Ladies and gentlemen, thank you for standing by. Welcome to the MetLife's Third Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, with instructions given at that time. [Operator Instructions]. And as a reminder, today's conference is being recorded. Before we get started, I would like to read the following statement on behalf of MetLife. Except with respect to historical information, statements made in this conference call constitute forward-looking statements within the meaning of the Federal Securities laws, including statements relating to trends in the company's operations and financial results and the business and the products of the company and its subsidiaries. MetLife's actual results may differ materially from the results anticipated in the forward-looking statements, as a result of risks and uncertainties, including those described from time-to-time in MetLife Inc.'s filings with the U.S. Securities and Exchange Commission. MetLife Inc. specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. With that, I'd like to turn the call over to Conor Murphy, Head of Investor Relations. Please go ahead

Thank you, Julie. Good morning everyone. Welcome to MetLife's third quarter 2008 earnings call. We are delighted to be here this morning to talk about our results for the quarter. We will be discussing certain financial measures not based on generally accepted accounting principles, or so called non-GAAP measures. We've reconciled these non-GAAP measures to the most directly comparable GAAP measures in our earnings press release and in our quarterly financial supplements, both of which are available at metlife.com, on our Investor Relations page. A reconciliation of forward-looking financial information to the most directly comparable GAAP measure is not accessible because MetLife believes it is not possible to provide a reliable forecast of the net investment related gains and losses which can fluctuate from period-to-period and may have a significant impact on GAAP net income. Joining me this morning on the call are Rob Henrikson, our Chairman and Chief Executive Officer; Steve Kandarian our Chief Investment Officer, and Bill Wheeler, our Chief Financial Officer. After our brief prepared comments, we will take your questions. And here with us today to participate in the discussion are Bill Mullaney, President of our Institutional businesses; Lisa Weber, President of Individual; Will Toppeta, President of International and Bill Moore, President of Auto and Home. With that, I would like to turn the call over to Rob.

Thank you, Conor and good morning everyone. I don't think anyone would disagree that the environment in which we are operating is unprecedented. I know it comes as no surprise that the earnings we reported yesterday, which are consistent with our pre-announcement earlier this month, reflect the challenges we are facing. This was an extraordinary quarter in our industry as we experienced significant deterioration in both the equity and credit markets. As I said in the press release, we are not immune to this and like all in our industry we are affected by these markets. But let me make one thing clear. MetLife is in a very strong position. Our fundamentals, the value proposition we bring to the marketplace and the unwavering commitments we make to our clients will not change. We are demonstrating how the approach we take to our business is working to our benefit. Just consider this for a moment, MetLife's premiums, fees and other revenues grew 16% this quarter, and we are up 12% year-to-date. That's 12% business growth in an environment where double-digit declines are not uncommon. And it is well above the 9% guidance we provided at investor day. Let me share a few examples. Institutional business continued to generate significant top line growth across all of its segments, as premium fees and other revenues grew 30% to reach $4.5 billion. Driving this was a 16% increase in non-medical health top line, as well as a $1.1 billion in retirement and savings revenue due to several large pension close-out cases in both the U.S. and the UK. While individual business was clearly impacted by the declining equity markets this quarter, variable annuity deposits increased over the second quarter. Also important, variable annuity lapse rates declined and net flows remain positive, both on a…

Thanks, Rob. Given the increased volatility in the financial markets, I would like to spend a few minutes reviewing variable investment income, realized and unrealized losses and certain components of our portfolio. First, let me start with a comment on variable investment income. Pre-tax variable income was approximately $200 million lower than planned for the third quarter, primarily driven by negative corporate joint venture in hedge fund returns. As I have mentioned on the previous two earnings calls, we expected corporate joint venture income to be under pressure due to overall market conditions. Furthermore, we anticipate corporate joint venture and hedge fund returns to remain weak for the remainder of the year. On other hand, income from our securities lending program continued to outperform plan due to the steeper yield curve and higher spreads in the reinvestment portfolio. In our securities lending business, we lend various types of fixed income assets in return for cash collateral which we reinvest in a diversified portfolio of securities. As of September 30th, our securities lending book was approximately $41 billion, down from $45 billion at June 30th. As mentioned on the October 8th pre-release earnings call, the demand for securities lending by our counter parties has decreased. As a result, these balances have declined further to approximately $31 billion as of October 28th. Of this $31 billion, approximately $15 billion was unopened, which means the securities can be returned to us overnight. The remainder of the balance has varying maturities ranging from one week to several months. Of the $15 billion securities unopened, about $13 billion were treasuries and agency securities which, if put to us can be immediately sold to satisfy the cash requirements. Should liquidity need to accelerate, we have a pool of $14.6 billion in cash to meet those needs.…

