Item 8. | Financial Statements and Supplementary Data |
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Financial Statements at December 31, 2007 and 2006 and for the Years Ended December 31, 2007, 2006 and 2005: | ||||
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Financial Statement Schedules at December 31, 2007 and 2006 and for the Years Ended December 31, 2007, 2006 and 2005: | ||||
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February 28, 2008 (except with respect to our opinion on the consolidated financial statements and financial statement schedules insofar as it relates to the effects of the split-off of Reinsurance Group of America, Incorporated, as described in Note 2 as to which the date is November 13, 2008).
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2007 | 2006 | |||||||
Assets | ||||||||
Investments: | ||||||||
Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $229,847 and $228,904, respectively) | $ | 232,844 | $ | 233,556 | ||||
Equity securities available-for-sale, at estimated fair value (cost: $5,735 and $4,391, respectively) | 5,913 | 4,931 | ||||||
Trading securities, at estimated fair value (cost: $768 and $727, respectively) | 779 | 759 | ||||||
Mortgage and consumer loans | 46,198 | 41,503 | ||||||
Policy loans | 9,360 | 9,213 | ||||||
Real estate and real estate joint ventures held-for-investment | 6,588 | 4,785 | ||||||
Real estate held-for-sale | 181 | 201 | ||||||
Other limited partnership interests | 6,155 | 4,781 | ||||||
Short-term investments | 2,573 | 2,569 | ||||||
Other invested assets | 8,064 | 6,511 | ||||||
Total investments | 318,655 | 308,809 | ||||||
Cash and cash equivalents | 9,964 | 6,943 | ||||||
Accrued investment income | 3,551 | 3,279 | ||||||
Premiums and other receivables | 13,390 | 13,348 | ||||||
Deferred policy acquisition costs and value of business acquired | 18,008 | 17,686 | ||||||
Current income tax recoverable | 336 | — | ||||||
Goodwill | 4,814 | 4,801 | ||||||
Assets of subsidiaries held-for-sale | 22,037 | 21,014 | ||||||
Other assets | 8,239 | 7,866 | ||||||
Separate account assets | 160,142 | 144,349 | ||||||
Total assets | $ | 559,136 | $ | 528,095 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Future policy benefits | $ | 126,174 | $ | 122,353 | ||||
Policyholder account balances | 130,692 | 125,736 | ||||||
Other policyholder funds | 7,994 | 7,254 | ||||||
Policyholder dividends payable | 994 | 960 | ||||||
Policyholder dividend obligation | 789 | 1,063 | ||||||
Short-term debt | 667 | 1,449 | ||||||
Long-term debt | 9,100 | 8,822 | ||||||
Collateral financing arrangements | 4,882 | — | ||||||
Junior subordinated debt securities | 4,075 | 3,381 | ||||||
Shares subject to mandatory redemption | — | 119 | ||||||
Liabilities of subsidiaries held-for-sale | 19,958 | 19,163 | ||||||
Current income tax payable | — | 1,436 | ||||||
Deferred income tax liability | 1,516 | 1,268 | ||||||
Payables for collateral under securities loaned and other transactions | 44,136 | 45,846 | ||||||
Other liabilities | 12,838 | 11,098 | ||||||
Separate account liabilities | 160,142 | 144,349 | ||||||
Total liabilities | 523,957 | 494,297 | ||||||
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 | $ | 559,136 | $ | 528,095 | ||||
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2007 | 2006 | 2005 | ||||||||||
Revenues | ||||||||||||
Premiums | $ | 22,985 | $ | 22,066 | $ | 20,990 | ||||||
Universal life and investment-type product policy fees | 5,310 | 4,779 | 3,827 | |||||||||
Net investment income | 18,086 | 16,302 | 14,117 | |||||||||
Other revenues | 1,466 | 1,302 | 1,221 | |||||||||
Net investment gains (losses) | (561 | ) | (1,387 | ) | (110 | ) | ||||||
Total revenues | 47,286 | 43,062 | 40,045 | |||||||||
Expenses | ||||||||||||
Policyholder benefits and claims | 23,839 | 22,942 | 22,298 | |||||||||
Interest credited to policyholder account balances | 5,478 | 4,916 | 3,667 | |||||||||
Policyholder dividends | 1,726 | 1,700 | 1,680 | |||||||||
Other expenses | 10,458 | 9,565 | 8,281 | |||||||||
Total expenses | 41,501 | 39,123 | 35,926 | |||||||||
Income from continuing operations before provision for income tax | 5,785 | 3,939 | 4,119 | |||||||||
Provision for income tax | 1,668 | 1,018 | 1,161 | |||||||||
Income from continuing operations | 4,117 | 2,921 | 2,958 | |||||||||
Income from discontinued operations, net of income tax | 200 | 3,372 | 1,756 | |||||||||
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 | $ | 5.35 | $ | 3.66 | $ | 3.87 | ||||||
Diluted | $ | 5.22 | $ | 3.62 | $ | 3.83 | ||||||
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 | ||||||
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Accumulated Other | ||||||||||||||||||||||||||||||||||||
Comprehensive Income | ||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||
Unrealized | Foreign | Defined | ||||||||||||||||||||||||||||||||||
Additional | Treasury | Investment | Currency | Benefit | ||||||||||||||||||||||||||||||||
Preferred | Common | Paid-in | Retained | Stock | Gains | Translation | Plans | |||||||||||||||||||||||||||||
Stock | Stock | Capital | Earnings | at Cost | (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 | ||||||||||||||||
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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 | (5,310 | ) | (4,779 | ) | (3,827 | ) | ||||||
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 | 9,963 | 6,601 | 8,020 | |||||||||
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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2007 | 2006 | 2005 | ||||||||||
Cash flows from financing activities | ||||||||||||
Policyholder account balances: | ||||||||||||
Deposits | $ | 58,025 | $ | 53,946 | $ | 52,076 | ||||||
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 | 3,942 | 15,374 | 14,509 | |||||||||
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 | $ | 164 | $ | 129 | $ | 210 | ||||||
Cash and cash equivalents, subsidiaries held-for-sale, end of year | $ | 404 | $ | 164 | $ | 129 | ||||||
Cash and cash equivalents, from continuing operations, beginning of year | $ | 6,943 | $ | 3,889 | $ | 3,896 | ||||||
Cash and cash equivalents, from continuing operations, end of year | $ | 9,964 | $ | 6,943 | $ | 3,889 | ||||||
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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(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. |
• | 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. |
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• | 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) | 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 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. |
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• | 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. |
F-30
Table of Contents
F-31
Table of Contents
F-32
Table of Contents
• | 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. |
F-33
Table of Contents
• | 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. |
F-34
Table of Contents
