UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ______________________________________

Form 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

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 every Interactive Data File required to be submitted 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 such files).    Yes þ   No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

At May 9, 2019, 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 (Unaudited) (at March 31, 2019 and December 31, 2018 and for the Three Months Ended March 31, 2019 and 2018)
	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	14
	Note 4 — Closed Block	16
	Note 5 — Investments	19
	Note 6 — Derivatives	34
	Note 7 — Fair Value	46
	Note 8 — Leases	61
	Note 9 — Equity	63
	Note 10 — Other Revenues and Other Expenses	65
	Note 11 — Employee Benefit Plans	65
	Note 12 — Income Tax	66
	Note 13 — Contingencies, Commitments and Guarantees	66
	Note 14 — Related Party Transactions	71
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	75
Item 4.	Controls and Procedures	85
Part II — Other Information
Item 1.	Legal Proceedings	86
Item 1A.	Risk Factors	86
Item 6.	Exhibits	87
Signatures		88

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 and terms such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future 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.

Many factors will be important in determining the results of Metropolitan Life Insurance Company, its subsidiaries and affiliates. Forward-looking statements are based on our assumptions and current expectations, which may be inaccurate, and on the current economic environment, which may change. These statements are not guarantees of future performance. They involve a number of risks and uncertainties that are difficult to predict. 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 economic conditions, including risks relating to interest rates, credit spreads, equity, real estate, obligors and counterparties, and derivatives; (2) adverse global capital and credit market conditions, which may affect our ability to meet liquidity needs and access capital, including through credit facilities; (3) downgrades in our claims paying ability, financial strength or credit ratings; (4) availability and effectiveness of reinsurance, hedging or indemnification arrangements; (5) the impact on us of changes to and implementation of the wide variety of laws and regulations to which we are subject; (6) regulatory, legislative or tax changes relating to our operations that may affect the cost of, or demand for, our products or services; (7) adverse results or other consequences from litigation, arbitration or regulatory investigations; (8) investment losses, defaults and volatility; (9) potential liquidity and other risks resulting from our participation in a securities lending program and other transactions; (10) differences between actual claims experience and underwriting and reserving assumptions; (11) the impact of technological changes on our businesses; (12) catastrophe losses; (13) a deterioration in the experience of the closed block established in connection with the reorganization of Metropolitan Life Insurance Company; (14) changes in assumptions related to deferred policy acquisition costs, deferred sales inducements or value of business acquired; (15) exposure to losses related to guarantees in certain products; (16) ineffectiveness of risk management policies and procedures or models; (17) a failure in MetLife’s cybersecurity systems or other information security systems or MetLife’s disaster recovery plans; (18) any failure to protect the confidentiality of client information; (26) changes in accounting standards; (19) MetLife associates taking excessive risks; (20) difficulties in marketing and distributing products through our distribution channels; (21) difficulties, unforeseen liabilities, asset impairments, or rating agency actions arising from business acquisitions and dispositions, joint ventures, or other legal entity reorganizations; and (22) 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 “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

March 31, 2019 and December 31, 2018 (Unaudited)

(In millions, except share and per share data)

	March 31, 2019		December 31, 2018
Assets
Investments:
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $153,883 and $155,175, respectively)	$	162,387	$	159,073
Equity securities, at estimated fair value	817		773
Mortgage loans (net of valuation allowances of $295 and $291, respectively; includes $210 and $210, respectively, relating to variable interest entities; includes $276 and $299, respectively, under the fair value option)	65,926		63,687
Policy loans	6,054		6,061
Real estate and real estate joint ventures (includes $1,411 and $1,394, respectively, relating to variable interest entities)	6,281		6,152
Other limited partnership interests	4,513		4,481
Short-term investments, principally at estimated fair value	2,433		1,506
Other invested assets (includes $1,135 and $1,130, respectively, of leveraged and direct financing leases and $111 and $113, respectively, relating to variable interest entities)	15,496		15,690
Total investments	263,907		257,423
Cash and cash equivalents, principally at estimated fair value (includes $21 and $14, respectively, relating to variable interest entities)	5,538		6,882
Accrued investment income (includes $1 and $1, respectively, relating to variable interest entities)	2,094		2,050
Premiums, reinsurance and other receivables (includes $2 and $2, respectively, relating to variable interest entities)	22,703		21,829
Deferred policy acquisition costs and value of business acquired	3,876		4,117
Deferred income tax asset	—		43
Other assets (includes $2 and $2, respectively, relating to variable interest entities)	4,608		3,723
Separate account assets	117,279		110,850
Total assets	$	420,005	$	406,917
Liabilities and Equity
Liabilities
Future policy benefits	$	125,919	$	126,099
Policyholder account balances	91,854		90,656
Other policy-related balances	7,599		7,264
Policyholder dividends payable	517		494
Policyholder dividend obligation	1,116		428
Payables for collateral under securities loaned and other transactions	18,314		18,472
Short-term debt	128		129
Long-term debt (includes $5 and $5, respectively, at estimated fair value, relating to variable interest entities)	1,559		1,567
Current income tax payable	673		611
Deferred income tax liability	648		—
Other liabilities	27,280		24,620
Separate account liabilities	117,279		110,850
Total liabilities	392,886		381,190
Contingencies, Commitments and Guarantees (Note 13)
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	12,451		12,450
Retained earnings	7,951		9,512
Accumulated other comprehensive income (loss)	6,517		3,562
Total Metropolitan Life Insurance Company stockholder’s equity	26,924		25,529
Noncontrolling interests	195		198
Total equity	27,119		25,727
Total liabilities and equity	$	420,005	$	406,917

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 EndedMarch 31, 2019 and 2018 (Unaudited)

(In millions)

	Three Months Ended March 31,
	2019			2018
Revenues
Premiums	$	5,052		$	4,949
Universal life and investment-type product policy fees	503			531
Net investment income	2,645			2,701
Other revenues	401			401
Net investment gains (losses)	(54		)	(196		)
Net derivative gains (losses)	(310		)	60
Total revenues	8,237			8,446
Expenses
Policyholder benefits and claims	5,662			5,514
Interest credited to policyholder account balances	662			581
Policyholder dividends	257			262
Other expenses	1,148			1,354
Total expenses	7,729			7,711
Income (loss) before provision for income tax	508			735
Provision for income tax expense (benefit)	—			63
Net income (loss)	508			672
Less: Net income (loss) attributable to noncontrolling interests	1			3
Net income (loss) attributable to Metropolitan Life Insurance Company	$	507		$	669
Comprehensive income (loss)	$	3,446		$	(1,695	)
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of income tax	1			3
Comprehensive income (loss) attributable to Metropolitan Life Insurance Company	$	3,445		$	(1,698	)

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 Three Months EndedMarch 31, 2019 and 2018 (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, 2018	$	5	$	12,450	$	9,512		$	3,562	$	25,529		$	198		$	25,727
Cumulative effects of changes in accounting principles, net of income tax (Note 1)					78			17		95						95
Balance at January, 1 2019	5		12,450		9,590			3,579		25,624			198			25,822
Capital contributions from MetLife, Inc.			1							1						1
Dividends to MetLife, Inc.					(2,146		)			(2,146		)				(2,146		)
Change in equity of noncontrolling interests										—			(4		)	(4		)
Net income (loss)					507					507			1			508
Other comprehensive income (loss), net of income tax								2,938		2,938						2,938
Balance at March 31, 2019	$	5	$	12,451	$	7,951		$	6,517	$	26,924		$	195		$	27,119

	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, 2017	$	5	$	14,150	$	10,035		$	5,428		$	29,618		$	143	$	29,761
Cumulative effects of changes in accounting principles, net of income tax (Note 1)					(917		)	924			7					7
Balance at January 1, 2018	5		14,150		9,118			6,352			29,625			143		29,768
Capital contributions from MetLife, Inc.			1								1					1
Dividends paid to MetLife, Inc.					(1,000		)				(1,000		)			(1,000		)
Change in equity of noncontrolling interests											—			59		59
Net income (loss)					669						669			3		672
Other comprehensive income (loss), net of income tax								(2,367		)	(2,367		)			(2,367		)
Balance at March 31, 2018	$	5	$	14,151	$	8,787		$	3,985		$	26,928		$	205	$	27,133

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 Three Months Ended March 31, 2019 and 2018 (Unaudited)

(In millions)

	Three Months Ended March 31,
	2019			2018
Net cash provided by (used in) operating activities	$	1,191		$	510
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturity securities available-for-sale	14,382			16,447
Equity securities	47			63
Mortgage loans	1,497			1,955
Real estate and real estate joint ventures	83			125
Other limited partnership interests	158			90
Purchases and originations of:
Fixed maturity securities available-for-sale	(12,900		)	(12,322		)
Equity securities	(9		)	(62		)
Mortgage loans	(3,637		)	(3,342		)
Real estate and real estate joint ventures	(278		)	(164		)
Other limited partnership interests	(233		)	(154		)
Cash received in connection with freestanding derivatives	579			919
Cash paid in connection with freestanding derivatives	(575		)	(1,316		)
Net change in policy loans	7			(3		)
Net change in short-term investments	(954		)	(206		)
Net change in other invested assets	9			(44		)
Net change in property, equipment and leasehold improvements	(7		)	(23		)
Other, net	1			—
Net cash provided by (used in) investing activities	(1,830		)	1,963
Cash flows from financing activities
Policyholder account balances:
Deposits	18,826			20,232
Withdrawals	(17,928		)	(21,647		)
Net change in payables for collateral under securities loaned and other transactions	(158		)	(381		)
Long-term debt issued	—			14
Long-term debt repaid	(10		)	(32		)
Financing element on certain derivative instruments and other derivative related transactions, net	(30		)	(51		)
Dividends paid to MetLife, Inc.	(1,400		)	(1,000		)
Other, net	(6		)	58
Net cash provided by (used in) financing activities	(706		)	(2,807		)
Effect of change in foreign currency exchange rates on cash and cash equivalents balances	1			—
Change in cash and cash equivalents	(1,344		)	(334		)
Cash and cash equivalents, beginning of period	6,882			5,069
Cash and cash equivalents, end of period	$	5,538		$	4,735
Supplemental disclosures of cash flow information
Net cash paid (received) for:
Interest	$	12		$	11
Income tax	$	12		$	2
Non-cash transactions:
Capital contributions from MetLife, Inc.	$	1		$	1
Dividends to MetLife, Inc. declared and unpaid	$	746		$	—
Reclassification of certain equity securities to other invested assets	$	—		$	733

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 and is organized into two segments: U.S. and MetLife Holdings. 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.

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, 2018 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, 2018 (the “2018 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 2018 Annual Report.

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 real estate joint ventures and other limited partnership interests (“investee”) 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 in net investment income 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.

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.

Reclassifications

Certain amounts in the prior year periods’ interim condensed consolidated financial statements and related footnotes thereto have been reclassified to conform to the 2019 presentation as discussed throughout the Notes to the Interim Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs. The following tables provide a description of new ASUs issued by the FASB and the impact of the adoption 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)

Adoption of New Accounting Pronouncements

Except as noted below, the ASUs adopted by the Company effective January 1, 2019 did not have a material impact on its consolidated financial statements.

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2017-12,Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, as clarified and amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments	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 their financial statements.	January 1, 2019. The Company adopted using a modified retrospective approach.	The adoption of the guidance resulted in a $18 million, net of income tax, increase to accumulated other comprehensive income (loss) (“AOCI”) with a corresponding decrease to retained earnings due to the reclassification of hedge ineffectiveness for cash flow hedging relationships existing as of January 1, 2019. The Company has included the expanded disclosures within Note 6.
ASU 2016-02,Leases (Topic 842), as clarified and amended by ASU 2018-10, Codification Improvements to Topic 842, Leases, ASU 2018-11, Leases (Topic 842): Targeted Improvements, andASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors	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 also requires new qualitative and quantitative disclosures. In July 2018, two amendments to the new guidance were issued. The amendments provide the option to adopt the new guidance prospectively without adjusting comparative periods. Also, the amendments provide lessors with a practical expedient not to separate lease and non-lease components for certain operating leases. In December 2018, an amendment was issued to clarify lessor accounting relating to taxes, certain lessor’s costs and variable payments related to both lease and non-lease components.	January 1, 2019. The Company adopted using a modified retrospective approach.	The Company elected the package of practical expedients allowed under the transition guidance. This allowed the Company to carry forward its historical lease classification. In addition, the Company elected all other practical expedients that were allowed under the new guidance and were applicable, including the practical expedient to combine lease and non-lease components into one lease component for certain real estate leases. The adoption of this guidance resulted in the recording of additional net right-of-use (“ROU”) assets and lease liabilities of approximately $818 million and $902 million, respectively, as of January 1, 2019. The reduction of the ROU assets was a result of adjustments for prepaid/deferred rent, unamortized initial direct costs and impairment of certain ROU assets based on the net present value of the remaining minimum lease payments and sublease revenues. In addition, retained earnings increased by $95 million, net of income tax, as a result of the recognition of deferred gains on previous sale leaseback transactions. The guidance did not have a material impact on the Company’s consolidated net income and cash flows. The Company has included expanded disclosures on the consolidated balance sheets and in Notes 5 and 8.

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)

Future Adoption of New Accounting Pronouncements

ASUs not listed below were assessed and either determined to be not applicable or are not expected to have a material impact on the Company’s consolidated financial statements. ASUs issued but not yet adopted as of March 31, 2019 that are currently being assessed and may or may not have a material impact on the Company’s consolidated financial statements are summarized in the table below.

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2018-15,Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	The new guidance requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as an asset and which costs to expense as incurred. Implementation costs that are capitalized under the new guidance are required to be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use.	January 1, 2020. The new guidance can be applied either prospectively to eligible costs incurred on or after the guidance is first applied, or retrospectively to all periods presented.	The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
ASU 2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	The new guidance removes certain disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant for employers that sponsor defined benefit pension or other postretirement plans.	December 31, 2020, to be applied on a retrospective basis to all periods presented (with early adoption permitted).	The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
ASU 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	The new guidance modifies the disclosure requirements on fair value by removing some requirements, modifying others, adding changes in unrealized gains and losses included in other comprehensive income (loss) (“OCI”) for recurring Level 3 fair value measurements, and under certain circumstances, providing the option to disclose certain other quantitative information with respect to significant unobservable inputs in lieu of a weighted average.	January 1, 2020. Amendments related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively.	As of December 31, 2018, the Company early adopted the provisions of the guidance that removed the requirements relating to transfers between fair value hierarchy levels and certain disclosures about valuation processes for Level 3 fair value measurements. The Company will adopt the remainder of the new guidance at the effective date, and is currently evaluating the impact of those changes on its consolidated financial statements.
ASU 2018-12,Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts	The new guidance (i) prescribes the discount rate to be used in measuring the liability for future policy benefits for traditional and limited payment long-duration contracts, and requires assumptions for those liability valuations to be updated after contract inception, (ii) requires more market-based product guarantees on certain separate account and other account balance long-duration contracts to be accounted for at fair value, (iii) simplifies the amortization of deferred policy acquisition costs (“DAC”) for virtually all long-duration contracts, and (iv) introduces certain financial statement presentation requirements, as well as significant additional quantitative and qualitative disclosures.	January 1, 2021, to be applied retrospectively to January 1, 2019 (with early adoption permitted).	The Company has started its implementation efforts and is currently evaluating the impact of the new guidance. Given the nature and extent of the required changes to a significant portion of the Company’s operations, the adoption of this standard is expected to have a material impact 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)

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment	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.	January 1, 2020, to 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 will reduce the complexity involved with the evaluation of goodwill for impairment. The impact of the new guidance will depend on the outcomes of future goodwill impairment tests.
ASU 2016-13,Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as clarified and amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses and ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments	This new guidance 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. In November 2018, the FASB issued ASU 2018-19, clarifying that receivables arising from operating leases should be accounted for in accordance withTopic 842, Leases. 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.	January 1, 2020. For substantially all financial assets, the ASU is to be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings. For previously impaired debt securities and certain debt securities acquired with evidence of credit quality deterioration since origination, the new guidance is to be applied prospectively.	The Company believes that the most significant impact upon adoption will be to its mortgage loan investments. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

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.

