METLIFE INC | 2013 | FY | 3


8. Investments
See Note 10 for information about the fair value hierarchy for investments and the related valuation methodologies.
Investment Risks and Uncertainties
Investments are exposed to the following primary sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the consolidated financial statements.
The determination of valuation allowances and impairments is highly subjective and is based upon periodic evaluations and assessments of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
The recognition of income on certain investments (e.g. structured securities, including mortgage-backed securities, asset-backed securities (“ABS”), certain structured investment transactions and FVO and trading securities) is dependent upon certain factors such as prepayments and defaults, and changes in such factors could result in changes in amounts to be earned.
Fixed Maturity and Equity Securities AFS
Fixed Maturity and Equity Securities AFS by Sector
The following table presents the fixed maturity and equity securities AFS by sector. Redeemable preferred stock is reported within U.S. corporate and foreign corporate fixed maturity securities and non-redeemable preferred stock is reported within equity securities. Included within fixed maturity securities are structured securities including RMBS, commercial mortgage-backed securities (“CMBS”) and ABS.
 
December 31, 2013
 
December 31, 2012
 
Cost or
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair
Value
 
Cost or
Amortized
Cost
 
Gross Unrealized
 
Estimated
Fair
Value
 
 
Gains
 
Temporary
Losses
 
OTTI
Losses
 
Gains
 
Temporary
Losses
 
OTTI
Losses
 
 
 
 
 
 
 
 
 
 
(In millions)
 
 
 
 
 
 
 
 
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate
$
100,203

 
$
7,495

 
$
1,229

 
$

 
$
106,469

 
$
102,669

 
$
11,887

 
$
430

 
$

 
$
114,126

Foreign corporate (1)
59,778

 
3,939

 
565

 

 
63,152

 
61,806

 
5,654

 
277

 
(1
)
 
67,184

Foreign government
50,717

 
4,107

 
387

 

 
54,437

 
51,967

 
5,440

 
71

 

 
57,336

U.S. Treasury and agency
43,928

 
2,251

 
1,056

 

 
45,123

 
41,874

 
6,104

 
11

 

 
47,967

RMBS
34,167

 
1,584

 
490

 
206

 
35,055

 
35,666

 
2,477

 
315

 
349

 
37,479

CMBS
16,115

 
605

 
170

 

 
16,550

 
18,177

 
1,009

 
57

 

 
19,129

ABS
15,458

 
296

 
171

 
12

 
15,571

 
15,762

 
404

 
156

 
13

 
15,997

State and political subdivision
13,233

 
903

 
306

 

 
13,830

 
12,949

 
2,169

 
70

 

 
15,048

Total fixed maturity securities
$
333,599

 
$
21,180

 
$
4,374

 
$
218

 
$
350,187

 
$
340,870

 
$
35,144

 
$
1,387

 
$
361

 
$
374,266

Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
$
1,927

 
$
431

 
$
5

 
$

 
$
2,353

 
$
2,034

 
$
147

 
$
19

 
$

 
$
2,162

Non-redeemable preferred stock
1,085

 
76

 
112

 

 
1,049

 
804

 
65

 
140

 

 
729

Total equity securities
$
3,012

 
$
507

 
$
117

 
$

 
$
3,402

 
$
2,838

 
$
212

 
$
159

 
$

 
$
2,891

______________
(1)
The noncredit loss component of OTTI losses for foreign corporate securities was in an unrealized gain position of $1 million at December 31, 2012, due to increases in estimated fair value subsequent to initial recognition of noncredit losses on such securities. See also “— Net Unrealized Investment Gains (Losses).”
The Company held non-income producing fixed maturity securities with an estimated fair value of $74 million and $85 million with unrealized gains (losses) of $23 million and $11 million at December 31, 2013 and 2012, respectively.

Methodology for Amortization of Premium and Accretion of Discount on Structured Securities

Amortization of premium and accretion of discount on structured securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and ABS are estimated using inputs obtained from third-party specialists and based on management’s knowledge of the current market. For credit-sensitive mortgage-backed and ABS and certain prepayment-sensitive securities, the effective yield is recalculated on a prospective basis. For all other mortgage-backed and ABS, the effective yield is recalculated on a retrospective basis.
Maturities of Fixed Maturity Securities
The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date, were as follows at:
 
December 31,
 
2013
 
2012
 
Amortized
Cost
 
Estimated
Fair
Value
 
Amortized
Cost
 
Estimated
Fair
Value
 
(In millions)
Due in one year or less
$
15,828

 
$
16,030

 
$
24,177

 
$
24,394

Due after one year through five years
70,467

 
74,229

 
66,973

 
70,759

Due after five years through ten years
78,159

 
83,223

 
82,376

 
91,975

Due after ten years
103,405

 
109,529

 
97,739

 
114,533

Subtotal
267,859

 
283,011

 
271,265

 
301,661

Structured securities (RMBS, CMBS and ABS)
65,740

 
67,176

 
69,605

 
72,605

Total fixed maturity securities
$
333,599

 
$
350,187

 
$
340,870

 
$
374,266


Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. Fixed maturity securities not due at a single maturity date have been presented in the year of final contractual maturity. RMBS, CMBS and ABS are shown separately, as they are not due at a single maturity.
Continuous Gross Unrealized Losses for Fixed Maturity and Equity Securities AFS by Sector
The following table presents the estimated fair value and gross unrealized losses of fixed maturity and equity securities AFS in an unrealized loss position, aggregated by sector and by length of time that the securities have been in a continuous unrealized loss position.
 
