William Mullaney - President of the U.S. Business organization Conor Murphy - IR Steven Kandarian - Chief Investment Officer, Executive Vice President, Chief Investment Officer of Metropolitan Life Insurance Company and Executive Vice President of Metropolitan Life Insurance Company Peter Carlson - William Toppeta - President of International and President of International - Metropolitan Life Insurance Company C. Henrikson - Chairman, Chief executive officer, President, Chairman of Executive Committee, Member of Corporate Responsibility & Compliance Committee, Member of Investment Committee, Chief Executive Officer of Metropolitan Life, President of Metropolitan Life and Director of Metropolitan Life Insurance Company William Wheeler - Chief Financial Officer, Executive Vice President, Chief Financial Officer of Metropolitan Life and Executive Vice President of Metropolitan Life

Andrew Kligerman - UBS Investment Bank Suneet Kamath - Bernstein Research John Nadel - Sterne Agee & Leach Inc. Randy Binner - FBR Capital Markets & Co. Jamminder Bhullar - JP Morgan Chase & Co John Hall - Wells Fargo Securities, LLC A. Mark Finkelstein - Macquarie Research Colin Devine - Citigroup Inc

Ladies and gentlemen, thank you for standing by. Welcome to the MetLife Second Quarter Earnings Release conference call. [Operator Instructions] 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 statement whether as a result of new information, future developments or otherwise. With that, I'd like to turn the call now over to Conor Murphy, Head of Investor Relations.

Thank you, Greg. Good morning, everyone. Welcome to MetLife's Second Quarter 2010 Earnings Call. We're 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, so-called non-GAAP measures. We have reconciled these non-GAAP measures to the most directly comparable GAAP measures in our earnings press release and in our quarterly financial supplement, 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. Here with us today to participate in the discussion are other members of the management, including Bill Mullaney, President of U.S. Business; Bill Toppeta, President of International; and Bill Moore, President of Auto & Home; and Donna DeMaio, President of MetLife Bank. With that, I would like to turn the call over to Rob.

Thank you, Conor, and good morning, everyone. For the second quarter of 2010, MetLife has again delivered strong results across the board. Remember last December at Investor Day, we highlighted our commitment to discipline growth, margin improvement and ROE expansion. Well, we delivered on that commitment in the first quarter, and I believe we have done so yet again in the second. Our premiums, fees and other revenues increased 4% over the second quarter of 2009. Operating earnings grew to over $1 billion, up considerably from both the year-ago period and sequentially. I'm also pleased to report that book value increased tremendously, up 48% over the year-ago period and 10% sequentially, driven not only by our Investment performance but also our strong operating earnings. At the same time, our ROE continued to improve and we achieved excellent underwriting results. And importantly, we remain committed to expense discipline and risk management. Let me share a few highlights, beginning with the U.S. Business results. U.S. Business generated premiums, fees and other revenues of $7.2 billion, up 2% over the prior-year period. Excluding the impact of lower pension closeout activity, which can vary from quarter-to-quarter, the top line grew by over 6%. Operating earnings grew by 39%, with significant increases in each of the major business segments, largely driven by strong underwriting results. Within the Insurance Products segment, premiums, fees and other revenues grew 2% over the second quarter of 2009, and operating earnings grew 29%. Group Life premiums grew 4% and operating earnings were up 56% compared with the prior-year period. Group underwriting results were excellent, with the Group Life mortality ratio at 86.6%. Non-Medical Health revenues were up slightly, reflecting higher Dental revenue, partially offset by lower Disability revenue. Non-Medical Health earnings were up over 40%, with improved interest and underwriting…

