UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________

Form 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

or

¨ 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: 000-55029

________________________________________

Metropolitan Life Insurance Company

(Exact name of registrant as specified in its charter)

New York	13-5581829
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
200 Park Avenue, New York, N.Y.	10166-0188
(Address of principal executive offices)	(Zip Code)

(212) 578-9500

(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 ¨

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 þ   No ¨

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

At November 8, 2017, 494,466,664 shares of the registrant’s common stock, $0.01 par value per share, were outstanding, all of which were owned directly by 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.

Table of Contents

		Page
Part I — Financial Information
Item 1.	Financial Statements (at September 30, 2017 (Unaudited) and December 31, 2016 and for the Three Months and Nine Months Ended September 30, 2017 and 2016 (Unaudited))
	Interim Condensed Consolidated Balance Sheets	3
	Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	4
	Interim Condensed Consolidated Statements of Equity	5
	Interim Condensed Consolidated Statements of Cash Flows	6
	Notes to the Interim Condensed Consolidated Financial Statements:
	Note 1 — Business, Basis of Presentation and Summary of Significant Accounting Policies	7
	Note 2 — Segment Information	10
	Note 3 — Insurance	17
	Note 4 — Closed Block	19
	Note 5 — Investments	22
	Note 6 — Derivatives	36
	Note 7 — Fair Value	51
	Note 8 — Equity	69
	Note 9 — Other Expenses	72
	Note 10 — Employee Benefit Plans	72
	Note 11 — Contingencies, Commitments and Guarantees	73
	Note 12 — Related Party Transactions	79
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	84
Item 4.	Controls and Procedures	97
Part II — Other Information
Item 1.	Legal Proceedings	98
Item 1A.	Risk Factors	100
Item 6.	Exhibits	101
Signatures		102

As used in this Form 10-Q, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including 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, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of MLIC. 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 Metropolitan Life Insurance Company's filings with the U.S. Securities and Exchange Commission. These factors include: (1) difficult conditions in the global capital markets; (2) increased volatility and disruption of the global capital and credit markets, which may affect our ability to meet liquidity needs and access capital, including through credit facilities, generate market-related revenue and finance statutory reserve requirements; (3) exposure to global financial and capital market risks; (4) regulatory, legislative or tax changes relating to our insurance or other operations that may affect the cost of, or demand for, our products or services; (5) adverse results or other consequences from litigation, arbitration or regulatory investigations; (6) impact on us of comprehensive financial services regulation reform, including potential regulation of MetLife, Inc. as a non-bank systemically important financial institution, or otherwise; (7) our ability to address difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions, dispositions of businesses, entry into joint ventures, or legal entity reorganizations; (8) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (9) investment losses, and changes to investment valuations; (10) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements, or value of business acquired; (11) the defaults or deteriorating credit of other financial institutions that could adversely affect us; (12) downgrades in our financial strength or credit ratings, or MetLife, Inc.’s credit ratings; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) availability and effectiveness of reinsurance, hedging or indemnification arrangements, as well as any default or failure of counterparties to perform; (15) differences between actual claims experience and underwriting and reserving assumptions; (16) ineffectiveness of MetLife’s risk management policies and procedures; (17) exposure to losses related to variable annuity guarantee benefits, including from significant and sustained downturns or extreme volatility in equity markets, reduced interest rates, unanticipated policyholder behavior, mortality or longevity, and any adjustment for nonperformance risk; (18) changes in accounting standards, practices and/or policies; (19) the effects of business disruption or economic contraction due to disasters such as terrorist attacks, cyberattacks, other hostilities, or natural catastrophes, including any related impact on MetLife’s disaster recovery systems, cyber- or other information security systems and management continuity planning; (20) any failure to protect the confidentiality of client information; and (21) other risks and uncertainties described from time to time in Metropolitan Life Insurance Company's filings with the U.S. Securities and Exchange Commission.

Metropolitan Life Insurance Company does not undertake any obligation to publicly correct or update any forward-looking statement if Metropolitan Life Insurance Company later becomes aware that such statement is not likely to be achieved. Please consult any further disclosures Metropolitan Life Insurance Company makes on related subjects in reports to the U.S. Securities and Exchange Commission.

Note Regarding Reliance on Statements in Our Contracts

See “Item 6. Exhibits — Note Regarding Reliance on Statements in Our Contracts” for information regarding agreements included as exhibits to this Quarterly Report on Form 10-Q.

2

Part I — Financial Information

Item 1. Financial Statements

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Balance Sheets

September 30, 2017 (Unaudited) and December 31, 2016

(In millions, except share and per share data)

	September 30, 2017		December 31, 2016
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $160,383 and $155,141, respectively)	$	172,284	$	163,120
Equity securities available-for-sale, at estimated fair value (cost: $1,712 and $1,785, respectively)	1,791		1,839
Mortgage loans (net of valuation allowances of $272 and $267, respectively; includes $564 and $566, respectively, under the fair value option)	58,054		56,560
Policy loans	5,985		5,945
Real estate and real estate joint ventures (includes $1,102 and $1,124, respectively, relating to variable interest entities; includes $61 and $56, respectively, of real estate held-for-sale)	6,657		6,386
Other limited partnership interests (includes $0 and $14, respectively, relating to variable interest entities)	3,893		3,725
Short-term investments, principally at estimated fair value	4,682		4,690
Other invested assets (includes $140 and $39, respectively, relating to variable interest entities)	15,335		17,255
Total investments	268,681		259,520
Cash and cash equivalents, principally at estimated fair value (includes $9 and $0, respectively, relating to variable interest entities)	4,323		5,714
Accrued investment income	2,228		2,019
Premiums, reinsurance and other receivables (includes $3 and $6, respectively, relating to variable interest entities)	22,148		22,383
Deferred policy acquisition costs and value of business acquired	4,492		4,743
Other assets (includes $3 and $3, respectively, relating to variable interest entities)	4,514		4,346
Separate account assets	132,670		133,836
Total assets	$	439,056	$	432,561
Liabilities and Equity
Liabilities
Future policy benefits	$	118,726	$	115,556
Policyholder account balances	94,175		92,466
Other policy-related balances	6,607		6,731
Policyholder dividends payable	551		510
Policyholder dividend obligation	2,201		1,931
Payables for collateral under securities loaned and other transactions	21,839		20,815
Short-term debt	100		100
Long-term debt (includes $6 and $12, respectively, at estimated fair value, relating to variable interest entities)	1,679		1,589
Current income tax payable	236		50
Deferred income tax liability	2,738		2,503
Other liabilities	28,976		29,497
Separate account liabilities	132,670		133,836
Total liabilities	410,498		405,584
Contingencies, Commitments and Guarantees (Note 11)
Equity
Metropolitan Life Insurance Company stockholder’s equity:
Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding	5		5
Additional paid-in capital	14,149		14,413
Retained earnings	9,184		9,250
Accumulated other comprehensive income (loss)	5,041		3,119
Total Metropolitan Life Insurance Company stockholder’s equity	28,379		26,787
Noncontrolling interests	179		190
Total equity	28,558		26,977
Total liabilities and equity	$	439,056	$	432,561

See accompanying notes to the interim condensed consolidated financial statements.

3

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months and Nine Months EndedSeptember 30, 2017 and 2016 (Unaudited)

(In millions)

	Three Months   Ended  September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Premiums	$	6,629		$	6,142		$	17,597		$	16,801
Universal life and investment-type product policy fees	556			638			1,706			1,928
Net investment income	2,660			2,870			7,955			8,349
Other revenues	371			389			1,148			1,121
Net investment gains (losses):
Other-than-temporary impairments on fixed maturity securities	(6		)	(4		)	(7		)	(66		)
Other-than-temporary impairments on fixed maturity securities transferred to other comprehensive income (loss)	1			(5		)	1			(9		)
Other net investment gains (losses)	101			51			190			190
Total net investment gains (losses)	96			42			184			115
Net derivative gains (losses)	(26		)	(205		)	(317		)	(562		)
Total revenues	10,286			9,876			28,273			27,752
Expenses
Policyholder benefits and claims	7,317			6,897			19,561			19,019
Interest credited to policyholder account balances	567			560			1,660			1,675
Policyholder dividends	267			302			827			924
Other expenses	1,205			1,364			3,808			4,450
Total expenses	9,356			9,123			25,856			26,068
Income (loss) before provision for income tax	930			753			2,417			1,684
Provision for income tax expense (benefit)	187			123			475			232
Net income (loss)	743			630			1,942			1,452
Less: Net income (loss) attributable to noncontrolling interests	5			(7		)	8			(9		)
Net income (loss) attributable to Metropolitan Life Insurance Company	$	738		$	637		$	1,934		$	1,461
Comprehensive income (loss)	$	914		$	637		$	3,864		$	5,619
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	5			(7		)	8			(9		)
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company	$	909		$	644		$	3,856		$	5,628

See accompanying notes to the interim condensed consolidated financial statements.

4

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Equity

For the Nine Months EndedSeptember 30, 2017 and 2016 (Unaudited)

(In millions)

	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total Metropolitan Life Insurance Company Stockholder’s Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2016	$	5	$	14,413		$	9,250		$	3,119	$	26,787		$	190		$	26,977
Capital contributions from MetLife, Inc.			5								5						5
Returns of capital			(20		)						(20		)				(20		)
Dividends paid to MetLife, Inc.						(2,000		)			(2,000		)				(2,000		)
Purchase of operating joint venture interest from an affiliate (Note 5)			(249		)						(249		)				(249		)
Change in equity of noncontrolling interests														(19		)	(19		)
Net income (loss)						1,934					1,934			8			1,942
Other comprehensive income (loss), net of income tax									1,922		1,922						1,922
Balance at September 30, 2017	$	5	$	14,149		$	9,184		$	5,041	$	28,379		$	179		$	28,558

	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)		Total Metropolitan Life Insurance Company Stockholder’s Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2015	$	5	$	14,444		$	13,738		$	2,685	$	30,872		$	372		$	31,244
Capital contributions from MetLife, Inc.			4								4						4
Returns of capital			(62		)						(62		)				(62		)
Tax deficiencies related to stock-based compensation			(11		)						(11		)				(11		)
Dividends paid to MetLife, Inc.						(3,600		)			(3,600		)				(3,600		)
Change in equity of noncontrolling interests														(203		)	(203		)
Net income (loss)						1,461					1,461			(9		)	1,452
Other comprehensive income (loss), net of income tax									4,167		4,167						4,167
Balance at September 30, 2016	$	5	$	14,375		$	11,599		$	6,852	$	32,831		$	160		$	32,991

See accompanying notes to the interim condensed consolidated financial statements.

5

Metropolitan Life Insurance Company

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

Interim Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2017 and 2016 (Unaudited)

(In millions)

	Nine Months Ended September 30,
	2017			2016
Net cash provided by (used in) operating activities	$	5,010		$	3,625
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities	37,260			53,466
Equity securities	470			798
Mortgage loans	5,696			9,008
Real estate and real estate joint ventures	673			353
Other limited partnership interests	412			618
Purchases of:
Fixed maturity securities	(40,819		)	(53,863		)
Equity securities	(387		)	(703		)
Mortgage loans	(7,020		)	(11,010		)
Real estate and real estate joint ventures	(671		)	(1,125		)
Other limited partnership interests	(536		)	(589		)
Cash received in connection with freestanding derivatives	1,439			1,165
Cash paid in connection with freestanding derivatives	(2,259		)	(1,589		)
Net change in policy loans	(40		)	86
Net change in short-term investments	78			(128		)
Net change in other invested assets	(168		)	(316		)
Net change in property, equipment and leasehold improvements	(148		)	(154		)
Net cash provided by (used in) investing activities	(6,020		)	(3,983		)
Cash flows from financing activities
Policyholder account balances:
Deposits	53,149			46,119
Withdrawals	(52,610		)	(44,175		)
Net change in payables for collateral under securities loaned and other transactions	1,443			1,698
Long-term debt issued	169			11
Long-term debt repaid	(81		)	(55		)
Financing element on certain derivative instruments and other derivative related transactions, net	(210		)	(72		)
Dividends paid to MetLife, Inc.	(2,000		)	(3,600		)
Returns of capital	(5		)	(62		)
Return of capital associated with the purchase of operating joint venture interest from an affiliate (Note 5)	(249		)	—
Other, net	(10		)	19
Net cash provided by (used in) financing activities	(404		)	(117		)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances	23			—
Change in cash and cash equivalents	(1,391		)	(475		)
Cash and cash equivalents, beginning of period	5,714			4,651
Cash and cash equivalents, end of period	$	4,323		$	4,176
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	64		$	71
Income tax	$	1,137		$	596
Non-cash transactions:
Capital contributions from MetLife, Inc.	$	5		$	4
Returns of capital	$	15		$	—
Fixed maturity securities received in connection with pension risk transfer transactions	$	—		$	985
Transfer of fixed maturity securities from affiliate	$	292		$	—
Transfer of fixed maturity securities to affiliates	$	—		$	3,435
Transfer of mortgage loans to affiliates	$	—		$	375
Deconsolidation of real estate joint venture:
Reduction of real estate and real estate joint ventures	$	—		$	339
Reduction of noncontrolling interests	$	—		$	339

See accompanying notes to the interim condensed consolidated financial statements.

6

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited)

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

Business

Metropolitan Life Insurance Company and its subsidiaries (collectively, “MLIC” or the “Company”) is a provider of insurance, annuities, employee benefits and asset management. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”).

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

Consolidation

The accompanying interim condensed consolidated financial statements include the accounts of Metropolitan Life Insurance Company and its subsidiaries, as well as partnerships and joint ventures in which the Company has control, and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany accounts and transactions have been eliminated.

The Company uses the equity method of accounting for equity securities when it has significant influence or at least 20% interest and for real estate joint ventures and other limited partnership interests (“investees”) when it has more than a minor ownership interest or more than a minor influence over the investee’s operations. The Company generally recognizes its share of the investee’s earnings on a three-month lag in instances where the investee’s financial information is not sufficiently timely or when the investee’s reporting period differs from the Company’s reporting period. The Company uses the cost method of accounting for investments in which it has virtually no influence over the investee’s operations.

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2017 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity.

The accompanying interim condensed consolidated financial statements are unaudited and reflect all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP. Interim results are not necessarily indicative of full year performance. The December 31, 2016 consolidated balance sheet data was derived from audited consolidated financial statements included in Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), which include 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 2016 Annual Report.

Adoption of New Accounting Pronouncements

Effective January 1, 2017, the Company early adopted guidance relating to business combinations. The new guidance clarifies the definition of a business and requires that an entity apply certain criteria in order to determine when a set of assets and activities qualifies as a business. The adoption of this standard will result in fewer acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that do not qualify as businesses will be capitalized rather than expensed. The adoption did not have a material impact on the Company’s consolidated financial statements.

Effective January 1, 2017, the Company retrospectively adopted guidance relating to consolidation. The new guidance does not change the characteristics of a primary beneficiary under current GAAP. It changes how a reporting entity evaluates whether it is the primary beneficiary of a VIE by changing how a reporting entity that is a single decisionmaker of a VIE handles indirect interests in the entity held through related parties that are under common control with the reporting entity. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

7

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

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

Other

Effective January 3, 2017, the Chicago Mercantile Exchange (“CME”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives for which the CME serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $751 million, gross derivative liabilities by $603 million, accrued investment income by $55 million, accrued investment expense recorded within other liabilities by $10 million, collateral receivables recorded within premiums, reinsurance and other receivables of $226 million, and collateral payables recorded within payables for collateral under securities loaned and other transactions of $419 million.

Future Adoption of New Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance on hedging activities (Accounting Standards Update (“ASU”) 2017-12,Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities). The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. Early adoption is permitted. The new guidance simplifies the application of hedge accounting in certain situations and amends the hedge accounting model to enable entities to better portray the economics of their risk management activities in the financial statements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In March 2017, the FASB issued new guidance on purchased callable debt securities (ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.) The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings. Early adoption is permitted. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date. However, the new guidance does not require an accounting change for securities held at a discount whose discount continues to be amortized to maturity. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In March 2017, the FASB issued new guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost (ASU 2017-07,Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost). The new guidance is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The guidance requires that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The guidance should be applied retrospectively for the presentation of the service cost component in the income statement and allows a practical expedient for the estimation basis for applying the retrospective presentation requirements. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In February 2017, the FASB issued new guidance on derecognition of nonfinancial assets (ASU 2017-05,Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption was permitted for interim or annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The new guidance clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term, “in-substance nonfinancial asset.” The ASU also adds guidance for partial sales of nonfinancial assets. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

8

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

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

In January 2017, the FASB issued new guidance on goodwill impairment (ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment). The new guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The new guidance simplifies the current two-step goodwill impairment test by eliminating Step 2 of the test. The new guidance requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In November 2016, the FASB issued new guidance on restricted cash (ASU 2016-18,Statement of Cash Flows (Topic 230): a consensus of the FASB Emerging Issues Task Force). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a retrospective basis. Early adoption is permitted. The new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, the new guidance requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance does not provide a definition of restricted cash or restricted cash equivalents. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In October 2016, the FASB issued new guidance on tax accounting for intra-entity transfers of assets (ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied on a modified retrospective basis. Early adoption is permitted in the first interim or annual reporting period. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. The new guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Also, the guidance eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In August 2016, the FASB issued new guidance on cash flow statement presentation (ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments). The new guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Early adoption is permitted in any interim or annual period. This ASU addresses diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In June 2016, the FASB issued new guidance on measurement of credit losses on financial instruments (ASU 2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments). The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This ASU replaces the incurred loss impairment methodology with one that reflects expected credit losses. The measurement of expected credit losses should be based on historical loss information, current conditions, and reasonable and supportable forecasts. The new guidance requires that an other than temporary impairment (“OTTI”)on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through realized investment gains and losses. The guidance also requires enhanced disclosures. The Company has assessed the asset classes impacted by the new guidance and is currently assessing the accounting and reporting system changes that will be required to comply with the new guidance. The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is continuing to evaluate the overall impact of the new guidance on its consolidated financial statements.

9

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

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

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02,Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach. Early adoption is permitted. The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. The Company’s implementation efforts are primarily focused on the review of its existing lease contracts, as well as identification of other contracts that may fall under the scope of the new guidance. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

In January 2016, the FASB issued new guidance (ASU 2016-01,Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities) on the recognition and measurement of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the instrument-specific credit risk provision. The new guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option (“FVO”) that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. Additionally, there will no longer be a requirement to assess equity securities for impairment since such securities will be measured at fair value through net income. The Company has assessed the population of financial instruments that are subject to the new guidance and has determined that the most significant impact will be the requirement to report changes in fair value in net income each reporting period for all equity securities currently classified as available-for-sale (“AFS”) and to a lesser extent, other limited partnership interests and real estate joint ventures that are currently accounted for under the cost method. The estimated impact, using values as of September 30, 2017, related to the change in accounting for equity securities AFS, was$50 millionof net unrealized investment gains, net of income tax, which would be reclassified from accumulated other comprehensive income (“AOCI”) to retained earnings. The estimated financial statement impact related to cost method other limited partnership interests and real estate joint ventures was not material.

In May 2014, the FASB issued a comprehensive new revenue recognition standard (ASU 2014-09,Revenue from Contracts with Customers (Topic 606)), effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. The Company will apply this guidance retrospectively with a cumulative-effect adjustment as of January 1, 2018. The new guidance will supersede nearly all existing revenue recognition guidance under U.S. GAAP. However, it will not impact the accounting for insurance and investment contracts within the scope of Accounting Standards Codification Topic 944,Financial Services - Insurance, leases, financial instruments and certain guarantees. For those contracts that are impacted, the new guidance will require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled, in exchange for those goods or services. Given the scope of the new revenue recognition guidance, the Company does not expect the adoption to have a material impact on its consolidated revenues or statements of operations, with the Company’s implementation efforts primarily focused on other revenues on the consolidated statements of operations. Other revenues on the consolidated statements of operations represents less than 5% of consolidated total revenues for the nine months ended September 30, 2017. Based on implementation efforts completed to date, the Company has identified revenue streams within the scope of the guidance and is evaluating the related contracts, primarily consisting of prepaid legal plans and administrative-only contracts in the U.S. segment, advisory fees in the MetLife Holdings segment, and fee-based investment management services in Corporate & Other. While the Company has not yet identified any material changes in the recognition and measurement of other revenue, the Company’s assessment is ongoing, including the consideration of the new disclosure requirements.

2. Segment Information

The Company is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other.

10

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) through a distribution of 96,776,670 shares of the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing 80.8% of those shares, to MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding.

U.S.

The U.S. segment offers a broad range of protection products and services aimed at serving the financial needs of customers throughout their lives. These products are sold to corporations and their respective employees, other institutions and their respective members, as well as individuals. The U.S. segment is organized into two businesses: Group Benefits and Retirement and Income Solutions.

• The Group Benefits business offers insurance products and services which include life, dental, group short- and long-term disability, individual disability, accidental death and dismemberment, critical illness, vision and accident & health coverages, as well as prepaid legal plans. This business also sells administrative services-only arrangements to some employers.

• The Retirement and Income Solutions business offers a broad range of annuity and investment products, including guaranteed interest contracts and other stable value products, institutional income annuities and separate account contracts for the investment management of defined benefit and defined contribution plan assets. This business also includes structured settlements and certain products to fund postretirement benefits and company-, bank- or trust-owned life insurance used to finance nonqualified benefit programs for executives.

MetLife Holdings

The MetLife Holdings segment consists of operations relating to products and businesses no longer actively marketed by the Company in the United States. These products and businesses include variable, universal, term and whole life, as well as variable, fixed and index-linked annuities. The MetLife Holdings segment also includes the Company’s discontinued long-term care business.

Corporate & Other

Corporate & Other contains the excess capital, as well as certain charges and activities, not allocated to the segments, including enterprise-wide strategic initiative restructuring charges and various start-up businesses (including the investment management business through which the Company offers fee-based investment management services to institutional clients, as well as the direct to consumer portion of the U.S. Direct business). Corporate & Other also includes the Company’s ancillary international operations, the business of the Company that MetLife, Inc. separated and included in Brighthouse Financial in the prior periods and interest expense related to the majority of the Company’s outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. In addition, Corporate & Other includes the elimination of intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings.

Financial Measures and Segment Accounting Policies

Operating earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also the Company’s GAAP measure of segment performance and is reported below. Operating earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of operating earnings as the Company measures it for management purposes enhances the understanding of its performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings allows analysis of the Company’s performance and facilitates comparisons to industry results.

Operating earnings is defined as operating revenues less operating expenses, both net of income tax.

11

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

The financial measures of operating revenues and operating expenses focus on the Company’s primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses).

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

• Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuityguaranteed minimum income benefits (“GMIBs”) fees (“GMIB Fees”); and

• Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method and (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP.

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

• Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);

• Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;

• Amortization ofdeferred policy acquisition costs (“DAC”) and value of business acquired (“VOBA”) excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;

• Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and

• Other expenses excludes costs related to noncontrolling interests and goodwill impairments.

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate.

Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for thethree monthsandnine months endedSeptember 30, 2017and2016. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for operating earnings adjustments as defined above. In addition, segment accounting policies include the method of capital allocation described below.

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 and the Company’s business.

12

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

MetLife’s economic capital model, coupled with considerations of local capital requirements, aligns segment allocated equity with emerging standards and consistent risk principles. The model applies statistics-based risk evaluation principles to the material risks to which the Company is exposed. These consistent risk principles include calibrating required economic capital shock factors to a specific confidence level and time horizon while applying an industry standard method for the inclusion of diversification benefits among risk types. MetLife’s management is responsible for the ongoing production and enhancement of the economic capital model and reviews its approach periodically to ensure that it remains consistent with emerging industry practice standards.

Segment net investment income is credited or charged based on the level of allocated equity; however, changes in allocated equity do not impact the Company’s consolidated net investment income, net income (loss) or operating earnings.

Net investment income is based upon the actual results of each segment’s specifically identifiable investment portfolios 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.

