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(Mark One) | ||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2007 | ||
or | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware | 13-4075851 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 Park Avenue, New York, N.Y. | 10166-0188 | |
(Address of principal executive offices) | (Zip Code) | |
(212) 578-2211 (Registrant’s telephone number, including area code) |
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $0.01 | New York Stock Exchange | |
Floating Rate Non-Cumulative Preferred Stock, Series A, par value $0.01 | New York Stock Exchange | |
6.50% Non-Cumulative Preferred Stock, Series B, par value $0.01 | New York Stock Exchange | |
6.375% Common Equity Units | New York Stock Exchange | |
5.875% Senior Notes | New York Stock Exchange | |
5.375% Senior Notes | Irish Stock Exchange | |
5.25% Senior Notes | Irish Stock Exchange |
Large accelerated filerþ | Accelerated filero | |
Non-accelerated filero | Smaller reporting companyo | |
(Do not check if a smaller reporting company) |
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Item 1. | Business |
• | Build on widely recognized brand names | |
• | Capitalize on a large customer base | |
• | Enhance capital efficiency | |
• | Expand distribution channels | |
• | Continue to introduce innovative and competitive products | |
• | Focus on international operations | |
• | Maintain balanced focus on asset accumulation and protection products | |
• | Manage operating expenses commensurate with revenue growth | |
• | Further commit to a diverse workplace | |
• | Capitalize on retirement income needs |
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• | case estimates for losses reported on direct business, adjusted in the aggregate for ultimate loss expectations; | |
• | estimates of incurred but not reported losses based upon past experience; | |
• | estimates of losses on insurance assumed primarily from involuntary market mechanisms; and | |
• | estimates of future expenses to be incurred in settlement of claims. |
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• | evaluating potential worksite marketing employer accounts and independent agencies; | |
• | establishing guidelines for the binding of risks; | |
• | reviewing coverage bound by agents; | |
• | underwriting potential insureds, on a case by case basis, presented by agents outside the scope of their binding authority; | |
• | pursuing information necessary in certain cases to enable Auto & Home to issue a policy within our guidelines; and | |
• | ensuring that renewal policies continue to be written at rates commensurate with risk. |
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Moody’s | ||||||||||||||||
A.M. Best | Fitch | Investors | Standard & | |||||||||||||
Company (1) | Ratings (2) | Service (3) | Poor’s (4) | |||||||||||||
First MetLife Investors Insurance Company | A+ | N/R | N/R | AA | ||||||||||||
General American Life Insurance Company | A+ | AA | Aa2 | AA | ||||||||||||
MetLife Insurance Company of Connecticut | A+ | AA | Aa2 | AA | ||||||||||||
MetLife Investors Insurance Company | A+ | AA | Aa2 | AA | ||||||||||||
MetLife Investors USA Insurance Company | A+ | AA | Aa2 | AA | ||||||||||||
Metropolitan Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Direct Property and Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan General Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Group Property & Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Life Insurance Company | A+ | AA | Aa2 | AA | ||||||||||||
Metropolitan Life Insurance Company (Short-Term Rating) | N/R | N/R | P-1 | A-1+ | ||||||||||||
Metropolitan Lloyds Insurance Company of Texas | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Property and Casualty Insurance Company | A | N/R | N/R | N/R | ||||||||||||
Metropolitan Tower Life Insurance Company | A+ | N/R | Aa3 | N/R | ||||||||||||
New England Life Insurance Company | A+ | AA | Aa2 | AA | ||||||||||||
RGA Reinsurance Company | A+ | AA− | A1 | AA− | ||||||||||||
RGA Life Reinsurance Company of Canada | A+ | N/R | N/R | AA− | ||||||||||||
Texas Life Insurance Company | A | N/R | N/R | N/R |
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Moody’s | ||||||||||||||||
A.M. Best | Fitch | Investors | Standard & | |||||||||||||
Company (1) | Ratings (2) | Service (3) | Poor’s (4) | |||||||||||||
General American Life Insurance Company (Surplus Notes) | a+ | N/R | A1 | A+ | ||||||||||||
MetLife Capital Trust II (Preferred Stock) | a− | A− | A3 | BBB+ | ||||||||||||
MetLife Capital Trust III (Preferred Stock) | a− | A− | A3 | BBB+ | ||||||||||||
MetLife Capital Trust IV (Trust Securities) | bbb+ | N/R | Baa1 | BBB+ | ||||||||||||
MetLife Funding, Inc. (Commercial Paper) | AMB-1+ | F1+ | P-1 | A-1+ | ||||||||||||
MetLife, Inc. (Commercial Paper) | AMB-1 | F1 | P-1 | A-1 | ||||||||||||
MetLife, Inc. (Senior Unsecured) | a | A | A2 | A | ||||||||||||
MetLife, Inc. (Subordinated Debt) | a− | N/R | A3 | BBB+ | ||||||||||||
MetLife, Inc. (Junior Subordinated Debt) | bbb+ | N/R | Baa1 | BBB+ | ||||||||||||
MetLife, Inc. (Preferred Stock) | bbb+ | A− | Baa1 | BBB+ | ||||||||||||
MetLife, Inc. (Noncumulative Perpetual Preferred Stock) | bbb+ | A− | Baa1 | BBB | ||||||||||||
Metropolitan Life Insurance Company (Surplus Notes) Open Block | a+ | A+ | A1 | A+ | ||||||||||||
Reinsurance Group of America, Incorporated (Senior Unsecured) | a− | A− | Baa1 | A− | ||||||||||||
Reinsurance Group of America, Incorporated (Junior Subordinated Debt) | bbb | BBB+ | Baa3 | BBB− | ||||||||||||
RGA Capital Trust I (Preferred Stock) | bbb+ | BBB+ | Baa2 | BBB |
(1) | A.M. Best Company (“Best”) financial strength ratings range from “A++ (superior)” to “F (in liquidation).” Ratings of “A+” and “A” are in the “superior” and “excellent” categories, respectively. | |
Best’s long-term credit ratings range from “aaa (exceptional)” to “d (in default).” A “+” or “— ” may be appended to ratings from “aa” to “ccc” to indicate relative position within a category. Ratings of “a” and “bbb” are in the “strong” and “adequate” categories. | ||
Best’s short-term credit ratings range from “AMB-1+ (strongest)” to “d (in default).” | ||
(2) | Fitch Ratings (“Fitch”) insurer financial strength ratings range from “AAA (exceptionally strong)” to “D (distressed).” A “+” or “— ” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. A rating of “AA” is in the “very strong” category. | |
Fitch long-term credit ratings range from “AAA (highest credit quality),” to “D (default).” A “+” or “— ” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. Ratings of “A” and “BBB” are in the “high” and “good” categories, respectively. | ||
Fitch short-term credit ratings range from “F1+ (exceptionally strong credit quality)” to “D (in default).” A rating of “F1” is in the “highest credit quality” category. | ||
(3) | Moody’s Investors Service (“Moody’s”) insurance financial strength ratings range from “Aaa (exceptional)” to “C (extremely poor).” A numeric modifier may be appended to ratings from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. A rating of “Aa” is in the “excellent” category. | |
Moody’s short-term insurer financial strength ratings range from“P-1 (superior)” to “NP (not prime).” | ||
Moody’s long-term credit ratings range from “Aaa (exceptional)” to “C (typically in default).” A numeric modifier may be appended to ratings from “Aa” to “Caa” to indicate relative position within a category, with 1 being the highest and 3 being the lowest. Ratings of “A” and “Baa” are in the “upper-medium grade” and “medium-grade” categories, respectively. | ||
Moody’s short-term credit ratings range from“P-1 (superior)” to “NP (not prime).” | ||
(4) | Standard & Poor’s (“S&P”) long-term insurer financial strength ratings range from “AAA (extremely strong)” to “R (under regulatory supervision).” A “+” or “— ” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. A rating of “AA” is in the “very strong” category. |
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S&P short-term insurer financial strength ratings range from“A-1+ (extremely strong)” to “R (under regulatory supervision).” | ||
S&P long-term credit ratings range from “AAA (extremely strong)” to “D (payment default).” A “+” or “— ” may be appended to ratings from “AA” to “CCC” to indicate relative position within a category. A rating of “A” is in the “strong” category. A rating of “BBB” has adequate protection parameters and is considered investment grade. | ||
S&P short-term credit ratings range from“A-1+ (extremely strong)” to “D (payment default).” A rating of“A-1” is in the “strong” category. | ||
N/R | indicates not rated. |
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Item 1A. | Risk Factors |
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• | reducing new sales of insurance products, annuities and other investment products; | |
• | adversely affecting our relationships with our sales force and independent sales intermediaries; | |
• | materially increasing the number or amount of policy surrenders and withdrawals by contractholders and policyholders; | |
• | requiring us to reduce prices for many of our products and services to remain competitive; and | |
• | adversely affecting our ability to obtain reinsurance at reasonable prices or at all. |
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• | licensing companies and agents to transact business; | |
• | calculating the value of assets to determine compliance with statutory requirements; | |
• | mandating certain insurance benefits; | |
• | regulating certain premium rates; | |
• | reviewing and approving policy forms; | |
• | regulating unfair trade and claims practices, including through the imposition of restrictions on marketing and sales practices, distribution arrangements and payment of inducements; | |
• | regulating advertising; | |
• | protecting privacy; | |
• | establishing statutory capital and reserve requirements and solvency standards; | |
• | fixing maximum interest rates on insurance policy loans and minimum rates for guaranteed crediting rates on life insurance policies and annuity contracts; | |
• | approving changes in control of insurance companies; | |
• | restricting the payment of dividends and other transactions between affiliates; and | |
• | regulating the types, amounts and valuation of investments. |
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• | an election or removal of directors in which a stockholder has properly nominated one or more candidates in opposition to a nominee or nominees of MetLife, Inc.’s Board of Directors or a vote on a stockholder’s proposal to oppose a board nominee for director, remove a director for cause or fill a vacancy caused by the removal of a director by stockholders, subject to certain conditions; | |
• | a merger or consolidation, a sale, lease or exchange of all or substantially all of the assets, or a recapitalization or dissolution, of MetLife, Inc., in each case requiring a vote of stockholders under applicable Delaware law; | |
• | any transaction that would result in an exchange or conversion of shares of common stock held by the Trust for cash, securities or other property; and | |
• | any proposal requiring MetLife, Inc.’s Board of Directors to amend or redeem the rights under the stockholder rights plan, other than a proposal with respect to which we have received advice of nationally-recognized legal counsel to the effect that the proposal is not a proper subject for stockholder action under Delaware law. |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
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December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions, except number of claims) | ||||||||||||
Asbestos personal injury claims at year end | 79,717 | 87,070 | 100,250 | |||||||||
Number of new claims during the year | 7,161 | 7,870 | 18,500 | |||||||||
Settlement payments during the year (1) | $ | 28.2 | $ | 35.5 | $ | 74.3 |
(1) | Settlement payments represent payments made by MLIC during the year in connection with settlements made in that year and in prior years. Amounts do not include MLIC’s attorneys’ fees and expenses and do not reflect amounts received from insurance carriers. |
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Item 4. | Submission of Matters to a Vote of Security Holders |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
2007 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
Common Stock Price | ||||||||||||||||
High | $ | 65.92 | $ | 69.04 | $ | 69.92 | $ | 70.87 | ||||||||
Low | $ | 59.01 | $ | 63.15 | $ | 59.62 | $ | 60.46 |
2006 | ||||||||||||||||
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
Common Stock Price | ||||||||||||||||
High | $ | 51.98 | $ | 53.19 | $ | 57.23 | $ | 59.83 | ||||||||
Low | $ | 48.14 | $ | 48.37 | $ | 49.65 | $ | 56.23 |
Dividend | ||||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | ||||||||||||
(In millions, | ||||||||||||||||
except per share data) | ||||||||||||||||
October 23, 2007 | November 6, 2007 | December 14, 2007 | $ | 0.74 | $ | 541 | ||||||||||
October 24, 2006 | November 6, 2006 | December 15, 2006 | $ | 0.59 | $ | 450 | ||||||||||
October 25, 2005 | November 7, 2005 | December 15, 2005 | $ | 0.52 | $ | 394 |
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(c) Total Number | (d) Maximum Number | |||||||||||||||
of Shares | (or Approximate | |||||||||||||||
Purchased as Part | Dollar Value) of | |||||||||||||||
(a) Total Number | of Publicly | Shares that May Yet | ||||||||||||||
of Shares | (b) Average Price | Announced Plans | Be Purchased Under | |||||||||||||
Period | Purchased (1) | Paid per Share | or Programs (2) | the Plans or Programs | ||||||||||||
October 1-October 31, 2007 | 1,026 | $ | 68.52 | — | $ | 1,241,566,413 | ||||||||||
November 1-November 30, 2007 | 11,576,793 | $ | 63.17 | 11,559,803 | $ | 510,735,127 | ||||||||||
December 1-December 31, 2007 | 21,087 | $ | 62.45 | — | $ | 510,735,127 | ||||||||||
Total | 11,598,906 | $ | 63.17 | 11,559,803 | $ | 510,735,127 | ||||||||||
(1) | During the periods October 1 — October 31, 2007, November 1 — November 30, 2007 and December 1 — December 31, 2007, separate account affiliates of the Company purchased 1,026 shares, 16,990 shares and 21,087 shares, respectively, of common stock on the open market in nondiscretionary transactions to rebalance index funds. Except as disclosed above, there were no shares of common stock which were repurchased by the Company other than through a publicly announced plan or program. | |
(2) | In February 2007, the Company’s Board of Directors authorized an additional $1 billion common stock repurchase program. In September 2007, the Company’s Board of Directors authorized an additional $1 billion common stock repurchase program which began after the completion of the $1 billion common stock repurchase program authorized in February 2007. At December 31, 2007, $511 million remained under the September 2007 program. Under these authorizations, the Company may purchase its common stock from the MetLife Policyholder Trust, in the open market (including pursuant to the terms of a pre-set trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act) and in privately negotiated transactions. | |
In December 2007, the Company entered into an accelerated common stock repurchase agreement with a major bank. Under the terms of the agreement, the Company paid the bank $450 million in cash in January 2008 in exchange for 6,646,692 shares of the Company’s outstanding common stock that the bank borrowed from third parties. Also, in January 2008, the bank delivered 1,043,530 additional shares of the Company’s common stock to the Company resulting in a total of 7,690,222 shares being repurchased under the agreement. At December 31, 2007, the Company recorded the obligation to pay $450 million to the bank as a reduction of additional paid-in capital. Upon settlement with the bank, the Company increased additional paid-in capital and reduced treasury stock. As no settlement occurred prior to December 31, 2007, the impact of this accelerated common stock repurchase agreement was not reflected in the table above. | ||
In November 2007, the Company repurchased 11,559,803 shares of its outstanding common stock at an initial cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the stock sold to the Company from third parties and purchased the common stock in the open market to return to such third parties. Also, in November 2007, the Company received a cash adjustment of $19 million based on the trading price of the common stock during the repurchase period, for a final purchase price of $731 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. | ||
In March 2007, the Company repurchased 11,895,321 shares of its outstanding common stock at an aggregate cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Company from third parties and purchased common stock in the open market to return to such third parties. In June 2007, the Company paid a cash adjustment of $17 million for a |
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final purchase price of $767 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. |
In December 2006, the Company repurchased 3,993,024 shares of its outstanding common stock at an aggregate cost of $232 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Company from third parties and purchased the common stock in the open market to return to such third parties. In February 2007, the Company paid a cash adjustment of $8 million for a final purchase price of $240 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. |
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Item 6. | Selected Financial Data |
Years Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Statement of Income Data (1) | ||||||||||||||||||||
Revenues (2) (3): | ||||||||||||||||||||
Premiums | $ | 27,895 | $ | 26,412 | $ | 24,860 | $ | 22,200 | $ | 20,575 | ||||||||||
Universal life and investment-type product policy fees | 5,311 | 4,780 | 3,828 | 2,867 | 2,495 | |||||||||||||||
Net investment income | 19,006 | 17,082 | 14,756 | 12,261 | 11,373 | |||||||||||||||
Other revenues | 1,533 | 1,362 | 1,271 | 1,198 | 1,199 | |||||||||||||||
Net investment gains (losses) | (738 | ) | (1,382 | ) | (86 | ) | 175 | (551 | ) | |||||||||||
Total revenues | 53,007 | 48,254 | 44,629 | 38,701 | 35,091 | |||||||||||||||
Expenses (2) (3): | ||||||||||||||||||||
Policyholder benefits and claims | 27,828 | 26,431 | 25,506 | 22,662 | 20,811 | |||||||||||||||
Interest credited to policyholder account balances | 5,741 | 5,171 | 3,887 | 2,997 | 3,035 | |||||||||||||||
Policyholder dividends | 1,726 | 1,701 | 1,679 | 1,666 | 1,731 | |||||||||||||||
Other expenses | 11,673 | 10,783 | 9,264 | 7,813 | 7,168 | |||||||||||||||
Total expenses | 46,968 | 44,086 | 40,336 | 35,138 | 32,745 | |||||||||||||||
Income from continuing operations before provision for income tax | 6,039 | 4,168 | 4,293 | 3,563 | 2,346 | |||||||||||||||
Provision for income tax (2) | 1,759 | 1,097 | 1,222 | 991 | 580 | |||||||||||||||
Income from continuing operations | 4,280 | 3,071 | 3,071 | 2,572 | 1,766 | |||||||||||||||
Income from discontinued operations, net of income tax (2) | 37 | 3,222 | 1,643 | 272 | 477 | |||||||||||||||
Income before cumulative effect of a change in accounting, net of income tax | 4,317 | 6,293 | 4,714 | 2,844 | 2,243 | |||||||||||||||
Cumulative effect of a change in accounting, net of income tax (3) | — | — | — | (86 | ) | (26 | ) | |||||||||||||
Net income | 4,317 | 6,293 | 4,714 | 2,758 | 2,217 | |||||||||||||||
Preferred stock dividends | 137 | 134 | 63 | — | — | |||||||||||||||
Charge for conversion of company-obligated mandatorily redeemable securities of a subsidiary trust | — | — | — | — | 21 | |||||||||||||||
Net income available to common shareholders | $ | 4,180 | $ | 6,159 | $ | 4,651 | $ | 2,758 | $ | 2,196 | ||||||||||
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December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Balance Sheet Data (1) | ||||||||||||||||||||
Assets: | ||||||||||||||||||||
General account assets | $ | 398,403 | $ | 383,350 | $ | 353,776 | $ | 270,039 | $ | 251,085 | ||||||||||
Separate account assets | 160,159 | 144,365 | 127,869 | 86,769 | 75,756 | |||||||||||||||
Total assets (2) | $ | 558,562 | $ | 527,715 | $ | 481,645 | $ | 356,808 | $ | 326,841 | ||||||||||
Liabilities: | ||||||||||||||||||||
Life and health policyholder liabilities (4) | $ | 278,246 | $ | 267,146 | $ | 257,258 | $ | 193,612 | $ | 177,947 | ||||||||||
Property and casualty policyholder liabilities (4) | 3,324 | 3,453 | 3,490 | 3,180 | 2,943 | |||||||||||||||
Short-term debt | 667 | 1,449 | 1,414 | 1,445 | 3,642 | |||||||||||||||
Long-term debt | 9,628 | 9,129 | 9,489 | 7,412 | 5,703 | |||||||||||||||
Collateral financing arrangements | 5,732 | 850 | — | — | — | |||||||||||||||
Junior subordinated debt securities | 4,474 | 3,780 | 2,533 | — | — | |||||||||||||||
Payables for collateral under securities loaned and other transactions | 44,136 | 45,846 | 34,515 | 28,678 | 27,083 | |||||||||||||||
Other | 17,017 | 17,899 | 15,976 | 12,888 | 12,618 | |||||||||||||||
Separate account liabilities | 160,159 | 144,365 | 127,869 | 86,769 | 75,756 | |||||||||||||||
Total liabilities (2) | 523,383 | 493,917 | 452,544 | 333,984 | 305,692 | |||||||||||||||
Stockholders’ Equity | ||||||||||||||||||||
Preferred stock, at par value | 1 | 1 | 1 | — | — | |||||||||||||||
Common stock, at par value | 8 | 8 | 8 | 8 | 8 | |||||||||||||||
Additional paid-in capital | 17,098 | 17,454 | 17,274 | 15,037 | 14,991 | |||||||||||||||
Retained earnings (5) | 19,884 | 16,574 | 10,865 | 6,608 | 4,193 | |||||||||||||||
Treasury stock, at cost | (2,890 | ) | (1,357 | ) | (959 | ) | (1,785 | ) | (835 | ) | ||||||||||
Accumulated other comprehensive income (6) | 1,078 | 1,118 | 1,912 | 2,956 | 2,792 | |||||||||||||||
Total stockholders’ equity | 35,179 | 33,798 | 29,101 | 22,824 | 21,149 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 558,562 | $ | 527,715 | $ | 481,645 | $ | 356,808 | $ | 326,841 | ||||||||||
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Years Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
Other Data (1) | ||||||||||||||||||||
Net income available to common shareholders | $ | 4,180 | $ | 6,159 | $ | 4,651 | $ | 2,758 | $ | 2,196 | ||||||||||
Return on common equity (7) | 13.0% | 21.9% | 18.5% | 12.5% | 11.4% | |||||||||||||||
Return on common equity, excluding accumulated other comprehensive income | 13.2% | 22.6% | 20.4% | 14.4% | 13.0% | |||||||||||||||
EPS Data (1) | ||||||||||||||||||||
Income from Continuing Operations Available to Common Shareholders Per Common Share | ||||||||||||||||||||
Basic | $ | 5.57 | $ | 3.85 | $ | 4.02 | $ | 3.43 | $ | 2.36 | ||||||||||
Diluted | $ | 5.44 | $ | 3.81 | $ | 3.98 | $ | 3.41 | $ | 2.34 | ||||||||||
Income (loss) from Discontinued Operations Per Common Share | ||||||||||||||||||||
Basic | $ | 0.05 | $ | 4.24 | $ | 2.19 | $ | 0.35 | $ | 0.65 | ||||||||||
Diluted | $ | 0.04 | $ | 4.18 | $ | 2.18 | $ | 0.35 | $ | 0.64 | ||||||||||
Cumulative Effect of a Change in Accounting Per Common Share (3) | ||||||||||||||||||||
Basic | $ | — | $ | — | $ | — | $ | (0.11 | ) | $ | (0.04 | ) | ||||||||
Diluted | $ | — | $ | — | $ | — | $ | (0.11 | ) | $ | (0.04 | ) | ||||||||
Net Income Available to Common Shareholders Per Common Share | ||||||||||||||||||||
Basic | $ | 5.62 | $ | 8.09 | $ | 6.21 | $ | 3.67 | $ | 2.97 | ||||||||||
Diluted | $ | 5.48 | $ | 7.99 | $ | 6.16 | $ | 3.65 | $ | 2.94 | ||||||||||
Dividends Declared Per Common Share | $ | 0.74 | $ | 0.59 | $ | 0.52 | $ | 0.46 | $ | 0.23 |
(1) | On July 1, 2005, the Company acquired Travelers. The 2005 selected financial data includes total revenues and total expenses of $966 million and $577 million, respectively, from the date of the acquisition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Acquisitions and Dispositions.” | |
(2) | Discontinued Operations: |
Years Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Investment income | $ | 59 | $ | 276 | $ | 435 | $ | 690 | $ | 763 | ||||||||||
Investment expense | (43 | ) | (182 | ) | (273 | ) | (418 | ) | (452 | ) | ||||||||||
Net investment gains (losses) | 13 | 4,795 | 2,125 | 146 | 420 | |||||||||||||||
Total revenues | 29 | 4,889 | 2,287 | 418 | 731 | |||||||||||||||
Interest expense | — | — | — | 13 | 4 | |||||||||||||||
Provision for income tax | 11 | 1,727 | 813 | 143 | 266 | |||||||||||||||
Income from discontinued operations, net of income tax | $ | 18 | $ | 3,162 | $ | 1,474 | $ | 262 | $ | 461 | ||||||||||
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Years Ended December 31, | ||||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Revenues | $ | 71 | $ | 100 | $ | 74 | $ | 333 | $ | 235 | ||||||||||
Expenses | 58 | 89 | 89 | 310 | 206 | |||||||||||||||
Income before provision for income tax | 13 | 11 | (15 | ) | 23 | 29 | ||||||||||||||
Provision for income tax | 4 | 3 | (2 | ) | 13 | 13 | ||||||||||||||
Income (loss) from discontinued operations, net of income tax | 9 | 8 | (13 | ) | 10 | 16 | ||||||||||||||
Net investment gains, net of income tax | 10 | 52 | 182 | — | — | |||||||||||||||
Income from discontinued operations, net of income tax | $ | 19 | $ | 60 | $ | 169 | $ | 10 | $ | 16 | ||||||||||
December 31, | ||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | |||||||||||||||||
(In millions) | ||||||||||||||||||||
General account assets | $ | 1,563 | $ | 1,621 | $ | 410 | $ | 210 | ||||||||||||
Total assets | $ | 1,563 | $ | 1,621 | $ | 410 | $ | 210 | ||||||||||||
Life and health policyholder liabilities (4) | $ | 1,595 | $ | 1,622 | $ | 24 | $ | 17 | ||||||||||||
Short-term debt | — | — | 19 | — | ||||||||||||||||
Other | — | — | 225 | 73 | ||||||||||||||||
Total liabilites | $ | 1,595 | $ | 1,622 | $ | 268 | $ | 90 | ||||||||||||
(3) | The cumulative effect of a change in accounting, net of income tax, of $86 million for the year ended December 31, 2004, resulted from the adoption ofSOP 03-1,Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts.The cumulative effect of a change in accounting, net of income tax, of $26 million for the year ended December 31, 2003, resulted from the adoption of SFAS No. 133 Implementation Issue No. B36,Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments. | |
(4) | Policyholder liabilities include future policy benefits, other policyholder funds and bank deposits. The life and health policyholder liabilities also include policyholder account balances, policyholder dividends payable and the policyholder dividend obligation. | |
(5) | The cumulative effect of changes in accounting, net of income tax, of $329 million, which decreased retained earnings at January 1, 2007, resulted from $292 million related to the adoption ofSOP 05-1,Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts,and $37 million related to the adoption of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109. | |
(6) | The cumulative effect of a change in accounting, net of income tax, of $744 million resulted from the adoption of SFAS No. 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,and decreased accumulated other comprehensive income at December 31, 2006. | |
(7) | Return on common equity is defined as net income available to common shareholders divided by average common stockholders’ equity. |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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(i) | the fair value of investments in the absence of quoted market values; | |
(ii) | investment impairments; | |
(iii) | the recognition of income on certain investments; | |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the fair value of and accounting for derivatives; | |
(vi) | the capitalization and amortization of DAC and the establishment and amortization of VOBA; | |
(vii) | the measurement of goodwill and related impairment, if any; | |
(viii) | the liability for future policyholder benefits; | |
(ix) | accounting for income taxes and the valuation of deferred tax assets; | |
(x) | accounting for reinsurance transactions; | |
(xi) | accounting for employee benefit plans; and | |
(xii) | the liability for litigation and regulatory matters. |
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(i) | the length of time and the extent to which the market value has been below cost or amortized cost; | |
(ii) | the potential for impairments of securities 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 of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; | |
(vi) | the Company’s ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost; | |
(vii) | unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and | |
(viii) | other subjective factors, including concentrations and information obtained from regulators and rating agencies. |
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Years Ended December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Investment return | $ | 100 | $ | 192 | ||||
Expense | (53 | ) | 45 | |||||
In-force/Persistency | 17 | (7 | ) | |||||
Policyholder dividends and other | (55 | ) | (39 | ) | ||||
Total | $ | 9 | $ | 191 | ||||
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(i) | future taxable income exclusive of reversing temporary differences and carryforwards; | |
(ii) | future reversals of existing taxable temporary differences; | |
(iii) | taxable income in prior carryback years; and | |
(iv) | tax planning strategies. |
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 27,895 | $ | 26,412 | $ | 24,860 | ||||||
Universal life and investment-type product policy fees | 5,311 | 4,780 | 3,828 | |||||||||
Net investment income | 19,006 | 17,082 | 14,756 | |||||||||
Other revenues | 1,533 | 1,362 | 1,271 | |||||||||
Net investment gains (losses) | (738 | ) | (1,382 | ) | (86 | ) | ||||||
Total revenues | 53,007 | 48,254 | 44,629 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 27,828 | 26,431 | 25,506 | |||||||||
Interest credited to policyholder account balances | 5,741 | 5,171 | 3,887 | |||||||||
Policyholder dividends | 1,726 | 1,701 | 1,679 | |||||||||
Other expenses | 11,673 | 10,783 | 9,264 | |||||||||
Total expenses | 46,968 | 44,086 | 40,336 | |||||||||
Income from continuing operations before provision for income tax | 6,039 | 4,168 | 4,293 | |||||||||
Provision for income tax | 1,759 | 1,097 | 1,222 | |||||||||
Income from continuing operations | 4,280 | 3,071 | 3,071 | |||||||||
Income from discontinued operations, net of income tax | 37 | 3,222 | 1,643 | |||||||||
Net income | 4,317 | 6,293 | 4,714 | |||||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Net income available to common shareholders | $ | 4,180 | $ | 6,159 | $ | 4,651 | ||||||
% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
International | $ | 472 | 39 | % | ||||
Institutional | 314 | 26 | ||||||
Corporate & Other | 278 | 23 | ||||||
Individual | 110 | 9 | ||||||
Auto & Home | 20 | 2 | ||||||
Reinsurance | 15 | 1 | ||||||
Total change, net of income tax | $ | 1,209 | 100 | % | ||||
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• | An increase in Argentina’s income from continuing operations primarily due to a net reduction of liabilities resulting from pension reform, a reduction in claim liabilities resulting from experience reviews in both the current and prior years, higher premiums resulting from higher pension contributions attributable to higher participant salaries, higher net investment income resulting from capital contributions in the prior year, and a smaller increase in market indexed policyholder liabilities without a corresponding decrease in net investment income, partially offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation, an increase in retention incentives related to pension reform, as well as lower trading portfolio income. Argentina also benefited, in both the current and prior years, from the utilization of tax loss carryforwards against which valuation allowances had been previously established. | |
• | Mexico’s income from continuing operations increased primarily due to a decrease in certain policyholder liabilities caused by a decrease in the unrealized investment results on invested assets supporting those liabilities relative to the prior year, the favorable impact of experience refunds during the first quarter of 2007, a reduction in claim liabilities resulting from an experience review and the unfavorable impact in the prior year resulting from an adjustment to experience refunds in its institutional business, a year over year decrease in DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years, a decrease in liabilities based on a review of outstanding remittances, and growth in its institutional and universal life businesses. These increases in Mexico’s income from continuing operations were partially offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits, the favorable impact in the prior year associated with a large group policy that was not renewed, a decrease in various one-time revenue items, lower investment yields, the favorable impact in the prior year of liabilities related to employment matters that were reduced, and the benefit in the prior year from the elimination of liabilities for pending claims determined to be invalid. | |
• | Taiwan’s income from continuing operations increased primarily driven by an increase due to higher DAC amortization in the prior year resulting from a loss recognition adjustment and restructuring costs, partially offset by the favorable impact of liability refinements in the prior year, as well as higher policyholder liabilities related to loss recognition in the fourth quarter of 2006. | |
• | Brazil’s income from continuing operations increased due to the unfavorable impact of increases in policyholder liabilities due to higher than expected mortality on specific blocks of business and an increase in litigation liabilities in the prior year, the unfavorable impact of the reversal of a tax credit in the prior year, as well as growth of the in-force business. | |
• | Ireland’s income from continuing operations increased primarily due to the utilization of net operating losses for which a valuation allowance had been previously established, higher investment income, partially offset by higherstart-up expenses and currency transaction losses. | |
• | Japan’s income from continuing operations increased due to improved hedge results and business growth, partially offset by the impact of foreign currency transaction losses. | |
• | Hong Kong’s income from continuing operations increased due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation, as well as business growth. | |
• | Chile’s income from continuing operations increased primarily due to growth of the in-force business, higher joint venture income and higher returns on inflation indexed securities, partially offset by higher compensation, infrastructure and marketing expenses. | |
• | Income from continuing operations increased in the United Kingdom due to a reduction of claim liabilities resulting from an experience review, offset by an unearned premium calculation refinement. | |
• | Australia’s income from continuing operations increased due to growth of the in-force business and changes in foreign currency exchange rates. |
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• | These increases in income from continuing operations were partially offset by a decrease in the home office due to higher economic capital charges and investment expenses, an increase in contingent tax expenses in the current year, as well as higher spending due to growth and initiatives, partially offset by the elimination of certain intercompany expenses previously charged to the International segment, and a tax benefit associated with a prior year income tax expense related to a revision of an estimate. | |
• | India’s income from continuing operations decreased primarily due to headcount increases and growth initiatives, as well as the impact of valuation allowances established against losses in both years. | |
• | South Korea’s income from continuing operations decreased due to a favorable impact in the prior year associated with the implementation of a more refined reserve valuation system, as well as additional expenses in the current year associated with growth and infrastructure initiatives, partially offset by continued growth and lower DAC amortization, both in the variable universal life business. |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Institutional | $ | 594 | 27 | % | ||||
Reinsurance | 573 | 26 | ||||||
International | 560 | 26 | ||||||
Individual | 364 | 17 | ||||||
Auto & Home | 65 | 3 | ||||||
Corporate & Other | 29 | 1 | ||||||
Total change | $ | 2,185 | 100 | % | ||||
• | An increase in Mexico’s premiums, fees and other revenues due to higher fees and growth in its institutional and universal life businesses, a decrease in experience refunds during the first quarter of 2007 on Mexico’s institutional business, as well as the adverse impact in the prior year of an adjustment for experience refunds on Mexico’s institutional business, offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits and various one-time revenue items which benefited both the current and prior years. | |
• | Premiums, fees and other revenues increased in Hong Kong primarily due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation as well as business growth. | |
• | Chile’s premiums, fees and other revenues increased primarily due to higher annuity sales, higher institutional premiums from its traditional and bank distribution channels, and the decrease in the prior year resulting from management’s decision not to match aggressive pricing in the marketplace. | |
• | South Korea’s premiums, fees and other revenues increased primarily due to higher fees from growth in its guaranteed annuity and variable universal life businesses. | |
• | Brazil’s premiums, fees and other revenues increased due to changes in foreign currency exchange rates and business growth. | |
• | Premiums, fees and other revenues increased in Japan due to an increase in reinsurance assumed. | |
• | Australia’s premiums, fees and other revenues increased primarily due to growth in the institutional and reinsurance business in-force, an increase in retention levels and changes in foreign currency exchange rates. |
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• | Argentina’s premiums, fees and other revenues increased due to higher pension contributions resulting from higher participant salaries and a higher salary threshold subject to fees and growth in bancassurance, offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation. | |
• | Taiwan’s and India’s premiums, fees and other revenues increased primarily due to business growth. |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Individual | $ | 512 | 57 | % | ||||
International | 219 | 25 | ||||||
Institutional | 124 | 14 | ||||||
Corporate & Other | 51 | 6 | ||||||
Auto & Home | (15 | ) | (2 | ) | ||||
Reinsurance | (1 | ) | — | |||||
Total change | $ | 890 | 100 | % | ||||
• | Argentina’s other expenses increased primarily due to a liability for servicing obligations that was established as a result of pension reform, an increase in commissions on bancassurance business, an increase in retention incentives related to pension reform, and the impact of management’s update of DAC assumptions as a result of pension reform and growth, partially offset by a lower increase in liabilities due to inflation and exchange rate indexing. | |
• | South Korea’s other expenses increased primarily due to the favorable impact in DAC amortization associated with the implementation of a more refined reserve valuation system in the prior year, additional expenses associated with growth and infrastructure initiatives, as well as business growth and higher bank insurance fees, partially offset by a decrease in DAC amortization. |
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• | Mexico’s other expenses increased due to higher expenses related to business growth and the favorable impact in the prior year of liabilities that were reduced, offset by a decrease in DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years and a decrease in liabilities based on a review of outstanding remittances. | |
• | Other expenses increased in India primarily due to headcount increases and growth initiatives, partially offset by the impact of management’s update of assumptions used to determine estimated gross profits. | |
• | Other expenses increased in Australia primarily due to business growth and changes in foreign currency exchange rates. | |
• | Other expenses increased in Chile primarily due to compensation costs, infrastructure and marketing programs, and growth partially offset by a decrease in DAC amortization related to inflation indexing. | |
• | Other expenses increased in Hong Kong due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Ireland’s other expenses increased due to higherstart-up costs, as well as foreign currency transaction losses. | |
• | Brazil’s other expenses increased due to changes in foreign currency exchange rates partially offset by an increase in litigation liabilities in the prior year. | |
• | The United Kingdom’s other expenses increased due to changes in foreign currency exchange rates and higher spending on business initiatives partially offset by lower DAC amortization resulting from calculation refinements. | |
• | These increases in other expenses were partially offset by a decrease in Taiwan’s other expenses primarily due to a one-time increase in DAC amortization in the prior year due to a loss recognition adjustment resulting from low interest rates related to product guarantees coupled with high persistency rates on certain blocks of business, an increase in DAC amortization in the prior year associated with the implementation of a new valuation system, as well as one-time expenses in the prior year related to the termination of the agency force, and expense reductions recognized in the current year due to the elimination of the agency force. |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Institutional | $ | (319 | ) | (140 | )% | |||
Individual | (68 | ) | (30 | ) | ||||
International | (33 | ) | (15 | ) | ||||
Corporate & Other | (25 | ) | (11 | ) | ||||
Auto & Home | 192 | 85 | ||||||
Reinsurance | 26 | 11 | ||||||
Total change, net of income tax | $ | (227 | ) | (100 | )% | |||
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• | Taiwan had a decrease due to a loss recognition adjustment and a restructuring charge, partially offset by reserve refinements associated with the implementation of a new valuation system. | |
• | Income from continuing operations decreased in Canada primarily due to the realignment of economic capital in the prior year. | |