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 (“RIS”).

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

• The RIS business offers a broad range of life and annuity-based insurance and investment products, including stable value and pension risk transfer products, institutional income annuities, tort settlements, and capital markets investment products, as well as solutions for funding postretirement benefits and company-, bank- or trust-owned life insurance.

MetLife Holdings

The MetLife Holdings segment consists of operations relating to products and businesses, previously included in MLIC’s former retail business, that the Company no longer actively markets, such as variable, universal, term and whole life insurance, variable, fixed and index-linked annuities and long-term care insurance.

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)

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. Additionally, Corporate & Other includes run-off businesses, the Company’s ancillary international operations, 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 affiliated reinsurance and intersegment loans, which bear interest rates commensurate with related borrowings.

Financial Measures and Segment Accounting Policies

Adjusted earnings is used by management to evaluate performance and allocate resources. Consistent with GAAP guidance for segment reporting, adjusted earnings is also the Company’s GAAP measure of segment performance and is reported below. Adjusted earnings should not be viewed as a substitute for net income (loss). The Company believes the presentation of adjusted 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.

Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax.

The financial measures of adjusted revenues and adjusted 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. Adjusted 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 adjusted 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 adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to securitization entities that are VIEs consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnership interests that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in estimated fair value is recognized in net investment gains (losses) under GAAP.

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 following additional adjustments are made to expenses, in the line items indicated, in calculating adjusted 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 and other pass-through adjustments, (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 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: (i) noncontrolling interests, (ii) acquisition, integration and other costs, and (iii) 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.

Set forth in the tables below is certain financial information with respect to the Company’s segments, as well as Corporate & Other, for thethree months endedMarch 31, 2019and2018. The segment accounting policies are the same as those used to prepare the Company’s consolidated financial statements, except for adjusted 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.

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 adjusted 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.

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)

Three Months Ended March 31, 2019	U.S.			MetLife Holdings		Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	4,302		$	750	$	—		$	5,052		$	—		$	5,052
Universal life and investment-type product policy fees	264			217		—			481			22			503
Net investment income	1,638			1,139		(57		)	2,720			(75		)	2,645
Other revenues	204			63		134			401			—			401
Net investment gains (losses)	—			—		—			—			(54		)	(54		)
Net derivative gains (losses)	—			—		—			—			(310		)	(310		)
Total revenues	6,408			2,169		77			8,654			(417		)	8,237
Expenses
Policyholder benefits and claims and policyholder dividends	4,438			1,398		—			5,836			83			5,919
Interest credited to policyholder account balances	487			178		—			665			(3		)	662
Capitalization of DAC	(15		)	3		—			(12		)	—			(12		)
Amortization of DAC and VOBA	14			47		—			61			(42		)	19
Interest expense on debt	3			2		22			27			—			27
Other expenses	723			200		191			1,114			—			1,114
Total expenses	5,650			1,828		213			7,691			38			7,729
Provision for income tax expense (benefit)	157			67		(128		)	96			(96		)	—
Adjusted earnings	$	601		$	274	$	(8	)	867
Adjustments to:
Total revenues									(417		)
Total expenses									(38		)
Provision for income tax (expense) benefit									96
Net income (loss)									$	508					$	508

Three Months Ended March 31, 2018	U.S.			MetLife Holdings		Corporate & Other			Total			Adjustments			Total Consolidated
	(In millions)
Revenues
Premiums	$	4,177		$	773	$	(1	)	$	4,949		$	—		$	4,949
Universal life and investment-type product policy fees	253			255		—			508			23			531
Net investment income	1,593			1,204		(4		)	2,793			(92		)	2,701
Other revenues	196			66		139			401			—			401
Net investment gains (losses)	—			—		—			—			(196		)	(196		)
Net derivative gains (losses)	—			—		—			—			60			60
Total revenues	6,219			2,298		134			8,651			(205		)	8,446
Expenses
Policyholder benefits and claims and policyholder dividends	4,411			1,374		(11		)	5,774			2			5,776
Interest credited to policyholder account balances	394			188		—			582			(1		)	581
Capitalization of DAC	(12		)	2		—			(10		)	—			(10		)
Amortization of DAC and VOBA	17			77		—			94			(6		)	88
Interest expense on debt	3			2		21			26			—			26
Other expenses	719			255		278			1,252			(2		)	1,250
Total expenses	5,532			1,898		288			7,718			(7		)	7,711
Provision for income tax expense (benefit)	147			77		(119		)	105			(42		)	63
Adjusted earnings	$	540		$	323	$	(35	)	828
Adjustments to:
Total revenues									(205		)
Total expenses									7
Provision for income tax (expense) benefit									42
Net income (loss)									$	672					$	672

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)

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

	March 31, 2019		December 31, 2018
	(In millions)
U.S.	$	242,926	$	233,998
MetLife Holdings	152,773		147,498
Corporate & Other	24,306		25,421
Total	$	420,005	$	406,917

Revenues derived from one U.S. segment customer were $763 million and $818 million for the three months ended March 31, 2019 and 2018, respectively, which represented 13% and 14%, respectively, of consolidated premiums, universal life and investment-type product policy fees and other revenues. Revenues derived from any other customer did not exceed 10% of consolidated premiums, universal life and investment-type product policy fees and other revenues for the three months ended March 31, 2019 and 2018.

3. Insurance

Guarantees

As discussed in Notes 1 and 4 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report, the Company issues directly and assumes through reinsurance variable annuity products with guaranteed minimum benefits. Guaranteed minimum accumulation benefits (“GMABs”), the non-life-contingent portion of guaranteed minimum withdrawal benefits (“GMWBs”) and certain non-life contingent portions of GMIBs 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:

	March 31, 2019								December 31, 2018
	In the Event of Death				At Annuitization				In the Event of Death				At Annuitization
	(Dollars in millions)
Annuity Contracts:
Variable Annuity Guarantees:
Total account value (1), (2)	$	49,822			$	21,827			$	47,393			$	20,692
Separate account value (1)	$	39,904			$	20,996			$	37,342			$	19,839
Net amount at risk	$	1,429	(3	)	$	350	(4	)	$	2,433	(3	)	$	418	(4	)
Average attained age of contractholders	68 years				66 years				67 years				65 years
Other Annuity Guarantees:
Total account value (1), (2)	N/A				$	144			N/A				$	144
Net amount at risk	N/A				$	84	(5	)	N/A				$	85	(5	)
Average attained age of contractholders	N/A				53 years				N/A				53 years

14

Metropolitan Life Insurance Company

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

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

3. Insurance (continued)

	March 31, 2019				December 31, 2018
	Secondary Guarantees		Paid-Up Guarantees		Secondary Guarantees		Paid-Up Guarantees
	(Dollars in millions)
Universal and Variable Life Contracts:
Total account value (1), (2)	$	4,682	$	927	$	4,614	$	937
Net amount at risk (6)	$	44,035	$	6,189	$	44,596	$	6,290
Average attained age of policyholders	56 years		63 years		55 years		63 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.

(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.

15

Metropolitan Life Insurance Company

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

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

3. Insurance (continued)

Liabilities for Unpaid Claims and Claim Expenses

Rollforward of Claims and Claim Adjustment Expenses

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

	Three Months Ended March 31,
	2019			2018
	(In millions)
Balance, beginning of period	$	12,590		$	12,090
Less: Reinsurance recoverables	1,497			1,401
Net balance, beginning of period	11,093			10,689
Incurred related to:
Current period	4,295			4,469
Prior periods (1)	87			(161		)
Total incurred	4,382			4,308
Paid related to:
Current period	(1,931		)	(2,044		)
Prior periods	(2,201		)	(2,138		)
Total paid	(4,132		)	(4,182		)
Net balance, end of period	11,343			10,815
Add: Reinsurance recoverables	1,537			1,414
Balance, end of period (included in future policy benefits and other policy-related balances)	$	12,880		$	12,229

__________________

(1) For the three months ended March 31, 2019, claims and claim adjustment expenses associated with prior periods increased due to events incurred in prior periods but reported in the current period. For the three months ended March 31, 2018, claims and claim adjustment expenses associated with prior periods decreased due to favorable claims experience in the current period.

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.

16

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:

	March 31, 2019			December 31, 2018
	(In millions)
Closed Block Liabilities
Future policy benefits	$	39,727		$	40,032
Other policy-related balances	422			317
Policyholder dividends payable	453			431
Policyholder dividend obligation	1,116			428
Deferred income tax liability	36			28
Other liabilities	200			328
Total closed block liabilities	41,954			41,564
Assets Designated to the Closed Block
Investments:
Fixed maturity securities available-for-sale, at estimated fair value	25,616			25,354
Equity securities, at estimated fair value	63			61
Contractholder-directed equity securities and fair value option securities, at estimated fair value	47			43
Mortgage loans	6,994			6,778
Policy loans	4,505			4,527
Real estate and real estate joint ventures	556			544
Other invested assets	592			643
Total investments	38,373			37,950
Accrued investment income	451			443
Premiums, reinsurance and other receivables	70			83
Current income tax recoverable	71			69
Total assets designated to the closed block	38,965			38,545
Excess of closed block liabilities over assets designated to the closed block	2,989			3,019
Amounts included in AOCI:
Unrealized investment gains (losses), net of income tax	1,675			1,089
Unrealized gains (losses) on derivatives, net of income tax	74			86
Allocated to policyholder dividend obligation, net of income tax	(882		)	(338		)
Total amounts included in AOCI	867			837
Maximum future earnings to be recognized from closed block assets and liabilities	$	3,856		$	3,856

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

	Three Months Ended March 31, 2019		Year   Ended   December 31, 2018
	(In millions)
Balance, beginning of period	$	428	$	2,121
Change in unrealized investment and derivative gains (losses)	688		(1,693		)
Balance, end of period	$	1,116	$	428

17

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 March 31,
	2019			2018
	(In millions)
Revenues
Premiums	$	367		$	387
Net investment income	428			444
Net investment gains (losses)	(1		)	(29		)
Net derivative gains (losses)	3			(3		)
Total revenues	797			799
Expenses
Policyholder benefits and claims	539			571
Policyholder dividends	228			244
Other expenses	29			29
Total expenses	796			844
Revenues, net of expenses before provision for income tax expense (benefit)	1			(45		)
Provision for income tax expense (benefit)	—			(10		)
Revenues, net of expenses and provision for income tax expense (benefit)	$	1		$	(35	)

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.

18

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 Securities Available-for-Sale

Fixed Maturity Securities Available-for-Sale by Sector

The following table presents the fixed maturity securities available-for-sale (“AFS”) by sector. U.S. corporate and foreign corporate sectors include redeemable preferred stock. Residential mortgage-backed securities (“RMBS”) includes Agency, prime, alternative and sub-prime mortgage-backed securities. Asset-backed securities (“ABS”) includes securities collateralized by corporate loans and consumer loans. Municipals includes taxable and tax-exempt revenue bonds, and to a much lesser extent, general obligations of states, municipalities and political subdivisions. Commercial mortgage-backed securities (“CMBS”) primarily includes securities collateralized by multiple properties. RMBS, ABS and CMBS are collectively “Structured Securities.”

	March 31, 2019											December 31, 2018
	Amortized Cost		Gross Unrealized							Estimated Fair Value		Amortized Cost		Gross Unrealized							Estimated Fair Value
			Gains		Temporary Losses		OTTI Losses (1)							Gains		Temporary Losses		OTTI Losses (1)
	(In millions)
U.S. corporate	$	52,163	$	3,548	$	536	$	—		$	55,175	$	53,927	$	2,440	$	1,565	$	—		$	54,802
U.S. government and agency	27,587		2,846		177		—			30,256		28,139		2,388		366		—			30,161
Foreign corporate	27,441		1,180		817		—			27,804		26,592		674		1,303		—			25,963
RMBS	22,372		974		164		(29		)	23,211		22,186		831		305		(25		)	22,737
ABS	8,650		40		59		—			8,631		8,599		40		112		—			8,527
Municipals	6,073		1,129		8		—			7,194		6,070		907		30		—			6,947
CMBS	5,475		114		29		—			5,560		5,471		48		75		—			5,444
Foreign government	4,122		491		57		—			4,556		4,191		408		107		—			4,492
Total fixed maturity securities AFS	$	153,883	$	10,322	$	1,847	$	(29	)	$	162,387	$	155,175	$	7,736	$	3,863	$	(25	)	$	159,073

__________________

(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 AFS with an estimated fair value of $24 million and $14 million, and unrealized gains (losses) of less than $1 million and ($1) million at March 31, 2019 and December 31, 2018, respectively.

Maturities of Fixed Maturity Securities AFS

The amortized cost and estimated fair value of fixed maturity securities AFS, by contractual maturity date, were as follows at March 31, 2019:

	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 AFS
	(In millions)
Amortized cost	$	8,873	$	26,920	$	27,372	$	54,221	$	36,497	$	153,883
Estimated fair value	$	8,798	$	27,323	$	28,363	$	60,501	$	37,402	$	162,387

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

19

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Continuous Gross Unrealized Losses for Fixed Maturity Securities AFS by Sector

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

	March 31, 2019								December 31, 2018
	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)
U.S. corporate	$	7,164	$	210	$	5,883	$	326	$	23,398	$	1,176	$	3,043	$	389
U.S. government and agency	2,089		3		6,363		174		4,322		29		7,948		337
Foreign corporate	5,762		428		3,581		389		12,911		893		2,138		410
RMBS	1,196		25		6,440		110		5,611		107		4,482		173
ABS	4,844		48		598		11		5,958		105		223		7
Municipals	75		3		191		5		675		22		94		8
CMBS	1,148		7		506		22		2,455		45		344		30
Foreign government	294		29		385		28		1,364		83		191		24
Total fixed maturity securities AFS	$	22,572	$	753	$	23,947	$	1,065	$	56,694	$	2,460	$	18,463	$	1,378
Total number of securities in an unrealized loss position	2,352				1,833				5,263				1,125

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

As described more fully in Notes 1 and 8 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report, the Company performs a regular evaluation of all investment classes for impairment, including fixed maturity securities AFS 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 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 March 31, 2019. Future OTTI will depend primarily on economic fundamentals, issuer performance (including changes in the present value of future cash flows expected to be collected), and changes in credit ratings, collateral valuation, and foreign currency exchange rates. If economic fundamentals deteriorate or if there are adverse changes in the above factors, OTTI may be incurred in upcoming periods.