	Operating Results
Three Months Ended September 30, 2017	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	5,820		$	806		$	3		$	6,629		$	—		$	6,629
Universal life and investment-type product policy fees	245			286			—			531			25			556
Net investment income	1,554			1,228			(39		)	2,743			(83		)	2,660
Other revenues	191			36			144			371			—			371
Net investment gains (losses)	—			—			—			—			96			96
Net derivative gains (losses)	—			—			—			—			(26		)	(26		)
Total revenues	7,810			2,356			108			10,274			12			10,286
Expenses
Policyholder benefits and claims and policyholder dividends	6,006			1,448			—			7,454			130			7,584
Interest credited to policyholder account balances	373			195			—			568			(1		)	567
Capitalization of DAC	(15		)	(2		)	—			(17		)	—			(17		)
Amortization of DAC and VOBA	15			(79		)	—			(64		)	21			(43		)
Interest expense on debt	3			2			21			26			—			26
Other expenses	681			291			272			1,244			(5		)	1,239
Total expenses	7,063			1,855			293			9,211			145			9,356
Provision for income tax expense (benefit)	262			161			(190		)	233			(46		)	187
Operating earnings	$	485		$	340		$	5		830
Adjustments to:
Total revenues										12
Total expenses										(145		)
Provision for income tax (expense) benefit										46
Net income (loss)										$	743					$	743

13

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

	Operating Results
Three Months Ended September 30, 2016	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	5,036		$	1,091		$	15		$	6,142		$	—		$	6,142
Universal life and investment-type product policy fees	244			310			58			612			26			638
Net investment income	1,554			1,463			(7		)	3,010			(140		)	2,870
Other revenues	188			46			155			389			—			389
Net investment gains (losses)	—			—			—			—			42			42
Net derivative gains (losses)	—			—			—			—			(205		)	(205		)
Total revenues	7,022			2,910			221			10,153			(277		)	9,876
Expenses
Policyholder benefits and claims and policyholder dividends	5,281			1,814			29			7,124			75			7,199
Interest credited to policyholder account balances	322			230			9			561			(1		)	560
Capitalization of DAC	(17		)	(44		)	2			(59		)	—			(59		)
Amortization of DAC and VOBA	14			217			10			241			(29		)	212
Interest expense on debt	2			2			24			28			—			28
Other expenses	668			341			163			1,172			11			1,183
Total expenses	6,270			2,560			237			9,067			56			9,123
Provision for income tax expense (benefit)	269			109			(139		)	239			(116		)	123
Operating earnings	$	483		$	241		$	123		847
Adjustments to:
Total revenues										(277		)
Total expenses										(56		)
Provision for income tax (expense) benefit										116
Net income (loss)										$	630					$	630

14

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

	Operating Results
Nine Months Ended September 30, 2017	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	15,055		$	2,530		$	12		$	17,597		$	—		$	17,597
Universal life and investment-type product policy fees	757			876			—			1,633			73			1,706
Net investment income	4,646			3,711			(103		)	8,254			(299		)	7,955
Other revenues	581			126			441			1,148			—			1,148
Net investment gains (losses)	—			—			—			—			184			184
Net derivative gains (losses)	—			—			—			—			(317		)	(317		)
Total revenues	21,039			7,243			350			28,632			(359		)	28,273
Expenses
Policyholder benefits and claims and policyholder dividends	15,743			4,395			3			20,141			247			20,388
Interest credited to policyholder account balances	1,076			587			—			1,663			(3		)	1,660
Capitalization of DAC	(42		)	(15		)	—			(57		)	—			(57		)
Amortization of DAC and VOBA	44			165			—			209			(85		)	124
Interest expense on debt	8			6			65			79			—			79
Other expenses	2,044			895			735			3,674			(12		)	3,662
Total expenses	18,873			6,033			803			25,709			147			25,856
Provision for income tax expense (benefit)	756			381			(485		)	652			(177		)	475
Operating earnings	$	1,410		$	829		$	32		2,271
Adjustments to:
Total revenues										(359		)
Total expenses										(147		)
Provision for income tax (expense) benefit										177
Net income (loss)										$	1,942					$	1,942

15

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

2. Segment Information (continued)

	Operating Results
Nine Months Ended September 30, 2016	U.S.			MetLife Holdings			Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	13,451		$	3,303		$	47		$	16,801		$	—		$	16,801
Universal life and investment-type product policy fees	741			928			182			1,851			77			1,928
Net investment income	4,518			4,260			(35		)	8,743			(394		)	8,349
Other revenues	561			98			462			1,121			—			1,121
Net investment gains (losses)	—			—			—			—			115			115
Net derivative gains (losses)	—			—			—			—			(562		)	(562		)
Total revenues	19,271			8,589			656			28,516			(764		)	27,752
Expenses
Policyholder benefits and claims and policyholder dividends	14,232			5,475			103			19,810			133			19,943
Interest credited to policyholder account balances	964			687			26			1,677			(2		)	1,675
Capitalization of DAC	(43		)	(239		)	(3		)	(285		)	—			(285		)
Amortization of DAC and VOBA	43			591			51			685			(265		)	420
Interest expense on debt	7			5			72			84			—			84
Other expenses	2,057			1,439			612			4,108			123			4,231
Total expenses	17,260			7,958			861			26,079			(11		)	26,068
Provision for income tax expense (benefit)	720			178			(403		)	495			(263		)	232
Operating earnings	$	1,291		$	453		$	198		1,942
Adjustments to:
Total revenues										(764		)
Total expenses										11
Provision for income tax (expense) benefit										263
Net income (loss)										$	1,452					$	1,452

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

	September 30, 2017		December 31, 2016
	(In millions)
U.S.	$	250,516	$	247,314
MetLife Holdings	164,588		163,048
Corporate & Other	23,952		22,199
Total	$	439,056	$	432,561

16

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

3. Insurance

Guarantees

As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report, the Company issues variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and the portion of certain GMIBs that do not require annuitization are accounted for as embedded derivatives in policyholder account balances and are further discussed in Note 6.

The Company also issues other annuity contracts that apply a lower rate on funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize. These guarantees include benefits that are payable in the event of death, maturity or at annuitization. Certain other annuity contracts contain guaranteed annuitization benefits that may be above what would be provided by the current account value of the contract. Additionally, the Company issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid-up benefit.

Information regarding the Company’s guarantee exposure, which includes direct business, but excludes offsets from hedging or reinsurance, if any, was as follows at:

	September 30, 2017								December 31, 2016
	In the Event of Death				At Annuitization				In the Event of Death				At Annuitization
	(Dollars in millions)
Annuity Contracts (1):
Variable Annuity Guarantees:
Total account value (2)	$	55,962			$	25,123			$	54,629			$	24,310
Separate account value	$	45,046			$	24,179			$	43,359			$	23,330
Net amount at risk	$	1,082	(3	)	$	383	(4	)	$	1,386	(3	)	$	328	(4	)
Average attained age of contractholders	66 years				65 years				65 years				64 years
Other Annuity Guarantees:
Total account value (2)	N/A				$	140			N/A				$	141
Net amount at risk	N/A				$	93	(5	)	N/A				$	92	(5	)
Average attained age of contractholders	N/A				52 years				N/A				52 years

	September 30, 2017				December 31, 2016
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(Dollars in millions)
Universal and Variable Life Contracts (1):
Total account value (2)	$	4,548	$	985	$	4,306	$	1,014
Net amount at risk (6)	$	47,348	$	6,826	$	49,161	$	7,164
Average attained age of policyholders	54 years		62 years		53 years		62 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) Includes the contractholder’s investments in the general account and separate account, if applicable.

(3) Defined as the death benefit less the total account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date and includes any additional contractual claims associated with riders purchased to assist with covering income taxes payable upon death.

17

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

3. Insurance (continued)

(4) Defined as the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. This amount represents the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date, even though the contracts contain terms that allow annuitization of the guaranteed amount only after the 10th anniversary of the contract, which not all contractholders have achieved.

(5) Defined as either the excess of the upper tier, adjusted for a profit margin, less the lower tier, as of the balance sheet date or the amount (if any) that would be required to be added to the total account value to purchase a lifetime income stream, based on current annuity rates, equal to the minimum amount provided under the guaranteed benefit. These amounts represent the Company’s potential economic exposure to such guarantees in the event all contractholders were to annuitize on the balance sheet date.

(6) Defined as the guarantee amount less the account value, as of the balance sheet date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts on the balance sheet date.

Liabilities for Unpaid Claims and Claim Expenses

Rollforward of Claims and Claim Adjustment Expenses

Information regarding the liabilities for unpaid claims and claim adjustment expenses was as follows:

	Nine Months Ended September 30,
	2017			2016
	(In millions)
Balance at December 31 of prior period	$	11,621		$	7,527
Less: Reinsurance recoverables	539			273
Net Balance at December 31 of prior period	11,082			7,254
Cumulative adjustment (1)	—			3,397
Net balance, beginning of period	11,082			10,651
Incurred related to:
Current period	11,768			12,392
Prior periods (2)	205			239
Total incurred	11,973			12,631
Paid related to:
Current period	(8,952		)	(8,678		)
Prior periods	(3,115		)	(3,505		)
Total paid	(12,067		)	(12,183		)
Net balance, end of period	10,988			11,099
Add: Reinsurance recoverables	1,355			1,489
Balance, end of period (included in future policy benefits and other policy-related balances)	$	12,343		$	12,588

__________________

(1) Reflects the accumulated adjustment, net of reinsurance, upon implementation of the new short-duration contracts guidance which clarified the requirement to include claim information for long-duration contracts. The accumulated adjustment primarily reflects unpaid claim liabilities, net of reinsurance, for long-duration contracts as of the beginning of the period presented.

(2) During both the nine months ended September 30, 2017 and 2016, as a result of changes in estimates of insured events in the respective prior periods, the claims and claim adjustment expenses associated with prior periods increased due to unfavorable claims experience.

18

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Closed Block

On April 7, 2000 (the “Demutualization Date”), Metropolitan Life Insurance Company converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance approving Metropolitan Life Insurance Company’s plan of reorganization, as amended (the “Plan of Reorganization”). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company.

Experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized gains and losses, directly impact the policyholder dividend obligation. Amortization of the closed block DAC, which resides outside of the closed block, is based upon cumulative actual and expected earnings within the closed block. Accordingly, the Company’s net income continues to be sensitive to the actual performance of the closed block.

Closed block assets, liabilities, revenues and expenses are combined on a line-by-line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item.

19

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Closed Block (continued)

Information regarding the closed block liabilities and assets designated to the closed block was as follows at:

	September 30, 2017			December 31, 2016
	(In millions)
Closed Block Liabilities
Future policy benefits	$	40,489		$	40,834
Other policy-related balances	193			257
Policyholder dividends payable	483			443
Policyholder dividend obligation	2,201			1,931
Current income tax payable	—			4
Other liabilities	277			196
Total closed block liabilities	43,643			43,665
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	27,541			27,220
Equity securities available-for-sale, at estimated fair value	71			100
Mortgage loans	5,904			5,935
Policy loans	4,542			4,553
Real estate and real estate joint ventures	628			655
Other invested assets	1,053			1,246
Total investments	39,739			39,709
Cash and cash equivalents	60			18
Accrued investment income	487			467
Premiums, reinsurance and other receivables	68			68
Current income tax recoverable	30			—
Deferred income tax assets	109			177
Total assets designated to the closed block	40,493			40,439
Excess of closed block liabilities over assets designated to the closed block	3,150			3,226
Amounts included in accumulated other comprehensive income (loss) (“AOCI”):
Unrealized investment gains (losses), net of income tax	1,851			1,517
Unrealized gains (losses) on derivatives, net of income tax	23			95
Allocated to policyholder dividend obligation, net of income tax	(1,431		)	(1,255		)
Total amounts included in AOCI	443			357
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,593		$	3,583

Information regarding the closed block policyholder dividend obligation was as follows:

	Nine Months Ended September 30, 2017		Year   Ended   December 31, 2016
	(In millions)
Balance, beginning of period	$	1,931	$	1,783
Change in unrealized investment and derivative gains (losses)	270		148
Balance, end of period	$	2,201	$	1,931

20

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

4. Closed Block (continued)

Information regarding the closed block revenues and expenses was as follows:

	Three Months   Ended   September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Revenues
Premiums	$	413		$	436		$	1,247		$	1,297
Net investment income	450			486			1,368			1,435
Net investment gains (losses)	—			(3		)	(10		)	(19		)
Net derivative gains (losses)	(6		)	4			(24		)	(3		)
Total revenues	857			923			2,581			2,710
Expenses
Policyholder benefits and claims	591			619			1,773			1,861
Policyholder dividends	235			232			732			723
Other expenses	30			33			94			100
Total expenses	856			884			2,599			2,684
Revenues, net of expenses before provision for income tax expense (benefit)	1			39			(18		)	26
Provision for income tax expense (benefit)	—			13			(8		)	8
Revenues, net of expenses and provision for income tax expense (benefit)	$	1		$	26		$	(10	)	$	18

Metropolitan Life Insurance Company charges the closed block with federal income taxes, state and local premium taxes and other state or local taxes, as well as investment management expenses relating to the closed block as provided in the Plan of Reorganization. Metropolitan Life Insurance Company also charges the closed block for expenses of maintaining the policies included in the closed block.

21

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments

Fixed Maturity and Equity Securities Available-for-Sale

Fixed Maturity and Equity Securities Available-for-Sale by Sector

The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including residential mortgage-backed securities (“RMBS”), asset-backed securities (“ABS”) and commercial mortgage-backed securities (“CMBS”) (collectively, “Structured Securities”).

	September 30, 2017											December 31, 2016
	Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value		Cost or Amortized Cost		Gross Unrealized							Estimated Fair Value
			Gains		Temporary Losses		OTTI Losses (1)							Gains		Temporary Losses		OTTI Losses (1)
	(In millions)
Fixed maturity securities:
U.S. corporate	$	52,903	$	4,851	$	277	$	—		$	57,477	$	52,665	$	4,079	$	586	$	—		$	56,158
U.S. government and agency	36,722		3,630		244		—			40,108		32,834		3,238		457		—			35,615
Foreign corporate	24,311		1,563		507		—			25,367		24,596		957		1,196		—			24,357
RMBS	23,470		1,095		184		(39		)	24,420		22,786		911		290		(10		)	23,417
ABS	7,652		68		15		—			7,705		7,567		32		95		—			7,504
State and political subdivision	6,284		1,159		8		—			7,435		6,252		928		44		—			7,136
CMBS	5,239		145		27		—			5,357		4,876		118		59		—			4,935
Foreign government	3,802		639		26		—			4,415		3,565		507		74		—			3,998
Total fixed maturity securities	$	160,383	$	13,150	$	1,288	$	(39	)	$	172,284	$	155,141	$	10,770	$	2,801	$	(10	)	$	163,120
Equity securities:
Common stock	$	1,274	$	72	$	16	$	—		$	1,330	$	1,220	$	91	$	12	$	—		$	1,299
Non-redeemable preferred stock	438		29		6		—			461		565		14		39		—			540
Total equity securities	$	1,712	$	101	$	22	$	—		$	1,791	$	1,785	$	105	$	51	$	—		$	1,839

__________________

(1) Noncredit OTTI losses included in AOCI in an unrealized gain position are due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”

The Company held non-income producing fixed maturity securities with an estimated fair value of $1 million and less than $1 million with unrealized gains (losses) of less than ($1) million and less than $1 million at September 30, 2017 and December 31, 2016, respectively.

Maturities of Fixed Maturity Securities

The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at September 30, 2017:

	Due in One Year or Less		Due After  One Year Through Five Years		Due After Five Years Through Ten Years		Due After Ten Years		Structured Securities		Total Fixed Maturity Securities
	(In millions)
Amortized cost	$	6,872	$	35,227	$	30,763	$	51,160	$	36,361	$	160,383
Estimated fair value	$	6,894	$	36,381	$	32,449	$	59,078	$	37,482	$	172,284

22

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. Structured Securities are shown separately, as they are not due at a single maturity.

Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector

The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position at:

	September 30, 2017								December 31, 2016
	Less than 12 Months				Equal to or Greater than 12 Months				Less than 12 Months				Equal to or Greater than 12 Months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
	(Dollars in millions)
Fixed maturity securities:
U.S. corporate	$	4,644	$	119	$	1,750	$	158	$	8,406	$	337	$	2,260	$	249
U.S. government and agency	15,499		240		149		4		6,032		457		—		—
Foreign corporate	2,153		74		3,870		433		5,343		336		4,523		860
RMBS	5,075		77		1,566		68		6,662		187		1,707		93
ABS	1,156		2		463		13		1,482		12		1,714		83
State and political subdivision	222		6		60		2		943		43		17		1
CMBS	882		8		123		19		922		15		432		44
Foreign government	216		6		249		20		581		26		309		48
Total fixed maturity securities	$	29,847	$	532	$	8,230	$	717	$	30,371	$	1,413	$	10,962	$	1,378
Equity securities:
Common stock	$	98	$	16	$	3	$	—	$	58	$	12	$	10	$	—
Non-redeemable preferred stock	—		—		82		6		139		6		120		33
Total equity securities	$	98	$	16	$	85	$	6	$	197	$	18	$	130	$	33
Total number of securities in an unrealized loss position	1,592				886				3,076				940

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities

As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities, equity securities and perpetual hybrid securities, in accordance with its impairment policy, in order to evaluate whether such investments are other-than-temporarily impaired.

Current Period Evaluation

Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company concluded that these securities were not other-than-temporarily impaired at September 30, 2017. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), changes in credit ratings, collateral valuation, interest rates and credit spreads, as well as a change in the Company’s intention to hold or sell a security that is in an unrealized loss position. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

23

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Gross unrealized losses on fixed maturity securities decreased $1.5 billion during the nine months endedSeptember 30, 2017 to $1.2 billion. The decrease in gross unrealized losses for the nine months endedSeptember 30, 2017 was primarily attributable to decreasing longer-term interest rates and narrowing credit spreads, and to a lesser extent the impact of strengthening foreign currencies on non-functional currency denominated fixed maturity securities.

At September 30, 2017, $107 million of the total $1.2 billion of gross unrealized losses were from 30 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.

Gross unrealized losses on equity securities decreased $29 million during the nine months endedSeptember 30, 2017 to $22 million.

Investment Grade Fixed Maturity Securities

Of the $107 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $70 million, or 65%, were related to gross unrealized losses on 13 investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities

Of the $107 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $37 million, or 35%, were related to gross unrealized losses on 17 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to U.S. and foreign corporate securities (primarily industrial and utility securities) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty including concerns over lower oil prices in the energy sector. Management evaluates U.S. and foreign corporate securities based on factors such as expected cash flows and the financial condition and near-term and long-term prospects of the issuers.

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	September 30, 2017					December 31, 2016
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	34,495		59.4	%	$	34,008		60.1	%
Agricultural	12,700			21.9		12,358			21.9
Residential	10,567			18.2		9,895			17.5
Subtotal (1)	57,762			99.5		56,261			99.5
Valuation allowances	(272		)	(0.5	)	(267		)	(0.5	)
Subtotal mortgage loans, net	57,490			99.0		55,994			99.0
Residential — FVO	564			1.0		566			1.0
Total mortgage loans, net	$	58,054		100.0	%	$	56,560		100.0	%

__________________

(1) Purchases of mortgage loans, primarily residential, were$409 millionand $1.9 billionfor thethree monthsand nine months endedSeptember 30, 2017, respectively, and$732 millionand $1.9 billionfor thethree monthsand nine months endedSeptember 30, 2016, respectively.

Mortgage Loans, Valuation Allowance and Impaired Loans by Portfolio Segment

Mortgage loans by portfolio segment, by method of evaluation of credit loss, impaired mortgage loans including those modified in a troubled debt restructuring, and the related valuation allowances, were as follows at:

	Evaluated Individually for Credit Losses										Evaluated Collectively for Credit Losses				Impaired Loans
	Impaired Loans with a Valuation Allowance						Impaired Loans without a Valuation Allowance
	Unpaid Principal Balance		Recorded Investment		Valuation Allowances		Unpaid Principal Balance		Recorded Investment		Recorded Investment		Valuation Allowances		Carrying Value
	(In millions)
September 30, 2017
Commercial	$	—	$	—	$	—	$	—	$	—	$	34,495	$	171	$	—
Agricultural	22		21		2		28		28		12,651		38		47
Residential	—		—		—		335		304		10,263		61		304
Total	$	22	$	21	$	2	$	363	$	332	$	57,409	$	270	$	351
December 31, 2016
Commercial	$	—	$	—	$	—	$	12	$	12	$	33,996	$	167	$	12
Agricultural	11		9		1		27		27		12,322		37		35
Residential	—		—		—		265		241		9,654		62		241
Total	$	11	$	9	$	1	$	304	$	280	$	55,972	$	266	$	288

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $31 million and $297 million, respectively, for the three months endedSeptember 30, 2017; and $6 million, $28 million and $275 million, respectively, for the nine months endedSeptember 30, 2017.

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was$12 million, $48 millionand $202 million, respectively, for thethree months endedSeptember 30, 2016; and$34 million,$52 millionand$174 million, respectively, for thenine months endedSeptember 30, 2016.

Valuation Allowance Rollforward by Portfolio Segment

The changes in the valuation allowance, by portfolio segment, were as follows:

	Nine Months Ended September 30,
	2017											2016
	Commercial		Agricultural			Residential			Total			Commercial		Agricultural			Residential			Total
	(In millions)
Balance, beginning of period	$	167	$	38		$	62		$	267		$	165	$	37		$	55		$	257
Provision (release)	4		4			10			18			—		2			11			13
Charge-offs, net of recoveries	—		(2		)	(11		)	(13		)	—		(2		)	(12		)	(14		)
Balance, end of period	$	171	$	40		$	61		$	272		$	165	$	37		$	54		$	256

24

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Credit Quality of Commercial Mortgage Loans

The credit quality of commercial mortgage loans was as follows at:

	Recorded Investment										Estimated Fair Value		% of Total
	Debt Service Coverage Ratios								% of Total
	> 1.20x		1.00x - 1.20x		< 1.00x		Total
	(Dollars in millions)
September 30, 2017
Loan-to-value ratios:
Less than 65%	$	29,702	$	1,430	$	242	$	31,374	91.0	%	$	32,058	91.1	%
65% to 75%	2,441		159		168		2,768		8.0		2,769		7.9
76% to 80%	149		—		57		206		0.6		202		0.6
Greater than 80%	—		—		147		147		0.4		143		0.4
Total	$	32,292	$	1,589	$	614	$	34,495	100	%	$	35,172	100	%
December 31, 2016
Loan-to-value ratios:
Less than 65%	$	29,352	$	1,036	$	564	$	30,952	91.0	%	$	31,320	91.2	%
65% to 75%	2,522		—		198		2,720		8.0		2,694		7.9
76% to 80%	116		—		—		116		0.3		115		0.3
Greater than 80%	118		27		75		220		0.7		214		0.6
Total	$	32,108	$	1,063	$	837	$	34,008	100	%	$	34,343	100	%

Credit Quality of Agricultural Mortgage Loans

The credit quality of agricultural mortgage loans was as follows at:

	September 30, 2017				December 31, 2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	12,162	95.7	%	$	11,829	95.7	%
65% to 75%	520		4.1		424		3.4
76% to 80%	9		0.1		17		0.2
Greater than 80%	9		0.1		88		0.7
Total	$	12,700	100.0	%	$	12,358	100.0	%

The estimated fair value of agricultural mortgage loans was $12.8 billion and $12.5 billion at September 30, 2017 and December 31, 2016, respectively.

25

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Credit Quality of Residential Mortgage Loans

The credit quality of residential mortgage loans was as follows at:

	September 30, 2017				December 31, 2016
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	10,198	96.5	%	$	9,563	96.6	%
Nonperforming	369		3.5		332		3.4
Total	$	10,567	100.0	%	$	9,895	100.0	%

The estimated fair value of residential mortgage loans was $11.2 billion and $10.3 billion at September 30, 2017 and December 31, 2016, respectively.

Past Due and Nonaccrual Mortgage Loans

The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both September 30, 2017 and December 31, 2016. The Company defines delinquency consistent with industry practice, when mortgage loans are past due as follows: commercial and residential mortgage loans — 60 days and agricultural mortgage loans — 90 days. The past due and nonaccrual mortgage loans at recorded investment, prior to valuation allowances, by portfolio segment, were as follows at:

	Past Due				Greater than 90 Days Past Due and Still Accruing Interest				Nonaccrual
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
	(In millions)
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural	134		127		125		104		36		23
Residential	369		332		—		—		369		332
Total	$	503	$	459	$	125	$	104	$	405	$	355

Mortgage Loans Modified in a Troubled Debt Restructuring

During both thethree months and nine months endedSeptember 30, 2017and2016, the Company did not have a significant amount of mortgage loans modified in a troubled debt restructuring.

Cash Equivalents

The carrying value of cash equivalents was $3.0 billion and $4.7 billion at September 30, 2017 and December 31, 2016, respectively.

26

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Net Unrealized Investment Gains (Losses)

Unrealized investment gains (losses) on fixed maturity and equity securities AFS and the effect on DAC, VOBA, deferred sales inducements (“DSI”), future policy benefits and the policyholder dividend obligation, that would result from the realization of the unrealized gains (losses), are included in net unrealized investment gains (losses) in AOCI.

The components of net unrealized investment gains (losses), included in AOCI, were as follows:

	September 30, 2017			December 31, 2016
	(In millions)
Fixed maturity securities	$	11,787		$	7,912
Fixed maturity securities with noncredit OTTI losses included in AOCI	39			10
Total fixed maturity securities	11,826			7,922
Equity securities	123			72
Derivatives	1,557			2,244
Other	62			16
Subtotal	13,568			10,254
Amounts allocated from:
Future policy benefits	(18		)	(9		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	(1		)	(1		)
DAC, VOBA and DSI	(759		)	(569		)
Policyholder dividend obligation	(2,201		)	(1,931		)
Subtotal	(2,979		)	(2,510		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(13		)	(3		)
Deferred income tax benefit (expense)	(3,689		)	(2,690		)
Net unrealized investment gains (losses)	$	6,887		$	5,051

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

	Nine Months Ended September 30, 2017
	(In millions)
Balance, beginning of period	$	5,051
Fixed maturity securities on which noncredit OTTI losses have been recognized	29
Unrealized investment gains (losses) during the period	3,285
Unrealized investment gains (losses) relating to:
Future policy benefits	(9		)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI	—
DAC, VOBA and DSI	(190		)
Policyholder dividend obligation	(270		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(10		)
Deferred income tax benefit (expense)	(999		)
Balance, end of period	$	6,887
Change in net unrealized investment gains (losses)	$	1,836

Concentrations of Credit Risk

There were no investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, at both September 30, 2017 and December 31, 2016.