Thanks, Rob. I'd like to spend a few minutes reviewing the key components of our Investment results for the quarter. First, let me start with a comment on variable Investment income. Pretax variable Investment income for the second quarter was $296 million, which is $96 million above the top of the plan range that I provided on Investor Day. This is primarily driven by strong private equity returns. While we expect variable Investment income to trend lower for the remainder of the year, we believe it’ll still perform within our quarterly range. Now let me cover Investment gains and losses for the quarter. Gross Investment losses were $253 million. Gross Investment gains were $396 million, and write-downs were $172 million, for a net Investment loss, excluding derivatives, of $29 million. Results were largely in line with the previous quarter. Gross unrealized losses on fixed maturity and equity securities were $7 billion, down from the $10.8 billion at year end. Gross unrealized gains were substantial this quarter at $14.2 billion, as widening spreads were more than offset by declining interest rates. Overall, the portfolio was in a net unrealized gain position of $7.3 billion at quarter end. Next, let me expand upon Rob's comments regarding our Commercial Mortgage portfolio. The loan-to-value of our portfolio improved slightly to 68%, down from 69% last quarter, as valuations have stabilized. Our Commercial Mortgage valuation allowance declined modestly to $621 million. Total delinquent commercial mortgages decreased from $162 million to $137 million. The decrease in delinquencies was driven by the restructuring of one loan, resulting in a $5 million loss. As to the remaining two delinquent loans in the U.S. portfolio, one is expected to be paid off during the third quarter with no loss, and the other is a high-quality property that we plan to transfer to our real estate equity portfolio. As I have mentioned previously, we expect limited losses on these loans, as our recoveries are projected to be above the historical average of 75%. Although some challenges remain, we believe the commercial real estate market is slowly improving and that our portfolio will continue to maintain low loss levels and outperform the overall market. Finally, let me comment on our cash position, which increased from $17.2 billion last quarter to $20.4 billion this quarter. The vast majority of this increase can be attributed to higher cash collateral balances we see from our derivative counterparties. As interest rates and equity markets decline, the value of our derivative positions increased, and we took an additional cash collateral. Excluding the impact of cash collateral from our derivative counterparties, our cash position is down $4.1 billion since Investor Day, as we reinvested into higher-yielding assets. In summary, we continue to see solid results in our portfolio, with a variable income above plan, continued low losses and an improving commercial real estate market. With that, I will turn the call over to Bill Wheeler.

Thanks, Steve, and good morning, everybody. MetLife reported $1.23 of operating earnings per share for the second quarter. As Rob mentioned, this strong bottom line result represents solid business growth, higher Investment income, strong underwriting results and the impact of our expense management efforts. This morning, I will walk through our financial results and point out some highlights as well as some unusual items which occurred during the quarter. Let's begin with premiums, fees and other revenues. Total premiums, fees and other revenues, which were $8.7 billion in the second quarter, were up 4% from the second quarter of last year and up 6% when adjusting for closeout sales in both periods. As we have noted before, closeout sales can fluctuate from quarter to quarter. U.S. Business premiums, fees and other revenues of $7.2 billion reflect a 2% increase over the prior-year quarter. This includes a 2% increase in Insurance Products revenues, largely driven by an increase in Group Life. Group Life premiums are up 4% from the prior-year quarter, consistent with our Investor Day guidance. Growth was helped in the segment by a change in financial terms and a large retrospectively rated contract, which resulted in less reinsurance ceded [ph] in that particular contract. This change occurred in the fourth quarter of 2009 and was anticipated in the guidance we provided at Investor Day. Also, revenue in Retirement Products increased by 34% due to income annuity premium growth, as well as higher separate account fees due to positive net flows and favorable separate account Investment returns in prior quarters. Also revenue in Corporate Benefit Funding was down 17% from the prior-year quarter, driven by lower closeout premiums. Structured settlement premiums remained strong. International’s revenues were up 21% on a reported basis and 13% on a constant-currency basis over the…

[Operator Instructions] We have the first question from the line of Mark Finkelstein with Macquarie.

I guess it was a good quarter. You had favorable mortality, good morbidity, good Investments results, good expense control across the board. I think if you looked at the core number, it’s somewhere in the $1.10 to $1.15 range. I guess what I'm really interested in is how should we think about this level of earnings? And whether we should be trending off this number, or whether we should be thinking about a little bit lower of a number, just given the level of favorability in the quarter?

Hi Mark, it’s Bill. I always hesitate to say whether $1.11 is a good run rate or not because -- but I'll give you some sense of kind of the pluses and minuses. You're right; underwriting was very strong. And so I think a lot of that is sustainable. Some of it was probably just good fortune. But I also think, by the way, that like the improvements in Dental underwriting margins are very sustainable. In fact, they might get better from here. And the other interesting fact is Disability underwriting margins were roughly flat on a sequential-quarter basis. But there's potential for a lot of improvement there as early -- maybe in the third quarter, maybe not. But the guys who are very close to that business are encouraged by some of the signs they saw in the second quarter. So certainly, there are headwinds or there are things which might not be repeatable in the second quarter results, but there are further opportunities. I would also -- just a couple of other things to keep in mind is I think the expense picture only gets better as Operational Excellence continues to execute. Though probably the drop in equity markets at the end of the second quarter is probably a modest negative, as we think about third quarter fees in the Retirement business. And then finally, I think the low-interest rate environment that we're in, though I don't think it would be a very large impact in terms of our operating EPS, it will probably slice a little bit off of Investment margin in the future quarters. But I think it’ll be very modest. So that's sort of the color on what's sustainable and what might be in the future, and I’d kind of come away from that little dialogue as that kind of $1.11 current run rate is a number that I think you can think about as a reasonable projection going forward. Could it be a little lower? Sure, but not materially.