Thanks, Steve and good morning everybody. This morning, I'd like to walk through MetLife's third quarter results. MetLife reported $0.88 of operating earnings per share, 40% decline from the third quarter of 2007, which is consistent with our pre-announcement earlier this month. As I mentioned then, our third quarter results are respectable given the difficult environment. By the way, all the numbers in comparisons I will speak about this morning, exclude RGA which was split of in a transaction, which closed on September 12. So let me begin with top line revenues, which will be defined as premiums, fees and other income. Top line revenues were $8.6 billion this quarter, an increase of 16% over the third quarter of 2007. Year-to-date revenues are up 12% over the first nine months of 2007. So our revenue growth is strong. In International, top line revenues increased 13% over the prior year quarter to $1.2 billion. Changes in FX rate increased revenue growth by approximately 1 point this quarter. International revenue growth was driven largely by a very strong performance in our Latin America region. In Institutional, top line revenue growth of 30% over the year ago period was driven by strong revenue growth across all of our major products lines. High pension close-out sales during the quarter increased retirement and savings revenue to $1.1 billion. Non-Medical Health & Other had a 16% increase in premiums over the third quarter of 2007. That was driven by dental, which was also bolstered by our recent HMO acquisition. Growth in group Life resulted in an increase of 7% over the year ago period, which is also quite good. Turning to our operating margins, let's start with our underwriting results. In Institutional, our Group term life mortality ratio of 90.7% was excellent, and below our target…

Thank you. [Operator Instructions]. With that, we'll go to the line of Tom Gallagher with Credit Suisse. Please go ahead.

Good morning. Just wanted to ask a few questions around equity market sensitivity. First is, can you comment on just based on the extent of the equity market declines so far in Q4, is there an impact to your statutory capital. That's first question. And then second, Bill I guess just a follow up on your comments on DAC. I can appreciate that you all are truing this up every quarter. But, aren't we getting close to breaking through certain corridor in terms of longer term assumptions for DAC amortization? And if so, is there a risk that we could see a much larger charge perhaps in 4Q, if you do reset assumptions? Thanks.

Hi Tom. Yeah, okay. So stock capital, yeah we clearly have...quarter-to-date, if things stayed where we are in terms of the equity markets, we would certainly see an impact to our stat reserves regarding our variable annuity business. I guess or probably maybe I should size that a little bit for you. And this is...obviously we don't really recalculate RBC. It's actually... it's a long involved process, but we obviously make estimates about RBC. We have a person who does that. That's their full time job is to calculate and project RBC for us, various legal entities. We... think about it this way. We have a... in the third quarter, we had a 9% decline in the S&P 500 and that triggered for us we had to... we needed to increase our stat reserve, call it 3 or 4 RBC points, okay. And for us an RBC point is a little bit over $50 million. Okay, so that's sizing this for you. Now, the relationship is not completely linear of this way. So if you talked about... so you are like... so quarter-to-date, we've had a 19% decline in the S&P 500 I think and so if you know, if you sort of doubled the third quarter impact, you'd be left with sort of a 6 to 8% increase in our decline in RBC points. And again, the relationship... it's not completely linear, so it's higher than that. It might be something like 10 to 12 points, okay. A 10 point impact RBC is now roughly 500 million or $0.5 billion of additional stat reserves, you got to put up, but the number is probably a little higher than that. Okay, so that kind of size it for you in terms of if the markets stay where it is, the…

That's helpful and just a quick follow up. So we wouldn't be looking at, resetting assumptions but rather probably coming back within the high end of the corridor, would that be the right way to think about it?