27

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Securities Lending

Elements of the securities lending program are presented below at:

	September 30, 2017		December 31, 2016
	(In millions)
Securities on loan: (1)
Amortized cost	$	14,447	$	15,694
Estimated fair value	$	15,551	$	16,496
Cash collateral received from counterparties (2)	$	15,919	$	16,807
Security collateral received from counterparties (3)	$	—	$	14
Reinvestment portfolio — estimated fair value	$	16,012	$	16,821

__________________

(1) Included within fixed maturity securities.

(2) Included within payables for collateral under securities loaned and other transactions.

(3) Security collateral received from counterparties may not be sold or re-pledged, unless the counterparty is in default,and is not reflected on the consolidated financial statements.

The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:

	September 30, 2017								December 31, 2016
	Remaining Tenor of Securities Lending Agreements								Remaining Tenor of Securities Lending Agreements
	Open (1)		1 Month or Less		1 to 6 Months		Total		Open (1)		1 Month or Less		1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	3,532	$	6,962	$	5,425	$	15,919	$	4,033	$	5,640	$	7,134	$	16,807

__________________

(1) The related loaned security could be returned to the Company on the next business day which would require the Company to immediately return the cash collateral.

If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell securities to meet the return obligation, it may have difficulty selling such collateral that is invested in securities in a timely manner, be forced to sell securities in a volatile or illiquid market for less than what otherwise would have been realized under normal market conditions, or both. The estimated fair value of the securities on loan related to the cash collateral on open at September 30, 2017 was $3.5 billion, all of which were U.S. government and agency securities which, if put back to the Company, could be immediately sold to satisfy the cash requirement.

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. government and agency and ABS), short-term investments and cash equivalents with 68% invested in agency RMBS, U.S. government and agency securities, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company.

28

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Repurchase Agreements

Elements of the short-term repurchase agreements are presented below at:

	September 30, 2017
	(In millions)
Securities on loan: (1)
Amortized cost	$	1,879
Estimated fair value	$	2,000
Cash collateral received from counterparties (2)	$	1,960
Reinvestment portfolio — estimated fair value	$	1,972

__________________

(1) Included within fixed maturity securities.

(2) Included within payables for collateral under securities loaned and other transactions.

The cash collateral liability by loaned security type and remaining tenor of the agreements was as follows at:

	September 30, 2017
	Remaining Tenor of Repurchase Agreements
	1 Month or Less		Total
	(In millions)
Cash collateral liability by loaned security type:
U.S. government and agency	$	1,960	$	1,960

The reinvestment portfolio acquired with the cash collateral consisted principally of fixed maturity securities (including agency RMBS, U.S. government and agency securities and ABS), short-term investments and cash equivalents with 68% invested in agency RMBS, U.S. government and agency securities, short-term investments, cash equivalents or held in cash. If the securities on loan or the reinvestment portfolio become less liquid, the Company has the liquidity resources of most of its general account available to meet any potential cash demands when securities on loan are put back to the Company. There were no repurchase agreements outstanding at December 31, 2016.

Invested Assets on Deposit and Pledged as Collateral

Invested assets on deposit and pledged as collateral are presented below at estimated fair value for all asset classes, except mortgage loans, which are presented at carrying value at:

	September 30, 2017		December 31, 2016
	(In millions)
Invested assets on deposit (regulatory deposits)	$	49	$	47
Invested assets pledged as collateral	20,938		20,750
Total invested assets on deposit and pledged as collateral	$	20,987	$	20,797

The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Note 4 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report) and derivative transactions (see Note 6). Amounts in the table above include invested assets, and cash and cash equivalents. See Note 6.

See “— Securities Lending” and “— Repurchase Agreements” for information regarding securities on loan and Note 4 for information regarding investments designated to the closed block.

29

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Variable Interest Entities

The Company has invested in legal entities that are VIEs. In certain instances, the Company holds both the power to direct the most significant activities of the entity, as well as an economic interest in the entity and, as such, is deemed to be the primary beneficiary or consolidator of the entity. The determination of the VIE’s primary beneficiary requires an evaluation of the contractual and implied rights and obligations associated with each party’s relationship with or involvement in the entity, 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.

Consolidated VIEs

Creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company, as the Company’s obligation to the VIEs is limited to the amount of its committed investment.

The following table presents the total assets and total liabilities relating to investment-related VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at:

	September 30, 2017				December 31, 2016
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
Real estate joint ventures (1)	$	1,102	$	—	$	1,124	$	—
Renewable energy partnership (2)	114		—		—		—
Other investments (3)	41		6		62		12
Total	$	1,257	$	6	$	1,186	$	12

__________________

(1) The Company’s investment in these affiliated real estate joint ventures was$1.0 billionat bothSeptember 30, 2017andDecember 31, 2016. Other affiliates’ investments in these affiliated real estate joint ventures totaled$83 millionand$85 millionatSeptember 30, 2017andDecember 31, 2016, respectively.

(2) Assets of the renewable energy partnership, primarily consisting of other invested assets, were consolidated in prior periods. As a result of the Separation and a reassessment in the third quarter of 2017, the renewable energy partnership was determined to be a consolidated VIE.

(3) Other investments is primarily comprised of other invested assets and other limited partnership interests. The Company consolidates entities that are structured as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise.

30

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Unconsolidated VIEs

The carrying amount and maximum exposure to loss relating to VIEs in which the Company holds a significant variable interest but is not the primary beneficiary and which have not been consolidated were as follows at:

	September 30, 2017				December 31, 2016
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	35,845	$	35,845	$	34,912	$	34,912
U.S. and foreign corporate	1,162		1,162		1,167		1,167
Other limited partnership interests	3,490		5,865		3,383		5,674
Other invested assets	2,159		2,570		2,089		2,666
Real estate joint ventures	70		84		81		95
Total	$	42,726	$	45,526	$	41,632	$	44,514

__________________

(1) The maximum exposure to loss relating to fixed maturity securities AFS is equal to their carrying amounts or the carrying amounts of retained interests. The maximum exposure to loss relating to other limited partnership interests and real estate joint ventures is equal to the carrying amounts plus any unfunded commitments. For certain of its investments in other invested assets, the Company’s return is in the form of income tax credits which are guaranteed by creditworthy third parties. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by income tax credits guaranteed by third parties of $123 million and $150 million at September 30, 2017 and December 31, 2016, respectively. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee.

(2) For these variable interests, the Company’s involvement is limited to that of a passive investor in mortgage-backed or asset backed securities issued by trusts that do not have substantial equity.

As described in Note 11, 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 both the nine months endedSeptember 30, 2017 and 2016.

31

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Net Investment Income

The components of net investment income were as follows:

	Three Months   Ended  September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In millions)
Investment income:
Fixed maturity securities	$	1,764	$	1,907	$	5,274	$	5,803
Equity securities	20		19		68		65
Mortgage loans	697		630		1,989		1,930
Policy loans	77		104		230		311
Real estate and real estate joint ventures	104		159		327		366
Other limited partnership interests	163		154		506		274
Cash, cash equivalents and short-term investments	20		10		54		31
Operating joint venture	6		2		12		7
Other	49		67		154		136
Subtotal	2,900		3,052		8,614		8,923
Less: Investment expenses	240		182		659		574
Net investment income	$	2,660	$	2,870	$	7,955	$	8,349

See “— Related Party Investment Transactions” for discussion of affiliated net investment income and investment expenses.

32

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Net Investment Gains (Losses)

Components of Net Investment Gains (Losses)

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

	Three Months   Ended  September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Total gains (losses) on fixed maturity securities:
Total OTTI losses recognized — by sector and industry:
U.S. and foreign corporate securities — by industry:
Industrial	$	—		$	—		$	—		$	(58	)
Communications	—			—			—			(3		)
Consumer	(5		)	—			(5		)	—
Total U.S. and foreign corporate securities	(5		)	—			(5		)	(61		)
State and political subdivision	—			—			(1		)	—
RMBS	—			(9		)	—			(14		)
OTTI losses on fixed maturity securities recognized in earnings	(5		)	(9		)	(6		)	(75		)
Fixed maturity securities — net gains (losses) on sales and disposals	1			61			41			268
Total gains (losses) on fixed maturity securities	(4		)	52			35			193
Total gains (losses) on equity securities:
Total OTTI losses recognized — by sector:
Common stock	(4		)	(5		)	(16		)	(71		)
Non-redeemable preferred stock	—			—			(1		)	—
OTTI losses on equity securities recognized in earnings	(4		)	(5		)	(17		)	(71		)
Equity securities — net gains (losses) on sales and disposals	—			7			1			21
Total gains (losses) on equity securities	(4		)	2			(16		)	(50		)
Mortgage loans	(16		)	(9		)	(44		)	(6		)
Real estate and real estate joint ventures	169			20			436			28
Other limited partnership interests	(30		)	(8		)	(44		)	(38		)
Other	21			(14		)	(90		)	(44		)
Subtotal	136			43			277			83
FVO consolidated securitization entities:
Securities	—			1			—			2
Non-investment portfolio gains (losses)	(40		)	(2		)	(93		)	30
Subtotal	(40		)	(1		)	(93		)	32
Total net investment gains (losses)	$	96		$	42		$	184		$	115

See “— Related Party Investment Transactions” for discussion of affiliated net investment gains (losses) related to transfers of invested assets to affiliates.

Gains (losses) from foreign currency transactions included within net investment gains (losses) were($30) millionand ($139) millionfor thethree months and nine months endedSeptember 30, 2017, respectively,and$1 millionand $24 millionfor thethree monthsand nine months endedSeptember 30, 2016, respectively.

33

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Sales or Disposals and Impairments of Fixed Maturity and Equity Securities

Investment gains and losses on sales of securities are determined on a specific identification basis. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) were as shown in the table below.

	Three Months   Ended  September 30,
	2017			2016			2017			2016
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	5,888		$	15,343		$	317		$	28
Gross investment gains	$	32		$	135		$	4		$	9
Gross investment losses	(31		)	(74		)	(4		)	(2		)
OTTI losses	(5		)	(9		)	(4		)	(5		)
Net investment gains (losses)	$	(4	)	$	52		$	(4	)	$	2

	Nine Months Ended September 30,
	2017			2016			2017			2016
	Fixed Maturity Securities						Equity Securities
	(In millions)
Proceeds	$	22,256		$	41,425		$	407		$	85
Gross investment gains	$	225		$	637		$	9		$	28
Gross investment losses	(184		)	(369		)	(8		)	(7		)
OTTI losses	(6		)	(75		)	(17		)	(71		)
Net investment gains (losses)	$	35		$	193		$	(16	)	$	(50	)

Credit Loss Rollforward

The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was recognized in other comprehensive income (loss) (“OCI”):

	Three Months   Ended  September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Balance, beginning of period	$	136		$	171		$	157		$	188
Addition:
Additional impairments — credit loss OTTI on securities previously impaired	—			8			—			11
Reduction:
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI	(4		)	(10		)	(25		)	(30		)
Balance, end of period	$	132		$	169		$	132		$	169

34

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

5. Investments (continued)

Related Party Investment Transactions

The Company transfers invested assets primarily consisting of fixed maturity securities and mortgage loans to and from affiliates. Invested assets transferred to and from affiliates were as follows:

	Three Months   Ended  September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In millions)
Estimated fair value of invested assets transferred to affiliates	$	—	$	179	$	453	$	4,555
Amortized cost of invested assets transferred to affiliates	$	—	$	169	$	416	$	4,297
Net investment gains (losses) recognized on transfers	$	—	$	10	$	37	$	258
Estimated fair value of invested assets transferred from affiliates	$	—	$	51	$	293	$	150

In January 2017, the Company received transferred investments with an estimated fair value of $292 million, which are included in the table above, in addition to $275 million in cash related to the recapture of risks from minimum benefit guarantees on certain variable annuities previously reinsured by Brighthouse Life Insurance Company (“Brighthouse Insurance”). See Note 12 for additional information related to the transfer.

Below is a summary of certain affiliated loans which are more fully described in Note 8 of the Notes of the Consolidated Financial Statements included in the 2016 Annual Report.

The Company had affiliated loans outstanding to MetLife, Inc., which are included in other invested assets, totaling$1.8 billionat bothSeptember 30, 2017andDecember 31, 2016. Net investment income from affiliated loans was$19 millionand $58 millionfor thethree monthsandnine months endedSeptember 30, 2017, respectively,and$23 millionand $70 millionfor thethree monthsandnine months endedSeptember 30, 2016, respectively.

As a structured settlements assignment company, the Company purchases annuities from Brighthouse to fund the periodic structured settlement claim payment obligations it assumes. Each annuity purchased is contractually designated to the assumed claim obligation it funds. The aggregate annuity contract values recorded, for which the Company has also recorded unpaid claim obligations of equal amounts, were$1.3 billionat bothSeptember 30, 2017andDecember 31, 2016. The related net investment income and corresponding policyholder benefits and claims recognized were$18 millionand$51 millionfor thethree monthsandnine months endedSeptember 30, 2017, respectively, and$17 millionand$46 millionfor thethree monthsandnine months endedSeptember 30, 2016, respectively.

The Company holds a surplus note from American Life Insurance Company, an affiliate, which is included in other invested assets, with a carrying value of$100 millionat bothSeptember 30, 2017andDecember 31, 2016. Net investment income from this surplus note was$1 millionand$3 millionfor both thethree monthsandnine months endedSeptember 30, 2017,andthethree monthsandnine months endedSeptember 30, 2016.

The Company held preferred stock of Metropolitan Property and Casualty Insurance Company, an affiliate, which was included in other invested assets, with a carrying value of$315 millionat bothSeptember 30, 2017andDecember 31, 2016. Net investment income from the affiliated preferred stock dividends was$1 millionand$4 millionfor both thethree monthsandnine months endedSeptember 30, 2017, and thethree monthsandnine months endedSeptember 30, 2016.

In March 2017, the Company purchased from Brighthouse Insurance an interest in an operating joint venture for $286 million, which was settled in cash in April 2017.

The Company provides investment administrative services to certain affiliates. The related investment administrative service charges to these affiliates were$18 millionand $54 millionfor thethree monthsandnine months endedSeptember 30, 2017, respectively, and$42 million and$127 millionfor thethree monthsandnine months endedSeptember 30, 2016, respectively.

See “— Variable Interest Entities” for information on investments in affiliated real estate joint ventures.

35

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives

Accounting for Derivatives

Freestanding Derivatives

Freestanding derivatives are carried on the Company’s balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value. The Company does not offset the estimated fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreement.

Accruals on derivatives are generally recorded in accrued investment income or within other liabilities. However, accruals that are not scheduled to settle within one year are included with the derivatives carrying value in other invested assets or other liabilities.

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 reported in net derivative gains (losses) except as follows:

Statement of Operations Presentation:	Derivative:
Policyholder benefits and claims	•	Economic hedges of variable annuity guarantees included in future policy benefits
Net investment income	•	Economic hedges of equity method investments in joint ventures
	•	All derivatives held in relation to trading portfolios

Hedge Accounting

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. Hedge designation and financial statement presentation of changes in estimated fair value of the hedging derivatives are as follows:

• Fair value hedge (a hedge of the estimated fair value of a recognized asset or liability) - in net derivative gains (losses), consistent with the change in estimated fair value of the hedged item attributable to the designated risk being hedged.

• Cash flow hedge (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) - effectiveness in OCI (deferred gains or losses on the derivative are reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item); ineffectiveness in net derivative gains (losses).

The changes in estimated fair values of the hedging derivatives are exclusive of any accruals that are separately reported on the statement of operations within interest income or interest expense to match the location of the hedged item.

In its hedge 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 that 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 at least quarterly throughout the life of the designated hedging relationship. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income.

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

36

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

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 balance sheet at its estimated fair value, with changes in estimated fair value recognized in net derivative gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its estimated fair value due to the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in estimated fair value of derivatives recorded in OCI related to discontinued cash flow hedges are released into the statement of operations 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 on the anticipated date or within two months of that date, the derivative continues to be carried on the balance sheet at its estimated fair value, with changes in estimated fair value recognized currently in net derivative gains (losses). Deferred gains and losses of a derivative recorded in OCI pursuant to the discontinued cash flow hedge of a forecasted transaction that is no longer probable are recognized immediately in net derivative gains (losses).

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

Embedded Derivatives

The Company sells variable annuities and issues certain insurance products and investment contracts and is a party to certain reinsurance agreements that have embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated. The embedded derivative is bifurcated from the host contract and accounted for as a freestanding derivative if:

• the combined instrument is not accounted for in its entirety at estimated fair value with changes in estimated fair value recorded in earnings;

• the terms of the embedded derivative are not clearly and closely related to the economic characteristics of the host contract; and

• a separate instrument with the same terms as the embedded derivative would qualify as a derivative instrument.

Such embedded derivatives are carried on the balance sheet at estimated fair value with the host contract and changes in their estimated fair value are generally reported in net derivative gains (losses). If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income. Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) or net investment income if that contract contains an embedded derivative that requires bifurcation. At inception, the Company attributes to the embedded derivative a portion of the projected future guarantee fees to be collected from the policyholder equal to the present value of projected future guaranteed benefits. Any additional fees represent “excess” fees and are reported in universal life and investment-type product policy fees.

See Note 7 for information about the fair value hierarchy for derivatives.

Derivative Strategies

The Company is exposed to various risks relating to its ongoing business operations, including interest rate, foreign currency exchange rate, credit and equity market. The Company uses a variety of strategies to manage these risks, including the use of derivatives.

Derivatives are financial instruments with values derived from interest rates, foreign currency exchange rates, credit spreads and/or other financial indices. Derivatives may be exchange-traded or contracted in the over-the-counter (“OTC”) market. Certain of the Company’s OTC derivatives are cleared and settled through central clearing counterparties (“OTC-cleared”), while others are bilateral contracts between two counterparties (“OTC-bilateral”). The types of derivatives the Company uses include swaps, forwards, futures and option contracts. To a lesser extent, the Company uses credit default swaps and structured interest rate swaps to synthetically replicate investment risks and returns which are not readily available in the cash markets.

37

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

Interest Rate Derivatives

The Company uses a variety of interest rate derivatives to reduce its exposure to changes in interest rates, including interest rate swaps, interest rate total return swaps, caps, floors, swaptions, futures and forwards.

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 amount. The Company utilizes interest rate swaps in fair value, cash flow and nonqualifying hedging relationships.

The Company uses structured interest rate swaps to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. government and agency, or other fixed maturity security. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.

Interest rate total return swaps are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and the London Interbank Offered Rate (“LIBOR”), calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. 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. Interest rate total return swaps are used by the Company to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). The Company utilizes interest rate total return swaps in nonqualifying hedging relationships.

The Company purchases interest rate caps and floors primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and against interest rate exposure arising from mismatches between assets and liabilities, 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 nonqualifying hedging relationships.

Swaptions are used by the Company to hedge interest rate risk associated with the Company’s long-term liabilities and invested assets. A swaption is an option to enter into a swap with a forward starting effective date. In certain instances, the Company locks in the economic impact of existing purchased swaptions by entering into offsetting written swaptions. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. The Company utilizes swaptions in nonqualifying hedging relationships. Swaptions are included in interest rate options.

The Company enters into interest rate forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. The Company utilizes interest rate forwards in cash flow and nonqualifying hedging relationships.

To a lesser extent, the Company uses exchange-traded interest rate futures in nonqualifying hedging relationships.

Foreign Currency Exchange Rate Derivatives

The Company uses foreign currency exchange rate derivatives, including foreign currency swaps and foreign currency forwards, 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 notional amount. The notional 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 nonqualifying 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 at the specified future date. The Company utilizes foreign currency forwards in nonqualifying hedging relationships.

38

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

Credit Derivatives

The Company enters into purchased credit default swaps to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party to pay, at specified intervals, a premium to hedge credit risk. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional amount in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. Credit events vary by type of issuer but typically include bankruptcy, failure to pay debt obligations, repudiation, moratorium, involuntary restructuring or governmental intervention. In each case, payout on a credit default swap is triggered only after the Credit Derivatives Determinations Committee of the International Swaps and Derivatives Association, Inc. (“ISDA”) deems that a credit event has occurred. The Company utilizes credit default swaps in nonqualifying hedging relationships.

The Company enters into written credit default swaps to synthetically create credit investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and one or more cash instruments, such as U.S. government and agency securities, or other fixed maturity securities. These credit default swaps are not designated as hedging instruments.

The Company enters into forwards to lock in the price to be paid for forward purchases of certain securities. The price is agreed upon at the time of the contract and payment for the contract is made at a specified future date. When the primary purpose of entering into these transactions is to hedge against the risk of changes in purchase price due to changes in credit spreads, the Company designates these transactions as credit forwards. The Company utilizes credit forwards in cash flow hedging relationships.

Equity Derivatives

The Company uses a variety of equity derivatives to reduce its exposure to equity market risk, including equity index options, equity variance swaps, exchange-traded equity futures and equity total return swaps.

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. Certain of these contracts may also contain settlement provisions linked to interest rates. 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. The Company utilizes equity index options in nonqualifying 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. The Company utilizes equity variance swaps in nonqualifying hedging relationships.

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

In an equity total return swap, the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. The Company uses equity total return swaps to hedge its equity market guarantees in certain of its insurance products. Equity total return swaps can be used as hedges or to synthetically create investments. The Company utilizes equity total return swaps in nonqualifying hedging relationships.

39

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

Primary Risks Managed by Derivatives

The following table presents the primary underlying risk exposure, gross notional amount, and estimated fair value of the Company’s derivatives, excluding embedded derivatives, held at:

		September 30, 2017						December 31, 2016
	Primary Underlying Risk Exposure	Gross Notional Amount		Estimated Fair Value				Gross Notional Amount		Estimated Fair Value
				Assets		Liabilities				Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments:
Fair value hedges:
Interest rate swaps	Interest rate	$	3,942	$	2,305	$	3	$	4,993	$	2,221	$	6
Foreign currency swaps	Foreign currency exchange rate	636		44		4		1,200		29		224
Subtotal		4,578		2,349		7		6,193		2,250		230
Cash flow hedges:
Interest rate swaps	Interest rate	3,534		307		—		1,793		325		26
Interest rate forwards	Interest rate	3,413		—		203		4,033		—		370
Foreign currency swaps	Foreign currency exchange rate	22,027		936		1,043		20,080		1,435		1,604
Subtotal		28,974		1,243		1,246		25,906		1,760		2,000
Total qualifying hedges		33,552		3,592		1,253		32,099		4,010		2,230
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	43,155		1,773		328		32,662		2,514		879
Interest rate floors	Interest rate	7,201		127		—		9,001		173		2
Interest rate caps	Interest rate	73,018		54		2		78,358		112		3
Interest rate futures	Interest rate	2,096		2		—		2,342		3		—
Interest rate options	Interest rate	7,525		156		35		850		144		1
Interest rate forwards	Interest rate	—		—		—		396		—		3
Interest rate total return swaps	Interest rate	1,048		3		9		1,549		2		127
Synthetic GICs	Interest rate	11,254		—		—		5,566		—		—
Foreign currency swaps	Foreign currency exchange rate	7,068		644		135		8,175		1,247		58
Foreign currency forwards	Foreign currency exchange rate	1,429		37		6		1,396		52		18
Credit default swaps — purchased	Credit	878		10		7		961		12		6
Credit default swaps — written	Credit	8,031		166		1		8,025		119		8
Equity futures	Equity market	1,712		—		6		1,851		10		—
Equity index options	Equity market	6,773		223		496		11,119		260		426
Equity variance swaps	Equity market	5,579		81		228		5,579		69		193
Equity total return swaps	Equity market	1,063		—		35		1,013		1		42
Total non-designated or nonqualifying derivatives		177,830		3,276		1,288		168,843		4,718		1,766
Total		$	211,382	$	6,868	$	2,541	$	200,942	$	8,728	$	3,996

Based on gross notional amounts, a substantial portion of the Company’s derivatives was not designated or did not qualify as part of a hedging relationship at both September 30, 2017 and December 31, 2016. The Company’s use of derivatives includes (i) derivatives that serve as macro hedges of the Company’s exposure to various risks and that generally do not qualify for hedge accounting due to the criteria required under the portfolio hedging rules; (ii) derivatives that economically hedge insurance liabilities that contain mortality or morbidity risk and that generally do not qualify for hedge accounting because the lack of these risks in the derivatives cannot support an expectation of a highly effective hedging relationship; (iii) derivatives that economically hedge embedded derivatives that do not qualify for hedge accounting because the changes in estimated fair value of the embedded derivatives are already recorded in net income; and (iv) written credit default swaps and interest rate swaps that are used to synthetically create investments and that do not qualify for hedge accounting because they do not involve a hedging relationship. For these nonqualified derivatives, changes in market factors can lead to the recognition of fair value changes on the statement of operations without an offsetting gain or loss recognized in earnings for the item being hedged.