And then just finally, I know there's a lot of moving parts with equity markets down, interest rates. I think you mentioned adjusted capital is higher. Is there any update you can give on just the overall capital position?

We don't give out quarterly RBC projections. I just don't think that's a good practice because -- you’ll probably appreciate, the actual RBC projection is a very involved calculation. We don't perform it quarterly. We do estimate our RBC every quarter, so it just strikes me that until you do the real math, you shouldn't put out a number. I think the way to think about this is total adjusted capital, as I said in my prepared remarks, went up $1.1 billion. That's the numerator in the RBC projection, $1.1 billion. Now the denominator changes because the balance sheet’s a little bigger and things have changed a little bit. But $1.1 billion, you think $50 million to $60 million per RBC point, that sort of implies 15 to 20 RBC points in the numerator just in the second quarter, never mind the first quarter, which was another $1 billion increase. So we're clearly building statutory capital versus our RBC at year-end 2009, which was 432%. So we feel very good about our capital levels, and our cash levels with the holding company haven't changed. So I guess I feel that capital position is in good shape.

Our next question comes from the line of John Hall with Wells Fargo.

Just a couple of questions for Steve. I was wondering if you could give us a sense of those gross losses on the Investment portfolio that were realized, where they came from. And I think you sort of indicated along the way that you might be reducing some of your sovereign holdings, and I wonder if any of that activity occurred during the quarter.

Actually we did not decrease our sovereign holdings. We didn’t have very many sovereign holdings. You may be remembering some comments I made earlier when you talked about the ALICO transaction. And as you know, pre-closing, we don't control how they manage their portfolio. So I can't really comment on what is going on, on that side of the ledger. In terms of gross losses, it's a fairly varied group of sectors that are contributing to that. So there's no one item that’s sort of jumping out where I can say, “This sector is underperforming on the realized losses.” On impairments, it was more in the area of structured financed assets and there was some in CMBS, some in ABS, and that was the main driver for the impairments.

There was clearly a strong sales quarter building momentum around the Variable Annuity product. Can you give us a sense of how much the Fidelity relationship might have contributed to that? And are there any other, I guess, new sales relationships that could potentially keep that momentum going?

Hi, John, it’s Bill Mullaney. First of all, yes, we did have a good sales quarter in Variable Annuities. We had about a $4.5 billion level of sales, which we were very pleased with. It continued to come from a broad range of channels. The traditional channels where we sell Variable Annuities continues to be strong. Rob did mention in his comments the Fidelity relationship, and that has continued to grow and to give us an alternative way to distribute the products. We do look and are in discussions with other potential parties that we would partner with to distribute our VAs through some alternative channels. And as those things get finalized, we'll certainly make you aware of them.

And just, I guess, finally on capital, in a sense, have you guys made peace with S&P with the strong quarter and the strong book value growth?

We love S&P. Look, I hesitate certainly in public to speak about what S&P thinks. So they’ve put out a research report on us about a month ago, I think. I thought that was a pretty accurate reflection of where they're at. And that's sort of, I would say, our current state of affairs with them.

Our next question is from the line of Colin Devine with Citi.

One, with respect to what's going on in the U.K., I guess a couple of your more legitimate competitors have pulled out with AXA leaving and AON putting their business up for sale. Is there any sort of update on your thoughts on the U.K. pension market and where you're at? Second, I didn't catch what you said the sales were for the Variable Annuities through Fidelity. If you could just give a sense of that, it would be very helpful. And then also with respect to, I guess, your two other things at International; your ongoing discussions, I guess, with Matsui [ph] and where you stand on the JV [joint venture], if that is no longer going to be a JV. And can you give us any update on your negotiations with Japanese regulators to start taking capital out of ALICO early next year instead of having to wait till 2012?