Yes. That's exactly right. We don't... again we don't call it and I'm not sure why don't we call it a corridor, but we don't. And not ask us, I know other people do and I'm not sure that they are doing the same thing we are. It's a mean reversion range, and so we are... yes, so because we are at one end of the range the DAC adjustment is flowing right through. There is no sort of smoothing impact which you normally get with the mean reversion formula. So it's coming right through.

Right.

But there is no build up of... let me put it this way, there is no build up of DAC that we need to kind of release. Okay, it's... obviously that's the good part of doing it every quarter. We've been releasing it all along.

Thanks.

Thank you. The next question is from Suneet Kamath with Sanford Bernstein. Please go ahead.

Thanks. Maybe two quick ones. First, if you could just comment on your variable annuity hedging program and how that works relative to how many increases you've seen in volatility and if you think your pricing of the writers is appropriate. And then secondly, maybe more of a philosophical question on excess capital. You talked about $6 billion inclusive of the convert next year. How much of that excess capital you think is really redeployable at this point in time, just given the uncertainties sort of rating agencies concerns. I mean is really a 350 RBC ratio, where a AA company needs to be or is it something higher than that? Just any thoughts on that would be helpful. Thanks.

Yes, I think... thanks Suneet. There is a lot of questions in what asked. So maybe I'll let Sam talk about kind of a hedging program and so how it's working out. I'd say we had about... we think we had about $0.02 of hedge breakage. We actually did... we normally brag we never have hedge breakage, but we actually did have about $0.02 worth on the annuities, and then maybe Lisa will talk a little bit about annuity pricing and volatility and what that might mean and I'll come back to the... I'll do the philosophical is 350 RBC amount.

Good morning. As you know, we do balance economic hedges with high tenacity accounting. It's varies by product. If you look at various products that we offer, we've offer about everything. Our GMDB benefits are hedged sometimes to reinsurance and we've also done some capital markets reinsurance as well. Our GMIB products we've had different generations, our older generation, yeah we've had a pretty effective delta hedging program. With our newer generation, there is some additional features that allows us to do split accounting and some of it is in embedded derivative. And where we have an embedded derivative, we're able to do a full three Greek [ph] match. As Bill said, our program has worked pretty well. Our basis differences have been fairly small and the impact in the third quarter was only over $0.02 a share. And in terms of the pricing, our variable annuity hedges, I just want to remind you that to the extent that we are hedging, we generally do long dated hedges. So any kind of increase in volatility that causes an increase in our hedging cost, nearly affects the new business that we've written recently. And certainly, our individual business associates are considering the pricing of those writers.

Yes. I would just add that in this current environment, it would be imprudent not to look at raising the fees there and we will continue as we have with different products like long-term care. We'll continue to make the difficult decisions even if they're not popular.

Okay. So I've had some time to think about whether 350 RBC is the right number. It's... obviously the rating agencies make that call, I don't. But I'll give you my opinion, maybe they are listening. We've actually raised... something you kind of got to get, you need a little sense of history here. Three, four years ago, we used to mange to 300% RBC ratio and the bar is kind of get over the environment of the last few years, the bar has been raised. It went from 300 to 325, now 325 to 350. I am living with 350 now for, I think, about two years. So and I think that to some extent that to the rating agencies great credit. They've sort of said it, the products are little more interesting, they are a little more volatile. We think a higher capital question is warranted. And a lot of people have created economic capital models and said that showed a 350 is way in excess of what you need. Now I can only point on whether that makes any sense or not, but that kind of tells you that is 350 enough. So in our minds, we look at our business mix and our diversification, and even in this what I would call, pretty crazy tail in the environment we're in and we're still making money, and we are still building capital, and it kind of lets me to believe that 350 is probably okay, and an appropriate number. In our discussions with the rating agencies, they are not... this isn't coming up as a discussion point like well, maybe you need to be north of 350. That's not where our discussions have been. They've actually been very constructive and positive, so I guess I think it's enough. We're obviously holding up... you'll say well, 350 is enough, why are you holding $6 billion more? And look, this goes back to what we said in the equity capital rates. We want to be perceived as the strongest life insurance company out there. And we think in the coming world where I think people are going to focus a lot more on structure than may be price, this is going to work to our great benefit and that's how we want to be positioned.

Great, thank you very much.