40

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

Net Derivative Gains (Losses)

The components of net derivative gains (losses) were as follows:

	Three Months   Ended   September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Freestanding derivatives and hedging gains (losses) (1)	$	(167	)	$	(342	)	$	(634	)	$	947
Embedded derivatives gains (losses)	141			137			317			(1,509		)
Total net derivative gains (losses)	$	(26	)	$	(205	)	$	(317	)	$	(562	)

__________________

(1) Includes foreign currency transaction gains (losses) on hedged items in cash flow and nonqualifying hedging relationships, which are not presented elsewhere in this note.

The following table presents earned income on derivatives:

	Three Months   Ended   September 30,					Nine Months Ended September 30,
	2017			2016		2017			2016
	(In millions)
Qualifying hedges:
Net investment income	$	73		$	70	$	220		$	199
Interest credited to policyholder account balances	(20		)	—		(40		)	7
Nonqualifying hedges:
Net investment income	—			—		—			(1		)
Net derivative gains (losses)	93			152		327			428
Policyholder benefits and claims	2			1		4			3
Total	$	148		$	223	$	511		$	636

41

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

Nonqualifying Derivatives and Derivatives for Purposes Other Than Hedging

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

	Net Derivative Gains (Losses)			Net Investment Income (1)			Policyholder Benefits and Claims (2)
	(In millions)
Three Months Ended September 30, 2017
Interest rate derivatives	$	(60	)	$	(2	)	$	—
Foreign currency exchange rate derivatives	(238		)	—			—
Credit derivatives — purchased	(6		)	—			—
Credit derivatives — written	24			—			—
Equity derivatives	(124		)	(2		)	(52		)
Total	$	(404	)	$	(4	)	$	(52	)
Three Months Ended September 30, 2016
Interest rate derivatives	$	(305	)	$	—		$	—
Foreign currency exchange rate derivatives	65			—			—
Credit derivatives — purchased	(13		)	—			—
Credit derivatives — written	36			—			—
Equity derivatives	(231		)	(2		)	(62		)
Total	$	(448	)	$	(2	)	$	(62	)
Nine Months Ended September 30, 2017
Interest rate derivatives	$	(260	)	$	(2	)	$	—
Foreign currency exchange rate derivatives	(639		)	—			—
Credit derivatives — purchased	(14		)	—			—
Credit derivatives — written	80			—			—
Equity derivatives	(442		)	(4		)	(149		)
Total	$	(1,275	)	$	(6	)	$	(149	)
Nine Months Ended September 30, 2016
Interest rate derivatives	$	867		$	—		$	—
Foreign currency exchange rate derivatives	275			—			—
Credit derivatives — purchased	(31		)	—			—
Credit derivatives — written	38			—			—
Equity derivatives	(304		)	(12		)	(57		)
Total	$	845		$	(12	)	$	(57	)

__________________

(1) Changes in estimated fair value related to economic hedges of equity method investments in joint ventures and derivatives held in relation to trading portfolios.

(2) Changes in estimated fair value related to economic hedges of variable annuity guarantees included in future policy benefits.

Fair Value Hedges

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

42

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges within net derivative gains (losses). The following table presents the amount of such net derivative gains (losses):

Derivatives in Fair Value Hedging Relationships	Hedged Items in Fair Value Hedging Relationships	Net Derivative Gains (Losses) Recognized for Derivatives			Net Derivative Gains (Losses) Recognized for Hedged Items			Ineffectiveness Recognized in Net Derivative Gains (Losses)
		(In millions)
Three Months Ended September 30, 2017
Interest rate swaps:	Fixed maturity securities	$	1		$	—		$	1
	Policyholder liabilities (1)	(13		)	12			(1		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	(8		)	9			1
	Foreign-denominated policyholder account balances (2)	15			(16		)	(1		)
Total		$	(5	)	$	5		$	—
Three Months Ended September 30, 2016
Interest rate swaps:	Fixed maturity securities	$	5		$	(3	)	$	2
	Policyholder liabilities (1)	(47		)	42			(5		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	1			(1		)	—
	Foreign-denominated policyholder account balances (2)	(1		)	1			—
Total		$	(42	)	$	39		$	(3	)
Nine Months Ended September 30, 2017
Interest rate swaps:	Fixed maturity securities	$	2		$	(2	)	$	—
	Policyholder liabilities (1)	(15		)	83			68
Foreign currency swaps:	Foreign-denominated fixed maturity securities	(13		)	14			1
	Foreign-denominated policyholder account balances (2)	61			(40		)	21
Total		$	35		$	55		$	90
Nine Months Ended September 30, 2016
Interest rate swaps:	Fixed maturity securities	$	(3	)	$	1		$	(2	)
	Policyholder liabilities (1)	472			(482		)	(10		)
Foreign currency swaps:	Foreign-denominated fixed maturity securities	5			(4		)	1
	Foreign-denominated policyholder account balances (2)	(27		)	24			(3		)
Total		$	447		$	(461	)	$	(14	)

__________________

(1) Fixed rate liabilities reported in policyholder account balances or future policy benefits.

(2) Fixed rate or floating rate liabilities.

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Cash Flow Hedges

The Company designates and accounts for the following as cash flow hedges when they have met the requirements of cash flow hedging: (i) interest rate swaps to convert floating rate assets and liabilities to fixed rate assets and liabilities; (ii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated assets and liabilities; (iii) interest rate forwards and credit forwards to lock in the price to be paid for forward purchases of investments; and (iv) interest rate swaps and interest rate forwards to hedge the forecasted purchases of fixed-rate investments.

43

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net derivative gains (losses). There were no amounts reclassified from AOCI into net derivative gains (losses) for the three months ended September 30, 2017. The amount reclassified from AOCI into net derivative gains (losses) was $20 million for the nine months ended September 30, 2017. These amounts were $7 million and $10 million for the three months and nine months endedSeptember 30, 2016.

At both September 30, 2017 and December 31, 2016, the maximum length of time over which the Company was hedging its exposure to variability in future cash flows for forecasted transactions did not exceed five years.

At September 30, 2017 and December 31, 2016, the balance in AOCI associated with cash flow hedges was $1.6 billion and $2.2 billion, respectively.

The following table presents the effects of derivatives in cash flow hedging relationships on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of equity:

Derivatives in Cash Flow Hedging Relationships	Amount of Gains (Losses) Deferred in AOCI on Derivatives			Amount and Location of Gains (Losses) Reclassified from AOCI into Income (Loss)						Amount and Location of Gains (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)			(Effective Portion)						(Ineffective Portion)
				Net Derivative Gains (Losses)			Net Investment Income			Net Derivative Gains (Losses)
	(In millions)
Three Months Ended September 30, 2017
Interest rate swaps	$	15		$	8		$	4		$	(2	)
Interest rate forwards	2			(1		)	1			—
Foreign currency swaps	(37		)	282			(1		)	—
Credit forwards	—			—						—
Total	$	(20	)	$	289		$	4		$	(2	)
Three Months Ended September 30, 2016
Interest rate swaps	$	21		$	27		$	4		$	—
Interest rate forwards	(6		)	1			—			—
Foreign currency swaps	24			69			—			(4		)
Credit forwards	—			—			—			—
Total	$	39		$	97		$	4		$	(4	)
Nine Months Ended September 30, 2017
Interest rate swaps	$	90		$	22		$	12		$	5
Interest rate forwards	138			(5		)	2			(1		)
Foreign currency swaps	(2		)	882			(1		)	1
Credit forwards	—			1			—			—
Total	$	226		$	900		$	13		$	5
Nine Months Ended September 30, 2016
Interest rate swaps	$	330		$	44		$	10		$	—
Interest rate forwards	34			—			2			—
Foreign currency swaps	339			169			(1		)	(3		)
Credit forwards	—			3			—			—
Total	$	703		$	216		$	11		$	(3	)

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

44

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

AtSeptember 30, 2017,the Company expected to reclassify ($3) millionof deferred net gains (losses) on derivatives in AOCI to earnings within the next 12 months.

Credit Derivatives

In connection with synthetically created credit investment transactions, the Company writes credit default swaps for which it receives a premium to insure credit risk. Such credit derivatives are included within the nonqualifying derivatives and derivatives for purposes other than hedging table. If a credit event occurs, as defined by the contract, the contract may be cash settled or it may be settled gross by the Company paying the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company’s maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $8.0 billion at both September 30, 2017 and December 31, 2016. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current estimated fair value of the credit default swaps. At September 30, 2017 and December 31, 2016, the Company would have received $165 million and $111 million, respectively, to terminate all of these contracts.

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

	September 30, 2017					December 31, 2016
Rating Agency Designation of Referenced Credit Obligations (1)	Estimated Fair Value of Credit Default Swaps		Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)	Estimated Fair Value of Credit Default Swaps			Maximum Amount of Future Payments under Credit Default Swaps		Weighted Average Years to Maturity (2)
	(Dollars in millions)
Aaa/Aa/A
Single name credit default swaps (3)	$	3	$	229	2.2	$	1		$	229	2.7
Credit default swaps referencing indices	42		2,193		3.0	32			2,093		3.5
Subtotal	45		2,422		2.9	33			2,322		3.4
Baa
Single name credit default swaps (3)	5		493		1.6	3			563		2.2
Credit default swaps referencing indices	96		4,761		5.4	61			4,730		5.1
Subtotal	101		5,254		5.0	64			5,293		4.8
Ba
Single name credit default swaps (3)	—		105		3.6	(2		)	115		4.2
Credit default swaps referencing indices	—		—		—	—			—		—
Subtotal	—		105		3.6	(2		)	115		4.2
B
Single name credit default swaps (3)	2		30		2.6	—			70		1.8
Credit default swaps referencing indices	17		220		5.2	16			225		5.0
Subtotal	19		250		4.9	16			295		4.2
Total	$	165	$	8,031	4.4	$	111		$	8,025	4.4

__________________

(1) The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s Investors Service (“Moody’s”),Standard & Poor’s Global Ratings (“S&P”) and Fitch Ratings. If no rating is available from a rating agency, then an internally developed rating is used.

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

(3) Single name credit default swaps may be referenced to the credit of corporations, foreign governments, or state and political subdivisions.

45

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table above. As a result, the maximum amount of potential future recoveries available to offset the $8.0 billion from the table above was $30 million at both September 30, 2017 and December 31, 2016.

Credit Risk on Freestanding Derivatives

The Company may be exposed to credit-related losses in the event of nonperformance by its counterparties to derivatives. Generally, the current credit exposure of the Company’s derivatives is limited to the net positive estimated fair value of derivatives at the reporting date after taking into consideration the existence of master netting or similar agreements and any collateral received pursuant to such agreements.

The Company manages its credit risk related to derivatives by entering into transactions with creditworthy counterparties and establishing and monitoring exposure limits. The Company’s OTC-bilateral derivative transactions are generally governed by ISDA Master Agreements which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties in the event of early termination of a transaction, which includes, but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from the counterparty against payables to the same counterparty arising out of all included transactions. Substantially all of the Company’s ISDA Master Agreements also include Credit Support Annex provisions which require both the pledging and accepting of collateral in connection with its OTC-bilateral derivatives.

The Company’s OTC-cleared derivatives are effected through central clearing counterparties and its exchange-traded derivatives are effected through regulated exchanges. Such positions are marked to market and margined on a daily basis (both initial margin and variation margin), and the Company has minimal exposure to credit-related losses in the event of nonperformance by counterparties to such derivatives.

See Note 7 for a description of the impact of credit risk on the valuation of derivatives.

46

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

The estimated fair values of the Company’s net derivative assets and net derivative liabilities after the application of master netting agreements and collateral were as follows at:

	September 30, 2017						December 31, 2016
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement (1)	Assets			Liabilities			Assets			Liabilities
	(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)	$	6,773		$	2,284		$	7,926		$	3,349
OTC-cleared (1), (6)	152			218			905			611
Exchange-traded	2			6			13			—
Total gross estimated fair value of derivatives (1)	6,927			2,508			8,844			3,960
Amounts offset on the consolidated balance sheets	—			—			—			—
Estimated fair value of derivatives presented on the consolidated balance  sheets (1), (6)	6,927			2,508			8,844			3,960
Gross amounts not offset on the consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(1,914		)	(1,914		)	(2,737		)	(2,737		)
OTC-cleared	(32		)	(32		)	(391		)	(391		)
Exchange-traded	—			—			—			—
Cash collateral: (3), (4)
OTC-bilateral	(3,702		)	—			(3,418		)	—
OTC-cleared	(115		)	(181		)	(497		)	(217		)
Exchange-traded	—			—			—			—
Securities collateral: (5)
OTC-bilateral	(1,092		)	(371		)	(1,560		)	(609		)
OTC-cleared	—			(5		)	—			—
Exchange-traded	—			(5		)	—			—
Net amount after application of master netting agreements and collateral	$	72		$	—		$	241		$	6

__________________

(1) AtSeptember 30, 2017andDecember 31, 2016, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of$59 millionand$116 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of($33) millionand ($36) million, respectively.

(2) Estimated fair value of derivatives is limited to the amount that is subject to set-off and includes income or expense accruals.

(3) Cash collateral received by the Company for OTC-bilateral and OTC-cleared derivatives is included in cash and cash equivalents, short-term investments or in fixed maturity securities, and the obligation to return it is included in payables for collateral under securities loaned and other transactions on the balance sheet.

(4) The receivable for the return of cash collateral provided by the Company is inclusive of initial margin on exchange-traded and OTC-cleared derivatives and is included in premiums, reinsurance and other receivables on the balance sheet. The amount of cash collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements. At September 30, 2017 and December 31, 2016, the Company received excess cash collateral of $143 million and $77 million, respectively, and provided excess cash collateral of $4 million and $9 million, respectively, which is not included in the table above due to the foregoing limitation.

47

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

(5) Securities collateral received by the Company is held in separate custodial accounts and is not recorded on the balance sheet. Subject to certain constraints, the Company is permitted by contract to sell or re-pledge this collateral, but at September 30, 2017, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At September 30, 2017 and December 31, 2016, the Company received excess securities collateral with an estimated fair value of $81 million and $21 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At September 30, 2017 and December 31, 2016, the Company provided excess securities collateral with an estimated fair value of $179 million and $75 million, respectively, for its OTC-bilateral derivatives, and $307 million and $531 million, respectively, for its OTC-cleared derivatives, and $66 million and $116 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

(6) Effective January 3, 2017, the CME amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. See Note 1 for further information on the CME amendments.

The Company’s collateral arrangements for its OTC-bilateral derivatives generally require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the amount owed by that party reaches a minimum transfer amount. A small number of these arrangements also include financial strength or credit rating contingent provisions that include a threshold above which collateral must be posted. Such agreements provide for a reduction of these thresholds (on a sliding scale that converges toward zero) in the event of downgrades in credit ratings of Metropolitan Life Insurance Company and/or the credit ratings of the counterparty. In addition, substantially all of the Company’s netting agreements for derivatives contain provisions that require both Metropolitan Life Insurance Company and the counterparty to maintain a specific investment grade financial strength or credit rating from each of Moody’s and S&P. If a party’s financial strength or credit ratings were to fall below that specific investment grade financial strength or credit rating, that party would be in violation of these provisions, and the other party to the derivatives could terminate the transactions and demand immediate settlement and payment based on such party’s reasonable valuation of the derivatives.

48

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

The following table presents the estimated fair value of the Company’s OTC-bilateral 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 Metropolitan Life Insurance Company would be required to provide if there was a one-notch downgrade in its financial strength or credit rating, as applicable, at the reporting date or if its financial strength or credit rating, as applicable, sustained a downgrade to a level that triggered full overnight collateralization or termination of the derivative position at the reporting date. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.

	September 30, 2017						December 31, 2016
	Derivatives Subject to Financial Strength- Contingent Provisions		Derivatives Not Subject to Financial Strength- Contingent Provisions		Total		Derivatives Subject to Financial Strength- Contingent Provisions		Derivatives Not Subject to Financial Strength- Contingent Provisions		Total
	(In millions)
Estimated Fair Value of Derivatives in a Net Liability Position (1)	$	371	$	—	$	371	$	612	$	—	$	612
Estimated Fair Value of Collateral Provided:
Fixed maturity securities	$	465	$	—	$	465	$	684	$	—	$	684
Cash	$	—	$	—	$	—	$	—	$	—	$	—
Estimated Fair Value of Incremental Collateral Provided Upon:
One-notch downgrade in financial strength or credit rating, as applicable	$	—	$	—	$	—	$	—	$	—	$	—
Downgrade in financial strength or credit rating, as applicable, to a level that triggers full overnight collateralization or termination of the derivative position	$	—	$	—	$	—	$	—	$	—	$	—

__________________

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

Embedded Derivatives

The Company issues certain products or purchases certain investments that contain embedded derivatives that are required to be separated from their host contracts and accounted for as freestanding derivatives. These host contracts principally include: variable annuities with guaranteed minimum benefits, including GMWBs, GMABs and certain GMIBs; affiliated ceded reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; affiliated assumed reinsurance of guaranteed minimum benefits related to GMWBs, GMABs and certain GMIBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance; fixed annuities with equity indexed returns; and certain debt and equity securities.

49

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

6. Derivatives (continued)

The following table presents the estimated fair value and balance sheet location of the Company’s embedded derivatives that have been separated from their host contracts at:

	Balance Sheet Location	September 30, 2017			December 31, 2016
		(In millions)
Embedded derivatives within asset host contracts:
Ceded guaranteed minimum benefits	Premiums, reinsurance and other receivables	$	—		$	460
Options embedded in debt or equity securities	Investments	(119		)	(78		)
Embedded derivatives within asset host contracts		$	(119	)	$	382
Embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	Policyholder account balances	$	(31	)	$	169
Assumed guaranteed minimum benefits	Policyholder account balances	3			390
Funds withheld on ceded reinsurance	Other liabilities	906			777
Fixed annuities with equity indexed returns	Policyholder account balances	53			17
Embedded derivatives within liability host contracts		$	931		$	1,353

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

	Three Months   Ended   September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(In millions)
Net derivative gains (losses) (1), (2)	$	141	$	137	$	317	$	(1,509	)

__________________

(1) The valuation of direct and assumed guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($17) million and ($39) million for the three months and nine months endedSeptember 30, 2017, respectively, and ($47) million and $173 million for the three months and nine months endedSeptember 30, 2016, respectively. In addition, the valuation of ceded guaranteed minimum benefits includes a nonperformance risk adjustment. For the three months and nine months endedSeptember 30, 2017, the Company did not have any ceded guaranteed minimum benefits. The amounts included in net derivative gains (losses) in connection with this adjustment were $9 million and ($64) million for the three months and nine months endedSeptember 30, 2016, respectively.

(2) See Note 12 for discussion of affiliated net derivative gains (losses).

50

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value

Considerable judgment is often required in interpreting market data to develop estimates of fair value, and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

Recurring Fair Value Measurements

The assets and liabilities measured at estimated fair value on a recurring basis and their corresponding placement in the fair value hierarchy, including those items for which the Company has elected the FVO, are presented below at:

	September 30, 2017
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	52,694	$	4,783	$	57,477
U.S. government and agency	20,192		19,916		—		40,108
Foreign corporate	—		21,403		3,964		25,367
RMBS	412		20,637		3,371		24,420
ABS	—		7,286		419		7,705
State and political subdivision	—		7,434		1		7,435
CMBS	—		5,329		28		5,357
Foreign government	—		4,401		14		4,415
Total fixed maturity securities	20,604		139,100		12,580		172,284
Equity securities	483		943		365		1,791
Short-term investments	2,467		1,813		402		4,682
Residential mortgage loans — FVO	—		—		564		564
Derivative assets: (1)
Interest rate	2		4,722		3		4,727
Foreign currency exchange rate	—		1,661		—		1,661
Credit	—		137		39		176
Equity market	—		199		105		304
Total derivative assets	2		6,719		147		6,868
Embedded derivatives within asset host contracts (3)	—		—		—		—
Separate account assets (3)	23,832		107,799		1,039		132,670
Total assets	$	47,388	$	256,374	$	15,097	$	318,859
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	368	$	212	$	580
Foreign currency exchange rate	—		1,184		4		1,188
Credit	—		8		—		8
Equity market	6		531		228		765
Total derivative liabilities	6		2,091		444		2,541
Embedded derivatives within liability host contracts (2)	—		—		931		931
Long-term debt	—		—		—		—
Separate account liabilities (3)	1		6		2		9
Total liabilities	$	7	$	2,097	$	1,377	$	3,481

51

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

	December 31, 2016
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities:
U.S. corporate	$	—	$	51,303	$	4,855	$	56,158
U.S. government and agency	17,597		18,018		—		35,615
Foreign corporate	—		20,373		3,984		24,357
RMBS	—		19,719		3,698		23,417
ABS	—		6,745		759		7,504
State and political subdivision	—		7,126		10		7,136
CMBS	—		4,851		84		4,935
Foreign government	—		3,977		21		3,998
Total fixed maturity securities	17,597		132,112		13,411		163,120
Equity securities	408		1,011		420		1,839
Short-term investments	2,945		1,720		25		4,690
Residential mortgage loans — FVO	—		—		566		566
Derivative assets: (1)
Interest rate	3		5,489		2		5,494
Foreign currency exchange rate	—		2,763		—		2,763
Credit	—		101		30		131
Equity market	10		226		104		340
Total derivative assets	13		8,579		136		8,728
Embedded derivatives within asset host contracts (2)	—		—		460		460
Separate account assets (3)	27,633		105,055		1,148		133,836
Total assets	$	48,596	$	248,477	$	16,166	$	313,239
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	917	$	500	$	1,417
Foreign currency exchange rate	—		1,902		2		1,904
Credit	—		14		—		14
Equity market	—		468		193		661
Total derivative liabilities	—		3,301		695		3,996
Embedded derivatives within liability host contracts (3)	—		—		1,353		1,353
Long-term debt	—		—		74		74
Separate account liabilities (3)	—		16		7		23
Total liabilities	$	—	$	3,317	$	2,129	$	5,446

__________________

(1) Derivative assets are presented within other invested assets on the consolidated balance sheets and derivative liabilities are presented within other liabilities on the consolidated balance sheets. The amounts are presented gross in the tables above to reflect the presentation on the consolidated balance sheets, but are presented net for purposes of the rollforward in the Fair Value Measurements Using Significant Unobservable Inputs (Level 3) tables.

(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the consolidated balance sheets. At September 30, 2017 and December 31, 2016, debt and equity securities also included embedded derivatives of ($119) million and ($78) million, respectively.

52

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

(3) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets. Separate account liabilities presented in the tables above represent derivative liabilities.

The following describes the valuation methodologies used to measure assets and liabilities at fair value. The description includes the valuation techniques and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy.

Investments

Valuation Controls and Procedures

On behalf of the Company and MetLife, Inc.’s Chief Investment Officer and Chief Financial Officer, a pricing and valuation committee that is independent of the trading and investing functions and comprised of senior management, provides oversight of control systems and valuation policies for securities, mortgage loans and derivatives. On a quarterly basis, this committee reviews and approves new transaction types and markets, ensures that observable market prices and market-based parameters are used for valuation, wherever possible, and determines that judgmental valuation adjustments, when applied, are based upon established policies and are applied consistently over time. This committee also provides oversight of the selection of independent third-party pricing providers and the controls and procedures to evaluate third-party pricing. Periodically, the Chief Accounting Officer reports to the Audit Committee of the Board of Directors of each of MetLife, Inc. and Metropolitan Life Insurance Company regarding compliance with fair value accounting standards.

The Company reviews its valuation methodologies on an ongoing basis and revises those methodologies when necessary based on changing market conditions. Assurance is gained on the overall reasonableness and consistent application of input assumptions, valuation methodologies and compliance with fair value accounting standards through controls designed to ensure valuations represent an exit price. Several controls are utilized, including certain monthly controls, which include, but are not limited to, analysis of portfolio returns to corresponding benchmark returns, comparing a sample of executed prices of securities sold to the fair value estimates, comparing fair value estimates to management’s knowledge of the current market, reviewing the bid/ask spreads to assess activity, comparing prices from multiple independent pricing services and ongoing due diligence to confirm that independent pricing services use market-based parameters. The process includes a determination of the observability of inputs used in estimated fair values received from independent pricing services or brokers by assessing whether these inputs can be corroborated by observable market data. The Company ensures that prices received from independent brokers, also referred to herein as “consensus pricing,” represent a reasonable estimate of fair value by considering such pricing relative to the Company’s knowledge of the current market dynamics and current pricing for similar financial instruments. While independent non-binding broker quotations are utilized, they are not used for a significant portion of the portfolio. For example, fixed maturity securities priced using independent non-binding broker quotations represent less than 1% of the total estimated fair value of fixed maturity securities and less than 1% of the total estimated fair value of Level 3 fixed maturity securities at September 30, 2017.