It's Bill Mullaney. I'll talk about the first two parts of your question. As it relates to the U.K. closeout business, we have lower U.K. closeout sales out sales this quarter than we had in the first quarter. As we talked about in the past, closeout sales are lumpy. And they do vary from quarter to quarter, so I think you're seeing the effect of that. In addition though, I do think the low-interest rate environment, in particular, is having an impact on the closeout market in both the U.S. and the U.K. I think companies that would be thinking about transferring their pension plans to us are moving more slowly here because of the fact that interest rates are so low. And so I think that will continue to provide a challenge in that business until we see some improvement in the interest rate and the longer-term interest rate environment. So I think that's how we're thinking about the U.K. and the U.S. closeout market. In terms of the Fidelity relationship, you didn't hear the sales number because I didn't say what it was. And because it is a relationship that we have with another company, we don't disclose that publicly. But it has become an important part of the overall sales story. But I will tell you it represents less than 10% of our total VA sales.

Just on the Japan JV, we are in the discussions with Mitsui Sumitomo. I would say that the discussions are very positive and moving along well. We don't have any conclusion yet. And as soon as we do, you'll be the first to know.

Okay. And then what’s your spec to Japanese regulations?

I'm going to get back to Mr. Wheeler.

With the Japanese, obviously, we explained when we announced ALICO that under sort of the general rules, we thought we wouldn't be able to take out regular dividends out of Japan until sort of the 2012 time frame. It's quite possible that we may get some flexibility on that from the regulator. We haven't really brought that up in great detail with them yet because we've obviously been doing some other things with them about discussing other issues with them at the moment. But I'm hopeful that we might make some progress on that front earlier. But there's nothing definitive to say now.

Okay, and then just a quick one for Rob, you haven't said anything about the New York Attorney General investigation. I can't believe you're going to let that pass without some comment. So perhaps you can update us on your thinking about that.

I just lost a bet. I thought maybe somebody would let it go through and not mention it at all. But then I forgot who was involved. In the first place, I can't really say anything specifically about the Attorney General because even though we’ve read in the press, just like everyone else, about the sort of subpoena activity, we haven't seen anything nor we've talked to anybody from the Attorney General's office. So I really can’t comment.

Have you received it actually?

Not to my knowledge. Why? Do you have some other information? No, we have not received it. And I would comment just generally. Obviously, we strongly disagree with the misleading and incorrect statements, certainly the initial statements coming from the press. Subsequent to that, of course, those with correct knowledge of the situation, including the National Organization of Life Guaranty Association, the NAIC, the ACLI, we and other insurance companies have provided a lot of well-written clarifications. And I would say that certainly most of you on the call have made very clear that you understand how the accounts function. And I think you’ve provided a real public service, quite frankly, for putting together reports that demonstrate very ably your understanding of these. And I think that as more comes to light, that that's the direction things will go. I mean the beneficiaries have full access to their funds. They are in guaranteed minimum interest rates. They exceed what they could in other money market type accounts. Our account holders tell us they love it. It's consumer friendly, on and on. One of the interesting things, as you probably know, in terms of guarantee funds and whatnot, in the course of business, we actually are prohibited from talking about guarantee funds and whatnot in the insurance industry. I think that has to do with moral hazard issues and so forth, which we certainly wouldn't disagree with. By the way, you may recall back in 2008, during the crisis, they clarified the Guaranty Association coverage, which in this instance goes as if it were any kind of life insurance death benefit. And most states in the U.S., all 50 have coverage. Most are at 300,000. A handful, like New York, are at 500,000. None of them are below 250,000. So now I can say that because I'm just commenting on a comment from the guaranty fund association. They came out with a reaffirmation of that just this week. So I think there's nothing better than having good solid clarifying correct information when it comes to financial products. So that's about all I have to say, but I can't say anything about the Attorney General's office.

Okay, thanks. I think Bill said in the past they have about $3 billion in those accounts. Is that still the right number?

No, there was a report. It's north of that. I don't have the exact figure in my head, but it's north of $3 billion.

Your next question comes from the line of Jimmy Bhullar from JP Morgan. Jamminder Bhullar - JP Morgan Chase & Co: Just to clarify on the previous question, I think isn't the amount close to $10 billion in those accounts, Bill?

