309		17			—			2			—			328
Separate account assets (7)						159		(15	)		—			(3	)		1			142
Net embedded derivatives (8)						657		(217	)		—			44			—			484
For the three months ended March 31, 2008:
Fixed maturity securities		4,602		—		4,602		(10	)		(246	)		56			(89	)		4,313
Equity securities		556		—		556		(6	)		(45	)		3			(7	)		501
Net derivatives (6)		108		—		108		58			—			(11	)		—			155
Separate account assets (7)		183		—		183		(3	)		—			(6	)		—			174
Net embedded derivatives (8)		125		92		217		47			—			7			—			271


(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 estimated 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 are reported within the earnings caption of total gains (losses). Lapses associated with embedded derivatives are included within 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

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

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


		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 and/or out of Level 3 occurred at the beginning of the period. Items transferred in and/or out in the same period are excluded from the rollforward.

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

(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 ended March 31, 2009 and 2008 due to changes in estimated fair value recorded in earnings for Level 3 assets and liabilities:


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

For the three months ended March 31, 2009:
Fixed maturity securities	$	2	$	(63	)	$	(61	)
Equity securities		—		(51	)		(51	)
Net derivatives		—		17			17
Net embedded derivatives		—		(217	)		(217	)
For the three months ended March 31, 2008:
Fixed maturity securities		1		(11	)		(10	)
Equity securities		—		(6	)		(6	)
Net derivatives		—		58			58
Net embedded derivatives		—		47			47

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

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

The table below summarizes the portion of unrealized gains and losses recorded in earnings for the three months ended March 31, 2009 and 2008 for Level 3 assets and liabilities that are still held at March 31, 2009 and at March 31, 2008, respectively.


	Changes in Unrealized Gains (Losses)
	Relating to Assets Held at
	March 31, 2009 and 2008
	Net		Net
	Investment		Investment
	Income		Gains (Losses)			Total
	(In millions)

For the three months ended March 31, 2009:
Fixed maturity securities	$	1	$	(59	)	$	(58	)
Equity securities		—		(31	)		(31	)
Net derivatives		—		17			17
Net embedded derivatives		—		(220	)		(220	)
For the three months ended March 31, 2008:
Fixed maturity securities		1		(2	)		(1	)
Equity securities		—		(6	)		(6	)
Net derivatives		—		53			53
Net embedded derivatives		—		45			45

Non-Recurring Fair Value Measurements

At March 31, 2009 and at December 31, 2008, the Company recorded impairments on certain mortgage loans which are carried at estimated fair value based on independent broker quotations or, if the loans were in foreclosure or otherwise determined to be collateral dependent, on the value of the underlying collateral. These estimated fair values represent nonrecurring fair value measurements and were categorized as Level 3. Included within net investment gains (losses) are net impairments for mortgage loans of less than $1 million and $5 million for the three months ended March 31, 2009 and 2008, respectively. There was no reported carrying value for these impaired loans remaining at March 31, 2009 and December 31, 2008, respectively.

At March 31, 2009 and at December 31, 2008, the Company held $21 million and $6 million, respectively, in cost basis other limited partnership interests which were impaired based on the underlying limited partnership financial statements. These other limited partnership interests were recorded at estimated fair value and represent a nonrecurring fair value measurement. The estimated fair value is categorized as Level 3. Included within net investment gains (losses) for such other limited partnerships are impairments of $48 million for the three months ended March 31, 2009. There were no impairments for the three months ended March 31, 2008.


11.	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, and investment advice and distribution services. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $274 million and $214 million for the three months ended March 31, 2009 and 2008, respectively. For the three months ended March 31, 2009, the aforementioned expenses and fees incurred with affiliates were comprised of $30 million, $135 million, and $109 million recorded in compensation, commissions, and other expenses, respectively. For the three months ended March 31, 2008, the corresponding amounts were $26 million, $107 million, and $81 million recorded in compensation, commissions,

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

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

and other expenses, respectively. Revenue received from affiliates related to these agreements and recorded in other revenues was $13 million and $16 million for the three months ended March 31, 2009 and 2008, respectively. Revenue received from affiliates related to these agreements and recorded in universal life and investment-type product policy fees was $16 million and $24 million for the three months ended March 31, 2009 and 2008, respectively. See Note 2 for expenses related to investment advice under these agreements, recorded in net investment income.

The Company had net receivables from affiliates of $4 million and $92 million at March 31, 2009 and December 31, 2008, respectively, related to the items discussed above. These payables exclude affiliated reinsurance balances discussed below.

Reinsurance Transactions

The Company has reinsurance agreements with certain MetLife subsidiaries, including MLIC, MetLife Reinsurance Company of South Carolina, Exeter Reassurance Company, Ltd., General American Life Insurance Company and MRV. The Company had a reinsurance agreement with Mitsui Sumitomo MetLife Insurance Co., Ltd., an affiliate; however, effective December 31, 2008 this arrangement was modified via a novation as explained in detail below. The following table reflects related party reinsurance information:


	Three Months Ended
	March 31,
			As Restated
	2009		2008
	(In millions)

Assumed premiums	$	5	$	5
Assumed fees, included in universal life and investment-type product policy fees	$	22	$	44
Assumed benefits, included in policyholder benefits and claims	$	13	$	11
Assumed benefits, included in interest credited to policyholder account balances	$	15	$	14
Assumed acquisition costs, included in other expenses	$	11	$	22
Ceded premiums (1)	$	39	$	25
Ceded fees, included in universal life and investment-type product policy fees (1)	$	33	$	74
Amortization of unearned revenue associated with experience refund, included in universal life and investment-type product policy fees	$	15	$	10
Income from deposit contracts, included in other revenues	$	44	$	20
Ceded benefits, included in policyholder benefits and claims (1)	$	115	$	35
Ceded benefits, included in interest credited to policyholder account balances	$	8	$	4
Interest costs on ceded reinsurance, included in other expenses	$	3	$	17


(1)		In September 2008, MICC’s parent, MetLife, Inc. completed a tax-free split-off of its majority owned subsidiary, Reinsurance Group of America, Incorporated (“RGA”). After the split-off, reinsurance transactions with RGA were no longer considered affiliated transactions. For purposes of comparison, the 2008 affiliated transactions with RGA have been removed from the presentation in the table above. Affiliated transactions with RGA for the three months ended March 31, 2008 include ceded premiums, ceded fees and ceded benefits of $3 million, $12 million and $17 million, respectively.

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

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

The Company had assumed, under a reinsurance contract, risks related to guaranteed minimum benefit riders issued in connection with certain variable annuity products from a joint venture owned by an affiliate of the Company. These risks were retroceded in full to another affiliate under a retrocessional agreement resulting in no impact on net investment gains (losses). Effective December 31, 2008, the retrocession was recaptured by the Company and a novation agreement was executed whereby, the affiliated retrocessionaire assumed the business directly from the joint venture. As a result of this recapture and the related novation, the Company no longer assumes from the joint venture or cedes to the affiliate any risks related to these guaranteed minimum benefit riders. Upon the recapture and simultaneous novation, the embedded derivative asset of approximately $626 million associated with the retrocession was settled by transferring the embedded derivative liability associated with the assumption from the joint venture to the new reinsurer. As per the terms of the recapture and novation agreement, the amounts were offset resulting in no net gain or loss. For the three months ended March 31, 2008, net investment gains (losses) included ($233) million in changes in fair value of such embedded derivatives. The assumption was offset by the retrocession resulting in no net impact on net investment gains (losses). For the three months ended March 31, 2008, $14 million of bifurcation fees associated with the embedded derivatives was included in 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 associated with the cessions are included within premiums and other receivables and were assets of $1,575 million and $2,042 million at March 31, 2009 and December 31, 2008, respectively. For the three months ended March 31, 2009 and 2008, net investment gains (losses) included ($493) million and $326 million, respectively, in changes in fair value of such embedded derivatives as well as the associated bifurcation fees.

MLI-USA cedes two blocks of business to MRV, on a 90% coinsurance with funds withheld basis. Certain contractual features of this agreement qualify as embedded derivatives, which are 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 $45 million and $27 million at March 31, 2009 and December 31, 2008, respectively. For the three months ended March 31, 2009 and 2008, net investment gains (losses) included $18 million and $6 million, respectively, in changes in fair value of the embedded derivatives. The reinsurance agreement also includes an experience refund provision whereby some or all of the profits on the underlying reinsurance agreement are returned to MLI-USA from MRV during the first several years of the reinsurance agreement. For the three months ended March 31, 2009 and 2008, the experience refund reduced the funds withheld by MLI-USA from MRV by $38 million and $70 million, respectively, and are considered unearned revenue and amortized over the life of the contract using the same assumption basis as the deferred acquisition cost in the underlying policies. For the three months ended March 31, 2009 and 2008, the amortization of the unearned revenue associated with the experience refund was $15 million and $10 million, respectively, and is included in universal life and investment-type product policy fees in the consolidated statement of income, as indicated in the table above. At March 31, 2009 and December 31, 2008, the unearned revenue related to the experience refund was $246 million and $221 million, respectively, and is included in other policyholder funds in the consolidated balance sheet.

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

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

Information regarding ceded reinsurance recoverable balances, included in premiums and other receivables, is as follows:


	March 31, 2009		December 31, 2008
	(In millions)

Affiliated recoverables:
Deposit recoverables	$	3,977	$	3,041
Future policy benefit recoverables		2,948		3,296
Claim recoverables		17		13
All other recoverables		104		197

Total	$	7,046	$	6,547

All of the affiliated reinsurance recoverable balances are secured by funds withheld accounts, funds held in trust as collateral or irrevocable letters of credit issued by various financial institutions. Reinsurance balances payable to affiliated reinsurers, included in liabilities, were $2.3 billion and $2.5 billion at March 31, 2009 and December 31, 2008, respectively.