Thank you. We'll go to the line of John Nadel with Sterne Agee. Please go ahead.

Hi. Good morning. I've got a couple quick questions. First is, MetLife I think is a federally regulated bank holding company. I was wondering your thoughts on or if you would comment on whether you'd submit an application for funds under the TARP program, and if you'd be interested in that if it was made available for the life insurance space. That's question number one.

I was waiting for the question number two, John.

I was waiting for your response to figure out exactly which way I want to go.

I see, okay, maybe it's a good idea for me to respond to that and there is a lot of discussion out there in the press and so forth, so let me just respond. As you pointed out and as many of you know, but some may not have recognized, MetLife is a bank holding company. It is our understanding that the guidelines in the federal statute allow the company access to the capital purchase program. But other than that, I have no comment on the federal program. What I can tell you is what has been discussed in several ways before and on this call is that we're well capitalized. We have a strong balance sheet. We have financial strength ratings that are clearly among the highest in the industry. Bill talked about the successful common stock offering of 2.3 billion and that was on top of the excess that we already have as of September 30th '04. So I think that's... other than that, I have no comment on the federal program.

Okay. A separate one, but probably somewhat related. There's also an FDIC program available right now that I think is guaranteeing debt issuance. Are you eligible under that as well?

I don't want to... let me take another crack at all kinds of such programs and what not out there. As long as your notes would show, if you've been following this company, I would say that, I always say any kind of question around funding our financing, any kind of questions around acquisitions, anything that even looks or smells sort of like an acquisition including close-out opportunities and what not, we always say the same thing. Certainly I do, that we explore every avenue, we explore all options and everything we do. That's what it's all about to run a major company and then other than that, I don't have any comment on the federal program.

Okay, all right. Maybe to go back to the philosophical sort of piece of the discussion earlier, do you think, I mean your top line growth, Rob, you've hit on it pretty specifically at the open. Do you think that you're already seeing in that top line growth the benefits of sort of your competitive advantage, given the strength of the capital, the strength of the brand? And if so, I guess it'd be impossible to quantify. But, I guess it just goes to the question of that do you think or already seeing it?

Absolutely.

Okay. And then the last one is just a quick one on debt to capital levels. Bill, you guys used to have a table in the supplement that at least provided us some adjustments to get to debt to capital ratio. I think you guys used to focus on... you're probably still do, focus on the Moody's level for that. Any chance you can give us an update on where you guys stand relative to that sort of 25% typical target.

Yes. We dropped that number. I mean we used to have our own leverage ratio and I thought that mine was the best. But it couldn't convey to anybody else that. So they... so we started to stop because obviously we are governed by what the rating agencies think the leverage ratio should be. The Moody's ratio right now is sort of pro forma the equity offering would be... the leverage ratio of about 23.9%. They like it, it's not a bright line, but they like us to be 25 or lower. And so that gives you a sense of what our leverage is.

Okay. And last real quick one, if in your discussions with the rating agencies, sort of the 350 is actually... you mentioned it's not something that's coming... that's really coming out. What are they key sort of two or three topical areas where you sense that they're most focus with respect to you and maybe more broadly the industry right now? Thank you.

Yes, I got your point. For us, they really... they want to understanding what's going on the SEC lending and why we are... and what's happening there. And because they [Technical Difficulty] the world knows, it was in the paper today. Securities lending activity is shrinking around the globe. And so, they wanted to make sure that wasn't causing of any harm. I think we've reassured them and I think hopefully all of you that our SEC lending issues are very well controlled. We've done a great job in my mind of managing down the size of the program without triggering any meaningful capital losses and we've really made sure that we have the liquidity necessary to deal with that very effectively. So I think that's going extremely well. I think with regard to... the other thing I think more broadly is just what we're hearing in the conference calls this quarter, are what's going on with the equity... the potential statutory capital impact was going out of the equity markets. And so I think that's also a discussion point and I'm sure they are having that with others not just us. And yes, they are interested in credit loses and stuff like that. But I would say they are kind of get it. They know it's... they understand that is our business obviously. So they kind of, they have a good feel for what's going on there. And they realize we are in a highly unusual time.

All right,thanks very much.

Thank you. The next question is from Colin Devine with Citigroup. Please go ahead.