December 31, 2013
 
December 31, 2012
 
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
 
(In millions, except number of securities)
Fixed maturity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. corporate
$
13,889

 
$
808

 
$
3,807

 
$
421

 
$
3,799

 
$
88

 
$
3,695

 
$
342

Foreign corporate
9,019

 
402

 
2,320

 
163

 
2,783

 
96

 
2,873

 
180

Foreign government
5,052

 
336

 
1,846

 
51

 
1,431

 
22

 
543

 
49

U.S. Treasury and agency
15,225

 
1,037

 
357

 
19

 
1,951

 
11

 

 

RMBS
10,754

 
363

 
2,302

 
333

 
735

 
31

 
4,098

 
633

CMBS
3,696

 
142

 
631

 
28

 
842

 
11

 
577

 
46

ABS
3,772

 
59

 
978

 
124

 
1,920

 
30

 
1,410

 
139

State and political subdivision
3,109

 
225

 
351

 
81

 
260

 
4

 
251

 
66

Total fixed maturity securities
$
64,516

 
$
3,372

 
$
12,592

 
$
1,220

 
$
13,721

 
$
293

 
$
13,447

 
$
1,455

Equity securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
$
81

 
$
4

 
$
16

 
$
1

 
$
201

 
$
18

 
$
14

 
$
1

Non-redeemable preferred stock
364

 
65

 
191

 
47

 

 

 
295

 
140

Total equity securities
$
445

 
$
69

 
$
207

 
$
48

 
$
201

 
$
18

 
$
309

 
$
141

Total number of securities in an
unrealized loss position
4,480

 
 
 
1,571

 
 
 
1,941

 
 
 
1,335

 
 

Evaluation of AFS Securities for OTTI and Evaluating Temporarily Impaired AFS Securities
Evaluation and Measurement Methodologies
Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the estimated fair value has been below cost or amortized cost; (ii) the potential for impairments when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments where the issuer, series of issuers or industry has suffered a catastrophic loss or has exhausted natural resources; (vi) with respect to fixed maturity securities, whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers; (vii) with respect to structured securities, changes in forecasted cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies.
The methodology and significant inputs used to determine the amount of credit loss on fixed maturity securities are as follows:
The Company calculates the recovery value by performing a discounted cash flow analysis based on the present value of future cash flows. The discount rate is generally the effective interest rate of the security prior to impairment.
When determining collectability and the period over which value is expected to recover, the Company applies considerations utilized in its overall impairment evaluation process which incorporates information regarding the specific security, fundamentals of the industry and geographic area in which the security issuer operates, and overall macroeconomic conditions. Projected future cash flows are estimated using assumptions derived from management’s best estimates of likely scenario-based outcomes after giving consideration to a variety of variables that include, but are not limited to: payment terms of the security; the likelihood that the issuer can service the interest and principal payments; the quality and amount of any credit enhancements; the security’s position within the capital structure of the issuer; possible corporate restructurings or asset sales by the issuer; and changes to the rating of the security or the issuer by rating agencies.
Additional considerations are made when assessing the unique features that apply to certain structured securities including, but not limited to: the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying loans or assets backing a particular security, and the payment priority within the tranche structure of the security.
When determining the amount of the credit loss for U.S. and foreign corporate securities, foreign government securities and state and political subdivision securities, the estimated fair value is considered the recovery value when available information does not indicate that another value is more appropriate. When information is identified that indicates a recovery value other than estimated fair value, management considers in the determination of recovery value the same considerations utilized in its overall impairment evaluation process as described above, as well as any private and public sector programs to restructure such securities.
With respect to securities that have attributes of debt and equity (perpetual hybrid securities), consideration is given in the OTTI analysis as to whether there has been any deterioration in the credit of the issuer and the likelihood of recovery in value of the securities that are in a severe and extended unrealized loss position. Consideration is also given as to whether any perpetual hybrid securities, with an unrealized loss, regardless of credit rating, have deferred any dividend payments. When an OTTI loss has occurred, the OTTI loss is the entire difference between the perpetual hybrid security’s cost and its estimated fair value with a corresponding charge to earnings.
The cost or amortized cost of fixed maturity and equity securities is adjusted for OTTI in the period in which the determination is made. The Company does not change the revised cost basis for subsequent recoveries in value.
In periods subsequent to the recognition of OTTI on a fixed maturity security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted over the remaining term of the fixed maturity security in a prospective manner based on the amount and timing of estimated future cash flows.
Current Period Evaluation
Based on the Company’s current evaluation of its AFS securities in an unrealized loss position in accordance with its impairment policy, and the Company’s current intentions and assessments (as applicable to the type of security) about holding, selling and any requirements to sell these securities, the Company has concluded that these securities are not other-than-temporarily impaired at December 31, 2013. 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, interest rates and credit spreads. 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 increased $2.9 billion during the year ended December 31, 2013 from $1.7 billion to $4.6 billion. The increase in gross unrealized losses for the year ended December 31, 2013, was primarily attributable to an increase in interest rates, partially offset by narrowing credit spreads.
At December 31, 2013, $296 million of the total $4.6 billion of gross unrealized losses were from 95 fixed maturity securities with an unrealized loss position of 20% or more of amortized cost for six months or greater.
Investment Grade Fixed Maturity Securities
Of the $296 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $165 million, or 56%, are related to gross unrealized losses on 64 investment grade fixed maturity securities. Unrealized losses on investment grade fixed maturity securities are principally related to widening credit spreads and, with respect to fixed-rate fixed maturity securities, rising interest rates since purchase.
Below Investment Grade Fixed Maturity Securities
Of the $296 million of gross unrealized losses on fixed maturity securities with an unrealized loss of 20% or more of amortized cost for six months or greater, $131 million, or 44%, are related to gross unrealized losses on 31 below investment grade fixed maturity securities. Unrealized losses on below investment grade fixed maturity securities are principally related to non-agency RMBS (primarily alternative residential mortgage loans) and ABS (primarily foreign ABS) and are the result of significantly wider credit spreads resulting from higher risk premiums since purchase, largely due to economic and market uncertainties including concerns over unemployment levels and valuations of residential real estate supporting non-agency RMBS. Management evaluates non-agency RMBS and ABS based on actual and projected cash flows after considering the quality of underlying collateral, expected prepayment speeds, current and forecasted loss severity, consideration of the payment terms of the underlying assets backing a particular security, and the payment priority within the tranche structure of the security.
Equity Securities
Gross unrealized losses on equity securities decreased $42 million during the year ended December 31, 2013 from $159 million to $117 million. Of the $117 million, $39 million were from 11 equity securities with gross unrealized losses of 20% or more of cost for 12 months or greater, all of which were financial services industry investment grade non-redeemable preferred stock, of which 65% were rated A or better.
Mortgage Loans
Mortgage Loans by Portfolio Segment
Mortgage loans are summarized as follows at:
 