12.	March 31, 2008 Restatement

Effective December 31, 2007 the Company, through MLI-USA, entered into an indemnity reinsurance agreement with MetLife Reinsurance Company of Vermont, an affiliated entity, under which the Company ceded, on a coinsurance funds withheld basis, 90% quota share of certain universal life and level term business written in 2007 and 2008. The reinsurance agreement also includes an experience refund provision whereby some or all of the profits on the underlying reinsurance agreement are returned to the Company from MRV during the first several years of the reinsurance agreement. The Company had recorded this experience refund as revenue for the three months ended March 31, 2008. Since the experience refund is effectively the net cost of reinsurance related to the agreement, it should have been recorded as unearned revenue and amortized over the life of the reinsurance contract. Accordingly, the Company has restated its interim condensed consolidated financial statements for the three months ending March 31, 2008 to properly reflect the unearned revenue related to the experience refund. As a result of the foregoing, the Company’s net income for the three months ended March 31, 2008 decreased by $39 million.

A summary of the effects of these restatements on the Company’s consolidated financial statements is as set forth in the table below.


	March 31, 2008
	As Previously
	Reported		As Restated
	(In millions)
*Balance Sheet:*
Assets:
Deferred income tax assets	$	979	$	1,000
Total assets	$	124,768	$	124,789
Liabilities:
Other policyholder funds	$	1,795	$	1,855
Total liabilities	$	117,716	$	117,776
Stockholders’ Equity:
Retained earnings	$	1,002	$	963
Total stockholders’ equity	$	7,052	$	7,013
Total liabilities and stockholders’ equity	$	124,768	$	124,789

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

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


	For the Three Months Ended
	March 31, 2008
	As Previously
	Reported		As Restated
	(In millions)

*Income Statement:*
Premiums	$	155	$	149
Universal life and investment-type product policy fees	$	400	$	346
Total revenues	$	1,228	$	1,168
Income from continuing operations before provision for income tax	$	138	$	78
Provision for income tax	$	28	$	7
Income from continuing operations	$	110	$	71
Net income	$	110	$	71


	For the Three Months Ended
	March 31, 2008
	As Previously
	Reported			As Restated
	(In millions)

*Statement of Cash Flows:*
Net income	$	110		$	71
Universal life and investment-type product policy fees	$	(400	)	$	(346	)
Change in insurance-related liabilities	$	115		$	185
Change in income tax recoverable	$	29		$	8
Net cash provided by operating activities	$	844		$	906


Policyholder account balances:
Deposits	$	1,964		$	1,900
Net cash used in financing activities	$	(291	)	$	(355	)


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”). 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, 2008 (“2008 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, which may affect the Company’s ability to seek financing; (iii) uncertainty about the effectiveness of the U.S. government’s plan to stabilize the financial system by injecting capital into financial institutions, purchasing large amounts of illiquid, mortgage-backed and other securities from financial institutions or otherwise; (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 and finance statutory reserve requirements and may require the Company to pledge collateral or make payments related to declines in value of specified assets; (viii) defaults on the Company’s mortgage and consumer loans; (ix) investment losses and defaults, and changes to investment valuations; (x) impairments of goodwill and realized losses or market value impairments to illiquid assets; (xi) unanticipated changes in industry trends; (xii) heightened competition, including with respect to pricing, entry of new competitors, consolidation of distributors, 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 including with respect to guaranteed benefit riders (which may be affected by fair value adjustments arising from changes in MICC’s own credit spread) on certain of MICC’s variable annuity products; (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) economic, political, currency and other risks relating to the Company’s international operations; (xx) availability and effectiveness of reinsurance or indemnification arrangements; (xxi) regulatory, legislative or tax changes that may affect the cost of, or demand for, the Company’s products or services; (xxii) changes in accounting standards, practices and/or policies; (xxiii) adverse results or other consequences from litigation, arbitration or regulatory investigations; (xxiv) the effects of business disruption or economic contraction due to terrorism or other hostilities; (xxv) the Company’s

ability to identify and consummate on successful terms any future acquisitions, and to successfully integrate acquired businesses with minimal disruption; and (xxvi) 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 estimated 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 estimated fair value of embedded derivatives requiring bifurcation;

	(vi)	the estimated 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 income 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 2008 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 finance industries; others are specific to the Company’s businesses and operations. Actual results could differ from these estimates.

Fair Value

As described below, certain assets and liabilities are measured at estimated fair value on the Company’s consolidated balance sheets. In addition, these footnotes to the consolidated financial statements include disclosures of estimated fair values. The fair value is defined 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. Fair value of a liability is based on the amount that would be paid to transfer a liability to a third party with the same credit standing. Fair value is 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. When quoted prices are not used to determine fair value, three broad valuation techniques are used: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The approaches are not new, but an entity needs to determine the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs. The Company prioritizes the inputs to fair valuation techniques and uses unobservable inputs to the extent that observable inputs are not available. The Company has categorized its assets and liabilities measured at estimated fair value 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. The input levels are 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 estimated 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 estimated fair value requires significant management judgment or estimation.

Prior to 2008, estimated fair value was determined based solely upon the perspective of the reporting entity. Therefore, methodologies used to determine the estimated fair value of certain financial instruments prior to January 1, 2008, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as currently defined in accounting guidance. Prior to January 1, 2009, the measurement and disclosures of fair value based on exit price excluded certain items such as nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination, reporting units measured at estimated fair value in the first step of a goodwill impairment test and indefinite-lived intangible assets measured at estimated fair value for impairment assessment.

Estimated Fair Values of Investments

The Company’s investments in fixed maturity and equity securities, investments in trading securities, and certain short-term investments are reported at their estimated fair value. In determining the estimated fair value of these investments, 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.

Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company’s ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities.

Investment Impairments

One of the significant estimates related to available-for-sale securities is the evaluation of investments for other-than-temporary impairments (“OTTI”). The assessment of whether impairments have occurred is based on management’s case-by-case evaluation of the underlying reasons for the decline in estimated fair value. The Company’s review of its fixed maturity and equity securities for 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. 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 certain equity securities, greater weight and consideration are given by the Company to a decline in estimated fair value and the likelihood such estimated fair value decline will recover.

Additionally, management considers a wide range of factors about the security issuer and uses its 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 used by the Company in the impairment evaluation process include, but are not limited to:


	(i)	the length of time and the extent to which the estimated fair value has been below cost or amortized cost;


	(ii)	the potential for impairments of securities when the issuer is experiencing significant financial difficulties;

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

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

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

	(vi)	the Company’s 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.

The cost of 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. These impairments are included within net investment gains (losses) and the cost basis of the fixed maturity and equity securities is reduced accordingly. The Company does not change the revised cost basis for subsequent recoveries in value.

The determination of the amount of allowances and impairments on other invested asset classes is highly subjective and is based upon the Company’s periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised.

Recognition of Income on Certain Investment Entities

The recognition of income on certain investments (e.g. loan-backed securities, including mortgage-backed and asset-backed securities, certain investment transactions, trading securities, etc.) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned.

Application of the Consolidation Rules to Certain Investments

Additionally, the Company has invested in certain transactions that are variable interest entities (“VIEs”) under Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 46(r), Consolidation of Variable Interest Entities — An Interpretation of Accounting Research Bulletin No. 51 (“FIN 46(r)”). These transactions include reinsurance trusts, asset-backed securitizations, joint ventures, limited partnerships and limited liability companies. The Company is required to consolidate those VIEs for which it is deemed to be the primary beneficiary. The accounting rules under FIN 46(r) for the determination of when an entity is a VIE and when to consolidate a VIE are complex. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity’s expected losses and expected residual returns and the allocation of such estimates to each party involved in the entity. FIN 46(r) defines the primary beneficiary as the entity that will absorb a majority of a VIE’s expected losses, receive a majority of a VIE’s expected residual returns if no single entity absorbs a majority of expected losses, or both.

When determining the primary beneficiary for structured investment products such as asset-backed securitizations and collateralized debt obligations, the Company uses historical default probabilities based on the credit rating of each issuer and other inputs including maturity dates, industry classifications and geographic location. Using computational algorithms, the analysis simulates default scenarios resulting in a range of expected losses and the probability associated with each occurrence. For other investment structures such as trust preferred securities, joint ventures, limited partnerships and limited liability companies, the Company gains an understanding of the design of the VIE and generally uses a qualitative approach to determine if it is the primary beneficiary. This approach includes an analysis of all contractual rights and obligations held by all parties including profit and loss

allocations, repayment or residual value guarantees, put and call options and other derivative instruments. If the primary beneficiary of a VIE can not be identified using this qualitative approach, the Company calculates the expected losses and expected residual returns of the VIE using a probability-weighted cash flow model. The use of different methodologies, assumptions and inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the consolidated financial statements.

Derivative Financial Instruments

The Company enters into freestanding derivative transactions including swaps, forwards, futures and option contracts. The Company uses derivatives primarily to manage various risks. The risks being managed are variability in cash flows or changes in estimated fair values related to financial instruments. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, to synthetically replicate investment risks and returns which are not readily available in the cash market.

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

The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves, and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income. Also, fluctuations in the estimated fair value of derivatives which have not been designated for hedge accounting may result in significant volatility in net income.

hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Assessments of hedge effectiveness and measurements of ineffectiveness of hedging relationships are also subject to interpretations and estimations and different interpretations or estimates may have a material effect on the amount reported in net income.

Embedded Derivatives

Embedded derivatives principally include certain variable annuity riders and certain guaranteed investment contracts with equity or bond indexed crediting rates. Embedded derivatives are recorded in the financial statements at estimated fair value with changes in estimated 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 estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net investment gains (losses).