Good morning. Couple of quick ones I would think. First on, with the benefit ratio spiking up, should we start to be concerned that that's a reflection of the economy with MET being more I think, it was a large case company, this maybe a trend that continues for a while?. Second, if you could give us a little bit more detail on pension close-outs, you spoke perhaps for the quarter but also the outlook and the pipeline. And then on capital, Bill and RBC, I would take it now that your original plan with the convert was to avoid the dilution from it. And now, you're planning to just go with that. But then also when you talk about the $6 billion of excess, it would seem to me that if we look at what as you laid out earlier what may be happening to RBC in the fourth quarter, to really some of that $6 billion spoken for, you're going to have to put it down into the life company to keep that RBC number above 350. Is that fair?

It's stimulating. Let me start with the question that you asked about disability and about close-outs. In terms of disability, some of what we're seeing maybe a function of the trends that we're seeing in the economy we talked before about the fact that disability is a product that when the economy get soft, you do see some impact on your claims. In this particular quarter, the ratio did spike up to 95 [Technical Difficulty] of our range, but it does move from quarter-to-quarter. We do see some volatility in that range and what I would say is there wasn't any [Technical Difficulty] thing that drove the results up. Incidence was up a little bit, recoveries were down and the size of the recoveries were down, and all of those things together put some pressure on the ratio. We're watching it very closely, we are increasing some of our assumptions as it relates to these things where the economy is going to affect related to our prices for 2009. So it's something that I think we're keeping a very close eye on. In terms of close-outs, we had a very good quarter for close-outs, almost $700 million in close-outs for the quarter in both the U.S. and the UK. I would say that the pipeline for close-outs continues to be good. A lot of good conversations with main customers, both in the U.S. and the UK around the pension plans, what they're thinking about and what they might do in the future. So we feel pretty good that they'll continue to be good activity in the close-out area.

Yes. And then finally about capital, yes, with regard to the convert, a year ago I would have said, we would have offset the dilution from that conversion of the convert by doing buybacks. I think now, it's probably just better to keep the money obviously, so we'll do that. We'll keep the money. And in the shares outstanding, we'll increase a little bit. With regard to that $6 billion and the fact that we'll have some surplus strength, yes, I think that's right. I mean I think if... it's hard to... I think some of that $6 billion may have to go down in the statutory reserves. But technically, it doesn't... I don't think that will mean we have to put some money down in the holding company. We run... if we... rule of thumb, our RBC ratio, we're managing to sort of the high 300, sort of in the 390 range. It's a little different at the different legal entities. RBC ratio, so there is probably... we think there would be enough cushion down in the insurance subsidiaries right now to deal with this surplus problem. We wouldn't have still have to move any money down. The full $6 billion is not at the holding company; some of the cushion is sitting there in the insurance company.

And then is it fair to say the 6 could be more like $5 billion, which is still obviously quite a large amount, but 6 maybe closer to 5?

Well, yes, probably closer to 5 right now. I think that's probably fair. So it's... obviously we'll see how the quarter ends. But yes, I mean 500, 600, $700 million sort of because of this issue is certainly possible.

Okay. And then just one quick follow-up. In terms of your M&A appetite, which is I think Rob has indicated in the past. So it's primarily internationally oriented. Has that changed and perhaps expanding what Rob said earlier, would you consider something like the capital purchase program to help finance an acquisition if that was available?

Rob we can't comment.

I think that's okay. Thank you.

I'm not commenting because I think you'll repeat myself.

I'll take that as an affinitive, yes. Okay. In terms of that domestic versus international. Any change?

Sorry, we were laughing, so we didn't hear your full question. Would you repeat your last question?

In terms of your acquisition appetite, I think it's been primarily internationally oriented? Has that now changed, as are you also looking domestically?

I think the... let me... in terms of what we've looked at both over time, both internationally and domestically, I wouldn't characterize that our focus has been entirely on or even so heavily weighted to international, because we look at opportunities both domestically and internationally. But remember, I've always said in times passed, and it's probably a little bit different dynamic today that domestically you have to have a willing seller and a willing buyer and you have to have an attractive price. And so, the question about price and the question about the willing seller has been a pretty dominant feature in terms of the domestic market in particular and maybe today we see something different there.