December 31,
 
2013
 
2012
 
Carrying
Value
 
% of
Total
 
Carrying
Value
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Mortgage loans held-for-investment:
 
 
 
 
 
 
 
Commercial
$
40,926

 
70.9
 %
 
$
40,472

 
71.0
 %
Agricultural
12,391

 
21.5

 
12,843

 
22.5

Residential
2,772

 
4.8

 
958

 
1.7

Subtotal (1)
56,089

 
97.2

 
54,273

 
95.2

Valuation allowances
(322
)
 
(0.6
)
 
(347
)
 
(0.6
)
Subtotal mortgage loans held-for-investment, net
55,767

 
96.6

 
53,926

 
94.6

Residential — FVO
338

 
0.6

 

 

Commercial mortgage loans held by CSEs — FVO
1,598

 
2.8

 
2,666

 
4.7

Total mortgage loans held-for-investment, net
57,703

 
100.0

 
56,592

 
99.3

Mortgage loans held-for-sale
3

 

 
414

 
0.7

Total mortgage loans, net
$
57,706

 
100.0
 %
 
$
57,006

 
100.0
 %
______________
(1)
Purchases of mortgage loans were $2.2 billion and $205 million for the years ended December 31, 2013 and 2012, respectively.
See “— Variable Interest Entities” for discussion of CSEs.
Mortgage Loans and Valuation Allowance by Portfolio Segment
The carrying value prior to valuation allowance (“recorded investment”) in mortgage loans held-for-investment, by portfolio segment, by method of evaluation of credit loss, and the related valuation allowances, by type of credit loss, were as follows at:
 
December 31,
 
2013
 
2012
 
Commercial
 
Agricultural
 
Residential
 
Total
 
Commercial
 
Agricultural
 
Residential
 
Total
 
(In millions)
Mortgage loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evaluated individually for credit losses
$
506

 
$
100

 
$
16

 
$
622

 
$
539

 
$
181

 
$
13

 
$
733

Evaluated collectively for credit losses
40,420

 
12,291

 
2,756

 
55,467

 
39,933

 
12,662

 
945

 
53,540

Total mortgage loans
40,926

 
12,391

 
2,772

 
56,089

 
40,472

 
12,843

 
958

 
54,273

Valuation allowances:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Specific credit losses
58

 
7

 
1

 
66

 
94

 
21

 
2

 
117

Non-specifically identified credit losses
200

 
37

 
19

 
256

 
199

 
31

 

 
230

Total valuation allowances
258

 
44

 
20

 
322

 
293

 
52

 
2

 
347

Mortgage loans, net of valuation allowance
$
40,668

 
$
12,347

 
$
2,752

 
$
55,767

 
$
40,179

 
$
12,791

 
$
956

 
$
53,926


Valuation Allowance Rollforward by Portfolio Segment
The changes in the valuation allowance, by portfolio segment, were as follows:
 
Commercial
 
Agricultural
 
Residential
 
Total
 
(In millions)
Balance at January 1, 2011
$
562

 
$
88

 
$
14

 
$
664

Provision (release)
(152
)
 
(3
)
 
10

 
(145
)
Charge-offs, net of recoveries
(12
)
 
(4
)
 
(3
)
 
(19
)
Transfers to held-for-sale (1)

 

 
(19
)
 
(19
)
Balance at December 31, 2011
398

 
81

 
2

 
481

Provision (release)
(92
)
 

 
6

 
(86
)
Charge-offs, net of recoveries
(13
)
 
(24
)
 

 
(37
)
Transfers to held-for-sale (1)

 
(5
)
 
(6
)
 
(11
)
Balance at December 31, 2012
293

 
52

 
2

 
347

Provision (release)
(35
)
 
4

 
18

 
(13
)
Charge-offs, net of recoveries

 
(12
)
 

 
(12
)
Transfers to held-for-sale

 

 

 