The estimated 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. The projections of future benefits and future fees require capital market and actuarial assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Beginning in 2008, the valuation of these embedded derivatives 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 estimated fair value of the riders that could materially affect net income.

The Company ceded the risk associated with certain of the GMIB, GMAB and GMWB riders described in the preceding paragraphs to an affiliated reinsurance company. These reinsurance contracts contain embedded derivatives. The value of these 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. 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 estimated fair value of the embedded equity and bond indexed derivatives contained in certain guaranteed investment contracts is determined using market standard swap valuation models and observable market inputs, including an adjustment for the Company’s own credit that takes into consideration publicly available information

relating to the Company’s debt as well as its claims paying ability. Changes in equity and bond indices, interest rates and the Company’s credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income.

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 estimated fair value in the consolidated financial statements and respective changes in estimated fair value could materially affect net income.

Deferred Policy Acquisition Costs and Value of Business Acquired

The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issuance expenses. VOBA is an intangible asset that 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 business in-force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes.

DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums or gross profits, depending on the type of contract as described below.

The Company amortizes DAC and VOBA related to non-participating traditional contracts (primarily term insurance) over the entire premium paying period in proportion to the present value of actual historic and expected future gross premiums. The present value of expected premiums is based upon the premium requirement of each policy and assumptions for mortality, morbidity, persistency, and investment returns at policy issuance, or policy acquisition, as it relates to VOBA, that include provisions for adverse deviation and are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes.

The Company amortizes DAC and VOBA related to fixed and variable universal life contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties, the effect of any hedges used, and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses, and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits. Total DAC and VOBA amortization during a particular period may increase or decrease depending upon the relative size of the amortization change resulting from the adjustment to DAC and VOBA for the update of actual gross profits and the

re-estimation of expected future gross profits. Each period, the Company also reviews the estimated gross profits for each block of business to determine the recoverability of DAC and VOBA balances.

Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period which can result in significant fluctuations in amortization of DAC and VOBA. Returns that are higher than the Company’s long-term expectation produce higher account balances, which increases the Company’s future fee expectations and decreases future benefit payment expectations on minimum death and living benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company’s long-term expectation. The Company’s practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these changes and only changes the assumption when its long-term expectation changes. The effect of an increase/(decrease) by 100 basis points in the assumed future rate of return is reasonably likely to result in a decrease/ (increase) in the DAC and VOBA balances of approximately $40 million. During the current quarter, the Company did not change its long-term expectation of equity market appreciation.

The Company also reviews periodically other long-term assumptions underlying the projections of estimated gross profits. These include investment returns, interest crediting rates, mortality, persistency, and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross profits which may have significantly changed. If the update of assumptions causes expected future gross profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross profits to decrease.

Over the last several years, the Company’s most significant assumption updates resulting in a change to expected future gross profits and the amortization of DAC and VOBA have been updated due to revisions to expected future investment returns, expenses, in-force or persistency assumptions included within the Individual segment. During 2008 and 2009, the amount of net investment gains (losses) as well as the level of separate account balances also resulted in significant changes to expected future gross profits impacting amortization of DAC and VOBA. The Company expects these assumptions to be the ones most reasonably likely to cause significant changes in the future. Changes in these assumptions can be offsetting and the Company is unable to predict their movement or offsetting impact over time.

Note 4 of the Notes to the Interim Condensed Consolidated Financial Statements provides a rollforward of DAC and VOBA for the Company for the three months ended March 31, 2009 as well as a breakdown of DAC and VOBA by segment and reporting unit at March 31, 2009 and December 31, 2008. At March 31, 2009 and December 31, 2008, DAC and VOBA for the Company was $5.7 billion and $5.4 billion, respectively. Substantially all of the DAC and VOBA is associated with the Individual segment. Amortization of DAC and VOBA associated with the variable & universal life and the annuities reporting units within the Individual segment are significantly impacted by movements in equity markets. The following chart illustrates the effect on DAC and VOBA within the Company’s Individual segment of changing each of the respective assumptions as well as updating estimated gross profits with actual gross profits during the three months ended March 31, 2009. Increases (decreases) in DAC and VOBA balances, as presented below, result in a corresponding decrease (increase) in amortization.


	Three Months Ended
	March 31, 2009
	(In millions)

Investment return	$	3
Separate account balances		(105	)
Net investment gain (loss) related		144
Expense		(4	)

Total	$	38

During the three months ended March 31, 2009, there was a decrease in DAC and VOBA amortization attributable to the following:


	•	The decrease in equity markets during the quarter significantly lowered separate account balances resulting in a significant reduction in expected future gross profits on variable universal life contracts and variable deferred annuity contracts resulting in an increase of $105 million in DAC and VOBA amortization.

	•	Offsetting this increase is the net investment losses which decreased actual gross profits during the current period, resulting in decrease of $144 million in DAC and VOBA amortization. The net investment losses were primarily driven by the net derivative losses associated with the direct and ceded guarantee obligations as well as a widening of own credit in the valuation of these guarantee obligations.

The Company’s DAC and VOBA balance is also impacted by unrealized investment gains (losses) and the amount of amortization which would have been recognized if such gains and losses had been recognized. The significant increase in unrealized investment losses at March 31, 2009 resulted in an increase in DAC and VOBA of $80 million. Notes 2 and 4 of the Notes to the Interim Condensed Consolidated Financial Statements include the DAC and VOBA offset to unrealized investment losses.

Goodwill

Goodwill is the excess of cost over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. The Company performs its annual goodwill impairment testing during the third quarter of each year based upon data as of the close of the second quarter.

Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the “reporting unit” level. A reporting unit is the operating segment or a business one level below the operating segment, if discrete financial information is prepared and regularly reviewed by management at that level. For purposes of goodwill impairment testing, goodwill within Corporate & Other is allocated to reporting units within the Company’s business segments.

For purposes of goodwill impairment testing, if the carrying value of a reporting unit exceeds its estimated fair value, there may be an indication of impairment. In such instances, an implied fair value of the goodwill is determined in the same manner as the amount of goodwill would be determined in a business acquisition. The excess of the carrying value of goodwill over the implied fair value of goodwill is recognized as an impairment and recorded as a charge against net income.

The key inputs, judgments and assumptions necessary in determining fair value include projected operating earnings, current book value (with and without accumulated other comprehensive income), the level of capital required to support the mix of business, long term growth rates, comparative market multiples, the account value of in-force business, projections of new and renewal business as well as margins on such business, the level of interest rates, credit spreads, equity market levels, and the discount rate management believes appropriate to the risk associated with the respective reporting unit. The estimated fair value of the annuity and variable & universal life reporting units are particularly sensitive to the equity market levels.

Management applies significant judgment when determining the estimated fair value of the Company’s reporting units and when assessing the relationship of the estimated fair value of its reporting units and their book value. The valuation methodologies utilized are subject to key judgments and assumptions that are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation

regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company’s reporting units could result in goodwill impairments in future periods which could materially adversely affect the Company’s results of operations or financial position.

Liability for Future Policy Benefits

The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, traditional annuities and non-medical health insurance. Generally, amounts are payable over an extended period of time and related liabilities are calculated as the present value of future expected benefits to be paid, reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. These assumptions are established at the time the policy is issued and are intended to estimate the experience for the period the policy benefits are payable. Utilizing these assumptions, liabilities are established on a block of business basis. If experience is less favorable than assumptions, additional liabilities may be required, resulting in a charge to policyholder benefits and claims.

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

Liabilities for unpaid claims and claim expenses for workers’ compensation insurance are included in future policyholder benefits and represent the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Other policyholder funds include claims that have been reported but not settled and claims incurred but not reported on life and non-medical health insurance. Liabilities for unpaid claims are estimated based upon the Company’s historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs. With respect to workers’ compensation insurance, such unpaid claims are reduced for anticipated subrogation. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur.

Future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts and secondary guarantees relating to certain life policies are based on estimates of the expected value of benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. Liabilities for universal and variable life secondary guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The assumptions used in estimating these liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk.

The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with its actual experience. Differences between actual experience and the assumptions used in pricing these policies, guarantees and riders and in the establishment of the related liabilities result in variances in profit and could result in losses. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur.

Income Taxes

Income taxes represent the net amount of income taxes that the Company expects to pay to or receive from various taxing jurisdictions in connection with its operations. The Company provides for federal, state and foreign income taxes currently payable, as well as those deferred due to temporary differences between the financial

reporting and tax bases of assets and liabilities. The Company’s accounting for income taxes represents management’s best estimate of various events and transactions.

Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Factors in management’s determination consider the performance of the business including the ability to generate capital gains. Significant judgment is required in determining whether valuation allowances should be established, as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following:


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

	(ii)	future reversals of existing taxable temporary differences;

	(iii)	taxable income in prior carryback years; and

	(iv)	tax planning strategies.

The Company determines whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit is recorded in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. The Company may be required to change its provision for income taxes when the ultimate deductibility of certain items is challenged by taxing authorities or when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur.