The Company also applies a formal process to challenge any prices received from independent pricing services that are not considered representative of estimated fair value. If prices received from independent pricing services are not considered reflective of market activity or representative of estimated fair value, independent non-binding broker quotations are obtained, or an internally developed valuation is prepared. Internally developed valuations of current estimated fair value, which reflect internal estimates of liquidity and nonperformance risks, compared with pricing received from the independent pricing services, did not produce material differences in the estimated fair values for the majority of the portfolio; accordingly, overrides were not material. This is, in part, because internal estimates of liquidity and nonperformance risks are generally based on available market evidence and estimates used by other market participants. In the absence of such market-based evidence, management’s best estimate is used.

Securities, Short-term Investments and Long-term Debt

When available, the estimated fair value of these financial instruments is based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company’s securities holdings and valuation of these securities does not involve management’s judgment.

53

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies, giving priority to observable inputs. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. When observable inputs are not available, the market standard valuation methodologies rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. These unobservable inputs can be based in large part on management’s judgment or estimation and cannot be supported by reference to market activity. Even though these inputs are unobservable, management believes they are consistent with what other market participants would use when pricing such securities and are considered appropriate given the circumstances.

The estimated fair value of long-term debt is determined on a basis consistent with the methodologies described herein for securities.

The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.

Instrument		Level 2 Observable Inputs		Level 3 Unobservable Inputs
Fixed Maturity Securities
U.S. corporate and Foreign corporate securities
	Valuation Approaches: Principally the market and income approaches.			Valuation Approaches: Principally the market approach.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	illiquidity premium
	•	benchmark yields; spreads off benchmark yields; new issuances; issuer rating		•	delta spread adjustments to reflect specific credit-related issues
	•	trades of identical or comparable securities; duration		•	credit spreads
	•	Privately-placed securities are valued using the additional key inputs:		•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
		•	market yield curve; call provisions
		•	observable prices and spreads for similar public or private securities that incorporate the credit quality and industry sector of the issuer	•	independent non-binding broker quotations
		•	delta spread adjustments to reflect specific credit-related issues
U.S. government and agency, State and political subdivision and Foreign government securities
	Valuation Approaches: Principally the market approach.			Valuation Approaches: Principally the market approach.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	independent non-binding broker quotations
	•	benchmark U.S. Treasury yield or other yields		•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
	•	the spread off the U.S. Treasury yield curve for the identical security
	•	issuer ratings and issuer spreads; broker-dealer quotes		•	credit spreads
	•	comparable securities that are actively traded
Structured Securities
	Valuation Approaches: Principally the market and income approaches.			Valuation Approaches: Principally the market and income approaches.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	credit spreads
	•	spreads for actively traded securities; spreads off benchmark yields		•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
	•	expected prepayment speeds and volumes
	•	current and forecasted loss severity; ratings; geographic region		•	independent non-binding broker quotations
	•	weighted average coupon and weighted average maturity
	•	average delinquency rates; debt-service coverage ratios
	•	issuance-specific information, including, but not limited to:
		•	collateral type; structure of the security; vintage of the loans
		•	payment terms of the underlying assets
		•	payment priority within the tranche; deal performance

54

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

Instrument	Level 2 Observable Inputs		Level 3 Unobservable Inputs
Equity Securities
	Valuation Approaches: Principally the market approach.		Valuation Approaches: Principally the market and income approaches.
	Key Input:		Key Inputs:
	•	quoted prices in markets that are not considered active	•	credit ratings; issuance structures
			•	quoted prices in markets that are not active for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2
			•	independent non-binding broker quotations
Short-term investments
	•	Short-term investments are of a similar nature and class to the fixed maturity and equity securities described above; accordingly, the valuation approaches and observable inputs used in their valuation are also similar to those described above.	•	Short-term investments are of a similar nature and class to the fixed maturity and equity securities described above; accordingly, the valuation approaches and unobservable inputs used in their valuation are also similar to those described above.
Residential mortgage loans — FVO
	• N/A		Valuation Approaches: Principally the market approach.
			Valuation Techniques and Key Inputs: These investments are based primarily on matrix pricing or other similar techniques that utilize inputs from mortgage servicers that are unobservable or cannot be derived principally from, or corroborated by, observable market data.
Separate Account Assets and Separate Account Liabilities (1)
Mutual funds and hedge funds without readily determinable fair values as prices are not published publicly
	Key Input:		•	N/A
	•	quoted prices or reported Net Asset value (“NAV”) provided by the fund managers
Other limited partnership interests
	•	N/A	Valued giving consideration to the underlying holdings of the partnerships and by applying a premium or discount, if appropriate.
			Key Inputs:
			•	liquidity; bid/ask spreads; performance record of the fund manager
			•	other relevant variables that may impact the exit value of the particular partnership interest

__________________

(1) Estimated fair value equals carrying value, based on the value of the underlying assets, including: mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. Fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents are similar in nature to the instruments described under “— Securities, Short-term Investments and Long-term Debt” and “— Derivatives — Freestanding Derivatives.”

Derivatives

The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives, or through the use of pricing models for OTC-bilateral and OTC-cleared derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that management believes are consistent with what other market participants would use when pricing such instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk, nonperformance risk, volatility, liquidity and changes in estimates and assumptions used in the pricing models. The valuation controls and procedures for derivatives are described in “— Investments.”

The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. Certain OTC-bilateral and OTC-cleared 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. 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 management believes they are consistent with what other market participants would use when pricing such instruments.

55

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

Most inputs for OTC-bilateral and OTC-cleared derivatives are mid-market inputs but, in certain cases, liquidity adjustments are made when they are deemed more representative of exit value. Market liquidity, as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company’s derivatives and could materially affect net income.

The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all OTC-bilateral and OTC-cleared derivatives, and any potential credit adjustment is based on the net exposure by counterparty after taking into account the effects of netting agreements and collateral arrangements. The Company values its OTC-bilateral and OTC-cleared derivatives using standard swap curves which may include a spread to the risk-free rate, depending upon specific collateral arrangements. This credit spread is appropriate for those parties that execute trades at pricing levels consistent with similar collateral arrangements. As the Company and its significant derivative counterparties generally execute trades at such pricing levels and hold sufficient collateral, additional credit risk adjustments are not currently required in the valuation process. The Company’s ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. An evaluation of the requirement to make additional credit risk adjustments is performed by the Company each reporting period.

Freestanding Derivatives

Level 2 Valuation Approaches and Key Inputs:

This level includes all types of derivatives utilized by the Company with the exception of exchange-traded derivatives included within Level 1 and those derivatives with unobservable inputs as described in Level 3.

Level 3 Valuation Approaches and Key Inputs:

These valuation methodologies generally use the same inputs as described in the corresponding sections for Level 2 measurements of derivatives. However, these derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data.

Freestanding derivatives are principally valued using the income approach. Valuations of non-option-based derivatives utilize present value techniques, whereas valuations of option-based derivatives utilize option pricing models. Key inputs are as follows:

Instrument		Interest Rate		Foreign Currency Exchange Rate		Credit		Equity Market
Inputs common to Level 2 and Level 3 by instrument type	•	swap yield curves	•	swap yield curves	•	swap yield curves	•	swap yield curves
	•	basis curves	•	basis curves	•	credit curves	•	spot equity index levels
	•	interest rate volatility (1)	•	currency spot rates	•	recovery rates	•	dividend yield curves
			•	cross currency basis curves			•	equity volatility (1)
Level 3	•	swap yield curves (2)	•	swap yield curves (2)	•	swap yield curves (2)	•	dividend yield curves (2)
	•	basis curves (2)	•	basis curves (2)	•	credit curves (2)	•	equity volatility (1), (2)
	•	repurchase rates	•	cross currency basis curves (2)	•	credit spreads	•	correlation between model inputs (1)
			•	currency correlation	•	repurchase rates
					•	independent non-binding broker quotations

__________________

(1) Option-based only.

(2) Extrapolation beyond the observable limits of the curve(s).

56

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

Embedded Derivatives

Embedded derivatives principally include certain direct, assumed and ceded variable annuity guarantees, certain affiliated ceded reinsurance agreements related to such variable annuity guarantees, equity or bond indexed crediting rates within certain funding agreements and those related to funds withheld on ceded reinsurance agreements. Embedded derivatives are recorded at estimated fair value with changes in estimated fair value reported in net income.

The Company issues certain variable annuity products with guaranteed minimum benefits. GMWBs, GMABs and certain GMIBs contain embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net derivative gains (losses). These embedded derivatives are classified within policyholder account balances on the consolidated balance sheets.

The Company’s actuarial department calculates the fair value of these embedded derivatives, which are estimated as the present value of projected future benefits minus the present value of projected future fees using actuarial and capital market assumptions including expectations concerning policyholder behavior. The calculation is based on in-force business, and is performed using standard actuarial valuation software which projects future cash flows from the embedded derivative over multiple risk neutral stochastic scenarios using observable risk-free rates.

Capital market assumptions, such as risk-free rates and implied volatilities, are based on market prices for publicly traded instruments to the extent that prices for such instruments are observable. Implied volatilities beyond the observable period are extrapolated based on observable implied volatilities and historical volatilities. Actuarial assumptions, including mortality, lapse, withdrawal and utilization, are unobservable and are reviewed at least annually based on actuarial studies of historical experience.

The valuation of these guarantee liabilities includes nonperformance risk adjustments and adjustments for a risk margin related to non-capital market inputs. The nonperformance adjustment is determined by taking into consideration publicly available information relating to spreads in the secondary market for MetLife, Inc.’s debt, including related credit default swaps. These observable spreads are then adjusted, as necessary, to reflect the priority of these liabilities and the claims paying ability of the issuing insurance subsidiaries as compared to MetLife, Inc.

Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment, including assumptions of the amount and cost of capital needed to cover the guarantees. These guarantees may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in nonperformance risk; and variations in actuarial assumptions regarding policyholder behavior, mortality and risk margins related to non-capital market inputs, may result in significant fluctuations in the estimated fair value of the guarantees that could materially affect net income.

The Company ceded the risk associated with certain of the GMIBs, GMABs and GMWBs previously described. In addition to ceding risks associated with guarantees that are accounted for as embedded derivatives, the Company also ceded directly written GMIBs that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance agreement contains an embedded derivative. These embedded derivatives are included within premiums, reinsurance and other receivables on the consolidated balance sheets with changes in estimated fair value reported in net derivative gains (losses). The value of the embedded derivatives on the ceded risk is determined using a methodology consistent with that described previously for the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer.

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

57

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

The estimated fair value of the embedded equity and bond indexed derivatives contained in certain funding agreements is determined using market standard swap valuation models and observable market inputs, including a nonperformance risk adjustment. The estimated fair value of these embedded derivatives are included, along with their funding agreements host, within policyholder account balances with changes in estimated fair value recorded in net derivative gains (losses). 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.

Embedded Derivatives Within Asset and Liability Host Contracts

Level 3 Valuation Approaches and Key Inputs:

Direct and assumed guaranteed minimum benefits

These embedded derivatives are principally valued using the income approach. Valuations are based on option pricing techniques, which utilize significant inputs that may include swap yield curves, currency exchange rates and implied volatilities. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include: the extrapolation beyond observable limits of the swap yield curves and implied volatilities, actuarial assumptions for policyholder behavior and mortality and the potential variability in policyholder behavior and mortality, nonperformance risk and cost of capital for purposes of calculating the risk margin.

Reinsurance ceded on certain guaranteed minimum benefits

These embedded derivatives are principally valued using the income approach. The valuation techniques and significant market standard unobservable inputs used in their valuation are similar to those described above in “— Direct and assumed guaranteed minimum benefits” and also include counterparty credit spreads.

Embedded derivatives within funds withheld related to certain ceded reinsurance

These embedded derivatives are principally valued using the income approach. The valuations are based on present value techniques, which utilize significant inputs that may include the swap yield curves and the fair value of assets within the reference portfolio. These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. Significant unobservable inputs generally include the fair value of certain assets within the reference portfolio which are not observable in the market and cannot be derived principally from, or corroborated by, observable market data.

Transfers between Levels

Overall, transfers between levels occur when there are changes in the observability of inputs and market activity. Transfers into or out of any level are assumed to occur at the beginning of the period.

Transfers between Levels 1 and 2:

For assets and liabilities measured at estimated fair value and still held at September 30, 2017 and December 31, 2016, there were no transfers between Levels 1 and 2.

Transfers into or out of Level 3:

Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.

58

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)

The following table presents certain quantitative information about the significant unobservable inputs used in the fair value measurement, and the sensitivity of the estimated fair value to changes in those inputs, for the more significant asset and liability classes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at:

					September 30, 2017				December 31, 2016				Impact of Increase in Input on Estimated Fair Value (2)
	Valuation Techniques		Significant Unobservable Inputs		Range			Weighted Average (1)	Range			Weighted Average (1)
Fixed maturity securities (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Offered quotes (4)	21	-	140	108	18	-	138	106	Increase
	•	Market pricing	•	Quoted prices (4)	25	-	498	121	25	-	700	117	Increase
RMBS	•	Market pricing	•	Quoted prices (4)	5	-	173	94	19	-	137	91	Increase (5)
ABS	•	Market pricing	•	Quoted prices (4)	28	-	104	100	20	-	106	99	Increase (5)
	•	Consensus pricing	•	Offered quotes (4)	99	-	100	99	98	-	100	100	Increase (5)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (6)	200	-	300		200	-	300		Increase (7)
			•	Repurchase rates (8)	—	-	8		(44)	-	18		Decrease (7)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (6)	(24)	-	(1)		50	-	236		Increase (7)
Credit	•	Present value techniques	•	Credit spreads (9)	97	-	100		97	-	98		Decrease (7)
	•	Consensus pricing	•	Offered quotes (10)
Equity market	•	Present value    techniques or    option pricing    models	•	Volatility (11)	9%	-	30%		14%	-	32%		Increase (7)
			•	Correlation (12)	10%	-	30%		40%	-	40%
Embedded derivatives
Direct, assumed and ceded guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0%	-	0.09%		0%	-	0.09%		Decrease (13)
				Ages 41 - 60	0.04%	-	0.65%		0.04%	-	0.65%		Decrease (13)
				Ages 61 - 115	0.26%	-	100%		0.26%	-	100%		Decrease (13)
			•	Lapse rates:
				Durations 1 - 10	0.25%	-	100%		0.25%	-	100%		Decrease (14)
				Durations 11 - 20	3%	-	100%		3%	-	100%		Decrease (14)
				Durations 21 - 116	3%	-	100%		3%	-	100%		Decrease (14)
			•	Utilization rates	0%	-	25%		0%	-	25%		Increase (15)
			•	Withdrawal rates	0.25%	-	10%		0.25%	-	10%		(16)
			•	Long-term equity volatilities	17.40%	-	25%		17.40%	-	25%		Increase (17)
			•	Nonperformance risk spread	0.03%	-	0.46%		0.04%	-	0.57%		Decrease (18)

__________________

(1) The weighted average for fixed maturity securities is determined based on the estimated fair value of the securities.

(2) The impact of a decrease in input would have the opposite impact on estimated fair value. For embedded derivatives, changes to direct and assumed guaranteed minimum benefits are based on liability positions; changes to ceded guaranteed minimum benefits are based on asset positions.

(3) Significant increases (decreases) in expected default rates in isolation would result in substantially lower (higher) valuations.

(4) Range and weighted average are presented in accordance with the market convention for fixed maturity securities of dollars per hundred dollars of par.

59

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

(5) Changes in the assumptions used for the probability of default are accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumptions used for prepayment rates.

(6) Ranges represent the rates across different yield curves and are presented in basis points. The swap yield curves are utilized among different types of derivatives to project cash flows, as well as to discount future cash flows to present value. Since this valuation methodology uses a range of inputs across a yield curve to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.

(7) Changes in estimated fair value are based on long U.S. dollar net asset positions and will be inversely impacted for short U.S. dollar net asset positions.

(8) Ranges represent different repurchase rates utilized as components within the valuation methodology and are presented in basis points.

(9) Represents the risk quoted in basis points of a credit default event on the underlying instrument. Credit derivatives with significant unobservable inputs are primarily comprised of written credit default swaps.

(10) At both September 30, 2017 and December 31, 2016, independent non-binding broker quotations were used in the determination of less than 1% of the total net derivative estimated fair value.

(11) Ranges represent the underlying equity volatility quoted in percentage points. Since this valuation methodology uses a range of inputs across multiple volatility surfaces to value the derivative, presenting a range is more representative of the unobservable input used in the valuation.

(12) Ranges represent the different correlation factors utilized as components within the valuation methodology. Presenting a range of correlation factors is more representative of the unobservable input used in the valuation. Increases (decreases) in correlation in isolation will increase (decrease) the significance of the change in valuations.

(13) Mortality rates vary by age and by demographic characteristics such as gender. Mortality rate assumptions are based on company experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(14) Base lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. Lapse rates are also generally assumed to be lower in periods when a surrender charge applies. For any given contract, lapse rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(15) The utilization rate assumption estimates the percentage of contractholders with a GMIB or lifetime withdrawal benefit who will elect to utilize the benefit upon becoming eligible. The rates may vary by the type of guarantee, the amount by which the guaranteed amount is greater than the account value, the contract’s withdrawal history and by the age of the policyholder. For any given contract, utilization rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(16) The withdrawal rate represents the percentage of account balance that any given policyholder will elect to withdraw from the contract each year. The withdrawal rate assumption varies by age and duration of the contract, and also by other factors such as benefit type. For any given contract, withdrawal rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative. For GMWBs, any increase (decrease) in withdrawal rates results in an increase (decrease) in the estimated fair value of the guarantees. For GMABs and GMIBs, any increase (decrease) in withdrawal rates results in a decrease (increase) in the estimated fair value.

(17) Long-term equity volatilities represent equity volatility beyond the period for which observable equity volatilities are available. For any given contract, long-term equity volatility rates vary throughout the period over which cash flows are projected for purposes of valuing the embedded derivative.

(18) Nonperformance risk spread varies by duration and by currency. For any given contract, multiple nonperformance risk spreads will apply, depending on the duration of the cash flow being discounted for purposes of valuing the embedded derivative.

60

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

The following is a summary of the valuation techniques and significant unobservable inputs used in the fair value measurement of assets and liabilities classified within Level 3 that are not included in the preceding table. Generally, all other classes of securities classified within Level 3, including those within separate account assets and embedded derivatives within funds withheld related to certain ceded reinsurance, use the same valuation techniques and significant unobservable inputs as previously described for Level 3 securities. This includes matrix pricing and discounted cash flow methodologies, inputs such as quoted prices for identical or similar securities that are less liquid and based on lower levels of trading activity than securities classified in Level 2, as well as independent non-binding broker quotations. The residential mortgage loans — FVO and long-term debt are valued using independent non-binding broker quotations and internal models including matrix pricing and discounted cash flow methodologies using current interest rates. The sensitivity of the estimated fair value to changes in the significant unobservable inputs for these other assets and liabilities is similar in nature to that described in the preceding table.

The following tables summarize the change of all assets and (liabilities) measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)			U.S. Government and Agency			Structured Securities			State and Political Subdivision		Foreign Government			Equity Securities
	(In millions)
Three Months Ended September 30, 2017
Balance, beginning of period	$	8,458		$	—		$	4,133		$	—	$	14		$	416
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	(4		)	—			21			—		—			—
Total realized/unrealized gains (losses) included in AOCI	121			—			17			—		—			(3		)
Purchases (4)	420			—			220			—		—			4
Sales (4)	(255		)	—			(303		)	—		—			(52		)
Issuances (4)	—			—			—			—		—			—
Settlements (4)	—			—			—			—		—			—
Transfers into Level 3 (5)	117			—			—			1		—			—
Transfers out of Level 3 (5)	(110		)	—			(270		)	—		—			—
Balance, end of period	$	8,747		$	—		$	3,818		$	1	$	14		$	365
Three Months Ended September 30, 2016
Balance, beginning of period	$	8,904		$	175		$	4,415		$	28	$	65		$	456
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	9			—			25			—		—			4
Total realized/unrealized gains (losses) included in AOCI	66			—			23			3		—			(12		)
Purchases (4)	431			98			702			—		17			4
Sales (4)	(407		)	—			(294		)	—		(1		)	(11		)
Issuances (4)	—			—			—			—		—			—
Settlements (4)	—			—			—			—		—			—
Transfers into Level 3 (5)	331			—			36			7		—			1
Transfers out of Level 3 (5)	(139		)	(2		)	(159		)	—		(10		)	(5		)
Balance, end of period	$	9,195		$	271		$	4,748		$	38	$	71		$	437
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2017 (6)	$	(3	)	$	—		$	21		$	—	$	—		$	(2	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (6)	$	1		$	—		$	26		$	—	$	—		$	—

61

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Short-term Investments			Residential Mortgage Loans - FVO			Net Derivatives (7)			Net Embedded Derivatives (8)			Separate Accounts (9)			Long-term Debt
	(In millions)
Three Months Ended September 30, 2017
Balance, beginning of period	$	821		$	615		$	(277	)	$	(1,008	)	$	975		$	(19	)
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			32			(5		)	131			6			—
Total realized/unrealized gains (losses) included in AOCI	—			—			1			—			—			—
Purchases (4)	—			10			—			—			136			—
Sales (4)	(247		)	(72		)	—			—			(35		)	—
Issuances (4)	—			—			—			—			1			—
Settlements (4)	—			(21		)	(16		)	(54		)	(1		)	19
Transfers into Level 3 (5)	2			—			—			—			56			—
Transfers out of Level 3 (5)	(174		)	—			—			—			(101		)	—
Balance, end of period	$	402		$	564		$	(297	)	$	(931	)	$	1,037		$	—
Three Months Ended September 30, 2016
Balance, beginning of period	$	—		$	449		$	102		$	(1,508	)	$	1,485		$	(44	)
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			10			(44		)	119			(25		)	—
Total realized/unrealized gains (losses) included in AOCI	—			—			(8		)	—			—			—
Purchases (4)	187			42			—			—			4			—
Sales (4)	(1		)	(5		)	—			—			(25		)	—
Issuances (4)	—			—			(1		)	—			30			—
Settlements (4)	—			(15		)	(10		)	(57		)	(45		)	2
Transfers into Level 3 (5)	—			—			—			—			8			—
Transfers out of Level 3 (5)	—			—			—			—			(178		)	—
Balance, end of period	$	186		$	481		$	39		$	(1,446	)	$	1,254		$	(42	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2017 (6)	$	—		$	32		$	(9	)	$	59		$	—		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (6)	$	—		$	10		$	(33	)	$	119		$	—		$	—

62

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Fixed Maturity Securities
	Corporate (1)			U.S. Government and Agency		Structured Securities			State and Political Subdivision			Foreign Government			Equity Securities
	(In millions)
Nine Months Ended September 30, 2017
Balance, beginning of period	$	8,839		$	—	$	4,541		$	10		$	21		$	420
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	5			—		76			—			—			(14		)
Total realized/unrealized gains (losses) included in AOCI	394			—		94			—			—			27
Purchases (4)	1,853			—		465			—			—			10
Sales (4)	(1,229		)	—		(1,038		)	—			(1		)	(74		)
Issuances (4)	—			—		—			—			—			—
Settlements (4)	—			—		—			—			—			—
Transfers into Level 3 (5)	58			—		10			1			—			—
Transfers out of Level 3 (5)	(1,173		)	—		(330		)	(10		)	(6		)	(4		)
Balance, end of period	$	8,747		$	—	$	3,818		$	1		$	14		$	365
Nine Months Ended September 30, 2016
Balance, beginning of period	$	8,282		$	—	$	4,416		$	33		$	275		$	328
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	1			—		73			1			—			(21		)
Total realized/unrealized gains (losses) included in AOCI	633			13		(19		)	2			(1		)	38
Purchases (4)	1,155			98		1,726			—			18			20
Sales (4)	(717		)	—		(966		)	—			(1		)	(15		)
Issuances (4)	—			—		—			—			—			—
Settlements (4)	—			—		—			—			—			—
Transfers into Level 3 (5)	589			160		4			7			—			282
Transfers out of Level 3 (5)	(748		)	—		(486		)	(5		)	(220		)	(195		)
Balance, end of period	$	9,195		$	271	$	4,748		$	38		$	71		$	437
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2017 (6)	$	(1	)	$	—	$	66		$	—		$	—		$	(12	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (6)	$	3		$	—	$	76		$	1		$	—		$	(26	)

63

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Short-term Investments			Residential Mortgage Loans - FVO			Net Derivatives (7)			Net Embedded Derivatives (8)			Separate Accounts (9)			Long-term Debt
	(In millions)
Nine Months Ended September 30, 2017
Balance, beginning of period	$	25		$	566		$	(559	)	$	(893	)	$	1,141		$	(74	)
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			38			7			343			(22		)	—
Total realized/unrealized gains (losses) included in AOCI	—			—			136			—			—			—
Purchases (4)	400			184			—			—			269			—
Sales (4)	—			(155		)	—			—			(78		)	—
Issuances (4)	—			—			—			—			1			—
Settlements (4)	—			(69		)	119			(381		)	(62		)	34
Transfers into Level 3 (5)	2			—			—			—			21			—
Transfers out of Level 3 (5)	(25		)	—			—			—			(233		)	40
Balance, end of period	$	402		$	564		$	(297	)	$	(931	)	$	1,037		$	—
Nine Months Ended September 30, 2016
Balance, beginning of period	$	200		$	314		$	(23	)	$	186		$	1,520		$	(36	)
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	—			22			63			(1,476		)	7			—
Total realized/unrealized gains (losses) included in AOCI	—			—			27			—			—			—
Purchases (4)	187			187			6			—			107			—
Sales (4)	(199		)	(12		)	—			—			(64		)	—
Issuances (4)	—			—			(1		)	—			28			(11		)
Settlements (4)	—			(30		)	(33		)	(156		)	(57		)	5
Transfers into Level 3 (5)	—			—			—			—			9			—
Transfers out of Level 3 (5)	(2		)	—			—			—			(296		)	—
Balance, end of period	$	186		$	481		$	39		$	(1,446	)	$	1,254		$	(42	)
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2017 (6)	$	—		$	38		$	(19	)	$	343		$	—		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at September 30, 2016 (6)	$	—		$	22		$	66		$	(1,470	)	$	—		$	—

__________________

(1) Comprised of U.S. and foreign corporate securities.