Balance at December 31, 2013
$
258

 
$
44

 
$
20

 
$
322

______________
(1)
The valuation allowance on and the related carrying value of certain residential mortgage loans held-for-investment were transferred to mortgage loans held-for-sale in connection with the MetLife Bank Divestiture. See Note 3.
Valuation Allowance Methodology
Mortgage loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the loan agreement. Specific valuation allowances are established using the same methodology for all three portfolio segments as the excess carrying value of a loan over either (i) the present value of expected future cash flows discounted at the loan’s original effective interest rate, (ii) the estimated fair value of the loan’s underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan’s observable market price. A common evaluation framework is used for establishing non-specific valuation allowances for all loan portfolio segments; however, a separate non-specific valuation allowance is calculated and maintained for each loan portfolio segment that is based on inputs unique to each loan portfolio segment. Non-specific valuation allowances are established for pools of loans with similar risk characteristics where a property-specific or market-specific risk has not been identified, but for which the Company expects to incur a credit loss. These evaluations are based upon several loan portfolio segment-specific factors, including the Company’s experience for loan losses, defaults and loss severity, and loss expectations for loans with similar risk characteristics. These evaluations are revised as conditions change and new information becomes available.
Commercial and Agricultural Mortgage Loan Portfolio Segments
The Company typically uses several years of historical experience in establishing non-specific valuation allowances which captures multiple economic cycles. For evaluations of commercial mortgage loans, in addition to historical experience, management considers factors that include the impact of a rapid change to the economy, which may not be reflected in the loan portfolio, and recent loss and recovery trend experience as compared to historical loss and recovery experience. For evaluations of agricultural mortgage loans, in addition to historical experience, management considers factors that include increased stress in certain sectors, which may be evidenced by higher delinquency rates, or a change in the number of higher risk loans. On a quarterly basis, management incorporates the impact of these current market events and conditions on historical experience in determining the non-specific valuation allowance established for commercial and agricultural mortgage loans.
All commercial mortgage loans are reviewed on an ongoing basis which may include an analysis of the property financial statements and rent roll, lease rollover analysis, property inspections, market analysis, estimated valuations of the underlying collateral, loan-to-value ratios, debt service coverage ratios, and tenant creditworthiness. All agricultural mortgage loans are monitored on an ongoing basis. The monitoring process focuses on higher risk loans, which include those that are classified as restructured, delinquent or in foreclosure, as well as loans with higher loan-to-value ratios and lower debt service coverage ratios. The monitoring process for agricultural mortgage loans is generally similar to the commercial mortgage loan monitoring process, with a focus on higher risk loans, including reviews on a geographic and property-type basis. Higher risk loans are reviewed individually on an ongoing basis for potential credit loss and specific valuation allowances are established using the methodology described above. Quarterly, the remaining loans are reviewed on a pool basis by aggregating groups of loans that have similar risk characteristics for potential credit loss, and non-specific valuation allowances are established as described above using inputs that are unique to each segment of the loan portfolio.
For commercial mortgage loans, the primary credit quality indicator is the debt service coverage ratio, which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan. Generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss. The Company also reviews the loan-to-value ratio of its commercial mortgage loan portfolio. Loan-to-value ratios compare the unpaid principal balance of the loan to the estimated fair value of the underlying collateral. Generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss. The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis, with a portion of the loan portfolio updated each quarter.
For agricultural mortgage loans, the Company’s primary credit quality indicator is the loan-to-value ratio. The values utilized in calculating this ratio are developed in connection with the ongoing review of the agricultural mortgage loan portfolio and are routinely updated.
Residential Mortgage Loan Portfolio Segment
The Company’s residential mortgage loan portfolio is comprised primarily of closed end, amortizing residential mortgage loans. For evaluations of residential mortgage loans, the key inputs of expected frequency and expected loss reflect current market conditions, with expected frequency adjusted, when appropriate, for differences from market conditions and the Company’s historical experience. In contrast to the commercial and agricultural mortgage loan portfolios, residential mortgage loans are smaller-balance homogeneous loans that are collectively evaluated for impairment. Non-specific valuation allowances are established using the evaluation framework described above for pools of loans with similar risk characteristics from inputs that are unique to the residential segment of the loan portfolio. Loan specific valuation allowances are only established on residential mortgage loans when they have been restructured and are established using the methodology described above for all loan portfolio segments.
For residential mortgage loans, the Company’s primary credit quality indicator is whether the loan is performing or nonperforming. The Company generally defines nonperforming residential mortgage loans as those that are 60 or more days past due and/or in non-accrual status which is assessed monthly. Generally, nonperforming residential mortgage loans have a higher risk of experiencing a credit loss.
Credit Quality of Commercial Mortgage Loans
The credit quality of commercial mortgage loans held-for-investment, were as follows at:
 
Recorded Investment
 
Estimated
Fair
Value
 
% of
Total
 
Debt Service Coverage Ratios
 
Total
 
% of
Total
 
 
> 1.20x
 
1.00x - 1.20x
 
< 1.00x
 
 
(In millions)
 
 
 
(In millions)
 
 
December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan-to-value ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 65%
$
30,552

 
$
614

 
$
841

 
$
32,007

 
78.2
%
 
$
33,519

 
78.9
%
65% to 75%
6,360

 
438

 
149

 
6,947

 
17.0

 
7,039

 
16.6

76% to 80%
525

 
192

 
189

 
906

 
2.2

 
892

 
2.1

Greater than 80%
661

 
242

 
163

 
1,066

 
2.6

 
1,006

 
2.4

Total
$
38,098

 
$
1,486

 
$
1,342

 
$
40,926

 
100.0
%
 
$
42,456

 
100.0
%
December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan-to-value ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 65%
$
29,839

 
$
730

 
$
722

 
$
31,291

 
77.3
%
 
$
33,730

 
78.3
%
65% to 75%
5,057

 
672

 
153

 
5,882

 
14.6

 
6,129

 
14.2

76% to 80%
938

 
131

 
316

 
1,385

 
3.4

 
1,436

 
3.3

Greater than 80%
1,085

 
552

 
277

 
1,914

 
4.7

 
1,787

 
4.2

Total
$
36,919

 
$
2,085

 
$
1,468

 
$
40,472

 
100.0
%
 
$
43,082

 
100.0
%

Credit Quality of Agricultural Mortgage Loans
The credit quality of agricultural mortgage loans held-for-investment, were as follows at:
 
December 31,
 
2013
 
2012
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Loan-to-value ratios:
 
 
 
 
 
 
 