Gross unrealized losses on fixed maturity securities AFS decreased $2.0 billion for the three months endedMarch 31, 2019 to $1.8 billion. The decrease in gross unrealized losses for the three months endedMarch 31, 2019 was primarily attributable to decreases in interest rates, narrowing credit spreads and, to a lesser extent, the impact of strengthening foreign currencies on non-functional currency denominated fixed maturity securities AFS.

At March 31, 2019, $97 million of the total $1.8 billion of gross unrealized losses were from 20 fixed maturity securities AFS with an unrealized loss position of 20% or more of amortized cost for six months or greater.

20

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Investment Grade Fixed Maturity Securities AFS

Of the $97 million of gross unrealized losses on fixed maturity securities AFS with an unrealized loss of 20% or more of amortized cost for six months or greater, $67 million, or 69%, were related to gross unrealized losses on 11 investment grade fixed maturity securities AFS. Unrealized losses on investment grade fixed maturity securities AFS are principally related to widening credit spreads since purchase and, with respect to fixed-rate fixed maturity securities AFS, rising interest rates since purchase.

Below Investment Grade Fixed Maturity Securities AFS

Of the $97 million of gross unrealized losses on fixed maturity securities AFS with an unrealized loss of 20% or more of amortized cost for six months or greater, $30 million, or 31%, were related to gross unrealized losses on 9 below investment grade fixed maturity securities AFS. Unrealized losses on below investment grade fixed maturity securities AFS are principally related to CMBS and U.S. and foreign corporate securities (primarily industrial and financial institutions) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainty. Management evaluates CMBS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, the payment terms of the underlying assets backing a particular security and the payment priority within the tranche structure of the security and 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.

Equity Securities

Equity securities are summarized as follows at:

	March 31, 2019				December 31, 2018
	Estimated Fair Value		% of Total		Estimated Fair Value		% of Total
	(Dollars in millions)
Common stock	$	475	58.1	%	$	442	57.2	%
Non-redeemable preferred stock	342		41.9		331		42.8
Total equity securities	$	817	100.0	%	$	773	100.0	%

Mortgage Loans

Mortgage Loans by Portfolio Segment

Mortgage loans are summarized as follows at:

	March 31, 2019					December 31, 2018
	Carrying Value			% of Total		Carrying Value			% of Total
	(Dollars in millions)
Mortgage loans:
Commercial	$	39,220		59.5	%	$	38,123		59.9	%
Agricultural	14,355			21.8		14,164			22.2
Residential	12,370			18.7		11,392			17.9
Total recorded investment	65,945			100.0		63,679			100.0
Valuation allowances	(295		)	(0.4	)	(291		)	(0.5	)
Subtotal mortgage loans, net	65,650			99.6		63,388			99.5
Residential — FVO	276			0.4		299			0.5
Total mortgage loans, net	$	65,926		100.0	%	$	63,687		100.0	%

21

Metropolitan Life Insurance Company

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

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

5. Investments (continued)

Information on commercial, agricultural and residential mortgage loans is presented in the tables below. Information on residential mortgage loans — fair value option (“FVO”) is presented in Note 7. The Company elects the FVO for certain residential mortgage loans that are managed on a total return basis.

The amount of net discounts, included within total recorded investment, primarily attributable to residential mortgage loans, was $988 million and $907 million at March 31, 2019 and December 31, 2018, respectively.

Purchases of mortgage loans, primarily residential, were $1.3 billionand$288 million for thethree months endedMarch 31, 2019 and 2018, 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)
March 31, 2019
Commercial	$	—	$	—	$	—	$	—	$	—	$	39,220	$	194	$	—
Agricultural	31		31		3		93		92		14,232		42		120
Residential	—		—		—		447		399		11,971		56		399
Total	$	31	$	31	$	3	$	540	$	491	$	65,423	$	292	$	519
December 31, 2018
Commercial	$	—	$	—	$	—	$	—	$	—	$	38,123	$	190	$	—
Agricultural	31		31		3		169		169		13,964		41		197
Residential	—		—		—		431		386		11,006		57		386
Total	$	31	$	31	$	3	$	600	$	555	$	63,093	$	288	$	583

The average recorded investment for impaired commercial, agricultural and residential mortgage loans was $0, $161 million and $393 million, respectively, for the three months endedMarch 31, 2019 and $0, $84 million and $331 million, respectively, for the three months endedMarch 31, 2018.

Valuation Allowance Rollforward by Portfolio Segment

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

	Three Months Ended March 31,
	2019										2018
	Commercial		Agricultural		Residential			Total			Commercial		Agricultural		Residential			Total
	(In millions)
Balance, beginning of period	$	190	$	44	$	57		$	291		$	173	$	40	$	58		$	271
Provision (release)	4		1		1			6			11		—		—			11
Charge-offs, net of recoveries	—		—		(2		)	(2		)	—		—		(1		)	(1		)
Balance, end of period	$	194	$	45	$	56		$	295		$	184	$	40	$	57		$	281

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)

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)
March 31, 2019
Loan-to-value ratios:
Less than 65%	$	32,588	$	707	$	117	$	33,412	85.2	%	$	34,093	85.4	%
65% to 75%	4,509		26		—		4,535		11.6		4,586		11.5
76% to 80%	311		238		55		604		1.5		591		1.5
Greater than 80%	502		167		—		669		1.7		638		1.6
Total	$	37,910	$	1,138	$	172	$	39,220	100.0	%	$	39,908	100.0	%
December 31, 2018
Loan-to-value ratios:
Less than 65%	$	31,282	$	723	$	85	$	32,090	84.2	%	$	32,440	84.3	%
65% to 75%	4,759		—		21		4,780		12.5		4,829		12.6
76% to 80%	340		210		56		606		1.6		585		1.5
Greater than 80%	480		167		—		647		1.7		613		1.6
Total	$	36,861	$	1,100	$	162	$	38,123	100.0	%	$	38,467	100.0	%

Credit Quality of Agricultural Mortgage Loans

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

	March 31, 2019				December 31, 2018
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Loan-to-value ratios:
Less than 65%	$	13,430	93.5	%	$	13,075	92.3	%
65% to 75%	904		6.3		1,034		7.3
76% to 80%	—		—		32		0.2
Greater than 80%	21		0.2		23		0.2
Total	$	14,355	100.0	%	$	14,164	100.0	%

The estimated fair value of agricultural mortgage loans was $14.4 billion and $14.1 billion at March 31, 2019 and December 31, 2018, respectively.

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)

Credit Quality of Residential Mortgage Loans

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

	March 31, 2019				December 31, 2018
	Recorded Investment		% of Total		Recorded Investment		% of Total
	(Dollars in millions)
Performance indicators:
Performing	$	11,960	96.7	%	$	10,990	96.5	%
Nonperforming (1)	410		3.3		402		3.5
Total	$	12,370	100.0	%	$	11,392	100.0	%

__________________

(1) Includes residential mortgage loans in process of foreclosure of $140 million at both March 31, 2019 and December 31, 2018.

The estimated fair value of residential mortgage loans was $12.8 billion and $11.8 billion at March 31, 2019 and December 31, 2018, 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 March 31, 2019 and December 31, 2018. 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
	March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
	(In millions)
Commercial	$	—	$	—	$	—	$	—	$	167	$	167
Agricultural	134		204		39		109		105		105
Residential	410		402		—		—		410		402
Total	$	544	$	606	$	39	$	109	$	682	$	674

Real Estate and Real Estate Joint Ventures

The Company’s real estate investment portfolio is diversified by property type, geography and income stream, including income from operating leases, operating income and equity method income from real estate joint ventures. Real estate investments, by income type, as well as income earned, are as follows at and for the periods indicated:

	March 31, 2019		December 31, 2018		Three Months   Ended  March 31,
					2019			2018
	Carrying Value				Income
	(In millions)
Leased real estate investments	$	1,231	$	1,134	$	41		$	56
Other real estate investments	475		460		30			31
Real estate joint ventures	4,575		4,558		(5		)	24
Total real estate and real estate joint ventures	$	6,281	$	6,152	$	66		$	111

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)

The carrying value of real estate investments acquired through foreclosure was $41 million and $42 million at March 31, 2019 and December 31, 2018, respectively. Depreciation expense on real estate investments was $15 million and $19 million for the three months endedMarch 31, 2019 and 2018, respectively. Real estate investments were net of accumulated depreciation of $686 million and $671 million at March 31, 2019 and December 31, 2018, respectively.

Leases

Leased Real Estate Investments - Operating Leases

The Company, as lessor, leases investment real estate, principally commercial real estate for office and retail use, through a variety of operating lease arrangements, which typically include tenant reimbursement for property operating costs and options to renew or extend the lease. In some circumstances, leases may include an option for the lessee to purchase the property. In addition, certain leases of retail space may stipulate that a portion of the income earned is contingent upon the level of the tenants’ revenues. The Company has elected a practical expedient of not separating non-lease components related to reimbursement of property operating costs from associated lease components. These property operating costs have the same timing and pattern of transfer as the related lease component, because they are incurred over the same period of time as the operating lease. Therefore, the combined component is accounted for as an operating lease. Risk is managed through lessee credit analysis, property type diversification, and geographic diversification, primarily across the United States. Leased real estate investments and income earned, by property type, are as follows at and for the periods indicated:

	March 31, 2019		December 31, 2018		Three Months   Ended  March 31,
					2019		2018
	Carrying Value				Income
	(In millions)
Leased real estate investments:
Office	$	373	$	373	$	14	$	16
Retail	539		450		17		18
Apartment (1)	—		—		—		13
Industrial	261		209		10		9
Other	58		102		—		—
Total leased real estate investments	$	1,231	$	1,134	$	41	$	56

__________________

(1)    The Company sold its investment in apartment properties in the fourth quarter of 2018.

Future contractual receipts under operating leases at March 31, 2019 are $97 million for the remainder of 2019, $120 million in 2020, $97 million in 2021, $76 million in 2022, $60 million in 2023, $149 million thereafter, and in total are $599 million.

Leveraged and Direct Financing Leases

The Company has diversified leveraged lease and direct financing lease portfolios. Its leveraged leases principally include renewable energy generation facilities, rail cars, commercial real estate and commercial aircraft, and its direct financing leases principally include renewable energy generation facilities. These assets are leased through a variety of lease arrangements, which may include options to renew or extend the lease and options for the lessee to purchase the property. Residual values are estimated using available third-party data at inception of the lease. Risk is managed through lessee credit analysis, asset allocation, geographic diversification, and ongoing reviews of estimated residual values, using available third-party data. Generally, estimated residual values are not guaranteed by the lessee or a third party.

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)

Investment in leveraged and direct financing leases consisted of the following at:

	March 31, 2019						December 31, 2018
	Leveraged Leases			Direct Financing Leases			Leveraged Leases			Direct Financing Leases
	(In millions)
Lease receivables, net (1)	$	711		$	250		$	715		$	256
Estimated residual values	618			42			618			42
Subtotal	1,329			292			1,333			298
Unearned income	(392		)	(94		)	(401		)	(100		)
Investment in leases	$	937		$	198		$	932		$	198

__________________

(1) The future contractual receipts under direct financing leases at March 31, 2019 are $15 million for the remainder of 2019, $21 million in 2020, $21 million in 2021, $21 million in 2022, $21 million 2023, $151 million thereafter, and in total are $250 million.

Lease receivables are generally due in periodic installments, with payment periods generally ranging from one to 15 years, but in certain circumstances can be over 25 years. For lease receivables, the primary credit quality indicator is whether the lease receivable is performing or nonperforming, which is assessed monthly. The Company generally defines nonperforming lease receivables as those that are 90 days or more past due. At both March 31, 2019 and December 31, 2018, all lease receivables were performing.

The Company’s deferred income tax liability related to leveraged leases was $462 million and $465 million at March 31, 2019 and December 31, 2018, respectively.

Cash Equivalents

The carrying value of cash equivalents, which includes securities and other investments with an original or remaining maturity of three months or less at the time of purchase, was $3.9 billion and $5.0 billion at March 31, 2019 and December 31, 2018, 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 securities AFS and derivatives 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:

	March 31, 2019			December 31, 2018
	(In millions)
Fixed maturity securities AFS	$	8,490		$	3,890
Fixed maturity securities AFS with noncredit OTTI losses included in AOCI	29			25
Total fixed maturity securities AFS	8,519			3,915
Derivatives	1,813			1,742
Other	226			231
Subtotal	10,558			5,888
Amounts allocated from:
Future policy benefits	(15		)	(5		)
DAC, VOBA and DSI	(810		)	(571		)
Policyholder dividend obligation	(1,116		)	(428		)
Subtotal	(1,941		)	(1,004		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(6		)	(5		)
Deferred income tax benefit (expense)	(1,763		)	(982		)
Net unrealized investment gains (losses)	$	6,848		$	3,897

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

	Three Months Ended March 31, 2019
	(In millions)
Balance, beginning of period	$	3,897
Cumulative effects of changes in accounting principles, net of income tax (Note 1)	17
Fixed maturity securities AFS on which noncredit OTTI losses have been recognized	4
Unrealized investment gains (losses) during the period	4,644
Unrealized investment gains (losses) relating to:
Future policy benefits	(10		)
DAC, VOBA and DSI	(239		)
Policyholder dividend obligation	(688		)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI	(1		)
Deferred income tax benefit (expense)	(776		)
Balance, end of period	$	6,848
Change in net unrealized investment gains (losses)	$	2,951

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 March 31, 2019 and December 31, 2018.

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 and Repurchase Agreements

Securities, Collateral and Reinvestment Portfolio

A summary of the securities lending and repurchase agreements transactions is as follows:

	March 31,								December 31,
	2019								2018
	Securities on Loan (1)								Securities on Loan (1)
	Amortized Cost		Estimated Fair Value		Cash Collateral Received from Counterparties (2), (3)		Reinvestment Portfolio at Estimated Fair Value		Amortized Cost		Estimated Fair Value		Cash Collateral Received from Counterparties (2), (3)		Reinvestment Portfolio at Estimated Fair Value
							(In millions)
Securities lending	$	12,123	$	13,005	$	13,275	$	13,378	$	12,521	$	13,138	$	13,351	$	13,376
Repurchase agreements	$	1,779	$	1,890	$	1,860	$	1,873	$	974	$	1,020	$	1,000	$	1,001

__________________

(1) Securities on loan in connection with securities lending are included within fixed maturities securities AFS and securities on loan in connection with repurchase agreements are included within fixed maturities securities AFS and short-term investments.