• | Income from continuing operations in Mexico decreased primarily due to an increase in amortization of DAC, higher operating expenses, the net impact of an adjustment to the liability for experience refunds on a block of business, a decrease in various one-time other revenue items in both periods, as well as an increase in income tax expense due to a tax benefit realized in the prior year. These decreases in Mexico were partially offset by a decrease in certain policyholder liabilities caused by a decrease in unrealized investment gains on invested assets supporting those liabilities relative to the prior year, a decrease in policyholder benefits associated with a large group policy that was not renewed by the policyholder, a benefit in the current year from the release of liabilities for pending claims that were determined to be invalid following a review, and the unfavorable impact in the prior year of contingent liabilities. | |
• | In addition, a decrease in Brazil was primarily due to an increase in policyholder benefits and claims related to an increase in future policyholder benefit liabilities on specific blocks of business and an increase in litigation liabilities, as well as adverse claim experience in the current year. | |
• | The home office recorded higher infrastructure expenditures in support of segment growth, as well as a contingent tax liability. This was offset by a reduction in the amount charged for economic capital. | |
• | Results of the Company’s investment in Japan decreased primarily due to variability in the hedging program. | |
• | In addition, expenses related to the Company’sstart-up operations in Ireland reduced income from continuing operations. A valuation allowance was established against the deferred tax benefit resulting from the Ireland losses. | |
• | Partially offsetting these decreases in income from continuing operations were increases in Chile and the United Kingdom due to continued growth of the in-force business. | |
• | In addition, an increase occurred in Australia due to reserve strengthening on a block of business in the prior year. | |
• | South Korea’s income from continuing operations increased due to growth in the in-force business and the implementation of a more refined reserve valuation system. | |
• | Argentina’s income from continuing operations increased due to higher net investment income resulting from capital contributions, the release of liabilities for pending claims that were determined to be invalid following a review, the favorable impact of foreign currency exchange rates and inflation rates on certain |
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contingent liabilities, the utilization of net operating losses for which a valuation allowance had been previously established, and an increase in the prior year period of a deferred income tax valuation allowance, as well as business growth. Changes in foreign currency exchange rates also contributed to the increase. |
% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
Reinsurance | $ | 487 | 30 | % | ||||
International | 470 | 28 | ||||||
Institutional | 458 | 28 | ||||||
Individual | 229 | 14 | ||||||
Corporate & Other | 4 | — | ||||||
Auto & Home | 2 | — | ||||||
Total change | $ | 1,650 | 100 | % | ||||
• | An increase in Mexico’s premiums, fees and other revenues due to growth in the business and higher fees, partially offset by an adjustment for experience refunds on a block of business and various one- time other revenue items in both years. | |
• | South Korea’s premiums, fees and other revenues increased due to business growth, as well as the favorable impact of foreign currency exchange rates. | |
• | Brazil’s premiums, fees and other revenues increased due to business growth and higher bancassurance business, as well as an increase in amounts retained under reinsurance arrangements. |
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• | Chile’s premiums, fees and other revenues increased primarily due to higher institutional premiums through its bank distribution channel, partially offset by lower annuity sales. | |
• | Business growth in the United Kingdom, Argentina, Australia and Taiwan, as well as the favorable impact of changes in foreign currency exchange rates, also contributed to the increase in the International segment. |
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% of Total | ||||||||
$ Change | $ Change | |||||||
(In millions) | ||||||||
International | $ | 326 | 38 | % | ||||
Corporate & Other | 287 | 34 | ||||||
Reinsurance | 236 | 28 | ||||||
Institutional | 79 | 9 | ||||||
Auto & Home | 17 | 2 | ||||||
Individual | (94 | ) | (11 | ) | ||||
Total change | $ | 851 | 100 | % | ||||
• | Taiwan’s other expenses increased due to an increase in amortization of DAC, due to a loss recognition adjustment, refinements associated with the implementation of a new valuation system and a restructuring charge. | |
• | Mexico’s other expenses increased due to an increase in commissions commensurate with the revenue growth, higher DAC amortization, higher expenses related to growth initiatives and additional expenses associated with the Mexican pension business, partially offset by the unfavorable impact of contingent liabilities that were established in the prior year related to potential employment matters and which were eliminated in the current year. | |
• | South Korea’s other expenses increased due to an increase in DAC amortization and general expenses, partially offset by a decrease in DAC amortization associated with the implementation of a more refined reserve valuation system. |
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• | Brazil’s other expenses increased due to an increase in litigation liabilities. | |
• | Other expenses associated with the home office increased due to an increase in expenditures for information technology projects, growth initiative projects and integration costs, as well as an increase in compensation expense. | |
• | In addition, expenses were incurred related to thestart-up of operations in Ireland. |
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 12,392 | $ | 11,867 | $ | 11,387 | ||||||
Universal life and investment-type product policy fees | 803 | 775 | 772 | |||||||||
Net investment income | 8,179 | 7,265 | 5,942 | |||||||||
Other revenues | 726 | 685 | 653 | |||||||||
Net investment gains (losses) | (580 | ) | (631 | ) | (10 | ) | ||||||
Total revenues | 21,520 | 19,961 | 18,744 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 13,806 | 13,367 | 12,776 | |||||||||
Interest credited to policyholder account balances | 3,094 | 2,593 | 1,652 | |||||||||
Policyholder dividends | — | — | 1 | |||||||||
Other expenses | 2,438 | 2,314 | 2,229 | |||||||||
Total expenses | 19,338 | 18,274 | 16,658 | |||||||||
Income from continuing operations before provision for income tax | 2,182 | 1,687 | 2,086 | |||||||||
Provision for income tax | 743 | 562 | 698 | |||||||||
Income from continuing operations | 1,439 | 1,125 | 1,388 | |||||||||
Income from discontinued operations, net of income tax | 10 | 42 | 174 | |||||||||
Net income | $ | 1,449 | $ | 1,167 | $ | 1,562 | ||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 4,496 | $ | 4,516 | $ | 4,485 | ||||||
Universal life and investment-type product policy fees | 3,513 | 3,201 | 2,476 | |||||||||
Net investment income | 7,052 | 6,912 | 6,534 | |||||||||
Other revenues | 599 | 527 | 477 | |||||||||
Net investment gains (losses) | (99 | ) | (598 | ) | (50 | ) | ||||||
Total revenues | 15,561 | 14,558 | 13,922 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 5,721 | 5,409 | 5,417 | |||||||||
Interest credited to policyholder account balances | 2,030 | 2,035 | 1,775 | |||||||||
Policyholder dividends | 1,718 | 1,697 | 1,670 | |||||||||
Other expenses | 4,031 | 3,519 | 3,264 | |||||||||
Total expenses | 13,500 | 12,660 | 12,126 | |||||||||
Income from continuing operations before provision for income tax | 2,061 | 1,898 | 1,796 | |||||||||
Provision for income tax | 705 | 652 | 594 | |||||||||
Income from continuing operations | 1,356 | 1,246 | 1,202 | |||||||||
Income (loss) from discontinued operations, net of income tax | 1 | 18 | 296 | |||||||||
Net income | $ | 1,357 | $ | 1,264 | $ | 1,498 | ||||||
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• | Higher DAC amortization of $204 million, net of income tax, primarily resulting from business growth, lower net investment losses in the current year and revisions to management’s assumptions used to determine estimated gross profits and margins. | |
• | Unfavorable underwriting results in life products of $134 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs less claims incurred and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from period to period. | |
• | Higher expenses of $129 million, net of income tax. Higher general expenses, the impact of revisions to certain liabilities in both periods, and the write-off of a receivable from one of the Company’s joint venture partners contributed to the increase in other expenses. | |
• | An increase in the closed block-related policyholder dividend obligation of $75 million, net of income tax, which was driven by net investment gains. | |
• | Higher annuity benefits of $24 million, net of income tax, primarily due to higher amortization of deferred costs, partially offset by lower costs of guaranteed annuity benefit riders and related hedging. | |
• | An increase in policyholder dividends of $14 million, net of income tax, due to growth in the business. | |
• | An increase in interest credited to policyholder account balances of $13 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business. |
• | Higher fee income from separate account products of $271 million, net of income tax, primarily related to fees being earned on a higher average account balance resulting from a combination of growth in the business and overall market performance. | |
• | Higher net investment income on blocks of business not driven by interest margins of $85 million, net of income tax, due to an increase in yields and growth in the average asset base. | |
• | An increase in interest margins of $18 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed a $1 million decrease to the deferred annuity business offset by a $19 million increase to other investment-type products, both net of income tax. Interest margin is the difference between interest earned and interest credited to policyholder account balances related to the general account on these businesses. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non-policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move gradually over time to reflect market interest rate movements, subject to any minimum guarantees and, therefore, generally does not introduce volatility in expense. |
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• | Higher fee income from separate account products of $151 million, net of income tax, primarily related to fees being earned on a higher average account balance resulting from a combination of growth in the business and overall market performance. | |
• | Lower DAC amortization of $113 million, net of income tax, resulting from investment losses and revisions to management’s assumptions used to determine estimated gross profits and margins. | |
• | A decrease in the closed block-related policyholder dividend obligation of $68 million, net of income tax. | |
• | Favorable underwriting results in life products of $61 million, net of income tax. Underwriting results are generally the difference between the portion of premium and fee income intended to cover mortality, morbidity or other insurance costs less claims incurred and the change in insurance-related liabilities. Underwriting results are significantly influenced by mortality, morbidity, or other insurance-related experience trends, as well as the reinsurance activity related to certain blocks of business. Consequently, results can fluctuate from period to period. | |
• | Higher net investment income on blocks of business that were not driven by interest margins of $16 million, net of income tax. |
• | A decline in interest margins of $58 million, net of income tax. Interest margins relate primarily to the general account portion of investment-type products. Management attributed $40 million of this decrease to the deferred annuity business and the remaining $18 million to other investment-type products. Interest margin is the difference between interest earned and interest credited to policyholder account balances related to the general account on these businesses. Interest earned approximates net investment income on invested assets attributed to these businesses with net adjustments for other non-policyholder elements. Interest credited approximates the amount recorded in interest credited to policyholder account balances. Interest credited to policyholder account balances is subject to contractual terms, including some minimum guarantees, and may reflect actions by management to respond to competitive pressures. Interest credited to policyholder account balances tends to move gradually over time to reflect market interest rate movements, subject to any minimum guarantees, and therefore, generally does not introduce volatility in expense. |
• | Higher expenses of $52 million, net of income tax. Higher general spending in the current period was partially offset by higher corporate incentives in the prior year. | |
• | Higher annuity benefits of $30 million, net of income tax, primarily due to higher costs of the guaranteed annuity benefit riders and the related hedging, and revisions to future policyholder benefits. |
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• | An increase in interest credited to policyholder account balances of $26 million, net of income tax, due primarily to lower amortization of the excess interest reserves on acquired annuity and universal life blocks of business. | |
• | An increase in policyholder dividends of $18 million, net of income tax, due to growth in the business. |
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 2,966 | $ | 2,924 | $ | 2,911 | ||||||
Net investment income | 196 | 177 | 181 | |||||||||
Other revenues | 45 | 22 | 33 | |||||||||
Net investment gains (losses) | 16 | 4 | (12 | ) | ||||||||
Total revenues | 3,223 | 3,127 | 3,113 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 1,807 | 1,717 | 1,994 | |||||||||
Policyholder dividends | 4 | 6 | 3 | |||||||||
Other expenses | 830 | 845 | 828 | |||||||||
Total expenses | 2,641 | 2,568 | 2,825 | |||||||||
Income before provision for income tax | 582 | 559 | 288 | |||||||||
Provision for income tax | 146 | 143 | 64 | |||||||||
Net income | $ | 436 | $ | 416 | $ | 224 | ||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 3,096 | $ | 2,722 | $ | 2,186 | ||||||
Universal life and investment-type product policy fees | 995 | 804 | 579 | |||||||||
Net investment income | 1,248 | 950 | 794 | |||||||||
Other revenues | 23 | 28 | 20 | |||||||||
Net investment gains (losses) | 55 | (10 | ) | 12 | ||||||||
Total revenues | 5,417 | 4,494 | 3,591 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 2,458 | 2,411 | 2,128 | |||||||||
Interest credited to policyholder account balances | 355 | 289 | 240 | |||||||||
Policyholder dividends | 4 | (2 | ) | 5 | ||||||||
Other expenses | 1,748 | 1,529 | 997 | |||||||||
Total expenses | 4,565 | 4,227 | 3,370 | |||||||||
Income from continuing operations before provision for income tax | 852 | 267 | 221 | |||||||||
Provision for income tax | 208 | 95 | 35 | |||||||||
Income from continuing operations | 644 | 172 | 186 | |||||||||
Income (loss) from discontinued operations, net of income tax | (9 | ) | 28 | 6 | ||||||||
Net income | $ | 635 | $ | 200 | $ | 192 | ||||||
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• | Argentina by $146 million, net of income tax, primarily due to a net reduction of liabilities by $48 million, net of income tax, resulting from pension reform. Additionally, $66 million of a valuation allowance related to a deferred tax asset established in connection with such pension reform liabilities was reduced, resulting in a commensurate increase in income from continuing operations. Under the reform plan, fund administrators are no longer liable for death and disability claims of the plan participants, however administrators retain the obligation for administering certain existing and future participants’ accounts for which they receive no revenue. Also contributing is the favorable impact of reductions in claim liabilities resulting from experience reviews in both the current and prior years, higher premiums primarily due to higher pension contributions attributable to higher participant salaries, higher net investment income resulting from capital contributions in the prior year, and a smaller increase in market indexed policyholder liabilities without a corresponding decrease in net investment income, partially offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation, an increase in retention incentives related to pension reform, as well as lower trading portfolio income. Argentina also benefited, in both the current and prior years, from the utilization of tax loss carryforwards against which valuation allowances had previously been established, and in the current year from the reduction of valuation allowances due to expected realizability of deferred tax assets. | |
• | Mexico by $139 million, net of income tax, primarily due to a decrease in certain policyholder liabilities caused by a decrease in the unrealized investment results on invested assets supporting those liabilities relative to the prior year, the favorable impact of experience refunds during the first quarter of 2007 in its institutional business, a reduction in claim liabilities resulting from experience reviews, the adverse impact in the prior year of an adjustment for experience refunds in its institutional business, a year over year decrease in DAC amortization as a result of management’s update of assumptions used to determine estimated gross profits in both the current and prior years, a decrease in liabilities based on a review of outstanding remittances, as well as growth in its institutional and universal life businesses. These increases were offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits, the favorable impact in the prior year associated with a large group policy that was not renewed by the policyholder, a decrease in various one-time revenue items, lower investment yields, the favorable impact in the prior year of liabilities related to employment matters that were reduced, and the benefit in the prior year from the elimination of liabilities for pending claims that were determined to be invalid following a review. | |
• | Taiwan by $51 million, net of income tax, primarily due to an increase in DAC amortization in the prior year due to a loss recognition adjustment and prior year restructuring costs of $11 million associated with the termination of the agency distribution channel, partially offset by the favorable impact of liability refinements in the prior year and higher policyholder liabilities related to loss recognition in the prior year. | |
• | Brazil by $37 million, net of income tax, due to the unfavorable impact of increases in policyholder liabilities due to higher than expected mortality on specific blocks of business in the prior year, an increase in litigation liabilities in the prior year and the unfavorable impact of the reversal of a tax credit in the prior year, as well as growth of the in-force business. | |
• | Ireland by $19 million, net of income tax, primarily due to the utilization of net operating losses for which a valuation allowance had been previously established as well as higher investment income resulting from |
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higher invested assets from a capital contribution, partially offset by higherstart-up expenses and currency transaction losses. |
• | Japan by $22 million, net of income tax, due to improved hedge results and business growth, partially offset by the impact of foreign currency transaction losses. | |
• | Hong Kong by $9 million, net of income tax, due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation, as well as business growth. | |
• | Chile by $8 million, net of income tax, primarily due to continued growth of the in-force business, higher joint venture income and higher returns on inflation indexed securities, partially offset by higher compensation, infrastructure and marketing expenses. | |
• | The United Kingdom by $3 million, net of income tax, due to a reduction of claim liabilities resulting from an experience review, offset by an unearned premium calculation refinement. | |
• | Australia by $1 million, net of income tax, due to changes in foreign currency exchange rates offset by higher claims and business growth. |
• | The home office by $9 million, net of income tax, due to higher economic capital charges and investment expenses of $16 million, net of income tax, a $3 million increase in contingent tax expenses in the current year, as well as higher spending on growth and initiatives, partially offset by the elimination of certain intercompany expenses previously charged to the International segment and a tax benefit associated with a prior year income tax expense of $7 million related to a revision of an estimate. | |
• | India by $3 million, net of income tax, primarily due to headcount increases and growth initiatives, as well as the impact of valuation allowances established against losses in both years. | |
• | South Korea by $4 million, net of income tax, due to a favorable impact in the prior year of $38 million, net of income tax, in DAC amortization associated with the implementation of a more refined reserve valuation system, as well as additional expenses in the current year associated with growth and infrastructure initiatives, partially offset by continued growth in its variable universal life business, lower DAC amortization in the variable universal life business due to favorable market performance and a lower increase in claim liabilities. |
• | Mexico by $133 million primarily due to higher fees and growth in its institutional and universal life businesses, a decrease of $13 million in experience refunds during the first quarter of 2007 on Mexico’s institutional business, as well as the adverse impact in the prior year of an adjustment for experience refunds on Mexico’s institutional business. These increases were offset by lower fees resulting from management’s update of assumptions used to determine estimated gross profits, and various one-time revenue items for which the prior year benefited by $16 million and the current year benefited by $4 million. | |
• | Hong Kong by $98 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation, as well as business growth. |
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• | Chile by $94 million primarily due to higher annuity sales resulting from a higher interest rate environment, improved competitive conditions and an expected rate increase in 2008, higher institutional premiums from its traditional and bank distribution channels, as well as the decrease in the prior year resulting from management’s decision not to match aggressive pricing in the marketplace. | |
• | South Korea by $90 million primarily due to higher fees from growth in its guaranteed annuity business and variable universal life business. | |
• | Brazil by $35 million primarily due to changes in foreign currency exchange rates and business growth. | |
• | The Company’s Japan operation by $31 million due to an increase in reinsurance assumed. | |
• | Australia by $26 million as a result of growth in the institutional and reinsurance in-force business, an increase in retention levels and changes in the foreign currency exchange rates. | |
• | Argentina by $21 million primarily due to an increase in premiums and fees from higher pension contributions resulting from higher participant salaries and a higher salary threshold subject to fees and growth in bancassurance, partially offset by the reduction of cost of insurance fees as a result of the new pension system reform regulation. | |
• | Taiwan and India by $21 million and $11 million, respectively, primarily due to business growth. |
• | The United Kingdom by $3 million due to an unearned premium calculation refinement partially offset by changes in foreign currency rates. |
• | Chile by $148 million due to the impact of higher inflation rates on indexed securities, the valuations and returns of which are linked to inflation rates, higher joint venture income, as well as an increase in invested assets. | |
• | Mexico by $46 million due to an increase in invested assets, partially offset by a decrease in yields, exclusive of inflation. | |
• | Hong Kong by $43 million primarily due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Japan by $19 million due to an increase of $52 million from hedging activities associated with Japan’s guaranteed annuity, offset by a decrease of $33 million, net of income tax, in the Company’s investment in Japan primarily due to an increase in the costs of guaranteed annuity benefits and the impact of foreign currency transaction losses, partially offset by business growth. | |
• | South Korea and Taiwan by $24 million and $6 million, respectively, primarily due to increases in invested assets. | |
• | Brazil by $14 million primarily due to increases in invested assets as well as changes in foreign currency exchange rates. | |
• | Australia by $12 million due to changes in foreign currency exchange rates, higher yields and increases in invested assets. | |
• | Ireland by $9 million due to an increase in invested assets resulting from capital contributions. | |
• | India by $4 million due to an increase in invested assets, as well as higher yields. |
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• | The home office of $25 million primarily due to an increase in the amount charged for economic capital and investment management expenses. | |
• | Argentina by $7 million primarily due to unfavorable results in the trading portfolio, partially offset by higher invested assets resulting from capital contributions in the prior year. Additionally, net investment income in the prior year did not decrease correspondingly with the decrease in policyholder benefits and claims discussed below because the prior year did not include interest- and inflation-indexed assets to support such liabilities. |
• | Chile by $221 million primarily due to an increase in inflation indexed policyholder liabilities as well as growth in its annuity and institutional businesses. | |
• | Hong Kong by $119 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Taiwan by $65 million primarily due to a decrease of $14 million in the prior year from liability refinements associated with the conversion to a new valuation system, as well as higher policyholder liabilities related to loss recognition in the fourth quarter of 2006 and growth in the business. | |
• | South Korea by $27 million primarily due to business growth as well as changes in foreign currency exchange rates, partially offset by a lower increase in claims liabilities resulting from a change in the reinsurance allowance in the prior year. | |
• | Australia by $23 million due to higher claims, an increase in retention levels, business growth and changes in foreign currency exchange rates. | |
• | India by $4 million due to higher claims and business growth, partially offset by management’s update of assumptions used to determine estimated gross profits. |
• | Argentina by $250 million primarily due to the elimination of liabilities for claims and premium deficiencies of $208 million resulting from pension reform. Under the reform plan, which is effective January 1, 2008, fund administrators are no longer liable for new death and disability claims of the plan participants. Also contributing is a decrease in interest- and market-indexed policyholder liabilities and the favorable impact of reductions in claim liabilities resulting from experience reviews in both the current and prior years. | |
• | Mexico by $63 million, primarily due to a decrease in certain policyholder liabilities of $117 million caused by a decrease in the unrealized investment results on the invested assets supporting those liabilities relative to the prior year and a reduction in claim liabilities resulting from experience reviews, offset by an increase |
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of $10 million due to a decrease in the prior year of policyholder benefits associated with a large group policy that was not renewed by the policyholder, an increase of $6 million due to a benefit in the prior year from the elimination of liabilities for pending claims that were determined to be invalid following a review, as well as business growth. |
• | Brazil of $13 million primarily due to the impact in the prior year of increases in policyholder liabilities from higher than expected mortality on specific blocks of business, partially offset by changes in foreign currency exchange rates. | |
• | The United Kingdom by $8 million, due to a reduction of claim liabilities based on a review of experience. |
• | Argentina by $153 million, primarily due to a liability of $128 million for servicing obligations that was established as a result of pension reform. Under the reform plan, which is effective January 1, 2008, the Company retains the obligation for administering certain existing and future participants’ accounts for which they receive no revenue. Also contributing is an increase in commissions on bancassurance business, an increase in retention incentives related to pension reform, the impact of management’s update of DAC assumptions as a result of pension reform and growth, partially offset by a lower increase in liabilities due to inflation and exchange rate indexing. | |
• | South Korea by $92 million, primarily due to the favorable impact in the prior year of $60 million in DAC amortization associated with the implementation of a more refined reserve valuation system and additional expenses in the current year associated with growth and infrastructure initiatives, as well as business growth and higher bank insurance fees, partially offset by a decrease in DAC amortization related to market performance. | |
• | Mexico by $27 million primarily due to higher expenses related to business growth and the favorable impact in the prior year of liabilities related to employment matters that were reduced, offset by a decrease in DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years, and a decrease in liabilities based on a review of outstanding remittances. | |
• | India by $14 million primarily due to headcount increases and growth initiatives, partially offset by the impact of management’s update of assumptions used to determine estimated gross profits. | |
• | Australia by $12 million primarily due to business growth and changes in foreign currency exchange rates. | |
• | Chile by $12 million primarily due to higher compensation costs, higher spending on infrastructure and marketing programs and growth, partially offset by a decrease in DAC amortization related to inflation indexing. | |
• | Hong Kong by $11 million due to the acquisition of the remaining 50% interest in MetLife Fubon and the resulting consolidation of the operation. | |
• | Ireland by $10 million due to additionalstart-up costs, as well as $5 million of foreign currency transaction losses. | |
• | Brazil by $9 million primarily due to changes in foreign currency exchange rates, partially offset by an increase in litigation liabilities in the prior year. | |
• | The United Kingdom by $2 million due to changes in foreign currency rates and higher spending on business initiatives, partially offset by lower DAC amortization resulting from calculation refinements. |
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• | Taiwan by $118 million primarily due to a one-time increase in DAC amortization in the prior year of $77 million due to a loss recognition adjustment resulting from low interest rates relative to product guarantees coupled with high persistency rates on certain blocks of business, an increase in DAC amortization in the prior year associated with the implementation of a new valuation system, expenses of $17 million in the prior year related the termination of the agency distribution channel and expense reductions recognized in the current year due to elimination of the agency distribution channel. | |
• | The home office of $4 million primarily due to the elimination of certain intercompany expenses previously charged to the International Segment, offset by higher spending on growth and infrastructure initiatives. |
• | Taiwan by $59 million, net of income tax, due to a loss recognition adjustment (in the form of accelerated DAC amortization) of $50 million, net of income tax, and restructuring costs of $11 million, net of income tax, partially offset by reserve refinements of $3 million, net of income tax, associated with the conversion to a new valuation system. | |
• | Canada by $19 million, net of income tax, primarily due to the realignment of economic capital in the prior year. | |
• | Mexico by $12 million, net of income tax, due to an increase in amortization of DAC resulting from management’s update of assumptions used to determine estimated gross margins in both years, higher operating expenses from the pension business, the net impact of an adjustment to the liability for experience refunds on a block of business, a decrease in various one-time other revenue items for which the prior year benefited by $13 million, net of income tax, and the current year benefited by $11 million, net of income tax, as well as an increase of $27 million in tax due to tax benefits realized in the prior year from the American Jobs Creation Act of 2004 (“AJCA”).These were partially offset by a decrease in certain policyholder liabilities caused by a decrease in unrealized investment gains on invested assets supporting those liabilities relative to the prior year, a decrease in policyholder benefits associated with a large group policy that was not renewed by the policyholder, a benefit in the current year from the elimination of liabilities for pending claims that were determined to be invalid following a review, the unfavorable impact in the prior year of contingent liabilities that were established related to potential employment matters in that year and which were eliminated in the current year as well as overall business growth. | |
• | Brazil by $7 million, net of income tax, primarily due to a $10 million, net of income tax, increase in policyholder benefits and claims related to an increase in future policyholder benefit liabilities on specific |
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blocks of business. This increase is due to significantly higher than expected mortality experience, of which a total of $20 million, net of income tax, of additional liabilities were recorded, $10 million, net of income tax, of which was associated with the acquired Travelers’ business, and of which $10 million, net of income tax, was related to the existing MetLife entities. Brazil’s income from continuing operations was also impacted by an increase in litigation liabilities, as well as adverse claim experience in the current year. |
• | The Company’s investment in Japan by $4 million, net of income tax, due to variability in the hedging program. | |
• | The home office by $49 million primarily due to recorded higher infrastructure expenditures in support of segment growth of $39 million, net of income tax, as well as a $23 million, net of income tax, contingent tax liability. This was offset by an increase in income from continuing operations of $13 million, net of income tax, due to a reduction in the amount charged for economic capital. | |
• | The Company’s operation in Ireland reduced operating income by $34 million, net of income tax, due tostart-up expenses in the current year. A valuation allowance was established against the deferred income tax benefit resulting from the Ireland losses. |
• | South Korea by $79 million, net of income tax, primarily due to continued growth of the in-force business, a one-time benefit of $38 million, net of income tax, associated with the implementation of a more refined reserve valuation system, as well as a benefit of $13 million from the impact of foreign currency exchange rates. | |
• | Argentina by $61 million, net of income tax, due to higher net investment income resulting from capital contributions since the completion of the Travelers acquisition, the release of liabilities for pending claims that were determined to be invalid following a review, the favorable impact of foreign currency exchange rates and inflation rates on certain contingent liabilities, the utilization of $4 million of net operating losses for which a valuation allowance had been previously established, a $12 million increase in the prior year period of a deferred income tax valuation allowance established against tax benefits in that year, as well as business growth. | |
• | Australia by $22 million, net of income tax, primarily due to reserve strengthening on a block of business in the prior year, as well as business growth. | |
• | Chile by $5 million, net of income tax, primarily due to growth in the institutional business of $2 million, as well as the favorable impact of foreign currency exchange rates of $2 million. | |
• | The United Kingdom by $5 million, net of income tax, primarily due to growth of the in-force business. |
• | Mexico by $159 million, primarily due to higher fees and growth in its universal life and institutional business, partially offset by an adjustment for experience refunds on a block of business and various one- |
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time other revenue items for which the prior year benefited by $19 million and the current year benefited by $16 million. |
• | South Korea by $156 million primarily due to business growth driven by strong sales of its variable universal life product, as well as the favorable impact of foreign currency exchange rates of $56 million. | |
• | Brazil by $49 million due to business growth and higher bancassurance business, as well as an increase in amounts retained under reinsurance arrangements. | |
• | Chile by $22 million primarily due to the favorable impact of foreign currency exchange rates of $14 million, as well as an increase in institutional premiums through its bank distribution channel, partially offset by lower annuity sales due in part from management’s decision not to match aggressive pricing in the marketplace. | |
• | The United Kingdom, Argentina, Australia, and Taiwan by $21 million, $16 million, $15 million, and $12 million respectively, primarily due to business growth. |
• | Argentina by $41 million primarily due to higher invested assets resulting from capital contributions since the completion of the Travelers acquisition. | |
• | Mexico by $28 million primarily due to higher inflation rates and increases in invested assets, partially offset by lower average investment yields. | |
• | South Korea, Brazil and Taiwan by $25 million, $14 million and $5 million, respectively, primarily due to increases in invested assets, as well as the favorable impact of foreign currency exchange rates of $10 million. | |
• | Home office by $17 million primarily due to a reduction in the amount charged for economic capital from the prior year. |
• | Chile by $8 million primarily due to a reduction in the inflation rate, partially offset by the favorable impact of foreign currency exchange rates of $8 million and increases in invested assets. The invested asset valuations and returns on these invested assets are linked to inflation rates in most of the Latin American countries in which the Company does business. | |
• | Canada by $33 million due to the realignment of economic capital. |
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• | Mexico by $113 million primarily due to an increase in other policyholder benefits and claims of $108 million and in interest credited to policyholder account balances of $39 million commensurate with the growth in revenue discussed above. These increases in Mexico were partially offset by a decrease in certain policyholder liabilities of $18 million caused by a decrease in the unrealized investment gains on the invested assets supporting those liabilities, a $10 million benefit from a decrease in policyholder benefits associated with a large group policy that was not renewed by the policyholder, and a $6 million benefit in the current year from the elimination of liabilities for pending claims that were determined to be invalid following a review. | |
• | Brazil by $49 million primarily due to an increase in policyholder liabilities on these specific blocks of business as discussed above, an increase in amounts retained under reinsurance arrangements, as well as adverse claim experience in other lines of business. | |
• | South Korea by $44 million commensurate with the business growth discussed above, as well as the impact of foreign currency exchange rates of $33 million. |
• | Australia by $22 million due to reserve strengthening in the prior year on a block of reinsurance business. | |
• | Chile by $7 million primarily due to a decrease in annuity liabilities related to the decrease in the inflation index and the decrease in annuity premiums discussed above, partially offset by growth in the institutional business, as well as the impact of foreign currency exchange rates of $17 million. | |
• | Taiwan by $2 million primarily due to a decrease of $14 million from reserve refinements associated with the implementation of a new valuation system, partially offset by an increase of $12 million primarily due to business growth. | |
• | Argentina by $2 million primarily due to the elimination of liabilities for pending claims that were determined to be invalid following a review, partially offset by business growth. Increases in other countries accounted for the remainder of the change. |
• | Taiwan by $110 million primarily due to a one-time increase in DAC amortization of $77 million due to a loss recognition adjustment resulting from low interest rates relative to product guarantees coupled with high persistency rates on certain blocks of business, an increase of $17 million related to the termination of the agency distribution channel in Taiwan, an increase of $9 million from refinements associated with the implementation of a new valuation system, as well as business growth. | |
• | Mexico by $49 million primarily due to an increase in commissions commensurate with the revenue growth discussed above, higher DAC amortization resulting from management’s update of assumptions used to determine estimated gross profits in both the current and prior years, higher expenses related to growth initiatives, and additional expenses associated with the Mexican pension business, partially offset by the favorable impact of contingent liabilities that were established in the prior year related to potential employment matters and which were eliminated in the current year. | |
• | South Korea by $25 million, primarily due to an increase in DAC amortization and general expenses, which were both due to the growth in business, the impact in the prior year of an accrual for an early retirement program and the impact of foreign currency exchange rates of $15 million. These were partially offset by a decrease of $60 million in DAC amortization associated with the implementation of a more refined reserve valuation system. |