2. | Acquisitions and Dispositions |
• | A recapitalization of RGA common stock into two classes of common stock — RGA Class A common stock and RGA Class B common stock. Pursuant to the terms of the recapitalization, each outstanding share of RGA common stock, including the 32,243,539 shares of RGA common stock beneficially owned by the Company and its subsidiaries, was reclassified as one share of RGA Class A common stock. Immediately thereafter, the Company and its subsidiaries exchanged 29,243,539 shares of its RGA Class A common stock — which represented all of the RGA Class A common stock beneficially owned by the Company and its subsidiaries other than 3,000,000 shares of RGA Class A common stock — with RGA for 29,243,539 shares of RGA Class B common stock. | |
• | An exchange offer, pursuant to which the Company offered to acquire MetLife common stock from its stockholders in exchange for all of its 29,243,539 shares of RGA Class B common stock. The exchange ratio was determined based upon a ratio — as more specifically described in the exchange offering document — of the value of the MetLife and RGA shares during thethree-day period prior to the closing of the exchange offer. The 3,000,000 shares of the RGA Class A common stock were not subject to the tax-free exchange. |
F-35
Table of Contents
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 | ||||
F-36
Table of Contents
3. | Investments |
December 31, 2007 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 74,494 | $ | 1,695 | $ | 2,077 | $ | 74,112 | 31.8 | % | ||||||||||
Residential mortgage-backed securities | 54,853 | 599 | 377 | 55,075 | 23.7 | |||||||||||||||
Foreign corporate securities | 36,318 | 1,705 | 768 | 37,255 | 16.0 | |||||||||||||||
U.S. Treasury/agency securities | 19,768 | 1,486 | 13 | 21,241 | 9.1 | |||||||||||||||
Commercial mortgage-backed securities | 17,035 | 242 | 194 | 17,083 | 7.4 | |||||||||||||||
Foreign government securities | 11,647 | 1,350 | 182 | 12,815 | 5.5 | |||||||||||||||
Asset-backed securities | 11,055 | 40 | 518 | 10,577 | 4.5 | |||||||||||||||
State and political subdivision securities | 4,342 | 140 | 114 | 4,368 | 1.9 | |||||||||||||||
Other fixed maturity securities | 335 | 13 | 30 | 318 | 0.1 | |||||||||||||||
Total fixed maturity securities | $ | 229,847 | $ | 7,270 | $ | 4,273 | $ | 232,844 | 100.0 | % | ||||||||||
Common stock | $ | 2,477 | $ | 568 | $ | 108 | $ | 2,937 | 49.7 | % | ||||||||||
Non-redeemable preferred stock | 3,258 | 60 | 342 | 2,976 | 50.3 | |||||||||||||||
Total equity securities | $ | 5,735 | $ | 628 | $ | 450 | $ | 5,913 | 100.0 | % | ||||||||||
F-37
Table of Contents
December 31, 2006 | ||||||||||||||||||||
Cost or | ||||||||||||||||||||
Amortized | Gross Unrealized | Estimated | % of | |||||||||||||||||
Cost | Gain | Loss | Fair Value | Total | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. corporate securities | $ | 70,863 | $ | 2,014 | $ | 947 | $ | 71,930 | 30.8 | % | ||||||||||
Residential mortgage-backed securities | 50,115 | 378 | 303 | 50,190 | 21.5 | |||||||||||||||
Foreign corporate securities | 32,277 | 1,645 | 372 | 33,550 | 14.4 | |||||||||||||||
U.S. Treasury/agency securities | 29,894 | 984 | 248 | 30,630 | 13.1 | |||||||||||||||
Commercial mortgage-backed securities | 15,968 | 186 | 137 | 16,017 | 6.9 | |||||||||||||||
Foreign government securities | 9,967 | 1,352 | 30 | 11,289 | 4.8 | |||||||||||||||
Asset-backed securities | 13,383 | 72 | 52 | 13,403 | 5.7 | |||||||||||||||
State and political subdivision securities | 6,052 | 230 | 50 | 6,232 | 2.7 | |||||||||||||||
Other fixed maturity securities | 385 | 7 | 77 | 315 | 0.1 | |||||||||||||||
Total fixed maturity securities | $ | 228,904 | $ | 6,868 | $ | 2,216 | $ | 233,556 | 100.0 | % | ||||||||||
Common stock | $ | 1,784 | $ | 484 | $ | 16 | $ | 2,252 | 45.7 | % | ||||||||||
Non-redeemable preferred stock | 2,607 | 100 | 28 | 2,679 | 54.3 | |||||||||||||||
Total equity securities | $ | 4,391 | $ | 584 | $ | 44 | $ | 4,931 | 100.0 | % | ||||||||||
F-38
Table of Contents
December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amortized | Estimated | Amortized | Estimated | |||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
Due in one year or less | $ | 4,373 | $ | 4,465 | $ | 6,809 | $ | 6,897 | ||||||||
Due after one year through five years | 41,361 | 42,080 | 44,290 | 44,882 | ||||||||||||
Due after five years through ten years | 39,073 | 39,333 | 37,926 | 38,555 | ||||||||||||
Due after ten years | 62,097 | 64,231 | 60,413 | 63,612 | ||||||||||||
Subtotal | 146,904 | 150,109 | 149,438 | 153,946 | ||||||||||||
Mortgage-backed and asset-backed securities | 82,943 | 82,735 | 79,466 | 79,610 | ||||||||||||
Total fixed maturity securities | $ | 229,847 | $ | 232,844 | $ | 228,904 | $ | 233,556 | ||||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Proceeds | $ | 79,142 | $ | 87,663 | $ | 125,341 | ||||||
Gross investment gains | $ | 805 | $ | 550 | $ | 666 | ||||||
Gross investment losses | $ | (1,139 | ) | $ | (1,509 | ) | $ | (1,369 | ) |
F-39
Table of Contents
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 | $ | 27,930 | $ | 1,358 | $ | 11,619 | $ | 719 | $ | 39,549 | $ | 2,077 | ||||||||||||
Residential mortgage-backed securities | 14,104 | 273 | 5,846 | 104 | 19,950 | 377 | ||||||||||||||||||
Foreign corporate securities | 10,885 | 464 | 6,162 | 304 | 17,047 | 768 | ||||||||||||||||||
U.S. Treasury/agency securities | 431 | 3 | 625 | 10 | 1,056 | 13 | ||||||||||||||||||
Commercial mortgage-backed securities | 2,408 | 97 | 3,751 | 97 | 6,159 | 194 | ||||||||||||||||||
Foreign government securities | 3,387 | 158 | 436 | 24 | 3,823 | 182 | ||||||||||||||||||
Asset-backed securities | 7,279 | 417 | 1,203 | 101 | 8,482 | 518 | ||||||||||||||||||
State and political subdivision securities | 1,307 | 80 | 461 | 34 | 1,768 | 114 | ||||||||||||||||||
Other fixed maturity securities | 91 | 30 | 1 | — | 92 | 30 | ||||||||||||||||||
Total fixed maturity securities | $ | 67,822 | $ | 2,880 | $ | 30,104 | $ | 1,393 | $ | 97,926 | $ | 4,273 | ||||||||||||
Equity securities | $ | 2,681 | $ | 379 | $ | 531 | $ | 71 | $ | 3,212 | $ | 450 | ||||||||||||
Total number of securities in an unrealized loss position | 7,525 | 2,683 | ||||||||||||||||||||||
F-40
Table of Contents
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 | $ | 16,631 | $ | 274 | $ | 16,047 | $ | 673 | $ | 32,678 | $ | 947 | ||||||||||||
Residential mortgage-backed securities | 14,795 | 72 | 13,095 | 231 | 27,890 | 303 | ||||||||||||||||||
Foreign corporate securities | 6,098 | 98 | 7,229 | 274 | 13,327 | 372 | ||||||||||||||||||
U.S. Treasury/agency securities | 15,006 | 157 | 1,559 | 91 | 16,565 | 248 | ||||||||||||||||||
Commercial mortgage-backed securities | 4,723 | 29 | 4,019 | 108 | 8,742 | 137 | ||||||||||||||||||
Foreign government securities | 934 | 15 | 476 | 15 | 1,410 | 30 | ||||||||||||||||||
Asset-backed securities | 4,318 | 30 | 1,055 | 22 | 5,373 | 52 | ||||||||||||||||||
State and political subdivision securities | 305 | 12 | 519 | 38 | 824 | 50 | ||||||||||||||||||