Okay, thank you.

We next go to line of Jeff Schuman with KBW. Please go ahead. Jeffrey Schuman - Keefe, Bruyette & Woods, Inc.: Good morning. I have a question for Steve and I'd like to follow up. I'm just wondering, MetLife like a lot life insurers have been kind of in a cash conservation mode. I am wondering if you are at a point now where you kind of get the cash position closer to where you wanted and whether you might start to be more active investing in certain markets and where you might be looking first?

The cash raise had something to do as well with the securities lending program. So as we've mentioned, we're going to be shrinking that base. And again when you think about that program, we have a security we owned, we lend it out we get back cash collateral, we reinvest that cash collateral into other securities. So that since our balance sheet grows based upon that program, as that program comes down, so will that cash to some degree. You know exactly where that number will end up but there will likely be some cash left over at the end of the redemption of the program. At that point most certainly start looking at relative value across the different asset categories and decide where to put the money. We're likely to put that money in this environment in securities we feel are as safe as possible. As we feel all factors are being hit by spread widening. I don't think that means all sectors are equally vulnerable to default and delinquencies and losses. So most likely we will look at sectors such as now government backed RMBS with more exclusively government guarantee than previously. We'll look at sectors like AAA rated credit cards first to pay for of stack and we'll look at other kind of securities that are very high up in the structure in terms of credit enhancement, where we feel that the possibility of loss is lowest, can be possible in this marketplace. So that's where we'll put the money when we finish rightsizing the securities lending program. Jeffrey Schuman - Keefe, Bruyette & Woods, Inc.: And I'm wondering, I guess how much relationship there is between the I guess recent sort of inactivity of life insurers in some of these markets and the unrealized losses that have increased for life insurers. Now it just strikes me that life insurance is kind of a victim that what's happening in the markets. But they've also contributed to market levels by kind of withdrawing from some of these markets. I mean is it too optimistic to think that if we kind of roll through the fourth quarter as insurers get more active that they could actually contribute to some additional strength in recovering some of these fixed income markets or is that too optimistic?

WellI think you're asking kind of broad question about what's really occurred here with the credit crisis and the lack of liquidity in markets. So let me just talk a little bit about credit spreads because this unrealized loss you're seeing balloon in our balance sheet as well as other financial firms' balance sheets, really relates to that. So you can think about credit spreads in two ways. One related to fundamentals, meaning it's portending higher actual losses on the securities defaults, losses in terms of recoveries and so on. The second piece is a supply demand imbalance, lots and lots of sellers as people de-lever the balanced sheets, whether it be commercial banks, investment banks, hedge funds. While we are not de-levering in a major way at MetLife, the fact that we're shrinking the securities lending program in a small way suggest that we're taking a little bit of our asset base down. So lots and lots of our seller securities, almost no buyers right now. In the spread, if you look at in the marketplace driving those unrealized losses, probably do have some fundamental basis to them. But I think the majority of the spread widening relates to supply demand imbalance. And once... I think the banks get recapitalized, once the fear factors have to come down with the intervention of U.S. government and other governments across the globe, I believe these markets will start going back to more normal kinds of spreads giving fundamentals, not purely based upon these supply demand imbalances. Jeffrey Schuman - Keefe, Bruyette & Woods, Inc.: That's great. Thanks a lot, Steve.

Thank you. We'll go to the line of Mark Finkelstein with FPK. Please go ahead.

Good morning. Steve, you talked about repositioning the fixed maturities portfolio, kind of going into more recessionary times. I'm just curious what you're doing with alternative assets either as money becomes available to be pulled out or cash from the LBO funds gets delivered?

We've make commitments in certain categories such as LBO funds, where there are draw downs as you know. So, obviously we will honor all those commitments and that will go on for a number of years as those partnerships continue. I'll tell you that there haven't been a lot of draw downs lately because not a lot of deals are getting done in that area. There is very little credit availability to anyone. So the LBO players simply aren't doing deals right now by and large. In the area of hedge funds, we are likely to bring that program down somewhat. And we're going to look closely at the performance of the different hedge fund partnerships we invest in. We're going to make some decisions about who want to remain with going forward. I think that hedge fund area in general is going to shrink in the coming quarters, in the coming year or two. And there will be a shake out to some degree and we're evaluating which firms to remain with us as an investor. So, it's likely that program will shrink somewhat over the coming few quarters on our balance sheet. But in general we have not been making a lot of investments in the alternative area. Again, not a lot of capital is being put out in the marketplace either. So the fund raising actually is very, very limited at this point in time.