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• | Brazil by $25 million primarily due to the growth in business discussed above, as well as an increase in litigation liabilities. | |
• | Chile by $13 million due to increased commissions and other expenses associated with its institutional business, as well as the impact of foreign currency exchange rates of $4 million. | |
• | The United Kingdom and Australia by $15 million and $3 million, respectively, primarily due to business growth. | |
• | Home office by $57 million primarily due to an increase in expenditures for information technology projects, growth initiative projects and integration costs, as well as an increase in compensation resulting from an increase in headcount from the comparable 2005 period. | |
• | Ireland by $34 million primarily related to thestart-up of the Company’s operation in Ireland. |
• | Argentina by $9 million primarily due to the favorable impact of foreign currency exchange rates and inflation rates on certain contingent liabilities. |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 4,910 | $ | 4,348 | $ | 3,869 | ||||||
Net investment income | 871 | 732 | 606 | |||||||||
Other revenues | 77 | 66 | 58 | |||||||||
Net investment gains (losses) | (177 | ) | 7 | 22 | ||||||||
Total revenues | 5,681 | 5,153 | 4,555 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 3,989 | 3,490 | 3,206 | |||||||||
Interest credited to policyholder account balances | 262 | 254 | 220 | |||||||||
Other expenses | 1,226 | 1,227 | 991 | |||||||||
Total expenses | 5,477 | 4,971 | 4,417 | |||||||||
Income before provision for income tax | 204 | 182 | 138 | |||||||||
Provision for income tax | 71 | 64 | 46 | |||||||||
Net income | $ | 133 | $ | 118 | $ | 92 | ||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 35 | $ | 35 | $ | 22 | ||||||
Universal life and investment-type product policy fees | — | — | 1 | |||||||||
Net investment income | 1,460 | 1,046 | 699 | |||||||||
Other revenues | 63 | 34 | 30 | |||||||||
Net investment gains (losses) | 47 | (154 | ) | (48 | ) | |||||||
Total revenues | 1,605 | 961 | 704 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 47 | 37 | (15 | ) | ||||||||
Other expenses | 1,400 | 1,349 | 955 | |||||||||
Total expenses | 1,447 | 1,386 | 940 | |||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 158 | (425 | ) | (236 | ) | |||||||
Income tax benefit | (114 | ) | (419 | ) | (215 | ) | ||||||
Income (loss) from continuing operations | 272 | (6 | ) | (21 | ) | |||||||
Income from discontinued operations, net of income tax | 35 | 3,134 | 1,167 | |||||||||
Net income | 307 | 3,128 | 1,146 | |||||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Net income available to common shareholders | $ | 170 | $ | 2,994 | $ | 1,083 | ||||||
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Letter of | ||||||||||||||||||||
Credit | Unused | |||||||||||||||||||
Borrower(s) | Expiration | Capacity | Issuances | Drawdowns | Commitments | |||||||||||||||
(In millions) | ||||||||||||||||||||
MetLife, Inc. and MetLife Funding, Inc. | June 2012 | (1) | $ | 3,000 | $ | 1,532 | $ | — | $ | 1,468 | ||||||||||
MetLife Bank, N.A. | July 2008 | (2) | 200 | — | — | 200 | ||||||||||||||
Reinsurance Group of America, Incorporated | May 2008 | 30 | — | 30 | — | |||||||||||||||
Reinsurance Group of America, Incorporated | September 2012 | (3) | 750 | 406 | — | 344 | ||||||||||||||
Reinsurance Group of America, Incorporated | March 2011 | 44 | — | — | 44 | |||||||||||||||
Total | $ | 4,024 | $ | 1,938 | $ | 30 | $ | 2,056 | ||||||||||||
(1) | In June 2007, the Holding Company and MetLife Funding entered into a $3.0 billion credit agreement with various financial institutions, the proceeds of which are available to be used for general corporate purposes, to support their commercial paper programs and for the issuance of letters of credit. All borrowings under the credit agreement must be repaid by June 2012, except that letters of credit outstanding upon termination may remain outstanding until June 2013. The borrowers and the lenders under this facility may agree to extend the term of all or part of the facility to no later than June 2014, except that letters of credit outstanding upon termination may remain outstanding until June 2015. The $1.5 billion credit agreement, with an April 2009 expiration, and the $1.5 billion credit agreement, with an April 2010 expiration, were both terminated in June 2007 and replaced by the aforementioned facility. | |
(2) | In July 2007, the facility was extended for one year to July 2008. | |
(3) | In September 2007, RGA and certain of its subsidiaries entered into a credit agreement with various financial institutions. Under the credit agreement, RGA may borrow and obtain letters of credit for general corporate purposes for its own account or for the account of its subsidiaries with an overall credit facility amount of up to $750 million. The credit agreement replaced a former credit agreement in the amount of $600 million which was scheduled to expire on September 29, 2010. |
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Letter of | ||||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Re | June 2016 | (1) | $ | 500 | $ | — | $ | 490 | $ | 10 | 8 | |||||||||||||
Exeter Reassurance Company Ltd. | December 2027 | (2) | 650 | — | 410 | 240 | 20 | |||||||||||||||||
Timberlake Financial L.L.C. | June 2036 | (3) | 1,000 | 850 | — | 150 | 29 | |||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | (4) | 3,500 | 2,382 | — | 1,118 | 30 | |||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 | (2), (5) | 2,896 | — | 1,235 | 1,661 | 30 | |||||||||||||||||
Total | $ | 8,546 | $ | 3,232 | $ | 2,135 | $ | 3,179 | ||||||||||||||||
(1) | Letters of credit and replacements or renewals thereof issued under this facility of $280 million, $10 million and $200 million are set to expire no later than December 2015, March 2016 and June 2016, respectively. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | As described under “— Liquidity and Capital Resources — The Company — Liquidity Sources — Debt Issuances”, RGA may, at its option, offer up to $150 million of additional notes under this facility in the future. | |
(4) | In May 2007, MRSC terminated the $2.0 billion amended and restated five-year letter of credit and reimbursement agreement entered into among the Holding Company, MRSC and various financial institutions on April 25, 2005. In its place the Company entered into a30-year collateral financing arrangement as described under “Liquidity Sources — Debt Issuances”, which may be extended by agreement of the Company and the financial institution on each anniversary of the closing of the facility for an additional one-year period. At December 31, 2007, $2.4 billion had been drawn upon under the collateral financing arrangement. | |
(5) | In December 2007, Exeter Reassurance Company Ltd. (“Exeter”) terminated four letters of credit, with expirations from March 2025 through December 2026, that were issued under a letter of credit facility with an unaffiliated financial institution in an aggregate amount of $1.7 billion. The letters of credit had served as collateral for Exeter’s obligations under a reinsurance agreement that was recaptured by MetLife Investors USA Insurance Company (“MLI-USA”) in December 2007. MLI-USA immediately thereafter entered into a new reinsurance agreement with MetLife Reinsurance Company of Vermont (“MRV”). To collateralize its reinsurance obligations, MRV and the Holding Company entered into a30-year, $2.9 billion letter of credit facility with an unaffiliated financial institution. |
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More Than | ||||||||||||||||||||||
More Than | Three Years | |||||||||||||||||||||
One Year and | and Less | |||||||||||||||||||||
Less Than | Less Than | Than Five | More Than | |||||||||||||||||||
Contractual Obligations | Total | One Year | Three Years | Years | Five Years | |||||||||||||||||
(In millions) | ||||||||||||||||||||||
Future policy benefits | (1) | $ | 288,837 | $ | 6,823 | $ | 9,471 | $ | 9,742 | $ | 262,801 | |||||||||||
Policyholder account balances | (2) | 212,049 | 25,640 | 29,028 | 28,278 | 129,103 | ||||||||||||||||
Other policyholder liabilities | (3) | 10,592 | 8,322 | 93 | 112 | 2,065 | ||||||||||||||||
Short-term debt | (4) | 667 | 667 | — | — | — | ||||||||||||||||
Long-term debt | (4) | 16,832 | 975 | 1,797 | 2,330 | 11,730 | ||||||||||||||||
Collateral financing arrangements | (4) | 12,800 | 301 | 603 | 660 | 11,236 | ||||||||||||||||
Junior subordinated debt securities | (4) | 8,758 | 1,314 | 1,398 | 324 | 5,722 | ||||||||||||||||
Shares subject to mandatory redemption | (4) | 785 | 13 | 26 | 26 | 720 | ||||||||||||||||
Payables for collateral under securities loaned and other transactions | (5) | 44,136 | 44,136 | — | — | — | ||||||||||||||||
Commitments to lend funds | (6) | 10,559 | 8,063 | 1,141 | 639 | 716 | ||||||||||||||||
Operating leases | (7) | 2,167 | 254 | 442 | 316 | 1,155 | ||||||||||||||||
Other | (8) | 8,278 | 7,711 | 6 | 6 | 555 | ||||||||||||||||
Total | $ | 616,460 | $ | 104,219 | $ | 44,005 | $ | 42,433 | $ | 425,803 | ||||||||||||
(1) | Future policyholder benefits include liabilities related to traditional whole life policies, term life policies, closeout and other group annuity contracts, structured settlements, MTF agreements, single premium immediate annuities, long-term disability policies, individual disability income policies, LTC policies and property and casualty contracts. | |
Included within future policyholder benefits are contracts where the Company is currently making payments and will continue to do so until the occurrence of a specific event such as death as well as those where the timing of a portion of the payments has been determined by the contract. Also included are contracts where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death or illness, or where the occurrence of the payment triggering event, such as a surrender of a policy or contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience as well as its expectation of future payment patterns. |
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Liabilities related to accounting conventions, or which are not contractually due, such as shadow liabilities, excess interest reserves and property and casualty loss adjustment expenses, of $1.1 billion have been excluded from amounts presented in the table above. | ||
Amounts presented in the table above, excluding those related to property and casualty contracts, represent the estimated cash payments for benefits under such contracts including assumptions related to the receipt of future premiums and assumptions related to mortality, morbidity, policy lapse, renewal, retirement, inflation, disability incidence, disability terminations, policy loans and other contingent events as appropriate to the respective product type. Payments for case reserve liabilities and incurred but not reported liabilities associated with property and casualty contracts of $1.6 billion have been included using an estimate of the ultimate amount to be settled under the policies based upon historical payment patterns. The ultimate amount to be paid under property and casualty contracts is not determined until the Company reaches a settlement with the claimant, which may vary significantly from the liability or contractual obligation presented above especially as it relates to incurred but not reported liabilities. All estimated cash payments presented in the table above are undiscounted as to interest, net of estimated future premiums on policies currently in-force and gross of any reinsurance recoverable. The more than five years category displays estimated payments due for periods extending for more than 100 years from the present date. | ||
The sum of the estimated cash flows shown for all years in the table of $288.8 billion exceeds the liability amount of $132.3 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions, most significantly mortality, between the date the liabilities were initially established and the current date. | ||
For the majority of the Company’s insurance operations, estimated contractual obligations for future policyholder benefits and policyholder account balance liabilities as presented in the table above are derived from the annual asset adequacy analysis used to develop actuarial opinions of statutory reserve adequacy for state regulatory purposes. These cash flows are materially representative of the cash flows under generally accepted accounting principles. | ||
Actual cash payments to policyholders may differ significantly from the liabilities as presented in the consolidated balance sheet and the estimated cash payments as presented in the table above due to differences between actual experience and the assumptions used in the establishment of these liabilities and the estimation of these cash payments. See “— Liquidity and Capital Resources — The Company — Asset/Liability Management.” | ||
(2) | Policyholder account balances include liabilities related to conventional guaranteed investment contracts, guaranteed investment contracts associated with formal offering programs, funding agreements, individual and group annuities, total control accounts, bank deposits, individual and group universal life, variable universal life and company-owned life insurance. | |
Included within policyholder account balances are contracts where the amount and timing of the payment is essentially fixed and determinable. These amounts relate to policies where the Company is currently making payments and will continue to do so, as well as those where the timing of the payments has been determined by the contract. Other contracts involve payment obligations where the timing of future payments is uncertain and where the Company is not currently making payments and will not make payments until the occurrence of an insurable event, such as death, or where the occurrence of the payment triggering event, such as a surrender of or partial withdrawal on a policy or deposit contract, is outside the control of the Company. The Company has estimated the timing of the cash flows related to these contracts based on historical experience as well as its expectation of future payment patterns. | ||
Excess interest reserves representing purchase accounting adjustments of $794 million have been excluded from amounts presented in the table above as they represent an accounting convention and not a contractual obligation. | ||
Amounts presented in the table above represent the estimated cash payments to be made to policyholders undiscounted as to interest and including assumptions related to the receipt of future premiums and deposits; withdrawals, including unscheduled or partial withdrawals; policy lapses; surrender charges; annuitization; mortality; future interest credited; policy loans and other contingent events as appropriate to the respective product type. Such estimated cash payments are also presented net of estimated future premiums on policies |
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currently in-force and gross of any reinsurance recoverable. For obligations denominated in foreign currencies, cash payments have been estimated using current spot rates. | ||
The sum of the estimated cash flows shown for all years in the table of $212.0 billion exceeds the liability amount of $137.3 billion included on the consolidated balance sheet principally due to the time value of money, which accounts for at least 80% of the difference, as well as differences in assumptions between the date the liabilities were initially established and the current date. See also comments under footnote 1 regarding the source and uncertainties associated with the estimation of the contractual obligations related to future policyholder benefits and policyholder account balances. | ||
(3) | Other policyholder liabilities is comprised of other policyholder funds, policyholder dividends payable and the policyholder dividend obligation. Amounts included in the table above related to these liabilities are as follows: |
(a) | Other policyholder funds includes liabilities for incurred but not reported claims and claims payable on group term life, long-term disability, LTC and dental; policyholder dividends left on deposit and policyholder dividends due and unpaid related primarily to traditional life and group life and health; and premiums received in advance. Liabilities related to unearned revenue of $2.0 billion have been excluded from the cash payments presented in the table above because they reflect an accounting convention and not a contractual obligation. With the exception of policyholder dividends left on deposit, and those items excluded as noted in the preceding sentence, the contractual obligation presented in the table above related to other policyholder funds is equal to the liability reflected in the consolidated balance sheet. Such amounts are reported in the less than one year category due to the short-term nature of the liabilities. Contractual obligations on policyholder dividends left on deposit are projected based on assumptions of policyholder withdrawal activity. | |
(b) | Policyholder dividends payable consists of liabilities related to dividends payable in the following calendar year on participating policies. As such, the contractual obligation related to policyholder dividends payable is presented in the table above in the less than one year category at the amount of the liability presented in the consolidated balance sheet. | |
(c) | The nature of the policyholder dividend obligation is described in Note 9 of the Notes to Consolidated Financial Statements. Because the exact timing and amount of the ultimate policyholder dividend obligation is subject to significant uncertainty and the amount of the policyholder dividend obligation is based upon a long-term projection of the performance of the closed block, management has reflected the obligation at the amount of the liability presented in the consolidated balance sheet in the more than five years category. This was done to reflect the long-duration of the liability and the uncertainty of the ultimate cash payment. |
(4) | Amounts presented in the table above for short-term debt, long-term debt, collateral financing arrangements, junior subordinated debt securities and shares subject to mandatory redemption differ from the balances presented on the consolidated balance sheet as the amounts presented in the table above do not include premiums or discounts upon issuance or purchase accounting fair value adjustments. The amounts presented above also include interest on such obligations as described below. | |
Short-term debt consists principally of90-day commercial paper, with a remaining maturity of 54 days, and carries a variable rate of interest. The contractual obligation for short-term debt presented in the table above represents the amounts due upon maturity of the commercial paper plus the related variable interest which is calculated using the prevailing rates at December 31, 2007 through the date of maturity without consideration of any further issuances of commercial paper upon maturity of the amounts outstanding at December 31, 2007. | ||
Long-term debt bears interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at December 31, 2007 and, as such, does not consider the impact of future rate movements. | ||
Collateral financing arrangements bear interest at fixed and variable interest rates through their respective maturity dates. Interest on fixed rate debt was computed using the stated rate on the obligations through maturity. Interest on variable rate debt is computed using prevailing rates at December 31, 2007 and, as such, does not consider the impact of future rate movements. |
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Junior subordinated debt bears interest at fixed interest rates through their respective redemption dates. Interest was computed using the stated rate on the obligation through the scheduled redemption date as it is the Company’s expectation that the debt will be redeemed at that time. Inclusion of interest payments on junior subordinated debt through the final maturity date would increase the contractual obligation by $6.2 billion. | ||
Shares subject to mandatory redemption bear interest at fixed interest rates through their respective mandatory redemption dates. Interest on shares subject to mandatory redemption was computed using the stated fixed rate on the obligation through maturity. | ||
Long-term debt also includes payments under capital lease obligations of $13 million, $15 million, $3 million and $24 million, in the less than one year, one to three years, three to five years and more than five years categories, respectively. | ||
(5) | The Company has accepted cash collateral in connection with securities lending and derivative transactions. As the securities lending transactions expire within the next year or the timing of the return of the collateral is uncertain, the return of the collateral has been included in the less than one year category in the table above. The Company also holds non-cash collateral, which is not reflected as a liability in the consolidated balance sheet, of $718 million as of December 31, 2007. | |
(6) | The Company commits to lend funds under mortgage loans, partnerships, bank credit facilities, bridge loans and private corporate bond investments. In the table above, the timing of the funding of mortgage loans and private corporate bond investments is based on the expiration date of the commitment. As it relates to commitments to lend funds to partnerships and under bank credit facilities, the Company anticipates that these amounts could be invested any time over the next five years; however, as the timing of the fulfillment of the obligation cannot be predicted, such obligations are presented in the less than one year category in the table above. Commitments to fund bridge loans are short-term obligations and, as a result, are presented in the less than one year category in the table above. See “— Off-Balance Sheet Arrangements.” | |
(7) | As a lessee, the Company has various operating leases, primarily for office space. Contractual provisions exist that could increase or accelerate those leases obligations presented, including various leases with early buyoutsand/or escalation clauses. However, the impact of any such transactions would not be material to the Company’s financial position or results of operations. See “— Off-Balance Sheet Arrangements.” | |
(8) | Other includes those other liability balances which represent contractual obligations, as well as other miscellaneous contractual obligations of $32 million not included elsewhere in the table above. Other liabilities presented in the table above is principally comprised of amounts due under reinsurance arrangements, payables related to securities purchased but not yet settled, securities sold short, accrued interest on debt obligations, fair value of derivative obligations, deferred compensation arrangements, guaranty liabilities, the fair value of forward stock purchase contracts, as well as general accruals and accounts payable due under contractual obligations. If the timing of any of the other liabilities is sufficiently uncertain, the amounts are included within the less than one year category. | |
The other liabilities presented in the table above differs from the amount presented in the consolidated balance sheet by $6.1 billion due primarily to the exclusion of items such as minority interests, legal liabilities, pension and postretirement benefit obligations, taxes due other than income tax, unrecognized tax benefits and related accrued interest, accrued severance and employee incentive compensation and other liabilities such as deferred gains and losses. Such items have been excluded from the table above as they represent accounting conventions or are not liabilities due under contractual obligations. | ||
The net funded status of the Company’s pension and other postretirement liabilities included within other liabilities has been excluded from the amounts presented in the table above. Rather, the amounts presented represent the discretionary contributions of $150 million to be made by the Company to the pension plan in 2008 and the discretionary contributions of $116 million, based on the next year’s expected gross benefit payments to participants, to be made by the Company to the postretirement benefit plans during 2008. Virtually all contributions to the pension and postretirement benefit plans are made by the insurance subsidiaries of the Holding Company with little impact on the Holding Company’s cash flows. | ||
Excluded from the table above are deferred income tax liabilities, unrecognized tax benefits, and accrued interest of $2.5 billion, $1.0 billion, and $252 million, respectively, for which the Company cannot reliably determine the timing of payment. Current income tax payable is also excluded from the table. |
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See also “— Off-Balance Sheet Arrangements.” |
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RBC Ratios — Bank Holding Company
December 31,
Regulatory | Regulatory | |||||||||||||||
Requirements | Requirements | |||||||||||||||
2007 | 2006 | Minimum | “Well Capitalized” | |||||||||||||
Total RBC Ratio | 9.87 | % | 9.89 | % | 8.00 | % | 10.00 | % | ||||||||
Tier 1 RBC Ratio | 9.56 | % | 9.51 | % | 4.00 | % | 6.00 | % | ||||||||
Tier 1 Leverage Ratio | 5.56 | % | 5.55 | % | 4.00 | % | n/a |
RBC Ratios — Bank
December 31,
Regulatory | Regulatory | |||||||||||||||
Requirements | Requirements | |||||||||||||||
2007 | 2006 | Minimum | “Well Capitalized” | |||||||||||||
Total RBC Ratio | 12.60 | % | 11.44 | % | 8.00 | % | 10.00 | % | ||||||||
Tier 1 RBC Ratio | 12.03 | % | 10.88 | % | 4.00 | % | 6.00 | % | ||||||||
Tier 1 Leverage Ratio | 6.32 | % | 5.98 | % | 4.00 | % | 5.00 | % |
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2008 | 2007 | 2006 | ||||||||||||||||||
Permitted | Permitted | Permitted | ||||||||||||||||||
w/o | w/o | w/o | ||||||||||||||||||
Company | Approval (1) | Paid (2) | Approval (3) | Paid (2) | Approval (3) | |||||||||||||||
(In millions) | ||||||||||||||||||||
Metropolitan Life Insurance Company | $ | 1,299 | $ | 500 | $ | 919 | $ | 863 | $ | 863 | ||||||||||
MetLife Insurance Company of Connecticut | $ | 1,026 | $ | 690 | (5) | $ | 690 | $ | 917 | (4) | $ | — | ||||||||
Metropolitan Tower Life Insurance Company | $ | 113 | $ | — | $ | 104 | $ | 2,300 | (6) | $ | 85 | |||||||||
Metropolitan Property and Casualty Insurance Company | $ | — | $ | 400 | $ | 16 | $ | 300 | $ | 178 |
(1) | Reflects dividend amounts that may be paid during 2008 without prior regulatory approval. However, if paid before a specified date during 2008, some or all of such dividends may require regulatory approval. | |
(2) | Includes amounts paid including those requiring regulatory approval. | |
(3) | Reflects dividend amounts that could have been paid during the relevant year without prior regulatory approval. | |
(4) | Includes a return of capital of $259 million. | |
(5) | Includes a return of capital of $404 million as approved by the applicable insurance department, of which $350 million was paid to the Holding Company. | |
(6) | This dividend reflects the proceeds associated with the sale of Peter Cooper Village and Stuyvesant Town properties to be used for general corporate purposes. |
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• | In December 2007, the Holding Company, in connection with the collateral financing arrangement associated with MRC’s reinsurance of the closed block liabilities, entered into an agreement with an unaffiliated financial institution under which the Holding Company is entitled to the interest paid by MRC on the surplus notes of3-month LIBOR plus 55 basis points in exchange for the payment of3-month LIBOR plus 112 basis points, payable quarterly. Under this agreement, the Holding Company may also be required to make payments to the unaffiliated financial institution related to any decline in the market value of the surplus notes and in connection with any early termination of this agreement. The Holding Company’s net cost of 57 basis points has been allocated to MRC. For the year ended December 31, 2007, this amount was immaterial. | |
• | In May 2007, the Holding Company, in connection with the collateral financing arrangement associated with MRSC’s reinsurance of universal life secondary guarantees, entered into an agreement with an unaffiliated financial institution under which the Holding Company is entitled to the return on the investment portfolio held by the trust established in connection with this collateral financing arrangement in exchange for the payment of a stated rate of return to the unaffiliated financial institution of3-month LIBOR plus 70 basis |
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points, payable quarterly. The Holding Company may also be required to make payments to the unaffiliated financial institution, for deposit into the trust, related to any decline in the market value of the assets held by the trust, as well as amounts outstanding upon maturity or early termination of the collateral financing arrangement. As a result of this agreement, the Holding Company effectively assumed the $2.4 billion liability under the collateral financing arrangement along with a beneficial interest in the trust holding the associated assets. The Holding Company simultaneously contributed to MRSC its beneficial interest in the trust, along with any return to be received on the investment portfolio held by the trust. The Holding Company allocates the financing costs associated with the collateral financing arrangement to MRSC. |
Issue Date | Principal | Interest Rate | Maturity | |||||||||
(In millions) | ||||||||||||
June 2005 | $ | 1,000 | 5.00 | % | 2015 | |||||||
June 2005 | $ | 1,000 | 5.70 | % | 2035 | |||||||
June 2005 (1) | $ | 794 | 5.25 | % | 2020 | |||||||
December 2004 (1) | $ | 695 | 5.38 | % | 2024 | |||||||
June 2004 | $ | 350 | 5.50 | % | 2014 | |||||||
June 2004 | $ | 750 | 6.38 | % | 2034 | |||||||
November 2003 | $ | 500 | 5.00 | % | 2013 | |||||||
November 2003 | $ | 200 | 5.88 | % | 2033 | |||||||
December 2002 | $ | 400 | 5.38 | % | 2012 | |||||||
December 2002 | $ | 600 | 6.50 | % | 2032 | |||||||
November 2001 | $ | 750 | 6.13 | % | 2011 |
(1) | This amount represents the translation of pounds sterling into U.S. dollars using the noon buying rate on December 31, 2007 of $1.9843 as announced by the Federal Reserve Bank of New York. |
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• | a 1/80, or 1.25% ($12.50), undivided beneficial ownership interest in a series A trust preferred security of MetLife Capital Trust II (“Series A Trust”), with an initial liquidation amount of $1,000. | |
• | a 1/80, or 1.25% ($12.50), undivided beneficial ownership interest in a series B trust preferred security of MetLife Capital Trust III (“Series B Trust” and, together with the Series A Trust, the “Capital Trusts”), with an initial liquidation amount of $1,000. | |
• | a stock purchase contract under which the holder of the common equity unit will purchase and the Holding Company will sell, on each of the initial stock purchase date and the subsequent stock purchase date, a variable number of shares of the Holding Company’s common stock, par value $0.01 per share, for a purchase price of $12.50. |
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Letter of | ||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||
(In millions) | ||||||||||||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Re | June 2016 | (1) | $500 | $ | — | $ | 490 | $ | 10 | 8 | ||||||||||||
Exeter Reassurance Company Ltd. | December 2027 | (2) | 650 | — | 410 | 240 | 20 | |||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | (3) | 3,500 | 2,382 | — | 1,118 | 30 | |||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 | (2),(4) | 2,896 | — | 1,235 | 1,661 | 30 | |||||||||||||||
Total | $7,546 | $ | 2,382 | $ | 2,135 | $ | 3,029 | |||||||||||||||
(1) | Letters of credit and replacements or renewals thereof issued under this facility of $280 million, $10 million and $200 million are set to expire no later than December 2015, March 2016 and June 2016, respectively. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | In May 2007, MRSC terminated the $2.0 billion amended and restated five-year letter of credit and reimbursement agreement entered into among the Holding Company, MRSC and various institutional lenders on April 25, 2005. In its place the Company entered into a30-year collateral financing arrangement as described under “— Liquidity and Capital Resources — The Company — Liquidity Sources — Debt Issuances”, which may be extended by agreement of the Holding Company and the financial institution on each anniversary of the closing of the facility for an additional one-year period. At December 31, 2007, $2.4 billion had been drawn upon under the collateral financing arrangement. | |
(4) | In December 2007, Exeter terminated four letters of credit, with expirations from March 2025 through December 2026, that were issued under a letter of credit facility with an unaffiliated financial institution in an aggregate amount of $1.7 billion. The letters of credit had served as collateral for Exeter’s obligations under a reinsurance agreement that was recaptured by MLI-USA in December 2007. MLI-USA immediately thereafter entered into a new reinsurance agreement with MRV. To collateralize its reinsurance obligations, MRV and the Holding Company entered into a30-year, $2.9 billion letter of credit facility with an unaffiliated financial institution. |
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Dividend | ||||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | ||||||||||||
(In millions, except per share data) | ||||||||||||||||
October 23, 2007 | November 6, 2007 | December 14, 2007 | $ | 0.74 | $ | 541 | ||||||||||
October 24, 2006 | November 6, 2006 | December 15, 2006 | $ | 0.59 | $ | 450 | ||||||||||
October 25, 2005 | November 7, 2005 | December 15, 2005 | $ | 0.52 | $ | 394 |
Dividend | ||||||||||||||||||||
Series A | Series A | Series B | Series B | |||||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | Per Share | Aggregate | ||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
November 15, 2007 | November 30, 2007 | December 17, 2007 | $ | 0.4230476 | $ | 11 | $ | 0.4062500 | $ | 24 | ||||||||||
August 15, 2007 | August 31, 2007 | September 17, 2007 | $ | 0.4063333 | $ | 10 | $ | 0.4062500 | $ | 24 | ||||||||||
May 15, 2007 | May 31, 2007 | June 15, 2007 | $ | 0.4060062 | $ | 10 | $ | 0.4062500 | $ | 24 | ||||||||||
March 5, 2007 | February 28, 2007 | March 15, 2007 | $ | 0.3975000 | $ | 10 | $ | 0.4062500 | $ | 24 | ||||||||||
$ | 41 | $ | 96 | |||||||||||||||||
November 15, 2006 | November 30, 2006 | December 15, 2006 | $ | 0.4038125 | $ | 10 | $ | 0.4062500 | $ | 24 | ||||||||||
August 15, 2006 | August 31, 2006 | September 15, 2006 | $ | 0.4043771 | $ | 10 | $ | 0.4062500 | $ | 24 | ||||||||||
May 16, 2006 | May 31, 2006 | June 15, 2006 | $ | 0.3775833 | $ | 9 | $ | 0.4062500 | $ | 24 | ||||||||||
March 6, 2006 | February 28, 2006 | March 15, 2006 | $ | 0.3432031 | $ | 9 | $ | 0.4062500 | $ | 24 | ||||||||||
$ | 38 | $ | 96 | |||||||||||||||||
November 15, 2005 | November 30, 2005 | December 15, 2005 | $ | 0.3077569 | $ | 8 | $ | 0.4062500 | $ | 24 | ||||||||||
August 22, 2005 | August 31, 2005 | September 15, 2005 | $ | 0.2865690 | $ | 7 | $ | 0.4017361 | $ | 24 | ||||||||||
$ | 15 | $ | 48 | |||||||||||||||||
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December 31, | ||||||||||||
Affiliate | Interest Rate | Maturity Date | 2007 | 2006 | ||||||||
(In millions) | ||||||||||||
MLIC | 3-month LIBOR + 1.15% | December 31, 2009 | $ | 700 | $ | — | ||||||
MLIC | 7.13% | December 15, 2032 | 400 | 400 | ||||||||
MLIC | 7.13% | January 15, 2033 | 100 | 100 | ||||||||
MLIC | 5.00% | December 31, 2007 | — | 800 | ||||||||
MetLife Investors USA Insurance Company | 7.35% | April 1, 2035 | 400 | 400 | ||||||||
Total | $ | 1,600 | $ | 1,700 | ||||||||
• | In December 2007, the Holding Company entered into an accelerated common stock repurchase agreement with a major bank. Under the terms of the agreement, the Holding Company paid the bank $450 million in cash in January 2008 in exchange for 6.6 million shares of its outstanding common stock that the bank borrowed from third parties. Also, in January 2008, the bank delivered 1.1 million additional shares of Holding Company’s common stock to the Holding Company resulting in a total of 7.7 million shares being repurchased under the agreement. At December 31, 2007, the Holding Company recorded the obligation to pay $450 million to the bank as a reduction of additional paid-in capital. Upon settlement with the bank, the Holding Company increased additional paid-in capital and reduced treasury stock. | |
• | In November 2007, the Holding Company repurchased 11.6 million shares of its outstanding common stock at an initial cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the stock sold to the Holding Company from third parties and purchased the common stock in the open market to return to such third parties. Also, in November 2007, the Holding Company received a cash adjustment of $19 million based on the trading price of the common stock during the repurchase period, for a final purchase price of $731 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. | |
• | In March 2007, the Holding Company repurchased 11.9 million shares of its outstanding common stock at an aggregate cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Holding Company from third parties and purchased common stock in the open market to return to such third parties. In June 2007, the Holding Company paid a cash adjustment of $17 million for a final purchase price of $767 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. |
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• | In December 2006, the Holding Company repurchased 4.0 million shares of its outstanding common stock at an aggregate cost of $232 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Holding Company from third parties and purchased the common stock in the open market to return to such third parties. In February 2007, the Holding Company paid a cash adjustment of $8 million for a final purchase price of $240 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. | |
• | In December 2004, the Holding Company repurchased 7.3 million shares of its outstanding common stock at an aggregate cost of $300 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the stock sold to the Holding Company from third parties and purchased the common stock in the open market to return to such third parties. In April 2005, the Holding Company received a cash adjustment of $7 million based on the actual amount paid by the bank to purchase the common stock, for a final purchase price of $293 million. The Holding Company recorded the shares initially repurchased as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. |
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December 31, 2006 | ||||||||||||||||
Additional | ||||||||||||||||
Minimum | ||||||||||||||||
Pre | Pension | Adoption of | Post | |||||||||||||
SFAS 158 | Liability | SFAS 158 | SFAS 158 | |||||||||||||
Balance Sheet Caption | Adjustments | Adjustment | Adjustment | Adjustments | ||||||||||||
(In millions) | ||||||||||||||||
Other assets: Prepaid pension benefit cost | $ | 1,937 | $ | — | $ | (993 | ) | $ | 944 | |||||||
Other assets: Intangible asset | $ | 12 | $ | (12 | ) | $ | — | $ | — | |||||||
Other liabilities: Accrued pension benefit cost | $ | (505 | ) | $ | (14 | ) | $ | (79 | ) | $ | (598 | ) | ||||
Other liabilities: Accrued other postretirement benefit cost | $ | (802 | ) | $ | — | $ | (99 | ) | $ | (901 | ) | |||||
Accumulated other comprehensive income, before income tax: | ||||||||||||||||
Defined benefit plans | $ | (66 | ) | $ | (26 | ) | $ | (1,171 | ) | $ | (1,263 | ) | ||||
Minority interest | $ | — | $ | 8 | ||||||||||||
Deferred income tax | $ | 8 | $ | 419 | ||||||||||||
Accumulated other comprehensive income, net of income tax: | ||||||||||||||||
Defined benefit plans | $ | (41 | ) | $ | (18 | ) | $ | (744 | ) | $ | (803 | ) | ||||
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December 31, | ||||||||||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Benefit obligation at end of year | $ | 5,775 | $ | 5,959 | $ | 1,610 | $ | 2,073 | ||||||||
Fair value of plan assets at end of year | 6,550 | 6,305 | 1,183 | 1,172 | ||||||||||||
Funded status at end of year | $ | 775 | $ | 346 | $ | (427 | ) | $ | (901 | ) | ||||||
Amounts recognized in the consolidated balance sheet consist of: | ||||||||||||||||
Other assets | $ | 1,393 | $ | 944 | $ | — | $ | — | ||||||||
Other liabilities | (618 | ) | (598 | ) | (427 | ) | (901 | ) | ||||||||
Net amount recognized | $ | 775 | $ | 346 | $ | (427 | ) | $ | (901 | ) | ||||||
Accumulated other comprehensive (income) loss: | ||||||||||||||||
Net actuarial (gains) losses | $ | 623 | $ | 1,123 | $ | (112 | ) | $ | 328 | |||||||
Prior service cost (credit) | 64 | 41 | (193 | ) | (230 | ) | ||||||||||
Net asset at transition | — | — | — | 1 | ||||||||||||
687 | 1,164 | (305 | ) | 99 | ||||||||||||
Deferred income tax and minority interest | (251 | ) | (423 | ) | 109 | (37 | ) | |||||||||
$ | 436 | $ | 741 | $ | (196 | ) | $ | 62 | ||||||||
December 31, | ||||||||||||||||||||||||
Qualified Plans | Non-Qualified Plans | Total | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Aggregate fair value of plan assets (principally Company contracts) | $ | 6,550 | $ | 6,305 | $ | — | $ | — | $ | 6,550 | $ | 6,305 | ||||||||||||
Aggregate projected benefit obligation | 5,174 | 5,381 | 601 | 578 | 5,775 | 5,959 | ||||||||||||||||||
Over (under) funded | $ | 1,376 | $ | 924 | $ | (601 | ) | $ | (578 | ) | $ | 775 | $ | 346 | ||||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Projected benefit obligation | $ | 616 | $ | 594 | ||||
Accumulated benefit obligation | $ | 533 | $ | 501 | ||||
Fair value of plan assets | $ | — | $ | — |
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December 31, | ||||||||||||||||
Other | ||||||||||||||||
Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Projected benefit obligation | $ | 646 | $ | 623 | $ | 1,610 | $ | 2,073 | ||||||||
Fair value of plan assets | $ | 28 | $ | 25 | $ | 1,183 | $ | 1,172 |
December 31, | ||||
2007 | 2006 | |||
Weighted average discount rate | 6.65% | 6.00% | ||
Rate of compensation increase | 3.5% - 8% | 3% - 8% | ||
Average expected retirement age | 63 | 61 |
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December 31, | ||||
2007 | 2006 | |||
Pre-Medicare eligible claims | 8.5% down to 5% in 2014 | 9.0% down to 5% in 2014 | ||
Medicare eligible claims | 10.5% down to 5% in 2018 | 11.0% down to 5% in 2018 |
One Percent | One Percent | |||||||
Increase | Decrease | |||||||
(In millions) | ||||||||