Other fixed maturity securities | 146 | 77 | 4 | — | 150 | 77 | ||||||||||||||||||
Total fixed maturity securities | $ | 62,956 | $ | 764 | $ | 44,003 | $ | 1,452 | $ | 106,959 | $ | 2,216 | ||||||||||||
Equity securities | $ | 806 | $ | 20 | $ | 551 | $ | 24 | $ | 1,357 | $ | 44 | ||||||||||||
Total number of securities in an unrealized loss position | 9,862 | 4,235 | ||||||||||||||||||||||
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 | $ | 48,142 | $ | 1,808 | $ | 1,630 | $ | 518 | 5,954 | 568 | ||||||||||||||
Six months or greater but less than nine months | 16,400 | 14 | 794 | 4 | 1,197 | 24 | ||||||||||||||||||
Nine months or greater but less than twelve months | 8,982 | 7 | 547 | 2 | 653 | 1 | ||||||||||||||||||
Twelve months or greater | 30,458 | 50 | 1,215 | 13 | 2,812 | 32 | ||||||||||||||||||
Total | $ | 103,982 | $ | 1,879 | $ | 4,186 | $ | 537 | ||||||||||||||||
F-41
Table of Contents
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 | $ | 50,224 | $ | 35 | $ | 530 | $ | 12 | 8,620 | 81 | ||||||||||||||
Six months or greater but less than nine months | 2,537 | 3 | 40 | 1 | 362 | 2 | ||||||||||||||||||
Nine months or greater but less than twelve months | 11,731 | 14 | 197 | 4 | 796 | 1 | ||||||||||||||||||
Twelve months or greater | 46,003 | 29 | 1,469 | 7 | 4,229 | 6 | ||||||||||||||||||
Total | $ | 110,495 | $ | 81 | $ | 2,236 | $ | 24 | ||||||||||||||||
F-42
Table of Contents
December 31, | ||||||||
2007 | 2006 | |||||||
Sector: | ||||||||
U.S. corporate securities | 44 | % | 42 | % | ||||
Foreign corporate securities | 16 | 17 | ||||||
Asset-backed securities | 11 | 2 | ||||||
Residential mortgage-backed securities | 8 | 13 | ||||||
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 | 33 | % | 11 | % | ||||
Industrial | 19 | 24 | ||||||
Mortgage-backed | 12 | 19 | ||||||
Utility | 8 | 11 | ||||||
Government | 4 | 12 | ||||||
Other | 24 | 23 | ||||||
Total | 100 | % | 100 | % | ||||
F-43
Table of Contents
December 31, | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Amount | Percent | Amount | Percent | |||||||||||||
(In millions) | ||||||||||||||||
Commercial mortgage loans | $ | 34,837 | 75 | % | $ | 31,264 | 75 | % | ||||||||
Agricultural mortgage loans | 10,508 | 23 | 9,231 | 22 | ||||||||||||
Consumer loans | 1,051 | 2 | 1,190 | 3 | ||||||||||||
Total | 46,396 | 100 | % | 41,685 | 100 | % | ||||||||||
Less: Valuation allowances | 198 | 182 | ||||||||||||||
Total mortgage and consumer loans | $ | 46,198 | $ | 41,503 | ||||||||||||
F-44
Table of Contents
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 | ||||
F-45
Table of Contents
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Real estate | $ | 4,920 | $ | 4,323 | ||||
Accumulated depreciation | (1,103 | ) | (1,015 | ) | ||||
Net real estate | 3,817 | 3,308 | ||||||
Real estate joint ventures | 2,771 | 1,477 | ||||||
Real estate and real estate joint ventures | 6,588 | 4,785 | ||||||
Real estate held-for sale | 181 | 201 | ||||||
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 | % | ||||||||
F-46
Table of Contents
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 | ||||||
F-47
Table of Contents
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | 14,658 | $ | 13,645 | $ | 11,008 | ||||||
Equity securities | 265 | 106 | 68 | |||||||||
Mortgage and consumer loans | 2,813 | 2,491 | 2,261 | |||||||||
Policy loans | 574 | 549 | 515 | |||||||||
Real estate and real estate joint ventures | 911 | 748 | 510 | |||||||||
Other limited partnership interests | 1,309 | 945 | 709 | |||||||||
Cash, cash equivalents and short-term investments | 493 | 514 | 398 | |||||||||
Other | 340 | 258 | 275 | |||||||||
Total investment income | 21,363 | 19,256 | 15,744 | |||||||||
Less: Investment expenses | 3,277 | 2,954 | 1,627 | |||||||||
Net investment income | $ | 18,086 | $ | 16,302 | $ | 14,117 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Fixed maturity securities | $ | (596 | ) | $ | (1,122 | ) | $ | (882 | ) | |||
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 | (260 | ) | (208 | ) | 384 | |||||||
Other | 69 | (236 | ) | 190 | ||||||||
Net investment gains (losses) | $ | (561 | ) | $ | (1,387 | ) | $ | (110 | ) | |||
F-48
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 | ) | |||
F-49
Table of Contents
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 | ||||||||
F-50
Table of Contents
(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. |
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 | $ | 62,410 | $ | 784 | $ | 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 | 21,201 | 1,480 | 1,719 | 19,627 | 986 | 1,174 | ||||||||||||||||||
Foreign currency forwards | 4,177 | 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 | 6,625 | 58 | 33 | 6,247 | 4 | 21 | ||||||||||||||||||
Synthetic GICs | 3,670 | — | — | 3,739 | — | — | ||||||||||||||||||
Other | 250 | 43 | — | 250 | 56 | — | ||||||||||||||||||
Total | $ | 210,228 | $ | 4,036 | $ | 2,596 | $ | 136,669 | $ | 2,502 | $ | 1,459 | ||||||||||||
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Remaining Life | ||||||||||||||||||||
After Five | ||||||||||||||||||||
After One Year | 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 | $ | 7,535 | $ | 62,410 | ||||||||||
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 | 7,433 | 3,068 | 21,201 | |||||||||||||||
Foreign currency forwards | 4,175 | — | — | 2 | 4,177 | |||||||||||||||
Options | — | 620 | 1,250 | 173 | 2,043 | |||||||||||||||
Financial forwards | — | — | — | 4,600 | 4,600 | |||||||||||||||
Credit default swaps | 509 | 4,582 | 1,510 | 24 | 6,625 | |||||||||||||||
Synthetic GICs | 3,670 | — | — | — | 3,670 | |||||||||||||||
Other | — | — | — | 250 | 250 | |||||||||||||||
Total | $ | 65,465 | $ | 75,595 | $ | 53,429 | $ | 15,739 | $ | 210,228 | ||||||||||
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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 | 1,674 | 11 | 114 | 1,232 | 1 | 50 | ||||||||||||||||||
Non-qualifying | 193,831 | 3,214 | 2,062 | 123,093 | 2,062 | 1,173 | ||||||||||||||||||
Total | $ | 210,228 | $ | 4,036 | $ | 2,596 | $ | 136,669 | $ | 2,502 | $ | 1,459 | ||||||||||||
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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) | 278 | 296 | 86 | |||||||||
Total | $ | 269 | $ | 313 | $ | 137 | ||||||
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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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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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Net investment gains(losses), excluding embedded derivatives | $ | (227 | ) | $ | (686 | ) | $ | 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 | $ | 6 | $ | 123 | ||||
Embedded derivative liabilities | $ | 352 | $ | 120 |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Net investment gains(losses) | $ | (321 | ) | $ | 202 | $ | 62 |
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5. | Deferred Policy Acquisition Costs and Value of Business Acquired |