Less than 65%
$
11,461

 
92.5
%
 
$
11,908

 
92.7
%
65% to 75%
729

 
5.9

 
590

 
4.6

76% to 80%
84

 
0.7

 
92

 
0.7

Greater than 80%
117

 
0.9

 
253

 
2.0

Total
$
12,391

 
100.0
%
 
$
12,843

 
100.0
%

The estimated fair value of agricultural mortgage loans held-for-investment was $12.7 billion and $13.3 billion at December 31, 2013 and 2012, respectively.
Credit Quality of Residential Mortgage Loans
The credit quality of residential mortgage loans held-for-investment, were as follows at:
 
December 31,
 
2013
 
2012
 
Recorded
Investment
 
% of
Total
 
Recorded
Investment
 
% of
Total
 
(In millions)
 
 
 
(In millions)
 
 
Performance indicators:
 
 
 
 
 
 
 
Performing
$
2,693

 
97.1
%
 
$
929

 
97.0
%
Nonperforming
79

 
2.9

 
29

 
3.0

Total
$
2,772

 
100.0
%
 
$
958

 
100.0
%

The estimated fair value of residential mortgage loans held-for-investment was $2.8 billion and $1.0 billion at December 31, 2013 and 2012, respectively.
Past Due and Interest Accrual Status of Mortgage Loans
The Company has a high quality, well performing mortgage loan portfolio, with 99% of all mortgage loans classified as performing at both December 31, 2013 and 2012. 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 accrual status of 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 Status
 
December 31, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
 
December 31, 2013
 
December 31, 2012
 
(In millions)
Commercial
$
12

 
$
2

 
$
12

 
$

 
$
191

 
$
84

Agricultural
44

 
116

 

 
53

 
47

 
67

Residential
79

 
29

 

 

 
65

 
18

Total
$
135

 
$
147

 
$
12

 
$
53

 
$
303

 
$
169


Impaired Mortgage Loans
Impaired mortgage loans held-for-investment, including those modified in a troubled debt restructuring, by portfolio segment, were as follows at and for the years ended:
 
Loans with a Valuation Allowance
 
Loans without a Valuation Allowance
 
All Impaired Loans

Unpaid
Principal
Balance
 
Recorded
Investment
 
Valuation
Allowances
 
Carrying
Value
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Average
Recorded
Investment
 
Interest
Income
 
(In millions)
December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
214

 
$
210

 
$
58

 
$
152

 
$
299

 
$
296

 
$
513

 
$
448

 
$
526

 
$
15

Agricultural
68

 
66

 
7

 
59

 
35

 
34

 
103

 
93

 
153

 
9

Residential
12

 
12

 
1

 
11

 
5

 
4

 
17

 
15

 
14

 

Total
$
294

 
$
288

 
$
66

 
$
222

 
$
339

 
$
334

 
$
633

 
$
556

 
$
693

 
$
24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
445

 
$
436

 
$
94

 
$
342

 
$
103

 
$
103

 
$
548

 
$
445

 
$
464

 
$
14

Agricultural
110

 
107

 
21

 
86

 
79

 
74

 
189

 
160

 
204

 
8

Residential
13

 
13

 
2

 
11

 

 

 
13

 
11

 
13

 

Total
$
568

 
$
556

 
$
117

 
$
439

 
$
182

 
$
177

 
$
750

 
$
616

 
$
681

 
$
22


Unpaid principal balance is generally prior to any charge-offs. Interest income recognized is primarily cash basis income. The average recorded investment for commercial, agricultural and residential mortgage loans was $313 million, $252 million and $23 million, respectively, for the year ended December 31, 2011; and interest income recognized for commercial, agricultural and residential mortgage loans was $6 million, $5 million and $0, respectively, for the year ended December 31, 2011.
Mortgage Loans Modified in a Troubled Debt Restructuring
For a small portion of the mortgage loan portfolio, classified as troubled debt restructurings, concessions are granted related to borrowers experiencing financial difficulties. Generally, the types of concessions include: reduction of the contractual interest rate, extension of the maturity date at an interest rate lower than current market interest rates, and/or a reduction of accrued interest. The amount, timing and extent of the concession granted is considered in determining any impairment or changes in the specific valuation allowance recorded with the restructuring. Through the continuous monitoring process, a specific valuation allowance may have been recorded prior to the quarter when the mortgage loan is modified in a troubled debt restructuring. Accordingly, the carrying value (after specific valuation allowance) before and after modification through a troubled debt restructuring may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. The number of mortgage loans and carrying value after specific valuation allowance of mortgage loans modified during the period in a troubled debt restructuring were as follows:
 
Years Ended December 31,
 
2013
 
2012
 
Number of
Mortgage Loans
 
Carrying Value after Specific
Valuation Allowance
 
Number of
Mortgage Loans
 
Carrying Value after Specific
Valuation Allowance
 
 
 
Pre-Modification
 
Post-Modification
 
 
 
Pre-Modification
 
Post-Modification
 
 
 
(In millions)
 
 
 
(In millions)
Commercial
1

 
$
49

 
$
49

 
1

 
$
222

 
$
199

Agricultural
3

 
28

 
28

 
5

 
17

 
16

Residential
27

 
5

 
5

 

 

 

Total
31

 
$
82

 
$
82

 
6

 
$
239

 
$
215


The Company had one residential mortgage loan modified in a troubled debt restructuring with a subsequent payment default with a carrying value of less than $1 million at December 31, 2013. There were no mortgage loans modified in a troubled debt restructuring with a subsequent payment default at December 31, 2012. Payment default is determined in the same manner as delinquency status as described above.
Other Invested Assets
Other invested assets is comprised primarily of freestanding derivatives with positive estimated fair values (see Note 9), tax credit and renewable energy partnerships, and leveraged leases.
Leveraged Leases
Investment in leveraged leases consisted of the following at:
 
December 31,
 
2013
 
2012
 
(In millions)
Rental receivables, net
$
1,491

 
$
1,564

Estimated residual values
1,325

 
1,474

Subtotal
2,816

 
3,038

Unearned income
(870
)
 