Effect on total of service and interest cost components | $ | 7 | $ | (6 | ) | |||
Effect of accumulated postretirement benefit obligation | $ | 63 | $ | (62 | ) |
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Cumulative reduction in benefit obligation: | ||||||||||||
Beginning of year | $ | 328 | $ | 298 | $ | 230 | ||||||
Service cost | 7 | 6 | 6 | |||||||||
Interest cost | 19 | 19 | 16 | |||||||||
Net actuarial gains (losses) | (42 | ) | 15 | 46 | ||||||||
Prescription drug subsidy | (13 | ) | (10 | ) | — | |||||||
End of year | $ | 299 | $ | 328 | $ | 298 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Reduction in net periodic benefit cost: | ||||||||||||
Service cost | $ | 7 | $ | 6 | $ | 6 | ||||||
Interest cost | 19 | 19 | 16 | |||||||||
Amortization of net actuarial gains (losses) | 5 | 30 | 23 | |||||||||
Total reduction in net periodic benefit cost | $ | 31 | $ | 55 | $ | 45 | ||||||
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i) | Service Cost — Service cost is the increase in the projected pension benefit obligation resulting from benefits payable to employees of the Subsidiaries on service rendered during the current year. | |
ii) | Interest Cost on the Liability — Interest cost is the time value adjustment on the projected pension benefit obligation at the end of each year. | |
iii) | Expected Return on Plan Assets — Expected return on plan assets is the assumed return earned by the accumulated pension fund assets in a particular year. | |
iv) | Amortization of Prior Service Cost — This cost relates to the increase or decrease to pension benefit cost for service provided in prior years due to amendments in plans or initiation of new plans. As the economic benefits of these costs are realized in the future periods, these costs are amortized to pension expense over the expected service years of the employees. | |
v) | Amortization of Net Actuarial Gains or Losses — Actuarial gains and losses result from differences between the actual experience and the expected experience on pension plan assets or projected pension benefit obligation during a particular period. These gains and losses are accumulated and, to the extent they exceed 10% of the greater of the projected pension benefit obligation or the market-related value of plan assets, they are amortized into pension expense over the expected service years of the employees. |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Service cost | $ | 166 | $ | 163 | $ | 142 | ||||||
Interest cost | 354 | 335 | 318 | |||||||||
Expected return on plan assets | (507 | ) | (454 | ) | (446 | ) | ||||||
Amortization of net actuarial (gains) losses | 68 | 125 | 116 | |||||||||
Amortization of prior service cost (credit) | 17 | 11 | 16 | |||||||||
Net periodic benefit cost | $ | 98 | $ | 180 | $ | 146 | ||||||
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i) | Service Cost — Service cost is the increase in the expected postretirement plan benefit obligation resulting from benefits payable to employees of the Subsidiaries on service rendered during the current year. | |
ii) | Interest Cost on the Liability — Interest cost is the time value adjustment on the expected postretirement benefit obligation at the end of each year. | |
iii) | Expected Return on Plan Assets — Expected return on plan assets is the assumed return earned by the accumulated other postretirement fund assets in a particular year. | |
iv) | Amortization of Prior Service Cost — This cost relates to the increase or decrease to other postretirement benefit cost for service provided in prior years due to amendments in plans or initiation of new plans. As the economic benefits of these costs are realized in the future periods these costs are amortized to other postretirement benefit expense over the expected service years of the employees. | |
v) | Amortization of Net Actuarial Gains or Losses — Actuarial gains and losses result from differences between the actual experience and the expected experience on other postretirement benefit plan assets or expected postretirement plan benefit obligation during a particular year. These gains and losses are accumulated and, to the extent they exceed 10% of the greater of the accumulated postretirement plan benefit obligation or the market-related value of plan assets, they are amortized into other postretirement benefit expense over the expected service years of the employees. |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Service cost | $ | 27 | $ | 35 | $ | 37 | ||||||
Interest cost | 104 | 117 | 121 | |||||||||
Expected return on plan assets | (86 | ) | (79 | ) | (79 | ) | ||||||
Amortization of net actuarial (gains) losses | — | 23 | 15 | |||||||||
Amortization of prior service cost (credit) | (36 | ) | (36 | ) | (17 | ) | ||||||
Net periodic benefit cost | $ | 9 | $ | 60 | $ | 77 | ||||||
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December 31, | ||||||
Weighted Average | Weighted Average | |||||
Actual Allocation | Target Allocation | |||||
2007 | 2006 | 2008 | ||||
Asset Category | ||||||
Equity securities | 38% | 42% | 30%-55% | |||
Fixed maturities | 44% | 42% | 30%-65% | |||
Other (Real Estate and Alternative investments) | 18% | 16% | 10%-25% | |||
Total | 100% | 100% | ||||
December 31, | ||||||
Weighted Average | Weighted Average | |||||
Actual Allocation | Target Allocation | |||||
2007 | 2006 | 2008 | ||||
Asset Category | ||||||
Equity securities | 37% | 37% | 30%-45% | |||
Fixed maturities | 58% | 57% | 45%-70% | |||
Other (Real Estate and Alternative investments) | 5% | 6% | 0%-10% | |||
Total | 100% | 100% | ||||
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Pension | ||||
Benefits | ||||
(In millions) | ||||
2008 | $ | 360 | ||
2009 | $ | 373 | ||
2010 | $ | 383 | ||
2011 | $ | 397 | ||
2012 | $ | 413 | ||
2013-2017 | $ | 2,288 |
Prescription | ||||||||||||
Gross | Drug Subsidies | Net | ||||||||||
(In millions) | ||||||||||||
2008 | $ | 116 | $ | (14 | ) | $ | 102 | |||||
2009 | $ | 120 | $ | (15 | ) | $ | 105 | |||||
2010 | $ | 124 | $ | (16 | ) | $ | 109 | |||||
2011 | $ | 129 | $ | (16 | ) | $ | 113 | |||||
2012 | $ | 132 | $ | (17 | ) | $ | 115 | |||||
2013-2017 | $ | 713 | $ | (100 | ) | $ | 613 |
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December 31, | ||||||||
2007 | 2006 | |||||||
( In millions ) | ||||||||
Other Assets: | ||||||||
Premium tax offset for future undiscounted assessments | $ | 40 | $ | 45 | ||||
Premium tax offsets currently available for paid assessments | 6 | 7 | ||||||
Receivable for reimbursement of paid assessments(1) | 7 | 10 | ||||||
$ | 53 | $ | 62 | |||||
Liability: | ||||||||
Insolvency assessments | $ | 74 | $ | 90 | ||||
(1) | The Company holds a receivable from the seller of a prior acquisition in accordance with the purchase agreement. |
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(i) | recognition in the statement of financial position of the funded status of defined benefit plans measured as the difference between the fair value of plan assets and the benefit obligation, which is the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other postretirement plans; | |
(ii) | recognition as an adjustment to accumulated other comprehensive income (loss), net of income tax, those amounts of actuarial gains and losses, prior service costs and credits, and net asset or obligation at transition that have not yet been included in net periodic benefit costs as of the end of the year of adoption; | |
(iii) | recognition of subsequent changes in funded status as a component of other comprehensive income; | |
(iv) | measurement of benefit plan assets and obligations as of the date of the statement of financial position; and | |
(v) | disclosure of additional information about the effects on the employer’s statement of financial position. |
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• | Effective January 1, 2006, the Company adopted prospectively SFAS No. 155,Accounting for Certain Hybrid Instruments(“SFAS 155”). SFAS 155 amends SFAS No. 133,Accounting for Derivative Instruments and Hedging (“SFAS 133”) and SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(“SFAS 140”). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: |
(i) | clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; | |
(ii) | establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; | |
(iii) | clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and | |
(iv) | amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity (“QSPE”) from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. |
• | Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40,Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets (“Issue B40”). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company’s consolidated financial statements. | |
• | Effective January 1, 2006, the Company adopted prospectively SFAS 133 Implementation Issue No. B38,Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument |
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through Exercise of an Embedded Put Option or Call Option(“Issue B38”) and SFAS 133 Implementation Issue No. B39,Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor (“Issue B39”). Issue B38 clarifies that the potential settlement of a debtor’s obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS 133. Issue B39 clarifies that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. The adoption of Issues B38 and B39 did not have a material impact on the Company’s consolidated financial statements. |
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• | All business combinations (whether full, partial, or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
• | Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. | |
• | The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
• | Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. | |
• | Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
• | Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
• | When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
• | Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
• | When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
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• | credit risk, relating to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest; | |
• | interest rate risk, relating to the market price and cash flow variability associated with changes in market interest rates; and | |
• | market valuation risk. |
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December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
FIXED MATURITY SECURITIES | ||||||||||||
Yield (1) | 6.34 | % | 6.16 | % | 6.41 | % | ||||||
Investment income (2) | $ | 12,882 | $ | 11,977 | $ | 10,351 | ||||||
Investment gains (losses) | $ | (622 | ) | $ | (1,120 | ) | $ | (868 | ) | |||
Ending carrying value (2) | $ | 243,021 | $ | 242,687 | $ | 229,303 | ||||||
MORTGAGE AND CONSUMER LOANS | ||||||||||||
Yield (1) | 6.55 | % | 6.60 | % | 6.81 | % | ||||||
Investment income (3) | $ | 2,701 | $ | 2,411 | $ | 2,236 | ||||||
Investment gains (losses) | $ | 2 | $ | (8 | ) | $ | 17 | |||||
Ending carrying value | $ | 47,030 | $ | 42,239 | $ | 37,190 | ||||||
REAL ESTATE AND REAL ESTATE JOINT VENTURES (4) | ||||||||||||
Yield (1) | 10.28 | % | 11.55 | % | 10.59 | % | ||||||
Investment income | $ | 607 | $ | 549 | $ | 467 | ||||||
Investment gains (losses) | $ | 57 | $ | 4,898 | $ | 2,139 | ||||||
Ending carrying value | $ | 6,769 | $ | 4,986 | $ | 4,665 | ||||||
POLICY LOANS | ||||||||||||
Yield (1) | 6.21 | % | 5.99 | % | 6.00 | % | ||||||
Investment income | $ | 637 | $ | 603 | $ | 572 | ||||||
Ending carrying value | $ | 10,419 | $ | 10,228 | $ | 9,981 | ||||||
EQUITY SECURITIES AND OTHER LIMITED PARTNERSHIP INTERESTS | ||||||||||||
Yield (1) | 15.59 | % | 14.90 | % | 12.83 | % | ||||||
Investment income | $ | 1,567 | $ | 1,067 | $ | 798 | ||||||
Investment gains (losses) | $ | 180 | $ | 85 | $ | 159 | ||||||
Ending carrying value | $ | 12,205 | $ | 9,875 | $ | 7,614 | ||||||
CASH AND SHORT-TERM INVESTMENTS | ||||||||||||
Yield (1) | 4.74 | % | 5.51 | % | 3.66 | % | ||||||
Investment income | $ | 437 | $ | 442 | $ | 362 | ||||||
Investment gains (losses) | $ | 3 | $ | (2 | ) | $ | (2 | ) | ||||
Ending carrying value | $ | 13,016 | $ | 9,816 | $ | 7,324 |
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December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
OTHER INVESTED ASSETS(5) | ||||||||||||
Yield (1) | 8.98 | % | 9.60 | % | 8.96 | % | ||||||
Investment income | $ | 887 | $ | 821 | $ | 570 | ||||||
Investment gains (losses) | $ | (627 | ) | $ | (736 | ) | $ | 508 | ||||
Ending carrying value | $ | 12,642 | $ | 10,428 | $ | 8,078 | ||||||
TOTAL INVESTMENTS | ||||||||||||
Gross investment income yield (1) | 6.81 | % | 6.62 | % | 6.66 | % | ||||||
Investment fees and expenses yield | (0.15 | )% | (0.15 | )% | (0.15 | )% | ||||||
NET INVESTMENT INCOME YIELD | 6.66 | % | 6.47 | % | 6.51 | % | ||||||
Gross investment income | $ | 19,718 | $ | 17,870 | $ | 15,356 | ||||||
Investment fees and expenses | (440 | ) | (404 | ) | (339 | ) | ||||||
NET INVESTMENT INCOME | $ | 19,278 | $ | 17,466 | $ | 15,017 | ||||||
Ending carrying value | $ | 345,102 | $ | 330,259 | $ | 304,155 | ||||||
Gross investment gains | $ | 1,440 | $ | 5,754 | $ | 3,340 | ||||||
Gross investment losses | (1,765 | ) | (2,036 | ) | (1,578 | ) | ||||||
Writedowns | (148 | ) | (136 | ) | (116 | ) | ||||||
Subtotal | $ | (473 | ) | $ | 3,582 | $ | 1,646 | |||||
Derivative and other instruments not qualifying for hedge accounting | (534 | ) | (465 | ) | 307 | |||||||
INVESTMENT GAINS (LOSSES) | $ | (1,007 | ) | $ | 3,117 | $ | 1,953 | |||||
Minority interest — investment gains (losses) | 33 | — | (9 | ) | ||||||||
Investment gains (losses) tax benefit (provision) | 326 | (1,114 | ) | (681 | ) | |||||||
INVESTMENT GAINS (LOSSES), NET OF INCOME TAX | $ | (648 | ) | $ | 2,003 | $ | 1,263 | |||||
(1) | Yields are based on quarterly average asset carrying values, excluding recognized and unrealized investment gains (losses), and for yield calculation purposes, average assets exclude collateral associated with the Company’s securities lending program. | |
(2) | Fixed maturity securities include $779 million, $759 million and $825 million in ending carrying value related to trading securities at December 31, 2007, 2006 and 2005, respectively. Fixed maturity securities include $50 million, $71 million and $14 million of investment income related to trading securities for the years ended December 31, 2007, 2006 and 2005, respectively. | |
(3) | Investment income from mortgage and consumer loans includes prepayment fees. | |
(4) | Included in investment income from real estate and real estate joint ventures is $16 million, $94 million and $162 million related to discontinued operations for the years ended December 31, 2007, 2006 and 2005, respectively. Included in investment gains (losses) from real estate and real estate joint ventures is $13 million, $4.8 billion and $2.1 billion of gains related to discontinued operations for the years ended December 31, 2007, 2006 and 2005, respectively. | |
(5) | Included in investment income from other invested assets are scheduled periodic settlement payments on derivative instruments that do not qualify for hedge accounting under SFAS No. 133,Accounting for Derivative Instruments and Hedging, of $256 million, $290 million and $99 million for the years ended December 31, 2007, 2006 and 2005, respectively. These amounts are excluded from investment gains (losses). Additionally, excluded from investment gains (losses) is $26 million, $6 million and ($13) million for the years ended December 31, 2007, 2006 and 2005, respectively, related to settlement payments on derivatives used to hedge |
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interest rate and currency risk on policyholders account balances that do not qualify for hedge accounting. Such amounts are included within interest credited to policyholders account balances. |
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||
Cost or | Cost or | |||||||||||||||||||||||||
Amortized | Estimated | % of | Amortized | Estimated | % of | |||||||||||||||||||||
NAIC Rating | Rating Agency Designation (1) | Cost | Fair Value | Total | Cost | Fair Value | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||
1 | Aaa/Aa/A | $ | 172,711 | $ | 175,651 | 72.5 | % | $ | 174,430 | $ | 177,969 | 73.6 | % | |||||||||||||
2 | Baa | 48,265 | 48,914 | 20.2 | 45,897 | 46,881 | 19.4 | |||||||||||||||||||
3 | Ba | 10,676 | 10,738 | 4.4 | 9,332 | 9,738 | 4.0 | |||||||||||||||||||
4 | B | 6,632 | 6,481 | 2.7 | 6,814 | 7,030 | 2.9 | |||||||||||||||||||
5 | Caa and lower | 476 | 445 | 0.2 | 283 | 294 | 0.1 | |||||||||||||||||||
6 | In or near default | 1 | 13 | — | 12 | 16 | — | |||||||||||||||||||
Total fixed maturity securities | $ | 238,761 | $ | 242,242 | 100.0 | % | $ | 236,768 | $ | 241,928 | 100.0 | % | ||||||||||||||
(1) | Amounts presented are based on rating agency designations. Comparisons between NAIC ratings and rating agency designations are published by the NAIC. The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then the MetLife rating is used. |
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December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 4,537 | $ | 4,628 | $ | 6,923 | $ | 7,011 | ||||||||
Due after one year through five years | 42,453 | 43,167 | 45,331 | 45,928 | ||||||||||||
Due after five years through ten years | 40,783 | 41,046 | 39,571 | 40,200 | ||||||||||||
Due after ten years | 65,496 | 68,143 | 63,023 | 66,728 | ||||||||||||
Subtotal | 153,269 | 156,984 | 154,848 | 159,867 | ||||||||||||
Mortgage-backed and asset-backed securities | 85,492 | 85,258 | 81,920 | 82,061 | ||||||||||||
Total fixed maturity securities | $ | 238,761 | $ | 242,242 | $ | 236,768 | $ | 241,928 | ||||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Proceeds | $ | 80,685 | $ | 89,869 | $ | 127,709 | ||||||
Gross investment gains | $ | 831 | $ | 580 | $ | 704 | ||||||
Gross investment losses | $ | (1,183 | ) | $ | (1,533 | ) | $ | (1,391 | ) |
December 31, 2007 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 77,875 | $ | 1,725 | $ | 2,174 | $ | 77,426 | 32.0 | % | ||||||||||
Residential mortgage-backed securities | 56,267 | 611 | 389 | 56,489 | 23.3 | |||||||||||||||
Foreign corporate securities | 37,359 | 1,740 | 794 | 38,305 | 15.8 | |||||||||||||||
U.S. Treasury/agency securities | 19,771 | 1,487 | 13 | 21,245 | 8.8 | |||||||||||||||
Commercial mortgage-backed securities | 17,676 | 251 | 199 | 17,728 | 7.3 | |||||||||||||||
Foreign government securities | 13,535 | 1,924 | 188 | 15,271 | 6.3 | |||||||||||||||
Asset-backed securities | 11,549 | 41 | 549 | 11,041 | 4.6 | |||||||||||||||
State and political subdivision securities | 4,394 | 140 | 115 | 4,419 | 1.8 | |||||||||||||||
Other fixed maturity securities | 335 | 13 | 30 | 318 | 0.1 | |||||||||||||||
Total fixed maturity securities | $ | 238,761 | $ | 7,932 | $ | 4,451 | $ | 242,242 | 100.0 | % | ||||||||||
Common stock | $ | 2,488 | $ | 568 | $ | 108 | $ | 2,948 | 48.7 | % | ||||||||||
Non-redeemable preferred stock | 3,403 | 61 | 362 | 3,102 | 51.3 | |||||||||||||||
Total equity securities (1) | $ | 5,891 | $ | 629 | $ | 470 | $ | 6,050 | 100.0 | % | ||||||||||
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December 31, 2006 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 74,010 | $ | 2,047 | $ | 983 | $ | 75,074 | 31.0 | % | ||||||||||
Residential mortgage-backed securities | 51,602 | 385 | 321 | 51,666 | 21.4 | |||||||||||||||
Foreign corporate securities | 33,029 | 1,687 | 378 | 34,338 | 14.2 | |||||||||||||||
U.S. Treasury/agency securities | 29,897 | 984 | 248 | 30,633 | 12.7 | |||||||||||||||
Commercial mortgage-backed securities | 16,467 | 193 | 138 | 16,522 | 6.8 | |||||||||||||||
Foreign government securities | 11,406 | 1,835 | 34 | 13,207 | 5.4 | |||||||||||||||
Asset-backed securities | 13,851 | 75 | 53 | 13,873 | 5.7 | |||||||||||||||
State and political subdivision securities | 6,121 | 230 | 51 | 6,300 | 2.6 | |||||||||||||||
Other fixed maturity securities | 385 | 7 | 77 | 315 | 0.2 | |||||||||||||||
Total fixed maturity securities | $ | 236,768 | $ | 7,443 | $ | 2,283 | $ | 241,928 | 100.0 | % | ||||||||||
Common stock | $ | 1,798 | $ | 487 | $ | 16 | $ | 2,269 | 44.5 | % | ||||||||||
Non-redeemable preferred stock | 2,751 | 103 | 29 | 2,825 | 55.5 | |||||||||||||||
Total equity securities (1) | $ | 4,549 | $ | 590 | $ | 45 | $ | 5,094 | 100.0 | % | ||||||||||
(1) | Equity securities primarily consist of investments in common and preferred stocks and mutual fund interests. Such securities include private equity securities with an estimated fair value of $599 million and $238 million at December 31, 2007 and 2006, respectively. |
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December 31, 2007 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Less than six months | $ | 49,463 | $ | 1,943 | $ | 1,670 | $ | 555 | 6,339 | 644 | ||||||||||||||
Six months or greater but less than nine months | 17,353 | 23 | 844 | 7 | 1,461 | 31 | ||||||||||||||||||
Nine months or greater but less than twelve months | 9,410 | 7 | 568 | 2 | 791 | 1 | ||||||||||||||||||
Twelve months or greater | 31,731 | 50 | 1,262 | 13 | 3,192 | 32 | ||||||||||||||||||
Total | $ | 107,957 | $ | 2,023 | $ | 4,344 | $ | 577 | ||||||||||||||||
December 31, 2006 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Less than six months | $ | 52,222 | $ | 35 | $ | 547 | $ | 12 | 9,093 | 81 | ||||||||||||||
Six months or greater but less than nine months | 2,682 | 3 | 42 | 1 | 415 | 2 | ||||||||||||||||||
Nine months or greater but less than twelve months | 12,049 | 14 | 204 | 4 | 937 | 1 | ||||||||||||||||||
Twelve months or greater | 47,462 | 29 | 1,511 | 7 | 4,634 | 6 | ||||||||||||||||||
Total | $ | 114,415 | $ | 81 | $ | 2,304 | $ | 24 | ||||||||||||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
Sector: | ||||||||
U.S. corporate securities | 44 | % | 42 | % | ||||
Foreign corporate securities | 16 | 16 | ||||||
Asset-backed securities | 11 | 2 | ||||||
Residential mortgage-backed securities | 8 | 14 | ||||||
Foreign government securities | 4 | 1 | ||||||
Commercial mortgage-backed securities | 4 | 6 | ||||||
U.S. Treasury/agency securities | — | 11 | ||||||
Other | 13 | 8 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Finance | 34 | % | 10 | % | ||||
Industrial | 18 | 23 | ||||||
Mortgage-backed | 12 | 20 | ||||||
Utility | 8 | 11 | ||||||
Government | 4 | 12 | ||||||
Other | 24 | 24 | ||||||
Total | 100 | % | 100 | % | ||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||
Estimated | % of | Estimated | % of | |||||||||||||
Fair Value | Total | Fair Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Industrial | $ | 40,399 | 34.9 | % | $ | 39,296 | 35.9 | % | ||||||||
Foreign (1) | 38,305 | 33.1 | 34,338 | 31.5 | ||||||||||||
Finance | 22,013 | 19.0 | 21,559 | 19.7 | ||||||||||||
Utility | 13,780 | 11.9 | 13,038 | 11.9 | ||||||||||||
Other | 1,234 | 1.1 | 1,181 | 1.0 | ||||||||||||
Total | $ | 115,731 | 100.0 | % | $ | 109,412 | 100.0 | % | ||||||||
(1) | Includes U.S. dollar-denominated debt obligations of foreign obligors, and other foreign investments. |
December 31, 2007 | December 31, 2006 | |||||||||||||||
Estimated | % of | Estimated | % of | |||||||||||||
Fair Value | Total | Fair Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Residential mortgage-backed securities: | ||||||||||||||||
Collateralized mortgage obligations | $ | 37,372 | 43.8 | % | $ | 33,034 | 40.3 | % | ||||||||
Pass-through securities | 19,117 | 22.4 | 18,632 | 22.7 | ||||||||||||
Total residential mortgage-backed securities | 56,489 | 66.2 | 51,666 | 63.0 | ||||||||||||
Commercial mortgage-backed securities | 17,728 | 20.8 | 16,522 | 20.1 | ||||||||||||
Asset-backed securities | 11,041 | 13.0 | 13,873 | 16.9 | ||||||||||||
Total | $ | 85,258 | 100.0 | % | $ | 82,061 | 100.0 | % | ||||||||
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December 31, 2007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Cost or | Cost or | Cost or | Cost or | Cost or | |||||||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 234 | $ | 223 | $ | 132 | $ | 125 | $ | 19 | $ | 17 | $ | 14 | $ | 13 | $ | 4 | $ | 2 | $ | 403 | $ | 380 | ||||||||||||||||||||||||
2004 | 212 | 195 | 446 | 414 | 27 | 24 | — | — | 1 | — | 686 | 633 | ||||||||||||||||||||||||||||||||||||
2005 | 551 | 502 | 278 | 252 | 22 | 18 | 5 | 4 | — | — | 856 | 776 | ||||||||||||||||||||||||||||||||||||
2006 | 258 | 235 | 69 | 47 | — | — | — | — | — | — | 327 | 282 | ||||||||||||||||||||||||||||||||||||
2007 | 152 | 142 | 17 | 9 | — | — | — | — | — | — | 169 | 151 | ||||||||||||||||||||||||||||||||||||
Total | $ | 1,407 | $ | 1,297 | $ | 942 | $ | 847 | $ | 68 | $ | 59 | $ | 19 | $ | 17 | $ | 5 | $ | 2 | $ | 2,441 | $ | 2,222 | ||||||||||||||||||||||||
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December 31, 2006 | ||||||||||||||||||||||||||||||||||||||||||||||||
Below | ||||||||||||||||||||||||||||||||||||||||||||||||
Investment | ||||||||||||||||||||||||||||||||||||||||||||||||
Aaa | Aa | A | Baa | Grade | Total | |||||||||||||||||||||||||||||||||||||||||||
Cost or | Cost or | Cost or | Cost or | Cost or | Cost or | |||||||||||||||||||||||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | Amortized | Fair | |||||||||||||||||||||||||||||||||||||
Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | Cost | Value | |||||||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||||||||||||||||||
2003 & Prior | $ | 319 | $ | 317 | $ | 285 | $ | 285 | $ | 60 | $ | 60 | $ | 33 | $ | 33 | $ | — | $ | — | $ | 697 | $ | 695 | ||||||||||||||||||||||||
2004 | 307 | 305 | 456 | 458 | 47 | 47 | 15 | 15 | — | — | 825 | 825 | ||||||||||||||||||||||||||||||||||||
2005 | 736 | 730 | 305 | 306 | 22 | 22 | — | — | — | — | 1,063 | 1,058 | ||||||||||||||||||||||||||||||||||||
2006 | 321 | 322 | 42 | 43 | 57 | 57 | 32 | 32 | — | — | 452 | 454 | ||||||||||||||||||||||||||||||||||||
Total | $ | 1,683 | $ | 1,674 | $ | 1,088 | $ | 1,092 | $ | 186 | $ | 186 | $ | 80 | $ | 80 | $ | — | $ | — | $ | 3,037 | $ | 3,032 | ||||||||||||||||||||||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Commercial mortgage loans | $ | 35,501 | 75.5 | % | $ | 31,847 | 75.4 | % | ||||||||
Agricultural mortgage loans | 10,484 | 22.3 | 9,213 | 21.8 | ||||||||||||
Consumer loans | 1,045 | 2.2 | 1,179 | 2.8 | ||||||||||||
Total | $ | 47,030 | 100.0 | % | $ | 42,239 | 100.0 | % | ||||||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Region | ||||||||||||||||
Pacific | $ | 8,620 | 24.3 | % | $ | 7,663 | 24.0 | % | ||||||||
South Atlantic | 8,021 | 22.6 | 6,881 | 21.6 | ||||||||||||
Middle Atlantic | 5,110 | 14.4 | 4,858 | 15.3 | ||||||||||||
International | 3,642 | 10.3 | 2,832 | 8.9 | ||||||||||||
East North Central | 2,957 | 8.3 | 2,879 | 9.0 | ||||||||||||
West South Central | 2,925 | 8.2 | 2,631 | 8.3 | ||||||||||||
New England | 1,499 | 4.2 | 1,301 | 4.1 | ||||||||||||
Mountain | 1,086 | 3.1 | 859 | 2.7 | ||||||||||||
West North Central | 1,046 | 2.9 | 799 | 2.5 | ||||||||||||
East South Central | 503 | 1.4 | 452 | 1.4 | ||||||||||||
Other | 92 | 0.3 | 692 | 2.2 | ||||||||||||
Total | $ | 35,501 | 100.0 | % | $ | 31,847 | 100.0 | % | ||||||||
Property Type | ||||||||||||||||
Office | $ | 15,471 | 43.6 | % | $ | 15,083 | 47.4 | % | ||||||||
Retail | 7,557 | 21.3 | 6,552 | 20.6 | ||||||||||||
Apartments | 4,437 | 12.5 | 3,772 | 11.8 | ||||||||||||
Hotel | 3,282 | 9.2 | 2,120 | 6.7 | ||||||||||||
Industrial | 2,880 | 8.1 | 2,850 | 8.9 | ||||||||||||
Other | 1,874 | 5.3 | 1,470 | 4.6 | ||||||||||||
Total | $ | 35,501 | 100.0 | % | $ | 31,847 | 100.0 | % | ||||||||
December 31, 2007 | December 31, 2006 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Value | Total | Value | Total | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 2,963 | 8.3 | % | $ | 1,772 | 5.6 | % | ||||||||
Due after one year through two years | 4,247 | 12.0 | 3,006 | 9.4 | ||||||||||||
Due after two years through three years | 4,151 | 11.7 | 4,173 | 13.1 | ||||||||||||
Due after three years through four years | 3,892 | 11.0 | 3,822 | 12.0 | ||||||||||||
Due after four years through five years | 4,589 | 12.9 | 4,769 | 15.0 | ||||||||||||
Due after five years | 15,659 | 44.1 | 14,305 | 44.9 | ||||||||||||
Total | $ | 35,501 | 100.0 | % | $ | 31,847 | 100.0 | % | ||||||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Performing | $ | 35,665 | 100.0 | % | $ | 168 | 0.5 | % | $ | 31,996 | 100.0 | % | $ | 153 | 0.5 | % | ||||||||||||||||
Potentially delinquent | 3 | — | — | — | 3 | — | — | — | ||||||||||||||||||||||||
Delinquent or under foreclosure | 1 | — | — | — | 1 | — | — | — | ||||||||||||||||||||||||
Total | $ | 35,669 | 100.0 | % | $ | 168 | 0.5 | % | $ | 32,000 | 100.0 | % | $ | 153 | 0.5 | % | ||||||||||||||||
(1) | Amortized cost is the carrying value before valuation allowances. |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 153 | $ | 147 | $ | 149 | ||||||
Additions | 69 | 25 | 43 | |||||||||
Deductions | (54 | ) | (19 | ) | (45 | ) | ||||||
Balance, end of period | $ | 168 | $ | 153 | $ | 147 | ||||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Performing | $ | 10,440 | 99.4 | % | $ | 12 | 0.1 | % | $ | 9,172 | 99.4 | % | $ | 11 | 0.1 | % | ||||||||||||||||
Restructured | 2 | — | — | — | 9 | 0.1 | — | — | ||||||||||||||||||||||||
Potentially delinquent | 47 | 0.4 | 4 | 8.5 | 2 | — | — | — | ||||||||||||||||||||||||
Delinquent or under foreclosure | 19 | 0.2 | 8 | 42.1 | 48 | 0.5 | 7 | 14.6 | ||||||||||||||||||||||||
Total | $ | 10,508 | 100.0 | % | $ | 24 | 0.2 | % | $ | 9,231 | 100.0 | % | $ | 18 | 0.2 | % | ||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 18 | $ | 11 | $ | 7 | ||||||
Additions | 8 | 10 | 4 | |||||||||
Deductions | (2 | ) | (3 | ) | — | |||||||
Balance, end of period | $ | 24 | $ | 18 | $ | 11 | ||||||
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||||||||||
% of | % of | |||||||||||||||||||||||||||||||
Amortized | % of | Valuation | Amortized | Amortized | % of | Valuation | Amortized | |||||||||||||||||||||||||
Cost (1) | Total | Allowance | Cost | Cost (1) | Total | Allowance | Cost | |||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
Performing | $ | 1,006 | 95.7 | % | $ | 5 | 0.5 | % | $ | 1,155 | 97.1 | % | $ | 10 | 0.9 | % | ||||||||||||||||
Potentially delinquent | 19 | 1.8 | — | — | 17 | 1.4 | — | — | ||||||||||||||||||||||||
Delinquent or under foreclosure | 26 | 2.5 | 1 | 4.0 | 18 | 1.5 | 1 | 5.6 | ||||||||||||||||||||||||
Total | $ | 1,051 | 100.0 | % | $ | 6 | 0.6 | % | $ | 1,190 | 100.0 | % | $ | 11 | 0.9 | % | ||||||||||||||||
(1) | Amortized cost is equal to carrying value before valuation allowances. |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance, beginning of period | $ | 11 | $ | 15 | $ | 1 | ||||||
Additions | — | — | 17 | |||||||||
Deductions | (5 | ) | (4 | ) | (3 | ) | ||||||
Balance, end of period | $ | 6 | $ | 11 | $ | 15 | ||||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||
Carrying | % of | Carrying | % of | |||||||||||||
Type | Value | Total | Value | Total | ||||||||||||
(In millions) | ||||||||||||||||
Real estate | $ | 3,823 | 56.5 | % | $ | 3,322 | 66.6 | % | ||||||||
Real estate joint ventures | 2,771 | 40.9 | 1,477 | 29.6 | ||||||||||||
Foreclosed real estate | 3 | 0.1 | 3 | 0.1 | ||||||||||||
6,597 | 97.5 | 4,802 | 96.3 | |||||||||||||
Real estate held-for-sale | 172 | 2.5 | 184 | 3.7 | ||||||||||||
Total real estate holdings | $ | 6,769 | 100.0 | % | $ | 4,986 | 100.0 | % | ||||||||
December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Office | $ | 3,126 | 46 | % | $ | 2,709 | 55 | % | ||||||||
Apartments | 1,264 | 19 | 739 | 15 | ||||||||||||
Development joint ventures | 743 | 11 | 169 | 3 | ||||||||||||
Retail | 574 | 8 | 513 | 10 | ||||||||||||
Real estate investment funds | 516 | 8 | 401 | 8 | ||||||||||||
Industrial | 283 | 4 | 291 | 6 | ||||||||||||
Land | 174 | 3 | 71 | 1 | ||||||||||||
Agriculture | 29 | — | 32 | 1 | ||||||||||||
Other | 60 | 1 | 61 | 1 | ||||||||||||
Total real estate holdings | $ | 6,769 | 100 | % | $ | 4,986 | 100 | % | ||||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Rental receivables, net | $ | 1,491 | $ | 1,055 | ||||
Estimated residual values | 1,881 | 887 | ||||||
Subtotal | 3,372 | 1,942 | ||||||
Unearned income | (1,313 | ) | (694 | ) | ||||
Investment in leveraged leases | $ | 2,059 | $ | 1,248 | ||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Income from investment in leveraged leases (included in net investment income) | $ | 67 | $ | 51 | $ | 54 | ||||||
Less: Income tax expense on leveraged leases | (24 | ) | (18 | ) | (19 | ) | ||||||
Net income from investment in leveraged leases | $ | 43 | $ | 33 | $ | 35 | ||||||
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December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||
Current Market | Current Market | |||||||||||||||||||||||
Notional | or Fair Value | Notional | or Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 62,519 | $ | 785 | $ | 768 | $ | 27,148 | $ | 639 | $ | 150 | ||||||||||||
Interest rate floors | 48,937 | 621 | — | 37,437 | 279 | — | ||||||||||||||||||
Interest rate caps | 45,498 | 50 | — | 26,468 | 125 | — | ||||||||||||||||||
Financial futures | 10,817 | 89 | 57 | 8,432 | 64 | 39 | ||||||||||||||||||
Foreign currency swaps | 21,399 | 1,480 | 1,724 | 19,627 | 986 | 1,174 | ||||||||||||||||||
Foreign currency forwards | 4,185 | 76 | 16 | 2,934 | 31 | 27 | ||||||||||||||||||
Options | 2,043 | 713 | 1 | 587 | 306 | 8 | ||||||||||||||||||
Financial forwards | 4,600 | 122 | 2 | 3,800 | 12 | 40 | ||||||||||||||||||
Credit default swaps | 6,850 | 58 | 35 | 6,357 | 5 | 21 | ||||||||||||||||||
Synthetic GICs | 3,670 | — | — | 3,739 | — | — | ||||||||||||||||||
Other | 250 | 43 | — | 250 | 56 | — | ||||||||||||||||||
Total | $ | 210,768 | $ | 4,037 | $ | 2,603 | $ | 136,779 | $ | 2,503 | $ | 1,459 | ||||||||||||
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December 31, 2007 | ||||||||||||||||
Primary Beneficiary | Not Primary Beneficiary | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Total | Exposure to | Total | Exposure to | |||||||||||||
Assets (1) | Loss (2) | Assets (1) | Loss (2) | |||||||||||||
(In millions) | ||||||||||||||||
Asset-backed securitizations and collateralized debt obligations | $ | 1,167 | $ | 1,167 | $ | 1,591 | $ | 184 | ||||||||
Real estate joint ventures (3) | 48 | 26 | 276 | 42 | ||||||||||||
Other limited partnership interests (4) | 2 | 1 | 42,141 | 2,080 | ||||||||||||
Trust preferred securities (5) | 105 | 105 | 48,232 | 3,369 | ||||||||||||
Other investments (6) | 1,119 | 1,119 | 3,258 | 260 | ||||||||||||
Total | $ | 2,441 | $ | 2,418 | $ | 95,498 | $ | 5,935 | ||||||||
(1) | The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value. The assets of the real estate joint ventures, other limited partnership interests, trust preferred securities and other investments are reflected at the carrying amounts at which such assets would have been reflected on the Company’s consolidated balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. |
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(2) | The maximum exposure to loss relating to the asset-backed securitizations and collateralized debt obligations is equal to the carrying amounts of retained interests. In addition, the Company provides collateral management services for certain of these structures for which it collects a management fee. The maximum exposure to loss relating to real estate joint ventures, other limited partnership interests, trust preferred securities and other investments is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. | |
(3) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. | |
(4) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. | |
(5) | Trust preferred securities are complex, uniquely structured investments which contain features of both equity and debt, may have an extended or no stated maturity, and may be callable at the issuer’s option after a defined period of time. | |
(6) | Other investments include securities that are not trust preferred securities, asset-backed securitizations or collateralized debt obligations. |
• | such separate accounts are legally recognized; | |
• | assets supporting the contract liabilities are legally insulated from the Company’s general account liabilities; | |
• | investments are directed by the contractholder; and | |
• | all investment performance, net of contract fees and assessments, is passed through to the contractholder. |
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Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
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• | implementing a Board of Directors-approved corporate risk framework, which outlines the Company’s approach for managing risk on an enterprise-wide basis; | |
• | developing policies and procedures for managing, measuring and monitoring those risks identified in the corporate risk framework; | |
• | establishing appropriate corporate risk tolerance levels; | |
• | deploying capital on an economic capital basis; and | |
• | reporting on a periodic basis to the Governance Committee of the Holding Company’s Board of Directors and various financial and non-financial senior management committees. |
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• | the net present values of its interest rate sensitive exposures resulting from a 10% change (increase or decrease) in interest rates; | |
• | the market value of its equity positions due to a 10% change (increase or decrease) in equity prices; and | |
• | the U.S. dollar equivalent balances of the Company’s currency exposures due to a 10% change (increase or decrease) in currency exchange rates. |
• | the market risk information is limited by the assumptions and parameters established in creating the related sensitivity analysis, including the impact of prepayment rates on mortgages; | |
• | for derivatives that qualify as hedges, the impact on reported earnings may be materially different from the change in market values; | |
• | the analysis excludes other significant real estate holdings and liabilities pursuant to insurance contracts; and | |
• | the model assumes that the composition of assets and liabilities remains unchanged throughout the year. |
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December 31, 2007 | ||||
(In millions) | ||||
Non-trading: | ||||
Interest rate risk | $ | 5,170 | ||
Equity price risk | $ | 96 | ||
Foreign currency exchange rate risk | $ | 711 | ||
Trading: | ||||
Interest rate risk | $ | 18 |
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December 31, 2007 | ||||||||||||
Assuming a | ||||||||||||
10% increase | ||||||||||||
Notional | Estimated | in the yield | ||||||||||
Amount | Fair Value | curve | ||||||||||
(In millions) | ||||||||||||
Assets | ||||||||||||
Fixed maturity securities | $ | 242,242 | $ | (5,177 | ) | |||||||
Equity securities | 6,050 | — | ||||||||||
Mortgage and consumer loans | 47,599 | (594 | ) | |||||||||
Policy loans | 10,419 | (235 | ) | |||||||||
Short-term investments | 2,648 | (15 | ) | |||||||||
Cash and cash equivalents | 10,368 | — | ||||||||||
Mortgage loan commitments | $ | 4,035 | (43 | ) | (50 | ) | ||||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,196 | (59 | ) | — | |||||||
Total assets | $ | (6,071 | ) | |||||||||
Liabilities | ||||||||||||
Policyholder account balances | $ | 114,466 | $ | 840 | ||||||||
Short-term debt | 667 | — | ||||||||||
Long-term debt | 9,532 | 307 | ||||||||||
Collateral financing arrangements | 5,365 | — | ||||||||||
Junior subordinated debt securities | 4,338 | 136 | ||||||||||
Shares subject to mandatory redemption | 178 | — | ||||||||||
Payables for collateral under securities loaned and other transactions | 44,136 | — | ||||||||||
Total liabilities | $ | 1,283 | ||||||||||
Other | ||||||||||||
Derivative instruments (designated hedges or otherwise) Interest rate swaps | $ | 62,519 | $ | 17 | $ | (132 | ) | |||||
Interest rate floors | 48,937 | 621 | (47 | ) | ||||||||
Interest rate caps | 45,498 | 50 | 33 | |||||||||
Financial futures | 10,817 | 32 | (41 | ) | ||||||||
Foreign currency swaps | 21,399 | (244 | ) | (97 | ) | |||||||
Foreign currency forwards | 4,185 | 60 | — | |||||||||
Options | 2,043 | 712 | (93 | ) | ||||||||
Financial forwards | 4,600 | 120 | (5 | ) | ||||||||
Credit default swaps | 6,850 | 23 | (1 | ) | ||||||||
Synthetic GICs | 3,670 | — | — | |||||||||
Other | 250 | 43 | 1 | |||||||||
Total other | $ | (382 | ) | |||||||||
Net change | $ | (5,170 | ) | |||||||||
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Item 8. | Financial Statements and Supplementary Data |
Page | ||||
F-1 | ||||
Financial Statements at December 31, 2007 and 2006 and for the Years Ended December 31, 2007, 2006 and 2005: | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
Financial Statement Schedules at December 31, 2007 and 2006 and for the Years Ended December 31, 2007, 2006 and 2005: | ||||
F-127 | ||||
F-128 | ||||
F-139 | ||||
F-141 |
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F-1
Table of Contents
2007 | 2006 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $238,761 and $236,768, respectively) | $ | 242,242 | $ | 241,928 | ||||
Equity securities available-for-sale, at estimated fair value (cost: $5,891 and $4,549, respectively) | 6,050 | 5,094 | ||||||
Trading securities, at estimated fair value (cost: $768 and $727, respectively) | 779 | 759 | ||||||
Mortgage and consumer loans | 47,030 | 42,239 | ||||||
Policy loans | 10,419 | 10,228 | ||||||
Real estate and real estate joint ventures held-for-investment | 6,597 | 4,802 | ||||||
Real estate held-for-sale | 172 | 184 | ||||||
Other limited partnership interests | 6,155 | 4,781 | ||||||
Short-term investments | 2,648 | 2,709 | ||||||
Other invested assets | 12,642 | 10,428 | ||||||
Total investments | 334,734 | 323,152 | ||||||
Cash and cash equivalents | 10,368 | 7,107 | ||||||
Accrued investment income | 3,630 | 3,347 | ||||||
Premiums and other receivables | 14,607 | 14,490 | ||||||
Deferred policy acquisition costs and value of business acquired | 21,521 | 20,838 | ||||||
Current income tax recoverable | 303 | — | ||||||
Goodwill | 4,910 | 4,897 | ||||||
Assets of subsidiaries held-for-sale | — | 1,563 | ||||||
Other assets | 8,330 | 7,956 | ||||||
Separate account assets | 160,159 | 144,365 | ||||||
Total assets | $ | 558,562 | $ | 527,715 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 132,262 | $ | 127,489 | ||||
Policyholder account balances | 137,349 | 131,948 | ||||||
Other policyholder funds | 10,176 | 9,139 | ||||||
Policyholder dividends payable | 994 | 960 | ||||||
Policyholder dividend obligation | 789 | 1,063 | ||||||
Short-term debt | 667 | 1,449 | ||||||
Long-term debt | 9,628 | 9,129 | ||||||
Collateral financing arrangements | 5,732 | 850 | ||||||
Junior subordinated debt securities | 4,474 | 3,780 | ||||||
Shares subject to mandatory redemption | 159 | 278 | ||||||
Liabilities of subsidiaries held-for-sale | — | 1,595 | ||||||
Current income tax payable | — | 1,465 | ||||||
Deferred income tax liability | 2,457 | 2,278 | ||||||
Payables for collateral under securities loaned and other transactions | 44,136 | 45,846 | ||||||