DAC | VOBA | Total | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, 2005 | $ | 10,719 | $ | 1,041 | $ | 11,760 | ||||||
Capitalizations | 2,600 | — | 2,600 | |||||||||
Acquisitions | — | 3,780 | 3,780 | |||||||||
Subtotal | 13,319 | 4,821 | 18,140 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains(losses) | 2 | (25 | ) | (23 | ) | |||||||
Unrealized investment gains(losses) | (323 | ) | (139 | ) | (462 | ) | ||||||
Other expenses | 1,494 | 329 | 1,823 | |||||||||
Total amortization | 1,173 | 165 | 1,338 | |||||||||
Less: Dispositions and other | — | (12 | ) | (12 | ) | |||||||
Balance at December 31, 2005 | 12,146 | 4,668 | 16,814 | |||||||||
Capitalizations | 2,848 | — | 2,848 | |||||||||
Subtotal | 14,994 | 4,668 | 19,662 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains(losses) | (160 | ) | (74 | ) | (234 | ) | ||||||
Unrealized investment gains(losses) | 79 | 31 | 110 | |||||||||
Other expenses | 1,756 | 394 | 2,150 | |||||||||
Total amortization | 1,675 | 351 | 2,026 | |||||||||
Less: Dispositions and other | (51 | ) | 1 | (50 | ) | |||||||
Balance at December 31, 2006 | 13,370 | 4,316 | 17,686 | |||||||||
Effect ofSOP 05-1 adoption | (205 | ) | (248 | ) | (453 | ) | ||||||
Capitalizations | 3,089 | — | 3,089 | |||||||||
Acquisitions | — | 48 | 48 | |||||||||
Subtotal | 16,254 | 4,116 | 20,370 | |||||||||
Less: Amortization related to: | ||||||||||||
Net investment gains(losses) | (115 | ) | (11 | ) | (126 | ) | ||||||
Unrealized investment gains(losses) | 75 | 63 | 138 | |||||||||
Other expenses | 1,888 | 497 | 2,385 | |||||||||
Total amortization | 1,848 | 549 | 2,397 | |||||||||
Less: Dispositions and other | (31 | ) | (4 | ) | (35 | ) | ||||||
Balance at December 31, 2007 | $ | 14,437 | $ | 3,571 | $ | 18,008 | ||||||
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6. | Goodwill |
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Balance at January 1, | $ | 4,801 | $ | 4,701 | $ | 537 | ||||||
Acquisitions | 2 | 93 | 4,180 | |||||||||
Dispositions and other, net | 11 | 7 | (16 | ) | ||||||||
Balance at December 31, | $ | 4,814 | $ | 4,801 | $ | 4,701 | ||||||
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 | ||||||||||||||||||
Corporate and Other | 4,644 | 4,343 | 4,532 | 4,636 | 345 | 319 | ||||||||||||||||||
Total | $ | 126,174 | $ | 122,353 | $ | 130,692 | $ | 125,736 | $ | 7,994 | $ | 7,254 | ||||||||||||
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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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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. |
Annuity Contracts | Universal and Variable Life Contracts | |||||||||||||||||||
Guaranteed | ||||||||||||||||||||
Guaranteed | Annuitization | Secondary | Paid Up | |||||||||||||||||
Death 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 | ||||
8. | Reinsurance |
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Direct premiums | $ | 24,165 | $ | 23,323 | $ | 22,227 | ||||||
Reinsurance assumed | 1,192 | 928 | 806 | |||||||||
Reinsurance ceded | (2,372 | ) | (2,185 | ) | (2,043 | ) | ||||||
Net premiums | $ | 22,985 | $ | 22,066 | $ | 20,990 | ||||||
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%-6.50% | 5.57% | 2011-2035 | $ | 7,017 | $ | 6,996 | |||||||
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%-6.35% | 6.28% | 2008 | 43 | — | |||||||||
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 | 9,100 | 8,822 | ||||||||||||
Total short-term debt | 667 | 1,449 | ||||||||||||
Total | $ | 9,767 | $ | 10,271 | ||||||||||
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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 | ||||||||||||||
Total | $ | 3,200 | $ | 1,532 | $ | — | $ | 1,668 | ||||||||||||
(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. |
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”), 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. | |
(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 |
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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 |
15. | Income Taxes |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 428 | $ | 618 | $ | 526 | ||||||
State and local | 15 | 39 | 63 | |||||||||
Foreign | 200 | 144 | 95 | |||||||||
Subtotal | 643 | 801 | 684 | |||||||||
Deferred: | ||||||||||||
Federal | 1,019 | 163 | 456 | |||||||||
State and local | 31 | 2 | 14 | |||||||||
Foreign | (25 | ) | 52 | 7 | ||||||||
Subtotal | 1,025 | 217 | 477 | |||||||||
Provision for income tax | $ | 1,668 | $ | 1,018 | $ | 1,161 | ||||||
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Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Tax provision at U.S. statutory rate | $ | 2,025 | $ | 1,379 | $ | 1,442 | ||||||
Tax effect of: | ||||||||||||
Tax-exempt investment income | (296 | ) | (296 | ) | (169 | ) | ||||||
State and local income tax | 39 | 23 | 35 | |||||||||
Prior year tax | 70 | (10 | ) | (33 | ) | |||||||
Foreign tax rate differential and change in valuation allowance | (116 | ) | (55 | ) | (40 | ) | ||||||
Foreign operations repatriation | — | — | (27 | ) | ||||||||
Other, net | (54 | ) | (23 | ) | (47 | ) | ||||||
Provision for income tax | $ | 1,668 | $ | 1,018 | $ | 1,161 | ||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Deferred income tax assets: | ||||||||
Policyholder liabilities and receivables | $ | 4,123 | $ | 4,578 | ||||
Net operating loss carryforwards | 595 | 586 | ||||||
Employee benefits | 134 | 452 | ||||||
Capital loss carryforwards | 158 | 156 | ||||||
Tax credit carryforwards | 20 | — | ||||||
Intangibles | — | 22 | ||||||
Litigation-related and government mandated | 113 | 65 | ||||||
Other | 394 | 328 | ||||||
5,537 | 6,187 | |||||||
Less: Valuation allowance | 127 | 234 | ||||||
5,410 | 5,953 | |||||||
Deferred income tax liabilities: | ||||||||
Investments | 2,134 | 1,842 | ||||||
Intangibles | 32 | — | ||||||
DAC | 4,221 | 4,269 | ||||||
Net unrealized investment gains | 423 | 994 | ||||||
Other | 116 | 116 | ||||||
6,926 | 7,221 | |||||||
Net deferred income tax liability | $ | (1,516 | ) | $ | (1,268 | ) | ||
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Total Unrecognized | ||||
Tax Benefits | ||||
(In millions) | ||||
Balance at January 1, 2007 (date of adoption) | $ | 932 | ||
Additions for tax positions of prior years | 73 | |||
Reductions for tax positions of prior years | (53 | ) | ||
Additions for tax positions of current year | 77 | |||
Reductions for tax positions of current year | (8 | ) | ||
Settlements with tax authorities | (177 | ) | ||
Lapses of statutes of limitations | (4 | ) | ||
Balance at December 31, 2007 | $ | 840 | ||
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16. | Contingencies, Commitments and Guarantees |
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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 | $ | 246 | ||||||
2009 | $ | 421 | $ | 13 | $ | 226 | ||||||
2010 | $ | 368 | $ | 8 | $ | 201 | ||||||
2011 | $ | 292 | $ | 8 | $ | 173 | ||||||
2012 | $ | 217 | $ | 7 | $ | 135 | ||||||