(2) Amortization of premium/accretion of discount is included within net investment income. Impairments charged to net income (loss) on securities are included in net investment gains (losses), while changes in estimated fair value of residential mortgage loans — FVO are included in net investment income. Lapses associated with net embedded derivatives are included in net derivative gains (losses). Substantially all realized/unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivatives gains (losses).

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

(4) Items purchased/issued and then sold/settled in the same period are excluded from the rollforward. Fees attributed to embedded derivatives are included in settlements.

(5) Gains and losses, in net income (loss) and OCI, are calculated assuming transfers into and/or out of Level 3 occurred at the beginning of the period. Items transferred into and then out of Level 3 in the same period are excluded from the rollforward.

(6) Changes in unrealized gains (losses) included in net income (loss) relate to assets and liabilities still held at the end of the respective periods. Substantially all changes in unrealized gains (losses) included in net income (loss) for net derivatives and net embedded derivatives are reported in net derivative gains (losses).

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

64

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

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

(9) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders within separate account liabilities. Therefore, such changes in estimated fair value are not recorded in net income (loss). For the purpose of this disclosure, these changes are presented within net investment gains (losses). Separate account assets and liabilities are presented net for the purposes of the rollforward.

Fair Value Option

The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis. The following table presents information for residential mortgage loans, which are accounted for under the FVO, and were initially measured at fair value.

	September 30, 2017			December 31, 2016
	(In millions)
Unpaid principal balance	$	711		$	794
Difference between estimated fair value and unpaid principal balance	(147		)	(228		)
Carrying value at estimated fair value	$	564		$	566
Loans in nonaccrual status	$	213		$	214
Loans more than 90 days past due	$	106		$	137
Loans in nonaccrual status or more than 90 days past due, or both - difference between aggregate estimated fair value and unpaid principal balance	$	(121	)	$	(150	)

The following table presents information for long-term debt, which is accounted for under the FVO, and was initially measured at fair value.

	September 30, 2017		December 31, 2016
	(In millions)
Contractual principal balance	$	—	$	71
Difference between estimated fair value and contractual principal balance	—		3
Carrying value at estimated fair value (1)	$	—	$	74

__________________

(1) Changes in estimated fair value are recognized in net investment gains (losses). Interest expense is recognized in other expenses.

Fair Value of Financial Instruments Carried at Other Than Fair Value

The following tables provide fair value information for financial instruments that are carried on the balance sheet at amounts other than fair value. These tables exclude the following financial instruments: cash and cash equivalents, accrued investment income, payables for collateral under securities loaned and other transactions, short-term debt and those short-term investments that are not securities, such as time deposits, and therefore are not included in the three level hierarchy table disclosed in the “— Recurring Fair Value Measurements” section. The estimated fair value of the excluded financial instruments, which are primarily classified in Level 2, approximates carrying value as they are short-term in nature such that the Company believes there is minimal risk of material changes in interest rates or credit quality. All remaining balance sheet amounts excluded from the tables below are not considered financial instruments subject to this disclosure.

65

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

The carrying values and estimated fair values for such financial instruments, and their corresponding placement in the fair value hierarchy, are summarized as follows at:

	September 30, 2017
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	57,490	$	—	$	—	$	59,149	$	59,149
Policy loans	$	5,985	$	—	$	259	$	6,769	$	7,028
Real estate joint ventures	$	2	$	—	$	—	$	11	$	11
Other limited partnership interests	$	234	$	—	$	—	$	239	$	239
Other invested assets	$	2,260	$	—	$	2,051	$	159	$	2,210
Premiums, reinsurance and other receivables	$	15,036	$	—	$	643	$	14,895	$	15,538
Liabilities
Policyholder account balances	$	75,498	$	—	$	—	$	76,953	$	76,953
Long-term debt	$	1,673	$	—	$	2,037	$	—	$	2,037
Other liabilities	$	15,520	$	—	$	2,070	$	13,553	$	15,623
Separate account liabilities	$	63,481	$	—	$	63,481	$	—	$	63,481

	December 31, 2016
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	55,994	$	—	$	—	$	57,171	$	57,171
Policy loans	$	5,945	$	—	$	258	$	6,695	$	6,953
Real estate joint ventures	$	4	$	—	$	—	$	26	$	26
Other limited partnership interests	$	336	$	—	$	—	$	362	$	362
Other invested assets	$	2,263	$	—	$	2,151	$	151	$	2,302
Premiums, reinsurance and other receivables	$	14,888	$	—	$	368	$	15,421	$	15,789
Liabilities
Policyholder account balances	$	72,944	$	—	$	—	$	74,052	$	74,052
Long-term debt	$	1,503	$	—	$	1,755	$	—	$	1,755
Other liabilities	$	14,731	$	—	$	894	$	13,920	$	14,814
Separate account liabilities	$	65,545	$	—	$	65,545	$	—	$	65,545

The methods, assumptions and significant valuation techniques and inputs used to estimate the fair value of financial instruments are summarized as follows:

Mortgage Loans

The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans.

66

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

Policy Loans

Policy loans with fixed interest rates are classified within Level 3. The estimated fair values for these loans are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed by applying a weighted-average interest rate to the outstanding principal balance of the respective group of policy loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk, as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. Policy loans with variable interest rates are classified within Level 2 and the estimated fair value approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates.

Real Estate Joint Ventures and Other Limited Partnership Interests

The estimated fair values of these cost method investments are generally based on the Company’s share of the NAV as provided on the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments.

Other Invested Assets

These other invested assets are principally comprised of loans to affiliates. The estimated fair value of loans to affiliates is determined by discounting the expected future cash flows using market interest rates currently available for instruments with similar terms and remaining maturities.

Premiums, Reinsurance and Other Receivables

Premiums, reinsurance and other receivables are principally comprised of certain amounts recoverable under reinsurance agreements, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivatives and amounts receivable for securities sold but not yet settled.

Amounts recoverable under ceded reinsurance agreements, which the Company has determined do not transfer significant risk such that they are accounted for using the deposit method of accounting, have been classified as Level 3. The valuation is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using interest rates determined to reflect the appropriate credit standing of the assuming counterparty.

The amounts on deposit for derivative settlements, classified within Level 2, essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over short periods such that the estimated fair value approximates carrying value.

Policyholder Account Balances

These policyholder account balances include investment contracts which primarily include certain funding agreements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities and total control accounts (“TCA”). The valuation of these investment contracts is based on discounted cash flow methodologies using significant unobservable inputs. The estimated fair value is determined using current market risk-free interest rates adding a spread to reflect the nonperformance risk in the liability.

Long-term Debt

The estimated fair value of long-term debt is principally determined using market standard valuation methodologies.

Valuations of instruments are based primarily on quoted prices in markets that are not active or using matrix pricing that use standard market observable inputs such as quoted prices in markets that are not active and observable yields and spreads in the market. Instruments valued using discounted cash flow methodologies use standard market observable inputs including market yield curve, duration, call provisions, observable prices and spreads for similar publicly traded or privately traded issues.

67

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

7. Fair Value (continued)

Other Liabilities

Other liabilities consist primarily of amounts due for securities purchased but not yet settled, funds withheld amounts payable, which are contractually withheld by the Company in accordance with the terms of the reinsurance agreements, and amounts payable under certain assumed reinsurance agreements, which are recorded using the deposit method of accounting. The Company evaluates the specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which are not materially different from the carrying values, with the exception of certain deposit type reinsurance payables. For such payables, the estimated fair value is determined as the present value of expected future cash flows, which are discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty.

Separate Account Liabilities

Separate account liabilities represent those balances due to policyholders under contracts that are classified as investment contracts.

Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance, funding agreements related to group life contracts and certain contracts that provide for benefit funding.

Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described in the section “— Recurring Fair Value Measurements,” the value of those assets approximates the estimated fair value of the related separate account liabilities. The valuation techniques and inputs for separate account liabilities are similar to those described for separate account assets.

68

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Equity

Accumulated Other Comprehensive Income (Loss)

Information regarding changes in the balances of each component of AOCI attributable to Metropolitan Life Insurance Company, was as follows:

	Three Months   Ended   September 30, 2017
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	5,549		$	1,216		$	(82	)	$	(1,813	)	$	4,870
OCI before reclassifications	560			(20		)	29			2			571
Deferred income tax benefit (expense)	(214		)	7			(7		)	(1		)	(215		)
AOCI before reclassifications, net of income tax	5,895			1,203			(60		)	(1,812		)	5,226
Amounts reclassified from AOCI	(30		)	(293		)	—			40			(283		)
Deferred income tax benefit (expense)	10			102			—			(14		)	98
Amounts reclassified from AOCI, net of income tax	(20		)	(191		)	—			26			(185		)
Balance, end of period	$	5,875		$	1,012		$	(60	)	$	(1,786	)	$	5,041

	Three Months   Ended   September 30, 2016
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	7,051		$	1,785		$	(53	)	$	(1,938	)	$	6,845
OCI before reclassifications	343			39			(16		)	(258		)	108
Deferred income tax benefit (expense)	(117		)	(14		)	5			90			(36		)
AOCI before reclassifications, net of income tax	7,277			1,810			(64		)	(2,106		)	6,917
Amounts reclassified from AOCI	(44		)	(101		)	—			46			(99		)
Deferred income tax benefit (expense)	15			36			—			(17		)	34
Amounts reclassified from AOCI, net of income tax	(29		)	(65		)	—			29			(65		)
Balance, end of period	$	7,248		$	1,745		$	(64	)	$	(2,077	)	$	6,852

69

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Equity (continued)

	Nine Months Ended September 30, 2017
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	3,592		$	1,459		$	(67	)	$	(1,865	)	$	3,119
OCI before reclassifications	3,434			226			9			5			3,674
Deferred income tax benefit (expense)	(1,215		)	(79		)	(2		)	(2		)	(1,298		)
AOCI before reclassifications, net of income tax	5,811			1,606			(60		)	(1,862		)	5,495
Amounts reclassified from AOCI	98			(913		)	—			118			(697		)
Deferred income tax benefit (expense)	(34		)	319			—			(42		)	243
Amounts reclassified from AOCI, net of income tax	64			(594		)	—			76			(454		)
Balance, end of period	$	5,875		$	1,012		$	(60	)	$	(1,786	)	$	5,041

	Nine Months Ended September 30, 2016
	Unrealized Investment Gains (Losses), Net of Related Offsets (1)			Unrealized Gains (Losses) on Derivatives			Foreign Currency Translation Adjustments			Defined Benefit Plans Adjustment			Total
	(In millions)
Balance, beginning of period	$	3,337		$	1,436		$	(74	)	$	(2,014	)	$	2,685
OCI before reclassifications	6,132			703			6			(241		)	6,600
Deferred income tax benefit (expense)	(2,148		)	(247		)	4			84			(2,307		)
AOCI before reclassifications, net of income tax	7,321			1,892			(64		)	(2,171		)	6,978
Amounts reclassified from AOCI	(113		)	(227		)	—			145			(195		)
Deferred income tax benefit (expense)	40			80			—			(51		)	69
Amounts reclassified from AOCI, net of income tax	(73		)	(147		)	—			94			(126		)
Balance, end of period	$	7,248		$	1,745		$	(64	)	$	(2,077	)	$	6,852

__________________

(1) See Note 5 for information on offsets to investments related to future policy benefits, DAC, VOBA and DSI, and the policyholder dividend obligation.

70

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

8. Equity (continued)

Information regarding amounts reclassified out of each component of AOCI was as follows:

AOCI Components	Amounts Reclassified from AOCI												Consolidated Statements of Operations and Comprehensive Income (Loss) Locations
	Three Months   Ended   September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	$	(5	)	$	52		$	30		$	144		Net investment gains (losses)
Net unrealized investment gains (losses)	(3		)	—			(5		)	11			Net investment income
Net unrealized investment gains (losses)	38			(8		)	(123		)	(42		)	Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	30			44			(98		)	113
Income tax (expense) benefit	(10		)	(15		)	34			(40		)
Net unrealized investment gains (losses), net of income tax	20			29			(64		)	73
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate swaps	8			27			22			44			Net derivative gains (losses)
Interest rate swaps	4			4			12			10			Net investment income
Interest rate forwards	(1		)	1			(5		)	—			Net derivative gains (losses)
Interest rate forwards	1			—			2			2			Net investment income
Foreign currency swaps	282			69			882			169			Net derivative gains (losses)
Foreign currency swaps	(1		)	—			(1		)	(1		)	Net investment income
Credit forwards	—			—			1			3			Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax	293			101			913			227
Income tax (expense) benefit	(102		)	(36		)	(319		)	(80		)
Gains (losses) on cash flow hedges, net of income tax	191			65			594			147
Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)	(45		)	(48		)	(134		)	(150		)
Amortization of prior service (costs) credit	5			2			16			5
Amortization of defined benefit plan items, before income tax	(40		)	(46		)	(118		)	(145		)
Income tax (expense) benefit	14			17			42			51
Amortization of defined benefit plan items, net of income tax	(26		)	(29		)	(76		)	(94		)
Total reclassifications, net of income tax	$	185		$	65		$	454		$	126

__________________

(1) These AOCI components are included in the computation of net periodic benefit costs. See Note 10.

71

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

9. Other Expenses

Information on other expenses was as follows:

	Three Months   Ended   September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Compensation	$	530		$	488		$	1,541		$	1,598
Pension, postretirement and postemployment benefit costs	51			41			138			199
Commissions	132			168			398			527
Volume-related costs	69			40			164			162
Affiliated expenses on ceded and assumed reinsurance	149			152			521			774
Capitalization of DAC	(17		)	(59		)	(57		)	(285		)
Amortization of DAC and VOBA	(43		)	212			124			420
Interest expense on debt	26			28			79			84
Premium taxes, licenses and fees	62			89			210			272
Professional services	266			235			755			662
Rent and related expenses, net of sublease income	72			38			122			108
Other	(92		)	(68		)	(187		)	(71		)
Total other expenses	$	1,205		$	1,364		$	3,808		$	4,450

Affiliated Expenses

Commissions, capitalization of DAC and amortization of DAC and VOBA include the impact of affiliated reinsurance transactions. See Note 12 for a discussion of affiliated expenses included in the table above.

10. Employee Benefit Plans

Pension and Other Postretirement Benefit Plans

The Company sponsors and administers various defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements. Participating affiliates are allocated an equitable share of net expense related to the plans, proportionate to other expenses being allocated to these affiliates.

The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. Participating affiliates are allocated a proportionate share of net expense and contributions related to the postemployment and other postretirement plans.

72

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

10. Employee Benefit Plans (continued)

The components of net periodic benefit costs were as follows:

	Three Months   Ended   September 30,
	2017						2016
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	40		$	—		$	49		$	3
Interest costs	98			16			100			20
Divestitures and curtailment costs (1)	3			2			(1		)	(1		)
Expected return on plan assets	(121		)	(16		)	(139		)	(20		)
Amortization of net actuarial (gains) losses	45			—			45			3
Amortization of prior service costs (credit)	—			(5		)	—			(2		)
Allocated to affiliates	(9		)	—			(15		)	(3		)
Net periodic benefit costs (credit)	$	56		$	(3	)	$	39		$	—

	Nine Months Ended September 30,
	2017						2016
	Pension Benefits			Other Postretirement Benefits			Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	120		$	3		$	155		$	7
Interest costs	295			50			314			62
Divestitures and curtailment costs (1)	3			2			(1		)	26
Expected return on plan assets	(362		)	(48		)	(389		)	(56		)
Amortization of net actuarial (gains) losses	134			—			143			7
Amortization of prior service costs (credit)	(1		)	(15		)	—			(5		)
Allocated to affiliates	(26		)	(1		)	(50		)	(7		)
Net periodic benefit costs (credit)	$	163		$	(9	)	$	172		$	34

__________________

(1)During the three months and nine months ended September 30, 2016, the Company recognized curtailment charges on certain postretirement benefit plans in connection with the sale to MassMutual of MetLife, Inc.’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc.

11. Contingencies, Commitments and Guarantees

73

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Contingencies, Commitments and Guarantees (continued)

Contingencies

Litigation

The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.

Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will view the relevant evidence and applicable law.

The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities have been established for a number of the matters noted below. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be reasonably estimated at September 30, 2017. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.

Matters as to Which an Estimate Can Be Made

For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For such matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of September 30, 2017, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $350 million.

Matters as to Which an Estimate Cannot Be Made

For other matters disclosed below, the Company is not currently able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts, and the progress of settlement negotiations. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation contingencies and updates its accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.

74

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Contingencies, Commitments and Guarantees (continued)

Asbestos-Related Claims

Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life Insurance Company has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life Insurance Company issued liability or workers’ compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life Insurance Company’s employees during the period from the 1920’s through approximately the 1950’s and allege that Metropolitan Life Insurance Company learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life Insurance Company believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life Insurance Company. Metropolitan Life Insurance Company employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances.

Claims asserted against Metropolitan Life Insurance Company have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life Insurance Company’s defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life Insurance Company owed no duty to the plaintiffs — it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs did not rely on any actions of Metropolitan Life Insurance Company; (iii) Metropolitan Life Insurance Company’s conduct was not the cause of the plaintiffs’ injuries; (iv) plaintiffs’ exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against Metropolitan Life Insurance Company, while other trial courts have denied Metropolitan Life Insurance Company’s motions. There can be no assurance that Metropolitan Life Insurance Company will receive favorable decisions on motions in the future. While most cases brought to date have settled, Metropolitan Life Insurance Company intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials.

As reported in the 2016 Annual Report, Metropolitan Life Insurance Company received approximately 4,146 asbestos-related claims in 2016. During the nine months endedSeptember 30, 2017 and 2016, Metropolitan Life Insurance Company received approximately 2,742 and 3,267 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

The ability of Metropolitan Life Insurance Company to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict the numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life Insurance Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts.

The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company’s judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company’s total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material effect on the Company’s financial position.

75

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Contingencies, Commitments and Guarantees (continued)

The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life Insurance Company’s recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against Metropolitan Life Insurance Company, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against Metropolitan Life Insurance Company, but which Metropolitan Life Insurance Company believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life Insurance Company’s analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims.

Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2017.

Regulatory Matters

The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission (“SEC”); federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority (“FINRA”). The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.

In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida

In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain environmental testing at the Chemform Site. The EPA may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reached a settlement in principal on the EPA’s claim for past costs. The Company estimates that the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.

Sales Practices Regulatory Matters

Regulatory authorities in a number of states and FINRA, and occasionally the SEC, have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by Metropolitan Life Insurance Company. These investigations often focus on the conduct of particular financial services representatives and the sale of unregistered or unsuitable products or the misuse of client assets. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief, including restitution payments. The Company may continue to resolve investigations in a similar manner. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for these sales practices-related investigations or inquiries.

Total Control Accounts Litigation

Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as total control accounts (“TCA”), as a settlement option for death benefits.

76

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Contingencies, Commitments and Guarantees (continued)

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)

Plaintiff filed this class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.

Other Litigation

Sun Life Assurance Company of Canada Indemnity Claim

In 2006, Sun Life Assurance Company of Canada (“Sun Life”), as successor to the purchaser of Metropolitan Life Insurance Company’s Canadian operations, filed a lawsuit in Toronto, seeking a declaration that Metropolitan Life Insurance Company remains liable for “market conduct claims” related to certain individual life insurance policies sold by Metropolitan Life Insurance Company that were subsequently transferred to Sun Life. In January 2010, the court found that Sun Life had given timely notice of its claim for indemnification but, because it found that Sun Life had not yet incurred an indemnifiable loss, granted Metropolitan Life Insurance Company’s motion for summary judgment. Both parties agreed to consider the indemnity claim through arbitration. In September 2010, Sun Life notified Metropolitan Life Insurance Company that a purported class action lawsuit was filed against Sun Life in Toronto alleging sales practices claims regarding the policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. On August 30, 2011, Sun Life notified Metropolitan Life Insurance Company that another purported class action lawsuit was filed against Sun Life in Vancouver, BC alleging sales practices claims regarding certain of the same policies sold by Metropolitan Life Insurance Company and transferred to Sun Life. Sun Life contends that Metropolitan Life Insurance Company is obligated to indemnify Sun Life for some or all of the claims in these lawsuits. These sales practices cases against Sun Life are ongoing, and the Company is unable to estimate the reasonably possible loss or range of loss arising from this litigation.

Voshall v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Los Angeles, April 8, 2015)

Plaintiff filed this putative class action lawsuit on behalf of himself and all persons covered under a long-term group disability income insurance policy issued by Metropolitan Life Insurance Company to public entities in California between April 8, 2011 and April 8, 2015. Plaintiff alleges that Metropolitan Life Insurance Company improperly reduced benefits by including cost of living adjustments and employee paid contributions in the employer retirement benefits and other income that reduces the benefit payable under such policies. Plaintiff asserts causes of action for declaratory relief, violation of the California Business & Professions Code, breach of contract and breach of the implied covenant of good faith and fair dealing. The Company intends to defend this action vigorously.

Martin v. Metropolitan Life Insurance Company (Superior Court of the State of California, County of Contra Costa, filed December 17, 2015)

Plaintiffs filed this putative class action lawsuit on behalf of themselves and all California persons who have been charged compound interest by Metropolitan Life Insurance Company in life insurance policy and/or premium loan balances within the last four years. Plaintiffs allege that Metropolitan Life Insurance Company has engaged in a pattern and practice of charging compound interest on life insurance policy and premium loans without the borrower authorizing such compounding, and that this constitutes an unlawful business practice under California law. Plaintiff asserts causes of action for declaratory relief, violation of California’s Unfair Competition Law and Usury Law, and unjust enrichment. Plaintiff seeks declaratory and injunctive relief, restitution of interest, and damages in an unspecified amount. On April 12, 2016, the court granted Metropolitan Life Insurance Company’s motion to dismiss. Plaintiffs have appealed this ruling.

77

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Contingencies, Commitments and Guarantees (continued)

Lau v. Metropolitan Life Insurance Company (S.D.N.Y. filed, December 3, 2015)

This putative class action lawsuit was filed by a single defined contribution plan participant on behalf of all ERISA plans whose assets were invested in Metropolitan Life Insurance Company’s “Group Annuity Contract Stable Value Funds” within the past six years. The suit alleges breaches of fiduciary duty under ERISA and challenges the “spread” with respect to the stable value fund group annuity products sold to retirement plans. The allegations focus on the methodology Metropolitan Life Insurance Company uses to establish and reset the crediting rate, the terms under which plan participants are permitted to transfer funds from a stable value option to another investment option, the procedures followed if an employer terminates a contract, and the level of disclosure provided. Plaintiff seeks declaratory and injunctive relief, as well as damages in an unspecified amount. The Company intends to defend this action vigorously.

Newman v. Metropolitan Life Insurance Company (N.D. Ill., filed March 23, 2016)

Plaintiff filed this putative class action alleging causes of action for breach of contract, fraud, and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, based on Metropolitan Life Insurance Company’s class-wide increase in premiums charged for long-term care insurance policies. Plaintiff alleges a class consisting of herself and all persons over age 65 who selected a Reduced Pay at Age 65 payment feature and whose premium rates were increased after age 65. Plaintiff asserts that premiums could not be increased for these class members and/or that marketing material was misleading as to Metropolitan Life Insurance Company’s right to increase premiums. Plaintiff seeks unspecified compensatory, statutory and punitive damages, as well as recessionary and injunctive relief. On April 12, 2017, the court granted Metropolitan Life Insurance Company’s motion, dismissing the action with prejudice. On April 21, 2017, plaintiff appealed this ruling.

Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)

Plaintiffs filed this putative class action against MetLife, Inc. and Metropolitan Life Insurance Company in the U.S. District Court for the Central District of California, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy for a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, Plaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York. The Company intends to defend this action vigorously.

Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)

Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. The Company intends to defend this action vigorously.

Sales Practices Claims

Over the past several years, the Company has faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds, other products or the misuse of client assets. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys’ fees. The Company continues to defend vigorously against the claims in these matters. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices matters.

Summary

Putative or certified class action litigation and other litigation and 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, investor 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.

78

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

11. Contingencies, Commitments and Guarantees (continued)

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material 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 effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.3 billion and $3.9 billion at September 30, 2017 and December 31, 2016, respectively.