Reinsurance

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

Litigation Contingencies

The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company’s financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. On a quarterly and annual basis, the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and litigation-related contingencies to be reflected in the Company’s consolidated financial statements. It is possible that an adverse outcome in certain of the

Company’s litigation and regulatory investigations or the use of different assumptions in the determination of amounts recorded, could have a material effect upon the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Economic Capital

Results of Operations

Discussion of Results

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


	Three Months Ended
	March 31,
				As Restated,
	2009			2008 (1)
	(in millions)

Revenues
Premiums	$	184		$	149
Universal life and investment-type product policy fees		284			346
Net investment income		440			662
Other revenues		69			56
Net investment gains (losses)		(600	)		(45	)

Total revenues		377			1,168

Expenses
Policyholder benefits and claims		427			325
Interest credited to policyholder account balances		300			308
Other expenses		258			457

Total expenses		985			1,090

Income (loss) from continuing operations before provision for income tax		(608	)		78
Provision for income tax expense (benefit)		(226	)		7

Net income (loss)	$	(382	)	$	71


(1)		In 2007, the Company, through MLI-USA, entered into an indemnity reinsurance agreement with MetLife Reinsurance Company of Vermont (“MRV”), an affiliated entity, under which the Company ceded, on a coinsurance funds withheld basis, 90% quota share of certain universal life and level term business written in 2007 and 2008. The reinsurance agreement also includes an experience refund provision whereby some or all of the profits on the underlying reinsurance agreement are returned to the Company from MRV, through MLI-USA, during the first several years of the reinsurance agreement. The Company had recorded this experience refund as revenue for the three months ended March 31, 2008. Since the experience refund is effectively the net cost of reinsurance related to the agreement, it should have been recorded as unearned revenue and amortized over the life of the reinsurance contract. Accordingly, in its 2008 Annual Report, the Company restated its interim condensed consolidated financial statements for the three months ended March 31, 2008 to properly reflect the unearned revenue related to the experience refund. As a result of the foregoing, the Company’s net income for the three months ended March 31, 2008 decreased by $39 million. The consolidated financial


		statements at and for the three months ended March 31, 2008, as presented herein, have been restated for the effects of such adjustments.

Net Income

Net income decreased by $453 million to a loss of $382 million for the three months ended March 31, 2009 from income of $71 million in the prior period.

Included in this decrease were lower earnings of $361 million, net of income tax, driven by net investment losses of $390 million, net of income tax for the three months ended March 31, 2009 as compared to net investment losses of $29 million, net of income tax for the comparable 2008 period. The increase in net investment losses was due primarily to increased losses on derivatives, fixed maturity securities, equity securities, and other limited partnership interests, partially offset by increased foreign currency transaction gains. Derivative losses were driven by losses on both embedded derivatives and freestanding derivatives. Increased losses on embedded derivatives lowered net income by $210 million, net of income tax, and were driven primarily by a loss on the ceding to reinsurers of certain embedded derivative variable annuity riders. This loss was partially offset by a gain on the direct portion of these riders, which included the impact of MICC’s own credit spread widening of $85 million, net of income tax, which is unhedged. Increased losses on freestanding derivatives lowered net income by $152 million, net of income tax, and were driven by losses on interest rate floors as long- and mid-term interest rates rose, and by losses on certain foreign currency swaps used to hedge foreign currency denominated liabilities which were driven by the U.S. dollar strengthening. These losses were partially offset by gains on certain interest rate swaps that hedge long-term liabilities and gains on financial futures. The increase in losses on fixed maturity and equity securities of $104 million, net of income tax, was primarily attributable to an increase in impairments associated with financial services industry holdings, including impairments on perpetual hybrid securities as a result of deterioration of the credit rating of the issuer to below investment grade and due to a severe and extended unrealized loss position. Increased losses on fixed maturity securities and equity securities were also driven by an increase in credit-related impairments on communications, industrial, and consumer industries holdings, and asset-backed securities. The circumstances that gave rise to these impairments were financial restructurings, bankruptcy filings, ratings downgrades, or difficult underlying operating environments for the entities concerned. Increased losses on other limited partnership interests of $31 million, net of income tax, were due to higher impairments on cost method investments resulting from deterioration in value resulting from volatility in equity and credit markets. The increased losses on derivatives, fixed maturity and equity securities, and other limited partnerships interests were partially offset by an increase in other net investment gains (losses) of $136 million, net of income tax, which was principally attributable to an increase in foreign currency transaction gains on foreign-currency denominated liabilities primarily due to the U.S. dollar strengthening.

The impact of the change in net investment gains (losses) decreased policyholder benefits and claims by $4 million, net of income tax, the majority of which relates to policyholder participation in the portfolio.

Net income, excluding the impact of net investment gains (losses), decreased by $88 million primarily driven by the following items:


	•	A decrease in interest margins of $109 million, net of income tax. Management attributes this to a decrease of $49 million, net of income tax, and $25 million, net of income tax, in the annuity business and variable and universal life business, respectively. Management also attributes this decrease to the retirement & savings, group life, and non-medical health & other businesses, which contributed $31 million, $3 million and $1 million, net of income tax, respectively. Interest margin is the difference between interest earned and interest credited to policyholder account balances. Interest earned approximates net investment income on investable assets attributed to the segment 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 period 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, but may, introduce volatility in expense.


	•	A decrease in net investment income of $17 million, net of income tax, primarily due to lower returns on other limited partnership interests and real estate joint ventures. The reduction in yields and the negative returns in the first quarter of 2009 realized on other limited partnership interests were primarily due to a lack of liquidity and available credit in the financial markets, driven by volatility in the equity and credit markets. The decrease in yields and the negative returns in the first quarter of 2009 realized on real estate joint ventures was primarily from declining property valuations on real estate held by certain real estate investment funds that carry their real estate at fair value and operating losses incurred on real estate properties that were developed for sale by real estate development joint ventures, in excess of earnings from wholly-owned real estate. The commercial real estate properties underlying real estate investment funds have experienced lower occupancy rates which has led to declining property valuations, while the real estate development joint ventures have experienced fewer property sales due to declining real estate market fundamentals and decreased availability of real estate lending to finance transactions.

	•	A decrease in net investment income on blocks of business not driven by interest margins of $7 million, net of income tax.

	•	Increase in policyholder benefits and claims of $32 million, net of income tax, primarily due to higher guaranteed annuity benefit rider costs and higher amortization of sales inducements.

	•	Lower universal life and investment-type product policy fees combined with other revenues of $30 million, net of income tax, primarily resulting from lower average separate account balances due to recent unfavorable equity market performance.

	•	A decrease in underwriting results of $11 million, net of income tax, primarily due to decreases in the retirement & savings and group life businesses partially offset by an increase in the non-medical health & other 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.

	•	Higher expenses of $8 million, net of income tax, were primarily due to higher non-deferrable volume related expenses and higher interest expenses, which decreased net income.

	•	An increase in interest credited to policyholder account balances of $6 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business.

The aforementioned decrease in net income was partially offset by a decrease in DAC amortization of $137 million, net of income tax, resulting from net investment losses as compared to net investment gains during the prior period. This decrease in amortization caused by net investment losses more than offsets the increase in amortization due to decrease in separate account balances resulting from the market decline.

Income tax benefit for the three months ended March 31, 2009 was $226 million, compared with $7 million of expense for the prior period. The effective tax rate of 37% and 9% for the three months ended March 31, 2009 and 2008, respectively, differs from the corporate tax rate of 35% primarily due to the ratio of tax preference items to income before income tax on an annualized basis.

Revenues

Total revenues, excluding net investment gains (losses), decreased by $236 million to $977 million for the three months ended March 31, 2009 from $1,213 million in the 2008 comparable period.

Premiums increased by $35 million primarily due to an increase of $43 million due to the growth in individual immediate annuities. This increase was partially offset by a $3 million decrease in retirement & savings. This decrease was attributable to a decrease in the group institutional annuity business of $15 million, primarily due to

the impact of the first significant sales in the United Kingdom business in the prior period, partially offset by the impact of higher sales, in the current period, in the structured settlements business of $12 million. The remaining decrease of $6 million occurred as a result of an increase in indemnity reinsurance in certain run-off products.

Universal life and investment-type product policy fees combined with other revenues decreased by $49 million. A decrease of $45 million was primarily due to lower average separate account balances, mainly due to recent unfavorable equity market performance. Policy fees from variable life and annuity investment-type products are typically calculated as a percentage of the average assets in policyholder accounts. The value of these assets can fluctuate depending on equity performance. There was an additional decrease of $4 million in the group life business, primarily attributable to a decrease in the COLI business, which was largely due to lower fees earned in the current period.

Net investment income decreased by $222 million. Management attributes $207 million of this change to a decrease in yields and $15 million to decrease in average invested assets. Average invested assets are calculated on cost basis without unrealized gains and losses. The decrease in net investment income attributable to lower yields was primarily due to lower returns on other limited partnership interests, fixed maturity securities, real estate joint ventures, cash, cash equivalents and short-term investments, and equity securities. The reduction in yields and the negative returns in the first quarter of 2009 realized on other limited partnership interests were primarily due to a lack of liquidity and available credit in the financial markets, driven by volatility in the equity and credit markets. The decrease in fixed maturity securities yields was primarily due to lower yields on floating rate securities due to declines in short-term interest rates and an increased allocation to lower yielding U.S. Treasury, agency and government guaranteed securities, and from decreased securities lending results due to the smaller size of the program, offset slightly by improved spreads. The decrease in investment expenses was primarily attributable to lower cost of funds expense on the securities lending program and this decreased cost partially offsets the decrease in net investment income on fixed maturity securities. The decrease in yields and the negative returns realized in the first quarter of 2009 realized on real estate joint ventures was primarily from declining property valuations on real estate held by certain real estate investment funds that carry their real estate at fair value and operating losses incurred on real estate properties that were developed for sale by real estate development joint ventures, in excess of earnings from wholly owned real estate. The commercial real estate properties underlying real estate investment funds have experienced lower occupancy rates, which has led to declining property valuations, while the real estate development joint ventures have experienced fewer property sales due to declining real estate market fundamentals and decreased availability of real estate lending to finance transactions. The decrease in cash, cash equivalent, and short-term investment yields was primarily attributable to declines in short-term interest rates. The decrease in yields attributed to equity securities was due to losses on the trading securities portfolio which supports unit-linked policyholder liabilities. An additional decrease in net investment income was attributable to a $15 million decrease in average invested assets calculated on the cost basis without unrealized gains and losses, primarily within fixed maturity securities, and was partially offset by increases within cash, cash equivalents and short-term investments. The decrease in fixed maturity securities was primarily due to the smaller size of the securities lending program and the reinvestment of cash inflows into cash, cash equivalents and short-term investments. The increase in cash, cash equivalents and short-term investments has been accumulated to provide additional flexibility to address potential variations in cash needs while credit market conditions remain distressed.