Thereafter | $ | 766 | $ | 7 | $ | 1,143 |
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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 | $ | (497 | ) | $ | (14 | ) | $ | (66 | ) | $ | (577 | ) | ||||
Other liabilities: Accrued other postretirement benefit cost | $ | (794 | ) | $ | — | $ | (95 | ) | $ | (889 | ) | |||||
Subtotal | $ | (26 | ) | $ | (1,154 | ) | ||||||||||
Net liability of subsidiary held-for-sale | $ | — | $ | (17 | ) | |||||||||||
Accumulated other comprehensive income (loss), before income tax: | ||||||||||||||||
Defined benefit plans | $ | (66 | ) | $ | (26 | ) | $ | (1,171 | ) | $ | (1,263 | ) | ||||
Minority interest | $ | — | $ | 8 | ||||||||||||
Deferred income tax | $ | 8 | $ | 419 | ||||||||||||
Accumulated other comprehensive income (loss), net of income tax: | ||||||||||||||||
Defined benefit plans | $ | (41 | ) | $ | (18 | ) | $ | (744 | ) | $ | (803 | ) | ||||
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December 31, | ||||||||||||||||
Other | ||||||||||||||||
Pension | Postretirement | |||||||||||||||
Benefits | Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Change in benefit obligation: | ||||||||||||||||
Benefit obligation at beginning of year | $ | 5,917 | $ | 5,735 | $ | 2,061 | $ | 2,166 | ||||||||
Service cost | 163 | 160 | 27 | 35 | ||||||||||||
Interest cost | 352 | 333 | 103 | 117 | ||||||||||||
Plan participants’ contributions | — | — | 31 | 29 | ||||||||||||
Divestitures | — | (4 | ) | — | — | |||||||||||
Net actuarial (gains) losses | (388 | ) | 26 | (463 | ) | — | ||||||||||
Change in benefits | 39 | (11 | ) | — | (144 | ) | ||||||||||
Prescription drug subsidy | — | — | 13 | 10 | ||||||||||||
Benefits paid | (352 | ) | (322 | ) | (173 | ) | (152 | ) | ||||||||
Benefit obligation at end of year | 5,731 | 5,917 | 1,599 | 2,061 | ||||||||||||
Change in plan assets: | ||||||||||||||||
Fair value of plan assets at beginning of year | 6,284 | 5,501 | 1,172 | 1,093 | ||||||||||||
Actual return on plan assets | 546 | 725 | 58 | 104 | ||||||||||||
Divestitures | — | (4 | ) | — | — | |||||||||||
Employer contribution | 48 | 384 | 1 | 1 | ||||||||||||
Benefits paid | (352 | ) | (322 | ) | (48 | ) | (26 | ) | ||||||||
Fair value of plan assets at end of year | 6,526 | 6,284 | 1,183 | 1,172 | ||||||||||||
Funded status at end of year | $ | 795 | $ | 367 | $ | (416 | ) | $ | (889 | ) | ||||||
Amounts recognized in the consolidated balance sheet consist of: | ||||||||||||||||
Other assets | $ | 1,393 | $ | 944 | $ | — | $ | — | ||||||||
Other liabilities | (598 | ) | (577 | ) | (416 | ) | (889 | ) | ||||||||
Net amount recognized | $ | 795 | $ | 367 | $ | (416 | ) | $ | (889 | ) | ||||||
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 Plan | Non-Qualified Plan | Total | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Aggregate fair value of plan assets (principally Company contracts) | $ | 6,526 | $ | 6,284 | $ | — | $ | — | $ | 6,526 | $ | 6,284 | ||||||||||||
Aggregate projected benefit obligation | 5,148 | 5,356 | 583 | 561 | 5,731 | 5,917 | ||||||||||||||||||
Over (under) funded | $ | 1,378 | $ | 928 | $ | (583 | ) | $ | (561 | ) | $ | 795 | $ | 367 | ||||||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Projected benefit obligation | $ | 597 | $ | 577 | ||||
Accumulated benefit obligation | $ | 517 | $ | 490 | ||||
Fair value of plan assets | $ | — | $ | — |
December 31, | ||||||||||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
(In millions) | ||||||||||||||||
Projected benefit obligation | $ | 602 | $ | 581 | $ | 1,599 | $ | 2,061 | ||||||||
Fair value of plan assets | $ | 4 | $ | 4 | $ | 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 | $ | 163 | $ | 160 | $ | 140 | $ | 27 | $ | 35 | $ | 36 | ||||||||||||
Interest cost | 352 | 333 | 317 | 103 | 116 | 121 | ||||||||||||||||||
Expected return on plan assets | (506 | ) | (453 | ) | (445 | ) | (86 | ) | (79 | ) | (79 | ) | ||||||||||||
Amortization of net actuarial (gains) losses | 68 | 128 | 116 | — | 22 | 15 | ||||||||||||||||||
Amortization of prior service cost (credit) | 17 | 8 | 15 | (36 | ) | (36 | ) | (17 | ) | |||||||||||||||
Net periodic benefit cost | 94 | $ | 176 | $ | 143 | 8 | $ | 58 | $ | 76 | ||||||||||||||
Net periodic benefit cost of subsidiary held-for-sale | 4 | 1 | ||||||||||||||||||||||
98 | 9 | |||||||||||||||||||||||
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 | ||||||||
Benefits | Other Postretirement 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 | 11.5% 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, | ||||||||||||||||
Pension | ||||||||||||||||
Benefits | Other Postretirement 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 | ||||||||||||||||
Prescription | ||||||||||||||||
Pension | Drug | |||||||||||||||
Benefits | Gross | Subsidies | Net | |||||||||||||
(In millions) | ||||||||||||||||
2008 | $ | 358 | $ | 116 | $ | (14 | ) | $ | 102 | |||||||
2009 | $ | 371 | $ | 120 | $ | (15 | ) | $ | 105 | |||||||
2010 | $ | 381 | $ | 124 | $ | (16 | ) | $ | 108 | |||||||
2011 | $ | 394 | $ | 129 | $ | (16 | ) | $ | 113 | |||||||
2012 | $ | 409 | $ | 132 | $ | (17 | ) | $ | 115 | |||||||
2013-2017 | $ | 2,269 | $ | 711 | $ | (100 | ) | $ | 611 |
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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reduction of additional paid-in capital. Upon settlement with the bank, the Company increased additional paid-in capital and reduced treasury stock. |
• | 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 | ||||||||||||||||
Remaining | Aggregate | |||||||||||||||
Shares Under | Weighted Average | Contractual | Intrinsic | |||||||||||||
Option | Exercise Price | Term | 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 | ||||||||
Grant Date | ||||||||
Performance 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 w/o | Permitted w/o | Permitted 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 | 3,232 | 2,890 | 2,570 | |||||||||
Interest and debt issue costs | 987 | 812 | 618 | |||||||||
Amortization of DAC and VOBA | 2,259 | 1,916 | 1,800 | |||||||||
Capitalization of DAC | (3,089 | ) | (2,848 | ) | (2,600 | ) | ||||||
Rent, net of sublease income | 309 | 287 | 296 | |||||||||
Minority interest | 23 | 23 | (10 | ) | ||||||||
Insurance tax | 506 | 490 | 364 | |||||||||
Other | 2,675 | 2,569 | 2,026 | |||||||||
Total other expenses | $ | 10,458 | $ | 9,565 | $ | 8,281 | ||||||
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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 | $ | 4,117 | $ | 2,921 | $ | 2,958 | ||||||
Basic | $ | 5.53 | $ | 3.84 | $ | 3.95 | ||||||
Diluted | $ | 5.40 | $ | 3.79 | $ | 3.92 | ||||||
Income from discontinued operations, net of income tax | $ | 200 | $ | 3,372 | $ | 1,756 | ||||||
Basic | $ | 0.27 | $ | 4.43 | $ | 2.34 | ||||||
Diluted | $ | 0.26 | $ | 4.38 | $ | 2.32 | ||||||
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 | $ | 4,117 | $ | 2,921 | $ | 2,958 | ||||||
Preferred stock dividends | 137 | 134 | 63 | |||||||||