Commitments to Fund Partnership Investments, Bank Credit Facilities, Bridge Loans and Private Corporate Bond Investments

The Company commits to fund partnership investments and to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $4.0 billion and $4.2 billion at September 30, 2017 and December 31, 2016, respectively.

Guarantees

In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties such that it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third-party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $127 million, with a cumulative maximum of $367 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees, or commitments.

In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies its agents for liabilities incurred as a result of their representation of the Company’s interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount that could become due under these indemnities in the future.

The Company’s recorded liabilities were $4 million at September 30, 2017 and $5 million at December 31, 2016, respectively, for indemnities, guarantees and commitments.

12. Related Party Transactions

79

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Related Party Transactions (continued)

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 personnel, policy administrative functions and distribution services. For certain agreements, charges are based on various performance measures or activity-based costing. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual cost incurred by the Company and/or affiliate. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $575 million and $1.7 billion for the three months and nine months endedSeptember 30, 2017, respectively, and $631 million and $1.7 billion for the three months and nine months endedSeptember 30, 2016, respectively. Revenues received from affiliates related to these agreements, recorded in universal life and investment-type product policy fees, were $31 million and $93 million for the three months and nine months endedSeptember 30, 2017, respectively, and $37 million and $104 million for the three months and nine months endedSeptember 30, 2016, respectively. Revenues received from affiliates related to these agreements, recorded in other revenues, were $27 million and $82 million for the three months and nine months endedSeptember 30, 2017, respectively, and $37 million and $110 million for the three months and nine months endedSeptember 30, 2016, respectively.

The Company also entered into agreements with affiliates to provide additional services necessary to conduct the affiliates’ activities. Typical services provided under these agreements include management, policy administrative functions, investment advice and distribution services. Expenses incurred by the Company related to these agreements, included in other expenses, were$378 millionand$1.1 billionfor thethree months andnine months endedSeptember 30, 2017, respectively, and$304 millionand$1.1 billionfor thethree monthsandnine months endedSeptember 30, 2016, respectively, and were reimbursed to the Company by these affiliates.

The Company had net payables to affiliates, related to the items discussed above, of $142 million and $165 million at September 30, 2017 and December 31, 2016, respectively.

See Notes 5 and 10 for additional information on related party transactions.

Related Party Reinsurance Transactions

The Company has reinsurance agreements with certain of MetLife, Inc.’s subsidiaries, including MetLife Reinsurance Company of Charleston (“MRC”), MetLife Reinsurance Company of Vermont, Metropolitan Tower Life Insurance Company and General American Life Insurance Company, all of which are related parties. Additionally, the Company has reinsurance agreements with Brighthouse Insurance, Brighthouse Life Insurance Company of NY (“Brighthouse NY”) and New England Life Insurance Company (“NELICO”), former subsidiaries of MetLife, Inc. that were part of the Separation. See Note 2.

80

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on the consolidated statements of operations and comprehensive income (loss) was as follows:

	Three Months   Ended   September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
	(In millions)
Premiums
Reinsurance assumed	$	5		$	188		$	118		$	569
Reinsurance ceded	(32		)	(9		)	(101		)	(30		)
Net premiums	$	(27	)	$	179		$	17		$	539
Universal life and investment-type product policy fees
Reinsurance assumed	$	(2	)	$	14		$	16		$	45
Reinsurance ceded	(6		)	(40		)	(16		)	(109		)
Net universal life and investment-type product policy fees	$	(8	)	$	(26	)	$	—		$	(64	)
Other revenues
Reinsurance assumed	$	4		$	9		$	30		$	(5	)
Reinsurance ceded	139			143			421			429
Net other revenues	$	143		$	152		$	451		$	424
Policyholder benefits and claims
Reinsurance assumed	$	4		$	197		$	63		$	532
Reinsurance ceded	(26		)	(34		)	(90		)	(72		)
Net policyholder benefits and claims	$	(22	)	$	163		$	(27	)	$	460
Interest credited to policyholder account balances
Reinsurance assumed	$	12		$	8		$	36		$	24
Reinsurance ceded	(3		)	(22		)	(9		)	(66		)
Net interest credited to policyholder account balances	$	9		$	(14	)	$	27		$	(42	)
Other expenses
Reinsurance assumed	$	(4	)	$	9		$	33		$	456
Reinsurance ceded	139			145			459			417
Net other expenses	$	135		$	154		$	492		$	873

81

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Related Party Transactions (continued)

Information regarding the significant effects of affiliated reinsurance included on the consolidated balance sheets was as follows at:

	September 30, 2017					December 31, 2016
	Assumed		Ceded			Assumed		Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	50	$	12,730		$	229	$	13,334
Deferred policy acquisition costs and value of business acquired	—		(182		)	38		(198		)
Total assets	$	50	$	12,548		$	267	$	13,136
Liabilities
Future policy benefits	$	384	$	(4	)	$	663	$	(4	)
Policyholder account balances	168		—			563		—
Other policy-related balances	104		16			212		18
Other liabilities	1,865		12,969			1,853		13,065
Total liabilities	$	2,521	$	12,981		$	3,291	$	13,079

The Company ceded two blocks of business to an affiliate on a75%coinsurance with funds withheld basis. Certain contractual features of these agreements qualify as embedded derivatives, which are separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivatives related to the funds withheld associated with these reinsurance agreements are included within other liabilities and were$15 millionand$10 millionatSeptember 30, 2017andDecember 31, 2016, respectively. Net derivative gains (losses) associated with these embedded derivatives were less than($1) millionand($6) millionfor the three months andnine months endedSeptember 30, 2017, respectively, and less than($1) millionand($17) millionfor the threemonths andnine months endedSeptember 30, 2016, respectively.

The Company ceded risks to an affiliate related to guaranteed minimum benefit guarantees written directly by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with the cessions are included within premiums, reinsurance and other receivables and were$0and$460 millionatSeptember 30, 2017andDecember 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than($1) millionand($110) millionfor the threemonths andnine months endedSeptember 30, 2017, respectively, and($33) millionand$275 millionfor the threemonths andnine months endedSeptember 30, 2016, respectively.

Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and was$891 millionand$767 millionatSeptember 30, 2017andDecember 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivative were less than($1) millionand($124) millionfor the threemonths andnine months endedSeptember 30, 2017, respectively, and($3) millionand($512) millionfor the threemonths andnine months endedSeptember 30, 2016, respectively.

The Company assumes risks from affiliates related to guaranteed minimum benefit guarantees written directly by the affiliates. These assumed reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were$3 millionand$390 millionatSeptember 30, 2017andDecember 31, 2016, respectively. Net derivative gains (losses) associated with the embedded derivatives were less than$1 millionand$263 millionfor the threemonths andnine months endedSeptember 30, 2017, respectively,$6 millionand($136) millionfor the threemonths andnine months endedSeptember 30, 2016, respectively.

In January 2017, Brighthouse NY and NELICO recaptured risks related to certain variable annuities, including guaranteed minimum benefits, reinsured by the Company. This recapture resulted in a decrease in cash and cash equivalents of $34 million, a decrease in premiums, reinsurance and other receivables of $77 million, a decrease in future policy benefits of $79 million, a decrease in policyholder account balances of $387 million and an increase in other liabilities of $76 million. For the nine months endedSeptember 30, 2017, the Company recognized a gain of $178 million, net of income tax, as a result of this transaction.

82

Metropolitan Life Insurance Company

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

Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) — (continued)

12. Related Party Transactions (continued)

In January 2017, the Company recaptured risks related to guaranteed minimum benefit guarantees on certain variable annuities reinsured byBrighthouse Insurance. This recapture resulted in an increase in investments and cash and cash equivalents of$428 millionand a decrease in premiums, reinsurance and other receivables of$565 million. The Company recognized a loss of$89 million, net of income tax, for thenine months endedSeptember 30, 2017, as a result of this transaction.

83

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

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Page
Forward-Looking Statements and Other Financial Information	85
Business	85
Summary of Critical Accounting Estimates	88
Results of Operations	89
Adoption of New Accounting Pronouncements	96
Future Adoption of New Accounting Pronouncements	96
Non-GAAP and Other Financial Disclosures	96

84

Forward-Looking Statements and Other Financial Information

For purposes of this discussion, “MLIC,” the “Company,” “we,” “our” and “us” refer to Metropolitan Life Insurance Company, a New York corporation incorporated in 1868, and its subsidiaries. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. (MetLife, Inc., together with its subsidiaries and affiliates, “MetLife”). Management’s narrative analysis of the Company’s 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 Metropolitan Life Insurance Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016 Annual Report”), the cautionary language regarding forward-looking statements included below, the “Risk Factors” set forth in Part II, Item 1A, and the additional risk factors referred to therein, and the Company’s interim condensed consolidated financial statements included elsewhere herein.

This narrative analysis 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, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results. Any or all forward-looking statements may turn out to be wrong. Actual results could differ materially from those expressed or implied in the forward-looking statements. See “Note Regarding Forward-Looking Statements.”

This narrative analysis includes references to our performance measure, operating earnings, that is not based on accounting principles generally accepted in the United States of America (“GAAP”). This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also our GAAP measure of segment performance. Operating earnings allows analysis of our performance and facilitates comparisons to industry results. Forward-looking guidance provided on a non-GAAP basis cannot be reconciled to the most directly comparable GAAP measures on a forward-looking basis because net income may fluctuate significantly if net investment gains and losses and net derivative gains and losses move outside of estimated ranges. See “— Non-GAAP and Other Financial Disclosures” for a definition and discussion of this and other financial measures, and “— Results of Operations” for reconciliations of historical non-GAAP financial measures to the most directly comparable GAAP measures.

Business

Overview

MLIC is a provider of insurance, annuities, employee benefits and asset management to both individuals and groups. MLIC is organized into two segments: U.S. and MetLife Holdings. In addition, the Company reports certain of its results of operations in Corporate & Other. See Note 2 of the Notes to the Interim Condensed Consolidated Financial Statements for further information on the Company’s segments and Corporate & Other. Management continues to evaluate the Company’s segment performance and allocated resources and may adjust related measurements in the future to better reflect segment profitability.

Other Key Information

Separation of Brighthouse

On August 4, 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) through a distribution of 96,776,670 shares of the 119,773,106 shares of Brighthouse Financial, Inc. common stock outstanding, representing 80.8% of those shares, to MetLife, Inc. common shareholders (the “Separation”). MetLife, Inc. retained the remaining ownership interest of 22,996,436 shares, or 19.2%, of Brighthouse Financial, Inc. common stock outstanding. Certain MetLife affiliates hold MetLife, Inc. common stock and, as a result, participated in the distribution.

85

U.S. Retail Advisor Force Divestiture

In July 2016, MetLife, Inc. completed the sale to Massachusetts Mutual Life Insurance Company (“MassMutual”) of MetLife’s U.S. retail advisor force and certain assets associated with the MetLife Premier Client Group, including all of the issued and outstanding shares of MetLife’s affiliated broker-dealer, MetLife Securities, Inc., a wholly-owned subsidiary of MetLife, Inc. (the “U.S. Retail Advisor Force Divestiture”). MassMutual assumed all of the liabilities related to such assets that arise or occur at or after the closing of the sale. As part of the transactions, MetLife, Inc. and MassMutual entered into a product development agreement under which the part of MetLife’s former U.S. retail business now in Brighthouse will be the exclusive developer of certain annuity products to be issued by MassMutual. In the MassMutual purchase agreement, MetLife, Inc. agreed to indemnify MassMutual for certain claims, liabilities and breaches of representations and warranties up to limits described in the purchase agreement.

Extraordinary Dividends

In December 2016, MLIC distributed to MetLife, Inc., as a non-cash extraordinary dividend, all of the issued and outstanding shares of common stock of each of New England Life Insurance Company (“NELICO”) and General American Life Insurance Company (“GALIC”). See “— Results of Operations” and Note 3 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for further information.

Non-Bank SIFI

On December 18, 2014, the Financial Stability Oversight Council (“FSOC”) designated MetLife, Inc. as a non-bank systemically important financial institution (“non-bank SIFI”) subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the Federal Reserve Bank of New York (collectively with the Federal Reserve Board, the “Federal Reserve”) and the Federal Deposit Insurance Corporation (the “FDIC”), as well as to enhanced supervision and prudential standards. On March 30, 2016, the U.S. District Court for the District of Columbia (the “D.C. District Court”) ordered that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded. On April 8, 2016, the FSOC appealed the D.C. District Court’s order to the United States Court of Appeals for the District of Columbia (“D.C. Circuit”), and oral argument was heard on October 24, 2016. In a Presidential Memorandum for the Secretary of the Treasury dated April 21, 2017, President Trump directed the Secretary of the Treasury to review the FSOC SIFI designation process for transparency, due process and other factors, and, pending the completion of the review and submission of the Secretary’s recommendations, to refrain from voting for any non-emergency designations. The Secretary’s review and report were due by October 18, 2017. As of November 8, 2017, the Secretary’s report has not yet been issued. On August 2, 2017, the D.C. Circuit ordered that the appeal be held in abeyance pending the issuance of that report by the Secretary of the Treasury. The D.C. Circuit also ordered the parties to file additional procedural motions to govern future proceedings by November 17, 2017, or within 30 days of the issuance of the Treasury Secretary’s report, whichever occurs first. If the FSOC prevails on appeal or designates MetLife, Inc. as systemically important as part of its ongoing review of non-bank financial companies, MetLife, Inc. could once again be subject to regulation as a non-bank SIFI. See “Business — Regulation — Potential Regulation of MetLife, Inc. as a Non-Bank SIFI” included in the 2016 Annual Report.

Regulatory Developments    

The U.S. insurance industry is regulated primarily at the state level, with some products and services also subject to federal regulation. In addition, we are subject to regulation under the insurance holding company laws of the states of domicile of our U.S. insurance companies. Furthermore, some of our operations, products and services are subject to consumer protection laws, securities regulation, environmental and unclaimed property laws and regulations, and to the Employee Retirement Income Security Act of 1974 (“ERISA”). If MetLife, Inc. were re-designated as a non-bank SIFI, it could also be subject to regulation by the Federal Reserve and the FDIC and, as a subsidiary of MetLife, Inc., we could be affected by such regulation. We may also be affected by any additional capital requirements to which MetLife, Inc. may become subject as a global systemically important insurer. See “Business — Regulation,” “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” included in the 2016 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business — Regulatory Developments” and similarly named sections under the caption “Risk Factors.”

86

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) effected the most far-reaching overhaul of financial regulation in the United States in decades. However, President Trump and the majority party have expressed goals to amend Dodd-Frank. On June 8, 2017, the U.S. House of Representatives passed the Financial CHOICE Act of 2017, which proposes to amend or repeal various sections of Dodd-Frank. This proposed legislation is now being considered by the U.S. Senate. On February 3, 2017, President Trump issued an Executive Order that calls for a comprehensive review of laws, treaties, regulations, policies and guidance regulating the U.S. financial system, and requires the Secretary of the Treasury to consult with the heads of the member agencies of FSOC to identify any laws, regulations or requirements that inhibit federal regulation of the financial system in a manner consistent with the core principles identified in the Executive Order. The Secretary’s report on asset management and insurance was issued on October 26, 2017 and recommended activities-based evaluations of systemic risk in the insurance industry rather than an entity-based approach. The report also supported primary regulation of the U.S. insurance industry by the states rather than the federal government. See “Business — Regulation — Insurance Regulation” and “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated and Changes in Regulation and In Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” in the 2016 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q, for a discussion of Dodd-Frank and other U.S. regulation.

Insurance Regulation

Insurance Regulatory Examinations and Other Activities

The International Association of Insurance Supervisors has encouraged U.S. insurance supervisors, such as the New York State Department of Financial Services (“NYDFS”), to establish Supervisory Colleges for U.S.-based insurance groups with international operations, including MetLife, to facilitate cooperation and coordination among the insurance groups’ supervisors and to enhance the member regulators’ understanding of an insurance group’s risk profile. In October 2017, a Supervisory College meeting was chaired by the NYDFS and attended by MetLife’s key U.S. and international regulators. MetLife has not received any reports or recommendations from the Supervisory College meeting, and we do not expect any outcome of the meeting to have a material adverse effect on our business.

ERISA Considerations

We provide products and services to certain employee benefit plans that are subject to ERISA or the Internal Revenue Code of 1986, as amended (the “Code”). The applicable provisions of ERISA and the Code are subject to enforcement by the Department of Labor (“DOL”), among others. DOL regulations which became effective on June 9, 2017 broadened circumstances under which we may be deemed fiduciaries under ERISA in providing investment advice, increasing our potential exposure to fiduciary liabilities. Regulations that apply more onerous disclosure requirements and increase fiduciary requirements also become effective on January 1, 2018. On February 3, 2017, President Trump asked the DOL to update its analysis of the impact of the new regulations and possibly propose new regulations. On July 6, 2017, the DOL published a new Request for Information regarding a possible delay in the applicability date of January 1, 2018 along with possible additional changes to the rule. Following this, on August 31, 2017, the DOL proposed to delay the applicability date to July 1, 2019. The public comment period for that proposal ended on September 15, 2017. The rule is also being challenged in the Fifth Circuit Court of Appeals (and elsewhere), where a decision is expected by the end of 2017. See “Risk Factors — Regulatory and Legal Risks — Our Insurance Businesses Are Highly Regulated, and Changes in Regulation and in Supervisory and Enforcement Policies May Reduce Our Profitability and Limit Our Growth” in the 2016 Annual Report. 

Potential Regulation of MetLife, Inc. as a Non-Bank SIFI

See “— Overview — Other Key Information — Non-Bank SIFI” above for recent developments concerning FSOC’s appeal of the D.C. District Court’s order that the designation of MetLife, Inc. as a non-bank SIFI by the FSOC be rescinded.

Regulation of Over-the-Counter Derivatives and Qualified Financial Contracts

Federal banking regulators have recently adopted new rules that will apply to certain qualified financial contracts, including many derivatives contracts, securities lending agreements and repurchase agreements, with certain banking institutions and certain of their affiliates. These new rules, which will begin to go into effect in 2019, will generally require the banking institutions and their applicable affiliates to include contractual provisions in their qualified financial contracts that limit or delay certain rights of their counterparties including counterparties’ default rights (such as the right to terminate the contracts or foreclose on collateral) and restrictions on assignments and transfers of credit enhancements (such as guarantees) arising in connection with the banking institution or an applicable affiliate becoming subject to a bankruptcy, insolvency, resolution or similar proceeding. To the extent that any of the derivatives, securities lending agreements or repurchase agreements that we enter into are subject to these new rules, it could limit our recovery in the event of a default and increase our counterparty risk.

87

Summary of Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported on the Interim Condensed Consolidated Financial Statements. The most critical estimates include those used in determining:

(i) liabilities for future policy benefits and the accounting for reinsurance;

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

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

(iv) investment impairments;

(v) estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;

(vi) measurement of employee benefit plan liabilities;

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

(viii) liabilities for litigation and regulatory matters.

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

The above critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates” and Note 1 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report.

88

Results of Operations

Consolidated Results

Business Overview. Overall sales for the nine months ended September 30, 2017 increased over prior period levels reflecting higher sales from our U.S. segment in both our Retirement and Income Solutions (“RIS”) and Group Benefits businesses. The increase in RIS was primarily driven by an increase in funding agreement issuances, as well as higher sales of pension risk transfers and stable value products, partially offset by lower sales of structured settlements. Strong performance from our core and voluntary products resulted in a 22% increase in sales from our Group Benefits business. In connection with the Separation and the U.S. Retail Advisor Force Divestiture, we have discontinued the marketing of life and annuity products in our MetLife Holdings segment, which has led to lower sales.

	Nine Months Ended September 30,
	2017			2016
	(In millions)
Revenues
Premiums	$	17,597		$	16,801
Universal life and investment-type product policy fees	1,706			1,928
Net investment income	7,955			8,349
Other revenues	1,148			1,121
Net investment gains (losses)	184			115
Net derivative gains (losses)	(317		)	(562		)
Total revenues	28,273			27,752
Expenses
Policyholder benefits and claims and policyholder dividends	20,388			19,943
Interest credited to policyholder account balances	1,660			1,675
Capitalization of DAC	(57		)	(285		)
Amortization of DAC and VOBA	124			420
Interest expense on debt	79			84
Other expenses	3,662			4,231
Total expenses	25,856			26,068
Income (loss) before provision for income tax	2,417			1,684
Provision for income tax expense (benefit)	475			232
Net income (loss)	1,942			1,452
Less: Net income (loss) attributable to noncontrolling interests	8			(9		)
Net income (loss) attributable to Metropolitan Life Insurance Company	$	1,934		$	1,461

Nine Months Ended September 30, 2017 Compared with the Nine Months Ended September 30, 2016

During the nine months ended September 30, 2017, income (loss) before provision for income tax increased $733 million ($490 million, net of income tax) from the prior period primarily driven by favorable changes in operating earnings and net derivative gains (losses). As previously discussed, MLIC distributed to MetLife, Inc., as a non-cash extraordinary dividend, all of the issued and outstanding shares of common stock of each of NELICO and GALIC in December 2016. This transaction resulted in a $40 million decrease in net income for the nine months ended September 30, 2017 as compared to the prior period.

89

Management of Investment Portfolio and Hedging Market Risks with Derivatives. We manage our investment portfolio using disciplined asset/liability management principles, focusing on cash flow and duration to support our current and future liabilities. Our intent is to match the timing and amount of liability cash outflows with invested assets that have cash inflows of comparable timing and amount, while optimizing risk-adjusted net investment income and risk-adjusted total return. Our investment portfolio is heavily weighted toward fixed income investments, with over 80% of our portfolio invested in fixed maturity securities and mortgage loans. These securities and loans have varying maturities and other characteristics which cause them to be generally well suited for matching the cash flow and duration of insurance liabilities.

We purchase investments to support our insurance liabilities and not to generate net investment gains and losses. However, net investment gains and losses are incurred and can change significantly from period to period due to changes in external influences, including changes in market factors such as interest rates, foreign currency exchange rates, credit spreads and equity markets; counterparty specific factors such as financial performance, credit rating and collateral valuation; and internal factors such as portfolio rebalancing. Changes in these factors from period to period can significantly impact the levels of both impairments and realized gains and losses on investments sold.

We also use derivatives as an integral part of our management of the investment portfolio and insurance liabilities to hedge certain risks, including changes in interest rates, foreign currency exchange rates, credit spreads and equity market levels.

We use freestanding interest rate, equity, credit and currency derivatives to hedge certain invested assets and insurance liabilities. A small portion of these hedges are designated and qualify as accounting hedges, which reduce volatility in earnings. For those hedges not designated as accounting hedges, changes in market factors lead to the recognition of fair value changes in net derivative gains (losses) generally without an offsetting gain or loss recognized in earnings for the item being hedged, which creates volatility in earnings. During the first quarter of 2017, we began restructuring certain derivative hedges to partially stabilize volatility from nonqualified interest rate derivatives and to help meet prospective dividend objectives under varying interest rate scenarios. The restructuring of the hedge program is substantially complete in meeting our initial objectives. As part of this restructuring, we replaced certain nonqualified derivatives with derivatives that qualify for hedge accounting treatment. In addition, we also entered into replication transactions using interest rate swaps, which are accounted for at amortized cost under statutory guidelines and are nonqualified derivatives under GAAP. We actively evaluate market risk hedging needs and strategies to ensure our capital objectives are met under a range of market conditions.

Certain direct or assumed variable annuity products with guaranteed minimum benefits contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). We use reinsurance and derivatives to hedge the market and other risks inherent in these variable annuity guarantees. Ceded reinsurance of direct variable annuity products with guaranteed minimum benefits generally contain embedded derivatives that are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value recorded in net derivative gains (losses). The valuation of these embedded derivatives includes a nonperformance risk adjustment, which is unhedged, and can be a significant driver of net derivative gains (losses) and volatility in earnings, but does not have an economic impact on us.

90

Net Derivative Gains (Losses). Direct, assumed and ceded variable annuity embedded derivatives, as well as the associated freestanding derivatives, are referred to as “VA program derivatives” in the following table. All other embedded derivatives and all freestanding derivatives that are economic hedges of certain invested assets and insurance liabilities are referred to as “non-VA program derivatives” in the following table. The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:

	Nine Months   Ended September 30,
	2017			2016
	(In millions)
Non-VA program derivatives
Interest rate	$	68		$	992
Foreign currency exchange rate	(354		)	(50		)
Credit	107			45
Equity	26			9
Non-VA embedded derivatives	(190		)	(664		)
Total non-VA program derivatives	(343		)	332
VA program derivatives
Embedded derivatives-direct and assumed guarantees:
Market risks	511			(85		)
Nonperformance risk adjustment	(39		)	173
Other risks	145			(1,209		)
Total	617			(1,121		)
Embedded derivatives - ceded reinsurance:
Market and other risks	(110		)	340
Nonperformance risk adjustment	—			(64		)
Total	(110		)	276
Freestanding derivatives hedging direct and assumed embedded derivatives	(481		)	(49		)
Total VA program derivatives	26			(894		)
Net derivative gains (losses)	$	(317	)	$	(562	)

The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $675 million ($439 million, net of income tax). This was primarily due to mid- and long-term interest rates decreasing less in the current period versus the prior period, unfavorably impacting receive-fixed interest rate swaps, swaptions and floors, primarily hedging long duration liability portfolios. Additionally, the U.S. dollar weakened in relation to other key currencies more in the current period relative to the prior period, unfavorably impacting foreign currency swaps that primarily hedge foreign currency-denominated bonds. These unfavorable changes were partially offset by a change in the value of the underlying assets favorably impacting non-VA embedded derivatives related to funds withheld on a certain reinsurance agreement. Because certain of these hedging strategies are not designated or do not qualify as accounting hedges, the changes in the estimated fair value of these freestanding derivatives are recognized in net derivative gains (losses) without an offsetting gain or loss recognized in earnings for the item being hedged.