Other liabilities | 14,401 | 12,283 | ||||||
Separate account liabilities | 160,159 | 144,365 | ||||||
Total liabilities | 523,383 | 493,917 | ||||||
Contingencies, Commitments and Guarantees (Note 16) | ||||||||
Stockholders’ Equity: | ||||||||
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 84,000,000 shares issued and outstanding; $2,100 aggregate liquidation preference | 1 | 1 | ||||||
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 786,766,664 shares issued; 729,223,440 and 751,984,799 shares outstanding at December 31, 2007 and 2006, respectively | 8 | 8 | ||||||
Additional paid-in capital | 17,098 | 17,454 | ||||||
Retained earnings | 19,884 | 16,574 | ||||||
Treasury stock, at cost; 57,543,224 shares and 34,781,865 shares at December 31, 2007 and 2006, respectively | (2,890 | ) | (1,357 | ) | ||||
Accumulated other comprehensive income | 1,078 | 1,118 | ||||||
Total stockholders’ equity | 35,179 | 33,798 | ||||||
Total liabilities and stockholders’ equity | $ | 558,562 | $ | 527,715 | ||||
F-2
Table of Contents
For the Years Ended December 31, 2007, 2006 and 2005
2007 | 2006 | 2005 | ||||||||||
Revenues | ||||||||||||
Premiums | $ | 27,895 | $ | 26,412 | $ | 24,860 | ||||||
Universal life and investment-type product policy fees | 5,311 | 4,780 | 3,828 | |||||||||
Net investment income | 19,006 | 17,082 | 14,756 | |||||||||
Other revenues | 1,533 | 1,362 | 1,271 | |||||||||
Net investment gains (losses) | (738 | ) | (1,382 | ) | (86 | ) | ||||||
Total revenues | 53,007 | 48,254 | 44,629 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 27,828 | 26,431 | 25,506 | |||||||||
Interest credited to policyholder account balances | 5,741 | 5,171 | 3,887 | |||||||||
Policyholder dividends | 1,726 | 1,701 | 1,679 | |||||||||
Other expenses | 11,673 | 10,783 | 9,264 | |||||||||
Total expenses | 46,968 | 44,086 | 40,336 | |||||||||
Income from continuing operations before provision for income tax | 6,039 | 4,168 | 4,293 | |||||||||
Provision for income tax | 1,759 | 1,097 | 1,222 | |||||||||
Income from continuing operations | 4,280 | 3,071 | 3,071 | |||||||||
Income from discontinued operations, net of income tax | 37 | 3,222 | 1,643 | |||||||||
Net income | 4,317 | 6,293 | 4,714 | |||||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Net income available to common shareholders | $ | 4,180 | $ | 6,159 | $ | 4,651 | ||||||
Income from continuing operations available to common shareholders per common share | ||||||||||||
Basic | $ | 5.57 | $ | 3.85 | $ | 4.02 | ||||||
Diluted | $ | 5.44 | $ | 3.81 | $ | 3.98 | ||||||
Net income available to common shareholders per common share | ||||||||||||
Basic | $ | 5.62 | $ | 8.09 | $ | 6.21 | ||||||
Diluted | $ | 5.48 | $ | 7.99 | $ | 6.16 | ||||||
Cash dividends per common share | $ | 0.74 | $ | 0.59 | $ | 0.52 | ||||||
F-3
Table of Contents
For the Years Ended December 31, 2007, 2006 and 2005
Accumulated Other Comprehensive Income | ||||||||||||||||||||||||||||||||||||
Net | Foreign | Defined | ||||||||||||||||||||||||||||||||||
Additional | Treasury | Unrealized | Currency | Benefit | ||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock | Investment | Translation | Plans | |||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | Gains (Losses) | Adjustments | Adjustment | Total | ||||||||||||||||||||||||||||
Balance at January 1, 2005 | $ | — | $ | 8 | $ | 15,037 | $ | 6,608 | (1,785 | ) | $ | 2,994 | $ | 92 | $ | (130 | ) | $ | 22,824 | |||||||||||||||||
Treasury stock transactions, net | 58 | 99 | 157 | |||||||||||||||||||||||||||||||||
Common stock issued in connection with acquisition | 283 | 727 | 1,010 | |||||||||||||||||||||||||||||||||
Issuance of preferred stock | 1 | 2,042 | 2,043 | |||||||||||||||||||||||||||||||||
Issuance of stock purchase contracts related to common equity units | (146 | ) | (146 | ) | ||||||||||||||||||||||||||||||||
Dividends on preferred stock | (63 | ) | (63 | ) | ||||||||||||||||||||||||||||||||
Dividends on common stock | (394 | ) | (394 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 4,714 | 4,714 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | 233 | 233 | ||||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | (1,285 | ) | (1,285 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | (81 | ) | (81 | ) | ||||||||||||||||||||||||||||||||
Additional minimum pension liability adjustment, net of income tax | 89 | 89 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (1,044 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive income | 3,670 | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2005 | 1 | 8 | 17,274 | 10,865 | (959 | ) | 1,942 | 11 | (41 | ) | 29,101 | |||||||||||||||||||||||||
Treasury stock transactions, net | 180 | (398 | ) | (218 | ) | |||||||||||||||||||||||||||||||
Dividends on preferred stock | (134 | ) | (134 | ) | ||||||||||||||||||||||||||||||||
Dividends on common stock | (450 | ) | (450 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 6,293 | 6,293 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | (43 | ) | (43 | ) | ||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | (35 | ) | (35 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | 46 | 46 | ||||||||||||||||||||||||||||||||||
Additional minimum pension liability adjustment, net of income tax | (18 | ) | (18 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (50 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive income | 6,243 | |||||||||||||||||||||||||||||||||||
Adoption of SFAS 158, net of income tax | (744 | ) | (744 | ) | ||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | 1 | 8 | 17,454 | 16,574 | (1,357 | ) | 1,864 | 57 | (803 | ) | 33,798 | |||||||||||||||||||||||||
Cumulative effect of changes in accounting principles, net of income tax (Note 1) | (329 | ) | (329 | ) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2007 | 1 | 8 | 17,454 | 16,245 | (1,357 | ) | 1,864 | 57 | (803 | ) | 33,469 | |||||||||||||||||||||||||
Treasury stock transactions, net | 94 | (1,533 | ) | (1,439 | ) | |||||||||||||||||||||||||||||||
Obligation under accelerated common stock repurchase agreement (Note 18) | (450 | ) | (450 | ) | ||||||||||||||||||||||||||||||||
Dividends on preferred stock | (137 | ) | (137 | ) | ||||||||||||||||||||||||||||||||
Dividends on common stock | (541 | ) | (541 | ) | ||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||
Net income | 4,317 | 4,317 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on derivative instruments, net of income tax | (40 | ) | (40 | ) | ||||||||||||||||||||||||||||||||
Unrealized investment gains (losses), net of related offsets and income tax | (853 | ) | (853 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustments, net of income tax | 290 | 290 | ||||||||||||||||||||||||||||||||||
Defined benefit plans adjustment, net of income tax | 563 | 563 | ||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (40 | ) | ||||||||||||||||||||||||||||||||||
Comprehensive income | 4,277 | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | $ | 1 | $ | 8 | $ | 17,098 | $ | 19,884 | $ | (2,890 | ) | $ | 971 | $ | 347 | $ | (240 | ) | $ | 35,179 | ||||||||||||||||
F-4
Table of Contents
For the Years Ended December 31, 2007, 2006 and 2005
2007 | 2006 | 2005 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 4,317 | $ | 6,293 | $ | 4,714 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization expenses | 457 | 394 | 352 | |||||||||
Amortization of premiums and accretion of discounts associated with investments, net | (955 | ) | (618 | ) | (201 | ) | ||||||
(Gains) losses from sales of investments and businesses, net | 619 | (3,492 | ) | (2,271 | ) | |||||||
Undistributed equity earnings of real estate joint ventures and other limited partnership interests | (606 | ) | (459 | ) | (416 | ) | ||||||
Interest credited to policyholder account balances | 5,790 | 5,246 | 3,925 | |||||||||
Interest credited to bank deposits | 200 | 193 | 106 | |||||||||
Universal life and investment-type product policy fees | (5,311 | ) | (4,780 | ) | (3,828 | ) | ||||||
Change in accrued investment income | (275 | ) | (315 | ) | (157 | ) | ||||||
Change in premiums and other receivables | (283 | ) | (2,655 | ) | (37 | ) | ||||||
Change in deferred policy acquisition costs, net | (1,178 | ) | (1,317 | ) | (1,043 | ) | ||||||
Change in insurance-related liabilities | 5,463 | 5,031 | 5,709 | |||||||||
Change in trading securities | 200 | (432 | ) | (244 | ) | |||||||
Change in income tax payable | 101 | 2,039 | 528 | |||||||||
Change in other assets | 643 | 1,712 | 347 | |||||||||
Change in other liabilities | 729 | (202 | ) | 506 | ||||||||
Other, net | 51 | (38 | ) | 29 | ||||||||
Net cash provided by operating activities | 9,962 | 6,600 | 8,019 | |||||||||
Cash flows from investing activities | ||||||||||||
Sales, maturities and repayments of: | ||||||||||||
Fixed maturity securities | 112,062 | 113,321 | 155,709 | |||||||||
Equity securities | 1,738 | 1,313 | 1,062 | |||||||||
Mortgage and consumer loans | 9,854 | 8,348 | 8,462 | |||||||||
Real estate and real estate joint ventures | 664 | 6,211 | 3,668 | |||||||||
Other limited partnership interests | 1,121 | 1,768 | 1,132 | |||||||||
Purchases of: | ||||||||||||
Fixed maturity securities | (112,534 | ) | (129,644 | ) | (169,111 | ) | ||||||
Equity securities | (2,883 | ) | (1,052 | ) | (1,509 | ) | ||||||
Mortgage and consumer loans | (14,365 | ) | (13,472 | ) | (10,902 | ) | ||||||
Real estate and real estate joint ventures | (2,228 | ) | (1,523 | ) | (1,451 | ) | ||||||
Other limited partnership interests | (2,041 | ) | (1,915 | ) | (1,105 | ) | ||||||
Net change in short-term investments | 55 | 595 | 2,267 | |||||||||
Additional consideration related to purchases of businesses | — | (115 | ) | — | ||||||||
Purchases of businesses, net of cash received of $13, $0 and $852, respectively | (43 | ) | — | (10,160 | ) | |||||||
Proceeds from sales of businesses, net of cash disposed of $763, $0 and $43, respectively | (694 | ) | 48 | 260 | ||||||||
Net change in other invested assets | (1,020 | ) | (2,411 | ) | (450 | ) | ||||||
Other, net | (330 | ) | (358 | ) | (489 | ) | ||||||
Net cash used in investing activities | $ | (10,644 | ) | $ | (18,886 | ) | $ | (22,617 | ) | |||
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For the Years Ended December 31, 2007, 2006 and 2005
2007 | 2006 | 2005 | ||||||||||
Cash flows from financing activities | ||||||||||||
Policyholder account balances: | ||||||||||||
Deposits | $ | 58,026 | $ | 53,947 | $ | 52,077 | ||||||
Withdrawals | (55,256 | ) | (50,574 | ) | (47,827 | ) | ||||||
Net change in payables for collateral under securities loaned and other transactions | (1,710 | ) | 11,331 | 4,138 | ||||||||
Net change in short-term debt | (782 | ) | 35 | (56 | ) | |||||||
Long-term debt issued | 726 | 284 | 3,541 | |||||||||
Long-term debt repaid | (286 | ) | (732 | ) | (1,430 | ) | ||||||
Collateral financing arrangements issued | 4,882 | 850 | — | |||||||||
Shares subject to mandatory redemption | (131 | ) | — | — | ||||||||
Preferred stock issued | — | — | 2,100 | |||||||||
Dividends on preferred stock | (137 | ) | (134 | ) | (63 | ) | ||||||
Junior subordinated debt securities issued | 694 | 1,248 | 2,533 | |||||||||
Treasury stock acquired | (1,705 | ) | (500 | ) | — | |||||||
Dividends on common stock | (541 | ) | (450 | ) | (394 | ) | ||||||
Stock options exercised | 110 | 83 | 72 | |||||||||
Debt and equity issuance costs | (14 | ) | (25 | ) | (128 | ) | ||||||
Other, net | 67 | 12 | (53 | ) | ||||||||
Net cash provided by financing activities | 3,943 | 15,375 | 14,510 | |||||||||
Change in cash and cash equivalents | 3,261 | 3,089 | (88 | ) | ||||||||
Cash and cash equivalents, beginning of year | 7,107 | 4,018 | 4,106 | |||||||||
Cash and cash equivalents, end of year | $ | 10,368 | $ | 7,107 | $ | 4,018 | ||||||
Cash and cash equivalents, subsidiaries held-for-sale, beginning of year | $ | — | $ | — | $ | 58 | ||||||
Cash and cash equivalents, subsidiaries held-for-sale, end of year | $ | — | $ | — | $ | — | ||||||
Cash and cash equivalents, from continuing operations, beginning of year | $ | 7,107 | $ | 4,018 | $ | 4,048 | ||||||
Cash and cash equivalents, from continuing operations, end of year | $ | 10,368 | $ | 7,107 | $ | 4,018 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Net cash paid during the year for: | ||||||||||||
Interest | $ | 1,011 | $ | 819 | $ | 579 | ||||||
Income tax | $ | 2,128 | $ | 409 | $ | 1,391 | ||||||
Non-cash transactions during the year: | ||||||||||||
Business acquisitions: | ||||||||||||
Assets acquired | $ | — | $ | — | $ | 102,112 | ||||||
Less: liabilities assumed | — | — | 90,090 | |||||||||
Net assets acquired | — | — | 12,022 | |||||||||
Less: cash paid | — | — | 11,012 | |||||||||
Business acquisition, common stock issued | $ | — | $ | — | $ | 1,010 | ||||||
Business dispositions: | ||||||||||||
Assets disposed | $ | — | $ | — | $ | 366 | ||||||
Less: liabilities disposed | — | — | 269 | |||||||||
Net assets disposed | — | — | 97 | |||||||||
Plus: equity securities received | — | — | 43 | |||||||||
Less: cash disposed | — | — | 43 | |||||||||
Business disposition, net of cash disposed | $ | — | $ | — | $ | 97 | ||||||
Contribution of equity securities to MetLife Foundation | $ | 12 | $ | — | $ | 1 | ||||||
Accrual for stock purchase contracts related to common equity units | $ | — | $ | — | $ | 97 | ||||||
Real estate acquired in satisfaction of debt | $ | 1 | $ | 6 | $ | 1 | ||||||
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1. | Business, Basis of Presentation, and Summary of Significant Accounting Policies |
(i) | the fair value of investments in the absence of quoted market values; | |
(ii) | investment impairments; |
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(iii) | the recognition of income on certain investments; | |
(iv) | the application of the consolidation rules to certain investments; | |
(v) | the fair value of and accounting for derivatives; | |
(vi) | the capitalization and amortization of deferred policy acquisition costs (“DAC”) and the establishment and amortization of value of business acquired (“VOBA”); | |
(vii) | the measurement of goodwill and related impairment, if any; | |
(viii) | the liability for future policyholder benefits; | |
(ix) | accounting for income taxes and the valuation of deferred tax assets; | |
(x) | accounting for reinsurance transactions; | |
(xi) | accounting for employee benefit plans; and | |
(xii) | the liability for litigation and regulatory matters. |
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• | Annuity guaranteed minimum death benefit (“GMDB”) liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with the historical experience of the Standard & Poor’s 500 Index (“S&P”). The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. | |
• | Guaranteed minimum income benefit (“GMIB”) liabilities are determined by estimating the expected value of the income benefits in excess of the projected account balance at any future date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used for estimating the GMIB liabilities are consistent with those used for estimating the GMDB liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates an assumption for the percentage of the potential annuitizations that may be elected by the contractholder. |
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• | Guaranteed minimum withdrawal benefit riders (“GMWB”) guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder’s cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at fair value separately from the host variable annuity product. | |
• | Guaranteed minimum accumulation benefit riders (“GMAB”) provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is also an embedded derivative, which is measured at fair value separately from the host variable annuity product. | |
• | For both GMWB and GMAB, the initial benefit base is increased by additional purchase payments made within a certain time period and decreases by benefits paidand/or withdrawal amounts. After a specified period of time, the benefit base may also increase as a result of an optional reset as defined in the contract. |
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(i) | future taxable income exclusive of reversing temporary differences and carryforwards; | |
(ii) | future reversals of existing taxable temporary differences; | |
(iii) | taxable income in prior carryback years; and | |
(iv) | tax planning strategies. |
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(i) | recognition in the statement of financial position of the funded status of defined benefit plans measured as the difference between the fair value of plan assets and the benefit obligation, which is the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other postretirement plans; | |
(ii) | recognition as an adjustment to accumulated other comprehensive income (loss), net of income tax, those amounts of actuarial gains and losses, prior service costs and credits, and net asset or obligation at transition that have not yet been included in net periodic benefit costs as of the end of the year of adoption; | |
(iii) | recognition of subsequent changes in funded status as a component of other comprehensive income; | |
(iv) | measurement of benefit plan assets and obligations as of the date of the statement of financial position; and | |
(v) | disclosure of additional information about the effects on the employer’s statement of financial position. |
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• | Effective January 1, 2006, the Company adopted prospectively SFAS No. 155,Accounting for Certain Hybrid Instruments(“SFAS 155”). SFAS 155 amends SFAS 133 and SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(“SFAS 140”). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155: |
(i) | clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; | |
(ii) | establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; | |
(iii) | clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and | |
(iv) | amends SFAS 140 to eliminate the prohibition on a qualifying special-purpose entity (“QSPE”) from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. |
• | Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40,Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets(“Issue B40”). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely |
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from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company’s consolidated financial statements. |
• | Effective January 1, 2006, the Company adopted prospectively SFAS 133 Implementation Issue No. B38,Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option (“Issue B38”) and SFAS 133 Implementation Issue No. B39,Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor(“Issue B39”). Issue B38 clarifies that the potential settlement of a debtor’s obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS 133. Issue B39 clarifies that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. The adoption of Issues B38 and B39 did not have a material impact on the Company’s consolidated financial statements. |
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• | All business combinations (whether full, partial, or “step” acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. | |
• | Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. |
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• | The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. | |
• | Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. | |
• | Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. | |
• | Noncontrolling interests (formerly known as “minority interests”) are valued at fair value at the acquisition date and are presented as equity rather than liabilities. | |
• | When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. | |
• | Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. | |
• | When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. |
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2. | Acquisitions and Dispositions |
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Years Ended December 31, | ||||||||
2006 | 2005 | |||||||
(In millions) | ||||||||
Balance at January 1, | $ | 28 | $ | — | ||||
Acquisition | — | 49 | ||||||
Cash payments | (24 | ) | (20 | ) | ||||
Other reductions | (4 | ) | (1 | ) | ||||
Balance at December 31, | $ | — | $ | 28 | ||||
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3. | Investments |
December 31, 2007 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 77,875 | $ | 1,725 | $ | 2,174 | $ | 77,426 | 32.0 | % | ||||||||||
Residential mortgage-backed securities | 56,267 | 611 | 389 | 56,489 | 23.3 | |||||||||||||||
Foreign corporate securities | 37,359 | 1,740 | 794 | 38,305 | 15.8 | |||||||||||||||
U.S.Treasury/agency securities | 19,771 | 1,487 | 13 | 21,245 | 8.8 | |||||||||||||||
Commercial mortgage-backed securities | 17,676 | 251 | 199 | 17,728 | 7.3 | |||||||||||||||
Foreign government securities | 13,535 | 1,924 | 188 | 15,271 | 6.3 | |||||||||||||||
Asset-backed securities | 11,549 | 41 | 549 | 11,041 | 4.6 | |||||||||||||||
State and political subdivision securities | 4,394 | 140 | 115 | 4,419 | 1.8 | |||||||||||||||
Other fixed maturity securities | 335 | 13 | 30 | 318 | 0.1 | |||||||||||||||
Total fixed maturity securities | $ | 238,761 | $ | 7,932 | $ | 4,451 | $ | 242,242 | 100.0 | % | ||||||||||
Common stock | $ | 2,488 | $ | 568 | $ | 108 | $ | 2,948 | 48.7 | % | ||||||||||
Non-redeemable preferred stock | 3,403 | 61 | 362 | 3,102 | 51.3 | |||||||||||||||
Total equity securities | $ | 5,891 | $ | 629 | $ | 470 | $ | 6,050 | 100.0 | % | ||||||||||
December 31, 2006 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 74,010 | $ | 2,047 | $ | 983 | $ | 75,074 | 31.0 | % | ||||||||||
Residential mortgage-backed securities | 51,602 | 385 | 321 | 51,666 | 21.4 | |||||||||||||||
Foreign corporate securities | 33,029 | 1,687 | 378 | 34,338 | 14.2 | |||||||||||||||
U.S. Treasury/agency securities | 29,897 | 984 | 248 | 30,633 | 12.7 | |||||||||||||||
Commercial mortgage-backed securities | 16,467 | 193 | 138 | 16,522 | 6.8 | |||||||||||||||
Foreign government securities | 11,406 | 1,835 | 34 | 13,207 | 5.4 | |||||||||||||||
Asset-backed securities | 13,851 | 75 | 53 | 13,873 | 5.7 | |||||||||||||||
State and political subdivision securities | 6,121 | 230 | 51 | 6,300 | 2.6 | |||||||||||||||
Other fixed maturity securities | 385 | 7 | 77 | 315 | 0.2 | |||||||||||||||
Total fixed maturity securities | $ | 236,768 | $ | 7,443 | $ | 2,283 | $ | 241,928 | 100.0 | % | ||||||||||
Common stock | $ | 1,798 | $ | 487 | $ | 16 | $ | 2,269 | 44.5 | % | ||||||||||
Non-redeemable preferred stock | 2,751 | 103 | 29 | 2,825 | 55.5 | |||||||||||||||
Total equity securities | $ | 4,549 | $ | 590 | $ | 45 | $ | 5,094 | 100.0 | % | ||||||||||
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December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 4,537 | $ | 4,628 | $ | 6,923 | $ | 7,011 | ||||||||
Due after one year through five years | 42,453 | 43,167 | 45,331 | 45,928 | ||||||||||||
Due after five years through ten years | 40,783 | 41,046 | 39,571 | 40,200 | ||||||||||||
Due after ten years | 65,496 | 68,143 | 63,023 | 66,728 | ||||||||||||
Subtotal | 153,269 | 156,984 | 154,848 | 159,867 | ||||||||||||
Mortgage-backed and asset-backed securities | 85,492 | 85,258 | 81,920 | 82,061 | ||||||||||||
Total fixed maturity securities | $ | 238,761 | $ | 242,242 | $ | 236,768 | $ | 241,928 | ||||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Proceeds | $ | 80,685 | $ | 89,869 | $ | 127,709 | ||||||
Gross investment gains | $ | 831 | $ | 580 | $ | 704 | ||||||
Gross investment losses | $ | (1,183 | ) | $ | (1,533 | ) | $ | (1,391 | ) |
December 31, 2007 | ||||||||||||||||||||||||
Equal to or Greater than | ||||||||||||||||||||||||
Less than 12 months | 12 months | Total | ||||||||||||||||||||||
Estimated | Gross | Estimated | Gross | Estimated | Gross | |||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
U.S. corporate securities | $ | 29,237 | $ | 1,431 | $ | 12,119 | $ | 743 | $ | 41,356 | $ | 2,174 | ||||||||||||
Residential mortgage-backed securities | 14,404 | 279 | 6,195 | 110 | 20,599 | 389 | ||||||||||||||||||
Foreign corporate securities | 11,189 | 484 | 6,321 | 310 | 17,510 | 794 | ||||||||||||||||||
U.S. Treasury/agency securities | 432 | 3 | 625 | 10 | 1,057 | 13 | ||||||||||||||||||
Commercial mortgage-backed securities | 2,518 | 102 | 3,797 | 97 | 6,315 | 199 | ||||||||||||||||||
Foreign government securities | 3,593 | 161 | 515 | 27 | 4,108 | 188 | ||||||||||||||||||
Asset-backed securities | 7,627 | 442 | 1,271 | 107 | 8,898 | 549 | ||||||||||||||||||
State and political subdivision securities | 1,334 | 81 | 476 | 34 | 1,810 | 115 | ||||||||||||||||||
Other fixed maturity securities | 91 | 30 | 1 | — | 92 | 30 | ||||||||||||||||||
Total fixed maturity securities | $ | 70,425 | $ | 3,013 | $ | 31,320 | $ | 1,438 | $ | 101,745 | $ | 4,451 | ||||||||||||
Equity securities | $ | 2,771 | $ | 398 | $ | 543 | $ | 72 | $ | 3,314 | $ | 470 | ||||||||||||
Total number of securities in an unrealized loss position | 8,395 | 3,063 | ||||||||||||||||||||||
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December 31, 2006 | ||||||||||||||||||||||||
Equal to or Greater than | ||||||||||||||||||||||||
Less than 12 months | 12 months | Total | ||||||||||||||||||||||
Estimated | Gross | Estimated | Gross | Estimated | Gross | |||||||||||||||||||
Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
U.S. corporate securities | $ | 17,537 | $ | 285 | $ | 16,780 | $ | 698 | $ | 34,317 | $ | 983 | ||||||||||||
Residential mortgage-backed securities | 15,300 | 78 | 13,640 | 243 | 28,940 | 321 | ||||||||||||||||||
Foreign corporate securities | 6,401 | 102 | 7,277 | 276 | 13,678 | 378 | ||||||||||||||||||
U.S. Treasury/agency securities | 15,006 | 157 | 1,560 | 91 | 16,566 | 248 | ||||||||||||||||||
Commercial mortgage-backed securities | 4,960 | 30 | 4,029 | 108 | 8,989 | 138 | ||||||||||||||||||
Foreign government securities | 1,160 | 18 | 507 | 16 | 1,667 | 34 | ||||||||||||||||||
Asset-backed securities | 4,519 | 31 | 1,077 | 22 | 5,596 | 53 | ||||||||||||||||||
State and political subdivision securities | 334 | 12 | 532 | 39 | 866 | 51 | ||||||||||||||||||
Other fixed maturity securities | 146 | 77 | 4 | — | 150 | 77 | ||||||||||||||||||
Total fixed maturity securities | $ | 65,363 | $ | 790 | $ | 45,406 | $ | 1,493 | $ | 110,769 | $ | 2,283 | ||||||||||||
Equity securities | $ | 832 | $ | 20 | $ | 567 | $ | 25 | $ | 1,399 | $ | 45 | ||||||||||||
Total number of securities in an unrealized loss position | 10,529 | 4,640 | ||||||||||||||||||||||
December 31, 2007 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Less than six months | $ | 49,463 | $ | 1,943 | $ | 1,670 | $ | 555 | 6,339 | 644 | ||||||||||||||
Six months or greater but less than nine months | 17,353 | 23 | 844 | 7 | 1,461 | 31 | ||||||||||||||||||
Nine months or greater but less than twelve months | 9,410 | 7 | 568 | 2 | 791 | 1 | ||||||||||||||||||
Twelve months or greater | 31,731 | 50 | 1,262 | 13 | 3,192 | 32 | ||||||||||||||||||
Total | $ | 107,957 | $ | 2,023 | $ | 4,344 | $ | 577 | ||||||||||||||||
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December 31, 2006 | ||||||||||||||||||||||||
Cost or Amortized Cost | Gross Unrealized Loss | Number of Securities | ||||||||||||||||||||||
Less than | 20% or | Less than | 20% or | Less than | 20% or | |||||||||||||||||||
20% | more | 20% | more | 20% | more | |||||||||||||||||||
(In millions, except number of securities) | ||||||||||||||||||||||||
Less than six months | $ | 52,222 | $ | 35 | $ | 547 | $ | 12 | 9,093 | 81 | ||||||||||||||
Six months or greater but less than nine months | 2,682 | 3 | 42 | 1 | 415 | 2 | ||||||||||||||||||
Nine months or greater but less than twelve months | 12,049 | 14 | 204 | 4 | 937 | 1 | ||||||||||||||||||
Twelve months or greater | 47,462 | 29 | 1,511 | 7 | 4,634 | 6 | ||||||||||||||||||
Total | $ | 114,415 | $ | 81 | $ | 2,304 | $ | 24 | ||||||||||||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
Sector: | ||||||||
U.S. corporate securities | 44 | % | 42 | % | ||||
Foreign corporate securities | 16 | 16 | ||||||
Asset-backed securities | 11 | 2 | ||||||
Residential mortgage-backed securities | 8 | 14 | ||||||
Foreign government securities | 4 | 1 | ||||||
Commercial mortgage-backed securities | 4 | 6 | ||||||
U.S. Treasury/agency securities | — | 11 | ||||||
Other | 13 | 8 | ||||||
Total | 100 | % | 100 | % | ||||
Industry: | ||||||||
Finance | 34 | % | 10 | % | ||||
Industrial | 18 | 23 | ||||||
Mortgage-backed | 12 | 20 | ||||||
Utility | 8 | 11 | ||||||
Government | 4 | 12 | ||||||
Other | 24 | 24 | ||||||
Total | 100 | % | 100 | % | ||||
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December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Commercial mortgage loans | $ | 35,669 | 76 | % | $ | 32,000 | 75 | % | ||||||||
Agricultural mortgage loans | 10,508 | 22 | 9,231 | 22 | ||||||||||||
Consumer loans | 1,051 | 2 | 1,190 | 3 | ||||||||||||
Total | 47,228 | 100 | % | 42,421 | 100 | % | ||||||||||
Less: Valuation allowances | 198 | 182 | ||||||||||||||
Total mortgage and consumer loans | $ | 47,030 | $ | 42,239 | ||||||||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 182 | $ | 172 | $ | 157 | ||||||
Additions | 77 | 36 | 64 | |||||||||
Deductions | (61 | ) | (26 | ) | (49 | ) | ||||||
Balance at December 31, | $ | 198 | $ | 182 | $ | 172 | ||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Impaired loans with valuation allowances | $ | 624 | $ | 374 | ||||
Impaired loans without valuation allowances | 44 | 75 | ||||||
Subtotal | 668 | 449 | ||||||
Less: Valuation allowances on impaired loans | 73 | 21 | ||||||
Impaired loans | $ | 595 | $ | 428 | ||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Real estate | $ | 4,914 | $ | 4,326 | ||||
Accumulated depreciation | (1,088 | ) | (1,001 | ) | ||||
Net real estate | 3,826 | 3,325 | ||||||
Real estate joint ventures | 2,771 | 1,477 | ||||||
Real estate and real estate joint ventures | 6,597 | 4,802 | ||||||
Real estate held-for-sale | 172 | 184 | ||||||
Total real estate holdings | $ | 6,769 | $ | 4,986 | ||||
December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Office | $ | 3,126 | 46 | % | $ | 2,709 | 55 | % | ||||||||
Apartments | 1,264 | 19 | 739 | 15 | ||||||||||||
Development joint ventures | 743 | 11 | 169 | 3 | ||||||||||||
Retail | 574 | 8 | 513 | 10 | ||||||||||||
Real estate investment funds | 516 | 8 | 401 | 8 | ||||||||||||
Industrial | 283 | 4 | 291 | 6 | ||||||||||||
Land | 174 | 3 | 71 | 1 | ||||||||||||
Agriculture | 29 | — | 32 | 1 | ||||||||||||
Other | 60 | 1 | 61 | 1 | ||||||||||||
Total real estate holdings | $ | 6,769 | 100 | % | $ | 4,986 | 100 | % | ||||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Rental receivables, net | $ | 1,491 | $ | 1,055 | ||||
Estimated residual values | 1,881 | 887 | ||||||
Subtotal | 3,372 | 1,942 | ||||||
Unearned income | (1,313 | ) | (694 | ) | ||||
Investment in leveraged leases | $ | 2,059 | $ | 1,248 | ||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Income from investment in leveraged leases (included in net investment income) | $ | 67 | $ | 51 | $ | 54 | ||||||
Less: Income tax expense on leveraged leases | (24 | ) | (18 | ) | (19 | ) | ||||||
Net income from investment in leveraged leases | $ | 43 | $ | 33 | $ | 35 | ||||||
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Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | 15,150 | $ | 14,049 | $ | 11,349 | ||||||
Equity securities | 279 | 122 | 79 | |||||||||
Mortgage and consumer loans | 2,863 | 2,534 | 2,302 | |||||||||
Policy loans | 637 | 603 | 572 | |||||||||
Real estate and real estate joint ventures | 913 | 746 | 510 | |||||||||
Other limited partnership interests | 1,309 | 945 | 709 | |||||||||
Cash, cash equivalents and short-term investments | 503 | 519 | 400 | |||||||||
Other | 631 | 530 | 472 | |||||||||
Total investment income | 22,285 | 20,048 | 16,393 | |||||||||
Less: Investment expenses | 3,279 | 2,966 | 1,637 | |||||||||
Net investment income | $ | 19,006 | $ | 17,082 | $ | 14,756 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | (622 | ) | $ | (1,119 | ) | $ | (868 | ) | |||
Equity securities | 164 | 84 | 117 | |||||||||
Mortgage and consumer loans | 2 | (8 | ) | 17 | ||||||||
Real estate and real estate joint ventures | 44 | 102 | 14 | |||||||||
Other limited partnership interests | 16 | 1 | 42 | |||||||||
Sales of businesses | — | — | 8 | |||||||||
Derivatives | (414 | ) | (201 | ) | 391 | |||||||
Other | 72 | (241 | ) | 193 | ||||||||
Net investment gains (losses) | $ | (738 | ) | $ | (1,382 | ) | $ | (86 | ) | |||
F-46
Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | 3,378 | $ | 5,075 | $ | 6,132 | ||||||
Equity securities | 157 | 541 | 247 | |||||||||
Derivatives | (270 | ) | (208 | ) | (142 | ) | ||||||
Minority interest | (150 | ) | (159 | ) | (171 | ) | ||||||
Other | 3 | 9 | (102 | ) | ||||||||
Subtotal | 3,118 | 5,258 | 5,964 | |||||||||
Amounts allocated from: | ||||||||||||
Insurance liability loss recognition | (608 | ) | (1,149 | ) | (1,410 | ) | ||||||
DAC and VOBA | (327 | ) | (189 | ) | (79 | ) | ||||||
Policyholder dividend obligation | (789 | ) | (1,062 | ) | (1,492 | ) | ||||||
Subtotal | (1,724 | ) | (2,400 | ) | (2,981 | ) | ||||||
Deferred income tax | (423 | ) | (994 | ) | (1,041 | ) | ||||||
Subtotal | (2,147 | ) | (3,394 | ) | (4,022 | ) | ||||||
Net unrealized investment gains (losses) | $ | 971 | $ | 1,864 | $ | 1,942 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance, January 1, | $ | 1,864 | $ | 1,942 | $ | 2,994 | ||||||
Unrealized investment gains (losses) during the year | (2,140 | ) | (706 | ) | (3,372 | ) | ||||||
Unrealized investment gains of subsidiaries at the date of sale | — | — | 15 | |||||||||
Unrealized investment gains (losses) relating to: | ||||||||||||
Insurance liability gain (loss) recognition | 541 | 261 | 581 | |||||||||
DAC and VOBA | (138 | ) | (110 | ) | 462 | |||||||
Policyholder dividend obligation | 273 | 430 | 627 | |||||||||
Deferred income tax | 571 | 47 | 635 | |||||||||
Balance, December 31, | $ | 971 | $ | 1,864 | $ | 1,942 | ||||||
Net change in unrealized investment gains (losses) | $ | (893 | ) | $ | (78 | ) | $ | (1,052 | ) | |||
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December 31, 2007 | ||||||||||||||||
Primary Beneficiary | Not Primary Beneficiary | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Total | Exposure to | Total | Exposure to | |||||||||||||
Assets (1) | Loss (2) | Assets (1) | Loss (2) | |||||||||||||
(In millions) | ||||||||||||||||
Asset-backed securitizations and collateralized debt obligations | $ | 1,167 | $ | 1,167 | $ | 1,591 | $ | 184 | ||||||||
Real estate joint ventures (3) | 48 | 26 | 276 | 42 | ||||||||||||
Other limited partnership interests (4) | 2 | 1 | 42,141 | 2,080 | ||||||||||||
Trust preferred securities (5) | 105 | 105 | 48,232 | 3,369 | ||||||||||||
Other investments (6) | 1,119 | 1,119 | 3,258 | 260 | ||||||||||||
Total | $ | 2,441 | $ | 2,418 | $ | 95,498 | $ | 5,935 | ||||||||
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(1) | The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value. The assets of the real estate joint ventures, other limited partnership interests, trust preferred securities and other investments are reflected at the carrying amounts at which such assets would have been reflected on the Company’s consolidated balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. | |
(2) | The maximum exposure to loss relating to the asset-backed securitizations and collateralized debt obligations is equal to the carrying amounts of retained interests. In addition, the Company provides collateral management services for certain of these structures for which it collects a management fee. The maximum exposure to loss relating to real estate joint ventures, other limited partnership interests, trust preferred securities and other investments is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. | |
(3) | Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. | |
(4) | Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. | |
(5) | Trust preferred securities are complex, uniquely structured investments which contain features of both equity and debt, may have an extended or no stated maturity, and may be callable at the issuer’s option after a defined period of time. | |
(6) | Other investments include securities that are not trust preferred securities, asset-backed securitizations or collateralized debt obligations and the assets supporting the financing arrangement described in Note 11. |
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4. | Derivative Financial Instruments |
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||
Current Market | Current Market | |||||||||||||||||||||||
Notional | or Fair Value | Notional | or Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Interest rate swaps | $ | 62,519 | $ | 785 | $ | 768 | $ | 27,148 | $ | 639 | $ | 150 | ||||||||||||
Interest rate floors | 48,937 | 621 | — | 37,437 | 279 | — | ||||||||||||||||||
Interest rate caps | 45,498 | 50 | — | 26,468 | 125 | — | ||||||||||||||||||
Financial futures | 10,817 | 89 | 57 | 8,432 | 64 | 39 | ||||||||||||||||||
Foreign currency swaps | 21,399 | 1,480 | 1,724 | 19,627 | 986 | 1,174 | ||||||||||||||||||
Foreign currency forwards | 4,185 | 76 | 16 | 2,934 | 31 | 27 | ||||||||||||||||||
Options | 2,043 | 713 | 1 | 587 | 306 | 8 | ||||||||||||||||||
Financial forwards | 4,600 | 122 | 2 | 3,800 | 12 | 40 | ||||||||||||||||||
Credit default swaps | 6,850 | 58 | 35 | 6,357 | 5 | 21 | ||||||||||||||||||
Synthetic GICs | 3,670 | — | — | 3,739 | — | — | ||||||||||||||||||
Other | 250 | 43 | — | 250 | 56 | — | ||||||||||||||||||
Total | $ | 210,768 | $ | 4,037 | $ | 2,603 | $ | 136,779 | $ | 2,503 | $ | 1,459 | ||||||||||||
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Remaining Life | ||||||||||||||||||||
After One Year | After Five Years | |||||||||||||||||||
One Year or | Through Five | Through Ten | After Ten | |||||||||||||||||
Less | Years | Years | Years | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Interest rate swaps | $ | 14,844 | $ | 30,113 | $ | 9,918 | $ | 7,644 | $ | 62,519 | ||||||||||
Interest rate floors | — | 15,619 | 33,318 | — | 48,937 | |||||||||||||||
Interest rate caps | 29,905 | 15,593 | — | — | 45,498 | |||||||||||||||
Financial futures | 10,730 | — | — | 87 | 10,817 | |||||||||||||||
Foreign currency swaps | 1,632 | 9,068 | 7,434 | 3,265 | 21,399 | |||||||||||||||
Foreign currency forwards | 4,175 | — | — | 10 | 4,185 | |||||||||||||||
Options | — | 620 | 1,250 | 173 | 2,043 | |||||||||||||||
Financial forwards | — | — | — | 4,600 | 4,600 | |||||||||||||||
Credit default swaps | 509 | 4,582 | 1,510 | 249 | 6,850 | |||||||||||||||
Synthetic GICs | 3,670 | — | — | — | 3,670 | |||||||||||||||
Other | — | — | — | 250 | 250 | |||||||||||||||
Total | $ | 65,465 | $ | 75,595 | $ | 53,430 | $ | 16,278 | $ | 210,768 | ||||||||||
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F-52
Table of Contents
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Fair value | $ | 10,006 | $ | 650 | $ | 99 | $ | 7,978 | $ | 290 | $ | 85 | ||||||||||||
Cash flow | 4,717 | 161 | 321 | 4,366 | 149 | 151 | ||||||||||||||||||
Foreign operations | 1,872 | 11 | 119 | 1,232 | 1 | 50 | ||||||||||||||||||
Non-qualifying | 194,173 | 3,215 | 2,064 | 123,203 | 2,063 | 1,173 | ||||||||||||||||||
Total | $ | 210,768 | $ | 4,037 | $ | 2,603 | $ | 136,779 | $ | 2,503 | $ | 1,459 | ||||||||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Qualifying hedges: | ||||||||||||
Net investment income | $ | 29 | $ | 49 | $ | 42 | ||||||
Interest credited to policyholder account balances | (34 | ) | (35 | ) | 17 | |||||||
Other expenses | 1 | 3 | (8 | ) | ||||||||
Non-qualifying hedges: | ||||||||||||
Net investment income | (5 | ) | — | — | ||||||||
Net investment gains (losses) | 279 | 296 | 86 | |||||||||
Total | $ | 270 | $ | 313 | $ | 137 | ||||||
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Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Changes in the fair value of derivatives | $ | 334 | $ | 276 | $ | (118 | ) | |||||
Changes in the fair value of the items hedged | (326 | ) | (276 | ) | 115 | |||||||
Net ineffectiveness of fair value hedging activities | $ | 8 | $ | — | $ | (3 | ) | |||||
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Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Other comprehensive income (loss) balance at January 1, | $ | (208 | ) | $ | (142 | ) | $ | (456 | ) | |||
Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges | (168 | ) | 80 | 127 | ||||||||
Amounts reclassified to net investment gains (losses) | 96 | (158 | ) | 187 | ||||||||
Amounts reclassified to net investment income | 13 | 15 | 2 | |||||||||
Amortization of transition adjustment | (1 | ) | (1 | ) | (2 | ) | ||||||
Amounts reclassified to other expenses | (2 | ) | (2 | ) | — | |||||||
Other comprehensive income (loss) balance at December 31, | $ | (270 | ) | $ | (208 | ) | $ | (142 | ) | |||
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Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Net investment gains (losses), excluding embedded derivatives | $ | (232 | ) | $ | (685 | ) | $ | 299 | ||||
Policyholder benefits and claims | $ | 7 | $ | (33 | ) | $ | 2 | |||||
Net investment income(1) | $ | 31 | $ | (40 | ) | $ | (38 | ) |
(1) | Changes in fair value related to economic hedges of equity method investment in joint ventures that do not qualify for hedge accounting and changes in fair value related to derivatives held in relation to trading portfolios. |
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Embedded derivative assets | $ | 72 | $ | 180 | ||||
Embedded derivative liabilities | $ | 980 | $ | 169 |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Net investment gains (losses) | $ | (471 | ) | $ | 209 | $ | 69 | |||||
Interest credited to policyholder account balances | $ | (66 | ) | $ | (80 | ) | $ | (45 | ) |
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F-57
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5. | Deferred Policy Acquisition Costs and Value of Business Acquired |
DAC | VOBA | Total | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, 2005 | $ | 12,743 | $ | 1,584 | $ | 14,327 | ||||||
Capitalizations | 3,604 | — | 3,604 | |||||||||
Acquisitions | — | 3,780 | 3,780 | |||||||||
Subtotal | 16,347 | 5,364 | 21,711 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | 12 | (25 | ) | (13 | ) | |||||||
Unrealized investment gains (losses) | (323 | ) | (139 | ) | (462 | ) | ||||||
Other expenses | 2,128 | 335 | 2,463 | |||||||||
Total amortization | 1,817 | 171 | 1,988 | |||||||||
Less: Dispositions and other | 106 | (12 | ) | 94 | ||||||||
Balance at December 31, 2005 | 14,424 | 5,205 | 19,629 | |||||||||
Capitalizations | 3,589 | — | 3,589 | |||||||||
Subtotal | 18,013 | 5,205 | 23,218 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | (158 | ) | (74 | ) | (232 | ) | ||||||
Unrealized investment gains (losses) | 79 | 31 | 110 | |||||||||
Other expenses | 2,247 | 407 | 2,654 | |||||||||
Total amortization | 2,168 | 364 | 2,532 | |||||||||