Income from continuing operations available to common shareholders | $ | 3,980 | $ | 2,787 | $ | 2,895 | ||||||
Basic | $ | 5.35 | $ | 3.66 | $ | 3.87 | ||||||
Diluted | $ | 5.22 | $ | 3.62 | $ | 3.83 | ||||||
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 | $ | 11,556 | $ | 11,721 | $ | 11,678 | $ | 12,331 | ||||||||
Total expenses | $ | 10,177 | $ | 10,163 | $ | 10,355 | $ | 10,806 | ||||||||
Income from continuing operations | $ | 985 | $ | 1,109 | $ | 943 | $ | 1,080 | ||||||||
Income (loss) from discontinued operations, net of income tax | $ | 32 | $ | 54 | $ | 76 | $ | 38 | ||||||||
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 | $ | 1.26 | $ | 1.44 | $ | 1.22 | $ | 1.42 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | 0.04 | $ | 0.07 | $ | 0.10 | $ | 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 | $ | 1.24 | $ | 1.41 | $ | 1.19 | $ | 1.39 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | 0.04 | $ | 0.07 | $ | 0.10 | $ | 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 | $ | 10,328 | $ | 10,106 | $ | 11,247 | $ | 11,381 | ||||||||
Total expenses | $ | 9,370 | $ | 9,364 | $ | 9,994 | $ | 10,395 | ||||||||
Income from continuing operations | $ | 693 | $ | 556 | $ | 920 | $ | 752 | ||||||||
Income from discontinued operations, net of income tax | $ | 54 | $ | 94 | $ | 113 | $ | 3,111 | ||||||||
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 | $ | 0.87 | $ | 0.69 | $ | 1.16 | $ | 0.95 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | 0.07 | $ | 0.12 | $ | 0.15 | $ | 4.10 | ||||||||
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 | $ | 0.86 | $ | 0.68 | $ | 1.15 | $ | 0.93 | ||||||||
Income from discontinued operations, net of income tax, per common share | $ | 0.07 | $ | 0.12 | $ | 0.15 | $ | 4.02 | ||||||||
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 |
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22. | Business Segment Information |
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Auto & | Corporate & | |||||||||||||||||||||||
For the Year Ended December 31, 2007 | Institutional | Individual | Home | International | Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Premiums | $ | 12,392 | $ | 4,496 | $ | 2,966 | $ | 3,096 | $ | 35 | $ | 22,985 | ||||||||||||
Universal life and investment-type product policy fees | 802 | 3,513 | — | 995 | — | 5,310 | ||||||||||||||||||
Net investment income | 8,169 | 7,044 | 196 | 1,247 | 1,430 | 18,086 | ||||||||||||||||||
Other revenues | 726 | 600 | 43 | 24 | 73 | 1,466 | ||||||||||||||||||
Net investment gains (losses) | (582 | ) | (100 | ) | 15 | 56 | 50 | (561 | ) | |||||||||||||||
Policyholder benefits and claims | 13,805 | 5,721 | 1,807 | 2,460 | 46 | 23,839 | ||||||||||||||||||
Interest credited to policyholder account balances | 3,094 | 2,030 | — | 354 | — | 5,478 | ||||||||||||||||||
Policyholder dividends | — | 1,718 | 4 | 4 | — | 1,726 | ||||||||||||||||||
Other expenses | 2,439 | 4,030 | 829 | 1,749 | 1,411 | 10,458 | ||||||||||||||||||
Income from continuing operations before provision (benefit) for income tax | 2,169 | 2,054 | 580 | 851 | 131 | 5,785 | ||||||||||||||||||
Provision (benefit) for income tax | 737 | 703 | 144 | 207 | (123 | ) | 1,668 | |||||||||||||||||
Income from continuing operations | 1,432 | 1,351 | 436 | 644 | 254 | 4,117 | ||||||||||||||||||
Income (loss) from discontinued operations, net of income tax | 17 | 6 | — | (9 | ) | 186 | 200 | |||||||||||||||||
Net income | $ | 1,449 | $ | 1,357 | $ | 436 | $ | 635 | $ | 440 | $ | 4,317 | ||||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Total assets | $ | 204,005 | $ | 250,691 | $ | 5,672 | $ | 26,357 | $ | 72,411 | $ | 559,136 | ||||||||||||
DAC and VOBA | $ | 923 | $ | 14,236 | $ | 193 | $ | 2,648 | $ | 8 | $ | 18,008 | ||||||||||||
Goodwill | $ | 978 | $ | 2,957 | $ | 157 | $ | 313 | $ | 409 | $ | 4,814 | ||||||||||||
Separate account assets | $ | 52,046 | $ | 102,918 | $ | — | $ | 5,195 | $ | (17 | ) | $ | 160,142 | |||||||||||
Policyholder liabilities | $ | 121,147 | $ | 116,568 | $ | 3,324 | $ | 16,083 | $ | 9,521 | $ | 266,643 | ||||||||||||
Separate account liabilities | $ | 52,046 | $ | 102,918 | $ | — | $ | 5,195 | $ | (17 | ) | $ | 160,142 |
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Auto & | Corporate & | |||||||||||||||||||||||
For the Year Ended December 31, 2006 | Institutional | Individual | Home | International | Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Premiums | $ | 11,867 | $ | 4,516 | $ | 2,924 | $ | 2,722 | $ | 37 | $ | 22,066 | ||||||||||||
Universal life and investment-type product policy fees | 775 | 3,199 | — | 805 | — | 4,779 | ||||||||||||||||||
Net investment income | 7,261 | 6,908 | 177 | 949 | 1,007 | 16,302 | ||||||||||||||||||
Other revenues | 684 | 525 | 22 | 28 | 43 | 1,302 | ||||||||||||||||||
Net investment gains (losses) | (630 | ) | (595 | ) | 3 | (10 | ) | (155 | ) | (1,387 | ) | |||||||||||||
Policyholder benefits and claims | 13,367 | 5,409 | 1,717 | 2,411 | 38 | 22,942 | ||||||||||||||||||
Interest credited to policyholder account balances | 2,593 | 2,035 | — | 288 | — | 4,916 | ||||||||||||||||||
Policyholder dividends | — | 1,698 | 5 | (3 | ) | — | 1,700 | |||||||||||||||||
Other expenses | 2,314 | 3,514 | 846 | 1,531 | 1,360 | 9,565 | ||||||||||||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 1,683 | 1,897 | 558 | 267 | (466 | ) | 3,939 | |||||||||||||||||
Provision (benefit) for income tax | 561 | 653 | 142 | 95 | (433 | ) | 1,018 | |||||||||||||||||
Income (loss) from continuing operations | 1,122 | 1,244 | 416 | 172 | (33 | ) | 2,921 | |||||||||||||||||
Income from discontinued operations, net of income tax | 45 | 20 | — | 28 | 3,279 | 3,372 | ||||||||||||||||||
Net income | $ | 1,167 | $ | 1,264 | $ | 416 | $ | 200 | $ | 3,246 | $ | 6,293 | ||||||||||||
Balance Sheet: | ||||||||||||||||||||||||
Total assets | $ | 190,963 | $ | 243,604 | $ | 5,467 | $ | 22,724 | $ | 65,337 | $ | 528,095 | ||||||||||||
DAC and VOBA | $ | 1,370 | $ | 13,996 | $ | 190 | $ | 2,117 | $ | 13 | $ | 17,686 | ||||||||||||
Goodwill | $ | 977 | $ | 2,957 | $ | 157 | $ | 301 | $ | 409 | $ | 4,801 | ||||||||||||
Separate account assets | $ | 47,047 | $ | 94,124 | $ | — | $ | 3,178 | $ | — | $ | 144,349 | ||||||||||||
Policyholder liabilities | $ | 113,205 | $ | 117,866 | $ | 3,453 | $ | 13,544 | $ | 9,298 | $ | 257,366 | ||||||||||||
Separate account liabilities | $ | 47,047 | $ | 94,124 | $ | — | $ | 3,178 | $ | — | $ | 144,349 |
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Auto & | Corporate & | |||||||||||||||||||||||
For the Year Ended December 31, 2005 | Institutional | Individual | Home | International | Other | Total | ||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Statement of Income: | ||||||||||||||||||||||||
Premiums | $ | 11,387 | $ | 4,485 | $ | 2,911 | $ | 2,186 | $ | 21 | $ | 20,990 | ||||||||||||
Universal life and investment-type product policy fees | 772 | 2,476 | — | 579 | — | 3,827 | ||||||||||||||||||
Net investment income | 5,933 | 6,533 | 180 | 795 | 676 | 14,117 | ||||||||||||||||||