(2) In connection with securities lending, in addition to cash collateral received, the Company received from counterparties security collateral of $59 million and $64 millionat March 31, 2019 and December 31, 2018, respectively, which may not be sold or re-pledged, unless the counterparty is in default, and is not reflected on the consolidated financial statements.

(3) The securities lending liability for cash collateral is included within payables for collateral under securities loaned and other transactions, and the repurchase agreements liability for cash collateral is included within payables for collateral under securities loaned and other transactions and other liabilities.

Contractual Maturities

A summary of the remaining contractual maturities of securities lending agreements and repurchase agreements is as follows:

	March 31,								December 31,
	2019								2018
	Remaining Maturities								Remaining Maturities
	Open (1)		1 Month or Less		Over  1 to 6 Months		Total		Open (1)		1 Month or Less		Over 1 to 6 Months		Total
	(In millions)
Cash collateral liability by loaned security type:
Securities lending:
U.S. government and agency	$	2,010	$	4,060	$	7,205	$	13,275	$	1,970	$	7,426	$	3,955	$	13,351
Repurchase agreements:
U.S. government and agency	$	—	$	1,860	$	—	$	1,860	$	—	$	1,000	$	—	$	1,000

__________________

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)

(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. The estimated fair value of the securities on loan related to this cash collateral at March 31, 2019 was $2.0 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.

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 securities lending and repurchase agreements reinvestment portfolios acquired with the cash collateral consisted principally of high quality, liquid, publicly-traded fixed maturity securities AFS, 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.

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:

	March 31, 2019		December 31, 2018
	(In millions)
Invested assets on deposit (regulatory deposits)	$	46	$	47
Invested assets pledged as collateral (1)	20,591		20,207
Total invested assets on deposit and pledged as collateral	$	20,637	$	20,254

__________________

(1) 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 2018 Annual Report) and derivative transactions (see Note 6).

See “— Securities Lending and Repurchase Agreements” for information regarding securities supporting securities lending and repurchase agreement transactions and Note 4 for information regarding investments designated to the closed block. In addition, the restricted investment in Federal Home Loan Bank common stock was $724 million, at redemption value, at both March 31, 2019 and December 31, 2018.

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.

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)

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:

	March 31, 2019				December 31, 2018
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
Real estate joint ventures (1)	$	1,411	$	—	$	1,394	$	—
Renewable energy partnership (2)	103		—		102		—
Investment fund (primarily mortgage loans) (3)	224		—		219		—
Other investments	20		5		21		5
Total	$	1,758	$	5	$	1,736	$	5

__________________

(1) The Company’s investment in these affiliated real estate joint ventures was$1.3 billionat bothMarch 31, 2019andDecember 31, 2018. Other affiliates’ investments in these affiliated real estate joint ventures were$131 millionand$123 millionatMarch 31, 2019andDecember 31, 2018, respectively.

(2) Assets of the renewable energy partnership primarily consisted of other invested assets.

(3) The Company’s investment in this affiliated investment fund was $182 million and $178 million at March 31, 2019 and December 31, 2018, respectively. An affiliate had an investment in this affiliated investment fund of $42 million and $41 million at March 31, 2019 and December 31, 2018, respectively.

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:

	March 31, 2019				December 31, 2018
	Carrying Amount		Maximum Exposure to Loss (1)		Carrying Amount		Maximum Exposure to Loss (1)
	(In millions)
Fixed maturity securities AFS:
Structured Securities (2)	$	35,810	$	35,810	$	35,112	$	35,112
U.S. and foreign corporate	757		757		669		669
Other limited partnership interests	4,018		6,724		3,979		6,405
Other invested assets	1,851		1,981		1,914		2,066
Real estate joint ventures	31		35		33		37
Total	$	42,467	$	45,307	$	41,707	$	44,289

__________________

(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 $75 million and $93 million at March 31, 2019 and December 31, 2018, 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.

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)

As described in Note 13, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs for both the three months endedMarch 31, 2019 and 2018.

Net Investment Income

The components of net investment income were as follows:

		Three Months Ended March 31,
		2019		2018
	(In millions)
Investment income:
Fixed maturity securities AFS		$	1,768	$	1,785
Equity securities		9		11
Mortgage loans		764		671
Policy loans		76		72
Real estate and real estate joint ventures		66		111
Other limited partnership interests		85		147
Cash, cash equivalents and short-term investments		43		20
FVO Securities (1)		23		—
Operating joint venture		11		7
Other		59		79
Subtotal		2,904		2,903
Less: Investment expenses		259		202
Net investment income		$	2,645	$	2,701

__________________

(1) Changes in estimated fair value subsequent to purchase for FVO securities (“FVO Securities”) still held as ofMarch 31, 2019included in net investment income were$23 millionfor thethree months endedMarch 31, 2019. There were no changes in estimated fair value subsequent to purchase for FVO Securities still held as of March 31, 2018 included in net investment income for the three months endedMarch 31, 2018.

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

The Company invests in real estate joint ventures, other limited partnership interests and tax credit and renewable energy partnerships, and also does business through an operating joint venture, the majority of which is accounted for under the equity method.Net investment income from other limited partnership interests and the operating joint venture, accounted for under the equity method, and real estate joint ventures and tax credit and renewable energy partnerships, primarily accounted for under the equity method, totaled$36 millionand$133 millionfor thethree months endedMarch 31, 2019 and 2018, respectively.

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 Gains (Losses)

Components of Net Investment Gains (Losses)

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

	Three Months Ended March 31,
	2019			2018
	(In millions)
Total gains (losses) on fixed maturity securities AFS:
Total OTTI losses recognized — by sector and industry:
U.S. and foreign corporate securities — by industry:
Industrial	$	(6	)	$	—
Total U.S. and foreign corporate securities	(6		)	—
RMBS	(2		)	—
OTTI losses on fixed maturity securities AFS recognized in earnings	(8		)	—
Fixed maturity securities AFS — net gains (losses) on sales and disposals	(32		)	(45		)
Total gains (losses) on fixed maturity securities AFS	(40		)	(45		)
Total gains (losses) on equity securities:
Equity securities — net gains (losses) on sales and disposals	9			—
Change in estimated fair value of equity securities (1)	57			(39		)
Total gains (losses) on equity securities	66			(39		)
Mortgage loans	(14		)	(21		)
Real estate and real estate joint ventures	3			25
Other (2)	(50		)	(106		)
Subtotal	(35		)	(186		)
Change in estimated fair value of other limited partnership interests and real estate joint ventures	(16		)	(6		)
Non-investment portfolio gains (losses)	(3		)	(4		)
Subtotal	(19		)	(10		)
Total net investment gains (losses)	$	(54	)	$	(196	)

__________________

(1) Changes in estimated fair value subsequent to purchase for equity securities still held as of the end of the period included in net investment gains (losses) were$56 millionand($39) millionfor thethree months endedMarch 31, 2019and2018, respectively.

(2) Other gains (losses) for thethree months endedMarch 31, 2019 included tax credit partnership impairment losses of ($78) million and renewable energy partnership disposal gains of $46 million. Other gains (losses) for thethree months endedMarch 31, 2018 included leveraged lease impairment losses of ($105) million.

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($1) millionand($10) million for thethree months endedMarch 31, 2019and2018, respectively.

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)

Sales or Disposals and Impairments of Fixed Maturity Securities AFS

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

	Three Months Ended March 31,
	2019			2018
	(In millions)
Proceeds	$	10,665		$	13,255
Gross investment gains	$	135		$	51
Gross investment losses	(167		)	(96		)
OTTI losses	(8		)	—
Net investment gains (losses)	$	(40	)	$	(45	)

Credit Loss Rollforward of Fixed Maturity Securities AFS

The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities AFS still held for which a portion of the OTTI loss was recognized in OCI:

	Three Months Ended March 31,
	2019			2018
	(In millions)
Balance, beginning of period	$	70		$	110
Sales (maturities, pay downs or prepayments) of securities previously impaired as credit loss OTTI	(3		)	(6		)
Increase in cash flows — accretion of previous credit loss OTTI	(1		)	—
Balance, end of period	$	66		$	104

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)

Related Party Investment Transactions

Recurring related party investments and related net investment income were as follows at and for the periods ended:

		March 31, 2019		December 31, 2018		Three Months Ended March 31,
						2019		2018
Investment Type/Balance Sheet Category	Related Party	Carrying Value				Net Investment Income
		(In millions)
Affiliated investments (1)	MetLife, Inc.	$	1,781	$	1,798	$	8	$	11
Affiliated investments (2)	American Life Insurance Company	100		100		1		1
Affiliated investments (3)	Metropolitan Property and Casualty Insurance Company	315		315		3		2
Other invested assets		$	2,196	$	2,213	$	12	$	14
Money market pool (4)	Metropolitan Money Market Pool	$	101	$	52	$	—	$	—
Short-term investments		$	101	$	52	$	—	$	—

________________

(1) Represents an investment in affiliated senior notes. See Note 8 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report for a description of the redenomination of each of these affiliated senior notes in 2018 from U.S. dollar to Japanese yen, and the respective maturity dates, interest rates and interest payment terms of each of the redenominated affiliated senior notes. The affiliated senior notes have maturity dates from June 2019 to December 2021 and bear interest, payable semi-annually, ranging from 0.82% to 3.14%.

(2) Represents an investment in an affiliated surplus note. The surplus note, which bears interest at a fixed rate of 3.17%, payable semiannually, is due June 2020.

(3)Represents an investment in affiliated preferred stock. Dividends are payable quarterly at a variable rate.

(4)The investment has a variable rate of return.

Through March 31, 2018, the Company provided investment administrative services to certain affiliates. The related investment administrative service charges to these affiliates were $19 million for the three months ended March 31, 2018. Effective April 1, 2018, the Company receives investment advisory services from an affiliate. The related affiliated investment advisory charges to the Company for the three months ended March 31, 2019 were $76 million.

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

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 derivative’s carrying value in other invested assets or other liabilities.

34

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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

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 the same line item as the earnings effect of the hedged item. The carrying value of the hedged recognized asset or liability is adjusted for changes in its estimated fair value due to the hedged risk.

• 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 - in OCI and reclassified into the statement of operations when the Company’s earnings are affected by the variability in cash flows of the hedged item.

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. 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 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.

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 occurring, 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 of occurring are recognized immediately in net investment 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).

35

Metropolitan Life Insurance Company

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

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

6. Derivatives (continued)

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.

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 securities AFS. Structured interest rate swaps are included in interest rate swaps and are not designated as hedging instruments.

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)

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 a benchmark interest rate, 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 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, and interest rate floors primarily to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level. 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.

In exchange-traded interest rate (Treasury and swap) futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate securities, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchange. Exchange-traded interest rate (Treasury and swap) futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury or swap curve performance, and to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. The Company utilizes exchange-traded interest rate futures 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.

A synthetic guaranteed interest contract (“GIC”) is a contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the contractholder owns the underlying assets. The Company guarantees a rate of return on those assets for a premium. Synthetic GICs are not designated as hedging instruments.

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.

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)

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 and involuntary restructuring for corporate obligors, as well as repudiation, moratorium or governmental intervention for sovereign obligors. 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, or other fixed maturity securities AFS. 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 underlying 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, to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts and to pledge initial margin based on futures exchange requirements. 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 a benchmark interest rate, 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.

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)

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:

		March 31, 2019						December 31, 2018
	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	$	2,421	$	2,354	$	2	$	2,446	$	2,197	$	2
Foreign currency swaps	Foreign currency exchange rate	1,338		29		10		1,191		49		—
Subtotal		3,759		2,383		12		3,637		2,246		2
Cash flow hedges:
Interest rate swaps	Interest rate	3,547		152		5		3,181		139		1
Interest rate forwards	Interest rate	2,935		—		117		3,023		—		216
Foreign currency swaps	Foreign currency exchange rate	25,954		1,092		1,331		26,239		1,218		1,318
Subtotal		32,436		1,244		1,453		32,443		1,357		1,535
Total qualifying hedges		36,195		3,627		1,465		36,080		3,603		1,537
Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate swaps	Interest rate	35,151		1,702		90		36,238		1,507		85
Interest rate floors	Interest rate	12,701		106		—		12,701		102		—
Interest rate caps	Interest rate	51,138		82		1		54,576		154		1
Interest rate futures	Interest rate	710		—		—		794		—		1
Interest rate options	Interest rate	24,340		254		—		24,340		185		—
Interest rate total return swaps	Interest rate	1,048		44		—		1,048		33		2
Synthetic GICs	Interest rate	18,695		—		—		18,006		—		—
Foreign currency swaps	Foreign currency exchange rate	6,097		606		81		5,986		700		79
Foreign currency forwards	Foreign currency exchange rate	727		18		1		943		15		14
Credit default swaps — purchased	Credit	818		16		4		858		24		4
Credit default swaps — written	Credit	7,925		134		3		7,864		67		13
Equity futures	Equity market	1,498		1		8		1,006		1		6
Equity index options	Equity market	23,200		458		442		23,162		706		396
Equity variance swaps	Equity market	1,946		34		86		1,946		32		81
Equity total return swaps	Equity market	724		1		47		886		89		—
Total non-designated or nonqualifying derivatives		186,718		3,456		763		190,354		3,615		682
Total		$	222,913	$	7,083	$	2,228	$	226,434	$	7,218	$	2,219

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 March 31, 2019 and December 31, 2018. 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.