Less: Dispositions and other | (153 | ) | 1 | (152 | ) | |||||||
Balance at December 31, 2006 | 15,998 | 4,840 | 20,838 | |||||||||
Effect ofSOP 05-1 adoption | (205 | ) | (248 | ) | (453 | ) | ||||||
Capitalizations | 3,892 | — | 3,892 | |||||||||
Acquisitions | — | 48 | 48 | |||||||||
Subtotal | 19,685 | 4,640 | 24,325 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains (losses) | (225 | ) | (11 | ) | (236 | ) | ||||||
Unrealized investment gains (losses) | 75 | 63 | 138 | |||||||||
Other expenses | 2,517 | 495 | 3,012 | |||||||||
Total amortization | 2,367 | 547 | 2,914 | |||||||||
Less: Dispositions and other | (106 | ) | (4 | ) | (110 | ) | ||||||
Balance at December 31, 2007 | $ | 17,424 | $ | 4,097 | $ | 21,521 | ||||||
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6. | Goodwill |
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 4,897 | $ | 4,797 | $ | 633 | ||||||
Acquisitions | 2 | 93 | 4,180 | |||||||||
Dispositions and other, net | 11 | 7 | (16 | ) | ||||||||
Balance at December 31, | $ | 4,910 | $ | 4,897 | $ | 4,797 | ||||||
7. | Insurance |
December 31, | ||||||||||||||||||||||||
Future Policy | ||||||||||||||||||||||||
Benefits | Policyholder Account Balances | Other Policyholder Funds | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Institutional | ||||||||||||||||||||||||
Group life | $ | 3,326 | $ | 3,252 | $ | 13,997 | $ | 13,567 | $ | 2,364 | $ | 2,259 | ||||||||||||
Retirement & savings | 37,947 | 37,908 | 51,585 | 46,127 | 213 | 21 | ||||||||||||||||||
Non-medical health & other | 10,617 | 9,540 | 501 | — | 597 | 531 | ||||||||||||||||||
Individual | ||||||||||||||||||||||||
Traditional life | 52,493 | 51,715 | 1 | 1 | 1,479 | 1,429 | ||||||||||||||||||
Universal variable life | 985 | 894 | 14,898 | 14,544 | 1,572 | 1,367 | ||||||||||||||||||
Annuities | 3,063 | 3,186 | 37,807 | 40,251 | 76 | 43 | ||||||||||||||||||
Other | — | — | 2,410 | 2,412 | 1 | 1 | ||||||||||||||||||
Auto & Home | 3,273 | 3,392 | — | — | 51 | 61 | ||||||||||||||||||
International | 9,826 | 8,123 | 4,961 | 4,198 | 1,296 | 1,223 | ||||||||||||||||||
Reinsurance | 6,159 | 5,140 | 6,657 | 6,212 | 2,297 | 1,980 | ||||||||||||||||||
Corporate and Other | 4,573 | 4,339 | 4,532 | 4,636 | 230 | 224 | ||||||||||||||||||
Total | $ | 132,262 | $ | 127,489 | $ | 137,349 | $ | 131,948 | $ | 10,176 | $ | 9,139 | ||||||||||||
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Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 708 | $ | 715 | $ | — | ||||||
Acquisitions | 11 | — | 716 | |||||||||
Amortization | (16 | ) | (6 | ) | (1 | ) | ||||||
Other | 3 | (1 | ) | — | ||||||||
Balance at December 31, | $ | 706 | $ | 708 | $ | 715 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 578 | $ | 414 | $ | 294 | ||||||
Capitalization | 181 | 194 | 140 | |||||||||
Amortization | (82 | ) | (30 | ) | (20 | ) | ||||||
Balance at December 31, | $ | 677 | $ | 578 | $ | 414 | ||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Fixed maturity securities | $ | 35 | $ | 30 | ||||
Equity securities | $ | 41 | $ | 36 | ||||
Cash and cash equivalents | $ | 5 | $ | 5 |
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Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 7,244 | $ | 6,977 | $ | 5,824 | ||||||
Less: Reinsurance recoverables | (937 | ) | (940 | ) | (486 | ) | ||||||
Net balance at January 1, | 6,307 | 6,037 | 5,338 | |||||||||
Acquisitions, net | — | — | 160 | |||||||||
Incurred related to: | ||||||||||||
Current year | 5,796 | 5,064 | 4,940 | |||||||||
Prior years | (325 | ) | (329 | ) | (180 | ) | ||||||
5,471 | 4,735 | 4,760 | ||||||||||
Paid related to: | ||||||||||||
Current year | (3,297 | ) | (2,975 | ) | (2,841 | ) | ||||||
Prior years | (1,600 | ) | (1,490 | ) | (1,380 | ) | ||||||
(4,897 | ) | (4,465 | ) | (4,221 | ) | |||||||
Net balance at December 31, | 6,881 | 6,307 | 6,037 | |||||||||
Add: Reinsurance recoverables | 955 | 937 | 940 | |||||||||
Balance at December 31, | $ | 7,836 | $ | 7,244 | $ | 6,977 | ||||||
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December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
In the | At | In the | At | |||||||||||||
Event of Death | Annuitization | Event of Death | Annuitization | |||||||||||||
(In millions) | ||||||||||||||||
Annuity Contracts (1) | ||||||||||||||||
Return of Net Deposits | ||||||||||||||||
Separate account value | $ | 18,573 | N/A | $ | 13,809 | N/A | ||||||||||
Net amount at risk (2) | $ | 52 | (3) | N/A | $ | 1 | (3) | N/A | ||||||||
Average attained age of contractholders | 61 years | N/A | 61 years | N/A | ||||||||||||
Anniversary Contract Value or Minimum Return | ||||||||||||||||
Separate account value | $ | 87,168 | $ | 29,603 | $ | 87,351 | $ | 24,647 | ||||||||
Net amount at risk (2) | $ | 2,331 | (3) | $ | 441 | (4) | $ | 1,927 | (3) | $ | 65 | (4) | ||||
Average attained age of contractholders | 58 years | 60 years | 60 years | 60 years | ||||||||||||
Two Tier Annuities | ||||||||||||||||
General account value | N/A | $ | 286 | N/A | $ | 296 | ||||||||||
Net amount at risk (2) | N/A | $ | 51 | (5) | N/A | $ | 53 | (5) | ||||||||
Average attained age of contractholders | N/A | 60 years | N/A | 58 years |
December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Secondary | Paid-Up | Secondary | Paid-Up | |||||||||||||
Guarantees | Guarantees | Guarantees | Guarantees | |||||||||||||
(In millions) | ||||||||||||||||
Universal and Variable Life Contracts (1) | ||||||||||||||||
Account value (general and separate account) | $ | 9,347 | $ | 4,302 | $ | 8,357 | $ | 4,468 | ||||||||
Net amount at risk (2) | $ | 141,840 | (3) | $ | 33,855 | (3) | $ | 131,808 | (3) | $ | 36,447 | (3) | ||||
Average attained age of policyholders | 49 years | 55 years | 49 years | 54 years |
(1) | The Company’s annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. | |
(2) | The net amount at risk is based on the direct amount at risk (excluding reinsurance). | |
(3) | The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. |
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(4) | The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. | |
(5) | The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. |
Universal and Variable | ||||||||||||||||||||
Annuity Contracts | Life Contracts | |||||||||||||||||||
Guaranteed | Guaranteed | Paid | ||||||||||||||||||
Death | Annuitization | Secondary | Up | |||||||||||||||||
Benefits | Benefits | Guarantees | Guarantees | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Balance at January 1, 2005 | $ | 24 | $ | 19 | $ | 6 | $ | 29 | $ | 78 | ||||||||||
Incurred guaranteed benefits | 22 | 10 | 10 | 10 | 52 | |||||||||||||||
Paid guaranteed benefits | (5 | ) | — | (1 | ) | — | (6 | ) | ||||||||||||
Balance at December 31, 2005 | 41 | 29 | 15 | 39 | 124 | |||||||||||||||
Incurred guaranteed benefits | 17 | 7 | 29 | 1 | 54 | |||||||||||||||
Paid guaranteed benefits | (6 | ) | — | — | — | (6 | ) | |||||||||||||
Balance at December 31, 2006 | 52 | 36 | 44 | 40 | 172 | |||||||||||||||
Incurred guaranteed benefits | 28 | 38 | 53 | 6 | 125 | |||||||||||||||
Paid guaranteed benefits | (8 | ) | — | — | — | (8 | ) | |||||||||||||
Balance at December 31, 2007 | $ | 72 | $ | 74 | $ | 97 | $ | 46 | $ | 289 | ||||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Mutual Fund Groupings | ||||||||
Equity | $ | 69,477 | $ | 70,187 | ||||
Bond | 6,284 | 6,139 | ||||||
Balanced | 15,977 | 4,403 | ||||||
Money Market | 1,775 | 1,302 | ||||||
Specialty | 870 | 1,088 | ||||||
Total | $ | 94,383 | $ | 83,119 | ||||
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8. | Reinsurance |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Direct premiums | $ | 24,168 | $ | 23,324 | $ | 22,232 | ||||||
Reinsurance assumed | 6,181 | 5,294 | 4,646 | |||||||||
Reinsurance ceded | (2,454 | ) | (2,206 | ) | (2,018 | ) | ||||||
Net premiums | $ | 27,895 | $ | 26,412 | $ | 24,860 | ||||||
Reinsurance recoverables netted against policyholder benefits and claims | $ | 2,622 | $ | 2,313 | $ | 2,400 | ||||||
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9. | Closed Block |
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Closed Block Liabilities | ||||||||
Future policy benefits | $ | 43,362 | $ | 43,089 | ||||
Other policyholder funds | 323 | 282 | ||||||
Policyholder dividends payable | 709 | 701 | ||||||
Policyholder dividend obligation | 789 | 1,063 | ||||||
Payables for collateral under securities loaned and other transactions | 5,610 | 6,483 | ||||||
Other liabilities | 290 | 192 | ||||||
Total closed block liabilities | 51,083 | 51,810 | ||||||
Assets Designated to the Closed Block | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $29,631 and $30,286, respectively) | 30,481 | 31,255 | ||||||
Equity securities available-for-sale, at estimated fair value (cost: $1,555 and $1,184, respectively) | 1,875 | 1,484 | ||||||
Mortgage loans on real estate | 7,472 | 7,848 | ||||||
Policy loans | 4,290 | 4,212 | ||||||
Real estate and real estate joint ventures held-for-investment | 297 | 242 | ||||||
Short-term investments | 14 | 62 | ||||||
Other invested assets | 829 | 644 | ||||||
Total investments | 45,258 | 45,747 | ||||||
Cash and cash equivalents | 333 | 255 | ||||||
Accrued investment income | 485 | 517 | ||||||
Deferred income tax assets | 640 | 754 | ||||||
Premiums and other receivables | 151 | 156 | ||||||
Total assets designated to the closed block | 46,867 | 47,429 | ||||||
Excess of closed block liabilities over assets designated to the closed block | 4,216 | 4,381 | ||||||
Amounts included in accumulated other comprehensive income (loss): | ||||||||
Unrealized investment gains (losses), net of income tax of $424 and $457, respectively | 751 | 812 | ||||||
Unrealized gains (losses) on derivative instruments, net of income tax of ($19) and ($18), respectively | (33 | ) | (32 | ) | ||||
Allocated to policyholder dividend obligation, net of income tax of ($284) and ($381), respectively | (505 | ) | (681 | ) | ||||
Total amounts included in accumulated other comprehensive income (loss) | 213 | 99 | ||||||
Maximum future earnings to be recognized from closed block assets and liabilities | $ | 4,429 | $ | 4,480 | ||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 1,063 | $ | 1,607 | $ | 2,243 | ||||||
Impact on revenues, net of expenses and income tax | — | (114 | ) | (9 | ) | |||||||
Change in unrealized investment and derivative gains (losses) | (274 | ) | (430 | ) | (627 | ) | ||||||
Balance at December 31, | $ | 789 | $ | 1,063 | $ | 1,607 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | ||||||||||||
Premiums | $ | 2,870 | $ | 2,959 | $ | 3,062 | ||||||
Net investment income and other revenues | 2,350 | 2,355 | 2,382 | |||||||||
Net investment gains (losses) | 28 | (130 | ) | 10 | ||||||||
Total revenues | 5,248 | 5,184 | 5,454 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 3,457 | 3,474 | 3,478 | |||||||||
Policyholder dividends | 1,492 | 1,479 | 1,465 | |||||||||
Change in policyholder dividend obligation | — | (114 | ) | (9 | ) | |||||||
Other expenses | 231 | 247 | 263 | |||||||||
Total expenses | 5,180 | 5,086 | 5,197 | |||||||||
Revenues, net of expenses before income tax | 68 | 98 | 257 | |||||||||
Income tax | 21 | 34 | 90 | |||||||||
Revenues, net of expenses and income tax from continuing operations | 47 | 64 | 167 | |||||||||
Revenues, net of expenses and income tax from discontinued operations | — | 1 | — | |||||||||
Revenues, net of expenses, income taxes and discontinued operations | $ | 47 | $ | 65 | $ | 167 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at December 31, | $ | 4,429 | $ | 4,480 | $ | 4,545 | ||||||
Less: | ||||||||||||
Cumulative effect of a change in accounting principle, net of income tax | (4 | ) | — | — | ||||||||
Balance at January 1, | 4,480 | 4,545 | 4,712 | |||||||||
Change during year | $ | (47 | ) | $ | (65 | ) | $ | (167 | ) | |||
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10. | Long-term and Short-term Debt |
Interest Rates | ||||||||||||||||||||
Weighted | December 31, | |||||||||||||||||||
Range | Average | Maturity | 2007 | 2006 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Senior notes | 5.00%-6.75% | 5.60 | % | 2011-2035 | $ | 7,515 | $ | 7,196 | ||||||||||||
Repurchase agreements | 2.83%-5.65% | 4.49 | % | 2008-2013 | 1,213 | 998 | ||||||||||||||
Surplus notes | 7.63%-7.88% | 7.76 | % | 2015-2025 | 697 | 697 | ||||||||||||||
Fixed rate notes | 5.50%-7.25% | 6.68 | % | 2008 | 73 | 107 | ||||||||||||||
Other notes with varying interest rates | 3.44%-6.10% | 4.99 | % | 2009-2012 | 75 | 68 | ||||||||||||||
Capital lease obligations | 55 | 63 | ||||||||||||||||||
Total long-term debt | 9,628 | 9,129 | ||||||||||||||||||
Total short-term debt | 667 | 1,449 | ||||||||||||||||||
Total | $ | 10,295 | $ | 10,578 | ||||||||||||||||
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Letter of | ||||||||||||||||||
Credit | Unused | |||||||||||||||||
Borrower(s) | Expiration | Capacity | Issuances | Drawdowns | Commitments | |||||||||||||
(In millions) | ||||||||||||||||||
MetLife, Inc. and MetLife Funding, Inc. | June 2012 (1) | $ | 3,000 | $ | 1,532 | $ | — | $ | 1,468 | |||||||||
MetLife Bank, N.A | July 2008 (2) | 200 | — | — | 200 | |||||||||||||
Reinsurance Group of America, Incorporated | May 2008 | 30 | — | 30 | — | |||||||||||||
Reinsurance Group of America, Incorporated | September 2012(3) | 750 | 406 | — | 344 | |||||||||||||
Reinsurance Group of America, Incorporated | March 2011 | 44 | — | — | 44 | |||||||||||||
Total | $ | 4,024 | $ | 1,938 | $ | 30 | $ | 2,056 | ||||||||||
(1) | In June 2007, the Holding Company and MetLife Funding, Inc. entered into a $3.0 billion credit agreement with various financial institutions, the proceeds of which are available to be used for general corporate purposes, to support their commercial paper programs and for the issuance of letters of credit. All borrowings under the credit agreement must be repaid by June 2012, except that letters of credit outstanding upon termination may remain outstanding until June 2013. The borrowers and the lenders under this facility may agree to extend the term of all or part of the facility to no later than June 2014, except that letters of credit outstanding upon termination may remain outstanding until June 2015. The $1.5 billion credit agreement, with an April 2009 expiration, and the $1.5 billion credit agreement, with an April 2010 expiration, were both terminated in June 2007 and replaced by the aforementioned facility. | |
(2) | In July 2007, the facility was extended for one year to July 2008. | |
(3) | In September 2007, RGA and certain of its subsidiaries entered into a credit agreement with various financial institutions. Under the credit agreement, RGA may borrow and obtain letters of credit for general corporate purposes for its own account or for the account of its subsidiaries with an overall credit facility amount of up to $750 million. The credit agreement replaced a former credit agreement in the amount of $600 million which was scheduled to expire on September 29, 2010. |
Letter of | ||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||
(In millions) | ||||||||||||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Re | June 2016 (1) | $ | 500 | $ | — | $ | 490 | $ | 10 | 8 | ||||||||||||
Exeter Reassurance Company Ltd. | December 2027 (2) | 650 | — | 410 | 240 | 20 | ||||||||||||||||
Timberlake Financial L.L.C. | June 2036 (3) | 1,000 | 850 | — | 150 | 29 | ||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 (4) | 3,500 | 2,382 | — | 1,118 | 30 | ||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037(2),(5) | 2,896 | — | 1,235 | 1,661 | 30 | ||||||||||||||||
Total | $ | 8,546 | $ | 3,232 | $ | 2,135 | $ | 3,179 | ||||||||||||||
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(1) | Letters of credit and replacements or renewals thereof issued under this facility of $280 million, $10 million and $200 million are set to expire no later than December 2015, March 2016 and June 2016, respectively. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | As described in Note 11, RGA may, at its option, offer up to $150 million of additional notes under this facility in the future. | |
(4) | In May 2007, MetLife Reinsurance Company of South Carolina (“MRSC”), a wholly-owned subsidiary of the Company, terminated the $2.0 billion amended and restated five-year letter of credit and reimbursement agreement entered into among the Holding Company, MRSC and various financial institutions on April 25, 2005. In its place, the Company entered into a30-year collateral financing arrangement as described in Note 11, which may be extended by agreement of the Company and the financial institution on each anniversary of the closing of the facility for an additional one-year period. As of December 31, 2007, $2.4 billion had been drawn upon under the collateral financing arrangement. | |
(5) | In December 2007, Exeter Reassurance Company Ltd. (“Exeter”) terminated four letters of credit, with expirations from March 2025 through December 2026, that were issued under a letter of credit facility with an unaffiliated financial institution in an aggregate amount of $1.7 billion. The letters of credit had served as collateral for Exeter’s obligations under a reinsurance agreement that was recaptured by MLI-USA in December 2007. MLI-USA immediately thereafter entered into a new reinsurance agreement with MetLife Reinsurance Company of Vermont (“MRV”). To collateralize its reinsurance obligations, MRV and the Holding Company entered into a30-year, $2.9 billion letter of credit facility with an unaffiliated financial institution. |
11. | Collateral Financing Arrangements |
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12. | Junior Subordinated Debentures |
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13. | Common Equity Units |
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14. | Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts |
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15. | Income Taxes |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 435 | $ | 618 | $ | 553 | ||||||
State and local | 15 | 39 | 63 | |||||||||
Foreign | 210 | 156 | 111 | |||||||||
Subtotal | 660 | 813 | 727 | |||||||||
Deferred: | ||||||||||||
Federal | $ | 1,082 | $ | 220 | $ | 470 | ||||||
State and local | 31 | 2 | 14 | |||||||||
Foreign | (14 | ) | 62 | 11 | ||||||||
Subtotal | 1,099 | 284 | 495 | |||||||||
Provision for income tax | $ | 1,759 | $ | 1,097 | $ | 1,222 | ||||||
Years Ended December 31, | ||||||||||||||
2007 | 2006 | 2005 | ||||||||||||
(In millions) | ||||||||||||||
Tax provision at U.S. statutory rate | $ | 2,114 | $ | 1,459 | $ | 1,503 | ||||||||
Tax effect of: | ||||||||||||||
Tax-exempt investment income | (295 | ) | (296 | ) | (169 | ) | ||||||||
State and local income tax | 39 | 23 | 35 | |||||||||||
Prior year tax | 70 | (10 | ) | (31 | ) | |||||||||
Foreign tax rate differential and change in valuation allowance | (116 | ) | (57 | ) | (44 | ) | ||||||||
Foreign operations repatriation | — | — | (27 | ) | ||||||||||
Other, net | (53 | ) | (22 | ) | (45 | ) | ||||||||
Provision for income tax | $ | 1,759 | $ | 1,097 | $ | 1,222 | ||||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Deferred income tax assets: | ||||||||
Policyholder liabilities and receivables | $ | 4,026 | $ | 4,078 | ||||
Net operating loss carryforwards | 920 | 1,368 | ||||||
Employee benefits | 176 | 472 | ||||||
Capital loss carryforwards | 162 | 156 | ||||||
Tax credit carryforwards | 24 | — | ||||||
Intangibles | — | 22 | ||||||
Litigation-related and government mandated | 113 | 65 | ||||||
Other | 247 | 198 | ||||||
5,668 | 6,359 | |||||||
Less: Valuation allowance | 135 | 239 | ||||||
5,533 | 6,120 | |||||||
Deferred income tax liabilities: | ||||||||
Investments | 2,266 | 1,839 | ||||||
Intangibles | 32 | — | ||||||
DAC | 5,153 | 5,433 | ||||||
Net unrealized investment gains | 423 | 994 | ||||||
Other | 116 | 132 | ||||||
7,990 | 8,398 | |||||||
Net deferred income tax liability | $ | (2,457 | ) | $ | (2,278 | ) | ||
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Total Unrecognized | ||||
Tax Benefits | ||||
(In millions) | ||||
Balance at January 1, 2007 (date of adoption) | $ | 1,128 | ||
Additions for tax positions of prior years | 73 | |||
Reductions for tax positions of prior years | (59 | ) | ||
Additions for tax positions of current year | 85 | |||
Reductions for tax positions of current year | (8 | ) | ||
Settlements with tax authorities | (177 | ) | ||
Lapses of statutes of limitations | (4 | ) | ||
Balance at December 31, 2007 | $ | 1,038 | ||
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16. | Contingencies, Commitments and Guarantees |
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F-84
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December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions, except number of claims) | ||||||||||||
Asbestos personal injury claims at year end | 79,717 | 87,070 | 100,250 | |||||||||
Number of new claims during the year | 7,161 | 7,870 | 18,500 | |||||||||
Settlement payments during the year (1) | $ | 28.2 | $ | 35.5 | $ | 74.3 |
(1) | Settlement payments represent payments made by MLIC during the year in connection with settlements made in that year and in prior years. Amounts do not include MLIC’s attorneys’ fees and expenses and do not reflect amounts received from insurance carriers. |
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Other Assets: | ||||||||
Premium tax offset for future undiscounted assessments | $ | 40 | $ | 45 | ||||
Premium tax offsets currently available for paid assessments | 6 | 7 | ||||||
Receivable for reimbursement of paid assessments (1) | 7 | 10 | ||||||
$ | 53 | $ | 62 | |||||
Liability: | ||||||||
Insolvency assessments | $ | 74 | $ | 90 | ||||
(1) | The Company holds a receivable from the seller of a prior acquisition in accordance with the purchase agreement. |
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Gross | ||||||||||||
Rental | Sublease | Rental | ||||||||||
Income | Income | Payments | ||||||||||
(In millions) | ||||||||||||
2008 | $ | 455 | $ | 21 | $ | 254 | ||||||
2009 | $ | 421 | $ | 13 | $ | 234 | ||||||
2010 | $ | 368 | $ | 8 | $ | 208 | ||||||
2011 | $ | 292 | $ | 8 | $ | 177 | ||||||
2012 | $ | 217 | $ | 7 | $ | 139 | ||||||
Thereafter | $ | 766 | $ | 7 | $ | 1,155 |
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17. | Employee Benefit Plans |
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December 31, 2006 | ||||||||||||||||
Additional | ||||||||||||||||
Minimum | ||||||||||||||||
Pre | Pension | Adoption of | Post | |||||||||||||
SFAS 158 | Liability | SFAS 158 | SFAS 158 | |||||||||||||
Balance Sheet Caption | Adjustments | Adjustment | Adjustment | Adjustments | ||||||||||||
(In millions) | ||||||||||||||||
Other assets: Prepaid pension benefit cost | $ | 1,937 | $ | — | $ | (993 | ) | $ | 944 | |||||||
Other assets: Intangible asset | $ | 12 | $ | (12 | ) | $ | — | $ | — | |||||||
Other liabilities: Accrued pension benefit cost | $ | (505 | ) | $ | (14 | ) | $ | (79 | ) | $ | (598 | ) | ||||
Other liabilities: Accrued other postretirement benefit cost | $ | (802 | ) | $ | — | $ | (99 | ) | $ | (901 | ) | |||||
Accumulated other comprehensive income, before income tax: Defined benefit plans | $ | (66 | ) | $ | (26 | ) | $ | (1,171 | ) | $ | (1,263 | ) | ||||
Minority interest | $ | — | $ | 8 | ||||||||||||
Deferred income tax | $ | 8 | $ | 419 | ||||||||||||
Accumulated other comprehensive income, net of income tax: Defined benefit plans | $ | (41 | ) | $ | (18 | ) | $ | (744 | ) | $ | (803 | ) | ||||
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December 31, | ||||||||||||||||
Pension | ||||||||||||||||
Benefits | Other Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of year | $ | 5,959 | $ | 5,766 | $ | 2,073 | $ | 2,176 | ||||||||
Service cost | 166 | 163 | 27 | 35 | ||||||||||||
Interest cost | 354 | 335 | 104 | 117 | ||||||||||||
Plan participants’ contributions | — | — | 31 | 29 | ||||||||||||
Divestitures | — | (4 | ) | — | — | |||||||||||
Net actuarial (gains) losses | (390 | ) | 27 | (464 | ) | 1 | ||||||||||
Change in benefits | 39 | (6 | ) | — | (143 | ) | ||||||||||
Prescription drug subsidy | — | — | 13 | 10 | ||||||||||||
Benefits paid | (353 | ) | (322 | ) | (174 | ) | (152 | ) | ||||||||
Benefit obligation at end of year | 5,775 | 5,959 | 1,610 | 2,073 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | 6,305 | 5,518 | 1,172 | 1,093 | ||||||||||||
Actual return on plan assets | 548 | 725 | 58 | 104 | ||||||||||||
Divestitures | — | (4 | ) | — | — | |||||||||||
Employer contribution | 50 | 388 | 1 | 2 | ||||||||||||
Benefits paid | (353 | ) | (322 | ) | (48 | ) | (27 | ) | ||||||||
Fair value of plan assets at end of year | 6,550 | 6,305 | 1,183 | 1,172 | ||||||||||||
Funded status at end of year | $ | 775 | $ | 346 | $ | (427 | ) | $ | (901 | ) | ||||||
Amounts recognized in the consolidated balance sheet consist of: | ||||||||||||||||
Other assets | $ | 1,393 | $ | 944 | $ | — | $ | — | ||||||||
Other liabilities | (618 | ) | (598 | ) | (427 | ) | (901 | ) | ||||||||
Net amount recognized | $ | 775 | $ | 346 | $ | (427 | ) | $ | (901 | ) | ||||||
Accumulated other comprehensive (income) loss: | ||||||||||||||||
Net actuarial (gains) losses | $ | 623 | $ | 1,123 | $ | (112 | ) | $ | 328 | |||||||
Prior service cost (credit) | 64 | 41 | (193 | ) | (230 | ) | ||||||||||
Net asset at transition | — | — | — | 1 | ||||||||||||
687 | 1,164 | (305 | ) | 99 | ||||||||||||
Deferred income tax and minority interest | (251 | ) | (423 | ) | 109 | (37 | ) | |||||||||
$ | 436 | $ | 741 | $ | (196 | ) | $ | 62 | ||||||||
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December 31, | ||||||||||||||||||||||||
Qualified Plans | Non-Qualified Plans | Total | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Aggregate fair value of plan assets | ||||||||||||||||||||||||
(principally Company contracts) | $ | 6,550 | $ | 6,305 | $ | — | $ | — | $ | 6,550 | $ | 6,305 | ||||||||||||
Aggregate projected benefit obligation | 5,174 | 5,381 | 601 | 578 | 5,775 | 5,959 | ||||||||||||||||||
Over (under) funded | $ | 1,376 | $ | 924 | $ | (601 | ) | $ | (578 | ) | $ | 775 | $ | 346 | ||||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Projected benefit obligation | $ | 616 | $ | 594 | ||||
Accumulated benefit obligation | $ | 533 | $ | 501 | ||||
Fair value of plan assets | $ | — | $ | — |
December 31, | ||||||||||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Projected benefit obligation | $ | 646 | $ | 623 | $ | 1,610 | $ | 2,073 | ||||||||
Fair value of plan assets | $ | 28 | $ | 25 | $ | 1,183 | $ | 1,172 |
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Years Ended December 31, | ||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||
Benefits | Other Postretirement Benefits | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Net Periodic Benefit Cost | ||||||||||||||||||||||||
Service cost | $ | 166 | $ | 163 | $ | 142 | $ | 27 | $ | 35 | $ | 37 | ||||||||||||
Interest cost | 354 | 335 | 318 | 104 | 117 | 121 | ||||||||||||||||||
Expected return on plan assets | (507 | ) | (454 | ) | (446 | ) | (86 | ) | (79 | ) | (79 | ) | ||||||||||||
Amortization of net actuarial (gains) losses | 68 | 125 | 116 | — | 23 | 15 | ||||||||||||||||||
Amortization of prior service cost (credit) | 17 | 11 | 16 | (36 | ) | (36 | ) | (17 | ) | |||||||||||||||
Net periodic benefit cost | 98 | $ | 180 | $ | 146 | 9 | $ | 60 | $ | 77 | ||||||||||||||
Other Changes in Plan Assets and Benefit Obligations | ||||||||||||||||||||||||
Recognized in Other Comprehensive Income | ||||||||||||||||||||||||
Net actuarial (gains) losses | (432 | ) | (440 | ) | ||||||||||||||||||||
Prior service cost (credit) | 40 | — | ||||||||||||||||||||||
Amortization of net actuarial (gains) losses | (68 | ) | — | |||||||||||||||||||||
Amortization of prior service cost (credit) | (17 | ) | 36 | |||||||||||||||||||||
Total recognized in other comprehensive income | (477 | ) | (404 | ) | ||||||||||||||||||||
Total recognized in net periodic benefit cost and other comprehensive income | $ | (379 | ) | $ | (395 | ) | ||||||||||||||||||
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December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Cumulative reduction in benefit obligation: | ||||||||||||
Beginning of year | $ | 328 | $ | 298 | $ | 230 | ||||||
Service cost | 7 | 6 | 6 | |||||||||
Interest cost | 19 | 19 | 16 | |||||||||
Net actuarial gains (losses) | (42 | ) | 15 | 46 | ||||||||
Prescription drug subsidy | (13 | ) | (10 | ) | — | |||||||
End of year | $ | 299 | $ | 328 | $ | 298 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Reduction in net periodic benefit cost: | ||||||||||||
Service cost | $ | 7 | $ | 6 | $ | 6 | ||||||
Interest cost | 19 | 19 | 16 | |||||||||
Amortization of net actuarial gains (losses) | 5 | 30 | 23 | |||||||||
Total reduction in net periodic benefit cost | $ | 31 | $ | 55 | $ | 45 | ||||||
December 31, | ||||||||
Pension | Other Postretirement | |||||||
Benefits | Benefits | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Weighted average discount rate | 6.65% | 6.00% | 6.65% | 6.00% | ||||
Rate of compensation increase | 3.5%-8% | 3%-8% | N/A | N/A |
December 31, | ||||||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||
Weighted average discount rate | 6.00% | 5.82% | 5.83% | 6.00% | 5.82% | 5.98% | ||||||
Weighted average expected rate of return on plan assets | 8.25% | 8.25% | 8.50% | 7.47% | 7.42% | 7.51% | ||||||
Rate of compensation increase | 3.5%-8% | 3%-8% | 3%-8% | N/A | N/A | N/A |
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December 31, | ||||
2007 | 2006 | |||
Pre-Medicare eligible claims | 8.5% down to 5% in 2014 | 9.0% down to 5% in 2014 | ||
Medicare eligible claims | 10.5% down to 5% in 2018 | 11.0% down to 5% in 2018 |
One Percent | One Percent | |||||||
Increase | Decrease | |||||||
(In millions) | ||||||||
Effect on total of service and interest cost components | $ | 7 | $ | (6 | ) | |||
Effect of accumulated postretirement benefit obligation | $ | 63 | $ | (62 | ) |
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December 31, | ||||||||||||||||
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Asset Category | ||||||||||||||||
Equity securities | 38 | % | 42 | % | 37 | % | 37 | % | ||||||||
Fixed maturity securities | 44 | % | 42 | % | 58 | % | 57 | % | ||||||||
Other (Real Estate and Alternative Investments) | 18 | % | 16 | % | 5 | % | 6 | % | ||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Pension | Other | |||
Asset Category | ||||
Equity securities | 30%-55% | 30%-45% | ||
Fixed maturity securities | 30%-65% | 45%-70% | ||
Other (Real Estate and Alternative Investments) | 10%-25% | 0%-10% |
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Other Postretirement Benefits | ||||||||||||||||
Pension | Prescription | |||||||||||||||
Benefits | Gross | Drug Subsidies | Net | |||||||||||||
(In millions) | ||||||||||||||||
2008 | $ | 360 | $ | 116 | $ | (14 | ) | $ | 102 | |||||||
2009 | $ | 373 | $ | 120 | $ | (15 | ) | $ | 105 | |||||||
2010 | $ | 383 | $ | 124 | $ | (16 | ) | $ | 109 | |||||||
2011 | $ | 397 | $ | 129 | $ | (16 | ) | $ | 113 | |||||||
2012 | $ | 413 | $ | 132 | $ | (17 | ) | $ | 115 | |||||||
2013-2017 | $ | 2,288 | $ | 713 | $ | (100 | ) | $ | 613 |
18. | Equity |
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Dividend | ||||||||||||||||||
Series A | Series A | Series B | Series B | |||||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | Per Share | Aggregate | ||||||||||||
(In millions, except per share data) | ||||||||||||||||||
November 15, 2007 | November 30, 2007 | December 17, 2007 | $0.4230476 | $ | 11 | $ | 0.4062500 | $ | 24 | |||||||||
August 15, 2007 | August 31, 2007 | September 17, 2007 | $0.4063333 | $ | 10 | $ | 0.4062500 | $ | 24 | |||||||||
May 15, 2007 | May 31, 2007 | June 15, 2007 | $0.4060062 | $ | 10 | $ | 0.4062500 | $ | 24 | |||||||||
March 5, 2007 | February 28, 2007 | March 15, 2007 | $0.3975000 | $ | 10 | $ | 0.4062500 | $ | 24 | |||||||||
$ | 41 | $ | 96 | |||||||||||||||
November 15, 2006 | November 30, 2006 | December 15, 2006 | $0.4038125 | $ | 10 | $ | 0.4062500 | $ | 24 | |||||||||
August 15, 2006 | August 31, 2006 | September 15, 2006 | $0.4043771 | $ | 10 | $ | 0.4062500 | $ | 24 | |||||||||
May 16, 2006 | May 31, 2006 | June 15, 2006 | $0.3775833 | $ | 9 | $ | 0.4062500 | $ | 24 | |||||||||
March 6, 2006 | February 28, 2006 | March 15, 2006 | $0.3432031 | $ | 9 | $ | 0.4062500 | $ | 24 | |||||||||
$ | 38 | $ | 96 | |||||||||||||||
November 15, 2005 | November 30, 2005 | December 15, 2005 | $0.3077569 | $ | 8 | $ | 0.4062500 | $ | 24 | |||||||||
August 22, 2005 | August 31, 2005 | September 15, 2005 | $0.2865690 | $ | 7 | $ | 0.4017361 | $ | 24 | |||||||||
$ | 15 | $ | 48 | |||||||||||||||
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• | In December 2004, the Company repurchased 7.3 million shares of its outstanding common stock at an aggregate cost of $300 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the stock sold to the Company from third parties and purchased the common stock in the open market to return to such third parties. In April 2005, the Company received a cash adjustment of $7 million based on the actual amount paid by the bank to purchase the common stock, for a final purchase price of $293 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. | |
• | In December 2006, the Company repurchased 4.0 million shares of its outstanding common stock at an aggregate cost of $232 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Company from third parties and purchased the common stock in the open market to return to such third parties. In February 2007, the Company paid a cash adjustment of $8 million for a final purchase price of $240 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. | |
• | In March 2007, the Company repurchased 11.9 million shares of its outstanding common stock at an aggregate cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the common stock sold to the Company from third parties and purchased common stock in the open market to return to such third parties. In June 2007, the Company paid a cash adjustment of $17 million for a final purchase price of $767 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount paid as an adjustment to the cost of the treasury stock. | |
• | In November 2007, the Company repurchased 11.6 million shares of its outstanding common stock at an initial cost of $750 million under an accelerated common stock repurchase agreement with a major bank. The bank borrowed the stock sold to the Company from third parties and purchased the common stock in the open market to return to such third parties. Also, in November 2007, the Company received a cash adjustment of $19 million based on the trading price of the common stock during the repurchase period, for a final purchase price of $731 million. The Company recorded the shares initially repurchased as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. | |
• | In December 2007, the Company entered into an accelerated common stock repurchase agreement with a major bank. Under the terms of the agreement, the Company paid the bank $450 million in cash in January 2008 in exchange for 6.6 million shares of the Company’s outstanding common stock that the bank borrowed from third parties. Also, in January 2008, the bank delivered 1.1 million additional shares of the Company’s common stock to the Company resulting in a total of 7.7 million shares being repurchased under the agreement. At December 31, 2007, the Company recorded the obligation to pay $450 million to the bank as a |
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• | See Note 25 for further information with respect to an accelerated common stock repurchase agreement executed subsequent to December 31, 2007. |
Dividend | ||||||||||||
Declaration Date | Record Date | Payment Date | Per Share | Aggregate | ||||||||
(In millions, | ||||||||||||
except per share data) | ||||||||||||
October 23, 2007 | November 6, 2007 | December 14, 2007 | $ | 0.74 | $ | 541 | ||||||
October 24, 2006 | November 6, 2006 | December 15, 2006 | $ | 0.59 | $ | 450 | ||||||
October 25, 2005 | November 7, 2005 | December 15, 2005 | $ | 0.52 | $ | 394 |
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Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Shares Under | Average | Contractual | Aggregate | |||||||||||||
Option | Exercise Price | Term | Intrinsic Value | |||||||||||||
(Years) | (In millions) | |||||||||||||||
Outstanding at January 1, 2007 | 24,891,651 | $ | 34.68 | 6.58 | $ | 606 | ||||||||||
Granted | 3,297,875 | $ | 62.86 | |||||||||||||
Exercised | (3,518,083 | ) | $ | 31.33 | ||||||||||||
Cancelled/Expired | (68,314 | ) | $ | 30.57 | ||||||||||||
Forfeited | (172,582 | ) | $ | 55.13 | ||||||||||||
Outstanding at December 31, 2007 | 24,430,547 | $ | 38.83 | 6.17 | $ | 557 | ||||||||||
Aggregate number of stock options expected to vest at December 31, 2007 | 23,845,241 | $ | 38.49 | 6.12 | $ | 551 | ||||||||||
Exercisable at December 31, 2007 | 17,460,955 | $ | 32.83 | 5.28 | $ | 503 | ||||||||||
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Years Ended December 31, | ||||||
2007 | 2006 | 2005 | ||||
Dividend yield | 0.94% | 1.04% | 1.19% | |||
Risk-free rate of return | 4.30%-5.32% | 4.17%-4.96% | 3.34%-5.41% | |||
Expected volatility | 19.54% | 22.00% | 23.24% | |||
Exercise multiple | 1.66 | 1.52 | 1.48 | |||
Post-vesting termination rate | 3.66% | 4.09% | 5.19% | |||
Contractual term (years) | 10 | 10 | 10 | |||
Expected life (years) | 6 | 6 | 6 | |||
Weighted average exercise price of stock options granted | $62.86 | $50.21 | $38.70 | |||
Weighted average fair value of stock options granted | $17.76 | $13.84 | $10.09 |
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Year Ended | ||||
December 31, 2005 | ||||
(In millions, | ||||
except per share data) | ||||
Net income available to common shareholders | $ | 4,651 | ||
Add: Stock option-based employee compensation expense included in reported net income, net of income tax | $ | 33 | ||
Deduct: Total stock option-based employee compensation determined under fair value based method for all awards, net of income tax | $ | (35 | ) | |
Pro forma net income available to common shareholders | $ | 4,649 | ||
Basic earnings per common share | ||||
As reported | $ | 6.21 | ||
Pro forma | $ | 6.21 | ||
Diluted earnings per common share | ||||
As reported | $ | 6.16 | ||
Pro forma | $ | 6.15 | ||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Total intrinsic value of stock options exercised | $ | 122 | $ | 65 | $ | 39 | ||||||
Cash received from exercise of stock options | $ | 110 | $ | 83 | $ | 72 | ||||||
Tax benefit realized from stock options exercised | $ | 43 | $ | 23 | $ | 13 |
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Weighted Average | ||||||||
Performance | Grant Date | |||||||
Shares | Fair Value | |||||||
Outstanding at January 1, 2007 | 1,849,575 | $ | 42.24 | |||||
Granted | 916,075 | $ | 60.86 | |||||
Forfeited | (75,525 | ) | $ | 49.20 | ||||
Outstanding at December 31, 2007 | 2,690,125 | $ | 48.39 | |||||
Performance Shares expected to vest at December 31, 2007 | 2,641,669 | $ | 48.20 | |||||
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2008 | 2007 | 2006 | ||||||||||||||||||
Permitted | Permitted | Permitted | ||||||||||||||||||
w/o | w/o | w/o | ||||||||||||||||||
Company | Approval (1) | Paid (2) | Approval (3) | Paid (2) | Approval (3) | |||||||||||||||
(In millions) | ||||||||||||||||||||
Metropolitan Life Insurance Company | $ | 1,299 | $ | 500 | $ | 919 | $ | 863 | $ | 863 | ||||||||||
MetLife Insurance Company of Connecticut | $ | 1,026 | $ | 690 | (5) | $ | 690 | $ | 917 | (4) | $ | — | ||||||||
Metropolitan Tower Life Insurance Company | $ | 113 | $ | — | $ | 104 | $ | 2,300 | $ | 85 | ||||||||||
Metropolitan Property and Casualty Insurance Company | $ | — | $ | 400 | $ | 16 | $ | 300 | $ | 178 |
(1) | Reflects dividend amounts that may be paid during 2008 without prior regulatory approval. However, if paid before a specified date during 2008, some or all of such dividends may require regulatory approval. | |
(2) | Includes amounts paid including those requiring regulatory approval. | |
(3) | Reflects dividend amounts that could have been paid during the relevant year without prior regulatory approval. | |
(4) | Includes a return of capital of $259 million. | |
(5) | Includes a return of capital of $404 million as approved by the applicable insurance department, of which $350 million was paid to the Holding Company. |
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Holding gains (losses) on investments arising during the year | $ | (1,485 | ) | $ | (1,022 | ) | $ | (3,697 | ) | |||
Income tax effect of holding gains (losses) | 581 | 379 | 1,391 | |||||||||
Reclassification adjustments: | ||||||||||||
Recognized holding (gains) losses included in current year income | 176 | 916 | 524 | |||||||||
Amortization of premiums and accretion of discounts associated with investments | (831 | ) | (600 | ) | (199 | ) | ||||||
Income tax effect | 254 | (117 | ) | (122 | ) | |||||||
Allocation of holding losses on investments relating to other policyholder amounts | 676 | 581 | 1,670 | |||||||||
Income tax effect of allocation of holding losses to other policyholder amounts | (264 | ) | (215 | ) | (629 | ) | ||||||
Unrealized investment gains of subsidiary at date of sale | — | — | 15 | |||||||||
Deferred income tax on unrealized investment gains of subsidiary at date of sale | — | — | (5 | ) | ||||||||
Net unrealized investment gains (losses) | (893 | ) | (78 | ) | (1,052 | ) | ||||||
Foreign currency translation adjustments | 290 | 46 | (86 | ) | ||||||||
Foreign currency translation adjustments of subsidiary at date of sale | — | — | 5 | |||||||||
Foreign currency translation adjustment | 290 | 46 | (81 | ) | ||||||||
Minimum pension liability adjustment | — | (18 | ) | 89 | ||||||||
Deferred benefit plan adjustment | 563 | — | — | |||||||||
Other comprehensive income (loss) | $ | (40 | ) | $ | (50 | ) | $ | (1,044 | ) | |||
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19. | Other Expenses |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Compensation | $ | 3,556 | $ | 3,426 | $ | 3,217 | ||||||
Commissions | 4,114 | 3,801 | 3,510 | |||||||||
Interest and debt issue costs | 1,116 | 900 | 659 | |||||||||
Amortization of DAC and VOBA | 2,776 | 2,422 | 2,450 | |||||||||
Capitalization of DAC | (3,892 | ) | (3,589 | ) | (3,604 | ) | ||||||
Rent, net of sublease income | 309 | 287 | 296 | |||||||||
Minority interest | 240 | 234 | 154 | |||||||||
Insurance tax | 760 | 712 | 530 | |||||||||
Other | 2,694 | 2,590 | 2,052 | |||||||||
Total other expenses | $ | 11,673 | $ | 10,783 | $ | 9,264 | ||||||
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20. | Earnings Per Common Share |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions, except share and per share data) | ||||||||||||
Weighted average common stock outstanding for basic earnings per common share | 744,153,514 | 761,105,024 | 749,022,816 | |||||||||
Incremental common shares from assumed: | ||||||||||||
Stock purchase contracts underlying common equity units (1) | 7,138,900 | 1,416,134 | — | |||||||||