Other revenues | 655 | 477 | 34 | 20 | 35 | 1,221 | ||||||||||||||||||
Net investment gains(losses) | (11 | ) | (49 | ) | (12 | ) | 12 | (50 | ) | (110 | ) | |||||||||||||
Policyholder benefits and claims | 12,775 | 5,416 | 1,994 | 2,128 | (15 | ) | 22,298 | |||||||||||||||||
Interest credited to policyholder account balances | 1,652 | 1,775 | — | 240 | — | 3,667 | ||||||||||||||||||
Policyholder dividends | 1 | 1,671 | 3 | 5 | — | 1,680 | ||||||||||||||||||
Other expenses | 2,230 | 3,267 | 829 | 997 | 958 | 8,281 | ||||||||||||||||||
Income (loss) from continuing operations before provision (benefit) for income tax | 2,078 | 1,793 | 287 | 222 | (261 | ) | 4,119 | |||||||||||||||||
Provision (benefit) for income tax | 696 | 592 | 63 | 35 | (225 | ) | 1,161 | |||||||||||||||||
Income (loss) from continuing operations | 1,382 | 1,201 | 224 | 187 | (36 | ) | 2,958 | |||||||||||||||||
Income from discontinued operations, net of income tax | 180 | 297 | — | 5 | 1,274 | 1,756 | ||||||||||||||||||
Net income | $ | 1,562 | $ | 1,498 | $ | 224 | $ | 192 | $ | 1,238 | $ | 4,714 | ||||||||||||
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23. | Discontinued Operations |
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Investment income | $ | 61 | $ | 267 | $ | 431 | ||||||
Investment expense | (32 | ) | (175 | ) | (269 | ) | ||||||
Net investment gains (losses) | 13 | 4,795 | 2,125 | |||||||||
Total revenues | 42 | 4,887 | 2,287 | |||||||||
Provision for income tax | 18 | 1,725 | 814 | |||||||||
Income from discontinued operations, net of income tax | $ | 24 | $ | 3,162 | $ | 1,473 | ||||||
Years Ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
(In millions) | ||||||||||||
Net investment income | ||||||||||||
Institutional | $ | 16 | $ | 13 | $ | 37 | ||||||
Individual | 9 | 5 | 21 | |||||||||
Corporate & Other | 4 | 74 | 104 | |||||||||
Total net investment income | $ | 29 | $ | 92 | $ | 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) | ||||||||||||
Premiums | $ | 4,910 | $ | 4,348 | $ | 3,869 | ||||||
Net investment income | 908 | 781 | 640 | |||||||||
Other revenues | 77 | 66 | 58 | |||||||||
Net investment gains (losses) | (177 | ) | 7 | 22 | ||||||||
Total revenues | 5,718 | 5,202 | 4,589 | |||||||||
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 | 241 | 231 | 172 | |||||||||
Provision for income tax | 84 | 81 | 58 | |||||||||
Income from discontinued operations, net of income tax | $ | 157 | $ | 150 | $ | 114 | ||||||
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December 31, | ||||||||
2007 | 2006 | |||||||
(In millions) | ||||||||
Fixed maturity securities | $ | 9,398 | $ | 8,372 | ||||
Equity securities | 137 | 163 | ||||||
Mortgage and consumer loans | 832 | 736 | ||||||
Policy loans | 1,059 | 1,015 | ||||||
Short-term investments | 75 | 140 | ||||||
Other invested assets | 4,897 | 4,185 | ||||||
Total investments | 16,398 | 14,611 | ||||||
Cash and cash equivalents | 404 | 164 | ||||||
Accrued investment income | 78 | 68 | ||||||
Premiums and other receivables | 1,440 | 1,254 | ||||||
Deferred policy acquisition costs and VOBA | 3,513 | 3,152 | ||||||
Goodwill | 96 | 96 | ||||||
Other assets | 91 | 90 | ||||||
Separate account assets | 17 | 16 | ||||||
Total assetsheld-for-sale | $ | 22,037 | $ | 19,451 | ||||
Future policy benefits | $ | 6,159 | $ | 5,140 | ||||
Policyholder account balances | 6,657 | 6,212 | ||||||
Other policyholder funds | 2,297 | 1,980 | ||||||
Long-term debt | 528 | 307 | ||||||
Collateral financing arrangements | 850 | 850 | ||||||
Junior subordinated debt securities | 399 | 399 | ||||||
Shares subject to mandatory redemption | 159 | 159 | ||||||
Current income tax payable | 33 | 29 | ||||||
Deferred income tax liability | 941 | 1,010 | ||||||
Other liabilities | 1,918 | 1,466 | ||||||
Separate account liabilities | 17 | 16 | ||||||
Total liabilitiesheld-for-sale | $ | 19,958 | $ | 17,568 | ||||
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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 assetsheld-for-sale | $ | 1,563 | ||
Policyholder account balances | $ | 1,595 | ||
Total liabilitiesheld-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 | $ | 232,844 | $ | 232,844 | ||||||||
Trading securities | $ | 779 | $ | 779 | ||||||||
Equity securities | $ | 5,913 | $ | 5,913 | ||||||||
Mortgage and consumer loans | $ | 46,198 | $ | 46,758 | ||||||||
Policy loans | $ | 9,360 | $ | 9,360 | ||||||||
Short-term investments | $ | 2,573 | $ | 2,573 | ||||||||
Cash and cash equivalents | $ | 9,964 | $ | 9,964 | ||||||||
Accrued investment income | $ | 3,551 | $ | 3,551 | ||||||||
Mortgage loan commitments | $ | 4,030 | $ | — | $ | (43 | ) | |||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,196 | $ | — | $ | (59 | ) | |||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 110,406 | $ | 110,234 | ||||||||
Short-term debt | $ | 667 | $ | 667 | ||||||||
Long-term debt | $ | 9,100 | $ | 9,015 | ||||||||
Collateral financing arrangements | $ | 4,882 | $ | 4,604 | ||||||||
Junior subordinated debt securities | $ | 4,075 | $ | 3,982 | ||||||||
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 | $ | 233,556 | $ | 233,556 | ||||||||
Trading securities | $ | 759 | $ | 759 | ||||||||
Equity securities | $ | 4,931 | $ | 4,931 | ||||||||
Mortgage and consumer loans | $ | 41,503 | $ | 41,746 | ||||||||
Policy loans | $ | 9,213 | $ | 9,213 | ||||||||
Short-term investments | $ | 2,569 | $ | 2,569 | ||||||||
Cash and cash equivalents | $ | 6,943 | $ | 6,943 | ||||||||
Accrued investment income | $ | 3,279 | $ | 3,279 | ||||||||
Mortgage loan commitments | $ | 4,002 | $ | — | $ | 4 | ||||||
Commitments to fund bank credit facilities, bridge loans and private corporate bond investments | $ | 1,908 | $ | — | $ | — | ||||||
Liabilities: | ||||||||||||
Policyholder account balances | $ | 107,816 | $ | 104,416 | ||||||||
Short-term debt | $ | 1,449 | $ | 1,449 | ||||||||
Long-term debt | $ | 8,822 | $ | 8,981 | ||||||||
Junior subordinated debt securities | $ | 3,381 | $ | 3,367 | ||||||||
Shares subject to mandatory redemption | $ | 119 | $ | 131 | ||||||||
Payables for collateral under securities loaned and other transactions | $ | 45,846 | $ | 45,846 |
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25. | Subsequent Events |
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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 | $ | 19,768 | $ | 21,241 | $ | 21,241 | ||||||
State and political subdivision securities | 4,342 | 4,368 | 4,368 | |||||||||
Foreign government securities | 11,647 | 12,815 | 12,815 | |||||||||
Public utilities | 9,738 | 9,729 | 9,729 | |||||||||
All other corporate bonds | 93,357 | 94,258 | 94,258 | |||||||||
Mortgage-backed and asset-backed securities | 82,943 | 82,735 | 82,735 | |||||||||
Other fixed maturity securities | 266 | 217 | 217 | |||||||||
Redeemable preferred stock | 7,786 | 7,481 | 7,481 | |||||||||
Total fixed maturity securities | 229,847 | 232,844 | 232,844 | |||||||||
Trading Securities | 768 | 779 | 779 | |||||||||
Equity Securities: | ||||||||||||
Common stock: | ||||||||||||