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)

The Effects of Derivatives on the Interim Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

The following table presents the consolidated financial statement location and amount of gain (loss) recognized on fair value, cash flow, nonqualifying hedging relationships and embedded derivatives:

	Three Months Ended March 31, 2019
	Net Investment Income			Net Investment Gains (Losses)			Net Derivative Gains (Losses)			Policyholder Benefits and Claims			Interest Credited to Policyholder Account Balances			Other Expenses		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	(3	)	$	—		$	—		$	127		$	—		$	—	N/A
Hedged items	3			—			—			(128		)	—			—		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	(29		)	—			—			—			—			—		N/A
Hedged items	28			—			—			—			—			—		N/A
Amount excluded from the assessment of hedge effectiveness	—			—			—			—			—			—		N/A
Subtotal	(1		)	—			—			(1		)	—			—		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A			N/A			N/A			N/A			N/A			N/A		$	242
Amount of gains (losses) reclassified from AOCI into income	5			(6		)	—			—			—			—		1
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A			N/A			N/A			N/A			N/A			N/A		(126		)
Amount of gains (losses) reclassified from AOCI into income	(1		)	47			—			—			—			—		(46		)
Foreign currency transaction gains (losses) on hedged items	—			(56		)	—			—			—			—		—
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A			N/A			N/A			N/A			N/A			N/A		—
Amount of gains (losses) reclassified from AOCI into income	—			—			—			—			—			—		—
Subtotal	4			(15		)	—			—			—			—		71
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	(1		)	—			141			—			—			—		N/A
Foreign currency exchange rate derivatives (1)	—			—			(61		)	—			—			—		N/A
Credit derivatives — purchased (1)	—			—			(10		)	—			—			—		N/A
Credit derivatives — written (1)	—			—			92			—			—			—		N/A
Equity derivatives (1)	—			—			(482		)	(68		)	—			—		N/A
Foreign currency transaction gains (losses) on hedged items	—			—			37			—			—			—		N/A
Subtotal	(1		)	—			(283		)	(68		)	—			—		N/A
Earned income on derivatives	70			—			71			31			(32		)	—		—
Embedded derivatives (2)	N/A			N/A			(98		)	—			N/A			N/A		N/A
Total	$	72		$	(15	)	$	(310	)	$	(38	)	$	(32	)	$	—	$	71

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)

	Three Months Ended March 31, 2018
	Net Investment Income		Net Investment Gains (Losses)		Net Derivative Gains (Losses)			Policyholder Benefits and Claims		Interest Credited to Policyholder Account Balances			Other Expenses		OCI
	(In millions)
Gain (Loss) on Fair Value Hedges:
Interest rate derivatives:
Derivatives designated as hedging instruments (1)	$	—	$	—	$	(210	)	$	—	$	—		$	—	N/A
Hedged items	—		—		210			—		—			—		N/A
Foreign currency exchange rate derivatives:
Derivatives designated as hedging instruments (1)	—		—		(7		)	—		—			—		N/A
Hedged items	—		—		7			—		—			—		N/A
Amount excluded from the assessment of hedge effectiveness	—		—		—			—		—			—		N/A
Subtotal	—		—		—			—		—			—		N/A
Gain (Loss) on Cash Flow Hedges:
Interest rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A			N/A		N/A			N/A		$	(277	)
Amount of gains (losses) reclassified from AOCI into income	4		—		20			—		—			—		(24		)
Foreign currency exchange rate derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A			N/A		N/A			N/A		(229		)
Amount of gains (losses) reclassified from AOCI into income	—		—		160			—		—			—		(160		)
Foreign currency transaction gains (losses) on hedged items	—		—		(158		)	—		—			—		—
Credit derivatives: (1)
Amount of gains (losses) deferred in AOCI	N/A		N/A		N/A			N/A		N/A			N/A		—
Amount of gains (losses) reclassified from AOCI into income	—		—		—			—		—			—		—
Subtotal	4		—		22			—		—			—		(690		)
Gain (Loss) on Derivatives Not Designated or Not Qualifying as Hedging Instruments:
Interest rate derivatives (1)	4		—		(256		)	—		—			—		N/A
Foreign currency exchange rate derivatives (1)	—		—		(214		)	—		—			—		N/A
Credit derivatives — purchased (1)	—		—		(1		)	—		—			—		N/A
Credit derivatives — written (1)	—		—		(28		)	—		—			—		N/A
Equity derivatives (1)	1		—		10			1		—			—		N/A
Foreign currency transaction gains (losses) on hedged items	—		—		112			—		—			—		N/A
Subtotal	5		—		(377		)	1		—			—		N/A
Earned income on derivatives	77		—		82			2		(23		)	—		—
Embedded derivatives (2)	N/A		N/A		333			—		N/A			N/A		N/A
Total	$	86	$	—	$	60		$	3	$	(23	)	$	—	$	(690	)

__________________

(1) Excludes earned income on derivatives.

(2) The valuation of guaranteed minimum benefits includes a nonperformance risk adjustment. The amounts included in net derivative gains (losses) in connection with this adjustment were ($11) million and ($21) million for the three months ended March 31, 2019 and 2018, respectively.

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.

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)

The following table presents the balance sheet classification, carrying amount and cumulative fair value hedging adjustments for items designated and qualifying as hedged items in fair value hedges:

	March 31, 2019
Balance Sheet Line Item	Carrying Amount of the Hedged Assets/(Liabilities)			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets/(Liabilities) (1)
	(In millions)
Fixed maturity securities AFS	$	348		$	(1	)
Mortgage loans	$	1,226		$	(1	)
Future policy benefits	$	(5,399	)	$	(667	)
Policyholder account balances	$	(81	)	$	—

__________________

(1) Includes ($1) million of hedging adjustments on discontinued hedging relationships.

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

Cash Flow Hedges

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

In certain instances, the Company discontinued cash flow hedge accounting because the forecasted transactions were no longer probable of occurring. Because certain of the forecasted transactions also were not probable of occurring within two months of the anticipated date, the Company reclassified amounts from AOCI into net investment gains (losses). These amounts were $2 million and $0 for the three months ended March 31, 2019 and 2018 respectively.

At March 31, 2019 and December 31, 2018, 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 nine years and four years, respectively.

At March 31, 2019 and December 31, 2018, the balance in AOCI associated with cash flow hedges was $1.8 billion and $1.7 billion, respectively.

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

AtMarch 31, 2019,the Company expected to reclassify $100 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 $7.9 billion at both March 31, 2019 and December 31, 2018. 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 March 31, 2019 and December 31, 2018, the Company would have received $131 million and $54 million, respectively, to terminate all of these contracts.

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

	March 31, 2019					December 31, 2018
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)	$	2	$	154	1.7	$	2	$	154	2.0
Credit default swaps referencing indices	31		2,242		2.5	27		2,079		2.5
Subtotal	33		2,396		2.4	29		2,233		2.5
Baa
Single name credit default swaps (3)	2		232		1.6	1		277		1.6
Credit default swaps referencing indices	82		5,067		5.5	20		5,124		5.2
Subtotal	84		5,299		5.3	21		5,401		5.0
Ba
Single name credit default swaps (3)	—		10		1.2	—		10		1.5
Credit default swaps referencing indices	—		—		—	—		—		—
Subtotal	—		10		1.2	—		10		1.5
B
Single name credit default swaps (3)	—		—		—	—		—		—
Credit default swaps referencing indices	14		220		5.2	4		220		5.0
Subtotal	14		220		5.2	4		220		5.0
Total	$	131	$	7,925	4.4	$	54	$	7,864	4.3

__________________

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

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

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

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.

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)

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 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.

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:

	March 31, 2019						December 31, 2018
Derivatives Subject to a Master Netting Arrangement or a Similar Arrangement	Assets			Liabilities			Assets			Liabilities
	(In millions)
Gross estimated fair value of derivatives:
OTC-bilateral (1)	$	7,063		$	2,205		$	7,255		$	2,166
OTC-cleared (1)	112			18			52			24
Exchange-traded	1			8			1			7
Total gross estimated fair value of derivatives presented on the interim condensed consolidated balance sheets (1)	7,176			2,231			7,308			2,197
Gross amounts not offset on the interim condensed consolidated balance sheets:
Gross estimated fair value of derivatives: (2)
OTC-bilateral	(2,003		)	(2,003		)	(1,988		)	(1,988		)
OTC-cleared	(13		)	(13		)	(20		)	(20		)
Exchange-traded	—			—			—			—
Cash collateral: (3), (4)
OTC-bilateral	(2,996		)	—			(4,000		)	—
OTC-cleared	(91		)	—			(26		)	—
Exchange-traded	—			—			—			—
Securities collateral: (5)
OTC-bilateral	(1,959		)	(202		)	(1,136		)	(178		)
OTC-cleared	—			(5		)	—			(4		)
Exchange-traded	—			(8		)	—			(7		)
Net amount after application of master netting agreements and collateral	$	114		$	—		$	138		$	—

__________________

(1) AtMarch 31, 2019andDecember 31, 2018, derivative assets included income or (expense) accruals reported in accrued investment income or in other liabilities of$93 millionand$90 million, respectively, and derivative liabilities included (income) or expense accruals reported in accrued investment income or in other liabilities of$3 millionand ($22) 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.

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)

(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 AFS, 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 March 31, 2019 and December 31, 2018, the Company received excess cash collateral of $93 million and $95 million, respectively, and provided excess cash collateral of $0 and $1 million, respectively, which is not included in the table above due to the foregoing limitation.

(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 March 31, 2019, none of the collateral had been sold or re-pledged. Securities collateral pledged by the Company is reported in fixed maturity securities AFS on the balance sheet. Subject to certain constraints, the counterparties are permitted by contract to sell or re-pledge this collateral. The amount of securities collateral offset in the table above is limited to the net estimated fair value of derivatives after application of netting agreements and cash collateral. At March 31, 2019 and December 31, 2018, the Company received excess securities collateral with an estimated fair value of $47 million and $28 million, respectively, for its OTC-bilateral derivatives, which are not included in the table above due to the foregoing limitation. At March 31, 2019 and December 31, 2018, the Company provided excess securities collateral with an estimated fair value of $95 million and $94 million, respectively, for its OTC-bilateral derivatives, and $260 million and $231 million, respectively, for its OTC-cleared derivatives, and $71 million and $52 million, respectively, for its exchange-traded derivatives, which are not included in the table above due to the foregoing limitation.

The Company’s collateral arrangements for its OTC-bilateral derivatives require the counterparty in a net liability position, after considering the effect of netting agreements, to pledge collateral when the collateral amount owed by that counterparty reaches a minimum transfer amount. 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.

The following table presents the estimated fair value of the Company’s OTC-bilateral derivatives that were in a net liability position after considering the effect of netting agreements, together with the estimated fair value and balance sheet location of the collateral pledged. OTC-bilateral derivatives that are not subject to collateral agreements are excluded from this table.

	March 31, 2019						December 31, 2018
	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)	$	203	$	—	$	203	$	178	$	—	$	178
Estimated Fair Value of Collateral Provided:
Fixed maturity securities AFS	$	245	$	—	$	245	$	187	$	—	$	187
Cash	$	—	$	—	$	—	$	1	$	—	$	1

__________________

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

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)

Embedded Derivatives

The Company has issued 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; assumed reinsurance of guaranteed minimum benefits related to GMWBs; funds withheld on ceded reinsurance and affiliated funds withheld on ceded reinsurance and fixed annuities with equity indexed returns.

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	March 31, 2019		December 31, 2018
		(In millions)
Embedded derivatives within liability host contracts:
Direct guaranteed minimum benefits	Policyholder account balances	$	54	$	178
Assumed guaranteed minimum benefits	Policyholder account balances	3		3
Funds withheld on ceded reinsurance (including affiliated)	Other liabilities	695		465
Fixed annuities with equity indexed returns	Policyholder account balances	95		58
Embedded derivatives within liability host contracts		$	847	$	704

7. Fair Value

When developing estimated fair values, 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.

46

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)

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:

	March 31, 2019
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities AFS:
U.S. corporate	$	—	$	51,993	$	3,182	$	55,175
U.S. government and agency	12,160		18,096		—		30,256
Foreign corporate	—		23,656		4,148		27,804
RMBS	20		20,210		2,981		23,211
ABS	—		8,357		274		8,631
Municipals	—		7,194		—		7,194
CMBS	—		5,501		59		5,560
Foreign government	—		4,535		21		4,556
Total fixed maturity securities AFS	12,180		139,542		10,665		162,387
Equity securities	381		70		366		817
Short-term investments	814		1,492		127		2,433
Residential mortgage loans — FVO	—		—		276		276
Other investments	—		1		238		239
Derivative assets: (1)
Interest rate	—		4,650		44		4,694
Foreign currency exchange rate	—		1,745		—		1,745
Credit	—		120		30		150
Equity market	1		447		46		494
Total derivative assets	1		6,962		120		7,083
Embedded derivatives within asset host contracts (2)	—		—		—		—
Separate account assets (3)	22,240		94,135		904		117,279
Total assets (4)	$	35,616	$	242,202	$	12,696	$	290,514
Liabilities
Derivative liabilities: (1)
Interest rate	$	—	$	98	$	117	$	215
Foreign currency exchange rate	—		1,419		4		1,423
Credit	—		7		—		7
Equity market	8		489		86		583
Total derivative liabilities	8		2,013		207		2,228
Embedded derivatives within liability host contracts (2)	—		—		847		847
Separate account liabilities (3)	1		23		7		31
Total liabilities	$	9	$	2,036	$	1,061	$	3,106

47

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, 2018
	Fair Value Hierarchy
	Level 1		Level 2		Level 3		Total  Estimated Fair Value
	(In millions)
Assets
Fixed maturity securities AFS:
U.S. corporate	$	—	$	51,676	$	3,126	$	54,802
U.S. government and agency	12,310		17,851		—		30,161
Foreign corporate	—		21,988		3,975		25,963
RMBS	—		19,719		3,018		22,737
ABS	—		8,072		455		8,527
Municipals	—		6,947		—		6,947
CMBS	—		5,376		68		5,444
Foreign government	—		4,482		10		4,492
Total fixed maturity securities AFS	12,310		136,111		10,652		159,073
Equity securities	341		76		356		773
Short-term investments	698		783		25		1,506
Residential mortgage loans — FVO	—		—		299		299
Other investments	—		1		215		216
Derivative assets: (1)
Interest rate	—		4,284		33		4,317
Foreign currency exchange rate	—		1,982		—		1,982
Credit	—		62		29		91
Equity market	1		776		51		828
Total derivative assets	1		7,104		113		7,218
Embedded derivatives within asset host contracts (2)	—		—		—		—
Separate account assets (3)	20,558		89,348		944		110,850
Total assets (4)	$	33,908	$	233,423	$	12,604	$	279,935
Liabilities
Derivative liabilities: (1)
Interest rate	$	1	$	89	$	218	$	308
Foreign currency exchange rate	—		1,410		1		1,411
Credit	—		13		4		17
Equity market	6		395		82		483
Total derivative liabilities	7		1,907		305		2,219
Embedded derivatives within liability host contracts (2)	—		—		704		704
Separate account liabilities (3)	1		20		7		28
Total liabilities	$	8	$	1,927	$	1,016	$	2,951

__________________

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

(2) Embedded derivatives within asset host contracts are presented within premiums, reinsurance and other receivables on the interim condensed consolidated balance sheets. Embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities on the interim condensed consolidated balance sheets.

48

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.

(4) Total assets included in the fair value hierarchy excluded other limited partnership interests that are measured at estimated fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient. At March 31, 2019 and December 31, 2018, the estimated fair value of such investments was $108 million and $140 million, respectively.

The following describes the valuation methodologies used to measure assets and liabilities at fair value.

Investments

Securities, Short-term Investments and Other Investments

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

When quoted prices in active markets are not available, the determination of estimated fair value 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 other investments is determined on a basis consistent with the methodologies described herein for securities.

The valuation approaches and key inputs for each category of assets or liabilities that are classified within Level 2 and Level 3 of the fair value hierarchy are presented below. The primary valuation approaches are the market approach, which considers recent prices from market transactions involving identical or similar assets or liabilities, and the income approach, which converts expected future amounts (i.e., cash flows) to a single current, discounted amount. The valuation of most instruments listed below is determined using independent pricing sources, matrix pricing, discounted cash flow methodologies or other similar techniques that use either observable market inputs or unobservable inputs.