The favorable change in net derivative gains (losses) on VA program derivatives was $920 million ($598 million, net of income tax). This was due to a favorable change of $1.1 billion ($694 million, net of income tax) in market and other risks on direct and assumed variable annuity embedded derivatives, net of the impact of market and other risks on the ceded reinsurance embedded derivatives and net of freestanding derivatives hedging those risks, partially offset by an unfavorable change of $148 million ($96 million, net of income tax) related to the change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives, net of the impact of the nonperformance risk adjustment on the ceded variable annuity embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.

91

The foregoing favorable change of $1.1 billion ($694 million, net of income tax) was primarily driven by changes in market factors and other risks.

The primary changes in market factors are summarized as follows:

• Long-term interest rates decreased less in the current period than in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the 30-year U.S. swap rate decreased 6 basis points in the current period and decreased 84 basis points in the prior period.

• Key weighted average equity index levels increased more in the current period than in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives.

The primary changes in other risks are summarized as follows:

• Updates to actuarial policyholder behavior assumptions within the valuation model;

• Impacts due to variable annuity reinsurance recaptures, which became effective in the first quarter of 2017;

• An increase in the risk margin adjustment measuring policyholder behavior risks, which was affected by market and interest rate changes; and

• A combination of other factors, which include fees being deducted from accounts and changes in the benefit base, premiums, lapses, withdrawals and deaths.

We calculate the nonperformance risk adjustment as the change in the embedded derivative discounted at the risk-adjusted rate (which includes our own credit spread to the extent that the embedded derivative is in-the-money) less the change in the embedded derivative discounted at the risk-free rate. The unfavorable change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives of $212 million ($138 million, net of income tax) was primarily due to an unfavorable change of $190 million, before income tax, as a result of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and an unfavorable change of $22 million, before income tax, related to changes in our own credit spread. The favorable change in the nonperformance risk adjustment on the ceded variable annuity embedded derivatives of $64 million ($42 million, net of income tax) was due to a favorable change of $53 million, before income tax, as a result of the impact of changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, and a favorable change of $11 million, before income tax, related to changes in our own credit spread.

When equity index levels decrease in isolation, the direct and assumed variable annuity guarantees become more valuable to policyholders, which results in an increase in the undiscounted embedded derivative liability. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.

When the risk-free interest rate decreases in isolation, discounting the embedded derivative liability produces a higher valuation of the liability than if the risk-free interest rate had remained constant. Discounting this unfavorable change by the risk adjusted rate yields a smaller loss than by discounting at the risk-free interest rate, thus creating a gain from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees.

When our own credit spread increases in isolation, discounting the embedded derivative liability produces a lower valuation of the liability than if our own credit spread had remained constant. As a result, a gain is created from including an adjustment for nonperformance risk on the direct and assumed variable annuity embedded derivatives. The opposite impact occurs with respect to the nonperformance risk adjustment on the ceded variable annuity guarantees when the reinsurer’s credit spread increases in isolation. For each of these primary market drivers, the opposite effect occurs when they move in the opposite direction.

Generally, a higher portion of the ceded reinsurance for guaranteed minimum income benefits (“GMIBs”) is accounted for as an embedded derivative as compared to the direct guarantees since the settlement provisions of the reinsurance agreements generally meet the accounting criteria of “net settlement.” This mismatch in accounting can lead to significant volatility in earnings, even though the risks inherent in these direct guarantees are fully covered by the ceded reinsurance.

92

Net Investment Gains (Losses). The favorable change in net investment gains (losses) of $69 million ($45 million, net of income tax) primarily reflects higher gains on sales of real estate joint ventures and lower impairments of fixed maturity and equity securities. These favorable changes were partially offset by lower gains on sales of fixed maturity and equity securities, lower foreign currency transaction gains, increased provisions for loan losses on mortgage loans and higher impairments on leveraged leases.

Actuarial Assumption Review. Results for the current period include a $74 million ($48 million, net of income tax) gain associated with our annual review of actuarial assumptions related to reserves and DAC, of which an $18 million ($12 million, net of income tax) gain was recognized in net derivative gains (losses). Of the $74 million gain, a $141 million ($92 million, net of income tax) gain was associated with DAC, offset by a $67 million ($44 million, net of income tax) loss related to reserves. The $18 million gain recognized in net derivative gains (losses) associated with this annual review of actuarial assumptions was included within the other risks in embedded derivatives - direct and assumed guarantees caption in the table above.

As a result of our annual review of actuarial assumptions, changes were made to policyholder behavior, mortality and operational assumptions. The significant impacts of the assumption review were on the individual life and variable annuity blocks of business and are summarized as follows:

• Changes in the mortality assumptions resulted in a net charge of $23 million ($15 million, net of income tax).

• Changes in policyholder behavior assumptions resulted in reserve increases, net of reinsurance, which were partially offset by favorable DAC, resulting in a net charge of $45 million ($29 million net of income tax).

• Operational updates, most notably related to updates to maintenance expense assumptions and the closed block projections, resulted in a net gain of $142 million ($92 million, net of income tax).

Results for the prior period include a $722 million ($469 million, net of income tax) loss associated with the annual review of actuarial assumptions related to reserves and DAC, of which a $798 million ($519 million, net of income tax) loss was recognized in net derivative gains (losses). Of the $722 million charge, a $787 million ($512 million, net of income tax) loss was related to reserves while a $65 million ($43 million, net of income tax) gain was associated with DAC.

Taxes. Income tax expense for the nine months ended September 30, 2017 was $475 million, or 20% of income before provision for income tax, compared with income tax expense of $232 million, or 14% of income before provision for income tax, for the nine months ended September 30, 2016. Our effective tax rates differ from the U.S. statutory rate of 35% due to non-taxable investment income, and tax credits for low income housing. Current and prior period results include tax benefits of $25 million and $36 million, respectively, for tax audit settlements.

Operating Earnings. As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use operating earnings, which does not equate to net income (loss), as determined in accordance with GAAP, to analyze our performance, evaluate segment performance and allocate resources. We believe that the presentation of operating earnings, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. Operating earnings allows analysis of our performance and facilitates comparisons to industry results. Operating earnings should not be viewed as a substitute for net income (loss). Operating earnings increased $329 million, net of income tax, to $2.3 billion, net of income tax, for the nine months ended September 30, 2017 from $1.9 billion, net of income tax, for the nine months ended September 30, 2016.

93

Reconciliation of net income (loss) to operating earnings

	Nine Months Ended September 30,
	2017			2016
	(In millions)
Net income (loss)	$	1,942		$	1,452
Less: Net investment gains (losses)	184			115
Less: Net derivative gains (losses)	(317		)	(562		)
Less: Other adjustments to net income (1)	(373		)	(306		)
Less: Provision for income tax (expense) benefit	177			263
Operating earnings	$	2,271		$	1,942

__________________

(1) See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

Reconciliation of revenues to operating revenues and expenses to operating expenses

	Nine Months Ended September 30,
	2017			2016
	(In millions)
Total revenues	$	28,273		$	27,752
Less: Net investment gains (losses)	184			115
Less: Net derivative gains (losses)	(317		)	(562		)
Less: Other adjustments to revenues (1)	(226		)	(317		)
Total operating revenues	$	28,632		$	28,516
Total expenses	$	25,856		$	26,068
Less: Adjustments related to net investment gains (losses) and net derivative gains (losses)	(66		)	(281		)
Less: Other adjustments to expenses (1)	213			270
Total operating expenses	$	25,709		$	26,079

__________________

(1) See definitions of operating revenues and operating expenses under “— Non-GAAP and Other Financial Disclosures” for the components of such adjustments.

Consolidated Results — Operating

Nine Months Ended September 30, 2017 Compared with the Nine Months Ended September 30, 2016

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

As previously mentioned, MLIC transferred the issued and outstanding shares of NELICO’s and GALIC’s common stock to MetLife, Inc. in the form of a non-cash extraordinary dividend in December 2016. This transaction, which is excluded from the discussion below, resulted in an $87 million decrease in operating earnings as compared to the prior period.

94

Business Growth.An increase in net investment income was due to asset growth in our U.S. segment, consistent with the growth in average invested assets from increased net flows in our RIS business. This increase was partially offset by negative net flows, primarily as a result of a reduced asset base in our MetLife Holdings segment, due to the recapture of two assumed single-premium deferred annuity reinsurance agreements with Brighthouse. Consistent with the growth in average invested assets from increased premiums in the U.S. segment, interest credited on long-duration contracts increased. In our MetLife Holdings segment, negative net flows in our deferred annuities business and a decrease in universal life sales resulted in lower asset-based fee income, decreasing operating earnings. Higher interest credited on insurance liabilities and DAC amortization in our MetLife Holdings segment also decreased operating earnings. In our U.S. segment, an increase in premiums, fees and other revenues, coupled with a decline in direct and allocated expenses, was partially offset by higher volume-related expenses. The current period abatement of the annual health insurer fee under the Patient Protection and Affordable Care Act was offset by a corresponding decrease in premiums, fees and other revenues. The combined impact of the items discussed above decreased operating earnings by $67 million.

Market Factors. Market factors, including interest rate levels, variability in equity market returns, and foreign currency exchange rate fluctuations, continued to impact our results; however, certain impacts were mitigated by derivatives used to hedge these risks. Investment yields were negatively affected by lower prepayment fees, lower income on derivatives and lower returns on real estate joint ventures. In addition, earnings on our securities lending program decreased, which primarily resulted from lower margins due to a flatter yield curve. These declines were partially offset by higher income on other limited partnership interests, driven by improvements in equity market performance, and increased yields on fixed maturity securities. In our MetLife Holdings segment, higher equity returns drove an increase in average separate account balances, resulting in higher asset-based fees in our deferred annuities business. Certain of our funding agreements and guaranteed interest contract liabilities have interest credited rates that are contractually tied to current market rates, specifically the 3-month London Interbank Offered Rate (“LIBOR”) and, as a result, a higher average interest credited rate drove an increase in interest credited expense. In addition, the crediting rate on certain long-duration insurance contracts increased, which decreased operating earnings. The changes in market factors discussed above resulted in a $22 million decrease in operating earnings.

Underwriting, Actuarial Assumption Review and Other Insurance Adjustments. Favorable underwriting increased operating earnings by $87 million due to favorable mortality in our MetLife Holdings and U.S. segments and favorable morbidity in our U.S. segment. Mortality results improved by $58 million primarily as a result of lower life claim severity in our MetLife Holdings segment and favorable claims experience in our U.S. segment, mainly driven by a prior period development in our term life business and favorable current period mortality in our pension risk transfer, structured settlement and post-retirement benefit businesses. These positive results were partially offset by less favorable mortality in our accidental death and dismemberment and universal life businesses, driven by higher incidence and severity, as well as less favorable mortality in our specialized life insurance and income annuities businesses. A $29 million increase in operating earnings was driven by favorable morbidity experience in our U.S. segment, partially offset by unfavorable morbidity experience due to higher claim severity and volume in our long-term care business in our MetLife Holdings segment. The favorable morbidity experience in our U.S. segment was the result of favorable prior period development, current period utilization and the impact of pricing actions in our dental business, as well as favorable claims experience in our group disability and accident & health businesses. The impact in both periods of our annual actuarial assumption review resulted in a $170 million increase in operating earnings, primarily driven by favorable DAC unlockings in the current period compared to unfavorable DAC unlockings in the prior period, primarily in the life business in our MetLife Holdings segment. Refinements to DAC and certain insurance-related liabilities, which were recorded in both periods, resulted in an increase in operating earnings of $73 million. This includes current period refinements in the MetLife Holdings segment of (i) favorable reserve adjustments resulting from modeling improvements in the reserving process of $32 million and $28 million, in our life and long-term care businesses, respectively; (ii) a $10 million unfavorable DAC adjustment related to certain participating whole life business assumed from Brighthouse; and (iii) a net unfavorable impact from an affiliated life reinsurance recapture. This also includes an unfavorable prior period refinement resulting from modeling improvements in the reserving process for our universal life business in the MetLife Holdings segment, which increased operating earnings by $25 million in the current period.

Expenses and Taxes. An $88 million increase in expenses was primarily due to an increase in costs associated with corporate initiatives and projects, higher employee-related expenses and expenses incurred in the current period related to the guaranty fund assessment for Penn Treaty Network America Insurance Company, partially offset by lower costs as a result of the U.S. Retail Advisor Force Divestiture. Costs associated with corporate initiatives and projects include leasehold impairments, Separation-related costs and costs related to our unit cost initiative. Our effective tax rates differ from the U.S. statutory rate of 35% due to non-taxable investment income and tax credits for investments in low income housing. Current and prior period results include tax benefits of $25 million and $36 million, respectively, for tax audit settlements.

95

Other. In connection with the Separation, annuities reinsurance activity with Brighthouse increased operating earnings by $254 million. This favorable impact was primarily due to the recapture in 2016 of certain single-premium deferred annuity reinsurance agreements and the elimination of interest credited payments on the related reinsurance payable, as well as lower DAC amortization. This increase was partially offset by the net unfavorable impact in the current period from the recapture and novation of, as well as refinements to, assumed and ceded agreements covering certain variable annuity business.

Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

Future Adoption of New Accounting Pronouncements

See Note 1 of the Notes to the Interim Condensed Consolidated Financial Statements.

Non-GAAP and Other Financial Disclosures

In this report, the Company presents certain measures of its performance that are not calculated in accordance with GAAP. We believe that these non-GAAP financial measures enhance the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of our business.

The following non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP:

Non-GAAP financial measures:		Comparable GAAP financial measures:
(i)	operating revenues	(i)	revenues
(ii)	operating expenses	(ii)	expenses
(iii)	operating earnings	(iii)	net income (loss)

Reconciliations of these non-GAAP measures to the most directly comparable historical GAAP measures are included in the results of operations, see “— Results of Operations.” Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures is not accessible on a forward-looking basis because we believe it is not possible without unreasonable efforts to provide other than a range of net investment gains and losses and net derivative gains and losses, which can fluctuate significantly within or outside the range and from period to period and may have a material impact on net income.

Our definitions of the various non-GAAP and other financial measures discussed in this report may differ from those used by other companies:

Operating earnings

This measure is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, operating earnings is also our GAAP measure of segment performance. Operating earnings allows analysis of our performance and facilitates comparisons to industry results.

Operating earnings is defined as operating revenues less operating expenses, both net of income tax.

96

Operating revenues and operating expenses

These financial measures focus on our primary businesses principally by excluding the impact of market volatility, which could distort trends, and revenues and costs related to non-core products and certain entities required to be consolidated under GAAP. Also, these measures exclude results of discontinued operations under GAAP and other businesses that have been or will be sold or exited by MLIC but do not meet the discontinued operations criteria under GAAP and are referred to as divested businesses. Divested businesses also includes the net impact of transactions with exited businesses that have been eliminated in consolidation under GAAP and costs relating to businesses that have been or will be sold or exited by MLIC that do not meet the criteria to be included in results of discontinued operations under GAAP. Operating revenues also excludes net investment gains (losses) and net derivative gains (losses).

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

• Universal life and investment-type product policy fees excludes the amortization of unearned revenue related to net investment gains (losses) and net derivative gains (losses) and certain variable annuity GMIB fees (“GMIB Fees”); and

• Net investment income: (i) includes earned income on derivatives and amortization of premium on derivatives that are hedges of investments or that are used to replicate certain investments, but do not qualify for hedge accounting treatment, (ii) excludes post-tax operating earnings adjustments relating to insurance joint ventures accounted for under the equity method, and (iii) excludes certain amounts related to securitization entities that are variable interest entities (“VIEs”) consolidated under GAAP.

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

• Policyholder benefits and claims and policyholder dividends excludes: (i) changes in the policyholder dividend obligation related to net investment gains (losses) and net derivative gains (losses), (ii) amounts associated with periodic crediting rate adjustments based on the total return of a contractually referenced pool of assets, (iii) benefits and hedging costs related to GMIBs (“GMIB Costs”) and (iv) market value adjustments associated with surrenders or terminations of contracts (“Market Value Adjustments”);

• Interest credited to policyholder account balances includes adjustments for earned income on derivatives and amortization of premium on derivatives that are hedges of policyholder account balances but do not qualify for hedge accounting treatment;

• Amortization of DAC and VOBA excludes amounts related to: (i) net investment gains (losses) and net derivative gains (losses), (ii) GMIB Fees and GMIB Costs and (iii) Market Value Adjustments;

• Interest expense on debt excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP; and

• Other expenses excludes costs related to noncontrolling interests and goodwill impairments.

The tax impact of the adjustments mentioned above are calculated net of the U.S. or foreign statutory tax rate, which could differ from the Company’s effective tax rate. Additionally, the provision for income tax (expense) benefit also includes the impact related to the timing of certain tax credits, as well as certain tax reforms.

The following additional information is relevant to an understanding of our performance results:

• We sometimes refer to sales activity for various products. These sales statistics do not correspond to revenues under GAAP, but are used as relevant measures of business activity.

Item 4. Controls and Procedures

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

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

97

Part II — Other Information

Item 1. Legal Proceedings

The following should be read in conjunction with (i) Part I, Item 3, of the 2016 Annual Report; (ii) Part II, Item 1, of Metropolitan Life Insurance Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017; and (iii) Note 11 of the Notes to the Interim Condensed Consolidated Financial Statements in Part I of this report.

Asbestos-Related Claims

Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages.

As reported in the 2016 Annual Report, Metropolitan Life Insurance Company received approximately 4,146 asbestos-related claims in 2016. During the nine months endedSeptember 30, 2017 and 2016, Metropolitan Life Insurance Company received approximately 2,742 and 3,267 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2016 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s increase in its recorded liability at December 31, 2014. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year.

Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants and the jurisdictions in which claims are pending. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through September 30, 2017.

Regulatory Matters

The Company receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the SEC; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority. The issues involved in information requests and regulatory matters vary widely. The Company cooperates in these inquiries.

In the Matter of Chemform, Inc. Site, Pompano Beach, Broward County, Florida

In July 2010, the Environmental Protection Agency (“EPA”) advised Metropolitan Life Insurance Company that it believed payments were due under two settlement agreements, known as “Administrative Orders on Consent,” that New England Mutual Life Insurance Company (“New England Mutual”) signed in 1989 and 1992 with respect to the cleanup of a Superfund site in Florida (the “Chemform Site”). The EPA originally contacted Metropolitan Life Insurance Company (as successor to New England Mutual) and a third party in 2001, and advised that they owed additional clean-up costs for the Chemform Site. The matter was not resolved at that time. In September 2012, the EPA, Metropolitan Life Insurance Company and the third party executed an Administrative Order on Consent under which Metropolitan Life Insurance Company and the third party agreed to be responsible for certain environmental testing at the Chemform Site. The EPA may seek additional costs if the environmental testing identifies issues. The EPA and Metropolitan Life Insurance Company have reached a settlement in principal on the EPA’s claim for past costs. The Company estimates that the aggregate cost to resolve this matter, including the settlement for claims of past costs and the costs of environmental testing, will not exceed $300 thousand.

Total Control Accounts Litigation

Metropolitan Life Insurance Company is a defendant in a lawsuit related to its use of retained asset accounts, known as TCA, as a settlement option for death benefits.

98

Owens v. Metropolitan Life Insurance Company (N.D. Ga., filed April 17, 2014)

Plaintiff filed this class action lawsuit on behalf of all persons for whom Metropolitan Life Insurance Company established a retained asset account, known as a TCA, to pay death benefits under an Employee Retirement Income Security Act of 1974 (“ERISA”) plan. The action alleges that Metropolitan Life Insurance Company’s use of the TCA as the settlement option for life insurance benefits under some group life insurance policies violates Metropolitan Life Insurance Company’s fiduciary duties under ERISA. As damages, plaintiff seeks disgorgement of profits that Metropolitan Life Insurance Company realized on accounts owned by members of the class. In addition, plaintiff, on behalf of a subgroup of the class, seeks interest under Georgia’s delayed settlement interest statute, alleging that the use of the TCA as the settlement option did not constitute payment. On September 27, 2016, the court denied Metropolitan Life Insurance Company’s summary judgment motion in full and granted plaintiff’s partial summary judgment motion. On September 29, 2017, the court certified a nationwide class. The court also certified a Georgia subclass. The Company intends to defend this action vigorously.

Other Litigation

Miller, et al. v. MetLife, Inc., et al. (C.D. Cal., filed April 7, 2017)

Plaintiffs filed this putative class action against MetLife, Inc. and Metropolitan Life Insurance Company in the U.S. District Court for the Central District of California, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy for a Group Variable Universal Life policy wherein MetLife allegedly charged smoker rates for certain non-smokers. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On September 25, 2017, Plaintiffs dismissed the action and refiled the complaint in U.S. District Court for the Southern District of New York. The Company intends to defend this action vigorously.

Julian & McKinney v. Metropolitan Life Insurance Company (S.D.N.Y., filed February 9, 2017)

Plaintiffs filed this putative class and collective action on behalf of themselves and all current and former long-term disability (“LTD”) claims specialists between February 2011 and the present for alleged wage and hour violations under the Fair Labor Standards Act, the New York Labor Law, and the Connecticut Minimum Wage Act. The suit alleges that Metropolitan Life Insurance Company improperly reclassified the plaintiffs and similarly situated LTD claims specialists from non-exempt to exempt from overtime pay in November 2013. As a result, they and members of the putative class were no longer eligible for overtime pay even though they allege they continued to work more than 40 hours per week. The Company intends to defend this action vigorously.

Summary

Putative or certified class action litigation and other litigation and 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, investor 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.

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. In some of the matters referred to previously, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material 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 effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

99

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 2016 Annual Report, as amended or supplemented by the information under “Risk Factors” in Part II, Item 1A, of Metropolitan Life Insurance Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (the “Second Quarter 2017 Report”). Other than as described in this Item 1A, there have been no material changes to our risk factors from the risk factors previously disclosed in the 2016 Annual Report as amended or supplemented by such information in the Second Quarter 2017 Report.

Risks Related to Our Business

The following updates and replaces the similar risk factor entitled “Differences Between Actual Claims Experience and Underwriting and Reserving Assumptions May Adversely Affect Our Financial Results” included in the 2016 Annual Report.

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

Our earnings significantly depend upon the extent to which our actual claims experience is consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Such amounts are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. We cannot determine precisely the amounts which we will ultimately pay to settle our liabilities, and such amounts may vary from the estimated amounts, particularly when those payments may not occur until well in the future. We evaluate our liabilities periodically based on accounting requirements, which change from time to time, the assumptions used to establish the liabilities, as well as our actual experience. Reserve estimates in some instances are affected by our operating practices and procedures that are used, among other things, to support our assumptions with respect to the Company’s obligations to its policyholders and contractholders. To the extent that these practices and procedures do not accurately produce the data to support our assumptions our reserves may require adjustment. If the liabilities originally established for future benefit payments prove inadequate, we must increase them and/or reduce associated DAC and/or VOBA. Such adjustments could affect earnings negatively and have a material adverse effect on our business, results of operations and financial condition. See “Business — Policyholder Liabilities” included in the 2016 Annual Report. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Consolidated Results — Nine Months Ended September 30, 2017 Compared with the Nine Months Ended September 30, 2016 — Actuarial Assumption Review,” as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Deferred Policy Acquisition Costs and Value of Business Acquired” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Critical Accounting Estimates — Derivatives” included in the 2016 Annual Report for further information regarding the manner in which policyholder behavior and other events may differ from our assumptions and, thereby affect our financial results.

100

Item 6. Exhibits

(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 Metropolitan Life Insurance Company, its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about Metropolitan Life Insurance Company, its subsidiaries and affiliates may be found elsewhere in this Quarterly Report on Form 10-Q and Metropolitan Life Insurance Company’s other public filings, which are available without charge through the U.S. Securities and Exchange Commission website at www.sec.gov.)

		Incorporated by Reference
Exhibit No.	Description	Form	File Number	Exhibit	Filing Date	Filed or Furnished Herewith
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.					X
101.INS	XBRL Instance Document.					X
101.SCH	XBRL Taxonomy Extension Schema Document.					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.					X

101

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

METROPOLITAN LIFE INSURANCE COMPANY
By:		/s/ William O’Donnell
	Name:	William O’Donnell
	Title:	Executive Vice President and Chief
		Accounting Officer (Authorized Signatory
		and Principal Accounting Officer)

Date: November 8, 2017

102