Okay. In RNS premium and deposits were very strong, I think $13 billion according to your kind of policyholder account balance reconciliation. Can you just discuss what you're seeing as seeing money is coming from other competitors, but is that trend continuing post the quarter, just what are we seeing there?

Yes, we actually saw some pretty good... this is Bill Mullaney... pretty good net flows in the quarter for RNS. And getting back to the comment that Rob made earlier in terms of flight to quality. There are some companies out there that have been speaking with us about potentially moving money and so there are some counterbalances though, we have funding agreements in that portfolio and we are seeing some redemptions on our funding agreements as well. So I think you'll see some movement both ways in terms of some inflows, in terms of money moving to us in the flight to quality way and then you'll see some other movements downward because companies will be redeeming things like funding agreements to have greater levels of liquidity. So it's likely that the RNS fund balances will probably, we think, stay relatively flat for the next couple of quarters.

Okay. And then Bill just, if you would to look out 3 to 6 months from now, do you have any projection of where you think the securities lending portfolio might be. I think you're at $41 billion at the third quarter. I don't know if you gave an update as to where you are today. But if you have that, that would be great. And then where do you think we could end up in terms of the size of this portfolio?

This is Steve. Let me take that one. It's $31 billion as we mentioned now and we think it will shrink over the course of the reminder of this year, perhaps even below the $25 billion level before going back up during 2009 to roughly $25 billion in average of the course of 2009. That's our best case... our best guess if you will, at this point in time. Obviously, this program is driven by two things. One, the securities that we hold in general account that are lendable, if you will, that fit into the categories of lendable securities. And the second thing is the demand on the other side, our counterparties in terms of need for these securities, and given credit market issues, given hedge fund issues beneath those securities as much low today in the headwind in the past. So will there be some recovery there? We think yes. But at minimum, securities such as treasuries, agencies and government-backed residential mortgage-backed securities are likely still to be lendable going forward. Question mark around corporate securities. So even if you exclude corporate securities, we think we'll probably be around the $25 billion level as a norm for the foreseeable future. But the number could actually dip below that in the interim.

Okay. Great, thank you.

Thank you. We'll go to line of Ed Spehar with Merrill Lynch. Please go ahead.

Thank you, good morning. I think I have a few quick numbers questions. I was hoping that you could give us and if it's not the precise number, at least ballpark, of what the variable annuity account balances are with living benefit guarantees. And again roughly, if you don't have exact what the spilt is between IB and WB. And then I've a couple other quick ones.

Sure Ed. This is Tim Schmidt. The total living benefit composition of the VA balances would be about 42%. About $39 billion in total and the split between GMIB writers and the other with draw benefit writers would be about just a little under 50-50 of the total number.

A little under 50-50 that IB to WB.

Yes, it would be about 18 of the 38 or so that I quoted.

Is IB.

Is IB, yes.

Okay. And then, Bill, I wanted to make sure I understood the $6 billion roughly excess that you're talking about, is that as of the end of the third quarter, is it as of today where the S&P is? I'm not sure where that $500 million potential hit whether that was in that or not?

It's not because obviously you got to pick a point in time sometime. So we... I would say it as of the end of the third quarter, so the --

Okay.

So the $500 billion plus kind of effective statutory impact that might be a little higher than that, would be a subtraction from the fixed numbers.

Okay. And then could you comment on, just on your capacity to issue preferred securities, given where you are with your balance sheet. How much of this stuff could you issue? If you're would going to... obviously not issuing the buyback stock, but issuing for other reasons.

Well that's an interesting question. I would have said that in sort of a normal world, given the guidelines as sort of what I would call a hybrid basket, if you will, of what the preferred with inner. And also Moody's, it doesn't necessarily have a hybrid basket, but they have something... they want to look at the cash hold cover ratio of the holding company and those would lead you to believe... if you kind of thought those were a hard guidelines, you'd say, the number is $2 million to $3 billion, something like that in terms of the capacity. But I view those as guidelines. You're not going to like it Pirates of the Caribbean, so the guidelines. So there, --

Sort of the high bro references I can always count on for you.