49

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
Fixed maturity securities AFS
U.S. corporate and Foreign corporate securities
	Valuation Approaches: Principally the market and income approaches.			Valuation Approaches: Principally the market approach.
	Key Inputs:			Key Inputs:
	•	quoted prices in markets that are not active		•	illiquidity premium
	•	benchmark yields; spreads off benchmark yields; new issuances; issuer 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 securities, Municipals 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

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 (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 and Other investments
	•	Short-term investments and other investments are of a similar nature and class to the fixed maturity securities AFS and equity securities described above; accordingly, the valuation approaches and observable inputs used in their valuation are also similar to those described above.	•	Short-term investments and other investments are of a similar nature and class to the fixed maturity securities AFS and equity securities described above; accordingly, the valuation approaches and unobservable inputs used in their valuation are also similar to those described above.
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 NAV provided by the fund managers
Other limited partnership interests
	•	N/A	Valued giving consideration to the underlying holdings of the partnerships and adjusting, if appropriate.
			Key Inputs:
			•	liquidity; bid/ask spreads; performance record of the fund manager
			•	other relevant variables that may impact the exit value of the particular partnership interest

__________________

(1) Estimated fair value equals carrying value, based on the value of the underlying assets, including: mutual fund interests, fixed maturity securities, equity securities, derivatives, hedge funds, 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 Other Investments” and “— Derivatives — Freestanding Derivatives.”

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)

Derivatives

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

The significant inputs to the pricing models for most OTC-bilateral and OTC-cleared derivatives are inputs that are observable in the market or can be derived principally from, or corroborated by, observable market data. 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.

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.

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)

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).

Embedded Derivatives

Embedded derivatives principally include certain direct and assumed variable annuity guarantees, equity or bond indexed crediting rates within certain funding agreements and annuity contracts, 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 has issued 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 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, projecting 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.

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)

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

The estimated fair value of the embedded equity 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.

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.

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)

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.

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:

					March 31, 2019				December 31, 2018				Impact of Increase in Input on Estimated Fair Value (2)
	Valuation Techniques		Significant Unobservable Inputs		Range			Weighted Average (1)	Range			Weighted Average (1)
Fixed maturity securities AFS (3)
U.S. corporate and foreign corporate	•	Matrix pricing	•	Offered quotes (4)	88	-	140	109	85	-	134	105	Increase
	•	Market pricing	•	Quoted prices (4)	25	-	583	110	25	-	638	107	Increase
RMBS	•	Market pricing	•	Quoted prices (4)	—	-	108	95	—	-	106	94	Increase (5)
ABS	•	Market pricing	•	Quoted prices (4)	9	-	101	97	10	-	101	97	Increase (5)
Derivatives
Interest rate	•	Present value techniques	•	Swap yield (6)	240	-	322		268	-	317		Increase (7)
			•	Repurchase rates (8)	(3)	-	20		(5)	-	6		Decrease (7)
Foreign currency exchange rate	•	Present value techniques	•	Swap yield (6)	(23)	-	(7)		(20)	-	(5)		Increase (7)
Credit	•	Present value techniques	•	Credit spreads (9)	97	-	101		97	-	103		Decrease (7)
	•	Consensus pricing	•	Offered quotes (10)
Equity market	•	Present value    techniques or    option pricing    models	•	Volatility (11)	14%		23%		21%		26%		Increase (7)
			•	Correlation (12)	10%		30%		10%		30%
Embedded derivatives
Direct and assumed guaranteed minimum benefits	•	Option pricing techniques	•	Mortality rates:
				Ages 0 - 40	0.01%	-	0.18%		0.01%	-	0.18%		Decrease (13)
				Ages 41 - 60	0.04%	-	0.57%		0.04%	-	0.57%		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	2.5%	-	100%		2.5%	-	100%		Decrease (14)
			•	Utilization rates	0%	-	25%		0%	-	25%		Increase (15)
			•	Withdrawal rates	0.25%	-	10%		0.25%	-	10%		(16)
			•	Long-term equity volatilities	16.50%	-	22%		16.50%	-	22%		Increase (17)
			•	Nonperformance risk spread	0%	-	0.02%		0.05%	-	0.59%		Decrease (18)

__________________

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

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

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

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)

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

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

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

(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 March 31, 2019 and December 31, 2018, 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.

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)

(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.

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, embedded derivatives within funds withheld related to certain ceded reinsurance, and other investments 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 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 AFS
	Corporate (1)			Structured Securities			Foreign Government			Equity Securities			Short-term Investments
	(In millions)
Three Months Ended March 31, 2019
Balance, beginning of period	$	7,101		$	3,541		$	10		$	356		$	25
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	(2		)	13			—			28			—
Total realized/unrealized gains (losses) included in AOCI	230			19			—			—			—
Purchases (4)	330			128			11			2			102
Sales (4)	(168		)	(131		)	—			(20		)	—
Issuances (4)	—			—			—			—			—
Settlements (4)	—			—			—			—			—
Transfers into Level 3 (5)	190			—			—			—			—
Transfers out of Level 3 (5)	(351		)	(256		)	—			—			—
Balance, end of period	$	7,330		$	3,314		$	21		$	366		$	127
Three Months Ended March 31, 2018
Balance, beginning of period	$	7,586		$	4,076		$	31		$	366		$	7
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	6			23			—			(8		)	—
Total realized/unrealized gains (losses) included in AOCI	(36		)	6			—			—			—
Purchases (4)	385			445			—			1			550
Sales (4)	(425		)	(247		)	—			—			(2		)
Issuances (4)	—			—			—			—			—
Settlements (4)	—			—			—			—			—
Transfers into Level 3 (5)	45			45			1			—			—
Transfers out of Level 3 (5)	(266		)	(496		)	(19		)	—			(5		)
Balance, end of period	$	7,295		$	3,852		$	13		$	359		$	550
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2019: (6)	$	(2	)	$	13		$	—		$	21		$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2018: (6)	$	(1	)	$	21		$	—		$	—		$	—

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)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Residential Mortgage Loans - FVO			Other Investments		Net Derivatives (7)			Net Embedded Derivatives (8)			Separate Account Assets (9)
	(In millions)
Three Months Ended March 31, 2019
Balance, beginning of period	$	299		$	215	$	(192	)	$	(704	)	$	937
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	2			23		35			(98		)	3
Total realized/unrealized gains (losses) included in AOCI	—			—		98			—			—
Purchases (4)	—			—		—			—			80
Sales (4)	(16		)	—		—			—			(122		)
Issuances (4)	—			—		—			—			2
Settlements (4)	(9		)	—		(28		)	(45		)	(1		)
Transfers into Level 3 (5)	—			—		—			—			—
Transfers out of Level 3 (5)	—			—		—			—			(2		)
Balance, end of period	$	276		$	238	$	(87	)	$	(847	)	$	897
Three Months Ended March 31, 2018
Balance, beginning of period	$	520		—		$	(191	)	$	(876	)	$	958
Total realized/unrealized gains (losses) included in net income (loss) (2), (3)	2			—		(47		)	333			2
Total realized/unrealized gains (losses) included in AOCI	—			—		(104		)	—			—
Purchases (4)	—			—		—			—			407
Sales (4)	(64		)	—		—			—			(123		)
Issuances (4)	—			—		—			—			1
Settlements (4)	(20		)	—		49			(48		)	(1		)
Transfers into Level 3 (5)	—			—		—			—			53
Transfers out of Level 3 (5)	—			—		—			—			(75		)
Balance, end of period	$	438		$	—	$	(293	)	$	(591	)	$	1,222
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2019: (6)	$	—		$	23	$	37		$	(97	)	$	—
Changes in unrealized gains (losses) included in net income (loss) for the instruments still held at March 31, 2018: (6)	$	(8	)	$	—	$	(5	)	$	335		$	—

__________________

(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 derivative 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) 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).

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)

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

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

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

	March 31, 2019			December 31, 2018
	(In millions)
Unpaid principal balance	$	324		$	344
Difference between estimated fair value and unpaid principal balance	(48		)	(45		)
Carrying value at estimated fair value	$	276		$	299
Loans in nonaccrual status	$	79		$	89
Loans more than 90 days past due	$	34		$	41
Loans in nonaccrual status or more than 90 days past due, or both - difference between aggregate estimated fair value and unpaid principal balance	$	(35	)	$	(36	)

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.

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)

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:

	March 31, 2019
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	65,650	$	—	$	—	$	67,082	$	67,082
Policy loans	$	6,054	$	—	$	268	$	6,776	$	7,044
Other invested assets	$	2,923	$	—	$	2,651	$	147	$	2,798
Premiums, reinsurance and other receivables	$	14,326	$	—	$	314	$	14,621	$	14,935
Liabilities
Policyholder account balances	$	73,707	$	—	$	—	$	74,908	$	74,908
Long-term debt	$	1,554	$	—	$	1,815	$	—	$	1,815
Other liabilities	$	13,816	$	—	$	771	$	13,116	$	13,887
Separate account liabilities	$	53,328	$	—	$	53,328	$	—	$	53,328

	December 31, 2018
			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total Estimated Fair Value
	(In millions)
Assets
Mortgage loans	$	63,388	$	—	$	—	$	64,409	$	64,409
Policy loans	$	6,061	$	—	$	269	$	6,712	$	6,981
Other invested assets	$	2,940	$	—	$	2,673	$	146	$	2,819
Premiums, reinsurance and other receivables	$	14,228	$	—	$	113	$	14,673	$	14,786
Liabilities
Policyholder account balances	$	72,194	$	—	$	—	$	72,689	$	72,689
Long-term debt	$	1,562	$	—	$	1,746	$	—	$	1,746
Other liabilities	$	13,593	$	—	$	448	$	13,189	$	13,637
Separate account liabilities	$	50,578	$	—	$	50,578	$	—	$	50,578

60

Metropolitan Life Insurance Company

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

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

8. Leases

The Company, as lessee, has entered into various lease and sublease agreements for office space and other equipment. At contract inception, the Company determines that an arrangement contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. For contracts that contain a lease, the Company recognizes the ROU asset in Other assets and the lease liability in Other liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are determined using the Company’s incremental borrowing rate based upon information available at commencement date to recognize the present value of lease payments over the lease term. The ROU asset also includes lease payments and excludes lease incentives. Lease terms may include options to extend or terminate the lease and are included in the lease measurement when it is reasonably certain that the Company will exercise that option.

The Company has lease agreements with lease and non-lease components. The Company elected the practical expedient to not separate lease and non-lease components and accounted for these items as a single lease component for all asset classes.

The majority of the Company’s leases and subleases are operating leases related to office space. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term.

The Company has operating leases with remaining lease terms of one year to 12 years. The remaining lease terms for the subleases are one year to ten years.

ROU Asset andLease Liability

The ROU assets and lease liabilities for operating leases were:

	March 31, 2019
	(In millions)
ROU asset (1)	$	843
Lease liability (1)	$	928

__________________

(1) Assets and liabilities include amounts recognized upon adoption of new guidance. See Note 1.

Lease Costs

The components of operating lease costs were as follows:

	Three Months   Ended   March 31, 2019
	(In millions)
Operating lease cost	$	29
Variable lease cost	3
Sublease income	(20		)
Net lease cost	$	12

Operating lease expense and non-cancelable sublease income were $29 million and $11 million, respectively, for the three months ended March 31, 2018.

61

Metropolitan Life Insurance Company

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

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

8. Leases (continued)

Other Information

Supplemental other information related to operating leases was as follows:

	March 31, 2019
	(Dollars in millions)
Cash paid for amounts included in the measurement of lease liability - operating cash flows	$	29
ROU assets obtained in exchange for new lease liabilities	$	141
Weighted-average remaining lease term	10 years
Weighted-average discount rate	3.9		%

Maturities of Lease Liabilities

Maturities of operating lease liabilities were as follows:

	March 31, 2019
	(In millions)
Remainder of 2019	$	84
2020	124
2021	125
2022	123
2023	112
Thereafter	554
Total undiscounted cash flows	1,122
Less: interest	194
Present value of lease liability	$	928

Future minimum gross rental payments relating to lease arrangements in effect as determined prior to the adoption of ASU 2016-02 are as follows:

	December 31, 2018
	(In millions)
2019	$	125
2020	137
2021	136
2022	134
2023	122
Thereafter	567
Total	$	1,221

See Note 5 for information about the Company’s investments in leased real estate, leveraged leases and direct financing leases.

62

Metropolitan Life Insurance Company

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

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

9. 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 March 31, 2019
	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	$	2,515		$	1,382		$	(74	)	$	(261	)	$	3,562
OCI before reclassifications	3,604			94			(3		)	(1		)	3,694
Deferred income tax benefit (expense)	(754		)	(21		)	3			—			(772		)
AOCI before reclassifications, net of income tax	5,365			1,455			(74		)	(262		)	6,484
Amounts reclassified from AOCI	58			(45		)	—			6			19
Deferred income tax benefit (expense)	(12		)	10			—			(1		)	(3		)
Amounts reclassified from AOCI, net of income tax	46			(35		)	—			5			16
Cumulative effects of changes in accounting principles	(1		)	22			—			—			21
Deferred income tax benefit (expense), cumulative effects of changes in accounting principles	—			(4		)	—			—			(4		)
Cumulative effects of changes in accounting principles, net of income tax (2)	(1		)	18			—			—			17
Balance, end of period	$	5,410		$	1,438		$	(74	)	$	(257	)	$	6,517

	Three Months Ended March 31, 2018
	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	$	6,351		$	906		$	(47	)	$	(1,782	)	$	5,428
OCI before reclassifications	(2,380		)	(506		)	22			—			(2,864		)
Deferred income tax benefit (expense)	515			103			(6		)	—			612
AOCI before reclassifications, net of income tax	4,486			503			(31		)	(1,782		)	3,176
Amounts reclassified from AOCI	10			(184		)	—			31			(143		)
Deferred income tax benefit (expense)	(2		)	37			—			(7		)	28
Amounts reclassified from AOCI, net of income tax	8			(147		)	—			24			(115		)
Cumulative effects of changes in accounting principles	(119		)	—			—			—			(119		)
Deferred income tax benefit (expense), cumulative effects of changes in accounting principles	1,222			207			(7		)	(379		)	1,043
Cumulative effects of changes in accounting principles, net of income tax (3)	1,103			207			(7		)	(379		)	924
Balance, end of period	$	5,597		$	563		$	(38	)	$	(2,137	)	$	3,985

__________________

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

(2) See Note 1 for further information on adoption of new accounting pronouncements.

(3) See Note 1 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report for further information on adoption of new accounting pronouncements.