Yes, it's something like $10 billion. Jamminder Bhullar - JP Morgan Chase & Co: I had a couple of questions. One is on disability claims. Obviously, your margins held up fairly well. A few other companies have reported an uptick in claims. It seems like there is a business mix issue. But what's the possibility that if the economy stays the way it is that you actually see another uptick in claims over the next few quarters? And then the second question is on interest rates. With rates like 10-year sitting around 3%, could you maybe quantify a little bit on if that 10-year stays at this level for the rest of the year, how much of an impact it would have on your earnings and maybe even if it were to drop another 50 basis points, what sort of sensitivity would you have on your results?

It’s Bill Mullaney. I'll start off by talking about what we’re seeing in disability. As Bill Wheeler talked about in his opening remarks, we saw modest improvement this quarter in disability results relative to prior quarters. Incidence was down slightly. Recoveries were up, improved slightly. And so that's brought the loss ratio down a little bit. You commented on what some of our competitors are seeing. I can't really speak for them. And I'm not really sure why we saw the impact on our disability business more quickly. As you know, we've been talking about this issue for some time. Some of it may have to do with the mix of business that we have. We have a book of business that focuses on large companies. It's also got a significant percentage of those being financial services companies. And I think when the economy started to turn down, I think those companies acted more quickly in terms of adjusting their workforces. That may have had some impact on how quickly we saw claims coming into our operation. We also have taken some price increases over the last couple of pricing cycles, and I think that has helped us in terms of our overall results for the quarter. But what I would say just to summarize is that the performance of the quarter in disability was moderately encouraging. And I would say as the economy continues to slowly recover, we think that will begin to see a recovery in our disability business as well.

And Jimmy, with regard to interest rates, we have on a sensitivity or done a little projection, I guess, is by saying if sort of the interest rate environment that we're in now, sort of the 10-year roughly at 3% sort of continues for the rest of this year and through 2011, what would happen to our results? And I guess I would say, the answer is not much in general. By that I mean we would probably see a little lower earnings than otherwise expected in 2011. But it'd be enough to mention but not that significant. I think some people have talked about impairments of DAC or goodwill or things like that, and I wouldn't think that, that's likely in this sort of time frame. You also mentioned drop, and what would happen if we dropped the 10-year to 2 1/2%. I have to admit I haven't run that scenario. So I can't give you any real precise answer. But I would give you sort of a general response. You followed us, and I think most of the analysts listening to this call followed us for a long time. We’ve talked about the low interest rate issues and what we do to protect ourselves. And we've said that from time to time well before obviously the current situation. Because this is part of our risk management, we've often talked about a Japan scenario and how we protect ourselves against that risk. And we buy very long interest-rate floors, sometimes with deferred-start mechanisms to push out -- protect ourselves as long as we can. And we have a pretty good portfolio of those. So as interest rates continue down here, those things obviously come into the money and start paying. But honestly, they're increasing in value as we speak. Or obviously, even in the second quarter, we saw an increase in value of those contracts. So this is something we've thought about for a long time and have, I think, prepared ourselves pretty well for and spent the money, frankly, over the last five years to do. So I think that's being smart about risk management, understanding where your real risks are. So I think we're in relatively good shape here.

Your next question comes from the line of John Nadel from Sterne Agee. John Nadel - Sterne Agee & Leach Inc.: Any update on the timing for when you guys might file those pro forma historical financials that show Met and ALICO on a combined basis?

No, there's no update yet. Well, I'm not actually sure when AIG actually announces earnings for the second quarter. But I should probably know the answer to that. But there's no update yet. John Nadel - Sterne Agee & Leach Inc.: Okay, so sometime after hedge reports?

Well, I said there's no update yet. John Nadel - Sterne Agee & Leach Inc.: All right. So here's my bigger picture question for you. I mean your capital levels continue to grow. The investment portfolio is clearly recovering, showing good strength, very manageable credit-related investment losses and impairments. I guess I'm just curious as to whether we should expect the mix of your financing for ALICO to maybe shift a bit from your original expectations when you announced that deal?

I think probably the prudent thing for me to say is you'll just have to wait and see. Obviously, this has been a source of considerable discussion for us, and we obviously wanted to see how, we wanted to go through this quarter. And, obviously, we'll have to just see, I think, is the only answer I can really give.

Your next question comes from the line of Suneet Kamath from Sanford Bernstein.