Expenses

Total expenses decreased by $105 million, or 10%, to $985 million for the three months ended March 31, 2009 from $1,090 million in the comparable period.

The increase in policyholder benefits and claims of $102 million included a $6 million increase related to net investment gains (losses). Excluding the increase related to net investment gains (losses), policyholder benefits and claims increased by $96 million. The increase in policyholder benefits and claims was primarily attributable to a $49 million increase in guaranteed annuity benefit costs, higher amortization of sales inducements and a $43 million increase associated with income annuities commensurate with the change in premiums discussed above. This increase was also attributable to an increase in the retirement and savings business, primarily within structured settlements, of $17 million. The increase in retirement & savings’ policyholder benefits was largely due to an increase in the structured settlements business of $25 million. The increase in structured settlements business

was primarily due to the aforementioned increase in premiums, fees, and other revenues and the impact of favorable mortality in the prior period. This increase was partially offset by an $8 million decrease in the group institutional annuity business which was primarily due to the aforementioned decrease in premiums, partially offset by the impact of a liability refinement and unfavorable mortality, both in the current period. A decrease in group life of $3 million was primarily driven by the aforementioned decrease in premiums, fees, and other revenues. The decrease in non-medical health and other of $2 million was primarily driven by lower claim incidence in the disability business. The remaining decrease of $8 million occurred as a result of an increase in indemnity reinsurance in certain run-off products.

Interest credited to policyholder account balances decreased by $8 million compared to the prior period. This decrease was primarily due to a $45 million decrease from a decline in average crediting rates, which was largely due to the impact of lower short-term interest rates in the current period. In addition, interest credited to policyholder account balances decreased $18 million mainly due to decline in funding agreements. Management attributes the absence of funding agreement issuances in the current period as a direct result of the credit markets. Management believes this trend will continue through the remainder of 2009. Ireland decreased by $7 million primarily due to a decrease in interest credited as a result of a reduction in unit-linked policyholder liabilities reflecting the losses of the trading portfolio backing these liabilities. Partially offsetting these decreases was an increase of $62 million, primarily due to higher general account balances and interest crediting rates on the general account portion of investment-type products. In addition, interest credited increased by $9 million due to lower amortization of the excess interest liability on acquired annuity and universal life blocks of businesses primarily driven by lower lapses in the current period, which was entirely offset by a $9 million decrease in other businesses.

Other expenses decreased by $199 million primarily due to lower DAC amortization of $211 million resulting from net investment losses as compared to net investment gains during the same period of last year. This decrease in amortization caused by net investment losses more than offsets the increase in amortization due to decrease in separate account balances resulting from the market decline. Other expenses, excluding DAC amortization, increased by $12 million. Included in this was an increase of $9 million in interest expense on debt primarily due to the issuances of surplus notes and a $7 million increase related to foreign currency transaction gains in Ireland, both in the prior period. In addition, the current period includes higher commission expense of $30 million offset by higher DAC capitalization of $50 million primarily from increases in annuity deposits. Expenses allocated to MICC in connection with affiliated service agreements increased as a result of business growth, offset by a decrease in non-deferrable volume related expenses, which include those expenses associated with information technology and direct departmental spending.

Overview

Since mid-September 2008, 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 taken meaningful steps intended to eventually restore market confidence. Continuing adverse financial market conditions could significantly affect the Company’s ability to meet liquidity needs and obtain capital.

Liquidity Management. Based upon the strength of its franchise, diversification of its businesses and strong financial fundamentals, management believes that the Company has ample liquidity and capital resources to meet business requirements under current market conditions.

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. Asset/Liability Management (“ALM”) needs and opportunities are also being evaluated and managed in light of market conditions and, where appropriate, ALM strategies are adjusted to achieve management goals and objectives. The Company’s short-term liquidity position

(cash and cash equivalents and short term investments, excluding cash collateral received under the Company’s securities lending program and in connection with derivative instruments that has been reinvested in cash, cash equivalents, short-term investments and publicly-traded securities) was $4.5 billion and $6.1 billion at March 31, 2009 and December 31, 2008, respectively. A somewhat higher than normal level of short-term liquidity is being maintained to provide additional flexibility to address potential variations in cash needs while credit market conditions remain distressed.

During this extraordinary market environment, management is continuously monitoring and adjusting its liquidity and capital plans for the Company in light of changing needs and opportunities. The dislocation in the credit markets has limited the access of financial institutions to long-term debt and hybrid capital. While, in general, yields on benchmark U.S. Treasury securities are historically low, related spreads on debt instruments, in general, and those of financial institutions, specifically, are as high as they have been in MetLife’s history as a public company.

Liquidity Needs of the Insurance Business. 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 $21 billion at March 31, 2009. 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 and other capital markets products 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 Institutional’s retirement & savings liabilities where customers have limited liquidity rights at March 31, 2009, there were approximately $500 million 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 $225 million of these liabilities. The remainder of the notice periods are between 6 months 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 $500 million of the retirement & savings liabilities are subject to such triggers. In addition, such early termination payments are subject to 90 days prior notice. Management continues to control the liquidity exposure that can arise from these various product features.

Securities Lending. The Company was liable for cash collateral under its control of $5.7 billion and $6.4 billion at March 31, 2009 and December 31, 2008, respectively. Of this $5.7 billion of cash collateral to be returned at March 31, 2009, $0.7 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 and $3.7 billion, $0.6 billion and $0.7 billion, respectively, were due within 30 days, 60 days and over 90 days. Of the $0.7 billion of estimated fair value of the securities related to the cash collateral on open at March 31, 2009, $0.6 billion were U.S. Treasury, agency and government guaranteed securities which, if put to the Company, can be immediately sold to satisfy the cash requirements. The remainder of the securities on loan were primarily U.S. Treasury, agency and government guaranteed securities, and very liquid residential mortgage-backed securities. The estimated fair value of the reinvestment portfolio acquired with the cash collateral was $4.3 billion at March 31, 2009, and consisted principally of fixed maturity securities (including residential mortgage-backed, asset-backed, U.S. corporate and foreign corporate securities). If the on loan securities or the reinvestment portfolio were to become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demand when securities are put back to the Company.

Internal Asset Transfers. The Company employs an internal asset transfer process that allows for the sale of securities among the business portfolio segments for the purposes of efficient asset/liability matching. The execution of the internally transferred assets is permitted when mutually beneficial to both business segments. The asset is transferred at estimated fair market value with corresponding gains (losses) being eliminated in Corporate & Other.

During the first quarter of 2009, at a time of severe market disruption, internal asset transfers were utilized extensively to preserve economic value for the Company by transferring assets across business segments instead of selling them to external parties at depressed market prices. Securities with an estimated fair value of $488 million were transferred across business segments in the first quarter of 2009 generating $73 million in net investment losses, principally within Individual and Institutional, with the offset in Corporate & Other’s net investment gains (losses).

Collateral. 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.

Government Programs. 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, was accepted in October 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 firms will be able to rollover their maturing commercial paper. At March 31, 2009, MetLife Short Term Funding LLC had nothing outstanding under its CPFF capacity. The Company’s liability under the funding agreement it issued to MetLife Short Term Funding was $1,608 million and $2,371 million at March 31, 2009 and December 31, 2008, respectively.

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 2009, MetLife Insurance Company of Connecticut is permitted to pay, without prior regulatory approval, a dividend of $714 million. MetLife Insurance Company of Connecticut’s subsidiary, MLI-USA, had negative statutory unassigned surplus at December 31, 2008, 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

Business Combinations and Noncontrolling Interests


	•	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.

	•	Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition-date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable.

	•	Changes in deferred income 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.

	•	Net income includes amounts attributable to noncontrolling interests.

	•	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.

Effective January 1, 2009, the Company adopted prospectively Emerging Issue Task Force (“EITF”) Issue No. 08-6, Equity Method Investment Accounting Considerations (“EITF 08-6”). EITF 08-6 addresses a number of issues associated with the impact that SFAS 141(r) and SFAS 160 might have on the accounting for equity method investments, including how an equity method investment should initially be measured, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. The adoption of EITF 08-6 did not have an impact on the Company’s consolidated financial statements.

Other Pronouncements

Future Adoption of New Accounting Pronouncements

In April 2009, the FASB issued three FSPs providing additional guidance relating to fair value and other-than-temporary impairment measurement and disclosure. The FSPs must be adopted by the second quarter of 2009.


	•	FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”), provides guidance on (1) estimating the fair value of an asset or liability if there was a significant decrease in the volume and level of trading activity for these assets or liabilities and (2) identifying transactions that are not orderly. Further, the FSP 157-4 requires disclosure in the interim financial statements of the inputs and valuation techniques used to measure fair value. The Company is currently evaluating the impact of FSP 157-4 on its consolidated financial statements.