63

Metropolitan Life Insurance Company

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

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

9. 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 March 31,
	2019			2018
	(In millions)
Net unrealized investment gains (losses):
Net unrealized investment gains (losses)	$	(41	)	$	(47	)	Net investment gains (losses)
Net unrealized investment gains (losses)	—			3			Net investment income
Net unrealized investment gains (losses)	(17		)	34			Net derivative gains (losses)
Net unrealized investment gains (losses), before income tax	(58		)	(10		)
Income tax (expense) benefit	12			2
Net unrealized investment gains (losses), net of income tax	(46		)	(8		)
Unrealized gains (losses) on derivatives - cash flow hedges:
Interest rate derivatives	5			4			Net investment income
Interest rate derivatives	(6		)	—			Net investment gains (losses)
Interest rate derivatives	—			20			Net derivative gains (losses)
Foreign currency exchange rate derivatives	(1		)	—			Net investment income
Foreign currency exchange rate derivatives	47			—			Net investment gains (losses)
Foreign currency exchange rate derivatives	—			160			Net derivative gains (losses)
Gains (losses) on cash flow hedges, before income tax	45			184
Income tax (expense) benefit	(10		)	(37		)
Gains (losses) on cash flow hedges, net of income tax	35			147
Defined benefit plans adjustment: (1)
Amortization of net actuarial gains (losses)	(7		)	(36		)
Amortization of prior service (costs) credit	1			5
Amortization of defined benefit plan items, before income tax	(6		)	(31		)
Income tax (expense) benefit	1			7
Amortization of defined benefit plan items, net of income tax	(5		)	(24		)
Total reclassifications, net of income tax	$	(16	)	$	115

__________________

(1) These AOCI components are included in the computation of net periodic benefit costs. See Note 11.

64

Metropolitan Life Insurance Company

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

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

10. Other Revenues and Other Expenses

Other Revenues

Information on other revenues, which primarily includes fees related to service contracts from customers, was as follows:

	Three Months Ended March 31,
	2019		2018
	(In millions)
Prepaid legal plans	$	81	$	73
Recordkeeping and administrative services (1)	50		58
Administrative services-only contracts	53		56
Other revenue from service contracts from customers	19		12
Total revenues from service contracts from customers	203		199
Other	198		202
Total other revenues	$	401	$	401

__________________

(1) Related to products and businesses no longer actively marketed by the Company.

Other Expenses

Information on other expenses was as follows:

	Three Months Ended March 31,
	2019			2018
	(In millions)
General and administrative expenses	$	570		$	691
Pension, postretirement and postemployment benefit costs	26			17
Premium taxes, other taxes, and licenses & fees	77			95
Commissions and other variable expenses	441			447
Capitalization of DAC	(12		)	(10		)
Amortization of DAC and VOBA	19			88
Interest expense on debt	27			26
Total other expenses	$	1,148		$	1,354

Affiliated Expenses

Commissions and other variable expenses, capitalization of DAC and amortization of DAC and VOBA include the impact of affiliated reinsurance transactions. See Note 14 for a discussion of affiliated expenses included in the table above.

11. Employee Benefit Plans

Pension and Other Postretirement Benefit Plans

As of October 1, 2018, except for the nonqualified defined benefit pension plan, the plan sponsor was changed from the Company to an affiliate (the “Transferred Plans”). The Company remains a participating affiliate of the Transferred Plans. See Note 14 for additional information on related affiliated expenses.

65

Metropolitan Life Insurance Company

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

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

11. Employee Benefit Plans (continued)

Through September 30, 2018, the Company sponsored and administered various qualified and nonqualified defined benefit pension plans and other postretirement employee benefit plans covering employees 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.

Through September 30, 2018, the Company also provided 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.

The components of net periodic benefit costs, reported in other expenses, were as follows:

	Three Months Ended March 31,
	2019					2018
	Pension Benefits			Other Postretirement Benefits		Pension Benefits			Other Postretirement Benefits
	(In millions)
Service costs	$	4		$	—	$	40		$	1
Interest costs	12			—		93			11
Expected return on plan assets	—			—		(131		)	(18		)
Amortization of net actuarial (gains) losses	7			—		44			(8		)
Amortization of prior service costs (credit)	(1		)	—		—			(5		)
Allocated to affiliates	(6		)	—		(17		)	5
Net periodic benefit costs (credit)	$	16		$	—	$	29		$	(14	)

12. Income Tax

The Company’s effective tax rates differ from the U.S. statutory rate typically due to non-taxable investment income and tax credits. For the three months ended March 31, 2019, the Company’s provision for income tax expense (benefit) includes benefits of $6 million related to the effect of sequestration on the alternative minimum tax credit and $8 million related to the corporate tax deduction for stock compensation.

13. Contingencies, Commitments and Guarantees

Contingencies

Litigation

The Company is a defendant in a large number of litigation matters. Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed below and those otherwise provided for in the Company’s consolidated financial statements, have arisen in the course of the Company’s business, including, but not limited to, in connection with its activities as an insurer, mortgage lending bank, employer, investor, investment advisor, broker-dealer, and taxpayer.

The Company also receives and responds to subpoenas or other inquiries seeking a broad range of information from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the U.S. Securities and Exchange Commission; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority, as well as from local and national regulators and government authorities in jurisdictions outside the United States where the Company conducts business. The issues involved in information requests and regulatory matters vary widely, but can include inquiries or investigations concerning the Company’s compliance with applicable insurance and other laws and regulations. The Company cooperates in these inquiries.

66

Metropolitan Life Insurance Company

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

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

13. Contingencies, Commitments and Guarantees (continued)

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.

It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings. The Company establishes liabilities for litigation and regulatory loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. 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 March 31, 2019. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known to management, management does not believe any such charges are likely to have a material effect on the Company’s financial position. Given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s consolidated net income or cash flows in particular quarterly or annual periods.

Matters as to Which an Estimate Can Be Made

For some of the matters disclosed below, the Company is able to estimate a reasonably possible range of loss. For matters where a loss is believed to be reasonably possible, but not probable, the Company has not made an accrual. As of March 31, 2019, the Company estimates the aggregate range of reasonably possible losses in excess of amounts accrued for these matters to be $0 to $425 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.

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.

67

Metropolitan Life Insurance Company

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

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

13. Contingencies, Commitments and Guarantees (continued)

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 2018 Annual Report, Metropolitan Life Insurance Company received approximately 3,359 asbestos-related claims in 2018. For the three months endedMarch 31, 2019 and 2018, Metropolitan Life Insurance Company received approximately 843 and 823 new asbestos-related claims, respectively. See Note 16 of the Notes to the Consolidated Financial Statements included in the 2018 Annual Report for historical information concerning asbestos claims and Metropolitan Life Insurance Company’s update in its recorded liability at December 31, 2018. 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.

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.

68

Metropolitan Life Insurance Company

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

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

13. Contingencies, Commitments and Guarantees (continued)

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 March 31, 2019.

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 principle 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.

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. 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 (the “Ontario Litigation”). 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. In September 2018, the Court of Appeal for Ontario affirmed the lower court’s decision to not certify the sales practices claims in the Ontario Litigation. 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.

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

Plaintiff filed this class action lawsuit on behalf of persons for whom Metropolitan Life Insurance Company established a Total Control Account (“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.

69

Metropolitan Life Insurance Company

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

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

13. Contingencies, Commitments and Guarantees (continued)

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. Plaintiffs assert causes of action for declaratory relief, violation of California’s Unfair Competition Law and Usury Law, and unjust enrichment. Plaintiffs seek 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 appealed this ruling to the United States Court of Appeals for the Ninth Circuit. 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, on behalf of herself and all persons over age 65 who selected a Reduced Pay at Age 65 payment feature on their long-term care insurance policies and whose premium rates were increased after age 65. 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 to dismiss the action. Plaintiff appealed this ruling and the United States Court of Appeals for the Seventh Circuit reversed and remanded the case to the district court for further proceedings. 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. Plaintiffs seek unspecified compensatory and punitive damages, as well as other relief. On March 22, 2018, the Court conditionally certified the case as a collective action, requiring that notice be mailed to LTD claims specialists who worked for the Company from February 8, 2014 to the present. The Company intends to defend this action vigorously.

Total Asset Recovery Services, LLC. v. MetLife, Inc., et al. (Supreme Court of the State of New York, County of New York, filed December 27, 2017)

Total Asset Recovery Services (“The Relator”) brought an action under the qui tam provision of the New York False Claims Act (the “Act”) on behalf of itself and the State of New York. The Relator originally filed this action under seal in 2010, and the complaint was unsealed on December 19, 2017. The Relator alleges that MetLife, Inc., Metropolitan Life Insurance Company and several other insurance companies violated the Act by filing false unclaimed property reports with the State of New York from 1986 to 2017, to avoid having to escheat the proceeds of more than 25,000 life insurance policies, including policies for which the defendants escheated funds as part of their demutualizations in the late 1990s. The Relator seeks treble damages and other relief. On April 3, 2019, the Court granted MetLife, Inc.’s and Metropolitan Life Insurance Company’s motion to dismiss and dismissed the complaint in its entirety. The Relator filed a notice of appeal with the Appellate Division of the New York State Supreme Court, First Division.

Miller, et al. v. Metropolitan Life Insurance Company (S.D.N.Y., filed January 4, 2019)

Plaintiff filed a second amended complaint in this putative class action, purporting to assert claims on behalf of all persons who replaced their MetLife Optional Term Life or Group Universal Life policy with a Group Variable Universal Life policy wherein Metropolitan Life Insurance Company allegedly charged smoker rates for certain non-smokers. Plaintiff seeks unspecified compensatory and punitive damages, as well as other relief. The Company intends to defend this action vigorously.

Regulatory and Litigation Matters Related to Group Annuity Benefits

In 2018, the Company announced that it identified a material weakness in its internal control over financial reporting related to the practices and procedures for estimating reserves for certain group annuity benefits. Several regulators have made

70

Metropolitan Life Insurance Company

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

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

13. Contingencies, Commitments and Guarantees (continued)

inquiries into this issue and it is possible that other jurisdictions may pursue similar investigations or inquiries. The Company is exposed to lawsuits and regulatory investigations, and could be exposed to additional legal actions relating to these issues. These may result in payments, including damages, fines, penalties, interest and other amounts assessed or awarded by courts or regulatory authorities under applicable escheat, tax, securities, ERISA, or other laws or regulations. The Company could incur significant costs in connection with these actions.

Commitments

Mortgage Loan Commitments

The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $3.1 billion and $3.6 billion at March 31, 2019 and December 31, 2018, 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 $4.2 billion and $4.6 billion at March 31, 2019 and December 31, 2018, 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 $431 million, with a cumulative maximum of $804 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 $5 million at both March 31, 2019 and December 31, 2018 for indemnities, guarantees and commitments.

14. Related Party Transactions

Service Agreements

The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include personnel, policy administrative functions and distribution services. 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 $736 million and $516 million for the three months endedMarch 31, 2019 and 2018, respectively. Total revenues received from affiliates related to these agreements were $7 million and $58 million for the three months endedMarch 31, 2019 and 2018, respectively.

71

Metropolitan Life Insurance Company

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

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

14. Related Party Transactions (continued)

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 $0 and $298 million for the three months endedMarch 31, 2019 and 2018, respectively, and were reimbursed to the Company by these affiliates.

In 2018, the Company and the MetLife enterprise updated its shared facilities and services structure to more efficiently share enterprise assets and services. Effective as of October 1, 2018, the Company entered into new service agreements with its affiliates, which replaced existing agreements. Under the new agreements, the Company will no longer be the primary provider of services to affiliates and will receive further services from affiliates to conduct its activities.

The Company had net payables to affiliates, related to the items discussed above, of $128 million and $181 million at March 31, 2019 and December 31, 2018, respectively.

See Notes 5 and 11 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, and Metropolitan Tower Life Insurance Company, all of which are related parties. Additionally, the Company has reinsurance agreements with Brighthouse Life Insurance Company, Brighthouse Life Insurance Company of NY, and New England Life Insurance Company, former subsidiaries of MetLife, Inc. In August 2017, MetLife, Inc. completed the separation of Brighthouse Financial, Inc. and its subsidiaries (“Brighthouse”) and retained 19.2% of Brighthouse Financial, Inc. common stock outstanding. In June 2018, MetLife, Inc. sold its Brighthouse Financial, Inc. common stock and Brighthouse was no longer considered a related party.

72

Metropolitan Life Insurance Company

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

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

14. Related Party Transactions (continued)

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

	Three Months Ended March 31,
	2019			2018
	(In millions)
Premiums
Reinsurance assumed	$	3		$	3
Reinsurance ceded	(32		)	(32		)
Net premiums	$	(29	)	$	(29	)
Universal life and investment-type product policy fees
Reinsurance assumed	$	—		$	1
Reinsurance ceded	(6		)	(5		)
Net universal life and investment-type product policy fees	$	(6	)	$	(4	)
Other revenues
Reinsurance assumed	$	(4	)	$	3
Reinsurance ceded	127			133
Net other revenues	$	123		$	136
Policyholder benefits and claims
Reinsurance assumed	$	1		$	4
Reinsurance ceded	(33		)	(28		)
Net policyholder benefits and claims	$	(32	)	$	(24	)
Interest credited to policyholder account balances
Reinsurance assumed	$	7		$	11
Reinsurance ceded	(3		)	(3		)
Net interest credited to policyholder account balances	$	4		$	8
Other expenses
Reinsurance assumed	$	—		$	8
Reinsurance ceded	125			132
Net other expenses	$	125		$	140

73

Metropolitan Life Insurance Company

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

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

14. Related Party Transactions (continued)

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

	March 31, 2019					December 31, 2018
	Assumed		Ceded			Assumed		Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	—	$	12,587		$	—	$	12,676
Deferred policy acquisition costs and value of business acquired	—		(173		)	—		(175		)
Total assets	$	—	$	12,414		$	—	$	12,501
Liabilities
Future policy benefits	$	60	$	(3	)	$	61	$	(1	)
Policyholder account balances	139		—			141		—
Other policy-related balances	1		11			6		12
Other liabilities	842		12,477			841		12,366
Total liabilities	$	1,042	$	12,485		$	1,049	$	12,377

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$12 millionand$4 millionatMarch 31, 2019andDecember 31, 2018, respectively. Net derivative gains (losses) associated with these embedded derivatives were($8) millionand$6 millionfor thethree months endedMarch 31, 2019and2018, 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 $683 million and $461 million at March 31, 2019 and December 31, 2018, respectively. Net derivative gains (losses) associated with the embedded derivative were ($222) million and $235 million for the three months endedMarch 31, 2019 and 2018, respectively.

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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	76
Business	76
Summary of Critical Accounting Estimates	77
Results of Operations	78
Adoption of New Accounting Pronouncements	83
Future Adoption of New Accounting Pronouncements	83
Non-GAAP and Other Financial Disclosures	83

75

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, 2018 (the “2018 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. See “Note Regarding Forward-Looking Statements” for cautionary language regarding forward-looking statements.

This narrative analysis includes references to our performance measure, adjusted earnings, that is not based on accounting principles generally accepted in the United States of America (“GAAP”). 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. 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.

Regulatory Developments

The following discussion on regulatory developments should be read in conjunction with “Business — Regulation” in the 2018 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.”