Exercise or issuance of stock-based awards | 10,971,585 | 8,182,938 | 6,313,540 | |||||||||
Weighted average common stock outstanding for diluted earnings per common share | 762,263,999 | 770,704,096 | 755,336,356 | |||||||||
Earnings per common share before preferred stock dividends: | ||||||||||||
Income from continuing operations | $ | 4,280 | $ | 3,071 | $ | 3,071 | ||||||
Basic | $ | 5.75 | $ | 4.03 | $ | 4.10 | ||||||
Diluted | $ | 5.62 | $ | 3.99 | $ | 4.06 | ||||||
Income from discontinued operations, net of income tax | $ | 37 | $ | 3,222 | $ | 1,643 | ||||||
Basic | $ | 0.05 | $ | 4.24 | $ | 2.19 | ||||||
Diluted | $ | 0.04 | $ | 4.18 | $ | 2.18 | ||||||
Net income | $ | 4,317 | $ | 6,293 | $ | 4,714 | ||||||
Basic | $ | 5.80 | $ | 8.27 | $ | 6.29 | ||||||
Diluted | $ | 5.66 | $ | 8.17 | $ | 6.24 | ||||||
Earnings per common share after preferred stock dividends: | ||||||||||||
Income from continuing operations | $ | 4,280 | $ | 3,071 | $ | 3,071 | ||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Income from continuing operations available to common shareholders | $ | 4,143 | $ | 2,937 | $ | 3,008 | ||||||
Basic | $ | 5.57 | $ | 3.85 | $ | 4.02 | ||||||
Diluted | $ | 5.44 | $ | 3.81 | $ | 3.98 | ||||||
Net income | $ | 4,317 | $ | 6,293 | $ | 4,714 | ||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Net income available to common shareholders | $ | 4,180 | $ | 6,159 | $ | 4,651 | ||||||
Basic | $ | 5.62 | $ | 8.09 | $ | 6.21 | ||||||
Diluted | $ | 5.48 | $ | 7.99 | $ | 6.16 | ||||||
(1) | See Note 13 for a description of the Company’s common equity units. |
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21. | Quarterly Results of Operations (Unaudited) |
Three Months Ended | ||||||||||||||||
March 31, | June 30, | September 30, | December 31, | |||||||||||||
(In millions, except per share data) | ||||||||||||||||
2007 | ||||||||||||||||
Total revenues | $ | 12,908 | $ | 13,216 | $ | 13,053 | $ | 13,830 | ||||||||
Total expenses | $ | 11,469 | $ | 11,586 | $ | 11,668 | $ | 12,245 | ||||||||
Income from continuing operations | $ | 1,024 | $ | 1,154 | $ | 984 | $ | 1,118 | ||||||||
Income (loss) from discontinued operations, net of income tax | $ | (7 | ) | $ | 9 | $ | 35 | $ | — | |||||||
Net income | $ | 1,017 | $ | 1,163 | $ | 1,019 | $ | 1,118 | ||||||||
Net income available to common shareholders | $ | 983 | $ | 1,129 | $ | 985 | $ | 1,083 | ||||||||
Basic earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 1.32 | $ | 1.50 | $ | 1.28 | $ | 1.47 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | (0.01 | ) | $ | 0.01 | $ | 0.05 | $ | — | |||||||
Net income | $ | 1.35 | $ | 1.56 | $ | 1.37 | $ | 1.52 | ||||||||
Net income available to common shareholders, per common share | $ | 1.31 | $ | 1.52 | $ | 1.32 | $ | 1.47 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 1.29 | $ | 1.47 | $ | 1.25 | $ | 1.44 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | (0.01 | ) | $ | 0.01 | $ | 0.05 | $ | — | |||||||
Net income | $ | 1.32 | $ | 1.52 | $ | 1.34 | $ | 1.48 | ||||||||
Net income available to common shareholders, per common share | $ | 1.28 | $ | 1.48 | $ | 1.29 | $ | 1.44 | ||||||||
2006 | ||||||||||||||||
Total revenues | $ | 11,528 | $ | 11,350 | $ | 12,525 | $ | 12,851 | ||||||||
Total expenses | $ | 10,518 | $ | 10,553 | $ | 11,212 | $ | 11,803 | ||||||||
Income from continuing operations | $ | 727 | $ | 592 | $ | 958 | $ | 794 | ||||||||
Income from discontinued operations, net of income tax | $ | 20 | $ | 58 | $ | 75 | $ | 3,069 | ||||||||
Net income | $ | 747 | $ | 650 | $ | 1,033 | $ | 3,863 | ||||||||
Net income available to common shareholders | $ | 714 | $ | 617 | $ | 999 | $ | 3,829 | ||||||||
Basic earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 0.91 | $ | 0.73 | $ | 1.21 | $ | 1.00 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | 0.03 | $ | 0.08 | $ | 0.10 | $ | 4.03 | ||||||||
Net income | $ | 0.98 | $ | 0.85 | $ | 1.35 | $ | 5.09 | ||||||||
Net income available to common shareholders, per common share | $ | 0.94 | $ | 0.81 | $ | 1.31 | $ | 5.04 | ||||||||
Diluted earnings per share: | ||||||||||||||||
Income from continuing operations available to common shareholders | $ | 0.90 | $ | 0.73 | $ | 1.19 | $ | 0.99 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | 0.03 | $ | 0.08 | $ | 0.10 | $ | 3.98 | ||||||||
Net income | $ | 0.97 | $ | 0.84 | $ | 1.34 | $ | 5.00 | ||||||||
Net income available to common shareholders, per common share | $ | 0.93 | $ | 0.80 | $ | 1.29 | $ | 4.95 |
22. | Business Segment Information |
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For the Year Ended | Auto & | Corporate & | ||||||||||||||||||||||||||
December 31, 2007 | Institutional | Individual | Home | International | Reinsurance | Other | Total | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||||||
Premiums | $ | 12,392 | $ | 4,496 | $ | 2,966 | $ | 3,096 | $ | 4,910 | $ | 35 | $ | 27,895 | ||||||||||||||
Universal life and investment- type product policy fees | 803 | 3,513 | — | 995 | — | — | 5,311 | |||||||||||||||||||||
Net investment income | 8,179 | 7,052 | 196 | 1,248 | 871 | 1,460 | 19,006 | |||||||||||||||||||||
Other revenues | 726 | 599 | 45 | 23 | 77 | 63 | 1,533 | |||||||||||||||||||||
Net investment gains (losses) | (580 | ) | (99 | ) | 16 | 55 | (177 | ) | 47 | (738 | ) | |||||||||||||||||
Policyholder benefits and claims | 13,806 | 5,721 | 1,807 | 2,458 | 3,989 | 47 | 27,828 | |||||||||||||||||||||
Interest credited to policyholder account balances | 3,094 | 2,030 | — | 355 | 262 | — | 5,741 | |||||||||||||||||||||
Policyholder dividends | — | 1,718 | 4 | 4 | — | — | 1,726 | |||||||||||||||||||||
Other expenses | 2,438 | 4,031 | 830 | 1,748 | 1,226 | 1,400 | 11,673 | |||||||||||||||||||||
Income from continuing operations before provision (benefit) for income tax | 2,182 | 2,061 | 582 | 852 | 204 | 158 | 6,039 | |||||||||||||||||||||
Provision (benefit) for income tax | 743 | 705 | 146 | 208 | 71 | (114 | ) | 1,759 | ||||||||||||||||||||
Income from continuing operations | 1,439 | 1,356 | 436 | 644 | 133 | 272 | 4,280 | |||||||||||||||||||||
Income (loss) from discontinued operations, net of income tax | 10 | 1 | — | (9 | ) | — | 35 | 37 | ||||||||||||||||||||
Net income | $ | 1,449 | $ | 1,357 | $ | 436 | $ | 635 | $ | 133 | $ | 307 | $ | 4,317 | ||||||||||||||
Balance Sheet: | ||||||||||||||||||||||||||||
Total assets | $ | 204,005 | $ | 250,691 | $ | 5,672 | $ | 26,357 | $ | 21,331 | $ | 50,506 | $ | 558,562 | ||||||||||||||
DAC and VOBA | $ | 923 | $ | 14,236 | $ | 193 | $ | 2,648 | $ | 3,513 | $ | 8 | $ | 21,521 | ||||||||||||||
Goodwill | $ | 978 | $ | 2,957 | $ | 157 | $ | 313 | $ | 96 | $ | 409 | $ | 4,910 | ||||||||||||||
Separate account assets | $ | 52,046 | $ | 102,918 | $ | — | $ | 5,195 | $ | 17 | $ | (17 | ) | $ | 160,159 | |||||||||||||
Policyholder liabilities | $ | 121,147 | $ | 116,568 | $ | 3,324 | $ | 16,083 | $ | 15,113 | $ | 9,335 | $ | 281,570 | ||||||||||||||
Separate account liabilities | $ | 52,046 | $ | 102,918 | $ | — | $ | 5,195 | $ | 17 | $ | (17 | ) | $ | 160,159 |
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For the Year Ended | Auto & | Corporate & | ||||||||||||||||||||||||||
December 31, 2006 | Institutional | Individual | Home | International | Reinsurance | Other | Total | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||||||
Premiums | $ | 11,867 | $ | 4,516 | $ | 2,924 | $ | 2,722 | $ | 4,348 | $ | 35 | $ | 26,412 | ||||||||||||||
Universal life and investment- type product policy fees | 775 | 3,201 | — | 804 | — | — | 4,780 | |||||||||||||||||||||
Net investment income | 7,265 | 6,912 | 177 | 950 | 732 | 1,046 | 17,082 | |||||||||||||||||||||
Other revenues | 685 | 527 | 22 | 28 | 66 | 34 | 1,362 | |||||||||||||||||||||
Net investment gains (losses) | (631 | ) | (598 | ) | 4 | (10 | ) | 7 | (154 | ) | (1,382 | ) | ||||||||||||||||
Policyholder benefits and claims | 13,367 | 5,409 | 1,717 | 2,411 | 3,490 | 37 | 26,431 | |||||||||||||||||||||
Interest credited to policyholder account balances | 2,593 | 2,035 | — | 289 | 254 | — | 5,171 | |||||||||||||||||||||
Policyholder dividends | — | 1,697 | 6 | (2 | ) | — | — | 1,701 | ||||||||||||||||||||
Other expenses | 2,314 | 3,519 | 845 | 1,529 | 1,227 | 1,349 | 10,783 | |||||||||||||||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 1,687 | 1,898 | 559 | 267 | 182 | (425 | ) | 4,168 | ||||||||||||||||||||
Provision (benefit) for income tax | 562 | 652 | 143 | 95 | 64 | (419 | ) | 1,097 | ||||||||||||||||||||
Income (loss) from continuing operations | 1,125 | 1,246 | 416 | 172 | 118 | (6 | ) | 3,071 | ||||||||||||||||||||
Income from discontinued operations, net of income tax | 42 | 18 | — | 28 | — | 3,134 | 3,222 | |||||||||||||||||||||
Net income | $ | 1,167 | $ | 1,264 | $ | 416 | $ | 200 | $ | 118 | $ | 3,128 | $ | 6,293 | ||||||||||||||
Balance Sheet: | ||||||||||||||||||||||||||||
Total assets | $ | 190,963 | $ | 243,604 | $ | 5,467 | $ | 22,724 | $ | 18,818 | $ | 46,139 | $ | 527,715 | ||||||||||||||
DAC and VOBA | $ | 1,370 | $ | 13,996 | $ | 190 | $ | 2,117 | $ | 3,152 | $ | 13 | $ | 20,838 | ||||||||||||||
Goodwill | $ | 977 | $ | 2,957 | $ | 157 | $ | 301 | $ | 96 | $ | 409 | $ | 4,897 | ||||||||||||||
Separate account assets | $ | 47,047 | $ | 94,124 | $ | — | $ | 3,178 | $ | 16 | $ | — | $ | 144,365 | ||||||||||||||
Policyholder liabilities | $ | 113,205 | $ | 117,866 | $ | 3,453 | $ | 13,544 | $ | 13,332 | $ | 9,199 | $ | 270,599 | ||||||||||||||
Separate account liabilities | $ | 47,047 | $ | 94,124 | $ | — | $ | 3,178 | $ | 16 | $ | — | $ | 144,365 |
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For the Year Ended | Auto & | Corporate & | ||||||||||||||||||||||||||
December 31, 2005 | Institutional | Individual | Home | International | Reinsurance | Other | Total | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||||||
Premiums | $ | 11,387 | $ | 4,485 | $ | 2,911 | $ | 2,186 | $ | 3,869 | $ | 22 | $ | 24,860 | ||||||||||||||
Universal life and investment- type product policy fees | 772 | 2,476 | — | 579 | — | 1 | 3,828 | |||||||||||||||||||||
Net investment income | 5,942 | 6,534 | 181 | 794 | 606 | 699 | 14,756 | |||||||||||||||||||||
Other revenues | 653 | 477 | 33 | 20 | 58 | 30 | 1,271 | |||||||||||||||||||||
Net investment gains (losses) | (10 | ) | (50 | ) | (12 | ) | 12 | 22 | (48 | ) | (86 | ) | ||||||||||||||||
Policyholder benefits and claims | 12,776 | 5,417 | 1,994 | 2,128 | 3,206 | (15 | ) | 25,506 | ||||||||||||||||||||
Interest credited to policyholder account balances | 1,652 | 1,775 | — | 240 | 220 | — | 3,887 | |||||||||||||||||||||
Policyholder dividends | 1 | 1,670 | 3 | 5 | — | — | 1,679 | |||||||||||||||||||||
Other expenses | 2,229 | 3,264 | 828 | 997 | 991 | 955 | 9,264 | |||||||||||||||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 2,086 | 1,796 | 288 | 221 | 138 | (236 | ) | 4,293 | ||||||||||||||||||||
Provision (benefit) for income tax | 698 | 594 | 64 | 35 | 46 | (215 | ) | 1,222 | ||||||||||||||||||||
Income (loss) from continuing operations | 1,388 | 1,202 | 224 | �� | 186 | 92 | (21 | ) | 3,071 | |||||||||||||||||||
Income from discontinued operations, net of income tax | 174 | 296 | — | 6 | — | 1,167 | 1,643 | |||||||||||||||||||||
Net income | $ | 1,562 | $ | 1,498 | $ | 224 | $ | 192 | $ | 92 | $ | 1,146 | $ | 4,714 | ||||||||||||||
23. | Discontinued Operations |
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Investment income | $ | 59 | $ | 276 | $ | 435 | ||||||
Investment expense | (43 | ) | (182 | ) | (273 | ) | ||||||
Net investment gains | 13 | 4,795 | 2,125 | |||||||||
Total revenues | 29 | 4,889 | 2,287 | |||||||||
Provision for income tax | 11 | 1,727 | 813 | |||||||||
Income from discontinued operations, net of income tax | $ | 18 | $ | 3,162 | $ | 1,474 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Net investment income | ||||||||||||
Institutional | $ | 4 | $ | 8 | $ | 29 | ||||||
Individual | 1 | 4 | 20 | |||||||||
Corporate & Other | 11 | 82 | 113 | |||||||||
Total net investment income | $ | 16 | $ | 94 | $ | 162 | ||||||
Net investment gains (losses) | ||||||||||||
Institutional | $ | 12 | $ | 58 | $ | 242 | ||||||
Individual | — | 23 | 443 | |||||||||
Corporate & Other | 1 | 4,714 | 1,440 | |||||||||
Total net investment gains (losses) | $ | 13 | $ | 4,795 | $ | 2,125 | ||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | $ | 71 | $ | 100 | $ | 50 | ||||||
Expenses | 58 | 89 | 41 | |||||||||
Income before provision for income tax | 13 | 11 | 9 | |||||||||
Provision for income tax | 4 | 3 | 3 | |||||||||
Net investment gain (loss), net of income tax | (4 | ) | 20 | (5 | ) | |||||||
Income from discontinued operations, net of income tax | $ | 5 | $ | 28 | $ | 1 | ||||||
December 31, 2006 | ||||
(In millions) | ||||
Fixed maturity securities | $ | 1,500 | ||
Equity securities | 37 | |||
Deferred policy acquisition costs | 13 | |||
Other assets | 13 | |||
Total assets held-for-sale | $ | 1,563 | ||
Policyholder account balances | $ | 1,595 | ||
Total liabilities held-for-sale | $ | 1,595 | ||
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Year Ended | ||||
December 31, | ||||
2005 | ||||
(In millions) | ||||
Revenues | $ | 5 | ||
Expenses | 10 | |||
Income from discontinued operations before provision for income tax | (5 | ) | ||
Provision for income tax | — | |||
Net investment gain, net of income tax | 10 | |||
Income from discontinued operations, net of income tax | $ | 5 | ||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Revenues | $ | — | $ | — | $ | 19 | ||||||
Expenses | — | — | 38 | |||||||||
Income from discontinued operations before provision for income tax | — | — | (19 | ) | ||||||||
Provision for income tax | — | — | (5 | ) | ||||||||
Net investment gain, net of income tax | 14 | 32 | 177 | |||||||||
Income from discontinued operations, net of income tax | $ | 14 | $ | 32 | $ | 163 | ||||||
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24. | Fair Value Information |
Notional | Carrying | Estimated | ||||||||||
December 31, 2007 | Amount | Value | Fair Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 242,242 | $ | 242,242 | ||||||||
Trading securities | $ | 779 | $ | 779 | ||||||||
Equity securities | $ | 6,050 | $ | 6,050 | ||||||||
Mortgage and consumer loans | $ | 47,030 | $ | 47,599 | ||||||||
Policy loans | $ | 10,419 | $ | 10,419 | ||||||||
Short-term investments | $ | 2,648 | $ | 2,648 | ||||||||
Cash and cash equivalents | $ | 10,368 | $ | 10,368 | ||||||||
Accrued investment income | $ | 3,630 | $ | 3,630 | ||||||||
Mortgage loan commitments | $ | 4,035 | $ | — | $ | (43 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,196 | $ | — | $ | (59 | ) | |||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 115,385 | $ | 114,466 | ||||||||
Short-term debt | $ | 667 | $ | 667 | ||||||||
Long-term debt | $ | 9,628 | $ | 9,532 | ||||||||
Collateral financing arrangements | $ | 5,732 | $ | 5,365 | ||||||||
Junior subordinated debt securities | $ | 4,474 | $ | 4,338 | ||||||||
Shares subject to mandatory redemption | $ | 159 | $ | 178 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 44,136 | $ | 44,136 |
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Notional | Carrying | Estimated | ||||||||||
December 31, 2006 | Amount | Value | Fair Value | |||||||||
(In millions) | ||||||||||||
Assets: | ||||||||||||
Fixed maturity securities | $ | 241,928 | $ | 241,928 | ||||||||
Trading securities | $ | 759 | $ | 759 | ||||||||
Equity securities | $ | 5,094 | $ | 5,094 | ||||||||
Mortgage and consumer loans | $ | 42,239 | $ | 42,451 | ||||||||
Policy loans | $ | 10,228 | $ | 10,228 | ||||||||
Short-term investments | $ | 2,709 | $ | 2,709 | ||||||||
Cash and cash equivalents | $ | 7,107 | $ | 7,107 | ||||||||
Accrued investment income | $ | 3,347 | $ | 3,347 | ||||||||
Mortgage loan commitments | $ | 4,022 | $ | — | $ | 4 | ||||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,908 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 112,438 | $ | 108,318 | ||||||||
Short-term debt | $ | 1,449 | $ | 1,449 | ||||||||
Long-term debt | $ | 9,129 | $ | 9,299 | ||||||||
Collateral financing arrangements | $ | 850 | $ | 850 | ||||||||
Junior subordinated debt securities | $ | 3,780 | $ | 3,759 | ||||||||
Shares subject to mandatory redemption | $ | 278 | $ | 357 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 45,846 | $ | 45,846 |
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25. | Subsequent Events |
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Other Than Investments in Related Parties
December 31, 2007
(In millions)
Amount at | ||||||||||||
Cost or | Estimated | Which Shown on | ||||||||||
Type of Investments | Amortized Cost (1) | Fair Value | Balance Sheet | |||||||||
Fixed Maturity Securities: | ||||||||||||
Bonds: | ||||||||||||
U.S. Treasury/agency securities | $ | 19,771 | $ | 21,245 | $ | 21,245 | ||||||
State and political subdivision securities | 4,394 | 4,419 | 4,419 | |||||||||
Foreign government securities | 13,535 | 15,271 | 15,271 | |||||||||
Public utilities | 10,367 | 10,366 | 10,366 | |||||||||
All other corporate bonds | 97,149 | 97,985 | 97,985 | |||||||||
Mortgage-backed and asset-backed securities | 85,492 | 85,258 | 85,258 | |||||||||
Other fixed maturity securities | 267 | 217 | 217 | |||||||||
Redeemable preferred stock | 7,786 | 7,481 | 7,481 | |||||||||
Total fixed maturity securities | 238,761 | 242,242 | 242,242 | |||||||||
Trading Securities | 768 | 779 | 779 | |||||||||
Equity Securities: | ||||||||||||
Common stock: | ||||||||||||
Public utilities | 114 | 135 | 135 | |||||||||
Banks, trust and insurance companies | 680 | 747 | 747 | |||||||||
Industrial, miscellaneous and all other | 1,694 | 2,066 | 2,066 | |||||||||
Non-redeemable preferred stock | 3,403 | 3,102 | 3,102 | |||||||||
Total equity securities | 5,891 | 6,050 | 6,050 | |||||||||
Mortgage and consumer loans | 47,030 | 47,030 | ||||||||||
Policy loans | 10,419 | 10,419 | ||||||||||
Real estate and real estate joint ventures | 6,766 | 6,766 | ||||||||||
Real estate acquired in satisfaction of debt | 3 | 3 | ||||||||||
Other limited partnership interests | 6,155 | 6,155 | ||||||||||
Short-term investments | 2,648 | 2,648 | ||||||||||
Other invested assets | 12,642 | 12,642 | ||||||||||
Total investments | $ | 331,083 | $ | 334,734 | ||||||||
(1) | The Company’s trading securities portfolio is mainly comprised of fixed maturity and equity securities. Cost or amortized cost for fixed maturity securities and mortgage and consumer loans represents original cost reduced by repayments, net valuation allowances and writedowns fromother-than-temporary declines in value and adjusted for amortization of premiums or discounts; for equity securities, cost represents original cost reduced by writedowns fromother-than-temporary declines in value; for real estate, cost represents original cost reduced by writedowns and adjusted for valuation allowances and depreciation; cost for real estate joint ventures and other limited partnership interests represents original cost reduced forother-than-temporary impairments or original cost adjusted for equity in earnings and distributions. |
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(Parent Company Only)
December 31, 2007 and 2006
(In millions, except share and per share data)
2007 | 2006 | |||||||
Condensed Balance Sheets | ||||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities,available-for-sale, at estimated fair value (amortized cost: $2,567 and $3,504, respectively) | $ | 2,540 | $ | 3,490 | ||||
Equity securities,available-for-sale, at estimated fair value | ||||||||
(cost: $32 and $12, respectively) | 24 | 12 | ||||||
Other invested assets | 65 | 79 | ||||||
Total investments | 2,629 | 3,581 | ||||||
Cash and cash equivalents | 587 | 1,526 | ||||||
Accrued investment income | 62 | 56 | ||||||
Investment in subsidiaries | 45,611 | 40,238 | ||||||
Loans to subsidiaries | 1,600 | 1,700 | ||||||
Receivables from subsidiaries | 20 | — | ||||||
Other assets | 82 | 78 | ||||||
Total assets | $ | 50,591 | $ | 47,179 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Short-term debt | $ | 310 | $ | 616 | ||||
Long-term debt — unaffiliated | 7,017 | 6,996 | ||||||
Long-term debt — affiliated | 500 | 500 | ||||||
Collateral financing arrangements | 2,382 | — | ||||||
Junior subordinated debt securities | 3,382 | 3,382 | ||||||
Payables for collateral under securities loaned and other transactions | 814 | 1,096 | ||||||
Other liabilities | 1,007 | 791 | ||||||
Total liabilities | 15,412 | 13,381 | ||||||
Stockholders’ Equity: | ||||||||
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 84,000,000 shares issued and outstanding; $2,100 aggregate liquidation preference | 1 | 1 | ||||||
Common stock, par value $0.01 per share; 3,000,000,000 shares authorized; 786,766,664 shares issued; 729,223,440 shares and 751,984,799 shares outstanding at December 31, 2007 and 2006, respectively | 8 | 8 | ||||||
Additional paid-in capital | 17,098 | 17,454 | ||||||
Retained earnings | 19,884 | 16,574 | ||||||
Treasury stock, at cost; 57,543,224 shares and 34,781,865 shares at December 31, 2007 and 2006, respectively | (2,890 | ) | (1,357 | ) | ||||
Accumulated other comprehensive income | 1,078 | 1,118 | ||||||
Total stockholders’ equity | 35,179 | 33,798 | ||||||
Total liabilities and stockholders’ equity | $ | 50,591 | $ | 47,179 | ||||
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(Parent Company Only)
For the Years Ended December 31, 2007, 2006 and 2005
(In millions)
2007 | 2006 | 2005 | ||||||||||
Condensed Statements of Income | ||||||||||||
Equity in earnings of subsidiaries | $ | 4,632 | $ | 6,675 | $ | 4,956 | ||||||
Net investment income | 274 | 140 | 134 | |||||||||
Net investment gains (losses) | (41 | ) | (6 | ) | (40 | ) | ||||||
Other income | 84 | — | — | |||||||||
Interest expense | (733 | ) | (618 | ) | (425 | ) | ||||||
Other expenses | (62 | ) | (88 | ) | (44 | ) | ||||||
Income before income tax benefit | 4,154 | 6,103 | 4,581 | |||||||||
Income tax benefit | (163 | ) | (190 | ) | (133 | ) | ||||||
Net income | 4,317 | 6,293 | 4,714 | |||||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Net income available to common shareholders | $ | 4,180 | $ | 6,159 | $ | 4,651 | ||||||
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(Parent Company Only)
For the Years Ended December 31, 2007, 2006 and 2005
(In millions)
2007 | 2006 | 2005 | ||||||||||
Condensed Statements of Cash Flows | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 4,317 | $ | 6,293 | $ | 4,714 | ||||||
Earnings of subsidiaries | (4,632 | ) | (6,675 | ) | (4,956 | ) | ||||||
Dividends from subsidiaries | 1,254 | 4,237 | 4,822 | |||||||||
Other, net | 248 | 60 | 319 | |||||||||
Net cash provided by operating activities | 1,187 | 3,915 | 4,899 | |||||||||
Cash flows from investing activities | ||||||||||||
Sales of fixed maturity securities | 5,203 | 1,123 | 2,178 | |||||||||
Purchases of fixed maturity securities | (4,586 | ) | (3,575 | ) | (1,038 | ) | ||||||
Sales of equity securities | 13 | — | — | |||||||||
Purchases of equity securities | (32 | ) | — | — | ||||||||
Net change in short-term investments | — | 38 | 177 | |||||||||
Purchase of businesses | — | (115 | ) | (10,776 | ) | |||||||
Capital contribution to subsidiaries | (422 | ) | (690 | ) | (532 | ) | ||||||
Return of capital from subsidiaries | 526 | 413 | — | |||||||||
Repayment of loans to subsidiaries | 800 | — | — | |||||||||
Issuance of loans to subsidiaries | (700 | ) | — | (1,200 | ) | |||||||
Other, net | (60 | ) | — | (85 | ) | |||||||
Net cash provided by (used in) investing activities | 742 | (2,806 | ) | (11,276 | ) | |||||||
Cash flows from financing activities | ||||||||||||
Net change in payable for collateral under securities loaned and other transactions | (282 | ) | 850 | (477 | ) | |||||||
Net change in short-term debt | (306 | ) | (345 | ) | 961 | |||||||
Long-term debt issued | — | — | 2,733 | |||||||||
Long-term debt repaid | — | (500 | ) | (1,006 | ) | |||||||
Preferred stock issued | — | — | 2,100 | |||||||||
Dividends on preferred stock | (137 | ) | (134 | ) | (63 | ) | ||||||
Dividends on common stock | (541 | ) | (450 | ) | (394 | ) | ||||||
Junior subordinated debt securities issued | — | 1,248 | 2,134 | |||||||||
Treasury stock acquired | (1,705 | ) | (500 | ) | — | |||||||
Stock options exercised | 110 | 83 | 72 | |||||||||
Debt and equity issuance costs | (7 | ) | (12 | ) | (128 | ) | ||||||
Other, net | — | (1 | ) | — | ||||||||
Net cash (used in) provided by financing activities | (2,868 | ) | 239 | 5,932 | ||||||||
Change in cash and cash equivalents | (939 | ) | 1,348 | (445 | ) | |||||||
Cash and cash equivalents, beginning of year | 1,526 | 178 | 623 | |||||||||
Cash and cash equivalents, end of year | $ | 587 | $ | 1,526 | $ | 178 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Net cash paid (received) during the year for: | ||||||||||||
Interest | $ | 711 | $ | 596 | $ | 393 | ||||||
Income tax | $ | (241 | ) | $ | (136 | ) | $ | (264 | ) | |||
Non-cash transactions during the year: | ||||||||||||
Business acquisitions: | ||||||||||||
Assets acquired | $ | — | $ | — | $ | 11,966 | ||||||
Less: liabilities assumed | — | — | 180 | |||||||||
Net assets acquired | — | — | 11,786 | |||||||||
Less: cash paid | — | — | 10,776 | |||||||||
Business acquisition, common stock issued | $ | — | $ | — | $ | 1,010 | ||||||
Issuance of exchange bond to an affiliate | $ | — | $ | 214 | $ | 286 | ||||||
Accrual for stock purchase contracts related to common equity units | $ | — | $ | — | $ | 97 | ||||||
Contribution of goodwill to subsidiaries | $ | — | $ | 32 | $ | — | ||||||
Contribution of other intangible assets to subsidiaries, net of deferred income tax | $ | — | $ | 558 | $ | — | ||||||
Issuance of collateral financing arrangement | $ | 2,382 | $ | — | $ | — | ||||||
Capital contribution to subsidiary | $ | 2,382 | $ | — | $ | — | ||||||
Allocation of interest expense to subsidiary | $ | 84 | $ | — | $ | — | ||||||
Allocation of interest income to subsidiary | $ | 72 | $ | — | $ | — | ||||||
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1. | Summary of Accounting Policies |
• | Business, Basis of Presentation and Summary of Significant Accounting Policies (Note 1) | |
• | Long-term and Short-term Debt (Note 10) | |
• | Collateral Financing Arrangements (Note 11) |
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(Parent Company Only)
• | Junior Subordinated Debentures (Note 12) | |
• | Common Equity Units (Note 13) | |
• | Contingencies, Commitments and Guarantees (Note 16) | |
• | Equity (Note 18) | |
• | Earnings per Common Share (Note 20) | |
• | Subsequent Events (Note 25) |
Years Ended December 31, | ||||||||
2006 | 2005 | |||||||
(In millions) | ||||||||
Balance at January 1, | $ | 577 | $ | — | ||||
Acquisitions | — | 577 | ||||||
Amortization | (2 | ) | — | |||||
Contributions to subsidiaries | (575 | ) | — | |||||
Balance at December 31, | $ | — | $ | 577 | ||||
3. | Loans to Subsidiaries |
Interest | Maturity | December 31, | ||||||||||
Subsidiaries | Rate | Date | 2007 | 2006 | ||||||||
(In millions) | ||||||||||||
Metropolitan Life Insurance Company | 3-month LIBOR + 1.15% | December 31, 2009 | $ | 700 | $ | — | ||||||
Metropolitan Life Insurance Company | 7.13% | December 15, 2032 | 400 | 400 | ||||||||
Metropolitan Life Insurance Company | 7.13% | January 15, 2033 | 100 | 100 | ||||||||
Metropolitan Life Insurance Company | 5.00% | December 31, 2007 | — | 800 | ||||||||
MetLife Investors USA Insurance Company | 7.35% | April 1, 2035 | 400 | 400 | ||||||||
Total | $ | 1,600 | $ | 1,700 | ||||||||
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(Parent Company Only)
4. | Long-term and Short-term Debt |
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Senior notes: | ||||||||
6.13% due 2011 | $ | 750 | $ | 750 | ||||
5.38% due 2012 | 398 | 398 | ||||||
5.00% due 2013 | 497 | 497 | ||||||
5.50% due 2014 | 352 | 352 | ||||||
5.00% due 2015 | 998 | 998 | ||||||
5.25% due 2020 | 787 | 776 | ||||||
5.38% due 2024 | 687 | 677 | ||||||
6.50% due 2032 | 596 | 596 | ||||||
5.88% due 2033 | 200 | 200 | ||||||
6.38% due 2034 | 754 | 754 | ||||||
5.70% due 2035 | 998 | 998 | ||||||
Total long-term debt — unaffiliated | 7,017 | 6,996 | ||||||
Total long-term debt — affiliated | 500 | 500 | ||||||
Total | $ | 7,517 | $ | 7,496 | ||||
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(Parent Company Only)
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Short-term debt | $ | 33 | $ | 59 | $ | 2 | ||||||
Long-term debt — unaffiliated | 401 | 430 | 366 | |||||||||
Long-term debt — affiliated | 30 | 20 | — | |||||||||
Collateral financing arrangements | 84 | — | — | |||||||||
Junior subordinated debt securities | 183 | 106 | 55 | |||||||||
Stock purchase contracts | 2 | 3 | 2 | |||||||||
Total interest expense | $ | 733 | $ | 618 | $ | 425 | ||||||
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Letter of | ||||||||||||||||||||||||
Credit | Unused | Maturity | ||||||||||||||||||||||
Account Party/Borrower(s) | Expiration | Capacity | Drawdowns | Issuances | Commitments | (Years) | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Re | June 2016 | (1) | $ | 500 | $ | — | $ | 490 | $ | 10 | 8 | |||||||||||||
Exeter Reassurance Company Ltd. | December 2027 | (2) | 650 | — | 410 | 240 | 20 | |||||||||||||||||
MetLife Reinsurance Company of South Carolina & MetLife, Inc. | June 2037 | (3) | 3,500 | 2,382 | — | 1,118 | 30 | |||||||||||||||||
MetLife Reinsurance Company of Vermont & MetLife, Inc. | December 2037 | (2), (4) | 2,896 | — | 1,235 | 1,661 | 30 | |||||||||||||||||
Total | $ | 7,546 | $ | 2,382 | $ | 2,135 | $ | 3,029 | ||||||||||||||||
(1) | Letters of credit and replacements or renewals thereof issued under this facility of $280 million, $10 million and $200 million are set to expire no later than December 2015, March 2016 and June 2016, respectively. | |
(2) | The Holding Company is a guarantor under this agreement. | |
(3) | In May 2007, MetLife Reinsurance Company of South Carolina (“MRSC”) terminated the $2.0 billion amended and restated five-year letter of credit and reimbursement agreement entered into among the Holding Company, MRSC and various institutional lenders on April 25, 2005. In its place the Company entered into a30-year collateral financing arrangement as described in Note 5, which may be extended by agreement of the Holding Company and the financial institution on each anniversary of the closing of the facility for an additional one-year period. At December 31, 2007, $2.4 billion had been drawn upon under the collateral financing arrangement. | |
(4) | In December 2007, Exeter Reassurance Company Ltd. (“Exeter”) terminated four letters of credit, with expirations from March 2025 through December 2026, that were issued under a letter of credit facility with an unaffiliated financial institution in an aggregate amount of $1.7 billion. The letters of credit had served as collateral for Exeter’s obligations under a reinsurance agreement that was recaptured by MLI-USA in December 2007. MLI-USA immediately thereafter entered into a new reinsurance agreement with MetLife Reinsurance Company of Vermont (“MRV”). To collateralize its reinsurance obligations, MRV and the Holding Company entered into a30-year, $2.9 billion letter of credit facility with an unaffiliated financial institution. |
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(Parent Company Only)
5. | Related Party Transactions |
• | In December 2007, the Holding Company, in connection with the collateral financing arrangement associated with MetLife Reinsurance Company of Charleston’s (“MRC”) reinsurance of the closed block liabilities, entered into an agreement with an unaffiliated financial institution under which the Holding Company is entitled to the interest paid by MRC on the surplus notes of3-month LIBOR plus 55 basis points in exchange for the payment of3-month LIBOR plus 112 basis points, payable quarterly. Under this agreement, the Holding Company may also be required to make payments to the unaffiliated financial institution related to any decline in the market value of the surplus notes and in connection with any early termination of this agreement. The Holding Company’s net cost of 57 basis points has been allocated to MRC. For the year ended December 31, 2007, this amount was immaterial. | |
• | In May 2007, the Holding Company, in connection with the collateral financing arrangement associated with MRSC reinsurance of universal life secondary guarantees, entered into an agreement with an unaffiliated |
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(Parent Company Only)
financial institution under which the Holding Company is entitled to the return on the investment portfolio held by the trust established in connection with this collateral financing arrangement in exchange for the payment of a stated rate of return to the unaffiliated financial institution of3-month LIBOR plus 70 basis points, payable quarterly. The Holding Company may also be required to make payments to the unaffiliated financial institution, for deposit into the trust, related to any decline in the market value of the assets held by the trust, as well as amounts outstanding upon maturity or early termination of the collateral financing arrangement. As a result of this agreement, the Holding Company effectively assumed the $2.4 billion liability under the collateral financing arrangement along with a beneficial interest in the trust holding the associated assets. The Holding Company simultaneously contributed to MRSC its beneficial interest in the trust, along with any return to be received on the investment portfolio held by the trust. Interest expense incurred by the Holding Company under the collateral financing arrangement for the year ended December 31, 2007 was $84 million. The allocation of these financing costs of $84 million to MRSC is included in other revenues and recorded as an additional investment in MRSC. |
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December 31, 2007, 2006 and 2005
(In millions)
Future Policy | |||||||||||||||||||
Benefits, Other | |||||||||||||||||||
DAC | Policyholder Funds | Policyholder | Policyholder | ||||||||||||||||
and | and Policyholder | Account | Dividends | Unearned | |||||||||||||||
Segment | VOBA | Dividend Obligation | Balances | Payable | Revenue (1) | ||||||||||||||
2007 | |||||||||||||||||||
Institutional | $ | 923 | $ | 55,064 | $ | 66,083 | $ | — | $ | 56 | |||||||||
Individual | 14,236 | 60,458 | 55,116 | 994 | 1,386 | ||||||||||||||
Auto & Home | 193 | 3,324 | — | — | — | ||||||||||||||
International | 2,648 | 11,122 | 4,961 | — | 544 | ||||||||||||||
Reinsurance | 3,513 | 8,456 | 6,657 | — | — | ||||||||||||||
Corporate & Other | 8 | 4,803 | 4,532 | — | — | ||||||||||||||
$ | 21,521 | $ | 143,227 | $ | 137,349 | $ | 994 | $ | 1,986 | ||||||||||
2006 | |||||||||||||||||||
Institutional | $ | 1,370 | $ | 53,511 | $ | 59,694 | $ | — | $ | 37 | |||||||||
Individual | 13,996 | 59,698 | 57,208 | 960 | 1,206 | ||||||||||||||
Auto & Home | 190 | 3,453 | — | — | — | ||||||||||||||
International | 2,117 | 9,346 | 4,198 | — | 373 | ||||||||||||||
Reinsurance | 3,152 | 7,120 | 6,212 | — | — | ||||||||||||||
Corporate & Other | 13 | 4,563 | 4,636 | — | — | ||||||||||||||
$ | 20,838 | $ | 137,691 | $ | 131,948 | $ | 960 | $ | 1,616 | ||||||||||
2005 | |||||||||||||||||||
Institutional | $ | 1,259 | $ | 51,818 | $ | 54,180 | $ | — | $ | 27 | |||||||||
Individual | 13,523 | 60,103 | 59,011 | 917 | 1,050 | ||||||||||||||
Auto & Home | 186 | 3,490 | — | — | — | ||||||||||||||
International | 1,829 | 7,981 | 3,656 | — | 294 | ||||||||||||||
Reinsurance | 2,815 | 6,247 | 5,504 | — | — | ||||||||||||||
Corporate & Other | 17 | 3,503 | 4,338 | — | — | ||||||||||||||
$ | 19,629 | $ | 133,142 | $ | 126,689 | $ | 917 | $ | 1,371 | ||||||||||
(1) | Amounts are included within the future policy benefits, other policyholder funds and policyholder dividend obligation column. |
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Amortization of | ||||||||||||||||||||||||
Premium | Net | Policyholder | DAC and VOBA | Other | ||||||||||||||||||||
Revenue and | Investment | Benefits and | Charged to | Operating | Premiums Written | |||||||||||||||||||
Segment | Policy Charges | Income | Interest Credited | Other Expenses | Expenses (1) | (Excluding Life) | ||||||||||||||||||
2007 | ||||||||||||||||||||||||
Institutional | $ | 13,195 | $ | 8,179 | $ | 16,900 | $ | 251 | $ | 2,187 | $ | 4,972 | ||||||||||||
Individual | 8,009 | 7,052 | 7,751 | 1,220 | 4,529 | — | ||||||||||||||||||
Auto & Home | 2,966 | 196 | 1,807 | 468 | 366 | 2,982 | ||||||||||||||||||
International | 4,091 | 1,248 | 2,813 | 309 | 1,443 | 669 | ||||||||||||||||||
Reinsurance | 4,910 | 871 | 4,251 | 517 | 709 | — | ||||||||||||||||||
Corporate & Other | 35 | 1,460 | 47 | 11 | 1,389 | — | ||||||||||||||||||
$ | 33,206 | $ | 19,006 | $ | 33,569 | $ | 2,776 | $ | 10,623 | $ | 8,623 | |||||||||||||
2006 | ||||||||||||||||||||||||
Institutional | $ | 12,642 | $ | 7,265 | $ | 15,960 | $ | 182 | $ | 2,132 | $ | 4,575 | ||||||||||||
Individual | 7,717 | 6,912 | 7,444 | 908 | 4,308 | — | ||||||||||||||||||
Auto & Home | 2,924 | 177 | 1,717 | 459 | 392 | 2,946 | ||||||||||||||||||
International | 3,526 | 950 | 2,700 | 362 | 1,165 | 623 | ||||||||||||||||||
Reinsurance | 4,348 | 732 | 3,744 | 506 | 721 | — | ||||||||||||||||||
Corporate & Other | 35 | 1,046 | 37 | 5 | 1,344 | — | ||||||||||||||||||
$ | 31,192 | $ | 17,082 | $ | 31,602 | $ | 2,422 | $ | 10,062 | $ | 8,144 | |||||||||||||
2005 | ||||||||||||||||||||||||
Institutional | $ | 12,159 | $ | 5,942 | $ | 14,428 | $ | 174 | $ | 2,056 | $ | 4,107 | ||||||||||||
Individual | 6,961 | 6,534 | 7,192 | 941 | 3,993 | — | ||||||||||||||||||
Auto & Home | 2,911 | 181 | 1,994 | 455 | 376 | 2,921 | ||||||||||||||||||
International | 2,765 | 794 | 2,368 | 222 | 780 | 463 | ||||||||||||||||||
Reinsurance | 3,869 | 606 | 3,426 | 650 | 341 | — | ||||||||||||||||||
Corporate & Other | 23 | 699 | (15 | ) | 8 | 947 | — | |||||||||||||||||
$ | 28,688 | $ | 14,756 | $ | 29,393 | $ | 2,450 | $ | 8,493 | $ | 7,491 | |||||||||||||
(1) | Includes other expenses and policyholder dividends, excluding amortization of DAC and VOBA charged to other expenses. |
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December 31, 2007, 2006 and 2005
(In millions)
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2007 | ||||||||||||||||||||
Life insurance in-force | $ | 3,383,737 | $ | 758,185 | $ | 2,752,060 | $ | 5,377,612 | 51.2 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 15,203 | $ | 1,902 | $ | 5,953 | $ | 19,254 | 30.9 | % | ||||||||||
Accident and health | 5,900 | 436 | 202 | 5,666 | 3.6 | % | ||||||||||||||
Property and casualty insurance | 3,065 | 116 | 26 | 2,975 | 0.9 | % | ||||||||||||||
Total insurance premium | $ | 24,168 | $ | 2,454 | $ | 6,181 | $ | 27,895 | 22.2 | % | ||||||||||
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2006 | ||||||||||||||||||||
Life insurance in-force | $ | 3,602,755 | $ | 739,764 | $ | 2,104,460 | $ | 4,967,451 | 42.4 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 14,942 | $ | 1,643 | $ | 5,069 | $ | 18,368 | 27.6 | % | ||||||||||
Accident and health | 5,305 | 449 | 135 | 4,991 | 2.7 | % | ||||||||||||||
Property and casualty insurance | 3,077 | 114 | 90 | 3,053 | 2.9 | % | ||||||||||||||
Total insurance premium | $ | 23,324 | $ | 2,206 | $ | 5,294 | $ | 26,412 | 20.0 | % | ||||||||||
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2005 | ||||||||||||||||||||
Life insurance in-force | $ | 3,258,327 | $ | 726,946 | $ | 1,838,657 | $ | 4,370,038 | 42.1 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 14,443 | $ | 1,498 | $ | 4,445 | $ | 17,390 | 25.6 | % | ||||||||||
Accident and health | 4,748 | 388 | 138 | 4,498 | 3.1 | % | ||||||||||||||
Property and casualty insurance | 3,041 | 132 | 63 | 2,972 | 2.1 | % | ||||||||||||||
Total insurance premium | $ | 22,232 | $ | 2,018 | $ | 4,646 | $ | 24,860 | 18.7 | % | ||||||||||
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Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
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Item 9B. | Other Information |
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Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Number of Securities | ||||||||
Remaining Available for | ||||||||
Future Issuance Under | ||||||||
Number of Securities to | Weighted-average | Equity Compensation | ||||||
be Issued upon Exercise | Exercise Price of | Plans (Excluding | ||||||
of Outstanding Options, | Outstanding Options, | Securities Reflected | ||||||
Plan Category | Warrants and Rights (2) | Warrants and Rights (2) | in Column (a)) (2) | |||||
(a) | (b) | (c) | ||||||
Equity compensation plans approved | ||||||||
by security holders (1) | 33,270,305 | $ | 38.83 | 69,217,955 | ||||
Equity compensation plans not | ||||||||
approved by security holders | None | — | None | |||||
Total | 33,270,305 | $ | 38.83 | 69,217,955 |
(1) | Includes the MetLife, Inc. 2000 Stock Incentive Plan (the “2000 Stock Plan”) and the MetLife, Inc. 2000 Directors Stock Plan (the “2000 Directors Stock Plan”) each of which was approved by MLIC, the sole shareholder of the Holding Company at the time of approval. The policyholders of MLIC entitled to vote on its plan of reorganization (the “Plan”) approved that the Plan, which included both the 2000 Stock Plan and the 2000 Directors Stock Plan. The policyholders entitled to so vote received a summary description of each plan, including the applicable limits on the number of shares available for issuance under each plan. | |
(2) | The aggregate number of shares of common stock of the Holding Company (“Shares”) reserved for issuance under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan (the “2005 Stock Plan”), is 68,000,000. As of December 31, 2007, 11,917,472 additional Shares that were available but had not been utilized under the 2000 Stock Plan at the time the 2005 Stock Plan became effective, as well as 588,531 Shares recovered due to forfeiture or expiration of awards under the 2000 Stock Plan from that time through December 31, 2007, are available for issuance under the 2005 Stock Plan. | |
Under the 2005 Stock Plan, awards granted may be in the form of Stock Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Shares or Performance Share Units, Cash-Based Awards, and Stock-Based Awards (each as defined in the 2005 Stock Plan). Stock Options, Performance Shares, Restricted Stock Units and Stock-Based Awards have been awarded under the 2005 Stock Plan. | ||
Each Share issued under the 2005 Stock Plan in connection with awards other than Stock Options or Stock Appreciation Rights (including Shares payable on account of Performance Shares, Restricted Stock Units, and Stock-Based Awards) reduces the number of Shares remaining for issuance under the 2005 Stock Plan by 1.179 Shares. Accordingly, outstanding Preferred Stock Units and outstanding Performance Shares are reflected as reducing the number of Shares remaining for issuance by a factor of 1.179. Each Share issued under the 2005 Stock Plan in connection with a Stock Option or Stock Appreciation Right reduces the number of Shares remaining for issuance under the 2005 Stock Plan by 1.0. Accordingly, outstanding Stock Options are reflected as reducing the number of Shares remaining for issuance by a factor of 1.0. | ||