Well, my kids want you. So there... we live in a world where that maybe... that number may be different okay than $2 billion to $3 billion. And depending on what happen to that cash that would probably be okay with the rating agencies I bet.

Okay. And then the final question is, I mean I suspect that less than it used to be, but there was a time when you would talk about a lower RBC ratio as being okay relative to some others because of the unrealized real estate gains in the portfolio. Can you talk a little bit about how anybody is looking at that right now?

Steve is going to give you the number as part of what he thinks the unrealized gains on the real estate portfolio. I mean just for everybody's benefit, we have a lot of equity real estate which we hold at booked. We've had a pretty successful track record I think in terms of realizing gains at very big numbers. But... and so, we're pretty good at that and there's a lot of value there. That does not get counted in the RBC ratio obviously and we don't sort... we view it as a thing that's there, but we don't try to take credit for it and that's obviously there in our what we call our excess capital number because in my mind, that's not readily accessible, okay, especially in this environment. So but Steve?

We tracked that number every quarter. It's come down a little bit, but it's still at $3.3 billion as pre-tax. And as Bill mentioned, the liquidity in this marketplace obviously right now is not great. Lending is limited, but in terms of fundamental value even in this market with declining prices, we still have a number of $3.3 billion as an unrealized gain net pre-tax.

Okay thank you very much.

Thank you. And we have time of one final question from the line of Jimmy Bhullar with JPMorgan. Please go ahead.

Hi. Thank you. I had a couple of questions for Lisa. The first one is on your variable annuity sales. Based on industry numbers, it looks like the industry's preliminary number, the industry is going to be down in the mid to high single-digits. Your sales I think were up almost 7% sequentially. I don't think there was a special orienting. But if you could comment on what drove that? And then I have a follow up after that.

Sure, yes. There is a couple of things going on with our variable annuity sales. And we did have some enhancements in the second quarter to our GMIB. We added the $1000 death benefit and we also improved the LWG. But really what our sales increase is attributable to, I would say even more so is this whole opportunity in terms of the flight to quality and it's where the MetLife brand is really standing strong with all the market turmoil what clients are really looking for guarantees and safe havens and that's evident by the increase in the writer take rate. And so while Tim talked about the balances, we were up to an all-time high of almost an 86% take rate on the writers. So, it's that in addition our wholesalers are solid. More of them want to work here and have joined us and so our narrow and deep strategy with our focus firms has as well on the independent side. And so that we do believe that what you'll see in Q3 as we also saw our in 2Q is that again, we will gain market shares. So we felt really terrific about our annuity sales overall, both variable and fixed.

And then lastly, just on the living benefits. Has... there is sort of a high volatility in the market, maybe you rethink about the features that you are offering or at least raised prices. A few of your competitors have been thinking about raising prices, what are your thoughts on the long-term profitability of offering living benefits? And then secondly, the prices that you're charging for those.

Yes, as I commented a little bit earlier, we are looking at increasing our pricing now as we speak given the current environment and we will not sacrifice our profitability here. And so, we're going to make the decisions that we need to make and execute on the decisions and so you'll hear more about that as we go forward.

And then lastly, if I could ask one more, just on your variable investment income, it was obviously below plan this quarter and if you look at the market overall, IPO activity is pretty much non-existent, you also have a decline in your securities lending book. So, obviously the fourth quarter is going to be weak, but what needs to happen for variable investment income to return to like the $300 million, $350 million range next year or is that even a likely range, the macro environment right now?

As we look into the fourth quarter, we don't see a bounce back in the hedge funds space or in the corporate joint venture LBO space. And for that those areas to improve and the equity markets have to improve dramatically as do the sub-debt market for the LBO player. And I think that's going to be sometime before that turns around. As I mentioned earlier, in December at our investor day, I will give a new plan for variable income for 2009.

Okay, thank you.

And I'll turn it back to you Mr. Murphy.

Okay thank you. Just a remainder to please join us at our investor day on Monday, December 8th and that's it. Thank you very much.

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