In terms of some of the normalization adjustments that we talked about last night, in particular, I'm not used to backing up positive earnings in quarters when the equity markets are down. And obviously that was part of last night's drill. So as it relates to kind of thinking about Met's exposure to equity markets especially considering some of the hedges, would you consider the second quarter to be particularly abnormal in that you actually did well as markets came down because of some phenomenon in terms of how the markets traded in the second quarter? Or are you at a point where you're so over-hedged right now that to the extent that markets recover in the third quarter, we might actually see a little bit of earnings pressure because the hedges would underperform? That's question number one. Question number two is, I guess Met's been fairly involved in the FASB-IASB joint accounting project. I think you and your team, Bill, have talked to them about some of the industry’s issues and concerns there. Any update in terms of where we are and what things might look like as we progress through the year?

With regard to the second quarter phenomenon of that positive earnings adjustment, we had an interesting situation this quarter. And I'm not sure we've completely diagnosed why it came about because I think it is sort of unique. You had a pretty substantial drop in both equity and interest rates right at the end of the quarter. And so for most of the quarter, we were a little un-level, and then we had a pretty big drop near the end or in June. And the way GAAP works and when it reflects those sort of macro events, to put it simply, there are sometimes GAAP sort of smooth results with some things like mean reversion formulas and such. And this is one of those occasions where it ended up being a fairly big smoothing. At the same time, our hedging program, which we use to protect against these sort of events, doesn't smooth anything. And so effectively, we became over-hedged at least on an accounting basis, certainly not on an economic risk basis. I think that we feel hedging worked quite well there. And it was meaningful enough that obviously we felt we really had to call it out in the financials and talk about it because it represented roughly a nickel overall for the company of earnings per share. So now the interesting question is – so that’s sort of what happened. What happens if we get a reversal? It doesn’t magically go the other way, and there’s been a $0.05 adjustment going the other way. It doesn't work that simply. I do think that these things do balance out over time because, of course, that's the whole point of mean reversion, it's a smoothing mechanism that will spread out the adjustment over a longer period of time as much as, frankly, five years. So that's how the mean reversion works. So it also has to do with the fact that we are very much in the middle of the mean reversion corridor as opposed to being one end or the other which is good to be in the middle. But I think that, that sort of has a smoothing impact. So you could smooth a little bit the other way. But I think, obviously, if the stock market goes up that we would live with a little smoothing. That's okay. Now, with regard to accounting, I’m going to introduce Pete Carlson who is our Chief Accounting Officer. I remember what he told me yesterday about what was going on, but rather than me just trying to repeat it, maybe I'll let him speak and talk a little bit about what’s going on with these accounting initiatives.

Thanks, Bill. Suneet, I think you referenced the Insurance Contracts Project that’s a joint project between the International Accounting Board and the U.S. board, the FASB. What’s happened, the International Board actually overnight did release an exposure draft. They had a July 30th goal, and they’ve released their exposure draft for this project. That would apply to people under International financial reporting standards which obviously is not what we currently follow. The U.S. board, because there already are existing standards for insurance contracts, we have much more industry specific guidance here in the U.S. actually is on a little bit slower path and is not expected to release an exposure draft for another month or two and actually may not even do it an exposure draft. So the stage of the discussions are much more preliminary on the U.S. side. That being said, the boards have recently in discussions, reached a general consensus between both boards that acquisition costs actually would be considered in cash flow. So there would be some deferral of acquisition cost. And that's been one of the two key issues we’ve been monitoring as an industry.

The bigger issue at least for me is marking the market of liability, which I think can cause your earnings to swing around pretty dramatically for a noneconomic reason. Is that still kind of where their heads are? Or has there been enough communication with investors? Or perhaps they're taking another look at whether or not that makes sense in terms of improving transparency? Any thoughts on that would be helpful.