(1,040
)
Investment in leveraged leases, net of non-recourse debt
$
1,946

 
$
1,998


Rental receivables are generally due in periodic installments. The payment periods range from one to 15 years but in certain circumstances can be over 30 years. For rental receivables, the primary credit quality indicator is whether the rental receivable is performing or nonperforming, which is assessed monthly. The Company generally defines nonperforming rental receivables as those that are 90 days or more past due. At December 31, 2013 and 2012, all rental receivables were performing.
The deferred income tax liability related to leveraged leases was $1.6 billion at both December 31, 2013 and 2012.
The components of income from investment in leveraged leases, excluding net investment gains (losses), were as follows:
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
(In millions)
Income from investment in leveraged leases
$
82

 
$
57

 
$
125

Less: Income tax expense on leveraged leases
29

 
20

 
44

Investment income after income tax from investment in leveraged leases
$
53

 
$
37

 
$
81

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 $3.8 billion and $6.1 billion at December 31, 2013 and 2012, respectively.
Net Unrealized Investment Gains (Losses)
The components of net unrealized investment gains (losses), included in AOCI, were as follows:
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
(In millions)
Fixed maturity securities
$
16,672

 
$
33,641

 
$
21,096

Fixed maturity securities with noncredit OTTI losses in AOCI
(218
)
 
(361
)
 
(724
)
Total fixed maturity securities
16,454

 
33,280

 
20,372

Equity securities
390

 
97

 
(167
)
Derivatives
375

 
1,274

 
1,514

Other
(73
)
 
(30
)
 
72

Subtotal
17,146

 
34,621

 
21,791

Amounts allocated from:
 
 
 
 
 
Insurance liability loss recognition
(898
)
 
(6,049
)
 
(3,996
)
DAC and VOBA related to noncredit OTTI losses recognized in AOCI
6

 
19

 
47

DAC and VOBA
(1,190
)
 
(2,485
)
 
(1,800
)
Policyholder dividend obligation
(1,771
)
 
(3,828
)
 
(2,919
)
Subtotal
(3,853
)
 
(12,343
)
 
(8,668
)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI
73

 
119

 
236

Deferred income tax benefit (expense)
(4,956
)
 
(7,973
)
 
(4,694
)
Net unrealized investment gains (losses)
8,410

 
14,424

 
8,665

Net unrealized investment gains (losses) attributable to noncontrolling interests
4

 
(5
)
 
9

Net unrealized investment gains (losses) attributable to MetLife, Inc.
$
8,414

 
$
14,419

 
$
8,674

The changes in fixed maturity securities with noncredit OTTI losses included in AOCI were as follows:
 
Years Ended December 31,
 
2013
 
2012
 
(In millions)
Balance at January 1,
$
(361
)
 
$
(724
)
Noncredit OTTI losses and subsequent changes recognized (1)
60

 
(29
)
Securities sold with previous noncredit OTTI loss
149

 
177

Subsequent changes in estimated fair value
(66
)
 
215

Balance at December 31,
$
(218
)
 
$
(361
)
______________
(1)
Noncredit OTTI losses and subsequent changes recognized, net of DAC, were $52 million and ($21) million for the years ended December 31, 2013 and 2012, respectively.
The changes in net unrealized investment gains (losses) were as follows:
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
(In millions)
Balance at January 1,
$
14,419

 
$
8,674

 
$
3,122

Fixed maturity securities on which noncredit OTTI losses have been recognized
143

 
363

 
(123
)
Unrealized investment gains (losses) during the year
(17,618
)
 
12,467

 
14,823

Unrealized investment gains (losses) of subsidiary at the date of disposal

 

 
(105
)
Unrealized investment gains (losses) relating to:
 
 
 
 
 
Insurance liability gain (loss) recognition
5,151

 
(2,053
)
 
(3,406
)
Insurance liability gain (loss) recognition of subsidiary at the date of disposal

 

 
82

DAC and VOBA related to noncredit OTTI losses recognized in AOCI
(13
)
 
(28
)
 
9

DAC and VOBA
1,295

 
(685
)
 
(808
)
DAC and VOBA of subsidiary at date of disposal

 

 
11

Policyholder dividend obligation
2,057

 
(909
)
 
(2,043
)
Deferred income tax benefit (expense) related to noncredit OTTI losses recognized in AOCI
(46
)
 
(117
)
 
39

Deferred income tax benefit (expense)
3,017

 
(3,279
)
 
(2,936
)
Deferred income tax benefit (expense) of subsidiary at date of disposal

 

 
4

Net unrealized investment gains (losses)
8,405

 
14,433

 
8,669

Net unrealized investment gains (losses) attributable to noncontrolling interests
9

 
(14
)
 
5

Balance at December 31,
$
8,414

 
$
14,419

 
$
8,674

Change in net unrealized investment gains (losses)
$
(6,014
)
 
$
5,759

 
$
5,547

Change in net unrealized investment gains (losses) attributable to noncontrolling interests
9

 
(14
)
 
5

Change in net unrealized investment gains (losses) attributable to MetLife, Inc.
$
(6,005
)
 
$
5,745

 
$
5,552

Concentrations of Credit Risk
Investments in any counterparty that were greater than 10% of the Company’s equity, other than the U.S. government and its agencies, were in fixed income securities of the Japanese government and its agencies with an estimated fair value of $21.7 billion and $22.4 billion at December 31, 2013 and 2012, respectively. The Company’s investment in fixed maturity and equity securities to counterparties that primarily conduct business in Japan, including Japan government and agency fixed maturity securities, was $26.9 billion and $28.7 billion at December 31, 2013 and 2012, respectively.
Securities Lending
Elements of the securities lending program are presented below at:
 
December 31,
 
2013
 
2012
 
(In millions)
Securities on loan: (1)
 