	•	FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (“OTTI FSP”), provides new guidance for determining whether an other-than-temporary impairment exists. The OTTI FSP requires a company to assess the likelihood of selling a security prior to recovering its cost basis. If a company intends to sell a security or it is more-likely-than-not that it will be required to sell a security prior to recovery of its cost basis, a security would be written down to fair value with the full charge recorded in earnings. If a company does not intend to sell a security and it is not more-likely-than-not that it would be required to sell the security prior to recovery, the security would not be considered other-than-temporarily impaired unless there are credit losses associated with the security. Where credit losses exist, the portion of the impairment related to those credit losses would be recognized in earnings. Any remaining difference between the fair value and the cost basis would be recognized as part of other comprehensive income. The Company is currently evaluating the impact of the OTTI FSP on its consolidated financial statements.


	•	FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, requires interim financial instrument fair value disclosures similar to those included in annual financial statements. The Company will provide all of the material required disclosures in future periods.


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

Risk Management

The Company must effectively measure and monitor the market risk associated with its assets and liabilities. It has developed an integrated process for managing risk, which it conducts through its Enterprise Risk Management Department, Asset Liability Management Unit, Treasury Department and Investment Department along with the management of the business segments. The Company has established and implemented comprehensive policies and procedures at both the corporate and business segment level to minimize the effects of potential market volatility.

The Company regularly analyzes its exposure to interest rate, equity market and foreign currency exchange rate risks. As a result of that analysis, the Company has determined that the fair value of certain assets and liabilities are materially exposed to changes in interest rates, foreign currency exchange rates and changes in the equity markets.

Enterprise Risk Management. MetLife has established several financial and non-financial senior management committees as part of its risk management process. These committees manage capital and risk positions, approve asset/liability management strategies and establish appropriate corporate business standards.

MetLife also has a separate Enterprise Risk Management Department, which is responsible for risk throughout MetLife and reports to MetLife’s Chief Risk Officer. The Enterprise Risk Management Department’s primary responsibilities consist of:


	•	implementing a Board of Directors approved corporate risk framework, which outlines the Company’s approach for managing risk on an enterprise-wide basis;

	•	developing policies and procedures for managing, measuring, monitoring and controlling those risks identified in the corporate risk framework;

	•	establishing appropriate corporate risk tolerance levels;

	•	deploying capital on an economic capital basis; and

	•	reporting on a periodic basis to the Finance and Risk Policy Committee of the Company’s Board of Directors and various financial and non-financial senior management committees.

MetLife does not expect to make any material changes to its risk management practices in 2009.

Asset/Liability Management (“ALM”). The Company actively manages its assets using an approach that balances quality, diversification, asset/liability matching, liquidity, allocation and investment return. The goals of the investment process are to optimize, net of income tax, risk-adjusted investment income and risk-adjusted total return while ensuring that the assets and liabilities are reasonably managed on a cash flow and duration basis. The asset/liability management process is the shared responsibility of the Financial Risk Management and Asset/Liability Management Unit, Enterprise Risk Management, the Portfolio Management Unit, and the senior members of the operating business segments and is governed by the ALM Committee. The ALM Committee’s duties include reviewing and approving target portfolios, establishing investment guidelines and limits and providing oversight of the asset/liability management process on a periodic basis. The directives of the ALM Committee are carried out and monitored through ALM Working Groups which are set up to manage by product type.

MetLife establishes target asset portfolios for each major insurance product, which represent the investment strategies used to profitably fund its liabilities within acceptable levels of risk. These strategies are monitored through regular review of portfolio metrics, such as effective duration, yield curve sensitivity, convexity, liquidity, asset sector concentration and credit quality by the ALM Working Groups.

Market Risk Exposures

The Company has exposure to market risk through its insurance operations and investment activities. For purposes of this disclosure, “market risk” is defined as the risk of loss resulting from changes in interest rates, equity market prices and foreign currency exchange rates.

Interest Rates. The Company’s exposure to interest rate changes results primarily from its significant holdings of fixed maturity securities, its interest rate sensitive liabilities and derivatives it uses to hedge its interest rate risk. The fixed maturity securities include U.S. and foreign government bonds, securities issued by government agencies, corporate bonds and mortgage-backed securities, all of which are mainly exposed to changes in medium- and long-term interest rates. The interest rate sensitive liabilities for purposes of this disclosure include policyholder account balances related to certain investment type contracts and net embedded derivatives within liability host contracts which have the same type of interest rate exposure (medium- and long-term interest rates) as fixed maturity securities. The Company employs product design, pricing and asset/liability management strategies to reduce the adverse effects of interest rate movements. Product design and pricing strategies include the use of surrender charges or restrictions on withdrawals in some products and the ability to reset credited rates for certain products. Asset/liability management strategies include the use of derivatives, duration mismatch limits, and the purchase of mortgage securities structured to protect against prepayments.

Foreign Currency Exchange Rates. The Company’s exposure to fluctuations in foreign currency exchange rates against the U.S. dollar results from its holdings in non-U.S. dollar denominated fixed maturity securities, certain liabilities, as well as through its investments in foreign subsidiaries. The principal currencies that create foreign currency exchange rate risk in the Company’s investment portfolios are the Euro and the British pound. The principal currencies that create foreign currency exchange risk in the Company’s liabilities are the Euro, the British pound, the Japanese yen and the Australian dollar which the Company hedges primarily with foreign currency swaps. Through its investments in foreign subsidiaries and joint ventures, the Company is primarily exposed to the British pound. The Company has matched much of its foreign currency liabilities in its foreign subsidiaries with their respective foreign currency assets, thereby reducing its risk to foreign currency exchange rate fluctuation.

Equity Prices. The Company has exposure to equity prices through certain liabilities that involve long-term guarantees on equity performance such as variable annuities with guaranteed minimum benefit riders, certain policyholder account balances along with investments in equity securities. We manage this risk on an integrated basis with other risks through our asset/liability management strategies including the dynamic hedging of certain variable annuity riders, as well as reinsurance in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. The Company also manages equity market price risk incurred in its investment portfolio through the use of derivatives. Equity exposures associated with other limited partnership interests are excluded from this section as they are not considered financial instruments under generally accepted accounting principles.

Management of Market Risk Exposures

The Company uses a variety of strategies to manage interest rate, foreign currency exchange rate and equity price risk, including the use of derivative instruments.

Interest Rate Risk Management. To manage interest rate risk, the Company analyzes interest rate risk using various models, including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivative instruments. These projections involve evaluating the potential gain or loss on most of the Company’s in-force business under various increasing and decreasing interest rate environments. The Connecticut State Insurance Department regulations require that the Company perform some of these analyses annually as part of MetLife’s review of the sufficiency of its regulatory reserves. For several of its legal entities, the Company maintains segmented operating and surplus asset portfolios for the purpose of asset/liability management and the allocation of investment income to product lines. For each segment, invested assets greater than or equal to the GAAP liabilities less the DAC asset and any non-invested assets allocated to the segment are maintained, with any excess swept to the surplus segment. The operating segments may reflect differences in legal entity, statutory line of business and any product market characteristic which may drive a distinct investment strategy with respect to duration, liquidity or credit quality of the invested assets. Certain smaller entities make use

of unsegmented general accounts for which the investment strategy reflects the aggregate characteristics of liabilities in those entities. The Company measures relative sensitivities of the value of its assets and liabilities to changes in key assumptions utilizing Company models. These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding lapse, mortality and interest crediting rates. In addition, these models include asset cash flow projections reflecting interest payments, sinking fund payments, principal payments, bond calls, mortgage prepayments and defaults.

Common industry metrics, such as duration and convexity, are also used to measure the relative sensitivity of assets and liability values to changes in interest rates. In computing the duration of liabilities, consideration is given to all policyholder guarantees and to how the Company intends to set indeterminate policy elements such as interest credits or dividends. Each asset portfolio has a duration target based on the liability duration and the investment objectives of that portfolio. Where a liability cash flow may exceed the maturity of available assets, as is the case with certain retirement and non-medical health products, the Company may support such liabilities with equity investments, derivatives or curve mismatch strategies.

Foreign Currency Exchange Rate Risk Management. Foreign currency exchange rate risk is assumed primarily in three ways: investments in foreign subsidiaries, purchases of foreign currency denominated investments in the investment portfolio and the sale of certain insurance products.


	•	The Company’s Treasury Department is responsible for managing the exposure to investments in foreign subsidiaries. Limits to exposures are established and monitored by the Treasury Department and managed by the Investment Department.

	•	The Investment Department is responsible for managing the exposure to foreign currency investments. Exposure limits to unhedged foreign currency investments are incorporated into the standing authorizations granted to management by the Board of Directors and are reported to the Board of Directors on a periodic basis.

	•	The lines of business are responsible for establishing limits and managing any foreign exchange rate exposure caused by the sale or issuance of insurance products.

MetLife uses foreign currency swaps and forwards to hedge its foreign currency denominated fixed income investments, its equity exposure in subsidiaries and its foreign currency exposures caused by the sale of insurance products.

Equity Price Risk Management. Equity price risk incurred through the issuance of variable annuities is managed by the Company’s Asset/Liability Management Unit in partnership with the Investment Department. Equity price risk is also incurred through its investment in equity securities and is managed by its Investment Department. MetLife uses derivatives to hedge its equity exposure both in certain liability guarantees such as variable annuities with guaranteed minimum benefit riders and equity securities. These derivatives include exchange-traded equity futures and equity index options contracts. The Company’s derivative hedges performed effectively through the extreme movements in the equity markets during the latter part of 2008. The Company also employs reinsurance to manage these exposures. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on rider fees collected from policyholders and receives reimbursements for benefits paid or accrued in excess of account values, subject to certain limitations. The Company enters into similar agreements for new or in-force business depending on market conditions.