Regulation

Insurance Regulation

NAIC

In 2015, the National Association of Insurance Commissioners (“NAIC”) commenced an initiative to study variable annuity solvency regulations, with the goal of curtailing the use of variable annuity captives. In connection with this initiative, the NAIC engaged a third-party consultant to develop recommendations regarding reserve and capital requirements. Following several public exposures of the consultant’s recommendations, the NAIC adopted a new variable annuity framework, which is designed to reduce the level and volatility of the non-economic aspect of reserve and risk-based capital requirements for variable annuity products. The NAIC is now preparing technical language to be included in various NAIC manuals and guidelines to implement the new framework. We cannot predict the impact of this framework on our business until such technical requirements of the framework are completed, and we cannot predict if state insurance regulators will adopt standards different from the NAIC framework. The New York Department of Financial Services (“NYDFS”) is also pursuing a similar initiative that may deviate from the NAIC work product. At this time, we cannot predict the changes the NYDFS will propose in new variable annuity reserving standards or quantify the impact on MLIC.

76

Cybersecurity and Privacy Regulation

In addition, on October 24, 2017, the NAIC adopted the Insurance Data Security Model Law (the “Cybersecurity Model Law”), which establishes standards for data security and for the investigation of and notification of insurance commissioners of cybersecurity events involving unauthorized access to, or the misuse of, certain nonpublic information. The Cybersecurity Model Law has only been adopted by a few states. As adopted by these states, and if adopted as state legislation elsewhere, the Cybersecurity Model Law would impose significant new regulatory burdens intended to protect the confidentiality, integrity and availability of information systems. A drafting note in the Cybersecurity Model Law states that a licensee’s compliance with the New York cybersecurity regulation is intended to constitute compliance with the Cybersecurity Model Law.

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

The 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 2018 Annual Report.

77

Results of Operations

Consolidated Results

Business Overview. In our U.S. segment, overall sales for the three months ended March 31, 2019 increased over prior period levels, primarily driven by an increase in funding agreements in our Retirement and Income Solutions business. Sales increased in our Group Benefits business as compared to the prior period, as sales improved in both our voluntary and core businesses. Our MetLife Holdings segment consists of operations relating to products and businesses, previously included in our former retail business, that we no longer actively market.

		Three Months Ended March 31,
		2019			2018
	(In millions)
Revenues
Premiums		$	5,052		$	4,949
Universal life and investment-type product policy fees		503			531
Net investment income		2,645			2,701
Other revenues		401			401
Net investment gains (losses)		(54		)	(196		)
Net derivative gains (losses)		(310		)	60
Total revenues		8,237			8,446
Expenses
Policyholder benefits and claims and policyholder dividends		5,919			5,776
Interest credited to policyholder account balances		662			581
Capitalization of DAC		(12		)	(10		)
Amortization of DAC and VOBA		19			88
Interest expense on debt		27			26
Other expenses		1,114			1,250
Total expenses		7,729			7,711
Income (loss) before provision for income tax		508			735
Provision for income tax expense (benefit)		—			63
Net income (loss)		508			672
Less: Net income (loss) attributable to noncontrolling interests		1			3
Net income (loss) attributable to Metropolitan Life Insurance Company		$	507		$	669

Three Months Ended March 31, 2019 Compared with the Three Months Ended March 31, 2018

During the three months ended March 31, 2019, net income (loss) decreased $164 million from the prior period, primarily driven by an unfavorable change in net derivative gains (losses), partially offset by favorable changes in net investment gains (losses) and adjusted earnings.

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 available-for-sale 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.

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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 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. We actively evaluate market risk hedging needs and strategies to ensure our liquidity 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 derivatives to hedge the market and other risks inherent in these variable annuity guarantees. Ongoing refinement of the strategy may be required to take advantage of NAIC rules related to a statutory accounting election for derivatives that mitigate interest rate sensitivity related to variable annuity guarantees. The restructured hedge strategy is classified as a macro hedge program, included in the non-VA program derivatives section of the table below, to protect our overall statutory capital from significant adverse economic conditions. 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.

Net Derivative Gains (Losses). Direct, assumed and ceded variable annuity embedded derivatives, as well as the associated freestanding derivative hedges, are referred to as “VA program derivatives.” 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.” The table below presents the impact on net derivative gains (losses) from non-VA program derivatives and VA program derivatives:

	Three Months Ended March 31,
	2019			2018
	(In millions)
Non-VA program derivatives
Interest rate	$	172		$	(142	)
Foreign currency exchange rate	1			(83		)
Credit	93			(16		)
Equity	(213		)	13
Non-VA embedded derivatives	(267		)	244
Total non-VA program derivatives	(214		)	16
VA program derivatives
Embedded derivatives-direct and assumed guarantees:
Market risks	217			150
Nonperformance risk adjustment	(11		)	(21		)
Other risks	(37		)	(40		)
Total	169			89
Freestanding derivatives hedging direct and assumed embedded derivatives	(265		)	(45		)
Total VA program derivatives	(96		)	44
Net derivative gains (losses)	$	(310	)	$	60

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The unfavorable change in net derivative gains (losses) on non-VA program derivatives was $230 million ($182 million, net of income tax). This was primarily due to a change in the value of the underlying assets unfavorably impacting non-VA embedded derivatives related to funds withheld on a certain reinsurance agreement. Also, equity markets increased in the current period and decreased in the prior period, unfavorably impacting equity options acquired primarily as part of our macro hedge program. These unfavorable impacts were partially offset by a favorable change in interest rate impact due to: (i) long-term U.S. interest rates decreasing in the current period and increasing in the prior period, favorably impacting receive fixed interest rate swaps, total rate of return swaps and options; and (ii) mid-term rates decreasing in the current period and increasing in the prior period, negatively impacting interest rate caps. Also, credit spreads narrowed in the current period and widened in the prior period, favorably impacting written credit default swaps used in replications. Additionally, the Euro weakening relative to the U.S. dollar in the current period versus strengthening in the prior period positively impacted foreign currency swaps that primarily hedge foreign currency-denominated bonds. 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 unfavorable change in net derivative gains (losses) on VA program derivatives was $140 million ($111 million, net of income tax). This was due to an unfavorable change of $150 million ($119 million, net of income tax) in freestanding derivatives hedging market risks in embedded derivatives, net of embedded derivatives market and other risks, partially offset by a favorable change of $10 million ($8 million, net of income tax) in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives. Other risks relate primarily to the impact of policyholder behavior and other non-market risks that generally cannot be hedged.

The aforementioned unfavorable change of $150 million ($119 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:

• Key equity index levels increased in the current period and decreased in the prior period, contributing to an unfavorable change in our freestanding derivatives and a favorable change in our embedded derivatives. For example, the S&P 500 Index increased 13% in the current period and decreased 1% in the prior period.

• Long-term U.S. interest rates decreased in the current period and increased in the prior period, contributing to an unfavorable change in our embedded interest rate derivatives. For example, the 30-year U.S. swap rate decreased 26 basis points in the current period and increased 28 basis points in the prior period. The favorable change in our freestanding derivatives resulted from the restructuring of the VA hedging strategy in 2018.

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 favorable change in the nonperformance risk adjustment on the direct and assumed variable annuity embedded derivatives of $10 million ($8 million, net of income tax) was primarily due to a favorable change of $19 million, before income tax, as a result of model changes and changes in capital market inputs, such as long-term interest rates and key equity index levels, on variable annuity guarantees, partially offset by an unfavorable change of $9 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.

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.

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. For each of these primary market drivers, the opposite effect occurs when they move in the opposite direction.

Net Investment Gains (Losses). The favorable change in net investment gains (losses) of $142 million ($112 million, net of income tax) primarily reflects mark-to-market gains on equity securities in the current period versus mark-to-market losses in the prior period, which were measured at estimated fair value through net income, as well as lower alternative investment impairments in the current period.

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Taxes. Income tax expense for the three months ended March 31, 2019 was $0, compared with $63 million, or 9% of income (loss) before provision for income tax, for the three months ended March 31, 2018. The Company’s effective tax rates differ from the U.S. statutory rate of 21% typically due to non-taxable investment income and tax credits for investments in low income housing. Our current period results include benefits of $6 million related to the effect of sequestration on the alternative minimum tax credit and $8 million related to the corporate tax deduction for stock compensation.

Adjusted Earnings. As more fully described in “— Non-GAAP and Other Financial Disclosures,” we use adjusted earnings, which does not equate to net income (loss), as determined in accordance with GAAP, to analyze our performance, evaluate segment performance, and allocate resources. We believe that the presentation of adjusted earnings, as we measure it for management purposes, enhances the understanding of our performance by highlighting the results of operations and the underlying profitability drivers of the business. Adjusted earnings allows analysis of our performance and facilitates comparisons to industry results. Adjusted earnings should not be viewed as a substitute for net income (loss). Adjusted earnings increased $39 million, net of income tax, to $867 million, net of income tax, for the three months ended March 31, 2019 from $828 million, net of income tax, for the three months ended March 31, 2018.

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Reconciliation of net income (loss) to adjusted earnings

		Three Months Ended March 31,
		2019			2018
		(In millions)
Net income (loss)		$	508		$	672
Less: adjustments from net income (loss) to adjusted earnings:
Revenues:
	Net investment gains (losses)	(54		)	(196		)
	Net derivative gains (losses)	(310		)	60
	Premiums	—			—
	Universal life and investment-type product policy fees	22			23
	Net investment income	(75		)	(92		)
	Other revenues	—			—
Expenses:
	Policyholder benefits and claims and policyholder dividends	(83		)	(2		)
	Interest credited to policyholder account balances	3			1
	Capitalization of DAC	—			—
	Amortization of DAC and VOBA	42			6
	Interest expense on debt	—			—
	Other expenses	—			2
Provision for income tax (expense) benefit		96			42
Adjusted earnings		$	867		$	828

Consolidated Results — Adjusted Earnings

Three Months Ended March 31, 2019 Compared with the Three Months Ended March 31, 2018

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

Overview. The primary drivers of the increase in adjusted earnings were lower expenses, favorable underwriting and a larger invested asset base, partially offset by lower investment yields and higher interest credited expenses.

Business Growth. Net investment income improved as a result of higher average invested assets in our U.S. segment, partially offset by a reduced asset base in our MetLife Holdings segment. The higher asset base in our U.S. segment was due to the impact of increased net flows, primarily from prior period pension risk transfer sales. However, consistent with the growth in the U.S. segment’s average invested assets from increased premiums and net flows, 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 deposits resulted in lower fee income, decreasing adjusted earnings. In our U.S. segment, higher volume-related, and premium tax expenses were partially offset by lower direct expenses, including certain employee-related expenses. The net increase in expenses, which included the favorable impact of the 2019 abatement of the annual health insurer fee under the Patient Protection and Affordable Care Act, was more than offset by a corresponding increase in premiums, fees and other revenues. The combined impact of the items affecting our business growth, net of lower DAC amortization, increased adjusted earnings by $3 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 returns on private equities and real estate investments, lower income on derivatives, higher investment expenses and lower returns on alternative investments. The resulting decrease in net investment income was partially offset by increased yields on mortgage loans and higher returns on fair value option securities. In the U.S. segment, higher average interest credited rates on both our long-duration and deposit-type liabilities drove an increase in interest credited expenses. The changes in market factors discussed above resulted in a $129 million decrease in adjusted earnings.

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Underwriting and Other Insurance Adjustments. Favorable underwriting increased adjusted earnings by $47 million due to favorable morbidity and mortality experience in our U.S. segment, partially offset by less favorable mortality and morbidity experience in our MetLife Holdings segment. Favorable morbidity experience was due to favorable claim experience in our Group Benefits business, primarily driven by lower claim severity, favorable renewal results and an increase in recoveries in our group disability business. In addition, growth in the business, and favorable claims experience in both our accident & health and individual disability businesses contributed to the increase in adjusted earnings. Favorable mortality experience was due to favorable claims experience in our term life business (primarily due to the unfavorable impact of the influenza virus in the prior period), favorable prior period development and lower incidence, partially offset by less favorable mortality in our universal life, accidental death and dismemberment and pension risk transfer businesses. Refinements to DAC and certain insurance-related liabilities, which were recorded in both periods, resulted in a $3 million increase in adjusted earnings.

Expenses. Adjusted earnings increased $97 million as a result of lower expenses, primarily due to declines in employee-related costs, lower other expenses as a result of enterprise-wide initiatives and a decrease in interest on uncertain tax positions, partially offset by higher costs associated with corporate initiatives and projects, including the continued investment in our unit cost initiative.

Taxes. Our effective tax rates differ from the U.S. statutory rate of 21% typically due to nontaxable investment income and tax credits for investments in low income housing. Lower utilization of tax preferenced items decreased adjusted earnings by $3 million from the prior period. Our current period results include benefits of $6 million related to the effect of sequestration on the alternative minimum tax credit and $8 million related to the corporate tax deduction for stock compensation.

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 measure should not be viewed as a substitute for the most directly comparable financial measure calculated in accordance with GAAP:

Non-GAAP financial measure:		Comparable GAAP financial measure:
(i)	adjusted earnings	(i)	net income (loss)

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

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

Adjusted earnings

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

Adjusted earnings is defined as adjusted revenues less adjusted expenses, net of income tax.

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Adjusted revenues and adjusted expenses

The financial measures of adjusted revenues and adjusted expenses 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. Adjusted 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 adjusted 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 (“guaranteed minimum income benefit”) 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 (“Investment hedge adjustments”), (ii) excludes post-tax adjusted earnings adjustments relating to insurance joint ventures accounted for under the equity method, (iii) excludes certain amounts related to securitization entities that are variable interest entities (“VIEs”) consolidated under GAAP and (iv) includes distributions of profits from certain other limited partnership interests that were previously accounted for under the cost method, but are now accounted for at estimated fair value, where the change in estimated fair value is recognized in net investment gains (losses) under GAAP.

The following additional adjustments are made to expenses, in the line items indicated, in calculating adjusted 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 and other pass through adjustments, (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: (i) noncontrolling interests, (ii) acquisition, integration and other costs, and (iii) 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.

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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.

• Asymmetrical and non-economic accounting refers to: (i) the portion of net derivative gains (losses) on embedded derivatives attributable to the inclusion of our credit spreads in the liability valuations, (ii) hedging activity that generates net derivative gains (losses) and creates fluctuations in net income because hedge accounting cannot be achieved and the item being hedged does not a have an offsetting gain or loss recognized in earnings, and (iii) impact of changes in foreign currency exchange rates on the re-measurement of foreign denominated unhedged funding agreements and financing transactions to the U.S. dollar and the re-measurement of certain liabilities from non-functional currencies to functional currencies. We believe that excluding the impact of asymmetrical and non-economic accounting from total GAAP results enhances investor understanding of our performance by disclosing how these accounting practices affect reported GAAP results.

Item 4. Controls and Procedures

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

There were no changes to the Company’s internal control over financial reporting as defined in Exchange Act Rule 13a-15(f) during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

See Note 13 of the Notes to the Interim Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

Certain factors that may affect the Company’s business or operations are described under “Risk Factors” in Part I, Item 1A, of the 2018 Annual Report, as amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q under Item 1A. Risk Factors. There have been no material changes to our risk factors from the risk factors previously disclosed in the 2018 Annual Report.

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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

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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/ Tamara L. Schock
	Name:	Tamara L. Schock
	Title:	Executive Vice President and Chief
		Accounting Officer (Authorized Signatory
		and Principal Accounting Officer)

Date: May 9, 2019

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