 
 
Amortized cost
$
27,094

 
$
23,380

Estimated fair value
$
27,595

 
$
27,077

Cash collateral on deposit from counterparties (2)
$
28,319

 
$
27,727

Security collateral on deposit from counterparties (3)
$

 
$
104

Reinvestment portfolio — estimated fair value
$
28,481

 
$
28,112

______________
(1)
Included within fixed maturity securities, short-term investments, equity securities and cash and cash equivalents.
(2)
Included within payables for collateral under securities loaned and other transactions.
(3)
Security collateral on deposit from counterparties may not be sold or repledged, unless the counterparty is in default, and is not reflected in the consolidated financial statements.
Invested Assets on Deposit, Held in Trust and Pledged as Collateral
Invested assets on deposit, held in trust and pledged as collateral are presented below at estimated fair value for cash and cash equivalents, short-term investments, fixed maturity and equity securities, and FVO and trading securities, and at carrying value for mortgage loans at:
 
December 31,
 
2013
 
2012
 
(In millions)
Invested assets on deposit (regulatory deposits)
$
2,153

 
$
2,362

Invested assets held in trust (collateral financing arrangements and reinsurance agreements)
11,004

 
12,434

Invested assets pledged as collateral (1)
23,770

 
23,251

Total invested assets on deposit, held in trust and pledged as collateral
$
36,927

 
$
38,047

______________
(1)
The Company has pledged invested assets in connection with various agreements and transactions, including funding agreements (see Notes 4 and 12), collateral financing arrangements (see Note 13) and derivative transactions (see Note 9).
In the second quarter of 2013, MetLife, Inc. announced its plans to merge three U.S. based life insurance companies and an offshore reinsurance subsidiary to create one larger U.S. based and U.S. regulated life insurance company (the “Mergers”). The companies to be merged are MICC, MetLife Investors USA Insurance Company (“MLI-USA”) and MetLife Investors Insurance Company (“MLIIC”), each a U.S. insurance company that issues variable annuity products in addition to other products, and Exeter Reassurance Company, Ltd. (“Exeter”), a reinsurance company that mainly reinsures guarantees associated with variable annuity products. MICC, which is expected to be renamed and domiciled in Delaware, will be the surviving entity. In October 2013, Exeter, formerly a Cayman Islands company, was re-domesticated to Delaware. Effective January 1, 2014, following receipt of New York State Department of Financial Services (the “Department of Financial Services”) approval, MICC withdrew its license to issue insurance policies and annuity contracts in New York. Also effective January 1, 2014, MICC reinsured with an affiliate all existing New York insurance policies and annuity contracts that include a separate account feature; on December 31, 2013, MICC deposited investments with an estimated fair market value of $6.3 billion into a custodial account, which became restricted on January 1, 2014, to secure MICC’s remaining New York policyholder liabilities not covered by the reinsurance. The Mergers are expected to occur in the fourth quarter of 2014, subject to regulatory approvals. See Note 12 for information regarding the impact of the re-domestication of Exeter on availability under our credit facilities.
See “— Securities Lending” for securities on loan and Note 7 for investments designated to the closed block.
Purchased Credit Impaired Investments
Investments acquired with evidence of credit quality deterioration since origination and for which it is probable at the acquisition date that the Company will be unable to collect all contractually required payments are classified as purchased credit impaired (“PCI”) investments. For each investment, the excess of the cash flows expected to be collected as of the acquisition date over its acquisition date fair value is referred to as the accretable yield and is recognized as net investment income on an effective yield basis. If subsequently, based on current information and events, it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected to be collected, the accretable yield is adjusted prospectively. The excess of the contractually required payments (including interest) as of the acquisition date over the cash flows expected to be collected as of the acquisition date is referred to as the nonaccretable difference, and this amount is not expected to be realized as net investment income. Decreases in cash flows expected to be collected can result in OTTI or the recognition of mortgage loan valuation allowances.
The Company’s PCI investments, by invested asset class, were as follows at:
 
December 31,
 
2013
 
2012
 
2013
 
2012
 
Fixed Maturity Securities
 
Mortgage Loans
 
(In millions)
Outstanding principal and interest balance (1)
$
5,319

 
$
4,905

 
$
291

 
$
440

Carrying value (2)
$
4,109

 
$
3,900

 
$
138

 
$
199

______________
(1)
Represents the contractually required payments, which is the sum of contractual principal, whether or not currently due, and accrued interest.
(2)
Estimated fair value plus accrued interest for fixed maturity securities and amortized cost, plus accrued interest, less any valuation allowances, for mortgage loans.
The following table presents information about PCI investments acquired during the periods indicated:
 
Years Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
Fixed Maturity Securities
 
Mortgage Loans
 
(In millions)
Contractually required payments (including interest)
$
1,872

 
$
2,083

 
$

 
$

Cash flows expected to be collected (1)
$
1,446

 
$
1,524

 
$

 
$

Fair value of investments acquired
$
978

 
$
991

 
$

 
$

______________
(1)
Represents undiscounted principal and interest cash flow expectations, at the date of acquisition.
The following table presents activity for the accretable yield on PCI investments:
 
Years Ended December 31,
 
2013
 
2012
 
2013
 
2012
 
Fixed Maturity Securities
 
Mortgage Loans
 
(In millions)
Accretable yield, January 1,
$
2,665

 
$
2,311

 
$
184

 
$
254

Investments purchased
468

 
533

 

 

Accretion recognized in earnings
(260
)
 
(203
)
 
(87
)
 
(71
)
Disposals
(152
)
 
(102
)
 

 

Reclassification (to) from nonaccretable difference
25

 
126

 
(23
)
 