Hedging Activities. MetLife uses derivative contracts primarily to hedge a wide range of risks including interest rate risk, foreign currency risk, equity risk, and equity volatility risk. Derivative hedges are designed to reduce risk on an economic basis while considering their impact on accounting results and GAAP and Statutory capital. The construction of the Company’s derivative hedge programs vary depending on the type of risk being hedged. Some hedge programs are asset or liability specific while others are portfolio hedges that reduce risk related to a group of liabilities or assets. The Company’s use of derivatives by major hedge programs is as follows:


	•	Risks Related to Living Benefit Riders — The Company uses a wide range of derivative contracts to hedge the risk associated with variable annuity living benefit riders. These hedges include equity and interest rate


		futures, interest rate, currency and equity variance swaps, interest rate and currency forwards, and interest rate option contracts.


	•	Minimum Interest Rate Guarantees — For certain Company liability contracts, the Company provides the contract holder a guaranteed minimum interest rate. These contracts include certain fixed annuities and other insurance liabilities. The Company purchases interest rate floors to reduce risk associated with these liability guarantees.

	•	Reinvestment Risk in Long Duration Liability Contracts — Derivatives are used to hedge interest rate risk related to certain long duration liability contracts, such as long-term care. Hedges include zero coupon interest rate swaps and swaptions.

	•	Foreign Currency Risk — The Company uses currency swaps and forwards to hedge currency risk. These hedges primarily swap foreign denominated bonds or equity exposures to U.S. dollars.

	•	General ALM Hedging Strategies — In the ordinary course of managing the Company’s asset/liability risks, the Company uses interest rate futures, interest rate swaps, interest rate caps, interest rate floors and inflation swaps. These hedges are designed to reduce interest rate risk or inflation risk related to the existing assets or liabilities or related to expected future cash flows.

Risk Measurement: Sensitivity Analysis

The Company measures market risk related to its market sensitive assets and liabilities based on changes in interest rates, equity market prices and foreign 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 prices and foreign currency exchange rates. The Company believes that a 10% change (increase or decrease) in these market rates and prices is reasonably possible in the near-term. In performing the analysis summarized below, the Company used market rates at March 31, 2009. The sensitivity analysis separately calculates each of the Company’s market risk exposures (interest rate, equity price and foreign currency exchange rate) relating to its trading and non trading assets and liabilities. The Company modeled the impact of changes in market rates and prices on the fair values of its market sensitive assets and liabilities as follows:


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

	•	the U.S. dollar equivalent estimated fair values of the Company’s foreign currency exposures due to a 10% change (increase or decrease) in foreign currency exchange rates; and

	•	the estimated fair value of its equity positions due to a 10% change (increase or decrease) in equity market prices.

The sensitivity analysis is an estimate and should not be viewed as predictive of the Company’s future financial performance. The Company cannot ensure 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, including the impact of prepayment rates on mortgages;

	•	the 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, the Company uses such models as tools and not as substitutes for the experience and judgment of its management. 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 certain assets and liabilities from interest rate, foreign currency exchange rate and equity market exposures.

The table below illustrates the potential loss (gain) in estimated fair value for each market risk exposure of the Company’s market sensitive assets and liabilities at March 31, 2009:


	March 31, 2009
	(In millions)

Non-trading:
Interest rate risk	$	617
Foreign currency exchange rate risk	$	(8	)
Equity price risk	$	53

Sensitivity Analysis; Interest Rates. The table below provides additional detail regarding the potential loss in fair value of the Company’s trading and non-trading interest sensitive financial instruments at March 31, 2009 by type of asset or liability:


	March 31, 2009
						Assuming a
						10% Increase
	Notional		Estimated			in the Yield
	Amount		Fair Value (3)			Curve
	(In millions)

Assets:
Fixed maturity securities			$	34,778		$	(468	)
Equity securities				372			—
Trading securities				264			—
Mortgage and consumer loans, net				4,162			(15	)
Policy loans				1,279			(8	)
Real estate joint ventures (1)				87			—
Other limited partnership interests (1)				201			—
Short-term investments				2,799			—
Other invested assets:
Derivative assets	$	16,769		1,810			(188	)
Cash and cash equivalents				3,694			—
Accrued investment income				522			—
Premiums and other receivables				2,797			(34	)
Net embedded derivatives within asset host contracts (2)				1,594			(187	)
Mortgage loan commitments	$	192		(16	)		(1	)
Commitments to fund bank credit facilities and private corporate bond investments	$	287		(75	)		—

Total Assets						$	(901	)

Liabilities:
Policyholder account balances			$	20,886		$	178
Short-term debt				300			—
Long-term debt — affiliated				605			9
Payables for collateral under securities loaned and other transactions				6,719			—
Other liabilities:
Derivative liabilities	$	9,421		542			32
Other				272			—
Net embedded derivatives within liability host contracts (2)				1,110			65

Total Liabilities						$	284

Net Change						$	(617	)


	March 31, 2009
												Assuming a
	Assets				Liabilities				Total			10% Increase
	Notional		Estimated		Notional		Estimated		Estimated			in the Yield
	Amount		Fair Value		Amount		Fair Value		Fair Value			Curve
	(In millions)

Derivative Instruments:
Interest rate swaps	$	2,257	$	656	$	2,895	$	233	$	423		$	(51	)
Interest rate floors		6,018		201		3,468		75		126			(19	)
Interest rate caps		4,000		8		6		—		8			4
Interest rate futures		658		2		52		—		2			(76	)
Foreign currency swaps		1,815		565		1,602		202		363			(8	)
Foreign currency forwards		—		—		93		4		(4	)		—
Swap spreadlocks		—		—		208		11		(11	)		—
Credit default swaps		413		42		393		9		33			—
Equity futures		10		—		408		6		(6	)		(5	)
Equity options		813		282		—		—		282			—
Variance swaps		785		54		296		2		52			(1	)

Total Derivative Instruments	$	16,769	$	1,810	$	9,421	$	542	$	1,268		$	(156	)


(1)		Represents only those investments accounted for using the cost method.

(2)		Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract.

(3)		Separate account assets and liabilities which are interest rate sensitive are not included herein as any interest rate risk is borne by the holder of the separate account.

This quantitative measure of risk has increased by $62 million, or 11% to $617 million at March 31, 2009 from $555 million at December 31, 2008. Interest rate risk increased due to an increase in rates across the long-end of the swaps and U.S. Treasury curves, an increase in embedded derivatives within asset host contracts as they moved further away from the interest rate floors, and a decrease in the fair value of liabilities with guarantees increased risk of $54 million, $30 million and $60 million, respectively. This was partially offset by a decrease in reinsurance recoverables within premiums and other receivables, a decline in the asset base and the duration of the portfolio decreased risk in $36 million, $21 million and $19 million, respectively. The remainder of the fluctuation is attributable to numerous immaterial items.

Sensitivity Analysis; Foreign Currency Exchange Rates. The table below provides additional detail regarding the potential loss in fair value of the Company’s portfolio due to a 10% change in foreign currency exchange rates at March 31, 2009 by type of asset or liability:


	March 31, 2009
					Assuming a 10%
					Increase in
	Notional		Estimated		the Foreign
	Amount		Fair Value (1)		Exchange Rate
	(In millions)

Assets:
Fixed maturity securities			$	34,778	$	(59	)
Other invested assets:
Derivative assets	$	16,769		1,810		(137	)

Total Assets					$	(196	)

Liabilities:
Policyholder account balances			$	20,886	$	268
Other liabilities:
Derivative liabilities	$	9,421		542		(64	)

Total Liabilities					$	204

Net Change					$	8


	March 31, 2009
												Assuming a
	Assets				Liabilities				Total			10% Increase
	Notional		Estimated		Notional		Estimated		Estimated			in the Foreign
	Amount		Fair Value		Amount		Fair Value		Fair Value			Exchange Rate
	(In millions)

Derivative Instruments:
Interest rate swaps	$	2,257	$	656	$	2,895	$	233	$	423		$	1
Interest rate floors		6,018		201		3,468		75		126			—
Interest rate caps		4,000		8		6		—		8			—
Interest rate futures		658		2		52		—		2			—
Foreign currency swaps		1,815		565		1,602		202		363			(212	)
Foreign currency forwards		—		—		93		4		(4	)		10
Swap spreadlocks		—		—		208		11		(11	)		—
Credit default swaps		413		42		393		9		33			—
Equity futures		10		—		408		6		(6	)		—
Equity options		813		282		—		—		282			—
Variance swaps		785		54		296		2		52			—

Total Derivative Instruments	$	16,769	$	1,810	$	9,421	$	542	$	1,268		$	(201	)


(1)		Estimated fair value presented in the table above represents the fair value of all financial instruments within this financial statement caption not necessarily those solely subject to foreign exchange risk.

Foreign currency exchange rate risk increased by $2 million, or 25%, to $8 million at March 31, 2009 from $6 million at December 31, 2008. The strengthening of the U.S. dollar against major currencies resulted in an increase in the foreign exchange risk.