Public utilities | 114 | 135 | 135 | |||||||||
Banks, trust and insurance companies | 669 | 736 | 736 | |||||||||
Industrial, miscellaneous and all other | 1,694 | 2,066 | 2,066 | |||||||||
Non-redeemable preferred stock | 3,258 | 2,976 | 2,976 | |||||||||
Total equity securities | 5,735 | 5,913 | 5,913 | |||||||||
Mortgage and consumer loans | 46,198 | 46,198 | ||||||||||
Policy loans | 9,360 | 9,360 | ||||||||||
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 | 2,573 | 2,573 | ||||||||||
Other invested assets | 8,064 | 8,064 | ||||||||||
Total investments | $ | 315,469 | $ | 318,655 | ||||||||
(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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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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Schedule II
Condensed Financial Information
(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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Schedule II
Condensed Financial Information — (Continued)
(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 agreement | $ | 2,382 | $ | — | $ | — | ||||||
Capital contribution to subsidiary | $ | 2,382 | $ | — | $ | — | ||||||
Allocation of interest expense to a subsdiary | $ | 84 | $ | — | $ | — | ||||||
Allocation of interest income to a subsdiary | $ | 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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• | 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) |
2. | Value of Distribution Agreements |
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 |
December 31, | ||||||||||||
Subsidiaries | Interest Rate | Maturity 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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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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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 agreements | 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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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 |
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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 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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Schedule III
Consolidated Supplementary Insurance Information
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 | |||||||||||||||
Corporate & Other | 8 | 4,989 | 4,532 | — | — | |||||||||||||||
$ | 18,008 | $ | 134,957 | $ | 130,692 | $ | 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 | |||||||||||||||
Corporate & Other | 13 | 4,662 | 4,636 | — | — | |||||||||||||||
$ | 17,686 | $ | 130,670 | $ | 125,736 | $ | 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 | |||||||||||||||
Corporate & Other | 17 | 3,619 | 4,338 | — | — | |||||||||||||||
$ | 16,814 | $ | 127,011 | $ | 121,185 | $ | 917 | $ | 1,371 | |||||||||||
(1) | Amounts are included within the future policy benefits, other policyholder funds and policyholder dividend obligation column. |
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Schedule III — (Continued)
Consolidated Supplementary Insurance Information
December 31, 2007, 2006 and 2005
(In millions)
Amortization of | ||||||||||||||||||||||||
Premium | Net | Policyholder | DAC and VOBA | Other | Premiums | |||||||||||||||||||
Revenue and | Investment | Benefits and | Charged to | Operating | Written | |||||||||||||||||||
Segment | Policy Charges | Income | Interest Credited | Other Expenses | Expenses (1) | (Excluding Life) | ||||||||||||||||||
2007 | ||||||||||||||||||||||||
Institutional | $ | 13,194 | $ | 8,169 | $ | 16,899 | $ | 251 | $ | 2,188 | $ | 4,972 | ||||||||||||
Individual | 8,009 | 7,044 | 7,751 | 1,220 | 4,528 | — | ||||||||||||||||||
Auto & Home | 2,966 | 196 | 1,807 | 468 | 365 | 2,982 | ||||||||||||||||||
International | 4,091 | 1,247 | 2,814 | 309 | 1,444 | 669 | ||||||||||||||||||
Corporate & Other | 35 | 1,430 | 46 | 11 | 1,400 | — | ||||||||||||||||||
$ | 28,295 | $ | 18,086 | $ | 29,317 | $ | 2,259 | $ | 9,925 | $ | 8,623 | |||||||||||||
2006 | ||||||||||||||||||||||||
Institutional | $ | 12,642 | $ | 7,261 | $ | 15,960 | $ | 182 | $ | 2,132 | $ | 4,575 | ||||||||||||
Individual | 7,715 | 6,908 | 7,444 | 908 | 4,304 | — | ||||||||||||||||||
Auto & Home | 2,924 | 177 | 1,717 | 459 | 392 | 2,946 | ||||||||||||||||||
International | 3,527 | 949 | 2,699 | 362 | 1,166 | 623 | ||||||||||||||||||
Corporate & Other | 37 | 1,007 | 38 | 5 | 1,355 | — | ||||||||||||||||||
$ | 26,845 | $ | 16,302 | $ | 27,858 | $ | 1,916 | $ | 9,349 | $ | 8,144 | |||||||||||||
2005 | ||||||||||||||||||||||||
Institutional | $ | 12,159 | $ | 5,933 | $ | 14,427 | $ | 174 | $ | 2,057 | $ | 4,107 | ||||||||||||
Individual | 6,961 | 6,533 | 7,191 | 941 | 3,997 | — | ||||||||||||||||||
Auto & Home | 2,911 | 180 | 1,994 | 455 | 377 | 2,921 | ||||||||||||||||||
International | 2,765 | 795 | 2,368 | 222 | 780 | 463 | ||||||||||||||||||
Corporate & Other | 21 | 676 | (15 | ) | 8 | 950 | — | |||||||||||||||||
$ | 24,817 | $ | 14,117 | $ | 25,965 | $ | 1,800 | $ | 8,161 | $ | 7,491 | |||||||||||||
(1) | Includes other expenses and policyholder dividends, excluding amortization of DAC and VOBA charged to other expenses. |
F-141
Table of Contents
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2007 | ||||||||||||||||||||
Life insurance in-force | $ | 3,383,658 | $ | 710,077 | $ | 632,170 | $ | 3,305,751 | 19.1 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 15,200 | $ | 1,820 | $ | 965 | $ | 14,345 | 6.7 | % | ||||||||||
Accident and health | 5,900 | 436 | 201 | 5,665 | 3.5 | % | ||||||||||||||
Property and casualty insurance | 3,065 | 116 | 26 | 2,975 | 0.9 | % | ||||||||||||||
Total insurance premium | $ | 24,165 | $ | 2,372 | $ | 1,192 | $ | 22,985 | 5.2 | % | ||||||||||
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2006 | ||||||||||||||||||||
Life insurance in-force | $ | 3,602,677 | $ | 692,306 | $ | 124,162 | $ | 3,034,533 | 4.1 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 14,941 | $ | 1,622 | $ | 705 | $ | 14,024 | 5.0 | % | ||||||||||
Accident and health | 5,305 | 449 | 133 | 4,989 | 2.7 | % | ||||||||||||||
Property and casualty insurance | 3,077 | 114 | 90 | 3,053 | 2.9 | % | ||||||||||||||
Total insurance premium | $ | 23,323 | $ | 2,185 | $ | 928 | $ | 22,066 | 4.2 | % | ||||||||||
% Amount | ||||||||||||||||||||
Assumed | ||||||||||||||||||||
Gross Amount | Ceded | Assumed | Net Amount | to Net | ||||||||||||||||
2005 | ||||||||||||||||||||
Life insurance in-force | $ | 3,258,250 | $ | 667,705 | $ | 102,043 | $ | 2,692,588 | 3.8 | % | ||||||||||
Insurance premium | ||||||||||||||||||||
Life insurance | $ | 14,438 | $ | 1,523 | $ | 607 | $ | 13,522 | 4.5 | % | ||||||||||
Accident and health | 4,748 | 388 | 136 | 4,496 | 3.0 | % | ||||||||||||||
Property and casualty insurance | 3,041 | 132 | 63 | 2,972 | 2.1 | % | ||||||||||||||
Total insurance premium | $ | 22,227 | $ | 2,043 | $ | 806 | $ | 20,990 | 3.8 | % | ||||||||||
F-142