1

Accretable yield, December 31,
$
2,746

 
$
2,665

 
$
74

 
$
184

Collectively Significant Equity Method Investments
The Company holds investments in real estate joint ventures, real estate funds and other limited partnership interests consisting of leveraged buy-out funds, hedge funds, private equity funds, joint ventures and other funds. The portion of these investments accounted for under the equity method had a carrying value of $12.1 billion at December 31, 2013. The Company’s maximum exposure to loss related to these equity method investments is limited to the carrying value of these investments plus unfunded commitments of $4.0 billion at December 31, 2013. Except for certain real estate joint ventures, the Company’s investments in real estate funds and other limited partnership interests are generally of a passive nature in that the Company does not participate in the management of the entities.
As described in Note 1, the Company generally records its share of earnings in its equity method investments using a three-month lag methodology and within net investment income. Aggregate net investment income from these equity method investments exceeded 10% of the Company’s consolidated pre-tax income (loss) from continuing operations for two of the three most recent annual periods: 2013 and 2012. The Company is providing the following aggregated summarized financial data for such equity method investments, for the most recent annual periods, in order to provide comparative information. This aggregated summarized financial data does not represent the Company’s proportionate share of the assets, liabilities, or earnings of such entities.
The aggregated summarized financial data presented below reflects the latest available financial information and is as of, and for, the years ended December 31, 2013, 2012 and 2011. Aggregate total assets of these entities totaled $303.4 billion and $285.2 billion at December 31, 2013 and 2012, respectively. Aggregate total liabilities of these entities totaled $29.7 billion and $28.8 billion at December 31, 2013 and 2012, respectively. Aggregate net income (loss) of these entities totaled $26.3 billion, $17.9 billion and $9.7 billion for the years ended December 31, 2013, 2012 and 2011, respectively. Aggregate net income (loss) from the underlying entities in which the Company invests is primarily comprised of investment income, including recurring investment income and realized and unrealized investment gains (losses).
Variable Interest Entities
The Company has invested in certain structured transactions (including CSEs), formed trusts to invest proceeds from certain collateral financing arrangements and has insurance operations 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. The Company generally uses a qualitative approach to determine whether it is the primary beneficiary. However, for VIEs that are investment companies or apply measurement principles consistent with those utilized by investment companies, the primary beneficiary is based on a risks and rewards model and is defined as the entity that will absorb a majority of a VIE’s expected losses, receive a majority of a VIE’s expected residual returns if no single entity absorbs a majority of expected losses, or both. The Company reassesses its involvement with VIEs on a quarterly basis. The use of different methodologies, assumptions and inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the consolidated financial statements.
Consolidated VIEs
The following table presents the total assets and total liabilities relating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated at December 31, 2013 and 2012. 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.
 
December 31,
 
2013
 
2012
 
Total
Assets
 
Total
Liabilities
 
Total
Assets
 
Total
Liabilities
 
(In millions)
MRSC (collateral financing arrangement (primarily securities)) (1)
$
3,440

 
$

 
$
3,439

 
$

Operating joint venture (2)
2,095

 
1,777

 

 

CSEs (assets (primarily loans) and liabilities (primarily debt)) (3)
1,630

 
1,457

 
2,730

 
2,545

Investments:
 
 
 
 
 
 
 
Real estate joint ventures (4)
1,181

 
443

 
11

 
14

Other invested assets
82

 
7

 
85

 

FVO and trading securities
69

 

 
71

 

Other limited partnership interests
61

 

 
356

 
8

Total
$
8,558

 
$
3,684

 
$
6,692

 
$
2,567

______________
(1)
See Note 13 for a description of the MetLife Reinsurance Company of South Carolina (“MRSC”) collateral financing arrangement.
(2)
Assets of the operating joint venture are primarily fixed maturity securities and separate account assets. Liabilities of the operating joint venture are primarily future policy benefits, other policyholder funds and separate account liabilities. The assets and liabilities of the operating joint venture were consolidated in earlier periods; however, as a result of the quarterly reassessment in the first quarter of 2013, it was determined to be a consolidated VIE.
(3)
The Company consolidates entities that are structured as CMBS and as collateralized debt obligations. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise. The Company’s exposure was limited to that of its remaining investment in these entities of $154 million and $168 million at estimated fair value at December 31, 2013 and 2012, respectively. The long-term debt bears interest primarily at fixed rates ranging from 2.25% to 5.57%, payable primarily on a monthly basis. Interest expense related to these obligations, included in other expenses, was $122 million, $163 million and $324 million for the years ended December 31, 2013, 2012 and 2011 respectively.
(4)
The Company consolidated an open ended core real estate fund formed in the fourth quarter of 2013, which represented the majority of the balances at December 31, 2013. Assets of the real estate fund are a real estate investment trust which holds primarily traditional core income-producing real estate which has associated liabilities that are primarily non-recourse debt secured by certain real estate assets of the fund. The assets of these entities can only be used to settle their respective liabilities, and under no circumstances is the Company liable for any principal or interest shortfalls should any arise. The Company’s exposure was limited to that of its investment in the real estate fund of $178 million at carrying value at December 31, 2013. The long-term debt bears interest primarily at fixed rates ranging from 1.39% to 4.45%, payable primarily on a monthly basis. Interest expense related to these obligations, included in other expenses, was less than $1 million for the year ended December 31, 2013.
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:
 
December 31,
 
2013
 
2012
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
Carrying
Amount
 
Maximum
Exposure
to Loss (1)
 
(In millions)
Fixed maturity securities AFS:
 
 
 
 
 
 
 
Structured securities (RMBS, CMBS and ABS) (2)
$
67,176

 
$
67,176

 
$
72,605

 
$
72,605

U.S. and foreign corporate
3,966

 
3,966

 
5,287

 
5,287

Other limited partnership interests
5,041

 
6,994

 
4,436

 
5,908

Other invested assets
1,509

 
1,897

 
1,117