Share awards to Directors were made under a separate Share award authorization under the 2000 Directors Stock Plan. Those awards have not reduced the number of Shares remaining available for issuance as of December 31, 2007. Under the MetLife, Inc. 2005 Non-Management Director Stock Compensation Plan (the “2005 Directors Stock Plan”), awards granted may be in the form of non-qualified stock options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, or Stock-Based Awards (each as defined in the 2005 Directors Stock Plan). Share awards have been made under the 2005 Directors Stock Plan. The number of Shares reserved for issuance under the 2005 Directors Stock Plan is 2,000,000. | ||
Stock Options outstanding as December 31, 2007 are included in column (a) and are included in column (b) at their weighted average exercise price. | ||
Under the award agreements that apply to the Performance Share awards, Shares are payable to eligible award recipients following the conclusion of the performance period. The number of shares payable is determined by multiplying the number of performance shares by a performance factor (from 0% to 200%) based on the performance of the Holding Company with respect to: (i) change in annual net operating earnings per share; and |
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(ii) proportionate total shareholder return, as defined, as a percentile of the performance of other companies in the Standard & Poor’s Insurance Index, with regard to the performance period. Performance Shares that were unvested on December 31, 2007, or that vested by December 31, 2007 but whose performance factor has not yet been determined and has not yet become payable, are included in column (a) assuming the maximum performance factor, but are not included in determining the weighted average in column (b) because they have no exercise price. | ||
Under the award agreements that apply to the Restricted Stock Unit awards, Shares are equal to the number of Restricted Stock Units awarded are normally payable to eligible award recipients on the third or later anniversary of the date the Restricted Stock Units were granted. Restricted Stock Units that were unvested by December 31, 2007 are included in column (a), but are not included in determining the weighted average in column (b) because they have no exercise price. | ||
Shares that had become payable from any awards but had been deferred and remained unpaid as of December 31, 2007 are included in column (a), but are not included in determining the weighted average in column (b) because they have no exercise price. | ||
Under both the 2005 Stock Plan and the 2005 Directors Stock Plan, in the event of a corporate event or transaction (including, but not limited to, a change in the Shares or the capitalization of the Holding Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Holding Company, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Holding Company, or any similar corporate event or transaction, the appropriate committee of the Board of Directors of the Holding Company (each, a “Committee”), in order to prevent dilution or enlargement of participants’ rights under the applicable plan, shall in its sole discretion substitute or adjust, as applicable, the number and kind of Shares that may be issued under that plan and shall adjust the number and kind of Shares subject to outstanding awards. Any Shares related to awards under either plan which: (i) terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of Shares; (ii) are settled in cash either in lieu of Shares or otherwise; or (iii) are exchanged with the appropriate Committee’s permission for awards not involving Shares, are available again for grant under the applicable plan. If the option price of any Stock Option granted under either plan or the tax withholding requirements with respect to any award granted under either plan are satisfied by tendering Shares to the Holding Company (by either actual delivery or by attestation), or if a Stock Appreciation Right is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for issuance under that plan. The maximum number of Shares available for issuance under either plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock, Restricted Stock Units, or Stock-Based Awards. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
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Item 15. | Exhibits and Financial Statement Schedules |
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By | /s/ C. Robert Henrikson |
Title: | Chairman of the Board, President |
Signature | Title | Date | ||||
/s/ Sylvia Mathews Burwell Sylvia Mathews Burwell | Director | February 28, 2008 | ||||
/s/ Burton A. Dole, Jr. Burton A. Dole, Jr. | Director | February 28, 2008 | ||||
/s/ Cheryl W. Grisé Cheryl W. Grisé | Director | February 28, 2008 | ||||
/s/ James R. Houghton James R. Houghton | Director | February 28, 2008 | ||||
/s/ R. Glenn Hubbard R. Glenn Hubbard | Director | February 28, 2008 | ||||
/s/ Helene L. Kaplan Helene L. Kaplan | Director | February 28, 2008 | ||||
/s/ John M. Keane John M. Keane | Director | February 28, 2008 | ||||
/s/ James M. Kilts James M. Kilts | Director | February 28, 2008 | ||||
/s/ Charles M. Leighton Charles M. Leighton | Director | February 28, 2008 | ||||
/s/ Hugh B. Price Hugh B. Price | Director | February 28, 2008 |
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Signature | Title | Date | ||||
/s/ David Satcher, M.D. David Satcher, M.D. | Director | February 28, 2008 | ||||
/s/ Kenton J. Sicchitano Kenton J. Sicchitano | Director | February 28, 2008 | ||||
/s/ William C. Steere, Jr. William C. Steere, Jr. | Director | February 28, 2008 | ||||
/s/ C. Robert Henrikson C. Robert Henrikson | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) | February 28, 2008 | ||||
/s/ William J. Wheeler William J. Wheeler | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | February 28, 2008 | ||||
/s/ Joseph J. Prochaska, Jr. Joseph J. Prochaska, Jr. | Executive Vice President, Finance Operations and Chief Accounting Officer (Principal Accounting Officer) | February 28, 2008 |
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Exhibit | ||||||
No. | Description | |||||
2 | .1 | Plan of Reorganization (Incorporated by reference to Exhibit 2.1 to MetLife, Inc.’s Registration Statement onForm S-1(No. 333-91517) (the“S-1 Registration Statement”)) | ||||
2 | .2 | Amendment to Plan of Reorganization dated as of March 9, 2000 (Incorporated by reference to Exhibit 2.2 to theS-1 Registration Statement) | ||||
2 | .3 | Acquisition Agreement between MetLife, Inc. and Citigroup Inc., dated as of January 31, 2005 (Incorporated by reference to Exhibit 2.1 to MetLife, Inc.’s Current Report onForm 8-K dated February 4, 2005) | ||||
3 | .1 | Amended and Restated Certificate of Incorporation of MetLife, Inc. (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2006 (the “2006 Annual Report”)) | ||||
3 | .2 | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of MetLife, Inc., filed with the Secretary of State of Delaware on April 7, 2000 (Incorporated by reference to Exhibit 3.2 to the 2006 Annual Report) | ||||
3 | .3 | Certificate of Designations of Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc., filed with the Secretary of State of Delaware on June 10, 2005 (Incorporated by reference to Exhibit 99.5 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 10, 2005) | ||||
3 | .4 | Certificate of Designations of 6.50% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc., filed with the Secretary of State of Delaware on June 14, 2005 (Incorporated by reference to Exhibit 99.5 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 15, 2005) | ||||
3 | .5 | MetLife, Inc. Amended and Restated By-Laws effective June 19, 2007 (Incorporated by reference to Exhibit 3.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 25, 2007 (the “June 2007Form 8-K”)) | ||||
4 | .1(a) | Indenture dated as of November 9, 2001 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to Senior Debt Securities (Incorporated by reference to Exhibit 4.1(a) to the 2006 Annual Report) | ||||
4 | .1(b) | Form of Indenture for Senior Debt Securities between MetLife, Inc. and one or more banking institutions to be qualified as Trustee pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939 (Included in Exhibit 4.1(a) incorporated by reference to Exhibit 4.1(a) to the 2006 Annual Report, except for the name of the trustee) | ||||
4 | .2 | Second Supplemental Indenture dated as of November 27, 2001 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to the 6.125% Senior Notes due December 1, 2011 (Incorporated by reference to Exhibit 4.3 to the 2006 Annual Report) | ||||
4 | .3 | Third Supplemental Indenture dated as of December 10, 2002 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to the 5.375% Senior Notes due December 15, 2012 | ||||
4 | .4 | Fourth Supplemental Indenture dated as of December 10, 2002 between MetLife, Inc. and Bank One Trust Company, N.A. (predecessor to The Bank of New York Trust Company, N.A.) relating to the 6.50% Senior Notes due December 15, 2032 | ||||
4 | .5 | Fifth Supplemental Indenture dated as of November 21, 2003 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) relating to the 5.875% Senior Notes due November 21, 2033 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated November 21, 2003 (the “RetailForm 8-K”) | ||||
4 | .6 | Sixth Supplemental Indenture dated as of November 24, 2003 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) relating to the 5.00% Senior Notes due November 24, 2013 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated November 24, 2003 (the “InstitutionalForm 8-K”)) |
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Exhibit | ||||||
No. | Description | |||||
4 | .7 | Seventh Supplemental Indenture dated as of June 3, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.50% Senior Notes due June 15, 2014 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 3, 2004 (the “June 2004Form 8-K”)) | ||||
4 | .8 | Eighth Supplemental Indenture dated as of June 3, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 6.375% Senior Notes due June 15, 2034 (Incorporated by reference to Exhibit 4.3 to the June 2004Form 8-K) | ||||
4 | .9 | Ninth Supplemental Indenture dated as of July 23, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.50% Senior Notes due June 15, 2014 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 23, 2004 (the “July 2004Form 8-K”)) | ||||
4 | .10 | Tenth Supplemental Indenture dated as of July 23, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 6.375% Senior Notes due June 15, 2034 (Incorporated by reference to Exhibit 4.3 to the July 2004Form 8-K) | ||||
4 | .11 | Eleventh Supplemental Indenture dated as of December 9, 2004 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.375% Senior Notes due December 9, 2024 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 9, 2004 (the “December 2004Form 8-K”)) | ||||
4 | .12 | Twelfth Supplemental Indenture dated as of June 23, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.00% Senior Notes due June 15, 2015 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 23, 2005 (the “June 23, 2005Form 8-K”)) | ||||
4 | .13 | Thirteenth Supplemental Indenture dated as of June 23, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.70% Senior Notes due June 15, 2035 (Incorporated by reference to Exhibit 4.3 to the June 23, 2005Form 8-K) | ||||
4 | .14 | Fourteenth Supplemental Indenture dated as of June 29, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as trustee, relating to the 5.25% Senior Notes due June 29, 2020 (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated June 29, 2005 (the “June 29, 2005Form 8-K”)) | ||||
4 | .15 | Form of 6.125% Senior Note due December 1, 2011 (Included in Exhibit 4.2 incorporated by reference to Exhibit 4.3 to the 2006 Annual Report) | ||||
4 | .16 | Form of 5.375% Senior Note due December 15, 2012 (Included in Exhibit 4.3) | ||||
4 | .17 | Form of 6.50% Senior Note due December 15, 2032 (Included in Exhibit 4.4) | ||||
4 | .18 | Form of 5.875% Senior Note due November 21, 2033 (Included in Exhibit 4.5 incorporated by reference to Exhibit 4.1 to the RetailForm 8-K) | ||||
4 | .19 | Form of 5.00% Senior Note due November 24, 2013 (Included in Exhibit 4.6 incorporated by reference to Exhibit 4.1 to the InstitutionalForm 8-K) | ||||
4 | .20 | Form of 5.50% Senior Note due June 15, 2014 (Included in Exhibit 4.7 incorporated by reference to Exhibit 4.1 to the June 2004Form 8-K) | ||||
4 | .21 | Form of 6.375% Senior Note due June 15, 2034 (Included in Exhibit 4.8 incorporated by reference to Exhibit 4.3 to the June 2004Form 8-K) | ||||
4 | .22 | Form of 5.50% Senior Note due June 15, 2014 (Included in Exhibit 4.9 incorporated by reference to Exhibit 4.1 to the July 2004Form 8-K) |
E-2
Table of Contents
Exhibit | ||||||
No. | Description | |||||
4 | .23 | Form of 6.375% Senior Note due June 15, 2034 (Included in Exhibit 4.10 incorporated by reference to Exhibit 4.3 to the July 2004Form 8-K) | ||||
4 | .24 | Form of 5.375% Senior Note due December 9, 2024 (Included in Exhibit 4.11 incorporated by reference to Exhibit 4.1 to the December 2004Form 8-K) | ||||
4 | .25 | Form of 5.00% Senior Note due June 15, 2015 (Included in Exhibit 4.12 incorporated by reference to Exhibit 4.1 to the June 23, 2005Form 8-K) | ||||
4 | .26 | Form of 5.70% Senior Note due June 15, 2035 (Included in Exhibit 4.13 incorporated by reference to Exhibit 4.3 to the June 23, 2005Form 8-K) | ||||
4 | .27 | Form of 5.25% Senior Note due June 29, 2020 (Included in Exhibit 4.14 incorporated by reference to Exhibit 4.1 to the June 29, 2005Form 8-K) | ||||
4 | .28(a) | Indenture dated as of June 21, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) relating to Subordinated Debt Securities (the “Subordinated Indenture”) (Incorporated by reference to Exhibit 4.5 to MetLife, Inc.’s Current Report onForm 8-K dated June 22, 2005 (the “June 22, 2005Form 8-K”)) | ||||
4 | .28(b) | Form of Indenture for Subordinated Debt Securities between MetLife, Inc. and one or more banking institutions to be qualified as Trustee pursuant to Section 305(b)(2) of the Trust Indenture Act of 1939 (Incorporated by reference to Exhibit 4.28(a), except for the name of the trustee) | ||||
4 | .29 | First Supplemental Indenture dated as of June 21, 2005 to the Subordinated Indenture between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) (Incorporated by reference to Exhibit 4.6 to the June 22, 2005Form 8-K) | ||||
4 | .30 | Second Supplemental Indenture dated as of June 21, 2005 to the Subordinated Indenture between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.) (Incorporated by reference to Exhibit 4.8 to the June 22, 2005Form 8-K) | ||||
4 | .31 | Third Supplemental Indenture dated as of December 21, 2006 to the Subordinated Indenture between MetLife, Inc. and The Bank of New York Trust Company, N.A. (as successor to J.P. Morgan Trust Company, National Association) (Incorporated by reference to Exhibit 4.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 22, 2006 (the “December 2006Form 8-K”)) | ||||
4 | .32 | Form of Series A Debenture (Incorporated by reference to Exhibit 4.7 to the June 22, 2005Form 8-K) | ||||
4 | .33 | Form of Series B Debenture (Incorporated by reference to Exhibit 4.9 to the June 22, 2005Form 8-K) | ||||
4 | .34 | Form of junior subordinated debenture (Included in Exhibit 4.31 incorporated by reference to Exhibit 4.3 to the December 2006Form 8-K) | ||||
4 | .35 | Certificate of Trust of MetLife Capital Trust II (Incorporated by reference to Exhibit 4.6 to MetLife, Inc.’s, MetLife Capital Trust II’s and MetLife Capital Trust III’s Registration Statement onForm S-3 (Nos.333-61282,333-61282-01 and333-61282-02) (the “2001S-3 Registration Statement”)) | ||||
4 | .36 | Certificate of Trust of MetLife Capital Trust III (Incorporated by reference to Exhibit 4.7 to the 2001S-3 Registration Statement) | ||||
4 | .37 | Certificate of Amendment to Certificate of Trust of MetLife Capital Trust II (Incorporated by reference to Exhibit 4.5 to MetLife, Inc.’s, MetLife Capital Trust II’s and MetLife Capital Trust III’s Registration Statement onForm S-3 (Nos.333-112073,333-112073-01 and333-112073-02) (the “2004S-3 Registration Statement”)) | ||||
4 | .38 | Certificate of Amendment to Certificate of Trust of MetLife Capital Trust III (Incorporated by reference to Exhibit 4.6 to the 2004S-3 Registration Statement) |
E-3
Table of Contents
Exhibit | ||||||
No. | Description | |||||
4 | .39 | Certificate of Trust of MetLife Capital Trust V (Incorporated by reference to Exhibit 4.3 to MetLife, Inc.’s, MetLife Capital Trust V’s, MetLife Capital Trust VI’s, MetLife Capital Trust VII’s, MetLife Capital Trust VIII’s and MetLife Capital Trust IX’s Registration Statement onForm S-3 (Nos.333-147180,333-147180-01,333-147180-02,333-147180-03,333-147180-04 and333-147180-05) (the “2007S-3 Registration Statement”)) | ||||
4 | .40 | Certificate of Trust of MetLife Capital Trust VI (Incorporated by reference to Exhibit 4.4 to the 2007S-3 Registration Statement) | ||||
4 | .41 | Certificate of Trust of MetLife Capital Trust VII (Incorporated by reference to Exhibit 4.5 to the 2007S-3 Registration Statement) | ||||
4 | .42 | Certificate of Trust of MetLife Capital Trust VIII (Incorporated by reference to Exhibit 4.6 to the 2007S-3 Registration Statement) | ||||
4 | .43 | Certificate of Trust of MetLife Capital Trust IX (Incorporated by reference to Exhibit 4.7 to the 2007S-3 Registration Statement) | ||||
4 | .44 | Amended and Restated Declaration of Trust of MetLife Capital Trust II dated as of June 21, 2005 (Incorporated by reference to Exhibit 4.16 to the June 22, 2005Form 8-K) | ||||
4 | .45 | Amended and Restated Declaration of Trust of MetLife Capital Trust III dated as of June 21, 2005 (Incorporated by reference to Exhibit 4.17 to the June 22, 2005Form 8-K) | ||||
4 | .46 | Declaration of Trust of MetLife Capital Trust V (Incorporated by reference to Exhibit 4.8 to the 2007S-3 Registration Statement) | ||||
4 | .47 | Declaration of Trust of MetLife Capital Trust VI (Incorporated by reference to Exhibit 4.9 to the 2007S-3 Registration Statement) | ||||
4 | .48 | Declaration of Trust of MetLife Capital Trust VII (Incorporated by reference to Exhibit 4.10 to the 2007S-3 Registration Statement) | ||||
4 | .49 | Declaration of Trust of MetLife Capital Trust VIII (Incorporated by reference to Exhibit 4.11 to the 2007S-3 Registration Statement) | ||||
4 | .50 | Declaration of Trust of MetLife Capital Trust IX (Incorporated by reference to Exhibit 4.12 to the 2007S-3 Registration Statement) | ||||
4 | .51 | Form of Amended and Restated Declaration of Trust (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Incorporated by reference to Exhibit 4.13 to the 2007S-3 Registration Statement) | ||||
4 | .52 | Form of Trust Preferred Security Certificate (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Included in Exhibit 4.53 incorporated by reference to Exhibit 4.13 to the 2007S-3 Registration Statement) | ||||
4 | .53 | Guarantee Agreement dated June 21, 2005 by and between MetLife, Inc., as Guarantor, and J.P. Morgan Trust Company National Association (predecessor to The Bank of New York Trust Company, N.A.), as Guarantee Trustee, relating to MetLife Capital Trust II (Incorporated by reference to Exhibit 4.18 to the June 22, 2005Form 8-K) | ||||
4 | .54 | Guarantee Agreement dated June 21, 2005 by and between MetLife, Inc., as Guarantor, and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Guarantee Trustee, relating to MetLife Capital Trust III (Incorporated by reference to Exhibit 4.19 to the June 22, 2005Form 8-K) | ||||
4 | .55 | Form of Trust Preferred Securities Guarantee Agreement (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Incorporated by reference to Exhibit 4.15 to the 2007S-3 Registration Statement) | ||||
4 | .56 | Form of Common Securities Guarantee Agreement (substantially identical, except for names and dates, for MetLife Capital Trust V, MetLife Capital Trust VI, MetLife Capital Trust VII, MetLife Capital Trust VIII and MetLife Capital Trust IX) (Incorporated by reference to Exhibit 4.16 to the 2007S-3 Registration Statement) |
E-4
Table of Contents
Exhibit | ||||||
No. | Description | |||||
4 | .57 | Removal and Appointment of Trustees of MetLife Capital Trust II (Incorporated by reference to Exhibit 4.9 to the 2004S-3 Registration Statement) | ||||
4 | .58 | Removal and Appointment of Trustees of MetLife Capital Trust III (Incorporated by reference to Exhibit 4.10 to the 2004S-3 Registration Statement) | ||||
4 | .59 | Form of Certificate for Common Stock, par value $0.01 per share (Incorporated by reference to Exhibit 4.1 to theS-1 Registration Statement) | ||||
4 | .60 | Rights Agreement dated as of April 4, 2000 between MetLife, Inc. and ChaseMellon Shareholder Services, L.L.C. (predecessor to Mellon Investor Services LLC) (Incorporated by reference to Exhibit 4.48 to the 2006 Annual Report) | ||||
4 | .61 | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of MetLife, Inc., filed with the Secretary of State of Delaware on April 7, 2000 (see Exhibit 3.2 above) | ||||
4 | .62 | Form of Right Certificate (Included as Exhibit B of Exhibit 4.60 incorporated by reference to Exhibit 4.48 to the 2006 Annual Report) | ||||
4 | .63 | Form of Warrant Agreement (Incorporated by reference to Exhibit 4.21 to the 2007S-3 Registration Statement)** | ||||
4 | .64 | Form of Deposit Agreement (Incorporated by reference to Exhibit 4.22 to the 2007S-3 Registration Statement)** | ||||
4 | .65 | Form of Depositary Receipt (Included in Exhibit 4.64)** | ||||
4 | .66 | Form of Purchase Contract Agreement (Incorporated by reference to Exhibit 4.24 to the 2007S-3 Registration Statement)** | ||||
4 | .67 | Form of Pledge Agreement (Incorporated by reference to Exhibit 4.25 to the 2007S-3 Registration Statement)** | ||||
4 | .68 | Form of Unit Agreement (Incorporated by reference to Exhibit 4.26 to the 2007S-3 Registration Statement)** | ||||
4 | .69 | Stock Purchase Contract Agreement dated June 21, 2005 between MetLife, Inc. and J.P. Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Stock Purchase Contract Agent (Incorporated by reference to Exhibit 4.1 to the June 22, 2005Form 8-K) | ||||
4 | .70 | Form of Normal Common Equity Unit Certificate (Incorporated by reference to Exhibit 4.2 to the June 22, 2005Form 8-K) | ||||
4 | .71 | Form of Stripped Common Equity Unit Certificate (Incorporated by reference to Exhibit 4.3 to the June 22, 2005Form 8-K) | ||||
4 | .72 | Pledge Agreement dated as of June 21, 2005 among MetLife, Inc., JP Morgan Chase Bank, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Collateral Agent, Custodial Agent and Securities Intermediary, and J.P Morgan Trust Company, National Association (predecessor to The Bank of New York Trust Company, N.A.), as Stock Purchase Contract Agent (Incorporated by reference to Exhibit 4.4 to the June 22, 2005Form 8-K) | ||||
4 | .73 | Certificate of Designations of Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc., filed with the Secretary of State of Delaware on June 10, 2005 (See Exhibit 3.3 above) | ||||
4 | .74 | Form of Stock Certificate, Floating Rate Non-Cumulative Preferred Stock, Series A, of MetLife, Inc. (Incorporated by reference of Exhibit 99.6 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 10, 2005) | ||||
4 | .75 | Certificate of Designations of 6.50% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc., filed with the Secretary of State of Delaware on June 14, 2005 (See Exhibit 3.4 above) | ||||
4 | .76 | Form of Stock Certificate, 6.50% Non-Cumulative Preferred Stock, Series B, of MetLife, Inc. (Incorporated by reference to Exhibit 99.6 to MetLife, Inc.’s Registration Statement onForm 8-A filed on June 15, 2005) |
E-5
Table of Contents
Exhibit | ||||||
No. | Description | |||||
4 | .77 | Replacement Capital Covenant, dated as of December 21, 2006 (Incorporated by reference to Exhibit 4.2 to the December 2006Form 8-K) | ||||
4 | .78 | Replacement Capital Covenant, dated as of December 12, 2007 (Incorporated by reference to Exhibit 4.2 to MetLife, Inc.’s Current Report onForm 8-K dated December 12, 2007) | ||||
10 | .1 | Form of Amended and Restated Employment Continuation Agreement with Messrs. Henrikson and Toppeta* | ||||
10 | .2 | Amended and Restated Employment Continuation Agreement with Ms. Rein (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Current Report onForm 8-K dated May 20, 2005 (the “May 2005Form 8-K”))* | ||||
10 | .3 | Amended and Restated Employment Continuation Agreement with Ms. Weber* | ||||
10 | .4 | Form of Employment Continuation Agreement with Messrs. Launer and Lipscomb (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2003 (the “Third Quarter 200310-Q”))* | ||||
10 | .5 | Form of Employment Continuation Agreement with Mr. Wheeler (Incorporated by reference to Exhibit 10.7 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2003 (the “2003 Annual Report”))* | ||||
10 | .6 | Employment Continuation Agreement with Mr. Kandarian (Incorporated by reference to Exhibit 10.1 to the May 2005Form 8-K)* | ||||
10 | .7 | Form of Termination of Employment Continuation Agreement with Messrs. Henrikson, Wheeler and Toppeta and Mmes. Weber and Rein (effective as of December 17, 2007) (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 13, 2007 (the “December 13, 2007Form 8-K”)) (also applies to Messrs. Lipscomb and Kandarian)* | ||||
10 | .8 | MetLife Executive Severance Plan (effective as of December 17, 2007) (Incorporated by reference to Exhibit 10.2 to the December 13, 2007Form 8-K)* | ||||
10 | .9 | Agreement, Waiver and General Release dated August 18, 2004 between MetLife Group, Inc. and Stewart G. Nagler (Incorporated by reference to Exhibit 10.5 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2004 (the “Third Quarter 200410-Q”))* | ||||
10 | .10 | Agreement, dated as of the Effective Date as defined therein, by and between Robert H. Benmosche and MetLife, Inc. (Incorporated by reference to Exhibit 10.65 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2005 (the “2005 Annual Report”))* | ||||
10 | .11 | Separation Agreement, Waiver and General Release dated February 16, 2007 between MetLife Group, Inc. and Leland C. Launer, Jr. (Incorporated by reference to Exhibit 10.10 to the 2006 Annual Report)* | ||||
10 | .12 | MetLife, Inc. 2000 Stock Incentive Plan, as amended and restated March 28, 2000 (Incorporated by reference to Exhibit 10.7 to theS-1 Registration Statement)* | ||||
10 | .13 | MetLife, Inc. 2000 Stock Incentive Plan, as amended, effective February 8, 2002* | ||||
10 | .14 | Form of Management Stock Option Agreement (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2002 (the “Second Quarter 200210-Q”))* | ||||
10 | .15 | Form of Director Stock Option Agreement (Incorporated by reference to Exhibit 10.3 to the Second Quarter 200210-Q)* | ||||
10 | .16 | MetLife, Inc. 2000 Directors Stock Plan, as amended and restated March 28, 2000 (Incorporated by reference to Exhibit 10.8 to theS-1 Registration Statement)* | ||||
10 | .17 | MetLife, Inc. 2000 Directors Stock Plan, as amended effective February 8, 2002* | ||||
10 | .18 | MetLife, Inc. 2005 Stock and Incentive Compensation Plan, effective April 15, 2005 (the “2005 SIC Plan”) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2004 (the “First Quarter 200410-Q”))* |
E-6
Table of Contents
Exhibit | ||||||
No. | Description | |||||
10 | .19 | MetLife, Inc. 2005 Non-Management Director Stock Compensation Plan, effective April 15, 2005 (Incorporated by reference to Exhibit 10.3 to the First Quarter 200410-Q)* | ||||
10 | .20 | Form of Management Stock Option Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated February 28, 2005 (the “February 28, 2005Form 8-K”))* | ||||
10 | .21 | Form of Management Stock Option Agreement under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.4 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2007 (the “First Quarter 200710-Q”))* | ||||
10 | .22 | Amendment to Stock Option Agreements under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.1 to the First Quarter 200710-Q)* | ||||
10 | .23 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.19 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2004)* | ||||
10 | .24 | Amendment to Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Current Report onForm 8-K dated January 10, 2006 (the “January 10, 2006Form 8-K”))* | ||||
10 | .25 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.4 to the January 10, 2006Form 8-K)* | ||||
10 | .26 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.6 to the First Quarter 200710-Q)* | ||||
10 | .27 | Amendment to Restricted Stock Unit Agreements under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.3 to the First Quarter 200710-Q)* | ||||
10 | .28 | Form of Management Restricted Stock Unit Agreement under the 2005 SIC Plan (effective December 11, 2007) (Incorporated by reference to Exhibit 10.5 to the December 13, 2007Form 8-K)* | ||||
10 | .29 | Amendment to Restricted Stock Unit Agreements under the 2005 SIC Plan (effective as of December 31, 2007)* | ||||
10 | .30 | Form of Management Performance Share Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.2 to the February 28, 2005Form 8-K)* | ||||
10 | .31 | Clarification of Management Performance Share Agreement under the 2005 SIC Plan (Incorporated by reference to Exhibit 10.3 to MetLife, Inc.’s Current Report onForm 8-K dated December 19, 2005 (the “December 2005Form 8-K”))* | ||||
10 | .32 | Amendment to Management Performance Share Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.1 to the January 10, 2006Form 8-K))* | ||||
10 | .33 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective December 31, 2005) (Incorporated by reference to Exhibit 10.3 to the January 10, 2006Form 8-K)* | ||||
10 | .34 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective February 27, 2007) (Incorporated by reference to Exhibit 10.27 to the 2006 Annual Report)* | ||||
10 | .35 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.5 to the First Quarter 200710-Q)* | ||||
10 | .36 | Amendment to Management Performance Share Agreements under the 2005 SIC Plan (effective as of April 25, 2007) (Incorporated by reference to Exhibit 10.2 to the First Quarter 200710-Q)* | ||||
10 | .37 | Form of Management Performance Share Agreement under the 2005 SIC Plan (effective December 11, 2007) (Incorporated by reference to Exhibit 10.4 to the December 13, 2007Form 8-K)* |
E-7
Table of Contents
Exhibit | ||||||
No. | Description | |||||
10 | .38 | Amendment to Management Performance Share Agreements under the 2005 SIC Plan (effective as of December 31, 2007) (Incorporated by reference to Exhibit 10.3 to the December 13, 2007Form 8-K)* | ||||
10 | .39 | Policyholder Trust Agreement (Incorporated by reference to Exhibit 10.12 to theS-1 Registration Statement) | ||||
10 | .40 | Restatement of the Excess Asbestos Indemnity Insurance Policy, dated as of December 31, 1998, between Stockwood Reinsurance Company, Ltd. and Metropolitan Life Insurance Company (Incorporated by reference to Exhibit 10.13 to theS-1 Registration Statement) | ||||
10 | .41 | Restatement of the Excess Asbestos Indemnity Insurance Policy, dated as of December 31, 1998, between European Reinsurance Corporation of America and Metropolitan Life Insurance Company (Incorporated by reference to Exhibit 10.14 to theS-1 Registration Statement) | ||||
10 | .42 | Restatement of the Excess Asbestos Indemnity Insurance Policy, dated as of December 31, 1998, between Granite State Insurance Company and Metropolitan Life Insurance Company (Incorporated by reference to Exhibit 10.16 to theS-1 Registration Statement) | ||||
10 | .43 | Amended and Restated Five-Year Credit Agreement, dated as of August 15, 2006, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and the other parties signatory thereto (amending and restating the Amended and Restated Five-Year Credit Agreement, dated as of April 23, 2004, among MetLife, Inc., Metropolitan Life Insurance Company, MetLife Funding, Inc., and the other parties signatory thereto, effective December 21, 2006) (Incorporated by reference to Exhibit 10.33 to the 2006 Annual Report) | ||||
10 | .44 | Five-Year Credit Agreement, dated as of April 22, 2005 (“Five-Year Credit Agreement”), among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and other parties signatory thereto (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated April 28, 2005 (the “April 28, 2005Form 8-K”)) | ||||
10 | .45 | First Amendment to Five-Year Credit Agreement, dated as of August 15, 2006, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and other parties signatory thereto (Incorporated by reference to Exhibit 10.35 to the 2006 Annual Report) | ||||
10 | .46 | Amended and Restated Five-Year Letter of Credit and Reimbursement Agreement, dated as of April 25, 2005, among MetLife, Inc., The Travelers Life and Annuity Reinsurance Company (now known as MetLife Reinsurance Company of South Carolina), and other parties signatory thereto (Incorporated by reference to Exhibit 10.2 to the April 28, 2005Form 8-K) | ||||
10 | .47 | Five-Year $3,000,000,000 Credit Agreement, dated as of June 20, 2007, among MetLife, Inc. and MetLife Funding, Inc., as borrowers, and other parties signatory thereto (Incorporated by reference to Exhibit 10.1 to the June 2007Form 8-K) | ||||
10 | .48 | Stipulation of Settlement, as amended, relating to Metropolitan Life Insurance Company Sales Practices Litigation (Incorporated by reference to Exhibit 10.21 to theS-1 Registration Statement) | ||||
10 | .49 | Long-Term Performance Compensation Plan (for performance periods starting on or after April 1, 2001, as amended) (Incorporated by reference to Exhibit 10.24 to MetLife, Inc.’s Annual Report onForm 10-K for the fiscal year ended December 31, 2002)* | ||||
10 | .50 | MetLife Annual Variable Incentive Plan (“AVIP”) (Incorporated by reference to Exhibit 10.1 to the First Quarter 200410-Q)* | ||||
10 | .51 | Amendment Number One to the AVIP (Incorporated by reference to Exhibit 10.2 to the December 2005Form 8-K)* | ||||
10 | .52 | Resolutions of the MetLife, Inc. Board of Directors (adopted December 13, 2005) regarding the selection of performance measures for 2006 awards under the AVIP (Incorporated by reference to Exhibit 10.1 to the December 2005Form 8-K)* | ||||
10 | .53 | Resolutions of the MetLife, Inc. Board of Directors (adopted December 12, 2006) regarding the selection of performance measures for 2007 awards under the AVIP (Incorporated by reference to Exhibit 10.42 to the 2006 Annual Report)* |
E-8
Table of Contents
Exhibit | ||||||
No. | Description | |||||
10 | .54 | Resolutions of the MetLife, Inc. Board of Directors (adopted December 11, 2007) regarding the selection of performance measures for 2008 awards under the AVIP* | ||||
10 | .55 | Metropolitan Life Auxiliary Savings and Investment Plan (as amended and restated, effective May 4, 2005) (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2005 (the “First Quarter 200510-Q”))* | ||||
10 | .56 | Amendment, dated as of August 1, 2005, to the Metropolitan Life Auxiliary Savings and Investment Plan (effective as of July 1, 2005) (Incorporated by reference to Exhibit 10.7 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2005)* | ||||
10 | .57 | Metropolitan Life Auxiliary Savings and Investment Plan (as amended and restated, effective January 1, 2008)* | ||||
10 | .58 | MetLife Deferred Compensation Plan for Officers, as amended and restated, effective November 1, 2003 (Incorporated by reference to Exhibit 10.5 to the Third Quarter 200310-Q)* | ||||
10 | .59 | Amendment Number One to the MetLife Deferred Compensation Plan for Officers, dated May 4, 2005 (Incorporated by reference to Exhibit 10.1 to the First Quarter 200510-Q”)* | ||||
10 | .60 | Amendment Number Two to The MetLife Deferred Compensation Plan for Officers, effective December 14, 2005 (Incorporated by reference to Exhibit 10.7 to the December 2005Form 8-K)* | ||||
10 | .61 | Amendment Number Three to The MetLife Deferred Compensation Plan for Officers (as amended and restated as of November 1, 2003, effective February 26, 2007) (Incorporated by reference to Exhibit 10.48 to the 2006 Annual Report)* | ||||
10 | .62 | MetLife Leadership Deferred Compensation Plan, dated November 2, 2006 (as amended and restated effective with respect to salary and cash incentive compensation, January 1, 2005, and with respect to stock compensation, April 15, 2005) (Incorporated by reference to Exhibit 10.3 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2006 (the “Third Quarter 200610-Q”))* | ||||
10 | .63 | Amendment Number One to The MetLife Leadership Deferred Compensation Plan, dated December 13, 2007 (effective as of December 31, 2007)* | ||||
10 | .64 | MetLife Deferred Compensation Plan for Outside Directors, effective December 9, 2003 (Incorporated by reference to Exhibit 10.55 to the 2003 Annual Report)* | ||||
10 | .65 | Amendment Number One to The MetLife Deferred Compensation Plan for Outside Directors (as amended and restated as of December, 2003, effective February 26, 2007) (Incorporated by reference to Exhibit 10.51 to the 2006 Annual Report)* | ||||
10 | .66 | MetLife Non-Management Director Deferred Compensation Plan, dated November 2, 2006 (as amended and restated, effective January 1, 2005) (Incorporated by reference to Exhibit 10.4 to the Third Quarter 200610-Q)* | ||||
10 | .67 | Amendment Number One to The MetLife Non-Management Director Deferred Compensation Plan (as amended and restated as of December, 2006, effective February 26, 2007) (Incorporated by reference to Exhibit 10.53 to the 2006 Annual Report)* | ||||
10 | .68 | MetLife Non-Management Director Deferred Compensation Plan, dated December 5, 2007 (as amended and restated, effective January 1, 2005)* | ||||
10 | .69 | Summary of Non-Management Director Compensation (effective April 25, 2006) (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated January 20, 2006)* | ||||
10 | .70 | General American Life Insurance Company Directors’ Deferred Savings Plan for Non-Employee Directors 2002* | ||||
10 | .71 | MetLife Auxiliary Pension Plan dated August 7, 2006 (as amended and restated, effective June 30, 2006) (Incorporated by reference to Exhibit 10.3 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2006 (the “Second Quarter 200610-Q”))* |
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Table of Contents
Exhibit | ||||||
No. | Description | |||||
10 | .72 | MetLife Auxiliary Pension Plan dated December 21, 2006 (amending and restating Part I thereof, effective January 1, 2007) (Incorporated by reference to Exhibit 10.57 to the 2006 Annual Report)* | ||||
10 | .73 | MetLife Auxiliary Pension Plan dated December 21, 2007 (amending and restating Part I thereof, effective January 1, 2008) (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated December 28, 2007)* | ||||
10 | .74 | MetLife Plan for Transition Assistance for Officers, dated January 7, 2000, as amended (the “MPTA”) (Incorporated by reference to Exhibit 10.4 to the Third Quarter 200410-Q)* | ||||
10 | .75 | Amendment Number Ten to the MPTA, dated January 26, 2005* (Incorporated by reference to Exhibit 10.55 to the 2005 Annual Report)* | ||||
10 | .76 | Amendment Number Eleven to the MPTA, dated February 28, 2006 (Incorporated by reference to Exhibit 10.56 to the 2005 Annual Report)* | ||||
10 | .77 | Amendment Number Twelve to the MPTA, dated August 7, 2006 (Incorporated by reference to Exhibit 10.1 to the Second Quarter 200610-Q)* | ||||
10 | .78 | Amendment Number Thirteen to the MPTA, dated August 7, 2006 (Incorporated by reference to Exhibit 10.2 to the Second Quarter 200610-Q)* | ||||
10 | .79 | Amendment Number Fourteen to the MPTA, dated January 26, 2007 (Incorporated by reference to Exhibit 10.63 to the 2006 Annual Report)* | ||||
10 | .80 | Amendment Number Fifteen to the MPTA, dated June 1, 2007 (Incorporated by reference to Exhibit 10.2 to MetLife, Inc.’s Quarterly Report onForm 10-Q for the quarter ended June 30, 2007)* | ||||
10 | .81 | Amendment Number Sixteen to the MPTA, dated December 12, 2007* | ||||
10 | .82 | One Madison Avenue Purchase and Sale Agreement, dated as of March 29, 2005, between Metropolitan Life Insurance Company, as Seller, and 1 Madison Venture LLC and Column Financial, Inc., collectively, as Purchaser (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated April 4, 2005 (the “April 4, 2005Form 8-K”)) | ||||
10 | .83 | MetLife Building, 200 Park Avenue, New York, NY Purchase and Sale Agreement, dated as of April 1, 2005, between Metropolitan Tower Life Insurance Company, as Seller, and Tishman Speyer Development, L.L.C., as Purchaser (Incorporated by reference to Exhibit 10.2 to the April 4, 2005Form 8-K) | ||||
10 | .84 | Stuyvesant Town, New York, New York, Purchase and Sale Agreement between Metropolitan Tower Life Insurance Company, as Seller, and Tishman Speyer Development Corp., as Purchaser, dated as of October 17, 2006 (Incorporated by reference to Exhibit 10.1 to the Third Quarter 200610-Q) | ||||
10 | .85 | Peter Cooper Village, New York, New York, Purchase and Sale Agreement between Metropolitan Tower Life Insurance Company, as Seller, and Tishman Speyer Development Corp., as Purchaser, dated as of October 17, 2006 (Incorporated by reference to Exhibit 10.2 to the Third Quarter 200610-Q) | ||||
10 | .86 | International Distribution Agreement dated as of July 1, 2005 between MetLife, Inc. and Citigroup Inc. (Incorporated by reference to Exhibit 10.1 to MetLife, Inc.’s Current Report onForm 8-K dated July 8, 2005 (the “July 8, 2005Form 8-K”)) | ||||
10 | .87 | Domestic Distribution Agreement dated as of July 1, 2005 between MetLife, Inc. and Citigroup Inc. (Incorporated by reference to Exhibit 10.2 to the July 8, 2005Form 8-K) | ||||
10 | .88 | Investor Rights Agreement dated as of July 1, 2005 by and among Citigroup Inc., MetLife, Inc. and Citigroup Insurance Holding Corporation (Incorporated by reference to Exhibit 10.3 to the July 8, 2005Form 8-K) | ||||
10 | .89 | Transition Services Agreement dated as of July 1, 2005 by and between Citigroup Inc. and MetLife, Inc. (Incorporated by reference to Exhibit 10.4 to the July 8, 2005Form 8-K) | ||||
12 | .1 | Statement re: Computation of Ratios of Earnings to Fixed Charges | ||||
21 | .1 | Subsidiaries of the Registrant |
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Table of Contents
Exhibit | ||||||
No. | Description | |||||
23 | .1 | Consent of Deloitte & Touche LLP | ||||
31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||
32 | .1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
32 | .2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* | Indicates management contracts or compensatory plans or arrangements. | |
** | Indicates document to be filed as an exhibit to a Current Report onForm 8-K or Quarterly Report onForm 10-Q pursuant to Item 601 ofRegulation S-K and incorporated herein by reference. |
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