Yes. I’m pretty sure this IFRS insurance contracts exposure draft is going to include some mark-to-market of liabilities. The key is not whether or not they're going to do that, it's how they do it and the kind of discount rates they use. There was some discussions that they might consider using a risk-free rate. We think that would be a bad idea. We think that the discount rate should really mimic as closely as possible sort of what’s going on with spreads or the mark-to-market of the assets. So you have them. So ergo, if you're a well-matched company, which we think we are and others that, that would minimize the volatility of marking both sides to the balance sheet together. I think they're a lot more aware of that than they used to be. There's this whole interplay between what goes on in AOCI and the movements there and also net income versus operating income. And I think those sort of distinctions, a lot of I think the mark-to-market AOCI, as opposed to obviously including now liabilities is not going to just flow through a real income statement. But looking at operating income and being able to call that out is just only going to get more important as opposed to sort of the mark-to-market in the balance sheet that goes on every quarter. So I’ll probably confuse newspaper reporters, but I think the analyst community will get it. Also, one last thing on this since we’re on this topic is our expectation is this isn't going to be sort of the law of the land until sort of 2013 or '14. And they have pushed this date back a little bit, so we might not be done pushing it back. So this is quite a ways out before this is going to hit us.

Your next question comes from the line of Andrew Kligerman from UBS.

Some of the questions that we just heard. For example, on the net Non-Medical benefits ratio, you had an improved 87.8%. And then I look back to the good old days which are back in '06 and '07, and the ratios were slightly under 85%. So the first question is just, is that what we get back to as things improve, and do you kind of have any time trajectory for that?

Let me comment on that. First of all, the improvement that we saw in the Non-Medical Health benefits ratio this quarter as Bill mentioned in his comments was primarily driven by Dental. We saw the increase in utilization in Dental claims early in 2009 when we took some steps as part of our 2010 pricing both for new business and renewal pricing to adjust our prices to make sure that they reflected the higher cost of claims. And so I think you're starting to see the impact of those pricing changes working into our financial results. And as a result, the loss ratio in Dental has come down and that is the primary driver of Non-Medical Health benefits loss ratio. And that's one of the reasons why we created the new ratio because the Dental business has grown significantly over the past few years relative to the Disability business. So when you think about comparing the benefit ratio today versus the benefit ratio a few years ago, we have seen a change in the mix of the products that are there with Dental becoming much more significant. And that's one of the reasons why we adjusted that ratio in the first place. We still think that we have some opportunities for us to bring that ratio down as I talked about before. I think the Disability ratios continue to be high, reflecting the downturn in the economy that we are seeing some improvement there. And we haven’t yet seen the full impact of the Dental pricing changes working through into the benefits ratio. So over time, our expectation is that, that ratio will continue to trend down.

Great color. And just want to give a little [indiscernible] or quantify that?

I think there’s a number of things that will factor into that including how quickly the economy recovers and how that will impact Disability, so at this time, I don't think I will get any more specific than what I said before.

Okay, fair enough. And just shifting over to operational excellence, and Bill mentioned an expense ratio of 22.4% and then the low end of, I guess the guidance is 21.8%. Maybe, Bill, I guess you had got an additional $200 million of savings. I think that's all done. And maybe give us a sense of when you could get to that 21.8%.

In the first quarter, I think we were 21.7%. I think that’s right. So we were right at the bottom of the range. Obviously, it's a ratio, right, so you’ve got to look at the numerator and the denominator. In terms of expense control, we're ahead of our plan. And we’re doing better than our budgets and our plans this year. So we’re very good about that. Of course, what we can't control very well is the denominator which is revenues. And, obviously, what kind of made the ratio go up for this quarter is not because expenses went up; it’s because we had lots of close-out sales which are obviously lumpy. And that smoothes over a year period, but in the short run you can have lumpy quarters like the one we just did. So in terms of real expense control, we put out guidance that we raised our operational excellence guidance to $600 million at Investor Day, 2009, last December. And we're going to exceed that number. I mean it's hard for me to say how much. But as you would hope, a number we put out, we would like to beat. So we're doing very well there. And now, of course, you know that after this year, I think we start shifting our focus onto the ALICO acquisition and taking costs out of there. But I don’t know if we’ll have OpEx 2 necessarily, we're going to continuing to drive expense control around here. I think that's not just holding through ALICO, through the rest of the company. So I think there's more good news there to come in the future.

That’s interesting. Steve seemed somewhat optimistic about the outlook for commercial real estate. We'd love to hear a little color on just the overall environment for that and where you see that affecting Met’s ratios that you discussed earlier.