Sensitivity Analysis; Equity Prices. The table below provides additional detail regarding the potential loss in fair value of the Company’s portfolio due to a 10% change in equity at December 31, 2008 by type of asset or liability:


	March 31, 2009
					Assuming a
					10%Increase
	Notional		Estimated		in Equity
	Amount		Fair Value (1)		Prices
	(In millions)

Assets
Equity securities			$	372	$	13
Net embedded derivatives within asset host contracts (2)				1,594		(150	)
Other invested assets:
Derivative assets	$	16,769		1,810		(28	)

Total Assets					$	(165	)

Liabilities
Policyholder account balances			$	20,886	$	34
Net embedded derivatives within asset host contracts (2)				1,110		122
Other liabilities:
Derivative liabilities	$	9,421		542		(44	)

Total Liabilities					$	112

Net Change					$	(53	)


	March 31, 2009
												Assuming a
	Assets				Liabilities				Total			10% Increase
	Notional		Estimated		Notional		Estimated		Estimated			in Equity
	Amount		Fair Value		Amount		Fair Value		Fair Value			Prices
	(In millions)

Derivative Instruments:
Interest rate swaps	$	2,257	$	656	$	2,895	$	233	$	423		$	—
Interest rate floors		6,018		201		3,468		75		126			—
Interest rate caps		4,000		8		6		—		8			—
Interest rate futures		658		2		52		—		2			—
Foreign currency swaps		1,815		565		1,602		202		363			—
Foreign currency forwards		—		—		93		4		(4	)		—
Swap spreadlocks		—		—		208		11		(11	)		—
Credit default swaps		413		42		393		9		33			—
Equity futures		10		—		408		6		(6	)		(43	)
Equity options		813		282		—		—		282			(28	)
Variance swaps		785		54		296		2		52			(1	)

Total Derivative Instruments	$	16,769	$	1,810	$	9,421	$	542	$	1,268		$	(72	)


(1)		Estimated fair value presented in the table above represents the fair value of all financial instruments within this financial statement caption not necessarily those solely subject to foreign exchange risk.

(2)		Embedded derivatives are recognized in the consolidated balance sheet in the same caption as the host contract.

Equity price risk increased by $19 million to $53 million at March 31, 2009 from $34 million at December 31, 2008. The increase in equity price risk was primarily attributed to the increased use of equity derivatives employed

by the Company to hedge its equity exposures, particularly the use of financial futures and options. The remainder of the fluctuation is attributable to numerous immaterial items.


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 March 31, 2009 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 2008 Annual Report, and (ii) Note 7 to the interim condensed consolidated financial statements included in Part I of this report.

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 consolidated net income or cash flows in particular quarterly or annual periods.


Item 1A.	*Risk Factors*

The following should be read in conjunction with and supplements and amends the factors that may affect the Company’s business or operations described under “Risk Factors” in Part I, Item 1A, of the 2008 Annual Report.

There Can be No Assurance that Actions of the U.S. Government, Federal Reserve Bank of New York 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 Emergency Economic Stabilization Act of 2008 (“EESA”) into law. Pursuant to EESA, the U.S. Treasury has the authority to, among other things, purchase up to $700 billion of mortgage-backed and other securities (including newly issued preferred shares and subordinated debt) from financial institutions for the purpose of stabilizing the financial markets. The Federal Government, Federal Reserve Bank of New York, the Federal Deposit Insurance Corporation (“FDIC”) and other governmental and regulatory bodies have taken or are considering taking other actions to address the financial crisis. For example, the Federal Reserve Bank of New York has been making funds available to commercial and financial companies under a number of programs, including the Commercial Paper Funding Facility. The U.S. Treasury has published outlines of programs based in part on EESA and in part on the separate authority of the Federal Reserve Board and the FDIC, that could lead to purchases from banks, insurance companies and other financial institutions of certain kinds of assets for which valuations have been low and markets weak. Legislation is pending in Congress that will allow bankruptcy judges in certain bankruptcy proceedings to alter the terms of certain mortgages, including reducing the principal amount of the loan.

There can be no assurance as to what impact such actions will have on the financial markets, whether on the level of volatility, the level 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 materially and adversely affect our business, financial condition and results of operations. Furthermore, if the mortgage-related legislation is passed, it could cause loss of principal on certain of our nonagency prime residential mortgage-backed security holdings and could cause a ratings downgrade in such holdings which, in turn, would cause an increase in unrealized losses on such securities. See “Risk Factors — We Are Exposed to Significant Financial and Capital Markets Risk Which May Adversely Affect Our Results of Operations, Financial Condition and Liquidity, and Our Net Investment Income Can Vary from Period to Period” in the 2008 Annual Report. The choices made by the U.S. Treasury, the Federal Reserve Board and the FDIC in their distribution of amounts available under EESA and under the proposed new asset purchase programs could have the effect of supporting some aspects of the finance industry more than others. See “Risk Factors — Competitive Factors May Adversely Affect Our Market Share and Profitability” in the 2008 Annual Report. We cannot predict whether the $700 billion of funds to be made available pursuant to EESA will be enough to stabilize the financial markets or, if additional amounts are necessary, whether Congress will be willing to make the necessary appropriations, what the public’s sentiment would be towards any such appropriations, or what additional requirements or conditions might be imposed on the use of any such additional funds.

MetLife, Inc. and some or all of its affiliates may be eligible to sell assets under one or more of the programs established in whole or in part under EESA, and some of their assets may be among those that are eligible for purchase under the programs. MetLife, Inc. and some of its affiliates may also be eligible to invest in vehicles established to purchase troubled assets from other financial institutions under these programs, and to borrow funds under other programs to purchase specified types of asset-backed securities. Participation in one or more of various government programs may subject the MetLife enterprise to restrictions on the compensation that it can offer or pay to certain executive employees, including incentives or performance-based compensation. These restrictions could hinder or prevent the MetLife enterprise from attracting and retaining management and other employees with the talent and experience to manage and conduct the Company’s business effectively and from deducting certain compensation paid to executive employees in excess of specified amounts. In April 2009, MetLife, Inc. announced that it has elected not to participate in the Capital Purchase Program, a voluntary capital infusion program established by the U.S. Treasury under EESA. In May 2009, MetLife, Inc. also announced that it had been informed by the Federal Reserve that it had completed the U.S. Treasury’s Supervisory Capital Assessment Program and that, based on the assessment’s economic scenarios and methodology, MetLife has adequate capital to sustain a further deterioration in the economy. If some of our competitors receive funding under one of the federal government’s capital infusion programs, our competitive position could be adversely affected.

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 finance 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 or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to us. We also have exposure to these financial institutions in the form of unsecured debt instruments, non-redeemable and redeemable preferred securities, derivative transactions and equity investments. Further, potential action by governments and regulatory bodies in response to the financial crisis affecting the global banking system and financial markets, such as investment, nationalization, conservatorship, receivership and other intervention, whether under existing legal authority or any new authority that may be created, could negatively impact these instruments, securities, transactions and 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 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. See “Business — Regulation — Insurance Regulation” in the 2008 Annual Report. State insurance laws regulate most aspects of our U.S. insurance businesses, and our insurance subsidiaries are regulated by the insurance departments of the states in which they are domiciled and the states in which they are licensed. Our non-U.S. insurance operations are principally regulated by insurance regulatory authorities in the jurisdictions in which they are domiciled and operate.

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 2008 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 finance regulation, securities regulation, pension regulation, privacy, tort reform legislation and taxation. In addition, various forms of direct federal regulation of insurance have been proposed, including proposals for the establishment of an optional federal charter for insurance companies. In view of recent events involving certain financial institutions and the financial markets, 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, new powers for the regulation of systemic risk to the financial system and the resolution of systemically significant financial companies and/or that the oversight responsibilities and mandates of existing or newly created regulatory bodies could change. We cannot predict whether these 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 or on our dealings with other financial institutions.

Our international operations are subject to regulation in the jurisdictions in which they operate, which in many ways is similar to that of the state regulations outlined above. 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. See “Risk Factors — Our International Operations Face Political, Legal, Operational and Other Risks that Could Negatively Affect Those Operations or Our Profitability” in the 2008 Annual Report.

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 MICC and its subsidiaries 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.

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. A significant pandemic could have a major impact on the global economy or the economies of particular countries or regions, including travel, trade, tourism, the health system, food supply, consumption, overall economic output and, eventually, on the financial markets, and could deepen the U.S. and global recession. In addition, a pandemic that affected our employees or the employees of our distributors or of other companies with which we do business could disrupt our business operations. 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.

Most of the jurisdictions in which our insurance subsidiaries are admitted to transact business require life insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer is engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. See “Business — Regulation — Insurance Regulation — Guaranty Associations and Similar Arrangements” in the 2008 Annual Report.

While in the past five years, the aggregate assessments levied against us have not been material, it is possible that a large catastrophic event could render such guaranty funds inadequate and we may be called upon to contribute additional amounts, which may have a material impact on our financial condition or results of operations in a particular period. We have established liabilities for guaranty fund assessments that we consider adequate for assessments with respect to insurers that are currently subject to insolvency proceedings, but additional liabilities may be necessary. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Insolvency Assessments” in the 2008 Annual Report.

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.


	Page

Part I — Financial Information
Item 1. Financial Statements at March 31, 2009 (Unaudited) and December 31, 2008 and for the Three Months Ended March 31, 2009 and March 31, 2008 (Unaudited)		4
Interim Condensed Consolidated Balance Sheets		4
Interim Condensed Consolidated Statements of Income		5
Interim Condensed Consolidated Statements of Stockholders’ Equity		6
Interim Condensed Consolidated Statements of Cash Flows		8
Notes to the Interim Condensed Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		65
Item 3. Quantitative and Qualitative Disclosures About Market Risk		86
Item 4(T). Controls and Procedures		94
Part II — Other Information
Item 1. Legal Proceedings		94
Item 1A. Risk Factors		94
Item 6. Exhibits		99
Signatures		100
Exhibit Index		E-1
EX-31.1
EX-31.2
EX-32.1
EX-32.2


	March 31, 2009			December 31, 2008

Sector:
U.S. corporate securities		41	%		37	%
Foreign corporate securities		18			18
Residential mortgage-backed securities		14			15
Asset-backed securities		10			11
Commercial mortgage-backed securities		10			11
State and political subdivision securities		3			4
Other		4			4

Total		100	%		100	%

Industry:
Finance		31	%		25	%
Mortgage-backed		24			26
Asset-backed		10			11
Consumer		9			10
Utility		7			9
Communications		6			7
Industrial		3			4
Foreign government		1			1
Other		9			7

Total		100	%		100	%


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