We’ve seen at a minimum a bottom out of certain sectors of the commercial real estate market and even a slight improvement. And certainly, there are far more lenders going back into the area right now, and mortgage rates are coming down fairly significantly. So you're seeing activity pick up. You're seeing improving lease operates [ph] and so on of buildings. So I don't want overstate it. I'm not saying that there’ll be other problems coming down the road, because there's always a lag in this sector regarding a borrower who eventually can't pay off a mortgage. But onto the fundamentals of the business, itself, have improved slightly. And I think that where things go from here will be largely driven by what happens in the overall economy. So if we do have a slow recovery here, which I think is our position in terms of the most likely outcome, then you anticipate that the market overall will improve along with the economy. Were we to go into some sort of double-dip, which we're not predicting, then obviously, things could get worse.

Andrew, this is Rob. It's hard for me to be quiet on this topic. Steve is absolutely correct in everything he said. I would say, though, that he's reflecting -- because the question is about our portfolio and our mortgage holdings and so forth, I just wouldn't want to hasten to say that our experience is necessarily reflective of the entire marketplace. It hasn't been in the past, and it won't be in the future. And I say that because we have very high-quality properties and extraordinarily strong real estate history and team. And I think he's being a little modest. So I would just put it that way. Don't project that as a proxy to the entire marketplace, which is full of a lot of secondary market problems still and might even trend a little bit worse in some of those markets.

So it's a reflection of market quality of properties as opposed to just a general?

Exactly.

And your final question today comes from the line of Randy Binner from FBR Capital Markets. Randy Binner - FBR Capital Markets & Co.: Just interested in any thoughts we can get on Dodd-Frank bill specifically related to Volcker. And then derivatives on Volcker, there was a broad carve-up for the insurance industry. But at least we're still not clear on whether or not your holdings of hedge funds and private equity might be affected. And then just more broadly, kind of how you think derivatives might carry higher costs going forward?

Let me sort of provide a little color and commentary, Randy. Last call, and I think the one before that, I talked about, at least it was helpful for me to kind of differentiate thoroughbred racehorses from camels. I made that comment. And at least some of the people down in Washington kind of liked it and said it was actually reflective of what it was all about. So whether or not that's helpful for normal people, I don't know. But it seemed to help people in Washington. Let me just give you a little flavor. I mean as I said all along, the bill passes, and now relative to the insurance companies, the work is far from over which is a good thing, because the bill is full of bank language, full of bank processes and so forth. And so the clarifications then work to differentiate the insurance marketplace. And so it’s literally hundreds of rule-making and regulatory projects that are going on. You have an idea; there are 199 separate rule-making initiatives. There are 68 studies underway. There are 355 issues on which lawmakers have given regulators the authority to issue the regulations even if the regulations are not expressly required. And keep in mind that some of the studies are done by agencies that do not even now currently exist, like the Financial Services Oversight Council, the Consumer Financial Protection Bureau, et cetera, et cetera. So there's a lot of work to be done on the details. And because it is so important to us, other people may think that we would relax a little bit. And this is the time that we really have positioned ourselves, both as a company directly and through the ACLI as a resource to all of these rule-making initiatives and wordings and so forth. And so when it comes to things like – and this covers though Volcker rule, it covers derivatives. It covers things like resolution authority fees, taxes, this and the other. We're all very, very focused and very active here at MetLife in Washington. So that's probably the best way to answer that question because it's very difficult to be more clear than that. But we’re not discouraged. We’re not discouraged. We like this kind of slogging through. That’s kind of what we do very well. Randy Binner - FBR Capital Markets & Co.: The Volcker issue is a real issue, right, with the holding?

The Volcker issue is interesting because keep in mind where it started. It starts with proprietary accounts. The language in the original proposal did not, of course, contemplate nor think about insurance companies. Therefore, the definition of what a proprietary account was, was not clarified. And, of course, if you left the language alone, it would have given us problems relative to the general account, itself, because if proprietary is everything other than an account owned by an individual, as you know, individuals own contracts and policies with us in the general account. They don't own a specific investment. So that was a starting place. And I'll let Steve comment beyond that.

There is carve-out language in the Volcker rule component of the bill. It's somewhat vague, and there's a six-month study that's been ordered by the bill. But we think that when people really look through the announces here, they’ll realize that for us to invest in private equity funds, for us to invest in hedge funds with the capital requirements that are imposed upon us through our existing regulatory regime certainly still makes sense. So there's certainly no evidence to suggest any problems during this last crisis we went through related to these kinds of investments for insurance companies in their general account, again given the risk-based capital rules that we live under and so on. So my guess is that it will not affect us, but we’ll have to wait to see how the six-month study sorts out. And we’ll certainly be involved in providing input into that process.

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